Nlmk · RUS:NLMK
Nlmk — Q3 2017 Earnings Presentation
24 slides from Nlmk's earnings presentation, Oct 27, 2017
Slide 1: Q3 & 9M 2017 IFRS Results
NLMK Q3 & 9M 2017 IFRS Results 27 October 2017
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: Market review, Operating highlights
OLEG BAGRIN Market review President and CEO Operating highlights Q3’17 Financials Business divisions results Annex Q&A 3
Slide 4: Steel demand recovers while Chinese exports subside
STEEL DEMAND RECOVERS WHILE CHINESE EXPORTS SUBSIDE Steel demand recovers across key markets in 2017 Growth in steel demand across key markets USA: construction, automotive and energy %, yoy 2016 2017 YTD* EU: mechanical engineering, housing and non-residential 6,0% 8,0% Russia: machinery and constr
Slide 5: Price spreads widen on demand growth
PRICE SPREADS WIDEN ON DEMAND GROWTH Chinese steel stocks level remains below 5Y average Chinese steel stocks levels remain low while supply picks up Mt 44 75 Output (rhs) Steel prices react strongly to the better demand 39 70 34 EU: prices improved on reduced imports amid low season 29 65 Russia: p
Slide 6: Q3 sales grew on stronger home markets demand
Q3 SALES GREW ON STRONGER HOME MARKETS DEMAND Sales* up +3% qoq driven by growth in home markets sales – Shipments growth driven by sales to home markets* in US (+2%) and in Russia (+21%) Mt 4,3 +3% Total sales Higher HVA sales and increased volumes of semis on better economics 4,2 4,2 HVA** sales g
Slide 7: Strategy 2017: 103% of annual goal achieved in 9M'17
STRATEGY 2017: 103% OF ANNUAL GOAL ACHIEVED IN 9M’17 In 9M’17 NLMK hit 103% of its Strategy 2017 target for the year 103% of annual target achieved in 9 months 2017 $M $105 m gains achieved in Q3’17 (vs $106 m in Q2’17) as a result of new projects 260 269 $84 m gains from operational efficiency proj
Slide 8: Outlook
OUTLOOK MARKETS Global pricing environment is expected to be seasonally softer, lower Chinese exports will lend price support Russia: seasonal slowdown in demand, domestic prices to be supported by exports prices run-up Europe: better demand partially offset by service centers destocking USA: resili
Slide 9: Q3'17 Financials
Market review Operating highlights Q3’17 Financials SERGEY KARATAEV Business divisions results Acting CFO Annex Q&A 9
Slide 10: Q3'17 Financial Highlights
Q3’17 FINANCIAL HIGHLIGHTS Strategy 2017 effects and home markets demand drive profitability Margins widened on better prices and costs reduction EBITDA margin Revenue $2,551 m (flat qoq) 0 0 25% EBITDA: $648 m (+7% qoq) 0 EBITDA margin: 25% (+1 pp qoq) 0 24% Net income*: $357 m (+4% qoq) 0 0 0 11%
Slide 11: Margins' growth on better prices and cost improvements
MARGINS’ GROWTH ON BETTER PRICES AND COST IMPROVEMENTS EBITDA by divisions EBITDA expanded on stronger sales and price spreads growth $M +7% Q2'17 Russian Flat Products: EBITDA up +32% on strong sales +32% 603 648 (+) Seasonally strong demand drove volumes (+96 kt) and prices up Q3'17 453 (+) Strate
Slide 12: Strong free cash flow with 64% qoq growth
STRONG FREE CASH FLOW WITH 64% QOQ GROWTH Q3’17 CF bridge Net operating cash flow expanded by 47% qoq to $663 m – $M 0 100 200 300 400 500 600 700 800 working capital release of $109 m EBITDA 648 (+) accounts receivables decreased on higher sales in Russia with better credit terms Net working capita
Slide 13: Further improvements in debt portfolio and liquidity
FURTHER IMPROVEMENTS IN DEBT PORTFOLIO AND LIQUIDITY Net debt / 12M EBITDA: 0.3x (down from 0.4x qoq) Liquidity and short-term debt* $M Net debt: $0.74 bn (-29 % qoq) Total debt: $2.56bn (+6% qoq) Liquidity: $1.8 bn (+32% qoq) on strong FCF generation 1 901 Available credit lines Liability managemen
Slide 14: Business divisions results
Market review Operating highlights Q3’17 Financials Business divisions results Annex Q&A 14
Slide 15: Russian Flat Products
RUSSIAN FLAT PRODUCTS Sales grew by 3% qoq on stronger semis and value added sales Revenue & steel sales volumes Kt $M (+) Pig iron sales increased driven by better demand in export markets 3 328 +3% 3 425 1 957 -1% 1 932 (+) Slabs sales grew on increased demand from domestic pipe sector -24 % 28% 3
Slide 16: Russian Long Products
RUSSIAN LONG PRODUCTS Sales down by 21% qoq Revenue & steel sales volumes (-) Sales down on high base effect of Q2 Kt -21% $M -9% 935 737 505 460 (-) Service centers destocked before seasonal demand drop 24% 20% 20% 24% (+) Demand improved in September pushing prices up 8% 10% 19% 13% 8% 9% Revenue
Slide 17: Mining
MINING Sales volumes flat qoq Revenue & sales volumes (-) Decrease of concentrate sales by 4% Kt $M 4 392 0% 4 387 249 -16 % 209 (+) Pellets sales up by 6% 100 % (-) Output volumes reduced due to downtime required for HPGR* installation 80% 60% Revenue down by 16% qoq on lower selling prices 40% 100
Slide 18: NLMK USA
NLMK USA Sales increased by 2% qoq Revenue & steel sales volumes (+) HRC sales gained 9% qoq Kt 559 +2% 568 $M 436 -3 % 424 (+) Improved demand from key clients 53% 56% 45% 48% Revenue decreased by 3% qoq (-) Sales prices decreased by 5% on Section 232 decision postponing (+) Sales volume increased
Slide 19: NLMK Dansteel
NLMK DANSTEEL Revenue & steel sales volumes Sales down by 5% qoq on seasonally weaker demand Kt $M 112 -5% 107 101 -7% 94 6% 5% Revenue down by 6% qoq (-) Sales volumes seasonally down by 5% (-) Softer selling prices 100% 100% 94% 95% EBITDA up on improved price/cost spreads (+) Slab prices decline
Slide 20: Annex
Market review Operating highlights Q3’17 Financials Business divisions results Annex Q&A 20
Slide 21: Q3'17 NLMK sales, output, Lipetsk slabs costs
Q3’17 NLMK SALES, OUTPUT, LIPETSK SLABS COSTS Steel production Group sales to external customers by segments Mt qoq: +23% Mt qoq: +7% yoy: +8% 3,00 yoy: +8% 2,46 qoq: +7% 2,50 5,00 4,36 yoy: +6% 4,50 2,00 3,36 4,00 qoq: -21% qoq: +1% qoq: -20% 3,50 1,50 qoq: +8% yoy: -15% yoy: +25% 3,00 2,50 qoq: -5
Slide 22: Sales geography and product mix
SALES GEOGRAPHY AND PRODUCT MIX Steel product sales by region Sales structure by product Mt Mt 5 4,22 4,20 4,24 4,22 4,20 4,24 4 0,74 0,62 0,54 Others Semi- 0,49 1,44 1,26 1,46 0,32 0,57 finished 4 0,57 M. East* 0,78 3 0,65 Commercial 3 0,87 0,87 0,63 N.America 1,55 1,68 1,49 products 2 EU 2 1,71 1,
Slide 23: Foreign assets performance
FOREIGN ASSETS PERFORMANCE Slabs sales from Russian Flat Division NBH Rolled product sales Kt Kt 1 632 1 659 1 706 QoQ 556 QoQ 488 1 800,0 1 800 117 136 118 Total +3% 15 447 Total -20% 80 1 600,0 1 600 11 375 455 NLMK 77 9 1 400,0 1 400 551 -13% 63 CRC -37% Dansteel 204 1 200,0 1 200 386 NLMK USA -1
Slide 24: Company IR Contacts
COMPANY IR CONTACTS Sergey Takhiev Investor Relations Address 40, Bolshaya Ordynka Str., Bldg. 3 Moscow, 119017, Russia . IR E-mail Address st@nlmk.com Phone Number Office: +7 495 504 05 04; Mobile: +7 985 760 55 74 nlmkonair nlmk_group nlmk group 24