EquityStory.RS, LLC-News: PJSC Mechel / Key word(s): 9 Month figures PJSC Mechel : Mechel Reports the 3Q 2020 Financial Results 2020-11-19 / 13:00 MSK The issuer is solely responsible for the content of this announcement. MECHEL REPORTS THE 3Q 2020 FINANCIAL RESULTS Consolidated revenue - 64.4 bln rubles (-0.2% compared to 2Q 2020) EBITDA[*] - 9.3 bln rubles (+6% compared to 2Q 2020) Loss attributable to equity shareholders of Mechel PAO - 26.0 bln rubles Moscow, Russia - November 19, 2020 - Mechel PAO (MOEX: MTLR, NYSE: MTL), a leading Russian mining and steel group, announces financial results for the 3Q 2020. Mechel PAO's Chief Executive Officer Oleg Korzhov commented: "Following weaker financial results in 2Q2020, in the third quarter we have demonstrated stabilized revenue and EBITDA growth even as the markets for coal, our key product, were falling. High sales volumes in the steel division, together with growing prices on several products quarter-on-quarter, as well as lower cost of sales in the mining division, had a positive impact on the dynamics of our results. At the same time, low coal prices and the drop in demand for several types of steel products exerted negative pressure on the dynamics of our results. "In this reporting period, we faced a challenging situation due to weaker demand and accordingly, weaker prices for metallurgical coals both internationally and domestically, as well as volatile demand for a range of steel products, especially those used in engineering industry and export oriented. Despite that, we do not interrupt our effort to expand our mining equipment fleet and to upgrade our mining division's washing plants. We also continue equipment repairs at our steel division's facilities and master output of new types of marketable high value-added products. All our projects currently being implemented also include an ecological component aimed at reducing our operations' negative impact on the environment. "These issues are important not only for our steel facilities, but also for our logistical ones. By this year's end, Port Posiet will have implemented a series of measures that are part of its ecological program, and approximately 1 billion rubles will be invested in it within the next year and a half. As of now, we have invested more than 4 billion rubles into this port, which enabled us to implement here seven out of nine best available technologies. Port Temryuk is also planning to acquire and put into operation additional dust suppressing equipment, and is developing a project for a new runoff treatment system. "On the whole, I think that the Group has performed well in the third quarter. As the economy recovers from the crisis caused by the spreading coronavirus infection, and all markets see the revival of coal prices and demand for steel products, the Group's financial results will demonstrate an ever more confident positive dynamics." Consolidated Results For The 3Q 2020 and 9M2020 Mln rubles 3Q' 20 2Q' 20 % 9M' 20 9M' 19 % Revenue 64,424 64,536 -0.2% 196,197 220,113 -11% from contracts with external customers Operating profit 6,353 (2,260) - 12,023 30,787 -61% / (loss) EBITDA 9,349 8,852 6% 31,362 44,333 -29% EBITDA, margin 15% 14% 16% 20% (Loss) / profit (25,959) 47,074 -155% (15,763) 12,174 -229% attributable to equity shareholders of Mechel PAO Mechel PAO's Deputy Chief Executive Officer for Economics and Finance Nelli Galeeva commented: "Consolidated EBITDA in 9M2020 amounted to 31.4 billion rubles. Loss attributable to Mechel PAO's shareholders amounted to 15.8 billion rubles. Growing foreign exchange losses on foreign currency liabilities due to a weaker ruble in this reporting period, which grew by 57.9 billion rubles, had a key impact on this result's dynamics, though it was partly offset by the positive effect from the sale of Elga Coal Complex's companies. "The operating cash flow in 3Q2020 went down to 4.8 billion rubles from 8.3 billion rubles in 2Q2020. This was mostly a result of the Group's major products demand and market environment deterioration, as well as worse cash turnover due to a global economic situation affected by the spreading coronavirus infection in 2020. "In 3Q2020, the Group's finance costs went down by 1 billion rubles to 5.4 billion from 6.4 billion rubles in 2Q2020. Over the nine months of 2020, finance costs went down by 6.3 billion rubles or 24% year-on-year. This was due to our partial repayment of loans with Gazprombank and VTB Bank using the gain on the Elga Coal Complex sale and the decrease of the Bank of Russia's key interest rate. "The same factors had their impact on the decrease of the amount of interest paid, including capitalized interest and lease interest. In 3Q2020 this indicator amounted to 4.1 billion rubles compared to 7.9 billion rubles in the previous quarter. In 9M2020 the amount of interest paid went down by 5.3 billion rubles year-on-year and reached 18.6 billion rubles. "As of today, the company's average debt portfolio cost is 5.5% per annum, average paid interest rate is 5.4% per annum. "As of September 30, 2020, the Group's net debt excluding fines, penalties on overdue amounts and options went down by 64.3 billion rubles as compared to December 31, 2019, and amounted to 336.1 billion rubles. This was due to net loan settlement totaling 94 billion rubles, mostly as we repaid loans granted by Gazprombank and VTB Bank with cash received from sale of assets and decreased debt due to the effect of discontinued operations related to disposal of companies comprising Elga Coal Complex for a total of 9.5 billion rubles, and which was partly offset by the foreign exchange loss of 42.7 billion rubles due to the ruble's weakening against the US dollar and the euro. "The Net Debt to EBITDA ratio amounted to 8.2 by the end of 3Q2020, as compared to 7.5 at the end of 2019. This growth is due primarily to the growth of the ruble value of the debt's foreign currency share as the ruble weakened against the US dollar and the euro as of September 30, 2020, compared to December 31, 2019, as well as decreased EBITDA in the past 12 months ending September 30, 2020. "The debt portfolio's structure has changed and currently consists of 54% in rubles and the rest in foreign currency. The share of state-controlled banks is 86.7%." Mining Segment Revenue from contracts with external customers in 3Q2020 went down by 6% quarter-on-quarter due to negative price dynamics for nearly all types of coal products. EBITDA in 3Q2020 remained nearly unchanged compared to 2Q2020 as market weakness was offset by lower cost of sales. Revenue from sales to third parties in 9M2020 went down by 19% year-on-year. The division's EBITDA in this period went down by 41% year-on-year. This was primarily due to a major decline in prices for all types of coal products as compared to the same period of last year. Mechel Mining Management OOO's Chief Executive Officer Igor Khafizov noted: "In the third quarter and all nine months of 2020, the division's financial results were under pressure from weaker coal markets environment, particularly the coking coal market. Average sale prices in 9M2020 on FCA basis went down year-on-year by 41% for coking coal concentrate, 36% for anthracite and PCI and 12% for steam coal and middlings. Even though sales of all types of coal went up noticeably, revenue from sales to external customers went down. "The new coronavirus epidemic had a major impact on coal prices, as due to quarantine limitations demand for steel and raw materials for steelmaking slumped dramatically in many regions. Limitations on coal imports in China, linked to early quota exhaustion, also had a negative impact on the prices. "The third quarter was rather volatile for coal. Average sale prices for coking coal in the second quarter remained on the first quarter's level due to both quarterly contracts on the domestic market and the weaker ruble. However, in the third quarter the fact that external indicators remained at a persistently low level led to a decline in the domestic market's price quotations, which the average sale prices reflected at once. The coal market revived somewhat in September with the recovery of demand in India and Europe and positive expectations of softening customs limitations in China, but in October this trend came to naught. "Even with falling demand and prices for the division's products we do not halt our efforts on restoring and maintaining our production results. Mining in 9M2020 has shown confident growth year-on-year. Production dynamics in 3Q2020 worsened quarter-on-quarter, which was largely due to an extensive repair program implemented on our washing plants in order to improve their stability as mining volumes increase." Mln rubles 3Q' 20 2Q' 20 % 9M' 20 9M' 19 % Revenue 17,190 18,292 -6% 52,470 65,150 -19% from contracts with external customers Revenue 8,232 8,364 -2% 24,927 29,733 -16% inter-segment EBITDA 6,406 6,388 0% 19,746 33,578 -41% EBITDA, margin 25% 24% 26% 35% Steel Segment In 3Q2020 revenue from sales to external customers went up by 3%
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