MECHEL reports 2010 first half financial results

Mechel’s CEO Yevgeny Mikhel commented on the first half of 2010 results: “First half of the year was the period of hard and intense work for us. As a result we succeeded in resolving a number of challenging tasks. To be more specific, we restored coal production volumes to pre-crisis levels, brought down costs in the mining segment to their normalized levels, strengthened the position of the steel segment through new acquisitions and launch of new equipment at the existing steel plants and continued geographic expansion of our distribution network. At the same time we continued with our Capex program and streamlining of the Group’s management structure.
During the reported half-year period pricing environment on our main markets has been rather favorable, which allowed us to improve the company’s operational and financial results considerably”.
The net revenue in the first half of 2010 increased by 76.1% and amounted to $4.3 billion compared to $2.5 billion in the first half of 2009. The operating income rose by 1 455.9% and amounted to $555.1 million or 12.82% of the net revenue, compared to the operating loss of $40.9 million or -1.66% of the net revenue in the first half of 2009.
The consolidated EBITDA in the first half of 2010 increased by 377.0% to $781.0 million, compared to $163.8 million in the first half of 2009. Depreciation, depletion and amortization in the first half of 2010 for the Company were $240.6 million, an increase of 39.6% compared to $172.3 million in the first half of 2009.
Mining segment’s revenue from external customers for the first half of 2010 totaled $1.3 billion, or 29.7% of the consolidated net revenue, an increase of 77.9% over net segment’s revenue from external customers of $723.4 million, or 29.4% of the consolidated net revenue in the first half of 2009.
The operating income in the mining segment in the first half of 2010 increased by 609.7% to $468.7 million, or 28.01% of total segment’s revenue, compared to the operating income of $66.0 million, or 7.5% of total segment revenue for the first half of 2009. The EBITDA in the mining segment in the first half of 2010 went up by 262.4% and amounted to $586.2 million compared to segment’s EBITDA of $161.8 million in the first half of 2009. The EBITDA margin for the mining segment in the first half of 2010 was 35.03% compared to 18.30% in the first half of 2009. Depreciation, depletion and amortization in the mining segment amounted to $141.5 million that is 56.9% higher than $90.2 million in the first half of 2009.
Chief Executive Officer of Mechel Mining Management Company Boris Nikishichev commented on the mining segment’s results: “Targeted increase in production volumes and prices growth in the first half of 2010 coupled with our efforts to produce higher value-added types of coals, such as anthracites and PCI, used in steel production, eventually crystallized in the positive dynamics of the mining segment’s financial performance.
In the first quarter we were actively accelerating coal production by intensifying stripping works and equipment reparation. Consequently in the second quarter we achieved 2008 production volumes. Beginning from there group’s monthly production volumes were continuously exceeding pre-crisis levels. Simultaneously we managed to decrease production costs to their normalized levels.
We continue with the implementation of our key investment projects. Elga Coal Deposit development and construction of Ulak-Elga railway track remain the priority project in the mining segment. By the end of the year we intend to begin mining first volumes of coal there. We also continue construction of the second stage of Sibirginsk mine of Southern Kuzbass Coal Company, upon completion of which the mine’s production volumes should reach 2.4 mln tones per annum.
Current price trends for our mining products allow us to anticipate continued strong operating performance of the segment through the remainder of this year”.