Mechel · RUS:MTLR
Mechel — 9M 2008 Earnings Presentation
20 slides from Mechel's earnings presentation, Dec 18, 2008
Slide 1: 9 Months Results Presentation
9 Months Results Presentation December 18, 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, Mechel OAO
Mr. Igor Zyuzin CEO Mechel OAO 3
Slide 4: 9M 2008 Financial Highlights
9M 2008 Financial Highlights ¾ Strong 9M 08 vs. 9M 07 financial results +84.7% Revenue $8.6 billion +167.0% Operating income $2.8 billion +132.0% Net Income $1.6 billion +137.7% EBITDA $2.9 billion ¾ Successful implementation of strategy ¾ Strong Management ¾ Focus on shareholder value 4
Slide 5: Mr. Vladimir Polin, Senior Vice President
Mr. Vladimir Polin Senior Vice President Mechel OAO 5
Slide 6: 9M 2008 Production Growth
9M 2008 Production Growth Mining Segment Production Product output, Thousand 9M08vs.9M07 9M 08 tonnes % Coal 20,702 54 Coking coal 12,409 95 Steam coal 8,293 17 Iron ore concentrate 3,620 -2.5 Steel Segment Production Product output, Thousand 9M08vs.9M07 9M 08 tonnes % Hardware 604 16 Rolled product
Slide 7: 9M 2008 Production Growth
9M 2008 Production Growth Ferroalloy Segment Production Product output, Thousand 9M08vs.9M07 9M 08 tonnes % Nickel 14 6 Ferrosilicon 67 - Ferrochrome 48 - Power Segment Production Product Units 9M 2008 9M08vs.9M07 % Electric power generation ths. kWh 3,108,359 55 Heat power generation Gcal 4,098,027
Slide 8: New Business Segment - Ferroalloys
New Business Segment - Ferroalloys Overview Ferronickel Mechel is the only steel manufacturer in the world who has own Southern Urals Nickel Plant production facilities for the most essential ferroalloys Two open-pit nickel ore mines (Sakhara, Buruktal) 2nd largest nickel producer in Russia
Slide 9: Ferroalloys
Ferroalloys Ferrochrome Ferrosilicon Tikhvin Smelting Plant Bratsk Ferroalloy Plant • Located in Tikhvin, 200 km south east of St Petersburg, Russia • Phase 1 (2007– 2010) - an estimated production capacity of • 16% of Russian ferrosilicon production (87,000t in 2007), capacity 148ktpa HC FeCr of 90
Slide 10: Financial Review
Financial Review 10
Slide 11: Solid Financial Performance
Solid Financial Performance Revenue, EBITDA and Net profit Revenue (left scale) EBITDA (left scale) Mechel benefited from higher sales prices Net profit (left scale) EBITDA margin (right scale) across both mining and steel segments and $ Million efficiencies from the consolidation of acquired 9,000
Slide 12: Steel Segment Performance
Steel Segment Performance External sales structure 55% growth in revenue from external customers $3,119 mn $4,829 mn 100% Continuing commitment to modernisation and 16% 13% focus on an increasing share of higher margin, 80% 5% 7% higher value added production 14% 16% 60% 9% 8% Gross margin increased
Slide 13: Mining Segment Performance
Mining Segment Performance Record pricing in both coking and steam coal External sales structure supported revenue growth $882 mn $2,829 mn 3x growth in revenue to $2.8 billion 100% 5% 6% 14% 11% 80% Gross Margin increased to 68% 25% 60% 37% Coking coal sales reached 58% of revenue from 3rd parties
Slide 14: Ferroalloys Segment Sales
Ferroalloys Segment Sales Acquired reserves of chromites and nickel mark External sales structure expansion towards a more comprehensive $395 mn $402 mn ferroalloys business 100% 3% 2% 16% Additional product diversification 80% 17% 60% Increased vertical integration with the steel 97% segment throug
Slide 15: Diversified Revenues and EBITDA
Diversified Revenues and EBITDA High degree of diversification and vertical integration helps mitigate risk and provides stability Revenues and cash flows are well-balanced in the key segments: Mining - 59% of consolidated EBITDA and Net Income Steel - 40% of consolidated EBITDA and Net Income EBITD
Slide 16: Favourable Cost Structure
Favourable Cost Structure Growing benefits of vertical integration Cost structure in 9M08 into power and raw materials Other Depreciation and depletion Ability to source internally 100% of coking Energy Staff costs coal, nickel, ferrosilicon and iron ore for Raw materials and purchased goods our ste
Slide 17: Increasing Cash Generation Capacity
Increasing Cash Generation Capacity Strong improvement in cash flow generation Operating cash flow $ Million Operating cash flow of $1.9 billion in 2,000 30% 9M08 exceeded the 2007 full-year 1,600 22.4% 25% Disciplined approach to capital expenditure led to growing free operating 20% 1,200 16.3% cas
Slide 18: Post Acquisition Debt Metrics Recovery
Post Acquisition Debt Metrics Recovery Mechel’s financial policy is to maintain EBITDA, FFO and Net Debt/EBITDA Net Debt-to-EBITDA of below 2.0x EBITDA (left scale) FFO (left scale) Net Debt/EBITDA, (right scale) Insignificant Net Debt to EBITDA $ Million x, annualised dynamics despite sizable acqui
Slide 19: Debt Profile
Debt Profile Short-term maturities as of Sept. 30, 2008 $ Million Q408 Q109 Q209 Q309 Short-term debt and current portion of 642(2) 2,046 285 179 long-term debt(1) Including bridge loan 1,500 (1) Includes $765 mn of revolving credit lines (2) $443.5 mn were repaid and/or refinanced as of December 18
Slide 20: Financial Results Overview
Financial Results Overview US$ million unless 9M08 9M07 Change, % otherwise stated Revenue 8,581 4,647 85% Cost of sales (4,233) (2,830) 50% Operating income 2,808 1,052 167% EBITDA 2,864 1,205 138% EBITDA margin 33.4% 25.9% Net Income 1,637 706 132% Net Income margin 19.1% 15.2% EPS (USD per share)