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Mechel's presentation (October, 2015)

- This was a management presentation from October 2015 that provided an overview of Mechel, a leading vertically integrated mining and metals company based in Russia. - Mechel has competitive advantages from its vertically integrated business model, including being one of the largest global producers of metallurgical coal with attractive growth potential and a leading steel producer in Russia. - The presentation highlighted Mechel's broad geographic footprint, low-cost and high-quality coking coal assets, and its ability to supply both Asia-Pacific and Atlantic markets to support growth.

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MANAGEMENT PRESENTATION October 2015
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 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. 22
MECHEL AT A GLANCE
LEADING VERTICALLY INTEGRATED MINING & METALS COMPANY MECHEL INTEGRATED BUSINESS MODEL OPERATING HIGHLIGHTS, SALES Mining Segment Source: Company data 8,0 6,5 2,5 3,0 1,9 1,3 1H 2014 1H 2015 Met Coal Steam Coal Iron ore concentrate Steel Segment ‘000tonnes 4 Steel Mining Power FINANCIAL HIGHLIGHTS 1H 2015 Revenue Breakdown1H 2015 EBITDA(a)(1) Breakdown Mining Steel SALES & MARKETING LOGISTICS ‘000tonnes (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes. 2,13 2,15 1,6 1,4 0,38 0,34 1H 2014 1H 2015 Steel (production) Long Products Hardware 10% 33%57% 2% 47% 51% $ 2,272 mln$390 mln
INVESTMENT HIGHLIGHTS 5 Best-in-class global coking coal producer and exporter with attractive growth profile • One of the largest metallurgical coal producers globally • One of the leading exporters on the seaborne market • Developing one of the largest coking coal deposits globally Superior asset quality • One of the largest coal reserves base globally • Core assets positioned at the lower bound of the global cost curve • Ability to supply steel producers with a full range of metallurgical coal • First newly built rolling mill for high-speed long rails in Russia Strategically positioned to supply both Asia-Pacific and Atlantic seaborne markets • Uniquely positioned to supply metallurgical coal to attractive Asia Pacific markets • Access to key Far Eastern and European ports • Lower transportation cost to supply key growth markets in Asia • Own infrastructure including ports and rolling stock, secures access to end customers and export markets Vertically integrated steel business model • Steel business is virtually self-sufficient in coal and iron ore • Established distribution and sales platform in core markets Leading steel producer • Most diversified specialty steel producer in Russia • Second largest long steel producer in Russia • Largest distribution platform in Russia
Port Temryuk Russian Federation Lithuania Kazakhstan Elgaugol Yakutugol Korshunov Mining Plant Southern Kuzbass Coal Company Chelyabinsk Metallurgical Plant Urals Stampings Plant Beloretsk Metallurgical Plant Izhstal Moscow Coke and Gas Plant Vyartsilya Metal Products Plant Port Posiet Port Vanino* Port Kambarka Bratsk Ferroalloy Plant Southern Kuzbass Power Plant Moscow Mechel Coke Ukraine Mechel Nemunas BROAD GEOGRAPHIC FOOTPRINT TARGETING GROWTH MARKETS REVENUE BREAKDOWN BY MARKET (1H 2015) Mining Segment Steel Segment Source: Company data Mining Steel Power Port Head office 6 *Access to port secured by contractual agreements Mongolia China Russia 68% Europe 16% CIS 13% Asia 1% Middle East 1% Other 1% China 27% Russia 24% Europe 22% Asia w/o China 19% CIS 3% Middle East 4% Other 1%
TSO % of Total Ordinary 416,270,745 75% Preferred 138,756,915 25% Preferred Publicly Trading 57,209,577 10% Preferred held by Justice family 26,044,572 5% Preferred Share held by Mechel as treasury 55,502,766 10% Total 555,027,660 100% CAPITAL STRUCTURE CAPITALIZATION AND OWNERSHIP STRUCTURE Preferred Shares Ordinary Shares Public Float 32.6% Igor Zyuzin (with family) 67.4% Public Float 41% Justice Family 19% Mechel 40% Source: Company data OWNERSHIP STRUCTURE 7
NARROWED STRATEGY USING KEY COMPETITIVE ADVANTAGES FOR VALUE GROWTH GROWTH IN SHAREHOLDER VALUE BASED ON VERTICALLY-INTEGRATED BUSINESS MODEL One of the largest global metcoal producer1 Leader in Russia and CIS construction steel market2 Leader in specialty steel, stainless steel and hardware production3 Optimization of asset structure to deleverage4 8
4.3 10.1 6,3 3,2 Production Consumption MMt MMt MMt MMt MMt Production Consumption Production Consumption Shipped through own ports Shipped overall (excl. US ports) Own rolling stock Overall 9 Production Consumption 5th largest metallurgical coal producer globally* with ability to supply steel producers with a wide range of metallurgical coal types, coke and iron ore concentrate. Own infrastructure helps to establish access to end customers. *Ex-China Source: Company data - Volumes shipped through Vanino port Sea Port capacity, 12m 2014 Cargo turnover, 12m 2014 Power, 12m 2014 Coking Coal Concentrate, 12m 2014 Iron Ore Feed, 12m 2014 Coke, 12m 2014 blnKWh VERTICALLY INTEGRATED MINING & STEEL BUSINESS MODEL WITH FOCUS ON COMPETITIVE ADVANTAGES 1,9 3,4 6,0 12,3 4,4 10.4 48,6 14,9 5,3 3,7
7,6 9,3 9,4 10,4 12,5 13,0 15,3 24,5 27,0 78,4 0,0 20,0 40,0 60,0 80,0 100,0 4 361 3 690 2 576 1 602 1 500 1112 1 082 826 411 350 0 1 000 2 000 3 000 4 000 5 000 BMA Mechel Evraz Vale Alpha Natural Resources Peabody BHP Anglo-American Walter Energy Glencore Xstrata LEADING GLOBAL METALLURGICAL COAL PRODUCER 2nd largest metallurgical coal reserve base One of the largest metallurgical coal producer globally with superior leverage to metallurgical coal One of the largest global exporters of coking coal Top Ten Metallurgical Coal Exporters in 2014Ten Largest Metallurgical Coal Producers in 2014Ten Largest Metallurgical Coal Producers by Metallurgical Coal Reserves MMtMMt Source: CRU, company reports (1) Including 50% share of BMA Source: Company Filings All production numbers shown on an attributable saleable basis unless otherwise disclosed (1) Met coal with some minor thermal coal production (2) Small part may be third-party purchased coal (3) not including Jellinbah (4) Coking coal concentrate+PCI+Anthracites Source: Company Filings, IMC All reserve numbers shown on a 100% run-of-mine basis unless otherwise disclosed (1) Assumes 100% of disclosed reserves are metallurgical (2) On a saleable, attributable basis (3) Reserves as of 30 June 2012 (4) Adjusted for acquisition of Raspadskaya 10 MMt (1) (1) (1) (3) (4)) (1) (2) 9,4 9,4 12,7 13,5 15,3 15,5 16,3 24,8 26,7 79,2 0,0 20,0 40,0 60,0 80,0 100,0 (4) (3) (1) (2)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LOW COST COKING COAL PRODUCER Source: AME Notes: (1) FOB excluding land freight and port costs Source: AME Cumulative Production (%) Australia USA & CanadaRussia Other Cumulative Production (%) Australia USA & CanadaRussia Other 0 50 100 150 200 0 50 100 150 200 Yakutugol MechelBlended 0 50 100 150 200 0 50 100 150 200 MechelBlended U$/t Yakutugol post - Elgaugol About 80% of coking coal by open pit Access to cheap labor Low production cost Low raw material costs ESTIMATED EXPORT COKING COAL COST CURVE (FCA(1)) ESTIMATED EXPORT COKING COAL COST CURVE (FOB) U$/t 11 150 100 50 150 100 50
Port Posiet Yakutugol Elgaugol Southern Kuzbass Indonesia USA Canada Europe Australia India Japan China Russia 292 mn t (2) ABILITY TO SUPPLY ALL METCOAL MARKETS Major coking coal exporting regions Target markets for Mechel’s coking coal supplies Target markets for Mechel’s steam coal supplies Major coking coal importing regions Mechel’s routes 3rd parties routes Size of respective seaborne coking coal markets Notes: (1) FY2014 coal production (2) Total seaborne met coal trade (2014 est), CRU Source: MCQ47 Diversification / enhancement of sales channels to the fast-growing Asian and European markets Extensive range of metcoal grades allow for diversified product portfolio to serve a variety of customer needs Mechel’s own ports on the Sea of Japan and Azov Sea serve as a stable gateways to export markets Freight rates from port Posiet (Handysize 22 000 t) to Northern China $8 pmt to Yangtze River $9 pmt to Southern China $11.75 pmt to Thailand $12.75 pmt to Philippines $14 pmt to Indonesia $14 pmt India (West Coast / East Coast) $21.75 / $18.25 pmt to Japan $7 pmt 12.0 mn t (1) 9.4 mn t (1) 12 Freight rates from port Vanino (45 000 t) to Northern China $9.75 pmt to Yangtze River $10.75 pmt to Southern China $12.95 pmt to Thailand $13 pmt to Philippines $13.5 pmt to Indonesia $13.5 pmt India (West Coast / East Coast) $19 pmt / $17 pmt to Japan $7 pmt Port Vanino 1.2 mn t (1)
Source: Company data MECHEL SERVICE GLOBAL -- MAP OF DISTRIBUTION HUBS 70 storage sites and service centers throughout Russia, CIS & Europe Real time market intelligence and pricing feedback Opportunity to address specific customer needs and sell more high-marginal, value-added products ADVANTAGES PRODUCT PRODUCTION VOLUME, 12m 2014 ‘000 tonnes RUSSIAN PRODUCTION SHARE RANK Spring wire 162%52 Wire products 129%624 Wire rod 133%868 High- tensile wire 244%43 Flat stainless steel 154%18 Rebar 318%1,590 LEADER IN SPECIALTY, STAINLESS STEEL & HARDWARE 13 Geographies of presence of Mechel Service Mechel Service facilities
• Logistics flexibility on the Sea of Azov and Black Sea • Potential to increase export of coking coal, PCI and anthracite to Europe • Existing port capacity – 2 mln tonnes • Target capacity - 4 mln tonnes • Rolling stock of about 12,000 railcars • Ensures uninterrupted transportation • Reduces dependency on Russian Railways, state-owned and independent freighters • Increase access to Asian coal customers via seaborne market • Existing port capacity – 7 million tonnes per year • Target capacity - 9 mn tonnes (Panamax vessels) after 2nd stage of modernization MECHEL’S INFRASTRUCTURE ALLOWS SECURED ACCESS TO FINAL CUSTOMERS • Increases logistics flexibility to Asian coal customers via seaborne market securing exports from Elgaugol • Total turnover up to 10 million tonnes of cargo per year • Shorter transportation distances – lower rail and vessel freights TEMRYUK PORT MECHEL TRANS TRANSPORTATION COMPANY POSIET PORT VANINO PORT* 14 * Access to port secured by contractual agreements
KEY PROJECT CHARACTERISTICS 4.7 7.0 1.8 1.8 10.0 2012 2014 Posiet Temryuk Vanino 6.5 18.8 TEMRYUK POSIET VANINO EXISTING CAPACITY 1.8 MMt per year 7.0 MMt per year 10.0 MMt per year TARGET CAPACITY 4.2 MMt per year 9 MMt per year na DEVELOPMENT STAGE Modernization Modernization na VESSEL TYPE River-to-sea vessels Panamax (post modernization) Panamax TIMING 2017 na na Source: Company data Notes: * Volumes secured by contractual agreements ElgaugolYakutugol Southern Kuzbass Port Posiet Port Vanino Port Temryuk OWN SEAPORT FACILITIES OWN SEAPORT ANNUAL TURNOVER CAPACITIES, MMt * MECHEL TRANS – ACCESS TO SEABORNE MARKET 15 Access to main customers in Asia-Pacific and Europe secured through own ports infrastructure Port capacity aligned with expected growth in export volumes
ALIGNING ASSETS STRUCTURE WITH STRATEGY Mining Segment Korshunov Mining Plant Iron Ore Yakutugol Southern Kuzbass Coal Company Elgaugol Bluestone Coal Coke Mechel Coke Moscow Coke and Gas Plant Steel Segment Vyartsilya Metal Products Plant Beloretsk Metallurgical Plant Urals Stampings Plant Mechel Targoviste (Romania) Mechel Campia Turzii (Romania) Chelyabinsk Metallurgical Plant Buzau Plant (Romania) Otelu Rosu Plant (Romania) Izhstal Donetsk Electrometallurgical Plant Laminorul Plant (Romania) Mechel Nemunas (Lithuania) Ferroalloys Segment Ferronickel Ferrochrome Ferrosilicon Southern Urals Nickel Plant Tikhvin Ferroalloy Plant Voskhod Chrome Mining Plant (Kazakhstan) Bratsk Ferroalloy Plant Uvatskoye Deposit of Quartzite Power Segment Toplofikatsia Rousse Power Plant - Southern Kuzbass Power Plant Kuzbass Power Sales Company Generation Distribution Distribution Mechel Service Global * (ex Russia) Mechel Trading House Mechel Carbon Mechel-Mining Trading House Mechel Trading Mechel Service OOO (Russia) Invicta (UK) Group 1 Group 2 16 Improvement in financial results and cash flow Immediate deleverage Deal closed Deal closed Deal closed Deal closed Deal closed Deal closed Deal closed * Divestment in progress through inventory sell down Mothballed Deal closed Deal closed Deal closed
KEY DEVELOPMENTS
ELGA DEPOSIT: RAMP UP SECURED BY VEB PROJECT FINANCING CURRENT STATUS KEY PROJECT METRICS LOCATION OPERATIONAL DETAILS COAL TYPE RESERVES JORC STANDARDS • Country Russia • Location South-East of Yakutia • Mine Type 100% OP • Start of operations August 2011 • High volatile hard coking coal • Steam coal • Middlings • 2.2 billion tonnes as of December 31, 2012 • Elga coal deposit reserves account for 67% of total reserves of Mechel • Russia, Asia-Pacific countries TARGET MARKETS LOCATION OF OPERATIONS Mongolia Yakutugol Elgaugol Port Vanino Port Posiet China JapanKazakhstan Source: Company data 18  Railroad in place  Wash plant up & running  Workers settlement under construction  Existing capacity up to 4-5 mn tonnes of coal mining, 2.7 mn tonnes of coal processing  In FY 2014 1,2 mln tonnes mined, over 700,000 tonnes processed and about 1 mln tonnes shipped (includes coking coal concentrate , oxidized coal and middlings).  Expected to produce about 3,5 mln tonnes of run-of-mine coal in 2015  Seasonal washing plant became all year operational starting winter 2014-2015  Coal processing up to 2,7 mln tonnes starting from 2015 and till the first module of permanent washing plant is in place and operating (2018)  VEB project financing of 1st stage of Elga development: up to12 mn tons of coal mined by 2018  Once 9 mn tons of coal is mined and processed at Elga, the project should become operating cashflow positive FURTHER EXPANSION
CAPACITY PRODUCTS CAPEX TARGET CONSUMERS High-speed and low-temperature up to 100 meter long rails H-beams, channel bars, angles and grooves US$ 715 mn Up to 1.1 mn t Russian Railways Off-take secured by a 20-year supply agreement Russian Railways Strategy till 2030 provides for additional railway construction of more than 20,000 km, including more than 12,000 km of high-speed tracks Construction industry TIMING 2009 – 2013 UNIVERSAL ROLLING MILL – STRUCTURAL SHIFT IN LONG STEEL PRODUCTS PORTFOLIO Increased Output of High Value-Added Products Enhanced Profitability of Steel Division Structural Shift in the Long Steel Portfolio RAILS PRICING KEY PROJECT CHARACTERISTICS Source: Metal-Courier, Company data Notes: * There was no import of 100m length rails in 2014 19 982 963 920 932 653 637 630 623 652 637 631 623 1596 1 597 1386 0 1413 1 310 1310 0 530 517 504 494 0 500 1000 1500 2000 Average 2H2012 Average 1H2013 Average 2H2013 Average 1H2014 Billets (FOB ЧМ Россия) Rails 100m length (DES Vladivostok) Rails 100m length (DES St. Petersburg) L-bar (FOB Турция) Channel bar (FOB Турция) Beams (DAP Казахстан) Mill CURREN PROJECT STATUS  The mill launched in July 2013  H-beams and rails sales to 3d parties ongoing. In 9 month 2014 period about 85,000 tonnes produced and sold.  Rails have been certified for use by Russian Railways in June 2015.
FINANCIAL HIGHLIGHTS
1H2015 FINANCIAL RESULTS SUMMARY 21 * See our press release for full calculations 1H15 1H14 % 2Q15 1Q15 % Revenue 2,272 3,436 -34% 1,159 1,113 4% EBITDA (a) 390 262 49% 179 211 -15% Net (loss) / income (239) (648) -63% 34 (273) -112% Net Debt* 6,974 9,053 -23% 6,974 6,822 2%
1H 2015 HIGHLIGHTS 22 + Revenue increased by 4% QoQ primarily because of the increase of sales in Steel segment by 13%. + 1H 2015 Operating income increased 16x times compared with similar period of 2014 + EBITDA(a) was 15% lower QoQ mostly due to Steel segment EBITDA decrease on higher costs. + Major segments contributed almost equally to consolidated EBITDA(a) in 1H 2015 – 51% Steel segment and 47% Mining segment. + Net debt amounted to $7 bln as of June 30, 2015. Net debt increased by 2% QoQ because of revaluation of ruble denominated debts due to depreciation of US$ from 58,46 to 55,52 at the end of the periods. + Bottom line supported by $189mln FX gain and amounted to $34 mln in 2Q 2015. 1H 2015 Net loss was $239 mln.
94 87 87 106 96 77 138 120 106 83 3 -7 12 6 0,15 Power Steel Mining -7 548 489 483 390 363 1027 948 740 601 682 166 148 161 122 114 2Q14 3Q14 4Q14 1Q15 2Q15 Power Steel Mining 10% 33%57% 11% 32%57% SEGMENTS OVERVIEW REVENUE BY SEGMENTS $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 23 Steel Mining Power EBITDA(a)(1) BY SEGMENTS 2% 47% 51% 1H 2015 8% 29% 63% 1H 2014 REVENUE BY SEGMENTS $ Mln EBITDA(a) (1) BY SEGMENTS $ 2,272 mln $390 mln $3,436 mln $262 mln $ 1,741 $ 1,159 $ 1,585 $ 1,384 $ 1,113 $ 211 $ 179 $ 227 $ 220 $176 3Q14 4Q14 1Q152Q14 2Q15
SEGMENT HIGHLIGHTS 24 + International metallurgical coal prices continued to decrease. Hard coking coal benchmark decreased from $117 FOB in 1Q 2015 to $109.5 FOB in 2Q 2015 and moved down to $ 93 FOB in 3Q 2015. Domestic coal prices were more stable and profitability of domestic sales was supported by weaker ruble + Lower export prices led to Mining segment Revenue decrease by 7% QoQ (from $390mln to $363mln) and EBITDA(a) decrease by 8% QoQ (from $106mln to $97mln) EBITDA margin for 1H 2015 almost doubled to 20,6% comparing with the previous year (1H 2014 – 11,6%) + Mining segment finished 2Q 2015 period with Net income of $53 mln + Steel segment Revenue grew by 13% QoQ on a stable prices and higher sales volumes + 1H 2015 Steel segment EBITDA(a) is 2.5x times higher than in 1H 2014 (increase from US$74mln to US$188mln) EBITDA(a) margin decreased from 16,4% to 11,4% QoQ on higher costs
Mining Segment Steel Segment 35 30 55 44 31 27 26 61 28 22 20 51 26 18 15 32 30 19 18 44 Coal SKCC Coal YU Coal Elga Iron Ore KGOK 2Q14 3Q14 4Q14 1Q15 2Q15 548 489 483 390 363 151 144 106 101 131 13% 14% 15% 22% 20% 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin CASH COSTS, US$/TONNE $ Mln 425 376 390 501 403 361 364 482 310 284 288 377 254 240 243 303 312 311 322 370 Billets* Wire rod Rebar Carbon Flat 2Q14 3Q14 4Q14 1Q15 2Q15 1027 948 740 601 682 55 46 41 40 44 7% 14% 15% 16% 11% 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin REVENUE, EBITDA(a)(1) $ Mln CASH COSTS, US$/TONNE REVENUE, EBITDA(a)(1) (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. * Domestic sales
Coking coal 42% Anthracite and PCI 27% Coke 9% Coking products 2% Steam coal 9% Iron ore 8% Other 3% China 39% Russia 29% Europe 14% Asia w/o China 13% CIS 2% Middle East 2% Other 1% Coking coal 33% Anthracite and PCI 24% Coke 11% Coking products 3% Steam coal 12% Iron ore 4% Other 2% China 27% Russia 24%Europe 22% Asia w/o China 19% CIS 3% Middle East 4% Other 1% MINING SEGMENT 26 REVENUE BREAKDOWN BY REGION REVENUE BREAKDOWN BY PRODUCTS 1H 2015 1H 2014 1H 2015 revenue $753 mln 1H 2015 1H 2014 revenue $1,115 mln 1H 2014
Rebar 29% Carbon long products 19% Hardware 16% Forgings and stampings 9% Carbon flat 8% Semi-Finished Steel Products 5% Stainless flat 3% Ferrosilicon 2% Other 8% Rebar 29% Carbon long products 19% Hardware 16% Forgings and stampings 8% Semi-Finished Steel Products 6% Carbon flat 10% Stainless flat 2% Ferrosilicon 2% Other 8% Russia 66%Europe 17% CIS 13% Asia 2% Middle East 1% Other 1% Russia 68% Europe 16% CIS 13% Asia 1% Middle East 1% Other 1% STEEL SEGMENT 27 REVENUE BREAKDOWN BY REGION REVENUE BREAKDOWN BY PRODUCTS 1H 2015 4Q 2014 1H2015 revenue $1,283 mln 1H 2015 1H2014 revenue $1,956 mln 1H 2014
OPERATIONAL RESULTS 1H 2015 PRODUCTION: Product 1H’15, th. tonnes 1H’14, th. tonnes % 2Q’15, th. tonnes 1Q’15, th. tonnes % Run-of-mine coal 11 448 11 198 +2 5 941 5 506 +8 Pig Iron 2 045 1 900 +8 994 1 051 -5 Steel 2 147 2 127 +1 1 045 1 102 -5 SALES: Product name 1H’15, th. tonnes 1H’14, th. tonnes % 2Q’15, th. tonnes 1Q’15, th. tonnes % Coking coal concentrate 4 068 5 354 -24 2 028 2 040 -1 PCI 1 322 1 623 -19 669 653 +3 Anthracites 1 109 1 001 +11 564 544 +4 Steam coal 3 039 2 528 +20 1 563 1 476 +6 Iron ore concentrate 1 317 1 886 -30 609 707 -14 Coke 1 484 1 491 0 718 767 -6 Flat products 237 227 +4 120 117 +2 Long products 1 367 1 588 -14 730 637 +15 Billets 112 61 +84 31 81 -62 Hardware 340 384 -11 170 171 0 Forgings 28 26 +8 14 14 +2 Stampings 32 44 -27 20 13 +57 Ferrosilicon 39 42 -7 17 22 -22 28
POWER SEGMENT 29 AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS (RUSSIA), US$/MWH REVENUE, EBITDA(a)(1) $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 200 166 148 161 122 114 105 90 86 76 66 64 6% 1% -3% 5% 3% 0,1% -5% 5% 15% 25% 35% -50 50 150 250 350 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin 27 29 36 21 15 19 53,3 55,1 52,2 39,7 31,4 32,2 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Cash costs Sales price 91% 4% 3% 1% 1% 1H15 1H14 Other Depreciation and depletion Energy Staff costs Raw materials and purchased goods 90 % 4% 4% 1% 1% COS STRUCTURE $236 mln $366 mln + 1H 2015 EBITDA(a) $7 mln, EBITDA(a) margin 1.9%. + Seasonal reduction in sales volumes and ruble strengthening in 2Q 2015 led to an increase in cash costs + 1H 2015 Net loss of $8,2 mln.
CONSOLIDATED P&L 30 REVENUE, $MLN FINANCIAL PERFORMANCE HIGHLIGHTS: $ Mln $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 1741 1585 1384 1113 1159 36% 37% 44% 43% 41% 2Q14 3Q14 4Q14 1Q15 2Q15 Revenue Gross margin, % 176 227 220 211 179 10% 14% 16% 19% 15% 2Q14 3Q14 4Q14 1Q15 2Q15 EBITDA(a) EBITDA(a) margin EBITDA(a)(1) , $MLN + 1H2015 revenue decreased 34% HoH mostly because of the ruble depreciation Adjusted Operating income increased 5,5x times to US$260mln (1H2014: US$47mln) + EBITDA(a) increased to US$390mln (1H2014: 262mln) with EBITDA(a) margin increase from 7,6% to 17,2% for the comparable periods + Bottom line in 2Q 2015 became positive with support of $189mln FX-gain. Net Income of $34 mln. 1H 2015 net loss of $239mln (1H2014 net loss $648mln)
CASH FLOW & TRADE WORKING CAPITAL 31 CASH FLOW, $MLN + Operating cash flow deficit became a result of significant increase in debt serving payments. Cash deficit was financed by further decrease in trade working capital by $192 mln. + Investment cash flow amounted to $126 mln in 1H 2015 – mostly maintenance CAPEX and Elga. TRADE WORKING CAPITAL MANAGEMENT, $MLN 72 45 191 -126 -99 Cash as of 31.12.2014 Operating activities Investment activities Financing activities Cash as of 30.06.2015 2 007 1 681 1 219 1 202 1 153 -1 939 -1 773 -1 661 -1 825 -1 968 68 -92 -442 -623 -815 Trade current assets Trade current liabilities Trade working capital 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15
State banks 66% Bonds 4% Other lenders 5% International Banks 23% + At the end of August and beginning of September 2015 Group signed restructuring agreements with Gazprombank and VTB which include grace period for debt repayment till April 2017 with onwards repayment within 3 years + We have also signed restructuring agreement with other Russian and international banks such as Uralsib, MKB, Raiffeisenbank Russia, EABR. We are finalizing discussions with PXF and ECA lenders as well as RUR Bond holders on restructuring terms We discuss restructuring terms with Sberbank + Stable debt level and increase of financial results led to Net debt / EBITDA ratio of 8,3x. DEBT PROFILE BANK DEBT PROFILE AS OF SEPTEMBER 1, 2015 By currency By banks 32 Total Debt $6,313 mln Note: converted at the exchange rate established by CB RF as of September 01, 2015 DEBT BURDEN DYNAMICS 2011-2015, USD BLN 3,5x 3,5x 7,2x 12,6x 10,0x 8,2x 8,3x 2010 2011 2012 2013 2014 3m2015 6m2015 Long-term Short-term Lease Net debt / EBITDAEUR 6% USD 59% RUR 35%
US$ MILLION UNLESS OTHERWISE STATED 1H15 1H14 % 2Q15 1Q15 % Revenue (2) 2,272 3,436 -33.9% 1,159 1,113 4.1% Cost of sales (1,324) (2,254) 41.3% (689) (635) 8.5% Gross margin 41.7% 34.4% 40.6% 42.9% Adjusted Operating income 260 47 453% 108 152 -28.9% EBITDA(a) (1) 390 262 48.9% 179 211 -15.2% EBITDA(a) margin 17% 8% 15% 19% Net (loss) / income (239) (648) -63.1% 34 (273) -112.5% Net (loss) / income margin -10.5% -18.9% 2.9% -24.5% Net Debt 6,974 9,053 -23% 6,974 6,822 2% CapEx 91 274 -66.8% 57 34 67.6% FINANCIAL RESULTS OVERVIEW (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. (2) Includes sales to the external customers only 33
APPENDIX
ELGA WASHING PLANT 35
CHELYABINSK UNIVERSAL ROLLING MILL 36
SHAPES PRODUCED AT UNIVERSAL ROLLING MILL 37

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Mechel's presentation (October, 2015)

  • 1.
  • 2.
    DISCLAIMER This presentation doesnot 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 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. 22
  • 3.
  • 4.
    LEADING VERTICALLY INTEGRATED MINING& METALS COMPANY MECHEL INTEGRATED BUSINESS MODEL OPERATING HIGHLIGHTS, SALES Mining Segment Source: Company data 8,0 6,5 2,5 3,0 1,9 1,3 1H 2014 1H 2015 Met Coal Steam Coal Iron ore concentrate Steel Segment ‘000tonnes 4 Steel Mining Power FINANCIAL HIGHLIGHTS 1H 2015 Revenue Breakdown1H 2015 EBITDA(a)(1) Breakdown Mining Steel SALES & MARKETING LOGISTICS ‘000tonnes (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Gain / (loss) from remeasurement of contingent liabilities at fair value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, One-off accrual of taxes for prior periods and Income taxes. 2,13 2,15 1,6 1,4 0,38 0,34 1H 2014 1H 2015 Steel (production) Long Products Hardware 10% 33%57% 2% 47% 51% $ 2,272 mln$390 mln
  • 5.
    INVESTMENT HIGHLIGHTS 5 Best-in-class globalcoking coal producer and exporter with attractive growth profile • One of the largest metallurgical coal producers globally • One of the leading exporters on the seaborne market • Developing one of the largest coking coal deposits globally Superior asset quality • One of the largest coal reserves base globally • Core assets positioned at the lower bound of the global cost curve • Ability to supply steel producers with a full range of metallurgical coal • First newly built rolling mill for high-speed long rails in Russia Strategically positioned to supply both Asia-Pacific and Atlantic seaborne markets • Uniquely positioned to supply metallurgical coal to attractive Asia Pacific markets • Access to key Far Eastern and European ports • Lower transportation cost to supply key growth markets in Asia • Own infrastructure including ports and rolling stock, secures access to end customers and export markets Vertically integrated steel business model • Steel business is virtually self-sufficient in coal and iron ore • Established distribution and sales platform in core markets Leading steel producer • Most diversified specialty steel producer in Russia • Second largest long steel producer in Russia • Largest distribution platform in Russia
  • 6.
    Port Temryuk Russian Federation Lithuania Kazakhstan Elgaugol Yakutugol KorshunovMining Plant Southern Kuzbass Coal Company Chelyabinsk Metallurgical Plant Urals Stampings Plant Beloretsk Metallurgical Plant Izhstal Moscow Coke and Gas Plant Vyartsilya Metal Products Plant Port Posiet Port Vanino* Port Kambarka Bratsk Ferroalloy Plant Southern Kuzbass Power Plant Moscow Mechel Coke Ukraine Mechel Nemunas BROAD GEOGRAPHIC FOOTPRINT TARGETING GROWTH MARKETS REVENUE BREAKDOWN BY MARKET (1H 2015) Mining Segment Steel Segment Source: Company data Mining Steel Power Port Head office 6 *Access to port secured by contractual agreements Mongolia China Russia 68% Europe 16% CIS 13% Asia 1% Middle East 1% Other 1% China 27% Russia 24% Europe 22% Asia w/o China 19% CIS 3% Middle East 4% Other 1%
  • 7.
    TSO % of Total Ordinary 416,270,74575% Preferred 138,756,915 25% Preferred Publicly Trading 57,209,577 10% Preferred held by Justice family 26,044,572 5% Preferred Share held by Mechel as treasury 55,502,766 10% Total 555,027,660 100% CAPITAL STRUCTURE CAPITALIZATION AND OWNERSHIP STRUCTURE Preferred Shares Ordinary Shares Public Float 32.6% Igor Zyuzin (with family) 67.4% Public Float 41% Justice Family 19% Mechel 40% Source: Company data OWNERSHIP STRUCTURE 7
  • 8.
    NARROWED STRATEGY USINGKEY COMPETITIVE ADVANTAGES FOR VALUE GROWTH GROWTH IN SHAREHOLDER VALUE BASED ON VERTICALLY-INTEGRATED BUSINESS MODEL One of the largest global metcoal producer1 Leader in Russia and CIS construction steel market2 Leader in specialty steel, stainless steel and hardware production3 Optimization of asset structure to deleverage4 8
  • 9.
    4.3 10.1 6,3 3,2 Production Consumption MMt MMt MMt MMt MMt ProductionConsumption Production Consumption Shipped through own ports Shipped overall (excl. US ports) Own rolling stock Overall 9 Production Consumption 5th largest metallurgical coal producer globally* with ability to supply steel producers with a wide range of metallurgical coal types, coke and iron ore concentrate. Own infrastructure helps to establish access to end customers. *Ex-China Source: Company data - Volumes shipped through Vanino port Sea Port capacity, 12m 2014 Cargo turnover, 12m 2014 Power, 12m 2014 Coking Coal Concentrate, 12m 2014 Iron Ore Feed, 12m 2014 Coke, 12m 2014 blnKWh VERTICALLY INTEGRATED MINING & STEEL BUSINESS MODEL WITH FOCUS ON COMPETITIVE ADVANTAGES 1,9 3,4 6,0 12,3 4,4 10.4 48,6 14,9 5,3 3,7
  • 10.
    7,6 9,3 9,4 10,4 12,5 13,0 15,3 24,5 27,0 78,4 0,0 20,0 40,060,0 80,0 100,0 4 361 3 690 2 576 1 602 1 500 1112 1 082 826 411 350 0 1 000 2 000 3 000 4 000 5 000 BMA Mechel Evraz Vale Alpha Natural Resources Peabody BHP Anglo-American Walter Energy Glencore Xstrata LEADING GLOBAL METALLURGICAL COAL PRODUCER 2nd largest metallurgical coal reserve base One of the largest metallurgical coal producer globally with superior leverage to metallurgical coal One of the largest global exporters of coking coal Top Ten Metallurgical Coal Exporters in 2014Ten Largest Metallurgical Coal Producers in 2014Ten Largest Metallurgical Coal Producers by Metallurgical Coal Reserves MMtMMt Source: CRU, company reports (1) Including 50% share of BMA Source: Company Filings All production numbers shown on an attributable saleable basis unless otherwise disclosed (1) Met coal with some minor thermal coal production (2) Small part may be third-party purchased coal (3) not including Jellinbah (4) Coking coal concentrate+PCI+Anthracites Source: Company Filings, IMC All reserve numbers shown on a 100% run-of-mine basis unless otherwise disclosed (1) Assumes 100% of disclosed reserves are metallurgical (2) On a saleable, attributable basis (3) Reserves as of 30 June 2012 (4) Adjusted for acquisition of Raspadskaya 10 MMt (1) (1) (1) (3) (4)) (1) (2) 9,4 9,4 12,7 13,5 15,3 15,5 16,3 24,8 26,7 79,2 0,0 20,0 40,0 60,0 80,0 100,0 (4) (3) (1) (2)
  • 11.
    0% 10% 20%30% 40% 50% 60% 70% 80% 90% 100%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LOW COST COKING COAL PRODUCER Source: AME Notes: (1) FOB excluding land freight and port costs Source: AME Cumulative Production (%) Australia USA & CanadaRussia Other Cumulative Production (%) Australia USA & CanadaRussia Other 0 50 100 150 200 0 50 100 150 200 Yakutugol MechelBlended 0 50 100 150 200 0 50 100 150 200 MechelBlended U$/t Yakutugol post - Elgaugol About 80% of coking coal by open pit Access to cheap labor Low production cost Low raw material costs ESTIMATED EXPORT COKING COAL COST CURVE (FCA(1)) ESTIMATED EXPORT COKING COAL COST CURVE (FOB) U$/t 11 150 100 50 150 100 50
  • 12.
    Port Posiet Yakutugol Elgaugol Southern Kuzbass Indonesia USA Canada Europe Australia India Japan China Russia 292mn t (2) ABILITY TO SUPPLY ALL METCOAL MARKETS Major coking coal exporting regions Target markets for Mechel’s coking coal supplies Target markets for Mechel’s steam coal supplies Major coking coal importing regions Mechel’s routes 3rd parties routes Size of respective seaborne coking coal markets Notes: (1) FY2014 coal production (2) Total seaborne met coal trade (2014 est), CRU Source: MCQ47 Diversification / enhancement of sales channels to the fast-growing Asian and European markets Extensive range of metcoal grades allow for diversified product portfolio to serve a variety of customer needs Mechel’s own ports on the Sea of Japan and Azov Sea serve as a stable gateways to export markets Freight rates from port Posiet (Handysize 22 000 t) to Northern China $8 pmt to Yangtze River $9 pmt to Southern China $11.75 pmt to Thailand $12.75 pmt to Philippines $14 pmt to Indonesia $14 pmt India (West Coast / East Coast) $21.75 / $18.25 pmt to Japan $7 pmt 12.0 mn t (1) 9.4 mn t (1) 12 Freight rates from port Vanino (45 000 t) to Northern China $9.75 pmt to Yangtze River $10.75 pmt to Southern China $12.95 pmt to Thailand $13 pmt to Philippines $13.5 pmt to Indonesia $13.5 pmt India (West Coast / East Coast) $19 pmt / $17 pmt to Japan $7 pmt Port Vanino 1.2 mn t (1)
  • 13.
    Source: Company data MECHELSERVICE GLOBAL -- MAP OF DISTRIBUTION HUBS 70 storage sites and service centers throughout Russia, CIS & Europe Real time market intelligence and pricing feedback Opportunity to address specific customer needs and sell more high-marginal, value-added products ADVANTAGES PRODUCT PRODUCTION VOLUME, 12m 2014 ‘000 tonnes RUSSIAN PRODUCTION SHARE RANK Spring wire 162%52 Wire products 129%624 Wire rod 133%868 High- tensile wire 244%43 Flat stainless steel 154%18 Rebar 318%1,590 LEADER IN SPECIALTY, STAINLESS STEEL & HARDWARE 13 Geographies of presence of Mechel Service Mechel Service facilities
  • 14.
    • Logistics flexibilityon the Sea of Azov and Black Sea • Potential to increase export of coking coal, PCI and anthracite to Europe • Existing port capacity – 2 mln tonnes • Target capacity - 4 mln tonnes • Rolling stock of about 12,000 railcars • Ensures uninterrupted transportation • Reduces dependency on Russian Railways, state-owned and independent freighters • Increase access to Asian coal customers via seaborne market • Existing port capacity – 7 million tonnes per year • Target capacity - 9 mn tonnes (Panamax vessels) after 2nd stage of modernization MECHEL’S INFRASTRUCTURE ALLOWS SECURED ACCESS TO FINAL CUSTOMERS • Increases logistics flexibility to Asian coal customers via seaborne market securing exports from Elgaugol • Total turnover up to 10 million tonnes of cargo per year • Shorter transportation distances – lower rail and vessel freights TEMRYUK PORT MECHEL TRANS TRANSPORTATION COMPANY POSIET PORT VANINO PORT* 14 * Access to port secured by contractual agreements
  • 15.
    KEY PROJECT CHARACTERISTICS 4.7 7.0 1.8 1.8 10.0 20122014 Posiet Temryuk Vanino 6.5 18.8 TEMRYUK POSIET VANINO EXISTING CAPACITY 1.8 MMt per year 7.0 MMt per year 10.0 MMt per year TARGET CAPACITY 4.2 MMt per year 9 MMt per year na DEVELOPMENT STAGE Modernization Modernization na VESSEL TYPE River-to-sea vessels Panamax (post modernization) Panamax TIMING 2017 na na Source: Company data Notes: * Volumes secured by contractual agreements ElgaugolYakutugol Southern Kuzbass Port Posiet Port Vanino Port Temryuk OWN SEAPORT FACILITIES OWN SEAPORT ANNUAL TURNOVER CAPACITIES, MMt * MECHEL TRANS – ACCESS TO SEABORNE MARKET 15 Access to main customers in Asia-Pacific and Europe secured through own ports infrastructure Port capacity aligned with expected growth in export volumes
  • 16.
    ALIGNING ASSETS STRUCTUREWITH STRATEGY Mining Segment Korshunov Mining Plant Iron Ore Yakutugol Southern Kuzbass Coal Company Elgaugol Bluestone Coal Coke Mechel Coke Moscow Coke and Gas Plant Steel Segment Vyartsilya Metal Products Plant Beloretsk Metallurgical Plant Urals Stampings Plant Mechel Targoviste (Romania) Mechel Campia Turzii (Romania) Chelyabinsk Metallurgical Plant Buzau Plant (Romania) Otelu Rosu Plant (Romania) Izhstal Donetsk Electrometallurgical Plant Laminorul Plant (Romania) Mechel Nemunas (Lithuania) Ferroalloys Segment Ferronickel Ferrochrome Ferrosilicon Southern Urals Nickel Plant Tikhvin Ferroalloy Plant Voskhod Chrome Mining Plant (Kazakhstan) Bratsk Ferroalloy Plant Uvatskoye Deposit of Quartzite Power Segment Toplofikatsia Rousse Power Plant - Southern Kuzbass Power Plant Kuzbass Power Sales Company Generation Distribution Distribution Mechel Service Global * (ex Russia) Mechel Trading House Mechel Carbon Mechel-Mining Trading House Mechel Trading Mechel Service OOO (Russia) Invicta (UK) Group 1 Group 2 16 Improvement in financial results and cash flow Immediate deleverage Deal closed Deal closed Deal closed Deal closed Deal closed Deal closed Deal closed * Divestment in progress through inventory sell down Mothballed Deal closed Deal closed Deal closed
  • 17.
  • 18.
    ELGA DEPOSIT: RAMPUP SECURED BY VEB PROJECT FINANCING CURRENT STATUS KEY PROJECT METRICS LOCATION OPERATIONAL DETAILS COAL TYPE RESERVES JORC STANDARDS • Country Russia • Location South-East of Yakutia • Mine Type 100% OP • Start of operations August 2011 • High volatile hard coking coal • Steam coal • Middlings • 2.2 billion tonnes as of December 31, 2012 • Elga coal deposit reserves account for 67% of total reserves of Mechel • Russia, Asia-Pacific countries TARGET MARKETS LOCATION OF OPERATIONS Mongolia Yakutugol Elgaugol Port Vanino Port Posiet China JapanKazakhstan Source: Company data 18  Railroad in place  Wash plant up & running  Workers settlement under construction  Existing capacity up to 4-5 mn tonnes of coal mining, 2.7 mn tonnes of coal processing  In FY 2014 1,2 mln tonnes mined, over 700,000 tonnes processed and about 1 mln tonnes shipped (includes coking coal concentrate , oxidized coal and middlings).  Expected to produce about 3,5 mln tonnes of run-of-mine coal in 2015  Seasonal washing plant became all year operational starting winter 2014-2015  Coal processing up to 2,7 mln tonnes starting from 2015 and till the first module of permanent washing plant is in place and operating (2018)  VEB project financing of 1st stage of Elga development: up to12 mn tons of coal mined by 2018  Once 9 mn tons of coal is mined and processed at Elga, the project should become operating cashflow positive FURTHER EXPANSION
  • 19.
    CAPACITY PRODUCTS CAPEX TARGET CONSUMERS High-speed and low-temperatureup to 100 meter long rails H-beams, channel bars, angles and grooves US$ 715 mn Up to 1.1 mn t Russian Railways Off-take secured by a 20-year supply agreement Russian Railways Strategy till 2030 provides for additional railway construction of more than 20,000 km, including more than 12,000 km of high-speed tracks Construction industry TIMING 2009 – 2013 UNIVERSAL ROLLING MILL – STRUCTURAL SHIFT IN LONG STEEL PRODUCTS PORTFOLIO Increased Output of High Value-Added Products Enhanced Profitability of Steel Division Structural Shift in the Long Steel Portfolio RAILS PRICING KEY PROJECT CHARACTERISTICS Source: Metal-Courier, Company data Notes: * There was no import of 100m length rails in 2014 19 982 963 920 932 653 637 630 623 652 637 631 623 1596 1 597 1386 0 1413 1 310 1310 0 530 517 504 494 0 500 1000 1500 2000 Average 2H2012 Average 1H2013 Average 2H2013 Average 1H2014 Billets (FOB ЧМ Россия) Rails 100m length (DES Vladivostok) Rails 100m length (DES St. Petersburg) L-bar (FOB Турция) Channel bar (FOB Турция) Beams (DAP Казахстан) Mill CURREN PROJECT STATUS  The mill launched in July 2013  H-beams and rails sales to 3d parties ongoing. In 9 month 2014 period about 85,000 tonnes produced and sold.  Rails have been certified for use by Russian Railways in June 2015.
  • 20.
  • 21.
    1H2015 FINANCIAL RESULTSSUMMARY 21 * See our press release for full calculations 1H15 1H14 % 2Q15 1Q15 % Revenue 2,272 3,436 -34% 1,159 1,113 4% EBITDA (a) 390 262 49% 179 211 -15% Net (loss) / income (239) (648) -63% 34 (273) -112% Net Debt* 6,974 9,053 -23% 6,974 6,822 2%
  • 22.
    1H 2015 HIGHLIGHTS 22 + Revenueincreased by 4% QoQ primarily because of the increase of sales in Steel segment by 13%. + 1H 2015 Operating income increased 16x times compared with similar period of 2014 + EBITDA(a) was 15% lower QoQ mostly due to Steel segment EBITDA decrease on higher costs. + Major segments contributed almost equally to consolidated EBITDA(a) in 1H 2015 – 51% Steel segment and 47% Mining segment. + Net debt amounted to $7 bln as of June 30, 2015. Net debt increased by 2% QoQ because of revaluation of ruble denominated debts due to depreciation of US$ from 58,46 to 55,52 at the end of the periods. + Bottom line supported by $189mln FX gain and amounted to $34 mln in 2Q 2015. 1H 2015 Net loss was $239 mln.
  • 23.
    94 87 87 10696 77 138 120 106 83 3 -7 12 6 0,15 Power Steel Mining -7 548 489 483 390 363 1027 948 740 601 682 166 148 161 122 114 2Q14 3Q14 4Q14 1Q15 2Q15 Power Steel Mining 10% 33%57% 11% 32%57% SEGMENTS OVERVIEW REVENUE BY SEGMENTS $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 23 Steel Mining Power EBITDA(a)(1) BY SEGMENTS 2% 47% 51% 1H 2015 8% 29% 63% 1H 2014 REVENUE BY SEGMENTS $ Mln EBITDA(a) (1) BY SEGMENTS $ 2,272 mln $390 mln $3,436 mln $262 mln $ 1,741 $ 1,159 $ 1,585 $ 1,384 $ 1,113 $ 211 $ 179 $ 227 $ 220 $176 3Q14 4Q14 1Q152Q14 2Q15
  • 24.
    SEGMENT HIGHLIGHTS 24 + International metallurgicalcoal prices continued to decrease. Hard coking coal benchmark decreased from $117 FOB in 1Q 2015 to $109.5 FOB in 2Q 2015 and moved down to $ 93 FOB in 3Q 2015. Domestic coal prices were more stable and profitability of domestic sales was supported by weaker ruble + Lower export prices led to Mining segment Revenue decrease by 7% QoQ (from $390mln to $363mln) and EBITDA(a) decrease by 8% QoQ (from $106mln to $97mln) EBITDA margin for 1H 2015 almost doubled to 20,6% comparing with the previous year (1H 2014 – 11,6%) + Mining segment finished 2Q 2015 period with Net income of $53 mln + Steel segment Revenue grew by 13% QoQ on a stable prices and higher sales volumes + 1H 2015 Steel segment EBITDA(a) is 2.5x times higher than in 1H 2014 (increase from US$74mln to US$188mln) EBITDA(a) margin decreased from 16,4% to 11,4% QoQ on higher costs
  • 25.
    Mining Segment SteelSegment 35 30 55 44 31 27 26 61 28 22 20 51 26 18 15 32 30 19 18 44 Coal SKCC Coal YU Coal Elga Iron Ore KGOK 2Q14 3Q14 4Q14 1Q15 2Q15 548 489 483 390 363 151 144 106 101 131 13% 14% 15% 22% 20% 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin CASH COSTS, US$/TONNE $ Mln 425 376 390 501 403 361 364 482 310 284 288 377 254 240 243 303 312 311 322 370 Billets* Wire rod Rebar Carbon Flat 2Q14 3Q14 4Q14 1Q15 2Q15 1027 948 740 601 682 55 46 41 40 44 7% 14% 15% 16% 11% 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin REVENUE, EBITDA(a)(1) $ Mln CASH COSTS, US$/TONNE REVENUE, EBITDA(a)(1) (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. * Domestic sales
  • 26.
    Coking coal 42% Anthracite and PCI 27% Coke 9% Coking products 2% Steam coal 9% Ironore 8% Other 3% China 39% Russia 29% Europe 14% Asia w/o China 13% CIS 2% Middle East 2% Other 1% Coking coal 33% Anthracite and PCI 24% Coke 11% Coking products 3% Steam coal 12% Iron ore 4% Other 2% China 27% Russia 24%Europe 22% Asia w/o China 19% CIS 3% Middle East 4% Other 1% MINING SEGMENT 26 REVENUE BREAKDOWN BY REGION REVENUE BREAKDOWN BY PRODUCTS 1H 2015 1H 2014 1H 2015 revenue $753 mln 1H 2015 1H 2014 revenue $1,115 mln 1H 2014
  • 27.
    Rebar 29% Carbon long products 19% Hardware 16% Forgings and stampings 9% Carbonflat 8% Semi-Finished Steel Products 5% Stainless flat 3% Ferrosilicon 2% Other 8% Rebar 29% Carbon long products 19% Hardware 16% Forgings and stampings 8% Semi-Finished Steel Products 6% Carbon flat 10% Stainless flat 2% Ferrosilicon 2% Other 8% Russia 66%Europe 17% CIS 13% Asia 2% Middle East 1% Other 1% Russia 68% Europe 16% CIS 13% Asia 1% Middle East 1% Other 1% STEEL SEGMENT 27 REVENUE BREAKDOWN BY REGION REVENUE BREAKDOWN BY PRODUCTS 1H 2015 4Q 2014 1H2015 revenue $1,283 mln 1H 2015 1H2014 revenue $1,956 mln 1H 2014
  • 28.
    OPERATIONAL RESULTS 1H2015 PRODUCTION: Product 1H’15, th. tonnes 1H’14, th. tonnes % 2Q’15, th. tonnes 1Q’15, th. tonnes % Run-of-mine coal 11 448 11 198 +2 5 941 5 506 +8 Pig Iron 2 045 1 900 +8 994 1 051 -5 Steel 2 147 2 127 +1 1 045 1 102 -5 SALES: Product name 1H’15, th. tonnes 1H’14, th. tonnes % 2Q’15, th. tonnes 1Q’15, th. tonnes % Coking coal concentrate 4 068 5 354 -24 2 028 2 040 -1 PCI 1 322 1 623 -19 669 653 +3 Anthracites 1 109 1 001 +11 564 544 +4 Steam coal 3 039 2 528 +20 1 563 1 476 +6 Iron ore concentrate 1 317 1 886 -30 609 707 -14 Coke 1 484 1 491 0 718 767 -6 Flat products 237 227 +4 120 117 +2 Long products 1 367 1 588 -14 730 637 +15 Billets 112 61 +84 31 81 -62 Hardware 340 384 -11 170 171 0 Forgings 28 26 +8 14 14 +2 Stampings 32 44 -27 20 13 +57 Ferrosilicon 39 42 -7 17 22 -22 28
  • 29.
    POWER SEGMENT 29 AVERAGE ELECTRICITYSALES PRICES AND CASH COSTS (RUSSIA), US$/MWH REVENUE, EBITDA(a)(1) $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 200 166 148 161 122 114 105 90 86 76 66 64 6% 1% -3% 5% 3% 0,1% -5% 5% 15% 25% 35% -50 50 150 250 350 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Intersegment revenues Revenues EBITDA(a) margin 27 29 36 21 15 19 53,3 55,1 52,2 39,7 31,4 32,2 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Cash costs Sales price 91% 4% 3% 1% 1% 1H15 1H14 Other Depreciation and depletion Energy Staff costs Raw materials and purchased goods 90 % 4% 4% 1% 1% COS STRUCTURE $236 mln $366 mln + 1H 2015 EBITDA(a) $7 mln, EBITDA(a) margin 1.9%. + Seasonal reduction in sales volumes and ruble strengthening in 2Q 2015 led to an increase in cash costs + 1H 2015 Net loss of $8,2 mln.
  • 30.
    CONSOLIDATED P&L 30 REVENUE, $MLN FINANCIALPERFORMANCE HIGHLIGHTS: $ Mln $ Mln (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. 1741 1585 1384 1113 1159 36% 37% 44% 43% 41% 2Q14 3Q14 4Q14 1Q15 2Q15 Revenue Gross margin, % 176 227 220 211 179 10% 14% 16% 19% 15% 2Q14 3Q14 4Q14 1Q15 2Q15 EBITDA(a) EBITDA(a) margin EBITDA(a)(1) , $MLN + 1H2015 revenue decreased 34% HoH mostly because of the ruble depreciation Adjusted Operating income increased 5,5x times to US$260mln (1H2014: US$47mln) + EBITDA(a) increased to US$390mln (1H2014: 262mln) with EBITDA(a) margin increase from 7,6% to 17,2% for the comparable periods + Bottom line in 2Q 2015 became positive with support of $189mln FX-gain. Net Income of $34 mln. 1H 2015 net loss of $239mln (1H2014 net loss $648mln)
  • 31.
    CASH FLOW &TRADE WORKING CAPITAL 31 CASH FLOW, $MLN + Operating cash flow deficit became a result of significant increase in debt serving payments. Cash deficit was financed by further decrease in trade working capital by $192 mln. + Investment cash flow amounted to $126 mln in 1H 2015 – mostly maintenance CAPEX and Elga. TRADE WORKING CAPITAL MANAGEMENT, $MLN 72 45 191 -126 -99 Cash as of 31.12.2014 Operating activities Investment activities Financing activities Cash as of 30.06.2015 2 007 1 681 1 219 1 202 1 153 -1 939 -1 773 -1 661 -1 825 -1 968 68 -92 -442 -623 -815 Trade current assets Trade current liabilities Trade working capital 30.06.14 30.09.14 31.12.14 31.03.15 30.06.15
  • 32.
    State banks 66% Bonds 4% Other lenders 5% International Banks 23% + At theend of August and beginning of September 2015 Group signed restructuring agreements with Gazprombank and VTB which include grace period for debt repayment till April 2017 with onwards repayment within 3 years + We have also signed restructuring agreement with other Russian and international banks such as Uralsib, MKB, Raiffeisenbank Russia, EABR. We are finalizing discussions with PXF and ECA lenders as well as RUR Bond holders on restructuring terms We discuss restructuring terms with Sberbank + Stable debt level and increase of financial results led to Net debt / EBITDA ratio of 8,3x. DEBT PROFILE BANK DEBT PROFILE AS OF SEPTEMBER 1, 2015 By currency By banks 32 Total Debt $6,313 mln Note: converted at the exchange rate established by CB RF as of September 01, 2015 DEBT BURDEN DYNAMICS 2011-2015, USD BLN 3,5x 3,5x 7,2x 12,6x 10,0x 8,2x 8,3x 2010 2011 2012 2013 2014 3m2015 6m2015 Long-term Short-term Lease Net debt / EBITDAEUR 6% USD 59% RUR 35%
  • 33.
    US$ MILLION UNLESSOTHERWISE STATED 1H15 1H14 % 2Q15 1Q15 % Revenue (2) 2,272 3,436 -33.9% 1,159 1,113 4.1% Cost of sales (1,324) (2,254) 41.3% (689) (635) 8.5% Gross margin 41.7% 34.4% 40.6% 42.9% Adjusted Operating income 260 47 453% 108 152 -28.9% EBITDA(a) (1) 390 262 48.9% 179 211 -15.2% EBITDA(a) margin 17% 8% 15% 19% Net (loss) / income (239) (648) -63.1% 34 (273) -112.5% Net (loss) / income margin -10.5% -18.9% 2.9% -24.5% Net Debt 6,974 9,053 -23% 6,974 6,822 2% CapEx 91 274 -66.8% 57 34 67.6% FINANCIAL RESULTS OVERVIEW (1) EBITDA(a) represents earnings before Depreciation, depletion and amortization, Foreign exchange gain / (loss), Loss from discontinued operations, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of goodwill and long-lived assets, Provision for amounts due from related parties, Result of disposed companies (incl. the result from their disposal), Amount attributable to noncontrolling interests, Income taxes and Other one-off items. (2) Includes sales to the external customers only 33
  • 34.
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  • 37.
    SHAPES PRODUCED ATUNIVERSAL ROLLING MILL 37