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Mechel Reports the 1H 2017 Financial Results

Consolidated revenue 149.4 bln rubles (+15% compared to 1H2016)
EBITDA* - 40.2 bln rubles (+56% compared to 1H2016)
Net profit, attributable to equity shareholders of Mechel PAO 5.0 bln rubles

MOSCOW, Aug. 23, 2017 (GLOBE NEWSWIRE) -- Mechel PAO (MOEX:MTLR) (NYSE:MTL), a leading Russian mining and steel group, announces financial results for the 1H2017.

Mechel PAO’s Chief Executive Officer Oleg Korzhov commented:

“The company’s 1H2017 results demonstrated a substantial improvement year-on-year. This became possible due to a positive dynamics in the coking coal market, significant diversification of our steel facilities’ products and an increase in the share of high value-added products — rails, beams and special steel. The company made every effort to efficiently use opportunities presented by favorable market conditions to improve its financial results and free cash flow. The net profit figure was largely driven by the currency denominated debt revaluation depending on currency exchange rates fluctuations.

Also, we  made significant progress in repairs of our technological equipment and increase in our machinery fleet by acquiring new vehicles,  lease financing and contractors outsourcing. Over the last six months, we made major repairs of our production facilities at our steel and mining segments, acquired and put into operation new trucks, excavators and other mining machinery. Capital investment in 1H2017 increased by more than twofold and reached 5.4 bln rubles. More than several dozen of vehicles are planned to arrive at our mining facilities by the end of the year. Considering the specifics of mining, the results of these efforts will be reflected in our future operating results.”

Consolidated Results For The 1H 2017

Mln rubles 1H’ 17 1H’ 16 % 2Q’ 17 1Q’ 17 %
Revenue
from external customers
149,384   130,197   15 % 71,970   77,414   -7 %
Operating profit 30,677   17,200   78 % 12,588   18,089   -30 %
EBITDA 40,227   25,721   56 % 17,421   22,806   -24 %
EBITDA, margin 27 % 20 %   24 % 29 %  
Net profit (loss)
attributable to equity shareholders of Mechel PAO
4,994   8,300   -40 % (8,908 ) 13,902    

*  EBITDA - Adjusted EBITDA. Please find the calculation of the Adjusted EBITDA and other non-IFRS measures used here and hereafter in Attachment A.

Mining Segment

Mechel Mining Management OOO’s Chief Executive Officer Pavel Shtark noted:

“The coking coal market’s volatility, which we observed late last year and early this year, remained in the second quarter. April began with a hike in prices for high-quality hard coking coal concentrate from around $150 per tonne to over $300 per tonne after tropical storm Debbie seriously damaged the railroads used for transportation of coal mined in Australia’s Queensland to ports. These damages had briefly cut down coal exports from this region to international markets, creating a supply shortage. By mid-May, as local infrastructure recovered, coal prices went back to the level prior to the force majeure and remained there until the end of the quarter. In the third quarter, coal prices again began to grow and currently spot prices for hard coking coal are nearly at the level of $200 per tonne.

Due to uncertain spot market situation, negotiations between Australian mining companies and Japanese steelmakers regarding the 2Q2017 contract prices for hard coking coal had dragged out and ultimately resulted in a transfer to a new price system linked to spot indices. The ‘benchmark’ for hard coking coal was replaced by a ‘reference rate’ calculated as an average spot index over the period a month before the supply period.

The division took the advantage from the favorable market situation early in this quarter and increase coking coal exports to Asia-Pacific Region. We increased mining volumes by 4% quarter-on-quarter. Sales of coking coal concentrate also increased by 4%. Coking coal concentrate exports in 2Q2017 went up by over 20% quarter-on-quarter, and we nearly quadrupled our exports of Elga coal. Nevertheless, average commodity prices in 2Q2017 were lower than in 1Q2017, that led to a decrease in revenue and EBITDA quarter-on-quarter.”

Mln rubles 1H’ 17 1H’ 16 % 2Q’ 17 1Q’ 17 %
Revenue
from external customers
51,519   40,059   29 % 23,531   27,988   -16 %
Revenue
inter-segment
23,268   14,711   58 % 10,803   12,465   -13 %
EBITDA 34,563   14,438   139 % 14,607   19,956   -27 %
EBITDA, margin 46 % 26 %   43 % 49 %  

Steel Segment

Mechel-Steel Management Company OOO’s Chief Executive Officer Andrey Ponomarev noted:

“In 2Q2017, we continued to increase the share of high value-added products in the division’s sales structure. We have almost given up selling billets and reduced sales of wire rod by more than a quarter. Flat products sales remained at the previous quarter’s level. Sales of products made at Chelyabinsk Metallurgical Plant’s universal rolling mill, rebar and hardware went up. At the same time, the division’s revenue growth was limited by the second quarter’s market situation, which was weaker than in the first quarter. Since April, Russia’s rebar market has been hit by a negative price dynamics due to high stock, weak demand and the price slump on global markets of semi-finished and finished products. Prices began to recover only by the end of the quarter. This positive dynamics still persists, but effect from current prices will be reflected in the third quarter’s results. Meanwhile, even as revenue from sales to third parties grew, the division’s EBITDA decreased. Diversification of our product range improved the division’s financial results, but high commodity prices, including prices for raw materials acquired within the group, negated this effect.

In 2Q2017, we made a range of repairs to our facilities’ equipment. At Chelyabinsk Metallurgical Plant, we repaired two sintering machines and completed equipment repairs in the oxygen-converter workshop. At Izhstal, we conducted major repairs of the arc furnace for alloyed, stainless and high-speed steels. These measures will ensure stable and efficient work of those facilities and increase the level of ecological safety. We also continued to master production of new types of products. For example, Chelyabinsk Metallurgical Plant implemented technical solutions enabling the plant to produce bulk ingots. This production technology was successfully tested early in the third quarter 2017. The universal rolling mill also mastered production of new types of profiles, including rails compliant with the European railroad standards.”

Mln rubles 1H’ 17 1H’ 16 % 2Q’ 17 1Q’ 17 %
Revenue
from external customers
84,955   77,604   9 % 42,926   42,029   2 %
Revenue
inter-segment
3,740   3,619   3 % 1,776   1,964   -10 %
EBITDA 6,074   9,520   -36 % 2,518   3,556   -29 %
EBITDA, margin 7 % 12 %   6 % 8 %  

Power Segment        

Mechel-Energo OOO’s Chief Executive Officer Petr Pashnin noted:

“The second quarter’s financial results demonstrated a foreseen decrease quarter-on-quarter, as heat and electricity generation and sales went down with the closure of the heating season and beginning of repairs. The weakening of 1H2017 financial results year-on-year, even with a positive dynamics in our revenue, is due to the growth of tariffs on electricity for resale.”

Mln rubles 1H’ 17 1H’ 16 % 2Q’ 17 1Q’ 17 %
Revenue
from external customers
12,910   12,535   3 % 5,514   7,396   -25 %
Revenue
inter-segment
8,473   7,899   7 % 3,835   4,638   -17 %
EBITDA 966   2,014   -52 % 261   705   -63 %
EBITDA, margin 5 % 10 %   3 % 6 %  

The management of Mechel will host a conference call today at 18:00 p.m. Moscow time (4:00 p.m. London time, 11 a.m. New York time) to review Mechel’s financial results and comment on current operations. The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.

Mechel is an international mining and steel company. Its products are marketed in Europe, Asia, North and South America, Africa. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, heat and electric power. All of its enterprises work in a single production chain, from raw materials to high value-added products.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These documents contain and identify important factors, including those contained in the section captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions.

Attachments to the 1H 2017 Financial results Press Release

Attachment A

Non-IFRS financial measures. This press release includes financial information prepared in accordance with International Financial Reporting Standards, or IFRS, as well as other financial measures referred to as non-IFRS. The non-IFRS financial measures should be considered in addition to, but not as a substitute for the information prepared in accordance with IFRS.

Adjusted EBITDA (EBITDA) represents net profit (loss) attributable to equity shareholders of Mechel PAO before Depreciation and depletion, Foreign exchange (gain) loss, net, Finance costs including fines and penalties on overdue loans and borrowings and finance lease payments, Finance income, Net result on the disposal of non-current assets, Impairment of goodwill and other non-current assets, Write-off of accounts receivable, Provision (reversal of provision) for doubtful accounts,  Write-off of inventories to net realisable value, Loss (profit) after tax from discontinued operations, net, Net result on the disposal of subsidiaries, Profit (loss) attributable to non-controlling interests, Income tax expense (benefit), Pension service cost and actuarial loss, other related expenses, Other fines and penalties, Gain on write-off of accounts payable with expired legal term and Other one-off items. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of our Revenue. Our adjusted EBITDA may not be similar to EBITDA measures of other companies. Adjusted EBITDA is not a measurement under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our interim condensed consolidated statement of profit (loss). We believe that our adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While interest expenses, depreciation and depletion and impairment of goodwill and other non-current assets are considered operating expenses under IFRS, these expenses primarily represent the non-cash current period allocation of costs associated with non-current assets acquired or constructed in prior periods. Our adjusted EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry.

Adjusted net profit (loss) represents net profit (loss) attributable to equity shareholders of Mechel PAO before Impairment of goodwill and other non-current assets, Loss (profit) after tax from discontinued operations, net, Net result on the disposal of subsidiaries, Effect on loss attributable to non-controlling interests, Foreign exchange (gain) loss, net, Pension service cost and actuarial loss, other related expenses, Other fines and penalties, Gain on write-off of accounts payable with expired legal term and Other one-off items. Our adjusted net profit (loss) may not be similar to adjusted net profit (loss) measures of other companies. Adjusted net profit (loss) is not a measurement under IFRS and should be considered in addition to, but not as a substitute for, the information contained in our interim condensed consolidated statement of profit (loss). We believe that our adjusted net profit (loss) provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations. While impairment of goodwill and other non-current assets is considered operating expenses under IFRS, these expenses represent the non-cash current period allocation of costs associated with assets acquired or constructed in prior periods. Our adjusted net profit (loss) calculation is used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry.

Our calculations of Net debt, excluding fines and penalties on overdue amounts** and trade working capital are presented below:

Mln rubles 30.06.2017   31.12.2016  
Interest-bearing loans and borrowings, excluding interest payable, fines and penalties on overdue amounts 390,629   395,571  
Interest payable 18,867   16,916  
Non-current interest-bearing loans and borrowings 10,209   11,644  
Other non-current financial liabilities 38,201   36,197  
Other current financial liabilities 618   -  
less Cash and cash equivalents (2,951 ) (1,689 )
Net debt, excluding finance lease liabilities, fines and penalties on overdue amounts 455,573   458,639  
     
Finance lease liabilities, current portion 8,232   10,175  
Finance lease liabilities, non-current portion 775   421  
Net debt, excluding fines and penalties on overdue amounts 464,580   469,235  
     
     
Mln rubles 30.06.2017   31.12.2016  
Trade and other receivables 18,938   19,054  
Inventories 36,748   35,227  
Other current assets 7,430   6,942  
Income tax receivables 582   686  
Trade current assets 63,698   61,909  
     
Trade and other payables 38,186   40,985  
Advances received 4,432   3,815  
Provisions and other current liabilities 3,165   3,515  
Tax and similar charges payable other than income tax 8,971   9,195  
Income tax payable 3,632   2,552  
Trade current liabilities 58,386   60,062  
     
Trade working capital 5,312   1,847  

**  Calculations of Net debt could be differ from indicators calculated in accordance with loan agreements upon dependence on definitions in such agreements.


EBITDA can be reconciled to our interim condensed consolidated statement of profit (loss) as follows:

  Consolidated Results   Mining Segment***   Steel Segment***   Power Segment***
Mln rubles 6m 2017 6m 2016   6m 2017 6m 2016   6m 2017 6m 2016   6m 2017 6m 2016
Net profit (loss) attributable to equity shareholders of Mechel PAO 4,994   8,300     10,698   250     (4,312 ) 7,629     (13 ) 669  
Add:                      
Depreciation and depletion 7,228   6,566     4,077   3,788     2,919   2,603     232   175  
Foreign exchange (gain) loss, net (1,804 ) (17,442 )   (1,496 ) (10,009 )   (308 ) (7,358 )   -   (76 )
Finance costs including fines and penalties on overdue loans and borrowings and finance leases payments 24,096   29,800     17,725   22,150     6,975   8,153     447   587  
Finance income (442 ) (3,887 )   (1,042 ) (3,551 )   (421 ) (1,337 )   (32 ) (89 )
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-off of accounts receivables, provision (reversal of provision) for doubtful accounts and write-off of inventories to net realisable value 1,253   1,230     495   331     508   360     249   540  
Loss (profit) after tax from discontinued operations, net -   244     -   (41 )   -   270     -   15  
Net result on the disposal of subsidiaries 4   (55 )   4   -     -   (55 )   -   -  
Profit (loss) attributable to non-controlling interests 688   862     593   273     111   465     (16 ) 125  
Income tax expense (benefit) 3,627   (630 )   3,123   821     473   (1,510 )   31   59  
Pension service cost and actuarial loss, other related expenses 64   83     51   61     11   21     2   1  
Other fines and penalties 599   668     372   366     159   295     68   8  
Gain on write-off of accounts payable with expired legal term (80 ) (18 )   (37 ) -     (41 ) (18 )   (2 ) -  
Other one-off items -   -     -   -     -   -     -   -  
EBITDA 40,227   25,721     34,563   14,438     6,074   9,520     966   2,014  
EBITDA, margin 27 % 20 %   46 % 26 %   7 % 12 %   5 % 10 %
                       
Mln rubles 6m 2017 6m 2016   6m 2017 6m 2016   6m 2017 6m 2016   6m 2017 6m 2016
Net profit (loss) attributable to equity shareholders of Mechel PAO 4,994   8,300     10,698   250     (4,312 ) 7,629     (13 ) 669  
Add:                      
Impairment of goodwill and other non-current assets -   -     -   -     -   -     -   -  
Loss (profit) after tax from discontinued operations, net -   244     -   (41 )   -   270     -   15  
Net result on the disposal of subsidiaries 4   (55 )   4   -     -   (55 )   -   -  
Effect on loss attributable to non-controlling interests -   (40 )   -   -     -   (40 )   -   -  
Foreign exchange (gain) loss, net (1,804 ) (17,442 )   (1,496 ) (10,009 )   (308 ) (7,358 )   -   (76 )
Pension service cost and actuarial loss, other related expenses 64   83     51   61     11   21     2   1  
Other fines and penalties 599   668     372   366     159   295     68   8  
Gain on write-off of accounts payable with expired legal term (80 ) (18 )   (37 ) -     (41 ) (18 )   (2 ) -  
Other one-off items -   -     -   -     -   -     -   -  
Adjusted net profit (loss), net of income tax 3,777   (8,260 )   9,592   (9,374 )   (4,491 ) 745     55   618  
Operating profit 30,677   17,200     29,201   9,858     2,450   6,284     404   1,307  
Add:                      
Impairment of goodwill and other non-current assets -   -     -   -     -   -     -   -  
Loss on write-off of property, plant and equipment 148   121     62   109     54   13     32   -  
Pension service cost and actuarial loss, other related expenses 64   83     51   61     11   21     2   1  
Other fines and penalties 599   668     372   366     159   295     68   8  
Other one-off items -   -     -   -     -   -     -   -  
Adjusted operating profit 31,488   18,072     29,686   10,393     2,674   6,612     506   1,316  
*** including inter-segment operations                      

/EIN News/ --

  Consolidated Results   Mining Segment***   Steel Segment***   Power Segment***
Mln rubles 2q 2017 1q 2017   2q 2017 1q 2017   2q 2017 1q 2017   2q 2017 1q 2017
Net (loss) profit attributable to equity shareholders of Mechel PAO (8,908 ) 13,902     (2,163 ) 12,858     (6,530 ) 2,218     (250 ) 237  
Add:                      
Depreciation and depletion 3,811   3,417     2,149   1,928     1,540   1,379     122   110  
Foreign exchange loss (gain), net 7,876   (9,679 )   4,106   (5,601 )   3,756   (4,063 )   14   (14 )
Finance costs including fines and penalties on overdue loans and borrowings and finance leases payments 11,704   12,392     8,664   9,062     3,348   3,626     217   231  
Finance income (315 ) (127 )   (554 ) (488 )   (267 ) (154 )   (19 ) (13 )
Net result on the disposal of non-current assets, impairment of goodwill and other non-current assets, write-off of accounts receivables, provision (reversal of provision) for doubtful accounts and write-off of inventories to net realisable value 675   577     322   173     210   298     143   106  
Net result on the disposal of subsidiaries 4   -     4   -     -   -     -   -  
Profit (loss) attributable to non-controlling interests 132   556     202   392     (51 ) 162     (19 ) 3  
Income tax expense (benefit)   2,088   1,539     1,689   1,433     406   68     (7 ) 38  
Pension service cost and actuarial loss, other related expenses 32   32     25   25     6   6     1   1  
Other fines and penalties 373   226     199   174     113   44     61   7  
Gain on write-off of accounts payable with expired legal term (51 ) (29 )   (37 ) -     (13 ) (28 )   (1 ) (1 )
Other one-off items -   -     -   -     -   -     -   -  
EBITDA 17,421   22,806     14,607   19,956     2,518   3,556     261   705  
EBITDA, margin 24 % 29 %   43 % 49 %   6 % 8 %   3 % 6 %
                       
Mln rubles 2q 2017 1q 2017   2q 2017 1q 2017   2q 2017 1q 2017   2q 2017 1q 2017
Net (loss) profit attributable to equity shareholders of Mechel PAO (8,908 ) 13,902     (2,163 ) 12,858     (6,530 ) 2,218     (250 ) 237  
Add:                      
Impairment of goodwill and other non-current assets -   -     -   -     -   -     -   -  
Net result on the disposal of subsidiaries 4   -     4   -     -   -     -   -  
Effect on loss attributable to non-controlling interests -   -     -   -     -   -     -   -  
Foreign exchange loss (gain), net 7,876   (9,679 )   4,106   (5,601 )   3,756   (4,063 )   14   (14 )
Pension service cost and actuarial loss, other related expenses 32   32     25   25     6   6     1   1  
Other fines and penalties 373   226     199   174     113   44     61   7  
Gain on write-off of accounts payable with expired legal term (51 ) (29 )   (37 ) -     (13 ) (28 )   (1 ) (1 )
Other one-off items -   -     -   -     -   -     -   -  
Adjusted net (loss)  profit, net of income tax (674 ) 4,452     2,134   7,456     (2,668 ) (1,823 )   (175 ) 230  
                       
Operating profit (loss) 12,588   18,089     11,945   17,256     683   1,767     (73 ) 478  
Add:                      
Impairment of goodwill and other non-current assets -   -     -   -     -   -     -   -  
Loss on write-off of property, plant and equipment 77   71     27   35     49   5     1   31  
Pension service cost and actuarial loss, other related expenses 32   32     25   25     6   6     1   1  
Other fines and penalties 373   226     199   174     113   44     61   7  
Other one-off items -   -     -   -     -   -     -   -  
Adjusted operating profit (loss) 13,070   18,418     12,196   17,490     851   1,822     (10 ) 517  
*** including inter-segment operations                      


Attachment B

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS)
(All amounts are in millions of Russian rubles)   6 months ended June 30,
    2017*   2016*
    (unaudited)   (unaudited)
Continuing operations        
Revenue   149,384     130,197  
Cost of sales   (80,608 )   (72,175 )
Gross profit   68,776     58,022  
         
Selling and distribution expenses   (27,723 )   (28,167 )
Loss on write-off of property, plant and equipment   (148 )   (121 )
Provision for doubtful accounts   (321 )   (543 )
Taxes other than income taxes   (2,556 )   (3,168 )
Administrative and other operating expenses   (7,718 )   (9,100 )
Other operating income   367     277  
Total selling, distribution and operating income and (expenses), net   (38,099 )   (40,822 )
Operating profit   30,677     17,200  
         
Finance income   442     3,887  
Finance costs including fines and penalties on overdue loans and borrowings and finance leases payments of RUB 428 million, RUB 4,567 million for the 6 months ended June 30, 2017 and 2016, respectively   (24,096 )   (29,800 )
Foreign exchange gain (loss), net   1,804     17,442  
Share of profit of associates, net of provision   11     16  
Other income   541     168  
Other expenses   (70 )   (137 )
Total other income and (expenses), net   (21,368 )   (8,424 )
Income before tax from continuing operations   9,309     8,776  
         
Income tax (expense) benefit   (3,627 )   630  
Income for the period from continuing operations   5,682     9,406  
         
Discontinued operations        
Loss after tax for the period from discontinued operations, net   -     (244 )
Profit for the period   5,682     9,162  
         
Attributable to:        
Equity shareholders of Mechel PAO   4,994     8,300  
Non-controlling interests   688     862  
         
Other comprehensive income        
Other comprehensive income to be reclassified to profit or loss in subsequent periods, net of income tax:    28     1,077  
Exchange differences on translation of foreign operations   27     1,085  
Net gain (loss) on available for sale financial assets   1     (8 )
Other comprehensive income for the period, net of tax   28     1,077  
Total comprehensive income, net of tax   5,710     10,239  
         
Attributable to:        
Equity shareholders of Mechel PAO   5,022     9,377  
Non-controlling interests   688     862  
             


INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(All amounts are in millions of Russian rubles)        
     June 30, 2017*    December 31, 2016
    (unaudited)    
Assets        
Current assets        
Cash and cash equivalents   2,951     1,689  
Trade and other receivables   18,938     19,054  
Inventories   36,748     35,227  
Income tax receivables   582     686  
Other current financial assets   26     167  
Other current assets   7,430     6,942  
Total current assets   66,675     63,765  
         
Non-current assets        
Property, plant and equipment   202,254     204,353  
Mineral licenses   35,167     36,099  
Non-current financial assets   205     235  
Investments in associates   275     265  
Deferred tax assets   1,514     1,502  
Goodwill   18,344     18,355  
Other non-current assets   804     891  
Total non-current assets   258,563     261,700  
Total assets   325,238     325,465  
         
Equity and liabilities        
Current liabilities        
Interest-bearing loans and borrowings, including interest payable, fines and penalties on overdue amounts of RUB 40,287 million and RUB 38,594 million as of June 30, 2017 and December 31, 2016, respectively   430,916     434,165  
Trade and other payables   38,186     40,985  
Advances received   4,432     3,815  
Provisions   3,121     3,496  
Pension obligations   990     944  
Finance lease liabilities   8,232     10,175  
Income tax payable   3,632     2,552  
Taxes and similar charges payable other than income tax   8,971     9,195  
Other current financial liabilities   618     -  
Other current liabilities   44     19  
Total current liabilities   499,142     505,346  
         
Non-current liabilities        
Interest-bearing loans and borrowings   10,209     11,644  
Provisions   3,770     3,420  
Pension obligations   3,583     3,501  
Finance lease liabilities   775     421  
Deferred tax liabilities   16,938     16,282  
Other non-current liabilities   -     159  
Other non-current financial liabilities   38,735     36,740  
Income tax payable   151     540  
Total non-current liabilities   74,161     72,707  
Total liabilities   573,303     578,053  
         
Equity        
Common shares   4,163     4,163  
Preferred shares   833     833  
Additional paid-in capital   28,326     28,326  
Accumulated other comprehensive income   876     848  
Accumulated deficit   (290,306 )   (294,444 )
Equity attributable to equity shareholders of Mechel PAO   (256,108 )   (260,274 )
Non-controlling interests   8,043     7,686  
Total equity   (248,065 )   (252,588 )
Total equity and liabilities   325,238     325,465  
             


INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(All amounts are in millions of Russian rubles)   6 months ended June 30,
    2017*   2016*
    (unaudited)   (unaudited)
Cash Flows from Operating Activities        
Profit for the period   5,682     9,162  
Less loss after tax for the period from discontinued operations, net   -     (244 )
Income for the period from continuing operations   5,682     9,406  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:        
Depreciation   6,334     5,745  
Depletion and amortization   894     822  
Foreign exchange (gain) loss, net   (1,804 )   (17,442 )
Deferred income taxes   646     (252 )
Provision for doubtful accounts   321     543  
Write-off of accounts receivable   18     210  
Write-off of inventories to net realisable value   631     386  
Revision in estimated cash flows of rehabilitation provision   -     (12 )
Loss on write-off of property, plant and equipment   148     121  
Loss on disposal of non-current assets   134     10  
Gain on write-off of accounts payable with expired legal term   (80 )   (16 )
Pension service cost and actuarial loss, other related expenses   64     83  
Finance income   (442 )   (3,887 )
Finance costs, including fines and penalties on overdue loans and borrowings and finance lease payments   24,096     29,800  
Gain on royalty and other proceeds associated with disposal of Bluestone   (462 )   (10 )
Other   162     82  
Changes in working capital items:        
Trade and other receivables   (334 )   (5,247 )
Inventories   (2,474 )   (1,714 )
Trade and other payables   (2,247 )   1,318  
Advances received   597     65  
Taxes payable and other current liabilities   2,525     1,090  
Other current assets   (424 )   (973 )
Income tax paid   (2,360 )   (545 )
Net operating cash flows from discontinued operations   -     (306 )
         
Net cash provided by operating activities   31,625     19,277  
         
Cash Flows from Investing Activities        
Loans issued and other investments   (5 )   (11 )
Interest received   123     1  
Proceeds from disposal of subsidiaries   82     3  
Royalty and other proceeds associated with disposal of Bluestone   462     10  
Proceeds from loans issued and other investments   142     28  
Proceeds from disposals of property, plant and equipment   58     97  
Purchases of property, plant and equipment   (3,102 )   (989 )
Interest paid, capitalized   (188 )   (243 )
Net cash used in investing activities   (2,428 )   (1,104 )
         
Cash Flows from Financing Activities        
Proceeds from loans and borrowings   6,179     4,140  
Repayment of loans and borrowings   (15,984 )   (36,071 )
Interest paid, including fines and penalties   (15,869 )   (17,203 )
Proceeds from sales of 49% share in Elga coal complex, with put-option granted   -     34,300  
Repayment of obligations under finance lease   (1,983 )   (968 )
Deferred payments  for acquisition of assets   (108 )   -  
Deferred consideration paid for the acquisition of subsidiaries in prior periods   (1,545 )   (2,652 )
Net cash used in financing activities   (29,310 )   (18,454 )
         
Effect of exchange rate changes on cash and cash equivalents   (268 )   12  
         
Net decrease in cash and cash equivalents   (381 )   (269 )
         
Cash and cash equivalents at beginning of period   1,689     3,079  
Cash and cash equivalents net of overdrafts at beginning of period   1,453     891  
Cash and cash equivalents at end of period   2,951     2,822  
Cash and cash equivalents net of overdrafts at end of period   1,072     622  

*These interim condensed consolidated financial statements were prepared by Mechel PAO in accordance with IFRS and have not been audited by the independent auditor. If these interim condensed consolidated financial statements are audited in the future, the audit could reveal differences in our consolidated financial results and we cannot assure that any such differences would not be material.
There were certain reclassifications to conform with the current period presentation.

Alexey Lukashov
Director of Investor Relations
Mechel PAO
Phone: 7-495-221-88-88
Fax: 7-495-221-88-00
alexey.lukashov@mechel.com

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