Evraz Plc · LSE:EVR
Evraz — Investor Presentation (November 2013)
40 slides from Evraz's investor presentation, November 2013
Slide 1: EVRAZ Investor Presentation November 2013
EVRAZ Investor Presentation November 2013
Slide 2: Disclaimer
Disclaimer This document 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 EVRAZ plc (“EVRAZ”) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.)
Slide 3: EVRAZ Overview
g AS EVRAZ Overview
Slide 4: EVRAZ in brief
EVRAZ in brief One of the largest vertically integrated steel and mining companies in the world Top-20 steel producer in the world based on crude steel production of 15.9 mt in 2012 Leader in the Russian and CIS construction and railway product markets No 1 producer of rails and large diamet
Slide 5: EVRAZ assets
EVRAZ assets Tubular EVRAZ Europe DMZ Long Products NTMK ZSMK Products Production: 0.8 Mtpa Production*: 0.5 Petrovskogo Production*: 4.3 Mtpa Production*: 7.3 Mtpa Production: 0.9 Mtpa Mtpa Production*: 0.8 Mtpa Flat Products Sukha Balka KGOK VGOK Evrazruda Production: 1.0 Mtpa Production***: 2.6 M
Slide 6: EVRAZ product portfolio
EVRAZ product portfolio Product Products * 2012 EVRAZ external Main market of Application category sales volume, kt sales Construction Products Rebars 2,346 Russia & CIS, Asia Construction Channels 888 Russia & CIS, Asia Construction Beams 1,071 Russia & CIS, Asia, Africa Construction Angles 534 Rus
Slide 7: Russia is the core geography for EVRAZ
Russia is the core geography for EVRAZ Vertically integrated business model in Russia H1 2013 EBITDA by region *, $m predominantly based on blast furnace 16 21 steelmaking 81 40 Self-coverage in iron ore 97% in H1 2013 Russia Ukraine Self-coverage in coking coal 177% in H1 2013 North America E
Slide 8: Key Market Update
A WAN Z Key Market Update
Slide 9: World steel consumption and production
World steel consumption and production After decade-long acceleration of steel consumption the Steel consumption by country, kg per capita global steel industry is moving into a lower growth 700 phase 600 ~80% of world steel consumption growth during 2000- 2012 came from China 500 China steel
Slide 10: Long steel consumption in Russia
Long steel consumption in Russia Long steel consumption has reached pre-crisis level Demand is being driven by infrastructure development projects announced by the government and robust residential construction Demand from the construction sector is close to an all-time high EVRAZ is one of
Slide 11: Drivers of Russian long steel consumption growth
Drivers of Russian long steel consumption growth Lack of residential real estate in Russia – Residential construction in Russia square meters per capita are still well below m2 % developed countries and Eastern Europe 70 50 60 40 Penetration of mortgage financing instruments 50 40 30 Large sca
Slide 12: Russian railway product market
Russian railway product market Russia has one of the largest railway infrastructure globally EVRAZ is the market leader in rail production in Russia strengthening its market positions after completion of the rail mill modernisation project at EVRAZ ZSMK Russian government announced plans to im
Slide 13: North American rail market
North American rail market Projected annual rail demand, Mt* The North American rail market is strong and stable Market Product Key growth Market Cum. driven primarily by freight replacement sub- type drivers size*, 2013 Volume*, Limited corridor capacity is expected to drive the segment 2010-20
Slide 14: US and Canada line pipe market
US and Canada line pipe market 2013 Market Sub-Segment Product Types Key Growth Drivers Market Size Spiral (HSAW) Shale Oil & Gas drilling Large Diameter activity Straight-Seam ~1,050 kt (LD) Line Pipe (DSAW) Liquefied Natural Gas (LNG) approvals Regulatory approval Shale Oil & Gas drill
Slide 15: North American OCTG market segments
North American OCTG market segments 2012 2020 Market sub-segment Typical Market size Market size % Growth Key growth drivers product applications (metric t) (metric t) Conventional vertical drilling Overall drilling Carbon Grades Lower-risk drilling activity ~1,955 kt ~2,104 kt 0.9% environmen
Slide 16: EVRAZ North American tubular business
EVRAZ North American tubular business Large Diameter line pipe Oil Country Tubular Goods (OCTG) EVRAZ is the share leader in Large Diameter (LD) line An increase in more complex horizontal and directional pipe in North America drilling has led to increased OCTG demand, especially Largest LD ca
Slide 17: Financial Highlights, Liquidity and Debt
Financial Highlights, Liquidity and Debt
Slide 18: Financial highlights
Financial highlights Group structure H1 2013 Key Results of EVRAZ plc and Evraz Group S.A. H1 2013 US$ million EVRAZ plc unless otherwise stated EVRAZ plc Evraz Group TopCo S.A. level 100% Revenue 7,362 7,142 EBITDA* 939 922 HoldCo Evraz Group level 41% S.A. EBITDA margin, % 12.8 12.9 Operating cash
Slide 19: H1 2013 revenue and EBITDA drivers
H1 2013 revenue and EBITDA drivers Consolidated revenue decreased primarily due to Consolidated revenue by segment, $m lower sales prices, in line with general trends in the 7,619 7,362 global steel industry 541 465 263 H1 2013 EBITDA reflects lower prices of steel 1,383 268 1,622 Other operatio
Slide 20: Cost of revenue
Cost of revenue In H1 2013 cost of revenue decreased by 2% Consolidated cost of revenues by cost elements, $m vs. H1 2012 despite consolidation of Raspadskaya H1 % of H1 % of Relative Raw material costs declined by 20% and Item 2013 revenue 2012 revenue change depreciation by 19%, but were parti
Slide 21: Performance by regions
Performance by regions EBITDA, EVRAZ Russia, $m EBITDA, EVRAZ North America, $m 1,052 882 216 81 H1 2012 H1 2013 H1 2012 H1 2013 EBITDA, EVRAZ Ukraine, $m EBITDA, EVRAZ Europe, $m EBITDA, EVRAZ South Africa, $m 40 21 16 6 (3) (6) H1 2012 H1 2013 H1 2012 H1 2013 H1 2012 H1 2013 * H1 2012 numbers are
Slide 22: H1 2013 FCF generation
H1 2013 FCF generation Cash flows from operating activities fell by 42% in H1 2013 to U$628m reflecting lower product prices compared to H1 2012 and investment in working capital due to business seasonality Less capex spending ($492m) compared to budget to address challenging market environment
Slide 23: H1 2013 debt bridge and net leverage
H1 2013 debt bridge and net leverage In H1 2013 net debt increase was mostly due to the consolidation of Raspadskaya Under new approach accrued interest and nominal effect of swaps are now included in Total debt US$ million Cash, Deposits, 8,606 8,248 8,440 Collateral under swaps Total Debt 572
Slide 24: Liquidity and debt maturity profile
Liquidity and debt maturity profile Cash and short-term deposits of $1,537m provide sufficient liquidity. The major part of short-term credit lines was repaid, the utilisation of trade lines returned to a normalised level Debt composition: 72% – public debt (Eurobonds and Russian Rouble bonds),
Slide 25: Efficient debt management
Efficient debt management H1 2013 debt management included: issue of 7-year US$1bn Eurobonds at lowest ever rate of 6.50% refinancing the RUB bonds put (c.$365m) and repayment of PXF and other facilities with maintenance covenants as a result, remaining debt with maintenance covenants amount
Slide 26: Capex and Management Initiatives
Capex and Management Initiatives
Slide 27: Management initiatives to address current market environment
Management initiatives to address current market environment In response to challenging conditions of the steel industry EVRAZ seeks to streamline its business and focus on operational efficiencies throughout its key segments Idling of non-profitable Capex Reduction Asset Disposals facilities Other
Slide 28: Capex
Capex In H1 2013 total capital expenditure amounted to $492m compared to $565m in H1 2012, while updated FY2013 capex estimate is $0.9-1.0bn (including Raspadskaya) compared with budgeted capex of c.$1.3bn Delivering on major investment programme: Rail mill modernisation at EVRAZ ZSMK complete
Slide 29: Key investment projects
Key investment projects Cumulative Total capex by Capex in Capex in capex*, 30/06/2013*, H1 2013, H2 2013, Project $m $m $m $m Project targets Steel 347 224 46 72 Coke consumption to be reduced by ca. 20% and natural gas by Pulverised coal injection 199 124 17 33 ca. 50%, with additional 140kg PCI
Slide 30: Appendix
Appendix
Slide 31: Global macro data and steel market
Global macro data and steel market Steel prices, CFR East Asia, monthly, $/t Global steel production, monthly 800 140 88% 135 84% 700 130 80% 125 600 76% 120 72% 500 115 110 68% 400 105 64% Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Slab Billet
Slide 32: Global coking coal and iron ore
Global coking coal and iron ore China iron ore imports, Mt, monthly, annualised China coking coal imports, Mt, monthly, annualised 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 Iron ore prices, CF
Slide 33: Russian steel and raw materials markets
Russian steel and raw materials markets Crude steel production in Russia, Mt Steel consumption by industry 120 82 90 78 Total consumption 73 80 43.1 Mt 70 69 71 100 67 60 70 Construction 36% 80 28% 30% 32% 30% 33% 37% 39% 60 Tubular industry 23% 31% 50 EAFs 60 Metal products 12% 40 BOFs Machinery an
Slide 34: EVRAZ's steel product flows
EVRAZ’s steel product flows Global Vertically Integrated Steel, Mining and Vanadium Business with Strong Positions in Highly Attractive Markets 158 Russia/CIS 1,334 338 3,706 500 Europe 115 393 1,551 North America Asia 266 South America Africa Steel mills Steel Sales Volume Breakdown (H1 2013) Iron
Slide 35: Steel: CIS
Steel: CIS Russian steelmaking facilities continued to operate at close Steel products sales volumes: CIS vs. export, kt to full capacity during H1 2013 5,586 5,633 Construction industry remains the key driver of demand for steel products in CIS, demonstrating healthy growth of 13% 33% 34% Hig
Slide 36: Steel: North America
Steel: North America Strong production performance in tubular and construction & other steel products Flat product group focused on enhancement of capacity utilisation Tubular product group concentrated on improving productivity rates at the seamless mill at Pueblo and on heat treating investm
Slide 37: Mining: overview of operations
Mining: overview of operations Iron ore Coking coal Asset Production of saleable Asset Production of raw iron ore, 2012 coal, 2012 KGOK 10 Mtpa Yuzhkuzbassugol 8.5 Mtpa Evrazruda 5 Mtpa Raspadskaya 7.0 Mtpa Timir Greenfield Mezhegey Greenfield NTMK KGOK ZSMK Yuzhkuzbassugol Timir Raspadskaya Evrazru
Slide 38: Mining: iron ore
Mining: iron ore External sales volumes of iron ore products increased by 6% in H1 2013 compared to H1 2012 driven by higher volumes from EVRAZ Sukha Balka Intersegment sales decreased by 6% primarily due to changes to intersegment product delivery terms and lower volumes from the Irba mine at E
Slide 39: Mining: coking and steam coal
Mining: coking and steam coal Sales volumes of coking coal products of Yuzhkuzbassugol (incl. intersegment sales) increased in H1 2013 by 40% Raspadskaya contributed to additional 2.7mt sales of coking coal products Higher share of intersegment sales from Yuzhkuzbassugol was due to a shift of
Slide 40: Greenfield mining projects: Mezhegey and Timir
Greenfield mining projects: Mezhegey and Timir Mezhegey Project key parameters Timir Project* key parameters World class coking coal deposit in the largest A world class iron ore greenfield project (licences undeveloped coal province in Russia for 4 iron ore deposits with resources of 3.5bn t)