NLMK
5-6 September 2013, London
Sberbank CIB One-on-One Conference
"Russia: The Inside Track"
DISCLAIMER
This document is confidentialand has been prepared by NLMK (the “Company”) solely for use at the investor prese...
3
1. Business profile
2. Operating and financial profile
3. Strategy
BUSINESS PROFILE
4
• World’s leading steel producer with 17,2 mln t capacity
o High quality steel producer with highest pr...
BALANCED AND FAVORABLY LOCATED ASSETS
Russian production platform enhanced with international assets
2012 Crude steel
prod...
EFFICIENT VERTICAL INTEGRATION
~85%*
~115%*
~85%**
56%***
0%
20%
40%
60%
80%
100%
120%
Iron ore Coke Scrap Electricity
SEL...
DIVERSIFIED SALES
• Wide product mix with strong value-added share
• Rational export/domestic market balance
• Slabs sales...
1. Business profile
2. Operating and financial profile
3. Strategy
8
0,6
0,7
0,8
0,9
1
1,1
1,2
1,3
1,4
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Germany China USA
...
0
10
20
30
40
50
60
70
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan...
500
700
900
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-1...
100
600
1 100
1 600
2 100
2 600
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...
0
10
20
30
40
50
60
70
80
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013E
RUSSIAN MARKET - Construc...
-
20
40
60
80
100
120
140
160
180
200
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
...
RAW MATERIALS MARKET
• Prices and demand in international markets
o Correlation between raw material and steel price trend...
Global average
0%
20%
40%
60%
80%
100%
120%
Q1
'08
Q2
'08
Q3
'08
Q4
'08
Q1
'09
Q2
'09
Q3
'09
Q4
'09
Q1
'10
Q2
'10
Q3
'10
Q...
3,26
3,00
2,80 2,86 2,83
18%
16%
14%
11%
14%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2,0
2,2
2,4
2,6
2,8
3,0
3,2
3,4
Q2 '12...
$1,5 $1,4
Cash and equivalents
$1,5
$1,0
$3,5
$3,8
$-
$1,0
$2,0
$3,0
$4,0
$5,0
as at 31 Mar 2013 as at 30 Jun 2013
ST debt...
DEBT MATURITY
• Maturity schedule
o Substantial liquidity cushion incl. $1.36 bn of cash and
equivalents and $2.33 bn of c...
20
• Market overview
o Globally run rates remain high aggravating the supply/demand imbalance while the market continues t...
21
1. Business profile
2. Operating and financial profile
3. Strategy
22
GLOBAL MARKET TRENDS
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2...
23
Maximising upstream
integration into
key resources
1
Maintaining efficient and
sustainable growth
2
Improving efficienc...
0
6
0
2
4
6
8
10
2012 2016
12
14
>18
0
2
4
6
8
10
12
14
16
18
20
2010 2012 2016
MAXIMISING UPSTREAM INTEGRATION IN KEY RES...
12.3
3.4
1.5
17,2
0
4
8
12
16
2010 BF#7 EAF (Kaluga) 2014
Existing BF#7 EAF (Kaluga)
mtpa
BF: 3.4 m tpa
from mid 2011
EAF:...
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0,0
0,5
1,0
1,5
2,0
2,5
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
...
IMPROVING EFFICIENCY OF OPERATIONS
• Cost optimization programs
o Novolipetsk
o Altai-Koks
• Optimization of coke making, ...
AIR EMISSIONS AND WASTE WATER DISCHARGE
DEVELOPING NICHE SEGMENTS
DOWNSTREAM CAPACITY ADDITIONS
28
• Portfolio of niche st...
31%
69%
Столбец1Development
Maintenance capex
2013 INVESTMENTS
• Capex programme
o Lower capital intensity
o Focus on effi...
30
APPENDIX
Q2 ’13 CONSOLIDATED CASH COST OF SLABS
(AT LIPETSK SITE), $/T
Q2’13 Q1’13
Coke and coking coal $91 $99
Iron or...
www.nlmk.com
NLMK
Investor Relations
18, bldg 1 Bakhrushina str.
115054, Moscow
Russia
t. +7 495 915 15 75
f. +7 495 915 7...
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Nlmk presentation sep 2013 sberbank

  1. 1. NLMK 5-6 September 2013, London Sberbank CIB One-on-One Conference "Russia: The Inside Track"
  2. 2. DISCLAIMER This document is confidentialand 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 invitationto sell or issue or any solicitationof 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 informationcontained 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 informationor 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 jurisdictionsmay 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-lookingstatements. These forward-lookingstatements 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, financialcondition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-lookingstatements involve risks and uncertainties because they relate to events and depend on circumstancesthat may or may not occur in the future. The Company cautions you that forward-lookingstatements are not guarantees of future performanceand that the Company's actual results of operations, financial condition and liquidityand the development of the industry in which the Company operates may differ materiallyfrom those made in or suggested by the forward-lookingstatements contained in this document. In addition, even if the Company's results of operations, financial condition and liquidityand 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. 3 1. Business profile 2. Operating and financial profile 3. Strategy
  4. 4. BUSINESS PROFILE 4 • World’s leading steel producer with 17,2 mln t capacity o High quality steel producer with highest profitability o Top 10 low cost steelmaker o #1 in Russia with 20% of Russian steel output o 70% growth in output during the last 5 years • Balanced business model o Low cost raw materials with over 80% sufficiency in iron ore* and scrap, and 100% sufficiency in coke concentrated in Russia o Low cost steelmaking operations concentrated close to raw materials sources in Russia with BOF/EAF split of 80%/20% o Downstream processing located close to end-users and integrated with the Russian steel platform o 80-90% of finished steel products sold locally (area of production) • Diversified product mix and sales structure o Flat/long products 85/15 with 40% value added steel products o Presence in high growth (Russian construction) and mature markets (European and US manufacturing, automotive, etc.) o International/Russian sales 68/32 • 2012 Operating highlights o 14,9 mln t of steel production, up 25% o Revenue USD12.16 billion, up 8% o 16% EBITDA margin o Net debt/EBITDA: 1.88 with over $1 bn of cash o The only M&M major in Russia with investment grade credit rating * NLMK is 100% self-sufficient in iron ore concentrate and sinter. Pellets are currently purchased from 3rd parties. 23% 28% 19% 16% 8% 11% 9% 7% 0% 5% 10% 15% 20% 25% 30% 2009 2010 2011 2012 NLMK Global average EBITDA MARGIN NLMK VS GLOBAL AVERAGE Source: WSD, Company data 8,2 7,9 8,6 8,9 9,1 8,5 9,1 9,1 10,5 10,6 11,5 12,0 14,9 14% 20% -2% 3% 8% 13% 18% 23% 0 2 4 6 8 10 12 14 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 NLMK crude steel production NLMK share in Russian crude steel output NLMK CRUDE STEEL PRODUCTION m t
  5. 5. BALANCED AND FAVORABLY LOCATED ASSETS Russian production platform enhanced with international assets 2012 Crude steel production 2012 Steel products sales NLMK Group 14.9 m t 15.2 m t Moscow Novolipetsk Sinter: 15 m tpa Coke: 2.6 m tpa Steel: 12.4 m tpa Flats: 5.7 m tpa VIZ-Stal Transformer steel: 0.17 m tpa Altai-Koks Coke: 4.66 m tpa NLMK Europe Plates 3 rolling mills Thick plate about 2 m tpa Belgium France Italy Stoilensky Iron ore concentrate: 14 m tpa Sinter ore: 1.6 m tpa Denmark NLMK Europe Strip HRC 2.4 m tpa incl.: - Pickled 1.5 m tpa - CRC 0.8 m tpa - Galv. 0.7 m tpa - Pre-painted 0.1 m tpa 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 RUSSIA Czech Rep. USA NLMK Long products Steel : 2.2 m tpa Longs: 2 m tpa 5 Zhernovskoye (Feasibilitystudy) NLMK Kaluga Steel (EAF): 1.5 m tpa Longs: 0.9 m tpa Usinsky-3 (Feasibilitystudy) - NLMK Group production and trading assets - NLMK Europe and NLMK USA (acquired Steel Invest and Finance rolling facilities) - Service centres - Licenses to develop coal deposits
  6. 6. EFFICIENT VERTICAL INTEGRATION ~85%* ~115%* ~85%** 56%*** 0% 20% 40% 60% 80% 100% 120% Iron ore Coke Scrap Electricity SELF-SUFFICIENCY * NLMK currently is over 100% self-sufficient in iron ore concentrate, sinter ore, sinter and coke. Pellets are purchased from 3rd parties. From 2016 Group to achieve 100% self- sufficiency in pellets. ** at Russian operations. *** at Novolipetsk 6 • Iron ore: 85% self-sufficiency* 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% with modern facilities • Scrap: largest collector in Russia • Energy: 56% self-sufficiency *** • Coal: portfolio of coal deposit rights give an option to increase self-sufficiency Self-sufficiency in 2012 COAL PRICE: DOMESTIC VS INTERNATIONAL 50 100 150 200 250 300 350 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 Coking coal, Australia, FOB Coking coal, Russia FCA Source: Metal Bulletin, Metal Expert 200 250 300 350 400 450 500 550 600 650 3 123 236 342 454 546 632 NLMK Novolipetsk Cumulative BOF capacities, mt/y $/t NLMK SLAB PRODUCTION COSTS VS GLOBAL Source: WSD. Estimation of slab cash cost for BOF producers w/o overheads Slab Price
  7. 7. DIVERSIFIED SALES • Wide product mix with strong value-added share • Rational export/domestic market balance • Slabs sales hedged by overseas rolling operations • Market penetration through constantly improving product mix and quality • Niche product sales in focus of development (transformer steel, specialty thick plates, etc.) Q2 ‘13 SALES AND REVENUE BY REGIONS DIVERSIFIED SALES STRUCTURE 84% 20% 35% 10% 70% 35% 6% 10% 30% 0% 20% 40% 60% 80% 100% NLMK Russia NLMK Europe NLMK USA Other Machinery Construction 7 40% 20% 11% 9% 9% 11% 37% 16% 12% 11% 12% 12% Russia Europe N.America Middle East Asia Other regions Sales – outer circle Revenue – inner circle Total sales 3.77 million tonnes SALES BY PRODUCT Q2 ‘13 Total revenue $2.83 million NLMK’s segment’s sales to consuming industries. w/o international trading. 2011 data 2% 2% 2% 4% 8% 13% 6% 26% 10% 25% 2% Metalware Dynamo steel Transformer steel Pre-painted steel Galvanized steel CRC Plate HRC Long products Slabs Pig iron 37% HVA products HVA
  8. 8. 1. Business profile 2. Operating and financial profile 3. Strategy 8
  9. 9. 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3 1,4 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Germany China USA 60 80 100 120 140 160 180 200 300 400 500 600 700 800 900 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 HRC USA, EXW HRC Europe, EXW HRC China, EXW Iron ore, China, CFR, (rhs) GLOBAL STEEL MARKET OVERVIEW GLOBAL CAPACITY UTILIZATION PRICES BY REGION Index, January 2012 = 1 • Supply / Demand o Restocking at the beginning of 2013 followed by a significant supply growth and increased competition o Chinese production remains elevated but demand strengthened driving steel inventories down o Market buoyancy in September as summer holidays in Europe and Middle East come to an end • Prices o Prices are moving up supported mostly by increased raw materials prices Source: Metal Bulletin STEEL INVENTORIES Source: CRU, Bloomberg (China statistics) Source: World Steel Association $/t 9 $/t 50% 60% 70% 80% 90% 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 Global China North America EU (27)
  10. 10. 0 10 20 30 40 50 60 70 0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 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 Manufacturing PMI (r.h.) US construction starts US auto sales 1,5 1,7 1,9 2,1 2,3 2,5 2,7 2,9 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 5-yearave. - 100 200 300 400 500 100 300 500 700 900 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 HRC US domestic prices, EXW HRC Spread US vs China (RHS) Spread US HRC vs scrap (RHS) US MARKET Source: US Census Bureau, Ward’s Automotive Group US PRICE DYNAMICS $/metric t Source: Metal Bulletin INVENTORY LEVEL • Supply / Demand o LT demand looks strong with construction, machinery and energy sectors performing relatively well o Supply-side provides support to prices on improved producers’ discipline and reduced imports • Prices o Steel prices have strengthened significantly since May o Further price increases expected in September as buyers come back to the market after holidays and supply remains tight • Inventories o Months of supply are below average at 2.3 in July o Lead times for HRC and CRC increased to 4.7 and 6.3 weeks as buying activity improves US CONSTRUCTION INDUSTRIAL SECTOR INDICATORS US inventory/sales ratio, months 10 index Jan 2010=1 Source: Bloomberg $/metric t
  11. 11. 500 700 900 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 HRC, Northern EU, EXW Plates, Northern EU, EXW 5% -8% -35% 22% 6% -10% -3% 2% -40% -30% -20% -10% 0% 10% 20% 30% 0 50 100 150 200 250 2007 2008 2009 2010 2011 2012 2013E 2014E ASU, mt ASU, y-o-y, rhs m t 1,0 1,5 2,0 2,5 3,0 3,5 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 5yearav. EUROPEAN MARKET EU PRICE DYNAMICS $/t Source: Metal Bulletin • Supply / Demand o Run rates up slightly in early Q2 driven by restocking o Subdued demand due to overall contraction in manufacturing and construction activity • Prices o Steel prices supported by recent price hikes announcements and improved sentiment on international markets although strong recovery is not expected • Inventories o Inventory/sales ratio moved up slightly in Q2 after destocking at the end of Q1 GERMANY: STEEL INVENTORY Source: CRU. I/S ratio adjusted by CRU (three month moving average). . 11 Inventory/salesratio, months APPARENT STEEL CONSUMPTION IN EU Source: Eurofer
  12. 12. 100 600 1 100 1 600 2 100 2 600 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 Flats Longs 0 10 20 30 40 50 60 70 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E • Growth in steel consumption o 2013 ASU to grow by 2.6% yoy to 43 m t (WSA forecast) o 7M’13 finished steel consumption up by 3.4% yoy to 24.2 m t due to increased longs consumption (+6.4% yoy) o Construction and infrastructure sector – key contributors o Long-term fundamentals for steel consumption growth remain strong • Pricing trends o Ordinary grades replicate export market situation o More stable pricing for value added grades RUSSIAN MARKET $/t DOMESTIC STEEL PRICES, HRC / CRC (EXW) Sources: Metal Bulletin, Metal Expert m t STEEL CONSUMPTION IN RUSSIA Sources: McKinsey, World Steel Association Delayed steel consumption is 170 mt FINISHED STEEL CONSUMPTION ‘000 t Sources: Metal Expert, NLMK 12 300 400 500 600 700 800 900 1 000 1 100 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 Slab export, Russia FOB HRC Russia, EXW CRC Russia, EXW HDG Russia, EXW 66% 7% 12% 15% Столбец1 Pipes&tubes industry Machinery Processing, incl. white goods and construction Construction & infrastructure
  13. 13. 0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E RUSSIAN MARKET - Construction ‘000 t STEEL CONSUMPTION IN CONSTRUCTION Source: Metal Expert HOUSE COMPLETIONS, RUSSIA Source: Rosstat, NLMK estimates. Ministry of Economic Development FLOOR SPACE PER CAPITA, M2 Source: Company estimates 13 • Market overview o Construction (sq m completions) surpassed pre-crisis peak levels in 2012 o Residential completions up by 6.2% yoy in 7M’13 o New house sales supported by robust consumer confidence o 7M’13 steel consumption in construction and infrastructure up by 9% yoy with rebar consumption increasing by 14% yoy • NLMK strategy o Quality and service improvement o Greenfield expansion of long steel by 70% in 2013 o New long steel products (angles, channels) including niche one – high strength rebar (A1000) 67 48 37 23 0 10 20 30 40 50 60 70 80 US EU Eastern Europe Russia 50 % 50 % Столбец1 Normal Obsolete m square meters 0 500 1 000 1 500 2 000 2 500 3 000 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 Flat steel Long steel
  14. 14. - 20 40 60 80 100 120 140 160 180 200 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 Flat steel Long steel • Market fundamentals o 3.3 times growth in cars production since 2009 o 50% of car fleet is over 10 years old • Recent developments o 7M’13 steel consumption in automotive sector down by 18% yoy as auto production remains soft o Auto sales in 7M’13 down by 6.2% yoy • NLMK strategy o New steel grades (upgrade of BOF) – IF, etc. steels o Downstream development to grow market share o Technology and experience transfer and synergy with its European division RUSSIAN MARKET – Automotive ‘000 t STEEL CONSUMPTION IN AUTOMOTIVE Source: Metal Expert Source: Avtostat 14 AGE OF CAR FLEET IN RUSSIA 13% 15% 21% 17% 11% 23% < 3 years 3-5 years 5-10 years 10-15 years 15-20 years >20 years 50/50 RUSSIA: PRODUCTION OF CARS AND CAR FLEET 14 1,0 1,0 1,1 1,1 1,2 1,3 1,5 0,6 1,2 1,7 2,0 0 5 10 15 20 25 30 35 40 0,0 0,5 1,0 1,5 2,0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Passenger cars production, l.h. Car fleet , r.h. m units Source: Rosstat m units
  15. 15. RAW MATERIALS MARKET • Prices and demand in international markets o Correlation between raw material and steel price trends o In Q2 global prices for iron ore, coking coal and scrap declined by 15%, 6% and 7%, respectively o Raw materials prices are improving since July on the back of supply constraints and steel prices recovery o Raw materials demand remains solid as steel output expands o Chinese imports of iron ore were up by 7.7% yoy in 7M’13 o Iron ore inventories at Chinese ports hit bottom in March’13 and started to recover • Russian coking coal market remains oversupplied o 7M’13 exports increased by 33% while domestic shipments went down by 3.7% 40 50 60 70 80 90 100 110 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 GLOBAL RAW MATERIAL PRICES Sources: Metal Bulletin 0,4 0,5 0,6 0,7 0,8 0,9 1,0 1,1 1,2 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 Iron ore fines (Fe 62%) import China, CFR Coking coal, export Australia, FOB Scrap export Europe, FOB HRC China export, FOB CHINA: IRON ORE IMPORT AND INVENTORIES m t Sources: Bloomberg Jul-13 +5% in Q2 425 458 100 150 200 250 300 350 400 450 500 Импорт ЖРС 7М '12 7М '13 +7.7% IRON ORE IMPORT IRON ORE INVENTORIESAT CHINA PORTS m t Jan 2012 index 1.0 15 RUSSIA: COKING COAL MARKET BALANCE Sources: Metal Expert, NLMK estimates -14,2 -17,5 -18,6 40,9 40,6 39,0 2,5 2,0 2,0 -20 -10 0 10 20 30 40 50 2011 2012 2013E Export Sales to domestic market Import m t
  16. 16. Global average 0% 20% 40% 60% 80% 100% 120% 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 Lipetsk plant capacity utilization OPERATING RESULTS • > 95% - capacity utilization rate in 2012 • +25% - crude steel production in 2012 to 14.9 m t o Novolipetsk: 12.2 milliont, +25% yoy o NLMK Long Products: 1.8 milliont, +23% yoy o Foreign Rolled Products: 0.9 million t, +27% yoy • Q2 ‘13: 3.785 m t, +2.5% qoq • Q3 ‘13 is expected to grow by 4-5% qoq to 3.9 m t 16 STEELMAKING CAPACITY UTILISATION: NOVOLIPETSK AND GLOBAL AVERAGE NLMK CRUDE STEEL PRODUCTION 88% 83% 97% 94% 87% 90% 96% 94% 70% 80% 90% 100% NLMK USA NLMK Long products Novolipetsk NLMK Group Q1 '13 Q2 '13 NLMK: STEELMAKING CAPACITY UTILIZATION 3,0 3,1 3,1 3,0 3,0 3,1 0,4 0,5 0,5 0,4 0,5 0,5 0,3 0,2 0,2 0,2 0,2 0,2 3,6 3,8 3,8 3,7 3,7 3,8 0 1 2 3 4 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Steel segment Long products segment Foreign rolled products segment m t
  17. 17. 3,26 3,00 2,80 2,86 2,83 18% 16% 14% 11% 14% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2,0 2,2 2,4 2,6 2,8 3,0 3,2 3,4 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Revenue EBITDA margin 595 483 390 318 400 453 347 296 154 221 0 100 200 300 400 500 600 700 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 EBITDA Capex 17 • 12М ’12 financial results o Revenue $12,157 m (+4% yoy) o EBITDA $1,900 m (-16% yoy) o EBITDA margin 16% (-3,6 p.p.) o Operating cash flow : $1,825 m (+1%) o Capex: $1,453 m (-29%) o Net debt/EBITDA: 1.88 • Q2 ’13 financial results o Revenue $2,83 m (-1% qoq) o EBITDA $400 (+26% qoq) o EBITDA margin 14% (+3 p.p.) o Capex: $221 m (-51% yoy) • Cash flow generation o Growth in cash generation coupled with continuous deceleration in Investments FINANCIAL HIGHLIGHTS $ m $ bn FINANCIAL PERFORMANCE, QUARTERLY EBITDA AND CAPEX
  18. 18. $1,5 $1,4 Cash and equivalents $1,5 $1,0 $3,5 $3,8 $- $1,0 $2,0 $3,0 $4,0 $5,0 as at 31 Mar 2013 as at 30 Jun 2013 ST debt LT debt 3,0 2,5 2,7 3,1 3,3 3,4 2,0 2,2 2,4 2,6 2,8 3,0 3,2 3,4 3,6 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 18 • Debt position as at Q2’13 o Net debt: $3.42 bn (-1% qoq) o Gross debt: $4.79 bn (-3%) o Net debt / 12M EBITDA: 2.15 • Debt portfolio optimization o Short term debt reduced to $0.99 bn (-33%) o Average debt maturity increased to 3.4 • Ratings o Investment grade rating from Moody’s & Fitch DEBT POSITION MATURITY AND NET DEBT/EBITDA Weighted average maturity Years to maturity Net debt/L12M EBITDA LT AND ST DEBT 27% 40% 37% 40% 36% 20% 0% 20% 40% 60% 80% 100% Debt Revenue* RUR USD Euro Q2’13 CURRENCY OF THE DEBT AND REVENUE $ bn * Based on management accounts data including estimates 1,69 1,90 1,84 1,88 1,93 2,15 0,0 0,5 1,0 1,5 2,0 2,5 3,0 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
  19. 19. DEBT MATURITY • Maturity schedule o Substantial liquidity cushion incl. $1.36 bn of cash and equivalents and $2.33 bn of committed credit lines o ST debt: $0.99 bn (-33% qoq) o ECA financing o Credit lines for working capital financing o LT debt: $3.79 bn (+10% qoq) o Eurobonds and ruble bonds o Long term part of ECA o European operations’ long term debt • Financing costs as a % of EBITDA are low 19 LIQUID ASSETS AND ST DEBT MATURITY* * The ST maturity payments include interests accrued and bond coupon payments. ** Maturity payments do not include interest. *** Including interest capitalized as PPE 432 596 483 390 318 400 67 62 65 68 64 62 $0 $100 $200 $300 $400 $500 $600 $700 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 EBITDA Interest expense $ m EBITDA AND INTEREST EXPENSE*** 790 724 1044 2180 $0 $500 $1 000 $1 500 $2 000 $2 500 2013 2014 2015 2016 and beyond RUB bonds ECA EBRD NLMK Europe Others Europbonds (USD) TOTAL DEBT MATURITY** $ m 1 362 994 2 331 385 443 132 34 $0 $500 $1 000 $1 500 $2 000 $2 500 $3 000 $3 500 $4 000 Liquid assets Q3 '13 Q4 '13 Q1 '14 Q2 '14 $ m Undrawn committed credit lines Cash and equivalents
  20. 20. 20 • Market overview o Globally run rates remain high aggravating the supply/demand imbalance while the market continues to be soft o End user demand continues to be anemic due to lower activity in a number of regions. In Russia we expect stable demand from the construction sector o Pricing environment for steel products and raw materials remains volatile • Steel production o NLMK steel output in Q3 is expected to exceed Q2 ’13 level with 3.9 m t (+4%) driven by the NLMK Kaluga ramp-up • Financial results o Q3 ‘13 revenue is expected to remain sequentially flat o Profitability will be driven by steel / raw material price spreads that continue to be volatile o The Company will continue to optimize its cost base through the entire value chain to offset the weaker pricing environment and cost inflation OUTLOOK
  21. 21. 21 1. Business profile 2. Operating and financial profile 3. Strategy
  22. 22. 22 GLOBAL MARKET TRENDS 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 2 200 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 mtpa Excess capacity Crude steel production Capacity utilization rate (RHS) 1980-2007 average run rate – 86% 2010-2012 average run rate – 77% GLOBAL OVERCAPACITY 81% 78% 61% 35% 26% 11% 7% 22% 22% 28% 8% 15% 17% 44% 46% 0% 25% 50% 75% 100% 1995 2000 2005 2010 2011 Steelmaking Coking coal Iron ore PROFITABILITY SHIFT TO UPSTREAM Source: McKinsey Research. EBITDA split for HRC Source: World Steel Association STEEL DEMAND BY REGION 28% 12% 20% 4% 18% 9% 6% 46% 12% 5% 5% 15% 10% 9% 1980 2012 Other regions Asia other Japan China North America CIS Europe Source: World Steel Association • Demand shift in favor of emerging markets (EMs) o Over 50% of demand & growth comes from EMs o Developed markets (DMs) retained sizable demand, but still below historic peak consumption levels • Global overcapacity o Over 0.5 bn t of steelmaking overcapacity o Capacity growth in EMs and capacity retention in DMs • Profitability has slipped from steelmaking to mining • Further margin shift is unlikely but prices will be supported o Significant new capacities on stream vs. o Capital cost growth & operational cost inflation
  23. 23. 23 Maximising upstream integration into key resources 1 Maintaining efficient and sustainable growth 2 Improving efficiency of operations 3 Developing niche segments 4 Operating in a safe, socially and environmentally responsible manner 5 STRATEGIC OBJECTIVES OF NLMK GROUP
  24. 24. 0 6 0 2 4 6 8 10 2012 2016 12 14 >18 0 2 4 6 8 10 12 14 16 18 20 2010 2012 2016 MAXIMISING UPSTREAM INTEGRATION IN KEY RESOURCES • Iron ore o Growth in iron ore concentrate production o Pelletizing plant of 6 m t - 2016 • Coal o Use of alternative technology to improve coke quality and decrease coal consumption o PCI technology installation to reduce by 20/30% coke and by 70% natural gas consumption per 1 t of steel • Scrap o Target self-sufficiency of Russian operations at 80-85% • Energy o Efficiency gains and use of in-house generated energy (from by product gases) EXPANSION OF IRON ORE CONCENTRATE AND PELLETS CAPACITY 24 m t + over 6 m t 24 + 6 m t Iron ore concentrate Pellets m t 0 1 2 3 4 5 6 7 8 2010 2011 2013-14 2014-15 New BF#7 COAL CONSUMPTION DYNAMICS (LIPETSK) m t PCI effect Sources: Bloomberg industries Source: Bloomberg 0 20 40 60 80 100 120 140 160 180 0% 25% 50% 69% 90% GLOBAL IRON ORE PRODUCTION COSTS NLMK (Stoilensky) $/t 2012 Cumulative capacities:1.4 bn t
  25. 25. 12.3 3.4 1.5 17,2 0 4 8 12 16 2010 BF#7 EAF (Kaluga) 2014 Existing BF#7 EAF (Kaluga) mtpa BF: 3.4 m tpa from mid 2011 EAF: 1.5 m tpa from 2013 MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH • Capacity growth is complete o BF/BOF steelmaking (Russia) : 3.4 m tpa Brownfield project of ~$500/t* investments o EAF steelmaking (Russia): 1.5 m tpa Greenfield project of ~$750/t* investments • Improved steel grades portfolio o Allows for further improvement in downstream products portfolio and entering new markets • Expanded diversity of products o New gauges of semis added – e.g. 2.5 m tpa of wide slabs • Low cost position supplemented by quality improvements o Entering new markets o Improving position in the existing markets o Allowing for the full capacity load through the cycle CRUDE STEEL CAPACITY GROWTH: +40% 25 Crude steel capacity growth for the Russian operations * - total investments per annual capacity of the facility 30% 5% 58% 48% 12% 47% 0% 20% 40% 60% 80% 100% Jan-11 Jan-12 Finished (Intl) Finished (Russia) Semis INCREMENTAL STEEL SUPPLY HEDGED THROUGH CAPTIVE ROLLING %
  26. 26. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0,0 0,5 1,0 1,5 2,0 2,5 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 Russian production Import Import share, rhs MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH (2) NLMK Kaluga project • Russian rebar market o Consumption growth in Russia: x1.9 against 1H‘10 o Import growth in 1H’13: +60% yoy, x3 vs. 1H’10 o Regional demand/supply imbalance • Modern 1.5 m tpa EAF capacities o Product mix in demand from construction: rebar and sections o Favorable location: 90 km from Moscow – consumption cluster (Central district) o Total investments c. $1.2 billion (90% by 2013) o Cost advantage (logistics, modern production, scrap collection network) 26 RUSSIAN REBAR CONSUMPTION 250 950 1 000 0 200 400 600 800 1000 1200 2013Е 2014Е 2015Е NLMK KALUGA: PRODUCTOIN PLANBALANCE OF PRODUCTION AND CONSUMPTION AT REGIONS Sources: Metal Expert. Data for 2012 46% 21% 8% 9% 8% 6% 1% 0% 17% 12% 31% 18% 11% 7% 2% 1% 0% 10% 20% 30% 40% 50% Urals Siberia Central Privolzh sky North- West South FarEast North Caucasi an Share in long products production Share in long products consumption long products deficit – app. 3,8 million t/y 000’t Source: Metal Expert million t Record level of 2008 Import, share is over 20%
  27. 27. IMPROVING EFFICIENCY OF OPERATIONS • Cost optimization programs o Novolipetsk o Altai-Koks • Optimization of coke making, sintering, BOF operations o Maximum use of equipment potential o Minimizing raw material, fuel, material and energy consumption o Optimizing fuel and raw material balance structure o Reducing environmental footprint, including waste management • Significant economic potential o Costs cut by over $60 m in 2013 alone, target sustained savings of over $100 m since 2014* 27 COST OPTIMIZATION AT LIPETSK SITE REDUCED RAW MATERIAL CONSUMPTION FOLLOWING OPTIMIZATION MEASURES 100% 100% 100% 96,5% 97,6% 93,0% 80% 85% 90% 95% 100% 105% Coal Pellets Scrap* Before optimization After Lower specificraw material consumption,100% - Dec’12 level * Reduced consumption of purchased scrap Note: projected average annual savings 36 36 60 24 40 0 20 40 60 80 100 120 H1 2013 2013 target 2014 and onward $ million >$100 m compared to 2012 >$60 m compared to 2012 - H2 2013 - 12M 2013 * Estimation of an effect comparing to 2012 level of utilization rates and prices (for Novolipetsk and Altai-Koks)
  28. 28. AIR EMISSIONS AND WASTE WATER DISCHARGE DEVELOPING NICHE SEGMENTS DOWNSTREAM CAPACITY ADDITIONS 28 • Portfolio of niche strategies based on quality improvement... o Steelmaking assets upgrade at Novolipetsk to offer new high-quality products for the automotive, construction, white goods and electrical engineering industries o Production of new types of wide / thick slabs at Novolipetsk o Launched a transformer steel production • ...and capacity additions in attractive segments o Downstream capacity additions at Novolipetsk (HRC/CRC) o Q&T line at NLMK Clabecq o New thick plates line at NLMK Dansteel o New rebar capacity at Kaluga site to supply growing construction in Central region • Building sustainable business o In 2012, the Group invested $77 m in environmental projects o Commissioning of New Recovery Cogeneration Plant led to a 15 fold gross emissions reduction o First steelmaking company to achieve zero waste water emissions (at Novolipetsk) ‘000 t 1 500* 400 350 250 Long (NLMK Kaluga mini-mill) HRC (Lipetsk site) CRC (Lipetsk site) Q&T (EU Plate) * Current capacity is 900 kt with potential for an additional 600 kt RESPONSIBLE OPERATIONS 43 43 41 39 36 41 38 36 31 30 29 28 23 0 0,5 1 1,5 2 0 10 20 30 40 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Specific air emissions (kg/t), lhs Specific waste water discharge (kg/t), rhs
  29. 29. 31% 69% Столбец1Development Maintenance capex 2013 INVESTMENTS • Capex programme o Lower capital intensity o Focus on efficiency enhancement and niche products o Balanced approach to assessing new projects o Flexibility under various market scenarios • Long products division development o NLMK Kaluga launch (EAF+ rolling mill) o Development of scrap collecting facilities • Strengthening vertical integration o Pelletizing plant construction projects launched at Stoilensky o Coke making projects (PCI, etc.) to reduce energy costs • Quality improvement and niche products o Mastering the revamped rolling mill at NLMK Dansteel o Niche product development at NLMK Clabecq o Continued GO steel development programmed at Novolipetsk and at VIZ-Steel 29 1936 1115 1462 2020 1453 1000 0 500 1000 1500 2000 2008 2009 2010 2011 2012 2013Е CAPEX DYNAMICS $ m 45 24 17 30 24 20 0 10 20 30 40 50 2008 2009 2010 2011 2012 2013E MAINTENANCE CAPEX PER TONNE OF STEEL $/t
  30. 30. 30 APPENDIX Q2 ’13 CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE), $/T Q2’13 Q1’13 Coke and coking coal $91 $99 Iron ore $64 $73 Scrap $37 $34 Other materials $31 $34 Electricity $21 $21 Natural gas $18 $21 Personnel $33 $31 Other expenses $53 $51 Total $348 $364 CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013, $/T Q1'12 $395 Q2'12 $411 Q3'12 $383 Q4'12 $361 Q1'13 $364 Q2'13 $348
  31. 31. www.nlmk.com NLMK Investor Relations 18, bldg 1 Bakhrushina str. 115054, Moscow Russia t. +7 495 915 15 75 f. +7 495 915 79 04 email: ir@nlmk.com
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