OAO Mechel (MTL), Russia’s second-most indebted mining company, fell from its most expensive valuation in about a month in New York after declining production and sales dimmed the coal producer’s earnings outlook.
American depositary receipts of Mechel (MTLR) slumped 6.3 percent to $4.03 yesterday, while shares in Moscow slid for the first time in six days. The Moscow-based company’s enterprise value, the sum of its equity and net debt, fell to $11.64 million from a four-week high reached last week. The Bloomberg Russia-US Equity Index of Russian stocks in the U.S. dropped a third day, while RTS Index futures slipped 0.2 percent to 139,940.
Mechel, Russia’s biggest producer of coking coal, said yesterday that sales of the commodity used to make steel sank 11 percent in the first quarter from a year earlier, while total coal output slid 8 percent from the last three months of 2012. Revenue for the company, whose debt is 5.8 times its market value, will decline to a three-year low in 2013, according to the mean of 18 analysts’ estimates compiled by Bloomberg.
“Things will be hard for Mechel this year,” Nikolay Sosnovskiy, an analyst at VTB Capital in Moscow who has a hold rating on the shares, said by phone yesterday. “We already knew that coal and steel prices were falling and we now learned that the company’s sales fell.”
The RTS Volatility Index, which measures expected swings in the stock futures, gained 1.9 percent to 20.94. The Market Vectors Russia ETF (RSX), the largest exchange-traded fund dedicated to Russian equities, slipped 1.1 percent to $27.32.
Mechel fell 4.7 percent to 126.60 rubles ($4.04) in Moscow yesterday. The ADRs had the biggest drop since April 15, leading losses on the Bloomberg Russia-US Index, which slipped 0.7 percent to 94.50.
The company reported a net loss of $1.7 billion for 2012, compared with a profit of $727.9 million in 2011, and it also recognized an impairment charge, according to an April 15 statement. With $9.7 billion of debt as of Sept. 30, Mechel is the most-indebted Russian mining company after United Co. Rusal, the biggest aluminum producer.
“Coking coal is the key factor for Mechel,” Vladimir Sergievskiy, an analyst at Barclays Plc in London who rates Mechel sell, said by phone yesterday. “It makes no sense to own the stock in this environment of falling coking coal prices and an extremely high debt.”
Coking coal futures have tumbled 7.4 percent since March 25, compared with a 3.3 percent decline of the S&P GSCI gauge of 24 commodities.
Mechel’s ADRs are rated sell by 36 percent of 23 analysts covering the stock, the most since 2009, according to data compiled by Bloomberg. Mechel is down 42 percent this year as the Bloomberg Russia-US gauge fell 4.8 percent.
OAO Lukoil, Russia’s biggest non-government oil producer, rose 0.7 percent to $64.10 in New York after Goldman Sachs Group Inc. said the stock is a “top pick” among shares in Central and Eastern Europe, Middle East and Africa. OAO Gazprom Neft gained 0.2 percent to $20.66 after Goldman Sachs raised the stock to buy from neutral yesterday.
Crude for June delivery lost 0.9 percent to $95.17 a barrel on the New York Mercantile Exchange yesterday. Brent for May settlement dropped 1 percent to $102.82 a barrel on the London-based ICE Futures Europe exchange. Urals crude, Russia’s major export blend, slid 1.2 percent to $101.52.
Ruble futures showed the currency weakening 0.2 percent to 31.70 per dollar in U.S. hours. Russia’s ruble was little changed at 31.3475 per dollar yesterday and gained 0.1 percent to 35.5516 against the dollar-euro basket used by the central bank to manage swings that erode exporter competitiveness.
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