Mechel · RUS:MTLR
Mechel — H1 2006 Earnings Presentation
14 slides from Mechel's earnings presentation, Oct 11, 2006
Slide 1: 2006 First Half Results Presentation
2006 First Half Results Presentation October 11, 2006
Slide 2: Disclaimer
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 acti
Slide 3: Introduction and Overview
“ MECHEL ——e Introduction and Overview
Slide 4: Results Overview
Results Overview Net income in 1H06 was $181.7 million on revenues of $1.93 billion Consolidated EBITDA margin of 17.9% Actions to further expand mining segment – commissioning of Olzherasskaya mine Efficiency improvement programs in the steel segment yielding positive results, as EBITDA mar
Slide 5: 1H 2006: Mining Segment
1H 2006: Mining Segment Operating income of $96.4 million on revenues of $613.5 million. Revenue by product, 1H06 Steam Coal EBITDA margin of 19.2%* 25% Nickel 14% Mining segment EBITDA represented 42.6% of consolidated EBITDA Iron Ore Concent Sales to 3rd parties increased to 80.2% of total
Slide 6: 1H 2006: Mining Segment
1H 2006: Mining Segment Implementation of strategy in the mining segment Commissioning of Olzherasskaya mine – increased coal output by 1.8 million tonnes in 2007 and by 3 million tonnes annually starting from 2010 Erunakovskaya mine – construction to begin in 4Q 2006. Increased annual coal extr
Slide 7: 1H 2006: Steel Segment
1H 2006: Steel Segment Revenues from 3rd parties of $1,313 million in Revenue by product, 1H06 1H06 Other Flat Products 8% 6% EBITDA margin of 15.1%* Specialty Long Steel Steel segment EBITDA constituted 57.4% of Products 8% consolidated EBITDA 41% Semi-Finished Net income generated by the s
Slide 8: 1H 2006: Steel Segment
1H 2006: Steel Segment Implementation of strategy in the steel segment Chelyabinsk Metallurgical Plant: — Sinter plant commissioned in full: savings in 1H 2006 – $10.3 million, expected for FY 2006 – $ 38.5 million — Concaster #4 to be commissioned in 4Q 2006 Beloretsk Metallurgical Plant: — Mod
Slide 9: Financial Review
“ MECHEL Financial Review
Slide 10: Financial performance
Financial performance Revenues EBITDA* 4 000 3 636 3 805 1 000 908 30% 3 000 800 726 (US$m) 2 028 (US$m) 1 927 600 2 000 20% 1 314 341 345 1 020 400 207 1 000 200 106 0 10% 0 2001 2002 2003 2004 2005 1H06 200120022003200420051H06 EBITDA EBITDA margin Net profit * Total assets 600 543 44% 5 000 3 934
Slide 11: Segment operations
Segment operations Mining segment Steel segment 1 400 60% 3 000 60% 450 57 337 1 200 50% 2 500 50% 1 000 450 40% 2 000 40% 800 42 (US$m) (US$m) 152 30% 1 500 30% 2 757 10 2 710 600 1 095 39 185 20% 1 000 20% 878 400 1 614 70 613 1 313 10% 500 1 012 10% 200 414 340 303 680 0 0% 0 0% 2001 2002 2003 20
Slide 12: Strong balance sheet to support growth
Strong balance sheet to support growth Operating cashflow Sound cash flow generation 800 20% 16.3% Strong balance sheet 600 15% 619 US$122 million net debt position 13.9% 400 8.1% 10% provides significant financial 267 6.2% 5.9% flexibility to: 3.4% 296 200 5% — Fund capex program 35 119 0 81
Slide 13: Disciplined approach to spending
Disciplined approach to spending 2006-2010 Capex program 2006-2010 Capex breakdown US$m Comments Mining Coal 680 Mine development: Olzherasskaya, Erunakovskaya-1, Mining Steel Sibirginsk 68% 32% Construction of Sibirginsk washing plant Mining equipment Iron ore 70 Mine development: Krasnoyar
Slide 14: Compelling investment case
Compelling investment case Low-cost vertically Strong mining business: integrated producer, 2nd largest coking coal almost fully self- producer and the largest sufficient in key raw exporter materials NYSE-listed, Strong platform for Commitment to highest growth supported by corporate governance con