Presentation nlmk q3 2013 eng

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Presentation nlmk q3 2013 eng

  1. 1. NLMK Q3 2013 US GAAP CONSOLIDATED RESULTS Moscow, 8 November 2013 1
  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. This document is for distribution only in the United Kingdom and the presentation is being made only in the United Kingdom to persons having professional experience 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 such persons 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 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/viewing/downloading this presentation you agree to be bound by the foregoing terms. 2
  3. 3. INTERNATIONAL STEEL MARKET STEELMAKING CAPACITY UTILIZATION DEMAND AND SUPPLY • Average utilization rate in Q3 went down to 77.2% (- 2.4 p.p.) • Seasonal slowdown in demand and production in August was followed by a recovery in demand by the end of Q3 85% 75% PRICES Average prices in Q3 declined qoq o • 900 In Russia and Europe prices for HRC went down by 6% and 2%, respectively In USA prices for HRC jumped by 10% Quarterly global price trends adjusted for the production / sales cycle $/t China North America EU (27) Source: World Steel Association STEEL PRODUCTS INVENTORIES 1,4 1,3 Index, January 2012=1 Inventory change qoq/ during the quarter China :-17%, -10% USA: -2%, +1% Germany: -7%, -8% 1,2 700 1,1 600 1 500 0,9 400 0,8 HRC USA, EXW HRC China, EXW HRC Europe, EXW HRC Russia, EXW Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 200 Global average At the end of Q3, prices began recovering supported by strengthening in demand and an uptick in raw materials prices PRICES FOR HRC 800 300 55% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 o 65% Source: Metal Bulletin * - average daily output growth 0,7 Germany China USA 0,6 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 • Sources: CRU, Bloomberg (Steelhome, Metals Service Center Inst.) 3
  4. 4. RUSSIAN STEEL MARKET STEEL CONSUMPTION TREND DEMAND AND SUPPLY • 9M’13: steel consumption increased to 31.7 m t (+3.5% yoy) • Growth driven by the construction sector (+8% yoy) • • Imported volumes for 9M’13: up 6% to 5.8 m t yoy Q2’ 13 Q3’ 13 Import represents a significant share of ASU or 20% o mt Import share in consumption – about 20% 60% 50% 3,5 40% 3,0 30% 20% Long product import up 28% yoy to 2.8 m t o 4,0 Flat product import down 9% yoy to 3 m t 2,5 10% Apparent steel use Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 Nov-11 Sep-11 Long products increased by 1% qoq Jul-11 • May-11 HRC prices (in US$) down 6% driven by a RUB decline by 4% Mar-11 • 0% Jan-11 2,0 PRICES Share of import in RF steel consumption Source: Metal Expert NLMK’S SHARE IN RUSSIAN STEEL AND STEEL PRODUCT OUTPUT STEEL DEMAND BY SECTOR IN RUSSIA 12 10 8 mt 11.0 1,6 0,8 1,1 1,6 0,8 1,1 6 4 mt 11.0 7,5 7,5 2 0 Q2'13 Pipe producers Q3'13 Machinery, incl. automotive Source : Metal Expert 32 28 24 20 16 12 8 4 0 30.6 4,6 2,4 3,8 +3.5% 31.7 -5% 4,6 2,4 3,3 40% 35% 30% 25% 20% 15% 19,8 +8% 21,4 10% 33% 30% 22% 19% 32% 19% 21% Rebar Crude steel 5% 0% 9M '12 9M '13 HR coils CR coils HDG Pre-painted HVA* Steel constructions and shaping Construction and infrastructure Source: Metal Expert * High value added (HVA) Flat Steel: CR coils, coated, electrical steel 4
  5. 5. RAW MATERIALS MARKET PRICES AND DEMAND IN INTERNATIONAL MARKETS During Q3 prices for main raw materials were recovering from the bottom values in Q2, providing a cost push for steel prices in H2’13 Global prices for iron ore and coking coal went up in Q3’13 by 13% and 5%, respectively 0,6 0,5 0,4 Sep-13 Oct-13 Aug-13 Jun-13 Jul-13 Apr-13 May-13 Jan-13 Feb-13 Mar-13 RAW MATERIALS MARKET IN RUSSIA REMAINS OVERSUPPLIED Nov-12 Dec-12 0,3 Sep-12 Oct-12 In 9M 2013, iron ore import to China increased by 9% yoy 0,7 Aug-12 • 0,9 Jun-12 Jul-12 Demand for raw materials on the international markets remains high. 1,0 Apr-12 May-12 • 0,8 Q3’ 13 1,1 Jan-12 • 1,2 Feb-12 Mar-12 • GLOBAL RAW MATERIAL PRICES Iron ore fines (Fe 62%) import China, CFR Coking coal, export Australia, FOB Scrap export Europe, FOB HRC China export, FOB Source: Metal Bulletin RUSSIA: RAW MATERIALS MARKET BALANCE PELLET MARKET BALANCE COKING COAL MARKET BALANCE mt mt 19 2,2 1,7 1,8 1,6 CHINA: IRON ORE IMPORT AND INVENTORIES 110 100 mt IRON ORE INVENTORIES AT CHINA PORTS -26% yoy 90 700 80 9 20 17,7 30,5 17,1 29,4 600 -2% in Q3. 500 70 400 -1 -6,0 9M ‘12 -11 50 -12,4 -6,0 9М ‘13 Import Sales to domestic market Export Source: Metal Expert. -20 -16,1 9М ‘12 9М ‘13 Import Sales to domestic market Export 200 40 601 552 300 100 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 60 0 IRON ORE IMPORT mt +9% Source: Bloomberg Импорт ЖРС 9М '12 9М '13 5
  6. 6. PRODUCTION RESULTS HIGH CAPACITY UTILIZATION RATES NLMK: STEEL PRODUCTION mt • Growth in steel production in Q3’13 to 3.9 m t (+3% qoq) 0,2 0,6 0,9 1,8 3,0 3,1 3,1 12,2 Q1'13 Q2'13 Q3'13 Steel NLMK Russia Long – 90% 0,2 0,5 Long products NLMK Indiana – 91% o 3,9 15,5* 14,9 Lipetsk plant – 99% o 3,8 0,2 0,5 • Average capacity utilization rate 96% o ~4,1* 3,7 CRUDE STEEL PRODUCTION OUTLOOK • 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 • 2013 steel output of 15.5 m t, +4% yoy 2012 2013 (P) Foreign rolled products * Excluding NLMK Verona output in Q4’13 NLMK: STEELMAKING CAPACITY UTILIZATION STEELMAKING CAPACITY UTILIZATION 120% Q4'13 (P) 100% 96% 99% 94% 100% 91% 80% 90% 96% 90% 90% 87% 60% 40% 20% Lipetsk plant 80% Global average 0% 70% 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 NLMK USA NLMK Long products Q2'13 Source: global capacity utilization rate according to WSA Novolipetsk NLMK Group Q3'13 6
  7. 7. SALES GEOGRAPHY STEEL SALES BY REGION Q3 SALES TOTALED 3.72 M T (-1% QOQ) mt 3.76 • • • 3.77 3.72 0,43 SALES IN RUSSIA +13% QOQ, +22% YOY* TO 1.6 M T, INCL. 0,36 0,22 0,51 0,43 3 0,48 0,36 0,44 0,42 0,65 0,61 1,32 Long products sales: 0.44 m t, +16% qoq 0,52 0,43 0,46 2 Flat steel sales: 0.9 m t, +17% qoq 1,41 Wide slabs (for tube production) 0.142 m t, -21% qoq 1 INTERNATIONAL SALES -10% QOQ TO 2.13 M T • Seasonal decline in sales in Europe by 3% to 0.6 m t, • Other regions S.E. Asia North America 0,60 10% 6% 14% Middle East** 1,60 12% EU 16% Russia Asian sales went down to 0.22 m t • Share in Q3‘13 43% Sales in North America grew 17% supported by improved market conditions 0 Q1'13 by sector 80% 11% 8% Pipe producers 11% 61% 2 Flat products Construction and infrastructure 20% Long products Sales by sector Q3'13 *yoy changes are 9M’13 vs. 9M’12 2.72 0,35 0,28 0,37 0,22 0,36 0,24 0,32 0,25 0,26 0,12 0,38 0,25 0,56 0,54 1,09 1,18 Other regions 9% S.E.Asia 4% North America 14% 9% Q1'13 Q2'13 ** Middle East includes Turkey EU 20% Russia 0 Sales by product Q3'13 Share in Q3‘13 Middle East** 1 28% 0% 0% 2.83 1,06 Semi-finished 2.86 0,57 3 40% 80% 20% 60% mt by product 80% Machinery 60% 40% 100% Q3'13 REVENUE BY REGION NLMK SALES IN RUSSIA 100% Q2'13 43% Q3'13 7
  8. 8. SALES STRUCTURE SALES BY PRODUCT FINISHED STEEL SALES GREW 6% TO 2.9 M T • 100% Share of finished steel grew 5 p.p. qoq to 78% 3.774 m t 2% 0% • 80% Slab sales to third parties down 17% driven by increased 60% 26% 40% 20% 10% 2% 6% High value 13% added grades 8% 4% 4% Seasonal growth of long product and metalware sales 0% 0% Slabs 1% Pig iron sales down to 9,000 t, compared to 91,000 t in Q2 Foreign rolled products segment • Pig iron 21% 25% demand for finished steel and growth in slab sales to • 3.724 m t Billets HRC 28% Q2'13 Long products Metalware 12% 6% 15% 8% 4% 2% Plate CRC Galvanized 3% Q3'13 Pre-painted Electrical steel HIGH VALUE ADDED GRADES SALES UP 2% TO 1.41 M T CHANGE IN SALES BY PRODUCT Q3/Q2 Long products REVENUE BY PRODUCT 17% CRC 100% 11% HRC 80% 6% Metalware 3% Pre-painted 60% -1% Thick plates -2% Electrical steel Slabs Pig iron 40% -7% -17% 20% -89% -100% -40% -30% -20% -20% -10% -10% $2,72 bn 9% 0% 14% 1% 21% 23% 8% 2% 7% 12% 10% 2% 7% 13% Revenue from other operations* Pig iron Slabs Billets HRC Long products -2% Galvanized $2.83 bn 9% 1% 19% 0% 0% 0% 10% 10% 20% 20% 0% 9% 6% 6% Q2 '13 * Note: Revenue from other operations includes revenues from sales of iron ore, coke, scrap and others High value added grades 9% 6% 5% Q3 '13 Metalware Plate CRC Galvanized Pre-painted Electrical steel 8
  9. 9. OPERATIONAL EFFICIENCY PRODUCTION COSTS REDUCTION WITHIN “RAPID IMPROVEMENTS” PROGRAM IMPROVING HOT-END OPERATIONAL EFFICIENCY • The program covers production and auxiliary processes • Target level of savings in 2013: c. $100 m* • Effect of $80 m achieved in 9М13 120 $m 100 80 38 60 100 RESTRUCTURING OF EUROPEAN ASSETS • Restructuring program is being implemented since 2008 0 30 13 Q1'13 Change in asset perimeter and transition to a re-roller model o Q2'13 Q3'13 9M'13 12M'13 (Е) Consistent cost reduction through optimization programs NLMK La Louviere Restructuring Agreement (March 2013) o Headcount optimization by 30% o • 80 20 o • 40 Fixed costs reduction by $30 m/y (full effect in 2014) FIXED COSTS OF NLMK EUROPE STRIP 200 €m 150 50 Involvement of the Belgian state-owned company SOGEPA as a strategic partner in European assets 121 12 39 111 Sale of 20.5% interest in NLMK Belgium Holdings (NBH) for €91 m ($123 m) o SOGEPA participation in governance * Gains from “quick improvements“ program in hot-end operations at Novolipetsk and Altai-Koks. The program was announced in February 2013. 50 34 10 34 27 10 27 75 67 64 2008 o 100 2009 2010 100 102 9 27 92 9 27 92 9 31 66 56 52 2011 2012 2013(Е) 0 Carsid + EAF and Long products + Safef Thonville Service centers NLMK Coating and NLMK Strasbourg NLMK La Louviere and total overheads for division NLMK Europe Strip 9
  10. 10. KEY HIGHLIGHTS REVENUE AND EBITDA Q3 FINANCIAL RESULTS • Revenue $2 720 m (-4% qoq) • EBITDA $379 m (-5% qoq) • EBITDA margin 13.9% (-0.2 p.p.) • Net income $138 m $3 500 $m 3 002 2 803 $3 000 $1 500 $1 000 483 $500 390 318 400 379 $0 $2 772 m (-19%) Q4 '12 Q1 '13 Q2 '13 Q3 '13 $281 m • Net debt*** 2 720 $2 000 $449 m (+36%) • Investments** 2 829 $2 500 Q3 '12 • Operating cash flow* 2 856 Revenue OPERATING CASH FLOW AND INVESTMENTS** 1 600 • Net debt/12M EBITDA*** • Cash and cash equivalents 1.87 $1 351 m EBITDA 1 400 1 200 $m 1 491 1 158 1 030 1 000 800 658 600 • Free cash flow $274 m 400 200 0 9М'12 Operating cash flow 9М'13 Capex * Operating cash flow w/o interest income expenses ** Investments include capitalized interest expense *** Net debt w/o NBH debt, guaranteed by NLMK Group 10
  11. 11. PROFITABILITY EBITDA MARGIN Q3’13 EBITDA WAS $379 MILLION • Revenue declined by 4% 20% 16,1% o • Growth in value added product sales partially offset weaker prices and lower pig iron sales volume Stable profitability at 13.9% o 16% 13,9% Q2'13 Q3'13 11,1% 12% 8% (-) Decline in steel prices outpacing that of raw materials – narrowing price spreads o 0% Q3'12 Q4'12 Q1'13 (+) Cost reduction program o 4% (+) Sales structure improvement o (+) RUB/US$ rate down 4% qoq EBITDA: FACTOR ANALYSIS SEGMENT EBITDA CHANGES 500 14,1% 13,9% $m 400 450 -27 +27 +16 $m +19 +21 400 -37 -0 350 300 379 200 250 +10 +29 300 400 -50 +32 400 379 318 200 Q1'13 100 Q2'13 Steel Segment Foreign Rolled Products Segment Long Products Segment Mining Segment Others and intersegm. operations Q3'13 Sales structure Steel and raw Cost materials optimization, spreads FX effect, other Q2'13 Sales structure Steel and raw Cost materials optimiz-n spreads programs, FX effect, other Q3'13 11
  12. 12. NBH EQUITY SALE IMPACT REVENUE (PROFORMA) NBH DECONSOLIDATION • Accounting by the equity method and exclusion from consolidated figures • Impact on balance sheet starting from Q3’13 o o • $m Minor impact on shareholder capital (see slide 24) Q3 9M -1 062 -341 718 219 Financial debt reduction by $757 m 8 405 2 720 8 061 2 598 Impact on operating results starting from Q4’13 o Exclusion of sales and revenue o Exclusion of operating results (EBITDA) o 79.5% of net income of the entity will be recognized in PL NLMK Group fact NBH Slab sales NLMK revenue to NBH without NBH Q3 NBH Slab sales NLMK revenue to NBH without NBH EBITDA (PROFORMA) STEEL SALES (PROFORMA) 000’t NLMK Group fact 9M $m 9M Q3 15.8% -398 13.9% 467 -1 226 3 724 3 793 1 300 7 537 15.0% 46 13.0% 424 7 611 -125 1 221 379 1 096 NLMK NBH Sales Slab sales Group fact to NBH NLMK Group without NBH NLMK NBH Sales Slab sales Group fact to NBH NLMK Group without NBH NLMK Group NBH impact NLMK Group fact without NBH NLMK Group NBH impact NLMK Group fact without NBH 12
  13. 13. CASH FLOW CASH FLOW BRIDGE IN Q3‘13 POSITIVE FREE CASH FLOW • • Release of working capital: $125 m Control over investment project implementation 379 EBITDA +125 Working capital change +4 Other and non cash operations o Investments of $ 281 m significantly lower the operating cash flow Income tax -59 Net interests -17 OPERATING CASH FLOW o 432 Investment reduction as key projects are implemented Capital expenditures • -281 Cash from NBH shares sale $123 m +123 Cash from NLMK Belgium Holdings sale • Net outflow from borrowings $199 m • Free Cash Flow (FCFF) in Q3 was $274 m* 274 FREE CASH FLOW OF THE COMPANY -199 Net repayment of borrowings Other financial operations +6 Cash outflow -77 FREE CASH FLOW TO EQUITY 3 -381 Change in deposits FX rate change *Excluding cash, placed on ST bank deposits CHANGE IN CASH -27 -405 $m 13
  14. 14. DEBT POSITION CHANGE IN DEBT POSITION FINANCIAL DEBT • Net debt* • Total debt $4.12 bn (-14%) • Cash and equivalents ** 6 $2.77 bn (-19%) $1.35 bn (-1%) • Net debt/ 12M EBITDA* $ bn +0.40 +0.25 5 4 1.87 -0.60 0,99 +0.05 0,62 -0.76 NLMK BELGIUM HOLDINGS LIABILITIES DECONSOLIDATION 3 CONSISTENET NET DEBT REDUCTION 2 3,79 30 Jun '13 ST debt Borrowings Debt repayments INVESTMENT CREDIT RATING (MOODY’S, FITCH) 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 4,0 1,69 Other factors -0,43 1,93 3,0 1,87 -0,68 +0,28 3,42 -0,05 1,0 2,77 0,5 2,0 0,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '12 '12 '12 '12 '13 '13 '132 30 Sept '13 +0,25 1,88 1,84 NBH debt deconsolidation $ bn 2,15 2,5 1,90 Reclassification of debt for SIF shares*** NET DEBT CHANGE Net debt/EBITDA 3,0 3,51 LT debt Q1 Q2 Q3 Q4 Q1 Q2 Q3 '12 '12 '12 '12 '13 '13 '132 30 Jun '13 Operating cash flow Capex *W/o NBH debt, guaranteed by NLMK Group **Cash and equivalents and ST deposits *** In Q3, $252 of debt for SIF shares was included into financial debt; previously it was included in accounts payable, as they are reassigned to the bank Reclassification of debt for SIF shares*** NBH deconsolidation Other factors 30 Sept '13 14
  15. 15. SETTLEMENT OF FINANCIAL LIABILITIES SIGNIFICANT LIQUIDITY POSITION LIQUIDITY AND ST DEBT MATURITY* COMFORTABLE MATURITY SCHEDULE • $4 000 $m Undrawn committed credit lines $3 500 Short term debt $0.62 bn, (-38% qoq) $3 000 o Ruble bonds o • 2 331 Cash and equivalents $2 000 Credit lines o $2 500 ECA- financing $1 500 $1 000 $500 Long term debt $3.51 bn, (-7% qoq) o Liquid assets 66 64 Q4 '13 Q1 '14 Q2 '14 Q3 '14 12M 33 35 20 15% $1 500 $1 000 57 35 31 31 27 22 Q4'12 Q1'13 Q2'13 Q3'13 0 Q3'12 Capitalized interest expense (lhs) 5% $500 0% 24 * ST maturity payments with interest accrued and debt maturity schedule ** Quarterly figures are derived by computational method on the basis of quarterly reports *** Maturity payments do not include interest payments 895 723 2014 2015 27 $0 2013 Non-capitalized interest expense (lhs) Interest expense to EBITDA (rhs) 2 434 $2 000 10% 42 37 $m $2 500 20% 62 25% 30 10 616 TOTAL DEBT MATURITY SCHEDULE*** $3 000 68 60 40 212 Long term part of ECA $m 50 175 $0 INTEREST EXPENSES** 70 42 187 Eurobonds and ruble bonds o 1351 RUB bonds ECA EBRD NLMK Dansteel Others 2016 и далее Europbonds (USD) 15
  16. 16. OUTLOOK STEEL PRODUCTION • 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 • In Q4, we expect steel prices to soften due to the seasonal slowdown in demand and projected decline in steel raw material prices • The company continues to work on offsetting the negative impact of market conditions by improving technical and business process efficiency 16
  17. 17. SEGMENTS 17
  18. 18. SEGMENT CONTRIBUTION – Q3 ‘13 STEEL SEGMENT Decline in steel prices Product mix improvement Ongoing cost optimization $m Seasonal sales growth (incl. contribution from NLMK-Kaluga) High capacity utilization Lower iron ore prices Cost increase driven by electricity tariffs inflation $110 227 190 215 31 286 23 40 214 197 -62 -72 20 83 -26 Q3 '12 Q4 '12 Q1 '13 -$90 Steel segment Long products segment Others FOREIGN ROLLED PRODUCTS SEGMENT -62 187 -2 Q2 '13 -35 -2 Q3 '13 Foreign rolled products segment Mining segment NLMK USA operating results improvement Seasonal reduction in NLMK Europe performance SEGMENT CONTRIBUTION TO Q3 EBITDA SEGMENT FINANCIAL INDICATORS CHANGE Q3/Q2 $450 -3% -1% Mining segment $250 -1% Production cost 40 $200 10% Production cost Revenue $300 3% Long products Revenue segment -2 190 4% 379 $150 $100 187 $50 -11% $0 0% Q3 '13 Foreign rolled Revenue products Production cost segment -35 $350 Other factors Production cost $m $400 Foreign rolled products segment Revenue Mining segment Steel segment Steel segment • • 26 207 61 $310 MINING SEGMENT • • 27 190 LONG PRODUCTS SEGMENT • • 7 $510 Long products segment • • • SEGMENT EBITDA 18
  19. 19. STEEL SEGMENT SALES AND REVENUE STRUCTURE EXPORT SALES REDUCTION BY 7% TO 2.21 M T • • • 2,210,000 t Growth of domestic sales incl. finished products 100% Increase of intersegment slab supply • SG&A costs reduced by 6% 0% • Average RUB/USD FX rate decreased by 4% qoq CRC 14% Galvanized 7% 6% 3% 3% Sales Q3 7% 5% 3% 3% Sales Q2 9% 9% 3% 6% 8% 8% 4% 6% Pre-painted Revenue Q3 Revenue Q2 Transformer COST OF SALES STRUCTURE IN Q3 `13 $ bn Iron ore 0,46 Coke and coking coal 8% 0,30 0,35 0,37 0,35 24% 0,47 14% 1,84 13% 1,66 1,70 10% 10% 0,29 0,20 Other raw materials 1,53 1,68 9% 4% 0,08 0,21 0,19 Electricity 8% 1% 5% 16% 6% 0,0 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Revenue from intersegment sales Revenue from third parties EBITDA EBITDA margin Q3 '13 Scrap Ferroalloys 18% 0,32 Dynamo * Revenue from the Segment's sales of other products 1,5 0,5 HRC 19% 15% REVENUE AND EBITDA 1,82 Slab 17% 19% 20% Pig iron 31% 24% 40% Cost optimization programs 1,0 24% 8% 2% 23% 28% • 2,0 Other revenue* 60% KEEPING PROFITABILITY $1 685 m 8% 0% 39% 34% 80% $1 529 m 4% 0% Export sales decrease DECLINE IN AVERAGE SELLING PRICES 2,5 2,364,000 t 4% 4% 5% Natural gas Other energy resources Personnel Other expenses incl change in inventory Depreciation 19
  20. 20. LONG PRODUCTS SEGMENT SALES AND REVENUE STRUCTURE SALES AND REVENUE GROWTH • Sales increased by 21% to 570,000 t including sales from NLMK Kaluga (+86’000 t) • Stable pricing environment supported by a seasonal improvement in demand • 100% 469,000 t $355 m 0% 15% 3% $314 m 0% 5% NLMK Kaluga 60% 83% 69% 76% Long products 40% 24% of total revenue – scrap sales to Lipetsk site (Steel segment) 20% 14% Widening spreads between long products and scrap • 17% Sales Q3 Sales Q2 0% SEGMENT’S PROFITABILITY GROWTH TO 8% (+ 3 P.P.) • Other revenue* 13% 80% 71% Total segment revenue grew by 10% to $468 m o 570,000 t 15% 19% Metalware Revenue Q3 Revenue Q2 Production costs per tonne reduction due to sales growth * Revenue from other product sales REVENUE AND EBITDA 560 COST OF SALES STRUCTURE IN Q3 `13 $m 490 420 162 350 114 122 70 5% 6% 314 281 50 61 31 Other materials 8% 8% 329 8% 288 314 355 20 23 40 8% 1% 2% 0 Q2 '12 Q3 '12 Q4 '12 Revenue from intersegment sales Q1 '13 Ferroalloys 15% 59 210 140 5% 113 88 10% 280 Scrap 14% Q2 '13 Revenue from third parties Q3 '13 Electricity 60% Personnel costs Other expenses Depreciation EBITDA EBITDA margin * - Revenue from intersegment sales mainly include scrap supplies to the Lipetsk site 20
  21. 21. MINING SEGMENT SALES AND REVENUE STRUCTURE REVENUE DECLINE QOQ • 3,863,000 t $312 m 4% $349 m 3% 25% 23% 25% 76% 75% 72% 71% Sales Q3 76% to Lipetsk site o • 100% 3,860,000 t 24% Stable sales – 3.86 m t (flat, qoq) Sales Q2 Revenue Q3 Revenue Q2 80% Decline in average selling prices 60% LOWER EBITDA MARGIN (-4 P.P. TO 61%) 40% • Iron ore concentrate cash cost of $23/t 20% • Electricity tariff inflation • Scheduled repairs and maintnance 0% Other sales* Sales to the third parties Sales to Novolipetsk * Other sales include sales of limestone and dolomite COST OF SALES STRUCTURE IN Q3 `13 REVENUE AND EBITDA 500 $m Raw and other materials 69% 400 300 274 200 60% 247 222 60% 220 65% 64% 245 249 190 207 215 227 93 127 92 100 8% 16% 61% Energy 226 Natural gas 27% 190 Other energy 21% 100 86 0 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Revenue from intersegmental sales Revenue from third parties EBITDA EBITDA margin Q2 '13 Labour costs 86 Q3 '13 5% 22% 0,2% Other costs Depreciation 21
  22. 22. FOREIGN ROLLED PRODUCTS SEGMENT NLMK USA SALES AND REVENUE SALES FLAT QOQ Demand growth for HRC and galvanized steel on the US $336 m $313 m 12% 3% 16% 4% 13% 24% 25% 26% 27% 54% 56% 455,000 t 100% market 80% Seasonally weaker demand on the European market • 432,000 t 14% • 60% 40% FINANCIAL PERFORMANCE IMPROVEMENT Pre-painted CRC 62% 61% 20% • Other revenue HRC Positive impact of European asset restructuring programs 0% partially offset the seasonal decline in demand • Sales Q3 Sales Q2 Revenue Q3 Revenue Q2 NBH Q3 EBITDA loss was $ 37 m NLMK EUROPE SALES AND REVENUE REVENUE AND EBITDA 1 200 1 000 $m 10% 5% 1 026 800 600 0% 817 760 692 -3% -5% 400 -10% 200 0 -200 0% 750 730 -9% -8% -5 Q2 '12 -62 Q3 '12 -72 -26 Q4 '12 Q1 '13 Revenue from third parties -62 Q2 '13 -35 Q3 '13 -5% -10% -15% 100% 80% 60% 40% 20% 490,000 t $414 m $417 m 5% 18% 0% 18% 19% 3% 24% 4% 25% 23% 22% 509,000 t 19% 18% 16% 3% 21% 30% 4% Other sales NLMK Dansteel Pre-painted CRC HRC 28% 28% 28% 28% Sales Q3 Sales Q2 Revenue Q3 Revenue Q2 Thick plates 0% EBITDA EBITDA margin (rhs) 22
  23. 23. APPENDICES 23
  24. 24. IMPACT OF NBH STAKE SALE ASSETS CHANGE IN Q3 30 SEPTEMBER 2013 – SALE OF 20.5% STAKE IN NBH JOINT CONTROL – DECONSOLIDATION OF ASSETS UNDER US GAAP 3000 -609 2000 Positive results of $19 m (see Gains / (losses) on investments caption of the income statement) PPE INVENTORIES 2500 FINANCIAL RESULTS FROM NBH SALE • $m 1500 1000 -981 -24 2 530 10 981 1 897 163 10 163 500 0 GOODWILL AND LT INVESTMENTS CHANGE $m 800 700 600 500 400 300 200 100 0 FINANCIAL DEBT CHANGE $m LT INVESTMENTS GOODWILL 5000 4800 4600 290 5 77 4200 753 459 468 -757 4400 -1 552 +95 4 786 4000 4 124 3800 17 3600 Q2 '13 NBH decons* Other changes** Q3 '13 * NBH balance at deconsolidation date ** Q3 changes including intercompany balances between NLMK Group and NBH 24
  25. 25. FOREIGN ASSET PERFORMANCE NBH STEEL SALES LIPETSK SITE SLAB SALES IN 2013 mt 1,13 1,2 200 0,94 1,0 150 0,78 0,8 0,6 0,48 0,47 0,35 0,4 100 To third parties $m 2 313 2000 1500 1 234 1000 500 1 079 -116 Revenue 9М'13 1 -117 EBITDA 9М'13 0 -500 $m 80 21 14 Q1'13 Q3'13 NLMK Dansteel 900 800 700 600 500 400 300 200 100 0 -100 105 17 Q2'13 Q3'13 NLMK USA HRC FOREIGN ASSET FINANCIALS 2500 138 0 Q2'13 NBH 146 0,37 Q1'13 141 128 92 0,10 - 151 134 50 0,13 0,11 0,05 0,2 mt CRC Coated Thick plates NLMK USA AND NLMK DANSTEEL STEEL SALES mt 767 300 274 275 268 250 429 200 150 338 Revenue Q3'13 NBH NLMK USA and NLMK Dansteel -28 9 -37 EBITDA Q3'13 116 110 82 73 100 92 51 111 65 92 50 0 Q1'13 HRC CRC Q2'13 Coated Q3'13 Thick plates (NLMK Dansteel) 25
  26. 26. NLMK KALUGA LONG STEEL PRODUCTION/CONSUMPTION BALANCE BY REGION IN 2012 • 2014 production will be about 0.9 m t NLMK KALUGA PRODUCTION PLAN 1000 900 800 700 600 500 400 300 200 100 0 ‘000 t Share in long steel consumption 18% 12% 8% 9% 11% 8% 6% 7% 1% 2% MOSCOW AND MOSCOW REGION – NEAREST AND KEY SALES MARKET 70 km from Moscow NLMK Kaluga 1,2 Revyakinskiy MZ Severstal - Vologda 0,8 Rostovsky EMZ Abinsky EMZ 0,6 NSMMZ 400 75% 0,4 MMK Mechel 2013(e) Q3 2013 sales 86’000 t 1 Severstal - Balakovo 900 0% 1% North Caucasian 2014 PRODUCTION PLAN 21% 17% Southern 75% of Q3 sales in Moscow and Moscow region Share in long steel production 31% North Western • Long steel shortage – 3.8 m t py Volga In Q4’13 maximum capacity utilization is expected 46% Central • 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Siberian The plant is operating in hot testing mode Ural • Far Eastern 2013 RESULTS 2014(e) 0,2 ZSMK 0 0 1000 2000 3000 4000 25% Реализация 3кв 13 Sales to Moscow and MR Other regions 26
  27. 27. 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 27
  28. 28. SEGMENTAL INFORMATION Foreign rolled products Q3 2013 Steel (million USD) Revenue from external customers Long products Mining All other 1 529 749 355 86 Intersegment revenue 472 1 114 226 Gross profit / (loss) 299 (15) 70 206 44 (83) 18 173 2% (11%) 4% (84) (4) 144 13% (11%) (1%) 13 325 2 039 2 787 2 272 Consolidated 46% Operating income/(loss) as % of net sales Income / (loss), net of income tax as % of net sales Segment assets including goodwill 1 Foreign rolled products Q2 2013 (million USD) Revenue from external customers Steel Long products Mining 0 Intersegmental operations and balances 55% 258 Totals (813) (0) 560 (62) 497 (1) 151 (2) 149 5% 0 52 All other 100 Intersegment revenue 371 1 113 249 Gross profit / (loss) 352 (44) 43 242 81 (110) 2 209 4% 253 12% (15%) (182) (25%) 1% (42) (10%) 60% 211 60% 0 13 419 3 662 2 721 2 292 54 1 as at 30.09.2013 2 as at 30.06.2013 20 475 Totals 314 Segment assets including goodwill1 313 (175) 138 5% 730 as % of net sales Income / (loss), net of income tax as % of net sales 2 720 813 1 685 Operating income/(loss) 2 720 0 (4 170) Intersegmental operations and balances 16 305 Consolidated 2 829 2 829 734 (734) 0 592 (40) 552 (0) 182 (2) 180 241 (208) 6% 33 1% 22 148 (4 510) 17 638 28
  29. 29. QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q3 2013 Q2 2013 Q3 2013/Q2 2013 +/% (mln USD) 9M 2013 9M 2012 9M 2013/9M 2012 +/% Revenue 2 720 2 829 (110) (4%) 8 405 9 354 (949) (10%) Production cost (1 993) (2 058) 65 (3%) (6 175) (6 510) 335 (5%) Depreciation and amortization (230) (220) (10) 4% (656) (569) (87) 15% Gross profit 497 552 (54) (10%) 1 573 2 275 (702) (31%) General and administrative expenses (108) (112) 4 (4%) (339) (335) (4) 1% Selling expenses (212) (227) 15 (7%) (696) (871) 174 (20%) (28) (33) 4 (13%) (97) (127) 30 (23%) 149 180 (31) (17%) 440 942 (502) (53%) (11) (4) (7) 174% (17) (38) 21 (55%) Gains / (losses) on investments 26 (3) 29 23 (0) 23 0% Interest income 10 12 (2) (15%) 32 18 14 74% (22) (27) 5 (18%) (80) (38) (42) 112% Foreign currency exchange gain / (loss), net 52 (5) 57 21 (11) 31 0% Other expense, net (7) (10) 3 (29%) (26) (35) 9 (27%) 197 143 55 38% 393 839 (446) (53%) (59) (110) 51 (46%) (186) (223) 37 (17%) 0 0 (0) (5%) 0 0 (0) (34%) 138 33 105 319% 207 616 (409) (66%) Add: Net loss attributable to the non-controlling interest (1) 1 (1) 2 2 1 42% 0% Net income attributable to NLMK stockholders 138 34 104 309% 209 617 (408) (66%) EBITDA 379 400 (21) (5%) 1 096 1 511 (415) (27%) Taxes other than income tax Operating income Loss on disposals of property, plant and equipment Interest expense Income before income tax Income tax expense Equity in net earnings of associate Net income 9M 2013 and 9M 2012 are official reporting periods. Q2 2013 and Q3 2013 figures are derived by computational method. 29
  30. 30. CONSOLIDATED CASH FLOW STATEMENT Q3 2013 9M 2013 9M 2012 (mln. USD) Cash flow from operating activities Net income Adjustments to reconcile net income to net cash provided by operating Depreciation and amortization Loss on disposals of property, plant and equipment (Gains) / losses on investments, net Interest income Interest expense Equity in net ernings of associates Deferred income tax expense / (benefit) Gains on derivatives Other 9M 2013/9M 2012 +/ - % 138 207 616 (409) (66%) 230 11 (26) (10) 22 (0) 20 (16) (45) 656 17 (23) (32) 80 (0) 20 (7) 17 569 38 0 15% (55%) (0) (2) (7) 8 87 (21) (23) (32) 80 0 22 (0) 8 (295) 51 4 368 (3) (417) 152 6 333 21 75 128 19 50 (2) (492) 24 (13) 283 23 Cash provided from operating activities Interest received Interest paid 449 7 (24) 1 030 28 (71) 1 491 (461) (31%) Net cash provided from operating activities* 432 987 1 491 2 (281) 11 (381) 3 (658) 19 (403) 24 (1 157) 0 227 (157) (21) 500 19 (630) (87%) (43%) 46 46 (10) Net cash used in investing activities (604) (1 002) (1 063) 61 (6%) Cash flow from financing activities Proceeds from borrowings and notes payable Repayments of borrowings and notes payable Capital lease payments Dividends to shareholders Net cash (used in) / provided by financing activities 402 (601) (7) (3) (208) 1 664 (1 666) (19) (113) (135) 1 320 (551) (17) (116) 635 344 (1 115) (2) 2 (770) 26% 202% 13% (2%) Net (decrease) / increase in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the beginning of the period (381) (25) 1 241 (150) 34 951 1 063 (58) 797 (1 213) 92 154 19% 835 835 1 803 (968) (54%) Changes in operating assets and liabilities (Increase) / decrease in accounts receivable Decrease in inventories Decrease in other current assets Increase in accounts payable and other liabilities Increase/(decrease) in current income tax payable Cash flow from investing activities Proceeds from sale of property, plant and equipment Purchases and construction of property, plant and equipment Proceeds from sale of investments, net (Placement) / withdrawal of bank deposits, net Prepayment for acquisition of interests in new subsidiaries Disposal of investments Acquisition of additional stake in existing subsidiary Cash and cash equivalents at the end of the period 9M 2013 and 9M 2012 are official reporting periods. Q3 2013 figures are derived by computational method. (34%) 2% 19% (70%) (10) 30
  31. 31. CONSOLIDATED BALANCE SHEET as at 30.09.2013 as at 30.06.2013 as at 31.03.2013 as at 31.12.2012 as at 30.09.2012 as at 30.06.2012 as at 31.03.2012 (mln. USD) ASSETS Current assets Cash and cash equivalents Short-term investments Accounts receivable and advances given, net Inventories, net Deferred income tax assets Other current assets, net 4 918 835 516 1 540 1 897 120 9 5 537 1 241 121 1 497 2 530 121 27 5 834 1 220 271 1 557 2 689 71 25 5 469 951 107 1 491 2 827 63 30 6 287 1 803 11 1 559 2 819 54 42 5 230 769 10 1 642 2 733 28 47 5 714 926 11 1 786 2 904 24 63 Non-current assets Long-term investments, net Property, plant and equipment, net Intangible assets Goodwill Other non-current assets Deferred income tax assets 11 388 552 10 163 121 468 32 50 12 101 17 10 981 129 753 31 189 12 677 20 11 442 136 776 36 266 12 988 19 11 753 142 786 38 250 12 661 13 11 458 146 778 25 240 11 873 9 10 716 148 752 17 230 12 895 9 11 664 159 802 17 244 Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY 16 305 17 638 18 510 18 458 18 949 17 103 18 609 Current liabilities Accounts payable and other liabilities Short-term borrowings Current income tax liability 1 760 1 104 616 40 2 647 1 609 994 44 2 940 1 412 1 484 45 3 302 1 462 1 816 24 4 155 1 713 2 434 9 3 579 1 582 1 971 26 3 577 1 783 1 781 12 Non-current liabilities Long-term borrowings Deferred income tax liability Other long-term liabilities 4 147 3 508 578 61 4 695 3 792 746 157 4 678 3 459 765 454 4 065 2 816 792 457 3 875 2 850 752 273 3 329 2 373 690 266 3 880 2 693 762 425 Total liabilities 5 906 7 342 7 619 7 367 8 030 6 908 7 457 Stockholders’ equity Common stock Statutory reserve Additional paid-in capital Other comprehensive income Retained earnings NLMK stockholders’ equity Non-controlling interest Total stockholders’ equity 221 10 257 (1 772) 11 676 10 392 7 10 399 221 10 257 (1 736) 11 538 10 290 6 10 296 221 10 257 (1 224) 11 620 10 885 7 10 892 221 10 306 (997) 11 582 11 123 (33) 11 090 221 10 306 (1 178) 11 604 10 964 (45) 10 919 221 10 306 (1 738) 11 437 10 237 (42) 10 195 221 10 306 (613) 11 272 11 196 (45) 11 151 Total liabilities and stockholders’ equity 16 305 17 638 18 510 18 458 18 949 17 103 18 609 31
  32. 32. NLMK Investor relations Russia, 115054, Moscow Bakhrushina str, 18, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com www.nlmk.com

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