Russian miner Mechel OAO (MTL) posted net loss (as reported) of $575 million for the third quarter of 2014, wider than net loss of $127 million recorded in the third quarter of 2013 and a loss of $63 million recorded in the previous quarter. The results were partly affected by a significant plunge in coal and iron ore prices.
Adjusted net loss was $15 million for the reported quarter compared with $85 million reported in the year-ago quarter and $152 million in the previous quarter.
Revenues for the third quarter came in at $1,588 million, down about 24% from $2,089 million in the year-ago period. Sales were also down 9% sequentially.
Mechel registered adjusted operating income of $107 million for the reported quarter compared with an operating income of $39 million in the year-ago quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $219 million in the third quarter of 2014.
The company’s shares fell 6.5% and closed at $0.58 on Tuesday.
Segment Performance
Mining: The segment’s revenues from external customers were $492 million in the third quarter of 2014, down 29.2% from $695 million in the year-ago period. The lack of trade working capital led to a decrease in production in some of the segment’s enterprises, which in its turn resulted in lower revenues.
However, lower costs of most of the division's products helped the company to maintain a stable EBITDA margin on a sequential basis despite a decline in sales.
Steel: Revenues from the Steel segment decreased 22.6% year over year to $948 million in the third quarter. The company optimized its production and sales structure, increased its share of high value-added products and sold over 100,000 tons of high-quality structural shapes, including rails, made by Chelyabinsk Metallurgical Plant's universal rolling mill.
EBITDA in the third quarter went up 79% quarter-on-quarter to $138 million. Adjusted operating income nearly tripled sequentially and came in at $102 million.
Power: The Power segment generated $148 million of revenues from external customers in the reported quarter down from $149 million in the year-ago quarter. The segment significantly reduced its net loss during the quarter.
Financial Position
As of Sep 30, 2014, long-term debt was $240.9 million compared with $7,194 million as of Sep 30, 2013. As of Sep 30, 2014, cash and cash equivalents amounted to $72.1 million (down around 31% year over year).
Mechel remains focused on the development strategy approved by its board of directors in May 2012, which includes concentrating on core business segments, divestment of non-core assets and improving performance of the Group's key enterprises.
Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys. The company carries a Zacks Rank #3 (Hold).
Other steel companies worth considering include Kobe Steel Ltd. (KBSTY), Nucor Corporation (NUE) and United States Steel Corp. (X). While Kobe Steel sports a Zacks Rank #1 (Strong Buy), Nucor and United States Steel carry a Zacks Rank #2 (Buy).
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