FORM 6-K

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

 

October 3, 2007

 

Commission File Number: 333-119497

 

MECHEL OAO

(Translation of registrant’s name into English)

Krasnoarmeiskaya 1,

Moscow 125167

Russian Federation

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F x   Form 40-F o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes o   No x

 

Note: Regulation S-T Rule 101(b)(c) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes o   No x

 

Note:  Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

 

Yes o   No x

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):


 

 

 

 


 

 

 


 

 

 

 

 

 

MECHEL REPORTS FIRST HALF 2007 FINANCIAL RESULTS

 — Revenues increased 55% to $2.99 billion —

— Operating income more than tripled to $738.9 million —

— Net income increased 169% to $489.5 million, $3.53 per ADR or $1.18 per diluted share —

 

Moscow, Russia — October 3, 2007 — Mechel OAO (NYSE: MTL), a leading Russian integrated mining and steel group, today announced results for the first half ended June 30, 2007.

 

US$ thousand

 

1H
2007

 

1H
2006

 

Change
Y-on-Y

 

Revenue

 

2,986,862

 

1,926,516

 

55.0

%

Net operating income

 

738,986

 

209,475

 

252.8

%

Net operating margin

 

24.7

%

10.9

%

 

Net income

 

489,456

 

181,664

 

169.4

%

EBITDA (1)

 

813,681

 

344,741

 

136.0

%

EBITDA margin

 

27.2

%

17.9

%

 


(1) See Attachment A.

 

Igor Zyuzin, Mechel’s Chief Executive Officer, commented: “During the first half of 2007, Mechel continued to move forward with its plans for scaling up production volumes and increasing profitability.  In addition, the Company expanded its existing production capacity and acquired new assets that complement Mechel’s current operations. The Company’s operational progress, coupled with the ongoing favorable market conditions, enabled Mechel to achieve record financial results for the first half of 2007, tripling its operating income when compared to the same period last year.”

 

Consolidated Results

 

Net revenue in the first half of 2007 rose 55.0% to $2.99 billion, from $1.93 billion in the first half of 2006, reflecting increased production volumes and strong selling prices across the Company’s primary product categories. Operating income rose by 252.8% to $738.9 million, or 24.7% of net revenue, versus operating income of $209.5 million, or 10.9% of net revenue, in the first half of 2006.

 

For the first half of 2007, Mechel reported consolidated net income of $489.5 million, or $3.53 per ADR ($1.18 per diluted share).

 

Consolidated EBITDA rose by 136.0% to $813.7 million in the first half of 2007 from $344.7 million a year ago. Please see the attached tables for a reconciliation of consolidated EBITDA to net income.

 

 

2



 

Mining Segment Results

 

US$ thousand

 

1H
2007

 

1H
2006

 

Change
Y-on-Y

 

Revenues from external customers

 

897,766

 

613,478

 

46.3

%

Operating income

 

419,312

 

96,417

 

334.9

%

Net income

 

263,078

 

77,981

 

237.4

%

EBITDA

 

449,699

 

146,977

 

206.0

%

EBITDA margin (1)

 

36.3

%

19.2

%

 


(1) EBITDA margin calculation is based on the total revenues of the segment including intersegment sales.

 

Mining Segment Output

 

Product

 

1H 2007, thousand tonnes

 

1H 2007 vs 1H 2006

 

Coal

 

8,870

 

10

%

Coking coal

 

4,223

 

(6

)%

Steam coal

 

4,647

 

29

%

Iron ore concentrate

 

2,376

 

(1

)%

Nickel

 

8.4

 

20

%

 

Mining segment revenue from external customers for the first half of 2007 totaled $897.8 million, or 30.1%, of consolidated net revenue, an increase of 46.3% compared with segment revenue from external customers of $613.5 million, or 31.8%, of consolidated net revenue, in the first half of 2006. The increase in revenues reflects increased total output, strong market positions, and a favorable pricing environment.

 

Operating income for the first half of 2007 in the mining segment rose 334.9% to $419.3 million, or 33.9% of total segment revenue, compared to operating income of $96.4 million, or 12.6% of total segment revenues a year ago. This increase in profitability reflects Mechel’s enhanced cost control efforts, as well as the overall efficiency of the Company’s mining operations as revenue levels increased. EBITDA in the mining segment for the first half of 2007 was $449.7 million, 206.0% higher than segment EBITDA of $146.9 million in the first half of 2006. The EBITDA margin for the mining segment increased to 36.3% compared to 19.2% in the same period of last year.

 

Mr. Zyuzin commented on the results of the mining segment: “Mechel’s efforts to effectively manage costs and increase mining segment output yielded positive operating performance for the first half of 2007.  Coal output during the period increased by 10% year-on-year, driven by new production from the Olzherasskaya-New Mine, which was commissioned at the end of last year, and ongoing upgrades of mining equipment as part of the Company’s technical equipment modernization program.  In addition, we continued to optimize new technology processes in the segment, which enabled us to increase nickel production by 20%. Net income in the mining segment increased by 237.4% compared with first half results a year ago, due to the positive trends that we continue to see in key customer markets.  Supported by the current favorable pricing environment and the outlook for the coal and iron ore markets, we intend to maintain our pace of production output in line with our annual plan, and anticipate continued strong operating performance from the mining segment through the remainder of this year.”

 

 

3



 

 

Steel Segment Results

 

US$ thousand

 

1H
2007

 

1H
2006

 

Change
Y-on-Y

 

Revenues from external customers

 

2,089,096

 

1,313,038

 

59.1

%

Operating income (2)

 

348,393

 

113,567

 

206.8

%

Net income (2)

 

255,097

 

104,188

 

144.8

%

EBITDA (2)

 

392,702

 

198,267

 

98.1

%

EBITDA margin (1)

 

18.6

%

15.0

%

 


(1) EBITDA margin calculation is based on the total revenues of the segment including intersegment sales.

(2) Data for the first half of 2006 has been recalculated in accordance with a new segment calculation method. According to the previous methodology, the results of the steel segment were calculated after the elimination of the unrealized profit of the mining segment in the stock of the trading and producing entities of the steel segment - the approach did not provide the full picture of the steel segment performance on a stand-alone basis. According to the new methodology, the steel segment results are given before this elimination, which will be shown in the segment accounting separately.

 

Steel Segment Output

 

Product

 

1H 2007, thousand tonnes

 

1H 2007 vs 1H 2006

 

Coke

 

1,935

 

80

%

Pig iron

 

1,865

 

8

%

Steel

 

2,987

 

4

%

Rolled products

 

2,527

 

11

%

Hardware

 

336

 

17

%

 

Revenue from external customers in Mechel’s steel segment increased 59.1% in the first half of 2007 to $2.1 billion, or 69.9% of consolidated net revenue, compared to revenue from external customers of $1.3 billion, or 68.2% of consolidated net revenue reported for the first half of 2006.

 

In the first half of 2007, the steel segment generated operating income of $348.4 million, or 16.5% of total segment revenue, an increase of 206.8% over operating income of $113.6 million, or 8.6% of total segment revenue, in the first half of 2006.  EBITDA in the steel segment for the first half of 2007 increased 98.1% to $392.7 million, compared with $198.3 reported in the first half of 2006.  EBITDA margin for the steel segment rose to 18.6% in the first half of 2007, compared with 15.0% reported in the same period of last year.

 

Mr. Zyuzin commented, “The steel segment continued to benefit from our program to reduce production costs and increase operating efficiencies, as well as a strong pricing environment for our products.  These factors enabled us to more than double the segment’s net income in the first half of 2007, compared with the same period last year.  In line with our objective to improve our product sales mix, we increased output of high value added products, which also added to the segment’s profitability during the period. Commodity coke output increased by 80%, which was supported by Mechel’s acquisition of Moscow Coke and Gas Plant and the commissioning of a new coking battery at Chelyabinsk Metallurgical Plant at the end of last year.  While we expect year-over-year growth rates to remain robust, by the end of the year we expect some decline in demand for steel products, explained largely by typical seasonality patterns.  However, based on

 

4



 

Mechel’s diversified product portfolio and our expectation that any pricing softness would be limited, we anticipate good results for the segment overall for the year.”

 

Recent Highlights

                  In March, Mechel OAO announced the acquisition of a controlling stake of 93.4% of Southern Kuzbass Power Plant OAO.  The transaction amount totaled approximately US$270 million. The acquisition of Southern Kuzbass Power Plant was in line with Mechel’s strategy to further develop its mining segment.

                  In August, Mechel OAO acquired all the charter capital of Bratsk Ferroalloy Plant OOO, the largest enterprise in Eastern Siberia producing high grade ferrosilicon.

                  In September, Mechel OAO acquired all outstanding shares of the Temryuk-Sotra seaport, located at the Taman shore of the Sea of Azov. The seaport is primarily utilized for small tonnage river-sea type vessels in the Southern Russia.

                  In August, Mechel OAO announced that its trading company, Mechel-Service OOO, opened new warehouses in July and plans to further expand its distribution network. In total, the new warehouses have capacity of approximately 15,000 to 20,000 tonnes of metal products every month.

                  In July, Beloretsk Metallurgical Plant (BMP) commissioned new equipment and laid the foundation for a new steel wire-rope complex. The capacity of the lines can reach 27 thousand tonnes per year depending on the product range.

 

Mr. Zyuzin concluded, “Mechel continued to make significant progress during the first half of 2007.  The market environment for our products remained favorable, and we continued our strong performance from last year, achieving record operational and financial results for the first half through a combination of organic growth and selective acquisitions.  In addition, we have made additional progress on our capital expenditure program to support future production and efficiency enhancements, and also reduced our future dependence on electricity by considerably expanding our power business and acquiring power generation through our controlling stake in the Southern Kuzbass Power Plant OAO and power distribution via the Kuzbass Power Sales Company OAO assets. Through the planned development of a branch network of our trading subsidiary, Mechel Service, which substantially expanded its regional presence this year, we are laying the groundwork for a future increase of metal product sales directly to end users.  This strategic initiative allows the Company to further strengthen its relationships directly with the end users of its products and capture additional incremental revenues.  Overall, based on the demand for Mechel’s products that we are seeing across the steel and mining segments and the current pricing environment, we are optimistic about the growth prospects for the Company throughout the remainder of the year.”

 

 

Financial Position

 

First half cash expenditure on property, plant and equipment amounted to $146.4 million, of which $58.4 million was invested in the mining segment and $88.0 million in the steel segment.

 

In the first half of 2007, Mechel has spent $321.1 million on acquisitions, including $270 million (net of cash acquired) for 93.4% of the shares of Southern Kuzbass Power Plant OAO, and $37 million (net of cash acquired) for 49% of the shares of Kuzbass Power Sales Company OAO.

 

5



 

As of June 30, 2007, total debt(1) was at $383.3 million. Cash and cash equivalents amounted to $315.2 million at the end of the first half of 2007 and net debt(2) amounted to $68.1 million.


(1)Total debt is comprised of short-term borrowings and long-term debt

(2)Net debt is defined as total debt outstanding less cash and cash equivalents

 

The management of Mechel will host a conference call today at 6:00 p.m. Moscow time (10:00 a.m. New York time, 3:00 p.m. London time) to review Mechel’s financial results and comment on current operations.  The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.

 

***

Mechel OAO

Alexander Tolkach

Head of International Affairs & Investor Relations

Phone: 7-495-221-88-88

Fax: 7-495-221-88-00

alexander.tolkach@mechel.com

 

***

Mechel is one of the leading Russian mining and metals companies. Mechel unites producers of coal, iron ore, nickel, steel, rolled products, and hardware. Mechel products are marketed domestically and internationally.

 

***

 

Some of the information in this press release 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 1995. 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 20-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 20-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.

 

6



 

Attachments to the 1H 2007 Earnings Press Release

 

Attachment A

Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

Earnings Before Interest, Depreciation and Amortization (EBITDA) and EBITDA margin. EBITDA represents earnings before interest, depreciation and amortization. EBITDA margin is defined as EBITDA as a percentage of our net revenues. Our EBITDA may not be similar to EBITDA measures of other companies; is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While interest, depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry. EBITDA can be reconciled to our consolidated statements of operations as follows:

US$ thousands

 

1H 2007

 

1H 2006

 

Net income

 

489,456

 

181,664

 

 

 

 

 

 

 

Add:

 

 

 

 

 

Depreciation, depletion and amortization

 

115,834 

 

85,650 

 

Interest expense

 

19,708

 

22,538

 

Income taxes

 

188,684

 

54,890

 

Consolidated EBITDA

 

813,681

 

344,741

 

 

 

EBITDA margin can be reconciled as a percentage to our Revenues as follows:

 

US$ thousands

 

1H 2007

 

1H 2006

 

Revenue, net

 

2,986,862

 

1,926,516

 

EBITDA

 

813,681

 

344,741

 

EBITDA margin

 

27.2

%

17.9

%

 

7



 

Consolidated Balance Sheets
(in thousands of U.S. dollars, except share amounts)

 

 

 

 

 

 

 

June 30, 2007

 

December 31, 2006

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

315,233

 

$

172,614

 

Trading securities

 

 

270,964

 

Accounts receivable, net of allowance for doubtful accounts of $25,016 as of 30/06/2007 and $19,592 as of 31/12/2006

 

248,689

 

191,172

 

Due from related parties

 

2,702

 

545

 

Inventories

 

785,912

 

653,079

 

Deferred cost of inventory in transit

 

11,539

 

14,125

 

Current assets of discontinued operations

 

9

 

9

 

Deferred income taxes

 

7,025

 

7,922

 

Prepayments and other current assets

 

340,170

 

332,946

 

Total current assets

 

1,711,279

 

1,643,376

 

 

 

 

 

 

 

Long-term investments in related parties

 

435,045

 

429,206

 

Other long-term investments

 

47,547

 

44,392

 

Non-current assets of discontinued operations

 

111

 

108

 

Intangible assets, net

 

5,661

 

4,746

 

Property, plant and equipment, net

 

2,332,149

 

2,012,828

 

Mineral licenses, net

 

262,504

 

269,851

 

Deferred income taxes

 

11,280

 

6,983

 

Goodwill

 

220,753

 

45,914

 

Total assets

 

$

5,026,329

 

$

4,457,404

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Short-term borrowings and current portion of long-term debt

 

$

41,262

 

$

166,517

 

Accounts payable and accrued expenses:

 

 

 

 

 

Trade payable to vendors of goods and services

 

188,494

 

183,485

 

Advances received

 

102,423

 

96,624

 

Accrued expenses and other current liabilities

 

83,287

 

84,632

 

Taxes and social charges payable

 

117,611

 

143,037

 

Unrecognized income tax benefits

 

65,279

 

 

Dividends payable

 

317,651

 

 

Due to related parties

 

3,743

 

2,353

 

Current liabilities of discontinued operations

 

523

 

508

 

Asset retirement obligation, current portion

 

4,067

 

3,444

 

Deferred income taxes

 

24,698

 

58,820

 

Deferred revenue

 

40,025

 

7,183

 

Pension obligations, current portion

 

11,999

 

11,044

 

Finance lease liabilities, current portion

 

8,325

 

6,066

 

Total current liabilities

 

1,009,387

 

763,713

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

342,021

 

322,604

 

Restructured taxes and social charges payable, net of current portion

 

355

 

7,782

 

Asset retirement obligations, net of current portion

 

97,209

 

88,914

 

Pension obligations, net of current portion

 

66,013

 

59,170

 

Deferred income taxes

 

201,485

 

136,154

 

Finance lease liabilities, net of current portion

 

60,235

 

51,068

 

Other long-term liabilities

 

325

 

 

Minority interests

 

244,417

 

163,036

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

Common shares (10 Russian rubles par value; 497,969,086 shares authorized, 416,270,745 shares issued and 416,270,745 shares outstanding as of June 30, 2007 and December 31, 2006)

 

133,507

 

133,507

 

Additional paid-in capital

 

415,070

 

412,327

 

Accumulated other comprehensive income

 

228,097

 

188,218

 

Retained earnings

 

2,228,208

 

2,130,911

 

Total shareholders’ equity

 

3,004,882

 

2,864,963

 

Total liabilities and shareholders’ equity

 

$

5,026,329

 

$

4,457,404

 

 

 

8



 

Consolidated Income Statements
(in thousands of U.S. dollars, except share and per share amounts)

 

 

 

 

6 months ended June 30,

 

 

 

2007

 

2006

 

Revenue, net (including related party amounts of $56,557 and $36,325 during six months 2007 and 2006, respectively)

 

2,986,862

 

$

1, 926,516

 

Cost of goods sold (including related party amounts of $94,117 and $63,701 during six months 2007 and 2006, respectively)

 

(1,761,482

)

(1,318,787

)

Gross profit

 

1,225,380

 

607,729

 

 

 

 

 

 

 

Selling, distribution and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Selling and distribution expenses

 

(254,120

)

(217,074

)

Taxes other than income tax

 

(57,034

)

(56,806

)

Accretion expense

 

(2,098

)

(1,546

)

Provision for doubtful accounts

 

(1,900

)

(2,701

)

Provision for short-term investments

 

(3,507

)

 

General, administrative and other operating expenses

 

(167,735

)

(120,127

)

Total selling, distribution and operating expenses

 

(486,394

)

(398,254

)

Operating income

 

738,986

 

209,475

 

 

 

 

 

 

 

Other income and (expense):

 

 

 

 

 

Income from equity investments

 

2,360

 

1,963

 

Interest income

 

4,744

 

3,671

 

Interest expense

 

(19,708

)

(22,538

)

Other income (expense), net

 

(3,456

)

9,688

 

Foreign exchange gain

 

22,698

 

35,410

 

Total other income and (expense), net

 

6,638

 

28,194

 

Income before income tax, minority interest, discontinued operations

 

745,624

 

237,669

 

 

 

 

 

 

 

Income tax expense

 

(188,684

)

(54,890

)

Minority interest in income of subsidiaries

 

(67,714

)

(1,669

)

Income from continuing operations

 

489,226

 

181,110

 

Income (loss) from discontinued operations, net of tax

 

230

 

554

 

Net income

 

489,456

 

$

181,664

 

Currency translation adjustment

 

39,098

 

93,596

 

Unrealized gain on available-for-sale securities

 

781

 

169

 

Comprehensive income

 

529,335

 

$

275,429

 

 

 

 

 

 

 

Basic and diluted earnings per share:

 

 

 

 

 

Earnings per share from continuing operations

 

1.18

 

$

0.45

 

Gain per share effect of discontinued operations

 

0.00

 

0.00

 

Net income per share

 

1.18

 

$

0.45

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

416,270,745

 

$

403,218,566

 

 

 

9



Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)

 

 

6 months ended June 30,

 

 

 

2007

 

2006

 

Cash Flows from Operating Activities

 

 

 

 

 

Net income

 

$

489,456

 

$

181,664

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

106,096

 

76,006

 

Depletion and amortization

 

9,738

 

9,644

 

Foreign exchange gain

 

(22,698

)

(35,410

)

Deferred income taxes

 

(11,243

)

(164

)

Provision for doubtful accounts

 

1,900

 

2,701

 

Inventory write-down

 

222

 

679

 

Accretion expense

 

2,098

 

1,546

 

Minority interest

 

67,714

 

1,669

 

Loss on sale of trading securities

 

18,813

 

 

Income from equity investments

 

(2,360

)

(1,963

)

Non-cash interest on long-term tax and pension liabilities

 

2,360

 

8,594

 

Loss on sale of property, plant and equipment

 

721

 

218

 

Loss (gain) on sale of long-term investments

 

2,490

 

(503

)

Gain from discontinued operations, net

 

(230

)

(554

)

Gain on forgiveness of fines and penalties

 

(17,471

)

(5,825

)

Stock-based compensation expenses

 

 

209

 

Amortization of capitalized costs on bonds issue

 

 

661

 

Pension service cost and amortization of prior year service cost

 

2,076

 

1,389

 

Provision for unrecoverable short-term loans issued

 

3,507

 

 

Changes in current assets and liabilities, net of effects from acquisition of new subsidiaries:

 

 

 

 

 

Trading securities

 

252,151

 

 

Accounts receivable

 

(49,760

)

(16,212

)

Inventories

 

(117,369

)

(24,604

)

Trade payable to vendors of goods and services

 

(20,194

)

(101,233

)

Advances received

 

5,352

 

92,189

 

Accrued taxes and other liabilities

 

(132,769

)

(21,272

)

Settlements with related parties

 

(771

)

(1,332

)

Current assets and liabilities of discontinued operations

 

(79

)

(152

)

Deferred revenue and cost of inventory in transit, net

 

35,427

 

1,155

 

Other current assets

 

97,831

 

96,902

 

Unrecognized tax benefits

 

(10,128

)

 

Dividends received

 

2,804

 

994

 

Net cash provided by operating activities

 

715,684

 

266,996

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

Acquisition of SKPP, less cash acquired

 

(270,018

)

 

Acquisition of KES, less cash acquired

 

(37,413

)

 

Acquisition of Transkol, less cash acquired

 

(7,165

)

 

Acquisition of other subsidiaries, less cash acquired

 

(4,181

)

(2,153

)

Acquisition of minority interest in subsidiaries

 

(2,280

)

(1,569

)

Investments in other non-marketable securities

 

 

(760

)

Investments in other marketable securities.

 

(3,203

)

 

Proceeds from disposal of long-term investments

 

 

3,247

 

Proceeds from disposals of property, plant and equipment

 

4,060

 

169

 

Purchases of mineral licenses

 

(2,235

)

(6,382

)

Purchases of property, plant and equipment

 

(144,160

)

(247,210

)

Net cash used in investing activities

 

(466,595

)

(254,658

)

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

Proceeds from short-term borrowings

 

191,632

 

526,166

 

Repayment of short-term borrowings

 

(318,510

)

(757,474

)

Repayment of obligations under finance lease

 

(8,841

)

(3,280

)

Proceeds from long-term debt

 

16,082

 

228,957

 

Proceeds from disposal of treasury stock

 

 

1,248

 

Repayment of long-term debt and long-term portion of restructured taxes and social charges payable

 

(2,633

)

(1,203

)

Net cash used in financing activities

 

(122,270

)

(5,586

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

15,800

 

12,749

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

142,619

 

19,501

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

172,614

 

311,775

 

Cash and cash equivalents at end of period

 

$

315,233

 

$

331,276

 

 

 

 

10



 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

MECHEL OAO

 

 

 

 

By:

/s/ Igor Zyuzin

 

Name:

Igor Zyuzin

 

Title:

CEO

 

 

Date:  October 3, 2007

 

 

11