MOSCOW, July 7 /PRNewswire-FirstCall/ -- Mechel OAO (NYSE: MTL), a
leading Russian integrated mining and steel company, today announced
preliminary(1) financial results for the first quarter ended March 31,
2008.

    Consolidated net revenue in the first quarter of 2008 is expected to
exceed $2.3 billion, an increase of more than 60% when compared with
consolidated net revenue of $1.4 billion in the first quarter of 2007.
Consolidated net income in the first quarter of 2008 is expected to be
about $500 million, an increase of approximately 160% when compared with
consolidated net income of $190 million in the first quarter of 2007.
Consolidated gross profit is expected to exceed $1.0 billion, an increase
of 97% when compared with gross profit of $545 million in the corresponding
period of 2007, and consolidated operating income is expected to exceed
$630 million, an increase of approximately 100% over consolidated operating
income of $302 million in the first quarter of 2007. Consolidated EBITDA is
expected to exceed $850 million for the first quarter of 2008 compared with
consolidated EBITDA of $340 million in the first quarter of 2007.
Consolidated EBITDA margin is expected to increase to over 36.5% in the
first quarter of 2008 compared to 24% in the 2007 first quarter.

    Net debt to EBITDA ratio is expected to be approximately 1.45 in the
first quarter of 2008 compared to 0.14 in the first quarter of 2007.

    Igor Zyuzin, Mechel's Chief Executive Officer, commented: "Mechel
continues to rapidly grow its business and again expects to achieve record
financial results. Our expected performance in the 2008 first quarter
reflects the successful execution of our strategy, focused on the
development of the mining segment through both organic growth and
acquisitions, as well as the realization of efficiencies in the steel
segment from facility modernization, cost savings and product line
optimization initiatives. Mechel's strong performance in the first quarter
was also due to favorable pricing trends in our major markets."

    Mining Segment Preliminary Results

    Mining segment revenue from external customers in the first quarter of
2008 is expected to exceed $850 million, an increase of over 105% from
segment revenues of $409.3 million in the first quarter of 2007. The mining
segment net income in the first quarter of 2008 is expected to amount to
over $300 million, an increase of over 170% compared to net income of $107
million in the corresponding period of 2007. Gross profit is expected to
exceed $600 million, an increase of over 110% compared to gross profit of
$280.6 million in the corresponding period of 2007, and operating income is
expected to exceed $410 million, an increase of over 130% compared to
operating income of $176.6 million in the first quarter of 2007. Mining
segment EBITDA in the first quarter of 2008 is expected to be not less than
$510 million, an increase of over 150% compared to EBITDA of $198.3 million
achieved in the previous year's first quarter. EBITDA margin is expected to
increase to more than 49% in the first quarter of 2008 compared with 34.4%
in the first quarter of 2007. (EBITDA margin is calculated as a percentage
of consolidated revenues of the segment, including intersegment sales.)

    Vladimir Polin, Mechel Management Company's Chief Executive Officer,
commented on the mining segment operating results: "Our anticipated
financial results for the mining segment, which will represent another
record for the Company, are due in part to the acquisition of Yakutugol at
the end of 2007. Compared with the corresponding period in 2007, coal
production in the first quarter of 2008 rose over 60%. Furthermore, coking
coal production was the main driver of our performance, with production
increasing 94% compared to the first quarter of last year. Segment results
were also positively affected by increased capacity in Mechel's Port Posiet
terminal operation, where capacity in the 2008 first quarter was increased
by over 50% due to operational improvements. We also benefited from a
favorable price environment for coal products due to the fact that
significant demand and a supply imbalance appeared in consequence of
environmental and infrastructural problems. The mining segment saw coal
pricing growth over the past six months, and looking forward we anticipate
the existing price environment to continue given infrastructural restraints
in the market. We also expect to benefit from the results of our capital
expenditure program, gradually increasing mining segment production volumes
and continuing to achieve strong results throughout the year."

    Steel Segment Preliminary Results

    Revenue from external customers in Mechel's steel segment in the first
quarter of 2008 is expected to be approximately $1.27 billion, an increase
of over 28% compared to $990 million in the first quarter of 2007. Net
income in the segment in the first quarter of 2008 is expected to be more
than $170 million, an increase of over 80% when compared with $90 million
in the previous year's first quarter. Gross profit is expected to exceed
$360 million, an increase of over 30% over $267.8 million in the
corresponding period of 2007, and operating income is expected to exceed
$195 million, an increase of approximately 50% over operating income of
$131 million in the first quarter of 2007. EBITDA in the steel segment is
expected to be over $320 million, two times the $146.3 million achieved in
the first quarter of 2007. EBITDA margin is expected to increase from 14.5%
in the previous year's first quarter to about 24% in the first quarter of
this year. (EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.)

    Commenting on operating results in the steel segment, Vladimir Polin
said: "Mechel continues to increase the proportion of its steel produced
using the continuous casting method, which has improved the effectiveness
of the segment's metallurgical plants. Our first quarter 2008 results will
reflect the significant progress we have made with continuous casting
compared to the same period last year, as the share of steel produced
through continuous casting amounted to some 30%, that led to reduced
materials consumption. As a result, Mechel increased steel products output
by 5% compared to the first quarter of the last year. Financial results in
the steel segment were also supported by considerable growth of steel
products prices due in part to rising raw material prices for steel
production. Modernization of our facilities and growth in sales of high
value added products were also contributors to our results during the 2008
first quarter and remain among the main priorities for Mechel in the steel
segment. We expect to achieve strong results by realizing the benefits of
our partner agreement with Russian Railways, which was signed earlier this
year. The agreement envisages construction of a universal rolling mill,
which is capable of producing high-quality rails of up to 100 meters long
at the Chelyabinsk Metallurgical Plant."

    Power Segment Preliminary Results

    Revenue in Mechel's power segment is expected to exceed $190 million,
an increase of about 10 times over revenue of $19.1 million in the first
quarter of 2007. It is expected that net income for the segment will amount
to approximately $15 million, an increase of more than six times net income
of $2.5 million reported in the first quarter of the last year. Gross
profit is expected to exceed $100 million, compared with $5 million in the
corresponding period of 2007, and operating income is expected to exceed
$27 million, an increase of approximately 670% over $3.5 million in the
first quarter of 2007. EBITDA in the power segment in the first quarter of
2008 is expected to amount to not less than $30 million, approximately
eight times higher than the $3.7 million reported in the first quarter of
2007. EBITDA margin rose to more than 11% in the first quarter 2008
compared to 9.1% in the first quarter 2007. (EBITDA margin is calculated as
a percentage of consolidated revenues of the segment, including
intersegment sales.)

    Commenting on the results of the power segment Vladimir Polin said:
"Electrical power volumes generated in the first quarter of this year far
exceed those of 2007 primarily based on the inclusion of the Southern
Kuzbass Power Plant into Mechel's structure. During last year we made a
number of acquisitions in the power business and this year we took steps to
develop the power assets management structure by consolidating of
power-generating facilities to our OOO Mechel-Energo subsidiary."

    Igor Zyuzin concluded: "Our anticipated financial results for the first
quarter of 2008 demonstrate the effectiveness of Mechel's integrated
business model and strategy, as well as a market environment that has
continued to be favorable, as well as our investments aimed at productivity
enhancements and increased output of high value added products. In the
first quarter we also moved forward with our plans to start construction of
a railroad to Elga coal deposit. The commencement of operations at this
deposit will enable Mechel to strengthen its position as one of the world's
coking coal market leaders. We believe that the record profit performance
and our operational progress have created a strong foundation for Mechel to
achieve good results for the full year."

    (1) This information is intended to provide disclosure to investors of
currently expected preliminary figures regarding our financial results for
the first quarter of 2008. The preliminary figures provided in this
statement are subject to change and may differ meaningfully from the final
figures. Final 2008 first quarter financial results will be issued in
mid-July when a review of the first quarter financial statements has been
completed.

    Mechel is one of the leading Russian mining and metals companies.
Mechel unites producers of coal, iron ore, nickel, steel, rolled products,
and hardware. Mechel products are marketed domestically and
internationally.

    Some of the information in this press release 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.

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