Nlmk · RUS:NLMK
Nlmk — Q3 2014 Earnings Presentation
29 slides from Nlmk's earnings presentation, Nov 11, 2014
Slide 1: Q3 and 9M'14 US GAAP Consolidated Financial Results
Q3 AND 9M’14 US GAAP CONSOLIDATED FINANCIAL RESULTS Moscow, 11 November 2014 1
Slide 2: Disclaimer
DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the presentation of the Company and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. This document does no
Slide 3: Content
CONTENT 1. Key results 2. Financial highlights 3. Segment results 3
Slide 4: Operating Results
OPERATING RESULTS • GROWTH OF UTILIZATION RATES IN Q3’14: STEEL OUTPUT* o NLMK Group: 96% (+2 p.p. qoq), key drivers: mt ◦ Lipetsk site (Steel Segment): +2 p.p. 4.1 4.1 3.8 3.9 3.9 3.8 3.7 0.2 0.2 ◦ NLMK USA: +10 p.p. 0.2 0.2 0.2 0.2 0.2 0.7 0.8 0.5 0.5 0.6 0.7 0.7 • Q3’14 STEEL OUTPUT GROWTH: o 4.1
Slide 5: Strategic Markets
STRATEGIC MARKETS • STABLE POSITIONS IN THE RUSSIAN MARKET NLMK SALES IN RUSSIA o High sales in Russia in Q3’14: 1.69 m t (+6% yoy), 45% 47% 3.0 mt 43% 50% share: 47%, growth qoq and yoy 2.5 40% o 9M’14: growth of sales in Russia: +15% yoy: 2.0 1.74 1.69 1.60 1.55 30% ◦ Flat steel, including HVA* pr
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS • Q3’14 OPERATING RESULTS EBITDA MARGIN, % o Revenue $2,607 m (-7% qoq) o EBITDA $693 m (+17% qoq) 30% 25% o EBITDA margin 27% (+6 p.p.) 27% 20% 21% o Net debt $1,803 m (-14% qoq) 15% 18% 16% 10% 14% 14% o Net debt/12M EBITDA 0.83х 11% 5% • ONGOING PROFITABILITY GROWTH 0% Q1'13
Slide 7: Content
CONTENT 1. Key results 2. Financial highlights 3. Segment results 7
Slide 8: Profitability
PROFITABILITY • Q3’14 EBITDA: $693 M (+17% QOQ) SEGMENT CONTRIBUTION TO EBITDA • Q3’14 EBITDA MARGIN: 27% 800 $m 36 o Efficiency improvement programmes 145 - 20 o Widened spreads between prices for steel products and 600 77 raw materials 693 o Weaker RUB exchange rate 400 455 • STEEL SEGMENT 200 o I
Slide 9: Cash Flow in Q3'14
CASH FLOW IN Q3’14 • ONE-OFF DECREASE IN Q3’14 OPERATING CASH Q3‘14 CASH FLOW BRIDGE FLOW TO $194 M $m EBITDA 693 o Q3’14 EBITDA $693 m (+17% qoq) o Working capital increase by $364 m Working capital changes -364 due to one-off factors: Other non-cash operations 9 ◦ Seasonal accumulation of winter s
Slide 10: Free Cash Flow Growth
FREE CASH FLOW GROWTH • STRUCTURAL GROWTH IN BUSINESS PROFITABILITY CASH FLOW DYNAMICS o Sizable gains coming from operational efficiency programs $ bn o Effects from investment projects o Growth in free cash flow available to shareholders/creditors 0.8 1.8 1.8 0.4 0.4 1.2 1.2 • LOWER CAPITAL INTENS
Slide 11: Debt Position
DEBT POSITION • REDUCTION IN NET DEBT, HIGH LIQUIDITY LEVEL CHANGE IN DEBT POSITION IN Q3’14 PRESERVED 5 $ bn o Net debt $1.80 bn (-14% qoq) 3.83 4 3.29 o Gross debt $3.29 bn (-14% qoq) 3 1.16 -0.29 -0.26 0.93 o Cash and equivalents* $1.48 bn (-14% qoq) 2 o Net debt / 12M EBITDA 0.83х (-0.31 p. qoq)
Slide 12: Liquidity and Debt Settlement
LIQUIDITY AND DEBT SETTLEMENT • STRONG LIQUIDITY POSITION LIQUID ASSETS AND SHORT-TERM DEBT MATURITY* • COMFORTABLE MATURITY SCHEDULE Undrawn committed $m o Short term deb $0.93 bn $5,000 credit lines ◦ Ruble bonds $4,000 ◦ Revolving credit lines for working capital financing $3,000 Cash and equival
Slide 13: Q4'14 Outlook
Q4’14 OUTLOOK • MARKET o Russia – seasonal slowdown in the construction sector o Europe – seasonal recovery in demand o USA – stable market situation • OPERATIONAL RESULTS o Expected Group crude steel production: 4.0 m t o Sales volumes will increase by 2-5% 13
Slide 14: Content
CONTENT 1. Key results 2. Financial highlights 3. Segment results 14
Slide 15: Steel Segment
STEEL SEGMENT • STABLE TOTAL REVENUE IN Q3’14 QOQ SALES AND REVENUE FROM o Higher total sales volumes (+6% qoq) THIRD PARTIES o Increased slab deliveries to the Group’s foreign 2.351 m t 2.459 m t $1,636 m $1,728 m Income from other companies (+50%) and to NBH (+7%) 100% 7% 6% operations* Pig iron o
Slide 16: Long Products Segment
LONG PRODUCTS SEGMENT • SALES VOLUME DECREASE BY 18% THIRD PARTY SALES AND REVENUE o Decrease in the share of direct sales – longer revenue STRUCTURE recognition period o Accumulation of stock at NLMK Kaluga related to activities 608 ‘000 t 739 ‘000 t $378 m $430 m 100% aimed at mastering new produc
Slide 17: Mining Segment
MINING SEGMENT • REVENUE DECLINE BY 19% QOQ SALES AND REVENUE STRUCTURE o Decline in iron ore prices (15-20% qoq) 3,970 kt 4,004 kt $248 m $306 m o Stable iron ore sales at 4 m t, incl.: 100% 21% 33% ◦ 3.2 m t (+16% qoq) – to the Lipetsk site 80% 26% 36% ◦ 0.8 m t (-36% qoq) – to third parties 60% 4
Slide 18: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT • SEGMENT SALES DECLINE BY 3% QOQ NLMK USA SALES AND REVENUE STRUCTURE o Stable NLMK USA sales volumes as favourable market 534 ‘000 t 540 ‘000 t $445 m $443 m conditions persist 100% 5% 5% 15% 14% Other operations 16% 16% o Seasonal decline in thick plate sales (NLMK
Slide 19: Appendices
APPENDICES 19
Slide 20: Sales Structure
SALES STRUCTURE • GROWTH OF INTERCOMPANY SLAB SALES SALES STRUCTURE BY PRODUCT +50% QOQ mt 3.87 3.84 3.58 • INCREASE OF SLAB SALES TO NBH TO 0.46 M T Pig iron Slabs (+7% QOQ) 34% 25% 24% Billets • Q3’14: PIG IRON SALES WENT UP TO 97,000 T HRC 25% 25% Thick plates 22% CRC • LONG PRODUCT SALES DECREAS
Slide 21: Sales Geography
SALES GEOGRAPHY • SALES IN Q3 ’14: 3.6 M T (-7% QOQ) STEEL PRODUCT SALES BY REGION o Stable sales to the Russian market: 1.7 m t mt 3.87 3.84 3.58 4 ◦ Flat steel sales 0.945 m t (+9% qoq) 0.52 0.36 0.13 o Sales to export markets: 1.9 m t (-10% qoq) 3 0.75 0.64 0.70 ◦ Sales to Europe decreased (-5% q
Slide 22: Foreign Assets Performance
FOREIGN ASSETS PERFORMANCE SLAB SALES BY THE STEEL SEGMENT NBH ROLLED PRODUCT SALES mt mt 1.4 2.00 0.3 0.50 1.2 1.77 0.45 1.54 1.50 0.41 0.41 0.40 1.0 0.81 1.41 0.2 0.17 0.18 0.17 0.8 0.16 0.16 0.30 0.58 0.15 0.54 1.00 0.6 0.48 0.43 0.46 0.37 0.40 0.09 0.08 0.20 0.4 0.32 0.1 0.07 0.50 0.2 0.11 0.12
Slide 23: Segment Results Overview
SEGMENT RESULTS OVERVIEW EBITDA BY SEGMENT 2013-2014 SEGMENT RESULTS CHANGE QOQ $m 693 Revenue 594 Steel 0% $700 36 segment Production expenses -7% 400 468 19 145 379 409 $500 318 23 185 77 Long products Revenue -7% 30 209 52 segment 26 227 190 Production expenses -14% $300 228 7 215 23 40 455 Forei
Slide 24: Cash Cost of Slabs
CASH COST OF SLABS SLAB CONSOLIDATED CASH COST STRUCTURE (AT LIPETSK SITE) CASH COST OF SLABS (AT LIPETSK SITE), 2012-2014 Cost item Q3 ’14 Q2 ’14 ∆, $/t Period $/t Q1 ’12 $395 Coke and coking coal $77 $79 -$2 Q2 ’12 $411 Iron ore $49 $56 -$7 Q3 '12 $383 Q4 '12 $361 Scrap $31 $32 -$1 2012 $388 Other
Slide 25: Segment Information
SEGMENT INFORMATION Q3 2014 Foreign Intersegmental Long Steel rolled Mining All other Totals operations and Consolidated (million USD) products products balances Revenue from external customers 1 636 523 378 70 0 2 607 2 607 Intersegment revenue 373 115 178 666 (666) Gross profit 576 39 97 159 (1) 8
Slide 26: Quarterly Data: Consolidated Statement of Income
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q3 2014 Q2 2014 Q3 2014/Q2 2014 9M 2014 9M 2013 9M 2014/9M 2013 (mln USD) +/- % +/- % Sales revenue 2 607 2 808 (201) (7%) 8 053 8 405 (352) (4%) Production cost (1 592) (1 869) 277 (15%) (5 286) (6 175) 889 (14%) Depreciation and amortization (208) (
Slide 27: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q3 2014 Q2 2014 Q3 2014/Q2 2014 9M 2014 9M 2013 9M 2014/9M 2013 (mln. USD) +/ - % +/ - % Cash flow from operating activities Net income 295 159 137 86% 627 207 420 203% Adjustments to reconcile net income to net cash provided by operating activities Depreciation and
Slide 28: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at 30.09.2014 30.06.2014 31.03.2014 31.12.2013 31.12.2012 31.12.2011 (mln. USD) ASSETS Current assets 4 781 5 138 4 966 4 781 5 469 5 504 Cash and cash equivalents 815 939 830 815 951 797 Short-term investments 668 792 753 668 107 227 Accou
Slide 29: www.nlmk.com
NLMK Investor Relations Russia, 115054, Moscow 18, Bakhrushina str, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com www.nlmk.com