Mechel Posts Record Loss as Weak Coal Prices Add to WritedownsYuliya Fedorinova
OAO Mechel, Russia’s largest producer of coal used to make steel, had a record annual loss after prices declined and the company reported more than $2 billion in writedowns.
The net loss widened to $2.9 billion in 2013 from $1.7 billion, the company said in a statement today. Revenue from customers outside the group fell 19 percent to $8.6 billion. Earnings before interest, taxes, depreciation and amortization slumped 50 percent to $730 million.
“Volatility in the global markets for metallurgical resources brings certain changes to our operations, complicates the deleveraging process and limits our capital investment capacity,” Chief Executive Officer Oleg Korzhov said in the statement.
The average coking-coal price fell more than 20 percent last year as producers including BHP Mitsubishi Alliance increased output, while the steel industry grappled with falling demand in the U.S. and Europe.
Mechel has dropped almost 60 percent in the last 12 months in Moscow trading and was 1.65 percent lower at 47.7 rubles at 1:05 p.m.
The chief factors in the loss were writeoffs exceeding $2 billion because of discontinued operations, impairments and provision for amounts due from related parties, Mechel said. The company, among the most indebted in Russian mining, had net debt of $8.7 billion by the end of the year.
“Since expectations are already low, we do not expect the markets to react to the results,” George Buzhenitsa, a Deutsche Bank analyst in Moscow, wrote in a report yesterday, before Mechel’s announcement.