NLMK · RUS:NLMK
NLMK — Q2 2018 Earnings Presentation
24 slides from NLMK's earnings presentation, Jul 31, 2018
Slide 1: NLMK Q2'18 IFRS Results
NLMK Q2’18 IFRS Results 31 July 2018
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: Market review, Operating highlights
Grigory Fedorishin Market review CEO Operating highlights Q2’18 Financials Business divisions results Annex Q&A 3
Slide 4: Global steel demand remained firm in Q2'18
GLOBAL STEEL DEMAND REMAINED FIRM IN Q2’18 Demand across key markets was robust in 2Q’18 Seasonal growth in Q2’18 demand – China continues to surprise %, qoq – Consumption continued to rise in the US; stable growth in the EU 10.0% 9.0% – China: surge in apparent demand surprised on the upside 9.0% 8
Slide 5: Steel prices and spreads are holding up; stocks down
STEEL PRICES AND SPREADS ARE HOLDING UP; STOCKS DOWN Global steel stocks are seasonally lower, especially in China Global stocks remain tight Mt 40.0 Steel prices remained relatively flat worldwide except for the US market 35.0 – The US prices spiked $133/t qoq; prices in the EU were slightly lower
Slide 6: Strong Q2'18 sales: improved sales mix and volumes
STRONG Q2’18 SALES: IMPROVED SALES MIX AND VOLUMES Shipments increased 6% qoq on the back of robust demand Shipments growth qoq on higher demand Mt Product mix improved with 9% qoq growth in finished steel sales %, qoq 5.0 4.2 4.1 4.4 +6% Total sales – Seasonal recovery of demand in Russia 4.5 4.0 –
Slide 7: Committed strategy effects on schedule
COMMITTED STRATEGY EFFECTS ON SCHEDULE EBITDA gains from operational efficiency Operational efficiency gains contributed $95 m in 1H’18, $m or 73% of the annual target 140 130 – Additional volumes of steel production and optimization of raw 95 120 materials consumption are the key contributors 100 –
Slide 8: Q3 Outlook
Q3 OUTLOOK MARKETS Global steel prices would be subject to volatility on uncertainty from rising protectionism worldwide beyond the steel industry China: “blue sky protection plan” constrains output and exports – will provide additional support for global pricing Russia: seasonally better demand wil
Slide 9: Q2'18 Financials
Market review Operating highlights Q2’18 Financials Nelly Mescheryakova Business divisions results Deputy CFO Annex Q&A 9
Slide 10: Q2'18 financial highlights: 10-year record EBITDA
Q2’18 FINANCIAL HIGHLIGHTS: 10-YEAR RECORD EBITDA Revenue was up 11% qoq backed by higher shipments and prices Profitability continued to expand defying seasonality as well as improved product mix $ mln 30% 29% 29% 0 1,000 29% 28% 26% EBITDA hit 10-year record level on better prices and increased sa
Slide 11: Margins improved on volume and prices
MARGINS IMPROVED ON VOLUME AND PRICES EBITDA by divisions Russian Flat Products: EBITDA up on expanding price spreads $M supported by ruble depreciation and rising share of finished steel Q2'17 +17% Q1'18 80 0.0 795 .0 790 .0 785 .0 – (+) Sales of finished steel up 18% qoq on strong demand 780 .0 77
Slide 12: Free cash flow down on working capital buildup
FREE CASH FLOW DOWN ON WORKING CAPITAL BUILDUP Free cash flow of $288 m Q2’18 CF bridge $m 0 100 200 300 400 500 600 700 800 900 1,0 00 Net operating cash flow down 44% qoq to $412 m on working EBITDA 915 capital build-up of $356 m: – (-) $272 m increase in A/R on higher shipments and prices growth
Slide 13: Strong debt portfolio and liquidity position
STRONG DEBT PORTFOLIO AND LIQUIDITY POSITION Net debt / 12M EBITDA stood at 0.31x in Q2’18 (flat qoq) Liquidity and short-term debt* $m – Total debt decreased to $2.1 bn (-11 % qoq) due to working capital funding repayment – Net debt increased to $0.976 bn (+11 % qoq) Available credit lines – Liquid
Slide 14: Business divisions results
Market review Operating highlights Q2’18 Financials Business divisions results Annex Q&A 14
Slide 15: Q2'18: Russian flat products
Q2’18: RUSSIAN FLAT PRODUCTS Sales rose 3% qoq due to strong demand for finished steel Revenue & steel sales volumes mt $ bn – (+) Finished steel sales increased 18% qoq on seasonally strong +3 % +6% demand on the Russian market 2,17 2,30 3.34 3.43 – (+) Semis to 3rd parties up 1% qoq 0.66 1.20 1.10
Slide 16: Q2'18: Russian long products
Q2’18: RUSSIAN LONG PRODUCTS Sales down 17% qoq Revenue & steel sales volumes – (-) Reduced volumes due to active sales in Q1’18 and World Cup kt -17 % $ bn +7 % period slowdown 0,77 0,46 0,49 0,64 Revenue increased 7% qoq on scrap sales 0.21 0.04 0.13 0.06 0.16 0.11 – (+) Intersegmental scrap sales
Slide 17: Q2'18: Mining
Q2’18: MINING Revenue & sales volumes Sales volumes flat qoq - mining segment continues to exhibit strong Kt $ Bn +0 % -4% operating performance 4,51 4,52 0,34 40% 0,33 480 % – Pellets production slightly increased by 3kT 460 % 440 % 420 % 400 % 1.69 1.68 380 % – 1% qoq decrease in pellets sales (-1
Slide 18: Q2'18: NLMK USA
Q2’18: NLMK USA Sales increased by 15% qoq driven by stronger demand Revenue & steel sales volumes – (+) HRC sales increased by 16% qoq driven by seasonal factors, kt +15% 0,64 $m +37% continuing economic growth and demand from re-rollers impacted 0,55 0,59 by import restrictions 0.37 0,43 – (+) HVA
Slide 19: Q2'18: NLMK Dansteel
Q2’18: NLMK DANSTEEL Revenue & steel sales volumes Sales down 4% qoq driven by decline in demand kt $m -4% -4% 0,14 Revenue down 4% qoq following drop in deliveries 0,14 0,14 0,13 0.01 – (-) Shipments were down 4% qoq – (+) Selling prices supported revenue which was partially offset 0.14 by strength
Slide 20: Annex
Market review Operating highlights Q2’18 Financials Business divisions results Annex Q&A 20
Slide 21: Q2'18 NLMK sales, output, Lipetsk slabs costs
Q2’18 NLMK SALES, OUTPUT, LIPETSK SLABS COSTS Steel production Group sales to external customers by segments Mt qoq: +11% Mt qoq: +1% yoy: +15% yoy: +6% 2.31 qoq: -2% 2.50 5.00 4.33 yoy: +5% 2.00 4.5 0 3.29 4.0 0 qoq: -17% qoq: +12% qoq: -10% 1.50 3.50 3.00 qoq: +14% yoy: -32% yoy: +15% qoq: +11% yo
Slide 22: Sales geography and product mix
SALES GEOGRAPHY AND PRODUCT MIX Steel product sales by region Sales structure by product mt mt 5 5 4,20 4,15 4,38 5 4.20 4.15 4.38 5 0.65 0.53 0.56 Others Commercial 4 4 0.66 1.33 1.46 0.55 0.54 1.68 4 4 M. East* products 0.64 0.84 3 0.81 3 3 3 N.America 1.65 Semi-finished 2 2 0.87 0.92 0.91 2 1.26
Slide 23: Foreign assets performance
FOREIGN ASSETS PERFORMANCE Slabs sales from Russian Flat Division NBH Rolled product sales kt kt QoQ 1,823 1,750 640 QoQ 1,659 556 578 2,000.0 2,00 0 Total -4% 11 152 88 Total -10% 1,800.0 1,800 1,600.0 136 173 15 81 8 NLMK 80 1,600 1,400.0 503 285 +14% CRC -20% Dansteel 220 1,40 0 1,200.0 551 1,200
Slide 24: Company IR contacts
COMPANY IR CONTACTS Dmitriy Kolomytsyn, CFA Director, IR, Capital Markets Address 40, Bolshaya Ordynka Str., Bldg. 3 Moscow, 119017, Russia . IR E-mail Address [email protected] Phone Number Office: +7 495 504 05 04; Mobile: nlmkonair nlmk_group nlmk group 24