Evraz Plc · LSE:EVR
Evraz — H1 2012 Earnings Presentation
35 slides from Evraz's earnings presentation, Aug 30, 2012
Slide 1: H1 2012 Financial and Operating Results
H1 2012 Financial and Operating Results 30 August 2012
Slide 2: Disclaimer
Disclaimer This document 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 EVRAZ plc (“EVRAZ”) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.)
Slide 3: Agenda
Agenda HSE Performance Overview of H1 2012 Results Liquidity and Financial Position Operations by Segment Update on Investment Projects Key Market Developments and Outlook H1 2012 Financial and Operating Results 2
Slide 4: HSE Performance
HSE Performance Increase in LTIFR and FIFR vs. H1 2011 Lost Time Injury Frequency Rate (LTIFR) Safety remains a key priority 0.94 Key ongoing safety initiatives: 0.81 Contractor safety management Fall prevention (follow 6S project) PPE (Personal Protective Equipment) Improvement in wor
Slide 5: Overview of H1 2012 Results
Overview of H1 2012 Results
Slide 6: H1 2012 summary
H1 2012 summary US$ million unless otherwise stated H1 2012 H1 2011 Change Revenue 7,619 8,380 (9)% EBITDA1 1,175 1,629 (28)% EBITDA margin 15.4% 19.4% (21)% Net profit/(loss) (50) 263 (119)% Dividends for the period (cents/ordinary share) 11c 6.7c 64% Operating cash flow 1,089 1,594 (32)% Capex 565
Slide 7: H1 2012 financial highlights
H1 2012 financial highlights Consolidated revenue by segment, $m The major factor of the decrease in revenue was reduced steel sales volumes and prices 8,380 482 Decrease in revenues and EBITDA was also 320 541 7,619 2,040 263 a result of lower Mining segment contribution 1,383 Other operations
Slide 8: Net profit reconciliation
Net profit reconciliation $m 20 62 12 10 0 -10 -20 -30 -40 -50 (50) -60 Reported Net loss Special item: impairment due to reduced pricing outlook Net profit w/o special items H1 2012 Financial and Operating Results 7
Slide 9: Group cost dynamics
Group cost dynamics EVRAZ benefits from high level of vertical integration in iron ore and coking coal Costs positively impacted by rouble devaluation (more than 50% of the costs are rouble-denominated) Steel segment costs benefited from lower raw materials prices: costs of raw materials accou
Slide 10: Liquidity and Financial Position
Liquidity and Financial Position
Slide 11: Liquidity and debt maturity profile
Liquidity and debt maturity profile Total debt of $7,833m as of 30 June 2012, having increased as a result of drawing on available credit lines to increase the cash balance Cash and cash equivalents totalled $1,763m ($801m as at 31 December 2011) $600m 5-year notes issued in April 2012 at 7.4%
Slide 12: FCF Generation
FCF Generation Free cash flow generation of $362m Further release of working capital achieved 1,175 91 $m 1,132 1,089 (43) (134) (233) 92 362 (21) (565) EBITDA H1 Non-cash items EBITDA (excl. Changes in Income tax paid Cash flows from Net interest paid Capex CF from Collateral under Free cash fl
Slide 13: Operations by Segment
Operations by Segment
Slide 14: Steel: CIS
Steel: CIS Full economic utilisation of Russian steelmaking capacity Steel product sales, domestic vs. export, Kt maintained Overall steel product sales were flat y-o-y with higher sales 5,541 5,586 of construction products Rail sales volumes were negatively affected by planned 5- 32% 33% mont
Slide 15: Steel: North America
Steel: North America Demand in North America has remained strong and steel product sales were stable We have successfully expanded into high value added products (head hardened rails, premium connection OCTG tubes, heat treated seamless pipe) Record high steel output and sales of rails in H1 2
Slide 16: Steel: Europe, South Africa
Steel: Europe, South Africa H1 2012 EBITDA of European operations was $6m despite Steel product sales volumes, the weak economic environment European operations, Kt The loss making heavy section mill at EVRAZ Vitkovice 740 Steel was shut down effective from February 2012 109 EVRAZ Highveld lau
Slide 17: Mining: Coal
Mining: Coal Sales of coal products in H1 2012 decreased vs. H1 2011 Coal product sales, Kt due to lower steam coal volumes mined as a result of longwall 4,175* repositionings at both steam coal mines in Q1 2012 1,295 3,014 decreased volumes of external raw coal and increased 834 consumption o
Slide 18: Mining: Iron ore
Mining: Iron ore In H1 2012 total sales (intersegment and external) of iron ore products were 9.3 mt (-7.6% vs H1 2011) due to decreased use of external raw iron ore in concentrate production in 2012 and destocking at Sukha Balka in H1 2011 Cash costs decreased in line with rouble depreciation
Slide 19: Vanadium
Vanadium EVRAZ’s external sales of vanadium products decreased vs. Ferrovanadium prices (FeV), $/kg contained V H1 2011 by 17% to $251m, primarily due to lower prices As a result of operational improvements EVRAZ Vanady-Tula achieved record productivity levels of 40 tonnes of V2O5/day during H1
Slide 20: Update on Investment Projects
Update on Investment Projects
Slide 21: Key Investment Projects
Key Investment Projects Cumulative CAPEX by CAPEX in CAPEX in Total CAPEX 30.06. 2012 H1 2012 H2 2012, Project $m $m $m $m Project Project Targets Targets Project targets Iron ore Coal & coal & iron ore o Coal production of 2 mtpa Yerunakovskava VIII mine construction 390 81 47 150 o Start in Q1 201
Slide 22: Capex dynamics
Capex dynamics $m 1,400 1,281 1,200 1,103 1,000 H2 2012 capex 832 800 expected in the range of 600 565 $650-750m 441 400 200 - 2008 2009 2010 2011 H1 2012 Maintenance, Steel and other operations** Iron ore mine development Coal mine development * Investment projects * Investment into maintaining and
Slide 23: Key Market Developments and Outlook
Key Market Developments and Outlook
Slide 24: Recent market developments
Recent market developments Full utilisation of Russian steel making capacities continues EVRAZ selling prices, $/t Utilisation of non-Russian steelmaking capacities in 1,200 September: 1,100 1,000 ◦ EVRAZ North America: 90% 900 ◦ EVRAZ Highveld: 60% 800 700 ◦ EVRAZ Vitkovice Steel: 76% 600 500
Slide 25: Outlook
Outlook Global markets remain volatile resulting in ongoing uncertainty and low visibility in EVRAZ’s key markets Capacity utilisation remains high, finished goods inventories at our mills and sales network are low We expect our steel production volumes in Q3 2012 to be broadly in line with Q2
Slide 26: Summary
Summary H1 2012 results reflect worsening pricing environment for our products Continued investment in growth projects to bear fruit in the short-medium term Stable debt and liquidity position following continued focus on refinancing Outlook for H2 2012 remains challenging H1 2012 Financial
Slide 27: Appendix
Appendix
Slide 28: Global operating model
Global operating model 150 Russia/CIS 1,313 100 3,730 529 Europe 122 580 1,717 North America Asia 231 H1 2012 steel sales volume South America Africa H1 2012 steel sales volume by geography by product Africa and RoW Other 4% Tubular 4% 5% Semi- finished Russia & Asia CIS Steel mills 22% 22% Flat-rol
Slide 29: Revenue: geographic breakdown
Revenue: geographic breakdown H1 2011 H1 2012 Africa & Africa & Other RoW RoW Asian Other Asian 3% 3% 7% 9% Thailand 4% China Thailand 1% 3% China Middle East 1% Russia 3% 41% Middle East Russia 2% 40% Europe Europe 13% 10% Ukraine Americas Ukraine Americas 3% 4% 24% 22% Other CIS Other CIS 3% 4% H1
Slide 30: Steel products: sales by market
Steel products: sales by market Kt $m Kt 3,331 3,331 3,324 3,324 2,661 2,604 1,732 1,732 1,586 1,586 1,652 1,582 1,441 1,441 1,345 1,345 1,015 1,068 858858 758 632632 431431 406406 492 300300 275275 359 336 257 214 Russia Russia CISCIS Europe Europe Americas Americas Asia Asia Africa Africa & RoW &
Slide 31: Resilient and profitable asset base
Resilient and profitable asset base EBITDA, EVRAZ Russia, $m EBITDA, EVRAZ North America, $m 1,276 1,051 265 216 H1 2011 H1 2012 H1 2011 H1 2012 EBITDA, EVRAZ Ukraine, $m EBITDA, EVRAZ Europe, $m EBITDA, EVRAZ South Africa, $m 81 87 29 6 (3) H1 2011 H1 2012 (6) H1 2011 H1 2012 H1 2011 H1 2012 * Note
Slide 32: Cost Structure by Segment
Cost Structure by Segment Cost structure of Steel segment, $m Cost structure of Mining segment, $m 6,237 5,749 9% 8% Other 1,177 15% 3% 1,092 Energy 8% 9% 19% 4% 4% Depreciation 23% 6% 9% 11% 7% Staff Other 4% 13% 4% Transportation 5% Energy 17% 30% Semi-finished products 15% 16% Depreciation Other
Slide 33: EBITDA
EBITDA US$ million Six months ended 30 June 2012 2011 Consolidated EBITDA reconciliation Profit from operations 430 859 Add: Depreciation, depletion and amortisation 668 501 Impairment of assets 80 32 Loss on disposal of property, plant & equipment 25 17 Foreign exchange (gain) loss (28) 220 Consoli
Slide 34: Net debt
Net debt US$ million 30 June 2012 31 December 2011 Net debt calculation Add: Long-term loans, net of current portion 6,271 6,593 Short-term loans and current portion of long-term loans 1,531 613 Finance lease liabilities, including current portion 31 39 Less: Short-term bank deposit 0 (2) Cash and c
Slide 35: Thank you!
London +44 207 832 8990 Moscow +7 495 232 1370 [email protected] www.evraz.com Thank you! 30 August 2012