2009 Japan-Russia Energy and Environment Dialogue in Niigata S1-6 SOKOLOV ERINA

Transcription

1 Management Presentation

2 Disclaimer This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Mechel OAO (Mechel) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. Any purchase of securities should be made solely on the basis of information Mechel files from time to time with the U.S. Securities and Exchange Commission. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Mechel or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. This presentation may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 2-F. These documents contain and identify important factors, including those contained in the section captioned Risk Factors and Cautionary Note Regarding Forward-Looking Statements in our Form 2-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions. The information and opinions contained in this document are providedas at the date of this presentationand are subject to changewithout notice. 2

3 Mechel at a Glance Mechel Business Model Financial and Operational Performance US$ mln Mining Sales EBITDA 4, ,684 1,68 1,659 9, ,47 EBITDA margin, % 24.3% 24.8% 2,6 % Net Income ,89 Steel Ferroalloys 1.9% Source: Net margin, AME % 13.7% 13.7% Products 9M 29, thousand tonnes 3Q 29, thousand tonnes 2Q 29, thousand tonnes 3Q 29 as compared to 2Q 29, % Coal 12,349 5,445 3, Power Coking coal 6,567 3,739 1, Steam coal 5,794 1,76 1, Iron Ore Concentrate 3,17 1,216 1, Chromium Ore Concentrate Nickel Ferrosilicon (65% and 75%) Logistics Ferrochromium (65%) Hardware Rolled Products 3,891 1,457 1, Flat Products Sales and Marketing Long Products 2, Billets 1, Steel 3,972 1,477 1, Coke (6%) 2, Source: Company Information, audited consolidated US GAAP financial statements

4 Summary of Investment Highlights Experienced management team & best in class corporate governance among Russian companies Largest coking coal producer in Russia & one of the largest producers globally ll Largest and highest quality coking coal reserves base in Russia (1) Successful track record of acquisitions One of the lowest cost coking coal producers worldwide Own infrastructure allows to establish secured access to final customer Strategically positioned to expand coal exports to fast growing Asian markets High self-sufficiency of steel business in key raw materials Leading long steel producer positioned to supply fast growing Russian market Note: 1. Russian estimation methodology 4

5 M&A Significant Factor in Achieved Growth 7 mining operations in South Kuzbass Beloretsk Metallurgical Plant Vyartsilya y Metal Products Plant Mechel Targoviste Steel Mill Izhstal Port Posiet Yakutugol (25%+1) Port Kambarka Moscow Coke and Gas Plant Ductil Steel Oriel Resources HBL Holding Southern Urals Korshunov Iron Ore Yakutugol (75%-1) and Elgaugol (69)% Nickel Plant Mining Plant Bratsk Ferroalloy Plant Chelyabinsk Urals Stampings Plant Metallurgical Southern Kuzbass Power Plant Mechel Campia Turzii Plant Steel Mill Kuzbass Power Sales Company Mechel Nemunas Toplofikatsia Rousse Port Temryuk Bluestone Coal Mining - Coal Mining Iron Ore Steel Ferroalloys Power Logistics 5

6 Broad Geographic Footprint Targeting Growth Markets (project) 6

7 Largest Coking Coal Producer in Russia and One of the Largest Producers Globally Russian Raw Coking Coal Production in 28 (1) Russian Raw Steam Coal Producers in 28 (1) World Major Coking Coal Concentrate Producers in 28 (1) Mechel 15,2 23.% Suek 9, 34.6% BMA 54,6 Raspadskaya 9,3 14.1% KRU 45,4 17.5% Teck Coal 23, Evraz 9,1 13.7% Mechel 1,6 4.1% Anglo Am. 14,8 SDS-Ugol 8,6 3.3% Xs trata 12,2 Mt Sibuglemet 7,9 12.% Mt Evraz 56 5,6 22% 2.2% Mt Alpha NR 11,9 Severstal 6,9 1.5% LUTEK 5,3 2.% (2) Mechel 11,1 + 2,6 - Bluestone KRU 4,6 7.% Zarechnaya 4,4 1.7% Mas sey Energy 9,9 Belon 2,8 4.2% Priargunskoe 4, 1.5% Peabody 9, Source: Central Dispatching Department of the Fuel and Energy Complex Notes: 1. Yakutugol and Southern Kuzbass production volumes are included into Mechel s numbers. 2. Excluding washing of third party coal Source: Company Analysis of Public Data 7

8 Largest and Highest Quality Coking Coal Reserves Base in Russia Coking Coal Reserves of Key Russian Producers, bt Mechel Coking Coal Reserves Structure Russian grade International grade Amount % of total ZH Hard-coking 2,78.6 mt 63% K Hard-coking mt 8% 2. KO Semi-hard coking mt 4.5% bt KS Semi-soft coking 77.2 mt 2.3% OS Semi-hard coking mt 7.7 %. Mechel Evraz OPK Raspadskaya Sibuglemet Severstal Other coking coal grades mt 14.5 % Source: Central Dispatching Department of Fuel and Energy Complex Indicated reserves ABC1+C2 as per Russian estimation methodology 8

9 One of the Lowest cost Coking Coal Producers Worldwide 75% of coking coal by open pit Access to cheap labour Low raw mater ial costs + + = Low produ ction cost Coking Coal Concentrate Cash Costs in 28, EXW, US$/t US$/t Indicative Mechel s weighted average cash cost New Zealand Mechel Canada Australia A World USA Source: AME, Company data 9

10 Strategically Positioned to Expand Coal Exports to Main and Fast Growing Seaborn Markets Murmansk Pechorskiy Russia Canada St. Petersburg Yuzhnyi South Kuzbass South-Yakutian Kuznetskiy Yakutugol Trade Port Posiet China Japan USA Mechel Bluestone Taiwan India Indonesia Australia Major coking coal producing countries Major coking coal consuming countries Major steam coal producing countries Major steam coal consuming countries Major coal seaborne transport t routes 1

11 Leading Long Steel Producer Positioned to Supply Fast Growing Russian Market 2 nd Largest Finished Long Products Producer in Russia (1) (28) Leading Producer of Carbon and Specialty Steel Used in the Construction Industry Production Volume in 28, Kt Russian Production Share Rank Use 8 Rebar 1,31 23% 2 Construction 7 6,4 Wire rod* % 1 Hardware production, construction mt 6 5 Highendurance wire 62 47% 1 Construction 4 Spring wire 49 62% 1 Machinery, furniture 3 2 3, 2,1 1,8 1,6 Stainless long products* 16 36% 1 Machinery Tool steel* % 1 Machinery 1 Evraz Mechel Metalloinvest Severstal MMK High speed steel* 1.1 5% 1 Railways, construction Source: Metal Expert Notes: 1. By volume Source: Company Information, Metal Expert, Chermet * - Jan-Sept 28 11

12 Own Infrastructure Allows to Establish Secured Access to Final Customer Lithuania Romania Moscow Russia Port Kambarka Bulgaria Port Temryuk Elga Deposit Trade Port Vanino Project stage Legend logistics BAM railway planned railway to Elga Deposit Kazakhstan Mechel Trans Vladivostok Trade Port Posiet 4,15 railcars 12

13 Compelling Strategy Mechel Business Model Strategic Objectives Mining 1 Enhance market positions Development of existing reserves base Increase output of high value-added steel products and optimize production mix Steel Ferroalloys 2 Maintain high degree of vertical integration Expand internal logistics capabilities Exploit synergies and economies of scale Maintain flexibility to source raw materials internally Power 3 Continued cost improvement Asset modernization and operating efficiency improvements Cost cutting initiatives Logistics Sales and Marketing 4 Increase sales of coking coal to high Continued expansion into high growth markets growth international markets Further development of domestic steel sales capabilities Active monitoring of domestic and global M&A opportunities 13

14 Yakutugol and Elga Deposit Projects Expanding Coal Presence Yakutugol Elga Deposit Enlarged market positions & enhanced margins Coal reserves: 186 mt Coal reserves: 2.2 bt Quality shift in production volumes & product mix Coal type: premium hard coking coal Coal type: premium hard coking coal, semi soft and steam coal 28 production: 11.5 mt Expected full annual capacity: 3 mt Development of one of the largest untapped high quality coal deposits globally Expansion plans: increase coal production volumes up to 13 mt p.a. Expansion plans: Construction of a 315 km railway link to BAM Identified capex on railroad construction and deposit development in : US$1,645 mln 14

15 Universal Mill - Structural Shift in Long Steel Products Portfolio Overview Key Project Characteristics Enhanced Profitability of Steel Division Capacity, mt Up to 1 mt Products High-speed and low- temperature rails H-beams, shapes and grooves for port construction Structural Shift in the Long Steel Portfolio CAPEX required US$7 mln Universal Mill will be built at Chelyabinsk Metallurgical Plant A2 2-year agreement (21-23) 23) to supply RZD with high- h quality rails up to 1 meters in length signed in February 28 Project Implementation Horizon Increased Output of High Value- Added Products Supply of up to 4k tpa of high-durability rails suitable for high-speed, low temperature operation under the agreements Target consumers RZhD, Construction companies 15

16 New Business Segment - Ferroalloys Overview Ferronickel Mechel is the only steel manufacturer in the world who has own production facilities for the most essential ferroalloys 2nd largest nickel producer in Russia Most comprehensive producer of alloys in Russia: ferrochrome, ferronickel, ferrosilicon Southern Urals Nickel Plant Two open-pit pit nickel ore mines (Sakhara, Buruktal) Nickel production plant in Orsk Mechel Ferroalloys Segment Ferronickel Southern Urals Nickel Plant Shevchenko Nickel Deposit Ferrochrome Tikhvin Ferrochrome Smelter Voskhod Chrome Mining Plant Ferrosilicon Bratsk Ferroalloy Plant Production: Mine t t t Sakhara 1,118 1,236 1,26 Buruktal 1,24 1,591 1,436 Total ore production Ferronickel production Shevchenko Nickel Deposit 2,359 2,827 2, Located in Northern Kazakhstan close to Southern Urals Nickel Plant Project is a greenfield Plans for development are to be determined 16

17 Ferroalloys Ferrochrome Ferrosilicon Tikhvin Smelting Plant Bratsk Ferroalloy Plant Located in Tikhvin, 2 km south east of St Petersburg, Russia Ferrochrome production commenced in April 27 4 x 22.5MVA semi-closed submerged arc AC furnaces Phase 1 (27 21) - an estimated production capacity of 148ktpa HC FeCr Phase 2 (211 - onwards) - full production capacity of 18ktpa HC FeCr 15% of Russian ferrosilicon production (91,11t in 28), capacity of 9, t Supply of ferroalloys to steel subsidiaries producing high-margin products Access to inexpensive electric power supply from Bratsk GES Steady demand from steel producers c.5-6 kg of FeSi in every tonne of produced worldwide Expected feed of 33ktpa chrome ore and concentrate by Phase 1 and feed of 4ktpa by Phase 2 Voskhod Chrome Mining Plant The deposit is located in the North-West Kazakhstan, approximately 11 km from Akhtubinsk Production started in September 28 Annual output of 1.2 million tonnes of Cr ore and.9 million tonnes of chrome concentrate Indicated resource of million tonnes at 48.47% Cr2O3, a 9.5% increase of contained chrome content over the PAS Inferred resources of 1.57 million tonnes at 41.5% Cr2O3, a six-fold increase of contained chrome content over the PAS Extension to the Voskhod contract license area awarded, which includes the Karaagash deposit with Russian C2 and P1 classified resources of some 7.8 million tonnes 17

18 Mechel-Service Mechel is the only Russian steel producer having its own unique Total number of sales units - 65 Over 5 offices in 4 major Russian cities International sales offices in 4 countries Sales agents in 15 foreign countries Expanding of sales network to Western Europe by acquisition of HBL Holding Over 12, of clients Daily sales of over 4, tonnes of steel Constant cash flow from sales even in severe market environment Further development along enhancing and extending range of its services retail sales network Mechel-Service: 18

19 Bluestone Acquisition Bluestone Coal Group A privately-owned company based in West Virginia. Sole owner of the company is Justice family. 8 surface mines and 5 underground mines with current production of 3, mln tonnes per year that can be increased to 6,9 mln tonnes. Ash content is within the range 3, 6,5 (Yakutugol K9 concentrate 1,1, Southern Kuzbass OS concentrate 11,2) JORC reserves and resourses mln tonnes Proved Reserves - 261, mln tonnes Inferred Resources - 197,5 mln tonnes High volatility 12% Mid volatility 6% Coal reserves structure Low volatility 82% Low and mid vol coal enjoys a price premium of 1-15% Reserves are planned to be increased up to 86 mln tonnes Reserves layout High coal quality, only coal cleaning is necessary Ohio All CAPEX necessary to grow up the production have been made till year CAPEX plan is $13 mln. Low debt level ($135 mln. out of which $4 mln. is working capital loans) West frontage of coal deposit available for exploitation Pennsylvania Main operation figures of the Company Production, mln. tonn 2,4 2,5 2,6 Sold, mln. tonn 24 2,4 25 2,5 2,5 Average price, $/t (FCA) 68,62 63,3 129,42 Revenue, $ mln. 164,5 157,3 326,8 EBITDA, $ mln. 37,4 37, 84, EBITDA margin, % 23% 24% 26% Kentucky Virginia Bluestone ownership High volatility coal (B) High volatility coal (A) Mid volatility coal Low volatility coal 19

20 Financial Highlights 2

21 Improving Financial Performance Improved gross result: gross margin grew to 32% gross profit rose by 9% to $375 mln Operating result turned positive $14 mln SG&A expenses fell from 43% to 31% Net result and EBITDA affected by y$ $592 mln FX loss Revenue, EBITDA and Net profit Operating margin (rhs) Revenue (lhs) EBITDA (lhs) Net profit (lhs) EBITDA margin (rhs) $ Million 4 6% % 37% % 28% 4% 32% 2 3% % % % (817) -1 (1,) (497) (474)(691) ) -18% -2% -2 (2,) 1Q8 2Q8 3Q8 4Q8 1Q9-4% -3 (3,) -4% -4 (4,) -6% -6% Revenue Dynamics $ Million 3 EBITDA Bridge $ Million (529) (2) EBITDA 4Q8 Change in operating profit Change in FX Change in DD&A Change in other items EBITDA 1Q9 1 5 (675) -4 (4) -6 (6) (6) (474) 1Q8 Price Volume Acquisitions 1Q9-8 (8) (817) -1 (1,) 21

22 Segments Overview High degree of diversification and vertical integration helps mitigate risk and provides stability Operating profit by segments $ Million Despite market and production downturn Mining segment demonstrate positive result Increase in export sales from 41% in the 4Q8 to 48% in 1Q Steel Mining Ferroalloy Power Cons.adj. Consolidated (25) (85) Revenue from third parties $ Million 3 5 2,328 3,21 3,231 1,37 1, Q8 2Q8 3Q8 4Q8 1Q9 Steel Mining Pow er Ferroalloys Revenue by market $ Million Q8 2Q8 3Q8 4Q8 1Q9 Russia Europe Asia CIS Middle East Other

23 Steel Segment Performance Revenue virtually stable at $643 mln 28% fall in COGS Increase in physical sales volumes across all major products SG&A expenses fell to 2% of the revenue Revenue, EBITDA $ Million 2, 1,75 1,5 1,25 1, % 15% 1, % 58 28% 22% 2% 1,743 1,825 Despite a $236 mln FX loss EBITDA loss halved % % -12% 42-38% 643 1Q8 2Q8 3Q8 4Q8 1Q9 Revenues (lhs) EBITDA margin (rhs) Intersegment revenues (lhs) Operating margin (rhs) 1% 75% 5% 25% % -25% -5% -75% -1% Cash costs, US$/tonne COS structure $94 mn $63 mn 1% 3% 2% 4% 1% 17% 16% 8% 11% 12% 6% 4% 67% 68% 2% Billets, ChMK Wire Rod, ChMK Rebar, ChMK 1Q8 2Q8 3Q8 4Q8 1Q9 % 1Q8 Raw materials and purchased goods Energy Other Staff costs Depreciation 1Q9 23

24 Steel Segment Performance 55% of the Group s revenue Increase in export sales supports production Increased sales of high quality constructional and stainless help on margin while increased sales of semi-finished help on volume Mechel Service and HBL contributes 3% to the segment s revenue Revenue breakdown by region External sales structure 1% 8% 6% 4% 2% % $1,261 mn 23% 4% 17% 9% 3% 6% 11% $643 mn 13% 2% 14% 8% 8% 3% 29% 6% 17% Billets 4Q8 Wire Rod 1Q9 Rebar Stainless flat Constructional steel Forgings and stampings Hardware Coke Other Average sales prices FCA, US$/tonne 1% 8% 6% 4% 2% % 4% 3% 9% 8% 19% 8% 23% 4% 2% 57% 47% 4Q8 1Q9 Russia Europe Asia CIS Middle East Other Q8 2Q8 3Q8 4Q8 1Q9 24

25 Mining Segment Performance Despite sharp fall in prices the gross margin still at 53% of revenue Cash cost of coking coal concentrate at Yakutugol temporarily rose as a result of sharp production decrease Cash cost at SKCC and KMP falls as production revives Production of steam coal at Yakutugol increased by 14% in 1Q9 to the 4Q8 Cash costs, US$/tonne Revenue, EBITDA $ Million 5, 6% 5% 52% 49% 4, 46% 5% 41% 48% 38% 4% 3, 33% 3% 2, % % 1, , % 1% % 1Q8 2Q8 3Q8 4Q8 1Q9 Revenues (lhs) Intersegment revenues (lhs) EBITDA margin (rhs) Operating margin (rhs) COS structure $367 mn $185 mn 1% 6% 6% 8% 17% 19% 9% 11% 6% 18% 25% 4% 2% 48% 39% Coking coal conc. SKCC Coking coal conc. Yakutugol Steam coal, SKCC Steam coal, Yakutugol 1Q8 2Q8 3Q8 4Q8 1Q9 Iron ore % 1Q8 Raw materials and purchased goods Energy Other 1Q9 Staff costs Depreciation and depletion 25

26 Mining Segment Performance Iron ore prices gain support Sales of iron ore concentrate increased supported by demand in China Change in geography of sales support positive result: Share of Russia fell to 27% Growth of sales of coal and iron ore to China Increase in steam coal sales to Europe External sales structure $54 mn $344 mn 1% 7% 4% 6% 12% 8% 6% 46% 64% 4% 2% 41% 2% % 4Q8 1Q9 Coking coal Steam coal Iron ore Other Revenue breakdown by region Average sales prices FCA, US$/tonne 1% 8% 6% 4% 2% 1% 7% 11% 35% 22% 4% 18% 29% 33% 27% 5% 6% % 4Q8 1Q9 Coking coal Steam coal Iron ore Russia Europe CIS Asia w/o China China Middle East Other 27 1Q8 2Q8 3Q8 4Q8 1Q9 26

27 Ferroalloys Segment Performance Revenue increased by almost 7% Chrome sales increased 127%, FeSi 97% SG&A expenses fell to 17% of the revenue from 41% in the 4Q8 Operating loss reduced 5 x to $25 mln Increased export sales help to sell the overhang stock Revenue breakdown by region Revenue, EBITDA $ Million 25 1% % 15 24% % 48 21% -5% -12% % Q8 2Q8 3Q8 4Q8 1Q9 Revenues (lhs) Intersegment revenues (lhs) EBITDA margin (rhs) Operating margin (rhs) Average sales prices FCA, US$/tonne 75% 5% 25% % -25% -5% -75% -1% 1% 8% 6% 4% 2% % 1% 4% 18% 1% 23% 57% 4Q8 21% 66% 1Q9 2 32, , , ,297 25,48 17,374 1,814 9, n/a Nickel Ferrosilicon Chrome Europe Russia Asia Other 1Q8 2Q8 3Q8 4Q8 27

28 Power Segment Performance Winter season helps the sales gross margin at healthy 3% SG&A expenses fell from 32% to 24% of revenue Reduction of cash cost q-o-q ensures high margins EBITDA and operating margins improved Internal sales represent 35% of the segment s revenue ,5 5,4 48, 47,2 41,6 Revenue, EBITDA $ Million % 8% 1% 12% % 1% % -2% 5% 4% % 6% Q8 2Q8 3Q8 4Q8 1Q9 Revenues (lhs) EBITDA margin (rhs) Intersegment revenues(lhs) Operating margin (rhs) Average electricity sales prices and cash COS structure costs, US$/MWh $189 mn $148 mn ,4 18,4 21,7 36, 33,2 28,8 21,9 6% 4% 2% 2% 3% 3% 3% 2% 3% 93% 92% 2% 15% 1% 5% % -5% -1% -15% -2% 1 4Q7 1Q8 2Q8 3Q8 4Q8 1Q9 % 1Q8 1Q9 Sales pirce Cash costs Raw materials and purchased goods Staff costs Depreciation Other 28

29 Cash Generation Capacity Release of $129 mln from the working capital helped to maintain the cash flow positive Investment CAPEX is financed through long-term debt instruments Additional financing from Russian banks helps to refinance the portfolio and increase cash balance to $953 mln Net Cash Flow $ Million Q8 4Q (128) (156) (1 ) (1 25) (2 ) (3 ) (4 ) (3 41) (3 31) Operating activities Investment activities Financial activities 1Q (17) Operating cash flow $ Million $ Million 2,5 35% 1 2, 1,5 1, 5 Operating Cash Flow Bridge 3% % 25% (1) (38) 2% (2) Net DD&A Minority FX Other Income Interest results non-cash 12.6% 13.5% 2,23 15% (4) (3) 1% (5) % 3.4% 4 5% (6) 75 % (7) (27) (691) Q9 Operating cash flow (left scale) as % of sales (right scale) 129 Changes in WC 4 Operating CF 29

30 Debt Profile Current cash - $725 mln sufficient to secure working capital and repayment financing Additional liquidity source RUR 3 bln 1- year registered commercial papers Debt profile $ Million Short-term debt Imminent restructuring of $2.7 bln debt including Oriel bridge with repayment till December Long-term debt Dec.31, 28 March 31, 29 Dec.31, 28 March 31, 29 Bridge loan for acquisition of Oriel Resources Plc Renewable working capital finance lines Total long-term borrowings Short-term borrowings to be repaid Reclassified amount Net Debt/Equity, EBITDA Interest Coverage 2, 1,5 1,,5, 16,8 16,2,94 15,2 12,9,76 15,8 15,2 14,7 1,9 ` 14,3 1,11 1,29 6,3 9, 1,69 1, (4.) 4Q7 1Q8 2Q8 3Q8 4Q8 1Q9 Net Debt/Equity (lhs) EBITDA/Interest expense (rhs) EBITDA/Interest expense exlc. forex (rhs) (5) -5 EBITDA, FFO and Net Debt/EBITDA $ Million x, annualised , , , 4 2,5 4, ,,9 1,2 1,3 1.8, (4) 1Q8 2Q8 3Q8 4Q8 1Q9-2, (385) (474) -4, (8) (615) (817) -6, (1 2) -8, EBITDA (lhs) FFO (lhs) Net Debt/EBITDA, (rhs) Net debt/ebitda excl. forex (rhs) 3

31 Debt Profile Loans repayment schedule as after refinancing in July, 29 $ Million repayment capex finance facilities repayment of Mechel OAO RUR 5 bln bond repayment of Gazprombank US$1bln loan repayment of Yakutugol PXF facility repayment of Oriel syndicated facility renewable working capital finance lines Q9 4Q9 1Q1 2Q1 3Q1 4Q and after

32 Financial Results Overview US$ million unless 1Q9 4Q8 Change, % otherwise stated Revenue 1,179 1,37-14% Cost of sales (84) (1,27) -22% Gross margin 31.8% 25.% Operating profit 14 (251) 15% Operating margin 1.2% 18.3% EBITDA (474) (817) 42% EBITDA margin -4.2% -59.7% Net Income (691) (497) -39% Net Income margin -58.6% -36.3% EPS (USD per share) % Sales volumes*, tonnes Mining segment 4,32 3,53 22% Steel segment 1,245 1,4 2% * Includes sales to the external customers only 32

33 Vertically Integrated Mining and Metals Platform Mining Steel Ferroalloys Transportation/Logistics Power Coal/Coke Southern Kuzbass: 4 open pit and 3 underground degou dmines, 4 washing plants, 1 coke plant Yakutugol and Elgaugol operations: 1 washing and 1 coke plant Bluestone Coal: 8 open pit and 5 underground mines Controls 26% of coal washing capacity in Russia Holds 16% in Mezhdurechye Iron ore Korshunov GOK, Irkutsk region 3 open-pit iron ore mines Limestone Pugachev limestone quarry, Urals Domestic assets Chelyabinsk Metallurgical Plant (ChMP) Izhstal Beloretsk Metallurgical Plant Vyartsilya Metal Products Plant Urals Stampings Plant International assets Mechel Targoviste (Romania) Mechel Campia Turzii (Romania) Otelu Rosu plant (Romania) Buzau plant (Romania) Mechel Nemunas (Lithuania) Ferrochrome Tikhvin Smelter, near St. Petersburg Chrome ore Voskhod Chrome mine in Kazakhstan Ferrosilicon Bratsk Ferroalloys Plant Ferronickel Southern Urals Nickel Plant Nickel ore 1 open-pit mine in Chelyabinsk region 1 open-pit mine in Orenburg region Shevchenko nickel deposit in Kazakhstan Mining Domestic sales Mechel Trading House International sales Mechel Trading AG Coal and iron ore Railway and by ship Nickel Rail to ChMP or to St. Petersburg/ Kaliningrad for export Mecheltrans Own 4,15 railcars 25.8 mt of Mechel s cargo transported in 27 Port Posiet Processed 1.7 mt of cargo in 27, mostly coal Used primarily for shipments to Japan and South Korea Steel Domestic Mechel Trading House and Mechel-Service International Mechel Trading AG Offices in 4 countries Agents in 15 countries Romanian sales through subsidiaries of Mechel Campia Turzii and Mechel Targoviste Transportation Mostly railway Total Power Generating Capacity of 1,2 MW (1) Assets Southern Kuzbass Power Plant 554 MW Urals Stampings Plant 3.5 MW Toplofikatsia Rousse 4 MW (1) Chelyabinsk Metallurgical Plant 23 MW Moscow Coke and Gas Plant 3 MW Integrated power business with its own raw material resources, power generating facilities and extensive client base Source: Company Information Notes: 1. Based on installed generating capacity of Toplofikatsia Rousse 33