Evraz Plc · LSE:EVR

Evraz — Investor Day (October 2018)

51 slides from Evraz's investor day presentation, Oct 19, 2018

  1. Slide 1: EVRAZ Investor Day

    EVRAZ Investor Day 19 October 2018, London

  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: Today's speakers

    Today’s speakers Sir Michael Peat Alexander Frolov Sergey Stepanov Alexander Erenburg Senior Independent Chief Executive Officer Vice President, Director, Non-Executive Director Head of the Coal Division Head of the Vanadium Division Alexey Ivanov Conrad Winkler Nikolay Ivanov Senior Vice President,

  4. Slide 4: Agenda

    Agenda 9:05 am Corporate governance Sir Michael Peat, Senior Independent Non-Executive Director 9:10 am Strategic overview Alexander Frolov, CEO 9:30 am Coal, Russia Sergey Stepanov, Vice President, Head of the Coal Division 9:45 am Vanadium Alexander Erenburg, Director, Head of the Vanadium Divisio

  5. Slide 5: Corporate governance

    Corporate governance Sir Michael Peat Senior Independent Non-Executive Director

  6. Slide 6: Changes in composition of Board and committees

    Changes in composition of Board and committees Current Board composition Changes and comments Directors Independent Non- Executive Directors Sir Michael Peat Alexander Abramov Senior INED, chairman of Chairman, the Nominations Committee, Non-Executive Director member of the Remuneration Committee Al

  7. Slide 7: Solid corporate governance

    Solid corporate governance  EVRAZ approach to corporate governance is primarily based on the UK Corporate Governance Code published by the Financial Reporting Council in April 2016 and the Listing Rules of the UK Listing Authority  EVRAZ complies with all provisions of the 2016 UK Corporate Govern

  8. Slide 8: Focus on environmental, social and governance commitment

    Focus on environmental, social and governance commitment  EVRAZ views environmental, social and governance (ESG) aspects as an integral part of its business and strives to address and monitor all relevant matters in this area  EVRAZ places a top priority on continuously improving its health, safet

  9. Slide 9: Strategic overview

    Strategic overview Alexander Frolov Chief Executive Officer

  10. Slide 10: EVRAZ vision

    EVRAZ vision EVRAZ is a global steel and mining company, the leading producer of infrastructure steel products with low-cost production along the value chain Coal Vanadium Russian Steel EVRAZ North America  №1 in Russian coking  №2 global vanadium  №1 in Russian rail and  №1 producer of rails an

  11. Slide 11: Global steel and raw materials market trends

    Global steel and raw materials market trends Trend Description 1  In 2017, 140mt of illegal induction furnace capacity was shut down  Chinese programme to shut down 150mt of steelmaking capacity during 2016-20 is Chinese steel forecast to reach the target by the end of 2018 supply discipline  The

  12. Slide 12: EVRAZ strategic priorities remained unchanged

    EVRAZ strategic priorities remained unchanged  Medium-term Net Debt level below  Investment programme expansion US$4bn  Development of investments with  Proactive management of target IRR at least 20% maturities Debt management Prudent  Total CAPEX within the range of  Dividend payout accordin

  13. Slide 13: Safety as a base for business sustainability

    Safety as a base for business sustainability  In 2018, EVRAZ was able to reduce YTD LTIFR to 1.7x vs 1.9x in 2017 and is now focused on two major new initiatives:  Contractor safety programme  HSE performance assessment for operations managers  EVRAZ remains committed to having zero fatal accide

  14. Slide 14: Focus on stable dividends

    Focus on stable dividends EVRAZ dividend payments EVRAZ leverage  In 2018, EVRAZ has returned to its shareholders more than  In the medium term, EVRAZ targets to maintain its Net Debt US$1.1bn, equivalent to a 13% yield, a record amount of level below US$4bn dividends since its London listing in 2

  15. Slide 15: Selective investments in development

    Selective investments in development  In 2019-22, EVRAZ expects its annual investment expenditures to be in the range of US$830-990m  Major development projects include the flat casting and rolling facility at EVRAZ ZSMK, the long rail mill at EVRAZ Pueblo, the rail and beam mill modernisation at

  16. Slide 16: Continuous focus on efficiency improvements

    Continuous focus on efficiency improvements  EVRAZ places great emphasis on customer focus efforts and cost management, which are expected to have a US$290-300m EBITDA effect in 2018  The target is to maintain the pace of improvements with an effect of at least 3% of COGS (US$250-300m per annum) E

  17. Slide 17: Key takeaways

    Key takeaways  EVRAZ remains committed to having zero fatal accidents at its sites and targets an LTIFR level of 1.0x  EVRAZ will keep its medium-term leverage target below US$4bn and manage maturities proactively  EVRAZ is considering four major investment projects with the target to increase sa

  18. Slide 18: Coal, Russia

    Coal, Russia Sergey Stepanov Vice President, Head of the Coal Division

  19. Slide 19: EVRAZ is the leading Russian and global producer of coking coal

    EVRAZ is the leading Russian and global producer of coking coal  Competitive cost position to serve local and global markets Key coking coal sales flows, 2018e, mt profitably  High-quality product portfolio with >80% share of hard coking EVRAZ coal (HCC) and semi-hard coking coal (SHCC) Russian Ru

  20. Slide 20: Stronger demand for coking coal

    Stronger demand for coking coal  Global seaborne coking coal demand is expected to be driven by the growth of steel production in Asia and insufficient domestic supply (eg in India)  Most of the increase will be met by producers from Australia and Mozambique  North American producers, mostly smal

  21. Slide 21: Coal Division volume growth

    Coal Division volume growth  In 2018, EVRAZ forecasts an increase in coal mining volumes of ~5% with KS and OS grades being major growth drivers  EVRAZ expects to reach mining volumes of 28.4mt by 2021 (+25% vs 2017) Coal mining volumes breakdown, mt ’21 vs ’17 changes, mt Key mining growth projec

  22. Slide 22: Logistical improvements in coal shipments

    Logistical improvements in coal shipments  Despite constraints and bottlenecks in railway logistics across Russia EVRAZ expects to increase export volumes by 15% in 2018 Logistical improvements EVRAZ coal export shipments, mt EVRAZ shipments to Europe, % of exports Geographical diversification of e

  23. Slide 23: Key takeaways

    Key takeaways  EVRAZ is the leading domestic and international coking coal supplier with a premium product portfolio, competitive cost position and geographically diverse client base  Global demand for coking coal is forecast to grow, driven mainly by Asian countries  EVRAZ development programme

  24. Slide 24: Vanadium

    Vanadium Alexander Erenburg Director, Head of the Vanadium Division

  25. Slide 25: EVRAZ Vanadium Division

    EVRAZ Vanadium Division  EVRAZ share of the global vanadium market is ~17% EVRAZ vanadium production model overview  EVRAZ annual sales volumes average ~13kmtV* (thousand metric tonnes of vanadium) Steel products Russia, Czech Republic EKGOK Yield ~77% FeV/slag  EVRAZ produces FeV from slag (a by

  26. Slide 26: Global vanadium demand could increase by 15% until 2022

    Global vanadium demand could increase by 15% until 2022  EVRAZ expects healthy growth rates of vanadium consumption at ~2.7% CAGR during 2018-22  China’s recently approved high-strength rebar standard will come into effect in November and could trigger additional vanadium demand of ~5kmtV (5-6% of

  27. Slide 27: Significant supply growth is expected only after 2020

    Significant supply growth is expected only after 2020  In 2014-18, vanadium supply dropped by 4kmtV due to the closure of EVRAZ Highveld and ecological restrictions in China  There is limited idle capacity that can come on line in the short term, new major Australian projects are at the initial st

  28. Slide 28: Vanadium deficit could last several years

    Vanadium deficit could last several years Index Dynamics Key trends 160 Supply Demand Market balance 120  With the limited substitution Market balance 80 options and strict standard forecast, requirement for rebar in China, kmtV New supply the vanadium market is going to 40 Oversupply Deficit perio

  29. Slide 29: EVRAZ aims to increase vanadium sales in 2019

    EVRAZ aims to increase vanadium sales in 2019  EVRAZ is focused on operational improvements in order to deliver higher production and sales volumes in 2019  In the medium term, EVRAZ is considering optimising the EVRAZ KGOK development programme Ferrovanadium sales, kmtV +2% 14.0 +7% +0.3 13.7 +0.

  30. Slide 30: Key takeaways

    Key takeaways  EVRAZ is one of the lowest-cost vanadium producers in the world  Global market vanadium supply is expected to grow significantly only after 2020, so demand for vanadium will exceed supply until that time  For the deficit period, vanadium prices will stay at elevated levels  EVRAZ

  31. Slide 31: Steel, Russia

    Steel, Russia Alexey Ivanov Senior Vice President, Commerce and Business development

  32. Slide 32: Russian steel demand

    Russian steel demand  Since 2017, domestic steel demand is forecast to grow at an average CAGR of 2.5% (multiple to GDP growth of 1.6x)  Demand for EVRAZ key products is forecast to increase at above-average rates due to the Russian government’s strong infrastructure investment pipeline Finished s

  33. Slide 33: EVRAZ aims to enter flat product segment in Russia

    EVRAZ aims to enter flat product segment in Russia  EVRAZ expects its domestic shipments to increase from 4.1mt in 2017 to 6.9mt by 2023  A major effect comes from the entrance into flat products (+1.5mt of domestic sales) and beams sales growth (+0.5mt) EVRAZ finished steel sales in Russia, mt ’2

  34. Slide 34: Integrated flat casting and rolling facility at EVRAZ ZSMK

    Integrated flat casting and rolling facility at EVRAZ ZSMK  In 2017, domestic flat products consumption in Russia was 24mt and the HRC vs slab spread equalled US$145/t  EVRAZ is considering constructing a 2.5mtpa integrated flat casting and rolling facility at EVRAZ ZSMK  This project will allow

  35. Slide 35: Other major Steel Division investment projects

    Other major Steel Division investment projects  The current investment pipeline is mainly focused on product portfolio development Investment projects Production Financials Timeline Rail and beam mill  Additional volumes: +230ktpa  CAPEX:  Construction: 2019-21 modernisation at of beams, +50ktpa

  36. Slide 36: Maintaining low-cost position

    Maintaining low-cost position  In 2018, EVRAZ Steel division continues its cost-cutting efforts with an expected EBITDA effect of ~US$120-130m  The cost-cutting effect comes from increased productivity, improved yields and savings on materials and services  These initiatives are helping EVRAZ to

  37. Slide 37: EVRAZ Business System (EBS) transformation progress

    EVRAZ Business System (EBS) transformation progress  The first stages of the EBS transformation have led to more than 12 000 ideas generated by employees and a total effect of US$100m  The long-term goal of EBS is to constantly generate initiatives to achieve an annual effect of 3% of COGS Economi

  38. Slide 38: Key takeaways

    Key takeaways  EVRAZ has the potential to increase domestic steel sales from 4.1mtpa in 2017 to 6.9mtpa by 2023 due to the implementation of investment projects and on the back of organic market growth  The biggest project is the construction of a 2.5mtpa integrated flat casting and rolling facili

  39. Slide 39: EVRAZ North America

    EVRAZ North America Conrad Winkler CEO, EVRAZ North America

  40. Slide 40: EVRAZ North America business overview

    EVRAZ North America business overview  EVRAZ North America (ENA) is a leading producer of high-quality engineered steel products with a focus on partnering with its customers  ENA has three major segments across the US and Canada ENA footprint Key segments of EVRAZ North America Segment 2018e sale

  41. Slide 41: Recent investments & positive market outlook, opportunity for growth

    Recent investments & positive market outlook, opportunity for growth  The large-diameter pipe market in Canada is expected to North American tubular demand Canada US grow due to the new pipelines planned in Western Canada  OCTG demand in Canada is forecast to stay strong due to Large-diameter pipe

  42. Slide 42: Portland profitability is stable, despite the impact from tariffs

    Portland profitability is stable, despite the impact from tariffs  Domestic plate demand in the US is forecast to grow by 3% US plate market annually until 2023 based on the general economic growth US plate demand, mt Western US market, 2018e  EVRAZ has leading positions in the Western US with a m

  43. Slide 43: Pueblo provides growth opportunity in rails

    Pueblo provides growth opportunity in rails  EVRAZ is the leader in the North American rails market with a market share of ~40% North American rails market  EVRAZ has a strong technical team with deep relationships with Market Market supply each Class I customer demand, mt breakdown, 2018e  The N

  44. Slide 44: Key takeaways

    Key takeaways  EVRAZ North America is a leading producer of engineered products with a diverse product mix in the tubular, long and flat segments Canada  Canadian tubular demand is expected to grow steadily  EVRAZ is focused on the operational performance of its steelmaking operations and large-d

  45. Slide 45: Financial review

    Financial review Nikolay Ivanov CFO

  46. Slide 46: Strong EBITDA margin

    Strong EBITDA margin  Since 2013, EVRAZ has steadily improved its EBITDA margin, which reached 30% in H1 2018  In H1 2018, EVRAZ had the second-highest EBITDA margin among global industry peers EBITDA margin comparison with steel companies, EBITDA margin performance %, H1 2018 EBITDA margin, % EBI

  47. Slide 47: Robust FCF generation

    Robust FCF generation EVRAZ financials CAPEX forecast  Despite increasing investments for development programme in  Since 2013 EVRAZ was able to generate strong Free Cash 2019 – 22, CAPEX will be below US$1bn level and is expected Flows at the average level of ~US$820m to be financed from operatin

  48. Slide 48: Debt management

    Debt management  Total debt reduced by ~US$0.7bn to ~US$4.8bn in 9M 2018 Debt maturity profile, as of 30.09.2018*, US$m  Credit profile improvements were recognised by major Trade lines Eurobonds international rating agencies with current ratings standing at: Swap effect on RUB bond principal Bank

  49. Slide 49: Updated cash-flow priorities

    Updated cash-flow priorities 1 Dividends 2 Reinvestment  Formal dividend policy announced in March 2018 3 Debt management  Dividends paid in 2017 amounted  Selective investments in to US$428m in total; the dividend development yield reached 9.2%  Further gross debt reduction  Dividends paid in

  50. Slide 50: Q&A

    Q&A

  51. Slide 51: London +44 207 832 8990 Moscow +7 495 232 1370 IR@evraz.com

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

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