Metinvest confirms EBITDA rose 39% yoy in 9M17

Revenue at Ukraine's leading steel holding Metinvest (METINV) rose 36% yoy to USD 6.222 bln in 9M17, according to its quarterly update published on Dec. 19. The revenue increase by USD 1.65 bln yoy was mainly due to higher revenue of its metallurgical segment’s revenue, which grew by USD 1.40 bln, or 38%, yoy, of which 37pp was due to climbing prices. Sales volumes of Metinvest’s metallurgical segment increased by 61 kt, or by 1%, yoy.



In its mining segment, Metinvest reported that sales volumes in Europe rose 1.970 mmt, or 67% yoy, to 4.906 mmt. However, due to the yoy drop in sales volumes in Ukraine (2.994 mmt), Southeast Asia (1.782 mmt), and North America (0.731 mmt), the total sales volume of Metinvest’s mining segment fell by 3.551 mmt, or 23%, yoy. Nevertheless, strong growth in prices resulted in the mining segment’s yoy revenue growth of USD 253 mln, or 29%.



Metinvest’s EBITDA grew 39% yoy to USD 1.37 bln, a figure it reported on Nov. 22 in a presentation on its preliminary results for 9M17. Its overall 9M17 EBITDA margin was unchanged yoy at 22%. However, its metallurgical segment’s EBITDA margin dropped 10pp yoy to 7%, whereas its mining segment’s EBITDA margin jumped 13pp yoy to 41%.



Dmytro Khoroshun: Metinvest reported most of these results on Nov. 22. Some of the details are new, however. For example, it is encouraging to see that Metinvest was able to substantially increase the sales volumes of its iron ore products in Europe, a market with margins that are substantially higher than Southeast Asia (which includes China).



Regarding the increase in steel prices, the main factor behind the jump in Metinvest’s revenue, we note that the yoy increase in average prices for semi-finished products, 46%, was larger than that for finished products, 34%, according to our calculations. Therefore, we are not surprised that Metinvest boosted sales volumes of its semi-finished products by 150 kt while sales volumes of its finished products fell by 161 kt.



One crucial result that Metinvest does not disclose in its 3M and 9M trading updates is the value of the Consolidated Net Leverage parameter calculated in accordance with its debt restructuring documents. This parameter is calculated using Consolidated EBITDA, which differs from Adjusted EBITDA (the one Metinvest publishes every month) in several ways, including EBITDA of JVs and Exceptional Items (neither is included in Consolidated EBITDA).



Using the Consolidated Net Leverage value of 1.7x that Metinvest reported as of Jun. 30, we estimate that as of Sept. 30, this parameter should be close to 1.5x, right on top of the threshold that should allow Metinvest to attract new debt. Taking into consideration media reports on Metinvest intending to hit the debt markets already in January-February, which implies using the 9M17 results for the offering documentation, we conclude that the Consolidated Net Leverage as of Sept. 30 was slightly less than 1.5x.



Regarding our short-term outlook, as we reported earlier, the increase in steel prices for contracts concluded, which was observed on July-August, was not reflected in Metinvest’s August prices, and its metallurgical segment’s margin was 6% for that month, the same low value as for June and July.



Yet in September, Metinvest’s rising steel product prices were finally reflected and its metallurgical segment’s margin jumped to 14%. So we expect October to be another strong month for Metinvest, with EBITDA remaining close to the recent monthly high of USD 217 mln. We are keeping our neutral view on METINV Eurobonds.

Источник: Конкорд Капитал