Mechel Reports the 3Q 2021 Financial Results

Mechel PAO announces financial results for the 3Q 2021 and 9M 2021. The Group’s consolidated revenue in 3Q2021 amounted to 102.9 billion rubles, down 5% quarter-on-quarter. EBITDA was 31.9 billion rubles, also down 5% quarter-on-quarter. EBITDA margin remained at 31%.

Mechel PAO’s Chief Executive Officer Oleg Korzhov commented: "The decrease in our steel division’s financial results made the main influence on the dynamics of the Group’s results. This year’s third quarter was characterized by weaker trends on the steel market. As export duties were imposed, steelmakers tried their best to re-orient their output for domestic market. As a result, after the prices peaked in June, oversupply cut prices, particularly rebar prices, went down at the average rate of 10% monthly during the third quarter. That led to lower sales volumes and financial results.

The mining division’s sales in 3Q2021 also demonstrated negative dynamics as compared to the high start-off point of the second quarter. However, consistently upward market trends enabled us to compensate the decrease in coking coal concentrate sales and demonstrate inancial growth.

In October, Chinese authorities took measures enabling improvement of domestic coking coal supply, such as canceling safety inspections, opening border checkpoints with Mongolia and unloading vessels carrying Australian coal that stayed in port since China introduced a ban on Australian coal imports. These measures will provide downward pressure on coking coal prices until the quarter’s end. However, it is most likely that prices will adjust gradually, as it is impossible to quickly rectify coal shortages and logistical difficulties. The energy crisis and the heating season’s onset will also prevent coal prices from dropping too sharply.

Nevertheless, the Group’s EBITDA margin in 3Q2021 remained on the 2Q2021 level, while coal mining and steel and pig iron output remained practically unchanged quarter-on-quarter. Despite market volatility, overall prices for the products of both our mining and steel divisions remained at levels favorable for the Group.

We service our restructured debt obligations in compliance with loan agreements, and by the end of the third quarter our net debt went down to less than 300 billion rubles. Our net debt to EBITDA ratio went down to 3.2.

Our facilities receive new equipment and implement repairs and reconditioning programs. We launched a new project in our mining division, which will help us to increase our Group’s integration into iron ore with fairly low level of capital investment.”