MetinvestB.V. (the Netherlands), the parent company of the Metinvest mining and metallurgical group, received consolidated revenues declined by 11% in January-March 2020 compared to the same period in 2019, to $2.536 billion.
According to the preliminary unaudited consolidated financial statements released on Friday, May 29, the adjusted EBITDA was $373 million over the first quarter, which is 14% lower than during the same period in 2019.
Within the reporting period, consolidated revenues decreased mainly due to lower metal sales prices that followed the global benchmarks, as well as the effects of coronavirus (COVID-19) pandemic on business activity and steel demand in several strategic markets for the Group. Furthermore, resale volumes decreased. In addition, selling prices of coking coal concentrate and coke fell following a drop in coking coal benchmark quotations.
Moreover, the iron ore sales mix and geography were affected by weak demand in Europe and reduced pellet premiums. At the same time, Metinvest boosted its revenues from merchant iron ore concentrate due to higher sales volumes and selling prices amid global supply disruptions.
In the first quarter of 2020, revenues in Ukraine declined by 6% compared to the same period in 2019, to $726 million, mainly due to lower selling prices of steel products, coke and coking coal concentrate, as well as lower coke resale volumes. The share of Ukraine in consolidated revenues rose by 2 percentage points (p.p.), to 29%.
Other markets’ sales decreased by 13%, to $1.810 billion accounting for 71% of total revenue. In particular, revenues from Europe decreased by 23%, mainly due to lower selling prices of steel products and pellet premiums, as well as lower shipments of iron ore products (down 42%) and flat (down 7%) products. As a result, the region’s share in overall revenue declined by 5 p.p., to 32%.
The revenue of the metallurgical segment decreased by 14%, to $2.018 billion in the first quarter of 2020 mainly driven by lower sales of flat products ($203 million), coke ($59 million) and square billets ($33 million). Overall, the segment accounted for 80% of the overall top line, own 1 p.p. lower compared to the same period in 2019.
The mining segment’s revenues decreased by 2%, to $518 million, primarily driven by a lower contribution from pellets ($81 million) and other products and services ($34 million). This was partly compensated by greater revenues from iron ore concentrate ($88 million) and coking coal concentrate ($16 million). In the reporting period, the segment accounted for 20% of the overall top line, to 1 p.p. higher than the same period in 2019.
The group’s consolidated EBITDA amounted to $373 million in January-March, which is 14% lower than in January-March 2019. This was driven by a decrease in the Mining segment’s contribution of $89 million and an increase in eliminations of $70 million. The metallurgical segment’s EBITDA increased by $98 million.
The decrease in consolidated EBITDA was primarily driven by lower average selling prices for Metinvest’s metal products, coke and coking coal concentrate, as well as weaker pellet premiums ($ 189 million) and the 9% year-over-year appreciation of the hryvnia against the U.S. dollar to an average of UAH 25.04 the U.S. dollar compared with UAH 27.30 per the U.S. dollar in January-March 2019 ($54 million). In addition, this was due to a 15% salary increase mainly for production personnel in April 2019 and corresponding social security expenses ($25 million), a deteriorated contribution from the Zaporizhstal JV ($11 million), as well as greater spending on goods transportation services ($10 million), mainly due to a 3.7 fold increase in iron ore sales volumes to Southeast Asia.
These factors were partially compensated by lower spending on raw materials by $152 million, mainly as a result of reduced purchase prices of coking coal, coke, scrap and iron ore materials ($93 million); lower consumption of coking coal due to a 12% y-o-y drop in coke output; lower y-o-y inventory destocking; and lower raw material transportation costs. It was also compensated by lower expenses on energy materials of $37 million, mainly due to a decrease in natural gas prices by 42% and PCI coal by 23%, a higher contribution from the Southern GOK JV ($14 million); greater sales volumes ($5 million), primarily iron ore and coking coal concentrate. In addition, a decrease in other expenses by $20 million, mainly amid lower repair and maintenance expenses.
In the first quarter of 2020, the consolidated EBITDA margin remained flat at 15% compared to the same period in 2019. The Metallurgical segment’s EBITDA margin increased by 5 p.p., to 8%, while the mining segment’s fell by 5 p.p., to 37%.
As of March 31, 2020, total debt was up 2% since the beginning of 2020, to $3.107 billion. This was mainly due to greater use of trade finance facilities ($31 million); a consolidation of Dnipro Coke’s debt ($28 million) after obtaining the controlling interest in the asset in March; and an increase in interest accrued under bonds ($20 million). Thus, in 2020, EUR 34 million has been secured for such purpose sat Ilyich Steel through two buyer credit facilities granted by Raiffeisen Bank International: one of EUR 24.4 million for up to 11 years for the construction of an air separation unit and vaporisation station covered by an export guarantee from France; and another of EUR 9.8 million for up to ten years for the purchase and installation of a hydraulic down coiler for the HSM1700covered by an export guarantee from Austria.
As of March 31, 2020, cash and cash equivalents amounted to $328 million (an increase of 20% since the beginning of 2020), net debt amounted to $2.779 billion (an increase of 1% from the beginning of 2020), and the ratio of net debt to EBITDA for the last 12 months amounted to 2.4x (an increase of 0.1x from the beginning of 2020).
