Evraz Plc · LSE:EVR
Evraz — H1 2010 Earnings Presentation
30 slides from Evraz's earnings presentation, Sep 2, 2010
Slide 1: EVRAZ GROUP 1H 2010 Financial and Operating Results
EVRAZ GROUP 1H 2010 Financial and Operating Results 2 September 2010
Slide 2: Disclaimer
Disclaimer 02 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
Slide 3: Agenda
Agenda 03 1H 2010 Results Summary Liquidity and Financial Position Operations by Segment Growth Strategy Key Market Developments and Outlook Appendices
Slide 4: 1H 2010 Financial Summary
1H 2010 Financial Summary 04 US$ mln unless otherwise stated 1H 2010 1H 2009 Change Revenue 6,379 4,639 38% Cost of revenue (5,296) (4,297) 23% SG&A (750) (595) 26% Adjusted EBITDA* 1,154 468 147% Adjusted EBITDA margin 18% 10% Net Profit/(Loss)** (270) (999) EPS (US$ per GDR) (0.64) (2.52) Net Debt
Slide 5: Effects of Non-cash and One-off Transactions on Net Result
Effects of Non-cash and One-off Transactions 05 on Net Result US$ mln 400 34 284 300 37 67 200 100 146 100 316 (270) 0 -100 -200 -300 Net loss as Additional Revaluation Net profit as Loss on sale of Change in fair Impairment: Net profit excl. reported depreciation deficit (98) and would be Koksovaya
Slide 6: 1H 2010 Financial Highlights
1H 2010 Financial Highlights 06 Consolidated Revenue by Segment ◦ Group revenue rose by 38%, largely driven by increase in sales volumes of steel products and higher average US$ mln 6,379 7,500 414 prices 290 4,639 1,120 ◦ Group EBITDA advanced by 147% reflecting revenue 6,000 4,500 343 138 652 expa
Slide 7: Cost Dynamics
Cost Dynamics 07 ◦ Growth in scrap, coking coal and iron ore prices in 1H Cash Cost*, Slabs & Billets 2010 increased steelmakers’ costs US$/t ◦ This cost increase was significantly offset by Evraz’s 450 400 402 430 high level of vertical integration into iron ore and coking 394 420 341 350 coal 285
Slide 8: EBITDA to FCF Reconciliation
EBITDA to FCF Reconciliation 08 US$ mln 1600 1,154 (51) 1200 1,103 (258) (101) 744 (308) 800 (397) 400 12 51 0 Adjusted Non-cash EBITDA Changes in Income tax CF from Interest and Capex CF from Free cash EBITDA items (excl. non- working paid operating covenant investing flow* cash items) capital acti
Slide 9: Developments: Capital Markets
Developments: Capital Markets 09 ◦ RUB15bn (equivalent to US$500 million) 3-year bonds issued in March 2010, swapped into US dollars to minimise Rouble currency exposure ◦ In May 2010, Evraz drew down US$950 million 5-year Gazprombank loan and repaid US$1,007million VEB loan ◦ In June-July 2010, Evr
Slide 10: Balanced Debt Maturity Profile
Balanced Debt Maturity Profile 10 ◦ Total debt of approx. US$7.9bn, net debt of US$7.2bn as of 30 June 2010 ◦ Consolidated cash balance of not less than US$500 million constantly maintained ◦ Liquidity (defined as cash and cash equivalents, amounts available under credit facilities and short-term ba
Slide 11: Steel: Geographic and Product Mix Change
Steel: Geographic and Product Mix Change 11 ◦ Recovery in demand for construction and railway products in Russian market raised the proportion of finished products in the portfolio ◦ Share of construction products increased from 25% to 32% ◦ Share of semi-finished products fell from 40% to 29% ◦ Sha
Slide 12: Steel: CIS Domestic
Steel: CIS Domestic 12 ◦ Real demand for finished steel increased from approx. 70% of pre-crisis peak level to approx. 80% with significant fluctuations in apparent demand due to destocking/restocking cycles ◦ Sales volumes of steel products to CIS market expanded by 31% ◦ Sales volumes of construct
Slide 13: Steel: CIS Export
Steel: CIS Export 13 ◦ Strong underlying demand from developing countries ◦ Some correction in prices due to supply pressure of Chinese steel in Asian markets associated with cancellation of export rebates in China ◦ Export sales of steel products declined by 12% in volume terms reflecting the switc
Slide 14: Steel: North America
Steel: North America 14 ◦ Gradual recovery in demand driven by economic improvements and the onset of regional governments’ infrastructure spending ◦ Shale gas exploration projects generate strong demand for small diameter pipe ◦ Sales volumes of steel products increased by 35% ◦ Flat-rolled steel v
Slide 15: Steel: Europe, South Africa
Steel: Europe, South Africa 15 ◦ Domestic demand in Europe remains weak and mostly related to public projects ◦ Temporary shutdown of steelmaking in the Czech Republic: ◦ Evraz Vitkovice Steel temporarily closed its steelmaking operations from July 2010 due to the price dispute with the supplier of
Slide 16: Benefiting from Rising Prices for Iron Ore and Coal
Benefiting from Rising Prices for Iron Ore and Coal 16 Raw Raw Material Material Prices Prices (Domestic (Domestic Markets) Markets) ◦ Volumes of coking coal mined decreased due the US$/t 400 repositioning of longwall at Ulyanovskaya mine ◦ Mining segment revenue doubled and EBITDA 300 quadrupled re
Slide 17: Mining: Vertical Integration
Mining: Vertical Integration 17 ◦ High level of vertical integration into iron ore sustained and continues to mitigate effect of rising raw material prices ◦ Coking coal volumes decreased due to postponement of longwall repositioning at the Ulyanovskaya mine ◦ Third quarter volumes depressed due to
Slide 18: Vanadium
Vanadium 18 ◦ Global leader with geographically diversified revenues via five operating units on four continents ◦ Vanadium is used predominantly in steelmaking and follows steel market trends ◦ Significant improvement in global demand for vanadium, although price growth is limited by supply pressur
Slide 19: Growth Strategy
Growth Strategy 19 Product mix improvements ◦ Modernisation of rail mills enabling the production of high value-added products ◦ Upgrade of wheel shops ◦ Shift to production of American Petroleum Institute certified slabs and other enhanced quality higher margin steel products ◦ Product mix expansio
Slide 20: Key Investment Project and CAPEX Guidance
Key Investment Project and CAPEX Guidance 20 ◦ 1H 2010 CAPEX totalled US$397m ◦ FY2010 CAPEX is expected to be around US$950m vs. previous guidance of US$800m due to sustainable market improvement ◦ Increase of US$50m to US$450m in maintenance CAPEX designed to decrease down time and increase produc
Slide 21: Key Market Developments
Key Market Developments 21 US$/t Evraz Selling Prices ◦ Growth in steel prices is driven by demand recovery 900 and increases in input costs 800 ◦ International prices for semi-finished steel declined in 700 May-June due to seasonal and regulatory factors but 600 stabilised in July and could recover
Slide 22: Outlook
Outlook 22 ◦ High raw material prices and improving demand provides support for steel prices ◦ Russian construction market displaying positive dynamics ◦ Due to the lag between the spot prices and sales prices, market volatility during May- July 2010 will negatively affect 3Q10 results ◦ 3Q 2010 EBI
Slide 23: Summary
Summary 23 ◦ 1H 2010 saw a continuation of the gradual market recovery ◦ Rapidly rising raw material prices provide support for steel prices and create cost pressure, particularly in relation to scrap and externally purchased iron ore ◦ Increase in the proportion of finished products in the mix refl
Slide 24: Appendices
Appendices
Slide 25: Evraz's Global Business
_| Evraz’s Global Business 25 5 - Evraz Inc. NA 6 - Highveld 7 - Evraz Palini e Bertoli 8 - Evraz Vitkovice Steel 9 - Evrazruda 10 - KGOK 11 -VGOK 12 - Sukha Balka 13 - Yuzhkuzbassugol 14 - Raspadskaya 15 - Bagley Coke 0 -Steel 16 - Dneprodzerzhinsk Coke ©) -Iron Ore 17 - Dnepropetrovsk Coke . 18 -
Slide 26: Revenue by Geography of Customers
Revenue by Geography of Customers 26 1H 2009 1H 2010 Africa & Africa & RoW RoW Other Asian 3% Other Asian 3% 7% Thailand 11% 3% Russia China 28% Thailand Russia 5% 4% 34% China Middle East 3% 10% Middle East 4% Ukraine 2% Europe Other CIS 9% Europe Ukraine 3% 9% 4% Other CIS Americas Americas 4% 30%
Slide 27: Steel Products Sales by Market
Steel Products Sales by Market 27 ’000 tonnes 3,000 2,799 2,518 2,433 2,500 1,950 2,000 1,500 1,307 948 1,000 704 577 442 500 311 310 238 0 Russia CIS Europe Americas Asia Africa & RoW 1H09 1H10
Slide 28: Cost Structure by Segment
Cost Structure by Segment 28 Cost Cost Structure Structure of of Steel Steel Segment Segment ◦ Rapid rises in coking coal, iron ore and scrap prices caused an increase in the contribution of raw 19% 11% 9% materials to steel segment costs 8% 11% ◦ Vertically integrated model largely protects 12% 10%
Slide 29: Adjusted EBITDA
Adjusted EBITDA 29 Six months ended 30 June (millions of US dollars) 2010 2009 Consolidated Adjusted EBITDA reconciliation (Loss) profit from operations 167 (1,046) Add: Depreciation, depletion and amortisation 861 782 Impairment of assets 38 211 Loss on disposal of property, plant & equipment 24 25
Slide 30: IR@evraz.com www.evraz.com
+7 495 232-13-70 IR@evraz.com www.evraz.com