Ubs annual conference


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Ubs annual conference

  1. 1. EVRAZ GROUPUBS Annual ConferenceRussia/CIS: To ProsperityThrough Partnership October 30, 2008
  2. 2. Disclaimer 02This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Evraz Group S.A. (Evraz) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of Evraz or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with the document.This communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) 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 document or any of its contents.This document contains “forward-looking statements”, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Evraz’s control that could cause the actual results, performance or achievements of Evraz to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions.Such forward-looking statements are based on numerous assumptions regarding Evraz’s present and future business strategies and the environment in which Evraz Group S.A. will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and Evraz expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Evraz’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.Neither Evraz, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document.The information contained in this document is provided as at the date of this document and is subject to change without notice.
  3. 3. Evraz Strategy 03Our Vision is to be a world class steel and mining company and one of the Top 5 most profitable steelmakers globally by ROCE and EBITDA margin Advance long product leadership in Russia and 2007 EBITDA per Tonne of Steel Sales CIS US$ 600 Enhance cost leadership position 514 500 387 400 Expand presence in international plate 325 markets 300 260 216 214 197 190 200 180 178 167 Complete vertical integration and 144 139 88 competitive mining platform 100 63 0 POSCO Achieve world leadership in vanadium business NLMK MMK Nucor Baoshan Steel China Steel Mechel Steel US Steel Maanshan Steel ArcelorMittal Gerdau Evraz Usiminas CSN Nippon Steel Sources: IISI, Renaissance Capital estimates
  4. 4. 1H08 Financial Highlights 04◦ Revenue increased by 78% to US$10.7 million driven by 1H08 EBITDA stronger pricing and successful acquisitions US$ mln 185 14◦ EBITDA soared by 82% to US$3,700 million 796◦ Share of Russian revenues decreased to 40% and sales in European and American markets generated 31% of revenue 2,705◦ Mining segment EBITDA hedged US$84 per tonne of crude steel Steel Mining Vanadium Other and unallocated Steel Sales Volumes* 1H08 vs 1H07 1H08 Revenue by Region ‘000 tonnes US$ mln 10,000 319 9,000 431 404 12,000 8,000 195 1,331 441 7,000 1,053 10,000 1,195 1,543 6,000 1,079 8,000 1,763 5,000 788 2,618 3,148 106 6,000 4,000 820 1,911 961 3,000 4,000 277 1,068 2,000 3,090 2,987 2,000 4,280 1,000 2,786 - - 1H2007 1H2008 1 H07 1 H08 Russia Asia CIS Americas Europe Africa & RoW Semi-finished products Construction products Railway products Flat-rolled products Tubular products Other steel products
  5. 5. Russian Operations Construction Products Consumption 05 ‘000 tonnes and Russia’s GDP Growth*◦ Russian steel revenue grew by 44% in 1H08 7000 25.0% fuelled by domestic construction growth and strong pricing 6000 20.0%◦ Sales volumes of 3.8 million tonnes in 1H08 were 5000 15.0% almost flat y-o-y with a shift in sales mix to 4000 higher margin products 3000 10.0%◦ In 3Q08 prices for construction products started to 2000 5.0% decline reflecting seasonal decline in demand and 1000 freeze of construction projects caused by 0 0.0% 2003 2004 2005 2006 2007 2008F 2009F 2010F uncertainty on financial markets Rebars Angles, channels, sections GDP growth *2008-2010 Evraz estimates Evraz Russian Market Sales Volumes ‘000 tonnes Price Environment4,000 US$/t 338 262 214 1853,000 733 810 1,600 1,400 1,2002,000 1,792 1,000 2,134 8001,000 600 753 400 463 - 200 1H07 1H08 01-07 04-07 07-07 10-07 01-08 04-08 07-08 10-08 Semi-finished products Construction products H-beams Rebars (CPT, Moscow) Railway products Flat-rolled products Channel 10-16 (CPT, Moscow) Turkey Rebars, export (FOB) Other steel products Source: Metal-Courier
  6. 6. North American and European Operations 06◦ North America: ◦ In 1H08, average steel price grew by 22% to US$1,155/t ◦ Substantial growth of flat products sales volumes due to Claymont Steel consolidation (+182 thousand tonnes) ◦ Revenues from rail sales increased by 15% ◦ IPSCO Canada operations consolidated since June 12, 2008, contributed US$85.6 million to revenues and 59 thousand tonnes to the sales volumes ◦ Evraz Inc. Canada’s pipe-making capacity is fully booked until 2010 ◦ All North American operations were integrated into joint company Evraz Inc. NA with HQ in Portland (Oregon)◦ Europe: ◦ In 1H08, sales of flat-rolled products were down by 20% in volumes but up 34% in revenues due to high prices for plate North American Market Sales Volumes European Market Sales Volumes ‘000 tonnes ‘000 tonnes 36 229 111 401 248 404 415 Construction products Railway products Construction products Flat-rolled products Flat-rolled products Tubular products Other steel products
  7. 7. Mining 07 ◦ 1H08 EBITDA increased by 134% to US$796 million ◦ 11.3 million tonnes 1H08 iron ore output, increasing self-coverage to 93% ◦ Iron ore production cost of US$60/t in Russia and US$25/t in Ukraine ◦ Coking coal production almost fully covered* steel making requirements for coal in Russia and Ukraine in 1H08 ◦ Coking coal cash cost amounted to US$36 per tonne ◦ 1H08 revenue from steam coal sales amounted to US$160 million with 2.2 million tonnes of shipments 1H08 Coking Coal Balance 1H08 Iron Ore Balance ‘000 tonnes ‘000 tonnes8,000 13,5007,000 12,000 771 788 10,500 1,083 1,3356,000 1,392 1,012 9,000 1,5645,000 604 7,5004,000 6,000 3,397 10,0403,000 4,500 5,402 8,6242,000 4,390 3,0001,000 1,500 1,518 0 0 Gross Consumption Coke sales Steel Making Evraz production 40% of Production Consumption Needs Raspadskaya production Russia Ukraine S.Africa Russia Ukraine * Self-coverage is calculated as a sum of coking coal production by Mine 12, pro forma Yuzhkuzbassugol production and pro rata to Evraz’s ownership production of Raspadskaya , in coal concentrate equivalent, divided by group’s total coking coal consumption excluding coal, used in production of coke for sale to third parties
  8. 8. 3Q08 Operational Results 08 3Q08 Crude Steel and Rolled Products Output◦ Production of crude steel increased by 32% and of ‘000 tonnes 6,000 rolled products – by 30% y-o-y 4,743 4,324 4,886 4,491◦ Group’s production growth is attributable to 4,500 3,695 3,460 acquisitions in North America and Ukraine 3,000◦ Production of construction products declined as a consequence of shrinking demand globally 1,500◦ Production volumes of flat-rolled and tubular 0 goods in North America increased as a result of 3Q07 2Q08 3Q08 IPSCO and Claymont Steel consolidation Crude steel Rolled products 3Q08 Crude Steel Production by Region 3Q08 Rolled Products Production by Region ‘000 tonnes ‘000 tonnes 1,500 218 1,250 607 1,000 219 750 264 500 3,578 250 0 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 3Q07 2Q08 3Q08 Semi- Construction Railway Flat Tubular Others finished Russia Ukraine Europe North America South Africa Russia Ukraine Europe North America South Africa
  9. 9. 3Q08 Price Dynamics 09 ◦ The overall pricing environment for the majority of steel products was favourable in 3Q08 ◦ The price for construction products remained strong in Russia, Europe and South Africa ◦ The prices for plate and tubular goods in North America levelled out after a 1.5-year period of growth ◦ The prices for flat-rolled products in Europe and South Africa continued to increase due to steady demand Construction Products Flat-Rolled & Tubular non-RussianUS$/t US$/t 1,900 1,500 1,700 1,300 1,500 1,100 1,300 1,100 900 900 700 700 500 500 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Russia Europe North America South Africa Flat, Europe Flat, NA Tubular, NA Flat, SA
  10. 10. Current Debt Portfolio 010 ◦ As of 30 September 2008, the total debt amounted to US$10.17 billion, including US$4.27 billion of short-term debt ◦ 93.4% of the total debt is denominated in USD, 3.0% in RUR and 3.3% in EUR; for short-term debt it is 89.2% in USD, 7.1% in RUR and 2.9% in EUR ◦ In the next 12 months total interest payments will amount to approximately US$700 million Debt Maturity Short-Term Debt StructureUS$ mln US$ mln 2,500 2,500 2,203 2,069 2,000 201 1,796 2,000 300 1,500 1,500 925 805 1,047 1,000 801 747 764 1,000 700 244 800 500 500 719 23 12 10 276 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 Eurobond 2009 Syndicated $3.2b loan payments Term loans IPSCO bridge Other revolving debt
  11. 11. Evraz’s Global Business 011
  12. 12. +7 495