Revenue - 130.2 bln rubles, Consolidated EBITDA* -  25.7 bln rubles

Net profit, attributable to shareholders of Mechel PAO - 8.3 bln rubles

MOSCOW, Aug. 29, 2016 (GLOBE NEWSWIRE) -- Mechel PAO (MICEX:MTLR) (NYSE:MTL), a leading Russian mining and steel group, announces financial results for the 1H 2016.

Mechel PAO's Chief Executive Officer Oleg Korzhov commented on the 1H 2016 results:"If you compare the results of this year's first six months with the same period of the previous year, you can see similar production volumes and revenue. Nevertheless, the company's financial results have changed for the better — Mechel showed an increase in its operating profit by 23% to 17.2 billion rubles, net profit of 8.3 billion rubles and restoration of our cash flows."A number of external and internal factors had their positive impact on the company's results. The beginning of spring brought a revival of steelmaking commodities export markets and the domestic steel market. Product prices demonstrated growth compared to the minimums reached at the end of the previous year and at the beginning of this year. The market situation prompted a growth of the company's operating profit and improvement of its financial results. In this period we completed restructuring of our loans with Russian state banks, which enabled us to balance our financial payments. Also in late June we completed the deal on selling 49% in the Elga project to Gazprombank, which allowed us to source repayment of loans in the amount of 32.9 billion rubles and overdue interest payments from the previous periods."Currently we see a weaker activity on the metals market, which is offset by a major growth of spot prices for hard coking coal, and that will enable us to retain the Group's profitability as a whole."

Consolidated Results For The 1H 2016

Mln rubles 1H' 16 1H' 15 %
Revenuefrom external customers   130,197     130,334     0 %
Operating profit   17,200     13,945     23 %
EBITDA   25,721     23,602     9 %
EBITDA, margin   20 %   1 8 %  
Net profit (loss) attributable to shareholders of Mechel PAO   8,300     (16,746 )  

Mining Segment

Mechel Mining Management Company OOO's Chief Executive Officer Pavel Shtark noted:"In late 2015, the metallurgical coal market reached its minimum. Despite the positive trends which appeared in 1Q2016, the overall price level in this period was significantly lower than the previous year's. In the first and second quarters of this year, contract prices for hard coking coal were $81 and $84 per tonne, while in the first and second quarters of 2015 those prices were $117 and $109.5 per tonne. The decrease of sales of several types of products as market demand weakened in 1Q2016, had an additional negative impact on the division's revenue. Nevertheless, optimization of our costs structure enabled us, despite a drop in revenue and prices, to increase the division's EBITDA by 10% to 14.4 billion rubles, while the EBITDA margin went from 23% to 26% year-on-year."It is worth noting that by mid-summer the level of prices for Australian coal returned to the early 2015 level. Limited supply of imported coal in China became the chief factor for growth. Also, due to strong rains in eastern and southern China shipping within the country became complicated, and consumers became more active in buying imported raw materials. Record low levels of commodity stock in Chinese ports and storages also contribute to increased demand. As of now, spot prices for Australian hard coking coal reached $128 per tonne, which should uphold the trend for a quarterly increase in contract prices."

EBITDA* - Adjusted EBITDA. Please find the calculation of the Adjusted EBITDA and other non-IFRS measures used here and hereafter in Attachment A.

Mln rubles 1H' 16 1H' 15 %
Revenue from external customers   40,059     43,168     -7 %
Revenueinter-segment   14,711     13,309     11 %
EBITDA   14,438     13,139     10 %
EBITDA, margin   26 %   23 %  

Steel Segment

Mechel-Steel Management Company OOO's Chief Executive Officer Andrey Ponomarev noted:"For the second year in a row, the year's first two quarters demonstrate a radically different market situation. The previous year began with an upsurge in demand and prices for construction product range affected by the devaluation of the ruble. After that, the heightened demand was calmed, prices went down and stayed low by the end of 1H2015. In late 2015 and early 2016, prices were at their minimum, but then, as export prices and steel deficit on local markets grew, prices for the division's products also increased."Despite mixed market dynamics in each quarter, average prices for each half-year were the same. Increased sales, particularly of rebar and other types of long products, resulted in growth of revenue by 5%. Comparable growth of costs allowed us to retain EBITDA margin flat.

"Prices on the steel market are currently being adjusted downwards. The division's future operational results will be less volatile due to the change in the sales structure through this year's planned increase of the Chelyabinsk Metallurgical Plant's universal rolling mill capacity utilization to 60%, as well as the growth in production of high-quality steel grades at the group's facilities."

Mln rubles 1H' 16 1H' 15 %
Revenue from external customers   77,604     73,644     5 %
Revenueinter-segment   3,619     3,392     7 %
EBITDA   9,520     9,413     1 %
EBITDA, margin   1 2 %   1 2 %  

Power Segment        

Mechel-Energo OOO's Chief Executive Officer Petr Pashnin noted:"The division continues to demonstrate positive financial results. Despite a minor decrease in revenue, which was partly due to additional repairs and reconstruction of our generating facilities, our operational efficiency enabled us to improve our financial results."
Mln rubles 1H' 16 1H' 15 %
Revenue from external customers   12,535     13,523     -7 %
Revenueinter-segment   7,899     7,467     6 %
EBITDA   2,014     1,339     50 %
EBITDA, margin   10 %   6 %  

The management of Mechel will host a conference call today at 18:00 p.m. Moscow time (4:00 p.m. London time, 11 a.m. New York 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 three operating segments: mining, steel 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 1H 2016 Earnings Press Release

Attachment A

Non-IFRS financial measures. This press release includes financial information prepared in accordance with International Financial Reporting Standards, or IFRS, as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for the information prepared in accordance with IFRS.

Adjusted EBITDA (EBITDA) represents net profit or loss before Depreciation, depletion and amortization, Foreign exchange (gain) loss, net, Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments, Finance income, Net result on the disposal of non-current assets, Impairment of goodwill and other non-current assets, Allowance for doubtful accounts,  Write-offs of inventories to net realisable value, Loss (profit) after tax from discontinued operations, net, Net result on the disposal of subsidiaries, Income (loss) attributable to non-controlling interests, Income tax (benefit) expense, Pension service cost and actuarial loss, other expenses, Fines and penalties and Gain on write-off of accounts payable with expired legal term. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of our Revenue. Our adjusted EBITDA may not be similar to EBITDA measures of other companies. Adjusted EBITDA is not a measurement under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our interim condensed consolidated statement of profit (loss). We believe that our adjusted 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 expenses, depreciation, depletion and amortization are considered operating expenses under IFRS, these expenses primarily represent the non-cash current period allocation of costs associated with non-current assets acquired or constructed in prior periods. Our adjusted 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.

Adjusted net profit (loss) represents net profit (loss) before Impairment of goodwill and other non-current assets, Loss (profit) after tax from discontinued operations, net, Net result on the disposal of subsidiaries, Effect on net loss attributable to non-controlling interests, Foreign exchange (gain) loss, net, Pension service cost and actuarial loss, other expenses, Fines and penalties and, Gain on write-off of accounts payable with expired legal term. Our adjusted net profit (loss) may not be similar to adjusted net profit (loss) measures of other companies. Adjusted net profit (loss) is not a measurement under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our interim condensed consolidated statement of profit (loss). We believe that our adjusted net profit (loss) provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations. While impairment of goodwill and other non-current assets is considered operating expenses under IFRS, these expenses represent the non-cash current period allocation of costs associated with assets acquired or constructed in prior periods. Our adjusted net profit (loss) calculation is 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.

Our calculations of Net debt, excluding fines and penalties on overdue amounts *** and trade working capital are presented below:
Mln rubles   30.06.2016     31.12.2015     30.06.2015  
Short-term borrowings and current portion of long-term debt   410,334     444,199     371,596  
Interest payable   16,246     27,269     17,454  
Long-term debt   8,235     4,308     885  
less Cash and cash equivalents   (2,822 )   (3,079 )   (2,500 )
Net debt, excluding finance lease liabilities, fines and penalties on overdue amounts    431,993      472,697      387,435  
       
Finance lease liabilities, current portion   12,676     13,507     15,474  
Finance lease liabilities, non-current portion   102     481     56  
Net debt, excluding fines and penalties on overdue amounts    444,771      486,685      402,965  
       
       
Mln rubles   30.06.2016     31.12.2015     30.06.2015  
Trade and other receivables   19,979     16,013     19,781  
Inventories   35,354     35,189     32,528  
Other current assets   9,159     8,191     8,849  
Income tax receivables   400     603     554  
Trade current assets   64,892     59,996     61,712  
       
Trade and other payables   50,162     54,602     58,889  
Advances received   3,385     3,492     3,843  
Provisions and other current liabilities   2,396     2,558     1,836  
Tax payable other than income tax   10,373     8,034     9,730  
Income tax payable   4,342     5,549     6,269  
Trade current liabilities   70,658     74,235     80,567  
       
Trade working capital   (5,766 )   (14,239 )   (18,855 )

EBITDA can be reconciled to our interim condensed consolidated statement of profit (loss) as follows:

*** Calculations of Net debt could differ from indicators calculated in accordance with loan agreements upon dependence on definitions in such agreements.

  Consolidated Results   Mining Segment ** **   Steel Segment ** **   Power Segment ** **
Mln rubles 6m 2016 6m 2015   6m 2016 6m 2015   6m 2016 6m 2015   6m 2016 6m 2015
Net profit (loss) attributable to shareholders of Mechel PAO   8,300     (16,746 )     250     (5,095 )     7,629     (11,254 )     669     (110 )
Add:                      
Depreciation, depletion and amortization   6,566     6,818       3,788     4,147       2,603     2,475       175     196  
Foreign exchange (gain) loss, net   (17,442 )   (1,806 )     (10,009 )   (2,722 )     (7,358 )   927       (76 )   (11 )
Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments   29,800     32,675       22,150     18,108       8,153     14,008       587     1,224  
Finance income   (3,887 )   (77 )     (3,551 )   (527 )     (1,337 )   (188 )     (89 )   (24 )
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, allowance for doubtful accounts and write-offs of inventories to net realisable value   1,230     2,054       331     670       360     1,177       540     206  
Loss (profit) after tax from discontinued operations, net   244     (598 )     (41 )   (701 )     270     88       15     15  
Net result on the disposal of subsidiaries   (55 )   1       -     -       (55 )   1       -     -  
Income (loss) attributable to non-controlling interests   862     820       273     385       465     454       125     (19 )
Income tax (benefit) expense   (630 )   242       821     (1,162 )     (1,510 )   1,556       59     (152 )
Pension service cost and actuarial loss, other expenses   83     83       61     61       21     20       1     3  
Fines and penalties   668     273       366     (25 )     295     287       8     11  
Gain on write-off of accounts payable with expired legal term   (18 )   (137 )     -     -       (18 )   (137 )     -     -  
EBITDA   25,721     2 3 , 602       14,438     13,139       9,520     9 , 413       2,014     1,339  
EBITDA, margin   20 %   1 8 %     26 %   23 %     12 %   1 2 %     10 %   6 %
                       
Mln rubles 6m 2016 6m 2015   6m 2016 6m 2015   6m 2016 6m 2015   6m 2016 6m 2015
Net profit (loss) attributable to shareholders of Mechel PAO   8,300     (16,746 )     250     (5,095 )     7,629     (11,254 )     669     (110 )
Add:                      
Loss (profit) after tax from discontinued operations, net   244     (598 )     (41 )   (701 )     270     88       15     15  
Net result on the disposal of subsidiaries   (55 )   1       -     -       (55 )   1       -     -  
Effect on loss attributable to non-controlling interests   (40 )   (14 )     -     -       (40 )   (14 )     -     -  
Foreign exchange (gain) loss, net   (17,442 )   (1,806 )     (10,009 )   (2,722 )     (7,358 )   927       (76 )   (11 )
Pension service cost and actuarial loss, other expenses   83     83       61     61       21     20       1     3  
Fines and penalties   668     273       366     (25 )     295     287       8     11  
Gain on write-off of accounts payable with expired legal term   (18 )   (137 )     -     -       (18 )   (137 )     -     -  
Net (loss) profit, net of income tax   (8,260 )   (1 8 , 994 )     (9,374 )   (8,482 )     745     ( 10 , 083 )     618     (91 )
                       
Operating profit   17,200     13,945       9,858     8,048       6,284     5,270       1,307     916  
Add:                      
Loss on write-off of property, plant and equipment   121     99       109     38       13     61       -     -  
Pension service cost and actuarial loss, other expenses   83     83       61     61       21     20       1     3  
Fines and penalties   668     273       366     (25 )     295     287       8     11  
Adjusted operating profit   18,072     1 4 , 400       10,393     8,122       6,612     5 , 637       1,316     930  
 **** including inter-segment operations                      

EBITDA* - Adjusted EBITDA. Please find the calculation of the Adjusted EBITDA and other non-IFRS measures used here and hereafter in Attachment A.

Attachment B

Interim condensed consolidated statement of financial position  
(All amounts are in millions of Russian rubles)        
    June 30, 2016   December 31,
    (unaudited)   2015**** *
Assets        
Current assets        
Cash and cash equivalents     2,822       3,079  
Trade and other receivables     19,979       16,013  
Inventories     35,354       35,189  
Income tax receivables     400       603  
Other current financial assets     17       45  
Other current assets     9,159       8,191  
Total current assets     67,731       63,120  
         
Non-current assets        
Property, plant and equipment     210,687       215,844  
Mineral licenses     37,593       38,517  
Non-current financial assets     166       194  
Investments in associates     295       284  
Deferred tax assets     1,364       1,492  
Goodwill     21,311       21,378  
Other non-current assets     1,036       1,243  
Total non-current assets     272,452       278,952  
Total assets     340,183       342,072  
         
Equity and liabilities        
Current liabilities        
Interest-bearing loans and borrowings, including Interest payable, fines and penalties on overdue amounts of RUB 36,111 million and RUB 47,475 million as of June 30, 2016 and December 31, 2015     446,445       491,674  
Trade and other payables     50,162       54,602  
Advances received     3,385       3,492  
Provisions     2,365       2,532  
Pension obligations     1,120       1,120  
Finance lease liabilities     12,676       13,507  
Income tax payable     4,342       5,549  
Tax payable other than income tax     10,373       8,034  
Other current liabilities     31       26  
Total current liabilities     530,899       580,536  
         
Non-current liabilities        
Interest-bearing loans and borrowings     8,235       4,308  
Provisions     3,604       3,439  
Pension obligations     3,654       3,746  
Finance lease liabilities     102       481  
Deferred tax liabilities     10,749       11,090  
Other non-current liabilities     171       189  
Income tax payable     -       137  
Total non-current liabilities     26,515       23,390  
Total liabilities     557,414       603,926  
         
Equity        
Common shares     4,163       4,163  
Preferred shares     833       833  
Additional paid-in capital and other reserves     18,598       28,322  
Accumulated other comprehensive income     1,579       445  
Accumulated deficit     (293,232 )     (301,565 )
Equity attributable to equity shareholders of Mechel PAO     (268,059 )     (267,802 )
Non-controlling interests     50,828       5,948  
Total equity     (217,231 )     (261,854 )
Total equity and liabilities     340,183       342,072  

Interim condensed consolidated statement of profit (loss) and other comprehensive income (loss)
(All amounts are in millions of Russian rubles)   6 months ended June 30,
      2016       2015  
    (unaudited)   (unaudited)
Continuing operations        
Revenue     130,197       130,334  
Cost of goods sold     (72,175 )     (77,007 )
Gross profit     58,022       53,327  
         
         
Selling and distribution expenses     (28,167 )     (26,636 )
Loss on write-off of property, plant and equipment     (121 )     (99 )
Allowance for doubtful accounts     (543 )     (1,022 )
Taxes other than income taxes     (3,168 )     (2,856 )
Administrative and other operating expenses     (9,100 )     (8,829 )
Other operating income     277       60  
Total selling, distribution and operating expenses, net     (40,822 )     (39,382 )
Operating profit     17,200       13,945  
         
Finance income     3,887       77  
Finance costs including fines and penalties on overdue loans and borrowings and finance leases payments of RUB 4,567 million, RUB 10,658 million for the periods ended June 30, 2016 and 2015     (29,800 )     (32,675 )
Foreign exchange gain (loss), net     17,442       1,806  
Share of profit of associates     16       12  
Other income     168       554  
Other expenses     (137 )     (1 )
Total other income and (expense), net     (8,424 )     (30,227 )
Profit (loss) before tax from continuing operations     8,776       (16,282 )
         
Income tax benefit (expense)       630        (242 )
Profit (loss) from continuing operations     9,406       (16,524 )
         
Discontinued operations        
(Loss) profit after tax from discontinued operations, net       (244 )       598  
Profit (loss) for the period     9,162       (15,926 )
         
Attributable to:        
Equity holders of the parent     8,300       (16,746 )
Non-controlling interests       862         820  
         
Other comprehensive income        
Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of income tax:      1,077       3,442  
Exchange differences on translation of foreign operations     1,085       3,434  
Net (loss) gain on available for sale financial assets     (8 )     8  
Other comprehensive income not to be reclassified to profit or loss in subsequent periods, net of income tax:     -       7  
Re-measurement gain on defined benefit plans     -       7  
Other comprehensive income for the period, net of tax     1,077       3,449  
Total comprehensive income (loss), net of tax     10,239       (12,477 )
         
Attributable to:        
Equity holders of the parent     9,377       (13,297 )
Non-controlling interests     862       820  

Interim condensed consolidated statement of Cash Flows
(All amounts are in millions of Russian rubles, unless stated otherwise)   6 months ended June 30,
      2016       2015  
    (unaudited)   (unaudited)
Cash Flows from Operating Activities        
Net profit (loss)     9,162       (15,926 )
Loss (profit) from discontinued operations, net of income tax     244       (598 )
Net profit (loss) from continuing operations     9,406       (16,524 )
Adjustments to reconcile net profit (loss) from continuing operations to net cash provided by operating activities:        
Depreciation     5,745       6,072  
Depletion and amortization     822       746  
Foreign exchange (gain) loss, net     (17,442 )     (1,806 )
Deferred income taxes     (252 )     337  
Allowance for doubtful accounts     543       1,022  
Write-off of accounts receivable     210       83  
Write-off of inventories to net realisable value     386       962  
Revision in estimated cash flows of rehabilitation provision     (12 )     (15 )
Loss on write-off of property, plant and equipment     121       99  
Loss (gain) on sale of property, plant and equipment     10       (30 )
Gain on write-off of accounts payable with expired legal term     (16 )     (137 )
Pension service cost and actuarial loss, other expenses     83       83  
Finance income     (3,887 )     (77 )
Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments     29,800       32,675  
Other     72       559  
Changes in working capital items:        
Trade and other receivables     (5,247 )     (355 )
Inventories     (1,714 )     2,292  
Trade and other payables     1,318       495  
Advances received     65       (186 )
Taxes payable and other current liabilities     1,090       (260 )
Other current assets     (973 )     (77 )
Income tax paid     (545 )     (779 )
Net operating cash flows of discontinued operations     (306 )     (338 )
         
Net cash provided by operating activities     19,277       24,842  
         
Cash Flows from Investing Activities        
Monthly installments for acquisition of DEMP     (2,652 )     (2,694 )
Proceeds from disposal of securities     -       143  
Loans issued and other investments     (11 )     (2 )
Interest received     1       25  
Proceeds from disposal of subsidiaries     13       62  
Proceeds from disposal of Bluestone     -       101  
Proceeds from loans issued     28       7  
Proceeds from disposals of property, plant and equipment     97       244  
Purchases of property, plant and equipment     (989 )     (2,265 )
Interest paid, capitalized     (243 )     (478 )
Net cash used in investing activities     (3,756 )     (4,857 )
         
Cash Flows from Financing Activities        
Proceeds from borrowings     4,140       2,137  
Repayment of borrowings     (36,071 )     (7,227 )
Interest paid     (17,203 )     (15,412 )
Dividends paid to noncontrolling interest     -       (1 )
Disposal of noncontrolling interest in subsidiaries     34,300       -  
Repayment of obligations under finance lease     (968 )     (849 )
Net cash used in financing activities     (15,802 )     (21,352 )
         
Effect of exchange rate changes on cash and cash equivalents     12       (36 )
         
Net decrease in cash and cash equivalents     (269 )     (1,403 )
         
Cash and cash equivalents at beginning of period     3,079       3,983  
Cash and cash equivalents net of overdrafts at beginning of period     891       1,344  
Cash and cash equivalents at end of period     2,822       2,500  
Cash and cash equivalents net of overdrafts at end of period     622       (59 )

*****there were certain reclassifications to conform with the current period presentation

 
Alexey LukashovDirector of Investor RelationsMechel PAOPhone: 7-495-221-88-88Fax: 7-495-221-88-00alexey.lukashov@mechel.com

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