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Mechel posts 76% drop in Q1 profit YOY as sales suffer

Russia's Mechel PAO on May 24 posted a 76% year-over-year drop in net profit for the first quarter to 3.29 billion Russian rubles due to a slump in sales.

Sales of coking coal concentrate tumbled 19% to 1.6 million tonnes, iron ore concentrate sales plummeted 46% to 351,000 tonnes, and coke sales decreased 13% to 629,000 tonnes on an annual basis.

On the steel side, sales of long rolls fell 3% to 686,000 tonnes, and flat rolls dropped 10% to 138,000 tonnes.

The drop in sales impacted revenue, which fell 3% year on year to 74.85 billion rubles. Likewise, operating profit was down 26% year over year to 13.38 billion rubles, and EBITDA fell 19% to 18.44 billion rubles.

Mechel said CapEx for the three-month period came in at 2 billion rubles, including finance lease.

CEO Oleg Korzhov said sales dynamics suffered in the quarter due to "negative impact from several factors, including persistent shortage of railway gondola cars in the Kemerovo Region and infrastructure limitations in Russia's Far East on the way to ports."

Output for the quarter fell across the board, with run-of-mine coal decreasing 2% to 5 million tonnes and pig iron decreasing 6% to 985,000 tonnes. Steel production slipped 6% year over year to 1.1 million tonnes.

Korzhov said weaker results in the production and sale of iron ore concentrate are persisting due to a geologically difficult area and low iron content.

As of May 23, US$1 was equivalent to 61.61 Russian rubles.