FULL YEAR 2010 RESULTS PRESENTATION · Ferroalloys prices followed market trends in 4Q10: FeSi domestics sales increased due to better pricing environment from 47% to 74% y-o-y $60

FULL YEAR 2010 RESULTS PRESENTATION APRIL 11, 2011

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

55% 57% 58% 57%

30% 31% 33% 32%

9% 7% 5% 7% 6% 5% 4% 4%

FY09 FY10 3Q10 4Q10

EBITDA(1) BY SEGMENTS

42

172

9 22 9

254

113

428

33 5

-46

532

127

452

12 12 17

620

132

416

40 21 0.6

609

Steel Mining Ferroalloy Power Cons.adj. Consolidated

SEGMENTS OVERVIEW

REVENUE FROM THIRD PARTIES EBITDA BY SEGMENTS

$ 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 and gain/loss from remeasurement of contingent liabilities at fair value

$ Mln 1Q10 1Q10 1Q10 1Q10

5,754 9,746 2,645 2,770

21%

71%

3% 5%

2009 2010

Revenue split between the segments remains comparable to 2009

EBITDA margin up to 21% of the Revenue

Mining, steel and ferroalloys demonstrate highest EBITDA dynamics

Steel increases its share in consolidated EBITDA to 21%

4

CASH COSTS, US$/TONNE COS STRUCTURE

365 382 385 473 479 496 465 472 489

435 442 459

Billets Wire Rod Rebar

1Q10 2Q10 3Q10 4Q10

REVENUE, EBITDA(1)

STEEL SEGMENT PERFORMANCE


68% 78%

12% 9% 15% 9%

4% 2%

FY09 FY10

Other

Depreciation

Energy

Staff costs

Raw materials and purchased goods

$2,664 mn $4,727 mn

5

$ Mln

3,143

5,586

1,536 1,566

159

247

61 78 3%

7%

8% 8%

0%

3%

6%

9%

12%

15%

0 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000

FY09 FY10 3Q10 4Q10

Segment’s Revenue up 78% to $5.6 bn y-o-y

Net loss of $262 mn for 2009 turns into a Net income of $91 mn in 2010

Cash costs kept under control

Over 4 times growth of Segment’s EBITDA y-o-y

Growing EBITDA(1) margin despite rising input prices

Revenues Intersegment revenues Adj. EBITDA margin (rhs)

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

EXTERNAL SALES STRUCTURE

STEEL SEGMENT PERFORMANCE


Improved pricing environment across most of our steel products q-o-q

23% q-o-q growth in Flat steel sales after the launch of the 2nd slab caster in Chelyabinsk

Ongoing modernization led to a 38% y-o-y growth in HVA sales volume-wise

MSG’s sales reached 3 bn tonnes in 2010

27% of Segment’s Revenue in 2010 generated by resale operations

22% 27% 28% 28%

28% 21% 21% 17%

15% 13% 13% 12%

5% 5% 4%

5%

3% 6% 4% 5%

9% 9% 8% 10%

7% 6% 5% 5%

5% 5% 5% 4%

6% 8% 12% 14%

FY09 FY10 3Q10 4Q10

Other Stainless products Forgings and stampings Engineering steel Alloyed long Carbon and low-alloyed flat Hardware Rebar Semi-finished

50% 55% 56% 55%

19% 18% 18% 20%

6% 3% 1% 8% 7% 6% 7%

16% 15% 15% 16% 1% 2% 4% 2%

FY09 FY10 3Q10 4Q10

Other Middle East CIS Asia Europe Russia

378 483 644

730 567

1,693

510 619

796 837 662

2,050

487

610

812 854 693

1,861

534 631

893 869 670

2,117

Billets Rebar Engineering steel

Wire Carbon flat Forgings and stampings

1Q10 2Q10 3Q10 4Q10

6

1,713

3,051

871 893

399

805

207 211 21%

38% 42%

38%

0%

10%

20%

30%

40%

50%

60%

0

800

1,600

2,400

3,200

4,000

FY09 FY10 3Q10 4Q10

MINING SEGMENT PERFORMANCE

Significant improvement in financial results: • Revenue up 78% y-o-y • EBITDA(1) more than 3x up y-o-y • EBITDA margin reaches 38%

Cash costs slightly up on seasonal factors

CVR extinguishment cancels contingent payment obligations with respect to Bluestone acquisition


REVENUE, EBITDA(1)


34 31 36

89

27 26 30

87

26 27 33

91

32 29 40

86

Coal SKCC Coal YU Iron Ore Bluestone

1Q10 2Q10 3Q10 4Q10

47% 50%

20% 17%

9% 9% 17% 15% 7% 9%

FY09 FY10

Other

Depreciation and depletion Energy

Staff costs


$1,271 mn $1,739 mn

7

$ Mln Revenues Intersegment revenues Adj. EBITDA margin (rhs)



MINING SEGMENT PERFORMANCE

Coking coal sales increased 170% y-o-y and reached 48% of Segment’s Revenue in 2010

Anthracite and PCI sales up 10x to 10% of Segment’s Revenue in 2010

Coke sales up 160% y-o-y or 12% of Segment’s revenue in 2010

Steam coal sales dwindle in line with the Company’s policy to concentrate on metallurgical coal 31%

48% 48% 53% 2%

10% 10% 10%

8%

12% 10% 12%

36%

12% 13% 10% 14% 11% 11% 7%

9% 7% 8% 8%

FY09 FY10 3Q10 4Q10

Other Iron ore Steam coal Coke Anthracites and PCI Coking coal

235

128

86

39 57

329

164

114 61

97

307

147 119

71 85

319

158

112 70 86

Coking coal Steam coal Iron ore

4Q10 1Q10 2Q10 3Q10

Coke Anthracites and PCI

34% 32% 30% 32%

17% 18% 15% 15%

1% 8% 8% 13%

15% 13% 18% 9%

22% 22% 22% 23% 5% 3% 2% 3% 4% 4% 5% 5%

FY09 FY10 3Q10 4Q10

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

8

FERROALLOYS SEGMENT PERFORMANCE


REVENUE, EBITDA(1)


EBITDA(1) up 2.7x to $94 mn y-o-y

EBITDA(1) margin grew from 8% in 2009 to 15% in 2010

EBITDA(1) margin in 4Q10 reached record level of 23%

Cash costs in Cr improve as mining works at Voskhod recover

364

455

103 125

67

174

48 49

8%

15%

8%

23%

0%

5%

10%

15%

20%

25%

-50

50

150

250

350

450

550

FY09 FY10 3Q10 4Q10

54% 53%

11% 9%

19% 18%

12% 12% 4% 8%

FY09 FY10

Other

Depreciation and depletion Energy

Staff costs


16,987

633 1,661

18,618

616

2,214

17,868

706

2,336

18,811

734

2,107

Nickel Ferrosilicon Chrome

1Q10 2Q10 3Q10 4Q10 $392 mn $534 mn

9

$ Mln Revenues Intersegment revenues Adj. EBITDA margin (rhs)


18,407

1,193 1,893

22,039

1,477 2,663

20,164

1,424

2,470

22,714

1,692 2,580


FERROALLOYS SEGMENT PERFORMANCE

Ferroalloys prices followed market trends in 4Q10:

FeSi domestics sales increased due to better pricing environment from 47% to 74% y-o-y

$60 mn non-cash write-up in deferred income tax due to a change in Kazakh corporate tax law 52% 55% 53% 62%

18% 20% 23% 20%

26% 21% 21% 14%

FY09 FY10 3Q10 4Q10

Other Chrome ore Chrome Ferrosilicon Nickel

Nickel Ferrosilicon Chrome

15% 24% 25% 28%

70% 61% 59% 62%

12% 9% 8% 4% 3% 6% 8% 6%

FY09 FY10 3Q10 4Q10

Other Asia Europe Russia

10

•  Ni up 13% •  FeSi up 19% •  Cr up 4%

4Q10 1Q10 2Q10 3Q10

POWER SEGMENT PERFORMANCE

AVERAGE ELECTRICITY SALES PRICES AND CASH COSTS, US$/MWH COS STRUCTURE

REVENUE, EBITDA(1)


$ Mln

Electricity market liberalization helped Revenue grow 22% to $654 mn y-o-y

EBITDA (1) margin increased from 5% in 2009 to 7% in 2010

Net income grew over 9x y-o-y

Acquisition of Toplofikatsia Rousse in Q4 2010 offers opportunity in the European electricity market and extends steam coal value chain

534 654

135 186

339

409

95 105

6% 6% 5%

7%

-4%

0%

4%

8%

12%

-100

100

300

500

700

900

1,100

FY09 FY10 3Q10 4Q10

93% 93%

FY09 FY10

Other

Depreciation

Staff costs


$643 mn $763 mn

11

Revenues Intersegment revenues Adj. EBITDA margin (rhs)

IMPROVING FINANCIAL PERFORMANCE

REVENUE DYNAMICS REVENUE, EBITDA(1) AND NET PROFIT

$ 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 and gain/loss from remeasurement of contingent liabilities at fair value

$ Mln

69% growth in Revenue to $9.7 bn

EBITDA(1) grew 3x to $2.0 bn

EBITDA(1) margin doubled from 12% to 21%

Consolidated Net Income up 9x to $657 mn

Sensible improvement in 2010 financial performance y-o-y:

1,900

2,431 2,645

2,770

254 532

620 609

83 38

341 195

13%

22% 23% 22%

0%

10%

20%

30%

40%

0

500

1,000

1,500

2,000

2,500

3,000

1Q10 2Q10 3Q10 4Q10

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

margin (rhs)

12

CASH GENERATION CAPACITY

OPERATING CASH FLOW NET CASH FLOW

$ Mln $ Mln

Operating CF continued to recover despite heavy investment into working capital of trading operations

Exceedingly improving economics facilitated capital raising for the ambitious investment program, which incurred over $1 bn of expenditure in 2010

$538 mn cash and cash equivalents as of December 31, 2010

2009 2010

562

(147)

(710)

(1,119)

375

1,210

Operating activities Investment activities Financial activities

562

-97 -159

52 56

10%

-5% -7%

2% 2%

-10%

-5%

0%

5%

10%

(1,000)

(500)

0

500

1,000

2009 1Q10 2Q10 3Q10 4Q10

Operating cash flow (left scale)

13

DEBT PROFILE

DEBT PROFILE AS AT DECEMBER 31, 2010 LOANS REPAYMENT SCHEDULE AS AT DECEMBER 31, 2010

$ Mln

FINANCIAL RATIOS

$ Mln 1st successful refinancing of $2 bn syndicated facility post crisis in September 2010

RUR10 bn of 10 year bonds (with 3 year put option) with a coupon 8.25% placed in Feb. 2011 to refinance short-term debt

$1.8 bn of unutilized committed credit lines as of March 2011

Credit portfolio evenly split between RUR and US$ reflecting revenue in these currencies

Other Less then 1%

EUR 6% RUR 48%

USD 46%

254

532

620 609

6.0

3.0 2.6

3.5 2.1

3.3 4.4

5.1

0

2

4

6

8

10

0

200

400

600

1Q10 2Q10 3Q10 4Q10

Adj. EBITDA (lhs) Net Debt / Adj. EBITDA for covenants testing (rhs) Adj. EBITDA/Interest expense, net, per quarter (rhs)

1,463

642

328

328

328 328

287

748

1,078

1,789

2011 2012 2013 2014 and after

Repayment of other term loans (incl. capex financing)

RUB Сommercial papers and bonds (incl. put options)

Renewable working capital and trade finance lines

14

Revenue 2,770 2,645 5%

Cost of sales (1,767) (1,623) 9%

Gross margin 36.2% 38.7%

Operating profit 496 481 3%

Operating margin 17.9% 18.2%

Adjusted EBITDA(1) 609 620 - 2%

Adjusted EBITDA(1) margin 22.0% 23.4%

Net Income 195 341 - 43%

Net Income margin 7.0% 12.9%

Sales volumes(2), ‘000 tonnes

Mining segment 5,526 5,764 - 4%

Steel segment 1,906 1,968 - 3%

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 and gain/loss from remeasurement of contingent liabilities at fair value

(2)  Includes sales to the external customers only

US$ MILLION UNLESS OTHERWISE STATED 4Q10 3Q10 CHANGE, %

15

Documents

FULL YEAR 2010 RESULTS PRESENTATION · Ferroalloys prices followed market trends in 4Q10: FeSi domestics sales increased due to better pricing environment from 47% to 74% y-o-y $60