OMZ (pref) · RUS:OMZZP
OMZ (pref) — OMZ — FY2004 Earnings Presentation
36 slides from OMZ (pref)'s earnings presentation, June 2005
Slide 1: 2004 annual IFRS financial results
2004 annual IFRS financial results 11
Slide 2: 2004 results - macroeconomic context
2004 results - macroeconomic context • Negative factors – High inflation – Ruble appreciation in real terms – Significant increase in raw material prices (ferro-alloys) • Positive factors – Considerable growth in demand for our products due to high commodities prices 22
Slide 3: Income statement highlights
Income statement highlights $mln 2004 % 2003 % Change % Including: Organic Forex Disposal Acquisition Sales 523.8 100% 340.1 100% 183.7 +54% 87.5 15.9 (9.8) 90.1 Gross 102 19.5% 104.8 31% (2.8) -3% (4.6) (2.9) (4.2) 8.9 profit EBITDA 39.5 7.5% 32.4 9.5% 7.1 +22% 3.3 (7.6) 5.8 5.6 EBIT 21.8 4.2% 24.6
Slide 4: Pro-forma P&L excluding MNP and including Skoda for full year
Pro-forma P&L excluding MNP and including Skoda for full year $mln 2004 % Sales 626.6 100% Gross profit 103.4 16.5% EBITDA 41.1 6.6% EBIT 16.5 2.7% Profit for the year 107.4 17.2% 44
Slide 5: Change in sales by segment
Change in sales by segment $mln 2004 2003 Change % Including: Organic Forex Disposal Acquisition NPPEQ 146.0 117.6 28.4 +24% (0.3) 0.2 - 28.5 STEEL 180.5 103.3 77.2 +75% 15.7 7.3 - 54.2 MMEQ 160.1 105.2 54.9 +52% 51.9 6.6 (3.6) - MINEQ 96.3 46.5 49.8 +107% 44.0 5.8 - - Other 105.3 100.7 4.6 +4.6% (0
Slide 6: International sales
International sales Geographic 2004 2003 area Russia 252.0 203.8 CIS 31.7 9.7 Asia 157.4 108.7 Europe 81.2 14.2 Other 1.5 3.7 TOTAL 523.8 340.1 % of int’l 52% 40% sales 66
Slide 7: Reasons for sales growth
Reasons for sales growth • NPPEQ – Acquisition of Skoda JS • STEEL – Acquisition of Skoda Steel – Overall higher demand for specialty steel products, especially from China • MINEQ – Significant increase in demand for original equipment by Russian mining companies due to considerable increase in comm
Slide 8: Cost of sales
Cost of sales $mln 2004 2003 Change % Including: Organic Forex Disposal Acquisition Sales 523.8 340.1 183.7 +54% Materials and components used 246.3 55% 102.4 42% 143.9 +141% 96.9 15.1 (0.6) 32.5 Labour costs 72.0 16% 67.8 28% 4.2 +6% (2.6) 4.5 (5.7) 8.0 Gas and fuel 53.2 12% 38.3 15.5% 14.9 +39% 2.
Slide 9: Increase in metals prices hurt us
Increase in metals prices hurt us Динамика це н на ф е рро мо л иб д е н 60% в 2004г., Китай, на скл ад е Ро тте рд ам, Ло нд о нский СПОТ-рыно к, д о л л ./кг Мо Scrap Scrap metal metal prices, prices, ex-VAT, ex-VAT, US$/ton US$/ton Prices Prices of of ferromolybdenum, ferromolybdenum, LME LME spo
Slide 10: Our ability to pass on costs was limited
Our ability to pass on costs was limited Raw materials materials Customers: suppliers: * Strong * Few and large OMZ bargaining power * OMZ small buyer for them * Competitive environment Lag in passing on costs 10 10
Slide 11: Group profitability
Group profitability Million US$ 2004 2003 Operating profit before negative goodwill 11.4 31.8 Less gain from release of government tax (9.6) (2.7) penalties Plus (minus) impairment of PP&E 13.9 (7.3) Plus impairment of intangible assets 6.1 2.8 Plus depreciation & amortization 17.7 7.8 Total EBITDA
Slide 12: Other operating income/expenses
Other operating income/expenses Reflected in Million US$, note 26 2004 Description 2003 segment (2004) Profit from sale of non-core GTEK, ZSMK, Izhora- Unallocated items 21.4 14.7 subs Energosbit, Instrument (see segment report) Change in provision for Write-off of receivables Across segments impair
Slide 13: Profitability by segment
Profitability by segment 2004 2003 $mn Sales Gross Operating Gross Operating profit EBITDA Sales EBITDA profit profit profit NPPEQ 146.0 34.0 10.0 13.0 117.6 47.5 20.7 22.7 STEEL 180.5 18.2 (2.4) 6.3 103.3 12.0 1.1 2.6 MMEQ 160.1 19.3 (23.6) (2.3) 105.2 15.8 (0.7) (6.3) MINEQ 96.3 15.9 3.3 3.4 46.5
Slide 14: Change in profitability by segment
Change in profitability by segment Gross margin EBITDA margin Operating margin $mn 2004 2003 +/- 2004 2003 +/- 2004 2003 +/- NPPEQ 23% 40% - 9% 19% - 7% 18% - STEEL 10% 12% - 4% 3% + (1%) 1% - MMEQ 12% 15% - (1%) (6%) + (15%) 0% - MINEQ 16% 23% - 4% 6% - 3% 6% - Other 16% 17% - 6% 8% - 1% 2% - 14 14
Slide 15: Change in EBITDA by segment
Change in EBITDA by segment $mln 2004 2003 Change % Including: Organic Forex Disposal Acquisition NPPEQ 13.0 22.7 (9.7) -43% (9.9) (6.1) - 6.3 STEEL 6.3 2.6 3.7 +142% 4.3 - - (0.6) MMEQ (2.3) (6.3) 4.0 +63% 5.3 (1.5) 0.2 - MINEQ 3.4 2.8 0.6 +21% 0.4 0.2 - - Other 5.8 7.7 (1.9) -25% (1.0) 0.3 (1.2) -
Slide 16: Reasons for margin decrease
Reasons for margin decrease • NPPEQ – a) reassessment of cost to complete contracts based on growth of raw materials costs; b) revision of revenue due to changes in forward rates and c) completion of certain contracts – recognition of loss in last reporting period due to final total calculation of e
Slide 17: Uralmash – non cash losses
Uralmash – non cash losses Out of $23.6mn operating loss at MMEQ, $17mn relates to non-cash impairments MMEQ, other operating income, 2004 Million US$ Impairment of fixed assets (14.1) Impairment of intangibles (3.8) Gain on sale of non-core assets 1.3 Provision on inventory and other (0.4) Total (1
Slide 18: Management was limited in its efforts
Management was limited in its efforts Management took over an order book which had already been contracted with little or no opportunity for re-negotiating prices We focused on managing costs with success in several areas 18 18
Slide 19: SG&A
SG&A $mln 2004 2003 Change % Including: Organic Forex Disposal Acquisition Taxes 6.7 8.1% 9.4 11% (2.7) -28.7% (3.0) 0.4 (0.2) 0.1 Labour costs 45.3 54.5% 41.6 48.5% 3.7 +8.9% 1.4 2.7 (1.9) 1.5 Amortization of intangibles 1.1 1.3% - - 1.1 - 1.0 - - 0.1 Depreciation 2.3 2.8% 1.5 1.7% 0.8 +53% 0.3 0.1
Slide 20: Cost cutting vs ruble appreciation
Cost cutting vs ruble appreciation Ruble appreciation weakened the effect of our cost-cutting efforts $mln 2004 2003 Change % Organic component G&A 83.0 85.8 (2.8) -3.3% (8.6) -10% Selling 21.2 12.2 9.0 +73% 3.8 +31% Total SG&A 104.2 98.0 6.2 +6.3% (4.8) -4.9% 20 20
Slide 21: Working capital optimization
Working capital optimization • For the first time OMZ has a positive cash- flow from operations after changes in working capital • Initiatives for optimization of working capital: – Review of norms for WC requirements – Limits for WC established – Obsolete inventories identified and a plan for sale
Slide 22: Change in working capital
Change in working capital $mln 2004 2003 Change % Including: * Excl. financial and investing activities Organic Forex Disposal Acquisition Cash 24 8 16 +200% - - (3) 19 Trade receivables 221 133 88 +66% 57 2 (1) 30 Advances issued 104 46 58 +126% 14 2 (1) 43 Taxes receivable 73 63 10 +16% (1) 4 (4)
Slide 23: Key Ratios
Key Ratios Turnover (days) 31 Dec. 2004 31 Dec. 2003 Inventories 123 195 Trade accounts receivable 177 149 Trade accounts payable 207 229 Net WC (excl. cash) 122 124 23 23
Slide 24: Debt and interest dynamics
Debt and interest dynamics $mln 31 December’04 31 December’03 Long-term debt (incl. non-convertible 97.4 44% 43.5 18% bonds) Short-term debt 122.0 56% 195.0 82% Total debt 219.4 100% 238.5 100% 2004 2003 Average debt 229.0 174.3 Interest expense 26.6 20.5 Effective interest rate 11.6% 11.8% EBITDA t
Slide 25: Debt portfolio – cost and duration
Debt portfolio – cost and duration 1-Jan-05 10-June-05 Average duration 286 days 292 days of debt portfolio Cost of debt: US Dollars 7.88% 8.95% Rubles 10.53% 10.53% Euro 7.14% 7.01% 25 25
Slide 26: Debt portfolio – currency structure as of June 2005
Debt portfolio – currency structure as of 10 June ‘05 Euro 6% USD 39% Rubles 55% 26 26
Slide 27: Debt portfolio - repayment schedule
Debt portfolio - repayment schedule as of 10 June ‘05 Repayment period Amount to be repaid, million US$ Q2’05 7.3 Q3’05 61.7* Q4’05 51.7 Q1’06 42.7 Q2’06 17.6 Q3’06 8.7 Q4’06 6.3 Q1’07+ 60.6 TOTAL 256.6 ** Incl. Incl. ~$30mn ~$30mn of of 2009 2009 ruble ruble bonds bonds due due to to put-option put
Slide 28: Liquidity as of June 2005
Liquidity as of 10 June ‘05 US$ million Cash in bank 22.7 Deposits 20.1 Unused credit lines 19.2 Unused credit limits 70.8 Total 132.8 28 28
Slide 29: 2005 debt dynamics to date
2005 debt dynamics to date Debt as of 31 December 2004 219.4 - Debt refinanced 58.6 + Debt taken on incl. 95.8 Due from sales of non-core during 2004 9 Due to ASE non-payment (net effect $22mn) 45 Skoda (last pmt.) 21 Debt as of 10 June 2005 256.6 29 29
Slide 30: Order book as of April 2005
Order book as of 1 April 2005 Manuf. Services = 15% Total = US$767mn US$115mn Specialty Steel = 17% $128mn Mining Equipment = 10% US$77mn Nuclear Equipment = 58% $447mn 30 30
Slide 31: Currency structure of order book
Currency structure of order book US Dollars – 22% Czech Krona - 36% Rubles – 21% Euro - 21% 31 31
Slide 32: Maturity of the order book
Maturity of the order book Weighted average US$, mn 2005 2006 2007 2008 ’09-’14 Total duration, months MINEQ 69 8 - - - 77 4 NPPEQ 187 94 65 46 55 447 17 STEEL 125 3 - - - 128 2 MMEQ 96 19 - - - 115 6 TOTAL 477 124 65 46 55 767 12 32 32
Slide 33: Q1'05 preliminary results by segment
Q1’05 preliminary results by segment Q1 2005 2004 $mn Sales Gross profit Gross margin, % Gross margin, % NPPEQ 26.0 5.6 21.5% 23% STEEL 75.6 10.3 13.6% 10% MMEQ 30.7 4.0 13.0% 12% MINEQ, of which 29.2 5.9 20.2% 16% Original Equipment 19.9 3.5 17.6% Spare parts 9.3 2.4 25.8% Other 13.3 1.3 9.7% 16% I
Slide 34: OMZ 2005 budget by business segment
OMZ 2005 budget by business segment Division/ Manuf. Nuclear Mining Specialty key Services TOTAL Equip. Equip. Steel numbers + Other Sales (before 267 138 257 216 878 consolidation) External 267 138 214 141 760 sales Bus. Segment 30 14 27 7 78 EBITDA Group - - - - 65 EBITDA 34 34
Slide 35: Sale of non-core subs
Sale of non-core subs Sale price, Profit from Cash received Sold in 2004 US$ mn sale as of June’05 Instrument 7 4.4 7 GTEK 10 6 8.5 ZSMK 4.5 5.3 4.5 Energosbit 8 4 1.4 Other 3 1.6 1.5 Total ‘04 32.7 21.3 22.9 To be sold in 2005 Zarubezhenergoproekt 2 NA Equipment and real 6.5 NA estate - Izhora Equi
Slide 36: Opportunities for margin growth
Opportunities for margin growth • 2005 target for personnel reductions – 30% of middle management at Uralmash and Izhora • Further working capital optimization • Further non-core asset sales • Cost pass-on contracts with customers • Increase in outsourcing • Business process optimization • Increase