Bloomberg News

Metinvest Consolidated 2011 Net Income Soars on Steel Output

April 17, 2012

Metinvest, Ukraine’s biggest steelmaker, said its profit more than quadrupled last year as it produced more steel and earned more on iron ore sales, while outlook for this year worsens.

Consolidated net income soared to $1.85 billion, as the company, controlled by billionaire Rinat Akhmetov, took advantage of acquisitions to boost output, the Donetsk, Ukraine- based steelmaker, said today. Crude-steel production rose 64 percent to 14.4 million metric tons, coke-coal rose 12.3 percent to 11.3 million tons and iron ore totaled 35.7 million tons. Revenue jumped 52 percent to $14.2 billion.

The takeover of Mariupolsky Metallurgical Zavod of Ilyich in 2010 helped Donetsk-based Metinvest to boost production in 2011, while this year will prove more difficult as Europe’s debt crisis erodes demand. Total steel output for the former Soviet republic dropped 6.2 percent last month to 2.9 million tons as global demand declined.

“We expect this year to be more challenging than 2011,” Chief Financial Officer Sergiy Novikov said in a phone interview from Donetsk today. “We do not expect the results of 2011 to be repeated in 2012 because of volatility in global markets.”

The government of Prime Minister Mykola Azarov expects the economy’s growth to slow to 3.9 percent this year because of declining demand for steel, the country’s primary export product.

Planned Acquisition

Metinvest plans to double its stake in Zaporizhstal Integrated Iron & Steel Works JSC, in which it bought a 12.5 percent stake last year, Novikov said.

“We are still in the process of negotiations,” he said. “We do hope that the talks will finish successfully at some point between now and August,” Novikov said. “Maximum exposure” will be $180 million to $190 million for an additional 12.5 percent stake.’’

Iron ore will account for most of Metinvest’s earnings before interest, taxes, depreciation and amortization, or Ebitda, this and next year, Novikov said. Ebitda rose almost 40 percent to $3.56 billion in 2011, the company said.

Iron ore and steel output is going to be on par with last year, without “any significant changes,” he said.

“We are targeting between 35 million tons and 36 million tons” of iron ore production this year, he said, adding that coking coal output will increase “a little” from 11.34 million tons last year.

Metinvest plans to invest $1.2-$1.3 billion to make its production more efficient and to improve the quality of steel divisions, Novikov said. The company will pay shareholders $800 million from its 2011 profit, he said.

To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net Claudia Carpenter at ccarpenter2@bloomberg.net


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