This year, however, weaker iron ore prices will hurt bottom line.
Ukrainian mining group and steel producer Metinvest said on April 17 that its net profit was likely to drop in 2012 after quadrupling to $1.85 billion in the prior period, hit this year by weaker iron ore prices.
Iron ore prices plummeted in September-October 2011 after rallying for the previous three quarters, helping boost the company’s earnings.
“Given the current situation on the market, we think 2012 will be much closer to 2010 than 2011 (in terms of financial results),” Metinvest’s Chief Financial Officer Sergiy Novikov told Reuters.
The privately-held firm, majority-owned by Ukraine’s richest man Rinat Akhmetov, increased its revenue to $14.19 billion in 2011 from $9.39 billion in 2010, its IFRS financial report showed, driven by a sharp expansion in the steel operations partly due to an acquisition.
However, the steel segment was loss making at the adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) level and group earnings were mostly generated by the iron ore segment.
“The iron ore segment accounted for 92.4 percent of Metinvest’s adjusted EBITDA, coke and coal for 14.2 percent while the steel segment generated a negative margin of 3.6 percent,” Metinvest said.
Metinvest owns iron ore and coal mines, ore enrichment plants, smelters and other connected companies in Ukraine and abroad. It increased crude steel output to by 64.4 percent to 14.375 million tons in 2011. The increase was partly due to the 2010 acquisition of Ilyich steel plant.
Metinvest exports steel mostly to Europe, the CIS and the Middle East, while its iron ore exports mostly go to Europe and Southeast Asia. The company sold a total of 21.98 million tons of iron ore in 2011.
Novikov said Metinvest planned to keep output stable this year and was “constantly scanning the market” for potential acquisitions.
Asked about the possibility of an initial public offering, Novikov said the issue was up to shareholders but he did not expect such a move this year. Akhmetov owns a 71.25 percent stake in Metinvest. A minority share of 23.75 percent is owned by Vadim Novinsky’s Smart Holding.
