Mechel Installs New Furnace - Analyst Blog
22 Marzo 2012 - 5:04PM
Zacks
Russian mining company Mechel OAO (MTL)
announced that it has installed a ferroalloy electric furnace and
conducted the first smelting of ferrosilicon in order to renovate
its ferroalloys division’s Bratsk Ferroalloy Plant. The electric
furnace will supply four furnaces, each having a capacity of 33
mega volt-amperes (MVA) while replacing the existing furnaces with
a capacity of 25 MVA each.
The reconstruction of the plant was started in late 2010 and is
scheduled to be completed by 2013. The plant’s production capacity
is expected to increase by 30% while power consumption is
anticipated to reduce by 10%-13% due to the installation of new
furnaces.
The company has invested 1.9 billion rubles ($65 million) for
the reconstruction of the plant. The reconstruction does not hinder
the company’s current infrastructure and allows the plant to
significantly cut costs and save time in implementing the
project.
As per Mechel, the technology adopted by the company to install
the furnace is appropriate and will increase the efficiency of the
plant. Ferrosilicon production will ensure reconstruction of the
raw materials dosage system and also expand the storage space for
finished products.
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.
Mechel recorded net income of $25.7 million in the third quarter
of 2011, down 86.6% from the previous quarter’s net income of
$191.9 million. Revenues in the quarter decreased 7.6% sequentially
to $3.2 billion.
Mechel’s debt-to-capital ratio hovered around 50% in the last
couple of quarters. Higher debt results in a greater interest
charge. 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.
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).
ARCELOR MITTAL (MT): Free Stock Analysis Report
MECHEL OAO ADS (MTL): Free Stock Analysis Report
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