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Presentation q3 2014 (us gaap) eng nov 2014 +

NLMK reported financial results for Q3 and 9M 2014 with the following key highlights: - Revenue decreased 7% quarter-over-quarter to $2.6 billion in Q3 due to a one-time decrease in sales, but EBITDA increased 17% to $693 million as efficiency programs took effect. - For 9M 2014, revenue declined 4% year-over-year to $8.1 billion while EBITDA grew 60% to $1.8 billion as the EBITDA margin expanded to 22%. - Capital expenditures remained conservative at $158 million in Q3 and $439 million for 9M, on track to meet the 2014 target of $650-

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1 Moscow, 11 November 2014 Q3 AND 9M’14 US GAAP CONSOLIDATED FINANCIAL RESULTS
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 thatforward-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 areconsistent 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 DISCLAIMER
CONTENT 1. Key results 2. Financial highlights 3. Segment results 3
OPERATING RESULTS •GROWTH OF UTILIZATION RATES IN Q3’14: oNLMK Group: 96% (+2 p.p. qoq), key drivers: ◦Lipetsk site (Steel Segment): +2 p.p. ◦NLMK USA: +10 p.p. •Q3’14 STEEL OUTPUT GROWTH: o4.1 m t, +10%qoq •SALES IN Q3’14: oSales to third parties: 3.6 m t (-7% qoq) oOne-off decrease in sales due to a prolonged revenue recognition period for Long Products segment products oSales growth in Q4 by 2-5% 4 3.0 3.1 3.1 3.2 3.1 2.9 3.2 0.5 0.5 0.6 0.7 0.7 0.7 0.8 0.2 0.2 0.2 0.2 0.2 0.2 0.2 3.7 3.8 3.9 4.1 3.9 3.8 4.1 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Steel segment Long products segment Foreign rolled product segment * NLMK Verona production volumes excluded from total since Q4’13 STEEL OUTPUT* m t 81% 85% 98% 94% 91% 85% 100% 96% 50% 60% 70% 80% 90% 100% NLMK USA NLMK Longproducts Lipetsk site NLMK Group Q2'14 Q3'14 Global average utilization rate 75% UTILIZATION RATES BY SITE Sources: global utilization rate as per WSA data SALES 1,148 1,256 1,189 1,331 1,518 1,372 1,388 1,061 1,022 3,867 480 3,835 454 3,583 684 Q1' 14externalsales Q1' 14intra- groupsales Q2' 14externalsales Q2' 14intra- groupsales Q3' 14externalsales Q3' 14intra- groupsales Semis Ordinaryproducts HVA products Slab sales tosubsidiaries ‘000 t
0.74 0.74 0.81 0.84 0.74 0.77 0.90 0.77 0.77 0.87 0.94 0.36 0.45 0.43 0.39 0.42 0.45 0.52 0.52 0.52 0.62 0.52 1.10 1.20 1.26 1.32 1.32 1.41 1.60 1.46 1.55 1.74 1.69 0% 10% 20% 30% 40% 50% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Semi-finished products Flat products Long products TOTAL Russian market share (r.h.) •STABLE POSITIONS IN THE RUSSIAN MARKET oHigh sales in Russia in Q3’14: 1.69 m t (+6% yoy), share: 47%, growth qoqand yoy o9M’14: growth of sales in Russia: +15% yoy: ◦Flat steel, including HVA* products: +7% yoy ◦Long products driven by NLMK Kaluga: +20% yoy ◦Semi-finished products: +39% yoy •INTERNATIONAL MARKETS DEVELOPMENTS oSales of the foreign assets grew by +11% yoy** •TARGETED SEGMENTS DEVELOPMENT IN ACCORDANCE WITH STRATEGY 2017 oNLMK EU Strip: sales of flat products for automotive in Europe went up to 0.323 m t (+15% yoy, 42% of sales in 9M’14) oNLMK EU Plates: sales of niche plates went up to 0.150 m t (+53% yoy, 18% of sales in 9M’14) 5 STRATEGIC MARKETS FOREIGN ASSET SALES ** m t NLMK SALES IN RUSSIA Total sales 43% 47% *HVA-high value added products. HVAincludes cold-rolled, galvanized, pre-painted and electrical steel ** Sales of foreign assets include sales of NBH companies 62% 58% 38% 42% 737 764 0 200 400 600 800 1000 9M'13 9M'14 Automotive Other industries NLMK EU STRIP 000’ t NLMK USA 000’ t 87% 82% 13% 18% 746 858 0 200 400 600 800 1000 9M'13 9M'14 Q&T / niche thick plates Ordinary grades Итого NLMK EU PLATE 000’ t 1,362 1,533 0 400 800 1200 1600 2000 9M'13 9M'14 Flat steel 45%
FINANCIAL HIGHLIGHTS 6 •Q3’14 OPERATING RESULTS oRevenue$2,607m(-7% qoq) oEBITDA $693 m(+17% qoq) oEBITDA margin 27% (+6 p.p.) oNet debt$1,803m(-14% qoq) oNet debt/12M EBITDA 0.83х •ONGOING PROFITABILITY GROWTH •CONSISTENT IMPLEMENTATION OF OPERATIONAL EFFICIENCY PROGRAMS oQ3’14 effect totaled $50 m (compared to 2013) o9M’14 cost saving reached $183 m -approximately 80% of the Strategy 2017 target (excluding the ruble weakening effect: 88%) •9M’14 OPERATING RESULTS oRevenue$8,053m(-4% yoy) oEBITDA $1,756 m(+60% yoy) oEBITDA margin 22% (+9 p.p. yoy) EBITDA MARGIN, % 11% 14% 14% 16% 18% 21% 27% 0% 5% 10% 15% 20% 25% 30% Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 6 9M’14 OPERATIONAL EFFICIENCY GAINS BY SEGMENT 61% 6% 11% 7% 16% Steel segment Long products segment Mining segment Foreign rolled productssegment NLMK Belgium Holdings $183m
CONTENT 1. Key results 2. Financial highlights 3. Segment results 7
PROFITABILITY 8 •Q3’14 EBITDA: $693 M (+17% QOQ) •Q3’14 EBITDA MARGIN: 27% oEfficiency improvement programmes oWidened spreads between prices for steel products and raw materials oWeaker RUB exchange rate •STEEL SEGMENT oIncreased demand for semi-finished products •LONG PRODUCTS SEGMENT oDecrease in the share of direct sales -longer period of revenue recognition •MINING SEGMENT oDecline in iron ore prices •FOREIGN ROLLED PRODUCTS SEGMENT oSeasonal reduction in steel consumption in the EU market oStable sales in the US market EBITDA CHANGE BY SEGMENT (QOQ) 594 +102 +25 -40 +17 -5 693 400 500 600 700 800 Q2'14 Steel segment Long productssegment Mining segment Foreign rolledproductssegment Other operationsandintersegmental Q3'14 $ m SEGMENT CONTRIBUTION TO EBITDA 455 77 145 36 -20 693 200 400 600 800 Steel segment Long productssegment Mining segment Foreign rolledproductssegment Other operationsandintersegmental Q3'14 $ m
EBITDA Working capital changes Other non-cash operations Income tax Net interest * NET OPERATING CASH FLOW Capital expenditures ** FREE CASH FLOW TO THE FIRM Net repayments of borrowings/attraction of funds FREE CASH FLOW TO EQUITY Change in deposits and financial investment FX rate change CHANGE IN CASH CASH FLOW IN Q3’14 9 Q3‘14 CASH FLOW BRIDGE •ONE-OFF DECREASE IN Q3’14 OPERATING CASH FLOW TO $194 M oQ3’14 EBITDA $693m(+17% qoq) oWorking capital increase by $364 m due to one-off factors: ◦Seasonal accumulation of winter stock(scrap and NLMK USA slabs) ◦Delayed recognition of Long Products segment revenue ◦Stock accumulation at NLMK Kaluga –preparation for mastering new types of products ◦Impact of RUB exchange rate in terms of working capital of international assets (>$100 m) •CONSERATIVE INVESTMENT PROGRAM oQ3’14 capex: $158 m (+5% qoqand-44% yoy) o9M’14 capex: $439 m(-33% yoy) o2014 capex:$650-700 m o2015E capex:$800-900 m oSource of investment financing –operational cash flow $ m -124 -19 149 -254 -290 36 -158 194 -33 -111 9 -364 693 * Including interest paid (w/o capitalized interest) of$42 m and interest received of$10 m ** Including capitalized interest of$16m
FREE CASH FLOW GROWTH 10 •STRUCTURAL GROWTH IN BUSINESS PROFITABILITY oSizable gains coming from operational efficiency programs oEffects from investment projects oGrowth in free cash flow available to shareholders/creditors •LOWER CAPITAL INTENSITY BUSINESS •LOWER DEBT LOAD oTarget Net debt / EBITDA achieved •POTENTIAL DIVIDENT PAYMENT GROWTH 1.8 1.8 1.2 1.2 -2.0 -1.5 -0.8 -0.4 -0.2 0.4 0.4 0.8 2011 2012 2013 9М'14 Operational cash flow Capex Free cash flow to the firm CASH FLOW DYNAMICS $bn 4.4 4.6 4.2 3.3 3.4 3.6 2.7 1.8 1.5 1.9 1.8 0.8 0.5 1.0 1.5 2.0 0 1 2 3 4 5 2011 2012 2013 9М'14 Financial debt Net Debt Net Debt/EBITDA ratio LOWER DEBT LOAD $bn
2.68 2.36 1.16 -0.29 -0.26 0.93 0 1 2 3 4 5 30 Jun '14 Net settlements ofdebt FX rate changeimpact 30 Sep '14 ST debt LT debt DEBT POSITION 11 •REDUCTION IN NET DEBT, HIGH LIQUIDITY LEVEL PRESERVED oNet debt $1.80bn(-14% qoq) oGross debt$3.29bn(-14% qoq) oCash and equivalents*$1.48bn(-14% qoq) oNet debt/ 12M EBITDA 0.83х(-0.31 p. qoq) CHANGE IN DEBT POSITION IN Q3’14 NET DEBT CHANGE IN Q3’14 MATURITY AND NET DEBT/EBITDA $bn Weighted average maturity 1.93 2.15 1.87 1.80 1.39 1.14 0.83 0.0 0.5 1.0 1.5 2.0 2.5 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Strategy 2017 target –1.0 Net debt/EBITDA 3.3 3.4 3.6 3.3 3.2 3.0 2.9 0.0 1.0 2.0 3.0 4.0 5.0 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 * Cash and equivalents and short term investments 2.10 0.19 0.16 0.26 1.80 1.0 1.5 2.0 2.5 30 Jun '14 Operating cashflow Capex FX rate and otherfactors 30 Sep '14 $bn 3.83 3.29
423 748 369 324 817 560 $0 $200 $400 $600 $800 $1,000 Q4 2014 2015 2016 2017 2018 2019 andonward Other debt Revolving credit lines for working capital financing Eurobonds (USD) ECA financing and investment credits Ruble bonds LIQUIDITY AND DEBT SETTLEMENT 12 •STRONG LIQUIDITY POSITION •COMFORTABLE MATURITY SCHEDULE oShort term deb$0.93bn ◦Ruble bonds ◦Revolving credit lines for working capital financing ◦ECA financing oLong term debt$2.36bn ◦Eurobonds and ruble bonds ◦Long term part of ECA financing TOTAL DEBT MATURITY SCHEDULE*** INTEREST EXPENSES** $m 1,483 898 2,522 423 173 117 185 $0 $1,000 $2,000 $3,000 $4,000 $5,000 Liquid assets Q3 '14 Q4 '14 Q1 '15 Q2 '15 12M $m Undrawn committed credit lines Cash and equivalents LIQUID ASSETS AND SHORT-TERM DEBT MATURITY* 31 27 22 33 32 33 32 33 35 35 22 21 17 16 0% 5% 10% 15% 20% 25% 0 10 20 30 40 50 60 70 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Non-capitalized interest expense (lhs) Capitalized interest expense (lhs) Interest expense to EBITDA (rhs) * ST maturity payments without interest accrued ** Quarterly figures are derived by computational method on the basis of quarterly reports *** Maturity payments do not include interest payments $ m
Q4’14 OUTLOOK •MARKET oRussia –seasonal slowdown in the construction sector oEurope –seasonal recovery in demand oUSA –stable market situation •OPERATIONAL RESULTS oExpected Group crude steel production: 4.0 m t oSales volumes will increase by 2-5% 13
CONTENT 1. Key results 2. Financial highlights 3. Segment results 14
1.66 1.68 1.53 1.60 1.74 1.73 1.64 0.35 0.37 0.47 0.21 0.30 0.27 0.37 0.08 0.21 0.19 0.15 0.26 0.35 0.45 0.0 0.5 1.0 1.5 2.0 2.5 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Revenue from intercompany sales Revenue from sales to third parties EBITDA 4% 10% 9% 8% 13% 18% 23% EBITDA margin 24% 18% 6% 5% 6% 5% 5% 9% 12% 9% Iron ore materials Coke and coal Scrap Ferroalloys Other raw materials Electricity Natural gas Other energy resources Personnel costs Other expenses and changes in inventories Depreciation STEEL SEGMENT •STABLE TOTAL REVENUE IN Q3’14 QOQ oHigher total sales volumes (+6% qoq) oIncreased slab deliveries to the Group’s foreign companies (+50%) and to NBH (+7%) oLower average sales prices •EBITDA MARGIN INCREASED TO 23% oMaximum steelmaking capacity utilization rates oEfficiency improvement programmes oWidened spreads between prices for steel and raw materials COST OF SALES, Q3’14 SEGMENT REVENUE ANDEBITDA SALES AND REVENUE FROM THIRD PARTIES $ bn 15 8% 8% 6% 7% 8% 8% 17% 16% 15% 15% 26% 26% 21% 21% 36% 39% 30% 33% 7% 6% 0% 20% 40% 60% 80% 100% SalesQ3' 14 SalesQ2' 14 RevenueQ3' 14 RevenueQ2' 14 Income from otheroperations* Pig iron Slabs HRC CRC Galvanized Pre-painted Dynamo Transformer 2.351 m t $1,636 m * Revenue from the sale of other products and services 2.459m t $1,728m $1,432 m
288 314 355 371 337 430 378 59 113 114 102 57 101 115 20 23 40 12 7 52 77 0 70 140 210 280 350 420 490 560 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Revenue from intra-group sales Revenue from third parties EBITDA 6% 5% 8% 3% 2% 10% 16% EBITDA margin 67% 3% 1% 8% 9% 5% 7% Scrap Ferroalloys Other raw materials Electricity Personnel Other expenses Depreciation $396 m LONG PRODUCTS SEGMENT •SALES VOLUME DECREASE BY 18% oDecrease in the share of direct sales –longer revenue recognition period oAccumulation of stock at NLMK Kaluga related to activities aimed at mastering new product types •EXTERNAL REVENUE DECRESE BY 12% oFavourablepricing environment •EBITDA MARGIN UP TO 16% oSustainably high capacity utilization rates oWidened spreads between rebar and scrap prices SEGMENT REVENUE AND EBITDA THIRD PARTY SALES AND REVENUE STRUCTURE $ m 16 COST OF SALES IN Q3 ‘14 * Revenue from intra-group sales is represented mostly by ferrous scrap deliveries to the Lipetsk site 14% 12% 16% 13% 11% 11% 8% 8% 75% 77% 74% 76% 0% 20% 40% 60% 80% 100% Sales volumeQ3 '14 Sales volumeQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Other operations* Long products Billets Metalware 739‘000 t $430 m * Revenue from other products $378m 608‘000 t
92 100 86 94 88 117 70 245 249 226 259 229 189 178 215 227 190 228 209 185 145 0 100 200 300 400 500 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Revenue from intersegmental sales Revenue from third parties EBITDA 64% 65% 61% 65% 66% 60% 58% EBITDA margin 7% 23% 6% 23% 21% 19% Raw materials Electricity Natural gas Other energy resources Personnel Other expenses Depreciation MINING SEGMENT •REVENUE DECLINE BY 19% QOQ oDecline in iron ore prices (15-20% qoq) oStable iron ore sales at 4 m t, incl.: ◦3.2 m t(+16% qoq) –to the Lipetsk site ◦0.8m t(-36% qoq) –to third parties •EBITDA MARGIN AT 58% oLower global iron ore prices oEfficiency improvement programmesand increase in equipment productivity SALES AND REVENUE STRUCTURE 17 COST OF SALES IN Q3‘14 79% 70% 68% 60% 21% 33% 26% 36% 0% 20% 40% 60% 80% 100% SalesvolumesQ3 '14 SalesvolumesQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Otheroperations* Iron ore salesto third parties Iron ore salesto Lipetsk site 4,004kt $306 m $248 m 3,970kt * Other operations include limestone and dolomite sales SEGMENT REVENUE AND EBITDA $m $89 m
817 730 750 445 471 533 523 -26 -62 -35 30 23 19 36 -3% -9% -5% 7% 5% 4% 7% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% -200 0 200 400 600 800 1,000 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Revenue EBITDA EBITDA margin (r.h.) FOREIGN ROLLED PRODUCTS SEGMENT •SEGMENT SALES DECLINE BY 3% QOQ oStable NLMK USA sales volumes as favourablemarket conditions persist oSeasonal decline in thick plate sales (NLMK Dansteel) by 13% qoqto 90,000 t •REVENUE DOWN BY 2% QOQ •SEGMENT PROFITABILITY GROWTH oWidened spreads between prices for slabs and rolled products oEfficiency improvement programmes NLMK USA SALES AND REVENUE STRUCTURE 18 $ m SEGMENT REVENUE AND EBITDA 58% 56% 51% 49% 26% 29% 27% 30% 15% 14% 16% 16% 5% 5% 0% 20% 40% 60% 80% 100% SalesvolumeQ3 '14 SalesvolumeQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Other operations Pre-painted CRC HRC Semi-finished 540‘000 t $443 m $445 m 534 ‘000 t
APPENDICES 19
SALES STRUCTURE 20 •GROWTH OF INTERCOMPANY SLAB SALES +50% QOQ •INCREASE OF SLAB SALES TO NBH TO 0.46 M T (+7% QOQ) •Q3’14: PIG IRON SALES WENT UP TO 97,000 T •LONG PRODUCT SALES DECREASE –LONGER SALES RECOGNITION PERIOD (Q4’14) SALES STRUCTURE BY PRODUCT REVENUE BY PRODUCT SALES MIX CHANGE BY PRODUCT 13% 15% 13% 3% 4% 3% 3% 3% 3% 6% 6% 6% 13% 14% 15% 22% 25% 25% 34% 25% 24% Q1'14 Q2'14 Q3'14 Pig iron Slabs Billets HRC Thick plates CRC Galvanized Pre-painted Electrical Long products Metalware 3.87 3.84 m t 3.58 10% 12% 11% 5% 6% 6% 5% 5% 5% 7% 7% 8% 13% 14% 14% 19% 21% 22% 27% 20% 19% 9% 9% 8% Q1'14 Q2'14 Q3'14 0% 20% 40% 60% 80% 100% Other products* Pig iron Slabs Billets HRC Thick plates CRC Galvanized Pre-painted Electrical Long products Metalware $2.81 bn $2.64bn $2.61 bn -42% -22% -19% -13% -12% -5% -4% -3% -1% -1% 5% x22 NGO steel Billets Long products Thick plates Slabs Galvanized HRC Metalware CRC Pre-painted GO steel Pig Iron Sales changeqoq
SALES GEOGRAPHY 21 •SALES IN Q3 ’14: 3.6 M T (-7% QOQ) oStable sales to the Russian market: 1.7 m t ◦Flat steel sales 0.945 m t (+9% qoq) oSales to export markets: 1.9 m t (-10% qoq) ◦Sales to Europe decreased (-5% qoq) due to seasonal factor ◦Sales to N. America increased (+10% qoq) •IN 9M ’14 SALES: 11.3 M T (0% YOY) oSales to Russia increased to 5.0 m t (+15% yoy) oSales to USA increased (+46% yoy) oSales to Europe grew (+13% yoy) ◦Slab sales to NBH from Q4 ’13 recognized as external sales 1.55 1.74 1.69 0.74 0.71 0.67 0.24 0.24 0.22 0.75 0.64 0.70 0.52 0.36 0.13 0 1 2 3 4 Q1 '14 Q2 '14 Q3 '14 Others SE Asia N.America M. East* EU Russia 1.04 1.20 1.22 0.45 0.49 0.42 0.15 0.15 0.13 0.51 0.64 0.59 0.04 0.45 0.28 0.20 0 1 2 3 Q1 '14 Q2 '14 Q3 '14 Others SE Asia N. America M. East* EU Russia 2.64 $bn 2.81 2.61 m t 3.87 3.84 Share in Q3’14 8% 2% 23% 5% 16% 47% *Incl. Turkey 3.58 STEEL PRODUCT SALES BY REGION REVENUE BY REGION NLMK SALES TO THE RUSSIAN MARKET 72% 13% 14% 0% 20% 40% 60% 80% 100% Sales by industriesin Q3'14 Pipe producers Machine building Construction andinfrastructure 30% 56% 14% 0% 20% 40% 60% 80% 100% Sales by producttype in Q3'14 Semi-finished Flat steel Long products andmetalware by sector by product type
450 -26 370 -28 374 -26 -100 0 100 200 300 400 500 RevenueQ1 '14 EBITDAQ1 '14 RevenueQ2 '14 EBITDAQ2 '14 RevenueQ3 '14 EBITDAQ3 '14 FOREIGN ASSETS PERFORMANCE 22 NBH FINANCIAL RESULTS $ m NLMK USA AND NLMK DANSTEEL ROLLED PRODUCT SALES 0.25 0.30 0.31 0.13 0.16 0.14 0.07 0.08 0.08 0.10 0.10 0.09 0.56 0.64 0.62 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0 0.1 0.2 0.3 0.4 0.5 Q1 '14 Q2 '14 Q3 '14 HRC CRC Coated steel Thick plates(NLMK Dansteel) NBH ROLLED PRODUCT SALES 0.17 0.15 0.16 0.02 0.01 0.01 0.09 0.08 0.07 0.18 0.16 0.17 0.45 0.41 0.41 0.00 0.10 0.20 0.30 0.40 0.50 0 0.1 0.2 0.3 Q1 '14 Q2 '14 Q3 '14 HRC CRC Coated Thick plates m t SLAB SALES BY THE STEEL SEGMENT 0.81 0.54 0.40 0.48 0.43 0.46 0.11 0.12 0.11 0.37 0.32 0.58 1.77 1.41 1.54 0.00 0.50 1.00 1.50 2.00 - 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Q1 '14 Q2 '14 Q3 '14 To third parties NBH NLMK Dansteel NLMK USA m t m t
SEGMENT RESULTS OVERVIEW 23 REVENUE FROM THIRD PARTIES BYSEGMENT SEGMENT RESULTS CHANGE QOQ $m 1,728 1,636 430 378 117 70 533 523 0 500 1,000 1,500 2,000 2,500 3,000 Q2'14 Q3'14 Steel segment Long products segment Mining segment Foreign rolled products segment -12% -19% -5% -2% -14% -7% -7% 0% Steel segment Mining segment Revenue Production expenses Revenue Revenue Revenue Production expenses Production expenses Production expenses Long productssegment Foreign rolled products segment 83 214 187 153 262 353 455 20 23 40 12 7 52 77 215 227 190 228 209 185 145 26 -2 -2 -14 -33 -14 -20 -26 -62 -35 30 23 19 36 -$100 $100 $300 $500 $700 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Foreign rolled product segment Other operations including intersegmental Mining segment Long products segment Steel segment $m 409 379 400 318 594 468 EBITDA BY SEGMENT2013-2014 693
24 CASH COST OF SLABS SLAB CONSOLIDATED CASH COST STRUCTURE (AT LIPETSK SITE) Cost item Q3 ’14 Q2 ’14 Δ, $/t Coke and coking coal $77 $79 -$2 Iron ore $49 $56 -$7 Scrap $31 $32 -$1 Other materials $29 $30 -$1 Electricity $17 $19 -$2 Natural gas $18 $20 -$2 Personnel $27 $28 -$1 Other expenses $46 $43 +$3 Total $295 $308 -$13 CASH COST OF SLABS (AT LIPETSK SITE), 2012-2014 Period $/t Q1 ’12 $395 Q2 ’12 $411 Q3 '12 $383 Q4 '12 $361 2012 $388 Q1 '13 $364 Q2 '13 $348 Q3 '13 $329 Q4 '13 $349 2013 $348 Q1 '14 $310 Q2 '14 $308 Q3 '14 $295
25 1as of 30.09.2014 2as of30.06.2014 SEGMENT INFORMATIONQ3 2014(million USD) Revenue from external customers1 6365233787002 6072 607Intersegment revenue373115178666(666) Gross profit5763997159(1)871(65)807Operating income/(loss)312(67)49127(1)421(19)402as % of net sales16%(13%)10%51%15% Income / (loss) from continuing operations before minority interest378(165)2331721619(282)337as % of net sales19%(31%)47%69%13% Segment assets including goodwill111 3501 7862 3602 04113817 674(3 661)14 013Q2 2014(million USD) Revenue from external customers1 72853343011702 8082 808Intersegment revenue271101189561(561) Gross profit4662474208(0)771(44)727Operating income/(loss)207(1)23168(1)396(14)382as % of net sales10%(0%)4%55%14% Income / (loss) from continuing operations before minority interest469(13)(2)990555(336)219as % of net sales23%(2%)(0%)32%8% Segment assets including goodwill212 7371 8672 6612 33712119 724(3 860)15 863TotalsIntersegmental operations and balancesConsolidatedSteelForeign rolled productsLong productsMiningAll otherTotalsIntersegmental operations and balancesConsolidatedSteelForeign rolled productsLong productsMiningAll other
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME 26 Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures (with the exception of Q1) are derived by computational method, including for segment reporting. Q3 2014Q2 20149M 20149M 2013(mln USD)+ / -%+ / -% Sales revenue2 6072 808(201)(7%)8 0538 405(352)(4%) Production cost(1 592)(1 869)277(15%)(5 286)(6 175)889(14%) Depreciation and amortization(208)(212)4(2%)(620)(656)37(6%) Gross profit8077278011%2 1471 57357437% General and administrative expenses(80)(84)4(5%)(257)(339)82(24%) Selling expenses(207)(225)19(8%)(644)(696)52(8%) Taxes other than income tax(35)(35)(0)1%(110)(97)(13)14% Impairment losses(83)(83)(83)(83) Operating income402382205%1 053440613139% Gain / (loss) on disposals of property, plant and equipment(8)(3)(5)155%(12)(17)5(27%) Gains / (losses) on investments3843441231880% Interest income119223%2632(6)(18%) Interest expense(34)(33)(1)2%(99)(80)(19)23% Foreign currency exchange loss, net73(62)135(217%)572136174% Other expense, net(32)(11)(21)185%(50)(26)(25)97% Income from continuing operations before income tax44828516357%1 015393623159% Income tax(111)(66)(45)69%(242)(186)(56)30% Equity in net earnings/(losses) of associate(41)(60)19(146)0(146) Net income29515913786%627207420203% Less: Net loss / (income) attributable to the non-controlling interest(15)(0)(15)(14)2(16)(662%) Net (loss) / income attributable to OJSC Novolipetsk Steel stockholders28115812277%613209404193% EBITDA6935949917%1 7561 09665960% Q3 2014/Q2 20149M 2014/9M 2013
CONSOLIDATED CASH FLOW STATEMENT Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures (with the exception of Q1) are derived by computational method, including for segment reporting. 28 Q3 2014Q2 20149M 20149M 2013(mln. USD)+ / -%+ / -% Cash flow from operating activities Net income29515913786%627207420203% Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization208212(4)(2%)620656(37)(6%) Loss on disposals of property, plant and equipment835155%1217(5)(27%) (Gain)/loss on investments(38)(4)(34)863%(41)(23)(18)80% Interest income(11)(9)(2)23%(26)(32)6(18%) Interest expense343312%99801923% Equity in net ernings of associate4160(19)(32%)146(0)146Defferd income tax (benefit)/expense027(27)(100%)2020(1) Loss / (income) on forward contracts11(4)15(375%)13(7)20(277%) Loss of impairment83838383Other movements(42)7(49)(703%)(41)17(58)(348%) Changes in operating assets and liabilitiesIncrease in accounts receivables(42)72(114)(158%)(198)(417)219(53%) Increase in inventories(366)102(468)(459%)(34)152(187)(123%) Decrease/(increase) in other current assets33012%(5)6(10)(184%) Increase in accounts payable and oher liabilities9(23)32(140%)(17)333(350)(105%) Increase/(decrease) in current income tax payable32(10)42(437%)36211573% Cash provided from operating activities2271 2931 03026326% Interest received109111%2424Interest paid(42)(20)(22)107%(103)(103) Net cash provided from operating activities*194618(424)(69%)1 21398722623% Cash flow from investing activities Proceeds from sale of property, plant and equipment(1)3(4)(136%)53277% Purchases and construction of property, plant and equipment(158)(151)(7)5%(439)(658)219(33%) Proceeds from sale / (purchases) of investments, net451133297%(14)19(33) (Placement) / withdrawal of bank deposits, net109(139)248(178%)(213)(403)190Acquisition of additional stake in existing subsidiary(10)10(100%) Net cash used in investing activities(5)(276)271(98%)(660)(1 002)342(34%) 0Cash flow from financing activities Proceeds from borrowings and notes payable19910109%301 664(1 634)(98%) Repayments of borrowings and notes payable(310)(144)(166)115%(602)(1 666)1 064(64%) Capital lease payments(4)(6)2(33%)(15)(19)4(22%) Dividends to shareholders(3)(111)108(115)(113)(1)1% Net cash used in financing activities(298)(252)(46)18%(702)(135)(567) Net increase / (decrease) in cash and cash equivalents(108)91(199)(220%)(149)(150)1Effect of exchange rate changes on cash and cash equivalents(16)18(34)(187%)(7)34(41)(119%) Cash and cash equivalents at the beginning of the period93983010913%970951192% Cash and cash equivalents at the end of the period815939(124)(13%)815835(21)(2%) Q3 2014/Q2 20149M 2014/9M 2013
28 CONSOLIDATED BALANCE SHEETas at 30.09.2014as at 30.06.2014as at 31.03.2014as at 31.12.2013as at 31.12.2012as at 31.12.2011(mln. USD) ASSETSCurrent assets4 7815 1384 9664 7815 4695 504Cash and cash equivalents815939830815951797Short-term investments668792753668107227Accounts receivable, net1 3711 5611 5441 3711 4911 573Inventories, net1 8221 7351 7311 8222 8272 828Deferred income tax assets959690956319Other current assets, net101617103059Non-current assets 9 23310 72510 2419 23312 98811 753Long-term investments, net415466443415198Property, plant and equipment, net8 2599 6109 1628 25911 75310 570Intangible assets789311078142159Goodwill391452428391786760Other non-current assets, net556239553819Deferred income tax assets35435835250237Total assets14 01315 86315 20614 01318 45817 257LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities2 0952 3072 2422 0953 3022 940Accounts payable and other liabilities1 1131 1251 0681 1131 4621 623Short-term borrowings9301 1571 1419301 8161 306Current income tax liability512533512411Non-current liabilities2 9973 3293 3612 9974 0654 212Long-term borrowings2 3552 6762 7432 3552 8163 074Deferred income tax liability541602566541792714Other long-term liabilities1015152101457425Total liabilities5 0915 6355 6035 0917 3677 152Stockholders’ equityCommon stock221221221221221221Statutory reserve101010101010Additional paid-in capital257257257257306306Other comprehensive income(3 621)(2 159)(2 739)(3 621)(997)(1 489) Retained earnings12 01911 87311 82912 01911 58211 099NLMK stockholders’ equity8 88610 2029 5798 88611 12310 147Non-controlling interest36262536(33)(42) Total stockholders’ equity8 92210 2289 6038 92211 09010 105Total liabilities and stockholders’ equity14 01315 86315 20614 01318 45817 257
www.nlmk.com NLMK Investor Relations Russia, 115054, Moscow 18, Bakhrushinastr, bldg1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com

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Presentation q3 2014 (us gaap) eng nov 2014 +

  • 1.
    1 Moscow, 11November 2014 Q3 AND 9M’14 US GAAP CONSOLIDATED FINANCIAL RESULTS
  • 2.
    This document isconfidential 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 thatforward-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 areconsistent 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 DISCLAIMER
  • 3.
    CONTENT 1. Keyresults 2. Financial highlights 3. Segment results 3
  • 4.
    OPERATING RESULTS •GROWTHOF UTILIZATION RATES IN Q3’14: oNLMK Group: 96% (+2 p.p. qoq), key drivers: ◦Lipetsk site (Steel Segment): +2 p.p. ◦NLMK USA: +10 p.p. •Q3’14 STEEL OUTPUT GROWTH: o4.1 m t, +10%qoq •SALES IN Q3’14: oSales to third parties: 3.6 m t (-7% qoq) oOne-off decrease in sales due to a prolonged revenue recognition period for Long Products segment products oSales growth in Q4 by 2-5% 4 3.0 3.1 3.1 3.2 3.1 2.9 3.2 0.5 0.5 0.6 0.7 0.7 0.7 0.8 0.2 0.2 0.2 0.2 0.2 0.2 0.2 3.7 3.8 3.9 4.1 3.9 3.8 4.1 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Steel segment Long products segment Foreign rolled product segment * NLMK Verona production volumes excluded from total since Q4’13 STEEL OUTPUT* m t 81% 85% 98% 94% 91% 85% 100% 96% 50% 60% 70% 80% 90% 100% NLMK USA NLMK Longproducts Lipetsk site NLMK Group Q2'14 Q3'14 Global average utilization rate 75% UTILIZATION RATES BY SITE Sources: global utilization rate as per WSA data SALES 1,148 1,256 1,189 1,331 1,518 1,372 1,388 1,061 1,022 3,867 480 3,835 454 3,583 684 Q1' 14externalsales Q1' 14intra- groupsales Q2' 14externalsales Q2' 14intra- groupsales Q3' 14externalsales Q3' 14intra- groupsales Semis Ordinaryproducts HVA products Slab sales tosubsidiaries ‘000 t
  • 5.
    0.74 0.74 0.81 0.84 0.74 0.77 0.90 0.77 0.77 0.87 0.94 0.36 0.45 0.43 0.39 0.42 0.45 0.52 0.52 0.52 0.62 0.52 1.10 1.20 1.26 1.32 1.32 1.41 1.60 1.46 1.55 1.74 1.69 0% 10% 20% 30% 40% 50% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Semi-finished products Flat products Long products TOTAL Russian market share (r.h.) •STABLE POSITIONS IN THE RUSSIAN MARKET oHigh sales in Russia in Q3’14: 1.69 m t (+6% yoy), share: 47%, growth qoqand yoy o9M’14: growth of sales in Russia: +15% yoy: ◦Flat steel, including HVA* products: +7% yoy ◦Long products driven by NLMK Kaluga: +20% yoy ◦Semi-finished products: +39% yoy •INTERNATIONAL MARKETS DEVELOPMENTS oSales of the foreign assets grew by +11% yoy** •TARGETED SEGMENTS DEVELOPMENT IN ACCORDANCE WITH STRATEGY 2017 oNLMK EU Strip: sales of flat products for automotive in Europe went up to 0.323 m t (+15% yoy, 42% of sales in 9M’14) oNLMK EU Plates: sales of niche plates went up to 0.150 m t (+53% yoy, 18% of sales in 9M’14) 5 STRATEGIC MARKETS FOREIGN ASSET SALES ** m t NLMK SALES IN RUSSIA Total sales 43% 47% *HVA-high value added products. HVAincludes cold-rolled, galvanized, pre-painted and electrical steel ** Sales of foreign assets include sales of NBH companies 62% 58% 38% 42% 737 764 0 200 400 600 800 1000 9M'13 9M'14 Automotive Other industries NLMK EU STRIP 000’ t NLMK USA 000’ t 87% 82% 13% 18% 746 858 0 200 400 600 800 1000 9M'13 9M'14 Q&T / niche thick plates Ordinary grades Итого NLMK EU PLATE 000’ t 1,362 1,533 0 400 800 1200 1600 2000 9M'13 9M'14 Flat steel 45%
  • 6.
    FINANCIAL HIGHLIGHTS 6 •Q3’14 OPERATING RESULTS oRevenue$2,607m(-7% qoq) oEBITDA $693 m(+17% qoq) oEBITDA margin 27% (+6 p.p.) oNet debt$1,803m(-14% qoq) oNet debt/12M EBITDA 0.83х •ONGOING PROFITABILITY GROWTH •CONSISTENT IMPLEMENTATION OF OPERATIONAL EFFICIENCY PROGRAMS oQ3’14 effect totaled $50 m (compared to 2013) o9M’14 cost saving reached $183 m -approximately 80% of the Strategy 2017 target (excluding the ruble weakening effect: 88%) •9M’14 OPERATING RESULTS oRevenue$8,053m(-4% yoy) oEBITDA $1,756 m(+60% yoy) oEBITDA margin 22% (+9 p.p. yoy) EBITDA MARGIN, % 11% 14% 14% 16% 18% 21% 27% 0% 5% 10% 15% 20% 25% 30% Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 6 9M’14 OPERATIONAL EFFICIENCY GAINS BY SEGMENT 61% 6% 11% 7% 16% Steel segment Long products segment Mining segment Foreign rolled productssegment NLMK Belgium Holdings $183m
  • 7.
    CONTENT 1. Keyresults 2. Financial highlights 3. Segment results 7
  • 8.
    PROFITABILITY 8 •Q3’14EBITDA: $693 M (+17% QOQ) •Q3’14 EBITDA MARGIN: 27% oEfficiency improvement programmes oWidened spreads between prices for steel products and raw materials oWeaker RUB exchange rate •STEEL SEGMENT oIncreased demand for semi-finished products •LONG PRODUCTS SEGMENT oDecrease in the share of direct sales -longer period of revenue recognition •MINING SEGMENT oDecline in iron ore prices •FOREIGN ROLLED PRODUCTS SEGMENT oSeasonal reduction in steel consumption in the EU market oStable sales in the US market EBITDA CHANGE BY SEGMENT (QOQ) 594 +102 +25 -40 +17 -5 693 400 500 600 700 800 Q2'14 Steel segment Long productssegment Mining segment Foreign rolledproductssegment Other operationsandintersegmental Q3'14 $ m SEGMENT CONTRIBUTION TO EBITDA 455 77 145 36 -20 693 200 400 600 800 Steel segment Long productssegment Mining segment Foreign rolledproductssegment Other operationsandintersegmental Q3'14 $ m
  • 9.
    EBITDA Working capitalchanges Other non-cash operations Income tax Net interest * NET OPERATING CASH FLOW Capital expenditures ** FREE CASH FLOW TO THE FIRM Net repayments of borrowings/attraction of funds FREE CASH FLOW TO EQUITY Change in deposits and financial investment FX rate change CHANGE IN CASH CASH FLOW IN Q3’14 9 Q3‘14 CASH FLOW BRIDGE •ONE-OFF DECREASE IN Q3’14 OPERATING CASH FLOW TO $194 M oQ3’14 EBITDA $693m(+17% qoq) oWorking capital increase by $364 m due to one-off factors: ◦Seasonal accumulation of winter stock(scrap and NLMK USA slabs) ◦Delayed recognition of Long Products segment revenue ◦Stock accumulation at NLMK Kaluga –preparation for mastering new types of products ◦Impact of RUB exchange rate in terms of working capital of international assets (>$100 m) •CONSERATIVE INVESTMENT PROGRAM oQ3’14 capex: $158 m (+5% qoqand-44% yoy) o9M’14 capex: $439 m(-33% yoy) o2014 capex:$650-700 m o2015E capex:$800-900 m oSource of investment financing –operational cash flow $ m -124 -19 149 -254 -290 36 -158 194 -33 -111 9 -364 693 * Including interest paid (w/o capitalized interest) of$42 m and interest received of$10 m ** Including capitalized interest of$16m
  • 10.
    FREE CASH FLOWGROWTH 10 •STRUCTURAL GROWTH IN BUSINESS PROFITABILITY oSizable gains coming from operational efficiency programs oEffects from investment projects oGrowth in free cash flow available to shareholders/creditors •LOWER CAPITAL INTENSITY BUSINESS •LOWER DEBT LOAD oTarget Net debt / EBITDA achieved •POTENTIAL DIVIDENT PAYMENT GROWTH 1.8 1.8 1.2 1.2 -2.0 -1.5 -0.8 -0.4 -0.2 0.4 0.4 0.8 2011 2012 2013 9М'14 Operational cash flow Capex Free cash flow to the firm CASH FLOW DYNAMICS $bn 4.4 4.6 4.2 3.3 3.4 3.6 2.7 1.8 1.5 1.9 1.8 0.8 0.5 1.0 1.5 2.0 0 1 2 3 4 5 2011 2012 2013 9М'14 Financial debt Net Debt Net Debt/EBITDA ratio LOWER DEBT LOAD $bn
  • 11.
    2.68 2.36 1.16 -0.29 -0.26 0.93 0 1 2 3 4 5 30 Jun '14 Net settlements ofdebt FX rate changeimpact 30 Sep '14 ST debt LT debt DEBT POSITION 11 •REDUCTION IN NET DEBT, HIGH LIQUIDITY LEVEL PRESERVED oNet debt $1.80bn(-14% qoq) oGross debt$3.29bn(-14% qoq) oCash and equivalents*$1.48bn(-14% qoq) oNet debt/ 12M EBITDA 0.83х(-0.31 p. qoq) CHANGE IN DEBT POSITION IN Q3’14 NET DEBT CHANGE IN Q3’14 MATURITY AND NET DEBT/EBITDA $bn Weighted average maturity 1.93 2.15 1.87 1.80 1.39 1.14 0.83 0.0 0.5 1.0 1.5 2.0 2.5 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Strategy 2017 target –1.0 Net debt/EBITDA 3.3 3.4 3.6 3.3 3.2 3.0 2.9 0.0 1.0 2.0 3.0 4.0 5.0 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 * Cash and equivalents and short term investments 2.10 0.19 0.16 0.26 1.80 1.0 1.5 2.0 2.5 30 Jun '14 Operating cashflow Capex FX rate and otherfactors 30 Sep '14 $bn 3.83 3.29
  • 12.
    423 748 369 324 817 560 $0 $200 $400 $600 $800 $1,000 Q4 2014 2015 2016 2017 2018 2019 andonward Other debt Revolving credit lines for working capital financing Eurobonds (USD) ECA financing and investment credits Ruble bonds LIQUIDITY AND DEBT SETTLEMENT 12 •STRONG LIQUIDITY POSITION •COMFORTABLE MATURITY SCHEDULE oShort term deb$0.93bn ◦Ruble bonds ◦Revolving credit lines for working capital financing ◦ECA financing oLong term debt$2.36bn ◦Eurobonds and ruble bonds ◦Long term part of ECA financing TOTAL DEBT MATURITY SCHEDULE*** INTEREST EXPENSES** $m 1,483 898 2,522 423 173 117 185 $0 $1,000 $2,000 $3,000 $4,000 $5,000 Liquid assets Q3 '14 Q4 '14 Q1 '15 Q2 '15 12M $m Undrawn committed credit lines Cash and equivalents LIQUID ASSETS AND SHORT-TERM DEBT MATURITY* 31 27 22 33 32 33 32 33 35 35 22 21 17 16 0% 5% 10% 15% 20% 25% 0 10 20 30 40 50 60 70 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Non-capitalized interest expense (lhs) Capitalized interest expense (lhs) Interest expense to EBITDA (rhs) * ST maturity payments without interest accrued ** Quarterly figures are derived by computational method on the basis of quarterly reports *** Maturity payments do not include interest payments $ m
  • 13.
    Q4’14 OUTLOOK •MARKET oRussia –seasonal slowdown in the construction sector oEurope –seasonal recovery in demand oUSA –stable market situation •OPERATIONAL RESULTS oExpected Group crude steel production: 4.0 m t oSales volumes will increase by 2-5% 13
  • 14.
    CONTENT 1. Keyresults 2. Financial highlights 3. Segment results 14
  • 15.
    1.66 1.68 1.53 1.60 1.74 1.73 1.64 0.35 0.37 0.47 0.21 0.30 0.27 0.37 0.08 0.21 0.19 0.15 0.26 0.35 0.45 0.0 0.5 1.0 1.5 2.0 2.5 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Revenue from intercompany sales Revenue from sales to third parties EBITDA 4% 10% 9% 8% 13% 18% 23% EBITDA margin 24% 18% 6% 5% 6% 5% 5% 9% 12% 9% Iron ore materials Coke and coal Scrap Ferroalloys Other raw materials Electricity Natural gas Other energy resources Personnel costs Other expenses and changes in inventories Depreciation STEEL SEGMENT •STABLE TOTAL REVENUE IN Q3’14 QOQ oHigher total sales volumes (+6% qoq) oIncreased slab deliveries to the Group’s foreign companies (+50%) and to NBH (+7%) oLower average sales prices •EBITDA MARGIN INCREASED TO 23% oMaximum steelmaking capacity utilization rates oEfficiency improvement programmes oWidened spreads between prices for steel and raw materials COST OF SALES, Q3’14 SEGMENT REVENUE ANDEBITDA SALES AND REVENUE FROM THIRD PARTIES $ bn 15 8% 8% 6% 7% 8% 8% 17% 16% 15% 15% 26% 26% 21% 21% 36% 39% 30% 33% 7% 6% 0% 20% 40% 60% 80% 100% SalesQ3' 14 SalesQ2' 14 RevenueQ3' 14 RevenueQ2' 14 Income from otheroperations* Pig iron Slabs HRC CRC Galvanized Pre-painted Dynamo Transformer 2.351 m t $1,636 m * Revenue from the sale of other products and services 2.459m t $1,728m $1,432 m
  • 16.
    288 314 355 371 337 430 378 59 113 114 102 57 101 115 20 23 40 12 7 52 77 0 70 140 210 280 350 420 490 560 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Revenue from intra-group sales Revenue from third parties EBITDA 6% 5% 8% 3% 2% 10% 16% EBITDA margin 67% 3% 1% 8% 9% 5% 7% Scrap Ferroalloys Other raw materials Electricity Personnel Other expenses Depreciation $396 m LONG PRODUCTS SEGMENT •SALES VOLUME DECREASE BY 18% oDecrease in the share of direct sales –longer revenue recognition period oAccumulation of stock at NLMK Kaluga related to activities aimed at mastering new product types •EXTERNAL REVENUE DECRESE BY 12% oFavourablepricing environment •EBITDA MARGIN UP TO 16% oSustainably high capacity utilization rates oWidened spreads between rebar and scrap prices SEGMENT REVENUE AND EBITDA THIRD PARTY SALES AND REVENUE STRUCTURE $ m 16 COST OF SALES IN Q3 ‘14 * Revenue from intra-group sales is represented mostly by ferrous scrap deliveries to the Lipetsk site 14% 12% 16% 13% 11% 11% 8% 8% 75% 77% 74% 76% 0% 20% 40% 60% 80% 100% Sales volumeQ3 '14 Sales volumeQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Other operations* Long products Billets Metalware 739‘000 t $430 m * Revenue from other products $378m 608‘000 t
  • 17.
    92 100 86 94 88 117 70 245 249 226 259 229 189 178 215 227 190 228 209 185 145 0 100 200 300 400 500 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Revenue from intersegmental sales Revenue from third parties EBITDA 64% 65% 61% 65% 66% 60% 58% EBITDA margin 7% 23% 6% 23% 21% 19% Raw materials Electricity Natural gas Other energy resources Personnel Other expenses Depreciation MINING SEGMENT •REVENUE DECLINE BY 19% QOQ oDecline in iron ore prices (15-20% qoq) oStable iron ore sales at 4 m t, incl.: ◦3.2 m t(+16% qoq) –to the Lipetsk site ◦0.8m t(-36% qoq) –to third parties •EBITDA MARGIN AT 58% oLower global iron ore prices oEfficiency improvement programmesand increase in equipment productivity SALES AND REVENUE STRUCTURE 17 COST OF SALES IN Q3‘14 79% 70% 68% 60% 21% 33% 26% 36% 0% 20% 40% 60% 80% 100% SalesvolumesQ3 '14 SalesvolumesQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Otheroperations* Iron ore salesto third parties Iron ore salesto Lipetsk site 4,004kt $306 m $248 m 3,970kt * Other operations include limestone and dolomite sales SEGMENT REVENUE AND EBITDA $m $89 m
  • 18.
    817 730 750 445 471 533 523 -26 -62 -35 30 23 19 36 -3% -9% -5% 7% 5% 4% 7% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% -200 0 200 400 600 800 1,000 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Revenue EBITDA EBITDA margin (r.h.) FOREIGN ROLLED PRODUCTS SEGMENT •SEGMENT SALES DECLINE BY 3% QOQ oStable NLMK USA sales volumes as favourablemarket conditions persist oSeasonal decline in thick plate sales (NLMK Dansteel) by 13% qoqto 90,000 t •REVENUE DOWN BY 2% QOQ •SEGMENT PROFITABILITY GROWTH oWidened spreads between prices for slabs and rolled products oEfficiency improvement programmes NLMK USA SALES AND REVENUE STRUCTURE 18 $ m SEGMENT REVENUE AND EBITDA 58% 56% 51% 49% 26% 29% 27% 30% 15% 14% 16% 16% 5% 5% 0% 20% 40% 60% 80% 100% SalesvolumeQ3 '14 SalesvolumeQ2 '14 RevenueQ3 '14 RevenueQ2 '14 Other operations Pre-painted CRC HRC Semi-finished 540‘000 t $443 m $445 m 534 ‘000 t
  • 19.
  • 20.
    SALES STRUCTURE 20 •GROWTH OF INTERCOMPANY SLAB SALES +50% QOQ •INCREASE OF SLAB SALES TO NBH TO 0.46 M T (+7% QOQ) •Q3’14: PIG IRON SALES WENT UP TO 97,000 T •LONG PRODUCT SALES DECREASE –LONGER SALES RECOGNITION PERIOD (Q4’14) SALES STRUCTURE BY PRODUCT REVENUE BY PRODUCT SALES MIX CHANGE BY PRODUCT 13% 15% 13% 3% 4% 3% 3% 3% 3% 6% 6% 6% 13% 14% 15% 22% 25% 25% 34% 25% 24% Q1'14 Q2'14 Q3'14 Pig iron Slabs Billets HRC Thick plates CRC Galvanized Pre-painted Electrical Long products Metalware 3.87 3.84 m t 3.58 10% 12% 11% 5% 6% 6% 5% 5% 5% 7% 7% 8% 13% 14% 14% 19% 21% 22% 27% 20% 19% 9% 9% 8% Q1'14 Q2'14 Q3'14 0% 20% 40% 60% 80% 100% Other products* Pig iron Slabs Billets HRC Thick plates CRC Galvanized Pre-painted Electrical Long products Metalware $2.81 bn $2.64bn $2.61 bn -42% -22% -19% -13% -12% -5% -4% -3% -1% -1% 5% x22 NGO steel Billets Long products Thick plates Slabs Galvanized HRC Metalware CRC Pre-painted GO steel Pig Iron Sales changeqoq
  • 21.
    SALES GEOGRAPHY 21 •SALES IN Q3 ’14: 3.6 M T (-7% QOQ) oStable sales to the Russian market: 1.7 m t ◦Flat steel sales 0.945 m t (+9% qoq) oSales to export markets: 1.9 m t (-10% qoq) ◦Sales to Europe decreased (-5% qoq) due to seasonal factor ◦Sales to N. America increased (+10% qoq) •IN 9M ’14 SALES: 11.3 M T (0% YOY) oSales to Russia increased to 5.0 m t (+15% yoy) oSales to USA increased (+46% yoy) oSales to Europe grew (+13% yoy) ◦Slab sales to NBH from Q4 ’13 recognized as external sales 1.55 1.74 1.69 0.74 0.71 0.67 0.24 0.24 0.22 0.75 0.64 0.70 0.52 0.36 0.13 0 1 2 3 4 Q1 '14 Q2 '14 Q3 '14 Others SE Asia N.America M. East* EU Russia 1.04 1.20 1.22 0.45 0.49 0.42 0.15 0.15 0.13 0.51 0.64 0.59 0.04 0.45 0.28 0.20 0 1 2 3 Q1 '14 Q2 '14 Q3 '14 Others SE Asia N. America M. East* EU Russia 2.64 $bn 2.81 2.61 m t 3.87 3.84 Share in Q3’14 8% 2% 23% 5% 16% 47% *Incl. Turkey 3.58 STEEL PRODUCT SALES BY REGION REVENUE BY REGION NLMK SALES TO THE RUSSIAN MARKET 72% 13% 14% 0% 20% 40% 60% 80% 100% Sales by industriesin Q3'14 Pipe producers Machine building Construction andinfrastructure 30% 56% 14% 0% 20% 40% 60% 80% 100% Sales by producttype in Q3'14 Semi-finished Flat steel Long products andmetalware by sector by product type
  • 22.
    450 -26 370 -28 374 -26 -100 0 100 200 300 400 500 RevenueQ1 '14 EBITDAQ1 '14 RevenueQ2 '14 EBITDAQ2 '14 RevenueQ3 '14 EBITDAQ3 '14 FOREIGN ASSETS PERFORMANCE 22 NBH FINANCIAL RESULTS $ m NLMK USA AND NLMK DANSTEEL ROLLED PRODUCT SALES 0.25 0.30 0.31 0.13 0.16 0.14 0.07 0.08 0.08 0.10 0.10 0.09 0.56 0.64 0.62 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0 0.1 0.2 0.3 0.4 0.5 Q1 '14 Q2 '14 Q3 '14 HRC CRC Coated steel Thick plates(NLMK Dansteel) NBH ROLLED PRODUCT SALES 0.17 0.15 0.16 0.02 0.01 0.01 0.09 0.08 0.07 0.18 0.16 0.17 0.45 0.41 0.41 0.00 0.10 0.20 0.30 0.40 0.50 0 0.1 0.2 0.3 Q1 '14 Q2 '14 Q3 '14 HRC CRC Coated Thick plates m t SLAB SALES BY THE STEEL SEGMENT 0.81 0.54 0.40 0.48 0.43 0.46 0.11 0.12 0.11 0.37 0.32 0.58 1.77 1.41 1.54 0.00 0.50 1.00 1.50 2.00 - 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Q1 '14 Q2 '14 Q3 '14 To third parties NBH NLMK Dansteel NLMK USA m t m t
  • 23.
    SEGMENT RESULTS OVERVIEW 23 REVENUE FROM THIRD PARTIES BYSEGMENT SEGMENT RESULTS CHANGE QOQ $m 1,728 1,636 430 378 117 70 533 523 0 500 1,000 1,500 2,000 2,500 3,000 Q2'14 Q3'14 Steel segment Long products segment Mining segment Foreign rolled products segment -12% -19% -5% -2% -14% -7% -7% 0% Steel segment Mining segment Revenue Production expenses Revenue Revenue Revenue Production expenses Production expenses Production expenses Long productssegment Foreign rolled products segment 83 214 187 153 262 353 455 20 23 40 12 7 52 77 215 227 190 228 209 185 145 26 -2 -2 -14 -33 -14 -20 -26 -62 -35 30 23 19 36 -$100 $100 $300 $500 $700 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Foreign rolled product segment Other operations including intersegmental Mining segment Long products segment Steel segment $m 409 379 400 318 594 468 EBITDA BY SEGMENT2013-2014 693
  • 24.
    24 CASH COSTOF SLABS SLAB CONSOLIDATED CASH COST STRUCTURE (AT LIPETSK SITE) Cost item Q3 ’14 Q2 ’14 Δ, $/t Coke and coking coal $77 $79 -$2 Iron ore $49 $56 -$7 Scrap $31 $32 -$1 Other materials $29 $30 -$1 Electricity $17 $19 -$2 Natural gas $18 $20 -$2 Personnel $27 $28 -$1 Other expenses $46 $43 +$3 Total $295 $308 -$13 CASH COST OF SLABS (AT LIPETSK SITE), 2012-2014 Period $/t Q1 ’12 $395 Q2 ’12 $411 Q3 '12 $383 Q4 '12 $361 2012 $388 Q1 '13 $364 Q2 '13 $348 Q3 '13 $329 Q4 '13 $349 2013 $348 Q1 '14 $310 Q2 '14 $308 Q3 '14 $295
  • 25.
    25 1as of30.09.2014 2as of30.06.2014 SEGMENT INFORMATIONQ3 2014(million USD) Revenue from external customers1 6365233787002 6072 607Intersegment revenue373115178666(666) Gross profit5763997159(1)871(65)807Operating income/(loss)312(67)49127(1)421(19)402as % of net sales16%(13%)10%51%15% Income / (loss) from continuing operations before minority interest378(165)2331721619(282)337as % of net sales19%(31%)47%69%13% Segment assets including goodwill111 3501 7862 3602 04113817 674(3 661)14 013Q2 2014(million USD) Revenue from external customers1 72853343011702 8082 808Intersegment revenue271101189561(561) Gross profit4662474208(0)771(44)727Operating income/(loss)207(1)23168(1)396(14)382as % of net sales10%(0%)4%55%14% Income / (loss) from continuing operations before minority interest469(13)(2)990555(336)219as % of net sales23%(2%)(0%)32%8% Segment assets including goodwill212 7371 8672 6612 33712119 724(3 860)15 863TotalsIntersegmental operations and balancesConsolidatedSteelForeign rolled productsLong productsMiningAll otherTotalsIntersegmental operations and balancesConsolidatedSteelForeign rolled productsLong productsMiningAll other
  • 26.
    QUARTERLY DATA: CONSOLIDATEDSTATEMENT OF INCOME 26 Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures (with the exception of Q1) are derived by computational method, including for segment reporting. Q3 2014Q2 20149M 20149M 2013(mln USD)+ / -%+ / -% Sales revenue2 6072 808(201)(7%)8 0538 405(352)(4%) Production cost(1 592)(1 869)277(15%)(5 286)(6 175)889(14%) Depreciation and amortization(208)(212)4(2%)(620)(656)37(6%) Gross profit8077278011%2 1471 57357437% General and administrative expenses(80)(84)4(5%)(257)(339)82(24%) Selling expenses(207)(225)19(8%)(644)(696)52(8%) Taxes other than income tax(35)(35)(0)1%(110)(97)(13)14% Impairment losses(83)(83)(83)(83) Operating income402382205%1 053440613139% Gain / (loss) on disposals of property, plant and equipment(8)(3)(5)155%(12)(17)5(27%) Gains / (losses) on investments3843441231880% Interest income119223%2632(6)(18%) Interest expense(34)(33)(1)2%(99)(80)(19)23% Foreign currency exchange loss, net73(62)135(217%)572136174% Other expense, net(32)(11)(21)185%(50)(26)(25)97% Income from continuing operations before income tax44828516357%1 015393623159% Income tax(111)(66)(45)69%(242)(186)(56)30% Equity in net earnings/(losses) of associate(41)(60)19(146)0(146) Net income29515913786%627207420203% Less: Net loss / (income) attributable to the non-controlling interest(15)(0)(15)(14)2(16)(662%) Net (loss) / income attributable to OJSC Novolipetsk Steel stockholders28115812277%613209404193% EBITDA6935949917%1 7561 09665960% Q3 2014/Q2 20149M 2014/9M 2013
  • 27.
    CONSOLIDATED CASH FLOWSTATEMENT Reporting periods of the Company are 3M, 6M, 9M and 12M. Quarterly figures (with the exception of Q1) are derived by computational method, including for segment reporting. 28 Q3 2014Q2 20149M 20149M 2013(mln. USD)+ / -%+ / -% Cash flow from operating activities Net income29515913786%627207420203% Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization208212(4)(2%)620656(37)(6%) Loss on disposals of property, plant and equipment835155%1217(5)(27%) (Gain)/loss on investments(38)(4)(34)863%(41)(23)(18)80% Interest income(11)(9)(2)23%(26)(32)6(18%) Interest expense343312%99801923% Equity in net ernings of associate4160(19)(32%)146(0)146Defferd income tax (benefit)/expense027(27)(100%)2020(1) Loss / (income) on forward contracts11(4)15(375%)13(7)20(277%) Loss of impairment83838383Other movements(42)7(49)(703%)(41)17(58)(348%) Changes in operating assets and liabilitiesIncrease in accounts receivables(42)72(114)(158%)(198)(417)219(53%) Increase in inventories(366)102(468)(459%)(34)152(187)(123%) Decrease/(increase) in other current assets33012%(5)6(10)(184%) Increase in accounts payable and oher liabilities9(23)32(140%)(17)333(350)(105%) Increase/(decrease) in current income tax payable32(10)42(437%)36211573% Cash provided from operating activities2271 2931 03026326% Interest received109111%2424Interest paid(42)(20)(22)107%(103)(103) Net cash provided from operating activities*194618(424)(69%)1 21398722623% Cash flow from investing activities Proceeds from sale of property, plant and equipment(1)3(4)(136%)53277% Purchases and construction of property, plant and equipment(158)(151)(7)5%(439)(658)219(33%) Proceeds from sale / (purchases) of investments, net451133297%(14)19(33) (Placement) / withdrawal of bank deposits, net109(139)248(178%)(213)(403)190Acquisition of additional stake in existing subsidiary(10)10(100%) Net cash used in investing activities(5)(276)271(98%)(660)(1 002)342(34%) 0Cash flow from financing activities Proceeds from borrowings and notes payable19910109%301 664(1 634)(98%) Repayments of borrowings and notes payable(310)(144)(166)115%(602)(1 666)1 064(64%) Capital lease payments(4)(6)2(33%)(15)(19)4(22%) Dividends to shareholders(3)(111)108(115)(113)(1)1% Net cash used in financing activities(298)(252)(46)18%(702)(135)(567) Net increase / (decrease) in cash and cash equivalents(108)91(199)(220%)(149)(150)1Effect of exchange rate changes on cash and cash equivalents(16)18(34)(187%)(7)34(41)(119%) Cash and cash equivalents at the beginning of the period93983010913%970951192% Cash and cash equivalents at the end of the period815939(124)(13%)815835(21)(2%) Q3 2014/Q2 20149M 2014/9M 2013
  • 28.
    28 CONSOLIDATED BALANCESHEETas at 30.09.2014as at 30.06.2014as at 31.03.2014as at 31.12.2013as at 31.12.2012as at 31.12.2011(mln. USD) ASSETSCurrent assets4 7815 1384 9664 7815 4695 504Cash and cash equivalents815939830815951797Short-term investments668792753668107227Accounts receivable, net1 3711 5611 5441 3711 4911 573Inventories, net1 8221 7351 7311 8222 8272 828Deferred income tax assets959690956319Other current assets, net101617103059Non-current assets 9 23310 72510 2419 23312 98811 753Long-term investments, net415466443415198Property, plant and equipment, net8 2599 6109 1628 25911 75310 570Intangible assets789311078142159Goodwill391452428391786760Other non-current assets, net556239553819Deferred income tax assets35435835250237Total assets14 01315 86315 20614 01318 45817 257LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities2 0952 3072 2422 0953 3022 940Accounts payable and other liabilities1 1131 1251 0681 1131 4621 623Short-term borrowings9301 1571 1419301 8161 306Current income tax liability512533512411Non-current liabilities2 9973 3293 3612 9974 0654 212Long-term borrowings2 3552 6762 7432 3552 8163 074Deferred income tax liability541602566541792714Other long-term liabilities1015152101457425Total liabilities5 0915 6355 6035 0917 3677 152Stockholders’ equityCommon stock221221221221221221Statutory reserve101010101010Additional paid-in capital257257257257306306Other comprehensive income(3 621)(2 159)(2 739)(3 621)(997)(1 489) Retained earnings12 01911 87311 82912 01911 58211 099NLMK stockholders’ equity8 88610 2029 5798 88611 12310 147Non-controlling interest36262536(33)(42) Total stockholders’ equity8 92210 2289 6038 92211 09010 105Total liabilities and stockholders’ equity14 01315 86315 20614 01318 45817 257
  • 29.
    www.nlmk.com NLMK InvestorRelations Russia, 115054, Moscow 18, Bakhrushinastr, bldg1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com