Evraz Plc · LSE:EVR
Evraz — H1 2014 Earnings Presentation
35 slides from Evraz's earnings presentation, Aug 27, 2014
Slide 1: H1 2014 Financial Results
H1 2014 Financial Results 27 August 2014
Slide 2: Disclaimer
Disclaimer This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of EVRAZ plc (“EVRAZ”) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.)
Slide 3: Highlights
Highlights Overview of H1 2014 Results Liquidity and Financial Position Segmental and Geographical Results Capex and Investment Projects Summary H1 2014 Financial Results 2
Slide 4: Overview of H1 2014 Results
Overview of H1 2014 Results
Slide 5: HSE Performance
HSE Performance Lost Time Injury Frequency Rate (LTIFR)* 7 employee and 6 contractor fatalities recorded in H1 2014 2.16 Employees’ unsafe behavior accounts for up to 1.64 90% of incidents Strategic goal of zero fatality incidents Priority initiatives for 2014: Training of all operations a
Slide 6: H1 2014 summary
H1 2014 summary US$ million unless otherwise stated H1 2014 H1 2013 Change Steel sales volumes1(‘000 t) 7,653 7,739 -1% Revenue 6,805 7,319 -7% EBITDA2 1,080 925 +17% EBITDA margin 15.9% 12.6% +3.3pp Net profit/(loss) 1 (146) n/m Capex3 365 492 -26% Free cash flow4 444 (87) n/m Total debt5 7,479 8,1
Slide 7: H1 2014 financial highlights
H1 2014 financial highlights Consolidated revenue decreased primarily due to Consolidated revenue by segment, $m lower prices in line with negative global price 7,319 465 6,805 trends and a lag in domestic steel prices in Russia 268 434 Total 900 and Ukraine in adjusting to the depreciation of 722
Slide 8: Analysis of cost of revenue
Analysis of cost of revenue H1 2014, % of H1 2013, % of Relative Item revenue revenue change Comments on changes $m $m Revenue 6,805 7,319 (7)% Cost of revenue 5,192 76% 5,886 80% (12)% Raw materials, incl. 1,731 25% 1,819 25% (5)% Iron ore 432 6% 371 5% 16% Higher external purchases following dispo
Slide 9: Efficiency improvement plan: H1 2014 progress update
Efficiency improvement plan: H1 2014 progress update Implementation of efficiency savings plan resulted in savings of $193m* Total 2014 target is $400m Efficiency improvement, $m Cost cutting initiatives at ongoing operations: $98m 36 Reduction of headcount and related G&A costs $33m Cost cuttin
Slide 10: H1 2014 FCF generation
H1 2014 FCF generation Working capital increased by $175m due to the repayment of a $312m payable to Yuzhny GOK (supplier of sinter to EVRAZ DMZP) which was offset by other improvements Interest payments were $235m compared to $273m last year due to lower debt and refinancing at lower rates Ca
Slide 11: Liquidity and Financial Position
Liquidity and Financial Position
Slide 12: H1 2014 debt bridge and net leverage
H1 2014 debt bridge and net leverage US$ million H1 2014 Financial Results 11
Slide 13: Liquidity and debt maturity profile
Liquidity and debt maturity profile Cash and short-term deposits of $1,353m as at 30 June 2014 compared to short-term debt of $1,244m On 12 August 2014, EVRAZ signed a $425 million syndicated pre-export financing facility, covering most refinancing needs until Q4 2015 Debt currency composition
Slide 14: Segmental and Geographical Results
Segmental and Geographical Results
Slide 15: Performance by regions
Performance by regions EBITDA, EVRAZ Russia, $m EBITDA, EVRAZ North America, $m 1,000 870 129 81 H1 2013 H1 2014 H1 2013 H1 2014 EBITDA, EVRAZ Ukraine, $m EBITDA, EVRAZ Europe, $m EBITDA, EVRAZ South Africa, $m 53 40 27 21 16 H1 2013 H1 2014 H1 2013 H1 2014 (12) H1 2013 H1 2014 Note. (1) Consolidate
Slide 16: Steel: CIS
Steel: CIS Facilities operated at close to full economic capacity Steel products sales: CIS vs. export, kt 19% growth in sales of semi-finished products driven 5,620 5,954 by changes in product mix 34% 38% Sales volumes of construction products were broadly stable despite growing competition f
Slide 17: Steel: North America
Steel: North America Stable sales volumes and higher revenue on the back of healthier economic indicators and outlook in the US Suspension of unprofitable EVRAZ Claymont operations resulted in a decrease in sales volumes of flat- rolled products but improved profitability of the flat-rolled divi
Slide 18: Coal
Coal Coal segment revenues (incl. steam coal sales) Coking coal product sales, kt decreased by 8% to $665m in H1 2014 vs. $722m in H1 2013 due to lower prices, which offset the increase in 7,425 6,903 coal volumes External coking coal sales volumes increased in H1 2014 2,177 2,179 Coking coal co
Slide 19: Iron ore
Iron ore Iron ore segment revenues decreased by 27% to $659m Iron ore product sales (excluding Mapochs*), kt in H1 2014 vs. $900m in H1 2013 due to lower sales volumes for internal consumption as a result of EVRAZ 9,025 VGOK and optimisation of Evrazruda’s assets and lower 7,651 prices 2,133 2,064
Slide 20: Capex and Investment Projects
Capex and Investment Projects
Slide 21: Capex
Capex No major capital spending in 2014 as key investment projects were completed in 2013 Significantly increased capex flexibility going forward Capex is mostly channelled to maintenance Priority is given to cash cost reduction projects with projected IRR of >40% As a result, in H1 2014 t
Slide 22: Summary
Summary
Slide 23: Current trading and market outlook
Current trading and market outlook Seasonal improvement in long steel consumption in Long products consumption, kt Russia with domestic prices of rebar and sections 6000 increasing Improved market balance due to falling imports of 5000 construction products mostly from Ukraine 4000 EVRAZ is we
Slide 24: Summary
Summary H1 2014 sales volumes were broadly flat, while H1 2014 financial results reflected weaker steel and steel raw materials price environment EBITDA of $1,080m and EBITDA margin of 15.9% Asset optmisation and cost efficiency actions brought $193m of gains H1 2014 capex of $365m, in line
Slide 25: Appendix
Appendix
Slide 26: EVRAZ's Global Business
EVRAZ’s Global Business Global Vertically Integrated Steel, Mining and Vanadium Business with Strong Positions in Highly Attractive Markets 141 Russia/CIS 16 1,301 349 3,718 124 Europe 479 1,716 North America Asia 237 South America Africa Steel mills Steel Sales Volume Breakdown (H1 2014) Iron ore m
Slide 27: Steel: South Africa
Steel: South Africa Weak economic fundamentals and social unrest continue to impact results of EVRAZ Highveld Steel and Vanadium (“Highveld”) In August 2014, EVRAZ sold 34% of the issued share capital of Highveld to local strategic investor Macrovest 147 Proprietary Limited for approx. $27m. Mac
Slide 28: Vanadium
Vanadium Vanadium segment revenues decreased by 5% to Ferrovanadium prices (FeV), $/kg contained V $255m in H1 2014 compared to $268m in H1 2013 affected by lower prices, partly offset by increased sale volumes 31.0 31.15 External sales volumes increased by 4%, mostly as 31.6 27.80 a result of g
Slide 29: Cost structure by segment
Cost structure by segment Cost structure of Steel segment, % of segment revenue Cost structure of Coal segment, % of segment revenue Revenue: 6,393 5,898 Revenue: 722 665 CoR: 5,260 4,649 Other CoR: 640 557 Energy 89% Depreciation 84% 82% 79% Staff costs 23% Other 13% 22% 15% Transportation Energy 7
Slide 30: Efficiency improvement plan: update on progress
Efficiency improvement plan: update on progress Initiative H1 2014 achievements H1 2014* vs. H1 2013 actual results, $m Operating cost savings plan is Shutdown and disposal of inefficient Russian iron ore, coal mines, Restructuring of workshop at ZSMK, Central Heat and Power Plant and mill at EV
Slide 31: EBITDA
EBITDA US$ million Consolidated EBITDA reconciliation 30 June 2014 30 June 2013 Profit from operations 297 145 Add: Depreciation, depletion and amortisation 435 580 Impairment of assets 147 7 Loss on disposal of property, plant & equipment 21 14 Foreign exchange (gain) loss 180 179 Consolidated EBIT
Slide 32: Free cash flow
Free cash flow US$ million Free cash flow calculation 30 June 2014 EBITDA 1,080 Changes in working capital, excl. income tax (175) Income tax paid (94) Other 33 Cash flows from operating activities 844 Net interest and similar payments (235) Capital expenditures, incl. recorded in financing activiti
Slide 33: Total debt
Total debt US$ million Total debt calculation 30 June 2014 31 December 2013 Long-term loans 5,960 6,041 Short-term loans and current portion of long-term 1,244 1,816 loans Add back: Unamortised debt issue costs and fair value adjustment to liabilities assumed in business 40 41 combination Nominal ef
Slide 34: Net debt
Net debt US$ million Net debt calculation 30 June 2014 31 December 2013 Total Debt 7,479 8,166 Short-term bank deposits - - Cash and cash equivalents (1,353) (1,604) Cash of assets classified as held for sale - (7) Collateral under swaps (31) (21) Net Debt 6,095 6,534 H1 2014 Financial Results 33
Slide 35: Investor relations contact
London +44 207 832 8990 Moscow +7 495 232 1370 IR@evraz.com www.evraz.com 27 August 2014