mechel presentation (february, 2015)
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DISCLAIMER
This presentation does not constitute or form part of and should not be construed as,
an offer to sell or issue or the solicitation of an offer to buy or acquire securities of
Mechel OAO (Mechel) or any of its subsidiaries in any jurisdiction or an inducement to
enter into investment activity. No part of this presentation, nor the fact of its
distribution, should form the basis of, or be relied on in connection with, any contract
or commitment or investment decision whatsoever. Any purchase of securities should
be made solely on the basis of information Mechel files from time to time with the U.S.
Securities and Exchange Commission. No representation, warranty or undertaking,
express or implied, is made as to, and no reliance should be placed on, the fairness,
accuracy, completeness or correctness of the information or the opinions contained
herein. None of the Mechel or any of its affiliates, advisors or representatives shall
have any liability whatsoever (in negligence or otherwise) for any loss howsoever
arising from any use of this presentation or its contents or otherwise arising in
connection with the presentation.
This presentation 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.
The information and opinions contained in this document are provided as at the date
of this presentation and are subject to change without notice.
2 2
Mining 32%
Steel 58%
Power 10%
Mining 61%
Steel 30%
Power 9%
LEADING VERTICALLY INTEGRATED MINING & METALS COMPANY MECHEL INTEGRATED BUSINESS MODEL
OPERATING HIGHLIGHTS, SALES
Mining Segment
Source: Company data
- Share produced by third parties
0.5 0.3
9m 2013 9m 2014
Crude Steel, production Long products
Billets Flat products
12.5 11.8
4.5 4.2
3.1 2.5
9m 2013 9m 2014
Met Coal Steam Coal Iron ore concentrate
Steel Segment
‘000 t
onnes
4
Steel Mining Power
FINANCIAL HIGHLIGHTS
9m 2014 Revenue Breakdown 9m 2014 EBITDA(a)(1) Breakdown
Mining
Steel
SALES & MARKETING
LOGISTICS
3.6
2.7
0.7
3.2
2.3
0.08
‘000 t
onnes
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair value, Interest
expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their
disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
INVESTMENT HIGHLIGHTS
5
Best-in-class global coking coal producer and exporter
with attractive growth profile
• One of the largest metallurgical coal producers globally
• One of the leading exporters on the seaborne market
• Developing one of the largest coking coal deposits globally
Superior asset quality
• One of the largest coal reserves base globally
• Core assets positioned at the lower bound of the global cost curve
• Ability to supply steel producers with a full range of metallurgical coal
• First newly built rolling mill for high-speed long rails in Russia
Strategically positioned to
supply both Asia-Pacific and Atlantic seaborne markets
• Uniquely positioned to supply metallurgical coal to attractive Asia Pacific markets
• Access to key Far Eastern and European ports
• Lower transportation cost to supply key growth markets in Asia
• Own infrastructure including ports and rolling stock, secures access to end customers and export markets
Vertically integrated steel business model
• Steel business is virtually self-sufficient in coal and iron ore
• Established distribution and sales platform in core markets
Leading steel producer • Largest specialty steel producer in Russia
• Second largest long steel producer in Russia
• Largest distribution platform in Russia
Port Temryuk
Russian Federation
Lithuania
Kazakhstan
Elga Coal Complex Yakutugol
Korshunov Mining Plant
Southern Kuzbass
Coal Company
Chelyabinsk Metallurgical Plant
Urals Stampings Plant
Beloretsk Metallurgical Plant
Izhstal
Moscow Coke
and Gas Plant
Vyartsilya Metal Products Plant
Port Posiet
Port Vanino*
Port Kambarka
Bratsk Ferroalloy Plant Southern Kuzbass
Power Plant
Moscow Mechel Coke
Ukraine
Mechel
Nemunas
BROAD GEOGRAPHIC FOOTPRINT TARGETING GROWTH MARKETS
USA Mechel Bluestone
West Virginia
REVENUE BREAKDOWN BY
MARKET (9m 2014)
Mining Segment
China 36%
Russia 29%
Europe 15%
Asia w/o China 14%
CIS 3%
Middle East 3%
Other 0%
Steel Segment
Russia 68%
Europe 16%
CIS 12%
Asia 1%
Middle East 1%
USA 0.3% Other
1.7%
Source: Company data
Mining
Steel Power
Port Head office
6
*Access to port secured by contractual agreements
Mongolia
China
TSO
%
of Total
Ordinary 416,270,745 75%
Preferred 138,756,915 25%
Preferred Publicly Trading 57,209,577 10%
Preferred held by Justice family 26,044,572 5%
Preferred Share held by Mechel as treasury
55,502,766 10%
Total 555,027,660 100%
CAPITAL STRUCTURE
CAPITALIZATION AND OWNERSHIP STRUCTURE
Preferred Shares
Ordinary Shares
Public Float
32.6%
Igor Zyuzin
(with family)
67.4%
Public Float
41%
Justice Family
19%
Mechel
40%
Source: Company data
OWNERSHIP STRUCTURE
7
NARROWED STRATEGY USING KEY COMPETITIVE ADVANTAGES FOR VALUE GROWTH
GROWTH IN SHAREHOLDER VALUE
BASED ON VERTICALLY-INTEGRATED BUSINESS
MODEL
TOP-5 global metcoal producer 1
Leader in Russia and CIS construction steel market 2
Leader in specialty steel, stainless steel and hardware production 3
Optimization of asset structure to deleverage 4
8
35.9
11.1
1.4
2.6
3.4
7.7 4.6
2.5
4.1
2.6
Production Consumption
MM
t
MM
t
MM
t
MM
t
MM
t
Production Consumption Production Consumption
Shipped through
own ports
Shipped overall
(excl. US ports)
Own rolling stock Overall
9
Production Consumption
9.6
4.5
3.3
7.8
5th largest metallurgical coal
producer globally* with ability
to supply steel producers with
a wide range of metallurgical
coal types, coke and iron
ore concentrate.
Own infrastructure
helps to establish access to
end customers.
*Ex-China Source: Company data
- Volumes shipped through Vanino port
Sea Port capacity, 9m 2014 Cargo turnover, 9m 2014 Power, 9m 2014
Coking Coal Concentrate, 9m 2014 Iron Ore Feed, 9m 2014 Coke, 9m 2014
bln
KW
h
VERTICALLY INTEGRATED MINING & STEEL BUSINESS MODEL WITH FOCUS ON COMPETITIVE ADVANTAGES
4 361
3 690
2 576
1 602
1 500
1112
1 082
826
411
350
0 1 000 2 000 3 000 4 000 5 000
BMA
Mechel
Evraz
Vale
Alpha Natural Resources
Peabody
BHP
Anglo-American
Walter Energy
Glencore Xstrata
33,8
31,2
25,6
20,1
16,4
15,9
12,1
11,8
11,6
7,9
0 10 20 30 40
BMA
Anglo-American
Teck
Alpha Natural Resources
Mechel
Peabody
Rio Tinto
Xstrata
Walter-Energy
BHP
LEADING GLOBAL METALLURGICAL COAL PRODUCER
2nd largest metallurgical coal reserve base
5th largest metallurgical coal producer globally with superior leverage to metallurgical coal
One of the largest global exporters of coking coal
Top Ten Metallurgical Coal Exporters in 2013 Ten Largest Metallurgical Coal Producers in 2013 Ten Largest Metallurgical Coal Producers by
Metallurgical Coal Reserves
MMt MMt
Source: Wood Mackenzie 2013 (1) Including 50% share of BMA (2) Including PCI and anthracite export
Source: Company Filings All production numbers shown on an attributable saleable basis unless otherwise disclosed (1) Met coal with some minor thermal coal production (2) Small part may be third-party purchased coal (3) 100% for consolidated entities and attributable for JVs and associates (4) South Walker+Poitrel. BHP/Mitsui – 80/20 (5) Coking coal concentrate+PCI+Anthracites (6) Met coal only (7) With IIIawarra project
Source: Company Filings, IMC All reserve numbers shown on a 100% run-of-mine basis unless otherwise disclosed (1) Assumes 100% of disclosed reserves are metallurgical (2) On a saleable, attributable basis (3) Reserves as of 30 June 2012 (4) Adjusted for acquisition of Raspadskaya
10
(1)
(2)
MMt (1)
(1)
(1)
65
22
22
18
17
15
14
14
13
11
0 20 40 60 80
BHP Billiton
Teck
Anglo American
Peabody
Alpha
Glencore Xstrata
Rio Tinto
Walter Energy
Mechel
Vale S.A.
(3)
(4))
(3)
(4)
(6)
(2)
(1)
(2)
(5)
(7)
(6)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
LOW COST COKING COAL PRODUCER
Source: AME
Notes: (1) FOB excluding land freight and port costs
Source: AME
Cumulative Production (%)
Australia USA & Canada Russia Other
Cumulative Production (%)
Australia USA & Canada Russia Other
0
50
100
150
200
0
50
100
150
200
Yakutu
gol Mechel B
lended
0
50
100
150
200
0
50
100
150
200
Me
ch
el B
len
ded
U$/t
Yakutu
gol
post - Elga
About 80% of coking coal by open pit
Access to cheap labor Low production cost
Low raw material costs
ESTIMATED EXPORT COKING COAL COST CURVE (FCA(1)) ESTIMATED EXPORT COKING COAL COST CURVE (FOB)
U$/t
11
150
100
50
150
100
50
Port Posiet
Yakutugol Southern
Kuzbass
Indonesia
USA
Canada
Europe
Australia
India
Japan China
Russia
211.7 mn t (2)
ABILITY TO SUPPLY ALL METCOAL MARKETS
Major coking coal
exporting regions
Target markets for Mechel’s
coking coal supplies
Target markets for Mechel’s
steam coal supplies
Major coking coal
importing regions
Mechel’s routes
3rd parties routes
Size of respective
seaborne coking coal markets
Notes: (1) FY2013 coal production
(2) Total seaborne met coal imports (2013 est), China, India, Japan, South Korea.
Source: MCQ47
Diversification / enhancement of sales channels to the fast-growing Asian and European markets
Extensive range of metcoal grades allow for diversified product portfolio to serve a variety of customer needs
Mechel’s own ports on the Sea of Japan and Azov Sea serve as a stable gateways to export markets
Freight rates from port Posiet
(Handysize 22 000 t)
to Northern China $11 pmt
to Yangtze River $12 pmt
to Southern China $15.75 pmt
to Thailand $16.60 pmt
to Philippines $17 pmt
to Indonesia $18.50 pmt
India (West Coast / East Coast)
$33 / $30 pmt
to Japan $10.50 pmt
15.1 mn t (1)
9.9 mn t (1)
12
Freight rates from port Vanino
(45 000 t)
to Northern China $11.50 pmt
to Yangtze River $12.50 pmt
to Southern China $15 pmt
to Thailand $14.95 pmt
to Philippines $15 pmt
to Indonesia $16 pmt
India (West Coast / East Coast)
$26.25/ $23
pmt
to Japan $9 pmt
Port Vanino
Source: Company data
MECHEL SERVICE GLOBAL -- MAP OF DISTRIBUTION HUBS
95 storage sites and service centers throughout Russia,
CIS & Europe
Real time market intelligence and pricing feedback
Opportunity to address specific customer needs and sell
more high-marginal, value-added products
ADVANTAGES
PRODUCT PRODUCTION
VOLUME, 6m 2014
‘000 tonnes
RUSSIAN
PRODUCTION
SHARE
RANK
Spring
wire 1 58% 21
Wire
products 1 31% 323
Wire rod 1 32% 429
High-
tensile wire 2 37% 17
Flat
stainless
steel 1 46% 5
Rebar 3 18% 791
LEADER IN SPECIALTY, STAINLESS STEEL & HARDWARE
13
Geographies of presence of Mechel Service
Mechel Service facilities
• Logistics flexibility on the Sea of
Azov and Black Sea
• Potential to increase export of coking
coal, PCI and anthracite to Europe
• Existing port capacity – 2 mln tonnes
• Target capacity - 4 mln tonnes
• Rolling stock of more than 11,900
railcars
• Ensures uninterrupted transportation
• Reduces dependency on Russian
Railways, state-owned and
independent freighters
• Increase access to Asian coal
customers via seaborne market
• Existing port capacity – 7 million
tonnes per year
• Target capacity - 9 mn tonnes
(Panamax vessels) after 2nd stage of
modernization
MECHEL’S INFRASTRUCTURE ALLOWS SECURED ACCESS TO FINAL CUSTOMERS
• Increases logistics flexibility to Asian
coal customers via seaborne market
securing exports from Elga
• Total turnover up to 10 million tonnes
of cargo per year
• Shorter transportation distances –
lower rail and vessel freights
TEMRYUK PORT MECHEL TRANS TRANSPORTATION COMPANY
POSIET PORT VANINO PORT*
14
* Access to port secured by contractual agreements
KEY PROJECT CHARACTERISTICS
4.7 7.0
1.8
1.8
10.0
0,0
5,0
10,0
15,0
20,0
2012 2014
Posiet Temryuk Vanino
6.5
18.8
TEMRYUK POSIET VANINO
EXISTING
CAPACITY 1.8 MMt per year 7.0 MMt per year 10.0 MMt per year
TARGET
CAPACITY 4.2 MMt per year 9 MMt per year na
DEVELOPMENT
STAGE Modernization Modernization na
VESSEL TYPE River-to-sea
vessels
Panamax (post
modernization) Panamax
TIMING 2017 na na Source: Company data
Notes: * Volumes secured by contractual agreements
Elga Coal Complex Yakutugol
Southern
Kuzbass
Port Posiet
Port Vanino Port Temryuk
OWN SEAPORT FACILITIES
OWN SEAPORT ANNUAL TURNOVER CAPACITIES, MMt *
MECHEL TRANS – ACCESS TO SEABORNE MARKET
15
Access to main customers in Asia-Pacific and
Europe secured through own ports infrastructure
Port capacity aligned with expected growth in
export volumes
ALIGNING ASSETS STRUCTURE WITH STRATEGY
Mining Segment
Korshunov Mining
Plant
Iron Ore
Yakutugol
Southern Kuzbass
Coal Company
Elga Coal
Deposit
Bluestone
Coal
Coke
Mechel Coke
Moscow Coke and
Gas Plant
Steel Segment
Vyartsilya Metal Products Plant
Beloretsk Metallurgical Plant
Urals Stampings Plant
Mechel Targoviste
(Romania)
Mechel Campia Turzii
(Romania)
Chelyabinsk Metallurgical Plant
Buzau Plant
(Romania)
Otelu Rosu Plant
(Romania)
Izhstal
Donetsk Electrometallurgical Plant
Laminorul Plant
(Romania)
Mechel Nemunas (Lithuania)
Ferroalloys Segment
Ferronickel
Ferrochrome
Ferrosilicon
Southern Urals Nickel
Plant
Tikhvin Ferroalloy Plant
Voskhod Chrome
Mining Plant
(Kazakhstan)
Bratsk Ferroalloy Plant
Uvatskoye Deposit of
Quartzite
Power Segment
Toplofikatsia Rousse
Power Plant -
Southern Kuzbass
Power Plant
Kuzbass Power
Sales Company
Generation
Distribution
Distribution
Mechel Service Global *
(ex Russia)
Mechel Trading House
Mechel Carbon
Mechel-Mining Trading
House
Mechel Trading
Mechel Service OOO
(Russia)
Invicta (UK)
Group 1
Group 2
16
Improvement in financial results and cash flow
Immediate deleverage
Deal closed
Deal closed
Deal closed
Deal closed
Deal closed
Deal closed
Deal signed
Deal closed
* Divestment in progress through inventory sell down
Mothballed
Deal closed
Deal closed
ELGA DEPOSIT: RAMP UP SECURED BY VEB PROJECT FINANCING
CURRENT STATUS
KEY PROJECT METRICS
LOCATION
OPERATIONAL
DETAILS
COAL TYPE
RESERVES
JORC STANDARDS
• Country Russia
• Location South-East of Yakutia
• Mine Type 100% OP
• Start of operations August 2011
• High volatile hard coking coal
• Steam coal
• Middlings
• 2.2 billion tonnes as of December 31, 2012
• Elga coal deposit reserves account for 67% of total
reserves of Mechel
• Russia, Asia-Pacific countries TARGET MARKETS
LOCATION OF OPERATIONS
Mongolia
Yakutugol Elga
Port Vanino
Port Posiet China
Japan Kazakhstan
Source: Company data
18
Railroad in place
Wash plant up & running
Workers settlement under construction
Existing capacity up to 4-5 mn tonnes of coal mining,
2.7 mn tonnes of coal processing
In FY 2014 1,2 mln tonnes mined, over 700,000 tonnes processed
and about 1 mln tonnes shipped (includes coking coal concentrate ,
oxidized coal and middlings).
Expected to produce about 3,5 mln tonnes of run-of-mine coal in
2015
Seasonal washing plant to become all year operational starting
winter 2014-2015
Coal processing up to 2,7 mln tonnes starting from 2015 and till the
first module of permanent washing plant is in place and operating
(2018)
VEB project financing of 1st stage of Elga development: up to12 mn
tons of coal mined by 2018
Once 9 mn tons of coal is mined and processed at Elga, the project
should become operating cashflow positive
FURTHER EXPANSION
CAPACITY
PRODUCTS
CAPEX
TARGET
CONSUMERS
High-speed and low-temperature up to 100 meter long rails
H-beams, channel bars, angles and grooves
US$ 715 mn
Up to 1.1 mn t
Russian Railways
Off-take secured by a 20-year supply agreement
Russian Railways Strategy till 2030 provides for additional railway
construction of more than 20,000 km, including more than 12,000 km
of high-speed tracks
Construction industry
TIMING 2009 – 2013
UNIVERSAL ROLLING MILL – STRUCTURAL SHIFT IN LONG STEEL PRODUCTS PORTFOLIO
Increased Output of High Value-Added Products
Enhanced Profitability of Steel Division
Structural Shift in the Long Steel Portfolio
RAILS PRICING
KEY PROJECT CHARACTERISTICS
Source: Metal-Courier, Company data
Notes: * There was no import of 100m length rails in 2014
19
982
963
920
932
653
637
630
623
652
637
631
623
1596
1 597
1386
0
1413
1 310
1310
0
530
517
504
494
0 500 1000 1500 2000
Average 2H2012
Average 1H2013
Average 2H2013
Average 1H2014
Billets (FOB ЧМ Россия) Rails 100m length (DES Vladivostok)
Rails 100m length (DES St. Petersburg) L-bar (FOB Турция)
Channel bar (FOB Турция) Beams (DAP Казахстан)
Mill
CURREN PROJECT STATUS
The mill launched in July 2013
H-beams and rails sales to 3d parties ongoing. In 9 month 2014 period about
85,000 tonnes produced and sold.
Rails have been sent to Russian Railways for certification
9M 2014 HIGHLIGHTS
21
In 3Q 2014 metallurgical coal market was rather stable but prices were at their lows.
Long steel products market looked better with some price increase on domestic market compared to 2Q 2014.
Export sales amounted to 33% of total Revenue for 9M 2014 period with mining segment being the largest
contributor to export sales.
On a stable Revenue structure, share of Steel segment in Consolidated EBITDA increased from 29% in 9M 2013 to 45% in 9M 2014.
Gross margin increased from 30% in 9M 2013 to 35% in 9M 2014.
Net debt (excluding finance lease liabilities) amounted to $7.8 bln as of September 30, 2014. In 3Q 2014 Net
debt decreased by 9% due to ruble depreciation and partial redemption of bonds.
In 3Q 2014 bottom line affected by $551 mln of FX loss primarily due to loan revaluation.
But adjusted Net loss decreased 90% q-o-q.
In 3Q 2014 operating income grew to $107 mln on adjusted basis net of one-off accruals (Impairment of
goodwill and long-lived assets, provision for amounts due from related parties, loss on write-off of PPE and
additional taxes) compared with adjusted operating income of $41 mln in 2Q 2014.
148
49
-4
193
83
34
11
121
63
-3
18
79 89
77
3
171
80
138
-7
219
Mining Steel Power Consolidated
3Q13 4Q13 1Q14 2Q14 3Q14
69
5
12
51
14
9
20
95
62
6
11
17
20
9
19
53
57
1
92
9
20
0
17
00
55
1
10
27
16
6
17
44
49
2
94
8
14
8
15
88
Mining Steel Power Consolidated
3Q13 4Q13 1Q14 2Q14 3Q14
10%
32% 58%
8%
32%
60%
SEGMENTS OVERVIEW
REVENUE BY SEGMENTS
$ Mln
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair
value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies
(incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
22
Steel Mining Power
EBITDA(a)(1) BY SEGMENTS
3%
46% 51%
9M 2014
4%
29%
67%
9M 2013
REVENUE BY SEGMENTS
$ Mln
EBITDA(a) (1) BY SEGMENTS
$ 5,032 mln $470 mln
$6,718 mln $599 mln
MINING SEGMENT
23
Stable EBITDA(a) margin of 12,5% in 3Q 2014.
Operating income $1.3 mln in 3Q 2014 vs $2 mln Operating loss in 2Q 2014
Cash costs decrease q-o-q of 11% at Southern Kuzbass, 8% at Yakutugol, 7% at Moscow Coke and Gas Plant
and 6% at Mechel Coke.
Cash cost in 3Q2014 at Elga was $26 per tonne.
Export sales on stable level of about 70%.
Bluestone operations suspension negatively influences segment`s results.
But Elga coal deposit shows first notable volumes.
By the end of 2014 over 1.2 mln tonnes of ROM coal expected with more then 250 thousand tonnes of HCC
concentrate produced.
Share of iron ore sales down to 2% q-o-q of Segment’s revenue as we switched to supplying our Steel segment and lower production volumes.
43%
23%
10%
16%
8%
9M2013 9M2014
Other
Depreciation anddepletion
Energy
Staff costs
Raw materials andpurchased goods
42%
26%
10%
16%
6%
34 32
43
35 37
51
37 32
46
35 30
55
44
31 27 26
61
Coal SKCC Coal YU Coal Elga Iron Ore KGOK
3Q13 4Q13 1Q14 2Q14 3Q14
695 626
571 551 492
110 149
151 151 144
18%
11% 9%
13% 12%
0%
20%
40%
60%
0
300
600
900
3Q13 4Q13 1Q14 2Q14 3Q14
Intersegment revenues Revenues EBITDA(a) margin
0.
MINING SEGMENT
$ Mln
CASH COSTS, US$/TONNE
24
REVENUE, EBITDA(a)(1)
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair
value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies
(incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
* Restated to include middlings
AVERAGE SALES PRICES FCA, US$/TONNE
COS STRUCTURE
$1,417 mln
$1,124 mln
178
71
57 49
78
176
78
66
44
85
161
65 62
39
85
170
47 53
40
76
166
53 59
41
65
Coke Coking coal Anthracite andPCI
Steam coal* Iron ore
3Q13 4Q13 1Q14 2Q14 3Q14
$ Mln
Coking coal 40%
Anthracites and PCI 28%
Coke 10%
Coking products
3%
Steam coal 11%
Iron ore 6%
Other 2%
Coking coal 39%
Anthracites and PCI
25%
Coke 8%
Coking products
2%
Steam coal 8%
Iron ore 16%
Other 2%
China 39%
Russia 28%
Europe 14%
Asia w/o China 10%
CIS 2%
Middle East 3%
USA 2%
Other 2%
MINING SEGMENT
25
REVENUE BREAKDOWN BY REGION
REVENUE BREAKDOWN BY PRODUCTS
9M 2013 9M 2014
9M 2013 9M 2014
China 36%
Russia 29%
Europe 15%
Asia w/o China 14%
CIS 3%
Middle East 3%
USA 0,15%
STEEL SEGMENT
26
3Q 2014 EBITDA(a) up 79% quarter on quarter on favorable market conditions and lower costs
EBITDA(a) margin doubled from 7% in 2Q 2014 to 14% in 3Q 2014.
Adjusted Operating income grew from $39 mln in 2Q 2014 to $102 mln in 3Q 2014.
Adjusted Net income of $15 mln in 3Q 2014 after Net loss of $47 mln in 2Q 2014.
Product mix mostly stable with further decrease of semi-finished products share to 3% in 3Q 2014 from 5% in
2Q 2014.
Further downsizing of Mechel Service Global operations in Europe resulted in European sales share decline.
504 419 425
823
507
436 448
863
427 396 402
806
425 376 390
777
403 361 364
737
Billets* Wire rod Rebar Ferrosilicon**
3Q13 4Q13 1Q14 2Q14 3Q14
1251 1117
929 1027
948
50 72
72 55
46
4% 3%
0%
7% 14%
0%
10%
20%
30%
40%
0
300
600
900
1200
1500
3Q13 4Q13 1Q14 2Q14 3Q14
Intersegment revenues Revenues EBITDA(a) margin
533
504
488
516
564
607
594
530
590
616
3530
3501
3314
3545
3743
2457
2183
2398
2400
2341
835
873
783
800
814
663
676
696
714
721
1142
1110
1166
1201
1207
3Q13 4Q13 1Q14 2Q14 3Q14
Semi-finished steel products Rebar Stainless flat products
Forgings and stampings Hardware Carbon flat
Ferrosilicon**
76%
9%
10% 2%
3%
9M2013 9M2014
Other
Depreciation anddepletion
Energy
Staff costs
Raw materials andpurchased goods
70%
11%
12%
4% 3%
STEEL SEGMENT
27
CASH COSTS, US$/TONNE
REVENUE, EBITDA(a)(1)
$ Mln
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair value, Interest
expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their
disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
* Domestic sales
** Ferroalloy segment was combined with Steel segment
AVERAGE SALES PRICES FCA, US$/TONNE
COS STRUCTURE
$3,475 mln
$2,472 mln
Semi-Finished Steel Products
5%
Rebar 29%
Stainless flat 2%
Carbon long products
19%
Forgings and stampings
9%
Hardware 16%
Carbon flat 8%
Ferrosilicon 2%
Other 10%
Semi-
Finished Steel
Products 11%
Rebar 28%
Stainless flat 3%
Carbon long
products 16%
Forgings and
stampings 8%
Hardware 15%
Carbon flat 8%
Ferrosilicon 1%
Other 10%
Russia 64%
Europe 17%
CIS 12%
Asia 3%
Middle East 3%
USA 0,2% Other
0,8%
Russia 68%
Europe 16%
CIS 12%
Asia 1%
Middle East 1%
USA 0,3%
Other 1,7%
STEEL SEGMENT
28
REVENUE BREAKDOWN BY REGION
REVENUE BREAKDOWN BY PRODUCTS
9M 2014 9M 2013
9M 2014 9M 2013
87%
4%
7%
1% 1%
9M2013 9M2014
Other
Depreciation anddepletion
Energy
Staff costs
Raw materials andpurchased goods
89%
4%
5%
1% 1%
POWER SEGMENT
29
AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS (RUSSIA), US$/MWH
REVENUE, EBITDA(a)(1)
$ Mln
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair
value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies
(incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
COS STRUCTURE
$647 mln $588mln
Seasonal decline in segment’s results.
Negative influence of ruble depreciation on Revenues.
Net loss decreased by 60%. 149
209 200 166
148
98
115 105
90 86
-2%
3% 6%
1%
-3% -10%
0%
10%
20%
30%
40%
-100
0
100
200
300
400
3Q13 4Q13 1Q14 2Q14 3Q14
Intersegment revenues Revenues EBITDA(a) margin
35
28 27
29
36
54 55
53 55 52,2
3Q13 4Q13 1Q14 2Q14 3Q14
Cash costs Sales price
CONSOLIDATED P&L
30
REVENUE, $MLN
FINANCIAL PERFORMANCE HIGHLIGHTS:
$ Mln $ Mln
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair
value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies
(incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
Consolidated EBITDA(a) up 28% q-o-q to $219 mln on Steel segment`s strong results
Further Gross margin and EBITDA(a) margin increase
Bottom line affected by FX loss but Adjusted Net loss decreased in 3Q 2014 to just $15 mln.
2 095 1 953
1 700 1 744 1 588
31% 29%
32% 36% 38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
500
1000
1500
2000
2500
3Q13 4Q13 1Q14 2Q14 3Q14
Revenue Gross margin, %
193
121
79
171
219
9%
6% 5%
10%
14%
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
200
250
3Q13 4Q13 1Q14 2Q14 3Q14
EBITDA(a) EBITDA(a) margin
EBITDA(a)(1) , $MLN
CASH FLOW & TRADE WORKING CAPITAL
31
CASH FLOW, $MLN
Considerable payments on financing activities are met mainly by working capital decrease.
Investment cash flow amounted to $436 mln in 9M 2014 with most of it going to Elga under project financing with VEB.
TRADE WORKING CAPITAL MANAGEMENT, $MLN
275
72
699
-436
-417
0
200
400
600
800
1 000
1 200
Cash as of31.12.2013
Operatingactivities
Investmentactivities
Financingactivities
Cash as of30.09.2014
738 671
260 40
-120
Trade current assets Trade current liabilities Trade working capital
1 934 1 835 1 909 1 974 1 808
2 672 2 506
2 168 2 014
1 688
30.09.13 31.12.13 31.03.14 30.06.14 30.09.14
State banks 68%
22%
Other 10% International
banks
Total debt reduced by $2.0 bln from $9.0 bln down to $7.0
bln as of December 1, 2014, mainly as an effect from ruble
devaluation
Since mid-year we entered into restructuring negotiations
and suspended repayments of principal to financial
institutions and cut interest payments.
DEBT PROFILE
DEBT MATURITY SCHEDULE, USD BLN
CHANGES IN CREDIT PORTFOLIO AS OF DECEMBER 1, 2014, USD BLN
DEBT PROFILE AS OF DECEMBER 1, 2014
By currency By banks
32
0.54
2.07 2.17
1.26
0.93
2014 2015 2016 2017 2018 and after
* incl. debt under restructuring
Debt $6 968 mln
Note: converted at the exchange rate established by CB RF December 1, 2014 on the following date
8,95
0,29
2,01
0,32 6,97
Debt as of31.12.13
Netrepayments
FX gain Swaps Debt as of01.12.14
-0,29
-2,01
USD 53% RUR
40%
EUR 7%
Revenue 5,032 6,718 -25.1%
Cost of sales (3,272) (4,670) -29.94%
Gross margin 34.97% 30.49%
Adjusted Operating income 124 216 -42.6%
EBITDA(a) (1) 470 599 -21.5%
EBITDA(a) margin 9.3% 8.9%
Net Income / (loss) (1,223) (2,247) -45.6%
Net Income margin -24.30% -33.44%
Net Debt (excluding finance lease liabilities) 7,836 9,087 -13.8%
CapEx 421 445 -5%
Sales volumes(2), ‘000 tonnes 9m2014 9m2013 %,
Mining segment 15,021 17,889 -16%
Steel segment 3,746 5,070* -26%
FINANCIAL RESULTS OVERVIEW
(1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair value,
Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result
from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes.
(2) Includes sales to the external customers only
* Ferroalloy segment was combined with Steel segment
US$ MILLION UNLESS OTHERWISE STATED 9m2014 9m2013 CHANGE, %
33
OPERATIONAL RESULTS OVERVIEW
SALES, thousand tonnes 9m 2014 9m 2013 9m 2014 vs. 9m 2013, % 3Q2014 2Q2014 3Q2014vs. 2Q2014, %
Coking coal concentrate 7,781 8,349 -7 2,427 2,743 -12
PCI 2,443 2,567 -5 820 1,033 -21
Anthracites 1,526 1,603 -5 525 519 +1
Steam Coal 4,167 4,499 -7 1,639 1,167 +40
Iron ore concentrate 2,504 3,083 -19 618 913 -32
Coke 2,321 2,291 +1 830 735 +13
Ferrosilicon (65% and 75%) 65 72 -9 23 21 +12
Flat Products 332 468 -29 105 115 -9
Long Products 2,283 2,747 -17 695 806 -14
Billets 80 651 -88 19 27 -29
Hardware 584 653 -11 200 207 -3
Forgings 41 52 -22 15 14 +5
Stampings 64 76 -16 20 21 -6
Electric power generation (thousand kWh) 2,597,421 2,890,768 -10 732,043 854,187 -14
Heat power generation (Gcal) 4,165,232 4,728,075 -12 790,268 1,071,913 -26
PRODUCTION, thousand tonnes 9m 2014 9m 2013 9m 2014 vs. 9m 2013, % 3Q2014 2Q2014 3Q2014vs. 2Q2014, %
Coal (run-of-mine) 17,008 20,430 -17 5,810 5,633 +3
Pig iron 2,910 2,908 0 1,010 964 +5
Steel 3,182 3,648 -13 1,055 1,096 -4
35
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