Mechel : Сonsolidated financial statements for 9 months 2020

PAO MECHEL

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT (LOSS)

AND OTHER COMPREHENSIVE INCOME for the nine months ended September 30, 2020

(All amounts are in millions of Russian rubles)

	Nine months ended		Nine months ended
	September 30,		September 30,
	2020	2019
	(unaudited)		(unaudited)
Continuing operations
Revenue from contracts with customers	196,197	220,113
Cost of sales	(124,805)		(138,330)
Gross profit	71,392		81,783
Selling and distribution expenses	(37,058)	(36,121)
Impairment of goodwill and other non-current assets, net	(3,828)	-
Allowance for expected credit losses on financial assets	(517)	(384)
Taxes other than income taxes	(3,733)	(2,741)
Administrative and other operating expenses	(15,009)	(12,299)
Other operating income	776		549
Total selling, distribution and operating income and (expenses), net	(59,369)		(50,996)
Operating profit	12,023		30,787
Finance income	769	525
Finance costs including fines and penalties on overdue loans and
borrowings and lease payments	(19,644)	(25,993)
Foreign exchange (loss) gain, net	(42,649)	15,234
Share of profit of associates, net	11	32
Other income	281	94
Other expenses	(197)		(397)
Total other income and (expense), net	(61,429)		(10,505)
(Loss) profit before tax from continuing operations	(49,406)	20,282
Income tax expense	(7,862)		(2,138)
(Loss) profit for the period from continuing operations	(57,268)	18,144
Discontinued operations
Profit (loss) after tax for the period from discontinued operations	41,609	(4,717)
(Loss) profit for the period	(15,659)	13,427
Attributable to:
Equity shareholders of Mechel PAO	(15,763)	12,174
Non-controlling interests	104	1,253
Other comprehensive income
Other comprehensive income (loss) that may be reclassified to profit
or loss in subsequent periods, net of income tax	2,615	(1,351)
Exchange differences on translation of foreign operations	2,615	(1,351)
Other comprehensive loss not to be reclassified to profit or loss in
subsequent periods, net of income tax	(9)	(327)

Re-measurement of defined benefit plans	(9)		(327)
Other comprehensive income (loss) for the period, net of tax	2,606		(1,678)
Total comprehensive (loss) income for the period, net of tax	(13,053)	11,749
Attributable to:
Equity shareholders of Mechel PAO	(13,158)	10,502
Non-controlling interests	105	1,247

INTERIM CONDENSED CONSOLIDATED

STATEMENT OF FINANCIAL POSITION as of September 30, 2020

(All amounts are in millions of Russian rubles)
	September 30, 2020		December 31, 2019
	(unaudited)
Assets
Non-current assets
Property, plant and equipment	81,541	179,264
Right-of-use assets	12,917	17,728
Mineral licenses	18,591	31,075
Goodwill and other intangible assets	10,435	13,652
Investments in associates	332	321
Deferred tax assets	359	3,648
Other non-current assets	557	553
Non-current financial assets	257		232
Total non-current assets	124,989	246,473
Current assets
Inventories	43,047	39,773
Income tax receivables	46	65
Trade and other receivables	16,767	15,340
Other current assets	8,168	6,982
Other current financial assets	430	363
Cash and cash equivalents	3,728		3,509
Total current assets	72,186		66,032
Total assets	197,175	312,505
Equity and liabilities
Equity
Common shares	4,163	4,163
Preferred shares	840	840
Treasury shares	(907)	(63)
Additional paid-in capital	23,410	24,434
Accumulated other comprehensive income (loss)	1,740	(848)
Accumulated deficit	(289,561)		(273,754)
Equity attributable to equity shareholders of Mechel PAO	(260,315)	(245,228)
Non-controlling interests	13,078		11,631
Total equity	(247,237)	(233,597)
Non-current liabilities
Loans and borrowings	2,646	7,205
Lease liabilities	4,057	7,002
Other non-current financial liabilities	1,931	48,303
Other non-current liabilities	267	105
Pension obligations	5,264	4,933
Provisions	4,247	5,238
Deferred tax liabilities	10,478		13,877
Total non-current liabilities	28,890		86,663

Current liabilities
Loans and borrowings, including interest payable, fines and penalties
on overdue amounts of RUB 13,355 million and RUB 11,111 million
as of September 30, 2020 and December 31, 2019, respectively	326,177	381,317
Trade and other payables	44,269	38,244
Lease liabilities	8,075	10,353
Income tax payable	10,072	9,161
Taxes and similar charges payable other than income tax	13,155	9,228
Advances received and other current liabilities	5,391	5,816
Other current financial liabilities	318	147
Pension obligations	621	615
Provisions	7,444		4,558
Total current liabilities	415,522		459,439
Total liabilities	444,412		546,102
Total equity and liabilities	197,175	312,505

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the nine months ended September 30, 2020

(All amounts are in millions of Russian rubles)
Nine months	Nine months
ended September	ended September
30,	30,
2020	2019
(unaudited)	(unaudited)

Cash flows from operating activities

(Loss) profit for the period from continuing operations

Profit (loss) after tax for the period from discontinued operations

(Loss) profit for the period

Adjustments to reconcile profit to net cash provided by operating activities

Depreciation and amortisation Foreign exchange loss (gain), net Deferred income tax expense (benefit)

Changes in allowance for expected credit losses and write-off of trade and other receivables and payables, net

Write-off of inventories to net realisable value

Impairment of goodwill and other non-current assets, net and loss on write-off of non-current assets

Finance income

Finance costs including fines and penalties on overdue loans and borrowings and lease payments

Provisions for legal claims, taxes and other provisions Gain on sale of the discontinued operations

Other

(57,268)	18,144
41,609	(4,717)
(15,659)	13,427
10,813	11,268
44,026	(15,889)
6,348	(2,146)
444	264
814	1,663
4,073	615
(769)	(534)
21,352	29,439
3,050	2,922
(45,580)	-
154	16

Changes in working capital items
Trade and other receivables	(828)	(2,490)
Inventories	(3,988)	(1,706)
Trade and other payables	1,220	3,393
Advances received	(646)	(822)
Taxes payable and other liabilities	5,964	4,025
Other assets	(943)	1,200
Income tax paid	(855)	(2,068)
Net cash provided by operating activities
28,990	42,577
Cash flows from investing activities
Interest received	21	67
Royalty and other proceeds associated with disposal of subsidiaries	-	17
Proceeds from loans issued and other investments	39	313
Proceeds from disposal of the discontinued operations, net of cash
disposed	88,979	-
Proceeds from disposals of property, plant and equipment	40	211
Purchases of property, plant and equipment	(3,694)	(4,499)
Interest paid, capitalised	(49)		(194)
Net cash provided by (used in) investing activities	85,336		(4,085)

Cash flows from financing activities

Proceeds from loans and borrowings, including proceeds from factoring arrangement of RUB 33 million and RUB 478 million for the nine months ended September 30, 2020 and 2019, respectively Repayment of loans and borrowings, including payments from factoring arrangement of RUB 168 million and RUB 2,066 million for the nine months ended September 30, 2020, and 2019, respectively Repurchase of common shares

Proceeds from sale of non-controlling interest in subsidiaries Dividends paid to shareholders of Mechel PAO Dividends paid to non-controlling interests

Interest paid, including fines and penalties Repayment of lease liabilities

Effect of sale and leaseback transactions Deferred payments for acquisition of assets

Deferred consideration paid for the acquisition of subsidiaries in prior periods

Net cash used in financing activities

Foreign exchange loss (gain) on cash and cash equivalents, net Changes in allowance for expected credit losses on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents, net of overdrafts at beginning of period

Cash and cash equivalents at end of period

Cash and cash equivalents, net of overdrafts at end of period

19,115	7,008
(113,125)	(16,511)
(844)	-
104	-
-	(1,515)
(3)	(7)
(18,592)	(23,724)
(1,813)	(1,615)
510	243
(477)	(213)
-		(361)
(115,125)		(36,695)
354	(592)
(25)		4
(470)		1,209
3,509		1,803
2,867		380
3,728		2,947
2,397	1,589

There were certain reclassifications to conform with the current period presentation. These interim condensed consolidated financial statements were prepared by Mechel PAO in accordance with IFRS and have not been audited by the independent auditor. If these interim condensed consolidated financial statements are audited in the future, the audit could reveal differences in our consolidated financial results and we cannot assure that any such differences would not be material.