Nlmk · RUS:NLMK
Nlmk — Q3 2013 Earnings Presentation
32 slides from Nlmk's earnings presentation, Nov 8, 2013
Slide 1: NLMK Q3 2013 US GAAP Consolidated Results
NLMK Q3 2013 US GAAP CONSOLIDATED RESULTS Moscow, 8 November 2013 1
Slide 2: Disclaimer
DISCLAIMER This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor 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 documen
Slide 3: International Steel Market
INTERNATIONAL STEEL MARKET DEMAND AND SUPPLY STEELMAKING CAPACITY UTILIZATION • Average utilization rate in Q3 went down to 77.2% (- 2.4 p.p.) 85% • Seasonal slowdown in demand and production in August was followed by a recovery in demand by the end of Q3 75% PRICES • Average prices in Q3 declined q
Slide 4: Russian Steel Market
RUSSIAN STEEL MARKET DEMAND AND SUPPLY STEEL CONSUMPTION TREND Q2’ Q3’ • 9M’13: steel consumption increased to 31.7 m t (+3.5% yoy) 4,0 mt Import share in consumption – 13 13 60% about 20% • Growth driven by the construction sector (+8% yoy) 50% 3,5 • Import represents a significant share of ASU or
Slide 5: Raw Materials Market
RAW MATERIALS MARKET PRICES AND DEMAND IN INTERNATIONAL MARKETS GLOBAL RAW MATERIAL PRICES • During Q3 prices for main raw materials were recovering 1,2 Q3’ 13 from the bottom values in Q2, providing a cost push for 1,1 1,0 steel prices in H2’13 0,9 • Global prices for iron ore and coking coal went
Slide 6: Production Results
PRODUCTION RESULTS HIGH CAPACITY UTILIZATION RATES NLMK: STEEL PRODUCTION mt • Growth in steel production in Q3’13 to 3.9 m t (+3% qoq) 3,7 3,8 3,9 ~4,1* 14,9 15,5* 0,2 0,2 0,9 • Average capacity utilization rate 96% 0,2 0,5 0,5 0,6 1,8 o Lipetsk plant – 99% o NLMK Indiana – 91% 3,0 3,1 3,1 12,2 o N
Slide 7: Sales Geography
SALES GEOGRAPHY Q3 SALES TOTALED 3.72 M T (-1% QOQ) STEEL SALES BY REGION mt Share in Q3‘13 SALES IN RUSSIA +13% QOQ, +22% YOY* TO 1.6 M T, INCL. 3.76 3.77 3.72 0,43 0,43 0,36 Other regions 10% • Flat steel sales: 0.9 m t, +17% qoq 3 0,52 0,46 0,22 6% 0,51 S.E. Asia 0,48 0,44 • Long products sales:
Slide 8: Sales Structure
SALES STRUCTURE SALES BY PRODUCT FINISHED STEEL SALES GREW 6% TO 2.9 M T 3.774 m t 3.724 m t Pig iron • Share of finished steel grew 5 p.p. qoq to 78% 100% 2% 0% Slabs 21% 25% Billets 80% • Pig iron sales down to 9,000 t, compared to 91,000 t in Q2 0% 1% HRC 60% 28% 26% Long products • Slab sales to
Slide 9: Operational Efficiency
OPERATIONAL EFFICIENCY PRODUCTION COSTS REDUCTION WITHIN “RAPID IMPROVING HOT-END OPERATIONAL EFFICIENCY IMPROVEMENTS” PROGRAM 120 $m • The program covers production and auxiliary processes 100 • Target level of savings in 2013: c. $100 m* 80 • Effect of $80 m achieved in 9М13 60 38 100 40 80 RESTRU
Slide 10: Key Highlights
KEY HIGHLIGHTS Q3 FINANCIAL RESULTS REVENUE AND EBITDA $m $3 500 • Revenue $2 720 m (-4% qoq) 3 002 2 803 2 856 2 829 $3 000 2 720 $2 500 • EBITDA $379 m (-5% qoq) $2 000 $1 500 • EBITDA margin 13.9% (-0.2 p.p.) $1 000 483 390 400 379 $500 318 • Net income $138 m $0 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '1
Slide 11: Profitability
PROFITABILITY Q3’13 EBITDA WAS $379 MILLION EBITDA MARGIN • Revenue declined by 4% 20% 16,1% 16% 14,1% o Growth in value added product sales partially offset weaker 13,9% 13,9% prices and lower pig iron sales volume 12% 11,1% • Stable profitability at 13.9% 8% o (-) Decline in steel prices outpacing
Slide 12: NBH Equity Sale Impact
NBH EQUITY SALE IMPACT NBH DECONSOLIDATION REVENUE (PROFORMA) • Accounting by the equity method and exclusion from $m Q3 9M consolidated figures • Impact on balance sheet starting from Q3’13 -1 062 o Minor impact on shareholder capital (see slide 24) -341 718 219 o Financial debt reduction by $757 m
Slide 13: Cash Flow
CASH FLOW CASH FLOW BRIDGE IN Q3‘13 POSITIVE FREE CASH FLOW 379 • Release of working capital: $125 m EBITDA +125 Working capital change • Control over investment project implementation Other and non cash operations +4 o Investments of $ 281 m significantly lower the Income tax -59 Net interests oper
Slide 14: Debt Position
DEBT POSITION FINANCIAL DEBT CHANGE IN DEBT POSITION 6 • Net debt* $2.77 bn (-19%) $ bn +0.40 • Total debt $4.12 bn (-14%) 5 +0.25 • Cash and equivalents ** $1.35 bn (-1%) -0.60 +0.05 0,99 • Net debt/ 12M EBITDA* 1.87 4 0,62 -0.76 NLMK BELGIUM HOLDINGS LIABILITIES DECONSOLIDATION 3 3,79 ST debt LT d
Slide 15: Settlement of Financial Liabilities
SETTLEMENT OF FINANCIAL LIABILITIES SIGNIFICANT LIQUIDITY POSITION LIQUIDITY AND ST DEBT MATURITY* COMFORTABLE MATURITY SCHEDULE $4 000 $m Undrawn committed • Short term debt $0.62 bn, (-38% qoq) $3 500 credit lines $3 000 o Ruble bonds $2 500 2 331 Cash and $2 000 equivalents o Credit lines $1 500
Slide 16: Outlook
OUTLOOK STEEL PRODUCTION • Steel output in Q4’13 will grow by 5% to 4.1 m t, driven by production growth at NLMK Kaluga • In 2013 steel production will reach 15.5 m t (or +4% y/y) FINANCIALS • In Q4, we expect steel prices to soften due to the seasonal slowdown in demand and projected decline in ste
Slide 17: Segments
SEGMENTS 17
Slide 18: Segment Contribution – Q3 '13
SEGMENT CONTRIBUTION – Q3 ‘13 STEEL SEGMENT SEGMENT EBITDA • Decline in steel prices $m • Product mix improvement 7 • Ongoing cost optimization $510 27 190 LONG PRODUCTS SEGMENT 61 207 26 227 190 $310 • Seasonal sales growth (incl. contribution from NLMK-Kaluga) 31 215 23 40 • High capacity utilizat
Slide 19: Steel Segment
STEEL SEGMENT EXPORT SALES REDUCTION BY 7% TO 2.21 M T SALES AND REVENUE STRUCTURE 2,210,000 t 2,364,000 t $1 529 m $1 685 m • Growth of domestic sales incl. finished products Other revenue* 100% 4% 0% 8% 8% • Export sales decrease 0% 2% Pig iron 80% 34% 24% 39% Slab • Increase of intersegment slab
Slide 20: Long Products Segment
LONG PRODUCTS SEGMENT SALES AND REVENUE STRUCTURE SALES AND REVENUE GROWTH • Sales increased by 21% to 570,000 t including sales from 570,000 t 469,000 t $355 m $314 m 100% 0% 3% 5% Other revenue* NLMK Kaluga (+86’000 t) 15% 0% 13% • Stable pricing environment supported by a seasonal 80% NLMK Kaluga
Slide 21: Mining Segment
MINING SEGMENT SALES AND REVENUE STRUCTURE REVENUE DECLINE QOQ 3,860,000 t 3,863,000 t $312 m $349 m • Stable sales – 3.86 m t (flat, qoq) 100% 4% 3% 24% 25% o 76% to Lipetsk site 23% 25% 80% • Decline in average selling prices 60% LOWER EBITDA MARGIN (-4 P.P. TO 61%) 40% 76% 75% 72% 71% 20% • Iron
Slide 22: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT NLMK USA SALES AND REVENUE SALES FLAT QOQ 455,000 t 432,000 t $336 m $313 m • Demand growth for HRC and galvanized steel on the US 100% 3% 4% 14% 12% 16% 13% Other revenue market 80% 25% 24% 27% 26% • Seasonally weaker demand on the European market 60% Pre-painted 40%
Slide 23: Appendices
APPENDICES 23
Slide 24: Impact of NBH Stake Sale
IMPACT OF NBH STAKE SALE 30 SEPTEMBER 2013 – SALE OF 20.5% STAKE IN NBH ASSETS CHANGE IN Q3 JOINT CONTROL – DECONSOLIDATION OF ASSETS UNDER $m INVENTORIES PPE US GAAP 3000 2500 -981 163 FINANCIAL RESULTS FROM NBH SALE -609 -24 2000 • Positive results of $19 m (see Gains / (losses) on 1500 2 530 10 9
Slide 25: Foreign Asset Performance
FOREIGN ASSET PERFORMANCE LIPETSK SITE SLAB SALES IN 2013 NBH STEEL SALES mt mt 1,13 200 1,2 0,94 151 146 1,0 150 134 141 138 0,78 128 0,8 105 92 0,6 0,48 100 80 0,47 0,35 0,37 0,4 50 0,2 0,11 0,13 0,10 17 21 14 0,05 - - 0 Q1'13 Q2'13 Q3'13 Q1'13 Q2'13 Q3'13 To third parties NBH NLMK Dansteel NLMK U
Slide 26: NLMK Kaluga
NLMK KALUGA LONG STEEL PRODUCTION/CONSUMPTION 2013 RESULTS BALANCE BY REGION IN 2012 46% • The plant is operating in hot testing mode 50% Long steel shortage – 45% 3.8 m t py 40% • In Q4’13 maximum capacity utilization is expected 35% 31% Share in long steel production 30% • 75% of Q3 sales in Mosco
Slide 27: Cash Cost of Slabs
CASH COST OF SLABS CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE) CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013 Cost item Q3’13 Q2’13 ∆, $/t Period $/t Coke and coking coal $84 $91 -$7 Q1 '12 $395 Iron ore $60 $64 -$4 Q2 '12 $411 Scrap $29 $37 -$8 Other materials $27 $31 -$4 Q3 '12 $383 Electri
Slide 28: Segmental Information
SEGMENTAL INFORMATION Q3 2013 Foreign Intersegmental Long Steel rolled Mining All other Totals operations and Consolidated (million USD) products products balances Revenue from external customers 1 529 749 355 86 0 2 720 2 720 Intersegment revenue 472 1 114 226 813 (813) Gross profit / (loss) 299 (1
Slide 29: Quarterly Data: Consolidated Statement of Income
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q3 2013 Q2 2013 Q3 2013/Q2 2013 9M 2013 9M 2012 9M 2013/9M 2012 (mln USD) +/- % +/- % Revenue 2 720 2 829 (110) (4%) 8 405 9 354 (949) (10%) Production cost (1 993) (2 058) 65 (3%) (6 175) (6 510) 335 (5%) Depreciation and amortization (230) (220) (10
Slide 30: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q3 2013 9M 2013 9M 2012 9M 2013/9M 2012 (mln. USD) +/ - % Cash flow from operating activities Net income 138 207 616 (409) (66%) Adjustments to reconcile net income to net cash provided by operating Depreciation and amortization 230 656 569 87 15% Loss on disposals o
Slide 31: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at as at 30.09.2013 30.06.2013 31.03.2013 31.12.2012 30.09.2012 30.06.2012 31.03.2012 (mln. USD) ASSETS Current assets 4 918 5 537 5 834 5 469 6 287 5 230 5 714 Cash and cash equivalents 835 1 241 1 220 951 1 803 769 926 Short-term investme
Slide 32: Investor Relations Contact
NLMK Investor relations Russia, 115054, Moscow Bakhrushina str, 18, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com www.nlmk.com