NLMK · RUS:NLMK
NLMK — Q2 2019 Earnings Presentation
29 slides from NLMK's earnings presentation, Jul 26, 2019
Slide 1: Q2 2019 IFRS Results
1 Q2 2019 IFRS Results 26 July 2019
Slide 2: Disclaimer
DISCLAIMER 2 This document is confidential and has been prepared by NLMK (the the industry in which the Company operates. By their nature, forwarding- “Company”) solely for use at the presentation of the Company and may looking statements involve risks and uncertainties because they relate to not be
Slide 3: Agenda: Market review, operating highlights, strategy update
3 • Market review Grigory • Operating Fedorishin highlights CEO • Strategy 2022 update • Q2’19 Financials • Business divisions results
Slide 4: Market Update
MARKET UPDATE 4 Economic activity in key regions has softened over STEEL DEMAND DYNAMICS IN MANUFACTURING PMI recent months KEY REGIONS, Q2’19, yoy Activity expansion – Only the US PMI remains in the expansion zone 58 10.0% 12.0% 55 10.0% 6.0% 8.0% Apparent steel demand increased yoy in Q2’19 in 6.0
Slide 5: Mixed Steel Prices Dynamics
MIXED STEEL PRICES DYNAMICS 5 Divergent trends worldwide remain in place HRC PRICES WERE LOWER QOQ, $/t %, qoq Q1'19 Q2'19 – Prices in Russia were supported by seasonally stronger demand in 2Q’19 -11% -6% 8% 7% -1% 1% 1% 1100 0% – The US HRC prices softened qoq amid growing 1000 680 -200% 900 supply
Slide 6: NLMK: Slab Shipments Down in Q2'19 QoQ, Product Mix Improved
NLMK: SLAB SHIPMENTS DOWN IN Q2’19 QOQ, PRODUCT MIX IMPROVED 6 Sales declined 7% qoq to 4.3 m t mainly INCREASED SHIPMENTS TO RUSSIA, m t HIGHER SHARE OF FINISHED PRODUCT SALES, m t on lower slabs deliveries driven by %, qoq %, qoq scheduled maintenance at BF & BOF 4.4 4.6 4.3 4.4 4.6 shops at NLMK
Slide 7: Strategy 2022 Targets
STRATEGY 2022 TARGETS 7 LOW-COST GROWING Lowest steel production cost globally Growth across the integrated production chain Operational and process excellence Full self-sufficiency in + $500 m key raw materials and energy with minor capex* + $300 m + 1 m t steel pa + $1,250 m SUSTAINABLE PREMIUM QU
Slide 8: Leadership in Operational Efficiency
❶ LEADERSHIP IN OPERATIONAL EFFICIENCY 8 H1’19 gains totaled $72 m, including: EBITDA GAINS FROM OPERATIONAL EFFICIENCY IN H1’19, BY AREA, $ m – $30 m: additional iron ore concentrate output 7 – $15 m: yields, productivity and quality Production & technology 6 improvements as well as lower processin
Slide 9: Growth in Low-Cost Steel Production
❷ GROWTH IN LOW-COST STEEL PRODUCTION 9 +1 m t of integrated steel – Targets: + 1 m t of slabs pa, +2.3 m t of concentrate pa, +1.2 m t of pellets pa – EBITDA gains: $170 m pa – Timeline: full effect in 2021 – Project status: – assembling works of continuous casting machine #9 – start of constructio
Slide 10: World-Class Sales Portfolio
❸ WORLD-CLASS SALES PORTFOLIO 10 Premium plates at Dansteel TARGET DANSTEEL SALES, m t – Target: +0.25 m t of niche premium plate pa 0.7 – Timeline: +0.14 m t in 2020, full effect in 2022 Premium 0.5 3.6x 0.3 – Accelerated cooling system (ACC) status: hot products 0.1 testing and fine-tuning Commerc
Slide 11: Leadership in Sustainability and Safety
❹ LEADERSHIP IN SUSTAINABILITY AND SAFETY 11 Continuous safety improvement GROUP LTIFR*, EMPLOYEES & CONTRACTORS – LTIFR in H1’19 was 21% lower vs. 2018 1.12 Environmental program is on track 0.77 0.61 – Coke and chemical by-product recovery 0.5 complex launched: two-fold reduction in air emissions
Slide 12: Q3'19 Outlook
Q3’19 OUTLOOK 12 MARKETS Russia: demand and prices to level off in The EU prices to remain at current levels, Iron ore: potential decline in steel output in H2’19 after strong seasonal recovery in 2Q’19 on average, during seasonally slow Q3’19 China combined with rising domestic iron ore supported b
Slide 13: Q2'19 Financials
13 • Market review Shamil • Operating highlights Kurmashov • Strategy 2022 update CFO • Q2’19 Financials • Business divisions results
Slide 14: Q2'19 Results Driven by Higher Share of Finished Steel & Wider Spreads
Q2’19 RESULTS DRIVEN BY HIGHER SHARE OF FINISHED STEEL & WIDER SPREADS 14 Revenue was down 3% qoq on lower shipments EBITDA ROSE 6% QOQ AND MARGIN INCREASED TO 26%, $ m EBITDA increased 6% qoq driven by wider spreads to 32% 1,200 29% raw materials and improved product mix 0 28% 26% 1,000 – Revenue:
Slide 15: Q2'19 Margin Growth in Russian Divisions
Q2’19 MARGIN GROWTH IN RUSSIAN DIVISIONS 15 Russian Flat products: EBITDA up by 7% qoq on prices growth EBITDA BY DIVISION, $ m and improved product mix +7% +300% -6% +0% +22% % chg qoq – (+) Widening spreads driven by steel prices recovery 800.0 795.0 790.0 785.0 780.0 775.0 770.0 765.0 760.0 755.0
Slide 16: Q2'19 WC Buildup QoQ Following Destocking in Q1'19
Q2’19 WC BUILDUP QOQ FOLLOWING DESTOCKING IN Q1’19 16 Net operating cash flow decreased by 42% qoq Q2’19 FCF BRIDGE, $ m to $494 m 0 100 200 300 400 500 600 700 800 EBITDA 735 Working capital buildup of $151 m: Net working capital change -151 – (-) $147 m increase in accounts receivables on higher s
Slide 17: Strong Debt Portfolio and Liquidity Position
STRONG DEBT PORTFOLIO AND LIQUIDITY POSITION 17 Total debt rose by 34% qoq to $2.8 bn LIQUIDITY AND SHORT-TERM DEBT*, $ m DEBT** MATURITY, $ m – New $500 m 7Y Eurobonds issue with 4.7% coupon Working capital lines Eurobonds ECA lines – The use of revolving loan facility 700 1,774 Available credit li
Slide 18: Business Divisions Results
18 • Market review • Operating highlights • Strategy 2022 update • Q2’19 Financials • Business divisions results
Slide 19: Q2'19: Russian Flat Products
Q2’19: RUSSIAN FLAT PRODUCTS 19 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments down 10% qoq following the drop in steel output -10% -3 % – (-) Semi-finished products down 12% qoq 3,40 1,98 3,06 1,92 – (+) Share of finished steels increased to 45% 0.75 0.35 0.93 0.48 0.69 0.36 – (+) Sales were re
Slide 20: Q2'19: Russian Long Products
Q2’19: RUSSIAN LONG PRODUCTS 20 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments were down 7% qoq – (-) Decrease in export of billets due to lower -7 % +13% 0,47 margins at export markets 0,77 0,42 0,72 0.09 – (+) Sales in Russia were up by 27% qoq due 0.04 0.17 0.08 0.08 0.03 to the seasonal upti
Slide 21: Q2'19: Mining
Q2’19: MINING 21 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Mining segment shipments dropped 2% qoq – Shipments of iron ore concentrate decreased -2% +19 % 480 % in line with NLMK’s reduced steel production 0.32 40% 4.59 0.27 – It was partially offset by sales to third parties 4.51 460 % that totaled
Slide 22: Q2'19: NLMK USA
Q2’19: NLMK USA 22 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments down 3% qoq – (-) Lower demand on the back of customers’ -3% -10 % expectations of further price declines 0.53 0.48 0.60 0.58 Revenue fell 10% qoq due to lower prices 0.26 0.22 0.33 0.31 – (-) Prices dropped 7% qoq, on average – (
Slide 23: Q2'19: NLMK Dansteel
Q2’19: NLMK DANSTEEL 23 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments of thick plate down 6% qoq on the back high consumer stock levels -6% -6 % 0.15 0.14 0.14 0.13 Revenue decrease 6% qoq following lower deliveries – (-) Shipments decreased by 6% qoq 0.15 0.14 0.13 0.12 – (~) Plate prices flat
Slide 24: Q2'19: NBH
Q2’19: NBH 24 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Sales volumes grew 20% qoq – (+) Shipments rose 20% qoq to 0.62 m t +20% +13% (+7% yoy), driven by higher flat steel output at 0.62 0.45 NLMK La Louviere and restored capacity 0.40 0.51 utilization after the strike at NLMK Clabecq 0.45 0.29 0.25
Slide 25: Appendix
25 Appendix
Slide 26: Q2'19: NLMK Output, Shipments, Slab Cash Costs
Q2’19: NLMK OUTPUT, SHIPMENTS, SLAB CASH COSTS 26 STEEL PRODUCTION, m t GROUP SHIPMENTS TO EXTERNAL CUSTOMERS BY SEGMENT, m t qoq: -20% Q2 2018 Q1 2019 Q2 2019 Q2 2018 Q1 2019 Q2 2019 qoq: -5% 3.00 yoy: -8% yoy: -9% qoq: -10% 5.00 3.94 2.12 2.50 yoy: -10% 4.50 4.00 2.95 2.00 qoq: -7% qoq: -3% 3.50 q
Slide 27: Sales Geography and Product Mix without NBH
SALES GEOGRAPHY AND PRODUCT MIX WITHOUT NBH 27 STEEL PRODUCT SALES BY REGION, m t SALES STRUCTURE BY PRODUCT, m t 4.61 4.61 4.38 5 4.38 4.27 4.27 5 5 5 0.81 0.28 Others 0.56 1.54 4 0.41 1.46 4 1.47 Commercial products 0.66 0.71 4 M. East* 4 0.75 3 0.65 3 0.84 N.America Semi-finished 3 1.13 3 1.65 1.
Slide 28: Foreign Assets Performance
4,0 00 FOREIGN ASSETS PERFORMANCE 1,4 00 28 3,5 00 1,2 00 SLABS SALES FROM THE RUSSIAN FLAT PRODUCTS DIVISION, k t NBH ROLLED PRODUCTS SALES, k t 3,0 00 1,0 00 2,5 00 NLMK Dansteel NLMK USA NBH To 3rd parties CRC Coated Plates & ingots HRC QoQ 800 QoQ 1,750 1,852 13 618 153 Total -18% 8 578 Total +2
Slide 29: Company IR Contacts
COMPANY IR CONTACTS 29 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 nlmkonair nlmk_group nlmk group