FY2012 RESULTS PRESENTATION · FY2012 RESULTS PRESENTATION APRIL 15, 2013 . DISCLAIMER This...

FY2012 RESULTS PRESENTATION APRIL 15, 2013

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

2

FINANCIAL HIGHLIGHTS

57% 60% 63% 62%

33% 29% 29% 27%

4% 4% 3% 3%6% 7% 5% 8%

FY11 FY12 3Q12 4Q12

Steel Mining Ferroalloys Power

SEGMENTS OVERVIEW Diversified business model: Mining down while steel holds up.

REVENUE FROM THIRD PARTIES EBITDA BY SEGMENTS

Consolidated revenue down 10% y-o-y to $11.3 bn on

weaker commodity prices

Bad debt provisions and write-off of $1.6 bn result in a Net

Loss of $1.7 bn for 2012.

A relatively stronger steel segment increased its share in the

consolidated revenue to 60%

The steel segment share in EBITDA grew to 23% on

efficiency improvements

$ Mln

$ Mln

(1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of

contingent liabilities at fair value, impairment of long-lived assets and goodwill, provision for amounts due from related parties and losses from discontinued operations, net of income tax. 4

Steel Mining Ferroalloys Power

EBITDA(1) BY SEGMENTS

12,541 11,275 2,711 2,521

49

358

-7

29 37

465

91

302

-76

-0,6

391

75

305

-3-6

5

376

7633

-31

15 7

100

Steel Mining Ferroalloys Power Cons.adj. Consolidated

1Q12 2Q12 3Q12 4Q12

FY2011

2% 2%

13%

83%

FY2012

3%

23%

78%

-4%

MINING SEGMENT Demand volatility and one-offs affect the profitability

$ Mln

CASH COSTS, US$/TONNE COS STRUCTURE

$2,324 mn $2,131 mn

5

REVENUE, EBITDA(1)

3933

42

113

4236

45

100

4232

45

88

39

28

43

89

41

29

45

115

Coal SKCC Coal YU Iron Ore Bluestone

4Q11 1Q12 2Q12 3Q12 4Q12

55%51%

18%20%

9% 9%

14% 14%

4% 6%

FY11 FY12

Other

Depreciation and depletion

Energy

Staff costs

Raw materials and purchased goods


contingent liabilities at fair value, impairment of long-lived assets and goodwill, provision for amounts due from related parties and losses from discontinued operations, net of income tax.

945

895

781676

213193

168

143

31%28%

32%

4%

-10%

20%

50%

0

300

600

900

1 200

1Q12 2Q12 3Q12 4Q12

Revenues (lhs) Intersegment revenues (lhs) Adj. EBITDA margin (rhs)

Segments EBITDA down to $33 mn due to:

• 13% revenue decrease

• 7% COGS growth (incl. $19 mn inventory write-down)

• 12 % growth in S&D expenses due to geography change

• $66 mn of reversals and one-off accruals for tax

contingencies and trade dispute settlement

Cash costs slightly up on seasonal factors but still under

control

Cash cost at Bluestone up due to temporary idling of

operations

53%44% 42% 37%

17%21% 22%

22%

9%9% 10%

11%

2%2% 2%

3%

7%8% 9%

9%

9% 13% 14% 16%

3% 3% 1% 2%

FY11 FY12 3Q12 4Q12

Coking coal Anthracites and PCI Coke Coking productsSteam coal Iron ore Other

MINING SEGMENT Solution: rebalancing geography of sales

6

REVENUE BREAKDOWN BY REGION AVERAGE SALES PRICES FCA, US$/TONNE

Coking coal sales down 25% q-o-q due to decrease in export

sales to Europe and Ukraine by 16%.

Sales to China grew to 29%, balancing out reduction of demand

elsewhere although at a lower spot price.

Iron ore sales volumes up 18% as domestic sales of iron ore

grew 2x due to better pricing

*Restated to include middlings

EXTERNAL SALES STRUCTURE

291

181

104

43

101

263

142

101

54

82

236

129

96

49

84

229

122

80

4965

214

9369

5159

Coke Coking coal Anthracite and PCI Steam coal* Iron ore

4Q11 1Q12 2Q12 3Q12 4Q12

25% 25% 25%32%

18% 14% 16%14%

13%9% 8%

5%

19%30% 27%

29%

16% 13% 18% 10%

3% 5%4%

7%6% 4% 2% 3%

FY11 FY12 3Q12 4Q12

Russia Europe CIS China Asia w/o China Middle East Other

STEEL SEGMENT Structural changes improve EBITDA margin…

7


REVENUE, EBITDA(1)

Revenue down 8% q-o-q due to seasonal demand slowdown

Structural adjustments relieve pressure on profitability…

… resulting in stable EBITDA at $76 mn

Bottom line affected by $887 mn of write-downs and bad

debt provisions.

$6,341 mn $6,026 mn

$ Mln

1 541

1 649

1 8981 700

1 557

7679

67

5073

-3%

3%

5%

4%

5%

-5%

-2%

1%

4%

7%

10%

13%

0

500

1 000

1 500

2 000

4Q11 1Q12 2Q12 3Q12 4Q12


545503 511

494 499 515

436 452470

409 431452

408437 444

Billets* Wire Rod Rebar

4Q11 1Q12 2Q12 3Q12 4Q12

80% 78%

8% 8%

9% 10%

2% 2%1% 2%

FY11 FY12

Other

Depreciation

Energy

Staff costs


*Carbon and low-alloyed billets



54% 56% 60% 61%

23% 19%17% 20%

1% 3% 2%2%6% 11% 12%

13%11%7% 7%

4%5% 4% 2% 0%

FY11 FY12 3Q12 4Q12

Russia Europe Asia CIS Middle East Other

STEEL SEGMENT … and withstand demand slowdown with better product mix

8



Downward price trend countered by a change in product mix

Sales of semi-finished steel products down in Q4 due to a

shut-down of DEMZ

Share of sales to Europe and share of flat products sales up

after consolidation of Cognor

21% 19% 18% 16%

23% 25% 26% 26%

3% 2% 2% 2%

17% 15% 15% 14%

7% 7% 6% 7%

13% 13% 14% 14%

7% 7% 5% 8%

9% 12% 14% 13%

FY11 FY12 3Q12 4Q12

Semi-finished steel products Rebar Stainless flat products

Carbon long products Forgings and stampings Hardware

Carbon flat Other

583 686

4332

2703

919 742

550

692

4303

2647

932

734551692

4195

3082

891 724533684

4038

2545

894

700517

677

3910

2411

927

700

Semi-finished steel products

Rebar Stanless flat products

Forgings and stampings

Hardware Carbon flat

4Q11 1Q12 2Q12 3Q12 4Q12




Nickel

FERROALLOYS SEGMENT Shutdown of nickel plant and one-offs depress profitability in Q4

REVENUE, EBITDA(1)

Revenue down 25% due to price volatility and reduction of Ni

sales.

Cash cost demonstrate different dynamics:

• FeSi up 7% due as electricity price grows

• Cr flat

• Cr concentrate down 25% due to better geological

conditions

Provisions related to SUNP shut-down and bad receivables

result in a negative EBITDA of $31 mn in 4Q12

Bottom line affected by $23 mn write-down on mineral

licenses in Shevchenko nickel deposit

9

$ Mln

$644 mn $539 mn

116125

132

91

69

16

28 22

23

14

-9%-5% -5% -3%

-37%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

4Q11 1Q12 2Q12 3Q12 4Q12


51% 49%

10% 9%

18%18%

13% 16%

8% 8%

FY11 FY12

Other

Depreciation

Energy

Staff costs


4Q11 1Q12 2Q12 3Q12 4Q12

912

2.08K

877

2.05K

845

2.06K

848

2.11K

907

2.10K

Ferrosilicon Chrome

184 172 149 151 113

Chrome Ore Concentrate

20.6K 21.4K

19.1K 19.7K

N/A



28% 30%36%

44%

56% 49% 37%31%

8%12%

14% 13%

8% 9% 13% 12%

FY11 FY12 3Q12 4Q12

Russia Europe Asia Other

FERROALLOYS SEGMENT … but lay ground for better performance in the future

10



Share of Ni sales down q-o-q due to halting production at

Southern Urals Nickel Plant in 4Q12

Cr sales up due to inventories liquidation

Cut of Ni production led to Russia sales grow to 44% of the

total

4Q11 1Q12 2Q12 3Q12 4Q12

Nickel Ferrosilicon Chrome

1 340 1 309

1 227

1 299

1 254

2 180 2 184 2 218

1 928 1 891

54%

40% 35%

12%

18%

16% 21%

27%

22%

31% 26%

42%

4%11% 16% 15%

2% 2% 2% 4%

FY11 FY12 3Q12 4Q12

Nickel Ferrosilicon Chrome Chrome ore Other

18 064 19 126

17 202

15 327 16 314

POWER SEGMENT A steady contribution to diversification

11

AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS (RUSSIA), US$/MWH COS structure

REVENUE, EBITDA(1)

Revenue up 57% q-o-q due to high season

Cash costs down 19% as sales of heat and electricity grow

EBITDA back to black with $15 mn

$ Mln

51,7 53,5 54,7 53,8

25,828,0

30,1

24,5

1Q12 2Q12 3Q12 4Q12

Sales price Cash costs

89% 88%

3% 3%6% 6%

1% 1%1% 2%

FY11 FY12

Other

Depreciation

Energy

Staff costs


$932 mn $932 mn

230

168140

220

136

113

109

1268%

2%

-2%

4%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

15%

0

100

200

300

400

1Q12 2Q12 3Q12 4Q12

Revenues (lhs) Intersegment revenues(lhs) Adj. EBITDA margin (rhs)



Consolidated P&L Q4 takes the hit… but clears the path for a bounce back in 2013.

12

REVENUE DYNAMICS REVENUE, EBITDA(1) AND NET PROFIT

Consolidated EBITDA down 73% q-o-q to $100 mn due to lower profitability and one-offs in the mining and ferroalloys segments

Q4 net result affected by $910 mn of one-off write-downs and $44 mn of loss from discontinued operations totaling $1,114 mn of net loss

4Q2012 FINANCIAL PERFORMANCE Q-O-Q HIGHLIGHTS:

$ Mln $ Mln

2 7112 521

-18779 -82

0

1 000

2 000

3 000

3Q2012 Volume Acquisitions Price 4Q2012

29493093

27112521

465 391 376100

218

-823

55

-1114

16% 13% 14%

4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

(1 200)

(700)

(200)

300

800

1 300

1 800

2 300

2 800

3 300

1Q12 2Q12 3Q12 4Q12

Revenue (lhs) Adj. EBITDA (lhs) Net profit (lhs) Adj. EBITDA



Cash Flow Statements Record operating cashflow despite volatile markets

13

OPERATING CASH FLOW DYNAMICS NET CASH FLOW

Continuing production adjustment and working capital management added another $208 mn to the CFO in Q4 resulting in a record $1,31

bn operating cashflow in 2012.

Investment cashflow minimized to $43 mn in Q4 allowing for debt reduction

Superior CFO in 2012 allowed to finance the entire capex and repay $577 mn of debt before FX adjustments

$ Mln FY’10 FY’11*

270*

306

456

208

(50)

150

350

1Q12 2Q12 3Q12 4Q12

Operating cash flow

FY’12

(148)

399

1 311

(1 120)

(1 674)

(839)

1 210

2 079

(792)

Operating activities Investment activities Financial activities

* Excluding the effect of loan to Estar * Excluding the effect of loan to Estar

IMPROVING DEBT MATURITY PROFILE

Net debt stable at USD 9.6 bln (including financial lease) as of

April 10, 2013

Debt repayments of approximately USD 0.32 bln in 2012

(reduction of gross debt excluding FX effect)

Cash and available credit lines total USD 1.1 bln as of April 10,

2013; in line with remaining 2013 maturities

A new RUR 40 bln (~ USD 1.3 bln) 5 year facility from VTB has

substantially eased the liquidity pressure from repayments in

2013.

DEBT PROFILE AS OF APRIL 10, 2013 (W/O PRO FORMA)

RUR 58%

USD 35%

EUR 7%

Russian

Banks

51%

14

DEBT MATURITY SCHEDULE AS OF APRIL 10, 2013 WITH PRO FORMA DEBT MATURITY SCHEDULE AS OF DECEMBER 1, 2012

235 210 3 1

78

1 287 2 048

1 699

578 544 -

86

483

483

483

- -

482

- 322

-

- 14

148

120 72

44

45 327

2 213

2 654

2 577

1 105

588

0

500

1000

1500

2000

2500

3000

3500

4000

1.12.12 2012 2013 2014 2015 2016 2017 and after

Renewable lines Other term loans Expiration of put options on bonds Maturity of bonds Expiration of financial lease

141

736

293

1 170

Cash

Other undrawn credit lines

ECA undrawn amount

152 33 -

636

2 105 2 117

1 385 1 047

413

15

483 322

483

-

-

160

- -

-

-

-

126

140 86

51

37

15

1 090

2 761 2 525

1 919

1 083

427

0

500

1000

1500

2000

2500

3000

3500

4000

31.3.13 2013 2014 2015 2016 2017 2018 and after

Renewable lines Other term loans Expiration of put options on bonds Maturity of bonds Expiration of financial lease

Foreign

Banks

23%

Bonds

26%

173

587

329

1 089

Cash

Other undrawn credit lines

ECA undrawn amount

Revenue 2,521 2,711 -7.0%

Cost of sales (1,882) (1,978) -4.9%

Gross margin 25.4% 27.1%

Operating profit / (loss) (933) 129 -

Operating margin -37.0% 4.8%

Adjusted EBITDA(1) 100 376 -73.3%

Adjusted EBITDA(1) margin 4.0% 13.9%

Net Income / (loss) (1 114) 55 -

Net Income margin -44.2% 2.0%

Sales volumes(2), „000 tonnes

Mining segment 5,570 5,862 -5.0%

Steel segment 1,872 2,072 -9.7%

FINANCIAL RESULTS OVERVIEW

(1) Adjusted EBITDA represents EBTIDA adjusted by forex gain/loss, interest income, net income on the disposal of non-current assets, amount attributable to non-controlling interests gain/loss from remeasurement of contingent

liabilities at fair value, impairment of long-lived assets and goodwill, provision for amounts due from related parties and losses from discontinued operations, net of income tax..

(2) Includes sales to the external customers only

US$ MILLION UNLESS OTHERWISE STATED 4Q12 3Q12 CHANGE, %

15

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