Ubs investment conference 2009

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Ubs investment conference 2009

  1. 1. EVRAZ GROUPUBS Investment Conference Timur Yanbukhtin, Vice President Moscow 22 October 2009
  2. 2. Execution of Management Action Plan 2◦ Production optimisation ◦ Shutdown of inefficient capacity ◦ Shift of production to semi-finished products, where demand is relatively high ◦ Take advantage of flexibility between billet and slab production depending on market situation ◦ Full utilisation of available capacity in Russia (13.2 mtpa of crude steel)◦ Cost saving measures ◦ Cash cost of one tonne of semi-finished steel products in Russia decreased by 35% ◦ Labour costs decreased by 32% compared to 1H08 ◦ Services and auxiliary materials costs decreased by 42% compared to 1H08◦ Capex savings ◦ Capex in 1H09 was US$203 million (62% down vs. 1H08) out of US$500m FY2009 guidance ◦ Exit from Cape Lambert Project in Australia◦ Financial management ◦ US$738m of working capital released in 1H09 in line with our full year guidance to release US$700m ◦ Total debt decreased to US$8,482m, net debt decreased to US$7,783m as of 30/06/09 US$965m raised from concurrent GDR and convertible bond offerings in July 2009 ◦ Additional US$912m short-term debt repayment in July and August
  3. 3. Maintaining Cost Leadership 3 ◦ Constant review of product and resources flows for potential efficiency gains ◦ Mining segment cash costs have reduced significantly: ◦ Approximately 75% of consolidated cost is rouble denominated ◦ Russian-based assets have benefited from declines in utilities and staff costs Cash Cost, Coal Products and Cash Cost*, Slabs & Billets 100% Fe Iron Ore Products US$/t US$/t 400 345 375 120 107 300 221 248 90 73 200 60 50 30 100 30 0 0 Slab, Russia Billet, Russia Coal products Iron ore products, 1H08 1H09 1H08 1H09 100% Fe* Average for Russian steel mills, excl. SG&A and amortisation
  4. 4. Market Improvement since the Beginning of 2009 4◦ Recovery in prices for semi-finished Prices for Evraz Steel Products products is driven by demand from Asia, the Middle East and North Africa US$/t◦ Expected steelmaking capacity utilisation 1,800 until year-end: 1,500 ◦ Russia – 100% ◦ Ukraine – 65% 1,200 ◦ North America – 80% 900 ◦ Czech Republic – 65%; 600 ◦ South Africa – 100% 300◦ Russian mining assets are running at 100% capacity in coal and 85% in iron 0 ore 1Q09 2Q09 3Q09◦ Steel volumes in 2H09 to grow by Semi-finished, Russia approximately 10% compared to 1H09 Construction, Russia due to the restart of blast furnace Flat-rolled, Europe◦ Prices for semi-finished products in Flat-rolled, NA Tubular, NA 2H09 will be higher than 1H09 Construction, SA
  5. 5. 3Q09 Operational Results 5◦ In 3Q09, consolidated crude steel output increased by 22% vs. 2Q09 reflecting overall higher production volumes at Evraz’s steel mills (except for Ukraine)◦ Production volumes of rolled products rose on the back of better demand than in 2Q09 ◦ Russia +23% ◦ Europe +38% ◦ North America +8% ◦ South Africa +5%◦ Growth of production in all major product segments vs. 2Q09 except for railway products in Russia and North America and tubular products in North America ‘ Production of Rolled Products‘000 tonnes +12%* - 8%* 1,500 1,200 - 23%* 900 - 50%* 600 - 54%* - 16%* 300 0 Semi-finished Construction Railway Flat-rolled Tubular Other steel products products products products products products 3Q08 2Q09 3Q09 * year-on-year comparison
  6. 6. 3Q09 Production/Steel: Russia 6◦ Destocking in Russian domestic market completed◦ Domestic demand for construction steel picked up in since July◦ Russian government infrastructure spending, potentially a major driver of demand for construction steel and railway products, is unlikely to have significant impact this year due to seasonality ‘000 tonnes Production 3,200 129 64 122 567 79 263 2,400 127 71 285 1,058 936 1,600 798 800 1,293 1,497 1,084 0 3Q08 2Q09 3Q09 Semi-finished Construction Railway Flat-rolled Other steel
  7. 7. 3Q09 Production/Steel: North America 7◦ Good performance at the beginning of 2009 with subsequent deterioration in line with market trends◦ Stability of demand for large diameter pipes in Canada due to long contracts◦ Destocking in the market is largely over with apparent demand remaining distinctly limited◦ Well-positioned to benefit from expected government infrastructure investments Evraz Inc. NA’s Production‘000 tonnes 1,000 800 253 600 400 321 153 117 115 186 200 122 79 121 0 103 65 108 3Q08 2Q09 3Q09 Construction products Railway products Flat-rolled products Tubular products
  8. 8. 3Q09 Production/Steel: Europe and S. Africa 8 Production, Europe Production, South Africa‘000 tonnes ‘000 tonnes 400 200 14 6 300 150 2 5 6 97 55 200 287 7 100 98 226 34 100 168 50 73 59 50 44 17 33 3 0 0 3Q08 2Q09 3Q09 3Q08 2Q09 3Q09 Other steel products Other steel products Flat-rolled products Flat-rolled products Construction products Construction products Semi-finished products
  9. 9. Debt Maturities and Liquidity Profile 9◦ Total debt of US$8.48bn as of 30 June 2009; short- Breakdown of Short-term Debt Breakdown of Short-term Debt term debt of US$3.8bn as of 30 June 2009 as of 30 June 2009◦ In July Evraz raised US$965m from concurrent GDR US$ mln and convertible bond offerings 320 176◦ In July-August 2009 Evraz repaid US$912m of current 806 loans and borrowings, including US$176m of 2009 Eurobonds 765◦ VEB approved the extension of maturity of the US$1.81bn loan facilities for another year; including 328 $1.4bn of short-term debt◦ Cash and cash equivalents amounted to US$1.1bn as of 1 October 2009 1,404◦ RUB20bn (US$680m) 5-year bond issue with a 13.5% Bond 2009 coupon rate per annum priced this week $3.2bn syndicated loan◦ Evraz is currently in compliance with all its financial Term loans covenants VEB◦ Proactive approach to potential covenant compliance Revolving debt issue in relation to FY2009 results VTB
  10. 10. Summary 10◦ Recovery in global demand for semi-finished steel allowed us to fully utilise Russian steelmaking starting from 1 July 2009◦ Consistent execution of management action plan brought significant cost savings and working capital release◦ Company continues its focus on maintaining low costs position and preserving cash◦ CAPEX is reduced to maintenance level, dividend payments will only resume upon deleveraging and clear signs of market recovery◦ Continuous decrease of overall debt level, replacement of short-term debt by longer-term maturities◦ Compliance with all financial covenants, proactive approach to potential covenant compliance issue in relation to FY2009 results◦ End of destocking in our key markets, alongside recovery in prices and volumes, makes us confident of achieving better results in the second half of 2009

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