Nlmk · RUS:NLMK
Nlmk — Q2 2016 Earnings Presentation
29 slides from Nlmk's earnings presentation, Jul 27, 2016
Slide 1: Q2 2016 and 6M 2016 IFRS Results
Q2 2016 AND 6M 2016 IFRS RESULTS 27 JULY 2016
Slide 2: Disclaimer
DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the presentation of the Company and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. This document does no
Slide 3: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy update 3. Financial Highlights 5. Segment Results 5. Annex 3
Slide 4: Q2'16 Global Steel Market Trends
Q2’16 GLOBAL STEEL MARKET TRENDS • Global steel output up 6% qoq to 410 m t (-0,2% yoy) STEEL OUTPUT o China output grew by 9% qoq (+1% yoy) Mt 500 8% o World ex-China increased output by 3% qoq (-2% yoy) 450 407 418 408 403 399 411 395 385 386 410 400 210 • Chinese steel exports up 1.6 m t qoq to 2
Slide 5: Q2'16 NLMK Output and Sales
Q2’16 NLMK OUTPUT AND SALES • Group steel production grew by 6% qoq to a record SALES STRUCTURE level of 4.2 m t Mt o Significant production growth across all divisions 4.01 4.14 3.95 • Group capacity utilization up by 6 pp to 100% 1.14 1.12 1.28 o Growth in utilization rates across all divisions 1.
Slide 6: Q2'16 Highlights
Q2’16 HIGHLIGHTS • Financial performance improved in Q2’16 FINANCIAL PERFORMANCE o Revenue: $1,869 m (+19% qoq; -13% yoy) $M 3,000 30% o EBITDA: $460 m (+59% qoq; -4% yoy) 2,500 25% o EBITDA margin: 25% (+7 p.p. qoq; +3 p.p. yoy) 2,000 20% o Net profit: $185 m (3.3x qoq; +15 % yoy) 1,500 15% o Capex
Slide 7: Q3'16 Outlook
Q3’16 OUTLOOK • MARKET o Global market: seasonal slowdown in Q3 with diverging macro trends across the international markets, Chinese steel exports are expected to decrease as export prices declined from peak levels of Q2 o Russian market: seasonally strong demand backed by improving construction an
Slide 8: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy update 3. Financial Highlights 4. Segment Results 5. Annex 8
Slide 9: Strategy 2017: H1'16 Update
STRATEGY 2017: H1’16 UPDATE Leadership in o Achieve best-in-class operational efficiency 1 standards across production chain operational efficiency World-class o Scale up efficient iron ore mining platform 2 resource base o Reduce consumption of expensive resources o Increase market share in Russia/
Slide 10: Leadership in Operational Efficiency
1 LEADERSHIP IN OPERATIONAL EFFICIENCY • Continued growth of efficiency projects portfolio GROWING NUMBER OF EFFICIENCY PROJECTS o 350 new projects launched in 6M’16 +350 • 6M’16 savings: $37 m 2,164 1,949 1,817 • Russian Flat Products 1,623 1,613 1,460 o Productivity improvements: +191 k t of pig i
Slide 11: World Class Resource Base
2 WORLD CLASS RESOURCE BASE • Growth in low cost iron ore concentrate production IRON ORE OUTPUT GROWTH to feed new pellet plant mt 16.93 16.53 15.40 - Efficiency improvements: 16. 00 1.58 1.74 1.45 o Cumulative 2 m tpa of additional concentrate output 14. 00 12. 00 vs 2013 level 10. 00 8.54 8.66 o
Slide 12: Leadership in Strategic Markets
3 LEADERSHIP IN STRATEGIC MARKETS • 6M’16 Group sales reached all time high NLMK GROUP SALES, 6M’16 o Driven by sales growth in strategic markets and Product mix improved product mix 7.7 8.0 +2% 8.1 • 67% local sales in Russia, the EU and the US 33% International sales target end customers and value
Slide 13: Leadership in Sustainability and Safety
4 LEADERSHIP IN SUSTAINABILITY AND SAFETY • Relentless focus on safe operating practices LTIFR*, RUSSIAN ASSETS o Russian operations LTIFR* YTD 11% lower vs. 2015 o Continued focus on accidents and fatalities prevention o Improvement of employees’ H&S awareness, competence and motivation at all Grou
Slide 14: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy update 3. Financial Highlights 4. Segment Results 5. Annex 14
Slide 15: Q2'16 Profitability
Q2’16 PROFITABILITY • EBITDA up by 59% qoq to $460 m Q2’16/ Q1’16 EBITDA ANALYSIS o Due to widening price/cost spreads as sales prices recovered 600 .0 $M 16 • (+) Russian Flat Products 500 .0 60 - 27 o (+) Widening price spreads 46 400 .0 76 o (+) Cost efficiency programs 300 .0 200 .0 460 • (+) Ru
Slide 16: Cash Flow
CASH FLOW • Q2’16 Net Operating Cash Flow: $319 M Q2’16 CASH FLOW BRIDGE, $M o Working capital outflow of $61 m EBITDA 460 Normalizing of finished steel inventories at Russian Long Products segment Net working capital change -61 Seasonal increase of scrap inventories at Russian facilities Norm
Slide 17: Debt Position
DEBT POSITION • Improved maturity profile from 2.6 years to 3.3 years FINANCIAL DEBT CHANGE IN Q2’16 • New Eurobond issued at record low coupon rate 4 $ BN o $700 m Eurobonds with coupon 4.5% and maturity in 2023 2.80 3 2.67 0.09 0.04 o Refinanced of $571 m of existed Eurobonds with maturity 0.61 in
Slide 18: Liquidity and Debt Maturity Profile
LIQUIDITY AND DEBT MATURITY PROFILE • Strong liquidity position of $1.6 bn with LIQUIDITY AND ST-DEBT PAYMENTS* $M additional $1.1 bn of credit lines • Comfortable debt maturity profile 1,149 Available credit lines o ST debt $0.58 bn* incl. revolver lines for W/C financing, RUB bonds, short term par
Slide 19: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy update 3. Financial Highlights 4. Segment Results 5. Annex 19
Slide 20: Russian Flat Products
RUSSIAN FLAT PRODUCTS • SALES TO 3RD PARTIES DOWN BY 19% QoQ SALES & REVENUE FROM 3RD PARTIES o (-) Sales down due to hike in inter segment slab sales up to 64% qoq -19 % +7 % Other operations** 2.458 m t 1.988 m t $928 m $992 m Transformer o (+) 3rd party sales of HVA products up by 16% 4% 6% Dynam
Slide 21: Russian Long Products
RUSSIAN LONG PRODUCTS • SALES TO 3RD PARTIES UP BY 2% QoQ SALES & REVENUE FROM 3RD PARTIES o (+) Higher exports of billets and long products +2 % +51% 625 k t 635 k t $165 m $250 m • EXTERNAL REVENUE UP BY 51% QoQ 17% o (+) Increase in sales prices 27% 16% 19% Scrap and other** 10% 11% 10% 12% Bille
Slide 22: Mining
MINING • SALES VOLUMES DOWN BY 7% QoQ SALES AND REVENUE o Due to stock build up before starting production of pellets -7 % +36 % 4.303 m t 3.989 m t $ 107 m $145 m • REVENUE UP BY 36% QoQ 7% 7% 24% 25% Other o (+) Uptick in sales iron ore prices 21% 23% operations* o (-) Lower sales volumes Iron ore
Slide 23: Foreign Rolled Products
FOREIGN ROLLED PRODUCTS • SEGMENT SALES UP BY 12% QoQ SALES & REVENUE FROM 3RD PARTIES o (+) NLMK Dansteel sales +16% qoq +12% +26% o (+) NLMK USA sales +11% qoq 590 k t 663 k t $ 317 m $400 m 6% 6% 14% 14% Other operations* 16% 16% • SEGMENT’S PROFITABILITY IMPROVED 24% 22% Galvanized 26% 24% o (+)
Slide 24: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy update 3. Financial Highlights 4. Segment Results 5. Annex 24
Slide 25: Sales Structure
SALES STRUCTURE • Q2’16: SALES DECREASED BY 5% QoQ TO 3.95 MT SALES STRUCTURE BY PRODUCT o -5% qoq of semi-finished 4.01 4.14 M tonnes 3.95 Pig iron Slabs o +8% qoq high value added products 1.11 Billets 1.23 1.31 o +18% qoq Flats HRC Plates o +37% qoq Longs 0.91 0.99 0.90 CRC Galvanized • Q2’16: RE
Slide 26: Sales Geography
SALES GEOGRAPHY • GROUP SALES DOWN BY 5% QoQ STEEL PRODUCT SALES BY REGION • SALES TO RUSSIAN MARKET DECLINED 14% QoQ… 4.01 4.14 M tonnes 3.95 5 Others • … WHILE GLOBAL SALES INCREASED BY 1% QoQ 4 0.30 0.02 0.48 0.33 4 0.15 0.16 SE Asia 0.62 o +3% qoq in North America 3 0.60 0.62 0.40 0.36 N.America
Slide 27: Foreign Assets Performance
FOREIGN ASSETS PERFORMANCE SLABS SALES FROM RUSSIAN FLAT DIVISION NBH ROLLED PRODUCT SALES K tonnes K tonnes 614 1,705 644.28 642.99 641.70 577 1,630 640.41 1,625 639.12 QoQ 637.84 QoQ 636.55 635.26 633.97 632.68 631.39 630.10 628.82 627.53 626.24 624.95 10 623.66 622.37 621.09 619.80 618.51 1,800.0
Slide 28: Cash Cost of Slab
CASH COST OF SLAB k rub/t $/t 15 500 12.5 12.5 12.7 12.3 12.4 12.0 11.9 11.6 12 400 11.0 10.8 10.8 10.7 10.7 396 388 348 9 300 310 308 295 238 6 225 200 197 197 190 193 159 3 100 RUB/$ exchange rate 29.39 31.09 31.85 34.96 35.00 36.19 47.42 62.19 52.65 62.98 65.94 74.63 65.89 0 0 2011 2012 2013 Q1'1
Slide 29: www.nlmk.com
Sergey Takhiev NLMK Investor Relations 40, Bolshaya Ordynka Str., Bldg. 3 Moscow, 119017, Russia www.nlmk.com t. +7 495 544 54 29 m.+7 985 760 55 74 [email protected]