Mechel’s 2024 Performance: Decline in Profits Amid Export Challenges
Mechel, one of Russia's leading mining and steel companies, has announced its financial and operational results for the year 2024, revealing significant challenges in its operations. Despite being a major player in the global steel market, the company faced a range of obstacles, particularly stemming from export restrictions, which affected its revenue and profitability. Below, we explore the financial performance and production metrics that shaped Mechel's year.
Financial Results for 2024: Net Loss and Declining Revenues
In 2024, Mechel posted a net loss of RUB 37.12 billion ($421.8 million). This marks a stark contrast to the net profit of RUB 22.32 billion reported for 2023. The substantial downturn in profit can be attributed to the ongoing challenges presented by geopolitical factors and trade restrictions. These factors particularly impacted the company's ability to export its products to international markets.
• Sales revenue for 2024 amounted to RUB 387.47 billion ($4.4 billion), a 4.5% decline compared to the previous year. This drop in sales revenue is largely attributed to export restrictions and the overall difficult economic environment.
• The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell by 35.2%, reaching RUB 55.9 billion ($635.2 million), signaling a severe contraction in profit margins.
Operational Performance: Steel Production Declines, Coal and Iron Ore Sales Grow
In terms of operational results, Mechel saw mixed performance across its various product lines in 2024.
• Crude steel production totaled 3.35 million metric tons (mt), which represents a 3.9% decline compared to 2023. This reduction in production reflects challenges within the steel market, including fluctuations in demand and increasing production costs.
• Similarly, pig iron production also saw a 5.6% decline year-on-year, totaling 2.98 million metric tons (mt), indicating the slowdown in steel production.
However, not all areas of Mechel's operations saw a downturn. The company reported strong growth in its coal and iron ore production:
• Run-of-mine coal production for 2024 increased by 4.7%, totaling 10.86 million metric tons (mt). This growth is attributed to rising global demand for coal and the company’s ongoing investments in mining operations.
• The company also recorded significant growth in its coking coal concentrate sales, which rose by 29.7% to 4.04 million metric tons (mt). This was largely driven by an increase in sales to third parties, which surged by 45.6% year-on-year to 2.72 million metric tons (mt).
• Iron ore concentrate sales also saw a notable increase, with the company selling 1.47 million metric tons (mt), reflecting a 42.9% rise from the previous year. This increase indicates a stronger market for iron ore amid a challenging global environment.
Steel Products: Long Steel Products See Modest Growth, Flat Steel Declines
Mechel's performance in steel product sales also showed varied results:
• Sales of long steel products experienced a 1.7% increase, totaling 2.44 million metric tons (mt). The growth in these products was primarily driven by increased production volumes at the Chelyabinsk Metallurgical Plant, particularly in reinforcement and rail products.
• On the other hand, sales of flat steel products significantly declined by 41.2%, with only 219,000 metric tons (mt) sold. This drop can be attributed to reduced demand in certain regions and challenges related to export restrictions, which made it more difficult for Mechel to reach global markets for its flat steel products.
Looking Ahead: Mechel’s Strategy and Adaptation to the Market
While Mechel faced significant challenges in 2024, including a sharp drop in profits and a decrease in steel production, the company has continued to show resilience in key areas such as coal production and iron ore concentrate sales. Moving forward, Mechel will likely focus on adapting to the evolving geopolitical environment by focusing on internal cost efficiency and diversifying its market reach.
• The company may also look to increase its focus on high-demand products like coking coal and iron ore, which continue to show solid growth despite external market challenges.
Key Takeaways:
• Mechel reported a net loss of RUB 37.12 billion ($421.8 million) in 2024, a significant shift from the net profit of RUB 22.32 billion in 2023.
• Sales revenue decreased by 4.5% year-on-year to RUB 387.47 billion ($4.4 billion), mainly due to export restrictions.
• The company’s EBITDA dropped by 35.2%, totaling RUB 55.9 billion ($635.2 million).
• Steel production was down by 3.9%, with crude steel production totaling 3.35 million metric tons (mt) and pig iron production decreasing by 5.6% to 2.98 million metric tons (mt).
• Run-of-mine coal production rose by 4.7% to 10.86 million metric tons (mt).
• Coking coal concentrate sales surged by 29.7% to 4.04 million metric tons (mt), with sales to third parties rising by 45.6%.
• Iron ore concentrate sales grew by 42.9%, reaching 1.47 million metric tons (mt).
• Sales of long steel products increased by 1.7% to 2.44 million metric tons (mt), while sales of flat steel products dropped by 41.2% to 219,000 metric tons (mt).
