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NLMK — Goldman Sachs Global Metals & Mining, Steel Conference 2013
32 slides from NLMK's conference presentation, Nov 21, 2013
Slide 1: Goldman Sachs Global Metals & Mining, Steel Conference
NLMK Goldman Sachs Global Metals & Mining, Steel Conference Grigory Fedorishin, CFO SERGEY TAKHIEV, HEAD OF IR 20-21 NOVEMBER 2013, NEW YORK
Slide 2: Disclaimer
DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor 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 documen
Slide 3: Business profile, Operating and financial profile, Strategy
1. Business profile 2. Operating and financial profile 3. Strategy 3
Slide 4: Business profile
BUSINESS PROFILE • World’s leading steel producer with 17 mln t capacity NLMK CRUDE STEEL PRODUCTION o High quality steel producer with highest profitability Run rate o Top 10 low cost steelmaker globally mt Run rate of 100% 23% 14 20% o #1 in Russia with over 20% of Russian steel output of 100% 12
Slide 5: Balanced and favorably located assets
BALANCED AND FAVORABLY LOCATED ASSETS Russian production platform enhanced with international assets NLMK Dansteel Novolipetsk NLMK Kaluga Sinter: 15 m tpa Altai-Koks NLMK USA Strip Thick plate about Steel (EAF): 1.5 m tpa Coke: 2.6 m tpa 1 mini-mill & 2 rolling mills 0.5 m tpa Coke: 4.66 m tpa Long
Slide 6: Efficient vertical integration
EFFICIENT VERTICAL INTEGRATION • Iron ore: 85% self-sufficiency* NLMK SLAB PRODUCTION COSTS VS GLOBAL o The Group is over 100% self-sufficient in iron ore concentrate with 650 $/t over 100 years of mine life 600 o One of the most efficient iron ore producer globally 550 • Coke: over 100% self-suffic
Slide 7: Diversified sales
DIVERSIFIED SALES • Russian market remains a key sales region with 80% DIVERSIFIED SALES STRUCTURE exposure into construction and infrastructure 100% Others (incl 11% • Wide product mix with strong value-added share 8% 29% stockholders) 80% • Rational export/domestic market balance 9% 60% Pipe produ
Slide 8: Operating and financial profile
1. Business profile 2. Operating and financial profile 3. Strategy 8
Slide 9: Global steel market overview
GLOBAL STEEL MARKET OVERVIEW • Supply / Demand GLOBAL CAPACITY UTILIZATION o Restocking at the beginning of 2013 followed by a significant 90% supply growth and increased competition o Market environment improvement over Q3 supported by 80% the slightly improved supply-demand balance • Prices 70% o
Slide 10: US market
US MARKET • Supply / Demand US STEEL-CONSUMING SECTORS PERFORMANCE o LT demand looks strong with construction, machinery and energy sectors performing relatively well and approaching pre-crisis levels 1 200 ‘000 units million units 17 o Supply-side provides support to prices on improved producers’ 1
Slide 11: European market
EUROPEAN MARKET • Emerging signs of recovery in the European industry INDUSTRIAL SECTOR INDICATORS o PMI above 50 for the 4th consecutive month 70 10 o Strengthening industrial and construction confidence in the 60 0 core EU countries 50 • Supply / Demand -10 40 o Apparent steel consumption growth i
Slide 12: Russian market
RUSSIAN MARKET • Growth in steel consumption DOMESTIC STEEL PRICES, HRC / CRC (EXW) o 2013 ASU to grow by 3.8% yoy to 43.6 m t (WSA forecast) 1 100 $/t o 9M’13 finished steel consumption up by 3.5% yoy to 31.7 m t 1 000 due to increased longs consumption (+5.1% yoy) 900 o Key drivers - construction
Slide 13: Russian market - Construction
RUSSIAN MARKET - Construction • Market overview o Construction (sq m completions) surpassed pre-crisis peak STEEL CONSUMPTION IN CONSTRUCTION levels in 2012 3 000 o Residential completions up by 12% yoy in 9M’13 ‘000 t o New house sales supported by robust consumer confidence 2 500 o 9M’13 steel con
Slide 14: Russian market – Automotive
RUSSIAN MARKET – Automotive • Market fundamentals STEEL CONSUMPTION IN AUTOMOTIVE o 3.3 times growth in cars production since 2009 200 ‘000 t o 50% of car fleet is over 10 years old 180 160 • Recent developments 140 o YTD steel consumption in automotive sector down as auto 120 production of local br
Slide 15: Raw materials market
RAW MATERIALS MARKET GLOBAL RAW MATERIAL PRICES • Prices and demand in international markets 1,2 Jan 2012 index 1.0 o Correlation between raw material and steel price trends 1,1 o In Q3 global prices for iron ore and coking coal recovered 1,0 by 13% and 9% respectively underpinning steel prices 0,9
Slide 16: Operating results
OPERATING RESULTS • High capacity utilization rates NLMK CRUDE STEEL PRODUCTION o Growth in steel production in Q3’13 to 3.9 m t (+3% qoq) mt o Average capacity utilization rate 96% 3,8 3,9 ~4,1** 14,9 15,5** 3,7 o Lipetsk plant – 99% 0,2 0,2 0,9 0,2 0,5 0,6 1,8 o NLMK Indiana*– 91% 0,5 o NLMK Russi
Slide 17: Financial highlights
FINANCIAL HIGHLIGHTS • 9М ’13 financial results FINANCIAL PERFORMANCE, QUARTERLY o Revenue $8,405 m (-10% yoy) $ bn 3,4 16,1% 18,0% o EBITDA $1,096 m (-27% yoy) 13,9% 14,1% 13,9% 16,0% 3,2 14,0% o EBITDA margin 13% (-3,2 p.p.) 3,0 11,1% 12,0% 2,8 10,0% o Operating cash flow : $1,030 m (-31%) 2,6 8,0
Slide 18: Debt position
DEBT POSITION • Financial debt LT AND ST DEBT o Net debt* $2.77 bn (-19%) $5,0 $ bn o Total debt $4.12 bn (-14%) o Cash and equivalents ** $1.35 bn (-1%) $4,0 o Net debt * / 12M EBITDA 1.87x $3,0 $3,8 • NLMK Belgium Holdings (NBH) liabilities $2,3 $3,5 $2,3 $2,0 deconsolidation $1,0 • Consistent net
Slide 19: Debt maturity
DEBT MATURITY • Significant liquidity position LIQUID ASSETS AND ST DEBT MATURITY* • Comfortable maturity schedule $4 000 $m Undrawn committed o Short term debt $0.62 bn, (-38% qoq) $3 500 credit lines o Ruble bonds $3 000 o Credit lines $2 500 2 331 Cash and o ECA- financing $2 000 equivalents $1 5
Slide 20: Outlook
OUTLOOK • Steel production o Steel output in Q4’13 will grow by 5% to 4.1 m t, driven by production growth at NLMK Kaluga o In 2013 steel production will reach 15.5 m t (or +4% y/y) • Financials o In Q4, we expect steel prices to soften due to the seasonal slowdown in demand and projected decline in
Slide 21: Strategy
1. Business profile 2. Operating and financial profile 3. Strategy 21
Slide 22: Global market trends
GLOBAL MARKET TRENDS • Global overcapacity GLOBAL OVERCAPACITY o Over 0.5 bn t of steelmaking overcapacity 2 200 100% mtpa o Capacity growth in EMs and capacity retention in DMs 2 000 95% 1 800 1980-2007 average run rate – 86% 90% • Production costs inflation 1 600 85% o Decline in raw materials lea
Slide 23: Strategic objectives of NLMK Group
STRATEGIC OBJECTIVES OF NLMK GROUP Maximising upstream integration into key resources 1 Operating in a safe, socially Maintaining efficient and and environmentally 5 2 responsible manner sustainable growth 4 3 Developing niche Improving efficiency segments of operations 23
Slide 24: Maximising upstream integration in key resources
MAXIMISING UPSTREAM INTEGRATION IN KEY RESOURCES • Iron ore EXPANSION OF IRON ORE CONCENTRATE AND o Growth in iron ore concentrate production through brownfield PELLETS CAPACITY expansion / debottlenecking mt 10 mt o Pelletizing plant of 6 m t – 2016 to cover 100% needs 20 >18 18 + over 6 m t +6mt •
Slide 25: Maintaining efficient and sustainable growth
MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH • Steel capacity expansion is complete CRUDE STEEL CAPACITY GROWTH: +40% o BF/BOF steelmaking (Russia) : 3.4 m tpa Brownfield project of ~$500/t* investments (in 2011) mtpa o EAF steelmaking (Russia): 1.5 m tpa 16 1.5 Greenfield project of ~$750/t* invest
Slide 26: Maintaining efficient and sustainable growth (2)
MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH (2) NLMK Kaluga project RUSSIAN REBAR CONSUMPTION, 2008-2013 • Russian rebar market overview 2,5 mt Import, share is over 20% o Consumption growth in Russia: x1.9 against 1H‘10 Record level of 2008 2,0 o Import growth in 1H’13: +60% yoy, x3 vs. 1H’10 o Re
Slide 27: Efficiency of operations
EFFICIENCY OF OPERATIONS PRODUCTION COSTS REDUCTION WITHIN “QUICK • Cost optimization programs at all sites (effects to WINS” PROGRAM be presented to the market in Q1 2014) 120 $m • Optimization of coke making, sintering, BOF 100 operations (Novolipetsk and Altai Koks) 80 o Maximum use of equipment
Slide 28: European assets restructuring
EUROPEAN ASSETS RESTRUCTURING • Restructuring workflow FIXED COSTS OF NLMK EUROPE STRIP o Restructuring program is being implemented since 2008 o Change in asset perimeter and transition to a re-roller 200 €m Carsid + EAF and model Long products + o Consistent cost reduction through optimization pro
Slide 29: 2013 investments
2013 INVESTMENTS • Capex programme o Lower capital intensity CAPEX DYNAMICS o Focus on efficiency enhancement and niche products $m o Balanced approach to assessing new projects 2000 o Flexibility under various market scenarios 1500 • Long products division development 1000 1936 2020 o NLMK Kaluga l
Slide 30: Appendix
APPENDIX 30
Slide 31: Cash cost of slabs
CASH COST OF SLABS CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE) CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013 Cost item Q3’13 Q2’13 ∆, $/t Period $/t Coke and coking coal $84 $91 -$7 Q1 '12 $395 Iron ore $60 $64 -$4 Q2 '12 $411 Scrap $29 $37 -$8 Other materials $27 $31 -$4 Q3 '12 $383 Electri
Slide 32: NLMK Investor Relations
NLMK Investor Relations 18, bldg 1 Bakhrushina str. 115054, Moscow Russia t. +7 495 915 15 75 f. +7 495 915 79 04 email: [email protected] www.nlmk.com
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