Mechel

Aktivs

PJSC Mechel, founded in 2003, is one of the world's leading companies in the mining and metallurgical industries. The company includes production enterprises in 11 regions of Russia, as well as abroad.

For 2019, Mechel unites more than 20 industrial enterprises. These are producers of coal, iron ore, steel, rolled products, ferroalloys, thermal and electric energy. All enterprises operate in a single production chain: from the extraction of raw materials to products with high added value. The holding also includes three trading ports, its own transport operators, sales and service networks. Mechel's products are sold in the Russian and foreign markets.

Mechel is one of the TOP-10 world producers of metallurgical coal (excluding Chinese producers) and is among the world leaders in terms of coking coal concentrate production. The company controls more than a quarter of the country's coking coal enrichment capacity. Mechel also ranks second in Russia in the production of long products, is the most diversified manufacturer of special steels and alloys in Russia.

The Mechel metal trading network has more than 80 divisions, including 18 service centers. It includes the Russian company Mechel Service, subsidiaries in the CIS countries, Western and Eastern Europe.

Mining segment

Management company LLC UK Mechel-Mining

Mechel's mining operations are engaged in the production and sale of iron ore concentrate, coking coal concentrate, anthracites, PCI and coke, which are the main raw materials for steel production, as well as the production and sale of thermal coal and industrial products. The products of the mining segment for 2019 are sold to third-party consumers in Russia and abroad, and are used to meet the internal needs of the Group's metallurgical and energy areas.

• Yakutugol (Russia)
• Elgaugol (Russia)
• South Kuzbass (Russia)
• Korshunovsky GOK (Russia)
• Mechel-Cox (Russia)
• Moscow Coke and Gas Plant (Russia)

Metallurgical segment

Management company: LLC UK Mechel-Stal

Mechel's activities in the metallurgical business segment for 2019 cover the production of long products from carbon and special steel, flat products from stainless steel, shaped products, metal products with high added value, including metalware and stamping, as well as the production of blanks.

• Chelyabinsk Metallurgical Plant (Russia)
• Beloretsk Metallurgical Plant (Russia)
• Izhstal (Russia)
• Ural Forge (Russia)
• Donetsk Electrometallurgical Plant (Ukraine)
• Mechel Nyamunas (Lithuania)
• Vyartsilsky Metalware Plant (Russia)
• Bratsk Ferroalloy Plant (Russia)
• South Ural Nickel Mill (Russia)
• Kaslinsky Plant of Architectural and Art Casting (Russia)

Energy segment

Management company: Mechel-Energo LLC

The energy segment makes it possible to sell part of thermal coal, profit from the supply of final products to third parties and supply the Group's enterprises with electricity.

• Mechel-Energo (Russia)
• Yuzhno-Kuzbass GRES (Russia)
• Kuzbassenergosbyt (Russia)

Logistics

Management company: LLC "UK Mechel-Trans"

The availability of our own freight transportation facilities allows Mechel to save on costs, makes the Group less dependent on fluctuations in the transportation market, and also makes it possible to form a flexible delivery schedule that is convenient for the company's customers.

• Mechel-Trans (Russia)
• Mechel-Trans Auto (Russia)
• Port of Kambarka (Russia)
• Commercial port of Posyet (Russia)
• "Port Mechel-Temryuk" (Russia)

Performance indicators

2023: Decrease in revenue by 6% to RUB 405.88 billion

In 2023, Mechel raised 405.88 billion rubles, which is 6% less than revenue a year ago at 434.05 billion rubles. Net profit during this time decreased from 65.17 billion to 24.25 billion rubles. The mining and metallurgical company published such data under IFRS on February 21, 2024.

It follows from Mechel's reporting that the consolidated EBITDA for 2023 amounted to 86.34 billion rubles, which is 28.8 billion rubles or 25% lower than the same indicator for 2022. EBITDA margin was 21%. Gross profit decreased to 155.54 billion rubles, operating profit - to 64.85 billion rubles. Mechel CEO Oleg Korzhov noted that the mining segment had the main impact on the dynamics of the consolidated EBITDA indicator.

source = Mechel

The indicators weakened relative to 2022 as a result of a significant correction in market prices, as well as a decrease in coal production and sales in early 2023. During the reporting period, the situation with production and shipments stabilized, "he explained.

The net debt of the Mechel group without penalties and fines as of December 31, 2023, compared to the same indicator at the end of 2022, increased by 8% and amounted to 250 billion rubles. This change is mainly due to the weakening of the ruble against the US dollar, euro and yuan, which is partially offset by the net repayment of debt on loans and borrowings, the company noted.

Mechel reduced coal production in 2023 by 8% compared to 2022 - to 10.36 million tons. Steel production in 2023 amounted to 3.48 million tons, which is 2% lower than the previous year. Iron production also fell by 2%, to 3.16 million tons. Sales of coking coal concentrate (coking coal concentrate) decreased by 21%, to 3.11 million tons, and thermal coal - by 28%, to 2.32 million tons.

MECHEL ANNOUNCES FINANCIAL RESULTS FOR 2023

2022: Increased steel and cast iron production

Mechel in 2022 increased steel smelting by 1% compared to 2021 - to 3.56 million tons. Coal production decreased slightly to 11.3 million tons, and pig iron production increased by 2% to 3.23 million tons. The company released such data on March 23, 2023.

According to Mechel's materials, sales of coking coal concentrate in 2022 decreased by 9% compared to the volume of one year ago - to 3.97 million tons due to restrictions on the transportation of products by rail to the Far Eastern ports in the second half of 2022. Thermal coal sales grew by 7%, to 3.22 million tons due to an increase in export shipments, the company said. At the same time, sales of iron ore concentrate increased by 9%, to 1.48 million tons.

Steel smelting by Mechel increased by 1%

Sales of coke decreased by 22% - to 2.15 million tons. This decline in the company was explained by two factors: administrative and logistical barriers to shipments in Western European directions and a decrease in demand from Russian consumers.

The restructuring of supply chains, which led to an increase in the delivery time of goods, caused a 3% reduction in the sales rate of ferrosilicon from the Bratsk Ferroalloy Plant. The situation in the global ferroalloy market has continued to be quite favorable over the past two years.

Sales of flat rolled products decreased by 9% year-on-year primarily due to the excessive supply of these products in the domestic market, which was observed since the second quarter of last year.

The decrease in the total volume of metalware sales by 7% was due to the weakening demand for wire. At the same time, thanks to the expansion of the client base, sales of ropes showed positive dynamics in 2022: + 12^[1]

2020: Decrease in revenue by 8%, to 265.45 billion rubles, profit - by 66%, to 808 million rubles

The revenue of PJSC Mechel in 2020 reached 265.45 billion rubles, which is 8% less than a year earlier, when the indicator was measured at 287.15 billion rubles. Revenue from contracts with external buyers in the metallurgical segment decreased by 5%, to 166.89 billion rubles. In the energy segment, similar revenue fell by 4% to 27.69 billion rubles in 2020 from 28.79 billion rubles in 2019.

The net profit of the Russian metallurgical company in 2020 compared to 2019 decreased by 66%, to 808 million rubles. A significant drop in Mechel's profit was associated with an increase in negative exchange rate differences in foreign currency debt by 54.7 billion rubles due to the weakening of the ruble against the US dollar and the euro in the reporting period, which was partially offset by the positive effect of the sale of the Elginsky coal complex.

At the end of 2020, Mechel's financial expenses decreased by 8.8 billion rubles or 26% compared to 2019. This happened due to the repayment of part of the loans of GPB and VTB through the sale of companies of the Elginsky coal complex and with a decrease in the key rate of the Bank of Russia.

Net debt of the group without penalties, fines and options as of December 31, 2020 compared to the same indicator at the end of 2019 decreased by 74.8 billion rubles and amounted to 325.6 billion rubles. This change is due to a net repayment of RUB 99.5 billion primarily due to the repayment of GPB and VTB loans from the sale of assets and a decrease in loans due to the effect of discontinued operations as a result of the disposal of Elginsky coal complex companies in the amount of 9,5 billion rubles, which was partially offset by a negative exchange rate difference in the amount of 36,1 billion rubles due to the weakening of the ruble against the US dollar and the euro.^[2]

2018: Revenue - 312.6 billion rubles, profit - 75.7 billion rubles

According to the results of financial activities for 2018, Mechel's revenue amounted to 312.6 billion rubles, EBITDA - 75.7 billion rubles, net profit attributable to shareholders of PJSC Mechel - 12.6 billion rubles.

Information Technology

Main article: Information technology in Mechel

In the classic version, the IT service is divided into groups that deal with infrastructure and information systems. Manufacturing plants add management of production systems. At the same time, Mechel has a single IT team that, in fact, implements the group's projects. She works for Mechel InfoTech, which was created in September 2018. The size of this team for April 2019 is 100 people. And the total number of IT-related employees in Mechel is about a thousand. But it includes signalmen, electricians, people who ensure the operation of sensors, drive mechanisms in production, and so on. If we talk about pure IT - analysts and programmers - then there are about 200 of them throughout Mechel.

History

2023: Gazprombank sued Mechel 11.9 billion rubles, which were supposed to be returned to the French BNP Paribas

The Moscow Arbitration Court decided to recover $244.2 million from the mining and metallurgical holding Mechel and the Chelyabinsk Metallurgical Plant (CHMK) in favor of Gazprombank. The reason for the claims was a loan agreement concluded in 2010 between Mechel and the French bank BNP Paribas.

Recognize Public Joint Stock Company Chelyabinsk Metallurgical Plant as an obligatory person to Gazprombank under the financing participation agreement dated September 15, 2010 and under the loan agreement dated September 15, 2010. Recognize Mechel as an obligated person to Gazprombank under the guarantee agreement dated September 15, 2010. Collect jointly from the public joint-stock company "Chelyabinsk Metallurgical Plant" and the public joint-stock company "Mechel" debt in the amount of $154.86 million and interest on the loan in the amount of $89.36 million, - said the judge on July 17, 2023 (quoted by TASS).

Gazprombank sued Gazprombank 11.9 billion rubles

In the court file, the claim is estimated at 11.9 billion, rubles notes Kommersant"." According to the newspaper, the funds received under a loan agreement with BNP Paribas went to the construction of a universal rail and rolling mill at the Chelyabinsk Metallurgical Plant (CHMK). According to the position of the plaintiff, Gazprombank provided financing to the French bank, and he, in turn, credited CHMK. The funds were due to be returned before 2019, but the last payment on the principal came in 2014.

Going to court, Gazprombank referred to the decree of the President of Russia No. 430 of July 5, 2022. According to him, Russian debtor companies under syndicated loan agreements are obliged to fulfill obligations under these agreements to resident creditors directly, bypassing a foreign (unfriendly) payment agent.^[3]

2022: Stock trading halted on US stock exchange

At the end of February 2022, the American exchanges Nasdaq and NYSE stopped trading in shares of Yandex, Ozon, MTS, Mechel and Cian.ru after the introduction of US sanctions against Russia. Read more here.

2021: Overdue loans by 33 billion rubles

In March 2021, it became known about Mechel's overdue loans. The mining and metallurgical company was unable to repay debt on loans issued under the guarantee of export credit agencies (Export Credit Agency, ECA).

According to Kommersant, citing documents provided by Mechel to the US Securities and Exchange Commission, the company's total debt is 33 billion rubles, including 29 billion rubles to BNP Paribas, which also provided €102.8 million of its own funds. Other major lenders included Gazprombank ($219.4 million) and UniCredit (€89.2 million).

Mechel overdue loans by 33 billion rubles

We defaulted on principal and interest payments under unstructured export credit agreements with international creditors. In addition, we have violated and continue to violate a number of financial and non-financial obligations under our loan agreements, the document says.

According to the senior director, head of the risk assessment group for the sustainable development of AKRAMaksim Khudalov, in the current situation, hardly any of the creditors will initiate bankruptcy. In the event of bankruptcy, BNP Paribas and UniCredit are likely to receive less, since most of the company's assets could be pledged to state-owned banks as part of the first restructuring, he said.

The share of overdue debt in Mechel's total debt increased to 11.1% from 6.6% at the end of 2019, despite the fact that the company repaid part of the debt to state banks in 2020 due to profits from the sale of Elga. The company expects to complete debt restructuring in 2021.

The publication of Kommersant says that in 2020 Mechel was able to restructure most of its debt thanks to agreements with Gazprombank and VTB, but it was not possible to agree with international banks.^[4]

2010: Enterprises in 12 regions of Russia, Romania, Bulgaria and Lithuania

In 2010, Mechel's business consisted of three segments: mining, metallurgical and energy. Mechel unites producers of coal, iron ore concentrate, nickel, steel, rolled products, ferroalloys, high-end products, thermal and electrical energy. Mechel enterprises at this time operate in 12 regions of Russia, Kazakhstan, Romania, Bulgaria and Lithuania.

2004: New York Stock Exchange Stock Offering

Mechel is the first mining and metallurgical company in Russia, Central and Eastern Europe to list its shares on the New York Stock Exchange. Since 2004, ADRs for ordinary shares of the company have been traded on the largest American platform. Since May 2010, ADRs for preferred shares of Mechel have also been traded on the New York Stock Exchange.

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