March 21, 2019 / 12:35 PM / 3 months ago

Steel producer Mechel's 2018 profits fall 7 percent on lower sales

MOSCOW (Reuters) - Russian steel and coal producer Mechel said on Thursday its 2018 core earnings fell 7 percent versus the previous year, with lower sales in the mining division only partly offset by higher coal prices.

FILE PHOTO: Igor Zyuzin, Chairman of Board of Directors of Mechel in Moscow, Russia March 14, 2019. REUTERS/Maxim Shemetov

Mechel, controlled by businessman Igor Zyuzin, said its 2018 earnings before interest, taxation, depreciation and amortization (EBITDA) were at 75.67 billion roubles ($1.2 billion), down from 81.11 billion in 2017.

Mechel, at one point on the brink of bankruptcy, has been in restructuring talks with its lenders for several years.

In January, the company completed the restructuring of a $1 billion syndicated loan.

On Thursday, Mechel said net debt stood at 468 billion roubles by the end of 2018, compared to 466.87 at the end of 2017.

“Our finance expenses went down by 5.6 billion roubles, or 12 percent, year-on-year due to decrease of the Bank of Russia key interest rate as well as the group’s efforts to restructure debt and decrease debt costs,” chief financial officer Nelli Galeeva said in the statement.

Mechel’s shares were trading up 4.93 percent at 1130 GMT.

The decline in Mechel’s mining division sale volumes was due to railcar shortages in the second half of the year, the company said.

Coal mining volumes fell 9 percent compared to 2017 and coking coal sales fell by 10 percent, the company said in a presentation.

“Considering the major work we have done last year to prepare reserves for mining, we expect our output to grow this year,” mining division head Pavel Shtark said in a statement.

“The persistently high prices on the mining division’s products will also help us improve our financial results,” he added.

Average coking coal prices on the Russian market in 2018 were about 17 percent higher than during the previous year, Mechel said in its presentation.

Overall revenue in 2018 rose by 5 percent year-on-year to 312.6 billion roubles, Mechel said, supported by positive price trends in steel.

The company also benefited from the write-off of certain fines and penalties after Mechel fulfilled the conditions of its debt restructuring with Russian state banks, Galeeva said in the statement.

Reporting by Polina Ivanova and Andrey Kuzmin; Editing by Jane Merriman

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