Mechel · RUS:MTLR
Mechel — FY2007 Earnings Presentation
21 slides from Mechel's earnings presentation, May 29, 2008
Slide 1: FY 2007 Results Presentation
FY 2007 Results Presentation May 29, 2008
Slide 2: Disclaimer
Disclaimer This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Mechel OAO (Mechel) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment acti
Slide 3: Mr. Igor Zyuzin, CEO
Mr. Igor Zyuzin CEO Mechel OAO 3
Slide 4: FY07 Financial Highlights
FY07 Financial Highlights ¾ Strong FY07 vs. FY06 financial results +52.0% Revenue $6.7 billion +92.6% Operating income $1.4 billion +51.4% Net Income $913 million ¾ Well balanced strategy ¾ Strong Management ¾ Focus on shareholder value 4
Slide 5: Strategy realized through acquisitions
Strategy realized through acquisitions ¾ Southern Kuzbass Power Plant – close proximity to Southern Kuzbass coal operations allows for efficient use of low quality coal byproducts ¾ Kuzbass Power Sales Company – the largest power distributing company in Siberia controlling more than 50% of regional
Slide 6: Strategy realized through acquisitions
Strategy realized through acquisitions ¾ Yakutugol Russia’s largest coking coal exporter (sells mostly to Japan, South Korea, and Taiwan) The only producer of K9 hard coking coal in Russia Coal reserves are estimated at 200 million tonnes 10.8 million tonnes of coal in 2007 ¾ Elgaugol One
Slide 7: Oriel Resources plc
Oriel Resources plc Acquired reserves of chromites and nickel mark expansion of Mechel Group towards a more Russia comprehensive ferroalloys business Strategically positioned to supply the growing stainless steel markets of China, Russia & Asia as well as developed European markets Southern Urals Se
Slide 8: Strategy realized through acquisitions
Strategy realized through acquisitions Ductil Steel (Romania) Main features of Ductil Steel Two new assets Mechel Campia Turzii Otelu Rosu Plant - Mini mill producing billets Otelu Rosu plant Buzau plant - Billets capacity – 300 ktpa Buzau Plant - Rolling facilities for long products and Mechel Targ
Slide 9: Record FY07 Results
Record FY07 Results ¾ Strong FY2007 vs. FY2006 financial results +52.0% Revenue $6.7 billion +55.3% EBITDA $1.7 billion +51.4% Net Income $913 million ¾ Well balanced strategy ¾ Strong Management ¾ Focus on shareholder value 9
Slide 10: Mr. Vladimir Polin, CEO Mechel Management OOO
Mr. Vladimir Polin CEO Mechel Management OOO 10
Slide 11: FY07 Production Growth
FY07 Production Growth Mining Segment Production Product output, Thousand FY07vs.FY06 FY2007 tonnes % Coal 21,195 25 Coking coal 10,419 7 Steam coal 10,775 47 Iron ore concentrate 4,963 0 Nickel 17.14 19 Steel Segment Production Product output, Thousand FY07vs.FY06 FY2007 tonnes % Hardware 683 12 Ro
Slide 12: Expansion of Mechel's sales network
Expansion of Mechel’s sales network Trading company Mechel-Service established new retail and service sites to meet high demand for construction rolled products Targets achieved: ¾ Increased sales volumes of steel products to end customers ¾ Expansion of sales geography ¾ Additional margins on sold
Slide 13: Mr. Stanislav Ploschenko, CFO
Mr. Stanislav Ploschenko CFO Mechel OAO 13
Slide 14: Sales Overview
Sales Overview Consolidated revenue The Group benefited from higher 7,000 611 6,684 sales prices across both mining and 1,455 220 6,000 steel segments 5,000 4,398 (US$mn) Increased steel sales volumes 4,000 3,000 Recent acquisitions in power segment 2,000 contributed US$447 million to 1,000 0
Slide 15: Steel Sales: Structure and Prices
Steel Sales: Structure and Prices 42% growth in revenue from external Sales structure* customers 100% 17% 17% Diversification protects overall company 80% 15% 1% 6% financial performance from market 8% 14% 60% 8% volatility 10% 4% 10% 5% 40% Focus on growing domestic market 25% 23% 20% Growi
Slide 16: Mining Sales: Structure and Prices
Mining Sales: Structure and Prices Sales structure* Gross Margin up to 51,4% 100% 3% 5% 20% 28% contribution to the consolidated 80% 25% 13% revenue 60% 12% 24% Expansion into the fast growing Asian 40% 24% Pacific Basin countries 20% 40% 34% Privatization of power generation 0% companies pr
Slide 17: Cost Structure
Cost Structure Stable cost structure despite changing conditions in the input markets Overall G&A expenses as a percentage of sales decreased to 16.75% from 18.46% y-o-y as a result of sales structure changes Deepening of vertical integration after the acquisition of Bratsk Ferroalloy Plant an
Slide 18: Segment Operations
Segment Operations Sustainable operating results in the steel segment EBITDA/tonne of steel – increase by 8% to US$120.5 Strong coal and iron ore prices pushed operating profit in the mining segment 2.8x to US$887 mln. EBITDA margin in mining segment grew to 39% Balanced business model mit
Slide 19: Financial Performance Analysis
Financial Performance Analysis Revenue – Gross margin Best operational results in the Group’s 7,000 6,684 50% history 6,000 Sustainable growth and robust financial 5,000 4,398 40% 3,805 performance over the past 3 years (US$mn) 4,000 Visible returns from capital investment 3,000 30% 2,000 prog
Slide 20: Solid Financial Position
Solid Financial Position Operating cash flow Record operating cash flow sufficient to 1,000 20% finance investment program 16.3% 800 15% Comfortable leverage post acquisition of 12.6% 13.2% (US$mn) 600 Yakutugol and Elgaugol provides sufficient 8.1% 881 10% room to finance additional growth 400
Slide 21: FY 2007 Results Overview
FY 2007 Results Overview US$ million unless 2007 2006 Change, % otherwise stated Revenue 6,684 4,398 52% Cost of sales (4,167) (2,860) 46% Operating income 1,398 726 93% EBITDA 1,659 1,068 55% EBITDA margin 24.8% 24.3% Net Income 913 603 51% Net Income margin 13.7% 13.7% EPS (USD per share) 2.19 1.4