Ukraine Markets Daily (January 30, 2017)

Market news

  • Metinvest reported 3% m/m (22.9% y/y) revenue increase in November 2016

Market comment

The UX index decreased by 0.1% on Friday, while the PFTS index remained unchanged (in UAH term). The WIG-Ukraine index increased by 2.5%. On the interbank exchange market, the USD/UAH remained nearly unchanged at UAH 27.19 (mid price), according to Bloomberg. The official exchange rate reported by the NBU was UAH 27.19.


Metinvest reported 3% m/m (22.9% y/y) revenue increase in November 2016

On January 27, 2017, Metinvest B.V. (“Metinvest”) published its monthly report for November 2016 in line with the commitments related to its debt restructuring negotiation schedule. The company’s revenues grew by 3% m/m (22.9% y/y) to USD 112 mn, leaving an adjusted EBITDA of USD 112 mn, compared with USD 127 mn a month earlier, and up from a negative adjusted EBITDA of USD 4 mn a year earlier. The mining division above all contributed to the revenue expansion, increasing sale volume by 16.5% m/m to USD 113 mn thanks to pellets production (+USD 20 mn or +44.4% m/m). Meanwhile, metal sale volume contracted by 0.2% m/m on lower sales of long products (-15.5% m/m), slabs (-21.4% m/m), and coke (-30.4% m/m). Metinvest reported an operating cash flow before working capital changes of USD 86 mn, dropping 8% m/m after a deeper contraction of 11% m/m in October 2016. Year over year, however, operating cash flow before working capital change turned to positive, compared with a USD 16 mn outflow in the corresponding month of 2015. Net cash from operating activities declined by 64% m/m (-61.3% y/y) to USD 12 mn. The negative development is attributed to inventory buildup (USD 5 mn, compared with –USD 39 mn in October), expanding receivables (+7% m/m), together with stronger interest payment (+41.7% m/m). Metinvest used USD 43 mn on investing activities in November, which is 95% m/m higher than in the previous month, used mostly in purchase of property, plant and equipment (+76% m/m). The company received USD 27 mn from financing activities, after having used USD 5 mn in financing in the previous month. The overall development left the company with a balance of cash and cash equivalent of USD 255 mn by end of November, therefore recording a monthly cash outflow of USD 3 mn. Metinvest reported a total debt of USD 2.9 bn in eleven months, contracting by 1.1% y/y, though increasing by 1% m/m.

Our view:

The monthly result is POSITIVE, showing the company’s revenue generating capacity to remain strong despite the still fluctuating market environment for finished metal products. The operating results of the company weakened slightly due to building inventories and accumulating receivables. Meanwhile, the strong revenue base secured by the price rally on mining products allowed Metinvest not only supporting, but increasing its capital investments. Notwithstanding a potential lowering of activities in December 2016, the eleven months results allow expecting a notable improvement in the debt to EBITDA ratio up to 3x in 2016, down from nearly 6x in 2015.