Nlmk · RUS:NLMK
Nlmk — Q1 2014 Earnings Presentation
29 slides from Nlmk's earnings presentation, May 20, 2014
Slide 1: Q1 2014 US GAAP Consolidated Financial Results
NLMK Q1 2014 US GAAP CONSOLIDATED FINANCIAL RESULTS Moscow, 20 May 2014 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: Global Steel Market
GLOBAL STEEL MARKET SUPPLY AND DEMAND IN Q1’14 STEELMAKING CAPACITY UTILIZATION RATE • Global steel output grew by 2.5% yoy* to 406 m t • Capacity utilization rate: 78%. Seasonally softer demand 85% • Increase in finished product inventories 75% o Finished product inventories in China grew by 26% qo
Slide 4: Russian Steel Market
RUSSIAN STEEL MARKET SUPPLY AND DEMAND FINISHED STEEL PRODUCTS CONSUMPTION TRENDS • Seasonal slowdown in demand 4,0 mt Imports share in consumption Q4’ 13 Q1’ 14 30% – c.12% • Production remained stable (+0.4% yoy) 25% 3,5 • Imports as a share in consumption down to 12% as RUB 20% weakened 3,0 15% o
Slide 5: Raw Materials Market
RAW MATERIALS MARKET PRICES AND DEMAND IN GLOBAL MARKETS IN Q1’14 RAW MATERIAL GLOBAL PRICE INDEX • Iron ore prices in China down by 9% qoq on the back of higher 1,2 Q1’ 14 imports of raw materials and lower buyer activity due to limited 1,1 access to credit instruments 1,0 0,9 o Iron ore imports to
Slide 6: Production Results
PRODUCTION RESULTS NLMK: CRUDE STEEL PRODUCTION* Q1’14 STEEL OUTPUT: 3.9 M T (-4% QOQ AND +6% YOY) mt 3,9 4,1 3,9 3,7 3,8 Q1’14 GROUP STEELMAKING CAPACITY RUN RATES: 92% 0,2 0,2 0,2 0,2 0,2 0,7 0,5 0,5 0,6 0,7 • Novolipetsk: 98% • NLMK Long Products: 73% (due to mastering of sections at NLMK Kaluga)
Slide 7: Sales Geography
SALES GEOGRAPHY Q1’14 SALES UP BY 8% QOQ TO 3.866 M T STEEL SALES BY REGION mt • Sales to the Russian market up 6% qoq to 1.55 m t including 3.76 3.57 3.87 0,43 0,52 o Flat steel sales totaled 0.766 m t (0% qoq) 0,28 0,07 3 0,52 0,25 0,75 o Long products sales totaled 0.589 m t (+3% qoq) 0,48 0,67 0
Slide 8: Sales Structure
SALES STRUCTURE Q1’14: SALES UP BY 8% QOQ TO 3.87 M T SALES BY PRODUCT • Finished steel sales went up to 2.5 m t (+11% qoq) mt 3.76 3.57 3.87 • Finished steel share in the total sales: 64% (+2 p.p. qoq) Pig iron Slabs o HRC sales +27% qoq after mill 2000 repair in Q4’13 30% 34% 34% Billets • NLMK Da
Slide 9: Strategy for Leadership in Operational Efficiency Is on Track
STRATEGY FOR LEADERSHIP IN OPERATIONAL EFFICIENCY IS ON TRACK NLMK CONTINUES TO IMPLEMENT OPERATIONAL EFFICIENCY OPERATIONAL EFFICIENCY PROGRAM EFFECT PROGRAMS $300 $m Q1’14 NET GAINS WERE $70 M IN LINE WITH THE STRATEGY 2017 SCHEDULE $200 KEY DIMENSIONS OF OPTIMISATION PROGRAMS • Technology: 244 $1
Slide 10: Key Highlights
KEY HIGHLIGHTS Q1’14 FINANCIAL RESULTS PROFITABILITY 2013-2014 $ bn 3,0 2,9 2,8 2,7 25% • Revenue $2,638 m (+5% qoq) 2,5 2,6 2,5 20% • EBITDA $468 m (+14% qoq) 2,0 18% 15% 1,5 16% 14% 14% 10% • EBITDA margin 17.7% (+1.4 p.p.) 1,0 11% 0,4 0,4 0,4 0,5 0,5 0,3 5% • Operating cash flow* $436 m (+131% qo
Slide 11: Profitability
PROFITABILITY EBITDA Q1’14: $468 M (+14% QOQ) EBITDA MARGIN % 20% • EBITDA margin was 17.7% 16,3% 17,7% 16% 14,1% 13,9% o (+) Higher sales volumes and optimized sales portfolio 12% 11,1% o (-) Decline in prices on the domestic market 8% o (+) Strong pricing environment maintained on the export marke
Slide 12: Cash Flow
CASH FLOW Q1‘14 CASH FLOW BRIDGE Q1’14 FREE CASH FLOW TO THE FIRM WENT UP BY 293% $m QOQ TO $271 M EBITDA 468 • EBITDA $468 m (+14% qoq) Working capital changes +2 • Investments $131 m (+33% qoq) Other non-cash operations +32 • Stable level of working capital Income tax -65 o Sales of previously acc
Slide 13: Debt Position
DEBT POSITION CONSISTENT REDUCTION OF NET DEBT AND LIQUIDITY CHANGE IN DEBT POSITION 5 $ bn GROWTH 4 • Net debt $2.30 bn (-15% qoq) 1,12 -0,15 -0,13 1,14 3 • Gross debt $3.89 bn (-7% qoq) 2 • Cash and equivalents * $1.58 bn (+9% qoq) 3,04 2,74 1 • Net debt / 12M EBITDA 1.39х 0 31 Dec '13 Net settlem
Slide 14: Settlement of Financial Liabilities
SETTLEMENT OF FINANCIAL LIABILITIES STRONG LIQUIDITY POSITION LIQUID ASSETS AND SHORT-TERM DEBT MATURITY * $m Undrawn committed COMFORTABLE MATURITY SCHEDULE $5 000 credit lines • Short term debt $1.1 bn $4 000 o Ruble bonds $3 000 2 795 Cash and equivalents o Revolving credit lines for working capi
Slide 15: Q2'14 Outlook
Q2’14 OUTLOOK MARKET • Prices are expected to increase driven by seasonally improved demand from key consumers, incl. from the construction sector CRUDE STEEL PRODUCTION • Group crude steel production will remain at the level of the previous quarter at ~ 3.9 m t FINANCIAL INDICATORS • Realization of
Slide 16: Segments
SEGMENTS Rate this presentation >> 16
Slide 17: Q1'14 Segment Contribution
Q1’14 SEGMENT CONTRIBUTION STEEL SEGMENT EBITDA BY SEGMENT 2013-2014 • Favorable export market environment $700 $m • Seasonal decline in prices on the domestic market 400 468 • Widened spreads between steel and raw materials prices $500 379 409 318 23 30 • Efficiency improvement programs 209 26 227
Slide 18: Steel Segment
STEEL SEGMENT Q1’14 TOTAL SEGMENT REVENUE UP BY 13% THIRD PARTY SALES AND REVENUE STRUCTURE • Favorable pricing environment on export markets 2,665 k t 2,393 k t $1,742 m $1,595 m 100% Other operations* • Sales of stocks accumulated in the previous periods 7% 8% Pig iron • Finished steel sales went
Slide 19: Long Products Segment
LONG PRODUCTS SEGMENT Q1’14 SALES GROWTH BY 2% THIRD PARTIES SALES AND REVENUE STRUCTURE • NSMMZ (the Urals based mill) sales growth 644 k t 633 k t $337 m $371 m 100% • Lower sales from NLMK Kaluga due to mastering of a new Income from operations* product (sections) - preparation works ahead of sea
Slide 20: Mining Segment
MINING SEGMENT Q1’14 REVENUE DOWN BY 10% QOQ SALES AND REVENUE STRUCTURE • Iron ore prices declined 3,871 k t 3,964 k t $317 m $353 m • Iron ore sales (concentrate and sinter ore) declined: 3.871m t 100% (-2% qoq) 24% 23% 80% 25% 22% o incl. 2.940 m t (-4% qoq) to the Lipetsk plant 60% EBITDA MARGIN
Slide 21: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT SEGMENT SALES WENT UP BY 3% QOQ NLMK USA SALES AND REVENUE STRUCTURE • NLMK USA sales growth (+2% qoq) on the back of strong 458 k t 451 k t $381 m $365 m 100% Other operations demand 4% 5% 16% 18% 18% 19% Pre-painted • NLMK Dansteel sales went up by 11% qoq 80% 29% 2
Slide 22: Appendix
Appendix Rate this presentation >> 22
Slide 23: International Assets Performance
INTERNATIONAL ASSETS PERFORMANCE SLAB SALES FROM THE MAIN PRODUCTION SITE IN LIPETSK NBH ROLLED PRODUCT SALES mt 000’ t 1,11 250 459 453 1,2 392 204 1,0 200 168 177 0,78 0,81 151 152 0,8 150 133 0,6 0,48 92 86 90 0,45 100 0,35 0,37 0,4 0,21 50 18 0,11 0,13 0,11 16 17 0,2 0,05 0 - Q1'13 Q4'13 Q1'14 Q
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 Period $/t Cost item Q1’14 Q4’13 ∆,$/t Q1’12 $395 Coke and coking coal $78 $89 -$10 Q2’12 $411 Iron ore $62 $70 -$8 Q3'12 $383 Scrap $29 $32 -$3 Q4'12 $361 Other materials $27 $
Slide 25: Segment Information
SEGMENT INFORMATION Q1 2014 Foreign Intersegmental Long Steel rolled Mining All other Totals operations and Consolidated (million USD) products products balances Revenue from external customers 1 742 471 337 88 0 2 638 2 638 Intersegment revenue 296 57 229 582 (582) Gross profit 406 32 21 226 (0) 68
Slide 26: Quarterly Data: Consolidated Statement of Income
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q1 2014 Q4 2013 Q1 2014/Q4 2013 Q1 2013 Q1 2014/Q1 2013 (mln USD) +/- % +/- % Sales revenue 2 638 2 505 133 5% 2 856 (218) (8%) Production cost (1 825) (1 753) (72) 4% (2 125) 300 (14%) Depreciation and amortization (199) (205) 6 (3%) (207) 8 (4%) Gro
Slide 27: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q1 2014 Q4 2013 Q1 2014/Q4 2013 Q1 2013 Q1 2014/Q1 2013 (mln. USD) +/ - % +/ - % Cash flow from operating activities Net income 173 1 172 35 137 388% Adjustments to reconcile net income to net cash provided by operating Depreciation and amortization 199 205 (6) (3%)
Slide 28: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at 31.03.2014 31.12.2013 30.09.2013 30.06.2013 31.03.2013 31.12.2012 (mln. USD) ASSETS Current assets 4 966 5 102 4 918 5 537 5 834 5 469 Cash and cash equivalents 830 970 835 1 241 1 220 951 Short-term investments 753 485 516 121 271 107 A
Slide 29: Investor Relations Contact
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