Mechel update its steel segment for H1 and Q2 results
Steel Segment Results
| H1 2011 | H1 2010 | Change | |
| Revenue | 38,17,400 | 24,83,858 | 53.70% |
| Intersegment sales | 1,63,797 | 1,08,464 | 51.00% |
| Operating income | 1,62,371 | 1,01,758 | 59.60% |
| Net income | -56,254 | 3,821 | -1572.20% |
| Adjusted EBITDA | 2,15,215 | 1,54,312 | 39.50% |
Steel Segment Output
| Q2'11, | Q1'11 | Change | |
| Pig iron | 824.2 | 1,013.20 | -19% |
| Steel | 1,420.80 | 1,588.40 | -11% |
In’000 tonnes
Product Sales
| Q2'11, | Q1'11 | Change | |
| Flat products | 167.5 | 205.50 | -18% |
| Including those produced by third parties | 19.40 | 24.10 | -20% |
| Long products | 1,158.10 | 897.1 | 29% |
| Including those produced by third parties | 63.8 | 62.3 | 2% |
| Billets | 730 | 682.2 | 7% |
| Including those produced by third parties | 146.3 | 112.6 | 30% |
| Hardware and welded mesh | 247.5 | 209.7 | 18% |
| Including those produced by third parties | 6.6 | 4.7 | 40% |
| Forgings | 20.9 | 20.7 | 1% |
| Stampings | 31.9 | 27 | 18% |
In’000 tonnes
Mechel’s steel segment revenue from external customers in Q2 2011 amounted to USD 2.1 billion, or 59.3% of the consolidated net revenue, an increase of 17.3% over the net segment’s revenue from external customers of USD 1.8 billion or 59.9% of consolidated net revenue in the Q1 2011.
In Q2 2011, the steel segment operating income decreased by 70.7% and totalled USD 36.8 million or 1.7% of total segment’s revenue, versus the operating income of USD 125.6 million, or 6.8% of total segment’s revenue, in 1Q 2011. The adjusted EBITDA in the steel segment in 1H 2011 decreased by 56.3% and amounted to USD 65.4 million, compared to the adjusted EBITDA of USD 149.8 million in Q1 2011. The adjusted EBITDA margin of the steel segment was 3.06% for the 2Q 2011, versus the adjusted EBITDA margin of 8.11% in Q1 2011. Depreciation and amortization in steel segment rose by 11.3% from USD 29.1 million in Q1 2011 to USD 32.4 million in Q2 2011.
Commenting on the results of the steel segment Mr Andrey Deineko CEO of Mechel-Steel Management Company noted that “In the second quarter we managed to retain a high workload and used the period of rising prices for construction products to increase sales of our key products rebar and hardware, by 46% and 12% respectively. We made full use of our expansive Mechel Service Global sales network, which allowed us to stock our warehouses to the maximum in the first quarter for efficient sales in the second quarter, which is a traditional high season for steel products.
He said that “Nevertheless, I must note that the situation in the steel market was not so favorable in the second quarter. We had to deal with growing prices for raw materials, which were not compensated by the growth of steel prices. Scheduled repairs of the furnace #5 at our largest asset, Chelyabinsk Metallurgical Plant, provided additional pressure on production costs and the division’s final financial results in the second quarter.”
He added that “We continue to consistently implement our investment program aimed at upgrading our production facilities and making the steel segment more efficient. For example, the investment project on Izhstal modernization overhaul is nearly complete. After launching a new electric arc furnace, an out-of-furnace steel processing complex and a concaster, in August we made the warm launch of the mill and are currently holding tests. Construction of the universal rolling mill at Chelyabinsk Metallurgical Plant is also going along actively.”
