Metinvest revenue rises 2%, EBITDA 15% yoy in 2013

Обзоры по компаниям и отраслям 18.03.2014 Ukraine’s largest steelmaker, Metinvest, boosted its revenue 2% yoy to USD 12.8 bln and EBITDA by 15% yoy to USD 2.3 bln in 2013, the company reported in its preliminary financial results released on March 17. Total debt grew from USD 3.7 bln in 3Q13 to USD 4.3 bln as of end-2013, but stood flat yoy (+1%). CapEx changed insignificantly (-2% yoy) to USD 747 mln, bringing the total debt-to-EBITDA ratio to 1.9x on December 2013, higher than 1.6x at end-3Q13 but lower than 2.1x at end-2012. The primary revenue growth driver was a 17% improvement in sales of its semi-finished products by its metallurgical division to 3 mmt. Growth in deliveries was partially offset by plunged steel products prices, resulting in 4% yoy revenue growth in the semi-finished sub-segment to USD 1.5 bln. Sales of finished steel products remained stable yoy at 8.9 mmt in 2013. The performance of its mining division was weak due to a 32% plunge in sales of coal products to 3.1 mmt, exacerbated by falling prices. Metinvest disclosed that its sales to Russian markets generated 8% of revenue in 2013, compared to 12% a year before. Roman Topolyuk: Metinvest’s reported 2013 EBITDA came close to our recent expectations of USD 2.2 bln, though the mounting total debt, which led to a higher leverage ratio, was a negative surprise. While we don’t see reasons for Metinvest to sharply increase its leverage further (its investment program is rather moderate), earnings aren’t likely to grow in 2014 either, as the latest developments on the steel market indicate. The positive effect of hryvnia devaluation on EBITDA may be neutralized by a drop in global iron ore prices. The Russian gas discount, which we previously assumed to be applied for all of 2014 and was accounted for in our estimate of Metinvest’s EBITDA, will be off the table as of 2Q14. With our new projection for 2014 EBITDA at about USD 2.3-2.4 bln, the total debt-to-EBITDA ratio might stay in the range of 1.9-2.0x. A downside risk for this forecast remains a possible disruption of sales to Russia due to trade restrictions, which isn’t likely to be fully redirected to other markets.