Mechel · RUS:MTLR
Mechel — 9M 2006 Earnings Presentation
17 slides from Mechel's earnings presentation, Nov 28, 2006
Slide 1: 9 Months Results Presentation
9 Months Results Presentation November 28, 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
Uh MECHEL a Introduction and Overview
Slide 4: Results Overview
Results Overview Record financial results - net profit for 9M06 is almost equal to net profit for the whole year 2005 Net income in 9M06 was $372 million on revenues of $3.1 billion Consolidated EBITDA margin of 21.3% Further expansion in the steel segment: acquisition of Moscow Coke & Gas p
Slide 5: 9M 2006: Mining Segment
9M 2006: Mining Segment Operating income of $190.5 million on Revenue by product, 9M06 revenues of $975.4 million. Steam Coal EBITDA margin of 21.4 %* 25% Nickel 18% Mining segment EBITDA represented 39% of consolidated EBITDA Iron Ore Concent Strong segment output growth rate 12% Nickel o
Slide 6: 9M 2006: Steel Segment
9M 2006: Steel Segment Revenues from 3rd parties of $2,166 Revenue by product, 9M06 million in 9M06 Other Flat Products 9% 7% Steel segment EBITDA constituted 61% Specialty of consolidated EBITDA Long Steel Products 6% Net income generated by the segment 43% Semi-Finished soared by 384% compar
Slide 7: Financial Review
Financial Review 7
Slide 8: 9M 2006 Financial performance
9M 2006 Financial performance Revenue EBITDA* 4,000 3,636 3,805 1,000 908 30% 3,142 2,910 800 726 3,000 669 569 (US$m) (US$m) 2,028 600 2,000 20% 400 341 1,000 200 0 0 10% 2003 2004 9M05 2005 9M06 2003 2004 9M05 2005 9M06 EBITDA EBITDA margin, % Net profit * Total assets 600 543 20% 5,000 90% 4,222
Slide 9: 9M 2006 Financial performance by quarters
9M 2006 Financial performance by quarters Net Profit – EBITDA margin Strong positive trend in profitability 190 200 growth 170 35% 150 119 (US$m) 25% 100 Two consecutive quarters of 74 71 66 63 15% sustainable improvements in sales, 50 net profit and EBITDA 0 5% 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q0
Slide 10: Sales Structure
Sales Structure Revenue breakdown by region, 9M06 Sales Mix, 9M06 $3,142 m $3,142 m CIS 16% Asia Russia Non-Russia Non- Russia 8% 47% $1,663 m $1,479 m Middle 53% 47% East 6% Coal 20% ($633 m) Iron Ore 4% ($121 m) Europe Nickel 5% ($171 m) Billets, structurals 20% ($625 m) Russia 67% Other Rebar 17%
Slide 11: Segment operations
Segment operations Mining segment Steel segment 1,400 40% 3,000 40% 9M by quarters 75 9M by quarters 57 337 1,200 2,500 246 323 30% 15 30% 1,000 2,000 800 42 (US$m) (US$m) 20% 1,500 20% 2,757 2,710 600 1,095 185 975 2,166 878 1,000 5 400 95 5 76 10% 1,614 76 5 10% 362 500 853 200 414 324 749 289 564
Slide 12: 9M 2006 Cost Structure
9M 2006 Cost Structure Selling expenses share to sales decreased to 10% from 12% as a result of sales structure changes G&A expenses remain flat due to strict cost management Mining segment COS structure Steel segment COS structure 7% 4% 2% 8% Raw materials and Raw materials and 11% purchased go
Slide 13: Strong balance sheet to support growth
Strong balance sheet to support growth Operating cashflow $442 million net debt position provides 800 20% 16,3% significant financial flexibility to: 600 13.6% 15% — Fund capex program 619 427 400 8,1% 10% — Pursue value enhancing M&A 6,2% 5,9% opportunities 200 3,4% 296 5% — Considerably expand c
Slide 14: Solid financial position
Solid financial position Share of Unsecured Debt increased to 61% at 30.09.06 versus 52% at 31.12.05 Considerable improvement in maturity profile Debt/EBITDA ratio is considerable well below the target of 2.0 Debt to EBITDA ratio Maturity Profile 1.36 389 800 1.5 400 600 350 445 442 1.0 400 0.
Slide 15: Disciplined approach to spending
Disciplined approach to spending Key focus on efficiency improvement in steel segment and expansion of main facilities in mining segment Implementation of major projects on track Capital spending of $344 million in 9M06 versus $395 million in 9M05 Project Status Olzherasskaya Mine Completed in
Slide 16: 9M 2006 Results Overview
9M 2006 Results Overview $ million unless 9M 2006 9M 2005 Change, % otherwise stated Revenue 3,142 2,910 8% Cost of revenue (2,069) (1,852) 12% Operating income 483 452 7% EBITDA 669 569 17% EBITDA margin 21.3% 19.6% Net Income 372 315 18% Net Income margin 11.8% 10.8% EPS (USD per share) 0.92 0.78
Slide 17: WU Eo OE
4 WU Eo OE a del ie ee