Russian miner Mechel OAO MTL posted net loss (as reported) of $3,113 million for the fourth quarter of 2014, wider than net loss of $681 million recorded in the fourth quarter of 2013 and a loss of $575 million in the previous quarter. The company’s loss widened due to weakening of the ruble.
Adjusted net income was $134 million for the reported quarter versus adjusted net loss of $251 million reported in the year-ago quarter and income of $17 million in the previous quarter.
For 2014, net loss was $4,335 million compared with net loss of $2,928 million for 2013. Adjusted net loss for 2014 was $144 million compared with adjusted net loss of $527 million a year ago.
Revenues for the fourth quarter came in at $1,384 million, down about 26.6% from $1,885 million in the year-ago period. Sales were also down 12.7% sequentially.
For the full year, revenues came in at $6,406 million, down 24.7% year over year. The downside of Mechel’s assets sale and decline in value of the ruble led to the decrease in its 2014 revenues. The company also recorded a loss due to $1.5 billion in asset sale related to write-offs and $2.4 billion of foreign exchange losses.
Mechel registered adjusted operating income of $157 million for the reported quarter as against an operating loss of $136 million in the year-ago quarter while rising from income of $124 million in the sequentially prior quarter. For 2014, adjusted operating income was $327 million compared with $290 million for 2013.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $220 million in the fourth quarter of 2014 compared with $227 in the sequentially prior quarter. The company is optimizing its asset portfolio which has boosted its EBITDA.
The company’s shares fell around 1.6% during the trading session following the announcement last Tuesday, before closing the day higher at $1.28.
Segment Performance
Mining: The segment’s revenues from external customers were $483 million in the fourth quarter of 2014, down from $626 million in the year-ago period and $489 million in the third quarter of 2014. The increase in coke demand and prices enabled Mechel to increase the share of coking coal processed within the segment, raise the capacity utilization of its coke-producing facilities and increase the profitability of its saleable products.
Ruble devaluation as well as seasonal factors and the company’s ongoing process of cost optimization led to a considerable decrease of production costs at almost every facility. As a result, the company delivered higher EBITDA every quarter.
Steel: Revenues from the Steel segment decreased 28.1% year over year to $740 million in the fourth quarter. During the second half of the year, the company’s efforts to optimize the segment's production and sales structure, the launch of Chelyabinsk Metallurgical Plant's universal rolling mill, as well as of the incoming commodities price slump and a stronger market yield bore positive results. The company optimized its production and sales structure, and as a result of it gross margin went up to 21% in 2014 from 16% in 2013.
Power: The Power segment generated $161 million of revenues from external customers in the reported quarter, down from $209 million in the year-ago quarter. The segment provided reliable supply of electricity and heat to its customers and did the necessary and organized more efficient load of its facilities.
Financial Position
As of Dec 31, 2014, Mechel’s cash and cash equivalents amounted to $70.8 million (down around 74.1% year over year).
As of Dec 31, 2014, long-term debt was $167 million compared with $7,513 million as of Dec 31, 2013. The company launched talks on debt restructuring with its lenders in 2014. The company's management is making every effort to resolve its debt issue as soon as possible.
Mechel is a leading domestic steel and coal producer with a strong position in key businesses, including production of specialty steel and alloys.
Other well-placed companies in the steel industry include RTI International Metals, Inc. RTI, Evraz Highveld Steel & Vanadium Ltd. HGVLY and LB Foster Co. FSTR. While RTI International sports a Zacks Rank #1 (Strong Buy), Evraz Highveld and LB Foster carry a Zacks Rank #2 (Buy).
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