Mmk · RUS:MAGN
Mmk — Investor Presentation (January 2019)
40 slides from Mmk's investor presentation, January 2019
Slide 1: Investor Presentation January 2019
INVESTOR PRESENTATION January, 2019
Slide 2: MMK at a Glance
1 2 3 4 5 Market overview Strategy Overview Operational and Appendix Financial Performance Overview MMK AT A GLANCE 4
Slide 3: Key Credit Highlights
KEY CREDIT HIGHLIGHTS 1 Strong profitability 5 Low leverage High standards of corporate 2 High product diversification 6 governance #1 supplier to metal consumers in Russia1 3 Efficient cost optimization 7 High level of liquidity Sophisticated HVA2 Sustainable cash flow 4 8 products production gener
Slide 4: MMK Group Assets Portfolio
MMK GROUP ASSETS PORTFOLIO The key production segments are MMK-Steel (Russian and Turkish Steel Segments) and MMK-Ugol (Coal Segment). The Russian Steel Segment consists of the Magnitogorsk Iron and Steel Works, which is a key asset of the company Magnitogorsk Iron and Steel Works (MMK) Crude steel
Slide 5: MMK Group Snapshot
MMK GROUP SNAPSHOT MMK Group is a leading Russian steel company Vertically integrated company with entire production chain from 2017 2016 2015 iron-ore processing to downstream production of rolled steel and Finished steel production (mln t) 11.6 11.6 11.2 other HVA products 3 business segments:
Slide 6: Solid Operational Results
SOLID OPERATIONAL RESULTS MMK’s operational efficiency provides a long-term competitive advantage and protection against market volatility Sustainable share of HVA products in steel production MMK Group is a strong player on the Russian market 11.2 11.6 11.6 Supplies the widest range of HVA prod
Slide 7: Operational Efficiency Improvements
OPERATIONAL EFFICIENCY IMPROVEMENTS Permanent focus on operational efficiency improvement secures MMK’s leading positions on global and domestic steel markets. Main areas of focus: Support of innovative process among Company’s employees (over 5000 initiatives implemented in 2017) Higher efficien
Slide 8: Sustainable EBITDA Margin Leadership
SUSTAINABLE EBITDA MARGIN LEADERSHIP MMK Historic EBITDA (USD million) 5 000 30,0% 29,4% 29,1% 28,6% MMK EBITDA margin 26,9% 25,8% 25,0% 4 000 20,8% 19,4% 20,9% 20,2% 20,0% 3 000 17,9% Average EBITDA margin, top-25 producers 15,0% 14,9% 13,8% 13,0% 14,4% 14,6% 11,6% 2 000 10,9% 11,2% 10,7% 9,6% 8,3%
Slide 9: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE MMK has one of the best financial profiles among global Metals and Mining peers Strong profitability As a result of prudent cost management, working capital control and clear strategy, MMK has managed to develop a stable financial Efficient production process and foc
Slide 10: High Dividend Payments
HIGH DIVIDEND PAYMENTS A new dividend story for a rejuvenated Company • While making significant capital investments (2000-2013) MMK reinvested a significant part of its cash flow into developing production capacity • New growth points were identified to help the Company successfully navigate this p
Slide 11: High Standards of Corporate Governance and Dedicated Shareholders
HIGH STANDARDS OF CORPORATE GOVERNANCE AND DEDICATED SHAREHOLDERS In conducting its business, MMK complies with the best Russian and international corporate governance practices Structure of PJSC MMK Board of Directors 50 years in Free float 16% MMK 50% 30% Victor Rashnikov Independent Chairman of B
Slide 12: Market Overview
2 1 3 4 5 MMK at a Glance Strategy Operational and Appendix Overview Financial Performance Overview MARKET OVERVIEW
Slide 13: Continuing Global Oversupply Relieved by Capacity Shutdowns in China
CONTINUING GLOBAL OVERSUPPLY WAS RELIEVED BY CAPACITY SHUTDOWNS IN CHINA Shutdown of capacities in China and decrease of Chinese export led to growth of steel prices and producers’ margin Steel demand and supply (mln t)1 Global China In 2017, global steel producers’ margin surged due to tighter 1,
Slide 14: Russian Steel Market Is Expected to Grow Amid Economic Recovery
RUSSIAN STEEL MARKET IS EXPECTED TO GROW AMID ECONOMIC RECOVERY Positive global dynamics and improved market environment in Russia is expected to benefit local players Steel products consumption in Russia According to MMK Group, rolled steel demand is expected to Consumption of rolled steel Consum
Slide 15: Strategy Overview
3 1 2 4 5 MMK at a Glance Market Operational and Appendix Overview Financial Performance Overview STRATEGY OVERVIEW
Slide 16: MMK's Historical Milestones
MMK’S HISTORICAL MILESTONES Listing of GDRs The Company on the London presented its 2013 2017 Stock Exchange Growth Strategy as part of a roadshow 2016 Purpose: to raise share capital to 2015 implement the second stage of the 2000-2007-2013 Strategy 2014 2013 New Growth 2012 Strategy through 2025 St
Slide 17: 2000 – 2013 Strategy Success
2000 – 2013 STRATEGY SUCCESS Strategic priorities Achievements across 2000-2013 No. 1 producer of coated products in Russia (In 2017, MMK’s capacities stood at 2.2mt for production of galvanized metal and 0.6mt - for polymer-coated steel)1 1 Organic growth Launch of Mill 5000 for thick-plate pro
Slide 18: 2016 – 2025 New Strategy. Overview
2016 – 2025 NEW STRATEGY. OVERVIEW 1 Creating value through sustainability 2 Further increase in efficiency and productivity Advantages throughout the business process: External Factors • Structural surplus of key raw materials in the local market • Customer proximity and low transport costs • Low p
Slide 19: 2016 – 2025 New Strategy: Prudent Capex Management
2016 – 2025 NEW STRATEGY PRUDENT CAPEX MANAGEMENT 3 Prudent approach to investment Principles of the investment programme CAPEX dynamics ($ bln) Capex levels maintained in the range of $ 0.4-0.7 bln in 2015-2017 in comparison • Strict approach to project selection based on DCF and risk to c. $ 10bln
Slide 20: MMK Main Investment Projects, 2018-2025
MMK MAIN INVESTMENT PROJECTS, 2018-2025 Product Mix Cost Efficiency Parameters H/R Mill 2500 Sinter Plant Coke Battery Blast Furnace Oxygen Unit Reconstruction 2.5 mln tpa of coke 5.0 mln tpa of HRC 5.5 mln tpa of sinter 3.5 mln tpa of cast iron Capacity (to replace 5 old coke 35 th m3/h (from curre
Slide 21: MMK Group Main Investment Projects, 2018-2025
MMK GROUP MAIN INVESTMENT PROJECTS, 2018-2025 Parameters MMK Metiz Lysva Plant MMK Coal +1.6 mln tpa of coal Capacity 428 th tpa +350 th tpa of coated steel Mono-grade “G” production - Lower fixed costs due to facilities - Higher share of HVA products - Lower purchase volumes of coal concentration -
Slide 22: Priority IT Projects: Industry 4.0
Priority IT projects: INDUSTRY 4.0 Mathematical modelling Optimisation and predictive analytics Mathematical modelling of Other projects Automated defects detection, the production processes Internet of Things, exoskeleton technologies, etc. Project Projects Developing and adopting Creatin
Slide 23: 2016 – 2025 New Strategy: Green Production as a Main Priority
2016 – 2025 NEW STRATEGY GREEN PRODUCTION AS A MAIN PRIORITY 4 Enhanced emphasis on protecting the environment Atmospheric emissions Effluent discharges 205,3 50 100 10,0 201,8 199,3 90 9,0 77,2 80 8,0 70 62,9 62,2 7,0 182,7 60 7,0 6,0 50 5,0 5,6 5,4 40 4,0 30 20,7 3,0 18,7 17,8 17,4 15,2 20 2,0 10
Slide 24: Investments in Environmental Protection Activities
Investments in environmental protection activities Total investments in environmental protection in 2014-2018 will exceed Investments into environmental protection activities in RUB 15.5 bln 2018 - 2025 6000,0 5 480,8 10.9 air protection measures 5000,0 1180,0 waste management RUB 4 157,8 5.5 and re
Slide 25: Reducing the Impact on the Atmosphere
Reducing the impact on the atmosphere Air pollutant emissions 900 70 65,1 800 60 700 50 807,7 600 40 500 36,6 400 30 25,6 300 21,4 318,5 17,4 17,3 20 Reconstruction of production facilities from 2000 to 2017 resulted in 16,2 265,7 15,2 reducing air emissions by 119.2 thousand tonnes (or by 37.4%). 2
Slide 26: Reducing the Impact on the Atmosphere
Reducing the impact on the atmosphere Sulphur capture unit № 4 SO2 air emissions, ths tonnes 30,12 29,57 17,25 Sulphur capture unit № 2 9,4 5,9 2000 2005 2010 2017 2020 From 2000 to 2017, the reconstruction of the existing sulphur capture unit in the sinter plant took place. From 2017 to 2019 the co
Slide 27: Reduction on the Impact on the Water Facilities
Reduction on the impact on the water facilities Scheme of the Magnitogorsk Reservoir Discharge of pollutants into water facilities 160 18 16,9 140 13,4 13,4 16 14 120 146,5 139,1 138,9 12 100 10 Output No.1 80 Discharge voiume 5,4 8 is 218 mln 4,9 m3/year 60 6 40 62,2 58,2 2,5 4 1,7 20 2 29,6 20,7 0
Slide 28: Waste Management
Waste management 2.3 million tonnes of waste are annually used in the sinter production burden screenings of dust and sludge raw materials from gas 35% cleaning 24% metal fraction after slag processing 22% Reduction in the amount of slag in slag heaps, processing iron oxide after the recovery of of
Slide 29: Remediation Measures
Remediation measures In 2016, remediation of the sludge depository No. 1, which had been decommissioned in 1951, with an area of 290 thousand m2, was completed Currently, the Western quarry of Magnitnaya mountain is being rehabilitated The total reforestation territory is 154 thousand m2 5,600 tree
Slide 30: Urban Landscaping in Magnitogorsk
Urban landscaping in Magnitogorsk In 2017, MMK planted: • 1,000 ash and maple seedlings in 77 schools and kindergartens; • 460 biennial Siberian spruce in the southern suburban districts of the city. In 2018 MMK planted: • 300 maple leaf seedlings in 13 schools and kindergartens; • 315 ash, 160 birc
Slide 31: MMK Projects Aimed at Reducing Greenhouse Gases (CO2)
MMK projects aimed at reducing greenhouse gases (CO2) Greenhouse gases (CO2) emmissions by PJSC MMK, mln tonnes / year As a result of the implementation of the Kyoto Protocol projects, 50 MMK reduced CO2 emissions by 2.257 million tonnes. 39,3 RUB 443.8 million were received through the sale of carb
Slide 32: Operational and Financial Performance Overview
4 1 2 3 5 MMK at a Glance Market Strategy Appendix Overview Overview OPERATIONAL AND FINANCIAL PERFORMANCE OVERVIEW
Slide 33: Well Diversified Product Portfolio Supports MMK Group Presence on Local Market
WELL DIVERSIFIED PRODUCT PORTFOLIO SUPPORTS MMK GROUP PRESENCE ON LOCAL MARKET Leading positions on the Russian market allow MMK Group to be less sensitive to global volatility Diversified product portfolio2 Despite the challenging economic situation, continued focus on domestic customers remains
Slide 34: Stable Free Cash Flow Generation and Efficient Working Capital Management
STABLE FREE CASH FLOW GENERATION AND EFFICIENT WORKING CAPITAL MANAGEMENT Free Cash Flow bridge ($ mln) Working capital management as a cash flow control tool: Benchmark targeting on an ongoing basis 2015 2016 2017 Identification of optimisation reserves based on analysis of individual types o
Slide 35: Strong Debt Profile and Liquidity
STRONG DEBT PROFILE AND LIQUIDITY Leverage 4 416 MMK saw significant reduction in debt burden in recent years, with 3 992 Net Debt/Adjusted EBITDA falling to 0.1x in 2016 and further to 3,0x (0.01x) in 2017 This level represents one of the lowest leverage metrics across its Russian and internati
Slide 36: MMK Group vs. Peers: Profitability
MMK GROUP VS. PEERS: PROFITABILITY MMK Group’s prudent cost control and focus on HVA ensures sustainable profitability EBITDA margin 33% 27% 26% 23% 14% 13% 12% 12% 11% 9% 6% Severstal MMK NLMK Evraz Tata Steel Nucor Posco ArcelorMittal Gerdau Nippon Steel ThyssenKrupp EBITDA per tonne of sales ($ /
Slide 37: Appendix
5 1 2 3 4 MMK at a glance Market overview Strategy Operational and overview Financial Performance overview APPENDIX
Slide 38: MMK Credit Ratings Overview
MMK CREDIT RATINGS OVERVIEW Baa3 (positive) / Moody’s Rating Evolution BBB- (stable) / S&P BBB- (stable)/ Fitch Baa3/BBB- Ba1/BB+ Ba2/BB Ba3/BB- B1/ B+ B2/B S&P Moody's Fitch • MMK’s credit ratings have been improving consistently over the last 17 years, proving resilience to global commodities mark
Slide 39: MMK Key Financials
MMK KEY FINANCIALS (in $ mln, unless stated otherwise) 2015 2016 2017 Income statement Revenue 5,839 5,630 7,546 Operating Expenses 669 650 800 Adjusted EBITDA 1,668 1,956 2,032 Tax expenses 192 231 306 Net Profit 421 1,111 1,189 Balance sheet Cash & cash equivalents 369 266 556 Inventories 877 1,06
Slide 40: Disclaimer
DISCLAIMER •THIS PRESENTATION IS FOR INFORMATION ONLY. •THIS PRESENTATION IS FOR DISTRIBUTION IN UK ONLY AMONG THE PEOPLE HAVING PROFESSIONAL SKILL IN THE ISSUES RELATED TO INVESTMENTS WITHIN THE MEANING OF ARTICLE 19(5) OF DIRECTIVE ON FINANCIAL ADVERTISEMENT APPROVED IN 2005 ON THE BASIS OF LAW ON