NLMK-Kaluga site visit in December 2013

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NLMK-Kaluga site visit in December 2013

  1. 1. NLMK KALUGA 9 December 2013
  2. 2. DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the 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. NLMK GROUP RUSSIAN ASSETS NLMK Kaluga Crude steel: Stage 1 – 1.5 m t Long steel: Stage 2 – 0.9 m t Stage 3 (option) – 0.6 m t Moscow NLMK Kaluga США RUSSIA Moscow Altai-Koks Coke: 4.66 m t Kaluga VIZ-Steel Transformer steel: 0.17 m t NLMK Russia Long Crude steel: 2.2 m t Long steel: 2 m t Novolipetsk Sinter: 15 m t Coke: 2.6 m t Steel: 12.4 m t Flat products: 5.7 m t Stoilensky Iron ore concentrate: 14 m t Sinter ore: 1.6 m t NLMK Group’s Russian production assets NLMK Kaluga Licences for deposit development 3
  4. 4. NLMK RUSSIA LONG STEEL DIVISION • Part of NLMK Group since December 2007 • Capacity: o Steel (EAF) – 3.7 million t o Long products – 2.9 million t o Scrap – 3.5 million t Moscow NSMMZ Long product market share in Russia: c. 20% • Sales regions: over 95% of sales to the Russian market NLMK Russia Long production sites (Ural, Southern, Central Federal Districts) CRUDE STEEL AND FINISHED PRODUCT OUTPUT NLMK RUSSIA LONG STEEL FINANCIALS $ million mt 2,5 2500 1837 1794 2,0 1645 1377 1500 1243 882 1000 500 259 46 34 2010 2011 170 1,7 1,3 1,7 1,4 1,4 1,5 1,5 1,8 1,7 1,5 1,4 0,5 83 0,0 0 2008 1,5 1,9 1,0 -69 -500 UZPS NLMK Kaluga • 2000 Yekaterinburg 2009 Revenue 2012 EBITDA 9M 2013 2008 2009 Crude steel 2010 2011 2012 9M 2013 Long products and metalware 4
  5. 5. STRATEGIC GOALS • Strategic priorities o o NLMK RUSSIA LONG MARKET TARGET SHARE IN 2015 Develop scrap-collecting facilities to maximize costefficient sufficiency in scrap 35% Expand market presence 25% 33% 30% 23% 20% o A flexible sales strategy and improved customer service o o • Expand the range of long products and metalware Ensuring high efficiency at all stages of the process 15% 12% 10% 5% 0% Rebar market Sections market Market goals after NLMK Kaluga launch o Increase rebar market share from 17% in 2012 to 23% in 2015 o Enter the sections market o Around 1/3 of long steel for construction in the Central region of Russia Long products for the construction market in the Central region LONG PRODUCT CONSUMPTION GROWTH RATES IN RUSSIA, 2010-12 30% 25% 24% 20% 14% 15% 11% 10% 5% 0% Rebar Sections Long products in the Central region Average growth rate in 2010-2012 5
  6. 6. NLMK KALUGA: COMPANY OVERVIEW • CRUDE STEEL AND ROLLED STEEL PRODUCTION CAPACITIES AT NLMK KALUGA Location: Kaluga region, Borovsky district, Vorsino Industrial Park, c.~70 km away from Moscow 1,6 • Production site area: 202 ha • Capacity: 1.5 m t/y of steel, from 0.9 to 1.5 m t/y* of long steel m t/y 1,5 1,5 1,5 1,4 1,2 0,9 1 0,8 0,6 • • Products: billets and long steel for construction – rebar, channels, angles Capex: RUB 38 billion 0,4 0,2 0 Stage 1 and 2 Steel • • • Logistics: option to deliver products by rail from the plant’s own station – Vorsino – and by trucks Beginning of construction: 2008 In Q4 2013, 250,000 tonnes of steel will be produced, an increase of 138% q-o-q Stage 3 Rolled products FINISHED STEEL PRODUCTION PLAN AT NLMK KALUGA 1000 ‘000 t/y 900 800 700 600 500 900 400 300 200 ~400 100 0 2013E * Potential to expand rolling capacity by 600,000 t/y 2014E 6
  7. 7. NLMK KALUGA COMPETITIVE ADVANTAGES o A developed construction sector The market o High level of long steel consumption o Shortage of long steel in the region o Surplus of scrap collection in the region o Low transportation costs Efficiency o Developed scrap collection network o Energy- and resource-saving production Products o An extensive mix of long products in high demand 7
  8. 8. CONSTRUCTION SECTOR IN CENTRAL RUSSIA • AMOUNT OF CONSTRUCTION ACTIVITIES IN H1 2013 The Central region of Russia has the highest density of population o 59.5 average people/km2, Moscow and the Moscow region 16% 7 times higher than the Russian Central Region w/o Moscow and the Moscow region 8% • The most developed construction sector across all Russian regions The rest of Russia o Share in construction activity: 24% in H1’13 76% Note: shares in total volume of construction works given in rubles o Share in residential completions: 28% in H1’13 Source: Rosstat o Moscow and the Moscow region account for a significant share • The construction sector continues to grow o In H1’13 residential completions in the Central region grew by 18,5% y-o-y REGIONAL SPLIT OF THE RUSSIAN CONSTRUCTION SECTOR, H1 2013 12 10 sq m of residential completions per 1 sq km of region area 9,8 7,1 8 7,3 6 4,8 4 1,3 2 1,1 0,5 0 Central North Southern North Western Caucasian Volga Ural Siberian 0,1 Far Eastern Source: Rosstat 8
  9. 9. LONG PRODUCTS MARKET • o o • 2,5 mt record 2008 level 2,0 30% 25% 20% 1,5 15% 10% A c.30% increase in rebar import vs 9M’12, x2.6 vs 9M’10 0,5 0,0 0% Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 Q4 11 Q3 11 Q2 11 Q1 11 Q4 10 Q3 10 Q2 10 Q1 10 Q4 09 Q3 09 Q2 09 Q1 09 Q4 08 Q3 08 Q2 08 Q1 08 ~3.8 m t/y shortage of long products in the Central region In 2012, long product consumption in the Central region +15.6% (+0.7 m t to 5.2 m t/y) 5% Import Rebar produced by Russian companies Import share, rhs Pricing trends o Import, share in % ~20% 1,0 Regional demand/supply imbalance o o • Consumption of long steel products used in construction in Russia in 2012 grew by 9% y-o-y to 15.7 m t In 2013, consumption will grow by 7%*, or by 1.1 m t; NLMK Kaluga’s share in the gain will be ~35%. Import substitution potential o • REBAR MARKET, CONSUMPTION IN RUSSIA Long product consumption exceeds pre-crisis levels Sustainable price premium to flat steel Source: Metal Expert LONG STEEL PRODUCTION/CONSUMPTION BALANCE BY REGION STEEL PRICES IN THE CENTRAL REGION OF RUSSIA $/t 50% 46% 850 long steel shortage – 3.8 m t/y Share in long steel production Share in long steel consumption 40% 31% 750 30% 21% 20% 650 12% 11% 8% 6% 7% North Caucasian Southern North Western Volga Central Source: Metal Expert Siberian Nov-13 Sep-13 Jul-13 May-13 Mar-13 Jan-13 Nov-12 Sep-12 Jul-12 May-12 Mar-12 Jan-12 0% 1% 0% HRC, Moscow 450 * - Company estimates 9% 1% 2% Ural Rebar, Moscow 8% Far Eastern 10% 550 18% 17% Source: Metal Expert. Data for 2012. 9
  10. 10. SCRAP MARKET • Significant export substitution potential in Russia o • Regional demand/supply imbalance o • Export accounts for ~29% (or 5.8 m t/y) of annual scrap processing volumes m t/month 3 Scrap exports, m t In 2012, the share of export in total scrap processing was ~29% 2,5 5,8 6 5,8 ~30% exported from the Central Region 4,7 4 1,5 Scrap surplus in the Central Federal District is ~3 m t/y 7 5 2 3 1 2 0,5 1 0 Pricing trends 0 Export Sep-13 May-13 Jan-13 Sales to the Russian market Sep-12 May-12 Jan-12 Sep-11 May-11 Jan-11 Sep-10 High competition at the international scrap market May-10 Jan-10 o SCRAP MARKET BALANCE IN RUSSIA 2010 2011 2012 Source: Metal Expert, Russian Railways, NLMK estimates SCRAP MARKET BALANCE IN RUSSIA AND THE CENTRAL REGION SCRAP PRICES Russia January 2010 = 100 25 m t/y 7 20 1,4 Central region 8 ~6 m t is exported m t/y 6 5 15 10 1,2 5 20,6 3 14,8 2 1 Average prices in Russia 0 0,9 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 Source: Metal Expert, Metal Bulletin 1,7 ~3 m t surplus 4 1,3 5,2 2,2 0 2012 Scrap collection Scrap consumption Srap Consumption Sales to generation in the region other regions of Russia Export Source: Metal Expert, Russian Railways, NLMK estimates 10
  11. 11. COST ADVANTAGES • Low transportation costs for the delivery of raw materials and finished steel o Developed captive scrap collection network “Vtorchermet NLMK” in the region o In 2013, a new shredder was launched in Podolsk (Moscow region) o Located close to key customers NLMK KALUGA VS. RUSSIAN PEERS 104% 105% 100% 100% 100% 100% 95% 90% 90% 85% 82% 80% • Specific energy consumption Efficient resource use o Processing of by-products generated at the main operations Specific natural gas consumption Average for Russian producers o Advanced technologies and equipment NLMK Kaluga DISTANCE FROM LONG STEEL PRODUCERS TO THE MOSCOW REGION NLMK Kaluga o Use of pig iron and waste metal generated at Novolipetsk as feedstock Efficiency of raw material use 70 km from Moscow Revyakinskiy MZ Severstal - Vologda Severstal - Balakovo Rostovsky EMZ Abinsky EMZ NSMMZ MMK Mechel ZSMK km 0 1000 2000 3000 4000 11
  12. 12. EQUIPMENT AND PRODUCTS • Equipment suppliers o Steelmaking - Siemens VAI o Long product rolling - SMS Meer • Universal high performance continuous rolling mill o Ability to roll rebar at high speed and produce small and medium sections at a single line • In 2013-2014, NLMK Kaluga is planning to master over 30 product types: o Billet 100х100, 125х125, 150х150, 160х160 o Rebar #10-40 o Angle #25-100 А240 bars #10 #12 #14 #16 Rebar А500S bars in compliance with GOST 52544 #10 #12 #14 #16 #18 #20 #22 #25 o Channel #5-12 - to be mastered in 2013 Sections Angles Channels L25 L32 L35 L40 L45 L50 L63 L70 L75 L80 L90 L100 SH5 SH6,5 SH8 SH10 SH12 - to be mastered in 2014 - already mastered 12
  13. 13. CORPORATE RESPONSIBILITY • Air protection o o • Modern dust and gas cleaning systems with efficiency of at least 99% Emissions less than 1kg per tonne of steel (almost 7 times lower than for its Russian peers) Water protection o Closed water supply system o Low level of natural water consumption due to cleaning • Waste processing • New jobs o • 1,250 at the plant and 600 at the service companies Investments into personnel development o o • About RUB 55 million into personnel training Additional study programmes to train qualified professionals at regional learning establishments Regional development o Construction of new apartment buildings for employees 13
  14. 14. THANK YOU! 14

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