Evraz PLC · LSE:EVR
Evraz — Investor Day (November 2005)
31 slides from Evraz's investor day presentation, Nov 29, 2005
Slide 1: Analyst day
Presentation Analyst day 29 November 2005
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 Group S.A. (Evraz) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment act
Slide 3: Agenda
Agenda n Evraz Highlights n Strategic Overview n Financial Overview n Recent Corporate Developments n Palini e Bertoli n Vitkovice Steel n Neryungri Ugol n Eurobond n Corporate Governance 2
Slide 4: Evraz Highlights
Evraz Highlights Section 1
Slide 5: Evraz Highlights
Evraz Highlights n Among the 15 largest steel producers in the world n Russia’s largest producer of steel and steel products n Vertically integrated steel and mining business n Recent acquisitions of Palini e Bertoli and Vitkovice Steel n Produced 13.7 mt of crude steel in 2004 and 7.0 mt in 1H05 n
Slide 6: Strategic Overview
Strategic Overview Section 2
Slide 7: Our strategy
Our strategy STRATEGY ACTIONS n Enhance margin profile n Realisation of synergies from recent acquisitions and continued capex-driven efficiency improvements n Enhance product mix to expand Evraz’s position as a competitive exporter of semi- finished products n Achieve superior growth n Continue to
Slide 8: Top Russian steel producer
Top Russian steel producer Evraz’s main locations Top Russian steel producers Output1 (million tons) Russian Main ranking Company 2003 2004 1H05 products 1 Evraz Group 13.9 13.7 7.0 Long 2 MMK 11.5 11.3 5.5 Flat/long 3 Severstal 9.9 10.4 5.1 Flat/long 4 NLMK 8.9 9.1 4.1 Flat 5 Mechel 4.6 5.5 2.7 Lon
Slide 9: An integrated steel and mining platform
An integrated steel and mining platform (1) Mastercroft 100% Steel NTMK Zapsib NKMK Palini e Bertoli Vitkovice Steel 84.4% 95.4% 100% 75%+1 99% Neryungri Coal Raspadskaya Mine 12 Ugol Yuzhkuzbassugol 47.8%(2) 100% 100% 50% under common control but not consolidated Iron Ore KGOK Evrazruda VGOK Coking
Slide 10: Russia's growing construction industry
Russia’s growing construction industry n Russian steel consumption remains below global benchmarks n Construction sector output is forecasted to exceed GDP growth by 37% between 2004 and 2008 n Significant downstream capacity flexibility to capture migration to higher margin products for domestic ma
Slide 11: Unique position in rail products
Unique position in rail products The Russian Railways (RZD) opportunity n Railway products contributed 13% to Evraz’s revenues in 1H05 n RZD, Evraz’s major customer, is among the biggest railway operators globally n Evraz accounted for nearly 100% of sales of rails in Russia n Significant RZD capex
Slide 12: Growing self-sufficiency in raw materials
Growing self-sufficiency in raw materials n Approximately 75% of iron ore and 70%(1) of coking coal are sourced internally n Evraz has access to a large proportion of its raw materials supply n Limited exposure to high and variable raw material prices Global iron ore and coking coal prices ($/t)(2)
Slide 13: Flexibility in Semis
Flexibility in Semis Evraz slab capacity Sales volumes and prices in 2005 mt kt $/tonne 200 600 16.0 180 14.0 500 160 12.0 140 400 10.0 120 100 300 8.0 80 6.0 5.2 200 60 4.0 2.7 40 100 2.0 1.2 20 - - - 2003 2004 2005Е Jan Mar May July Sept Slabs Slab capacity Billets Steel production Slab price, RHS
Slide 14: Financial overview
Financial overview Section 3
Slide 15: Magnitude and quality of transformation
Magnitude and quality of transformation Growing profitable business Increasingly diversified EBITDA 8,000 40% 100% 7,000 6,709 34% 80% 32% 6,000 30% 5,000 60% (US$m) 22% 4,000 20% 40% 3,000 14% 2,168 2,000 10% 1,413 20% 1,000 0 0% 0% 2002 2003 2004 LTM№ 1H04 2004 1H05 Net income EBITDA Steel segment
Slide 16: Summary financials
Summary financials US$m 2002 2003 2004 1H05 Income statement Revenues 1,540 2,168 5,933 3,632 Gross Profit 205 559 2,447 1,381 Margin (%) 13.3% 25.8% 41.2% 38.0% Adjusted EBITDA (1) 209 476 2,017 1,119 Margin (%) 13.6% 22.0% 34.0% 30.8% Net income 1 253 1,345 729 Balance sheet Total assets 1,222 2,2
Slide 17: Robust credit fundamentals
Robust credit fundamentals Net debt / capital (%) Net debt / EBITDA (x) 50% 46% 1.5 36% 1.0 34% 1.0 30% 0.6 0.5 19% 0.5 0.3 10% 0.0 1 1 2002 2003 2004 LTM№ 2002 2003 2004 LTM№ EBITDA(2) net interest coverage (x) FFO(3) / Capex (x) 25 4 21.0 18.2 3.0 2.9 20 3 15 2.0 10.3 2 1.7 10 5 3.7 1 0 0 1 1 2002
Slide 18: Cost Structure
Cost Structure Steel division costs Mining division costs US$2,566m US$1,683m US$325m US$192m 100% 100% 8% 5% 10% 12% 6% 6% 3% 3% 8% 80% 7% 5% 80% 10% 10% 27% 8% 10% 60% 60% 8% 18% 40% 40% 76% 67% 58% 20% 20% 35% 0% 0% 1H05 1H04 1H05 1H04 Raw materials Transportation Staff costs Depreciation Energy
Slide 19: Price dynamics: iron ore
Price dynamics: iron ore Ore (RUR/tonne) Concentrate (RUR/tonne) 700 2 500 600 2 000 500 1 500 400 1 000 300 500 200 100 0 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Lebedinsky GOK (68% Fe) Stoilensky GOK (66,7% Fe) Stoilensky GOK (53 % Fe) Mikhailovsky GOK(52,3 % Fe) Mikh
Slide 20: Price dynamics: coal
Price dynamics: coal Coking coal concentrate (RUR/tonne) 3000 2500 2000 1500 1000 500 0 Jan March May July Sept Average price in Russia for coking coal concentrate, FCA Note: Price for average quality coking coal concentrate Source: OOO Rasmin, VGUP Vukhin, Evraz 19
Slide 21: Price dynamics: steel products
Price dynamics: steel products Rebars (RUR/tonne) H-beams (RUR/tonne) 24 000 16000 20 000 16 000 12000 12 000 8000 8 000 4000 4 000 0 0 Jan Feb March April May June July Aug Sept Oct Jan Feb M arc h A pril M ay June July A ug S ept O ct Export price, FOB Export price, FOB Russian price index, FCA Ru
Slide 22: CAPEX Programme
CAPEX Programme Presented at IPO Current status n Steel capex programme focused primarily on n New slab caster at ZapSib revamping the front-end commissioned on time n More than $700 million invested to date with n Review projects to confirm approximately $1 billion planned by 2010 to high returns c
Slide 23: Recent Corporate Developments
Recent Corporate Developments Section 4
Slide 24: Palini e Bertoli
Recent Corporate Developments Palini e Bertoli n Palini e Bertoli is a rolling mill operator in northern Italy producing steel plate products n Target markets - Southern Europe and the Mediterranean n 2004 output - 356,000 tonnes of rolled products, revenues - €183m under198 - 2002 003 - Present Ita
Slide 25: Vitkovice Steel
Recent Corporate Developments Vitkovice Steel n Vitkovice Steel in the north-east of the Czech Republic is a leading European producer of hot-rolled steel products n Target markets – the Czech Republic and Central Europe 003 - Present n Total sales in 2004 - 870,000 tonnes of rolled products, 2004 r
Slide 26: Neryungri Ugol – Project on track
Neryungri Ugol – Project on track n Highlights n 2.4 m tpy coking coal mine n Extractable reserves are estimated at 70-85 million tonnes of high grade hard coking coal n Production to start in 2H06, expected to reach full production during 2008 n Current stage n Evraz – Mitsui JV agreement signed, M
Slide 27: Eurobond'15
Eurobond’15 n Issuer Evraz Group S.A. n Guarantor Mastercroft Limited n Maturity 10 years n Yield 8.5% n Amount US$750 million n Structure Reg S / 144A n Ratings S&P = B+ (Positive) Moody’s = Ba3/B2 (Stable) Fitch = BB- (Stable) n Listing London n Use of proceeds Re-finance existing debt as well as
Slide 28: Corporate Governance
Corporate Governance Section 5
Slide 29: Corporate Governance
Corporate Governance n Management n Board of Directors decision on management changes based on necessity to separate the roles of chief executive officer and of chairman of the Board: n New structure to become effective since January 1, 2006: – Mr. Valery Khoroshkovsky, Managing Director Operations,
Slide 30: Key investment highlights
Key investment highlights Robust macro Robust macro Russia’s leading Russia’s leading fundamentals and fundamentals and steel producer steel producer with with strong position strong position in in high high global scale global scale growth steel growth steel markets markets Continuously Continuousl
Slide 31: Contacts
Contacts Alexander Frolov Corporate Affairs and Investor Relations: Managing Director Corporate Irina Kibina Vice President Pavel Tatyanin Chief Financial Officer Nikolay Arutyunov Director Timur Yanbukhtin Director, Corporate Finance Irina Dubitskaya Senior Manager Irina Osadchaya Manager Tel. +7-0