Page 79 - UKRRptOct20

Metinvest​, Ukraine’s largest steelmaker, released its 1H20 financial results on September 8. The holding’s revenue lost 15% y/y to $4,968mn​, EBITDA (including contributions from joint ventures, JVs) dropped 20% y/y to $715mn, and net profit was negative $240mn vs. positive $408mn a year ago. Its EBITDA margin decreased 1pp y/y to 14%. EBITDA of Metinvest’s mining segment dropped 31% y/y to $546mn in 1H20, while that of its metallurgical segment jumped 80% y/y to $238mn. EBITDA excluding contributions from JVs dropped 19% y/y to $615mn in 1H20. Operating cash flows before working capital dropped 15% y/y to $677mn. Net cash from operations increased 20% y/y to $685mn. Operating cash inflow due to changes in working capital was $138mn in 1H20 vs. an outflow of $2mn in 1H19. Metinvest’s CapEx amounted to $313mn in 1H20, down 35% y/y, due to a 39% y/y drop in its metallurgical segment’s investments to $147mn and a 30% y/y decrease in its mining segment’s CapEx to $155mn. Net debt stood at $2,545mn at June 30, down 8% YTD, and the ratio of net debt to last-12-months EBITDA (excluding JVs) amounted to 2.8x, inching up from 2.6x at the end of 2019. Metinvest did not pay dividends in 1H20 ($31mn paid in 1H19). At a conference call with investors on the same day, Metinvest’s CEO Yuriy Ryzhenkov said the holding expects CapEx of around $800mn in both 2020 (25% less y/y) and 2021. A further working capital release occurred in July-August, but later in the year the holding expects its working capital to rise due to increases in prices. Dmytro Khoroshun: Metinvest avoided breaching its 3x net leverage covenant in large part due to releasing working capital, particularly $210mn in June, frontloading CapEx cuts, and refraining from paying dividends. Nevertheless, Metinvest’s leverage remains high, and possible drops in steel and iron ore prices later in 2H20 and in 2021 might increase the risks of Metinvest breaching its covenants. We maintain our neutral view on METINV bonds.
Metinvest​ allowed to consolidate Pokrovske Coal asset companies.​ ​The Antimonopoly Committee of Ukraine (AMCU) has granted permission to Metinvest B.V., the main holding company of Ukraine’s largest steelmaker Metinvest (METINV), to consolidate control over nine companies comprising the so-called Pokrovske Coal (PC) assets, the AMCU said in an October 1 press release.​ ​The AMCU said that its main focus was on two companies: PrJSC Pokrovske Coal, a coking coal miner, and Svyato-Varvarynska Enrichment Plant LLC. The AMCU took into consideration that coking coal consumers in Ukraine import up to 75% of this material, and that some coking coal mines in Ukraine are underutilized, according to the release. To further protect the consumers, the AMCU forced Metinvest B.V. to take on obligations to sell to third parties at least 10% of the coking coal concentrate produced by the PC assets at market prices, the release said.​ ​At their October 6 AGM, the shareholders of PrJSC Pokrovske Coal plan to allow the company to enter a settlement deed that would involve PrJSC Donetsksteel and its creditors, according to the AGM agenda available at the Pokrovske Coal website. According to the proposed drafts of the AGM decision, the settlement deed involves PrJSC Donetsksteel paying $500mn to PrJSC Pokrovske Coal, and PrJSC Pokrovske Coal paying this sum to the creditors.​ ​Recall, PrJSC Pokrovske Coal ​was a guarantor for several loans​ to PrJSC Donetsksteel, the total amount of, which (including interest accrued but unpaid) at the end of 2019 was about $1.3bn, according to Concorde Capital estimates.​ ​Recall, Metinvest ​purchased a 24.99% stake in Pokrovske Coal assets in July 2018​, together with what the holding said were its four co-investors.
Metinvest steel output rises 10% m/m in August.​ ​Steel production at Ukraine’s largest producer Metinvest was 25.2 kt per day (or 780 kt per month)
79​ UKRAINE Country Report​ October 2020 ​ ​www.intellinews.com