Mechel Consolidates Shipments within Mecheltrans - Analyst Blog

Russian mining company Mechel OAO MTL announced that it is combining the shipments of the company's products within its subsidiary – Mecheltrans.

Mechel is taking this step in order to reduce transport costs and improve the logistics of shipments both by its own and outsourced wagons. This will also offer opportunities to increase the company's revenues from product sales.

Mecheltrans will manage rail shipments of all of the Group's products with further transshipment in ports and delivery to end customers by internal river routes in Russia and Europe.

By combining the company's freight traffic, Mechel will be able to reduce transport costs by 3-10% depending on freight type. Merging the company's freight traffic in a transport operator will enable Mechel to improve management of its logistical supply chains. The company also intends to make its products competitive by consolidation.

Last month, Mechel released its full-year 2013 results. The company posted a consolidated net loss (as reported) of $2.9 billion for 2013, much higher than a net loss of $1.7 billion registered in 2012. The higher loss was mainly due to over $2 billion of write-offs associated with discontinued operations.

Adjusted net loss was $734 million for the year, in stark contrast to a profit of $305 million registered in 2012.

Revenues for 2013 came in at roughly $8.6 billion, down 19% from $10.6 billion in the year-ago period. The decline was attributable to the company's disposal of unprofitable assets (Romanian facilities) and interruption of supplies from third parties due to the end of its partnership with Estar plants.

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 currently carries a Zacks Rank #3 (Hold).

Other companies in the steel and related industries with a favorable Zacks Rank include Universal Stainless & Alloy Products Inc. USAP, ThyssenKrupp AG (TYEKF) and Grupo Simec S.A.B. de C.V. SIM. While Universal Stainless & Alloy Products sports a Zacks Rank #1 (Strong Buy), ThyssenKrupp and Grupo Simec carry a Zacks Rank #2 (Buy).