July 14, 2010 / 5:00 PM / in 8 years

UPDATE 2-Russia's Mechel Q1 net beats estimates, sees growth

* Q1 net $82.6 million vs $66.3 million f‘cast

* EBITDA $257.6 million vs $289 million f‘cast

* Revenue $1.90 bln vs $1.79 bln f‘cast

* Shares up 1.5 percent in New York

(Adds details on debt, coking coal)

By Alfred Kueppers

MOSCOW, July 14 (Reuters) - Russian coking coal and steel producer Mechel (MTL.N) said it expects significant growth this year after posting first-quarter net profit of $82.6 million, beating forecasts.

The company said on Wednesday its results should improve through the rest of 2010, helped by a debt refinancing and an expansion in coal output.

“These steps let us improve our first-quarter results and provide significant growth in operational and financial performance of the group throughout the rest of the year,” Chief Executive Yevgeny Mikhel said in a statement.

Analyst polled by Reuters had forecast a first-quarter net profit of $66.3 million from Mechel, which has revived its fortunes thanks to stronger coking coal prices and improved steel demand after posting a $690.7 million loss a year ago.

First-quarter revenue rose to $1.90 billion from $1.18 billion, while earnings before interest, taxation, depreciation and amortisation (EBITDA) rose to $257.6 million from $116.6 million.

As of March 31, 2010, Mechel’s total debt was $6.3 billion.

On a conference call with analysts, Chief Financial Officer Stanislav Ploschenko said the company would achieve a net debt to EBITDA ratio of 3 to 1 by end-2010, and could even achieve a lower multiple.

    He also said the company expects to agree with international banks on refinancing a major syndicated facility within the next two months. Reuters in May cited banking sources as saying Mechel had appointed ING and RBS to coordinate a $2 billion refinancing. [ID:nLDE64R1NG]

    Its shares were up 1.5 percent in New York at $19.83 by 1624 GMT.

    The company’s results were driven by its mining division which includes both coking coal and lesser quantities of iron ore. Analyst Sergey Donskoy at brokerage Troika Dialog said coking coal remained the main focus for investors.

    “Coking coal prices and production volumes are the key for (Mechel‘s) earnings going forward,” he said.

    The company produced 2.36 million tonnes of coking coal concentrate in the first quarter, up 230 percent from a year earlier. It is also investing $700 million this year to develop the Elga coal deposit in the Sakha Republic in Siberia.

    Initial production is expected to start in the fourth quarter, though the railway required to facilitate large scale exports is not scheduled to start operations until end-2011.

    The deposit holds about 2.2 billion tonnes of coking coal. (Editing by Erica Billingham and David Holmes)

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