Mechel Q1 2015 production and sales results

In the first quarter of 2015, Mechel Group enterprises showed stable results, despite the low prices for the main products of the division. Production was maintained at planned levels, and even improved some indicators. A good example of successful work is the increase in coal production from the Elginskoye deposit by almost 2 times compared to the previous quarter.

The company's steel segment production in Q1 2015 operated with improved margins due to record low prices for raw materials for steelmaking, the output of which increased by 7 percent YoY and 1 percent QoQ to 1,102 thousand tonnes. Pig iron production amounted to 1,051 thousand tons, which is 1 percent higher on a quarterly level and 12 percent higher on an annual basis. However, the weak construction market in Russia and the closure of a number of Mechel subsidiaries in Western Europe led to a decline in flat steel sales to 117 thousand tonnes and long products to 637 thousand tonnes, down 1 and 6 percent quarter-on-quarter, respectively.

The production of 20 new types of products was mastered at the universal rolling mill, in connection with which, in the 1st quarter of 2015, a double volume of products was shipped compared to the same period last year. During the reporting period, the mill produced 43825 thousand tons of products, including high-quality structural forms of reinforcement and rails. In the near future, the company expects to receive certificates for railway products in order to begin deliveries of Russian Railways, including for the high-speed Moscow-Kazan railway, which will ensure the maximum load of the universal rolling mill.

Sales of semi-finished products show an increase of 119 percent to 81 thousand tonnes due to the signing of a lucrative contract and the delivery in Q1 2015 of an excess of semi-finished products accumulated in European warehouses. Also due to the growing demand in Europe, the sales of forgings increased by 6 percent to 14 thousand tons. At the same time, there was a 36% decline in sales of stampings up to 13 thousand tons due to weakening demand from machine-building enterprises, which reduced the purchase of spare parts.

Sales of coking coal concentrate for the reporting period fell to 2,040 thousand tonnes, down 14 percent quarter-on-quarter and 22 percent year-on-year. Anthracite sales totaled 544 thousand tonnes, down 6 percent compared to Q4 2014 due to lower supplies to CIS customers, but increased 3 percent on an annualized basis. Steam coal sales totaled 1,476 thousand tonnes, an increase of 8 percent compared to Q1 2014 and a decline of 18 percent QoQ due to weak demand in Europe. At the same time, the Asian markets saw an increase in demand and prices for iron ore concentrate, which ensured a 15 percent increase in sales qoq to 707 thousand tonnes.