* Mechel Q3 net profit $55 mln after Q2 net loss
* Analysts say Mechel dividends on preferred stock unlikely
* Asset acquisition not to affect Mechel's debt level
* Shares underperform on local market
(Adds details on asset acquisition financing)
MOSCOW, Dec 12 Russian mining and steel group
Mechel said on Wednesday it was committed to keeping
its debt under control after borrowings rose nearly 5 percent to
$9.1 billion in the third quarter.
Mechel, with a market capitalisation of about $3.2 billion
and controlled by billionaire Igor Zyuzin, like other Russian
steelmakers invested heavily in expansion before the 2008
financial crisis hit steel demand, forcing it to borrow to
"Work on optimising the company's debt structure never
stops," Evgeny Mikhel, Mechel chief executive, said in a
statement accompanying third-quarter results.
Mechel, the most indebted Russian mining company after
aluminium giant RUSAL, had said earlier it wants to
reduce its short-term debts to below $1 billion by Sept. 2013.
As of Dec. 1, t ho se debts stood at $2.4 billion.
Mechel shares were little changed in Moscow on Wednesday
because the debt burden offset the fact that the company managed
to switch to a profit after a net loss a quarter earlier,
Mechel's third-quarter net profit reached $55 million,
lagging analysts forecasts, and showed that is unlikely to pay
dividends on preferred stock for 2012, Nomos Bank said in a
note. The company's nine-month net loss stood at $550 million.
Mechel last week won the right to buy 55 percent of the
Pacific port of Vanino, one of several ports vital for Russian
coal and metal exports to Asia, by offering the highest bid of
15.5 billion roubles ($504 million)..
"This acquisition will have practically no impact on the
group's existing debt leverage," Mikhel said during a conference
call for analysts on Wednesday.
"We agreed the consortium of investors, which will provide
non-debt funding for this deal on condition of our
administrating the port," Mikhel told analysts.
As part of its debt restructuring, the company secured a
credit line for 24 billion roubles ($780 million) in October and
got a $1 billion syndicated loan restructure in December, it
Its cash and cash equivalents rose to $582 million from $151
million as the end of September, while operational cash flow
reached its highest since 2009, the company added.
The rise in third-quarter net borrowings to $9.1 billion was
due to the rouble strengthening, a nalysts said. The rouble
strengthened about 4 percent against the dollar in the third
quarter, increasing the dollar value of Mechel's debt, a half of
which is held in roubles.
The New York-listed firm put its non-core assets up for sale
earlier this year in an attempt to raise around $4 billion to
cut its debt leverage. It has yet to make any major sales.
Mechel plans to finish its asset restructuring and to sell a
stake in its mining assets during the first half of 2013, Mikhel
said during the call.
Mechel shares fell 38 percent in Moscow in the last 12
months, while its preferred stock lost 54 percent in
Mechel shares were down 0.3 percent in Moscow by 1451 GMT on
Wednesday, underperforming a 0.57 percent increase in the local
metals and mining index.
The firm's net debt/EBITDA (earnings before interest, taxes,
depreciation and amortisation) ratio stood at 5.5 at the end of
September compared with rivals like Evraz and Severstal
which have a ratio below 3 times, Yuri Volov, an
analyst from Nomos bank, said.
Mechel plans to sell 25.5-26 million tonnes of coal in 2013,
the company added during the call. Its nine-month coal output
stood at 20.8 million tonnes this year.
($1 = 30.7530 roubles)
(Reporting by Polina Devitt and Andrey Kuzmin; Editing by