Back to top

Analyst Blog

Russian mining company Mechel OAO (MTL - Analyst Report) inked a deal with Belarus-based BelAZ OAO, following their agreement-in-principle in August 2011.

As per the partnership agreement, BelAZ is expected to set up production of cargo platforms on the dump trucks and further certify a Mechel subsidiary as a BelAZ service center in the Russian Federation. The financial details of the transaction were not disclosed.

The pact, expected to run for 10 years, was signed at a session of the Supreme State Council of the Union State of Russia and Belarus.

According to Mechel's statement, Mechel Group's mining division plans to use the mining dump trucks mainly at the Elga coal deposit, which has estimated reserves of 2.2 billion metric ton of coking coal.

In October 2011, Mechel recorded a net income of $191.9 million for the second quarter of 2011, down 37.9% from the previous quarter’s consolidated net income of $309.1 million.

Revenues in the second quarter soared 18.3% sequentially to $3.5 billion based on the company’s relentless efforts restoring production volumes in its mining segment while preserving high capacity utilization rates in steel and other segments.

Operating income in the reported quarter climbed 6.2% to $476.3 million versus the first quarter of 2011. Operating margin was 13.72% in the second quarter of 2011 versus 15.28% in the first quarter of 2011.

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.

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.

Currently, Mechel has a short-term (1 to 3 months) Zacks #5 Strong Sell rating and a long-term (6 months) Underperform recommendation.

Mechel faces stiff competition from Arcelor Mittal (MT - Analyst Report) and Norilsk Nickel Mining and Metallurgical Co.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
BANCO DO BR… BDORY 16.78 +8.05%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%