Mechel Shuts Two Plants Temporarily - Analyst Blog
27 Novembre 2012 - 3:15PM
Zacks
Russian company Mechel OAO (MTL) announced that
it has temporarily stalled production at Donetsk
Electrometallurgical Plant (DEMZ), a part of Mechel's steel
division, and at its steel manufacturing unit in Romania, which
forms a part of its Eastern European Steel Division. The company’s
decision to shut down the plants came in the wake of unfavorable
steel prices in Europe, arising from rising ferrous scrap prices
and weak demand for finished products.
Despite the temporary halt in production in these facilities,
Mechel believes that sales will not be affected as the contractual
supplies will be made from the warehouses. These measures are taken
by the company to make optimum usage of the financial resources and
minimize financial risks.
Apart from stalling production, Mechel will take other requisite
measures to maintain the facilities' operational capability and
conduct maintenance works in winter. The company will also
compensate the employees by paying their full salary while those
who are not involved in the scheduled work will be either paid for
idle time or placed on leave, as per labor law.
The company is closely reviewing the market conditions and
expects to resume production at the facilities once the conditions
stabilize.
Last month, Mechel released its second quarter 2012 results. The
company posted consolidated net loss of $823 million in the
quarter, compared with a profit of $191.9 million in the year-ago
quarter. Revenues for the quarter came in at $3.09 billion, down
11.1% from $3.47 billion in the year-ago period.
The company registered an operating loss of $470.6 million in the
quarter compared with an operating income of $476.3 million a year
ago, leading to a contraction in operating margin. Adjusted
earnings before interest, taxes, depreciation and amortization
(EBITDA) declined 37.1% year over year to $385.4 million in the
quarter.
Mechel has the largest coal reserve base in Russia and is
currently focusing on growth and cost reduction measures. The
company’s primary competitors include
ArcelorMittal (MT). It retains a Zacks #4 Rank
that translates to a short-term (1 to 3 months) Sell rating and we
currently have a long-term (more than 6 months) Neutral
recommendation on the stock.
ARCELOR MITTAL (MT): Free Stock Analysis Report
MECHEL OAO ADS (MTL): Free Stock Analysis Report
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