Nlmk · RUS:NLMK
Nlmk — Q2 2011 Earnings Presentation
29 slides from Nlmk's earnings presentation, 2011
Slide 1: NLMK Q2 and H1 2011 Financial and Production Results
NLMK Q2 and H1 2011 Financial and Production Results US GAAP Consolidated Financial Statements
Slide 2: Disclaimer
Disclaimer This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor presentation of th e 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 docum
Slide 3: Key Highlights
KEY HIGHLIGHTS FINANCIAL PERFORMANCE EARNINGS PER SHARE 0.12 o Revenue: $/share 0.098 • Q2 2011 $2.982 bn (+26% q-o-q) 0.10 0.086 0.077 o Production cost: 0.08 0.065 • Q2 2011 $1.785 bn (+22% q-o-q) 0.06 o EBITDA: 0.04 0.025 • Q2 2011 $837 mln (+43% q-o-q) 0.02 o EBITDA margin: 0.00 • Q2 2011 28% (+
Slide 4: Production
PRODUCTION CRUDE STEEL PRODUCTION GROWTH CRUDE STEEL PRODUCTION o NLMK Group steel output: 3.0 m t, +3% q-o-q 3,500 ‘000 tonnes 157 137 113 164 160 3,000 o Lipetsk site – 2.4 m t, +3% q-o-q 492 2,500 454 501 448 472 o Long Products Division – 0.5 m t, +5% q-o-q 2,000 o NLMK Indiana – 0.2 m t, -2% q-
Slide 5: Sales and Revenue in Q2 2011
SALES AND REVENUE IN Q2 2011 SALES VOLUMES INCREASED BY 13% Q-O-Q SALES AND REVENUE BY REGIONS Q2 2011 o Seasonal growth of steel consumption and demand Sales – outer Revenue – ring 8% inner ring o HVA sales increased to 927,000 t (+5%) 4% 7% Russia 6% 10% 36% Europe GROWING EXPOSURE TO DOMESTIC MAR
Slide 6: Key Drivers
KEY DRIVERS STEEL PRICES GROWTH (+11% Q-O-Q) DOMESTIC MARKET SALES o Supported by seasonal uptick in demand 3500 NLMK quarterly sales share to o Cost push dynamics in the global steel market followed by the 3000 domestic market increase in global raw materials prices 2500 2000 GEOGRAPHICAL SALES STR
Slide 7: Production Costs
PRODUCTION COSTS PRODUCTION COSTS GROWTH LAGS BEHIND AV.SELLING CASH COSTS OF PRODUCTS PRICE 600 $ /t 527 o Impact from further growth in raw materials prices capped by 480 500 upstream vertical integration 408 431 406 386 o Depletion of low cost raw materials inventory formed in the 400 361 325 330
Slide 8: Debt Position
DEBT POSITION TOTAL DEBT $2.61 BILLION: SHORT TERM DEBT PAYMENT1 o ST debt $0.54 billion $ billion o LT debt $2.07 billion 0.6 0.14 0.62 3 RUR bond issues 0.4 0.17 EBRD loan LT part of PXF 0.15 0.2 $1.11 BILLION OF LIQUID FUNDS2 0.16 0 NET DEBT/ LTM EBITDA 0.57 Q1 12 Q3 11 Q4 11 Q2 12 Q3 11 - Q2 12
Slide 9: Investments
INVESTMENTS CRUDE STEEL CAPACITY GROWTH INVESTMENTS DYNAMICS* 600 o 40% increase in capacity to 17.3 m t per annum (2012) $ mln 522 480 500 o Quality improvement +30 new grades of steel 399 378 371 400 INCREASE IN FINISHED STEEL CAPACITY 300 o Rolling capacity growth 200 o HVA grades capacity increa
Slide 10: Q2 2011 Cash Flow Bridge
Q2 2011 CASH FLOW BRIDGE CHANGE IN CASH -66 Effect of exchange rate changes -49 Dividends -4 FREE CASH FLOW -17 Other financial operations 1 +221 Net borrowings +4 Acquisition and construction of PPE -522 CASH FLOW FROM OPERATIONS 280 Income tax -144 Other and non-cash operations 2 +18 Change in wor
Slide 11: Steel Invest and Finance Highlights
STEEL INVEST AND FINANCE HIGHLIGHTS* OPERATING RESULTS SIF SALES o Stable sales volumes 1,200 ‘000 t o Sales structure by product: 1,000 929 869 828 • 37% of sales – HRC and P&O, 800 717 719 • 20% - plates, 600 • 20% - CRC, 400 • 21% - coated steel. 200 o In Q2 NLMK slab sales to SIF grew to 719,000
Slide 12: Outlook
OUTLOOK NLMK GROUP Q3 2011 OUTLOOK o Steel production is expected to be ~ 2.9 m t o Further increase of HVA share in sales o Revenue growth is expected to be at 10-15% q-o-q o EBITDA margin is expected to be at 20-25% q-o-q FY 2011 OUTLOOK o Steel production is expected to be about 12.5 m t o Growth
Slide 13: Appendix: Investment Program and Segments Results
APPENDIX INVESTMENT PROGRAM AND SEGMENTS RESULTS 13
Slide 14: BF Production (2011)
BF PRODUCTION (2011) BLAST FURNACE PIG IRON PRODUCTION CAPACITY (LIPETSK) 14 million t o Location: Lipetsk 12.7 12 BF #7 launch in Q3 o Capacity: 3.4 m t pa 9.4 2011 10 o Goal: expand steel output at the main site 8 o Launch date: Q3 2011 6 4 CONSTRUCTION OF POWER PLANT 2 o Capacity: 150 MW - 2010 2
Slide 15: Steelmaking (2011)
STEELMAKING (2011) NEW CONVERTER STEELMAKING CAPACITY (LIPETSK) 14 million t 12.4 o Launch date: 2011, Lipetsk site 12 9.4 10 o Goal: processing of BF# 7 pig iron output 8 6 o Together with a new converter Novolipetsk total 4 steelmaking capacities will be 12.4 m t pa 2 - LADLE FURNACES and VACUUM D
Slide 16: Expansion of Rolling Capacities (2011)
EXPANSION OF ROLLING CAPACITIES (2011) EXPANSION OF HRC PRODUCTION FLAT STEEL PRODUCTION GROWTH o Location: Lipetsk site Установка Completed 60% o Upgrading of the existing Mill 2000 «печь-ковш» 50% Completed o Capacity growth: +400,000 tonnes by 2014 40% 30% 55% EXPANSION OF PLATE PRODUCTION 20% 40
Slide 17: High Grade Transformer Steel (2011-2012)
HIGH GRADE TRANSFORMER STEEL (2011-2012) PRODUCTION UPGRADES AT NOVOLIPETSK TRANSFORMER STEEL PRODUCTION CAPACITIES o Status: 80% complete 400 Установка High-permeability transformer .000 t 350 steel production «печь-ковш» Possible further o Capacity: about 64,000 t pa of high-permeability transform
Slide 18: Long Products (2012-13)
LONG PRODUCTS (2012-13) KALUGA MINI-MILL (EAF) STEEL AND FINISHED PRODUCT CAPACITY o Location: Kaluga region 4,0 Установка 3.8 3,5 million t «печь-ковш» o Capacity: 1.55 m t pa 3,0 2,5 2.2 100% o Total investments: c. $1.2 bn finished 2,0 products 80% 1,5 finished o Extended product mix for construc
Slide 19: Expansion of Iron Ore Production (2011-2014)
EXPANSION OF IRON ORE PRODUCTION (2011-2014) OPEN PIT EXPANSION IRON ORE PRODUCTION CAPACITIES Concentrate Pellets o Location: Stoilensky (Stary Oskol) 20 7 mln t mln t 6 o +30% growth in iron ore raw extraction 4 15 5 2 o Goal: maintain 100% self-sufficiency in low cost iron 4 10 ore 3 6 12 2 5 PEL
Slide 20: Segmental Performance
SEGMENTAL PERFORMANCE STEEL SEGMENT DROVE GROUP FINANCIALS IN Q2 2011 CONSOLIDATED PRODUCTION COST, Q2 2011 o Revenue from third parties $2.520 mln (84 of consolidated Iron ore 4% Coke and coal revenue) 11% o Operating profit $354 mln (51% of the Group operating Scrap profit ) 25% 18% Ferroalloys Ot
Slide 21: Steel Segment
STEEL SEGMENT НЛМК PRODUCTION AND SALES VOLUMES GROWTH SALES REVENUE FROM 3 rd PARTIES BY PRODUCT 3,000 Long products and billets $ mln 2,520 30 Dynamo steel HVA SALES REVENUE INCREASING 2,009 115 85 160 Transformer steel 2,000 38 138 109 78 386 Pre-painted 126 135 239 492 Galvanised OPERATING PROFI
Slide 22: Long Products Segment
LONG PRODUCTS SEGMENT НЛМК SEGMENT’S REVENUE INCREASING DUE TO CONSTRUCTION SALES REVENUE FROM 3 rd PARTIES BY PRODUCT SECTOR DEMAND IMPROVEMENT 400 $ mln 336 Q2 2011 OPERATING PROFIT DECREASING AS A RESULT OF 12 Scrap SCRAP PRICES GROWTH AND INCREASE OF KALUGA PLANT 300 260 60 Metallware ADMINISTRA
Slide 23: Mining Segment
MINING SEGMENT НЛМК PRODUCTION AND SALES GROWTH DUE TO ADDITIONAL SALES REVENUE FROM 3rd PARTIES BY PRODUCT BENEFECIATION SECTION (CAPACITY 2 MLN T) LAUNCH IN 40 $ mln Q2 36 Iron ore concentrate IMPROVING SEGMENT’S FINANCIAL INDICATORS DUE TO 30 Sinter ore SALES AND IRON ORE PRICES RISE 17 20 Limest
Slide 24: Coke-Chemical Segment
COKE-CHEMICAL SEGMENT SALES VOLUME AND SEGMENT PRODUCTS PRICE SALES REVENUE FROM 3 rd PARTIES BY PRODUCT INCREASING $ mln 100 90 Coke 75 70 COOKING COAL PRICES RISE AND AS A RESULT Chemical products 50 78 60 OPERATING MARGIN DECREASE 25 Other operations 2 4 9 8 0 Q1 2011 Q2 2011 (‘000 tonnes) Q2 Q1
Slide 25: Segmental Information
SEGMENTAL INFORMATION Q2 2011 Intersegmental Steel Long products Mining Coke-chemical All other Totals operations and Consolidated (million USD) balances Revenue from external customers 2,520 336 36 90 0.5 2,982 2,982 Intersegment revenue 47 199 364 277 887 (887) Gross profit 616 63 307 73 0.2 1,060
Slide 26: Consolidated Statement of Income
CONSOLIDATED STATEMENT OF INCOME Q2 2011 Q1 2011 Q2 2011/Q1 2011 H1 2011 H1 2010 H1 2011/H1 2010 (mln USD) +/- % +/- % Sales revenue 2,982 2,359 623 26% 5,341 3,853 1,488 39% 0% Production cost (1,785) (1,466) (319) 22% (3,250) (2,197) (1,054) 48% Depreciation and amortization (135) (124) (11) 9% 0%
Slide 27: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at as at as at 30.06.2011 31.03.2011 31.12.2010 30.09.2010 30.06.2010 31.03.2010 31.12.2009 31.12.2008 (mln. USD) ASSETS Current assets 4,811 4,438 4,105 4,372 4,150 4,091 3,877 5,346 Cash and cash equivalents 911 977 748 780 953 1,157 1,24
Slide 28: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q2 2011 Q1 2011 Q2 2011/Q1 2011 H1 2011 H1 2010 H1 2011/H1 2010 (mln. USD) +/- % +/- % Cash flow from operating activities Net income 591 381 210 55% 972 560 411 73% Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amo
Slide 29: Novolipetsk Steel (NLMK) Investor Relations
Novolipetsk Steel (NLMK) Investor relations Russia, 115054, Moscow Bakhrushina str, 18, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 www.nlmk.com