Evraz Plc · LSE:EVR
Evraz — FY2016 Earnings Presentation
26 slides from Evraz's earnings presentation, Mar 1, 2017
Slide 1: FY 2016 Financial Results
FY 2016 Financial Results 1 March 2017
Slide 2: Disclaimer
Disclaimer This 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 plc (“EVRAZ”) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.)
Slide 3: Core operations and distribution markets
Core operations and distribution markets No. 1 No. 1 No. 1 28%* - rail 27%* - LDP 72%* 14%* (rebar) No. 1 51%** among rail among rail in the rebar and among the & LDP suppliers in construction steel Russian coking suppliers in Russia market in Russia coal producers North America Consolidated revenue
Slide 4: Highlights
Highlights Alexander Frolov – Chief Executive Officer
Slide 5: Key themes
Key themes During 2016, we saw positive global trends in steel and Global steel and raw material prices, $/t bulk commodities with several spikes primarily driven by Slab, CFR East Asia, lhs Iron ore, Fines, 62% Fe, SPOT, CFR China, rhs developments in China Hard coking coal, spot, FOB Australia,
Slide 6: Safety as a base for business sustainability
Safety as a base for business sustainability Safety remains a key priority for EVRAZ EVRAZ substantially reduced number of fatalities over last five years Regrettably, 6 fatalities in 2016 LTIFR demonstrated mixed dynamics due to ongoing efforts on safety improvement and a better reporting s
Slide 7: EVRAZ strategic priorities
EVRAZ strategic priorities Global trends EVRAZ strategic priorities 1 Development of product portfolio and customer Global steel industry capacity base utilisation is expected to gradually improve over the medium term 2 Retention of low-cost position Iron ore market is expected to stabilise over
Slide 8: Development of product portfolio and customer base
Development of product portfolio and customer base Strong market positions is a base for value creation across EVRAZ key product groups Product Production in 2016 Priorities Russian rails, mt #1 N.A. rails, mt #1 0.9 Secure position in domestic markets and increase Rails 0.3 0.24 export shipment
Slide 9: Retention of low-cost position
Retention of low-cost position Vertically integrated business model supported by robust cost base Having low-cost operations is crucial for EVRAZ Significant progress in cash cost reduction due to implementation of cost-cutting initiatives amid rouble devaluation Enhanced cost positions*, $/t Av
Slide 10: Prudent CAPEX strategy
Prudent CAPEX strategy Significant CAPEX reduction over the last five years (both in development and maintenance) Over the medium term maintenance CAPEX will increase to support current capacities Development CAPEX will largely depend on market conditions and financing capabilities 53% of CA
Slide 11: Debt reduction
Debt reduction Debt repayment remains a priority over dividends and excessive CAPEX EVRAZ was able to reduce net debt by $1.7bn since 2013 and reach $4.8bn in 2016 Long-term target to reach 2.0x Net Debt/EBITDA level Net Leverage 3.5x 2.5x 3.7x 3.1x 2.0x - $1,732m 6,534 - $547m 5,814 5,349 4,8
Slide 12: Strategic priorities - FY 2016 deliverables
Strategic priorities - FY 2016 deliverables Key business priorities EBITDA effect* from customer focus initiatives of $169m achieved. Major effects are: Development of $46m – rails sales volumes increase 1 product portfolio and $43m – logistics optimisation customer base $15m – high quality
Slide 13: Financial Performance
Financial Performance Nikolay Ivanov – Chief Financial Officer
Slide 14: Performance improved
Performance improved Financial performance 2014 – 2016 EBITDA reached $1,542m, up 7.2% from $1,438m14000 13,061 50.0% in 2015, driving the EBITDA margin from 16.4% to 14000 12000 13,061 Revenue, $m EBITDA, $m EBITDA margin 45.0% 50.0% 20.0% due to numerous improvement initiatives 40.0% 45.0% 12000 1
Slide 15: FY 2016 FCF generation
FY 2016 FCF generation Free cash flow for the period is a positive $659m Net cash flow from operating activities contracted to $1,503m in 2016 from $1,622m in 2015 mainly due to lower release in working capital EBITDA bridge to Free cash flow* in 2016, $m 1,549 160 (183) 1,503 (23) (454) (428) 2
Slide 16: Debt management
Debt management Total debt was reduced by $763m to $5,961m via scheduled debt Maturity profile as of 31.12.2016*, $m YT (maturities only) repayments and liability management initiatives 2,229 2,229 Uncommitted credit lines RUB15 billion (c.$221m) 12.60% bonds due in 2021 were issued Committed cr
Slide 17: Development CAPEX
Development CAPEX Development CAPEX breakdown by segments, $m Over the last five years EVRAZ completed a substantial investment programme Coal 6% EVRAZ made good progress with the construction of an LDP mill at Regina, which should underpin its leadership Steel 21% position in LDP in 2017 The
Slide 18: Looking Forward
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Slide 19: Looking forward
Looking forward While market sentiment is positive, our outlook remains cautious. Key risks include the pace of steel capacity optimisation in China and the general health of the country’s economy To ensure our competitiveness, we remain vigilant in our cost control. We expect to keep the current
Slide 20: Operational update
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Slide 21: Significant presence in the Russian rail market
Significant presence in the Russian rail market Rail consumption in Russia reached 1.1mt in 2016, up EVRAZ’ rail shipments, kt 52% from 690kt in 2015, mainly driven by increased Russian operations Other operations demand from Russian Railways EVRAZ remained the core supplier to Russian Railways
Slide 22: Construction steel: robust market position in Russia
Construction steel: robust market position in Russia EVRAZ' construction steel sales volumes in Russia, kt Despite slower domestic shipments during the year, the Group sustained its strong positions in key high-value- 2015 2015 2016 2016 1,447 added product segments. Domestic beam market share 4,8
Slide 23: Semi-finished steel
Semi-finished steel Sales volumes of slabs & billets, kt EVRAZ has substantially increased value-added slabs and 2015 2016 2015 2016 billets sales to the domestic and export markets with average premium of $10-12/t to base grade margin 4,832 4,822 4,832 4,822 Lower total slab sales volumes (main
Slide 24: Russia's largest coking coal producer
Russia’s largest coking coal producer Overall revenues in the segment increased in 2016, due to Coal products sales by market, kt the recovery of global demand +2% Local coking coal prices improved in 2016, driven by global 15,210 15,568 benchmark trends 3864 3,731 Total EVRAZ maintained its l
Slide 25: Leading market positions in LDP & rail in North America
Leading market positions in LDP & rail in North America Despite fairly strong large-diameter pipe (LDP) market EVRAZ' steel products sales in North America in 2016, kt fundamentals during the reporting period, demand fell to (25)% 2,222 1.1 mt from 1.5 mt in 2015 because of pipeline project delays
Slide 26: Investor relations contact
London +44 207 832 8990 Moscow +7 495 232 1370 IR@evraz.com www.evraz.com 1 March 2017