Mechel Halts Otel Rseu Production - Analyst Blog
12 Marzo 2012 - 4:59PM
Zacks
Mechel OAO (MTL) announced that it has
temporarily halted the smelting production at Otelu Rosu, Romania
due to a contingency situation. Operation at one of the electric
furnaces of the plant was stopped due to technical reasons.
Due to some malfunction in the process, the furnace and
auxiliary communications got damaged resulting in stoppage of work.
The company’s experts are looking into the matter to find out some
solution for diminishing the effects of malfunction.
Last month, the company halted production at Targoviste and
Ductil Steel Otelu Rosu plants due to severe weather conditions.
During the period, transport in Romania was a problem due to
severely cold weather and the plants used their winter stores of
scrap, which had been depleting at that time.
Mechel is a leading 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.
The company owns and controls essential infrastructure,
including ports, rolling stock and power plants, which provide
access to the export markets. However, Mechel’s large
capital-spending program, high debt and substantial interest burden
are matters of concern.
In December 2011, Mechel recorded a net income of $25.7 million
in the third quarter of 2011, down 86.6% from the previous
quarter’s consolidated net income of $191.9 million. Revenues in
the third quarter decreased 7.6% sequentially to $3.2 billion.
Currently Mechel maintains a Zacks #3 Rank, which translates
into short-term (1 to 3 months) Hold rating. However, we reiterate
our Underperform recommendation on the stock for the long-term
(more than 6 months). Mechel has a major capital-spending
program, which could pose a risk given the slow growth in global
economies.
Mechel’s debt-to-capital ratio hovered around 50% in the last
couple of quarters. Higher debt results in a greater interest
charge for the period. Moreover, a high leverage restricts the
company’s ability to raise new debt for further financing. The
company 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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