Business

Metinvest Group’s Investment Milestones in the Steel Industry Value Chain

Metinvest is an international mining and metals company operating primarily in Ukraine, Europe, and the United States.

Established in June 2006 as a subsidiary of SCM Group, Metinvest today controls 50 percent of the iron ore market, 46 percent of the baking coal market, and 40 percent of the metal products market.

At the core of Metinvest’s business is a vertically integrated group of steel and mining companies that manage the entire value chain, from the mining and processing of raw iron ore and to the sale of finished steel products. According to Metinvest, this gives the company greater control over the business and enhances stability as it helps to mitigate the impact of market changes.

In terms of its core values, Metinvest is committed to making continued strategic investments into the growth and development of the business. This helps to ensure its ability to compete and prosper in what is a competitive global market.

Historic Investment Milestones & Highlights

In 2019, Metinvest ranked as the world’s 42nd largest steelmaker. Here’s a look at some of the company’s strategic investment moves that have made this possible over the years:

2006:

  • 100% stake acquired in Leman Ukraine LLC.
  • 27% stake acquired in Yenakiieve Iron and Steel Works.
  • 82.5% stake acquired in Ingulets GOK (Ukraine).
  • Acquires a 100 percent stake in Italian firm Trametal.

2009:

  • Acquires a 100 percent stake in the US United Coal Company.
  • 95 percent stake acquired in Bulgarian firm Promet Steel.
  • Establishes control of Ukrainian firm Makiivka Steel.

2010-2012:

  • Finalises a merger deal with Ilyich Steel.
  • Launches BOF steel rail production at Azovstal.
  • Acquires a stake in Zaporizhstal Group.
  • Commissions the building of a modern blast furnace at Yenakievo.
  • Construction begins on an air separation unit at Yenakievo.

2013-2015:

  • Increases equity stake in Zaporizhstal Group to 99.8 percent.
  • Announces US$1 billion iron ore joint venture with Black Iron in Ukraine.
  • Announces major upgrades to Azovstal blast furnace number four.
  • Announces major investment plans for Kriviy Rih ore mines.

2016-2018:

  • Invests $17 million for PCI at the recently upgraded the Azovstal blast furnace.
  • Acquires Ukrainian coking coal assets for US$190 million.

Also in 2018, Metinvest completed a US$2,271 million market-driven refinancing of debt, the largest ever carried out by a Ukrainian corporate. The refinancing consisted of the issuance of two tranches of bonds and the restatement of its pre-export finance facility. This saw Metinvest issue US$1,592 in new bonds and secure US$765 million in the pre-export finance facility.

Recent Financial Information & Investment Highlights

Since establishing Metinvest in 2006, SCM Group has retained a majority stake of 71.24 percent through its holding company, SCM Holdings. Smart Holding Group, owned by Ukrainian politician Vadym Novynskyi, owns 23.76 percent, and Clarandale Limited owns the remaining five percent.

In Mid-February, Metinvest announced its financial results for 2020.

Revenues for the year came in at US$10,453 million, a small three percent year-on-year decrease from its 2019 revenues of US$10,757 million despite the COVID-19 pandemic. Despite lower revenues, net profits increased by 54 percent to US$526 million (a margin of five percent) from US$341 million in 2019. Net debt also fell, down by 23 percent from US$2,758 million in 2019 to US$2,111 million in 2020.

Metinvest’s 2020 earnings report highlights how the company was able to set a record in terms of capital expenditure (CAPEX) investments, which exceeded US$200 million in a year that was widely disrupted by the ongoing COVID-19 pandemic.

These CAPEX investments included the completion of core works on the large-scale reconstruction of Ilyich Steel’s sinter plant and the upgrade of Central GOK’s beneficiation plant. The latter project unlocked the production of iron ore concentrate with 70.5 percent Fe content and pellets with 67.5 percent Fe content used in direct reduced iron (DRI) technology.

Metinvest has also continued to extend its raw material production by increasing stakes in existing assets, in some cases making them subsidiaries. Dnipro Coke, a Ukrainian producer of coke and chemicals, is one example, while Zaporizhia, a production of refractory products and materials, is another.

Anticipating a difficult external environment, the Group took the decision to reduce CAPEX in 2020, while maintaining it at a decent level. At the same time, Metinvest’s focus on operational improvements to ensure global cost competitiveness yielded a total effect of US$376 million in 2020,” said Yuriy Ryzhenkov, Metinvest CEO, when commenting on the results.

Metinvest’s investments in the global sales network highlighted the company’s ability to respond to market changes quickly and effectively. The company generated free cash flow of US$916 million despite these market changes, enabling it to triple its 2020 year-end cash balance to US$826 million.

Metinvest has also been focusing on enhancing its debt portfolio and strengthening its credit profile. Recently, Finacity Corporation launched a EUR 75 million receivables securitisation program for Metinvest Trametal and Ferriera Valsider, two of Metinvest’s re-rolling steel mills based Italy. This will also help Metinvest establish a framework for long-term working capital financing.

“This landmark deal is part of our broader strategy to expand our customer base and provide additional, flexible solutions for financing sales in Europe,” said Metinvest CEO Yuriy Ryzhenkov in an announcement on Finacity’s website from December 2020.

Other debt management efforts included an extension of its bond maturity profile by issuing a US$333 million, seven-year paper bearing a fixed rate coupon of 7.65 percent annually. The proceeds were used to redeem bonds due in 2021 and 38 percent due in 2023.

Investing in the Future

Metinvest’s raw appetite for future-proof investments is perhaps best illustrated by two major recent projects: the reconstruction of facilities at Ilyich Steel and the construction of a namesake university, Metinvest Polytechnic.

Ilyich Steel

Ilyich Steel is one of Metinvest’s most notable projects to date. The large-scale environmental project, which began in July 2012 and lasted seven years, focused on reconstructing and modernising the sinter plant at the Ilyich Iron and Steel Works at a cost of over US$160 million.

Until recently, the sinter plant accounted for a whopping 80 percent of all emissions produced by Ilyich Iron and Steel Works, and up to 40 percent of dust emissions. Following the seven-year modernisation and rebuild, which brings the sinter plant in line with European standards, none of the sinter plant’s chimneys emit smoke.

According to Metinvest, after the phased introduction of new filters, dust emissions will be cut by 90 percent and dust emissions by 46 percent. Overall, dust emissions in Mariupol, where the sinter plants are located, will be reduced by one third.

“Regulations envisaged a sinter plant dust emission level of 300 mg/m3 and our gas cleaning systems now provide 15-20 mg/m3, while Ukrainian legislation stipulates 50 mg/ m3“, said Andrey Panchenko, a Metinvest official who managed the modernisation project.

Metinvest Polytechnic

Founded in 2020 and described as the world’s first private steel and mining university, Metinvest Polytechnic is a fully-fledged university with its own faculty, research and educational programmes, and the right to award state-recognised diplomas and degrees to its students.

The objective of the university is simple: To create a scientific and educational institution with a focus on technical subjects and advanced training, and provide education to those who want to join the engineering profession, as well as to current Metinvest employees who want to improve their qualifications and develop within the company.

The University will specialise in areas where Metinvest as a company currently operates and excels, including material sciences, metallurgy, computer science, the automation of production processes, economics, the environment, chemical technologies and engineering, architecture and civil engineering, occupational safety, and mining.

Metinvest Polytechnic has also struck deals with leading manufacturers of technology and equipment, including Siemens, Schneider Electric, Honeywell Ukraine and Festo for the building and equipping of a modern state-of-the-art laboratory base of the University.

Microsoft will develop the university’s IT infrastructure and has already supported the creation of an online training system for advanced programs. The University has also gained access to courses from the world’s leading universities on the Coursera platform.

A campus is currently being built for Metinvest Polytechnic and its students in Mariupol, designed by the Dutch architectural firm MASA Architects and its famous architect, Hiroki Matsuura.

These developments and the company’s recent financial performance illustrate a bright future for Metinvest.

“We are optimistic about 2021, as the rollout of vaccination campaigns worldwide fulfills a key precondition for a broader economic recovery. The pandemic has only highlighted that the health and safety of our employees and communities are paramount”, said Metinvest CEO Yuriy Ryzhenkov.

 

 



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