NLMK
Goldman Sachs Global Metals & Mining, Steel Conference

Grigory Fedorishin, CFO
SERGEY TAKHIEV, HEAD OF IR
20-21 NOVE...
DISCLAIMER
This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor pres...
1. Business profile

2. Operating and financial profile

3. Strategy

3
BUSINESS PROFILE
•

World’s leading steel producer with 17 mln t capacity
o
o
o
o

•

Balanced business model
o
o
o
o

•

...
BALANCED AND FAVORABLY LOCATED ASSETS
Russian production platform enhanced with international assets

NLMK USA Strip
1 min...
EFFICIENT VERTICAL INTEGRATION
•

Iron ore: 85% self-sufficiency*

NLMK SLAB PRODUCTION COSTS VS GLOBAL

o The Group is ov...
DIVERSIFIED SALES
•

Russian market remains a key sales region with 80%
exposure into construction and infrastructure

•

...
1. Business profile

2. Operating and financial profile

3. Strategy

8
GLOBAL STEEL MARKET OVERVIEW
•

Supply / Demand

GLOBAL CAPACITY UTILIZATION

o Restocking at the beginning of 2013 follow...
US MARKET
•

Supply / Demand

US STEEL-CONSUMING SECTORS PERFORMANCE

o LT demand looks strong with construction, machiner...
EUROPEAN MARKET
Emerging signs of recovery in the European industry
o PMI above 50 for the 4th consecutive month
o Strengt...
RUSSIAN MARKET
•

Growth in steel consumption

DOMESTIC STEEL PRICES, HRC / CRC (EXW)

o 2013 ASU to grow by 3.8% yoy to 4...
RUSSIAN MARKET - Construction
Market overview
o Construction (sq m completions) surpassed pre-crisis peak
levels in 2012
o...
RUSSIAN MARKET – Automotive
Market fundamentals

STEEL CONSUMPTION IN AUTOMOTIVE

Flat steel

Sep-13

May-13

Jan-13

Sep-...
RAW MATERIALS MARKET
GLOBAL RAW MATERIAL PRICES

•

Prices and demand in international markets
o Correlation between raw m...
OPERATING RESULTS
•

High capacity utilization rates

NLMK CRUDE STEEL PRODUCTION

o Growth in steel production in Q3’13 t...
FINANCIAL HIGHLIGHTS
•

9М ’13 financial results
o

FINANCIAL PERFORMANCE, QUARTERLY

Revenue $8,405 m (-10% yoy)

$ bn
3,...
DEBT POSITION
•

Financial debt
o
o
o
o

LT AND ST DEBT

Net debt*
Total debt
Cash and equivalents **
Net debt * / 12M EBI...
DEBT MATURITY
•

Significant liquidity position

•

Comfortable maturity schedule

LIQUID ASSETS AND ST DEBT MATURITY*
$4 ...
OUTLOOK
•

Steel production
o
o

•

Steel output in Q4’13 will grow by 5% to 4.1 m t, driven by production growth at NLMK ...
1. Business profile

2. Operating and financial profile

3. Strategy

21
GLOBAL MARKET TRENDS
Global overcapacity

GLOBAL OVERCAPACITY

Excess capacity
Capacity utilization rate (RHS)

2012

2010...
STRATEGIC OBJECTIVES OF NLMK GROUP
Maximising upstream
integration into
key resources
1

Operating in a safe, socially
and...
MAXIMISING UPSTREAM INTEGRATION IN KEY RESOURCES
•

Iron ore
o

Growth in iron ore concentrate production through brownfie...
MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH
•

Steel capacity expansion is complete
o
o

•

Improved steel grades portfol...
MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH (2)
NLMK Kaluga project
Russian rebar market overview
o
o
o

•

2,5

Consumpt...
EFFICIENCY OF OPERATIONS
•

PRODUCTION COSTS REDUCTION WITHIN “QUICK
WINS” PROGRAM

Cost optimization programs at all site...
EUROPEAN ASSETS RESTRUCTURING
•

Restructuring workflow
o

o

•

Restructuring program is being implemented since 2008
o C...
2013 INVESTMENTS
•

Capex programme
o
o
o
o

Lower capital intensity
Focus on efficiency enhancement and niche products
Ba...
APPENDIX

30
CASH COST OF SLABS
CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE)

Cost item
Coke and coking coal

Q3’13
$84

Q2’13
$91...
NLMK
Investor Relations
18, bldg 1 Bakhrushina str.
115054, Moscow
Russia
t. +7 495 915 15 75
f. +7 495 915 79 04
email: s...
Upcoming SlideShare
Loading in...5
×

NLMK presentation. Goldman Sachs Conference. November 2013

517

Published on

Corporate presentation of NLMK. Presented by Grigoriy Fedorishin, CFO, and Sergey Takhiev, Head of IR

Published in: Investor Relations, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
517
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
24
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

NLMK presentation. Goldman Sachs Conference. November 2013

  1. 1. NLMK Goldman Sachs Global Metals & Mining, Steel Conference Grigory Fedorishin, CFO SERGEY TAKHIEV, HEAD OF IR 20-21 NOVEMBER 2013, NEW YORK
  2. 2. DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor 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 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 purchase or 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 the basis 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. No representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should inform themselves 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 regarding the 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 uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the Company's actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company's results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analysts' expectations or estimates or to update any forward-looking statements 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. 1. Business profile 2. Operating and financial profile 3. Strategy 3
  4. 4. BUSINESS PROFILE • World’s leading steel producer with 17 mln t capacity o o o o • Balanced business model o o o o • Low cost raw materials with over 80% sufficiency in iron ore* and scrap, and 100% sufficiency in coke concentrated in Russia Low cost steelmaking operations concentrated close to raw materials sources in Russia with BOF/EAF split of 80%/20% Downstream processing located close to end-users and integrated with the Russian steel platform 80-90% of finished steel products sold locally (where they were manufactured) NLMK CRUDE STEEL PRODUCTION mt o o Flat/long products 85/15 with over 40% value added steel products Presence in high growth (Russian construction) and mature markets (European and US manufacturing, automotive, etc.) International/Russian sales 57/43 (in Q3’13) 2012 Operating highlights o o o o o 14,9 mln t of steel production, up 25% Revenue USD12.16 billion, up 4% 16% EBITDA margin Net debt/EBITDA: 1.88 with over $1 bn of cash The only M&M major in Russia with investment grade credit rating Run rate of 100% Run rate of 100% 14 23% 20% 12 10 18% 14% 13% 8 14,9 6 4 8,2 7,9 8,6 8,9 9,1 8,5 9,1 9,1 8% 12,0 10,5 10,6 11,5 3% 2 0 -2% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 NLMK crude steel production NLMK share in Russian crude steel output Diversified product mix and sales structure o • High quality steel producer with highest profitability Top 10 low cost steelmaker globally #1 in Russia with over 20% of Russian steel output 70% growth in output during the last 5 years EBITDA MARGIN NLMK VS GLOBAL AVERAGE 28% 30% 25% 23% 19% 20% 16% 15% 10% 11% 8% 9% 7% 5% 0% * NLMK is 100% self-sufficient in iron ore concentrate and sinter. Pellets are currently purchased from 3rd parties. 2009 2010 NLMK 2011 2012 Global average Source: WSD, Company data 4
  5. 5. BALANCED AND FAVORABLY LOCATED ASSETS Russian production platform enhanced with international assets NLMK USA Strip 1 mini-mill & 2 rolling mills HRC 2.7 m tpa incl.: - CRC 0.7 m tpa - HDG 0.8 m tpa NLMK Dansteel Novolipetsk NLMK Kaluga Thick plate about 0.5 m tpa Sinter: 15 m tpa Coke: 2.6 m tpa Steel: 12.4 m tpa Flats: 5.7 m tpa Steel (EAF): 1.5 m tpa Longs: 0.9 m tpa Altai-Koks Coke: 4.66 m tpa RUSSIA Moscow VIZ-Stal Denmark USA Transformer steel: 0.17 m tpa Belgium Stoilensky France Italy Iron ore concentrate: 14 m tpa Sinter ore: 1.6 m tpa NLMK Long products Steel : 2.2 m tpa Longs: 2 m tpa NLMK Belgium Holdings (NBH) HRC 1.7 m tpa incl. rerolling and coating Thick plates: 0.9 m tpa - NLMK Russia production and trading assets - NLMK International operations 2012 Crude steel production NLMK Group 2012 Steel products sales 14.9 m t - NBH production assets - Service centres - Licenses to develop coal deposits 15.2 m t * numbers represents effective capacity 5
  6. 6. EFFICIENT VERTICAL INTEGRATION • Iron ore: 85% self-sufficiency* NLMK SLAB PRODUCTION COSTS VS GLOBAL o The Group is over 100% self-sufficient in iron ore concentrate with over 100 years of mine life o One of the most efficient iron ore producer globally • Coke: over 100% self-sufficient with modern facilities • Scrap: 85% self-sufficiency. Largest scrap collecting network in Russia • Energy: 56% self-sufficiency from reuse of by-product gases *** • $/t 650 600 550 500 450 400 350 300 250 200 Slab Price NLMK Novolipetsk 3 Coal: Exposure to the local oversupplied market. Portfolio of coal deposit rights give an option to increase self-sufficiency 123 236 342 454 546 632 Cumulative BOF capacities, mt/y Source: WSD. Estimation of slab cash cost for BOF producers w/o overheads COAL PRICE: DOMESTIC VS INTERNATIONAL SELF-SUFFICIENCY 350 Self-sufficiency in 2012 Coking coal, Australia, FOB ~115%* 120% 300 100% 250 ~85%* ~85%** 80% 200 56%*** 60% 150 40% 100 20% Coking coal, Russia FCA 50 Source: Metal Bulletin, Metal Expert Oct-13 Jul-13 Apr-13 Jan-13 Oct-12 Jul-12 Apr-12 Jan-12 Oct-11 Jul-11 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 0% Iron ore Coke Scrap Electricity * NLMK currently is over 100% self-sufficient in iron ore concentrate, sinter ore and coke. Pellets are purchased from 3rd parties. From 2016 Group to achieve 100% selfsufficiency in pellets. ** at Russian operations. *** at Novolipetsk 6
  7. 7. DIVERSIFIED SALES • Russian market remains a key sales region with 80% exposure into construction and infrastructure • Wide product mix with strong value-added share • Slabs sales hedged by overseas rolling operations 100% 11% 8% Rational export/domestic market balance • DIVERSIFIED SALES STRUCTURE • 80%-90% of total finished steel sold to local customers • Market penetration through constantly improving product mix and quality • Niche product sales in focus of development (transformer steel, specialty thick plates, feedstock for LDP, etc.) 2% 0% 3% 21% 1% Metalware 38% HVA products HVA 15% Galvanized steel 12% Construction 20% 30% 3.72 million tonnes 10% 10% NLMK Europe NLMK USA 0% NLMK Russia NLMK divisional sales to consuming industries. w/o international trading. Q3 2013 data Sales – outer circle 10% 6% Russia 9% 12% 9% 43% 43% N.America Middle East 14% S.E. Asia 14% 20% Billets Pig iron Europe 4% HRC Slabs Total sales 30% CRC Long products 6% Pipe producers Machinery 32% 81% Pre-painted steel Plate 28% 60% 40% 60% 9% Electrical steel 8% 29% Q3 ‘13 SALES AND REVENUE BY REGIONS SALES BY PRODUCT Q3 ‘13 4% 80% Others (incl stockholders) Other regions 16% Revenue – inner circle Total sales 3.72 million tonnes Total revenue $2.83 million 7
  8. 8. 1. Business profile 2. Operating and financial profile 3. Strategy 8
  9. 9. GLOBAL STEEL MARKET OVERVIEW • Supply / Demand GLOBAL CAPACITY UTILIZATION o Restocking at the beginning of 2013 followed by a significant supply growth and increased competition o Market environment improvement over Q3 supported by the slightly improved supply-demand balance 80% Prices 70% o Prices moved up over the Q3 driven by increased raw materials prices and strengthened buying activity o Prices are expected to stabilize in Q4 underpinned by low inventories • 60% 50% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 • 90% Inventories o The pace of destocking slowed in Q3, inventories are now considered to be at a historically low level and in balance with the demand Global STEEL INVENTORIES North America EU (27) PRICES BY REGION Index, January 2012 = 1 900 1,3 $/t $/t 800 1,2 160 700 1,1 140 600 1 120 500 0,9 100 400 0,8 0,7 Germany China 300 USA HRC USA, EXW HRC China, EXW HRC Europe, EXW Iron ore, China, CFR, (rhs) 200 Source: CRU, Bloomberg Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 0,6 180 80 60 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 1,4 China Source: World Steel Association Source: Metal Bulletin 9
  10. 10. US MARKET • Supply / Demand US STEEL-CONSUMING SECTORS PERFORMANCE o LT demand looks strong with construction, machinery and energy sectors performing relatively well and approaching pre-crisis levels 1 200 o Supply-side provides support to prices on improved producers’ discipline (quick adjustments of run rates) and reduced imports (YTD imports fell by 8% yoy). • ‘000 units million units 1 000 800 Prices o Steel prices have strengthened significantly since May o Further price increases introduced by local producers supported by tight supply o Lead times for HRC and CRC increased as buying activity improves US construction starts SAAR Sep-13 May-13 Jan-13 Sep-12 May-12 Jan-12 Sep-11 May-11 Jan-11 Sep-10 May-10 Jan-10 Sep-09 May-09 Jan-09 Sep-08 o Months of supply are below average at 2.4 in September May-08 400 Inventories Jan-08 • 600 17 16 15 14 13 12 11 10 9 8 US auto sales SAAR Source: US Census Bureau, Ward’s Automotive Group INVENTORY LEVEL 3,5 US PRICE DYNAMICS 900 US inventory/sales ratio, months $/metric t $/metric t $728/t 700 3 5-year average level 2,5 500 400 300 500 200 300 2 100 Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 Source: Bloomberg Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 100 1,5 HRC US domestic prices, EXW Spread US HRC vs scrap (RHS) Source: Metal Bulletin HRC Spread US vs China (RHS) 10
  11. 11. EUROPEAN MARKET Emerging signs of recovery in the European industry o PMI above 50 for the 4th consecutive month o Strengthening industrial and construction confidence in the core EU countries • 70 10 60 0 50 Supply / Demand o Apparent steel consumption growth is expected to turn positive in 2014 (+2.9%) driven by the investment improvement* o Imports pressure eased since Q2 and is expected to remain essentially stable • INDUSTRIAL SECTOR INDICATORS -10 40 -20 30 -30 20 -40 0 Prices 10 -50 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 • o Steel prices are expected to stabilize in Q4 on the seasonal demand slowdown and balanced inventories with the uptick at the beginning of 2014 due to improved orders Eurozone Manufacturing PMI EU-27 industrial confidence Source: Eurostat GERMANY: STEEL INVENTORY 3,5 Inventory/sales ratio, months EU PRICE DYNAMICS 900 $/t $/t 270 3,0 5-year average level 800 220 170 700 120 2,5 600 2,0 70 20 500 -30 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Source: CRU. I/S ratio adjusted by CRU (three month moving average) * Source: Eurofer -80 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 400 1,5 HRC spread Northern EU domestic EXW vs import CFR HRC, Northern EU, EXW Source: Metal Bulletin Plates, Northern EU, EXW 11
  12. 12. RUSSIAN MARKET • Growth in steel consumption DOMESTIC STEEL PRICES, HRC / CRC (EXW) o 2013 ASU to grow by 3.8% yoy to 43.6 m t (WSA forecast) 1 100 o 9M’13 finished steel consumption up by 3.5% yoy to 31.7 m t due to increased longs consumption (+5.1% yoy) 1 000 o Key drivers - construction and infrastructure sector, contributing about 2 m t to ASU, or over 100% of total ASU growth in 2013 o Long-term fundamentals for steel consumption growth remain strong • $/t 900 800 700 600 500 Slab export, Russia FOB CRC Russia, EXW 400 Pricing trends 300 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 o Ordinary grades replicate export market situation HRC Russia, EXW HDG Russia, EXW o More stable pricing for value added grades Sources: Metal Bulletin, Metal Expert STEEL CONSUMPTION IN RUSSIA FINISHED STEEL CONSUMPTION ‘000 t 15% 2 100 12% 7% 1 600 Pipes&tubes industry Machinery 70 60 mt Delayed steel consumption from 1995 to 2005 is 170 m t 50 40 30 1 100 66% 600 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 Mar-13 May-13 Jul-13 Sep-13 100 Flats Sources: Metal Expert, NLMK Столбец1 Processing, incl. white goods and construction 20 Construction & infrastructure 0 10 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2 600 Longs Sources: McKinsey, World Steel Association 12
  13. 13. RUSSIAN MARKET - Construction Market overview o Construction (sq m completions) surpassed pre-crisis peak levels in 2012 o Residential completions up by 12% yoy in 9M’13 o New house sales supported by robust consumer confidence o 9M’13 steel consumption in construction and infrastructure up by 8% yoy o flat steel +7% yoy o long steel +8.5% yoy 3 000 ‘000 t 2 500 2 000 1 500 1 000 NLMK strategy o Quality and service improvement o Ramp up of the launched in mid-2013 NLMK Kaluga with the crude steel capacity of 1.5 m tpa (0.4 m t to be produced in 2013) o New long steel products (angles, channels) including niche one – high strength rebar (A1000) o Imports substitution 500 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 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 Mar-13 May-13 Jul-13 Sep-13 Flat steel HOUSE COMPLETIONS IN RUSSIA FLOOR SPACE PER CAPITA, M2 80 80 67 70 m square meters 60 60 48 50 50 % 37 40 30 50 Normal 30 23 20 50 % 10 40 0 20 Obsolete 10 Source: Company estimates Source: Rosstat, NLMK estimates. Ministry of Economic Development 2013E 2012 2011 2010 2009 2008 2007 Столбец1 2006 Russia 2005 Eastern Europe 2004 EU 2001 0 US 2000 70 Long steel Source: Metal Expert 2003 • STEEL CONSUMPTION IN CONSTRUCTION 2002 • 13
  14. 14. RUSSIAN MARKET – Automotive Market fundamentals STEEL CONSUMPTION IN AUTOMOTIVE Flat steel Sep-13 May-13 Jan-13 Sep-12 May-12 Jan-12 Sep-11 o Technology and experience transfer and synergy with its European division May-11 o Downstream development to grow market share Jan-11 o New steel grades – IF, etc. steels Sep-10 NLMK strategy May-10 • Jan-10 o Auto sales in 10M’13 down by 7% yoy Sep-09 o YTD steel consumption in automotive sector down as auto production of local brands remains soft May-09 Recent developments ‘000 t Jan-09 • 200 180 160 140 120 100 80 60 40 20 - Sep-08 o 50% of car fleet is over 10 years old May-08 o 3.3 times growth in cars production since 2009 Jan-08 • Long steel Source: Metal Expert RUSSIA: PRODUCTION OF CARS AND CAR FLEET AGE OF CAR FLEET IN RUSSIA m units 1,97 1,94 m units < 3 years 12% 2,0 1,7 1,5 1,5 50% 3-5 years 1,0 15% 5-10 years 1,0 1,0 1,1 1,1 1,2 1,3 1,2 40 35 30 25 20 15 0,6 10 0,5 5 23% > 10 years 0,0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Е Passenger cars production, l.h. Source: Avtostat Source: Rosstat, Avtostat, ASM-Holding Car fleet , r.h. 14
  15. 15. RAW MATERIALS MARKET GLOBAL RAW MATERIAL PRICES • Prices and demand in international markets o Correlation between raw material and steel price trends o In Q3 global prices for iron ore and coking coal recovered by 13% and 9% respectively underpinning steel prices upward movement o Raw materials demand remains solid as steel output continues to grow 1,2 1,0 0,9 0,8 0,7 0,6 0,5 o Iron ore inventories at Chinese ports hit bottom in March’13 and started to recover 0,4 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 o Chinese imports of iron ore were up by 9% yoy in 9M’13 • Jan 2012 index 1.0 1,1 Russian coking coal market remains oversupplied Iron ore fines (Fe 62%) import China, CFR Coking coal, export Australia, FOB Scrap export Europe, FOB HRC China export, FOB o 9M’13 exports increased by 30% while domestic shipments went down by 4% Sources: Metal Bulletin RUSSIA: COKING COAL MARKET BALANCE mt 2,5 2,0 40 2,0 100 30 20 mt IRON ORE INVENTORIES AT CHINESE PORTS 700 70 60 300 50 200 40 40,6 39,0 0 -14,2 -17,5 -22,6 -20 2011 Export 2012 Sales to domestic market Sources: Metal Expert, NLMK estimates 2013E Import IRON ORE SUPPLY mt 600 -2% 500 in Q3 400 100 90 40,9 10 -10 110 80 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 Mar-13 May-13 Jul-13 Sep-13 50 CHINA: IRON ORE IMPORTS AND INVENTORIES Sources: Bloomberg, NLMK estimates 601 552 274 295 9М '12 9М '13 Iron ore local production (Fe 62% equivalent) Iron ore imports 15
  16. 16. OPERATING RESULTS • High capacity utilization rates NLMK CRUDE STEEL PRODUCTION o Growth in steel production in Q3’13 to 3.9 m t (+3% qoq) o Average capacity utilization rate 96% o Lipetsk plant – 99% o NLMK Indiana*– 91% o NLMK Russia Long – 90% • mt ~4,1** 3,8 3,9 0,2 0,5 0,2 0,5 0,2 0,6 0,9 1,8 3,0 3,1 3,1 12,2 Q1'13 Q2'13 Q3'13 3,7 Steel production outlook o Q4’13 steel output up by 200,000 t, (+5% qoq) to 4.1 m t driven by NLMK Kaluga production of 290,000 t o 2013 steel output of 15.5 m t, +4% yoy (up from 14.9 m t in 2012) Steel Q4'13 (P) Long products 14,9 2012 15,5** 2013 (P) Foreign rolled products ** Excluding NLMK Verona output in Q4’13 STEELMAKING CAPACITY UTILISATION: NOVOLIPETSK AND GLOBAL AVERAGE NLMK: STEELMAKING CAPACITY UTILIZATION 100% 96% 99% 94% 91% 90% 96% 120% 100% 90% 90% 80% 87% 60% 40% 70% Lipetsk plant capacity utilization 20% 80% Global average 0% NLMK USA NLMK Long products Q2 '13 Novolipetsk NLMK Group Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '08 '08 '08 '08 '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 '12 '12 '12 '13 '13 '13 Q3 '13 * Steelmaking asset of NLMK Foreign rolled product segment 16
  17. 17. FINANCIAL HIGHLIGHTS • 9М ’13 financial results o FINANCIAL PERFORMANCE, QUARTERLY Revenue $8,405 m (-10% yoy) $ bn 3,4 o EBITDA $1,096 m (-27% yoy) o EBITDA margin 13% (-3,2 p.p.) 3,0 o Operating cash flow : $1,030 m (-31%) 2,8 o Investments: $658 m (-43%) o Net debt*/12M EBITDA: 1.87 16,1% 14,1% 13,9% 3,2 13,9% 11,1% 2,6 3,00 2,4 2,80 2,86 2,83 2,72 Q4 '12 Q1 '13 Q2 '13 Q3 '13 2,2 2,0 • Q3 '12 Q3 ’13 financial results o EBITDA $379 (-5% qoq) o EBITDA margin 13,9% (-0.2 p.p.) o Investments: $281 m Revenue OPERATING CASH FLOW AND INVESTMENTS** 1 600 Cash flow generation o Sustainable free cash generation coupled with continuous deceleration in Investments $m 1 491 1 400 1 200 • EBITDA margin Revenue $2,72 m (-4% qoq) o 18,0% 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% 1 158 1 030 1 000 800 658 600 400 200 0 9М'12 Operating cash flow * Net debt w/o NBH debt (deconsolidated after NBH stake sales to SOGEPA) ** Investments include capitalized interest expense 9М'13 Capex 17
  18. 18. DEBT POSITION • Financial debt o o o o LT AND ST DEBT Net debt* Total debt Cash and equivalents ** Net debt * / 12M EBITDA $2.77 bn (-19%) $4.12 bn (-14%) $1.35 bn (-1%) 1.87x $5,0 $ bn $4,0 $3,0 • NLMK Belgium Holdings (NBH) liabilities deconsolidation • Consistent net debt reduction $3,8 $2,3 $1,0 $1,4 $1,0 as at 30 Jun 2013 Investment credit rating (Moody’s, Fitch) ST debt MATURITY AND NET DEBT/EBITDA 3,8 3,6 3,4 3,2 3,0 2,8 2,6 2,4 2,2 2,0 Weighted average maturity 3,3 3,6 3,4 3,1 3,0 2,0 1,5 2,7 2,5 Years to maturity 6 2,15 2,5 1,90 1,69 Cash and equivalents Committed credit lines $ bn +0.40 +0.25 5 1,88 1,84 1,93 1,87 1,0 4 3 0,0 0,99 -0.60 +0.05 0,62 -0.76 0,5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '12 '12 '12 '12 '13 '13 '132 as at 30 Sep 2013 MATURITY AND NET DEBT/EBITDA Net debt/EBITDA 3,0 LT debt $1,4 $0,6 $- • $2,3 $3,5 $2,0 3,79 ST debt 3,51 LT debt 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '12 '12 '12 '12 '13 '13 '132 * Net debt w/o NBH debt (deconsolidated after NBH stake sales to SOGEPA) **Cash and equivalents and ST deposits 30 Jun '13 Borrowings Debt Reclass. of NBH repayments debt for SIF debt shares*** deconsolidation Other factors 30 Sept '13 18
  19. 19. DEBT MATURITY • Significant liquidity position • Comfortable maturity schedule LIQUID ASSETS AND ST DEBT MATURITY* $4 000 o Short term debt $0.62 bn, (-38% qoq) o Ruble bonds o Credit lines o ECA- financing Undrawn committed credit lines $3 500 $3 000 $2 500 2 331 Cash and equivalents $2 000 $1 500 o Long term debt $3.51 bn, (-7% qoq) o Eurobonds and ruble bonds o Long term part of ECA • $m $1 000 $500 1351 Liquid assets 68 60 50 40 42 37 33 35 10 35 15% 31 31 27 22 Q4'12 Q1'13 Q2'13 Capitalized interest expense (lhs) Q3 '14 12M $m 5% $500 895 723 2014 2015 27 $0 2013 Non-capitalized interest expense (lhs) Interest expense to EBITDA (rhs) * ST maturity payments with interest accrued and debt maturity schedule ** Quarterly figures are derived by computational method on the basis of quarterly reports 2 434 $1 000 Q3'13 0 Q3'12 Q2 '14 $1 500 0% 24 Q1 '14 $2 000 57 30 20 Q4 '13 $2 500 10% 62 25% 20% 64 616 TOTAL DEBT MATURITY*** $3 000 66 212 42 INTEREST EXPENSES** 70 175 $0 Financing costs as a % of EBITDA remain consistently low $m 187 RUB bonds ECA EBRD NLMK Dansteel *** Maturity payments do not include interest expenses Others **** **** Credit lines 2016 и and onward Europbonds (USD) 19
  20. 20. OUTLOOK • Steel production o o • Steel output in Q4’13 will grow by 5% to 4.1 m t, driven by production growth at NLMK Kaluga In 2013 steel production will reach 15.5 m t (or +4% y/y) Financials o In Q4, we expect steel prices to soften due to the seasonal slowdown in demand and projected decline in steel raw material prices o The company continues to work on offsetting the negative impact of market conditions by improving technical and business process efficiency 20
  21. 21. 1. Business profile 2. Operating and financial profile 3. Strategy 21
  22. 22. GLOBAL MARKET TRENDS Global overcapacity GLOBAL OVERCAPACITY Excess capacity Capacity utilization rate (RHS) 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 Profitability has slipped from steelmaking to mining 1980 • 2010-2012 average run rate – 77% 1990 o Decline in raw materials leads to cost curve flattening o Operating costs inflated by other expenses items o Steel demand becoming more “local” 1980-2007 average run rate – 86% 1988 Production costs inflation 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% mtpa 1986 • 2 200 2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 1984 o Over 0.5 bn t of steelmaking overcapacity o Capacity growth in EMs and capacity retention in DMs 1982 • Crude steel production Source: World Steel Association PROFITABILITY SHIFT TO UPSTREAM GLOBAL SLAB CASH COST $/t 800 2011 700 2012 600 100% 8% 11% 75% 15% 7% 44% 22% 2013 500 17% 50% 81% 400 35% Cumulative capacities BF/BOF mtpa 200 5 208 389 574 28% 32% 26% 27% 2011 2017Е 0% 1995 2000 Steelmaking Source: World Steel Dynamics 42% 61% 25% 300 22% 78% 46% 2005 2010 Coking coal Source: McKinsey Research. EBITDA split for HRC Iron ore 22
  23. 23. STRATEGIC OBJECTIVES OF NLMK GROUP Maximising upstream integration into key resources 1 Operating in a safe, socially and environmentally responsible manner 5 2 Maintaining efficient and sustainable growth 4 3 Developing niche segments Improving efficiency of operations 23
  24. 24. MAXIMISING UPSTREAM INTEGRATION IN KEY RESOURCES • Iron ore o Growth in iron ore concentrate production through brownfield expansion / debottlenecking Pelletizing plant of 6 m t – 2016 to cover 100% needs o • Coal o Use of alternative technology to improve coke quality and decrease coal consumption PCI technology installation to reduce by 20/30% coke and by 70% natural gas consumption per 1 t of steel o • Scrap o • Target self-sufficiency of Russian operations at 80-85% EXPANSION OF IRON ORE CONCENTRATE AND PELLETS CAPACITY 20 18 16 14 12 10 8 6 4 2 0 mt + over 6 m t 12 6 2 5 New BF#7 4 PCI effect 3 2 1 0 2010 2011 2013-14 2014-15 2013 2016 2013 2016 Pellets Iron ore concentrate GLOBAL IRON ORE PRODUCTION COSTS $/t 180 160 140 120 100 80 60 40 20 0 6 0 0 Efficiency gains and to reduce energy intensity Reuse of by-product gases to generate electricity in house mt +6mt 6 2010 7 mt 4 COKING COAL CONSUMPTION DYNAMICS (LIPETSK) 8 10 8 14 Energy o o >18 NLMK (Stoilensky) 2012 Cumulative capacities: 1.4 bn t 0% 25% 50% 69% Sources: Bloomberg industries, iron ore production costs in 2012 90% 24
  25. 25. MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH • Steel capacity expansion is complete o o • Improved steel grades portfolio o o • Allows for further improvement in existing portfolio of downstream products and mastering new ones To win new contracts and gain market share or enter new markets mtpa 1.5 16 3.4 12 4 0 Low cost position supplemented by quality improvements o BF#7 Existing BF#7 EAF (Kaluga) EAF (Kaluga) 2014 Crude steel capacity growth for the Russian operations New gauges of semis added – e.g. 2.5 m tpa of wide slabs Entering new markets (by geo and by segments) Improving position in the existing markets (e.g. green energy, construction, capital goods) Allowing for the full capacity load through the cycle (90% 100% run rate) 17,2 12.3 Expanded diversity of products o o EAF: 1.5 m tpa from 2013 BF: 3.4 m tpa from mid 2011 8 2010 o • BF/BOF steelmaking (Russia) : 3.4 m tpa Brownfield project of ~$500/t* investments (in 2011) EAF steelmaking (Russia): 1.5 m tpa Greenfield project of ~$750/t* investments (in 2013) CRUDE STEEL CAPACITY GROWTH: +40% INCREMENTAL STEEL SUPPLY HEDGED THROUGH CAPTIVE ROLLING 100% % 12% 80% 60% Finished (Intl) 47% 58% Finished (Russia) 40% 48% 20% Semis 30% 5% 0% Jan-11 * - total investments per annual capacity of the facility Jan-12 25
  26. 26. MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH (2) NLMK Kaluga project Russian rebar market overview o o o • 2,5 Consumption growth in Russia: x1.9 against 1H‘10 Import growth in 1H’13: +60% yoy, x3 vs. 1H’10 Regional demand/supply imbalance o o o Record level of 2008 2,0 1,5 Modern 1.5 m tpa EAF capacities o Offering product mix in demand from construction: rebar and sections Favorable location: 90 km from Moscow – consumption cluster (Central district) Total investments c. $1.2 billion (90% by 2013) Cost advantage (logistics, modern production, scrap collection network) 1,0 0,5 0,0 Russian production 46% long products deficit – app. 3,8 million t/y 40% 31% 30% Share in long products consumption 21% 20% 18% 17% 12% 10% 8% 9% 11% 8% 6% 7% 0% 1% North Caucasi an Far East South NorthWest Privolzh sky Central Siberia Crude steel 800 600 200 0% Urals 000’t 900 400 1% 2% Sources: Metal Expert. Data for 2012 NLMK KALUGA: PRODUCTOIN PLAN 1000 Share in long products production Import Source: Metal Expert BALANCE OF PRODUCTION AND CONSUMPTION AT REGIONS 50% Import, share is over 20% mt 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 '12 Q1 '13 Q2 '13 Q3 '13 • RUSSIAN REBAR CONSUMPTION, 2008-2013 400 0 2013Е 2014Е 26
  27. 27. EFFICIENCY OF OPERATIONS • PRODUCTION COSTS REDUCTION WITHIN “QUICK WINS” PROGRAM Cost optimization programs at all sites (effects to be presented to the market in Q1 2014) 120 • Optimization of coke making, sintering, BOF operations (Novolipetsk and Altai Koks) o o o o $m 100 80 Maximum use of equipment potential Minimizing raw material, fuel, material and energy consumption Optimizing fuel and raw material balance structure Reducing environmental footprint, including waste management 38 60 100 40 80 30 20 0 13 Q1'13 • Q2'13 Q3'13 9M'13 12M'13 (Е) Significant economic potential o o o Target announced in Feb 2013 - $60 m Effect of $80 m achieved in 9М13 Target level of savings in 2013: c. $100 m* REDUCED RAW MATERIAL CONSUMPTION FOLLOWING OPTIMIZATION MEASURES 105% Lower specific raw material consumption, 100% - Dec’12 level 100% 100% 100% 96,5% 100% 97,6% 95% 93,0% 90% 85% 80% Coal Pellets Before optimization * Estimation of an effect comparing to 2012 level of utilization rates and prices (for Novolipetsk and Altai-Koks) * Reduced consumption of purchased scrap Scrap* After 27
  28. 28. EUROPEAN ASSETS RESTRUCTURING • Restructuring workflow o o • Restructuring program is being implemented since 2008 o Change in asset perimeter and transition to a re-roller model o Consistent cost reduction through optimization programs NLMK La Louviere Restructuring Agreement (March 2013) o Headcount optimization by 30%, Fixed costs reduction by $30 m/y (full effect in 2014) Involvement of the Belgian state-owned company SOGEPA* as a strategic partner in European assets o o Sale of 20.5% interest in NLMK Belgium Holdings (NBH) for €91 m ($123 m) SOGEPA participation in governance FIXED COSTS OF NLMK EUROPE STRIP 200 €m 150 50 Carsid + EAF and Long products + Safef Thonville 121 39 12 50 34 10 27 100 102 9 27 75 67 64 2008 100 2009 2010 10 34 $m 000’t 92 9 27 92 9 31 66 56 52 2011 2012 2013(Е) 0 NBH IMPACT ON THE 9M NLMK RESULTS STEEL SALES Service centers 111 27 $m EBITDA 2500 2 297 2000 1 300 7 537 13.0% 7 611 -125 1500 1 221 1 096 1 235 1000 500 1 062 -124 Revenue 9М'13 1 -125 EBITDA 9М'13 0 NLMK NBH Sales Slab sales Group fact to NBH NLMK Group without NBH * Societe Wallonne de Gestion et de Participations S.A. NLMK La Louviere and total overheads for division NLMK Europe Strip NLMK FOREIGN ASSET FINANCIALS 15.0% -1 226 NLMK Coating and NLMK Strasbourg NLMK Group NBH impact NLMK Group fact without NBH -500 800 700 600 500 400 300 200 100 0 -100 $m 750 409 341 Revenue Q3'13 NBH NLMK USA and NLMK Dansteel -35 11 -46 EBITDA Q3'13 28
  29. 29. 2013 INVESTMENTS • Capex programme o o o o Lower capital intensity Focus on efficiency enhancement and niche products Balanced approach to assessing new projects Flexibility under various market scenarios CAPEX DYNAMICS $m 2000 1500 • Long products division development o • Strengthening vertical integration o o o • NLMK Kaluga launch (EAF+ rolling mill) Pelletizing plant construction projects launched at Stoilensky Coke making projects (PCI, etc.) to reduce energy costs Development of scrap collecting facilities 1000 2020 1936 1462 1453 1115 500 850 69% 31% 0 2008 2009 2010 2011 2012 2013Е Столбец1 Development Maintenance capex Quality improvement and niche products o o o Mastering the revamped rolling mill at NLMK Dansteel Niche product development at NLMK Clabecq Continued GO steel development programmed at Novolipetsk and at VIZ-Steel MAINTENANCE CAPEX PER TONNE OF STEEL $/t 50 40 30 20 45 24 10 30 17 24 20 2012 2013E 0 2008 2009 2010 2011 29
  30. 30. APPENDIX 30
  31. 31. CASH COST OF SLABS CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE) Cost item Coke and coking coal Q3’13 $84 Q2’13 $91 CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013 ∆, $/t Period $/t -$7 Q1 '12 $395 Q2 '12 $411 Iron ore $60 $64 -$4 Scrap $29 $37 -$8 Other materials $27 $31 -$4 Q3 '12 $383 Electricity $23 $21 +$2 Q4 '12 $361 Natural gas $21 $18 +$3 Q1 '13 $364 Q2'13 $348 Q3 '13 $329 Personnel $33 $33 0 Other expenses $52 $53 -$1 $329 $348 -$19 Total 31
  32. 32. NLMK Investor Relations 18, bldg 1 Bakhrushina str. 115054, Moscow Russia t. +7 495 915 15 75 f. +7 495 915 79 04 email: st@nlmk.com www.nlmk.com
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×