Mmk · RUS:MAGN
Mmk — Investor Presentation (November 2013)
31 slides from Mmk's investor presentation, November 2013
Slide 1: Investor Presentation
Investor Presentation November 2013
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: ММК – 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 459 495 442 220 450 490 490 413 180 459 400 450 385 440 442 374 140 406 405 405 413 399 350 385 100 390 411 385 395 374 383 300
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, Leading Domestic Market Position Russia • Magnitogorsk Steel is the major production site: MMK's share in Place in Russia Russia Russia‟s second largest int
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. tonne
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 1523 24 650 World steel 3,3% consumption 1500 1475 22 600 continues to grow 3,1% 1430 20 550 3,3% 1400 1385 18 500 6,1% 16 450 1306 14 400 1300 12 350 10 300 1200 06.01.12 0
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 • Integrated steel players Russian steel consumption in MM
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 13 000 70% 10 000 60% 11 000 8 000 >45 % 50% 9 000 6 000 40% 7 000 4 000 30% 2 000 20% 5 000 2010 2011 2012 2013E 2010
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 4 000 260 248 245 244 Demand for LDP remains strong 240 3 000 220 195 200 2 000 180 160 Higher demand for 1 000 thick plate in H1
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 9 940 Capacity, th. tpa 2,000 10 000 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 MMK organically grows its share in Russian C/r steel H/r steel market while demand in export markets 1
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 Healthy deleveraging is combined with EBITDA growth by continuous deleveraging 1 500 3,46 • MMK has adopted a debt tolerance principle of Total Debt 3,31 / EBITDA <=2x at any time thr
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 H1 2013 2012 2011 2010 11 500 9306 9328 Crude steel output, kt 6,154 13,037 12,195 11,419 9 500 7 719 Finished steel, kt 5,686 11,936 11,158 10,409 7 500 Revenues, $ mln
Slide 25: Key management considerations
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 – H1 2012, USD mln FY 2011 FY 2012 H1 2013 1400 314 1200 1000 925 879 800 600 519 (347) 427 (674) 400 (4) 201 200 (222) 0 -200 FFO 2011 WoC PPE FC
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: Growth Output Driven by HVA Products
Growth Output Driven by HVA Products • MMK Group finished products output in Q2 Key operational indicators Q2 '13 Q1 '13 % H1 '13 H1 '12 % 2013 is at the level of Q1 and amounted to 2.8 mln tonnes Cast iron 2 466 2 426 2% 4 892 5 037 -3% Crude steel incl. 3 079 3 075 0,1% 6 154 6 711 -8% • Q2 2013 M
Slide 29: MMK Group Q2 2013 Financial Highlights
MMK Group Q2 2013 Financial Highlights MMK Group Revenue, USD mln • Sales in Q2 2013 decreased 5,3% q-o-q and totaled USD USD 2 283 mln USD 2 161 mln 2300 88 2,161 mln. 175 102 160 1800 • Cost of sales in Q2 2013 decreased by 6.8% q-o-q and equaled USD 1,834 mln. This decrease was mostly due to 1300
Slide 30: ММК Group Operating Costs and Cost of Sales Structure
ММК Group Operating Costs and Cost of Sales Structure ММК Group operational costs, USD mln ММК Group operational costs Q2 13 Q1 13 +/- % Q2 2013 1,1% 6,6% Cost of sales 1 834 1 968 -134 -6,8% 6,5% Cost of sales Selling and distribution expenses 139 172 -33 -19% Selling and distribution expenses Gene
Slide 31: MMK Group Debt Profile
MMK Group Debt Profile Debt structure dynamics by security Debt maturity profile*, USD mln 100% 1 600 1 449 75% 1 200 68% 75% 77% 76% 777 50% 800 543 400 262 301 25% 32% 25% 23% 24% 0 1-st year 2-nd year 3-rd year 4-th year 5-th year and 0% beyond 2010 2011 2012 H1 2013 * Interest rate SWAP not incl