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Mechel Reports 1Q2013 Operational Results

Stocks in this article: MTL

"In 1Q2013, we have had an expected decrease in coal production compared to 4Q2012 due to less favorable conditions of open pit mining in cold winter months. At the same time, a certain improvement in the metallurgical coal market, which we could see since the beginning of this year, and our company's efforts aimed at expanding its client base enabled us to significantly boost our sales of coking coal, anthracites and PCI both internationally, primarily to Asia Pacific, and domestically, including supplies from Mechel Bluestone, which resumed operations early this year, to North America's market. As a whole, coking coal sales in 1Q2013 increased by 13% compared to 4Q2012, anthracite sales increased by 19% and PCI sales by 13%. Steam coal sales also went up by 9% compared to the previous quarter, which is primarily due to increased supplies to the Group's power enterprises, especially Southern Kuzbass Power Plant, which increased electricity generation due to seasonal factors.

"In the steel division, in 1Q2013 there was a decrease of sales on several counts, which was due to the measures taken to optimize production in view of steel product markets' seasonal weakness, primarily the long rolls market, as well as disposal of Mechel's steelmaking plants in Romania. Lower billet sales were due to the halting of Donetsk Electrometallurgical Plant.

"Ferrosilicon sales went up compared to 4Q2012 figures. Positive dynamics were due to repairs and launching of a furnace at Bratsk Ferroalloy Plant. A decrease in chrome sales was due to a planned production decrease at Tikhvin Ferroalloy Plant caused by a weaker market. Throughout the first quarter, the plant operated two furnaces out of four. Nickel was not produced due to the halting of Southern Urals Nickel Plant in late 2012 caused by unfavorable market conditions.

"The power division's enterprises maintained their production results in 1Q2013 on the level of last year's figures. A small decrease in results as compared to 1Q2012 was due to Mechel-Energo disposing of some power assets, primarily Toplofikatsia Rousse EAD. Also climate conditions were milder in this period compared to the same period last year, which have had their effect."

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