Nlmk · RUS:NLMK
Nlmk — FY2019 Earnings Presentation
35 slides from Nlmk's earnings presentation, Feb 12, 2020
Slide 1: 2019 IFRS Results
1 2019 IFRS Results 12 February 2020
Slide 2: Disclaimer
DISCLAIMER 2 This document is confidential and has been prepared by NLMK (the the industry in which the Company operates. By their nature, forwarding- “Company”) solely for use at the presentation of the Company and may looking statements involve risks and uncertainties because they relate to not be
Slide 3: Market review and operating highlights
3 • Market review Grigory • Operating Fedorishin highlights CEO • 2019 & Q4’19 Financials • Business divisions results
Slide 4: Market Update
MARKET UPDATE 4 Apparent steel demand in Russia and China MANUFACTURING PMI STEEL DEMAND DYNAMICS IN KEY REGIONS, yoy came in stronger than expected in 2019, 57 Activity expansion: >50 while in the EU and the US it fell short of The US The EU Russia China 2019E (updated) 8.0% 8.8% expectation 10.0%
Slide 5: Q4'19 spreads to raw materials were close to 5Y minimum
Q4’19 SPREADS TO RAW MATERIALS WERE CLOSE TO 5Y MINIMUM 5 HRC prices declined qoq during Q4’19 at HRC PRICES WERE DOWN IN 2019 AND Q4’19 IN MOST REGIONS, $/t NLMK’s home markets: 2018 2019 %, yoy Q3'19 Q4'19 %, qoq – The US HRC prices dropped 8% qoq, on -27% -20% -6% -8% -9% -7% average, despite a s
Slide 6: Shipments recovered in Q4'19
SHIPMENTS RECOVERED IN Q4’19 6 Q4’19 deliveries increased 4% qoq to 2019: SHIPMENTS WERE DOWN 3% YOY SHIPMENTS RECOVERED IN Q4’19, m t 4.2 m t driven by the completion of ON LOWER SEMIS SALES maintenance works at NLMK Lipetsk 17.6 4.6 – Shipments were stronger both in 17.1 4.0 4.2 Russia and in expo
Slide 7: Strategy 2022 – Results Snapshot
STRATEGY 2022 – RESULTS SNAPSHOT 7 During the first year of Strategy 2022 STRATEGY 2022 EFFECTS IN 2019, $ m pa implementation, total effect exceeded $200 m 570 520 1,250 470 Contributions from the operational 420 efficiency programs surpassed our 370 320 annual target of $100 m 41 214 173 270 220 –
Slide 8: Investment projects: completed and nearing completion
INVESTMENT PROJECTS: COMPLETED AND NEARING COMPLETION 8 NLMK: BF#6 and BOF#2 upgrade COMPLETED COMPLETED – Pig iron output to rise 8% to 3.4 m t pa at BF#6 BF#6 AND BOF#2, NLMK NEW REHEATING FURNACE AT HSM, NLMK – New BOF equipment to enable the use of BOF gas at new captive power plant for energy g
Slide 9: Q1'20 Outlook
Q1’20 OUTLOOK 9 MARKETS Russia: earlier than usual construction season start owing to mild The EU: limited supply as a result of production cuts in Q3-Q4’19 weather conditions and coupled with limited supply due to and end of destocking to positively weigh on prices overhauls at major mills should s
Slide 10: 2019 & Q4'19 Financials
10 • Market review Shamil • Operating highlights Kurmashov • 2019 & Q4’19 CFO Financials • Business divisions results
Slide 11: Q4'19 results impacted by correction in steel prices and product mix
Q4’19 RESULTS IMPACTED BY CORRECTION IN STEEL PRICES AND PRODUCT MIX 11 Revenue was down 10% qoq on lower steel prices and a FCF, EBITDA AND MARGIN DYNAMICS higher share of pig iron in the sales mix 1,000 0 28% 26% 24% 25% 900 800 0 21% 700 EBITDA declined 27% qoq 0 600 – Revenue: $2,312 m (-10% qoq
Slide 12: Q4'19 profitability suppressed by narrowing spreads
Q4’19 PROFITABILITY SUPPRESSED BY NARROWING SPREADS 12 Russian Flat products: EBITDA decreased 32% qoq on EBITDA BY DIVISION, $ m narrower spreads, partially offset by operational efficiency – (-) Min spreads driven by steel prices sharp correction 1200.0 1195.0 1190.0 1185.0 1180.0 1175.0 1170.0 11
Slide 13: Working capital release in Q4'19 supported FCF
WORKING CAPITAL RELEASE IN Q4’19 SUPPORTED FCF 13 Net operating cash flow increased by 25% qoq Q4’19 FCF BRIDGE, $ m to $710m 0 100 200 300 400 500 600 700 800 900 EBITDA 480 Working capital release of $334 m: – (+) $238 m: decrease in accounts receivables Net working capital change +334 driven by l
Slide 14: Strong debt portfolio and liquidity position support dividend payout
STRONG DEBT PORTFOLIO AND LIQUIDITY POSITION SUPPORT DIVIDEND PAYOUT 14 Total debt was down 1% qoq to $2.66 bn LIQUIDITY AND SHORT-TERM DEBT, $ m DEBT* MATURITY, $ m Working capital lines Eurobonds ECA lines Average cost of debt remains low at 3.4% 700 Available 1,649 credit lines 500 500 Net debt /
Slide 15: Business divisions results
15 • Market review • Operating highlights • Q4’19 Financials • Business divisions results
Slide 16: Q4'19: Russian Flat Products
Q4’19: RUSSIAN FLAT PRODUCTS 16 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments increased by 16% qoq due to higher semis sales on overhauls completion at the blast 3.50 +16% 3.23 -3% furnace and basic oxygen furnace operations 3.00 2.78 1.74 1.69 0.85 0.26 – (+) Semi-finished products sales grew
Slide 17: Q4'19: Russian Long Products
Q4’19: RUSSIAN LONG PRODUCTS 17 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments were down 3% qoq -3% -20% – (-) Billet sales close to zero on softer margins 0.69 0.67 0.49 0.03 – (+) Improved product portfolio mix 0.06 0.07 0.39 0.06 0.13 0.02 0.03 0.07 Revenue was down 20% qoq on poor long steel
Slide 18: Q4'19: Mining
Q4’19: MINING 18 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) The mining segment’s sales decreased 5% qoq due to scheduled repairs 4.78 -5% 0.41 -21% 490 % 46% 4.56 0.01 – Concentrate sales to 3rd parties were 49 k t 0.03 470 % 0.36 0.32 450 % 0.12 0.01 – Pellet sales to 3rd parties amounted to 71 k t 4
Slide 19: Q4'19: NLMK USA
Q4’19: NLMK USA 19 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments down 14% qoq -14% -18% – (-) Weaker demand in energy, automotive and 0.55 0.39 machinery segments 0.47 0.32 0.29 0.18 Revenue fell 18% qoq due to lower prices and 0.24 0.13 shipments – (-) Prices dropped 4% qoq on average 0.26 0.2
Slide 20: Q4'19: NLMK Dansteel
Q4’19: NLMK DANSTEEL 20 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Shipments of thick plates rose 9% qoq following the completion of scheduled repairs and solid +9% -1% demand for plates in November-December 0.13 0.11 0.11 0.12 0.01 0.01 Revenue almost flat qoq 0.12 0.13 0.11 – (+) Shipments were up 9
Slide 21: Q4'19: NBH
Q4’19: NBH 21 STEEL SHIPMENTS (m t) AND REVENUE ($ bn) Sales volumes decreased 3% qoq due to weak demand and high stocks at the consumers’ -3% -5% 0.54 0.52 0.37 0.35 Revenue down 5% qoq due to lower sales and lower prices 0.41 0.25 0.23 0.39 – (-) Shipments decreased 3% qoq – (-) Average prices dec
Slide 22: Appendix
22 Appendix
Slide 23: Q4'19: NLMK output, shipments, slab cash costs
Q4’19: NLMK OUTPUT, SHIPMENTS, SLAB CASH COSTS 23 STEEL PRODUCTION, m t GROUP SHIPMENTS TO EXTERNAL CUSTOMERS BY SEGMENT, m t qoq: +7% Q4 2018 Q3 2019 Q4 2019 Q4 2018 Q3 2019 Q4 2019 yoy: -9% qoq: +1% 3.00 5.00 yoy: -13% qoq: +6% 2.37 3.75 2.50 yoy: -11% 4.50 4.00 2.98 2.00 qoq: -3% 3.50 qoq: -10% q
Slide 24: Sales geography and product mix without NBH
SALES GEOGRAPHY AND PRODUCT MIX WITHOUT NBH 24 STEEL PRODUCT SALES BY REGION, m t SALES STRUCTURE BY PRODUCT, m t 4.64 4.64 5 4.17 4.17 5 4.02 4.02 5 5 1.02 Others 0.30 1.40 4 0.42 4 0.56 Commercial products 1.42 1.51 4 0.52 0.63 M. East* 4 0.73 3 3 0.81 0.61 N.America Semi-finished 3 2.02 3 0.67 0.
Slide 25: Foreign assets performance
4,0 00 FOREIGN ASSETS PERFORMANCE 1,2 00 25 3,5 00 1,0 00 SLABS SALES FROM THE RUSSIAN FLAT PRODUCTS DIVISION, k t NBH ROLLED PRODUCTS SALES, k t 3,0 00 800 2,5 00 QoQ QoQ 2,0 00 1,902 600 8 540 6 537 10 518 Total -3% Total +16% 376 1,497 70 80 79 CRCCRC +73% 1,5 00 1,290 Dansteel & 119 328 NLMK Dan
Slide 26: 2019 operating results
2019 OPERATING RESULTS 26 2019 shipments declined 3% yoy to 2019: SHIPMENTS DECREASED ON SEMIS EXPORT WHILE THE SHARE OF FINISHED PRODUCTS ROSE 17.1 m t mainly on lower pig iron and billet sales. Product mix improved 16.5 17.6 17.1 17.6 -3% 17.1 16.5 – Pig iron shipments were impacted by overhauls a
Slide 27: 2019 profitability suppressed by narrow spreads
2019 PROFITABILITY SUPPRESSED BY NARROW SPREADS 27 Russian Flat Products: EBITDA declined 36% yoy to $1.5 bn EBITDA BY DIVISION, $ m – (-) Lower spreads driven by decline in steel prices 3,589 – (-) Decreased slab sales due to BF & BOF maintenance 3796.0 3787.3 3778.6 3769.9 3761.2 3752.5 3743.8 373
Slide 28: Working capital release supported FCF in 2019
WORKING CAPITAL RELEASE SUPPORTED FCF IN 2019 28 Net operating cash flow decreased by 4% yoy 2019 FCF BRIDGE, $ m to $2.6 bn 0 100 200 300 400 500 600 700 800 900 1,0 00 1,1 00 1,2 00 1,3 00 1,4 00 1,5 00 1,6 00 1,7 00 1,8 00 1,9 00 2,0 00 2,1 00 2,2 00 2,3 00 2,4 00 2,5 00 2,6 00 2,7 00 2,8 00 2,9
Slide 29: 2019: Russian Flat Products
2019: RUSSIAN FLAT PRODUCTS 29 SHIPMENTS (m t) AND REVENUE ($ bn) Shipments were down 8% yoy due to overhauls at the BF and BOF operations 13.52 -8% 8.75 -16% 12.46 7.33 – (-) Semi-finished products sales down 16% yoy 2.42 4.31 3.08 1.43 – (+) Share of finished steels increased to 47% 0.47 0.46 2.29
Slide 30: 2019: Russian Long Products
2019: RUSSIAN LONG PRODUCTS 30 SHIPMENTS (m t) AND REVENUE ($ bn) Shipments were down 10% yoy 3.18 -10% -18% – (-) Lower exports of billets on softer margins 2.15 2.85 – (+) Strong demand in Russia translated into 0.77 0.43 1.76 0.31 increased share of finished steel (+11 p.p. yoy) 0.25 0.28 0.33 0.
Slide 31: 2019: Mining
2019: MINING 31 SHIPMENTS (m t) AND REVENUE ($ bn) The mining segment’s sales were flat yoy 18.38 0% 18.45 +9% 1.32 – Deliveries were supported by higher sales of 1.21 190 0% 0.60 0.05 188 0% 186 0% iron ore concentrate to the 3rd parties 184 0% 130 % 0.05 182 0% 180 0% 0.05 178 0% 176 0% 174 0% 172
Slide 32: 2019: NLMK USA
2019: NLMK USA 32 SHIPMENTS (m t) AND REVENUE ($ bn) Shipments were down 3% yoy 2.28 -3% 2.21 2.13 -20% – (-) Weaker demand for HRC in the pipe industry, manufacturing, automotive and energy 1.72 segments 1.27 1.18 1.05 0.79 Revenue declined 20% yoy due to sharp correction in prices and volumes 1.01
Slide 33: 2019: NLMK Dansteel
2019: NLMK DANSTEEL 33 SHIPMENTS (m t) AND REVENUE ($ bn) Shipments of thick plates increased 2% yoy due to demand growth in the wind power industry +2% -4% 0.52 0.53 0.51 0.49 0.05 0.03 Revenue decreased 4% yoy on price contraction – (-) Plate prices decreased 6% yoy 0.52 0.53 0.47 0.46 EBITDA grew
Slide 34: 2019: NBH
2019: NBH 34 SHIPMENTS (m t) AND REVENUE ($ bn) Sales volumes decreased 2% yoy 2.23 -2% 2.19 -15% – (-) Lower plate sales due to restructuring at 1.84 NLMK Clabecq 1.56 – (+) Flat steel sales rose 9% yoy 1.48 1.61 1.09 1.02 Revenue was down 15% yoy on the back of 0.75 0.74 lower prices and deliverie
Slide 35: Company IR Contacts
COMPANY IR CONTACTS 35 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