Evraz Plc · LSE:EVR
Evraz — FY2005 Earnings Presentation
31 slides from Evraz's earnings presentation, Apr 27, 2006
Slide 1: Excellent Progress Against IPO Commitments: 2005 Preliminary Results
EXCELLENT PROGRESS AGAINST IPO COMMITMENTS 2005 Preliminary Results APRIL 27, 2006
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 Group S.A. (Evraz) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment act
Slide 3: Agenda
Agenda n Results n Strategy n Current Outlook n Q&A 2
Slide 4: Strong Financial Results
Strong Financial Results Revenue Total Assets 8,000 $ mln 80% 8 000 6,651 $ mln 6,508 5,933 6,000 60% 6 000 4,253 4 000 4,000 40% 2,168 2,232 2 000 1,540 2,000 1,222 20% 0 0 0% 2002 2003 2004 2005 2002 2003 2004 2005 T otal assets ROCE***,% EBITDA2,017 Net Profit $ mln 1,860 $ mln 2,000 40% 2,000 25
Slide 5: Excellent Progress since IPO
Excellent Progress since IPO n Delivering superior growth n 10% growth in Group sales n 18% growth in domestic sales n Acquisition of high quality international downstream assets n Expanded mining platform n Strong growth in mining segment n Increased iron ore and coking coal resources n Focus on lo
Slide 6: Summary Income Statement
Summary Income Statement (US$ million, unless otherwise shown) 2005 2004 Revenues +10% 6,508 5,933 Cost of Revenues +18% (4,160) (3,514) SG&A +22% (658) (539) EBITDA * (8%) 1,860 2,017 EBITDA Margin 28.6% 34.0% Profit from Operations (14%) 1,584 1,837 Net Profit ** (23%) 905 1,180 Earnings per Share
Slide 7: Continued Volume Growth
Continued Volume Growth Product 2005, 2004, y-o-y ‘000 ‘000 change tonnes tonnes % n Retained position Steel division of the largest steel Pig iron 11,457 11,558 (0.9)% producer in Russia +1.2% Steel 13,852 13,689 Rolled products 12,086 11,995 +0.8% n Enhanced position in self-sufficiency in Mining
Slide 8: Prices for Major Products
Prices for Major Products n Stable domestic pricing environment supported sustainability of earnings Rebars* H-beams* 600 600 450 450 300 300 150 150 Apr July Aug Dec June May Nov Sept Oct Jan March Feb Apr July Dec Aug June Sept Oct May Nov Jan March Feb Expo rt price , FO B (Fa r Ea s t) Evra z pr
Slide 9: Steel Segment – Continued Growth
Steel Segment – Continued Growth Production Revenue m tonnes 2004 2005 7,000 $6,221 m $5,809 m 6,000 Pig Iron 11.6 11.5 5,000 Change, Y-o-Y (0.9%) US$m 4,000 3,000 Steel 13.7 13.9 2,000 1,000 Change, Y-o-Y 1.2% 0 2004 2005 Rolled Products 12.0 12.1 C onstruction Railway Mining Change, Y-o-Y 0.8% Sem
Slide 10: Mining Segment – Strong Growth
Mining Segment – Strong Growth Production Revenue Mining Segment 1,200 $989 m m tonnes 2004 2005 1,000 Iron ore - 800 $611 m US$m Concentrate 2.5 2.7 600 400 Change, Y-o-Y 10.1% 200 Iron ore - Sinter 7.9 8.8 0 2004 2005 Change, Y-o-Y 11.2% Third Party Inter-C ompany Iron ore - Pellets 3.3 5.2 Change
Slide 11: Cost Structure
Cost Structure § Evraz’s consolidated cost of revenues amounted to US$ 4,160 million and US$ 3,514 million in 2005 and 2004, respectively Steel Segment, 2005 Mining Segment,2005 7% 20% 7% 28% 4% 9% 63% 24% 10% 21% 7% Ra w ma teria ls Transpo rtation Sta ff cos ts Raw materials Staff costs Depreciati
Slide 12: Net Income
Net Income n Impacted by growing depreciation charge and income tax expense 2005 2004 Net Income, US$ million 1,043 1,345 Depreciation, depletion and amortisation 243 168 Income tax expense 476 377 Interest expense, net 127 96 (Income)/Loss from associates (45) (43) Loss on disposal of property, pla
Slide 13: Excellent Cash Flow Generation
Excellent Cash Flow Generation n Net Operating Cash Flow improved by +58% from US$ 946 million in 2004 to US$ 1,496 million in 2005 n Stronger Operating Cash Flow supported by enhanced Working Capital management n Conversion of EBITDA to Net Operating Cash Flow much stronger reaching 81% 2005 Cash F
Slide 14: Capital Expenditure
Capital Expenditure n Ongoing capex programme to improve efficiency n Total capex spending in 2005 of US$ 695 million n Project capex c.US$ 600 million n Key projects delivered on time n 2006 capex budgeted to be c.US$ 435 million Key Capital Investment Projects 2005 2006 Status Actual Planned NTMK:
Slide 15: Strong Financial Position
Strong Financial Position n Low-levered company with Net Debt/EBITDA below 1.0x n Share of Unsecured Debt increased to 60% in 2005 vs. 48% in 2004 n Multiple upgrades: n Ba3 by Moody’s n BB- by Fitch n B+/Positive Outlook by S&P Total Debt and Net Debt/EBITDA Significantly Improved Debt Maturity Pro
Slide 16: Agenda
Agenda n Results n Strategy n Current Outlook n Q&A 15
Slide 17: Strategy
Strategy Achieve Superior Growth Enhance Margin Profile n Advance long product leadership n Enhance cost leadership position position in Russia and CIS n Increase efficiency through operational n Leverage construction product range improvements and ongoing realization breadth, effective distribution
Slide 18: Top Russian Steel Producer
Top Russian Steel Producer Evraz’s Main Locations Top Russian Steel Producers Output1 (million tonnes) Russian Main ranking Company 2003 2004 2005 products 1 Evraz 13.9 13.7 13.9 Long 2 MMK 11.5 11.3 11.3 Flat/long 3 Severstal 9.9 10.4 10.8 Flat/long 4 NLMK 8.9 9.1 8.4 Flat 5 Mechel 4.6 5.5 4.6 Long
Slide 19: Low Cost Producer
Low Cost Producer n Lowest cost producer of steel in Russia and CIS n Substantial level of vertical integration and self-sufficiency in iron ore and coal with benefit from vertical integration growing by a factor of 4.3x on pro-forma basis n Mines located close to steel production sites Benefit of V
Slide 20: Well-positioned in High Growth Domestic Market
Well-positioned in High Growth Domestic Market n Reinforcing long product leadership in Russia and CIS n Exposed to high growth markets n Construction growth in Russia and CIS continues to outperform GDP n Rail product growth driven by US$21 billion investment in railway infrastructure and rolling s
Slide 21: Enhance Margin Profile
Enhance Margin Profile n Active arbitrage and management of semis exposure through portfolio flexibility n Resolving quality issues and improving customer service and logistics – key to realize benefits from premium slab capacity Slab/Billet Portfolio Flexibility Portfolio Management Opportunity US$
Slide 22: Market Share Opportunity
Market Share Opportunity n Russian sales remain high at more than 60% n Despite increase in volumes, non-Russian sales down as a proportion of total sales from 45% in 2004 to 40% in 2005 n Pursuing downstream integration to secure access to attractive export markets n Asia remains core market for se
Slide 23: Major Acquisitions in 2005
Major Acquisitions in 2005 Yuzhkuzbassugol n 50% stake acquired from Evraz shareholders to simplify corporate structure and improve transparency regarding related parties n Leading coal producer in Russia, operating 10 mines, 2 washing plants, 3 machinery plants, 3 transportation companies and a num
Slide 24: Successful Integration of Downstream Assets
Successful Integration of Downstream Assets n Highly cash generative businesses. n Consolidated only in the 2nd half 2005 n All integration benefits will be fully realised in 2006 onwards Selected Preliminary Financial Data 2005 Palini e Bertoli US$' 000* US$' 000 Income Statement 2005E** Consolidat
Slide 25: Corporate Governance
Corporate Governance n Highly professional pro-active Board n 3 independent directors chairing the following committees: n Strategy Committee n Audit Committee n Remuneration Committee n Chairman and CEO positions split by decision of the Board in November, 2005 n High quality entrepreneurial manage
Slide 26: Agenda
Agenda n Results n Strategy n Current Outlook n Q&A 25
Slide 27: 2006 Market Dynamics
2006 Market Dynamics Q1 2006, Q1 2005, Q1 2006 / Q1 2006 / Product ‘000 ‘000 Q1 2005 Q4 2005 tonnes tonnes change, % change, % Steel division Pig iron 3,071 3,032 +1.3% +3.9% Steel 3,841 3,541 +8.5% +5.6% Rolled products1 3,405 3,049 +11.6% +5.8% Mining division2 Iron ore (saleable products) Concent
Slide 28: Pricing Outlook 2005 - 2006
Pricing Outlook 2005 - 2006 Rebars * H-beams * 600 600 450 450 300 300 150 150 April Apr July Aug Dec June May Nov Sept Oct Jan March Jan March Feb Feb April Apr July Dec Aug June Sept Oct May Nov Jan March Jan March Feb Feb 0 0 Expo rt price , FOB (Fa r Ea s t) Evra z prices , FCA Expo rt price , F
Slide 29: Current Outlook
Current Outlook n Evraz committed to enhancing its position as a leading low cost producer of long products in Russia and CIS n Evraz will expand its presence in non-Russian markets n The Group has enjoyed a promising start to 2006 n Improvement in the world and Russian steel markets expected 28
Slide 30: Agenda
Agenda n Results n Strategy n Current Outlook n Q&A 29
Slide 31: Evraz Group
=) EVRAZ GROUP