Mechel announce 1Q 2013 financial results

Mechel OAO, a leading Russian mining and steel group, announced financial results for the 1Q 2013. Mr Evgeny Mikhel CEO of Mechel OAO said that “The Q1 was marked by an important step forward toward optimizing Mechel’s asset structure. We disposed of Romanian steelmaking assets, which did not fit into the company’s reviewed strategy and had a negative impact on our financial results. We expect that the sale of loss-making steel enterprises will have a positive influence on the economics of the steel division and the Group as a whole in the medium-term already.”

Mr Mikhel said that “As a whole, in the reported period the company demonstrated a marked improvement of its financial results as compared to the previous period. We made operational profit and saw a noticeable increase in EBITDA. This became possible due to a pick-up in the steel raw materials market seen in the beginning of this year, despite a seasonal correction in the steel products markets.”

He said that “Unfavorable price trends, observed since early this year, make undoubted pressure on the market players’ financial results. At the same time, we are certain that optimizing the asset structure, debt portfolio and control over expenditure and investment will enable Mechel to successfully go through the market slowdown.”

Mr Vladimir Tytsky CEO of Mechel-Steel Management Company OOO’s said that “As a whole the past quarter was characterized by a certain stability in demand and prices for the construction product range, which the division’s enterprises mostly focus their production on. We have to a certain degree decreased the volume of billet and rod sales, which was primarily due to our disposal of the Romanian assets and the halting of our Ukrainian plant. Throughout the quarter we have successfully controlled expenditures and despite the seasonal slump of our key markets, managed to demonstrate operational profit and a positive EBITDA.”

He said that “The launch of the universal rolling mill at Chelyabinsk Metallurgical Plant, which currently undergoes hot testing, will be the key event which will have a major impact on the division’s future activities. The mill has currently successfully tested the technology of producing several types of structural shapes and sections, including rails. The mill’s launch will have a positive effect on the division’s profitability, as all of the low-margin billets currently produced will be processed further to produce high-quality structural shapes and rails.”

Mr Yuri Yampolsky CEO of Mechel-Energo OOO’s said that “In the reported period, the division demonstrated an expected good result. We had operational and net profit and achieved a significant improvement of EBITDA. It was largely due to the seasonal high demand for our products. The division fulfilled its production plans, providing uninterrupted supply of heat and electricity to its customers during the most important period in the year.”

Mr Yampolsky said that “We now enter summer, which is traditionally characterized not only by lower electricity consumption, but also active work on technical maintenance and preparation of our production facilities for the next cold season.”

Recent Highlights:

1. In April, Mechel announced signing a memorandum of understanding with Baosteel Resources International Company Limited. The memorandum stipulates that Mechel OAO, through its subsidiary Mechel Carbon Singapore will supply Baosteel Resources with up to 960,000 tonnes of coking coal annually. The price will be corrected monthly.

2. In April, Mechel announced the resolutions of Mechel OAO’s Board of Directors to convene the Annual General Shareholders’ Meeting of Mechel OAO on June 28th 2013, to approve the agenda for the Annual General Shareholders’ Meeting, to prepare the list of the shareholders eligible to take part in the Annual General Shareholders’ Meeting based on the data in the Shareholders’ Register as of May 17th 2013.

3. In April, Mechel announced signing several loan agreements with Gazprombank OAO totaling USD 1 billion.

4. In April, Mechel announced its Board’s dividend recommendation to the annual general shareholders’ meeting regarding the payment of dividends based upon the results of the 2012 fiscal year:

5. In April, Mechel announced that its mining division's trading subsidiary Mechel Carbon (Singapore) Pte. Ltd. has signed a 3 year contract with South Korea's POSCO corporation for supply of coking coal. The agreement, signed on April 30th 2013, stipulates that Mechel Carbon (Singapore) will supply POSCO with 500,000 tonnes of coking coal per year. Besides that, Mechel Carbon also signed with POSCO a 1 year contract for supply of 200,000 tonnes of PCI coal in 2013.

6. In May, Mechel announced that successful hot testing was held at the complex of Chelyabinsk Metallurgical Plant’s universal rolling mill.

7. In June, Mechel announced signing a coking coal supply agreement with China’s Shasteel Group. According to the signed agreement, Mechel Carbon (Singapore), trading subsidiary of Mechel OAO’s mining division, will directly supply Shasteel Group with 40,000 tonne to 80,000 tonnes of coking coal a month from Russian Far East ports, starting from June 2013. Coking coal prices will be determined on a monthly basis.