Evraz PLC · LSE:EVR

Evraz — H1 2015 Earnings Presentation

30 slides from Evraz's earnings presentation, Aug 27, 2015

  1. Slide 1: H1 2015 Financial Results

    H1 2015 Financial Results 27 August 2015

  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: Highlights

    Highlights  Executive Summary  Strategic Update  Financial Performance  Segment Performance  Looking Forward  Appendix H1 2015 Financial Results 2

  4. Slide 4: Executive Summary

    Executive Summary

  5. Slide 5: Key financial metrics

    Key financial metrics  EBITDA of $922m, down 15% YoY  EBITDA margin up to 18.8% vs. 17.8% in FY 2014  Coal segment EBITDA up 10.3% YoY to $171m  Revenue of $4.9bn, down 28% YoY  CAPEX of $251m, down 31% vs H1 2014  Free cash flow of $372m vs $444m in H1 2014  Net profit of $19m vs. $15m in H1

  6. Slide 6: Safety focus

    Safety focus Lost Time Injury Frequency Rate (LTIFR)*  LTIFR rate growth reflects our efforts to improve reporting transparency 1.93 1.62  Initiatives to improve safety performance:  Improvement plans in the areas with serious incidents  Behavioural safety trainings and H1 2014 H1 2015 safety au

  7. Slide 7: Strategic Update

    Strategic Update

  8. Slide 8: Strategic goals 2015 – H1 deliverables

    Strategic goals 2015 – H1 deliverables Key business priorities  EBITDA effect* from customer focus initiatives of $38m achieved, target for Creating additional FY2015 - c.$75m 1 value for our  Expanding product portfolio and sales geography to better serve current and customers future customers: E

  9. Slide 9: Financial Performance

    Financial Performance

  10. Slide 10: Revenue evolution

    Revenue evolution Consolidated revenue by segment, $m  Group revenues decreased by 28%, mostly as a result of a decline in the Steel segment 6,805 Steel 330 revenues (28.1)% 708 4,894 Steel, North America 1,578 233 540 Coal  Steel segment sales were impacted by weak 1,249 demand (-5% YoY to 6.6mt)

  11. Slide 11: Cost of revenue

    Cost of revenue Cost of revenue breakdown by item, $m  The Group’s cost of revenue decreased by 5,192 Raw materials 31.2% due to reduction in all costs as a result (31.2)% Staff costs of cost cutting initiatives and devaluation of 800 the Russian rouble 380 Auxiliary 337 3,570 materials 382 Transpo

  12. Slide 12: EBITDA dynamics and breakdown

    EBITDA dynamics and breakdown Consolidated EBITDA dynamics, $m  EBITDA reached $922m (-15% YoY) 18.8% EBITDA, $m  A decline in steel prices has exceeded the 1,200 15.9% 20% positive devaluation effect 1,000 15% EBITDA 10%  A downturn in the OCTG and flat-rolled800 margin, % 5% product markets hav

  13. Slide 13: Efficiency improvement plan: H1 2015 progress update

    Efficiency improvement plan: H1 2015 progress update  Implementation of efficiency improvement plan resulted in $149m* of savings  Total 2015 cost optimisation target of $280m Efficiency improvement, $m Cost cutting initiatives & productivity $73m improvement: Improving yields and raw material cos

  14. Slide 14: H1 2015 FCF generation

    H1 2015 FCF generation  Free cash flow for the period is a positive $372m  Net cash flow from operating activities amounted to $804m in H1 2015  Proceeds from sale of disposal groups amounted to $40m  On 31 March 2015, the Board resolved to announce a return of capital to be effected by a tender

  15. Slide 15: H1 2015 debt bridge and net leverage

    H1 2015 debt bridge and net leverage  Deleveraging on track: net debt reduced to $5,680m  We remain focused on continued debt reduction Net debt bridge, $m H1 2015 Financial Results 14

  16. Slide 16: Maturity profile

    Maturity profile  Total debt was $6.7bn as of 30 June 2015  Focus on proactive refinancing of short-term maturities and cost-efficient use of cash for total debt reduction:  In April 2015, we partially repurchased below par 9.95% notes due October 2015 with principal of RUB 4,150m - total cash ou

  17. Slide 17: Debt structure

    Debt structure Cost of borrowings  Weighted average cost of debt as of 30.06.2015 remains at the level of 6.4% 8 5 7  In the current market EVRAZ continues to 6 4 replace capital market facilities with bank debt 5 4  Refinancing interest rate is close to our 3 3 weighted average cost of debt henc

  18. Slide 18: Capex

    Capex Capex breakdown by segment, $m  H1 2015 total capital expenditures, including recorded in financing activities, reduced to 1H2014 $251m, a $114m reduction compared to 1H2015 H1 2014 365 55% 243 251  Capex is mostly allocated to maintenance 137 55 53 60 38 23 7  Prudent capital expenditure m

  19. Slide 19: Segment Performance

    Segment Performance

  20. Slide 20: Russia: Steel

    Russia: Steel Steel sales breakdown by destination  Capacity utilisation remains high H1 2015 H1 2014  Crude steel output was largely unchanged YoY at 5.8mt Russia  Sales volumes of construction products in Russia Export dropped 26% to 1.4mt, with revenues impacted by lower prices 46% 42% 5,546kt

  21. Slide 21: Steel. Sales Mix.

    Steel. Sales Mix. Consolidated sales by product, mt  Production of steel and steel products remains the core EVRAZ’s business 7.7 (3)% 7.5 Total Semi-finished 0.3 0.3 0.5 products Other steel 0.4 0.8 0.5 products Construction 0.8 Tubular products  Consolidated steel sales totaled 7.5 mt, a 3% 1.1

  22. Slide 22: Iron ore

    Iron ore Iron ore production and consumption, kt  Production sinter and pellets in Russia remained flat in H1 2015, amounting to 8.7mt 12,000 88% vs 8.9mt in H1 2014 10,514 Production 9,907 86% 10,000  Steel segment revenues from the sales of 8,079 8,497 Consumption 84% iron ore products decreased

  23. Slide 23: Coal

    Coal  All steam coal mines have been closed or sold Washed coking coal (concentrate) production and consumption, kt *  H1 2015 coking coal sales decreased due to 8,000 185% optimisation of the production programme 7,000 6,711 Production 6,384 180%  Cash cost of washed coking coal dropped to 6,000

  24. Slide 24: North America: Steel

    North America: Steel Steel product sales (totals shown net of intracompany), kt  Tubular products: performance of large diameter (LD) pipe and the OCTG Tubular 1,301 (8)% products subsegments diverged significantly: 1,192 199 Flat-rolled  LD pipes: strengthening volumes as 195 products 275 infrast

  25. Slide 25: Looking Forward

    Looking Forward

  26. Slide 26: 2015 year-end outlook

    2015 year-end outlook Global  Assuming current market conditions persist into H2 2015, steel prices will continue to decline following the slide in input costs and pressure from the devaluation of key currencies against US dollar  China's weakening demand and recent Fx devaluation should further i

  27. Slide 27: 2015 market outlook - North America

    2015 market outlook - North America  With the exception of the energy sector, demand remains strong, in the automotive and non- residential construction sectors in particular  The US dollar appreciation and favourable local price premium led to significant import pressure on the US steel industry

  28. Slide 28: Appendix

    Appendix

  29. Slide 29: Revenue Drivers

    Revenue Drivers $m (182) (222) (1,118) 6,805 (33) (49) (17) (64) (226) 4,894 Revenues H1 2014 Steel, quantity Steel, mix Steel, prices Coal, volumes Coal, prices Iron ore, volumes Iron ore, prices Other Revenues H1 2015 H1 2015 Financial Results 28

  30. Slide 30: Contact

    London +44 207 832 8990 Moscow +7 495 232 1370 IR@evraz.com www.evraz.com 27 August 2015

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