) posted net loss (attributable to shareholders) of roughly $321
million for first-quarter 2013 compared to a profit of $218
million a year ago. Adjusted loss (excluding one-time items) was
$233 million in the reported quarter.
Revenues for the first quarter came in at roughly $2.48 billion,
down 15.9% from $2.95 billion in the year-ago period.
Mechel registered an operating income of $61 million in the first
quarter compared with $317 million a year ago. A pick-up in the
steel raw materials market, witnessed in the beginning of this
year, helped the company to post operating profit in the quarter.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) declined 56.9% year over year to $210
million in the quarter.
In the quarter, Mechel divested its Romanian steelmaking
assets, which had a negative impact on its results. The company
expects the sale of loss-making assets to positively impact the
The segment's revenues from external customers in the first
quarter were $769 million, down 18.6% from $945 million in the
The raw materials used in steel making faced volatile markets
while prices in the spot market outgrew the long-term contract
level. Mechel signed long-term contracts for coking coal supplies
totalling up to 2.5 million tons a year with China's Baosteel
Resources and Shasteel Group and South Korea's
These contracts were a part of the company's strategy to
diversify and expand its market. Mechel also continues technical
revamping of its enterprises and investment in promising
Revenues from the Steel segment decreased 13.3% year over year to
$1,430 million in the reported quarter. The prices and demand for
the construction products remained stable in the quarter. Mechel
also decreased the volume of billet and rod sales due to the sale
of the Romanian assets and the halting of its Ukrainian plant.
The launch of the universal rolling mill at Chelyabinsk
Metallurgical Plant is expected to have a major impact on the
division's future activities.
Ferroalloy segment sales totaled $54 million in the quarter, down
from $125 million in the year-ago quarter.
Mechel halted Southern Urals Nickel Plant's production
facilities, which helped the division to attain improvement. The
company reduced its supply of ferrosilicon to the domestic
market, due to declining demand and reoriented its volumes toward
export, where the market was more stable.
The Power segment generated revenues of $227 million in the
quarter compared with $230 million in the prior-year quarter.
There was a seasonal high demand for the products and the
division posted impressive results in the quarter.
Capital expenditure amounted to $172.4 million for the quarter,
of which $101.7 million was invested in the mining segment, $60.2
million in the steel segment, $7 million in the ferroalloy
segment and $3.5 million in the power segment. As of Mar 31,
2013, total debt was $9.3 billion while cash and cash equivalents
amounted to $170 million.
Mechel also announced its decision to buy back $100 million of
ADRs representing its common shares. The buyback will be executed
on behalf of Skyblock Limited, Mechel's fully-owned subsidiary.
The buyback decision reflects the company's confidence that the
fundamental value of its shares is higher and meets the interests
of its shareholders
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Mechel currently retains a short-term Zacks Rank #3 (Hold).
Other companies in the steel industry with favorable Zacks Rank
Kobe Steel Ltd.
Shiloh Industries Inc.
). Both Kobe Steel and Shiloh Industries hold a Zacks Rank #1