Mechel back from the dead on high coal prices

Mechel back from the dead on high coal prices
By bne IntelliNews August 24, 2017

Russian steel and coal major Mechel saw its tax burden finally decline thanks to high steel and coal prices after years of verging on the brink of insolvency, Vedomosti reported on August 24.

Mechel built up massive debts and nearly went bankrupt three years ago after miscalculating the costs of developing the huge Elginsky coal deposit. It has been in constant debt restructuring talks with its largest creditors, which include state-owned VTB and Sberbank. However, the rise in prices seems to have solved the worst of its troubles. 

In April-June, Mechel increased its coal output fourfold after the price skyrocketed to $300 per tonne in the wake of the tropical storm Debby, which hit the Australian coast.

As a result, the mill's Ebitda was up 1.6 times y/y to RUB40.2bn (€577mn) in January-June, the lion's share of which, RUB34.6bn, came from the coal division.

Thanks to the Ebitda growth, Mechel's tax burden is now the lowest since 2012, as the company's net debt has declined by 1.6% to RUB426bn since the beginning of the year and 75% of Mechel's outstanding debts have been restructured. The company is also in the process of restructuring a syndicated loan.

According to the company's report, the market was volatile in January-June.

A coking coal price of between $160 and $170 per tonne would be comfortable for Mechel against the backdrop of growing demand from Asia, Vedomosti reported.

Of Mechel's coal sales, 63% account for Asia, 22% for Russia and 11% for Europe.

Steel products accounts only for 15% in the company's Ebitda.

Mechel IFRS results
 
  1Q16 2Q16 3Q16 4Q16 1Q17 2Q17  Q/Q  Y/Y 
Revenue, $ mn 835 1 033 1 024 1 264 1 319 1 257  -5% 22%
Adjusted EBITDA, $ mn 134 239 245 390 389 304 -22% 27%
Adjusted EBITDA margin 16% 23% 24% 31% 29% 24% - 5ppts   1ppts 
Net income, $ mn 4 121 -43 25 237 -156
Net margin 1% 12% -4% 2% 18% -12%
Source: Mechel, BCS
 

 

Mechel 2Q17 Trading Update 
   2Q16  3Q16  4Q16  1Q17  2Q17  Q/Q  Y/Y
Total raw coal, 000 t  5 864  5 559  5 596  5 074  5 257  4% -10%
Coking coal concentrate, 000 t  2 249  2 021  2 172  1 996  2 076  4% -8%
PCI, 000 t  413 383 303 341 341 0% -17%
Antracite, 000 t  488 457 406 448 362 -19% -26%
Steam coal, 000 t  1 863  1 788  1 663  1 589  1 576  -1% -15%
Iron ore, 000 t  658 736 666 652 749 15% 14%
Steel, 000 t  1 067  1 019  1 125  1 121  1 096  -2% 3%
Steel products, 000 t  1 137  1 070  1 070  1 050  1 125  7% -1%
Ferrosilicon, 000 t  18 20 20 14 17 21% -6%
Electric power, mn kWh  751 759 904 932 746 -20% -1%
Source: Mechel, BCS

News

Dismiss