MECHEL REPORTS 2014 OPERATIONAL RESULTS
Moscow, Russia April 28, 2015 Mechel OAO (MICEX: MTLR, NYSE: MTL), one of the leading
Russian mining and metals companies, announces 2014 operational results.
Production and sales for 2014
Production:
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Product Name |
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2014, thousand |
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2013, thousand |
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% |
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4Q2014, thousand |
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3Q2014, thousand |
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% |
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tonnes |
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tonnes |
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tonnes |
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tonnes |
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Run-of-Mine Coal |
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22,624 |
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27,516 |
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-18 |
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5,617 |
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5,810 |
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-3 |
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Pig Iron |
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3,946 |
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3,743 |
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+5 |
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1,036 |
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1,010 |
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+3 |
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Steel |
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4,269 |
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4,650 |
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-8 |
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1,087 |
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1,055 |
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+3 |
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Sales:
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Product Name |
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2014, thousand |
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2013, thousand |
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% |
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4Q2014, thousand |
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3Q2014, thousand |
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% |
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tonnes |
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tonnes |
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tonnes |
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tonnes |
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Coking coal |
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concentrate |
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10,140 |
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11,051 |
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-8 |
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2,360 |
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2,427 |
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-3 |
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PCI |
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3,063 |
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3,308 |
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-7 |
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620 |
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820 |
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-24 |
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Anthracites |
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2,107 |
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2,202 |
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-4 |
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581 |
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525 |
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+11 |
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Steam coal |
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5,958 |
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5,898 |
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+1 |
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1,790 |
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1,640 |
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+9 |
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Iron ore concentrate |
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3,120 |
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4,166 |
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-25 |
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615 |
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619 |
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-1 |
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Coke |
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3,233 |
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2,976 |
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+9 |
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913 |
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830 |
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+10 |
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Ferrosilicon |
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87 |
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94 |
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-7 |
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22 |
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23 |
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-4 |
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Flat products |
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451 |
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586 |
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-23 |
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119 |
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105 |
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+13 |
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Long products |
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2,960 |
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3,541 |
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-16 |
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678 |
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695 |
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-2 |
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Billets |
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117 |
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690 |
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-83 |
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37 |
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19 |
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+95 |
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Hardware |
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766 |
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852 |
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-10 |
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183 |
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200 |
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-9 |
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Forgings |
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53 |
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69 |
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-21 |
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13 |
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15 |
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-13 |
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Stampings |
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84 |
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102 |
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-18 |
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20 |
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20 |
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0 |
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Electric power
generation
(thousand kWh) |
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3,682,128 |
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3,972,285 |
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-7 |
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1,084,708 |
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732,043 |
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+48 |
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Heat power
generation (Gcal) |
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5,106,092 |
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6,694,467 |
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-9 |
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1,940,860 |
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790,268 |
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+146 |
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Mechel OAOs Chief Executive Officer Oleg Korzhov commented on the 2014 operational results:
In the past year Mechel Groups enterprises operated as prices for our key products hit their
minimum, with a lack of trade working capital and sweeping cost cuts, as a significant share of our
earnings were used to service our debt. We currently continue talks with banks on restructuring our
debt, which we hope to complete shortly. Nevertheless, in the mining segment we began restoring our
operational results which slumped with the halting of Mechel Bluestone, by increasing production at
the Elga deposit. We improved the operation and sales planning system for our steel products and
also increased our own output of high value-added products while decreasing sales of third-party
products.
The 18-percent decrease in coal production last year was due largely to the halting of Mechel
Bluestone as well as a decrease in mining at Southern Kuzbass Coal Company, which was linked to our
program of cutting down stockpiles. Meanwhile we attained a significant increase in coal mining at
Elga Coal Complex (over 1.2 million tonnes).
Despite the volatility at global and domestic markets, sales of coking coal produced by Mechels
Russian-based enterprises increased by nearly 3% year-on-year due to exports to high-margin markets
of Japan and South Korea, and topped 10 million tonnes.
The 7-percent decrease in PCI coal sales in 2014 was due to a slump in the global market of
metallurgical coals. In 2014, we shifted the focus of our sales from Europe and South America to
Asia Pacific PCI exports to Asia Pacific went up by 0.5 million to reach 1.9 million tonnes. The
4-percent decrease in anthracite sales in 2014 is due to a minor decrease in demand from Asian
countries. Meanwhile, in order to cut down operational costs in this reporting period, we increased
anthracite supplies to Chelyabinsk Metallurgical Plants sintering operations.
The decrease in steam coal sales from Mechel Bluestone in 2014 was fully compensated for by an
increase in shipments of Elga steam coal. As a result, the overall sales went up by 1%. Export
sales went up by 1 million tonnes to reach 1.9 million tonnes, primarily thanks to China.
The growth of iron ore concentrate sales in the 4Q2014 as compared to the previous quarter was due
to high demand from Chinese enterprises.
The Groups steel segment as a result of 2014 mostly maintained its production volumes pig iron
production went up by 5%, steel production went down by 8% mostly due to a decrease in electric
furnace steel production at Chelyabinsk Metallurgical Plant and Izhstal. Thus, in 2014 we decreased
sales of low-profit products to third parties, taking necessary steps toward increasing billet
supplies to the segments enterprises. As a whole, we managed to greatly increase the segments
profitability, partly due to record low prices for coking coal and iron ore, which are the main raw
materials for steelmaking.
The decrease in overall sales of flat and long rolls produced by third parties in 2014 was due to
the closure of several Mechel Service Global subsidiaries in Europe. At the same time, sales of our
own products increased flat rolls by 7% and long rolls by 3%.
In 2014, we sold domestically over 120,000 tonnes of products manufactured by the universal
rolling mill, including rails. As of now, the mill has mastered production of 18 shapes, and in
2015 we plan to significantly increase the universal rolling mills range of high value-added
products. I would like to note that our R65-type rails currently continue to undergo the trials at
Russian Railways OAOs experimental rail ring, and we expect this stage to be completed in May.
In 2014, the demand for stampings and forgings went down which had a negative impact on our sales
of these products (-17% and -21% accordingly).
Sales of Bratsk Ferroalloy Plants products to the Groups enterprises and third parties went down
by 7% due to scheduled major repairs at the plants facilities. Domestic ferrosilicon prices have
meanwhile demonstrated a positive trend in 2014.
In our power segment, the chief reason for a 7-percent decrease in electricity production
year-on-year was due to scheduled repairs at Southern Kuzbass Power Plant. The 9-percent decrease
in heat production was due to our disposal of power facilities in the Chelyabinsk Region in late
2013.
***
Mechel OAO
Ekaterina Videman
Tel: + 7 495 221 88 88
ekaterina.videman@mechel.com
***
Mechel is an international mining and steel company which employs over 70,000 people. Its products
are marketed in Europe, Asia, North and South America, Africa. Mechel unites producers of coal,
iron ore concentrate, steel, rolled products, ferroalloys, heat and electric power. All of its
enterprises work in a single production chain, from raw materials to high value-added products.
***
Some of the information in this press release may contain projections or other forward-looking
statements regarding future events or the future financial performance of Mechel, as defined in the
safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to
caution you that these statements are only predictions and that actual events or results may differ
materially. We do not intend to update these statements. We refer you to the documents Mechel files
from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These
documents contain and identify important factors, including those contained in the section
captioned Risk Factors and Cautionary Note Regarding Forward-Looking Statements in our Form
20-F, that could cause the actual results to differ materially from those contained in our
projections or forward-looking statements, including, among others, the achievement of anticipated
levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of
competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact
of developments in the Russian economic, political and legal environment, volatility in stock
markets or in the price of our shares or ADRs, financial risk management and the impact of general
business and global economic conditions.
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