Mmk · RUS:MAGN
Mmk — IPO Roadshow (June 2007)
25 slides from Mmk's IPO roadshow presentation, June 2007
Slide 1: Magnitogorsk Iron & Steel Works, June 2007
MAGNITOGORSK IRON & STEEL \*¢ WORKS OPEN JOINT STOCK COMPANY June 2007
Slide 2: Disclaimer
Disclaimer By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: The information in this document has been prepared by OJSC Magnitogorsk Iron & Steel Works (the “Company”) solely for use at a presentation
Slide 3: Overview of MMK
Overview of MMK Development Strategy Investment Highlights Financial Review 2
Slide 4: MMK at a Glance
MMK at a Glance Geographic Location Financial & Operational Indicators - MMK Group 2004 2005 2006 Steel, tonnes produced mln (1) 11.3 11.4 12.5 Steel products produced, 10.1 10.2 11.3 tonnes mln (1) Moscow Sales, US$ mln 4,829 5,380 6,424 EBITDA, US$ mln 1,735 1,511 2,005 MMK Suppliers from Kuznetsk
Slide 5: Development Strategy
Overview of MMK Development Strategy Investment Highlights Financial Review 4
Slide 6: Strategy
Strategy Target High-growth Markets Security of Raw Materials and ROI-driven Capex Energy Supply Investments in Exceptional People and Systems Overview of MMK Development Strategy Investment Highlights Financial Review 5
Slide 7: Target High-Growth Markets
Target High-Growth Markets Increase of Sales Volumes in Russia and Steel Consumption Growth in Key Markets to Key CIS Countries mln tonnes ’000 tonnes 2002-2006 CAGR: Kazakhstan – 39% CAGR 4.6% Ukraine – 57% Russia - 8% 350 6,000 5,462 27 29 29 30 24 25 300 5,000 4,672 4,699 2000 2001 2002 2003 2004
Slide 8: ROI-Driven Capex: Mill 5000 Launch
ROI-Driven Capex: Mill 5000 Launch Considerable Growth of Profits Only 8 world producers (located in Germany, France and Japan) manufacture Growth of sales HR thick plates with comparable characteristics Unique production in Russia Overview Mill 5000: MMK and Severstal Characteristics MMK(1) Severst
Slide 9: Security of Raw Materials Supply
Security of Raw Materials Supply Key Suppliers Comments • 10-year contract for iron ore supply with SSGPO: volumes fixed Iron Ore SSGPO • License to develop Prioskolsky iron ore deposit and 51% stake in Bakalskoye Rudoupravleniye as well as own mine in Magnitogorsk Kuzmetugol • 5-year contracts with
Slide 10: Investments in Exceptional Systems
Investments in Exceptional Systems Implementation of Corporate IT system on the Basis of Oracle E-Business Suite Realisation of Activity Implementation of Based Costing Balanced Scorecard System of Accounting System Enhancement of Creation of Centralised Raw Materials Supply Cash Movement and Techni
Slide 11: Investment Highlights
Overview of MMK Development Strategy Investment Highlights Financial Review 10
Slide 12: MMK – Leader in Russian High Value-Added Steel Products
MMK – Leader in Russian High Value-Added Steel Products 1 2 3 4 5 6 7 1 Russia's only “pure” steel play 2 Focus on high value-added products within a broad product portfolio 3 Strongly positioned for attractive domestic market dynamics 4 Significant exposure to the fast-growing Russian pipe-making i
Slide 13: Russia's Only Pure Steel Play
Russia’s Only Pure Steel Play 1 2 3 4 5 6 7 Superior Margins Benefit From Falling Raw Material Prices 2006 EBITDA Margin (1, 2, 3) Raw material prices (US$ / tonne) 140 60% 120 50% 47.2% 100 80 40% 60 31.2% 30.4% 30% 40 24.0% 21.9% 20 20% 0 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E
Slide 14: Focus on High Value-Added Products
Focus on High Value-Added Products 1 2 3 4 5 6 7 Highest Share of High Value-Added Products (1) Evolution of Sales Structure High value-added products (2) 14% 14% 14% MMK (3) Key Products Severstal 58% 66% 68% NLMK HR/CR coils & sheets Mechel 18% 14% 15% Metal ware 10% 6% 3% Evraz 1996 2003 2006 Coa
Slide 15: Strongly Positioned for Attractive Domestic Market Dynamics
Strongly Positioned for Attractive Domestic Market Dynamics 1 2 3 4 5 6 7 Growing Demand for Steel Growing Share of Domestic Sales (1) % mln tonnes CAGR 7 % By volume in tonnes 60 15 40 10 20 5 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007F 2008F Fo rmer So viet Unio n Russian GDP gro wth rate 46
Slide 16: Strongly Positioned for Attractive Domestic Market Dynamics
Strongly Positioned for Attractive Domestic Market Dynamics 1 2 3 4 5 6 7 OAO MMK Shipments Split by Industries, 2006 Russian Oil & Gas Pipe Consumption 000’s tonnnes % of shipments in tonnes 8,000 CAGR 10.1 % 6,000 4,000 2,000 0 2004 2005 2006E 2007E 2008E 2009E 2010E Source: Rosstat, Metal Expert,
Slide 17: Significant Exposure to Fast-Growing Russian Pipes Industry
Significant Exposure to Fast-Growing Russian Pipes Industry 1 2 3 4 5 6 7 Russian Oil & Gas Pipe Consumption Russian Pipeline Projects Through 2015 000’s tonnnes Project Period Length Tonnage 8,000 (km) (mln tonnes) .1 % R 10 CAG 6,000 Gazprom Projects 2006-2015 30,879 23.8 4,000 Transneft Projects
Slide 18: Well-Invested, Low Cost Production Facilities
Well-Invested, Low Cost Production Facilities 1 2 3 4 5 6 7 Location in Proximity to Raw Largest Single-Site Facility in Russia (1) Materials Suppliers mln tonnes of crude steel 12.5 12 11.3 10 9.1 8 7.3 Moscow 5.6 6 4.9 3.6 4 1.5 MMK 2 Suppliers from Kuznetsk Coal SSGPO Basin 0 (2) (2) (2) ММК Seve
Slide 19: Leading Management Information System Among Russian Peers
Leading Management Information System Among Russian Peers 1 2 3 4 5 6 7 Unique Oracle Applications among Russian Companies Technical Production support HR and Sales and payroll marketing accounting Planning and Finance budgeting Business Projects efficiency management Contracts Inventory management
Slide 20: High Corporate Governance Standards
High Corporate Governance Standards 1 2 3 4 5 6 7 General shareholders meeting Review Commission Audit committee Staff and compensation (Chairman – Independent committee non-executive Director) (Chairman – Independent non-executive Director) Board of directors (10 members, including 5 independent no
Slide 21: Exceptional Management Team
Exceptional Management Team 1 2 3 4 5 6 7 Management Team Achievements Victor F. Rashnikov • Continued modernization of production Chairman of the Board of Directors of MMK President of MMK Managing Company facilities Experience with MMK – 39 years • Steel products output nearly doubled in 1996-2006
Slide 22: Financial Review
Overview of MMK Development Strategy Investment Highlights Financial Review 21
Slide 23: Key Financials
Key Financials Dynamics of Sales & EBITDA Dynamics of Operating Cashflow and Capex US$ mln US$ mln 7,000 40% 1,400 6,424 1,255 6,000 1,200 5,380 1,077 30% 1,010 5,000 4,829 1,000 4,000 800 725 20% 3,047 585 580 3,000 600 2,005 407 2,000 1,735 400 1,511 10% 1,426 1,232 1,003 217 947 1,000 200 608 0 0
Slide 24: Cost Structure Analysis: COGS
Cost Structure Analysis: COGS Cost of Goods Sold Breakdown MMK Group Raw Material Costs of MMK (1) 2006 = US$3,619 mln Other: 0.9% 2006 External Electric Power Agglomerate External Fuel 100% 1.3% 10.7% Overheads: 2.2% 6.4% 90% 80% Salaries: 10.9% Aux. Materials Pellets 70% 14.5% 10.7% 60% 50% 40% Ra
Slide 25: Strong Financial Position
Strong Financial Position (1) (1) xNet Debt / EBITDA Long-term US$ mln Debt Maturity Profile 2004 2005 2006 (2) 500 1.0 BB/ BB Ba3/ 421 Ba3/BB- BB-/Ba3/BB- B+/ 400 0.8 0.7 300 0.6 0.5 0.4 200 0.4 123 88 0.2 100 0.2 47 21 0 0.0 <0 <0 2007 2008 2009 2010 >2010 2004 2005 2006 Gross Debt/EBITDA Net Debt
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