Nlmk · RUS:NLMK
Nlmk — DBAccess CEEMEA Conference 2013
32 slides from Nlmk's conference presentation, Jan 25, 2013
Slide 1: NLMK - DBAccess CEEMEA Conference
NLMK DBACCESS CEEMEA CONFERENCE Sergey Takhiev HEAD OF INVESTOR RELATIONS London, 23-25 January 2013
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: Agenda
1. Market trends 2. Q3 2012 Operating Highlights 3. Sustainable growth strategy 4. Company overview 3
Slide 4: Steel Market Overview
STEEL MARKET OVERVIEW • Demand GLOBAL CAPACITY UTILIZATION o Weaker demand on major markets. Global run rates declined 100% 90% • Prices 80% o Raw materials up driven by restocking (e.g. China) with sizable 70% growth in iron ore while coking coal is still lagging 60% o Steel prices improved Asia an
Slide 5: Short Range Trends
SHORT RANGE TRENDS • High cost of production globally METALLIC CHARGE NLMK VS GLOBAL NON-INTEGRATED* 1 000 • Only efficient vertical integration provides cost $/t 800 Av. HRC price inflation hedge 600 Average non- • NLMK sustainably maintains higher utilisation 400 integrated 200 rates to global ben
Slide 6: US Market
US MARKET • Supply and demand DEMAND & STEELMAKING RUN RATES, MONTHLY 100% 120 o Demand is improving led by growth in energy, machinery and 90% 100 stabilization in construction. 80% 70% 80 o Run rates stabilized, cross sector discipline improved 60% 50% 60 • Prices 40% 30% 40 o Steel prices up by $
Slide 7: European Market
EUROPEAN MARKET • Supply and demand DEMAND & STEELMAKING RUN RATES, MONTHLY 70% 120 o Demand continue to be anemic 60% 100 o Better run rates on re-stocking 50% 80 • Prices 40% 60 30% o Speed of price decline decelerated suggesting near bottom levels 40 20% o Divergence between North and South becam
Slide 8: Russian Market
RUSSIAN MARKET • Growth in steel consumption DOMESTIC STEEL PRICES, HRC / CRC (EXW) o 2012 ASU – up to 43 mt (+5% y-o-y) 1 000 $/t o Value of works in construction 2% up in 11M 2012 (y-o-y) 800 o New cars registrations 11% up in 2012 (y-o-y) 600 • Pricing trends 400 Slab export, CIS FOB 200 HRC dome
Slide 9: Russian Market - Construction
RUSSIAN MARKET - Construction • Market overview STEEL CONSUMPTION IN CONSTRUCTION o Steel consumption in construction up 13% y-o-y in 11M 2012 3 000 ‘000 t o Construction (sq m completions) reached pre-crisis pick levels 2 500 2 000 o 11M 2012 growth in FAI by 8.4% (y-o-y) 1 500 • NLMK strategy 1 00
Slide 10: Russian Market - Automotive
RUSSIAN MARKET – Automotive • Market overview STEEL CONSUMPTION IN AUTOMOTIVE o Annual output and car fleet grew 70% and 58% from 2002 200 ‘000 t 180 o Steel consumption in automotive sector is recovering 160 o Expected sales to grow up to 3.5 mln units in the next 10 140 years (according to researc
Slide 11: Agenda
1. Market trends 2. Q3 2012 Operating Highlights 3. Sustainable growth strategy 4. Company overview 11
Slide 12: Q3 2012 Production Results
Q3 2012 PRODUCTION RESULTS • Stable output in Q3 2012 CRUDE STEEL PRODUCTION, QUARTERLY 4,5 million t o Novolipetsk (Steel segment) 3.076 m t 3,6 3,8 3,8 ~3,7 4,0 (-2% q-o-q) 3,5 3,2 3,0 o NLMK Long Steel 0.479 m t 2,5 (+3% q-o-q) 2,0 1,5 o Foreign rolled products segment 0.216 m t 1,0 (-13% q-o-q)
Slide 13: Sales
SALES • Wide product mix with stronger value-added share DIVERSIFIED SALES STRUCTURE 100% • Rational export/domestic market balance 6% 10% 10% Other 30% 80% • Slabs sales hedged by overseas rolling operations 60% 70% 35% Machinery • Market penetration through constantly improving 40% 84% product mix
Slide 14: Financial Highlights
FINANCIAL HIGHLIGHTS ● Q3 2012 results – sustainable through cycle LAST 12 MONTH PERFORMANCE, QUARTERLY o Steel sales – 3.816 m t (flat q-o-q) 3,40 billion $ 20% o Revenue $3,002 m (-8% q-o-q) 3,26 3,00 18% o EBITDA: $483 m; margin 16.1% (-2.2 p.p. q-o-q) 3,20 3,05 3,09 18% 16% 3,00 16% 14% ● Cash f
Slide 15: Debt Position
DEBT POSITION LIQUID ASSETS AND ST DEBT MATURITY1 ● Debt position $3 500 $ Committed o Gross debt $5.28 bn million credit lines o Cash and equivalents $1.814 bn $3 000 Cash and o Net debt / 12M EBITDA 1,84x $2 500 1 388 equivalents 203 o Balanced short term debt and cash position $2 000 493 ● Debt m
Slide 16: Efficient Vertical Integration
EFFICIENT VERTICAL INTEGRATION Ensures cost advantage in raw materials supply VERTICAL INTEGRATION CASH COST REDUCTION EFFECT, Iron ore: 80% self-sufficiency* Q3 2012 o The Group is 100% self-sufficient in iron ore 550 $/t concentrate with over 100 years of mine life Iron ore 500 444 Other raw Coke
Slide 17: Production Costs
PRODUCTION COSTS Constantly one of the best • Low cost steel producer GLOBAL CRUDE STEEL PRODUCTION COSTS o Vertical integration and efficient operations $650 $/t $600 • Q3 2012 cost position $550 $500 o Slab production cost at Novolipetsk (main plant) $450 $400 decreased by 7% q-o-q to $383/t, main
Slide 18: Agenda
1. Market trends 2. Q3 2012 Operating Highlights 3. Sustainable growth strategy 4. Company overview 18
Slide 19: Sustainable Growth
SUSTAINABLE GROWTH • Expansion of low cost steel capacity CAPEX $ million o Growth in BOF steel capacity by 37% (implemented) 100% 2500 o Growth in EAF steel capacity by 75% (underway) 80% 2000 77% o Growth in quality of steel produced 60% 76% 81% 82% 1500 87% o Decrease of per unit costs 40% 1000 •
Slide 20: Crude Steel Expansion
CRUDE STEEL EXPANSION • Capacity growth CRUDE STEEL CAPACITY GROWTH: +40% o BF/BOF steelmaking (Russia) : 3.4 mtpa mtpa Brownfield project of ~$500/t* investments o EAF steelmaking (Russia): 1.5 mtpa 16 1.5 Greenfield project of ~$750/t* investments 3.4 EAF: 1.5 mtpa 12 from 2013 BF: 3.4 mtpa 8 17,2
Slide 21: Raw Materials Self-Sufficiency
RAW MATERIALS SELF-SUFFICIENCY • Iron ore EXPANSION OF IRON ORE CONCENTRATE AND o Growth in iron ore concentrate production PELLETS CAPACITY o Pelletizing plant of 6 mtpa in 2015 20 million t >18 10 million t • Coal 18 + over 6 m t 8 +6mt 16 14 o Use of alternative technology to improve coke quality
Slide 22: Organic Expansion of Rolling Capacities
ORGANIC EXPANSION OF ROLLING CAPACITIES • Expansion of HRC production DOWNSTREAM GROWTH IN RUSSIA o Location: Novolipetsk ‘000 t Установка «печь- 1500 1,500 500 o Upgrading of the existing Mill 2000 400* ковш» 400 350 o Capacity growth: +400,000 tonnes in the end of 2015 300 • CRC mill 200 o Locatio
Slide 23: NLMK Europe Strip Strategy
NLMK EUROPE STRIP STRATEGY • Exposure to resilient sectors of EU Proximity to key o Auto and trucks; Yellow goods; Transportation; Secondary customers in N.Europe transformation o Targeting 50% share of value added products in sales portfolio 100% slab • Operational de-bottlenecking needs from o Upg
Slide 24: NLMK Europe Thick Plates Strategy
NLMK EUROPE THICK PLATES STRATEGY • Exposure to resilient sectors of EU NLMK PLATES o Machinery sector capital goods, energy, etc Re-rolling facilities with expanding capacities • Targeting new market niches o Exposure to value added niche products (Q&T plates) NLMK Clabecq and NLMK Verona 80% slab
Slide 25: NLMK USA Strategy
NLMK USA STRATEGY • Exposure to reviving sectors in USA o Machinery building sector • Creating product platform with strong pricing power • Geographic location close to scrap supply and end customers NLMK FLAT USA Re-rolling facilities forming • Resilient financial and operating performance during t
Slide 26: European Industry Needs Finished Steel
EUROPEAN INDUSTRY NEEDS FINISHED STEEL Between the rock and the hard place • Steel consumption per capita remains more resilient EU STEELMAKING UTILIZATION RATES 250 million t 105% • Steel production vs. steel consumption is diverging 100% 200 95% during downturn 90% 150 85% • Steel consumption sect
Slide 27: Global Slab Market
GLOBAL SLAB MARKET Lack of stability puts emphasis on downstream MERCHANT SLAB MARKET SHARE AS A TOTAL • Slab markets was fairly stable in size despite the WORLD'S OUTPUT growth of the steel production 3% %, share mt 35 • Slab demand has shifted to the Asian region and 3% 30 became highly volatile 2
Slide 28: European Steel Sector
EUROPEAN STEEL SECTOR Misplaced capacity vs resources • About 13% of the global steel capacity is EU STEEL SECTOR: PERFECTLY MISBALANCED 16% as % of total global located in EU 14% 14% 12% 11% • Structural shift of value into raw materials side 10% 9% made EU steel sector vulnerable to raw materials
Slide 29: Agenda
1. Market trends 2. Q3 2012 Operating Highlights 3. Sustainable growth strategy 4. Company overview 29
Slide 30: Business Profile
BUSINESS PROFILE One of the most competitive steel players EBITDA PER TONNE*** o Last 5-year EBITDA margin of 31%* 500 $/t 375 400 302 Sustainable growth with a proven delivery record 300 268 243 269 234 279 201 o 2006-12 liquid steel capacity increase of 70% 183 168 180 166 165 165 155 200 128 119
Slide 31: Balanced and Favorably Located Assets
BALANCED AND FAVORABLY LOCATED ASSETS Russian production platform enhanced with international assets Usinsky-3 Novolipetsk Kaluga mini-mill (Feasibility study) NLMK USA Strip Sinter: 15 mtpa 1 mini-mill & 2 rolling mills (under const’n) Coke: 2.6 mtpa HRC 2.7 mtpa incl.: Projected capacity Steel: 12
Slide 32: NLMK Investor Relations
NLMK Investor Relations 18, bldg 1 Bakhrushina str. 115054, Moscow Russia t. +7 495 915 15 75 f. +7 495 915 79 04 email: ir@nlmk.com www.nlmk.com