Nlmk · RUS:NLMK
Nlmk — HSBC's 8th Annual CEEMEA Investor Forum (September 2008)
41 slides from Nlmk's conference presentation, Sep 4, 2008
Slide 1: Novolipetsk Steel
NLMK Novolipetsk Steel London, September 4, 2008 HSBC's 8th Annual CEEMEA Investor Forum
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. purpose This
Slide 3: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 3
Slide 4: NLMK – Key Facts
NLMK today > NLMK Key facts NLMK – Key Facts Russian steel company with growing international presence JMC Tubes & pipes Crude steel Rolled steel Crude steel Rolled steel NLMK Group1 9 2m t 9.2m 5 4m t 5.4m JV with Duferco 2 1m t2 2.1m 4 2m t3 4.2m 1. 2007 production includes Lipetsk production site
Slide 5: Compelling Investment Case
NLMK today > Compelling investment case Compelling Investment Case Gaining international leadership • Efficiency leader with sustainable performance • Highly efficient steel company with superior EBITDA/tonne generation • Sustainable EBITDA margin over 40% for the last 5 years • Revenues +28% y-o-y,
Slide 6: NLMK – Key Facts
NLMK today > Key Facts NLMK – Key Facts Market leadership in slabs and value-added value added products Sales revenue: Global market position …by region1 World EU 7.5% Domestic market Top 5 producers (market share) 7.1% 43.4% 75% 80% 75% EU 25% 13.9% North America 20% 20% 15% Middle East, incl. 15%
Slide 7: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 7
Slide 8: Russia: Market Development Trends
Domestic growth > Russia Russia: Market Development Trends Sustainable growth and attractive opportunities • A GDP g growth of 135% from 2007 to 2012* Steel demand by industry supported by … • industrial production growth of 6.3% y-o-y Construction 20% • 21% y y-o-y y growth g of fixed assets invest
Slide 9: Domestic Market Strategy – Construction (64% of sales)
Domestic growth > Construction Domestic Market Strategy – Construction (64% of sales) Growing multi-product segment • Sector highlights: Steel consumption by product in construction industry*** • Government plans to increase new housing construction from 50m m2 in 2006 to 170m m2 by 2020* 35% Long g
Slide 10: Domestic Market Strategy – Machinery (23% of sales)
Domestic growth > Machinery Domestic Market Strategy – Machinery (23% of sales) Maintain leadership and capture growth • Sector highlights g g • Our p products g go to: • Machine building and white goods segments enjoy • Machinery and equipment strong investment inflow and government support • Autom
Slide 11: Domestic Market Strategy – Automotive (9% of sales)
Domestic growth > Automotive Domestic Market Strategy – Automotive (9% of sales) Bid for higher quality and for global customers • Sector highlights ,000 pcs. Auto manufacturing in Russia annual growth of 6% for 2007-15 • Fifth largest auto market and the largest sales market in Europe (USD 34.0 bn
Slide 12: Portfolio Development and Earnings Growth
Domestic growth > Portfolio development Portfolio Development and Earnings Growth A key supplier of HVA products in Russia to meet accelerating demand NLMK main site production • HVA products sales are concentrated in Russia 2007 vs. 2012E • Domestic economy growth drives earnings increase • Custome
Slide 13: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 13
Slide 14: Global Growth Strategy
Global Growth > Global Growth Strategy Global Growth Strategy Improving earnings quality by increasing internal slab re-rolling • Long term volatility of slab market is high Slab supply 2007 2012E • NLMK aims to secure slab supply to rolling DanSteel A/S 0.6 m t 0.6 m t facilities in its main market
Slide 15: Global High-value-added Market Presence
Domestic growth > Global HVA Market Presence Global High-value-added Market Presence Global niche player – high-margin high margin product development • NLMK commands 20% of global transformer steel market 2007 Key facts: • Over 20% EBITDA generated from only 5% of sales by volume • 328,000 t of tra
Slide 16: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 16
Slide 17: Enhancement of Production Platform
Development Plans > Enhancement of Production Platform Enhancement of Production Platform Capex drives output growth and improvements in efficiency Main Goals Over USD 10 billion1 • Increase steel production • Quality improvements Total Investment Capex 2007-15 • Fast growth of HVA products • Effici
Slide 18: Joint Venture with Duferco Group
Development Plans > Joint Venture with Duferco Joint Venture with Duferco Group Pursuing growth in finished output • Production profiles make NLMK and Duferco JV slab supply balance natural partners 2007 2012E • Access to distribution and service network JV internal slabs 1.7 m t 2.8 m t • Technolog
Slide 19: Future M&A Approach
Development Plans > Future M&A Approach Future M&A Approach Pursuing value enhancing opportunities Key drivers Examples Downstream vertical • Securing slab supply • Sharon Coating integration • Improving earnings quality (former Winner Steel) acquisition • Technology transfer • Definitive agreement
Slide 20: Acquisition of John Maneely Co (JMC)
Development Plans > JMC acquisition Acquisition of John Maneely Co (JMC) • Agreement g to acquire q 100% in JMC for USD3.53 on a cash/debt / free basis. The deal to be closed in Q4 2008. • Attractive valuation of 6.6x EV/Ebitda • A leading pipe manufacturer with 3.0 m tpa capacity with a diversified
Slide 21: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 21
Slide 22: Sustainable Financial Performance
Financial Strength > Sustainable Financial Performance Sustainable Financial Performance Strong cash generation through the cycle • Historical performance 2001-2007 EBITDA USD, bn • EBITDA CAGR of 50% 4 60% 53% 48% 44% 44% • Average EBITDA margin above 40% 3 36% 41% 45% 3.4 • Average ROE of ~35% 2 2
Slide 23: Strong Cost Position
Financial Strength > Strong Cost Position Strong Cost Position НЛМК One of the lowest cost producers worldwide USD 2007 slab cost • FY2007 slab cash cost on a consolidated 550 basis is USD 221 450 350 • Iron ore accounts for 7.2% of consolidated 250 production cost NLMK 150 • Major cost items: coal,
Slide 24: Solid Basis for Industry Leadership
Financial Strength > Solid Basis for Industry Leadership Solid Basis for Industry Leadership Key company company’s s strengths • Balanced portfolio of efficient assets • Main site withh optimall size and d composition off modern d facilities f l (Novolipetsk) ( l k) • Lowest cost iron ore producer i
Slide 25: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 25
Slide 26: Outlook: Revised steel price forecast for 2008
Outlook > Revised steel price forecast for 2008 Outlook Revised steel price forecast for 2008 • C Current t fforecastt • Favorable market situation with global steel prices stable or increasing compared to 2007 • We expect 2008 revenue to grow up to 70% y-o-y • EBITDA is expected to exceed the 2007
Slide 27: Strategic Outlook
Outlook > Strategic Outlook Strategic Outlook Long term sustainable development Long-term • Increase efficient self-sufficiency self sufficiency in basic raw materials • Maintain key competitive advantage in low cost production of slabs • Fully capture growing demand in the Russian market • Strength
Slide 28: Table of Contents
Table of Contents 1 NLMK Today 1. T d 4 2. Domestic Growth 8 3. Global Growth 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 25 7. Appendices 28 28
Slide 29: Sustainable Operating Performance
Appendices > Sustainable Operating Performance Sustainable Operating Performance … supported by NLMK NLMK’s s resilience to rising input costs • Backwards vertical integration mitigates increasing cost inflation Self-sufficient in iron ore (except iron ore pellets) Iron ore Plan to develop a pelleti
Slide 30: 2007 Sales
Appendices > 2007 Sales 2007 Sales Domestic vs. vs export, export tonnes Domestic market Export p market Pickled Pickled 7% Cold-rolled 5% 11% Thick plate Cold-rolled 8% Galvanized G l i d Hot-rolled 27% 15% 6% Pig-iron Pre Pre- 12% painted 10% Dynamo steel Transformer steel 5% 2% Hot-rolled Transfo
Slide 31: Enhancement of Production Platform
Appendices > Enhancement of Production Platform Enhancement of Production Platform Capex drives output growth and improvements in efficiency Main Goals • Increase steell production d • Quality improvements BF No.4 revamp • Fast growth of HVA products 60% energygy self- • Efficiency gains Blast furna
Slide 32: Maxi-Group Development Plan
Appendices > Maxi-Group Development Plan Maxi-Group Development Plan P Pursuing i capacity it growth th and d value l enhancing h i opportunities t iti New facilities New facilities Existing facilities 2008-2011 2008 2011 2012-2015 2012 2015 (2007 capacity) Capex: USD 1.8 bn¹ Capex: USD 2.0 bn¹ Bill
Slide 33: Automotive industry
Appendices > Automotive industry Automotive industry Russia is at the top of the agenda for global automotive producers Vsevolozhsk European Russia Ford Motor Company S.Peterburg 1 - Toyota 2 - GM (Chevrolet, Opel) 3 - Nissan 4 – Suzuki 5 - Hyundai Vsevolozhsk Izhevsk Kaluga 1 - Izh-Avto (KIA) S. Pe
Slide 34: “White goods” sector
Appendices > “White goods” sector “White goods” sector … and for manufacturers of domestic appliances European Russia S.Peterburg 1 – “BSH” 2 – “Electrolux” Kaliningrad 1 - Snaige Smolensk 1 – “Smolensk” Alexandrov 1 – “Vestel” S. Petersburg Ruza Kaliningrad 1 – “LG” Kirzhach Smolensk 1- “Beko” Podo
Slide 35: Maxi-Group Financial Highlights
Appendices > Maxi-Group Financial Highlights Maxi-Group Maxi Group Financial Highlights • 2007 highlights Revenue and EBITDA1 – Revenue USD 1,068 m 2,500 – EBITDA USD 156 m ,000 USD 2,000 2600 EBITDA – EBITDA margin 15% 1 500 1,500 21% ~21% – External debt USD 1.7 bn as at 1,000 1068 540 31.12.2007
Slide 36: Maxi-Group Business Model
Appendices > Maxi-Group Business Model Maxi-Group Business Model Dynamic regionalized production and distribution model • Maxi-Group’s targets supply of simple product mix to regional consumers using cost advantages in local scrap sourcing, sourcing local mini-mill mini mill production and local dis
Slide 37: Financial Position
Appendices > Maxi-Group Financial Position Financial Position Strong balance sheet and corporate ratings • Highest credit ratings among Russian Net Debt, 2007 peers USD, bn 6.5 • NLMK targets 30% gearing 6.3 4.5 • Strong financial position and cash flow 2.5 0.9 provides flexibility for further growt
Slide 38: Consolidated Statement of Income
Appendices > P&L НЛМК Consolidated Statement of Income Q4 2007/ 2007 2006 2007/2006 Q4 2007 Q3 2007 Q3 2007 (mln. US D ) + /‐ % + /‐ % S ales revenue 7,719 6,046 1,673 27.7% 2,174 1,936 237 12.2% P roduction oduc o cos t (3,569) ((2,716) , 6) (853) 31.4% 3 % ((1,044) ,0 ) (862)) (86 ((182) 8 ) 21.1%
Slide 39: Consolidated Balance Sheet
Appendices > BS НЛМК Consolidated Balance Sheet as at 31.12.2007 as at 30.09.2007 as at 30.06.2007 as at 31.03.2007 as at 31.12.2006 (mln. US D ) AS S E T S C urrent as s ets 4,388 3,904 3,629 3,484 3,050 C as h and cas h equivalents 1,155 1,388 1,349 898 665 S hort‐term inves tments 153 144 137 37
Slide 40: Consolidated Cash Flow Statement
Appendices > CF НЛМК Consolidated Cash Flow Statement Q4 2007/ 2007 2006 2007/2006 Q4 2007 Q3 2007 Q3 2007 (mln. US D ) + /‐ % + /‐ % C as h flow from operating ac tivities Net inc ome 2,247 2,066 181 8.8% 590 592 (3) (0.4% ) Adjus tments to rec onc ile net inc ome to net c as h provided by operatin
Slide 41: 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: info@nlmk info@nlmk.msk.ru msk ru www.nlmksteel.com
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