Nlmk · RUS:NLMK
Nlmk — Q3 2011 Earnings Presentation
33 slides from Nlmk's earnings presentation, 2011
Slide 1: Q3 and 9M 2011 Financial and Production Results
NLMK Q3 and 9M 2011 Financial and Production Results US GAAP Consolidated Financial Statements
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: Key Highlights
KEY HIGHLIGHTS FINANCIAL PERFORMANCE EARNINGS PER SHARE $0.12 o Revenue: $3.334 bn (+12% q‐o‐q) $/share 0.098 $0.10 0.086 o Production costs: $2.367 bn (+33% q‐o‐q) 0.077 $0.08 0.065 o EBITDA: $537 m* (incl. roll‐back effect on slabs supplied to $0.06 SIF in Q2 2011: $478 million*) $0.04 0.038 0.025
Slide 4: Production
PRODUCTION Q3 CRUDE STEEL PRODUCTION CRUDE STEEL PRODUCTION o NLMK Group steel output: 2.9 m t, ‐3% q‐o‐q 3,500 ‘000 tonnes 157 137 113 164 160 o Lipetsk site: 2.4 m t, +2% q‐o‐q 3,000 217 501 492 472 277 2,500 454 448 o Long Products Division: 0.28 m t, ‐41% q‐o‐q 2,000 o Foreign rolled products se
Slide 5: Sales
SALES SALES UP +9% q-o-q Q3 2011 SALES AND REVENUE BY REGIONS o Sales volumes up to 3.4 m t, +9% Sales – outer Revenue – o Sales and revenue highly diversified by regions circle 11% inner circle 6% 11% 5% 33% Russia INCREASED HVA SALES 8% 39% Europe o HVA sales*: 1.398 k t (+471 k t, +51%) 17% North
Slide 6: Key Drivers: Higher finished product sales
KEY DRIVERS Higher finished product sales FOLLOWING THE CONSOLIDATION OF ROLLING ASSETS HIGHER SHARE OF VALUE ADDED PRODUCT SALES 4000 ‘000 t (1) Higher sales 3500 +51% 3000 a. +9%, including +166 k t – net increase due to SIF consolidation 927 1,398 2500 880 (2) Changes in the mix and geography of
Slide 7: Key Drivers: Market changes
KEY DRIVERS Market changes STABLE DOMESTIC DEMAND PRICE DYNAMICS, index, January 2011=1 1.4 Slabs* HRC* 1.3 EXPORT MARKETS – PRICES SOFTENED DUE TO SEASONAL 1.2 SLOWDOWN IN EUROPE 1.1 1.0 3-3.5 month production cycle WORSENED MACROECONOMIC CONDITIONS HAD A 0.9 NEGATIVE IMPACT ON DEMAND 0.8 Jan‐11 Fe
Slide 8: Key Drivers: Higher production costs
KEY DRIVERS Higher production costs STEEL PRODUCTION IN RUSSIA: KEY DRIVERS IMPACTING Q3 PRODUCTION COSTS $2,500 o For Russian steelmaking assets, raw material prices $ million 70 2367 remained under control o Costs increased insignificantly following the launch of 567 new equipment $2,000 (7) (48)
Slide 9: Segments Profitability
SEGMENTS PROFITABILITY MAJOR FACTORS IMPACTING PROFITABILITY Q3 2011 EBITDA BY SEGMENT* o Deteriorated market environment coupled with lowering $600 $ million prices for steel products and nearly flat raw material prices $500 59 o The contribution of the less profitable assets of Foreign $400 22 4 r
Slide 10: Production Costs
PRODUCTION COSTS CASH COST PER TONNE OF SLABS IN LINE WITH Q2 CASH COSTS BY PRODUCT $600 531 $/t 527 $500 480 WEAKER RUR OFFSETS DEPLETION OF RAW MATERIAL 408 431 406 405 $400 330 361 INVENTORY FORMED AT LOWER PRICES 330 299 298 $300 268 226 239 $200 $100 18 19 22 18 20 $0 Q3 2010 Q4 2010 Q1 2011 Q2
Slide 11: Debt Position
DEBT POSITION TOTAL DEBT $3.82 BILLION: CHANGES IN DEBT PORTFOLIO o Consolidated SIF debt ~$1.2 billion $4 $ billion o … including c. $790 million to finance working capital 1.2 $3 $0.89 BILLION OF LIQUID FUNDS1 $2 3.8 NET DEBT/ LTM EBITDA 1.2 2.6 $1 BALANCED STRUCTURE OF DEBT AND CASH FUNDS $0 June
Slide 12: Debt Maturity
DEBT MATURITY DEBT MATURITY SCHEDULE DEBT STRUCTURE o ST debt: $1.03 billion $ million incl. ST part of PXF and SIF debt ST debt o LT debt: $2.79 billion incl. 3 bond issues, LT part of PXF; .. as well as SIF’s LT debt 9M CASH FLOW FROM OPERATIONS: $1,485 MILLION LT debt ST DEBT MATURITY1 LT DEBT MA
Slide 13: Investments
INVESTMENTS STEEL CAPACITY GROWTH INVESTMENT DYNAMICS $700 o 40% increase in capacity to 17.3 mtpy $ million 607 $600 522 o Quality improvement, +30 new grades of steel 480 $500 378 399 $400 371 INCREASE IN FINISHED PRODUCT CAPACITY $300 o Rolling capacity growth $200 o HVA grades capacity increase
Slide 14: Q3 2011 Cash Flow Bridge
Q3 2011 CASH FLOW BRIDGE CHANGE IN CASH ‐81 Effect of exchange rate changes +75 Dividends ‐244 FREE CASH FLOW 87 Other financial operations1 +274 Net borrowings ‐237 Acquisition and construction of PPE ‐607 658 CASH FLOW FROM OPERATIONS ‐148 Income tax +132 Other and non‐cash operations2 +197 Change
Slide 15: Outlook
OUTLOOK Q4 2011 o Steel production will total 3.1 m t (+7% q‐o‐q) o Sales will stay in line with Q3 (3.4 m t) FY 2011 OUTLOOK o Steel production is expected to be around 12 m t o Growth in high value added product sales following the consolidation of the EU and US rolling assets o Russian sales to s
Slide 16: Appendix: Investment Program and Segmental Performance
APPENDIX INVESTMENT PROGRAM AND SEGMENTAL PERFORMANCE 16
Slide 17: BF Production (2011)
BF PRODUCTION (2011) BLAST FURNACE PIG IRON PRODUCTION CAPACITY (LIPETSK) Установка o Capacity: 3.4 mtpy 14 mln t BF #7 hot testing«печь-ковш» 12.7 o Status: start‐up mode since September 2011 12 in Q3 2011 9.4 10 CONSTRUCTION OF COGENERATION PLANT 8 6 o Capacity: 150 MW 4 o Partially financed via E
Slide 18: Steelmaking (2011)
STEELMAKING (2011) NEW BOF SLAB PRODUCTION CAPACITY (LIPETSK) o Launch date: 2011, Lipetsk site 8 Mt o Goal: processing of BF# 7 pig iron output 7 50% ‐ o With the new BOF Novolipetsk total steelmaking capacity 6 2 Wide slabs processed Wide in‐ slab CCM will be 12.4 mtpy 5 house 4 3 5 Vacuum‐degasse
Slide 19: Expansion of Rolling Capacities (2011)
EXPANSION OF ROLLING CAPACITIES (2011) EXPANSION OF HRC PRODUCTION FLAT STEEL PRODUCTION GROWTH Установка Completed o Location: Lipetsk site «печь-ковш» Completed o Upgrading of the existing Mill 2000 o Capacity growth: +400,000 tonnes by 2014 EXPANSION OF PLATE PRODUCTION o Location: DanSteel (Denm
Slide 20: Transformer Steel (2011-2012)
TRANSFORMER STEEL (2011‐2012) PRODUCTION UPGRADES AT NOVOLIPETSK TRANSFORMER STEEL PRODUCTION CAPACITIES o Status: 80% complete Установка High‐permeability transformer 400 350 ‘000 t steel «печь-ковш» Possible further o Capacity: about 64,000 t pa of high‐permeability 64.0 expansion of 300 transform
Slide 21: Long Products (2012-13)
LONG PRODUCTS (2012‐13) KALUGA MINI-MILL (EAF) STEEL AND LONG PRODUCT CAPACITY Установка o Location: Kaluga region 5 mln t «печь-ковш» 3.8 o Capacity: 1.55 mtpy 3 2.2 o Total investments: c. $1.2 bn 100% finished o Extended product mix for construction 2 80% product finished o Launch date: 2012 (1st
Slide 22: Expansion of Iron Ore Production (2011-2014)
EXPANSION OF IRON ORE PRODUCTION (2011‐2014) IRON ORE PRODUCTION CAPACITIES OPEN PIT EXPANSION Concentrate Pellets 20 o Location: Stoilensky (Stary Oskol) mln t 7 mln t 4 6 o +30% growth in iron ore extraction 15 2 5 o Goal: maintain 100% self‐sufficiency in low cost iron ore 4 10 3 6 PELLETIZING PL
Slide 23: Appendix: Segmental Performance
APPENDIX SEGMENTAL PERFORMANCE 23
Slide 24: Segmental Performance
SEGMENTAL PERFORMANCE CONSOLIDATED PRODUCTION COST, 9М 2011 COST OF SALES INCREASED DUE TO HIGHER PRICES FOR RAW MATERIALS AND ENERGY, NEW EQUIPMENT Iron ore LAUNCHES AND THE CONSOLIDATION OF FOREIGN 10% 5% Coke and coal ASSETS Scrap 22% 17% Ferroalloys COKE-CHEMICAL SEGMENT WAS INCLUDED INTO THE Ot
Slide 25: Steel Segment
STEEL SEGMENT НЛМК INCREASED STEEL OUTPUT SALES REVENUE FROM 3rd PARTIES BY PRODUCT LOWER SALES DUE TO EXCLUDING SLABS SUPPLIED TO $ mln THE NEWLY ACQUIRED ASSETS IN Q3 2011 HVA SALES REVENUE GROWTH OPERATING PROFIT MARGIN REDUCED DUE TO HIGHER PRICES FOR RAW MATERIALS Q3 Q2 (‘000 tonnes) 20111 2011
Slide 26: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT* INCREASED PRODUCTION, SALES AND REVENUE DUE SALES REVENUE FROM 3rd PARTIES BY PRODUCT 1 600 1 475 TO SIF SA ASSET CONSOLIDATION STARTING FROM JULY $ mln Plate 2011 AND FORMING THE FOREIGN ROLLED PRODUCTS 1 200 461 HRC 978 SEGMENT CRC 252 800 525 570 Galvanised 319 Pr
Slide 27: Long Products Segment
LONG PRODUCTS SEGMENT НЛМК 9M 2011 REVENUE INCREASED DUE TO IMPROVED SALES REVENUE FROM 3rd PARTIES BY PRODUCT DOMESTIC DEMAND $ mln STEEL PRODUCTION DECREASED IN Q3 2011 AS A RESULT OF ISSUES WITH POWER EQUIPMENT AT NSMMZ 9M 9M LONG PRODUCTS SEGMENT PRODUCTION COST, 9М 2011 (‘000 tonnes) Q3 2011 Q2
Slide 28: Mining Segment
MINING SEGMENT НЛМК IRON ORE OUTPUT AND SALES IN LINE WITH Q2 SALES REVENUE FROM 3rd PARTIES BY PRODUCT GROWTH IN CONCENTRATE PRICES AND SALES $ mln SUPPORTED THE SEGMENT’s 9M 2011 FINANCIAL PERFORMANCE COSTS REMAIN UNDER CONTROL IRON ORE ASSET DEVELOPMENT PROGRAM CONTINUES 9M 9M (‘000 tonnes) Q3 20
Slide 29: Segmental Information
SEGMENTAL INFORMATION 9M 2011 Intersegmental Foreign rolled Steel Long products Mining All other Totals operations and Consolidated (million USD) products balances Revenue from external customers 6 157 895 148 1 475 1 8 675 8 675 Intersegment revenue 654 514 931 0 2 099 (2 099) Gross profit 1 730 17
Slide 30: Consolidated Statement of Income
CONSOLIDATED STATEMENT OF INCOME Q3 2011 Q2 2011 Q3 2011/Q2 2011 9M 2011 9M 2010 9M 2011/9M 2010 (mln USD) +/‐ % +/‐ % Sales revenue 3 334 2 982 352 12% 8 675 6 085 2 590 43% 0% Production cost (2 367) (1 785) (583) 33% (5 618) (3 457) (2 161) 62% Depreciation and amortization (201) (135) (67) 50% (
Slide 31: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at as at as at 30.09.2011 30.06.2011 31.03.2011 31.12.2010 30.09.2010 30.06.2010 31.03.2010 31.12.2009 (mln. USD) ASSETS Current assets 5 644 4 811 4 438 4 105 4 372 4 150 4 091 3 877 Cash and cash equivalents 830 911 977 748 780 953 1 157
Slide 32: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q3 2011 Q2 2011 Q3 2011/Q2 2011 9M 2011 9M 2010 9M 2011/9M 2010 (mln. USD) +/‐ % +/‐ % Cash flow from operating activities Net income 220 591 (371) (63%) 1 192 1 082 110 10% Adjustments to reconcile net income to net cash provided by operating activities Depreciation
Slide 33: www.nlmk.com
NLMK Investor relations Russia, 115054, Moscow Bakhrushina str, 18, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 www.nlmk.com