Investment milestones of the Metinvest group in the steel industry value chain



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

Created in June 2006 as a subsidiary of the 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 heart of Metinvest’s business is a vertically integrated group of steel and mining companies that manage the entire value chain, from the extraction and processing of crude iron ore to the sale of finished steel products. According to Metinvest, this gives the business greater control over the business and improves stability as it helps mitigate the impact of market changes.

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

Milestones and highlights of historic investment

In 2019, Metinvest ranked 42nd in the world for steelmakers. Here’s a look at some of the company’s strategic investments that have made this possible over the years:

2006:

  • 100% of the capital acquired in Leman Ukraine LLC.
  • 27% stake acquired in Yenakiieve Iron and Steel Works.
  • Acquisition of an 82.5% stake in Ingulets GOK (Ukraine).
  • Acquisition of a 100% stake in the Italian company Trametal.

2009:

  • Acquisition of a 100 percent stake in the US United Coal Company.
  • Acquisition of 95% of the capital of the Bulgarian company Promet Steel.
  • Takeover of the Ukrainian company Makiivka Steel.

2010-2012:

  • Finalizes merger agreement with Ilyich Steel.
  • Starts production of BOF steel rails in Azovstal.
  • Acquisition of a stake in the Zaporizhstal group.
  • Orders the construction of a modern blast furnace in Yenakievo.
  • Start of construction of an air separation unit in Yenakievo.

2013-2015:

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

2016-2018:

  • Invests $ 17 million for PCI in the newly refurbished Azovstal blast furnace.
  • Acquisition of Ukrainian coking coal assets for US $ 190 million.

Also in 2018, Metinvest finalized a debt refinancing of US $ 2,271 million, the largest ever by a Ukrainian company. The refinancing consisted of the issuance of two tranches of bonds and the restatement of its pre-export financing facility. This enabled Metinvest to issue $ 1,592 in new bonds and secure $ 765 million from the pre-export finance facility.

Recent financial information and investment highlights

Since the creation of Metinvest in 2006, SCM Group has retained a majority stake of 71.24% through its holding company, SCM Holdings. Smart Holding Group, owned by Ukrainian politician Vadym Novynskyi, owns 23.76% and Clarandale Limited holds the remaining 5%.

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

Revenue for the year was US $ 10,453 million, a slight decrease of 3% year-on-year from its revenue of US $ 10,757 million in 2019, despite the COVID pandemic -19. Despite the drop in revenue, net profits rose 54% to $ 526 million (a 5% margin), from $ 341 million in 2019. Net debt also fell 23%, from $ 2,758 million. in 2019 to $ 2,111 million in 2020.

Metinvest Results report 2020 highlights how the company was able to set a record for capital expenditure investments (CAPEX), which topped US $ 200 million in a year largely disrupted by the ongoing COVID-19 pandemic.

These CAPEX investments included the completion of basic works on the large-scale reconstruction of the Ilyich Steel sinter plant and the upgrade of the Central GOK enrichment plant. This latest project enabled the production of iron ore concentrate with an iron content of 70.5% and pellets with an iron content of 67.5% used in the direct reduction iron technology (DRI) to be unlocked. .

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

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

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

Metinvest has also focused on improving its debt portfolio and strengthening its credit profile. Recently, Finacity Corporation launched a € 75 million debt securitization program for Metinvest Trametal and Ferriera Valsider, two of Metinvest’s rolling steel mills based in Italy. It will also help Metinvest to establish a framework for long-term working capital financing.

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

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

Invest in the future

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

Ilyich steel

Ilyich Steel is one of Metinvest’s most notable projects to date. the big environmental project, which began in July 2012 and lasted seven years, focused on the reconstruction and modernization of the Ilyich Steelworks Sinter Plant 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. After seven years of modernization and reconstruction, which bring the agglomeration plant up to European standards, none of the smokestacks in the agglomeration plant emit smoke.

According to Metinvest, after the gradual introduction of new filters, dust emissions will be reduced by 90% and dust emissions by 46%. Overall, dust emissions in Mariupol, where the agglomeration factories are located, will be reduced by a third.

“The regulations provided for a dust emission level from the agglomeration plant of 300 mg / m3 and our gas cleaning systems now deliver 15-20 mg / m3, while Ukrainian legislation stipulates 50 mg / m3“said Andrey Panchenko, a manager of Metinvest who managed the modernization project.

Metinvest Polytechnique

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

The aim of the university is simple: to create a scientific and educational institution focused on technical subjects and advanced training, and to offer training to those who wish to join the engineering profession, as well as to current Metinvest employees who wish to improve their qualifications and develop within the company.

The University will specialize in areas where Metinvest as a company currently operates and excels, including materials sciences, metallurgy, IT, automation of production processes, economics, environment, chemical technology and engineering, architecture and civil engineering, occupational safety and mining.

Metinvest Polytechnic has also entered into agreements with leading manufacturers of technology and equipment, including Siemens, Schneider Electric, Honeywell Ukraine and Festo for the construction and equipment of a modern state-of-the-art laboratory at 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 also had access to courses from the world’s leading universities on the Coursera platform.

A campus is currently under construction 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 recent financial performance of the company illustrate a bright future for Metinvest.

“We are optimistic for 2021, as the roll-out of immunization campaigns around the world fulfills an essential precondition for a broader economic recovery. The pandemic has only underscored that the health and safety of our employees and our communities is paramount, ”said Metinvest CEO Yuriy Ryzhenkov.



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