Revenues amounted to $2.46 billion
Operating loss amounted to $40.9 million
Net loss amounted to $471.4 million
MOSCOW, Nov. 9, 2009 (GLOBE NEWSWIRE) -- Mechel OAO (NYSE:MTL), a leading Russian integrated mining and steel group, today announced financial results for the first half ended June 30, 2009.
Igor Zyuzin, Mechel's Chief Executive Officer, commented on the first half results: "The second quarter, most difficult period of the world's financial crisis, proved that Mechel has chosen the right way to overcome the difficult situation. Though our pre-crisis priced contracts mostly expired already in the first quarter, we managed to sustain stable cash flows, restructure most of our debt portfolio with international banks syndicate, restore pre-crisis capacity utilization in steel segment, and continue implementing a number of key investment projects. The vertically integrated structure of Mechel again has proved its reliability even in the times of deep markets decline, allowing us to end the quarter with positive EBITDA."
Consolidated Results for the first half of 2009
-----------------------------------------------
---------------------------------------------------------------------
US$ thousand 1H 2009 1H 2008 Change
Y-on-Y
---------------------------------------------------------------------
Revenues from external
customers 2,460,220 5,349,246 -54.0%
---------------------------------------------------------------------
Intersegment sales 346,533 791,420 -56.2%
---------------------------------------------------------------------
Net operating income (40,943) 1,606,384 -102.5%
---------------------------------------------------------------------
Net operating margin -1.7% 30.0% --
---------------------------------------------------------------------
Net income (471,378) 1,101,773 -142.8%
---------------------------------------------------------------------
EBITDA(1) (104,335) 1,879,919 -105.5%
---------------------------------------------------------------------
EBITDA margin(1) -4.2% 35.1% --
---------------------------------------------------------------------
EBITDA, FX adjusted(1)(2) 183,499 1,746,464 -89.5
---------------------------------------------------------------------
(1) See Attachment A.
(2) For comparison convenience, the EBITDA is also provided without
correction of Forex gain/loss
---------------------------------------------------------------------
US$ thousand 2Q 2009 1Q 2009 Change
Q-on-Q
---------------------------------------------------------------------
Revenues from external
customers 1,280,816 1,179,404 8.6%
---------------------------------------------------------------------
Intersegment sales 173,349 173,184 0.1%
---------------------------------------------------------------------
Net operating income (54,725) 13,782 -497.1%
---------------------------------------------------------------------
Net operating margin -4.3% 1.2% --
---------------------------------------------------------------------
Net income 219,322 (690,700) 131.8%
---------------------------------------------------------------------
EBITDA(1) 369,960 (474,295) 178.0%
---------------------------------------------------------------------
EBITDA margin(1) 28.9% -40.2% --
---------------------------------------------------------------------
EBITDA, FX adjusted(1)(2) 65,864 117,635 -44.0%
---------------------------------------------------------------------
(1) See Attachment A.
(2) For comparison convenience, the EBITDA is also provided without
correction of Forex gain/loss
Net revenue in the second quarter of 2009 increased by 8.6% to $1.28 billion compared to $1.18 billion in the first quarter of 2009, reflecting beginning of production volumes recovery. Meanwhile, operating loss amounted to $54.7 million versus operating income of $13.8 million in the first quarter of 2009.
In the second quarter of 2009, Mechel reported consolidated net income of $219.3 million compared to consolidated net loss of $690.7 million in the first quarter of 2009.
Consolidated EBITDA in the second quarter of 2009 amounted to $370.0 million. Depreciation, depletion and amortization in the second quarter of 2009 were $97.0 million, an increase of 28.7% over $75.4 million in the first quarter of 2009.
Mining Segment Results
----------------------
---------------------------------------------------------------------
US$ thousand 1H 2009 1H 2008 Change
Y-on-Y
---------------------------------------------------------------------
Revenues from external
customers 674,865 1,709,289 -60.5%
---------------------------------------------------------------------
Intersegment sales 104,764 375,021 -72.1%
---------------------------------------------------------------------
Operating income 62,633 917,433 -93.2%
---------------------------------------------------------------------
Net income (16,072) 630,701 -102.5%
---------------------------------------------------------------------
EBITDA* 181,305 1,063,512 -83.0%
---------------------------------------------------------------------
EBITDA margin** 23.3% 51.0% --
---------------------------------------------------------------------
* - See Attachment A.
** - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 2Q 2009 1Q 2009 Change
Q-on-Q
---------------------------------------------------------------------
Revenues from external
customers 330,629 344,236 -4.0%
---------------------------------------------------------------------
Intersegment sales 53,014 51,750 2.4%
---------------------------------------------------------------------
Operating income 12,625 50,008 -74.7%
---------------------------------------------------------------------
Net income 49,724 (65,796) 175.6%
---------------------------------------------------------------------
EBITDA 139,460 41,845 233.3%
---------------------------------------------------------------------
EBITDA margin* 36.4% 10.6% --
---------------------------------------------------------------------
* - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Mining Segment Output
---------------------
---------------------------------------------------------------------
Product 1H 2009, 2Q 2009, 2Q2009
thousand thousand vs.
tonnes tonnes 1Q 2009
---------------------------------------------------------------------
Coal 6,429 2,991 -13
---------------------------------------------------------------------
Coking coal 2,280 1,237 +19
---------------------------------------------------------------------
Steam coal 4,149 1,755 -27
---------------------------------------------------------------------
Coal concentrate* 3,129 1,736 +25
---------------------------------------------------------------------
Coking 2,093 1,221 +40
---------------------------------------------------------------------
Steam 1,036 524 +2
---------------------------------------------------------------------
Iron ore concentrate 1,954 1,073 +22
---------------------------------------------------------------------
* The coal concentrate has been produced from the part of the raw
coal output.
Mining segment revenue from external customers for the second quarter of 2009 totaled $330.6 million, or 25.8% of consolidated net revenue, a decrease of 4.0% over net segment revenue from external customers of $344.2 million in the first quarter of 2009.
As of June 30, 2009, Mechel's acquisition of Bluestone Coal Group companies was accounted for on a tentative basis subject to the finalization of assets appraisals and consideration paid measurement. Specifically, the Group has not yet determined the appropriate values of the Preferred Shares issued, the CVR and the Drilling program related contingent payments (the components of the consideration paid); and the allocation of the purchase consideration to the assets of the BCG companies acquired and liabilities incurred has not been completed. As of the appropriate acquisition date, the estimated amounts of Bluestone Coal Group companies non-current assets were $175,318, and total assets and liabilities amounted to $277,800 and $205,416, respectively. Assets and liabilities are currently accounted for based on their historic values rather than appraised amounts. Goodwill arising on the acquisition of Bluestone Coal Group companies tentatively amounted to $999,561. Specifically, the majority of the existing goodwill is expected to be primarily allocated to mineral licenses based on the ongoing third-party valuation.
Operating income in the mining segment in the second quarter of 2009 decreased by 74.7% to $12.6 million, or 3.3% of total segment revenue, compared to operating income of $50.0 million in the first quarter of 2009. EBITDA in the mining segment in the second quarter of 2009 totaled $139.5 million, an increase of 233.3% over segment EBITDA of $41.8 million in the first quarter of 2009. The EBITDA margin for the mining segment increased from 10.6% for the first three months of 2009 to 36.4% in the second quarter of 2009. Depreciation, depletion and amortization in mining segment amounted to $49.1 million, an increase of 28.9% over $38.1 million in the previous quarter.
Mechel's Senior vice-president Vladimir Polin commented on the mining segment operating results: "The mining segment's results in the second quarter were largely affected by significant decline of export prices, for most of the previous year's contracts, signed at the pike of the market, already expired in the first quarter. Also, after acquiring in May 2009 the Bluestone company in USA, we had to temporarily shut down production there in order to reorganize its operations and sales system according to our standards and due to expiration of old contracts. All this also resulted in the decline of the financial performance of the segment in the second quarter. At the same time, in the second quarter we got new international price benchmarks for coking coal and managed to sign new long term contracts with Chinese, Japanese and South Korean companies. That allowed us to boost capacity utilization in coking coal concentrate later and start returning them back to the pre-crisis levels, which was demonstrated in our nine-months operational results. At Bluestone, we have already surpassed the previous maximum production levels in coking coal concentrate. All this gives us reason to believe, that for our mining segment, the worst part of 2009 is over and we will witness only improvement of the segment's performance later."
Steel Segment Results
---------------------
---------------------------------------------------------------------
US$ thousand 1H 2009 1H 2008 Change
Y-on-Y
---------------------------------------------------------------------
Revenues from external
customers 1,397,854 3,004,173 -53.5%
---------------------------------------------------------------------
Intersegment sales 76,845 140,325 -45.2%
---------------------------------------------------------------------
Operating income (158,694) 598,896 -126.5%
---------------------------------------------------------------------
Net income (321,507) 467,678 -168.7%
---------------------------------------------------------------------
EBITDA* (180,816) 771,290 -123.4%
---------------------------------------------------------------------
EBITDA margin** -12.3% 24.5% --
---------------------------------------------------------------------
* - See Attachment A.
** - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 2Q 2009 1Q 2009 Change
Q-on-Q
---------------------------------------------------------------------
Revenues from external
customers 754,700 643,154 17.3%
---------------------------------------------------------------------
Intersegment sales 35,147 41,698 -15.7%
---------------------------------------------------------------------
Operating income (73,506) (85,188) 13.7%
---------------------------------------------------------------------
Net income 36,591 (358,098) 110.2%
---------------------------------------------------------------------
EBITDA 79,452 (260,268) 130.5%
---------------------------------------------------------------------
EBITDA margin* 10.1% -38.0% --
---------------------------------------------------------------------
* - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Steel Segment Output
--------------------
---------------------------------------------------------------------
Product 1H 2009, 2Q 2009, 2Q2009
thousand thousand vs.
tonnes tonnes 1Q 2009
---------------------------------------------------------------------
Coke 1,263 723 +34
---------------------------------------------------------------------
Pig iron 1,651 965 +41
---------------------------------------------------------------------
Steel 2,497 1,397 +27
---------------------------------------------------------------------
Rolled products 2,412 1,341 +25
---------------------------------------------------------------------
Hardware 297 173 +40
---------------------------------------------------------------------
Revenue from external customers in Mechel's steel segment increased by 17.3% in the second quarter of 2009 and amounted to $754.7 million, or 59% of consolidated net revenue, from $643.2 million, or 58.9% of consolidated net revenue, in the first quarter of 2009.
In the second quarter of 2009, the steel segment operating loss was $73.5 million, versus operating loss of $85.2 million in the first quarter of 2009. EBITDA in the steel segment in the second quarter of 2009 amounted to $79.5 million, compared to EBITDA of -$260.3 million in the first quarter of 2009. The EBITDA margin of the steel segment increased to 10.0% in the second quarter of 2009 compared to -38.0% in the first quarter of 2009. Depreciation, depletion and amortization in steel segment increased by 9.1% from $26.4 million in the first quarter of 2009 to $28.8 million in the second quarter of 2009.
Commenting the results of the steel segment, Vladimir Polin noted: "We are glad to note that Mechel's steel segment managed to restore its pre-crisis production levels already during second quarter 2009, and in some products even slightly improved them. Also, big work was conducted to further optimize the whole system of steel sales in the group. As a result, we have improved the operational income of the segment and significantly reduced accounts receivable, thus improving operational cash flows for the period. In the crisis times, demanding special focus on the production efficiency, we continue to increase the higher value-added products output, reducing volumes of semi-finished sales. We estimate that the trader destocking is over and their inventories are at their bottom levels. For example, the rebar inventories in Russia reduced during six months by 26%, and Mechel-Service managed to reduce them by 38%. In the third quarter we witnessed growth in demand for all of our export products in Middle East and Southeast Asia. We will continue to focus tightly on our cost side of the steel business, securing its platform for further improvements in performance."
Ferroalloy Segment Results
--------------------------
---------------------------------------------------------------------
US$ thousand 1H 2009 1H 2008 Change
Y-on-Y
---------------------------------------------------------------------
Revenues from external
customers 130,988 278,275 -52.9%
---------------------------------------------------------------------
Intersegment sales 19,419 92,501 -79.0%
---------------------------------------------------------------------
Operating income (30,341) 84,925 -135.7%
---------------------------------------------------------------------
Net income (202,609) 38,968 -619.9%
---------------------------------------------------------------------
EBITDA* (154,044) 98,426 -256.5%
---------------------------------------------------------------------
EBITDA margin** -102.4% 26.6% --
---------------------------------------------------------------------
* - See Attachment A.
** - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 2Q 2009 1Q 2009 Change
Q-on-Q
---------------------------------------------------------------------
Revenues from external
customers 77,129 53,859 43.2%
---------------------------------------------------------------------
Intersegment sales 12,344 7,075 74.5%
---------------------------------------------------------------------
Operating income (5,539) (24,802) 77.7%
---------------------------------------------------------------------
Net income 126,082 (328,691) 138.6%
---------------------------------------------------------------------
EBITDA 153,193 (307,237) 149.9%
---------------------------------------------------------------------
EBITDA margin* 171.2% -504.2% --
---------------------------------------------------------------------
* - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Ferroalloy Segment Output
-------------------------
---------------------------------------------------------------------
Product 1H 2009, 2Q 2009, 2Q2009
thousand thousand vs.
tonnes tonnes 1Q 2009
---------------------------------------------------------------------
Nickel 7.1 4.2 +45
---------------------------------------------------------------------
Ferrosilicon 44 21 -9
---------------------------------------------------------------------
Ferrochrome 23.3 15.6 +103
---------------------------------------------------------------------
Ferroalloy segment revenue from external customers for the second quarter of 2009 amounted to $77.1 million, or 6.0% of consolidated net revenue, an increase of 43.2% compared with segment revenue from external customers of $53.9 million, or 5% of consolidated net revenue, in the first quarter of 2009.
Operating loss in the ferroalloy segment in the second quarter of 2009 was $5.5 million, versus operating loss of $24.8 million in the previous quarter. EBITDA in the ferroalloy segment for the second quarter of 2009 was $153.2 million, compared to segment EBITDA of -$307.2 million in the first quarter of 2009. The EBITDA margin of the ferroalloy segment increased amounted to 171.2% in the second quarter of 2009. For ferroalloy segment depreciation, depletion and amortization in the second quarter of 2009 was $15.5 million, an increase of 142.2% over $6.4 million in the first quarter of 2009.
Vladimir Polin noted: "In the second quarter of 2009, an environment on Mechel's ferroalloy segment key distribution markets has improved materially. Given that we concurrently managed to significantly decrease costs and to put our ferroalloy plants to 100% capacity utilization quite promptly, the segment demonstrated an expansive growth of all financial indicators. Currently, we go forward with realization of package of measures focused on Mechel's ferroalloy assets efficiency improvement. We already managed to achieve projected output rate at Tikhvin Ferroalloy Plant, that produces ferrochrome, and to significantly increase production of chromite ore concentrate at Voskhod mining and processing plant that in turn will result in further growth of segment results."
Power Segment Results
---------------------
---------------------------------------------------------------------
US$ thousand 1H 2009 1H 2008 Change
Y-on-Y
---------------------------------------------------------------------
Revenues from external
customers 256,513 357,509 -28.2%
---------------------------------------------------------------------
Intersegment sales 145,505 183,574 -20.7%
---------------------------------------------------------------------
Operating income 12,337 23,126 -46.7%
---------------------------------------------------------------------
Net income (4,311) 7,193 -159.9%
---------------------------------------------------------------------
EBITDA* 19,048 35,916 -47.0%
---------------------------------------------------------------------
EBITDA margin** 4.7% 6.6% --
---------------------------------------------------------------------
* - See Attachment A.
** - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 2Q 2009 1Q 2009 Change
Q-on-Q
---------------------------------------------------------------------
Revenues from external
customers 118,358 138,155 -14.3%
---------------------------------------------------------------------
Intersegment sales 72,844 72,661 0.3%
---------------------------------------------------------------------
Operating income 213 12,124 -98.2%
---------------------------------------------------------------------
Net income (4,556) 245 -1,959.6%
---------------------------------------------------------------------
EBITDA 5,147 13,901 -63.0%
---------------------------------------------------------------------
EBITDA, margin* 2.7% 6.6% --
---------------------------------------------------------------------
* - EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Power Segment Output
--------------------
---------------------------------------------------------------------
Product Units 1H 2009, 2Q 2009, 2Q2009
thousand thousand vs. 1Q
tonnes tonnes 2009
---------------------------------------------------------------------
Electric power
generation ths. kWh 1,573,506 674,197 -25
---------------------------------------------------------------------
Heat power
generation Gcal 3,068,432 966,225 -54
---------------------------------------------------------------------
Mechel's power segment revenue from external customers for the second quarter of 2009 decreased by 14.3% to $118.4 million, or 9% of consolidated net revenue, compared to $138.2 million of segment revenue from external customers, or 12% of consolidated net revenue, in the first quarter of 2009.
Operating income in the power segment in the second quarter of 2009 was $213 thousand, a decrease of 98.2% compared to operating income of $12.1 million in the first quarter of 2009. EBITDA in the power segment in the second quarter of 2009 decreased 63.0% totaling $5.1 million, compared to EBITDA of $13.9 million in the first quarter of 2009. The EBITDA margin for the power segment decreased from 6.6% to 2.7%. Depreciation, depletion and amortization in power segment in the second quarter of 2009 decreased 22.2%, compared to the first quarter of 2009, from $4.5 million to $3.5 million.
Vladimir Polin noted: "From the very beginning of global financial and economic crisis we witness a power consumption decline that in the second quarter was further affected by overall seasonal decrease of power and heat energy consumption and generation. We work on costs reduction, fuel factor decrease and reaching of synergy between segments. In virtue of range of measures implemented in this area we managed to keep showing results that exceed average all-Russian figures and the segment still demonstrates operating profit."
Recent Highlights
* In July 2009, Mechel announced that electric furnace No. 1 at
Tikhvin Ferroalloy Smelting Plant (JSC "TFZ") has been
commissioned. JSC "TFZ" is a subsidiary of Oriel Resources Ltd.
(Great Britain). Electric furnace No. 1 that has been
commissioned at JSC "TFZ" became the last of the four units at
the plant put into continuously operating regime. Thus, Mechel
increases its output of high quality ferrochrome, an alloy
required to produce stainless and special steels.
* In July 2009, Mechel announced successful closing of the deal for
refinancing its short-term credit facilities totaling 2.6 billion
US dollars raised to purchase assets in Yakutia and Oriel
Resources Ltd. Mechel has become the first Russian company which
managed to refinance its significant credit facilities with
foreign banks by means of long-term instruments and, moreover, it
was done on acceptable and favorable terms.
* In July 2009, Mechel announced that it has competed placement of
its non-convertible, interest bearing, certificated bearer bonds
of 04 series for RUR 5.0 billion. The placement was arranged by
public offering in the form of tender on the coupon rate and
complied with the terms and procedure provided for in the
Resolution on the securities issue and Prospectus. The total
quantity of the placed securities was 5,000,000 bonds with the
nominal value of RUR 1,000.00 each. The first coupon rate was
established at 19% p.a.
* In August 2009, Mechel announced the Memorandum of Cooperation
signing with Mitsui & Co. Corporation. In this connection, the
parties are planning to realize cooperation in different
directions, among which -- marketing and sale of metal production
and resources, including coal, all types of ferroalloys, pig
iron, billet and other types of iron and steel products. Joint
investment projects are also planned, among which organization of
joint ventures in the sphere of primary goods production,
production of ferrous and non-ferrous metallurgy, sales and
distribution.
* In August 2009, Mechel announced establishing its official
representative office in Seoul, the Republic of Korea. Currently,
Mechel's representative office in the Republic of Korea (South
Korea) is the first Russian corporate representative office in
the mining and metals industry in the country. The representative
office of the company will support Mechel's business in the
Republic of Korea, interact directly with South Korean partners,
promote establishing new business contacts and assist in
broadening Mechel's activities in South Korea.
* In September 2009, Mechel announced commissioning of the new
production line for cold-deformed reinforcement wire at its
Beloretsk Metallurgical plant (BMP) subsidiary. New set of
equipment from GCR company, Italy, with annual capacity of 36,000
tons allows Beloretsk Metallurgical Plant to start production of
a brand new class of products -- reinforcing wire with 4-12mm
diameter used for construction.
* In October 2009, Mechel announced establishing its official
representative office in Tokyo, Japan. The representative office
of the company will support Mechel's business in Japan, including
conducting market researches, arranging meeting with partners and
searching for new ones, advertising the Group's products, and
performing representative functions.
* In October, Mechel announced that it has completed placement of
non-convertible interest-bearing documentary bonds of 05 series
with total value of RUR 5 billion. Placement was performed by
public subscription under the terms and conditions of Securities
Prospectus and Decision on Securities Issuance through collection
of purchasers' applications for fixed-price purchase of bonds
with coupon rate for the first coupon period. Securities offered
in the amount of 5 million, nominal value of each bond being
1,000 rubles. Coupon rate for the first coupon period set at
12.5% per annum.
Igor Zyuzin concluded: "Generally, the first half of 2009 was the most challenging period for Mechel during the crisis. Significant efforts were required to adopt the company to deteriorated global economy, to protect the production from shutdowns and then to restore it to pre-crisis levels as promptly as possible. Nevertheless, we succeeded not just to save our business but we also found new sources and methods of costs cutting and productivity enhancement, became more active and flexible in sales, approached new geographical markets, optimized logistics. It was illustrated by the fact that Mechel has become the first Russian industrial company which managed to refinance its debt portfolio with international banks syndicate, and thus has secured company's stability and further development capability. And that is why today the company is able to fully benefit from current economy stabilization and to increase its shareholder value."
Financial Position
Capital expenditure on property, plant and equipment and acquisition of mineral licenses for the first half of 2009 amounted to $223.2 million, of which $86.3 million was invested in the mining segment, $121.5 million was invested in the steel segment, $13.1 million was invested in the ferroalloy segment and $2.2 million was invested in the power segment.
In the first half of 2009, Mechel spent $5.1 million on acquisitions, including $4.1 million spent on acquisition of minority interest in other subsidiaries.
As of June 30, 2009, total debt was at $5,919.6 million. Cash and cash equivalents amounted to $822.4 million at the end of the first half of 2009 and net debt amounted to $5,097.2 million (net debt is defined as total debt outstanding less cash and cash equivalents).
The management of Mechel will host a conference call today at 9:00 a.m. New York time (2:00 p.m. London time, 5:00 p.m. Moscow time) to review Mechel's financial results and comment on current operations. The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.
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 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 2009 First Quarter Earnings Press Release
Attachment A
Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.
Earnings Before Interest, Depreciation and Amortization (EBITDA) and EBITDA margin. EBITDA represents earnings before interest, depreciation and amortization. EBITDA margin is defined as EBITDA as a percentage of our net revenues. Our EBITDA may not be similar to EBITDA measures of other companies; is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that 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 interest, depreciation and amortization are considered operating costs under 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 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. EBITDA can be reconciled to our consolidated statements of operations as follows:
-------------------------------------------------------------------
US$ thousands 1H 2009 1H 2008
-------------------------------------------------------------------
Net income (471,378) 1,101,773
-------------------------------------------------------------------
Add:
Depreciation, depletion and amortization 172,300 231,184
Interest expense 230,629 118,734
Income taxes (35,886) 428,229
-------------------------------------------------------------------
Consolidated EBITDA (104,335) 1,879,919
-------------------------------------------------------------------
Substract:
Forex gain/loss (287,834) 133,455
-------------------------------------------------------------------
EBITDA FX adjusted 183,499 1,746,464
-------------------------------------------------------------------
EBITDA margin can be reconciled as a
percentage to our Revenues as follows:
-------------------------------------------------------------------
US$ thousands 1H 2009 1H 2008
-------------------------------------------------------------------
Revenue, net 2,460,220 5,349,246
-------------------------------------------------------------------
EBITDA (104,335) 1,879,919
-------------------------------------------------------------------
EBITDA margin -4.2% 35.1%
-------------------------------------------------------------------
Consolidated Balance Sheets
(in thousands of U.S. dollars,
except share amounts)
June 30,
2009 Dec. 31,
(unaudited) 2008
----------- -----------
ASSETS
Cash and cash equivalents $ 822 357 $ 254 839
Accounts receivable, net of allowance for
doubtful accounts of $96,719 as of June
30, 2009 and $110,613 as of December
31, 2008 364 873 406 740
Due from related parties 8 739 22 180
Inventories 951 208 1 365 109
Deferred income taxes 30 110 22 047
Prepayments and other current assets 469 745 606 354
Short-term investments in related parties 94 329 67 907
----------- -----------
Total current assets 2 741 361 2 745 176
Long-term investments in related parties 81 180 80 408
Other long-term investments 23 518 472 772
Intangible assets, net 6 539 6 956
Property, plant and equipment, net 4 223 626 4 277 841
Mineral licenses, net 2 971 876 3 430 642
Other non-current assets 42 744 57 844
Deferred income taxes 75 204 27 551
Goodwill 1 864 735 910 444
----------- -----------
Total assets $12 030 784 $12 009 634
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion
of long-term debt (including debt of
$0 with loan covenant violations as of
June 30, 2009 and $4,233,751 as of
December 31, 2008) $ 3 598 986 $ 5 149 415
Accounts payable and accrued expenses:
Trade payable to vendors of goods
and services 564 566 688 702
Advances received 102 337 125 042
Accrued expenses and other
current liabilities 149 320 143 587
Taxes and social charges payable 134 062 131 241
Unrecognized income tax benefits 21 074 27 176
Due to related parties 1 398 1 588
Asset retirement obligation,
current portion 6 327 6 387
Deferred income taxes 16 812 17 785
Deferred revenue 6 795 1 776
Pension obligations, current portion 25 510 28 960
Dividends payable 212 843 4 919
Finance lease liabilities, current portion 34 780 14 891
----------- -----------
Total current liabilities 4 874 810 6 341 469
Long-term debt, net of current portion 2 320 627 219 816
Asset retirement obligations, net of
current portion 65 190 65 217
Pension obligations, net of
current portion 181 750 158 070
Deferred income taxes 746 429 841 214
Finance lease liabilities, net of
current portion 50 836 54 161
Commitments and contingencies
Other long-term liabilities 58 069 8 026
SHAREHOLDERS' EQUITY
Common shares (10 Russian rubles par
value; 497,969,086 shares authorized,
416,270,745 shares issued and outstanding
as of June 30 2009 and December 31, 2008) 133 507 133 507
Preferred shares (10 Russian rubles par
value, 138,756,915 shares authorized,
83,254,149 shares issued and outstanding
as of June 30, 2009) 25 314
Additional paid-in capital 915 388 415 070
Accumulated other comprehensive loss
(income) (236 903) 158 937
Retained earnings 2 643 853 3 323 298
----------- -----------
Equity attributable to shareholders of
Mechel OAO 3 481 159 4 030 812
Equity attributable to non-controlling
interests 251 913 290 849
Total equity 3 733 072 4 321 661
=========== ===========
Total liabilities and shareholders' equity $12 030 784 $12 009 634
=========== ===========
Consolidated Income Statements
(in thousands of U.S. dollars,
except share and per share amounts) 6 months ended June 30,
2009 2008
(unaudited) (unaudited)
----------- -----------
Revenue, net (including related party
amounts of $34,110 and $49,876 during
six months 2009 and 2008, respectively) $ 2 460 220 $ 5 349 246
Cost of goods sold (including related
party amounts of $2,895 and
$6,807 during six months 2009 and 2008,
respectively) (1 774 384) (2 718 611)
----------- -----------
Gross profit 685 836 2 630 635
Selling, distribution and operating
expenses:
Selling and distribution expenses (475 187) (663 606)
Taxes other than income tax (42 479) (85 133)
Accretion expense (3 675) (1 667)
Loss on write-off of property, plant
and equipment (3 493) --
Allowance for doubtful accounts 6 704 269
General, administrative and other
operating expenses (208 649) (274 112)
----------- -----------
Total selling, distribution and
operating expenses (726 779) (1 024 251)
----------- -----------
Operating (loss) income (40 943) 1 606 384
Other income and (expense):
Income (loss) from equity investments 1 146 (7 700)
Interest income 6 083 6 737
Interest expense (230 629) (118 734)
Other income (expenses), net 25 098 (5 339)
Foreign exchange (loss) gain (287 834) 133 455
----------- -----------
Total other income and (expense), net (486 137) 8 419
----------- -----------
(Loss) income before income tax,
non-controlling interest (527 080) 1 614 804
Income tax benefit (expense) 35 886 (428 229)
----------- -----------
Loss (Income) from continuing operations (491 195) 1 186 574
----------- -----------
Less: Net loss (income) attributable to
non-controlling interests 19 817 (84 801)
========== ===========
Net (loss) income attributable to
shareholders of Mechel OAO $(471 378) $1 101 773
========== ===========
Currency translation adjustment (389 742) 132 925
Change in pension benefit obligation (2 721) --
Adjustment of available-for-sale securities (3 377) (3 641)
========== ===========
Comprehensive loss (income) (867 218) 1 231 057
========== ===========
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
For 6 months
ended June 30,
-----------------------
2009 2008
(unaudited) (unaudited)
---------- -----------
Cash Flows from Operating Activities
Net income (loss) $ (471 378) $ 1 101 773
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 145 945 175 784
Depletion and amortization 26 355 55 400
Foreign exchange loss (gain) 287 834 (133 455)
Deferred income taxes (58 009) (3 724)
Release of allowance for doubtful accounts (6 704) (269)
Inventory write-down (118 121) --
Accretion expense 877 1 667
Loss on write-off of property, plant
and equipment 3 493 --
Minority interest (19 817) 84 802
Change in undistributed earnings of
equity investments (1 146) 7 700
Non-cash interest on long-term tax and
pension liabilities 7 571 10 922
Loss on sale of property, plant
and equipment 1 309 2 879
Gain on sale of investments (64) (4 305)
Gain on accounts payable with expired
legal term (1 208) --
Gain on forgiveness of fines and penalties (1 216) --
Amortization of loan origination fee 17 307 9 326
Gain resulting from remeasurement of the
transferred preferred stock (13 664) --
Pension service cost and amortization of
prior period service cost 4 208 5 008
---------- -----------
Net change before changes in working capital (196 428) 1 313 508
========== ===========
Changes in working capital items, net of
effects from acquisition of new
subsidiaries:
Accounts receivable 38 443 (263 678)
Inventories 472 770 (354 051)
Trade payable to vendors of goods
and services (96 986) 62 422
Advances received (20 438) 23 314
Accrued taxes and other liabilities (6 339) 239 137
Settlements with related parties 13 740 (32 407)
Deferred revenue and cost of inventory in
transit, net 8 958 (4 983)
Other current assets 169 741 (33 429)
Prepayments to non-state pension funds (6 642) (5 110)
Unrecognized income tax benefits (4 965) (707)
---------- -----------
Net cash provided by operating activities 371 854 944 016
========== ===========
Cash Flows from Investing Activities
Acquisition of Oriel, less cash acquired -- (1 430 503)
Acquisition of Ductil Steel S.A., less
cash acquired -- (197 622)
Acquisition of HBL, less cash acquired (8 387) --
Acquisition of the BCG Companies, less
cash acquired 9 812 --
Acquisition of other investments, less
cash acquired (2 418) --
Acquisition of minority interest
in subsidiaries (4 119) (38 346)
Investments in other marketable securities -- (380)
Investments in assets trust management
by affiliates (30 241) --
Proceeds from disposal of investments
in affiliates 2 069 --
Proceeds from disposal of non-marketable
equity securities 6 913 7 865
Proceeds from other long-term investment (133 854) --
Repayments of short-term loans issued 73 322 --
Proceeds from disposals of property, plant
and equipment 347 2 003
Purchases of mineral licenses (1 164) (1 705)
Purchases of property, plant and equipment (222 008) (461 119)
---------- -----------
Net cash used in investing activities (309 728) (2 119 807)
========== ===========
Cash Flows from Financing Activities
Proceeds from short-term borrowings 909 134 4 387 110
Repayment of short-term borrowings (1 152 602) (3 158 232)
Proceeds from long-term debt 859 812 39 407
Repayment of long-term debt (8 673) (7 921)
Repayment of obligations under
finance lease (9 919) (12 844)
---------- -----------
Net cash provided by (used in)
financing activities 597 752 1 247 520
========== ===========
Effect of exchange rate changes on cash
and cash equivalents (92 359) 9 759
---------- -----------
Net increase (decrease) in cash and
cash equivalents 567 519 81 488
========== ===========
Cash and cash equivalents at beginning
of period 254 838 236 779
---------- -----------
Cash and cash equivalents at end of period $ 822 357 $ 318 267
========== ===========
CONTACT: Mechel OAO
Alexander Tolkach, Director, Department of Communications
7-495-221-88-88
Fax: 7-495-221-88-00
alexander.tolkach@mechel.com
|
| Symbol: |
MTL |
| Last Trade: |
20.58
(16:01 ET)
|
| Change: |
-0.24
(-1.1527%)
|
| Day's Range: |
20.12 -
20.76 |
| Open: |
20.35 |
| Previous Close: |
20.82 |
| TSO: |
416,271,000 |
| Market Cap: |
8.57B |
| Day's Volume: |
1,197,376 |
|
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