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Mechel Reports The 1H 2012 Financial Results

In 2Q 2012, Mechel's consolidated financial result attributable to shareholders of Mechel OAO, decreased by 477.5% to net loss of $823.0 million compared to the net income of $218.0 million in 1Q 2012. If to eliminate the effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects) the adjusted net loss amounts to $177.0 million in 2Q 2012.

The consolidated adjusted EBITDA in 2Q 2012 decreased by 16.8% to $385.4 million, compared to $463.4 million in 1Q 2012. Depreciation, depletion and amortization in 2Q 2012 for the Company were $157.2 million, an increase of 0.9% compared to $155.8 million in 1Q 2012.

Mining Segment Results For The 1H 2012

US$ thousand 1H 20 12 (1) 1H 20 11 (1) Change Y-on-Y
Revenue from external customers 1,813,921 1,931,936 -6.1%
Intersegment sales 432,684 537,452 -19.5%
Operating income 468,138 766,511 -38.9%
Net income attributable to shareholders of Mechel OAO 211,480 616,620 -65.7%
Adjusted net income (1) (2) 232,186 616,620 -62.3%
Adjusted EBITDA (1) (3) 660,021 919,155 -28.2%
Adjusted EBITDA, margin (4) 29.38 % 3 7.22 % --
(1) See Attachment A.      
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)      
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for the loan given to related parties, amounts attributable to noncontrolling interests and interest income      
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.      
US$ thousand 2Q 20 12 (1) 1Q 20 12 (1) Change Q-on-Q
Revenue from external customers 881,180 932,741 -5.5%
Intersegment sales 207,085 225,599 -8.2%
Operating income 192,570 275,568 -30.1%
Net (loss) / income attributable to shareholders of Mechel OAO (30,024) 241,504 -112.4%
Adjusted net (loss) / income (1) (2) (9,318) 241,504 -103.9%
Adjusted EBITDA (1) (3) 301,906 358,116 -15.7%
Adjusted EBITDA, margin (4) 27.74 % 30 . 92% --
(1) See Attachment A.      
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)      
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for the loan given to related parties, amounts attributable to noncontrolling interests and interest income.      
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales      

Mining Segment Output and Sales For The 1H 2012

Production :

Product name 1H 2012, thousand tonnes 1H 2011, thousand tonnes 1H 2012 vs. 1H 2011, %
Coal (run-of-mine) 13,380 12,533 7%

Product Sales:

Product name 1H 2012, thousand tonnes 1H 2011, thousand tonnes 1H 2012 vs. 1H 2011, %
Coking coal concentrate 6,238 5,993 4%
Including coking coal concentrate supplied to Mechel enterprises 1,297 1,564 -17%
PCI 1,074 710 51%
Anthracites 1,350 1,068 26%
Including anthracites supplied to Mechel enterprises 189 161 17%
Steam coal 2,896 3,418 -15%
Including steam coal supplied to Mechel enterprises 718 865 - 17 %
Iron ore concentrate 2,073 2,209 -6%
Including iron ore concentrate supplied to Mechel enterprises 158 931 -83 %
Coke 1,853 1,686 10%
Including coke supplied to Mechel enterprises 1,339 1,119 20 %

Mining segment's revenue from external customers in 2Q 2012 totaled $881.2 million or 29% of the consolidated net revenue, a decrease of 5.5% over net segment's revenue from external customers of $932.7 million, or 32% of the consolidated net revenue in 1Q 2012.

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