Evraz Plc · LSE:EVR

Evraz — Investor Day (October 2019)

43 slides from Evraz's investor day presentation, Oct 18, 2019

1. Slide 1: EVRAZ Capital Markets Day

   EVRAZ Capital Markets Day 18 October 2019, London

2. 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.)

3. Slide 3: Our team today

   Our team today Presenters Sir Michael Peat Alexander Frolov Aleksey Ivanov Artem Natrusov Nikolay Ivanov Senior Independent Chief Executive Officer Senior Vice President, Vice President, Chief Financial Officer Non-executive Director Commerce and Information Technologies Remuneration committee Busin

4. Slide 4: Opening remarks

   Opening remarks Sir Michael Peat Senior Independent Non-executive Director

5. Slide 5: Opening remarks

   Opening remarks Ensuring zero injuries and fatalities in the workplace has always been and remains of paramount importance for EVRAZ’s management Markets have not been as helpful in 2019 as they were in 2018, prices declined for almost all major benchmarks Relentless focus on efficiency and cost con

6. Slide 6: Environmental, Social and Governance

   Environmental, Social and Governance Alexander Frolov Chief Executive Officer

7. Slide 7: EVRAZ focus on sustainable development

   EVRAZ focus on sustainable development  Sustainable development is a key factor in ensuring long-term stability, competitiveness and the ability to create value for stakeholders  EVRAZ efforts in ESG have led to continued position improvements in international sustainability ratings in 2019 EVRAZ

8. Slide 8: Safety as a first priority

   Safety as a first priority  In 2019, tragically, there were 15 fatal accidents: the most serious incident happened in February at the Raspadsky open pit  YTD 2019 LTIFR decreased to 1.88x. In order to achieve target of 1.0x EVRAZ is implementing a new risk management system  The new risk manageme

9. Slide 9: Creating a sustainable environment

   Creating a sustainable environment GHG emissions Fresh water consumption Renewable source of energy Achievement: in H1 2019, GHG  intensity ratio decreased by 8% vs 2016  Achievement: in 2018, fresh water consumption fell by 33% compared to  Project: new 240-megawatt solar facility in the USA (

10. Slide 10: Human capital & community relations

    Human capital & community relations Training and education Sport events Community projects  The EVRAZ New Leaders: training  “High Five” event: corporate charity  “EVRAZ City of Friends – City of and development programme of the run which has been held in Ideas”: annual grant contest aimed at hig

11. Slide 11: Corporate governance highlights

    Corporate governance highlights Premium listing in UK Balanced board New in 2019 EVRAZ published its first Premium listing on the main market of the London Stock Exchange  EVRAZ has a balanced Board with more than 50% of Independent Non-  Sustainability report in April 2019 executive directors

12. Slide 12: Strategic overview

    Strategic overview Alexander Frolov Chief Executive Officer

13. Slide 13: EVRAZ Corporate Vision

    EVRAZ Corporate Vision EVRAZ is a global steel and mining company, leading producer of infrastructure steel products with low-cost production along the value chain  Among the Top 30 global steel  #1 in Russian rail market  Located in the first quartile of producers  #1 in Russian beam market glo

14. Slide 14: Global steel demand continues to grow

    Global steel demand continues to grow  In 2019, global steel demand is expected to grow by 2.4% year-on-year due to economic stimulus in China and strong growth in India and Vietnam  In 2020, world steel consumption is forecasted to increase by 1.1% over 2019, led by slower economic growth in Chin

15. Slide 15: National projects will drive steel consumption in Russia

    National projects will drive steel consumption in Russia  Russian steel market is expected to increase by 3.1% in 2019 supported by strong demand in housing construction  Russian Government plans to spend ~US$187bn in total on National projects dedicated to infrastructure that will have a direct i

16. Slide 16: North American steel demand remains stable

    North American steel demand remains stable Rails Large Diameter Pipe (LDP) Rails demand in NA LDP demand in NA market, sh. mt market, sh. mt  The NA rail market is  LDP demand demonstrates 1.8 1.8 expected to remain relatively significant growth to 1.8mt in 1.1 1.2 1.2 1.1 1.2 stable at 1.1mt in 2

17. Slide 17: Despite new capacities coal market is expected to remain balanced

    Despite new capacities coal market is expected to remain balanced  In 2019, coking coal imports are expected to grow by 1.4% amid robust demand in Asian countries excluding China  In 2020, seaborne coking coal market is projected to reach 310mt, mainly due to the growing demand from India  The la

18. Slide 18: Vanadium market is returning to equilibrium

    Vanadium market is returning to equilibrium Consumption Production  Vanadium consumption increased by 10% in 2019, mainly as a result of China’s HS rebar standard implementation  In 2019, supply response was quicker than expected as Chinese  2019-24 demand CAGR is expected to be 2.5% due to conti

19. Slide 19: EVRAZ strategic priorities remained unchanged

    EVRAZ strategic priorities remained unchanged  Medium-term net debt level below  Investment programme US$4bn expansion  Proactive management of debt  Development of investments with maturities target IRR ~20% Debt management Prudent  Dividend payout according to and stable CAPEX  Total CAPEX o

20. Slide 20: Key takeaways

    Key takeaways Safety of employees and maintaining a sustainable environment remains EVRAZ’s first strategic priority EVRAZ increased focus on sustainable development as is the key factor in ensuring long-term stability, market competitiveness and the ability to create value for stakeholders Global s

21. Slide 21: Strategy execution

    Strategy execution Aleksey Ivanov Senior Vice President, Commerce and Business Development

22. Slide 22: Strategy execution framework

    Strategy execution framework Strategic target Approach Process Result EVRAZ Business System – Performance management – 3% of COGS culture of continuing improvements tracking of target execution annual improvements Major investment projects  Long rail mill at EVRAZ Pueblo  Rail and beam mill modern

23. Slide 23: Strategic goals in product portfolio development

    Strategic goals in product portfolio development Russian Steel EVRAZ North America 2019 expectations: 9.9mt of total Russian steel sales including 5.4mt of finished steel sales 2019 expectations: 2.3mt of ENA steel sales, including 0.8mt of rails and LDP sales Target 2024: 10.7mt of total Russi

24. Slide 24: Strategic goal of cost leadership

    Strategic goal of cost leadership  EVRAZ maintains cost leadership position through efficiency improvement programme, generating and implementing initiatives around US$300m every year  Already identified effect from initiatives for 2019-24 is approximately US$260m p.a. on average (~75% of effect i

25. Slide 25: Successful track record of investment projects execution

    Successful track record of investment projects execution  We have successfully managed a number of investment projects with total CAPEX of US$2.5bn and average IRR of 27% during challenging times and substantially higher leverage Projects Division CAPEX, US$m IRR, % Launch date Effect  + 200ktpa o

26. Slide 26: Staged approach to CAPEX

    Staged approach to CAPEX  In 2020-23, EVRAZ expects CAPEX to be on average US$1.0bn per annum, of which:  3 major development projects ~US$335m p.a. (2020-23 total capex ~US$1,340m)  Middle size and small development projects ~US$165m p.a.  Maintenance CAPEX ~US$500m p.a. CAPEX, US$m Key investm

27. Slide 27: Pueblo long rail mill (ENA)

    Pueblo long rail mill (ENA) Key figures Project description  Description: construction of new 100-m rail mill in Pueblo to maintain technical leadership and continue shifting to a higher value product mix  CAPEX: US$512m (incl. 2018-19 committed - US$31m, 2020-23 not committed - US$481m)  IRR: 18

28. Slide 28: Rail & beam mill modernisation at EVRAZ NTMK

    Rail & beam mill modernisation at EVRAZ NTMK Key figures Project description  Description: revamp of rail & beam mill in order to increase overall beam capacity by shifting production of heavy sections to H-beam rolling mill and starting production of mid- sized and small sections  CAPEX: US$180m

29. Slide 29: Integrated flat casting and rolling complex at EVRAZ ZSMK

    Integrated flat casting and rolling complex at EVRAZ ZSMK Key figures Project description  Description: construction of a 2.5mtpa integrated flat casting and rolling facility at EVRAZ ZSMK  CAPEX: US$647m (incl. 2020 committed - US$31m, 2020-23 not committed - US$615m)  IRR: 22%  Launch: 2023 

30. Slide 30: Key takeaways

    Key takeaways EVRAZ has a clear plan to create significant value by further developing its product portfolio Thanks to EVRAZ Business System, we are going to maintain our cost leadership position through efficiency improvement programme, generating and implementing initiatives of approximately US$30

31. Slide 31: Digital transformation

    Digital transformation Artem Natrusov Vice President, Information Technologies

32. Slide 32: Why is digital transformation important?

    Why is digital transformation important? EVRAZ & US$32bn digital digital transformation per year transformation Expert systems & journey predictive analytics (5% of COGS)* total effect for Production accounting the industry & control rooms EVRAZ main focus SCALE UP Autonomous equipment Digital maint

33. Slide 33: Expert systems & advanced analytics

    Expert systems & advanced analytics How does it work? What is done? Mathematical modeling of the production Expert system Blast Furnace #7 processes at EVRAZ ZSMK at EVRAZ NTMK STEP 1: physicochemical and machine learning models STEP 2: model predictions Effect: Effect:  US$9.6m per year EBITDA eff

34. Slide 34: Production accounting & control rooms

    Production accounting & control rooms How does it work? What is done? STEP 1: 3D models STEP 2: optimal planning through programmes Aerial photography Data centers STEP 3: management through a single data center Effect: Effect:  Overburden reduction  +8% of equipment productivity growth STEP 4: 

35. Slide 35: Key takeaways

    Key takeaways EVRAZ has a significant potential for innovations We have implemented a number of projects with a good economic effect EVRAZ is developing new competencies and organizational system to scale up digital transformation EVRAZ Capital Markets Day 2019, London 34

36. Slide 36: Financial review

    Financial review Nikolay Ivanov Chief Financial Officer

37. Slide 37: Stable performance despite market headwinds

    Stable performance despite market headwinds  US$1.5bn in H1 2019 consolidated EBITDA* Russian Steel Coal EVRAZ North America  Earnings impacted by vanadium price’s heavy fall, as well as lower sales prices for construction products  Relatively stable performance  Cost performance supported by gr

38. Slide 38: Robust FCF generation

    Robust FCF generation EVRAZ financials EBITDA bridge to free cash flow  Since 2014 EVRAZ was able to generate strong free cash flows  Free cash flow for H1 2019 amounted to US$692m at an average annual level of c.US$1bn CAPEX, US$m FCF*, US$m Investments in working capital, US$m FCF / EBITDA, % US

39. Slide 39: Focus on stable dividends

    Focus on stable dividends EVRAZ dividend payments EVRAZ leverage Achievement: US$2.6bn dividend payments in 2018-2019 Achievement: net debt as of 30.06.2019 is US$3.65bn, H1 2019 net debt / EBITDA ratio – 1.1x Target: annual dividends of at least US$300m while maintaining Target: net debt leve

40. Slide 40: Debt management

    Debt management  EVRAZ continued to proactively manage its indebtedness by Debt maturity profile, as of 30.09.2019*, US$m taking advantage of tailwinds in capital markets 1,111 1,056 1,061 1,027  Major refinancing activities consisted of:  Issue of US$700m 5.25% Eurobond due 2024 with proceeds us

41. Slide 41: Cash-flow priorities remain unchanged

    Cash-flow priorities remain unchanged 1 Dividends 2 Reinvestment  Dividends paid in 2018 amounted to US$1.6bn in total; 3 the dividend yield reached c.17% Debt management  Selective investments in  Dividends paid in 2019 YTD development amounted to US$1.1bn in total; the dividend yield reached c.

42. Slide 42: Q&A

    Q&A

43. Slide 43: IR@evraz.com www.evraz.com

    +7 495 232 1370 IR@evraz.com www.evraz.com

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