The Russian company Mechel OAO (MTL)
is one of just five Russian companies trading on the U.S. stock exchanges as American Depositary Receipts. The fact the company goes through the process to meet the U.S. accounting standards should give U.S. investors a little peace of mind. Mechel gives investors the opportunity to invest in Russia through the results of a single company and in dollar terms.
Mechel is a mining and metals production company. In mining the company primarily produces coal and iron ore. Mechel is Russia's largest producer of coking coal, with about a quarter of the market. The company is Russia's largest producer of specialty steel products. Significant revenues are generated from the production of ferroalloy metals and from energy sales.
In the first quarter of 2011, Mechel saw revenues increase by 54 percent over a year earlier to $2.93 billion. Net income increased almost threefold to $309.1 million from $82.6 million. The mining segment pulled in 28 percent of revenues, steel production was 60 percent of sales, ferroalloys chipped in 4 percent, and energy sales accounted for just under 8 percent. However, mining was responsible for 94 percent of the net income for the quarter.
Mechel OAO has a market capitalization of $10 billion, and the reported 2010 earnings per share in 2010 was $2.10.
Financing the future
On July 1, the company board of directors announced plans to issue an IPO of approximately $1 billion in shares of Mechel Mining OAO. The capital to be raised will be used to finance future acquisitions. Mechel has absorbed several Russian and eastern European mining companies over the last few years.
Analysts who follow Mechel OAO notes the company's aggressive push to increase production by modernizing facilities, mines and equipment. The average of published analyst target prices is just over $35 per share, representing a 40 percent increase from recent share price levels.
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