Nlmk · RUS:NLMK
Nlmk — Q1 2013 Earnings Presentation
29 slides from Nlmk's earnings presentation, May 17, 2013
Slide 1: NLMK Q1 2013 US GAAP Consolidated Results
NLMK Q1 2013 US GAAP CONSOLIDATED RESULTS Moscow, 17 May 2013 1
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: International Market
INTERNATIONAL MARKET DEMAND AND SUPPLY STEELMAKING CAPACITY UTILIZATION • Restocking from low levels in late 2012 + ~ 4 p.p. – increase in global capacity run • Subsequent spike in steel supply / utilization rates (+4 p.p.) 85% rates for Q1’13/Q4’12 PRICES • Divergent regional price dynamics for ste
Slide 4: Russian Market
RUSSIAN MARKET DEMAND STEEL CONSUMPTION • Seasonal slowdown in activity from construction and a 4,0 mt/month Seasonal growth in demand 60% Import share in consumption – weakening in machine building over 16% 50% 3,5 • Imports still represent significant share in supply 40% o + 40% yoy in long produc
Slide 5: Production
PRODUCTION CAPACITY UTILIZATION RATE: ~94% STEEL PRODUCTION mt • Novolipetsk: 97% (flat) 3,8 3,8 3,7 3,7 4 3,6 • NLMK Long Products: 83% (+2 p.p.) 3 • NLMK USA: 88% (-2 p.p) 2 Q1’13 STEEL PRODUCTION GROWTH 1 NLMK Group: 3.7 mt, +1%, including: 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 • Novolipetsk:
Slide 6: Sales Geography
SALES GEOGRAPHY HIGH SALES IN RUSSIA REVENUE BY REGION • Sales in Russia: +0% qoq and +20% yoy $m 3,094 2,803 2,856 • Higher long product sales: +8% qoq and +8% yoy 3 0,29 0,36 0,38 0,35 • Flat steel: -12% qoq (seasonal factor) and +0% yoy 0,46 0,23 0,28 2 0,30 0,37 • Increase in slab sales to pipe
Slide 7: Sales Structure
SALES STRUCTURE Q1’13: +2% INCREASE IN FINISHED PRODUCT SALES SALES AND REVENUE BY PRODUCT IN Q1’13 100% Revenue from other 1% • Share of finished products: 69% (+4 p.p. qoq), including 51% 11% operations* Pig iron 1% of HVA steel 34% 80% 21% Slabs • Growth in HVA products sales: +9% qoq HRC • Growt
Slide 8: NLMK: Management Gains Program
NLMK: MANAGEMENT GAINS PROGRAM BUSINESS PROCESS IMPROVEMENT PROGRAMME LOWER PRODUCTION EXPENSES • Novolipetsk $m Target savings of over $100 m 80 • Altai-Koks 70 60 24,6 OPTIMIZATION OF COKE CHEMICAL, SINTERING, BOF 50 OPERATIONS 40 8,8 7,4 72 • Maximum use of equipment potential 30 20 • Minimizing
Slide 9: 2013 Investments
2013 INVESTMENTS CAPEX PROGRAMME CAPEX DYNAMICS • Lower capital intensity $m 2000 • Focus on efficiency enhancement and niche products • Balanced approach to assessing new projects 1500 • Flexibility under various market scenarios 1000 2020 1936 1462 1453 69% LONG PRODUCTS DIVISION DEVELOPMENT 500 1
Slide 10: Investments: Stoilensky
INVESTMENTS: STOILENSKY STOILENSKY CAPACITY GROWTH • One of the most efficient iron ore concentrate producers in mt/y 10 mt/y 20 + over 6 mt >18 the world 18 16 8 • Cash cost of iron ore concentrate: $23/t 14 14 + 6 mt 12 12 6 PROJECT TO ACHIEVE 100% SELF-SUFFICIENCY IN IRON ORE 10 8 4 CONCENTRATE 6
Slide 11: Investments: NLMK Kaluga
INVESTMENTS: NLMK KALUGA RUSSIAN REBAR MARKET REBAR MARKET, CONSUMPTION IN RUSSIA • Consumption growth in Russia: +82% against Q1‘10 mt/q Import, 23% • Import growth: +59% against Q1‘12, x3 against Q1’10 2,0 30% share in % • Regional demand/supply imbalance Record level of 2008 25% 1,5 MODERN 1.5 MT
Slide 12: Key Highlights
KEY HIGHLIGHTS FINANCIAL RESULTS REVENUE AND EBITDA MARGIN • Revenue: $2,856 m (+2% qoq) $3,4 $ bn 18% 20% 16% 18% • EBITDA: $318 m (-18%) $3,2 14% 16% $3,0 • EBITDA margin: 11% (-2.8 p.p.) 11% 14% 14% 12% $2,8 • Net profit: $38 m 10% $2,6 3,26 3,09 8% • Operating cash flow: $261 m (-22%) 3,00 2,86
Slide 13: Cash Flow
CASH FLOW POSITIVE FREE CASH FLOW Q1’13 CASH FLOW • Working capital at a stable level despite the growth in $m EBITDA 318 sales from a low Q4’12 base • Q1 capex fell by 48% qoq to $154 m, due to seasonal Working capital change -18 factors and the completion of a number of projectsв • Net inflow on c
Slide 14: Debt Leverage
DEBT LEVERAGE LOWER NET DEBT CHANGE IN DEBT POSITION • Net deb: $3.45 bn (-3% qoq) $6 $ bn • Cash and equivalents1: $1.49 bn (+41%) 4.63 -0.6 4.94 $5 +0.9 • Net debt / 12M EBITDA: 1.93 $4 1,5 1,8 • Gross debt: $4.94 bn (+7%) $3 DEBT PORTFOLIO OPTIMIZATION $2 3,5 • Eurobond issue for a total of $800
Slide 15: Settlement of Financial Liabilities
SETTLEMENT OF FINANCIAL LIABILITIES MATURITY SCHEDULE LIQUID ASSETS AND ST DEBT MATURITY1 • Substantial liquidity cushion $m Committed credit lines $5 000 • ST debt: $1.48 bn $4 000 o PXF and ECA financing: $0.3 bn o Exchange bond put option for RUB 10 bn $3 000 2 358 Cash and equivalents • LT debt:
Slide 16: Outlook - Q2 2013
OUTLOOK - Q2 2013 MARKET OVERVIEW • In export markets, demand growth driven by restocking in early 2013 was replaced by a downward trend • Capacity utilization in some regions remains high, aggravating the demand/supply imbalance amid weak market conditions • The downward trend for steel prices in t
Slide 17: Segments
SEGMENTS 17
Slide 18: Segments Contribution – Q1 2013
SEGMENTS CONTRIBUTION – Q1 2013 STEEL SEGMENT SALES REVENUE FROM THIRD PARTIES • Lower profitability due to higher prices for input iron $3 500 $m ore and lower prices for steel products $3 000 275 329 314 288 $2 500 281 FOREIGN ROLLED PRODUCTS SEGMENT 989 1 026 759 $2 000 692 816 • Lower negative f
Slide 19: Steel Segment
STEEL SEGMENT STABLE SALES VOLUMES SALES AND REVENUE STRUCTURE IN Q1’13 • Higher slab sales to the domestic market 2,371,000 t $1,659 mt 0% Other revenue* 100% • Sales of value added products increased 2% 8% 90% 1% Pig iron 80% 47% Ordinary 34% Slab 70% grades LOWER PROFITABILITY 60% HRC 50% • Sprea
Slide 20: Steel Segment (2)
STEEL SEGMENT (2) STABLE SLAB PRODUCTION COSTS (+1% QOQ) CONSOLIDATED SLAB COSTS AND FX RATE • Pellet prices increased Slab cash cost* RUB/USD rate 450 $/t 32 RUB/$ • Higher railway tariffs 395 411 400 383 32 • Positive effect of the optimization programme 361 364 31 350 31 300 30 NEGATIVE IMPACT OF
Slide 21: Long Products Segment
LONG PRODUCTS SEGMENT SALES AND REVENUE INCREASED Q1 SALES AND REVENUE STRUCTURE • Sales went up by 7% 430,000 t $288 m 100% 2% • Revenue from third parties increased by 3% Other revenue* 80% • Intersegmental revenue declined by 33% due to lower Revenue from scrap consumption by the Steel Segment 60
Slide 22: Mining Segment
MINING SEGMENT SEGMENT REVENUE INCREASED IRON ORE CONCENTRATE SALES • Higher prices for iron ore 5,0 mt • Lower sales volumes 4,0 1,22 o Lower demand from Novolipetsk that has been using 0,63 3,0 0,74 0,77 accumulated inventories o High level of sales to third parties in Q4 2012 driven by 2,0 2,86 3
Slide 23: Foreign Rolled Products Segment
FOREIGN ROLLED PRODUCTS SEGMENT SALES INCREASED BY 18% NLMK USA SALES AND REVENUE • Stronger demand in the United States 000’t mln $m 600 000’t $m • Increased utilization rates with improved demand in 473 Europe 82 362 407 357 Other revenue 400 18 • Reconstruction of NLMK DanSteel capacities complet
Slide 24: Attachments
ATTACHMENTS 24
Slide 25: Segmental Information
SEGMENTAL INFORMATION Q1 2013 Foreign Intersegmental Long Steel rolled Mining All other Totals operations and Consolidated (million USD) products products balances Revenue from external customers 1 659 816 288 92 0,3 2 856 2 856 Intersegment revenue 346 1 59 245 650 (650) Gross profit 260 (6) 46 232
Slide 26: Quarterly Data: Consolidated Statement of Income
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME Q1 2013 Q4 2012 Q1 2013/Q4 2012 Q1 2013 Q1 2012 Q1 2013/Q1 2012 (mln USD) +/- % +/- % Sales revenue 2 856 2 803 53 2% 2 856 3 094 (239) (8%) Production cost (2 125) (1 984) (140) 7% (2 125) (2 210) 85 (4%) Depreciation and amortization (207) (199) (9)
Slide 27: Consolidated Cash Flow Statement
CONSOLIDATED CASH FLOW STATEMENT Q1 2013 Q4 2012 Q1 2013/Q4 2012 Q1 2013 Q1 2012 Q1 2013/Q1 2012 (mln. USD) +/ - % +/ - % Cash flow from operating activities Net income 35 (5) 41 (773%) 35 174 (138) (80%) Adjustments to reconcile net income to net cash provided by operating Depreciation and amortiza
Slide 28: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET as at as at as at as at as at as at 31.03.2013 31.12.2012 30.09.2012 30.06.2012 31.03.2012 31.12.2011 (mln. USD) ASSETS Current assets 5 834 5 469 6 287 5 230 5 714 5 504 Cash and cash equivalents 1 220 951 1 803 769 926 797 Short-term investments 271 107 11 10 11 227 Acco
Slide 29: Investor Relations
NLMK Investor relations Russia, 115054, Moscow Bakhrushina str, 18, bldg 1 t. +7 495 915 15 75 f. +7 495 915 79 04 ir@nlmk.com www.nlmk.com