Evraz Plc · LSE:EVR
Evraz — FY2011 Earnings Presentation
38 slides from Evraz's earnings presentation, Mar 28, 2012
Slide 1: EVRAZ plc 2011 Financial and Operating Results
EVRAZ plc 2011 Financial and Operating Results 28 March 2012
Slide 2: Disclaimer
1 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: Agenda
2 Agenda Overview of 2011 Liquidity and Financial Position Operations by Segment Update on Investment Projects Key Market Developments and Outlook Appendices
Slide 4: Overview of 2011
EVRAZ Overview of 2011
Slide 5: Overview of 2011
4 Overview of 2011 Top-20 steel producer in the world based on crude steel production of 16.8 million tonnes 15.5 million tonnes of steel products sold in 2011 (unchanged from 2010) 102% self-covered in iron ore and 56% in coking coal (2010: 96% and 58% respectively) Consolidated revenue of US$16.4
Slide 6: Health, Safety and Environmental Initiatives
5 Health, Safety and Environmental Initiatives Health and Safety Environment Lost Time Incident Frequency Rate /Fatalities Incident Frequency Rate* Emission Dynamics** (Per 1 million hours worked) (Rebased to 100) 4 0.18 0.20 0.14 0.16 0.13 0.12 2 0.07 0.08 0.04 2.23 2.69 2.40 1.86 0 0.00 2008 2009
Slide 7: 2011 Market Trends
6 2011 Market Trends Steel Iron Ore Met Coal ◦ Volatility in prices throughout the year, ◦ Strong pricing and demand in H1 ◦ Strong pricing in H1 followed by price with weakness in H2 followed by softening in H2 due to softening in H2 ◦ Markets strengthened with improved weaker steel outlook ◦ Incre
Slide 8: 2011 Summary
7 2011 Summary US$ m unless otherwise stated 2011 2010 Change Revenue 16,400 13,394 22% Gross profit 3,927 3,075 28% Adjusted EBITDA 1 2,898 2,350 23% Adjusted EBITDA margin 18% 18% 0% Net Profit 453 470 (4)% EPS (US$) 0.36 0.39 (8)% Dividends for the period (US$ per share) 2 0.24 -- Net Debt 3 6,44
Slide 9: 2011 Financial Highlights
8 2011 Financial Highlights Consolidated Revenue by Segment ◦ Growth in revenues and adjusted EBITDA as a result of US$ m improved market environment 16,400 20,000 966 ◦ 92% of the revenue growth is attributable to price 13,394 3,784 665 823 increases 15,000 566 2,507 ◦ Increased contribution to Gro
Slide 10: Group Cost Dynamics
9 Group Cost Dynamics Cash Cost*, Slabs & Billets ◦ EVRAZ‟s high level of vertical integration in iron ore and US$/t coking coal helped to partially mitigate the negative 600 impact of escalating prices of inputs on steelmakers‟ 479 500 437 446 431 costs 378 411 ◦ Some impact from rouble appreciatio
Slide 11: Net Profit Reconciliation
10 Net Profit Reconciliation US$ m 1000 182 886 800 71 704 19 633 161 600 453 400 200 0 Reported Net Conversion of Move to Net profit w/o Early Net profit w/o Increase in Net profit w/o profit convertible Premium oneoffs repurchase of oneoffs & bond mining extraordinary bonds due Listing 2013 bonds
Slide 12: Liquidity and Financial Position
11 Liquidity and Financial Position
Slide 13: Liquidity and Debt Maturity Profile
12 Liquidity and Debt Maturity Profile ◦ Improved liquidity profile due to a number of refinancing activities in 2011: ◦ In April 2011, EVRAZ issued US$850m bonds due 2018 at 6.75%, the lowest ever coupon for an EVRAZ Eurobond issue ◦ Part of the proceeds from the issue was used to purchase approx.
Slide 14: FCF Generation
13 FCF Generation ◦ Substantial free cash flow generation in 2011 US$ m 3,600 149 2,898 43 2,941 3,000 2,647 2,400 (443) 1,800 (818) 1,200 93 641 600 (1,281) 0 EBITDA 2011 Non-cash items EBITDA (excl. non- Changes in WC, excl Income tax paid CF from operating Interest paid & Capex CF from investing
Slide 15: Steel: CIS
14 Steel: CIS Steel Product Sales, Domestic vs. Export ◦ Full economic utilisation of Russian steelmaking capacity „000 tonnes maintained throughout the year 15,000 ◦ In 2011 domestic steel sales accounted for 69%‟ steel sales 11,084 10,953 of EVRAZ‟s Russian and Ukrainian mills compared to 58% in 1
Slide 16: Operations by Segment
EVRAZ Operations by Segment
Slide 17: Steel: North America
16 Steel: North America ◦ Economic situation stabilised in 2011 ◦ Sales volumes of steel products remained at the level of 2010 but prices have grown across all product groups ◦ Flat-rolled steel volumes increased by 7%; rail sales by 23% ◦ Investments in capacity expansion: ◦ The upgrade of Pueblo,
Slide 18: Steel: Europe, South Africa
17 Steel: Europe, South Africa Steel Product Sales Volumes, ◦ EVRAZ‟s European mills sales volumes increased by „000 tonnes European Operations 8% 1,500 ◦ Flat-rolled product sales were up 8% 1,200 1,206 1,296 157 155 ◦ Sales of EVRAZ Highveld‟s steel products were 900 effectively flat as domestic d
Slide 19: Coal Mining
18 Coal Mining Coal Products Sales ◦ Volumes of coking coal mined in 2011 decreased by 16% due to longwall repositionings and temporary mine stoppages for „000 tonnes 9,455 additional safety improvements 10,000 8,595 ◦ Steam coal volumes were impacted by the shutdown of 8,000 3,335 Tagaryshskaya min
Slide 20: Iron Ore Mining
19 Iron Ore Mining Iron Ore Products Sales ◦ Production of iron ore products increased from 19.8 „000 tonnes million tonnes in 2010 to 21.2 million tonnes in 2011 25,000 ◦ Self-coverage in iron ore was maintained at around 20,000 16,936 19,951 100% 15,000 3,794 5,259 ◦ External sales rose by 39% 10,
Slide 21: Advantages of Vertical Integration
20 Advantages of Vertical Integration o Vertical integration is a key part of EVRAZ‟s strategy o It allows EVRAZ to control steelmaking costs o As a result, EVRAZ‟s profitability is less volatile than that of lower-integrated peers and its EBITDA has remained positive throughout the steel cycle Hist
Slide 22: Vanadium
21 Vanadium Vanadium Prices, FeV, LMB ◦ Improvement in global demand for vanadium is US$/kg V affected by material availability issues worldwide 35.00 ◦ EVRAZ‟s vanadium processing capacities are 32.00 operating at maximum production capacity 29.00 ◦ EVRAZ‟s sales of vanadium products increased vs.
Slide 23: Update on Investment Projects
22 Update on Investment Projects
Slide 24: Key Investment Projects
23 Key Investment Projects Cum Cumulative CAPEX by CAPEX 30.06. by Total CAPEX 31.12. 20112011 2011 2012 Planned CAPEX Project $US $USmln m $US $USmln m $US $USmln m*(1) (1) Project Targets Project Targets Iron ore Coal & coal & iron ore o Coal production of 2 mtpa Yerunakovskava VIII Mine Construct
Slide 25: CAPEX Dynamics
24 CAPEX Dynamics ◦ CAPEX in 2012 and over the next few years expected to be around the 2011 level US$ mln 1,400 1,281 ~1,200 1,103 1,200 1,000 832 800 600 441 400 200 - 2008 2009 2010 2011 2012F Maintenance, Steel and other operations*** Iron ore mine development Coal mine development ** Investment
Slide 26: Key Market Developments and Outlook
25 Key Market Developments and Outlook
Slide 27: Exposure to Growth in Steel Consumption
26 Exposure to Growth in Steel Consumption Total Steel Consumption in Russia Mt ◦ EVRAZ is best positioned to benefit from infrastructure 50 development in its key markets 41.5 37.1 40 ◦ Leading producer of long products in Russia 26.9 30 ◦ In 2011, market share of 85% in H-beams, 61% in 20 channels
Slide 28: Recent Market Developments
27 Recent Market Developments EVRAZ Selling Prices ◦ Full utilisation of Russian steel making capacities US$/t since mid-2009 1,400 ◦ Current steel making capacity utilisation of non- 1,200 Russian mills: 1,000 ◦ Czech Republic – 95% 800 ◦ North America – 90% 600 ◦ South Africa – 95% 400 J an-10 A p
Slide 29: Outlook
28 Outlook The long-term prospects for global infrastructure are attractive, however in the near term global markets remain volatile resulting in ongoing uncertainty and low visibility in EVRAZ‟s key markets EVRAZ retains a strong order book and high capacity utilisation Inventories at traders and a
Slide 30: Summary
29 Summary 2011 results reflect the recovery of steel and raw material markets Benefits from increased raw material prices due to the Group‟s high level of vertical integration Stable liquidity position and reduced debt level following continuous refinancing in 2011 Ongoing investment in enhancing t
Slide 31: Appendix
EVRAZ Appendix
Slide 32: Global Operating Model
31 Global Operating Model 79 227 Russia/CIS 314 7,568 2,640 1,243 Europe 131 570 2,958 North America Asia 530 2011 Steel Sales Volume South America Africa 2011 Steel Sales Volume by Geography by Product Africa Other Europe 4% Tubular 4% 10% 6% Construction Russia & Steel Mills Railway 36% CIS 14% Am
Slide 33: 2011 Consolidated Revenue and Adjusted EBITDA
32 2011 Consolidated Revenue and Adjusted EBITDA US$ m 5,000 4,486 4,500 4,157 4,000 3,894 3,863 3,500 3,000 2,500 2,000 1,500 889 1,000 740 772 497 500 0 Q1 Q2 Q3 Q4 Revenue EBITDA
Slide 34: Revenue: Geographic Breakdown
33 Revenue: Geographic Breakdown 2011 2010 Other Asia Africa & Other Africa&RoW Philippines RoW 3% Taiwan 3% Philippines Asia 1% 3% 2% 4% 2% Thailand Taiwan 4% 3% Thailand China 4% 2% Middle East Russia China 3% 34% 3% Russia 40% Middle East Europe 5% 11% Europe 10% Ukraine Ukraine 4% Americas 4% Ot
Slide 35: Steel Products: Sales by Market
34 Steel Products: Sales by Market ‟000 tonnes US$ mln 8,000 6,000 5,443 7,000 6,722 5,000 6,000 5,543 4,000 5,000 3,641 4,424 3,276 4,000 3,000 2,802 3,020 2,364 3,000 2,662 2,766 1,988 2,000 2,000 1,348 1,562 1,472 1,018 1,000 1,000 872 849 602 716 486 406 533 573 0 0 Russia CIS Europe Americas As
Slide 36: Cost Structure by Segment
35 Cost Structure by Segment Cost Structure of Steel Segment Cost Structure of Mining Segment 13% 10% 8% 25% 21% 8% 4% 4% 8% 8% 11% 4% 5% 6% 16% 7% 7% 22% 7% 17% 16% 15% 22% 16% 25% 14% 12% 21% 9% 19% 12% 8% 2010 2011 2010 2011 Iron ore Coking coal Scrap Raw materials Transportation Staff costs Othe
Slide 37: Adjusted EBITDA
36 Adjusted EBITDA Year ended 31 December (millions of US dollars) 2011 2010 Consolidated Adjusted EBITDA reconciliation Profit from operations 1,860 1,330 Add: Depreciation, depletion and amortisation 1,153 925 Impairment of assets 104 147 Loss on disposal of property, plant & equipment 50 52 Forei
Slide 38: Contact
37 London +44 207 832 8990 Moscow +7 495 232 1370 [email protected] www.evraz.com