Metinvest B.V., the parent company of a vertically integrated group of steel and mining companies (jointly referred to as “Metinvest” or “the Group”), has released its audited IFRS consolidated financial statements for the 12 months ended 31 December 2019
|Summary - production results||FY2019||FY2018||Change, y-o-y|
|Iron ore concentrate||29,028||27,353||1,675||6%|
|Coking coal concentrate||2,961||2,683||278||10%|
|Summary - financial results||FY2019||FY2018||Change, y-o-y|
|Income statement highlights|
|Cash flow highlights|
|Net cash from operations||814||1,103||-289||-26%|
|Net cash used in investing activities||-943||-430||-513||>100%|
|Net cash used in financing activities||123||-643||766||-|
|Summary - financial results||31.12.2019||31.12.2018||Change, YTD|
|Cash and cash equivalents||274||280||-6||-2%|
Debt management highlights
Commenting on the results, Yuriy Ryzhenkov, Chief Executive Officer of Metinvest, said:
“Steel markets saw the rapid advance of adverse developments during the second half of the year. As a result, the steel pricing environment in the fourth quarter of 2019 was the weakest since 2016, which, coupled with high raw material costs, hit global steelmakers in general, and Metinvest in particular. Nonetheless, the Group was prepared and had all necessary measures in place to face the challenges posed by the business cycle. This was made possible due to our vertically integrated business model, highly experienced team and the unwavering support of our stakeholders.
In terms of operational performance, we delivered respectable results for the year. Steel production increased by 3% and the share of steel products in the metal mix reached 86%, up 5 percentage points year-on-year. Iron ore concentrate production rose by 6% year-on-year and coking coal output climbed by 10%. However, the steel market downturn in the fourth quarter significantly affected the Group’s steel output volumes, metal and iron ore product mix, as well as financial performance. Not least, the Ukrainian currency saw an unprecedented 12% appreciation against the US dollar in the second half of the year, increasing our production costs and reducing our export competitiveness. Consequently, revenues declined by 9% year-on-year to US$10,757 million and EBITDA by 52% year-on-year to US$1,213 million. All of our EBITDA in 2019 was provided by the Mining segment, which balanced the negative results of the steelmakers.
In response to the sharp decline in profitability, we have launched a cost-optimisation programme across the Group and enhanced our already strong focus on operational improvements. Consequently, we were able to more than double the effect of operational efficiency improvements from 2018 to US$63 million in 2019. We intend to improve these results in the coming years, as it is critical to our long-term ability to compete on a cost basis with leading global steelmakers.
We continued to invest in the future of the business and implement the Technological Strategy 2030. In 2019, we fulfilled our investment programme for the year, completing several major projects with an immediate positive impact on our output volumes, product portfolio, production costs and the environment. Total capital expenditures reached a five-year high of US$1,055 million. Amid the uncertain outlook for 2020, we intend to prioritise the completion of ongoing projects, environmental investments and crucial maintenance, while continuing design development of projects in the pipeline to be ready to launch them as soon as markets improve.
Last year, we also carried out the successful extension of the maturity of our eurobonds, ensuring a sustainable longer-term capital structure. We secured US$350 million of net proceeds from this offering, which together with a working capital release of US$163 million, provided us with financing options during the market downturn. We continue to review all options to further extend debt maturities.
Last but not least, the year 2019 saw Metinvest make important progress on its strategic priority of enhancing the sustainability of its operations. Moving closer to our zero-injury target, we undertook initiatives across our enterprises that resulted in major reductions in lost-time incidents, achieving the lowest rates in five years. Our environmental CAPEX this year hit a record high, exceeding US$155 million.
I believe the negative market developments during the second half of 2019 only proved our strength as a team, and we were able to act resolutely to keep our strategic priorities on track. I would like to thank our shareholders, lenders, investors, employees, partners and communities for their support. By strengthening the ties between us, we can overcome the challenges before us.”
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