NLMK: 12M 2012 and Q4 2012 US GAAP Financials

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NLMK: 12M 2012 and Q4 2012 US GAAP Financials

  1. 1. NLMK Q4 AND 12M 2012US GAAP CONSOLIDATED RESULTS Moscow, 26 March 2013 1
  2. 2. DISCLAIMERThis document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor presentation of the Company and may not bereproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose.This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchaseor subscribe for, any shares in the Company or Global Depositary Shares (GDSs), nor shall it or any part of it nor the fact of its presentation or distribution form thebasis of, or be relied on in connection with, any contract or investment decision.No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. Norepresentation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to theaccuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents.This document is for distribution only in the United Kingdom and the presentation is being made only in the United Kingdom to persons having professionalexperience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the“Order”) or high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2) of the Order (all suchpersons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of itscontents.The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should informthemselves about, and observe, any such restrictions.This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regardingthe Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity,prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertaintiesbecause they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statementsare not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity and the development of theindustry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. Inaddition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates areconsistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments infuture periods. The Company does not undertake any obligation to review or confirm analysts’ expectations or estimates or to update any forward-lookingstatements to reflect events that occur or circumstances that arise after the date of this presentation.By attending this presentation you agree to be bound by the foregoing terms. 2
  3. 3. INTERNATIONAL MARKETS2012 OVERVIEW STEELMAKING CAPACITIES UTILISATION 100% - 2.6 p.p. – reduction in global• Demand markedly deteriorated in H2 2012 capacities run rate for Q4/Q3 90%• Provoking massive destocking in steel products 80%• Prices dropped and capacity utilization decreased 70%Q4 2012 OVERVIEW 60% 50%• Repetition of H2 2012 key trends 40%• Steel prices stabilized by the year-end Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13• In Q1 2013 demand somewhat improved driven by stocks Global average China North America EU (27) replenishment and growth in iron ore prices Sources: World Steel Association STEEL INVENTORIES PRICES FOR HRC BY REGION1,3 Quarterly inventory change $900 $/ metric tonne Quarterly dynamics Index, January 2011=1 adjusted for Germany: -6.2%1,2 China : -14.6% Production / sales cycle $800 USA: - 5.6%1,1 $700 10,9 $600 Germany0,8 China $5000,7 USA0,6 $400 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Russia USA EU ChinaSources: CRU, Bloomberg (China statistic, Metals Service Center Inst.) Sources: Steel Business Briefing 3
  4. 4. RUSSIAN MARKET2012 OVERVIEW CRUDE STEEL OUTPUT, CONSUMPTION AND PRICES• Steel consumption went up by 5% m t/month seasonal decline in $/t 900 6,0 demand 800• Construction market is the largest steel consuming sector – its 5,0 700 share in steel demand expanded by 4 p.p. 600• NLMK became the largest steel producer in Russia. with 20% 4,0 500 share in the country steel output 3,0 400 300• NLMK is one of the niche products suppliers 2,0 Steel consumption + 5%, y/y 200 -8% q/qQ4 2012 OVERVIEW 1,0 100 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12• Steel demand was seasonally weaker by 8% q/q• Steel prices weakened by 2-7% Steel output ASU HRC prices rhs Re-bar prices rhs• … and stabilizing in Q1 2013 Sources: Metal-Expert (prices, consumption), WSA (steel production) RUSSIA’S STEEL DEMAND STRUCTURE NLMK MARKET POSITION IN RUSSIA ~+5 % growth in steel demand 40 m t Pipe producers 100% 38 m t ~70% 34 m t 15% 18% 39% 42% 20% 13% Machinery 14% 7% 13% 7% 20% 24% ~20% 7% 21% Steel processing and coating 12% +4 p.p. 61% 65% 60% constr. market Construction and production HRC CRC Galvanised Pre-painted Transformer Dynamo Rebars Metallware infrastructure Steel 2010 2011 2012 Production data for 12M 2012 Sources: Chermet, Metall-Expert, Company’s data 4
  5. 5. PRODUCTION >95% - CAPACITY UTILISATION RATE CRUDE STEEL PRODUCTION BY SEGMENT mt 5 16 14,9 3,8 3,8 3.7 ~3.7 +25% - CRUDE STEEL PRODUCTION IN 2012 TO 14.9 MT 4 3,6 14 12 4 • Novolipetsk: 12.2 million t, +25% y/y 12 3 10 ~+25 % 3 • NLMK Long Products: 1.8 million t, +23% y/y 8 2 6 2 • Foreign Rolled Products: 0.9 million t, +27% y/y 4 1 2 1 Q4 2012: 3.67 MT, -3% Q/Q 0 0 2011 2012 Q1 Q2 Q3 Q4 Q1 Q1 2013: 3,7 MT, FLAT Q/Q 2012 2012 2012 2012 2013Е Steel Long products Foreign rolled products STEELMAKING CAPACITY UTILISATION: NOVOLIPETSK AND GLOBAL AVERAGE STEELMAKING CAPACITY UTILIZATION120% 97%100% Novolipetsk 100%80% 81%60% Long products 86% Lipetsk planе capacity40% utilization Global average 90%20% NLMK USA 91% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 0% 20% 40% 60% 80% 100% 120% 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 Q4 2012 Q3 2012 5
  6. 6. SALES GEOGRAPHY12M 2012: +18% GROWTH IN SALES TO 15.2 MT REVENUE BY REGION• Driven by the launch of new steel capacity 14 $ million 4• Intercompany slab sales were up +47% to 2.6 million t 11,728 12,157 12 3,094 3,257 3,002 2,803 1,07 1,31 3 0,30• Growth in sales to growing Russian market 10 1,00 1,19 1,36 0,29 0,36 0,33 0,34 0,38 1,65 0,49 0,45 8 1,24 0,46 0,23 0,90• Increase in sales to S.E. Asia 6 2 0,27 0,19 0,40 0,20 0,30 0,24 2,77 2,54 0,74 0,70 0,52 0,58• In Q4 seasonal decline in domestic demand offset by growth in 4 1 2 4,46 4,40 1,02 1,20 1,09 1,09 exports 0 0 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012+14% Y/Y SALES GROWTH IN RUSSIA TO 4.9 MT Other regions Asia North America Middle East incl. Turkey• Over 80% - share of sales to construction sector EU Russia• About 11% - share of sales to automotive (+100% growth) SALES BY REGION million t 15,184 16 5 14 12,840 1,61 3,872 3,818 3,816 3,678 1,04 2,41 4 12 0,30 0,37 1,33 0,43 0,50 10 2,18 0,63 0,55 1,73 3 0,73 0,51 8 1,61 1,28 0,63 0,61 0,45 0,49 2,82 2 0,38 0,33 0,27 0,30 6 2,87 0,83 0,75 0,64 0,60 4 1 2 4,27 4,88 1,10 1,20 1,26 1,32 0 0 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Other regions Asia North America Middle East incl. Turkey EU Russia 6
  7. 7. SALES STRUCTURE2012: +22% GROWTH IN FINISHED PRODUCTS SALES SALES AND REVENUE BY PRODUCT IN Q4 100% Revenue from other 1% 9% operations*• +20% - growth in high value added (HVA) to 5.4 million t 1% Pig iron 80% 34% Slabs 24%• - 3 p.p. – decline in share of semi-finished to 30% HRC 60%Q4 2012: DEMAND FOR SLABS GREW IN GLOBAL MARKET 23% 21% Metalware 2% Long products• 33% - share in value added products, or -2 p.p. 40% 2% 8% 9% 5% Plate 4%• Sales of slabs went up supported by better demand in 20% 13% HVA products 12% CRC 8% Galvanised international markets 7% 6% 4% 3% 6% 0% Pre-painted• Sequential decline in plates sales due to upgrade of rolling Sales Revenue Electrical steel operations at NLMK DanSteel *Note: Revenue from other operations include revenues from sales of iron ore, coke, scrap and others STEEL PRODUCTS SALES CHANGE IN SALES STRUCTURE Q4/Q3 million t 15,184 3,872 3,818 3,816 3,67816 4 Slabs 26%14 12,840 Dynamo 12% 4,58 1,11 1,00 1,1812 3 1,28 Galvanised -3% 4,18 0,33 0,3910 1,42 0,37 Pre-painted -7% 0,33 8 1,29 2 HRC -8% 5,43 1,40 1,45 1,35 6 1,22 Long products -9% 4,51 4 1 CRC -10% 2 3,76 1,03 0,97 0,91 0,84 Metalware -14% 2,87 0 0 Transformer -17% 2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Plates* -22% Semi-finished Long products HVA Flat -30% -20% -10% 0% 10% 20% 30% *Lower thick plates sales partially relates to the launch of new mill at NLMK DanSteel 7
  8. 8. INVESTMENTS IN 2012STEEL PRODUCTION GROWTH 5-YEAR CAPEX• BF#7 capacity of 3.4 m tpa fully ramped up and running $m 100% 2500• Steel quality improvement, +30 new steel grades 80% 2000 87% 60% 76% 81% 82% 1500QUALITY IMPROVEMENTS FOR THE NICHE PRODUCTS 77%• NLMK DanSteel rolling mill revamping 40% 1000• Niche products development at NLMK Clabecq 20% 500 24% 19% 18% 23%• Transformer steel development program at Lipetsk site and 0% 13% 0 VIZ-Steel 2008 2009 2010 2011 2012 Maintenance capex Development Total investmentsLONG PRODUCTS DIVISION DEVELOPMENT• NLMK Kaluga mini-mill (EAF+ rolling mill) of 1.5 m tpa operational in 2013• Development of scrap collection facilities CAPEX BY SEGMENTS, 2012VERTICAL INTEGRATION 12% Steel segment• Iron ore capacity growth with continued expansion of Long products Stoilensky 16% segment• Coke-chemical projects (PCI, tar pitch, etc.) to reduce 51% Mining segment energy costs Foreign rolled 21% products segment 8
  9. 9. INVESTMENTS: NLMK KALUGAMODERN EAF BASED FACILITY WITH TOTAL CAPACITY OF RUSSIAN RE-BAR CONSUMPTION1.5 MILLION T 2,5 million t/quarter 150%• 2012 re-bar consumption exceeded all-time record of 2008 record level of 2008 140% 2,0• Construction sector offers strong demand for NLMK-Kaluga 130% products: re-bar and sections 1,5 120% 110%• Favorable location: 90 km from Moscow city 1,0 100%• Total investments c. $1.2 billion (about 80% has already 0,5 90% been invested) 80% 0,0 70%NLMK-KALUGA TO TAP LONG PRODUCTS DEFICIT IN THE Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12CENTRAL REGION Consumption incl. imports Russian self-sufficiency (r.h.) Sources: Metal Expert BALANCE OF PRODUCTION AND CONSUMPTION AT NLMK-KALUGA: PRODUCTOIN PLAN REGIONS50% 46% long products deficit – 1200 app. 3,8 million t/y 100040% Share in long products production 31% 80030% Share in long products consumption 21% 600 17% 18% 100020% 12% 400 800 11% 8% 9% 8%10% 6% 7% 200 380 1% 2% 0% 1%0% 0 Siberia North- Privolzhs Caucasia Central Urals South Far East 2013Е 2014Е 2015Е West North ky nSources: Metal Expert. Data for 2012 9
  10. 10. KEY HIGHLIGHTS12М 2012 FINANCIAL RESULTS REVENUE AND EBITDA MARGIN• Revenue $12,157 m (+4% y/y), $3,4 $ billion 18% 20% 16% 18% 14%• EBITDA $1,900 m (-16%), $3,2 14% 16% $3,0• EBITDA margin 16% (-3,6 p.p.), 14% $2,8 12%• Operating cash flow : $1,825 m (+1%), 10% $2,6 3,26 3,09 8%• Capex: $1,453 m (-29%), 3,00 6% $2,4 2,8012М 2012 OPERATING RESULTS $2,2 4% 2%• Steel output: 14,923 m t (+25%), $2,0 0% Q1 2012 Q2 2012 Q3 2012 Q4 2012• Steel sales: 15,184 m t (+18%),• Revenue/t: $801 (-12%), Revenue EBITDA margin (r.h.)Q4 ‘12 FINANCIAL RESULTS• Sales revenue $2,803 m (-7% q-o-q),• EBITDA $390 m (-19%), EBITDA PER TONNE• EBITDA margin 14% (-2,2 p.p.), $180 $/t• Operating cash flow: $333 m (-51%), $150• Capex: $296 m (-15%), $120• Net debt/EBITDA: 1.88 $90Q4 ‘12 OPERATING RESULTS 156 $60 127 112• Steel output: 3.674 m t (-3%), 106 $30• Steel sales: 3.678 m t (-4%), $0• Revenue/t: $762 (-3%), Q1 2012 Q2 2012 Q3 2012 Q4 2012 10
  11. 11. PRODUCTION COSTS AND PROFITPRODUCTION COSTS DOWN BY 5% COST OF GOODS SOLD $ million• Impacted by further reduction in raw materials prices $2 500 2 210 2 205 2 095 1 984• Strict control over operating expenses and overheads $2 000SLAB CASH COST AT NOVOLIPETSK WENT DOWN BY 6% TO $1 500$361/T. $1 000• Sustainable competitive cost advantage $500 177 171 221 199Q4 2012 EBITDA IMPACTED BY: $0 Q1 2012 Q2 2012 Q3 2012 Q4 2012• The major EBITDA decrease applied to the steel segment (-$90 Production expenses Depreciation million) and long products segment (-$29 million) due to lower steel prices and sales EBITDA CHANGE BY SEGMENT STEEL CASH COST GLOBALLY600 $ million 650 $/t500 600 -90 +20 550400 +16 500 -10300 -29 450 483 400200 390 350 main production plant, Novolipetsk 300100 250 0 200 Steel segment Q3 2012 Long products segment Q4 2012 Foreign rolled Other operations Mining intersegmental 3 123 236 342 454 546 632 products segment segment Cumulative capacities, million t/a incl Sources: World Steel Dynamics. Average data for 2012г. 11
  12. 12. CASH FLOW12M 2012 12M 2012 CASH BRIDGE $ million• Positive impact of working capital release on cash flow from CHANGE IN CASH 154 operations (+ $ 311 million)• 2012 Capex fell 29% down to $1,453 million as key capital FX rate change -109 intensive projected completed Dividends -117Q4 2012 FREE CASH FLOW TO THE FIRM 379• Q4 Capex dropped by 15% q/q to $ 296 million• Balancing the operating and investment cash flow Other financial operations -13• Short-term liabilities repayment in Q4 ($1247 million) Net loans +21• Net financial outflow ($748 million) Purchase of property plant -1 453 and equipment OPERATING CASH FLOW AND CAPEX800 1 825 $ million OPERATING CASH FLOW 684600 -305 502 Income tax 453400 358 347 333 -82 304 Other non cash operations 296200 Working capital change 311 0 EBITDA 1 900 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Operating cash flow Capex 12
  13. 13. DEBTDEBT POSITION CHANGE IN DEBT POSITION• Net debt $3.57 billion (+3%) $7 $ billion• Cash and equivalents 1 $1.058 billion (-42%) $6 +0,5 $5 -1,2 +0,1• Net debt / 12M EBITDA 1.88 $4 2,4• Gross debt $4.63 billion (-12%) 1,8 $3DEBT MANAGEMENT $2• Settlement of current liabilities In Q4 $1 2,9 ST Debt LT Debt 2,8• Average debt maturity extended to 3.1 years $0 30 Sep 12 Debt raising Debt FX rates and 31 Dec 12RATING settlements other factors• Investment grade rating (S&P, Moody’s, Fitch) AVERAGE MATURITY AND NET DEBT/EBITDA2 CURRENCY OF THE DEBT AND REVENUE Weighted average Debt currency2 Revenue currency 3 2,0 Net debt/EBITDA3,2 maturity period 100% 3,0 100% 19%3,0 1,9 2,7 3,1 35% 38% 80% 80%2,8 1,90 1,88 1,8 60% 42% 1,84 60%2,6 2,5 18% 19% 1,7 40% 40%2,4 Years 1,6 1,69 47%2,2 20% 43% 20% 39%2,0 1,5 0% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 2012 Q4 2012 Q4 2012 2012 2012 2012 2013 2012 2012 2012 20131. Cash and equivalents and ST deposits RUR USA Euro2. As of the end of the quarter3. Management accounts data 13
  14. 14. MATURITY DEBT MATURITY LIQUID ASSETS AND ST DEBT MATURITY 1 • Substantial liquidity cushion and portfolio of instruments Committed credit $4 000 $ million for debt restructuring $3 500 lines • Short-term debt $1.82 billion $3 000 o Settlement of RUR notes in Q1 2013, $2 500 2 493 Cash and $2 000 equivalents o PXF 504 $1 500 • Long term debt $2.82 billion $1 000 478 210 1 816 o Eurobonds $500 1 058 625 $0 o RUR notes, Liquid assets Q1 13E Q2 13E Q3 13E Q4 13E o Long term part of ECA and liabilities of European assets INTEREST EXPENSE 3 TOTAL DEBT MATURITY 2 70 67 $m 62 65 68 20% $2 000 $ million 60 50 15% $1 500 40 10% 30 $1 000 20 5% 10 $500 0 0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 $0 Interest expense Interest expense to EBITDA (right hand) 2013E 2014E 2015E 2016E and onward PXF Ruble bonds ECA EBRD NLMK Europe Others Eurobonds (USD)1. The ST maturity payments include interests accrued and bond coupon payments2. The maturity payments do not include interests3. Quarterly figures are derived by computational method based on reporting data for the 9M, 12M 2011 and for the 3M, 6M, 9M 2012 and 12M 2012. 14
  15. 15. OUTLOOKMARKET OVERVIEW• Steel prices somewhat improved in Q1 2013 amid restocking by traders and consumers, and raw materials prices growthPRODUCTION• In Q1 2013: 3.7 million t of steel (flat, q/q)• 12M 2013: 15.5 million t of steel (+4% y/y)FINANCIAL RESULTS• Q1 ‘13 Revenue may decline by roughly 5% q/q• Q1 ‘13 EBITDA is expected to be sequentially lower• 2013 Capex to further decline by 20-25% y/y• Debt level is expected to be at relatively stable level as compared to the last year 15
  16. 16. SEGMENTS 16
  17. 17. SEGMENTS CONTRIBUTION – Q4 2012STEEL SEGMENT SALES REVENUE FROM THIRD PARTIES• Revenue and profit decreased as prices went down $3 500 $ million $3 000 275 329FOREIGN ROLLED PRODUCTS SEGMENT 314 $2 500 281• Negative result on the back of decreased sales and lower 989 1 026 759 $2 000 692 prices $1 500LONG PRODUCTS SEGMENT $1 000 1 795 1 816 1 836 1 703• Lower revenue and profit due to seasonal decline on the $500 Russian construction market $0MINING SEGMENT Q1 2012 Q2 2012 Q3 2012 Q4 2012 Steel segment Foreign rolled products segment• Profitability remained stable Long products segment Mining segment Others PRODUCTION COSTS BY SEGMENTS SEGMENTS CONTRIBUTION TO Q4’12 EBITDA $450 $m Consolidated production costs 1 984 27 2 095 $400 $350 Intersegmental operations 681 646 $300 107 $250 207 Mining segment 81 $200 31 390 Long products segment 291 $150 337 $100 197 --72 Foreign rolled products segment 706 764 $50 1 560 $0 Steel segment $ млн segment Others Long products Steel segment Foreign rolled Q4 2012 1 559 Mining products segment segment Q4 2012 Q3 2012- 1 000 2 000 3 000 17
  18. 18. STEEL SEGMENT - Q4 2012 (1)STABLE SALES VOLUMES Q4 SALES AND REVENUE STRUCTURE 2 465 thousand t $1 703 million Revenue from other 100% 2% operations*• Growth of slabs shipments to domestic market (large 6% 1% Pig iron 90% diameter pipes producers) and external markets, pig iron 80% Slabs sales decreased 49% Ordinary 39% 70% grades HRC 60% 50% CRC 17%PROFITABILITY SLIGHTLY DECLINED (10%) 40% 20% Galvanized 30% Value added 14% grades Pre-painted 20% 14% 7%• Lower prices and spreads 10% 5% 5% 8% 4% Dynamo steel 2% 5% 0% 3%• Seasonal factor Sales Revenue Transformer *Note: Revenue from other operations incl. revenue from raw materials and coke, that sell Altai-Koks and Traders as part of Steel segment REVENUE AND EBITDA MARGIN SALES TO DOMESTIC MARKET AND EXPORT2,3 $ bn 18% 2,5 mt 1,79 1,82 1,84 16%1,8 1,70 2,0 0,74 0,82 0,93 14% 0,75 14% 13% 12%1,3 1,5 10% 10% 8% 8% 1,00,8 1,62 1,64 0,46 6% 1,47 1,54 0,42 0,35 0,30 0,50,3 4% 2% 0,0-0,2 Q1 2012 Q2 2012 Q3 2012 Q4 2012 0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Revenue from third parties (l.h.) Intercompany sales (l.h.) Sales to Russian market Export sales EBITDA margin (r.h.) 18
  19. 19. STEEL SEGMENT - Q4 2012 (2)SLAB CASH COST REDUCTION CASH COST AND FX RATE DYNAMICS $/t 35 RUR/$ 34• Raw materials prices went down 450 383 33 400 361• Optimization measures at Lipetsk site 350 32 300 31 250 205 204 30 200FX RATE 150 29 100 28 Average RUR/USD rate 50 27 decreased by 3% q/q• Average RUR/USD rate decreased by 3% q/q (about 90% of 0 26 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Q3 2012 Q4 2012 the Segment’s expenses nominated in RUR) Slab Coke COST STRUCTURE OF SEGMENT’S SALES CONSOLIDATED SLAB CASH COST Iron ore $/т Coking coal and coke 29% 450 $383/т Coke/coal 400 $361/т Iron ore 16% 7% Scrap 350 22% 110 Scrap 10% 18% Ferroalloys 300 104 Other raw materials 250 Other raw materials 8% 78 59 200 Electricity 41 37 Electricity 6% 8% 150 30 29 Natural gas 20 21% 100 19 19 Natural gas 5% 1% 18 4% Other energy costs 31 35 50 Labor costs 10% 4% 56 59 5% 3% 6% Labor costs - Other costs and balance changes Q3 2012 Q4 2012 Other costs 16% Depreciation 19
  20. 20. LONG PRODUCTS SEGMENT– Q4 2012SEASONAL DECLINE IN SALES AND REVENUE SALES AND REVENUE STRUCTURE IN Q4 2012• Segment’ revenue decline by 11% occurred against a 401 000’ t 281 $ million 100% 2% Revenue from other seasonal decrease in sales volume and prices operations* 80%SEGMENT’S PROFITABILITY 8% Ordinary Long products 60% 83% 79%• Decline of segment’s profitability by 6 p.p., which is grades caused by seasonal decrease in long products demand 40% Metalware and prices 20% Value added grades 17% 19%STABLE OPERATING EXPENSES 0% Sales Revenue• Production costs per ton of steel increased slightly to * Other sales (scrap) $458/t as capacity utilization edged down REVENUE AND EBITDA BILLET CASH COST AT NSMMZ**350 329 25% 500 $/t $451/т $458/т $ million 314 281 20% 450 Other costs 10% 275 47 58280 10% 14% 15% 400 8% 20 19 8% 10% 350 33 33 Labor 1%210 5% 300 162 250 Natural gas 0% 0%140 122 -5% 200 88 345 341 Ferroalloys 4% 73 -10% 15070 -15% 100 50 Electricity 7% -20% 0 -25% - Q3 2012 Q4 2012 Scrap 78% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Revenue from third parties (l.h.) EBITDA margin (r.h.) ** NSMMZ – the main asset of Long products segment Intercompany sales (l.h.) 20

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