MOSCOW (Commodity Online): Mechel OAO (NYSE: MTL) has regained its growth in the second quarter after a few difficult stages in the first quarter of the year with a net revenue of $3.5 billion, according to the financial results for the first half (H1) 2011 released by the company.
“The company was quite successful in this period. Despite a few difficulties we had to contend with early in the year or in first quarter (Q2), we concentrated on restoring production volumes in our mining segment while preserving high capacity utilization rates in steel and other segments. Our efforts were also directed to the implementation of the company’s ambitious investment program. As a result, in the second quarter (Q2) we demonstrated a growth in mining volumes and sales of nearly all our products, which, when combined with fairly favorable market conditions, enabled us to improve the financial results of the previous period.” said Yevgeny Mikhel, Chief Executive Officer , Mechel OAO.
According to the result, the net revenue in Q2 2011 increased by 18.3% and amounted to $3.5 billion compared to $2.9 billion in Q1 2011.Whereas the operating income rose by 6.2% and accounts to $476.3 million compared to the operating income of $448.4 million in Q1 2011. The consolidated adjusted EBITDA in Q2 2011 increased by 8.0% to $612.3 million, compared to $566.9 million in Q1 2011.
“The segment’s second-quarter results noticeably improved on the first quarter’s results on all points. We increased volumes of coal mining and concentrate production, while cutting down on mining costs in most of our assets, increased sales. This reflected in the improvement of our financial results. For example, EBITDA in the 2nd quarter grew by over 50% compared to the 1st quarter. " said Boris Nikishichev, Chief Executive Officer, Mechel Mining Management Company.
The mining segment’s revenue from external customers in Q2 2011 totaled $1.1 billion, or 31.8% of the consolidated net revenue and the operating income in the mining segment in Q2 2011 increased by 62.5% to $474.5 million, or 34.4% of total segment’s revenue, compared to the operating income of $292.1 million, or 26.8% of total segment revenue for the Q1 2011.
Meanwhile the company's steel segment’s revenue from external customers in Q2 2011 amounted to $2.1 billion, or 59.3% of the consolidated net revenue while the steel segment’s operating income decreased by 70.7% and totaled $36.8 million, or 1.7% of total segment’s revenue, versus the operating income of $125.6 million, or 6.8% of total segment’s revenue, in Q1 2011.
"Nevertheless, I must note that the situation in the steel market was not so favorable in the second quarter. We had to deal with growing prices for raw materials, which were not compensated by the growth of steel prices." said Andrey Deineko, Chief Executive Officer, Mechel-Steel Management Company.
The ferroalloys segment’s revenue from external customers in the Q2 2011 amounted to $131.5 million compared with the segment’s revenue from external customers of $124.1 million in Q1 2011 and the Mechel’s power segment’s revenue from external customers in Q2 2011 accounts for $176.8 million showing a decrease of 21.4% compared with the segment’s revenue from external customers of $225.1 million in Q1 2011.
Total debt was at $8.9 billion as of June 30, 2011 . Cash and cash equivalents amounted to $356.2 million and net debt amounted to $8.6 billion (net debt is defined as total debt outstanding less cash and cash equivalents) at end of Q2 2011.
The capital expenditure on property, plant and equipment and acquisition of mineral licenses for the H1 2011 amounted to $769.5 million, of which $562.4 million was invested in the mining segment, $174.6 million in the steel segment, $18.7 million in the ferroalloy segment and $13.8 million in the power segment.
Mechel OAO, founded in 2003, is one of Russia’s leading coal and steel producers.It is a fully integrated business consists of four segments: mining, steel, ferroalloys and power. The company has production facilities in 13 of Russia’s regions, as well as the United States, Kazakhstan, Romania, Lithuania and Bulgaria.
