FY 2017 RESULTS PRESENTATION · 5% 7 FY 2017 RESULTS PRESENTATION / KEY FINANCIAL RESULTS. 23.2...

FY 2017 RESULTS PRESENTATIONApril 5, 2018

www.mechel.com

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 PAO (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 harbour 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.

The information and opinions contained in this document are

provided as at the date of this presentation and are subject to

change without notice

Disclaimer

2www.mechel.comFY 2017 RESULTS PRESENTATION

KEY FINANCIAL RESULTS

Nelli Galeeva – Chief Financial Officer

www.mechel.com3 FY 2017 RESULTS PRESENTATION

Key market drivers

In 2017 prices on coal market were very volatile with a peak of over $300 per

tonne and lowest level at $140 per tonne. Relative stability was reached in 3Q17

when after bottoming to the level of $140 in June 2017, the price rebounded to

$200 in September, and after a short correction in October, rebounded to $250

per tonne by the year end.

Since the beginning of 2018 coal price fluctuates in the range $210-$230 per

tonne.

Totally average price on quarterly contracts for the FY2017 amounted to about

$210 per tonne FOB Australia, that is by $96 per tonne or by 84% higher than in

FY2016.

Iron ore prices in 1Q17 demonstrated growth to $95* per tonne supported by an

increase of steel prices, but in 2Q17 iron ore prices decreased to $54* following

the decline in steel prices. 3Q17 started with the upward trend for iron ore prices

but after a high level of $79 per tonne by the end of August, they started to

decline and by the end of quarter returned to $62. In 4Q17 iron ore prices were

stabilized at a level of $66.

As a result in FY2017 average level of Fe62% iron ore index CFR China

amounted to $71/dmt (+22% to the level of FY2016).

In 2017 billet demonstrated predominantly upward trend on stable demand from

Northern Africa and Middle East region. Antidumping duties imposed by Egypt

also supported price levels.

Overall in 2017 billet prices increased from the level of $400 to $500 FOB Black

Sea.

Rebar prices on the local Russian market were more volatile than billet prices on

international market. Nevertheless after weak first half of the year in summer

2017 rebar prices stabilized at a level above 24,000-28,000 Rubles per tonne

(ex VAT) and remain relatively stable in the beginning of 2018.

200

250

300

350

400

450

500

550

Billet FOB Black Sea, US$/t

Source: Metal Courier

HCC prices FOB Australia, US$/t

Source: Bloomberg

www.mechel.comFY 2017 RESULTS PRESENTATION / KEY MARKET DRIVERS4

* CFR China Fe62% Platts IODEX

117 11093 89 81 84 92

200

285

194

170192

237

0

50

100

150

200

250

300

350

HCC spot price HCC quarterly benchmark price HCC quarterly reference price

Consolidated Revenue in FY2017 amounted to 299.1 bln RUB. It

increased by 8% compared to FY2016, due to higher prices for

both Mining and Steel segments products and growing share of

high value-added products such as rails, beams, flat steel products

etc. in Steel segment product mix.

EBITDA* increased by 23% compared to FY2016 and amounted to

81.1 bln RUB with EBITDA margin reaching 27% which was a

result of Mining segment intense profitability growth due to higher

prices.

Group generated Profit attributable to equity shareholders of

Mechel PAO of 11.6 bln RUB vs 7.1 bln RUB in FY2016 including

foreign exchange rate effect which amounted to 4.2 bln RUB and

25.9 bln RUB, respectively.

www.mechel.comFY 2017 RESULTS PRESENTATION / KEY FINANCIAL RESULTS

RUB mln FY17 FY16 % 4Q17 3Q17 %

Revenue 299,113 276,009 8% 76,316 73,413 4%

Operating profit 57,167 42,690 34% 10,752 15,738 -32%

EBITDA* 81,106 66,164 23% 21,966 18,913 16%

EBITDA margin, % 27% 24% 29% 26%

Profit

attributable to equity

shareholders

of Mechel PAO

11,557 7,126 62% 443 6,120 -93%

FY 2017 Financial results summary

5

*Here and further EBITDA is calculated as Adjusted EBITDA in accordance with definition in Press

release Attachment A

Coal production in 2017 declined by 9%. Coking coal mining volumes declined

by 1.5 mln tonnes, steam coal mining was lower by 0.6 mln tonnes.

The major reason for lower mining volumes was non-sufficient stripping

operations and repairs over the last years.

We are fully committed to recover production in our Mining segment with

greater investments in equipment repairs, new mining machinery procurement,

increase of stripping works execution by the outsourcing to the third party

companies.

Production of pig iron and steel was at a stable level compared to FY2016.

Coking and steam coal sales in FY2017 declined compared to FY 2016 as a

result of lower mining volumes as well as a railcar deficit and the August

cyclone in the Far East. But there was positive dynamics quarter to quarter as

we realize equipment repair and procurement program.

Flat products sales in FY2017 increased by 17% compared to FY2016 on high

demand and product-line expansion efforts.

Long products sales slightly decreased in general compared to FY2016 but

within this product category semi-finished and low-marginal products were to a

great extent replaced by high value-added products.

www.mechel.com

Production (th tonnes)

Sales (th tonnes)

Product FY17 FY16 % 4Q17 3Q17 %

Run-of-mine

Coal20,638 22,683 -9 4,944 5,363 -8

Pig Iron 4,029 4,053 -1 981 1,010 -3

Steel 4,274 4,252 +1 1,057 1,000 +6


Coking Coal 7,942 8,664 -8 1,972 1,898 +4

Steam Coal 6,141 6,997 -12 1,499 1,478 +1

Flat Products 581 496 +17 128 149 -14

Long Products 2,919 2,990 -2 705 747 -6

FY 2017 Production and sales summary

6 FY 2017 RESULTS PRESENTATION / KEY FINANCIAL RESULTS

41.9

61.4

22.1 10.4 1.8-10.9 -3.9

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

EBITDA FY16 Prices External salesvolumes

Inter-segmentsales

Cost of sales Other EBITDA FY17

China and rest of Asia remain very important market for our Mining division.

In FY2017 combined share of this region increased to 61% from 58% in

FY2016 as a result of stronger demand and higher prices in this region.

Consolidated share of Russia together with Europe slightly decreased from

36% in FY2016 to 34% in FY2017.

Favorable pricing environment was the main factor of EBITDA growth almost

by half compared to FY2016 which reached 61.4 bln RUB with EBITDA

margin 43%.

Negative influence of lower sales volumes to third-parties was compensated

by higher intersegment sales since intra-group coal sales increased by 9%

year-on-year and almost 100% of iron ore concentrate produced by

Korshunov Mining Plant was consumed within the group.

www.mechel.com

Revenue, EBITDA margin, RUB Bln

29.7 28.0 23.5 23.2 25.4

9.4 12.5

10.8 9.79.3

46% 49%43% 39% 41%

0%

20%

40%

60%

80%

100%

120%

0,0

20,0

40,0

4Q16 1Q17 2Q17 3Q17 4Q17

Inter-segment revenue Revenue EBITDA margin

Revenue breakdown by regions (FY2017)EBITDA, RUB Bln

Mining segment

Asia w/o China32%

China29%

Russia22%

Europe12%

Other5%


23.218.8

11.2

0.4

3.8

-0.8

-19.0

0,0

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

EBITDA FY16 Prices External salesvolumes

Inter-segmentsales

Cost of sales Other EBITDA FY17

Traditionally Russian and CIS markets were most important for our steeldivision sales with their share amounting to 84% of segment revenue.

High raw materials prices and unfavorable market conditions in thebeginning of 2017 resulted in weakening of Steel division financial results butin the second half of 2017 segment`s metrics rebounded and returned tomore healthy levels.

Costs of sales increase was primarily a result of higher raw materials pricesas average iron ore and coke prices grew significantly comparing to FY2016.

Effect of higher costs was partially offset by higher prices but segment`sEBITDA in FY 2017 decreased by 19% if compared to FY2016.

www.mechel.com


42.7 42.0 42.9 44.4 43.4

2.0 2.0 1.8 1.7 2.2

16%

8%6%

13%15%

0%

10%

20%

30%

0,0

10,0

20,0

30,0

40,0

50,0

4Q16 1Q17 2Q17 3Q17 4Q17


Revenue breakdown by regions (FY 2017)EBITDA, RUB Bln

Steel segment

Russia74%

Europe14%

CIS10%

Other2%


41.9

66,881,9 81,3

61.4

23.2

18.81.7

19.5 -4.40.6 2.3

EBITDA FY16 MiningSegment

SteelSegment

PowerSegment

EBITDA FY17

Power Steel Mining

89.6

275,9 286,4 297,6

100.1

161.6172.8

24.7

10.5 11.2 1.5

26.2

RevenueFY16

MiningSegment

SteelSegment

PowerSegment

RevenueFY17

Power Steel Mining

Consolidated revenue and EBITDA dynamics

Mining segment Revenue to 3rd parties in FY2017 increased by 12%,compared to FY2016 on higher coal prices but their effect was partiallyoffset by lower sales volumes.

Steel segment Revenue demonstrated a 7% growth on higher prices andincreased share of rails, beams, flat steel and other high value-addedproducts compared to FY2016.

Power segment Revenue to 3rd parties increased by 6% due to tariffsgrowth compared to FY2016.

Due to high coal prices Mining segment EBITDA increased by 47%compared to FY2016 and amounted to 61.4 bln RUB.

Steel segment EBITDA lost 19% on higher costs arising from high rawmaterials prices and amounted to 18.8 bln RUB.

Power segment EBITDA increased by 39% Y-o-Y and amounted to 2.3 blnRUB as prices dynamics surpassed costs growth.

www.mechel.com

Revenue, RUB Bln

EBITDA, RUB Bln


23.8

63.3

-32.4

-6.9

-0.2

-22.4

1.4

Cash flowfrom

Operations

Net interestexpenses,

inlc. overdueinterest

Capitalexpenditures

(excludingleasing)

Net investingactivity

Free CashFlow

Net settlementof loan, lease

and otherobligations

Free CashFlow to Firm

Cash flow & trade working capital

Cash flow from operations completely covers Group's current expenses,

including debt service and partial amortization of debt.

In 2017 we invested 10.0 bln RUB into a working capital. We consider

current level of 11.8 bln RUB as comfortable to support Group`s stable

operations and envisage just slight increase in 2018.

Group’s capital expenditures increased from 8.8 bln RUB in FY2016 to 11.0

bln RUB in FY2017, including 3.5 bln RUB of lease payments

www.mechel.com

CASH FLOW, RUB Bln

FREE CASH FLOW for FY2017, RUB BlnTrade working capital management, RUB Bln

1.5 1.2

63.3-7.1

-55.7

-0.8

Cash net ofoverdrafts

as of31/12/2016

Netoperatingactivities

Netinvestingactivities

Netfinancingactivities

Effect ofexchange

ratechanges

Cash net ofoverdrafts

as of31/12/2017

61.967.4 63.7 64.6 64.4

(60.1) (59.2) (58.4)(53.8) (52.6)

1.88.2

5.310.8 11.8

31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017

Trade current assets Trade current liabilities Trade working capital


66.2 63.979.3 73.4 61.4

89.1 86.170.6 90.8

81.6

4.6 7.0 7.16.2

9.0

4Q16 1Q17 2Q17 3Q17 4Q17

Rails Rails for Russian Railways Beams and Shapes

Capacity utilization of Universal rolling mill grew from almost 50% in FY2016

to about 60% in FY2017 and is expected to exceed 70-75% in FY2018.

Total production volume during FY2017 amounted to over 630 th tonns, an

increase of 23% compared to FY2016. Plan for FY2018 is over 800 th tonns.

Over 90% of rails produced are 100 meters long rails.

New types of rails production (for use at European railways) have already

been adopted at the plant and passed certification for conformity with

European railroad standards.

www.mechel.com

Universal rolling millon Chelyabinsk metallurgical plant

Production plan for 2018 is 5.3 mln tonnes of coal.

In FY2017 share of coking coal in total mining volumes amounted to 83%.

Elga coal project development

Universal rolling mill production (th tonnes)


Rails, beams

and shapes636 517 +23 152 170 -11


Run-of-mine

coal

4,154 3,726 +11 1,105 1,116 -1

Elga Coal Complex (th tonnes)

Key projects results

11

Universal rolling mill Production in 4Q 2016 – 4Q 2017

(th tonnes)

FY 2017 RESULTS PRESENTATION / KEY FINANCIAL RESULTS

157.0 157.0 170.4159.9 152.0

Russian State Banks71%

ECA

8%

Syndicate16%

Bonds3%

Others2%

Debt structure & net debt / EBITDA ratio dynamics

www.mechel.com

13.7

11.0

6.65.3 5.3 5.1 5.3

0,0

5,0

10,0

15,0

20,0

25,0

30,0

0

10 0 00 0

20 0 00 0

30 0 00 0

40 0 00 0

50 0 00 0

60 0 00 0

FY'14 FY'15 FY'16 1Q'17 1H'17 9M'17 FY'17

Finance leaseLong-term borrowingsInterest payableShort-term borrowings and current portion of long-term borrowingsNet Debt*/EBITDA

RUB

406 bln

RUB

487 blnRUB

433 blnRUB

421 bln

RUB

426 bln

* excluding GPB option on Elga, fines and penalties


Restructured loans78%

In restructuring22%

RUB67%

USD27%

EUR6%

RUB

425 bln

RUB

426 bln

As of the date of financial release – portion of restructured debt has

increased to 78%; ruble portion of debt amounts to 67%; and Russian

state banks hold 71% of our debt portfolio.

New repayment schedules with Russian state banks came into force in

the middle of April 2017, which assumes a grace period until 1Q-2Q2020

and equal monthly repayment until 2Q2022.

Net leverage decreased to a level of 5.3 on EBITDA growth and stable

debt.

Average interest rate through the debt portfolio as of April 2018 is 8.1%

per annum and it trends to lower levels as most Ruble denominated

loans rate is linked to Central bank key interest rate; average paid

interest rate (with PIC) amounts to 7.9% per annum.

In 2017 Group repaid 11.8 bln RUB of debt.

December 29, 2017 Mechel PAO successfully completed negotiations on

restructuring the 1-billion-dollar syndicated loan with International banks.

All necessary documents will be signed in the nearest future.

APPENDIX

www.mechel.com13 FY 2017 RESULTS PRESENTATION

1,5

76*

1,0

67

1,9

95*

1,5

72*

1,6

49*

1,9

00

924

1,2

11

2,2

53

2,3

41

1,0

18

1,0

27

2,1

02

2,2

92

1,0

67

1,5

88

1,9

73

2,4

95

930

1,1

60

2,1

68

2,7

39

1,2

60

1,3

11

3,1

63

Coal SKCC Coal YU Coal Elga* Iron ore

4Q16 1Q17 2Q17 3Q17 4Q17

42%

27%

12%

15%

4%

FY16 FY17

Other

Depreciation and depletion

Energy

Staff costs

Raw materials and goodsfor resale

43%

26%

11%

14%

6%

www.mechel.comFY 2017 RESULTS PRESENTATION / APPENDIX

Cash costs, RUB/tonne COS structure

Average sales prices FCA, RUB/tonneRevenue, EBITDA margin, RUB Bln

Mining segment

29.728.0

23.5 23.225.4

9.4 12.5

10.8 9.79.3

46% 49%43%

39% 41%

0%

50%

100%

0,0

10,0

20,0

30,0

40,0

4Q16 1Q17 2Q17 3Q17 4Q17


11,6

28

8,4

37

4,6

56

2,1

27

4,2

61

13,3

18

7,9

36

4,6

08

1,6

13 6,5

86

12,0

36

5,9

78

4,3

17

1,7

54

6,6

71

12,3

06

5,6

59

3,9

16 1,7

95

6,5

22

14,5

76

5,9

17

4,3

00 1,9

65

6,4

75

Coke Coking coal Anthracite andPCI

Steam coal Iron ore

4Q16 1Q17 2Q17 3Q17 4Q17

49.0 bln RUB45.0 bln RUB

14

Coking coal concentrate produced on Elga

* Coking coal concentrate produced on Elga and Southern Kuzbass Coal Company washing facilities

www.mechel.com

Revenue breakdown by regions

FY 2017

Revenue breakdown by products

FY 2017


FY 2016


FY 2016

Mining segment

Coking coal

44%

Anthracites

and PCI21%

Steam coal

13%

Middlings

6%

Coke

11%

Coking

products2%

Other

3%

Asia w/o China32%

China29%

Russia22%

Europe12%

Other5%

Coking coal

43%

Anthracites

and PCI21%

Steam coal

14%

Middlings

6%

Coke

10%

Coking

products2%

Other

4%

Asia w/o China31%

China27%

Russia25%

Europe11%

CIS2%

Middle East1%

Other3%

RUB

100.1

bln

RUB

89.6

bln

15 FY 2017 RESULTS PRESENTATION / APPENDIX

73%

10%

12%4%

1%

FY16 FY17

Other

Depreciation

Energy

Staff costs

Raw materials andpurchased goods

74%

9%

11%3% 3%

www.mechel.com

Cash costs, RUB/tonne COS structure

Average sales prices FCA, RUB/tonneRevenue, EBITDA margin, RUB Bln

Steel segment

42.7 42.0 42.9 44.4 43.4

2.0 2.0 1.8 1.7 2.2

16%

8%6%

13%15%

0%

10%

20%

30%

40%

0,0

20,0

40,0

4Q16 1Q17 2Q17 3Q17 4Q17


18,9

90

17,8

93

18,3

64

21,6

95

25,7

59

23,2

40

22,7

76

23,5

50

26,5

07

30,5

01

22,0

87

21,2

52

22,3

40

25,2

72 30,2

93

21,8

19

19,6

05

20,9

63

25,0

44

28,4

90

22,4

49

20,0

32

21,2

61

25,7

67 30,9

22

Billets Wire rod Rebar Carbon flat Railway rails

4Q16 1Q17 2Q17 3Q17 4Q17146.4 bln RUB126.7 bln RUB

16

27,2

95 38,5

50

33,4

08

30,6

61

44,4

98

59,3

55

26,9

62

40,9

93

35,5

61

33,1

29 4

5,8

15 5

9,0

09

24,4

55

39,6

39

34,9

88

33,1

41 4

5,9

87 5

8,7

80

28,4

42 4

1,7

25

34,8

08

33,0

66 44,2

42

63,0

05

28,6

21

46,1

86

39,1

97

33,1

90 44,0

74

77,8

73

Rebar Hardware Carbon flat Railway rails Structuralshapes

Ferrosilicon

4Q16 1Q17 2Q17 3Q17 4Q17

FY 2017 RESULTS PRESENTATION / APPENDIX

www.mechel.com


FY 2017


FY 2017


FY 2016


FY 2016

Steel segment

Rebar

25%

Carbon long

products28%

Hardware

16%

Forgings and

stampings7%

Carbon flat

12%

Semi-Finished

Steel Products0.3%

Stainless flat

1%

Ferrosilicon

2%

Other

9%

Russia72%

Europe15%

CIS10%

Asia1%

Middle East1%

Other1%

Russia74%

Europe15%

CIS10%

Other1%

RUB

172.8

bln

RUB

118.9

bln

17

Rebar

28%

Carbon long

products24%

Hardware

15%

Forgings and

stampings7%

Carbon flat

10%

Semi-Finished

Steel Products2%

Stainless flat

1%

Ferrosilicon

2%

Other

11%

FY 2017 RESULTS PRESENTATION / APPENDIX

RUB

161.6

bln

www.mechel.com

Average electricity sales prices and cash costs, RUB/ th KWh COS structure


Revenue for the FY2017 increased by 6% mostly on tariffs growth.

FY2017 EBITDA increased by 39% Y-o-Y as prices dynamics surpassed costs growth.

Power segment

94%

4%

1%

1%

FY16 FY17

Other

Depreciation

Staff costs

Raw materials and goodsfor resale including energy

94%

4%

1%

1%

820 775 722912 880

2,401 2,4102,302

2,4562,603

4Q16 1Q17 2Q17 3Q17 4Q17

Cash costs Sales price

7.3 7.4 5.5 5.8 7.5

4.5 4.6

3.8 3.4

4.4

-4%

6%3%

0%

11%

-10%

0%

10%

20%

30%

40%

0,0

2,0

4,0

6,0

8,0

10,0

12,0

4Q16 1Q17 2Q17 3Q17 4Q17


29.8 bln RUB29.0 bln RUB

18 FY 2017 RESULTS PRESENTATION / APPENDIX

Mechel is a global mining and metals company

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FY 2017 RESULTS PRESENTATION · 5% 7 FY 2017 RESULTS PRESENTATION / KEY FINANCIAL RESULTS. 23.2...

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