Mechel Reports The 9M 2016 Financial Results

Consolidated revenue - 196.4 bln rubles, EBITDA *   -  41.6 bln rubles

Net profit, attributable to shareholders of Mechel PAO - 5.5 bln rubles

MOSCOW, Nov. 29, 2016 (GLOBE NEWSWIRE) -- Mechel PAO (MICEX:MTLR) (NYSE:MTL) , a leading Russian mining and steel group, announces financial results for the 9M 2016.

Mechel PAO's Chief Executive Officer Oleg Korzhov commented on the 9M 2016 results:

"This reporting period is characterized by significant volatility in prices for our key products. At the beginning of this year, prices for most of our products hit historical lows both domestically and internationally. The market situation fluctuated throughout these three quarters, but mostly market changes were favorable for Mechel, which found its reflection in our financial results. As a result of these nine months, our operating profit went up by 31% if compared to the same period of the previous year, reaching 28.8 billion rubles, EBITDA went up by 16% to 41.6 billion rubles, and EBITDA margin reached 21%. The group demonstrated net profit attributable to Mechel PAO's shareholders of 5.5 billion rubles and a stable cash flow.

"This spring's bullish price dynamics on the global market of steel and coal products also led to a revival of the domestic market. The group remains dependent on the external market environment, but on its part did its best to utilize the favorable market situation by controlling and cutting costs and improving production and sales efficiency, as well as adapting its sales policy to growing demand and investing in projects aimed at diversifying our product range and increasing production volumes.

"In this favorable market situation, the group is already generating a cash flow sufficient for servicing its debt obligations within the framework of agreements on restructuring and restoring working capital. The effect from the price growth will be even more tangible as results from the fourth quarter come in. We will use this opportunity to the maximum to finance our operations and reach agreements on restructuring our remaining financial debt. If any free cash flow arises, it will be used to bring down our debt burden, thus helping to increase our company's shareholder value."

Consolidated Results For The 9M 2016

Mln rubles 9M'16 9M'15 % 3Q'16 2Q'16 1Q'16
Revenuefrom external customers   196,350     194,039     1 %   66,153     67,965     62,232  
Operating profit   28,761     22,018     31 %   11,561     10,867     6,333  
EBITDA   41,571     35,845     16 %   15,850     15,747     9,974  
EBITDA, margin   21 %   1 8 %     24 %   23 %   1 6 %
Net profit (loss) attributable to shareholders of Mechel PAO   5,543     (74,585 )     (2,757 )   7,988     312  

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

Mining Segment

Mechel Mining Management OOO's Chief Executive Officer Pavel Shtark noted:

"In early 2016, prices on coking coal, our division's main product, were at their longtime lows. Steam coal prices were also extremely low. Later during the first half of the year, the market situation gradually improved, as benchmark and global indexes demonstrated stable growth, with our contract prices growing accordingly. However, in the second half of this year we witnessed an unprecedented hike in prices on high-quality coking coal. If benchmark contract prices for hard coking coal supplied by Australian producers to Japan were set at 92 US dollars per tonne in the third quarter, for the fourth quarter they were set at 200 US dollars per tonne. It is impossible to give an unequivocal explanation to this price hike, but experts mostly agree that it was caused by a deficit of premium coal grades on China's domestic market due to mining limits imposed on Chinese coal producers. Force majeure events on several Australian facilities as well as damage to the transport infrastructure in China and Australia added to this. Coal stocks in Chinese ports were at their historical lows. At the same time, spot prices on high-quality coking coal continued to grow and are currently set at their historical highs, topping 300 US dollars per tonne, at a significant difference with contract prices set for the fourth quarter. Negotiations for the first quarter 2017 basic prices will start shortly, and considering the spot market indicators, we can expect the contract price level for the first quarter to be significantly higher quarter-on-quarter.

"The rapid growth of coal prices, which began in mid-summer, didn't have time to make a full impact on the third quarter's financial results. We saw this hike's reflection in our contracts only by the very end of this reporting period. Still, the division's EBITDA has grown by 22% quarter-on-quarter, despite a small slump in revenue. The EBITDA margin reached 34% in the third quarter. The margin's growth is largely due to a decrease in costs. The current favorable market situation will definitely be reflected in the results of the fourth quarter and future periods."
Mln rubles 9M'16 9M'15 % 3Q'16 2Q'16 1Q'16
Revenue from external customers   59,990     62,384     -4 %   19,931     20,202     19,857  
Revenueinter-segment   22,481     20,661     9 %   7,770     7,652     7,059  
EBITDA   23,979     19,908     20 %   9,541     7,832     6,606  
EBITDA, margin   29 %   24 %     3 4 %   28 %   25 %

Steel Segment

Mechel-Steel Management Company OOO's Chief Executive Officer Andrey Ponomarev noted:

"The volume of the division's product sales in tonnes has grown by less than 1% if compared to the same period of the previous year with the divisions revenue up by 6% and EBITDA by 8%. The stable level of prices for our steel products in the second and third quarters was a key factor in this positive dynamics. However, changes we made in the production and sales structure had a most important impact on the results' improvement. We have significantly decreased sales of billets and wire rods while increasing sales of rails and beams. This was mostly due to increased production at Chelyabinsk Metallurgical Plant's universal rolling mill. The increase in revenue from this production segment is on the whole comparable to the overall growth in the division's revenue. Within nine months of 2016, the universal rolling mill produced over 350,000 tonnes of products, and will reach 500,000 tonnes by the end of this year. Considering that the mill's load is planned to grow further next year, the share of high value-added products in our sales structure will only increase."

Mln rubles 9M'16 9M'15 % 3Q'16 2Q'16 1Q'16
Revenue from external customers   118,900     112,387     6 %   41,296     42,456     35,148  
Revenueinter-segment   5,296     5,028     5 %   1,677     1,727     1,892  
EBITDA   15,845     14,636     8 %   6,325     7,867     1,653  
EBITDA, margin   13 %   1 2 %     1 5 %   18 %   4 %

Power Segment        

Mechel-Energo OOO's Chief Executive Officer Petr Pashnin noted:

"Comparatively mild weather conditions led to a decrease in electricity and heat sales to third parties and thus the division's revenue. Additional repairs to Southern Kuzbass Power Plant's equipment as part of the overall preparation for the upcoming fall-winter maximum load, as well as other factors, will help to improve efficiency of the division's operations in the future periods. At the same time, the increase of electricity fees not only partly compensated the slump in revenue, but also enabled us to increase EBITDA and EBITDA margin comparing with the same period of the previous year."

Mln rubles 9M'16 9M'15 % 3Q'16 2Q'16 1Q'16
Revenue from external customers   17,460     19,268     -9 %   4,925     5,307     7,228  
Revenueinter-segment   11,423     10,844     5 %   3,524     3,662     4,237  
EBITDA   2,102     1,761     19 %   88     370     1,644  
EBITDA, margin   7 %   6 %     1 %   4 %   14 %

The management of Mechel will host a conference call today at 18:00 p.m. Moscow time (3:00 p.m. London time, 10 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 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 9M 2016 financial results 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 (loss) attributable to shareholders of Mechel PAO 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, Write-off of accounts receivables, Allowance for doubtful accounts,  Write-off 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 expense (benefit), Pension service cost and actuarial loss, other expenses, Fines and penalties, 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) attributable to shareholders of Mechel PAO 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 (loss) income attributable to non-controlling interests, Foreign exchange (gain) loss, net, Pension service cost and actuarial loss, other expenses, Fines and penalties, 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   30.09.2016     31.12.2015  
Interest-bearing loans and borrowings, excluding interest, fines and penalties on overdue amounts   400,754     444,199  
Interest payable   21,463     27,269  
Non-current interest-bearing loans and borrowings   12,371     4,308  
Other non-current financial liabilities   35,246     -  
less Cash and cash equivalents   (2,350 )   (3,079 )
Net debt, excluding finance lease liabilities, fines and penalties on overdue amounts   467,484     472,697  
     
Finance lease liabilities, current portion   11,558     13,507  
Finance lease liabilities, non-current portion   106     481  
Net debt, excluding fines and penalties on overdue amounts   479,148     486,685  
     
     
Mln rubles   30.09.2016     31.12 .2015  
Trade and other receivables   18,166     16,013  
Inventories   34,042     35,189  
Other current assets   7,743     8,191  
Income tax receivables   437     603  
Trade current assets   60,388     59,996  
     
Trade and other payables   44,605     54,602  
Advances received   3,242     3,492  
Provisions and other current liabilities   1,833     2,558  
Tax payable other than income tax   9,718     8,034  
Income tax payable   3,439     5,549  
Trade current liabilities   62,837     74,235  
     
Trade working capital   (2,449 )   (14,239 )

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

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

  ConsolidatedResults   MiningSegment ** *   SteelSegment ** *   PowerSegment ** *
In millions of Russian rubles 9m 2016 9m 2015   9m 2016 9m 2015   9m 2016 9m 2015   9m 2016 9m 2015
Net profit (loss) attributable to shareholders of Mechel PAO   5,543     (74,585 )     (2,439 )   (47,080 )     8,051     (26,448 )     284     (598 )
Add:                      
Depreciation, depletion and amortization   10,022     10,253       5,813     6,331       3,947     3,631       262     291  
Foreign exchange (gain) loss, net   (19,738 )   43,011       (11,719 )   29,851       (7,950 )   12,927       (69 )   233  
Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments   43,247     47,956       32,134     26,827       13,212     20,332       794     1,749  
Finance income   (3,963 )   (121 )     (3,959 )   (766 )     (2,856 )   (268 )     (41 )   (39 )
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-off of accounts receivables, allowance for doubtful accounts and write-off of inventories to net realisable value   1,818     1,788       830     429       389     1,259       599     100  
Loss (profit) after tax from discontinued operations, net   343     (1,013 )     (84 )   (723 )     407     (309 )     20     19  
Net result on the disposal of subsidiaries   (191 )   75       -     -       (191 )   75       -     -  
Income (loss) attributable to non-controlling interests   1,153     330       298     (217 )     735     467       122     80  
Income tax expense (benefit)   2,427     6,914       2,698     4,711       (364 )   2,282       93     (79 )
Pension service cost and actuarial loss, other expenses   124     126       91     92       31     29       2     5  
Fines and penalties   847     1,270       319     454       492     817       36     (1 )
Gain on write-off of accounts payable with expired legal term   (61 )   (159 )     (3 )   (1 )     (58 )   (158 )     -     -  
EBITDA   41,571     35,845       23,979     19,908       15,845     14,636       2,102     1,761  
EBITDA, margin   21 %   18 %     29 %   24 %     13 %   12 %     7 %   6 %
                       
In millions of Russian rubles 9m 2016 9m 2015   9m 2016 9m 2015   9m 2016 9m 2015   9m 2016 9m 2015
Net profit (loss) attributable to shareholders of Mechel PAO   5,543     (74,585 )     (2,439 )   (47,080 )     8,051     (26,448 )     284     (598 )
Add:                      
Impairment of goodwill and other non-current assets   374     -       374     -       -     -       -     -  
Loss (profit) after tax from discontinued operations, net   343     (1,013 )     (84 )   (723 )     407     (309 )     20     19  
Net result on the disposal of subsidiaries   (191 )   75       -     -       (191 )   75       -     -  
Effect on (loss) income attributable to non-controlling interests   (61 )   49       -     -       (61 )   49       -     -  
Foreign exchange (gain) loss, net   (19,738 )   43,011       (11,719 )   29,851       (7,950 )   12,927       (69 )   233  
Pension service cost and actuarial loss, other expenses   124     126       91     92       31     29       2     5  
Fines and penalties   847     1,270       319     454       492     817       36     (1 )
Gain on write-off of accounts payable with expired legal term   (61 )   (159 )     (3 )   (1 )     (58 )   (158 )     -     -  
Net (loss) profit, net of income tax   (12,820 )   (31,226 )     (13,461 )   (17,407 )     721     (13,018 )     273     (342 )
                       
Operating profit   28,761     22,018       16,913     12,386       10,996     8,741       1,207     1,352  
Add:                      
Impairment of goodwill and other non-current assets   374     -       374     -       -     -       -     -  
Loss on write-off of property, plant and equipment   303     125       293     59       10     66       -     -  
Pension service cost and actuarial loss, other expenses   124     126       91     92       31     29       2     5  
Fines and penalties   847     1,270       319     454       492     817       36     (1 )
Adjusted operating profit   30,409     23,539       17,990     12,991       11,529     9,653       1,245     1,356  
*** including intersegment operations                      

  ConsolidatedResults   MiningSegment ** *   SteelSegment ** *   PowerSegment ** *
In millions of Russian rubles 3q 2016 2q 2016   3q 2016 2q 2016   3q 2016 2q 2016   3q 2016 2q 2016
Net (loss) profit attributable to shareholders of Mechel PAO   (2,757 )   7,988       (2,682 )   1,756       415     6,890       (385 )   (340 )
Add:                      
Depreciation, depletion and amortization   3,456     3,644       2,025     2,117       1,344     1,441       87     86  
Foreign exchange (gain) loss, net   (2,296 )   (8,874 )     (1,711 )   (5,084 )     (592 )   (3,771 )     7     (19 )
Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments   13,447     15,886       9,984     11,823       5,059     4,371       256     269  
Finance income   (76 )   (3,432 )     (409 )   (2,810 )     (1,519 )   (1,124 )     -     (74 )
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-offs of accounts receivables,  allowance for doubtful accounts and write-offs of inventories to net realisable value   588     586       494     215       34     59       58     314  
Loss (profit) after tax from discontinued operations, net   99     108       (43 )   2       137     101       5     5  
Net result on the disposal of subsidiaries   (136 )   3       -     -       (136 )   3       -     -  
Income (loss) attributable to non-controlling interests   291     691       25     156       270     466       (3 )   69  
Income tax expense (benefit)   3,057     (1,447 )     1,877     (675 )     1,146     (795 )     34     23  
Pension service cost and actuarial loss, other expenses   41     42       30     31       10     10       1     1  
Fines and penalties   179     552       (46 )   301       197     216       28     35  
Gain on write-off of accounts payable with expired legal term   (43 )   -       (3 )   -       (40 )   -       -     -  
EBITDA   15,850     15,747       9,541     7,832       6,325     7,867       88     370  
EBITDA, margin   24 %   23 %     34 %   28 %     15 %   18 %     1 %   4 %
                       
In millions of Russian rubles 3q 2016 2q 2016   3q 2016 2q 2016   3q 2016 2q 2016   3q 2016 2q 2016
Net (loss) profit attributable to shareholders of Mechel PAO   (2,757 )   7,988       (2,682 )   1,756       415     6,890       (385 )   (340 )
Add:                      
Impairment of goodwill and other non-current assets   374     -       374     -       -     -       -     -  
Loss (profit) after tax from discontinued operations, net   99     108       (43 )   2       137     101       5     5  
Net result on the disposal of subsidiaries   (136 )   3       -     -       (136 )   3       -     -  
Effect on loss attributable to non-controlling interests   (22 )   (16 )     -     -       (22 )   (16 )     -     -  
Foreign exchange (gain) loss, net   (2,296 )   (8,874 )     (1,711 )   (5,084 )     (592 )   (3,771 )     7     (19 )
Pension service cost and actuarial loss, other expenses   41     42       30     31       10     10       1     1  
Fines and penalties   179     552       (46 )   301       197     216       28     35  
Gain on write-off of accounts payable with expired legal term   (43 )   -       (3 )   -       (40 )   -       -     -  
Net (loss) profit, net of income tax   (4,561 )   (197 )     (4,081 )   (2,994 )     (31 )   3,432       (344 )   (318 )
                       
Operating profit (loss)   11,561     10,867       7,061     5,098       4,705     6,151       (99 )   (63 )
Add:                      
Impairment of goodwill and other non-current assets   374     -       374     -       -     -       -     -  
Loss on write-off of property, plant and equipment   182     114       182     103       -     11       -     -  
Pension service cost and actuarial loss, other expenses   41     42       30     31       10     10       1     1  
Fines and penalties   179     552       (46 )   301       197     216       28     35  
Adjusted operating profit (loss)   12,337     11,575       7,601     5,533       4,912     6,388       (70 )   (27 )
 *** including intersegment operations                      

Attachment B
Interim condensed consolidated statement of financial position
(All amounts are in millions of Russian rubles)
    September 30,2016   December 31,2015
    (unaudited)   ****
Assets        
Current assets        
Cash and cash equivalents     2,350       3,079  
Trade and other receivables     18,166       16,013  
Inventories     34,042       35,189  
Income tax receivables     437       603  
Other current financial assets     94       45  
Other current assets     7,743       8,191  
Total current assets     62,832       63,120  
         
Non-current assets        
Property, plant and equipment     209,254       215,844  
Mineral licenses     37,132       38,517  
Non-current financial assets     151       194  
Investments in associates     300       284  
Deferred tax assets     1,352       1,492  
Goodwill     21,305       21,378  
Other non-current assets     987       1,243  
Total non-current assets     270,481       278,952  
Total assets     333,313       342,072  
         
Equity and liabilities        
Current liabilities        
Interest-bearing loans and borrowings, including Interest payable, fines and penalties on overdue amounts of RUB 41,535 million and RUB 47,475 million as of September 30, 2016 and December 31, 2015.     442,289       491,674  
Trade and other payables     44,605       54,602  
Advances received     3,242       3,492  
Provisions     1,799       2,532  
Pension obligations     1,120       1,120  
Finance lease liabilities     11,558       13,507  
Income tax payable     3,439       5,549  
Tax payable other than income tax     9,718       8,034  
Other current liabilities     34       26  
Total current liabilities     517,804       580,536  
         
Non-current liabilities        
Interest-bearing loans and borrowings     12,371       4,308  
Provisions     3,686       3,439  
Pension obligations     3,688       3,746  
Finance lease liabilities     106       481  
Deferred tax liabilities     13,624       11,090  
Other non-current liabilities     555       189  
Other non-current financial liabilities     35,246       -  
Income tax payable     -       137  
Total non-current liabilities     69,276       23,390  
Total liabilities     587,080       603,926  
         
Equity        
Common shares     4,163       4,163  
Preferred shares     833       833  
Additional paid-in capital and other reserves     28,216       28,322  
Accumulated other comprehensive income     1,773       445  
Accumulated deficit     (295,954 )     (301,565 )
Equity attributable to equity shareholders of Mechel PAO     (260,969 )     (267,802 )
Non-controlling interests     7,202       5,948  
Total equity     (253,767 )     (261,854 )
Total equity and liabilities     333,313       342,072  

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

Interim condensed consolidated statement of profit (loss) and other comprehensive income
(All amounts are in millions of Russian rubles)   9 months ended September 30,
      2016       2015  
    (unaudited)   (unaudited)
Continuing operations        
Revenue     196,350       194,039  
Cost of goods sold     (108,274 )     (114,123 )
Gross profit     88,076       79,916  
         
         
Selling and distribution expenses     (41,237 )     (39,427 )
Loss on write-off of of property, plant and equipment     (303 )     (125 )
Impairment of goodwill and other non-current assets     (374 )     -  
Allowance for doubtful accounts     (740 )     (1,049 )
Taxes other than income taxes     (4,197 )     (4,471 )
Administrative  and other operating expenses     (12,975 )     (12,941 )
Other operating income     511       115  
Total selling, distribution and operating income and (expenses), net     (59,315 )     (57,898 )
Operating profit     28,761       22,018  
         
Finance income     3,963       121  
Finance costs including fines and penalties on overdue loans and borrowings and finance leases payments of RUB 5,254 million, RUB 15,883 million for the periods ended September 30, 2016 and 2015, respectively     (43,247 )     (47,956 )
Foreign exchange gain (loss), net     19,738       (43,011 )
Share of profit of associates     22       19  
Other income     379       593  
Other expense     (150 )     (139 )
Total other income and (expense), net     (19,295 )     (90,373 )
Profit (loss) before tax from continuing operations     9,466       (68,355 )
         
Income tax expense     (2,427 )     (6,914 )
Profit (loss) from continuing operations     7,039       (75,269 )
         
Discontinued operations        
(Loss) profit after tax from discontinued operations, net     (343 )     1,013  
Profit (loss) for the period     6,696       (74,256 )
         
Attributable to:        
Equity holders of the parent     5,543       (74,586 )
Non-controlling interests     1,153       330  
         
Other comprehensive income        
Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of income tax:      1,244       48  
Exchange differences on translation of foreign operations     1,244       40  
Net gain on available for sale financial assets     -       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     1,244       55  
Total comprehensive income (loss), net of tax     7,940       (74,201 )
         
Attributable to:        
Equity holders of the parent     6,787       (74,546 )
Non-controlling interests     1,153       345  

Interim condensed consolidated statement of cash flows
(All amounts are in millions of Russian rubles)   9 months ended September 30,
      2016       2015  
    (unaudited)   (unaudited)
Cash Flows from Operating Activities        
Net profit (loss)     6,696       (74,256 )
Loss (profit) after tax from discontinued operations, net     343       (1,013 )
Net profit (loss) from continuing operations     7,039       (75,269 )
Adjustments to reconcile net profit (loss) from continuing operations to net cash provided by operating activities:        
Depreciation     8,607       8,976  
Depletion and amortization     1,415       1,277  
Foreign exchange gain (loss), net     (19,738 )     43,011  
Deferred income taxes     2,632       6,882  
Allowance for doubtful accounts     740       1,049  
Write-off of accounts receivable     80       122  
Write-off of inventories to net realisable value     292       684  
Revision in estimated cash flows of rehabilitation provision     (44 )     (40 )
Loss on write-off of property, plant and equipment     303       125  
Impairment of goodwill and other non-current assets     374       -  
Loss (gain) on sale of property, plant and equipment     29       (70 )
Gain on sale of investments     (130 )     -  
Gain on write-off of accounts payable with expired legal term     (61 )     (159 )
Pension service cost and actuarial loss, other expenses     124       126  
Finance income     (3,963 )     (121 )
Finance costs, including fines and penalties on overdue loans and borrowings and finance leases payments     43,247       47,956  
Other     159       458  
Changes in working capital items:        
Trade and other receivables     (3,633 )     1,743  
Inventories     (430 )     3,040  
Trade and other payables     (3,419 )     (2,593 )
Advances received     (51 )     (1,110 )
Taxes payable and other current liabilities     644       (463 )
Other current assets     349       358  
Income tax paid     (1,364 )     (1,086 )
Net operating cash flows of discontinued operations     (436 )     177  
Net cash provided by operating activities     32,765       3 5 ,0 73  
         
Cash Flows from Investing Activities        
Monthly installments for acquisition of DEMP     (3,636 )     (3,557 )
Proceeds from disposal of securities     3       143  
Loans issued and other investments     (5 )     (22 )
Interest received     25       61  
Proceeds from disposal of subsidiaries     227       168  
Proceeds from loans issued     20       10  
Proceeds from disposals of property, plant and equipment     156       301  
Purchases of property, plant and equipment     (2,398 )     (3,143 )
Interest paid, capitalized     (459 )     (679 )
Net cash used in investing activities     (6,067 )     (6,718 )
         
Cash Flows from Financing Activities        
Proceeds from loans and borrowings     4,133       2,515  
Repayment of loans and borrowings     (37,922 )     (9,641 )
Interest paid, including  fines and penalties     (25,756 )     (19,412 )
Dividends paid     (5 )     (4 )
Dividends paid to non-controlling interest     (2 )     (1 )
Proceeds from disposal of non-controlling interest in subsidiaries with put option granted to non-controlling interest shareholders     34,300       -  
Repayment of obligations under finance lease     (1,868 )     (1,531 )
Net cash used in financing activities     (27,120 )     (28,074 )
         
Effect of exchange rate changes on cash and cash equivalents     (122 )     (1,075 )
         
Net decrease in cash and cash equivalents     (544 )     (794 )
         
Cash and cash equivalents at the beginning of period     3,079       3,983  
Cash and cash equivalents net of overdrafts at the beginning of period     891       1, 3 44  
Cash and cash equivalents at the end of period     2,350       2,377  
Cash and cash equivalents net of overdrafts at the end of period     347       550  

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

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