Questions? +1 (202) 335-3939 Login
Trusted News Since 1995
A service for gold trading professionals · Monday, June 17, 2019 · 488,191,430 Articles · 3+ Million Readers

Mechel Reports the 1Q 2019 Financial Results

Consolidated revenue 74.9 bln rubles (0% compared to 1Q2018)
EBITDA* 15.3 bln rubles (-17% compared to 1Q2018)
Profit attributable to equity shareholders of Mechel PAO – 11.3 bln rubles

MOSCOW, Russia, May 23, 2019 (GLOBE NEWSWIRE) -- Mechel PAO (MOEX: MTLR, NYSE: MTL), a leading Russian mining and steel group, announces financial results for the 1Q 2019.

Mechel PAO’s Chief Executive Officer Oleg Korzhov commented:

“The first quarter’s financial results demonstrated positive dynamics compared to previous period. Upon stable revenue, EBITDA went up by 2%, while operating profit and profit attributable to Mechel PAO’s shareholders showed major growth.

“As a key factor impacting the company’s results in this reporting period, I must note that the mining division restrained mining dynamics as planned to offload accumulated product stocks. At the same time, the division increased sales to third parties of practically all product types except anthracites, and demonstrated financial growth. The steel division did not allow any major slumps in revenue despite the winter inactivity in construction markets, but its results were subject to a negative impact of iron ore prices growth.

“Later this year we continue to consistently pursue measures aimed at upgrading our mining fleet to restore and then increase coal mining volumes, as well as a large-scale repair program at our steel division’s facilities.”

Consolidated Results For The 1Q2019

Mln rubles 1Q’ 19 1Q’ 18 % 1Q’ 19 4Q’ 18 %
Revenue
from contracts with external customers
74,856   74,852   0%   74,856   75,571   -1%  
Operating profit 10,837   13,383   -19%   10,837   1,978   448%  
EBITDA 15,322   18,436   -17%   15,322   15,021   2%  
EBITDA, margin 20%   25%     20%   20%    
Profit
attributable to equity shareholders of Mechel PAO
11,336   3,293   244%   11,336   1,631   595%  

Mechel PAO’s Chief Financial Officer Nelli Galeeva commented:

“Consolidated EBITDA in 1Q2019 was 15.3 billion rubles, which is 2% more quarter-on-quarter. Profit attributable to Mechel PAO’s shareholders went up nearly seven times in 1Q2019 quarter-on-quarter to reach 11.3 billion rubles. Growth of foreign exchange gains on foreign currency debt had a major impact on this indicator’s dynamics as the ruble strengthened against US dollar and euro in this reporting period.

“Despite a minor decrease in cash flow from our core operations, the operating cash flow remains sufficient not only for ensuring the Group’s operational needs, but also for bringing down its leverage. The Group’s net debt excluding penalties, fines and other non-current financial liabilities went down by 12 billion rubles as compared to where it stood as of December 31, 2018, totaling 411 billion rubles.

“The debt’s decrease was partly offset by our recognition of additional long-term lease obligations of 3.8 billion rubles under IFRS 16 Leases standard was applied starting January 1, 2019.

“Our financial expenditure went down by 0.2 billion rubles from 10.3 billion rubles in 4Q2018 to 10.1 billion rubles in this reporting period due to lower average foreign currency exchange rates. Interest paid in 1Q2019, including PIK interest, went down by 5% quarter-on-quarter and totaled 7.7 billion rubles.

“Net debt to EBITDA ratio was 5.7 by the end of 1Q2019.

“In our mining segment, 1Q2019 revenue from sales to third parties totaled 24.5 billion rubles, which is 4% higher quarter-on-quarter. Gross profit also went up by nearly 2 billion rubles or 11%, and EBITDA by 2.1 billion rubles or 23% quarter-on-quarter. This was due to an increase in coal volume product sales.

“In 1Q2019, steel product sales remained at the previous quarter’s level, but the seasonal price slump on the steel division’s key products combined with high iron ore and ferroalloys prices led to a decrease in gross margin from 22% in 4Q2018 to 16% in this reporting period, and a 46% quarter-on-quarter decrease in EBITDA from 6.0 billion rubles to 3.3 billion rubles.”

Mining Segment

Mechel Mining Management OOO’s Chief Executive Officer Pavel Shtark noted:

“Our mining facilities’ operational plans for the first quarter were amended to include a decrease in mining volumes as we have accumulated major coal stockpiles by last year’s end due to railcar shortages. As a result, mining volumes went down by 19% quarter-on-quarter. At the same time, coking coal concentrate sales to third parties went up by 3%, PCI sales increased by 7% and thermal coal sales went up by 45%. This enabled us to reduce significantly our stocks while cutting down unit costs in most of the division’s facilities, partly by optimizing equipment repair expenses, which are traditionally high in extremely low winter temperatures. Overall, coal stockpiles went down by nearly 30% in the first quarter.

“As a result, in 1Q2019 the division demonstrated improvement in financial results both quarter-on-quarter and year-on-year. As revenue from sales to third parties grew by 4% quarter-on-quarter, EBITDA went up by 23%.

“One of the division’s key tasks for this year is increasing mining volumes. To do so we continue to upgrade and grow our mining equipment fleet and prepare our resources for mining. I would like to note that in 2019 we will see the launch of such major equipment as EKG-18 and ESh-20/90 excavators which will enable us to improve mining and stripping efficiency.”

Mln rubles 1Q’ 19 1Q’ 18 % 1Q’ 19 4Q’ 18 %
Revenue
from contracts with external customers
24,545   22,724   8%   24,545   23,566   4%  
Revenue
inter-segment
9,473   9,412   1%   9,473   9,089   4%  
EBITDA 10,986   10,483   5%   10,986   8,934   23%  
EBITDA, margin 32%   33%     32%   27%    

Steel Segment

Mechel-Steel Management Company OOO’s Chief Executive Officer Andrey Ponomarev noted:

“This reporting period was characterized by a seasonal slump in demand for construction products which account for a major share in the division’s sales. This factor did not lead to a significant quarter-on-quarter decrease in overall sales volumes tonnage-wise, but had a negative impact on price levels. As a result, revenue from sales to third parties went down by 5% quarter-on-quarter. Higher iron ore prices due to the global growth of ore prices as well as the strengthening of our national currency led to increased production costs, which were reflected in a lower EBITDA and EBITDA margin quarter-on-quarter.

“In the second quarter, iron ore prices continue to grow as market participants worry over news of pessimistic forecasts for iron ore production in Australia, especially as iron ore supply from Brazil is expected to plunge. The persisting escalation of a trade conflict between the United States and China also supports the price growth trend. At the same time, by the second quarter’s end, we are expecting business activity on Russia’s construction steel market to recover and that may bring up prices for our division’s products.

“We have planned a whole series of major repairs and equipment maintenance for our facilities. This will enable us to maintain stable output of steel and finished products as well as reduce our facilities’ impact on the environment. At the same time, our plans for output of the most high value-added products envisages a year-on-year production growth.”

Mln rubles 1Q’ 19 1Q’ 18 % 1Q’ 19 4Q’ 18 %
Revenue
from contracts with external customers
42,062   44,238   -5%   42,062   44,076   -5%  
Revenue
inter-segment
1,595   1,590   0%   1,595   1,654   -4%  
EBITDA 3,259   6,204   -47%   3,259   6,030   -46%  
EBITDA, margin 7%   14%     7%   13%    

Power Segment        

Mechel-Energo OOO’s Chief Executive Officer Denis Graf noted:

“The division’s 1Q2019 financial results grew predictably quarter-on-quarter as the heating season peaked and sales on the capacity market went up. The division demonstrated a year-on-year revenue growth due to increased electricity and capacity sales, but outstripping growth of production costs linked to increased prices for electricity purchased led to a lower EBITDA.”

Mln rubles 1Q’ 19 1Q’ 18 % 1Q’ 19 4Q’ 18 %
Revenue
from contracts with external customers
8,249   7,891   5%   8,249   7,929   4%  
Revenue
inter-segment
4,400   4,037   9%   4,400   4,298   2%  
EBITDA 234   737   -68%   234   166   41%  
EBITDA, margin 2%   6%     2%   1%    

Alexey Lukashov
Director of Investor Relations
Mechel PAO
Phone: 7-495-221-88-88
Fax: 7-495-221-88-00
alexey.lukashov@mechel.com

Mechel is an international mining and steel company. 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.

Attachments to the Press Release

Attachment A

Non-IFRS financial measures. This press release includes financial information prepared in accordance with International Financial Reporting Standards, or IFRS, as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for the information prepared in accordance with IFRS.

Adjusted EBITDA (EBITDA) represents profit (loss) attributable to equity shareholders of Mechel PAO before Depreciation and amortisation, Foreign exchange (gain) loss, net, Finance costs including fines and penalties on overdue loans and borrowings and lease payments, Finance income, Net result on the disposal of non-current assets, Impairment of goodwill and other non-current assets, Write-off of trade and other receivables, Allowance for expected credit losses on financial assets, Provision (reversal of provision) for doubtful accounts, Write-off of inventories to net realisable value, Net result on the disposal of subsidiaries, Profit (loss) attributable to non-controlling interests, Income tax expense (benefit), Effect of pension obligations, Other fines and penalties, Gain on restructuring and forgiveness of trade and other payables and write-off of trade and other payables with expired legal term and Other one-off items. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of our Revenue. Our adjusted EBITDA may not be similar to EBITDA measures of other companies. Adjusted EBITDA is not a measurement under IFRS and should be considered in addition to, but not as a substitute for the information contained in our interim condensed consolidated statement of profit (loss) and other comprehensive income. We believe that our adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While depreciation, amortisation and impairment of goodwill and other non-current assets are considered operating expenses under IFRS, these expenses primarily represent the non-cash current period allocation of costs associated with non-current assets acquired or constructed in prior periods. Our adjusted EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry.

Our calculation of Net debt, excluding fines and penalties on overdue amounts** is presented below:

Mln rubles 31.03.2019   31.12.2018  
Loans and borrowings, excluding interest payable, fines and penalties on overdue amounts 382,280   402,417  
Interest payable 8,052   7,749  
Non-current loans and borrowings 11,510   6,538  
Other non-current financial liabilities 45,432   44,510  
less Cash and cash equivalents (2,745)   (1,803)  
Net debt, excluding lease liabilities, fines and penalties on overdue amounts 444,529   459,411  
     
Current lease liabilities 6,025   5,880  
Non-current lease liabilities 6,031   2,413  
Net debt, excluding fines and penalties on overdue amounts 456,585   467,704  

EBITDA can be reconciled to our interim condensed consolidated statement of profit (loss) and other comprehensive income as follows:

  Consolidated Results   Mining Segment ***   Steel Segment***   Power Segment***
Mln rubles 3m 2019   3m 2018     3m 2019   3m 2018     3m 2019   3m 2018     3m 2019   3m 2018  
Profit (loss) attributable to equity shareholders of Mechel PAO 11,336   3,293     5,988   913     6,935   992     (220)   (42)  
                       
Add:                      
Depreciation and amortisation 3,658   3,477     2,069   1,970     1,467   1,373     122   134  
Foreign exchange (gain) loss, net (11,979)   (508)     (2,611)   (497)     (9,350)   (12)     (18)   1  
Finance costs including fines and penalties on overdue loans and borrowings and leases payments 10,085   10,463     6,247   7,700     3,875   2,979     164   158  
Finance income (232)   (93)     (262)   (348)     (163)   (108)     (8)   (11)  
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-off of trade and other receivables, allowance for expected credit losses on financial assets, provision (reversal of provision) for doubtful accounts and write-off of inventories to net realisable value 512   1,241     210   364     180   437     122   440  
Profit attributable to non-controlling interests 378   238     180   29     197   172     1   37  
Income tax expense (benefit) 1,131   10     (960)   237     (77)   189     (42)   2  
Effect of pension obligations 48   36     40   29     7   6     1   1  
Other fines and penalties 440   310     125   92     202   199     113   19  
Gain on restructuring and forgiveness of trade and other payables and write-off of trade and other payables with expired legal term (55)   (31)     (40)   (6)     (14)   (23)     (1)   (2)  
EBITDA 15,322   18,436     10,986   10,483     3,259   6,204     234   737  
EBITDA, margin 20%   25%     32%   33%     7%   14%     2%   6%  
                       
                       
  Consolidated Results   Mining Segment ***   Steel Segment***   Power Segment***
Mln rubles 1q 2019   4q 2018     1q 2019   4q 2018     1q 2019   4q 2018     1q 2019   4q 2018  
Profit (loss) attributable to equity shareholders of Mechel PAO 11,336   1,631     5,988   918     6,935   75     (220)   (2,996)  
                       
Add:                      
Depreciation and amortisation 3,658   3,700     2,069   1,919     1,467   1,651     122   130  
Foreign exchange (gain) loss, net (11,979)   7,171     (2,611)   (696)     (9,350)   7,845     (18)   23  
Finance costs including fines and penalties on overdue loans and borrowings and leases payments 10,085   10,323     6,247   6,447     3,875   4,093     164   169  
Finance income (232)   (13,495)     (262)   (5,368)     (163)   (8,065)     (8)   (448)  
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-off of trade and other receivables, allowance for expected credit losses on financial assets, provision (reversal of provision) for doubtful accounts and write-off of inventories to net realisable value 512   7,889     210   3,929     180   1,192     122   2,768  
Net result on the disposal of subsidiaries -   (3)     -   -     -   (3)     -   -  
Profit (loss) attributable to non-controlling interests 378   (25)     180   (42)     197   53     1   (37)  
Income tax expense (benefit) 1,131   (3,507)     (960)   1,395     (77)   (966)     (42)   (192)  
Effect of pension obligations 48   440     40   427     7   12     1   1  
Other fines and penalties 440   952     125   35     202   168     113   749  
Gain on restructuring and forgiveness of trade and other payables and write-off of trade and other payables with expired legal term (55)   (55)     (40)   (30)     (14)   (25)     (1)   (1)  
EBITDA 15,322   15,021     10,986   8,934     3,259   6,030     234   166  
EBITDA, margin 20%   20%     32%   27%     7%   13%     2%   1%  
*** including inter-segment operations  
   

/EIN News/ -- Income tax, deferred tax related to the consolidated group of taxpayers are not allocated to segments as they are managed on the group basis.

Attachment B

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT (LOSS)
AND OTHER COMPREHENSIVE INCOME for the three months ended March 31, 2019

(All amounts are in millions of Russian rubles)
    Three months
ended March
31,
2019
    Three months
ended March
31,
2018
 
    (unaudited)     (unaudited)  
         
Revenue from contracts with customers   74,856     74,852  
Cost of sales   (45,248)     (41,556)  
Gross profit   29,608     33,296  
         
Selling and distribution expenses   (13,574)     (14,451)  
Loss on write-off of non-current assets   (77)     (132)  
Allowance for expected credit losses on financial assets   (120)     (344)  
Taxes other than income taxes   (1,137)     (1,267)  
Administrative and other operating expenses   (4,096)     (3,959)  
Other operating income   233     240  
Total selling, distribution and operating income and (expenses), net   (18,771)     (19,913)  
Operating profit   10,837     13,383  
         
Finance income   232     93  
Finance costs including fines and penalties on overdue loans and borrowings and leases payments   (10,085)     (10,463)  
Foreign exchange gain (loss), net   11,979     508  
Share of profit (loss) of associates, net   7     18  
Other income   55     31  
Other expenses   (180)     (29)  
Total other income and (expense), net   2,008     (9,842)  
Profit before tax   12,845     3,541  
         
Income tax expense   (1,131)     (10)  
Profit for the period   11,714     3,531  
         
Attributable to:        
Equity shareholders of Mechel PAO   11,336     3,293  
Non-controlling interests   378     238  
         
Other comprehensive income        
Other comprehensive loss that may be reclassified to profit or loss in subsequent periods, net of income tax:   (387)     (443)  
Exchange differences on translation of foreign operations   (387)     (443)  
Other comprehensive income not to be reclassified to profit or loss in subsequent periods, net of income tax:   14     3  
Re-measurement of defined benefit plans   14     3  
Other comprehensive loss for the period, net of tax   (373)     (440)  
         
Total comprehensive income for the period, net of tax   11,341     3,091  
         
Attributable to:        
Equity shareholders of Mechel PAO   10,963     2,852  
Non-controlling interests   378     239  
         


INTERIM CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION as of March 31, 2019
(All amounts are in millions of Russian rubles)
    March 31,
2019
    December 31, 2018  
    (unaudited)        
         
Assets        
Non-current assets        
Property, plant and equipment   191,345     189,879  
Mineral licenses   31,882     32,068  
Goodwill and other intangible assets   16,942     16,883  
Investments in associates   307     293  
Deferred tax assets   6,582     5,488  
Other non-current assets   654     630  
Non-current financial assets   179     244  
Total non-current assets   247,891     245,485  
         
Current assets        
Inventories   43,603     43,423  
Income tax receivables   64     121  
Trade and other receivables   20,146     17,612  
Other current assets   7,501     8,673  
Other current financial assets   257     508  
Cash and cash equivalents   2,745     1,803  
Total current assets   74,316     72,140  
         
Total assets   322,207     317,625  
         
Equity and liabilities        
Equity        
Common shares   4,163     4,163  
Preferred shares   833     833  
Additional paid-in capital   24,378     24,378  
Accumulated other comprehensive income   1,398     1,771  
Accumulated deficit   (263,696)     (274,186)  
Equity attributable to equity shareholders of Mechel PAO   (232,924)     (243,041)  
Non-controlling interests   10,110     9,846  
Total equity   (222,814)     (233,195)  
         
Non-current liabilities        
Loans and borrowings   11,510     6,538  
Lease liabilities   6,031     2,413  
Other non-current financial liabilities   45,432     44,510  
Other non-current liabilities   116     120  
Pension obligations   3,723     3,819  
Provisions   3,875     3,719  
Deferred tax liabilities   13,597     13,506  
Total non-current liabilities   84,284     74,625  
         
Current liabilities        
Loans and borrowings, including interest payable, fines and penalties on overdue amounts of RUB 10,198 million and RUB 9,877 million as of March 31, 2019 and December 31, 2018, respectively   392,478     412,294  
Trade and other payables   36,267     34,800  
Lease liabilities   6,025     5,880  
Income tax payable   7,742     6,425  
Taxes and similar charges payable other than income tax   7,242     6,106  
Advances received   5,194     5,028  
Other current liabilities   64     68  
Pension obligations   793     772  
Provisions   4,932     4,822  
Total current liabilities   460,737     476,195  
         
Total liabilities   545,021     550,820  
Total equity and liabilities   322,207     317,625  
         




INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the three months ended March 31, 2019
(All amounts are in millions of Russian rubles)
    Three months
ended March
31,
2019
    Three months
ended March
31,
2018
 
    (unaudited)     (unaudited)  
Cash flows from operating activities        
Profit for the period   11,714     3,531  
Adjustments to reconcile profit to net cash provided by operating activities        
Depreciation of property, plant and equipment   3,301     3,086  
Amortisation of mineral licenses and other intangible assets   357     391  
Foreign exchange (gain) loss, net   (11,979)     (508)  
Deferred income tax benefit   (822)     (1,761)  
Allowance for expected credit losses on financial assets   120     344  
Write-off of trade and other receivables   -     56  
Write-off of inventories to net realisable value   291     680  
Loss on write-off of non-current assets   77     132  
Result from disposal of non-current assets   (67)     29  
Gain on restructuring and forgiveness of trade and other payables and write-off of trade and other payables with expired legal term   (55)     (31)  
Effect of pension obligations   48     36  
Finance income   (232)     (93)  
Finance costs including fines and penalties on overdue loans and borrowings and leases payments   10,085     10,463  
Provisions for legal claims, taxes and other provisions   1,485     931  
Other   75     (68)  
         
Changes in working capital items        
Trade and other receivables   (3,323)     (2,834)  
Inventories   (1,850)     (3,120)  
Trade and other payables   2,300     2,739  
Advances received   224     1,572  
Taxes payable and other liabilities   1,935     2,521  
Other current assets   851     (122)  
         
Income tax paid   (522)     (1,304)  
         
Net cash provided by operating activities   14,013     16,670  
         
Cash flows from investing activities        
Interest received   49     37  
Proceeds from loans issued and other investments   272     5  
Proceeds from disposals of property, plant and equipment   145     42  
Purchases of property, plant and equipment   (1,082)     (1,013)  
Purchases of intangible assets   -     (75)  
Interest paid, capitalised   (30)     (132)  
Net cash used in investing activities   (646)     (1,136)  
         
Cash flows from financing activities        
Proceeds from loans and borrowings, including proceeds from factoring arrangement of RUB 132 million and RUB 5,303 million for the three months ended March 31, 2019 and 2018, respectively   840     6,539  
Repayment of loans and borrowings, including payments from factoring arrangement of RUB 1,694 million and nil for the three months ended March 31, 2019 and 2018, respectively   (4,304)     (12,456)  
Dividends paid to non-controlling interests   (6)     (1)  
Interest paid, including fines and penalties   (7,632)     (8,515)  
Repayment of lease obligations   (515)     (680)  
Deferred payments for acquisition of assets   (39)     (187)  
Deferred consideration paid for the acquisition of subsidiaries in prior periods   (361)     (1,058)  
Net cash used in financing activities   (12,017)     (16,358)  
         
Foreign exchange (gain) loss on cash and cash equivalents, net   (364)     40  
Changes in allowance for expected credit losses on cash and cash equivalents   5     -  
         
Net increase (decrease) in cash and cash equivalents   991     (784)  
         
Cash and cash equivalents at beginning of period   1,803     2,452  
Cash and cash equivalents, net of overdrafts at beginning of period   380     1,223  
Cash and cash equivalents at end of period   2,745     1,277  
Cash and cash equivalents, net of overdrafts at end of period   1,371     439  
             

There were certain reclassifications to conform with the current period presentation. These interim condensed consolidated financial statements were prepared by Mechel PAO in accordance with IFRS and have not been audited by the independent auditor. If these interim condensed consolidated financial statements are audited in the future, the audit could reveal differences in our consolidated financial results and we cannot assure that any such differences would not be material.
____________________

EBITDA - Adjusted EBITDA. Please find the calculation of the Adjusted EBITDA and other non-IFRS measures used here and hereafter in Attachment A.

** Calculations of Net debt could be differ from indicators calculated in accordance with loan agreements upon dependence on definitions in such agreements. 

Mechel OAO Logo

Powered by EIN News


EIN Presswire does not exercise editorial control over third-party content provided, uploaded, published, or distributed by users of EIN Presswire. We are a distributor, not a publisher, of 3rd party content. Such content may contain the views, opinions, statements, offers, and other material of the respective users, suppliers, participants, or authors.

Submit your press release