Mechel’s third-quarter earnings falls on lower output, sales

Mechel’s third-quarter consolidated revenue slipped -5% quarter-on-quarter to RUB 74.9 billion ($1.17 billion), dragging year-to-date revenue down by -4% on-year to $3.58 billion.

The decline was on the back of weaker coal markets and lower steel product sales on account of vital blast furnace repairs (see separate Kallanish article).

The mining segment’s revenue from external customers fell -7% on-quarter in Q3 to $367.2 million on lower sales volumes and general weakness of global coal markets. January-September revenue remained stable at $1.15 billion as prices increased, somewhat offsetting slightly lower sales volumes. This affected profitability, reducing it -3 percentage points q-on-q to 32% in Q3 and -4p.p. y-on-y to 32% in the first nine months.

Steel segment revenue from contracts with external customers also decreased, by -3% on-quarter in Q3 to $712.8m and by -7% on-year in 9M to $2.1 billion. Both output and sales volume fell in Q3 on the back of major blast furnace repairs and lower prices. The steel segment’s profitability lost -2p.p. in Q3 to 7% and -7p.p. on-year in 9M to 8%.

Mechel ceo Oleg Korzhov says major planned repairs of steel facilities will continue to affect operational performance in the medium term. However, restoring coal mining and iron ore concentrate production supported Q3 sales. Lower steel output has resulted in Mechel producing more high-value-added products, including rails, and stainless long and flat products. Production of rebar and wire rod has been reduced, as demand for these products also fell towards the end of Q3.