Mechel Reports the 1Q 2012 Financial Results
"As a result of the accounting period, in spite of the volatile market situation due to remaining difficulties in economic development of certain countries and regions that are clients of the Group's products, we managed to make good on key issues - we optimized the debt, retained high levels of revenue and freed significant amount of funds by reducing stock, in this way significantly improving the Group's operational cash flow."
The net revenue in 1Q 2012 increased
The net revenue in 1Q 2012 increased by 0.5% and amounted to $3.0 billion compared to $2.9 billion in 1Q 2011. The operating income decreased by 30.0% and amounted to $314 million or 10.64% of the net revenue, compared to the operating income of $448 million or 15.28% of the net revenue in 1Q 2011.
"At Elga, nevertheless that rail tracks are laid along the entire way to the deposit, chief resources are focused on constructing a seasonal washing plant, in order to begin production and sales of coking coal concentrate in the short term. Once the construction of the plant is completed this summer we will ship off the first load of coking coal concentrate, starting to get returns on the large-scale investment into the project.
Mechel's steel segment's revenue from external clients in 1Q 2012 amounted to $1.6 billion, or 56% of the consolidated net revenue, a decrease of 6.1% over the net segment's revenue from external clients of $1.8 billion, or 60% of consolidated net revenue, in 1Q 2011.
Capital expenditure on property, plant and equipment and acquisition of mineral licenses for the 1Q 2012 amounted to $276.2 million, of which $147.8 million was invested in the mining segment, $114.4 million was invested in the steel segment, $11.8 million was invested in the ferroalloy segment and $2.2 million was invested in the power segment.
As of March 31, 2012, total debt was at $9.6 billion. Cash and cash equivalents amounted to $439.7 million and net debt amounted to $9.2 billion at end of 1Q 2012.
The leading Russian companies
Mechel is one of the leading Russian companies. Its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, hardware, heat and electric power. Mechel products are marketed domestically and internationally.
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 place to place 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.
Adjusted EBITDA represents earnings previously Depreciation, depletion and amortization, Foreign exchange gain/(loss), Gain/(loss) from remeasurement of contingent liabilities at fair value, Interest expense, Interest income, Net result on the disposal of non-current assets, Amount attributable to non-controlling interests and Income taxes. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of our net earnings. Our adjusted EBITDA may not be similar to EBITDA measures of other companies. Adjusted EBITDA is not a measurement in accordance with accounting principles usually accepted in the United States and should be considered should the contingency arise to, now not as a substitute for, the information contained in our consolidated statement of operations. 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 just as capital expenditures, acquisitions and other investments and our ability to incur and service debt. During interest, depreciation and amortization are considered operating costs pursuant to this agreement generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived 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. Adjusted EBITDA can be reconciled to our consolidated statements of operations as follows: