Severstal · RUS:CHMF
Severstal — Investor Day (September 2012)
92 slides from Severstal's investor day presentation, Sep 3, 2012
Slide 1: Severstal Capital Markets Day
Severstal Capital Markets Day 3 September 2012
Slide 2: Table of Contents
Table of Contents Introduction from Chairman of the Board 5 Severstal Today: Focus on Internal Improvements and Organic Growth 9 Market Trends and Opportunities 25 Commitment to a Prudent Financial Policy 35 Sustainable Development 45 Severstal Russian Steel – Focus on Value-Added Steel
Slide 3: Today's Agenda
Today’s Agenda 2.00pm First Session Christopher Clark, Chairman Alexey Mordashov, Chief Executive Officer Thomas Veraszto, SVP Strategy & Corporate Development Alexey Kulichenko, Chief Financial Officer Vadim Saveliev, SVP Corporate Communications & IR Q&A 4.00pm Coffee Break 4.15pm Seco
Slide 4: Today's Presenting Team
Christopher Alexey Thomas Alexey Vadim Alexander Vadim Sergei Clark Mordashov Veraszto Kulichenko Saveliev Grubman Larin Kuznetsov Chairman of the Chief Executive SVP – Strategy Chief Financial SVP – Corporate CEO CEO CEO Board Officer and Corporate Officer Communications Severstal Severstal Severst
Slide 5: Introduction from Chairman of the Board
Introduction from Chairman of the Board Page 5 Christopher Clark Chairman of the Board of Directors Page 5
Slide 6: Today's Themes
Today’s Themes In good shape to meet the challenges in the steel and commodities markets On track with execution of our stated focused strategy Focus on further internal improvements and organic growth Well-invested assets and flexible CAPEX programme covered by operating cash flow Commitm
Slide 7: Corporate Governance
Corporate Governance A commitment, since IPO in 2006, to high governance standards Board includes more independent non-executive directors than executives • Constitution requires independent director authorisation of certain types of transactions Full committee system in place Board as a who
Slide 8: Alexey Mordashov, Chief Executive Officer
Alexey Mordashov Chief Executive Officer Page 8
Slide 9: Severstal Today: Focus on Internal Improvements and Organic Growth
Severstal Today: Focus on Internal Improvements and Organic Growth
Slide 10: Compelling Investment Case
Compelling Investment Case Unique business model Leading margins and return on investments Well-invested assets with low CAPEX requirements One of the strongest balance sheets in the industry Low-cost production platform: Full vertical integration in both iron ore and coking coal Value for s
Slide 11: Strategic Priorities
Strategic Priorities Prudent investment policy CAPEX focused on efficiency and margin enhancement, not volumes Limited cash-based M&A Balance sheet strength and cash generation are top priorities in the current environment Developing strength of our business model High value-added product mi
Slide 12: Strong, Global, Integrated
Strong, Global, Integrated Karelsky Okatysh Vorkutaugol (Russia) Usinskoye (Russia) Olkon (Russia) Cherepovets (Russia) (Russia) 7.6mt Potential: 2-4mt 4.7mt 11.6mt 10.1mt Coking and Coking coal Concentrate Iron Ore Concentrate Crude Steel Capacity Iron Ore Pellets Thermal Coal Starting 2018 PBS Coa
Slide 13: Our Stated Strategic Targets
Our Stated Strategic Targets To be the Efficiency Leader in Emerging Markets Industrial Targets Financial Targets Vertical Integration TOP 5 by EBITDA Globally EBITDA Margin >20% Over the Cycle Business System HVA Product Mix of Severstal In Top 10 Global Steel Companies by ROCE Consolidated & Net D
Slide 14: Executing Our Strategy
Executing Our Strategy Key Achievements 2011–2012 Separation of Nordgold Asset Structure Aligned Disposal of a 22% stake in Intex Resources nickel company with Strategic Priorities SNA portfolio optimization completed Implementation of $248m of EBITDA contribution in 2011 Business System of
Slide 15: Strong Cost Position
Strong Cost Position Vertical Integration Efficiency in Steelmaking Global Cost Competitiveness Leading Position in Iron Ore Gradual Optimisation: Russian Steel HRC Global Cost Curve LTM, US$/t Integration, % Division Headcount 2008–1H12 Evraz 109% -7% CAGR 800 58,730 Severstal 97% 50,213 48,013 47,
Slide 16: Vertical Integration Must Be Efficient
Vertical Integration Must Be Efficient Successful Steps to Reduce Production Costs in Mining Coking Coal Cash Cost Dynamics Among Russian Producers, Efficient Brownfield Expansion to Reduce Costs: 2007–2011 CAGR, % Vorkuta vs. Usinskoye Cash Cost, US$/t 92 50-60 Vorkutaugol Usinskoye Note: Vorkutaug
Slide 17: Focus on Right Products and Markets
Focus on Right Products and Markets The Largest Share of HVA Highly Consolidated Russian Market Average EBITDA per Tonne Excluding Products Among Russian Peers 2011, % Top-5 Share, % Mining 2011 , US$/t 23% 133 35% 32% 45% Others 9% 80 32% 55% 46% 66% 33% 22% 1% 9% Top-5 Severstal NLMK Evraz MMK 91%
Slide 18: Leading Profitability, Margin and ROCE
Leading Profitability, Margin and ROCE Improved Ranking in All Metrics Versus Prior Year EBITDA FY2011, US$m EBITDA Margin FY2011, % ROCE FY2011, % 1st 1st 1st 2nd 2nd 2nd 3rd 3rd 3rd 4th 4th 4th 5th 5th 5th 6th 6th 6th 7th 7th 7th 8th 8th 8th 9th 9th 9th 10th 10th 10th EBITDA for Severstal represen
Slide 19: Robust Financial Position
Robust Financial Position Steady Deleveraging of our Balance Sheet since 2008 Advantageous Position by Leverage Net Debt/EBITDA vs. Key Peers, 1Q12 3.1 3.0 2.8 1.1 Developed Markets Emerging Markets Russian Peers Severstal Peers Peers Notes: Notes: 1. 2011–1H12 data are excl. Nordgold. DM peers incl
Slide 20: Strong Business Model Resilient to Cyclical Downturns
Strong Business Model Resilient to Cyclical Downturns Fundamental Industry Outlook Volatile and Uncertain Overcapacity in Fundamental Strength in OPEX and Environment Global Steel Raw Materials CAPEX Inflation Strong Business Model Resilient to Cyclical Downturns Efficient Vertical Integration Princ
Slide 21: Business System of Severstal
Business System of Severstal Emphasis on Efficiency Improvement Business System of Severstal will be the Main Contributor to EBITDA Growth in Mid-term BSS is Expected to Contribute US$520m to EBITDA in 2012 Cost reduction Production growth Continuous Quality improvement Improvement Optimisat
Slide 22: Investment Policy: Looking Ahead
Investment Policy: Looking Ahead Key management focus is on Business System deployment and Balakovo Construction efficiency improvement, not on volumes We do not plan to add steel capacities after finalization of the ongoing projects: Columbus Phase II and Balakovo mini-mill Modest organic exp
Slide 23: Efficiency, Growth and Value-creation through the Cycle
Efficiency, Growth and Value-creation through the Cycle Robust long-term business model resilient through cyclical downturn Maintain low-cost position through efficient vertical integration and cost control Focus on downstream development and client relationships in steel Conservative approach t
Slide 24: Thomas Veraszto, SVP – Strategy and Corporate Development
Page 24 Thomas Veraszto SVP – Strategy and Corporate Development Page 24
Slide 25: Market Trends and Opportunities
Market Trends and Opportunities
Slide 26: Mixed Economic Outlook
Mixed Economic Outlook US – Slow 2% Growth Subdued by Fiscal Austerity Europe – Stagnation Due to Debt Crisis 3.0% 2.8% 1.7% GDP Growth, % Y-o-Y GDP Growth, % Y-o-Y 1.9% 1.9% 1.8% 1.7% 1.5% 0.2% 0.3% -4.1% -0.3% -0.2% -3.5% 2007 2008 2009 2010 2011 2012E 2013F 2007 2008 2009 2010 2011 2012E 2013F Ch
Slide 27: Steel Prices have Bottomed Out in USA/Europe, but still Declining in China
Steel Prices have Bottomed Out in USA/Europe, but still Declining in China Global HRC Prices, US$/t Global Capacity Utilisation and Steel Production $1 000 (Annualised) Russia Black Sea export FOB USA domestic FOB Midwest mill 1 800 100% $900 China domestic Shanghai (incl. 17% vat) S.Europe domestic
Slide 28: Developing World's Appetite for Steel Continues
Developing World’s Appetite for Steel Continues Cumulative ASU per Capita, Finished Steel, Urbanisation Rate, % of Population Tonnes per Capita 25 100% Japan Сотни 90% USA 20 80% China 70% Indonesia tonnes per Capita 15 60% 50% India 10 40% 30% 5 20% 10% 0 1950 1960 1970 1980 1990 2000 2010 0% 1950
Slide 29: China has Huge Potential for Growth in the Major Steel Consuming Industries
China has Huge Potential for Growth in the Major Steel Consuming Industries Automobile Industry, Motor Vehicles per 1000 People Rail Lines, km per 1000 People 900 0,8 USA USA 14.9x 11.5х 800 0,7 700 0,6 Japan 600 EU 0,5 EU 500 0,4 400 0,3 300 0,2 Japan 200 100 China 0,1 China 0 0,0 Electricity Produ
Slide 30: Growth Drivers for Raw Materials Prices
Growth Drivers for Raw Materials Prices Steel production growth by 4% per Sound steel consumption growth in developing regions will push up demand annum in the next for iron ore and coking coal 5 years New projects are pushed back: 3 year average delay for mining projects Raw materials supply is
Slide 31: Iron Ore: Support from China and Project Delays
Iron Ore: Support from China and Project Delays Iron Ore Fines Supply Curve to China, 2012 Incremental Iron Ore Seaborne Market Supply, mtpa $180 800 Production in China $160 700 $140 600 $120 Spot price, Aug 27 500 $100 400 $80 39% 300 $60 46% $40 200 41% Peer 4 Peer 2 Peer 3 Peer 1 $20 100 15% $0
Slide 32: Robust Import Demand to Support Coking Coal Prices
Robust Import Demand to Support Coking Coal Prices Met Coal International Demand from Key Importers 160 Robust demand for imported coking coal in China, 140 India and Brazil – 12% yoy growth on average in 120 2013–2017 100 80 High cost coking coal exports from USA will support 60 the market pric
Slide 33: Responding to Major Market Trends
Responding to Major Market Trends Key Trends Severstal Strategy Fully vertically integrated Higher raw materials prices Invest in upstream operations due to supply constraints Portfolio of attractive greenfields Organic improvements Overcapacity & volatility in steel Efficient & flexible f
Slide 34: Alexey Kulichenko, Chief Financial Officer
Page 34 Alexey Kulichenko Chief Financial Officer Page 34
Slide 35: Commitment to a Prudent Financial Policy
Commitment to a Prudent Financial Policy
Slide 36: Severstal Financial Policy
Severstal Financial Policy Our Targets Our Achievements Our Principles 0.5–1.5x Net 1.2x Net Debt/EBITDA as of M&A, Dividends, CAPEX capped by Debt/EBITDA Q2 12 leverage target; monthly scrutiny of compliance with 1.5x Net debt/EBITDA Liquidity (Cash on Liquidity c.US$2.8bn as of Strong
Slide 37: Solid Balance Sheet
Solid Balance Sheet Liquidity and Debt Position , US$m Strong Liquidity Position Solid cash cushion of around US$2bn, covering 838 FY12 and almost all of FY13 repayments Committed unused credit lines of US$838m 1,943 Well-Managed Debt Profile 1,581 1,121 579 567 737 657 71 Smooth repayment sch
Slide 38: Shareholder Returns
Shareholder Returns Recent Dividend History 0,7 40% 0,6 Dividend Play 30% 0,5 Severstal resumed dividend payments in 3Q10 0,4 20% 0,3 Over the last quarters Severstal has paid no less 0,2 10% than 25% of net income and expects to continue 0,1 to do so if the market allows 0 0% Q1 11 Q2 11 Q3 11
Slide 39: Investment KPIs
Investment KPIs Target Our key metrics to assess Profitability projects Index above 1.5 Target EBITDA Target ROCE Margin above Success above 20% 20% Target IRR above 20% Page 39
Slide 40: CAPEX 2012
CAPEX 2012 Selected 2012 CAPEX Projects FY2012 Target CAPEX Structure Segment Project Effect Launch Severstal Russian Balakovo mini-mill +1 mtpa of long 2013 Steel products capacity Maintenance Development US$820m US$849m SAP implementation Efficiency 2012 49% 51% Full reconstruction Higher coke out
Slide 41: CAPEX Flexibility
CAPEX Flexibility Base Case US$1,669m Low Case US$1,005m US$74m US$400m US$531m Severstal Russian Steel Severstal Resources Severstal International Base Case: reflects current market conditions and Low Case: takes into account further deceleration of corresponds to the forecasted inflows from Chines
Slide 42: Flexible Leverage Position
Flexible Leverage Position Well-balanced, Manageable Debt Structure (1) Crisis-tested Debt Portfolio Structure Source Currency Mix Diversification across instruments, products and lenders Private Keeping access to domestic and international 32% debt markets Public Focus on long-term financing
Slide 43: Ratings History
Ratings History Since 2010 Severstal has been regaining ratings agencies’ confidence and seeing consistent upgrade In 2012 S&P upgraded Severstal’s rating to BB+/Stable, Moody’s – to Ba1/Stable, Fitch – to BB/Stable BB+/Ba1 BB/Ba2 BB-/Ba3 B+/B1 Feb-04 Dec-04 Oct-05 Aug-06 Jun-07 Apr-08 Feb-09 De
Slide 44: Vadim Saveliev, SVP – Corporate Communications and Investor Relations
Page 44 Vadim Saveliev SVP – Corporate Communications and Investor Relations Page 44
Slide 45: Sustainable Development
Sustainable Development
Slide 46: Commitment to Sustainability
Commitment to Sustainability Long-term commitment to sustainability focused on three main areas: 1. Health, safety and development of our people 2. Environment 3. Support for local communities and regions where we operate Single HSE policies for all assets Board oversees activity in this area
Slide 47: Health & Safety
Health & Safety Corporate Health and Safety Policy In 2011, we spent over US$100m on health and safety 19% decrease in the LTIFR compared to 2009 Strategic objective is to eliminate all fatal accidents by 2015, and we think it’s achievable Severstal’s Lost Time Injury Frequency Rate (LTIFR)
Slide 48: Environmental Protection
Environmental Protection ISO 14001 Environmental Management Systems at 7 key assets in Russia and the USA In 2011 we invested c.US$74m in environmental programs Severstal is a member of the Sustainability Committee of the Worldsteel Environmental Performance of Cherepovets Steel Mill in 2000–2
Slide 49: Energy Efficiency
Energy Efficiency 20% energy consumption reduction at Cherepovets Steel Mill from 2000 to 2011 Employee rewards for the best energy saving idea 3 68 mln m of gas and 33 kt of coal saving per annum Improving Energy Efficiency at Cherepovets Steel Mill Energy Consumption Dynamics, Gcal/t of Stee
Slide 50: Converter Shop Upgrade
Converter Shop Upgrade We are complying with the existing regulation. The projects mentioned on that and the next slides are our additional commitment in this area Cherepovets Steel Mill Converter Shop Upgrade: A 3-year project with investments of approximately US$100m No idling of converter ope
Slide 51: Radical Reduction of Emissions at Sinter Production and Electric Arc Furnace Shop
Radical Reduction of Emissions at Sinter Production and Electric Arc Furnace Shop Sinter Production Units in Cherepovets Expected air Emissions Reduction In 2012, Severstal launched a at Sinter Production Units, tpa c.US$30m modernisation project 1,679 of six dust exhausters of the sinter producti
Slide 52: Personnel Development and Community Support
Personnel Development and Community Support Personnel Development and Ethical Standards Corporate Code of Conduct and Ethical Committee in Place Workplace equality: women account for around 30% of our personnel Annual 360° feedback including the company CEO Training: in 2011 40% of our staff
Slide 53: Alexander Grubman, CEO of Severstal Russian Steel
Page 53 Alexander Grubman CEO of Severstal Russian Steel Page 53
Slide 54: Severstal Russian Steel – Focus on Value-Added Steel
Severstal Russian Steel – Focus on Value-Added Steel
Slide 55: Overview
Overview Stated Strategic Priorities Focus on high value-added products Increasing share of domestic sales Efficiency and cost control • Targeted CAPEX programmes • Severstal Business System Main Achievements to date: Largest share of HVA products among Russian peers Highest domestic sales
Slide 56: Our Positioning in Russia
Our Positioning in Russia Severstal Russian Steel is the leading Russian steel producer with a focus on leadership in supplying high value-added products to the domestic market #3 by crude steel production The highest share of high value-added #1-2 by steel supply to the in Russia (2011) products am
Slide 57: Russia is a Strong Market For Steel Products
Russia is a Strong Market For Steel Products Steel Consumption in Russia, mt Russia’s steel demand potential: CAGR 4.7% • localization of foreign carmakers, handling and agricultural equipment manufacturers • realization of national programs to upgrade the railroad truck set and agricultural equip
Slide 58: Focus on the Domestic Market
Focus on the Domestic Market Severstal Russian Steel’s Sales by Market Key Competitive Advantages 2010 2011 Self-sufficiency in raw materials Favorable geographic position Exports • Proximity to major steel-consuming regions, Exports 10.8 Domestic 41% 11.0 Domestic (North-West and Central Russia
Slide 59: Achievements in Production and Sales
Achievements in Production and Sales Major Production Achievements in 2011 Sinter production: Over 9 mt Converter steel output: 9.6 mt Color-coated sheets: Over 220 kt (from a single line) Large-diameter pipes at Izhora Pipe Mill: Over 500 kt Severstal’s Domestic Market Share 32% 29% 26% 26%
Slide 60: Current Status of Business System Projects: Continuous Improvement
Current Status of Business System Projects: Continuous Improvement Continuous improvement Bigger number of initiatives allowed to beat the 2011 plan $m 190 Ways of optimization in 2011 Net effect, US$m 160 Raw materials mix 77 114 Conversion rate of resources 56 50 Cost of scrap 13 Other 14 2011 pla
Slide 61: Business System: Health & Safety, Customer Care, Business Standard
Business System: Health & Safety, Customer Care, Business Standard Lost Time Injury Frequency Rate (LTIFR) Health & Safety Securing operational safety conditions, -69% prevention of fatal accidents Customer Care Achievements in 2011 - H1 2012 Client orientation in all processes allows Greater cust
Slide 62: Long-term Objectives of the Business System
Long-term Objectives of the Business System Additional EBITDA gain from realization of Continuous improvement the Business System projects ($m) • Improvement of equipment and personnel performance, production quality and procurement process +US$640m • Cost reduction Customer care • Price premium
Slide 63: Sales Objectives
Sales Objectives Geography of Severstal Russian Steel Sales Breakdown by Destination, mt Sales 2011 2015 CIS & Baltics Other Exports 10% 16% CIS & Baltics 10% Other Exports Russia 31% 59% Russia 74% Consuming Severstal Russian Steel’s Share in the Key Domestic Consuming Industries, mt Industries 29%
Slide 64: Key Investment Projects
Key Investment Projects Launch Date Balakovo Mini-Mill to produce Long Products for construction, 1 mtpa 2013 capacity Service metal center in Vsevolozhsk to process rolled steel products for 2013 automotive sector, household appliances and regional distribution, up to 170 ktpa capacity Recons
Slide 65: Balakovo Mini-Mill
Balakovo Mini-Mill Rationale Targeting rapidly growing domestic market Focus on long products for construction sector Entering new sales markets Key Advantages Cutting-edge equipment and high degree of automation Favorable geographic position (Povolzhye region) • Proximity to customers • N
Slide 66: Severstal Steel Solutions
Severstal Steel Solutions Project Scope New area of development in the downstream Entry to the high-margin and continuously growing construction solutions market HVA steels (plate & coated steel) Step 1. Entry to the Construction Solutions Market Step 2. New industrial complex Timeframe: 2012-
Slide 67: Vadim Larin, CEO of Severstal Resources
Vadim Larin CEO of Severstal Resources Page 67
Slide 68: Severstal Resources – In Mining We Trust!
Severstal Resources – In Mining We Trust!
Slide 69: Overview
Overview Safety is the highest priority, 2011 LTIFR targets have been achieved We have good assets with excellent margins and FCF generation in strong markets, resilient and cost flexible in downturns Consistent delivery on cost management targets, structural improvement in coking coal costs;
Slide 70: Severstal Resources at a Glance
Severstal Resources at a Glance Severstal Resources today Olkon Vorkutaugol Usinskoe 4 established business Karelsky Okatysh Coalfield units with stable Centralny (Tyva) production PBS Coals Continuous focus on safety, operational efficiency and volumes Amapa Putu Portfolio of new prospective
Slide 71: Strong Financial Performance Amid Volatile Market
Strong Financial Performance Amid Volatile Market IN GOOD IN STRONG IN WEAKER MARKET MARKET MARKET EBITDA, US$m 2010 2011 H1 2012 Vorkuta 421 576 160 Karelsky Okatysh 548 723 316 Olkon 120 227 88 PBS Coals 66 87 48 Total 1,155 1,613 612 EBITDA Margin, % 2010 2011 1H 2012 Vorkuta 43% 48% 33% Karelsky
Slide 72: Cost Management Remains Our Priority
Cost Management Remains Our Priority Cash cost, US$/t Expected further Asset 2011 H1 2012 Comment cost development Longwall moved to Vorkutaugol, hard coking 102 113 the most productive coal, 2Zh grade seam in July Vorkutaugol, semi-soft Volumes up 13% 59 49 FLAT coking coal, GZhO grade compared to
Slide 73: How Are We Achieving That? Examples of the Business System Improvements
How Are We Achieving That? Examples of the Business System Improvements • Maintenance shift is every 3 days in most of the longwalls increased volumes by 6-8%, Vorkuta same goal for the development • Increase of skip productivity in Zapolyarnaya mine by 5% • Further headcount reduction to below 9,00
Slide 74: Robust Health & Safety Record
Robust Health & Safety Record Severstal Resources LTIFR 10.7 -64% 6.3 5.7 4.8 4.1 3.9 3.0 2006 2007 2008 2009 2010 2011 1H2012 The Safety Program is being implemented as a part of BSS to provide further safety improvements Figures exclude Nordgold Page 74
Slide 75: Brownfields Growth and Cost Initiatives in Iron Ore
Brownfields Growth and Cost Initiatives in Iron Ore Iron ore volumes expected to grow to 15.8mt in 2015 Karelskiy Okatysh, iron ore pellets, mtpa Olkon, iron ore concentrate, mtpa 10.7 5.1 4.9 10.3 10.1 4.7 2011 2012E 2015F 2011 2012E 2015F Karelskiy Okatysh: one of the most modern iron Olkon: conti
Slide 76: Brownfields Growth and Cost Initiatives in Metcoal
Brownfields Growth and Cost Initiatives in Metcoal Coal (incl. steam coal) volumes expected to grow to 12.7mt in 2015 Vorkutaugol, metcoal, mtpa PBS Coals, metcoal, mtpa 3.2 7.7 2.6 6.0 2.2 5.1 2011 2012E 2015F 2011 2012E 2015F Vorkutaugol: Incline shafts at Zapolyarnaya and PBS: Highly flexible vol
Slide 77: Sergei Kuznetsov, CEO of Severstal International
Sergei Kuznetsov CEO of Severstal International Page 77
Slide 78: Severstal International – Focused on the Future
Severstal International – Focused on the Future
Slide 79: Overview
Overview Modernization is completed – current investments are low and mostly maintenance-related Good progress in ramping up of the new facilities to achieve planned targets Business System of Severstal Development is building on the existing platform US market is attractive in the long-term
Slide 80: Severstal North America is Present on All Key NAFTA Growing Markets
Severstal North America (SNA*) is Present on All Key NAFTA Growing Markets Projected Steel Shipment to the NAFTA Light Vehicle Projected Steel Shipment to the US Construction, mt Industry, mt 4.9% 2.4% 20 15 12.7 13.3 13.6 14.0 15.7 15.0 15.3 12.3 12.5 13.9 13.6 13.7 14.1 14.4 10.4 11.0 15 12.3 10.3
Slide 81: SNA Today: Well-Invested Steel Assets
SNA Today: Well-Invested Steel Assets In 2012 SNA completed a US$3.1bn, multi-year expansion/modernization program in North America Combines the advanced product capabilities of integrated operations with the flexibility of mini-mill operations SNA 2004–2011 Investment Program Total investment
Slide 82: Competitive Benchmarking – H1 2012
Competitive Benchmarking – H1 2012 Revenue per tonne H1 2012, US$ 1,262 1,291 897 908 953 Revenue per tonne lower due to differences in product mix… EBITDA Margin H1 2012, % 13.6% …which is partially SNA USS SDI AK Steel Nucor 7.7% 6.6% 6.7% compensated by better EBITDA per tonne H1 2012, US$ 3.9% p
Slide 83: SNA Targets for Market Shares
SNA Targets for Market Shares SNA Products Mix Development SNA Product Mix in 2011 SNA Projected Product Mix in 2016 SNA Market Share Development SNA Market Share in 2011 SNA Projected Market Share in 2016 Page 83
Slide 84: Low-cost Steel Facilities
Low-cost Steel Facilities Hot Band Cumulative Conversion Cost, US$/t Columbus – the newest US mini-mill $119 Total crude steel capacity doubled to 3.1 mt in Savings of US$40- 2011 at the cost of US$0.55bn 50m per annum The mill is already among the most cost-effective in the US $103 H1 2011 Co
Slide 85: Competitive Input Costs
Competitive Input Costs SNA Supply Sources Columbus H1 2012 Production Cost Coke Iron Ore Pig Iron 6% Scrap 4% 14% 4% Utilities/Gases 4% 63% coke supply from Labour 3% 2% MSC (50% owned by SNA) 100% secured by long- Maintenance 7% term pellet contract with Overheads 37% secured by long-term Clevelan
Slide 86: Our New Facilities: Produce HVA Products with Low Annual Maintenance
Our New Facilities: Produce HVA Products with Low Annual Maintenance Dearborn: 1st Hot Dipped Galvanizing Line Dearborn: Pickle Line and Tandem Cold Mill Columbus: 2nd Galvanizing Line Columbus: Push-Pull Pickling Line Page 86
Slide 87: Development of Severstal Business System in SNA
Development of Severstal Business System in SNA Business System of Severstal Focus on five Aspects of Setting Aggressive, but Achievable Targets Development Company Performance Project business improvement of Implementation at Dearborn and Safety US$54m per annum in 2015 vs 2011 Columbus is un
Slide 88: SNA Development Strategy
SNA Development Strategy Dearborn Columbus Achieve product qualifications and ramp up PLTCM and Continue to explore opportunities for vertical integration HDG lines to rated capacity into metallics (DRI off take agreement versus building) Develop new products with new equipment capabilities
Slide 89: Conclusions
9] Severstal Conclusions
Slide 90: Key Highlights
Key Highlights Unique business model combining low cost production and customer reach Committed to our established strategy Focus on internal improvements and organic growth Balanced mid and long-term growth projects profile Leading margins and return on investment for shareholders Stron
Slide 91: Q&A
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Slide 92: Disclaimer
Disclaimer These materials are confidential and have been prepared by OAO Severstal (Severstal) solely for your information and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. These materials may contain projec