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Mechel's Q1'19 profit surges on forex gain; coal production falters

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Mechel's Q1'19 profit surges on forex gain; coal production falters

Mechel PAO's first-quarter profit came in 244% higher than 2018, when a slump in sales damaged earnings, despite declines in production across the board.

Profit hit 11.34 billion Russian rubles as the ruble strengthened against the dollar and euro, resulting in an exchange gain of 11.98 billion rubles, according to a May 23 financial update.

Cost of sales grew 8.9% to 45.25 billion rubles, outpacing revenue, which held steady at 74.86 billion rubles.

The Russian miner's coal output fell 29% year over year to 3.5 million tonnes, and steel production slipped below 1 Mt.

CEO Oleg Korzhov attributed the cut in coal output to the necessity of reducing stockpiles, which reached 1 Mt due to a shortage of railcars in the previous quarter.

Production of both steel and pig iron dropped 12% from the previous year to 930,000 tonnes and 870,000 tonnes, respectively.

Sales of coking coal concentrate grew 5% year over year to 1.7 Mt, though thermal coal sales declined 17% to 1.3 Mt.

Anthracite sales halved to 158,000 tonnes as Mechel shifts its production facilities to coking coal grades.

Prices for the company's key products remained at "fairly high levels," Korzhov said.

He added that Mechel's steel division faces a large-scale repair campaign this year, though some repairs were completed during the first quarter.

As of May 22, US$1 was equivalent to 64.32 Russian rubles.