Nlmk · RUS:NLMK
Nlmk — Q3 2018 Earnings Presentation
24 slides from Nlmk's earnings presentation, Oct 25, 2018
Slide 1: Q3 2018 IFRS Results
1 Q3 2018 IFRS Results 25 October 2018
Slide 2: Disclaimer
DISCLAIMER 2 This document is confidential and has been prepared by NLMK (the This document may include forward-looking statements. These forward- “Company”) solely for use at the presentation of the Company and may looking statements include matters that are not historical facts or not be reproduce
Slide 3: Market review, Operating highlights
3 Market review Operating highlights Grigory Fedorishin Q3’18 Financials CEO Business divisions results Annex Q&A
Slide 4: Global steel demand growth remains stable
GLOBAL STEEL DEMAND GROWTH REMAINS STABLE 4 DEMAND IS RISING YET THE CHINESE EXPORTS DROPPED QOQ AHEAD PACE OF GROWTH IS SLOWING OF NEW ROUND OF WINTER CUTS STEEL DEMAND GROWTH ACROSS KEY MARKETS REMAINS ROBUST YTD %, YTD mt Exports Output Demand* – Sequential qoq uptick in consumption in the US 6,3
Slide 5: Steel prices and spreads were marginally softer in Q3'18
STEEL PRICES AND SPREADS WERE MARGINALLY SOFTER IN Q3’18 5 STEEL/RAW MATERIALS SPREAD HAS NARROWED IN Q3’18 STEEL PRICES WEAKENED WORLDWIDE $/t 600 – The US prices remained high, on average, in Q3’18 Slab (BS FOB) but started shifting towards more normalized 500 levels in late July 400 480 – Average
Slide 6: Strong Q3'18 sales: improved sales mix and volumes
STRONG Q3’18 SALES: IMPROVED SALES MIX AND VOLUMES 6 SHIPMENTS ROSE 1% QOQ SHIPMENTS GROWTH QOQ ON HIGHER DEMAND RISING SALES AND MIX IMPROVEMENT mt mt – Sales increased by 35 k t qoq to 4.42 m t 4,24 4,38 4,42 4,38 4,42 – This was driven by growth in long 4,24 product sales in Russia %, qoq %, qoq
Slide 7: Committed strategy effects on schedule
COMMITTED STRATEGY EFFECTS ON SCHEDULE 7 EBITDA GAINS FROM STRATEGY (OPERATIONAL PRODUCTION INCREASE: 9M 2018 vs 9M 2017 STRATEGY GAINS CONTRIBUTED EFFICIENCY AND INVESTMENT PROJECTS) vs 2017 $245 M DURING 9M’18, OR 85% $m kt OF THE ANNUAL TARGET 289 350 +786 – Effects of full implementation of PCI
Slide 8: Q4 Outlook
Q4 OUTLOOK 8 MARKETS Global steel prices to moderate amid Europe: demand is expected to be Russia: seasonal slowdown in rising protectionism worldwide, which is stable yoy, import restrictions may demand with domestic prices to spreading beyond the steel industry provide support to local prices refl
Slide 9: Q3'18 Financials
9 Market review Operating highlights Q3’18 Financials Nelly Mescheryakova Business divisions results Deputy CFO Annex Q&A
Slide 10: Q3'18 financial highlights: 10-year record EBITDA
Q3’18 FINANCIAL HIGHLIGHTS: 10-YEAR RECORD EBITDA 10 REVENUE WAS UP 0,5% QOQ ON HIGHER PROFITABILITY CONTINUED TO EXPAND SHIPMENTS AND THE SHARE OF HVA PRODUCTS $m 0 30% 32% 1 200 EBITDA HIT 10-YEAR RECORD LEVEL DRIVEN BY 29% 28% 29% 29% 0 26% 25% IMPROVED PRODUCT MIX, LOWER COAL PRICES 25% 24% 1 00
Slide 11: Margins improved on volumes and prices
MARGINS IMPROVED ON VOLUMES AND PRICES 11 RUSSIAN FLAT PRODUCTS: EBITDA UP ON EXPANDING PRICE EBITDA BY DIVISIONS SPREADS $m +4% Q3'17 – (+) Wider spreads driven by reduced coking coal prices Q2'18 800,0 795,0 790,0 785,0 780,0 612636 775,0 770,0 765,0 760,0 755,0 750,0 745,0 740,0 735,0 – (-) Sales
Slide 12: Free cash flow increased despite higher capex
FREE CASH FLOW INCREASED DESPITE HIGHER CAPEX 12 FREE CASH FLOW INCREASED TO $638 M Q3’18 FCF BRIDGE $m NET OPERATING CASH FLOW UP 2Х QOQ 500 600 700 800 900 1 00 0 1 10 0 EBITDA 1015 TO $831 M Net working capital change -9 Other non-cash items -10 WORKING CAPITAL STABLE: Income tax -165 – (+) $49 m
Slide 13: Strong debt portfolio and liquidity position
STRONG DEBT PORTFOLIO AND LIQUIDITY POSITION 13 TOTAL DEBT INCREASED BY LIQUIDITY AND SHORT-TERM DEBT* DEBT** MATURITY 1% QOQ TO $2,123 M $m $m Working capital lines Eurobonds ECA lines NET DEBT / 12M EBITDA ACHIEVED 10-YEAR LOW LEVEL 700 Available credit lines OF 0.25X IN Q3’18 1 908 500 – Net debt
Slide 14: Business divisions results
14 Market review Operating highlights Q3’18 Financials Business divisions results Annex Q&A
Slide 15: Q3'18: Russian flat products – continued EBITDA growth
Q3’18: RUSSIAN FLAT PRODUCTS – CONTINUED EBITDA GROWTH 15 SALES VOLUMES DECLINED 7% QOQ STEEL SHIPMENTS AND REVENUE mt $ bn – (-) Sales of semis to captive assets down by 15% -7 % -7 % qoq due to seasonal repairs at NLMK’s EU plants 3,43 2,30 3,19 2,13 – (-) Finished steel sales decreased by 1% qoq
Slide 16: Q3'18: Russian long products – strong QoQ recovery
Q3’18: RUSSIAN LONG PRODUCTS – STRONG QOQ RECOVERY 16 SALES VOLUMES JUMPED 46% QOQ STEEL SHIPMENTS AND REVENUE kt $ bn – (+) Supported by the pick-up in demand after the +46 % +29% World Cup and subsequent sales of previously 0,93 0,63 accumulated finished steel stocks 0,20 0,64 0,49 0,13 0,07 REVEN
Slide 17: Q3'18: Mining – higher shipments, strong margins
Q3’18: MINING – HIGHER SHIPMENTS, STRONG MARGINS 17 THE MINING SEGMENT CONTINUES TO SHIPMENTS AND REVENUE SHOW STRONG OPERATING PERFORMANCE kt $ bn WITH SHIPMENTS +2% QOQ 4,52 +2% 4,60 -12% 0,33 40% 500 % 0,29 480 % 460 % – Pellets production slightly increased by 31 k t 440 % 420 % 1,68 1,71 400 %
Slide 18: Q3'18: NLMK USA
Q3’18: NLMK USA 18 STEEL SHIPMENTS AND REVENUE SALES VOLUMES DECLINED 8% QOQ kt $ bn - (-) Orders declined as customers’ expectations of further decline in steel prices continued to evolve -8 % +3% 0,64 0,59 0,61 REVENUE UP 3% QOQ DUE TO PRICES 0,59 – (+) Despite recent pullback, average selling pri
Slide 19: Q3'18: NLMK Dansteel
Q3’18: NLMK DANSTEEL 19 SHIPMENTS DOWN 11% QOQ ON THE BACK REVENUE & STEEL SALES VOLUMES OF MAINTANANCE WORKS kt $ bn -11% -5% REVENUE DOWN 5% QOQ FOLLOWING DROP 0,137 0,132 IN DELIVERIES 0,121 0,125 – (-) Shipments declined 11% qoq – (+) Plate selling prices partially offset shipments decline 0,137
Slide 20: Annex
20 Market review Operating highlights Q3’18 Financials Business divisions results Annex Q&A
Slide 21: Q3'18: NLMK output, shipments, slab cash costs
Q3’18: NLMK OUTPUT, SHIPMENTS, SLAB CASH COSTS 21 STEEL PRODUCTION GROUP SHIPMENTS TO EXTERNAL CUSTOMERS BY SEGMENTS mt mt qoq: -4% Q3 2017 Q2 2018 Q3 2018 qoq: +1% Q3 2017 Q2 2018 Q3 2018 yoy: -9% yoy: +0% 3,00 qoq: +1% 5,00 4,50 4,38 yoy: -1% 2,50 2,23 4,00 3,32 2,00 qoq: +46% qoq: -8% 3,50 qoq: +
Slide 22: Sales geography and product mix without NBH
SALES GEOGRAPHY AND PRODUCT MIX WITHOUT NBH 22 STEEL PRODUCT SALES BY REGION SALES STRUCTURE BY PRODUCT mt mt 5 4,24 4,38 4,42 5 4,24 4,38 4,42 5 5 4 0,54 0,56 0,70 4 0,46 0,66 Others 1,49 1,46 1,54 0,55 4 4 M. East* Commercial products 0,78 0,74 3 3 0,84 3 N.America 3 Semi-finished 0,66 0,81 1,46 1
Slide 23: Foreign assets performance
4 00 0 FOREIGN ASSETS PERFORMANCE 1 40 0 23 3 50 0 1 20 0 SLABS SALES FROM THE RUSSIAN FLAT PRODUCTS DIVISION 3 00 0 NBH ROLLED PRODUCTS SALES kt 1 00 0 kt 2 50 0 QoQ QoQ Total -18% 800 1 706 1 750 Total -9% 578 1 585 8 2 00 0 118 173 CRC -1% 126 NLMK 8 472 448 600 -27% 9 81 455 285 Dansteel 1 50 0
Slide 24: Company IR contacts
COMPANY IR CONTACTS 24 Dmitriy Kolomytsyn, CFA Director, IR, Capital Markets Address 40, Bolshaya Ordynka Str., Bldg. 3 Moscow, 119017, Russia . IR E-mail Address ir@nlmk.com Phone Number Office: +7 495 504 05 04 nlmkonair nlmk_group nlmk group