Mechel PAO
(MICEX:MTLR)
(NYSE:MTL)
, one of the
leading Russian mining and metals companies, announces 2016
operational results.
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Production and sales for 2016 |
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Production: |
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Product
Name |
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2016,thousandtonnes |
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2015,thousandtonnes |
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% |
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4Q2016,thousandtonnes |
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3Q2016,thousandtonnes |
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% |
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Run-of-mine
coal |
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22,683 |
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23,181 |
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-2 |
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5,596 |
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5,559 |
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+1 |
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Pig
iron |
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4,053 |
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4,065 |
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0 |
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1,041 |
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968 |
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+8 |
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Steel |
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4,252 |
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4,321 |
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-2 |
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1,125 |
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1,019 |
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+10 |
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Sales: |
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Product
Name |
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2016,thousandtonnes |
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2015, thousandtonnes |
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% |
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4Q2016,thousandtonnes |
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3Q2016,thousandtonnes |
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% |
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Coking coal
concentrate |
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8,664 |
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8,215 |
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+5 |
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2,172 |
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2,021 |
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+7 |
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Including cokingcoal
concentratesupplied to thirdparties |
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5,784 |
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5,246 |
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+10 |
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1,554 |
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1,320 |
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+18 |
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PCI |
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1,620 |
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2,251 |
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-28 |
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303 |
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383 |
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-21 |
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Including PCIsupplied
to thirdparties |
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1,620 |
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2,251 |
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-28 |
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303 |
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383 |
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-21 |
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Anthracites |
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1,771 |
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2,076 |
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-15 |
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406 |
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457 |
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-11 |
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Includinganthracites
suppliedto third parties |
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1,519 |
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1,816 |
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-16 |
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354 |
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389 |
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-9 |
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Steam
coal |
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6,994 |
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6,564 |
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+7 |
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1,631 |
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1,788 |
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-9 |
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Including steamcoal
supplied tothird parties |
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5,927 |
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4,880 |
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+21 |
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1,384 |
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1,511 |
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-8 |
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Iron
oreconcentrate |
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2,744 |
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2,806 |
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-2 |
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666 |
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736 |
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-10 |
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Coke |
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2,839 |
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2,911 |
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-3 |
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687 |
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703 |
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-2 |
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Including cokesupplied
to thirdparties |
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894 |
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985 |
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-9 |
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183 |
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226 |
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-19 |
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Ferrosilicon |
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79 |
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81 |
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-2 |
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20 |
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20 |
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0 |
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Long
rolls |
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2,988 |
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2,743 |
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+9 |
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730 |
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758 |
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-4 |
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Flat
rolls |
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494 |
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478 |
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+3 |
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141 |
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99 |
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+43 |
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Hardware |
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665 |
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692 |
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-4 |
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167 |
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167 |
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0 |
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Forgings |
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38 |
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54 |
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-30 |
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8 |
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11 |
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-30 |
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Stampings |
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75 |
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67 |
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+12 |
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20 |
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18 |
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+12 |
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Electric
powergeneration(thousand kWh) |
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3,378,220 |
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4,137,441 |
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-18 |
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904,107 |
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759,347 |
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+19 |
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Heat
powergeneration (Gcal) |
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5,730,268 |
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5,666,382 |
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+1 |
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1,959,645 |
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665,048 |
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+195 |
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Key
investment projects progress |
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Universal rolling mill: |
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2016,thousandtonnes |
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2015,thousandtonnes |
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% |
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4Q2016,thousandtonnes |
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3Q2016,thousandtonnes |
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% |
Rails, beams
and shapes |
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517 |
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175 |
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+195 |
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160 |
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144 |
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+11 |
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Elga coal
complex: |
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2016,thousandtonnes |
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2015,thousandtonnes |
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% |
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4Q2016,thousandtonnes |
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3Q2016,thousandtonnes |
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% |
Run-of-mine
coal |
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3,726 |
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3,952 |
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-6 |
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842 |
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872 |
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-3 |
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Mechel PAO’s Chief Executive Officer
Oleg Korzhov commented on the 2016 operational
results:
“Global coal prices have reached new lows in
2015, prompting experts to unanimously forecast an equally
difficult 2016. After the third quarter, few cared to remember
those forecasts, as spot prices for the coal producers’ main
benchmark — premium coking coal FOB Australia — went up by 190% by
the end of the year. As a result, coal won the status of the most
efficient commodity of the year. In our view, the coal market in
this accounting period was almost entirely under China’s influence.
Chinese authorities undertook a program of reducing the number of
domestic producers, halting half of its 500 million tonnes of
excessive production capacities by the end of 2016. The prices were
also hiked up by unfavorable weather conditions and transport
infrastructure problems in China and Australia. The price rally
made the export market particularly attractive for commercial
deals. The Group’s sales subsidiaries took on a proactive position
on this issue, and in the fourth quarter we significantly increased
our coal export sales to benefit from the favorable trend. In
4Q2016, nearly half of all exported coal was shipped in accordance
with updated prices on the existing contracts, while the other half
was sold on spot deals, with exports accounting for nearly 85% of
all coal sales to third parties. We also consider as positive the
increase of coking coal mining at the Elga deposit which now
accounts for 75% of all coal production. Starting in September and
until the end of the year, Elga’s products were sold exclusively to
export.
“We increased sales of coking coal concentrate,
our chief product, by 5% year-on-year. In 4Q2016 we also
redistributed our coking coal concentrate sales in favor of the
more profitable Asian markets, which enabled us to sell an
additional 400,000 tonnes of concentrate to Asia Pacific and
improve our quarterly results.
“The 28-percent slump in PCI sales was due to
two reasons. First, due to difficult mountainous and geological
conditions, the volume of overburden removal at Krasnogorsky Open
Pit increased, which affected PCI sales. Also, in 2015 we have been
optimizing our stock balance, and our coal stock reserves went down
nearly triple. At the same time we were meeting all our long-term
contract obligations in full. Anthracite sales had negative
dynamics (-15%) due to our reconsidering contract terms with our
key European client decreasing supplies.
“The seven-percent increase in steam coal sales
is due to sales of coal accumulated in our storages since 2015 and
re-orientation of sales from the domestic market to the foreign
ones. Due to a flexible sales policy we managed to increase steam
coal sales to third parties by more than a million tonnes. These
positive dynamics can be seen on all our export lines.
“Practically all iron ore concentrate produced
at Korshunov Mining Plant was shipped to Chelyabinsk Metallurgical
Plant to replace third-party supplies of steelmaking materials.
“The domestic coke market remains in surplus,
which had its effect on a slight decrease of our sales (-3%) in
2016. We continue to search for new sales opportunities both
domestically and internationally.
“Our company’s steel division maintained pig
iron production at the same level. A slight decrease in steel
production (-2%) was due to the increased share of steel production
for the more labor-intensive assortment of high-margin
products.
“In 2016 we increased by 195% sales of
high-margin product types produced at the universal rolling mill.
This includes sale of 304,000 tonnes of rails, with 270,000 tonnes
shipped to Russian Railways. By now, the mill has mastered
production of some 30 type sizes, and we will continue to expand
our product range.
“Long rolls sales went up by 9% primarily due to
the increase of sales of the universal rolling mill’s high
value-added products. In 2016 the steel division also increased
sales of rebar both domestically and in Europe.
“Flat rolls sales were maintained on a stable
level, with a three-percent increase due to Mechel’s steel
trade network’s European subsidiaries expanding their sales.
We should also note that in 4Q2016 we managed to boost sales of
such a high-margin product as flat stainless rolls by nearly a
third.
“The four-percent decrease in hardware sales was
due to a slump in construction and as a result weaker demand for
wire on the domestic market. Nevertheless, Beloretsk Metallurgical
Plant succeeded in import substitution, increasing sales of
high-strength types of wire and ropes for construction and oil
industries.
“The slump of demand in Europe affected the
dynamics of forgings sales (-15%). The 12-percent increase in
stampings sales came as Russia's wagon-building industry picked up
after the ban on life extension for outdated rolling stock came
into force. Wagon overhaul facilities increased procurement of
wagon axles.
“In 2016 Mechel’s power division generated 18%
less electricity than in 2015, as production volumes at Southern
Kuzbass Power Plant went down due to repairs of key facilities as
part of preparation for the fall-winter maximum load. These planned
repairs will enable the division to increase electricity generation
by nearly a third this year. Heat generation remained at the same
level and went up by 1% due to an additional calendar day in the
2016 leap year.”
Mechel is an international mining and steel
company which employs over 66,000 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.
Mechel PAO
Ekaterina Videman
Tel: + 7 495 221 88 88
ekaterina.videman@mechel.com
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