Mechel’s steel segment’s revenue from external customers in Q3 2012 amounted to USD 1.7 billion or 63% of the consolidated net revenue, a decrease of 10.4% over the segment’s revenue from external customers of USD 1.9 billion or 61% of consolidated revenue in Q3 2012.
In Q3 2012, the steel segment’s operating loss totaled USD 42.9 million or -2.4% of the segment’s revenue, versus an operating loss of USD 471.0 million, or -24.0% of total segment revenue in Q2 2012. The adjusted EBITDA in the steel segment in Q3 2012 decreased by 18.1% and amounted to USD 74.7 million compared to the adjusted EBITDA of USD 91.3 million in Q2 2012. The adjusted EBITDA margin of the steel segment was 4.27% in Q3 2012, versus an adjusted EBITDA margin of 4.65% in Q2 2012. Depreciation and amortization in the steel segment decreased by 3.4% from USD 41.2 million in Q2 2012 to USD 39.8 million in Q3 2012.
Steel Segment output and sales for 9 month 2012;
In ‘000 tonnes)
Mr Vladimir Tytsky CEO of Mechel Steel Management OOO said that “In the Q3 we continued to implement our equipment modernization program at our enterprises. Construction of the universal rolling mill at Chelyabinsk Metallurgical Plant has reached its final stage. We also continued to optimize stockpiles of steel products in our sales network’s warehouses. Despite a certain decrease of overall sales volumes of our finished products, we managed to increase sales of high value added products, such as hardware and forgings. Lower iron ore and coke prices enabled us to reduce production costs at the division’s key Russian enterprises. The Russian market’s stable demand for long products also proved helpful.”
He said that “At the same time, persistent weakness in the European steel market and high scrap prices put great pressure on the results of the division’s enterprises located in Eastern Europe. Ultimately we decided first to cut production at electric smelting plants and then to temporarily halt production there. Many other companies faced the same problems including those whose products we are selling through our sales network. Cutting production at such plants led to reduced sales volumes and therefore the division’s revenues. Due to our focus on the Russian market for long products, which fared much better than its European counterpart, in the third quarter we managed to maintain EBITDA at a fairly high level as compared to previous financial periods.”
