Mechel Forms Joint Venture - Analyst Blog
08 Settembre 2011 - 11:15AM
Zacks
A subsidiary
of Russian metals and mining company Mechel OAO
(MTL) has created a joint
venture with India’s Somani Group to sell metallurgical coal to
consumers in India.
Per the
parent company, Mechel OAO, Mechel Somani Carbon Private Ltd India
consists of Mechel Carbon AG, a Switzerland-based subsidiary of
Mechel Mining, and Somani’s Northern Exim Private Ltd. Mechel
Carbon AG will be the major partner with a 51% stake.
According to
a company statement, the project's distribution area will be
located on India's east coast, 20 kilometers from the major Indian
port of Vizag, which caters to an industrially developed
region.
Mechel
considers India to be a promising and strategically important
market. The joint venture will serve a large number of Indian
customers who desire to acquire small shipments of its
products.
In June
2011, the company reported its results for first quarter 2011. The
company recorded a net income of $309.1 million in first quarter
2011 comprehensively beating last year’s consolidated net income of
$82.6 million, a jump of 274.3% year over year.
Revenues in
the first quarter 2011 soared 54.4% year over year to $2.9 billion
based on the company’s relentless efforts to increase
production.
Throughout
the quarter the company made concerted efforts to enhance the coal
production volumes by modernizing production facilities, perfecting
the marketing structure, developing new high value-added products
and lastly, by implementing strategic investment projects, which
have strengthened its market position.
Operating
profits in the reported quarter climbed more than three times the
first quarter profit in 2010 and amounted to $448.4 million,
compared with the operating income of $147.6 million in the first
quarter of 2010. Operating margin was 15.28% in the first quarter
of 2011 versus 7.77% in the first quarter of 2010.
Mechel is a
leading domestic steel and coal producer with a strong position in
key businesses, including production of specialty steel and alloys.
The company has the largest coal reserve base in Russia. It is
focusing on growth and cost-cutting measures.
Mechel has
also entered into various agreements to supply its rail products to
large Russian metal mining companies. We are positive on the
company’s favorable business profile with a high degree of backward
integration and low-cost structure. Mechel’s key assets are located
close to the major steel consuming markets.
In addition,
the company owns and controls essential infrastructure, including
ports, rolling stock and power plants, which provide access to
export markets. However, Mechel’s large capital-spending program,
high debt and substantial interest burden are matters of
concern.
Currently,
Mechel has a short-term (1 to 3 months) Zacks #3 Hold rating and a
long-term (6 months) Neutral recommendation.
Mechel faces
stiff competition from Arcelor
Mittal (MT) and Norilsk Nickel Mining
and Metallurgical Co.
ARCELOR MITTAL (MT): Free Stock Analysis Report
MECHEL OAO ADS (MTL): Free Stock Analysis Report
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