Nlmk · RUS:NLMK
Nlmk — FY2015 Earnings Presentation
34 slides from Nlmk's earnings presentation, Mar 24, 2016
Slide 1: Q4 and 12M 2015 IFRS Results and Strategy Update
Q4 AND 12M 2015 IFRS RESULTS AND STRATEGY UPDATE 24 March 2016
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: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy Update 3. Financial Highlights 4. Segment Results 5. Annex 3
Slide 4: 2015 Global Steel Market Trends
2015 GLOBAL STEEL MARKET TRENDS • Global steel demand declined by 3% yoy STEEL DEMAND to 1.5 bn t Bn t Global China o Steel demand in China declined by 5% yoy 1.8 1.6 • Global steel production declined by 3% yoy 1.4 1.2 1.55 0.05 1,5 to 1.59 bn t 1 0.8 0.7 0.8 • Overcapacity continues driving down s
Slide 5: 2015 Global Steel Market Landscape
2015 GLOBAL STEEL MARKET LANDSCAPE Production (Y-o-Y, %), consumption (Y-o-Y, %) and HRC price (Y-o-Y,%) changes in 2015 EU-28 2.6 CIS Production ASU HRC NAFTA -2.1 -26 Production ASU HRC -4.4 -10.9 -28 Production ASU HRC -8.6 -9 MIDDLE EAST -38 CHINA 1 20 LATIN AMERICA Production ASU HRC -2.4 -42 P
Slide 6: Rising Protectionism Around the Globe
RISING PROTECTIONISM AROUND THE GLOBE • 2015 Chinese exports soared by 20% yoy to 112 m t LTM TRAILING CHINESE EXPORTS Mt • Protectionism is on the rise worldwide 120 o Trade barriers and anti-dumping measures mounted 100 simultaneously with Chinese steel exports buildup 80 • 3 m t of Russian steel
Slide 7: 2015 Russian Domestic Market Trends
2015 RUSSIAN DOMESTIC MARKET TRENDS • Steel demand decreased by 8% yoy to 39.4 m t 50% STEEL CONSUMPTION & SUPPLY TRENDS 25% following decline in fixed assets investment 45% Imports share in ASU ASU growth rate o Flats products demand declined by 7.5% yoy 40% Russian steelmakers supply to domestic m
Slide 8: NLMK 2015 Production and Sales
NLMK 2015 PRODUCTION AND SALES • Steel sales: 15.9 m t (+5% yoy) SALES STRUCTURE o Finished steel sales declined by 4% yoy due to weak Russian Mt domestic market 15.86 14.83 15.13 Semi- o Semi-finished steel sales to third parties grew by 33% yoy finished 4.36 4.90 6.07 • Steel output: 15.9 m t (fla
Slide 9: 2015 Headline Numbers
2015 HEADLINE NUMBERS • FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE o Revenue: $8,008 m (-23% yoy) $M 3,000 30% o EBITDA: $1,948 m (-18% yoy) 2,500 25% o EBITDA margin: 24% (+1 p.p. yoy) 2,000 20% o Net income: $967 m (+25% yoy) 1,500 15% o Capex: $595 m (+6% yoy) 1,000 10% o Free cash flow*: $997 m
Slide 10: Q1'2016 Outlook
Q1’2016 OUTLOOK • MARKET o Global market: world steel demand will continue declining mainly due to weaker steel consumption in the emerging markets. Steel prices show uneven upward trend as trade barriers and antidumping measures mount in the developed countries discouraging exports o Russian market
Slide 11: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy Update 3. Financial Highlights 4. Segment Results 5. Annex 11
Slide 12: Strategy 2017: Key Targets
STRATEGY 2017: KEY TARGETS TARGETED ANNUAL NET GAINS IN 2018 VS 2013: $1,000 M Leadership in 80 1 operational $330 m efficiency 250 $330 m 2 World-class 400 $480 m resource base 80 40 Leading positions Vladimir Lisin 3 in strategic $190 m Capital Markets Day, markets 150 February 2014 Leadership in
Slide 13: Strategy 2017: 48% of Targeted Gains Realized
STRATEGY 2017: 48% OF TARGETED GAINS REALIZED TARGETED ANNUAL NET GAINS 2018/ 2013: $1,000 M GAINS ACHIEVED IN 2014-15: $477 M 10 Leadership in 80 • Management 1 operational $330 m $280 m initiatives efficiency 250 Operational efficiency 270 gains exceeded initial $330 m $364 m target 94 $• Invest
Slide 14: Leadership in Operational Efficiency
1 LEADERSHIP IN OPERATIONAL EFFICIENCY • Continued growth of efficiency projects portfolio GROWING NUMBER OF EFFICIENCY PROJECTS o Over 500 new projects commenced in 2015 1,817 1,613 1,623 • 12M’15 savings: $197 m (2x 2015 target) 1,310 1,460 • Russian Flat Products 1,011 o Productivity improvements
Slide 15: World Class Resource Base
2 WORLD CLASS RESOURCE BASE • Stoilensky pellet plant to be commissioned in H2’16 PELLETIZING PLANT ECONOMICS o Capex of $650 m (74% invested as of December 2015) 60 USD/t o +$30 m of gains to be achieved in 2016 (1.0 mt of pellets) 50 o Annual gains of $180 m to be fully achieved in 2017 40 • Stoil
Slide 16: Leadership in Strategic Markets
3 LEADERSHIP IN STRATEGIC MARKETS • Flexible sales structure drew sales up 5% YoY RUN RATE AND DOMESTIC SALES SHARE o Actively managed sales with domestic sales share 110% fluctuating between 30% and 50% through the cycle 100% 90% • Diversified product mix 80% o Russian market is strategic for downs
Slide 17: Leadership in Sustainability and Safety
4 LEADERSHIP IN SUSTAINABILITY AND SAFETY • Relentless focus on safe operating practices LTIFR*, RUSSIAN ASSETS o Russian operations LTIFR* down by 22% yoy (at or better than global best practice level) o Proactive management of risks to life and health of employees and contractors -22% o Continued
Slide 18: Strategy 2017: Execution Checkpoint
STRATEGY 2017: EXECUTION CHECKPOINT ANNUAL GAINS BUILDUP VS. 2013 CAPEX REDUCTION 120 0 $ bn Strategy 2017 $ bn target of $1.0 bn pa 100 0 800 Strategy 2017 target of $0.9 bn pa 600 48% 1000 1.45 400 -179 256 400 477 0.60 200 0.56 0.55 0 2014 vs 2013 Prices & FX 2015 vs 2014 Cumulative Strategy 2017
Slide 19: Contents
CONTENTS 1. Market Update and Headline Numbers 2. Strategy Update 3. Financial Highlights 4. Segment Results 5. Annex 19
Slide 20: Q4'15 Profitability
Q4’15 PROFITABILITY • EBITDA down by 37% QoQ to $321 m Q4’15 EBITDA BY SEGMENT o Driven by narrowed spreads between raw material $M and steel products prices 83 -30 13 • Russian Flat Products -18 o (-) Weak demand in Russian market 321 o (-) Lower steel prices 272 • Russian Long Products o (-) Sharp
Slide 21: Cash Flow
CASH FLOW • Q4’15 Net Operating Cash Flow: $246 M CASH FLOW BRIDGE, $M o Neutral net working capital change – optimization measures fully offset of seasonal increase in material Q4’15 12M’15 stocks (scrap, slabs, etc.) EBITDA 321 1,948 o Q4’15 capex: $150 m Net working capital change 7 94 • Q4’15: F
Slide 22: Debt Position
DEBT POSITION • Net debt reduction 32% yoy CHANGE IN DEBT IN 2015 o Net Debt: $1.09 bn (+2% qoq, -32% yoy) 2.77 $ BN 2.68 o Total debt: $2.68 bn (+10% qoq, -3% yoy) -0,10 0.01 0.80 0.56 • Strong liquidity maintained o Cash and equivalents*: $1.59 bn (+16% qoq, +35% yoy) 2.76 1.96 2.12 • NET DEBT / 1
Slide 23: Liquidity and Debt Maturity Profile
LIQUIDITY AND DEBT MATURITY PROFILE • Strong liquidity position of $1.59 bn LIQUIDITY AND ST-DEBT PAYMENTS** $M • Comfortable debt maturity profile o ST debt $0.53 bn** incl. revolving credit lines for working capital financing, ruble bonds, short term part of 1,056 Available credit lines ECA-backed
Slide 24: Content
CONTENT 1. Market Update and Headline Numbers 2. Strategy Update 3. Financial Highlights 4. Segment Results 5. Annex 24
Slide 25: Russian Flat Products
RUSSIAN FLAT PRODUCTS • Sales to 3rd parties down by 4% qoq SALES & REVENUE FROM 3RD PARTIES o (-) Seasonal decrease in demand for flat steel in Russia -4% -16% Other operations* o (+) Semi-finished steel sales up 22% QoQ 2.502 m t 2.401 m t $1.223 m $1.025 m Transformer 4% 3% Dynamo • External reve
Slide 26: Russian Long Products
RUSSIAN LONG PRODUCTS • Sales to 3rd parties down by 27% qoq SALES & REVENUE FROM 3RD PARTIES o (-) Seasonal slowdown in Russian construction -27% -35% 602 k t 438 k t $ 220 m $142 m • External revenue reduction by 35% qoq 0% 1% 12% 0% 14% 4% 1% 1% 15% 15% Other operations* 14% 17% • EBITDA decline
Slide 27: Mining
MINING • Sales volumes up by 3% qoq SALES AND REVENUE o (+) Productivity improvement +3% +2% 4.352 m t 4.485 m t $ 143 m $145 m • Revenue increased by 2% qoq 8% 8% 25% 28% Other o (+) Growing sales volumes 24% 27% operations* o (+) Stabilization of iron ore prices QoQ Iron ore sales to third parties
Slide 28: Foreign Rolled Products
FOREIGN ROLLED PRODUCTS • Segment sales down by 21% qoq SALES & REVENUE FROM 3RD PARTIES o (+) NLMK Dansteel sales +18% qoq -21% -21% o (-) NLMK USA sales volumes down by 28% qoq to 0.4 Mt 590 k t 469 k t $ 359 m $282 m driven by demand implosion from the shale oil and gas 15% 17% 4% 8% Other operat
Slide 29: Content
CONTENT 1. Market update & headline numbers 2. Strategy update 3. Financial highlights 4. Segment results 5. Annex 29
Slide 30: Sales Structure
SALES STRUCTURE • 2015: SALES DOWN UP 5% YoY TO 15.9 MT SALES STRUCTURE BY PRODUCT o +24% YoY of semi-finished 14.8 15.1 M tonnes 15.9 Pig iron Slabs o -4% YoY high value added products 4.08 4.34 Billets 5.10 o -5% YoY HRC and long HRC Thick plates 3.56 3.52 CRC • 2015: REVENUE DOWN 23% YoY TO $8.0
Slide 31: Sales Geography
SALES GEOGRAPHY • +13% YoY GROWTH IN EXPORT SALES STEEL PRODUCT SALES BY REGION o +39% YoY to Middle East, including Turkey M tonnes 14.8 15.1 15.9 o +37% YoY to Asia 16 1.81 Others 1.51 1.43 0.63 14 0.46 o +21% YoY to Europe 12 1.44 2.79 2.37 SE Asia 2.10 1.40 1.01 • SALES TO RUSSIAN MARKET: 6.2Mt
Slide 32: Foreign Assets Performance
FOREIGN ASSETS PERFORMANCE SLABS SALES FROM RUSSIAN FLAT DIVISION NBH ROLLED PRODUCT SALES K tonnes K tonnes 1,905 2,000.57 1,996.57 1,992.57 1,726 1,988.57 1,984.57 YoY 1,980.57 YoY 1,976.56 1,972.56 1,968.56 1,964.56 1,960.56 1,956.56 1,952.56 1,948.56 1,944.55 1,940.55 1,936.55 1,932.55 45 1,928.
Slide 33: Cash Cost of Slab
CASH COST OF SLAB k rub/t $/t 15 500 12.5 12.4 12.5 12.0 12.3 11.6 12 400 11.0 10.8 10.8 10.7 10.7 396 388 348 9 300 310 308 295 238 6 225 200 197 197 190 3 100 RUB/$ exchange rate 29.39 31.09 31.85 35.96 35.00 36.19 47.42 62.19 52.65 62.98 65.94 0 0 2011 2012 2013 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'1
Slide 34: www.nlmk.com
Sergey Takhiev NLMK Investor Relations Russia, 115054, Moscow 18, Bakhrushina str, bldg 1 www.nlmk.com t. +7 495 915 15 75 m.+7 985 760 55 74 st@nlmk.com