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Merrill lynch russia & cis 1x1 forum


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Merrill lynch russia & cis 1x1 forum

  1. 1. EVRAZ GROUPMerrill LynchRussia & CIS1X1 Forum November 17-20, 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 Gerdau China Steel Baoshan Steel ArcelorMittal Mechel Steel US Steel Maanshan Steel Usiminas Evraz CSN Nippon Steel Sources: IISI, Renaissance Capital estimates
  4. 4. 3Q08 Results 04 ◦ 3Q08 consolidated revenue amounted to US$6.5 3Q08 Steel Sales by Region US$ mln billion on 4.3 million tonnes of steel sales 204 ◦ Russian and CIS sales accounted for 45% of the 868 total revenue 2,057 ◦ Demand and prices for majority of steel products were still high in most of 3Q08 contributing to overall strong performance 1,492 162 486 Russia CIS Europe Asia Africa 3Q08 Consolidated Revenue by Segment 3Q08 Rolled Products Sales*US$ mln ‘000 tonnes 586 170 307 340 1,095 338 767 5,269 1,392 600 Semi-finished products Construction products Railway products Steel Mining Vanadium Other Flat-rolled products Tubular products Other steel products *Excluding inter-company sales
  5. 5. 9M08 Financial Highlights 05 ◦ Revenue for the nine-month period was US$17,100 million ◦ EBITDA was US$5,951 million with EBITDA margin of 34.8% ◦ Depreciation amounted to US$869 million ◦ Interest expense was US$472 million ◦ Total debt as of September 30, 2008 amounted to approximately US$10,214 million including US$4,143 million of short-term loans and current portion of long-term loans ◦ Cash and cash equivalents at the end of the period stood at approximately US$623 million ◦ Capital expenditures amounted to US$900 million in 9M08 ◦ Total steel products sales in 9M08 amounted to 13.7 million tonnes Rolled Products Sales Volumes* US$ mln Revenue by Product ‘000 tonnes 528 579 516 1,082 3,108 4,163 2,146 2,628 1,830 4,415 4,439 1,737Semi-finished products Construction products Railway products Semi-finished products Construction products Railway productsFlat-rolled products Tubular products Other steel products Flat-rolled products Tubular products Other steel products *Excluding inter-company sales
  6. 6. Current Debt Portfolio 06 ◦ As of 30 September 2008, the total debt amounted to US$10,214 million, including US$4,143 million of short-term debt maturing within 12 months of the reporting date ◦ 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 ◦ 9M08 interest expense was US$472 million ◦ 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 2,069 201 2,000 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 $3.2b loan payments Term loans IPSCO bridge Other revolving debt
  7. 7. Russian Operations Construction Products Consumption 07 and Russia’s GDP Growth*◦ Total Russian steel sales in 3Q08 amounted to 1.8 ‘000 tonnes million tonnes generating US$ 2.1 billion in 7000 25.0% revenues 6000 20.0%◦ The pricing environment was favourable for most 5000 15.0% part of the year but in 3Q08 prices for construction 4000 products started to decline reflecting seasonal 3000 10.0% decline in demand and freeze of construction 2000 5.0% projects caused by uncertainty on financial markets 1000 0 0.0% 2003 2004 2005 2006 2007 2008F 2009F 2010F Rebars Angles, channels, sections GDP growth *2008-2010 Evraz estimates 3Q08 Evraz Russian Market Rolled Products Sales Volumes Price Environment ‘000 tonnes US$/t 115 1 600 228 89 1 400 1 200 1 000 411 800 600 980 400 200 0 1 -0 7 0 4 -0 7 0 7 -0 7 1 0 -0 7 0 1 -0 8 0 4 -0 8 0 7 -0 8 1 0 -0 8 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
  8. 8. North American and European Operations 08◦ North America: Flat-Rolled & Tubular non-Russian Prices ◦ 3Q08 steel sales revenues were US$1.5 billion on US$/t the back of 0.9 million tonnes of shipments 1,900 ◦ Substantial growth of flat and tubular products sales 1,700 volumes due to Claymont Steel and IPSCO Canada 1,500 consolidation 1,300 ◦ Evraz Inc. Canada’s pipe-making capacity is fully 1,100 900 booked until 2010 700◦ Europe: 500 ◦ In 3Q08 steel sales were stable amounting to 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 Flat, Europe Flat, NA Tubular, NA Flat, SA 385,000 tonnes and generating US$486 million 3Q08 Evraz North American Market 3Q08 Evraz European Market Rolled Products Sales Volumes Rolled Products Sales Volumes ‘000 tonnes ‘000 tonnes 28 15 106 64 306 125 37 242 330 Semi-finished products Construction products Railway products Construction products Railway products Flat-rolled products Tubular products Flat-rolled products Other steel products
  9. 9. Mining 09 ◦ 1H08 Mining EBITDA increased by 134% to US$796 million and hedged US$84 per tonne of crude steel ◦ 11.3 million tonnes iron ore output in 1H08, increasing self-coverage to 93% ◦ 1H08 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 ◦ In 9M08, including inter-company shipments, iron ore sales volumes totalled ~15.3 million tonnes, and coal sales consisted of 5.5 million tonnes of coking coal and 2.9 million tonnes of steam coal ◦ In 3Q08 and 9M08, mining segment generated respectively US$338 million and US$836 million of revenues 1H08 Coking Coal Balance 1H08 Iron Ore Balance ‘000 tonnes ‘000 tonnes8,000 13,5007,000 12,000 771 7886,000 1,392 10,500 1,083 1,335 1,012 1,5645,000 9,000 6044,000 7,500 3,397 6,0003,000 10,040 5,402 4,500 4,390 8,6242,000 3,0001,000 1,518 1,500 0 0 Gross Consumption Coke sales Steel Making Evraz production 40% of Production Consumption Needs Raspadskaya production Russia Ukraine Russia Ukraine S.Africa * 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
  10. 10. Price Dynamics 010 Iron ore fines, delivered, $/tonne US plate and HRC prices, $/tonne 250 1,800 200 1,500 1,200 150 900 100 600 50 300 0 0 Dec ’03 Jun ’04 Dec ’04 Jun ’05 Dec ’05 Jun ’06 Dec ’06 Jun ’07 Dec ’07 Jun ’08 Dec ’08 Dec ’04 Dec ’05 Dec ’06 Dec ’07 Dec ’08 India-China, spot Australia-China, contracts Plate HRC Billets vs ferrous scrap, $/tonne EU plate and HRC prices, EUR/tonne1,500 1,0001,200 800 900 600 600 400 300 200 0 0 Dec ’03 Jun ’04 Dec ’04 Jun ’05 Dec ’05 Jun ’06 Dec ’06 Jun ’07 Dec ’07 Jun ’08 Dec ’08 Dec ’06 Jun ’07 Dec ’07 Jun ’08 Dec ’08 Billets, FOB Black Sea Billet, FOB Turkey Scrap, FOB Rotterdam Plate HRC Source: Steel Business Briefing Source: Steel Business Briefing, Troika estimates
  11. 11. Evraz’s Global Business 011
  12. 12. +7 495