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Mechel

January 31, 2013

Mechel reports 2012 operational results

Moscow, Russia– January 31, 2012 – Mechel OAO (NYSE: MTL), one of the leading Russian mining and metals companies, announces 2012 operational results.

Production and sales for 2012

Production:

Product name

2012, thousand tonnes

2011, thousand tonnes

2012 vs. 2011, %

4Q2012, thousand tonnes

3Q2012, thousand tonnes

4Q2012 vs. 3Q2012, %

Coal (run-of-mine)

27,763

27,625

+1

6,970

7,414

-6

Pig iron

4,161

3,728

+12

1,054

1,092

 -3

Steel

6,532

6,118

+7

1,430

1,710

 -16

 

Sales:

Product name

2012, thousand tonnes

2011, thousand tonnes

2012 vs. 2011, %

4Q2012, thousand tonnes

3Q2012, thousand tonnes

4Q2012 vs. 3Q2012, %

Coking coal concentrate

11,542

12,511

-8

2,513

2,792

-10

Including coking coal concentrate supplied to Mechel enterprises

2,590

2,876

-10

640

652

-2

PCI

2,428

1,969

+23

725

629

 +15

Anthracites

2,391

2,344

+2

453

587

-23

Including anthracites supplied to Mechel enterprises

271

323

-16

25

57

-56

Steam coal

5,910

6,438

-8

1,420

1,595

-11

Including steam coal supplied to Mechel enterprises

1,540

1,319

+17

419

402

+4

Iron ore concentrate

4,390

4,404

0

1,171

1,146

+2

Including iron ore concentrate supplied to Mechel enterprises

280

1,695

-83

12

110

-89

Coke

3,561

3,457

+3

854

854

0

Including coke supplied to Mechel enterprises

2,448

2,415

+1

546

564

-3

Nickel

11

16.3

-32

0.5

2.5

-81

Including nickel supplied to Mechel enterprises

2

4.9

-67

0

0.5

-100

Ferrosilicon

78

83.8

-6

22

21

+1

Including ferrosilicon supplied to Mechel enterprises

30

30.3

-2

7.6

7.5

+2

Chrome

70

58.4

+20

17

13

+25

Including chrome supplied to Mechel enterprises

9

13.5

-37

2

2.5

-18

Flat products

718

679

+6

184

143

 +29

Including those produced by third parties

397

391

+1

94

66

+41

Long products

4,073

3,821

+7

966

1,130

-14

Including those produced by third parties

908

818

+11

242

263

-8

Billets

2,602

 2,092

+24

652

726

-10

Including those produced by third parties

881

1,437

-39

130

139

-7

Hardware and welded mesh

976

 961

+2

239

273

-12

Including those produced by third parties

57

52

+9

17

15

+19

Forgings

57

60

-5

18

11

+59

Stampings

111

117

-5

28

28

+1

Electric power generation (thousand kWh)

4,272,610

3,915,202

+9

1,175,399

845,163

+39

Heat power generation (Gcal)

7,945,674

7,142,197

+11

2,536,507

925,332

+174

Mechel OAO’s Chief Executive Officer Evgeny Mikhel commented on the company’s 2012 operational results:

“Despite market volatility, Mechel on the whole demonstrated positive dynamics in the Group’s key business areas over 2012.

“In the mining segment, production of run-of-mine coal increased by 1% compared to last year’s figures. The temporary suspension of mining activities at Mechel Bluestone in late 2012, as well as difficult weather conditions and current maintenance of mining equipment at Russian coal facilities had a negative impact on the coal mining volumes in the fourth quarter.

“Nevertheless, Mechel continued to successfully pursue its strategy of increasing the share of metallurgical coals in the mining division’s overall sales. For all of 2012, PCI sales were up by 23% and anthracites by 2%. A 23-percent decrease in anthracite sales in the fourth quarter was mostly due to major European consumers reducing inventories at the end of the year.

“In 2012, iron ore concentrate sales remained on the level of 2011. During the year, Korshunov Mining Plant’s sales structure changed.It significantly increased sales to external consumers, mostly Chinese steelmakers, and reduced sales to Mechel’s own enterprises. As a result, in 2012 intragroup sales decreased while third-party sales increased by half.

“In the steel division, production of steel increased by 7% and pig iron by 12% as compared to last year’s figures. The launch of Blast Furnace #5 at Chelyabinsk Metallurgical Plant after capital maintenance and the commissioning of a new electric furnace at Izhstal had a positive impact on production volumes.

“Sales of long and flat rolls in 2012 went up by 7% and 6% respectively, largely due to the sales and service network Mechel Service Global’s Russian and Kazakh subsidiaries optimizing work with the client base.

“One of Mechel’s strategic priorities is increasing output of high-margin metallurgical products. In line with this strategy, the Group, which has for several years been the leader among Russian hardware producers, continues to increase the production and sale of these products. In 2012 hardware and mesh sales amounted to some 978,000 tonnes, which is 2% higher than last year. A small decrease in hardware production in the fourth quarter was due to the suspension of production at the company’s Romanian assets due to unfavorable prices on European steel markets.

“In the ferroalloys division, ferrochrome sales were up by 20% compared to last year’s figures. The 32-percent decrease in nickel sales was caused by the halting of Southern Urals Nickel Plant following a weaker nickel market. Ferrosilicon production stayed stable, and the small difference between its sales in 2012 and 2011 are due to longer ownership transfer periods for volumes sold in late 2012.

“In 2012 the Group’s power division enterprises increased generation of heat to 7,945,674 Gcal and electricity to 4,272,610 KWh, which means a 11% and 9% increase, respectively. That was due not only to increased demand for energy resources, but also a successful 2012 maintenance campaign, as well as renovation of key facilities as part of implementing an investment program for Mechel-Energo OOO and the Group’s other power assets.”

 

 

 

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