Nlmk · RUS:NLMK
Nlmk — Q2 2017 Earnings Presentation
26 slides from Nlmk's earnings presentation, Jul 27, 2017
Slide 1: Q2 & H1 2017 IFRS Results
NLMK Q2 & H1 2017 IFRS Results 27 July 2017 1
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
OLEG BAGRIN Market review President and CEO Operating highlights Q2’17 Financials Business divisions results Annex Q&A 3
Slide 4: Steel demand continues to recover
STEEL DEMAND CONTINUES TO RECOVER USA demand: +7% on strong offtake from construction and machinery YTD’17* steel demand turns positive EU demand: +2% improves on demand from autos, capital goods, and %, yoy housing 7,0% Russian demand improves on better machinery sector 8,0% 7,0% 6,0% Chinese expor
Slide 5: Pricing environment normalizes
PRICING ENVIRONMENT NORMALIZES Raw materials prices range bound after large swings in 2015 and 2016 Raw materials drag down steel prices globally $/t 30 0 Inventories across regions continue to remain low supporting steel prices 25 0 in both home (EU, US) and export markets 20 0 163 Price premiums i
Slide 6: Q2'17 sales: better mix and volumes in the home markets
Q2’17 SALES: BETTER MIX AND VOLUMES IN THE HOME MARKETS Sales increase driven by home markets (+19% qoq) on stronger Shipments growth driven by sales to home markets* demand in Russia and by export sales (incl. Q1 sales recognition) MT Sales semis to captive assets Product mix improved with 20% qoq
Slide 7: Strategy 2017: strong delivery on annual targets
STRATEGY 2017: STRONG DELIVERY ON ANNUAL TARGETS In H1’17 NLMK has achieved 63% of Strategy 2017 targets for the year 63% of annual targets achieved in 6 months 2017 $M – Effects accelerated in Q2’17 with $106 m gains, up from $57 m in Q1’17 260 60 $125 m gains from investment projects realized in H
Slide 8: Pelletizing plant and fines output growth
PELLETIZING PLANT AND FINES OUTPUT GROWTH Pelletizer output ramp-up has been achieved Pelletizing plant operates at full capacity MT – May-June ‘17 average utilization is ~100% with max. daily output of 20 kt 6,0 Growth in pellet output: 2017 production target revised upwards to 6 mt 1,6 Q2’17 pelle
Slide 9: Outlook
OUTLOOK MARKETS Global pricing environment to stabilize with downside risks from seasonal demand slowdown and softer raw materials Russia: apparent demand to recover on better construction demand and lower inventories Europe: demand growth to level off due to seasonal slowdown USA: demand recovery,
Slide 10: Q2'17 Financials
Market review Operating highlights Q2’17 Financials SERGEY KARATAEV Business divisions results Acting CFO Annex Q&A 10
Slide 11: Financial highlights
FINANCIAL HIGHLIGHTS Narrowing price/cost spreads weigh on margins Strategy 2017 effects support profitability in weaker price conditions EBITDA margin 0 – Revenue $2,544 m (+18% qoq) 29% 25% 24% 0 – EBITDA: $603 m (-2% qoq) 0 – EBITDA margin: 24% (-5 pp qoq) 0 – Net income: $342 m (+6% qoq) 0 0 Mod
Slide 12: EBITDA margin narrowed due to price spreads
EBITDA MARGIN NARROWED DUE TO PRICE SPREADS Strong sales, better product mix and strategy effects partially offset EBITDA by divisions narrower cost/price spreads $M 618 603 Russian Flat Products EBITDA down on price spreads Q1'17 Q2'17 – (-) Spreads narrowed mainly due to expensive feedstock (coal,
Slide 13: Q2'17 strong free cash flow generation
Q2’17 STRONG FREE CASH FLOW GENERATION Q2’17 CF bridge Net operating cash flow expanded by 45% qoq to $450 m: $M 0 100 200 300 400 500 600 700 EBITDA 603 – Limited cash outflow for working capital financing while sales surged +14% – Slabs stock accumulated at NLMK USA Net working capital change -66
Slide 14: Debt portfolio management
DEBT PORTFOLIO MANAGEMENT Liquidity and short-term debt* Net debt / 12M EBITDA: 0.4x $M – Net debt: $1.05 bn (+12% qoq) – Total debt: $2.41 bn (+3% qoq) 1 662 Available credit lines Short-term debt (excluding working capital financing) of $691 m 450 9 898 fully covered by robust liquidity position 1
Slide 15: Business divisions results
Market review Operating highlights Q2’17 Financials Business divisions results Annex Q&A 15
Slide 16: Russian flat products
RUSSIAN FLAT PRODUCTS Increase of sales by 8% qoq Revenue & steel sales – (+) Sales to 3rd party up by 8% due to seasonally uptick in demand in Russia – (+) Increase of semis shipments to captive by 9% qoq 3 074 +8% 3 327 1 714 +14% 1 957 Revenue was up by 14% qoq on strong sales and prices 40% +9%
Slide 17: Russian long products
RUSSIAN LONG PRODUCTS Long steel sales spiked by 98% qoq Revenue & steel sales – (+) Seasonally strong demand both in Russia and in export markets 473 +98% 935 266 +90% 505 13% 24% 17% 20% Revenue up by 90% qoq 12% 8% 8% – (+) Strong 3rd parties sales 12% 19% – (+) Increase of inter-segment volumes
Slide 18: Mining
MINING Sales volumes up by 6% qoq Revenue & sales – (+) Increase of concentrate production due to operational efficiency 4 127 +6% 4 392 238 +5% 249 – (+) Pelletizer ramp up to nominal capacity, pellets sales up to 1.6 mt 100 % 0% Revenue up by 5% qoq 80% – (+) Increase in sales volumes – up by 6% 6
Slide 19: NLMK USA
NLMK USA Q2’17 sales flat qoq Revenue & steel sales – (+) HVA sales gained 6% qoq 562 0% 559 399 +9% 436 – (+) Strong demand from key clients - construction and pipe-makers 55% 53% 47% 45% Revenue grew 9% qoq on strong prices and improved product mix EBITDA went down by 9% qoq and margins contracted
Slide 20: NLMK Dansteel
NLMK DANSTEEL Segment sales down by 16% qoq Revenue & steel sales – (-) Maintenance activities in the end of Q1’17 134 -16% 112 105 -4% 101 18% 6% Revenue down by 4% qoq – (-) Decrease in sales volumes 100% 100% 94% 82% EBITDA down on sales decrease Sales volume Sales volume Revenue Revenue Q1'17 Q2
Slide 21: Annex
Market review Operating highlights Q2’17 Financials Business divisions results Annex Q&A 21
Slide 22: Q2'17 NLMK sales and output
Q2’17 NLMK SALES AND OUTPUT Steel production Sales to external customers by segments qoq: +8% qoq: -2% yoy: +1% 2,50 yoy: -3% 2,00 qoq: -7% 4,08 2,00 yoy: -5% 4,50 4,00 3,50 3,13 1,50 qoq: +98% 3,00 yoy: +47% qoq: -4% qoq: -7% 2,50 qoq: +28% 0,94 yoy: +1% yoy: -10% qoq: -15% 1,00 qoq: +6% 0,67 yoy:
Slide 23: Sales geography and product mix
SALES GEOGRAPHY AND PRODUCT MIX Steel product sales by region Sales structure by product Mt Mt 5 3,94 4,19 3,94 3,68 4,19 3,68 0,62 Semi- 4 0,64 0,41 Others 1,36 1,24 1,26 0,65 finished 4 3 0,62 0,64 0,57 N.America 3 0,40 0,70 Ordinary 0,87 M. East* 1,30 1,32 1,68 products 0,96 2 2 0,91 EU HVA 1,49
Slide 24: Foreign assets performance
FOREIGN ASSETS PERFORMANCE Slabs sales from Russian Flat Division NBH Rolled product sales Kt Kt 1 705 1 651 1 659 QoQ 614 599 QoQ 556 1 800,0 1 800 644,92 643,63 19 642,34 641,05 639,76 638,47 637,18 635,89 634,60 633,31 148 632,02 630,73 629,44 628,15 626,86 625,57 624,28 16 622,99 621,70 620,41 6
Slide 25: Costs
COSTS Cost of goods sold was up by 28% to $1.798 m NLMK Group cost of sales – Key drivers: growth in sales volumes – Stronger commodity prices Depreciation, 9% 9% 2% Iron ore, 2% 23% Coke & coal, 23% Other exp. & changes Consolidated cash cost of slabs (tonne) was down by 11% qoq 21% in inventories,
Slide 26: Company IR contacts
COMPANY IR CONTACTS Sergey Takhiev Investor Relations 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: +7 985 760 55 74 nlmkonair nlmk_group nlmk group 26