Mmk · RUS:MAGN
Mmk — Investor Presentation (January 2014)
33 slides from Mmk's investor presentation, January 2014
Slide 1: January 2014
January 2014
Slide 2: Disclaimer
DISCLAIMER THIS PRESENTATION IS FOR INFORMATION ONLY AND IS CONFIDENTIAL. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OF FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE RUSSIAN FEDERATION OR ANY JURISDICTION WHERE SUCH RELEASE, PUBLICAT
Slide 3: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 4: Key Credit Highlights
KEY CREDIT HIGHLIGHTS Leading position in the MMK is the second largest steel producer in Russia by volume of production Russian steel market Moreover, MMK not only managed to maintain its share but also grow it over the recent years The largest single sight facility The large size of Magnitog
Slide 5: MMK – Global Player with Strong Russian Presence
ММК – GLOBAL PLAYER WITH STRONG RUSSIAN PRESENCE Benefits from central location with proximity to local and export markets Interkos-IV Profit Metals service center Covers 100% of MMK and stamped-product scrap needs. factory with 250 th. tpy 77% capacity. Belon 7% 4 mln tonnes of coking coal mined in
Slide 6: Dominant Share of Sales to Emerging Market High Growth Countries and Russia
OJSC MMK DOMINANT SHARE OF SALES TO EMERGING MARKET HIGH GROWTH COUNTRIES AND RUSSIA IN PARTICULAR Regional Sales Structure based on Volumes, 2012 Steel consumption is expected to be the highest in the CIS region Americas 16% Africa 2% 1% 12% Europe 8% 7% 4% Far East & Asia 0% 3% Russia &CIS 77% -4%
Slide 7: Competitive Cost Position
COMPETITIVE COST POSITION MMK benefits from relatively low input materials prices Slab Cash-cost and Raw-material Price, USD/tonne MMK’s Slab Cash-Cost vs. peer, USD/tonne 459 442 413 495 399 385 490 400 385 374 363 200 450 459 442 413 385 399 385 160 400 374 363 300 406 361 405 405 395 411 383 120
Slide 8: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 9: Russian Steel Segment
RUSSIAN STEEL SEGMENT Main revenue contributor – 92% of Group’s revenue* • All significant assets of the segment are located in Magnitogorsk, Russia Leading Domestic Market Position • Magnitogorsk Steel is the major production site: Russia‟s second largest integrated plant with more than 14m tonne
Slide 10: Turkish Steel Segment
TURKISH STEEL SEGMENT Poised to become #2 flat steel producer in Turkey ММК Metalurji Located at two sites in Turkey: Iskenderun and Istanbul MMK Metalurji production breakdown, 2012FY Favourable geographic position (growing markets of Turkey and other Middle East countries) Total: 900 th. t G
Slide 11: Coal Segment
COAL SEGMENT Belon is one of Russia’s largest coal producers Belon Group comprises coal mining and processing assets MMK Coal reserve life vs. operational reserves (as of 2012) Located in Belovo, Kemerovo Region, Russian Federation 25 23,4 40 Assets include 20 >30 >30 >30 17,5 30 o 3 underground
Slide 12: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 13: Global Steel Industry Highlights
GLOBAL STEEL INDUSTRY HIGHLIGHTS World Steel Consumption, mln tonnes Chinese Steel Inventory Level vs. Steel Price, mln tonnes 1500 1385 1430 3,1% 1475 3,3% 1523 25 700 1306 3,3% 6,1% 600 20 500 1000 15 400 10 300 World steel 500 200 consumption continues to grow 5 100 0 0 06.01.12 06.05.12 06.09.12
Slide 14: Key Markets Fundamentals: Russia
KEY MARKETS FUNDAMENTALS: RUSSIA Market with significant growth potential Russia is one of key exporters due to strong cost advantage Russian Steel Consumption in MMK’s Product Mix, mln tonnes • Largest reserves of the low cost raw materials 45 43,3 • Integrated steel players 37,8 39,4 40 36,1 • Mod
Slide 15: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 16: Strategic Objectives of MMK Group
STRATEGIC OBJECTIVES OF MMK GROUP Focus on organic growth 1 Achieving quality balance Emphasized direct exposure 5 2 sheet to niche segments 4 3 Maintaining good progress Maximising share of domestic achieved in self-sufficiency sales 16
Slide 17: Focus on Organic Growth
1 FOCUS ON ORGANIC GROWTH …with increasing share of high value added products in MMK production MMK Steel Output Growth, th. tonnes MMK Increasing Share of HVA Products, th. tonnes 70% 12 000 12 000 60% 10 000 10 000 50% ≈40 % 8 000 8 000 40% 6 000 6 000 30% 4 000 20% 4 000 2 000 10% 2 000 0 0% 0 20
Slide 18: Emphasized Direct Exposure to Niche Segments
2 EMPHASIZED DIRECT EXPOSURE TO NICHE SEGMENTS Mill 5000 - Strong positions in Pipe sector LDP Demand/Supply in Russia, th. tonnes Mill 5000 Utilization rates, th. tonnes 4 000 300 248 245 244 Demand for LDP remains strong 3 000 195 200 179 170 2 000 100 Higher demand for 1 000 thick plate in 9M 201
Slide 19: Emphasized Direct Exposure to Niche Segments
2 EMPHASIZED DIRECT EXPOSURE TO NICHE SEGMENTS Strengthening position in Auto industry Key Mill 2,000 specifications Light Vehicle Production in 2012, ‘000 units Capacity, th. tpa 2,000 10 000 9 940 Russia is on the way to Sheet width, mm 850-1,880 8 000 diminish the lag to developed countries Sheet
Slide 20: Maximising Share of Domestic Sales
3 MAXIMISING SHARE OF DOMESTIC SALES ... in order to enhance profit margins and reduce exposure to the seaborne market MMK Domestic and Export Sales, mln tonnes Domestic Sales Structure, 2012 8,4 8 C/r steel H/r steel MMK organically grows its share in Russian market while demand in export 13% 40% 6
Slide 21: Maintaining Good Progress Achieved in Self-Sufficiency
4 MAINTAINING GOOD PROGRESS ACHIEVED IN SELF-SUFFICIENCY Levels remain balanced across all business segments 2007 Self-sufficiency Level, % 2012 Self-sufficiency Level, % 100% 100% 15% 28% 75% 75% 64% 78% 90% 50% 100% 100% 50% 100% 85% 72% 25% 25% 36% 22% 10% 0% 0% Iron Ore Coal Scrap Electricity Ir
Slide 22: Achieving Quality Balance Sheet
5 ACHIEVING QUALITY BALANCE SHEET Continuous deleveraging • The group of focussed on achieving quality balance sheet by Healthy deleveraging is combined with EBITDA growth continuous deleveraging 1 500 • MMK has adopted a debt tolerance principle of Total Debt / EBITDA 3,46 <=2x at any time through
Slide 23: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 24: Financial Highlights
FINANCIAL HIGHLIGHTS Demonstrating relative financial strength Summary of key results Revenue growth continued into 2012, USD mln 9M 2013 2012 2011 2010 11 500 9306 9328 9 500 Crude steel output, kt 9,027 13,037 12,195 11,419 7 719 7 500 Finished steel, kt 9,309 11,936 11,158 10,409 5 081 5 500 Reve
Slide 25: Prudent Financial Policy
PRUDENT FINANCIAL POLICY Target leverage <= 2.0x through Debt Tolerance Management’s commitment to Gross Debt/ EBITDA below 2x on a long-term basis the cycle Good relationship with banks and willingness to enter the bond market as an Liquidity and debt Cash on hand alternative source of funding mana
Slide 26: MMK Free Operating Cash Flow Generation
MMK FREE OPERATING CASH FLOW GENERATION Sound Free Operating Cash Flow Generation to support deleveraging Free Operating Cash Flow Generation Bridge 2011 – 9M 2012, USD mln FY 2011 FY 2012 9M 2013 1400 314 1200 1000 925 879 800 568 600 519 347 66 674 400 282 200 352 0 -200 -400 FFO 2011 WoC PPE FCF
Slide 27: Table of Contents
TABLE OF CONTENTS 1. MMK at a Glance 2. Business Overview 3. Industry Overview 4. Strategic overview 5. Financial overview 6. Appendix
Slide 28: High Level of Capacity Utilization
HIGH LEVEL OF CAPACITY UTILIZATION Key production indicators, ths tonnes • MMK Group finished steel products output in 9M 2013 was 8.3 mln tonnes, down 9% y-o-y Q3 '13 Q2 '13 % 9M '13 9M '12 % Cast iron 2 331 2 466 -5% 7 223 7 607 -5% • MMK Group High-Value-Added (HVA) steel products output in 9M 20
Slide 29: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS • MMK Group sales for Q3 2013 were USD 1,877 million, down 13.1% Q3 2013 revenue, million USD q-o-q 2 161 2300 102 • MMK Group sales for 9M 2013 were down 12.9% y-o-y due to a decline 1 877 160 in output volumes and average steel prices in 2013 74 1800 133 • Revenue from hig
Slide 30: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS EBITDA ММК Group for Q3 2013, million USD EBITDA ММК Group for 9M 2013, million USD 291 20,0% 1 060 25,0% 290 1140 27 3 4 233 74 11 940 20,0% 5 15,0% 780 190 14,6% 44 13,5% 740 11 15,0% 12,4% 10,0% 261 540 1040 12,3% 218 10,0% 90 340 726 5,0% 5,0% 140 -10 0,0% -60 -57 0,0% -
Slide 31: Structure of Operating Costs and Cash Costs
STRUCTURE OF OPERATING COSTS AND CASH COSTS Operating costs of MMK Group, million USD Material expenditures, MMK, million USD 1 282 1 124 3% 4% Power from outside Q3 13 Q2 13 +/- % sources 8% 10% 11% Fuel from outside 11% sources C ost of sales 1 628 1 834 -206 -11% 14% Auxiliary materials 13% 14% O
Slide 32: Debt Structure
DEBT STRUCTURE Reduced debt burden, million USD CAPEX, million USD 521 4 000 4,0 Debt, adjusted by FMG stake 34 Growth due to Blast furnace #6 -32% value as of 30.09.2013 г. 51 maintenance 3,0 6 3 000 3,0 400 352 2,6 2,9 27 57 2 000 3 992 2,2 2,0 4 +43% 3 518 430 3 071 200 130 2 381 1 000 1,0 91 8 1
Slide 33: Dynamics for the Fortescue Metals Group Share Price
DYNAMICS FOR THE FORTESCUE METALS GROUP SHARE PRICE The price of the stake in Fortescue Metals Group (FMG) on FMG‟s history, its proven ability to demonstrate an the balance of MMK Group as of 30 September 2013 was extraordinary pace of growth combined with stabilizing prices around USD 690 mln for