Nlmk · RUS:NLMK
Nlmk — Q2 2013 Earnings Presentation
30 slides from Nlmk's earnings presentation, Aug 12, 2013
Slide 1: NLMK Q2 2013 US GAAP Consolidated Results
NLMK Q2 2013 US GAAP CONSOLIDATED RESULTS Moscow, 12 August 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 STEELMAKING CAPACITY UTILIZATION DEMAND AND SUPPLY 79.6% (+0.7 p.p qoq) – steelmaking capacities utilization rates in Q2’13 • Q2’13 steel supply continued to grow 85% o Global steel production was up by 1.6% qoq* 75% o Traders and consumers started to destock (in China and
Slide 4: Russian Steel Market
RUSSIAN STEEL MARKET DEMAND AND SUPPLY STEEL DEMAND IN RUSSIA, MONTHLY • Q2’13 seasonal growth in demand of 14% qoq* to 11 m t mt Import share in Seasonal demand 4.0 60% consumption – growth: +14% qoq o Demand from construction up by 16% qoq ab. 20% 50% 3.5 o Demand from pipe producers, machinery an
Slide 5: Raw Materials Market
RAW MATERIALS MARKET PRICES AND DEMAND IN INTERNATIONAL MARKETS GLOBAL RAW MATERIAL PRICES Jan 2012 index 1.0 • Correlation between raw material and steel price trends 1.2 1.1 o Global prices for iron ore, coking coal and scrap declined by 1.0 15%, 6% and 7%, respectively 0.9 o Iron ore and scrap pr
Slide 6: Production Results
PRODUCTION RESULTS HIGH CAPACITY UTILIZATION RATES NLMK: STEEL PRODUCTION mt • Growth in crude steel production in Q2’13 to 3.785 m t (+2% qoq) 3.8 3.8 3.7 3.7 3.8 4 3.6 • Average capacity utilization rate: 94% 0.3 0.2 0.5 0.2 0.5 0.2 0.2 0.2 0.5 0.4 0.4 0.5 3 o Novolipetsk -96% o NLMK Russia Long -
Slide 7: Sales Geography
SALES GEOGRAPHY SALES IN RUSSIA CONTINUE TO GROW STEEL SALES BY REGION • Flat total sales volumes in Q2 – 3.77 m t mt 3.82 3.76 3.77 • Russian sales +7% qoq and +17% yoy 0.37 0.43 0.43 0.55 0.52 0.46 o Long product sales +8% qoq and flat yoy 3 0.61 0.44 0.48 o Flat product sales +4% qoq and +4% yoy
Slide 8: Sales Structure
SALES STRUCTURE SALES STRUCTURE IMPROVED SALES BY PRODUCT • Share of finished steel 73% (+4 p.p. qoq) 100% 3.763 m t 3.774 m t Pig iron 1% 2% Slabs GROWTH IN SALES OF VALUE ADDED : 1.38 M T, +4% QOQ 80% 30% 25% HRC • Demand for galvanized steel in Russia increased Long products 60% 26% 24% • Lower s
Slide 9: 2013 Investments
2013 INVESTMENTS CAPEX PROGRAMME CAPEX TRENDS • Investments decrease as the Company enters into a less $m 2000 capital intensive growth phase • Focus on efficiency improvements and niche product 1500 development 2,048 1000 1,934 • Conservative investment approach 1,463 1,453 69% 500 1,121 1,000 • Ca
Slide 10: NLMK Kaluga: Russian Rebar & Scrap Markets
NLMK KALUGA: RUSSIAN REBAR & SCRAP MARKETS REBAR MARKET IN H1 ‘13 REBAR MARKET, CONSUMPTION IN RUSSIA • Consumption of long products used in construction +11% mt Q2’13 import share is 24% 2.5 25% • Rebar consumption +14% yoy and x1.9 to H1’10 record 2008 level 2.0 20% • Rebar Import jumped 60% yoy,
Slide 11: NLMK Kaluga: Project Overview
NLMK KALUGA: PROJECT OVERVIEW MODERN EAF MINI-MILL WITH A CAPACITY OF 1.5 M TPA • Product mix in high demand by the construction industry: rebar and sections • Favorable geographic location: 70 km from Moscow – region with a highly concentrated level of consumption • Total investments: $1.2 billion
Slide 12: Key Highlights
KEY HIGHLIGHTS REVENUE AND EBITDA MARGIN FINANCIAL RESULTS $ bn $3.5 18% 16% 20% $3.0 • Revenue $2,829 m (-1% qoq) $2.5 14% 14% 15% 11% $2.0 10% 3.26 • EBITDA $400 m (+26%) $1.5 3.00 2.80 2.86 2.83 $1.0 0.60 5% 0.48 0.39 0.40 $0.5 0.32 • EBITDA margin 14% (+3 p.p.) $0.0 0% Q2 '12 Q3 '12 Q4 '12 Q1 '1
Slide 13: Group Profitability
GROUP PROFITABILITY Q2 EBITDA WENT UP BY 26% TO $400 MILLION EBITDA MARGIN EBITDA MARGIN GREW BY 3 P.P. TO 14% 20% 18% 18% 16% • Revenue was stable qoq (-1%) 16% 14% 14% 14% o Improved product mix partially offset lower prices 12% 11% 10% • Production costs down by 3% to $2,058 m, despite higher 8%
Slide 14: Cash Flow
CASH FLOW Q2’13 CASH FLOW POSITIVE FREE CASH FLOW $m • Working capital remains stable 400 EBITDA • Investments down x2 yoy to $221 m Working capital change -13 o Major investment projects completed Other and non cash operations +53 • Net cash outflow related to financial debt settlement was $150 m I
Slide 15: Debt Leverage Trends
DEBT LEVERAGE TRENDS FINANCIAL DEBT CHANGE IN DEBT POSITION $6 • Net debt $3.42 bn (-1%) $ bn +0,4 • Total financial debt $4.79 bn (-3%) $5 -0,5 1.0 1.5 • Cash and equivalents1 $1.36 bn (-9%) $4 • Net debt / 12M EBITDA 2.15 $3 $2 3.8 3.4 DEBT PORTFOLIO OPTIMIZATION $1 • Short term debt reduced to $0
Slide 16: Settlement of Financial Liabilities
SETTLEMENT OF FINANCIAL LIABILITIES MATURITY SCHEDULE LIQUIDITY AND ST DEBT MATURITY1 • Substantial liquidity cushion and instruments available for $4,000 $m Undrawn committed credit lines debt portfolio restructuring $3,500 $3,000 • Short term debt $0.99 bn (-33% qoq) $2,500 2,331 Cash and equivale
Slide 17: Outlook – Q3'13
OUTLOOK – Q3’13 MARKET OVERVIEW • Globally run rates remain high aggravating the supply/demand imbalance while the market continues to be soft • End user demand continues to be anemic due to lower activity in a number of regions. In Russia we expect stable demand from the construction sector • Prici
Slide 18: Segments
SEGMENTS 18
Slide 19: Segment Contribution – Q2 '13
SEGMENT CONTRIBUTION – Q2 ‘13 STEEL SEGMENT SEGMENT EBITDA • Two-fold profit growth on the back of the widened steel $m products/raw materials spread and cost optimization programmes 7 $510 247 LONG PRODUCTS SEGMENT 190 27 50 227 • Stable conditions in the long products market $310 61 207 26 23 • Ou
Slide 20: Steel Segment
STEEL SEGMENT STABLE SALES VOLUMES SALES AND REVENUE STRUCTURE IN Q2 ’13 2,364,000 t $1,685 m • Domestic steel sales growth, including higher slab sales 0% Other revenue* 100% 4% 8% • HVA sales growth 90% 2% Pig iron 80% 39% 31% Slab PROFITABILITY INCREASE 70% Ordinary 60% grades HRC • Steel product
Slide 21: Long Products Segment
LONG PRODUCTS SEGMENT REVENUE AND SALES GROWTH Q2 ‘13 SALES AND REVENUE STRUCTURE • Sales volumes up by 9% 469,000 t $314 m 100% 1% • Segment revenue from third parties increased by 9% Other revenue* 80% • Significant intersegment revenue growth by 92% - due to Revenue from increased demand for scra
Slide 22: Mining Segment
MINING SEGMENT SEGMENT REVENUE INCREASED IRON ORE CONCENTRATE SALES • Intersegment sales went up - higher Novolipetsk 5.0 mt purchases of iron ore concentrate 4.0 1.22 PROFIT AND MARGIN GROWTH 3.0 0.63 0.74 0.77 0.75 • EBITDA margin up to 65% by 1 p.p. 2.0 • Iron ore concentrate cash cost was $21.8/
Slide 23: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT SALES DECREASED BY 2% NLMK USA SALES AND REVENUE • Lower demand from the USA construction sector 000` t $$ m mln 000` t $m 600 • Plate shipments from NLMK DanSteel increased following 473 432 the completion of rolling mill reconstruction 82 362 Other revenue 400 51 31
Slide 24: Appendices
APPENDICES 24
Slide 25: Cash Cost of Slabs
APPENDIX Q2 ’13 CONSOLIDATED CASH COST OF SLABS CASH COST OF SLABS (AT LIPETSK SITE), $/T (AT LIPETSK SITE), 2012-2013, $/T Coke and coking coal $91 Q1'12 $395 Iron ore $64 Q2'12 $411 Scrap $37 Other materials $31 Q3'12 $383 Electricity $21 Q4'12 $361 Natural gas $18 Personnel $33 Q1'13 $364 Other e
Slide 26: Segmental Information
SEGMENTAL INFORMATION Q2 2013 Foreign Intersegmental Long Steel rolled Mining All other Totals operations and Consolidated (million USD) products products balances Revenue from external customers 1 685 730 314 100 0 2 829 2 829 Intersegment revenue 371 1 113 249 734 (734) Gross profit 352 (44) 43 24
Slide 27: Quarterly Data: Consolidated Statement of Income
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q2 2013 Q1 2013 Q2 2013/Q1 2013 6M 2013 6M 2012 6M 2013/6M 2012 (mln USD) +/- % +/- % Sales revenue 2 829 2 856 (27) (1%) 5 685 6 351 (666) (10%) Production cost (2 058) (2 125) 67 (3%) (4 183) (4 415) 232 (5%) Depreciation and amortization (220) (207
Slide 28: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q2 2013 Q1 2013 Q2 2013/Q1 2013 6M 2013 6M 2012 6M 2013/6M 2012 (mln. USD) +/ - % +/ - % Cash flow from operating activities Net income 33 35 (2) (7%) 68 449 (381) (85%) Adjustments to reconcile net income to net cash provided by operating Depreciation and amortizati
Slide 29: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at as at 30.06.2013 31.03.2013 31.12.2012 30.09.2012 30.06.2012 31.03.2012 31.12.2011 (mln. USD) ASSETS Current assets 5 537 5 834 5 469 6 287 5 230 5 714 5 504 Cash and cash equivalents 1 241 1 220 951 1 803 769 926 797 Short-term investme
Slide 30: 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