презентация для инвесторов, февраль 2011
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Corporate PresentationFebruary 2011
02
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 activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of Evraz or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with
the document.This communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this document or any of its contents. This document contains “forward-looking statements”, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could”
or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Evraz’s control that could cause the actual results, performance or achievements of Evraz to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost
and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or GDRs, financial risk management and the impact of general business and global economic conditions.Such forward-looking statements are based on numerous assumptions regarding Evraz’s present and future business strategies and the environment in which Evraz Group S.A. will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and Evraz expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Evraz’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.Neither Evraz, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this document.
The information contained in this document is provided as at the
date of this document and is subject to change without notice.
Disclaimer
03Evraz Group in Brief
◦
World-class steel and mining company, 14-th largest steel company globally
in 2009
◦
Leader in the Russian and CIS construction and railway products markets
◦
A lead player in the European and North American plate and large
diameter pipe markets
◦
One of the world’s lowest cost steel producers due to production efficiency and high level of vertical integration
◦
One of the leading producers in the global vanadium market
◦
In 2010, Evraz produced 16.3 million tonnes of crude steel and sold 14.7 million tonnes of rolled products
◦
2009 consolidated revenue amounted to US$9.8 billion; EBITDA was
US$1.2 billion
◦
GDRs
listed on London Stock Exchange; market capitalisation over US$18 billion
04Evraz’s Global Business
05
Consolidated Revenue and EBITDAUS$ mln
4,369619
1,121 6,379
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1H09 Revenue Volumes Prices 1H10 Revenue
Revenue Drivers in 1H10 vs. 1H09US$ mln
Consolidated Adjusted EBITDA
389738
94
390
81
(34)
70
85
(51) (140)-200
0
200
400
600
800
1,000
1,200
1,400
1H09 1H10Steel MiningVanadium Other operationsUnallocated subsidiaries & eliminations
468
1,154
1H 2010 Financial Highlights
US$ mln
◦
In 1H10 Group revenue rose by 38% vs. 1H09, largely driven by increase in sales volumes of steel products and higher average prices
◦
1H10 Group EBITDA advanced by 147% reflecting revenue expansion and cost control
◦
1H10 Mining segment EBITDA more than quadrupled, largely due to the growth in iron ore and coal prices
◦
EBITDA margin improved from 10% in 1H09 to 18% in 1H10
10,7239,657
4,639
6,3795,133
3,7062,509
468 769 1,154
0
2,000
4,000
6,000
8,000
10,000
1H08 2H08 1H09 2H09 1H10
Revenue EBITDA
268
324
224
420394 341
253285
430402
150
200
250
300
350
400
450
1H08 2H08 1H09 2H09 1H10
Slab Billet
* Average for Russian steel mills, integrated cash cost of production, EXW
06Cost Dynamics
◦
Growth in scrap, coking coal and iron ore prices in 1H 2010 increased steelmakers’
costs
◦
This cost increase was significantly offset by Evraz’s high level of vertical integration into iron ore and coking coal
◦
Consolidated cost, approx. 65% of which is Rouble denominated, was negatively impacted by 10% Rouble appreciation vs. US dollar compared to 1H09
◦
Increase in cash cost of coking coal concentrate resulted from lower production volumes due to postponed long
wall repositioning at the Ulyanovskaya
mine
Consolidated Cost of Revenue, 1H 2010 Cash Cost, Russian Coking Coal and Iron Ore Products
Cash Cost*, Slabs & BilletsUS$/t
US$/t
Source: Management accounts
50
61
47
56
43
55
69
43
63
47
35
45
55
65
75
1H08 2H08 1H09 2H09 1H10
Coal concentrate Iron ore products, 58% Fe
4%11%
6%
15%
13% 7%
10%
12%
5%
5%7%
5%
Iron ore Coking coal ScrapFerroalloys Purchased semis Auxilliary materialsElectricity Natural gas Staff costsTransportation Depreciation Other
0
3,000
6,000
9,000
12,000
15,000
2009 2010Semi-finished products Construction productsRailway products Flat-rolled productsTubular products Other steel products
0
200
400
600
800
1,000
1,200
1,400
Semi-finishedproducts
Constructionproducts
Railwayproducts
Flat-rolledproducts
Tubularproducts
Other steelproducts
1Q10 2Q10 3Q10 4Q10
074Q and FY 2010 Operational Results
Production of Rolled Products, 2009-2010
◦
2010 vs. 2009:◦
2010 consolidated crude steel output was 16.29 mt, +6.6% vs. 2009
◦
Finished goods production increased by 15-35% depending on product category as a result of demand recovery
in the key markets
◦
The Russian steel mills were 100% utilised
in 2010◦
The growing demand for finished products were met by reducing semi-finished output by 28.4%
◦
4Q10 vs. 3Q10: ◦
Production of steel and rolled products recovered following completion of scheduled maintenance at Russian steel mills
◦
Pricing for major products groups increased or remained flat◦
Coking coal production recovered as 4Q10 was devoid of any negative one-offs of the previous quarters
‘
‘000 tonnes
14,275 14,665
‘000 tonnesProduction of Rolled Products by Quarters, 2010
8,809 9,955 9,608 10,191
5,3014,998
3,655 3,854
2,131 2,0152,351 1,479
0
3,000
6,000
9,000
12,000
15,000
18,000
1H09 2H09 1H10 2H10
Iron ore products Raw coking coal Raw steam coal
652
1,120
94
390
0
200
400
600
800
1,000
1,200
1H09 1H10Revenue EBITDA
08Benefiting from Rising Prices for Iron Ore and Coal
Iron Ore and Raw Coal Production
◦
1H10 Mining segment revenue doubled and EBITDA quadrupled vs. 1H09 reflecting the growth in prices
◦
Volumes of coking coal mined decreased 27% in 2010 vs. 2009 due to a few negative exceptional factors, e.g. sale of Tomusinskaya
mine, shutdown of Yubileynaya
mine, delayed long wall repositioning in Ulyanovskaya
mine, temporary mine closures for safety inspections after the Raspadskaya explosion
◦
Coking coal production recovered in 4Q10 with a 36.7% increase over 3Q10
Mining Segment Revenue* and EBITDA, 1H09-1H10‘000 tonnes
*
Includes intersegment sales
US$ mln
Raw Material Prices (Domestic Markets)Raw Material Prices (Domestic Markets)US$/t
0
100
200
300
400
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Scrap, Russia, CPT Scrap, USA
Iron ore concentrate, Russia, ExW Coking coal concentrate, Russia, FC
09Russian Government Infrastructure Spending
◦
The Russian Government plans to spend US$30bn on capital investments in 2011, including US$23bn on construction
◦
Sochi 2014 Olympic construction objects consume approx. 8% of Evraz’s Russian construction product sales
◦
Such new projects as construction of various objects related to 2018 World Cup, an academic city in Yekaterinburg, a space centre in the Russian Far East, a high speed railway Moscow-St Petersburg will have considerable state financing
◦
Russia committed to invest total $50bn into preparation for World Cup 2018, including $3.82bn to construct stadiums and $11bn on infrastructure projects
◦
According to Evraz estimates, 2018 World Cup steel needs for construction of stadiums (13 new to be built and 3 to be renovated), hotels, local infrastructure (highways, bridges) may amount to 2.5-3 mt
◦
Being a large producer of construction products in Russia, Evraz will be one of the beneficiaries
RF Capital Investments in 2011
30%
12%
14%
16%
5%
23%
Infrastructure Housing for the militaryResidential housing Healthcare, education, recreational objectsPower objects Other
Source: Federal Capital Investment Programme, Morgan Stanley
30
26
13
2120
11
0
9
18
26
35
2006 2007 2008 2009 2010 2011
Construction Spending in 2011
US$bn
Consumption of Construction Steel in Russia
Recovery of construction steel product consumption began in 2010
Increase of shaped sections demand vs. rebar might be greater in
the next years due to infrastructure
projects development
Russian demand for construction steel is expected to be approx. 10% higher in 2010 than in 2009
Sources: Rosstat, Railway statistics, Customer service statistics, Metal Courier, Rusmet
5,8 6,2
4,1 4,5 4,9 5,5 5,8 6,1
1,4 1,1
0,70,8
0,91,1
1,31,3
1,6 1,3
0,91,0
1,1
1,31,6
1,6
1,00,8
0,50,6
0,8
0,91,0
1,1
0
2
4
6
8
10
12
2007 2008 2009 2010B 2011F 2012F 2013F 2014F
mln.t.
20
30
40
50
60
70
80
90
100mlm sq.m.
Rebar Channels Angles Beams Buildings completion, mln.m2
10
11Expansion of Rolling Capacities
○
Capacity of 450k tonnes of long steel, including 315k tonnes of
rebar and 135k tonnes of angles/channels out of billets supplied by DMZ, Evraz’s steel mill in Ukraine
○
CAPEX of US$158 million○
The plant is expected to be launched in mid-2013○
Yuzhny
Mill will provide Evraz with a presence in the fast-growing area of Southern Russia
In December 2010, Evraz announced plans to build two new rolling
mills:
○
Evraz will have 65% with 35% belonging to its local partner Caspian Group○
Capacity of 450k tonnes of rebar ○
Zapsib
and NKMK, Evraz’s steel mills in Siberia, will supply billets to the mill○
CAPEX of US$131 million○
The plant is expected to be launched in mid-2013○
Evraz will have an exposure to Kazakhstan local rebar market
Yuzhny
Rolling Mill
(Rostov region, Russia)
Kostanay
Rolling Mill
(Kazakhstan)
Construction of the mills will allow Evraz to expand its presence in the CIS long products market
12Strengthening Distribution Network
In December 2010, Evraz acquired Inprom, a leading metal service company in Russia, and created a combined company (Evraz 75%, Inprom
shareholders 25%) consisting of Inprom
and EvrazMetal
assets
◦
EvrazMetal
(former Carbofer
Metall) is a network of metal trading companies acquired by Evraz in October 2009:
◦
33 branches in Russia and the CIS (Kazakhstan)◦
Specialised
distributor of long products (in particular rebars)◦
Sales in 2010 ~800 kt
The combined company
will be the biggest steel retailer in CIS with steel sales of 1.2 million tonnes in 2010 increased profitability from high margin steel product sales
Inprom
is a leading metal service company with ◦
27 metal centres
in industrially developed regions of Russia◦
20,000 customers
◦
12 types of steel processing services◦
Main markets -
South and Central Russia. ◦
Sales in 2010 ~400 kt
◦
Evraz is a major Inprom’s
supplier with Evraz’s products accounting for 1/3 of sales
As a result of the deal, Evraz will be able to expand its presence in the steel retail trade in Russia
200
300
400
500
600
700
800
900
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Slabs, Russia, export* Billets, Russia, export*Rebars, Russia, FCA Plate, North America, FCA
13Recent Market Developments
◦
Overall growing trend in steel prices is driven by demand recovery and increases in input costs
◦
International prices for semi-finished steel declined in May-June due to seasonal and regulatory factors but stabilised
in July
◦ Steelmaking capacity utilisation:
◦ Russia >95%
◦ North America 95%
◦ Czech Republic 95%
◦ South Africa 70%
◦
Russian mining assets are running at 75% capacity in coal concentrate and 90% in iron ore
◦
Vanadium expected to perform better than steel as
vanadium usage rates in the emerging markets’
steel production sector approach the levels of industrially developed countries
◦
Larger steel production volumes and better pricing in 4Q10 vs
3Q10 may be offset by increased costs
◦
4Q10 EBITDA is expected to be in line with 3Q10 EBITDA of US$612 million
Evraz Selling Prices
Vanadium Prices, FeV, LMBUS$/kg V
US$/t
15
20
25
30
35
40
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10 Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
* Weighted average contract prices
8,482 7,923 7,873
46%
25% 22%
0
2,000
4,000
6,000
8,000
10,000
30-Jun-09 31-Dec-09 30-Jun-100%
20%
40%
60%
80%
100%
Total Debt Short-term Debt, % of Total Debt
◦
RUB15bn (equivalent to US$500 million) 3-year bonds issued in March 2010, swapped into US dollars to minimise Rouble currency exposure
◦ In May 2010, Evraz drew down US$950 million 5-year Gazprombank
loan and repaid US$1,007million VEB loan
◦
In June-July 2010, Evraz refinanced US$357 million Nordea
Bank loan due 4Q10 with new 4-year Nordea
loan facilities in the amount US$404 million
◦ RUB15bn (equivalent to US$490 million) 5-year bonds issued in November 2010
◦ 5-year structured credit facility for US$950 million signed in November 2010
Capital Market Developments
Proportion of Short-term Debt to Total DebtProportion of Short-term Debt to Total Debt
14
US$ mln
◦ Total debt of approx. US$7.9bn, net debt of US$7.2bn as of 30 September 2010
◦ Consolidated cash balance of not less than US$500 million constantly maintained
◦
Declining cost of capital (bond yields have decreased from approx. 10% in October 2009 to around
6%) reflects improvements in Evraz’s
performance and
market conditions
◦ After refinancing activities in 2010 there are no significant debt repayments until 2013.
◦ We intend to further decrease our leverage and extend debt maturities
Successful Debt Refinancing
Debt* Maturities Schedule (as of 31 December 2010)
Debt* Maturities Schedule (as of 31 December 2010)
15
US$ mln
* Principal debt (excl. interest accrued)
US$ mln
Debt* Maturities Schedule (as of 31 December 2008)
Debt* Maturities Schedule (as of 31 December 2008)
3,860
1,568
802 747
1,733
23
764
13 11
700
0
1,000
2,000
3,000
4,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
509
1623
2,3762,0772,084
307628
-
1,000
2,000
3,000
4,000
2011 2012 2013 2014 2015 2016 2017 2018
Q1 Q2 Q3 Q4
Source: Management accounts
16Growth Strategy
Product mix improvements
Cost-saving measures
Increase in production volumes
◦
Modernisation
of rail mills enabling the production of high value-added products◦
Upgrade of wheel shops
◦
Shift to production of American Petroleum Institute certified slabs and other enhanced quality higher margin steel products
◦
Product mix expansion geared to local market demand (new rebar grades, beams, pipe blanks, sheet) ◦
Exploring opportunities for development of construction steel rolling capacities in regions with high demand
◦
Implementation of pulverised
coal injection projects at the Russian steel mills to eliminate
usage of natural gas in blast furnaces and reduce consumption of coking coal. Added effect will be an increase in pig iron production volumes and, therefore, crude steel production
◦
Cost saving programmes
in place, yielding US$20-30m efficiency gains a year
at each plant
◦
Reconstruction of 4th
converter and 3rd
slab machine at NTMK completed in November 2010 increased crude steel output by up to 0.7 mtpa
◦
Considering construction of a second converter shop at NTMK with
additional crude steel capacity of 1.5-2.0 mtpa
Raw material base development◦
Development of a coal deposit in Yerunakovsky
region of Kuzbass◦
Expansion of resource base and development of the Mezhegey
coking coal deposit and the Eastern field of the Ulug-Khemsky
coking coal deposit◦
Increase of own iron ore production and supplementary exploration at existing sites
17Key Investment Projects◦
CAPEX in 2010 expected to be around US$950m
vs. US$441m in 2009◦
Approximately US$550m of 2010
CAPEX directed to increasing productivity and development projects, key projects being:
Project Total CAPEX 2010 CAPEX Project Targets
Reconstruction of rail mill at NKMK
US$440m US$220m ◦
Capacity of 950k tonnes of high-speed rails, including 450k tonnes of 100 metre rails
◦ On-stream by 2013Reconstruction of rail mill at NTMK
US$60m US$43m ◦ Production of higher-quality rails ◦ 550k tonnes capacity◦ On-stream by 2012
Pulverised coal injection (PCI) at NTMK
and ZSMKUS$320m US$40m ◦ Lower coke consumption from 420
to
320 kg/tonne◦ No need for gas consumption◦ On-stream by 2013
BOF workshop
and caster No3 reconstruction
at NTMKUS$365m US$20m ◦ Modernisation of production
◦
Increasing total converter shop capacity from 3.8 to 4.5 mtpa
and caster No3 capacity to 4.2 mtpa
◦ On-stream by 2013Construction of Yuzhny
and Kostanay
rolling millsUS$289m US$0m ◦ Capacity: 900 ktpa
of construction products◦ On-stream by mid-2013
Reconstruction of wheel & tyre
mill (mechanical area) NTMK
US$40m US$8m ◦ Production of higher-quality wheels◦ On-stream by 2011
Development of Mezhegey
and Eastern field coal deposits (Tyva, Russia)
TBD ◦
Maintaining self-sufficiency in high-quality hard coking coal after depletion of existing deposits
◦ On-stream by 2015 and 2021 respectively
18Summary
◦
Strategic focus on infrastructure markets and vertical integration into raw materials
◦
Gradual recovery in the key markets after the crisis
◦
Rapidly rising raw material prices provide support for steel prices and create cost pressure, especially for non-integrated steel producers
◦
Increase in the proportion of finished products in the mix reflecting demand improvement in key markets of Russia and North America
◦
Focus on operational efficiency, modernisation
of existing capacities,
development of mining base and integration of international assets
◦
Improved demand and stronger pricing environment together with
our cost
leadership leave us well positioned to fully capitalise on the market recovery
Appendices
20
* Adjusted EBITDA represents profit from operations plus depreciation and amortisation, impairment of assets, revaluation deficit, foreign exchange loss (gain) and loss (gain) on disposal of PP&E. See the appendix on p.29 for reconciliation of profit (loss) from operations to Adjusted EBITDA
**
If cost model of accounting for PP&E were applied, net result would have been a profit of approximately US$146 million for the 1H 2010***
As of the end of the reporting period**** Here and throughout this presentation segment sales data refers to external sales unless otherwise stated
Revenue 6,379 4,639 38%
Cost of revenue (5,296) (4,297) 23%
SG&A (750) (595) 26%
468 147%Adjusted EBITDA* 1,154
Adjusted EBITDA margin 18% 10%
(2.52)EPS (US$ per GDR) (0.64)
1H 2010 1H 2009US$ mln unless otherwise stated Change
1H 2010 Financial Summary
(56)%Short-term Debt*** 1,740 3,937
(999)Net Profit/(Loss)** (270)
6,823Steel sales volumes**** (’000 tonnes) 7,714 13%
Net Debt*** 7,198 7,783 (9)%
21Revenue by Geography of Customers
1H 2009 1H 2010
Africa & RoW3%
Russia28%
Ukraine2%
Other CIS3%
Americas30%
Europe9%
China5%
Middle East10%
Thailand3%
Other Asian7% Other Asian
11%
Thailand4%
Middle East4%
China3%
Europe9%
Americas24%
Other CIS4%
Ukraine4%
Russia34%
Africa & RoW3%
5% 7%10% 11%
26% 25%
27% 22%
14% 16%
19%18%
1H09 1H10 Raw materials Transportation Staff costs Depreciation Energy Other
22Cost Structure by Segment
Cost Structure of Vanadium SegmentCost Structure of Vanadium Segment
Cost Structure of Steel SegmentCost Structure of Steel Segment
Cost Structure of Mining SegmentCost Structure of Mining Segment
13% 15%11% 11%7% 15%
58%
1%
69%
1H09 1H10
Transportation Staff costs Depreciation Energy Other
◦
Rapid rises in coking coal, iron ore and scrap prices caused an increase in the contribution of raw materials to steel segment costs
◦
Vertically integrated model largely protects steelmaking segment from escalation in raw material prices
◦
Exception is scrap prices, although portion of increase is managed through the scrap-based price formula for certain products
12% 17%8%
13%11%14%5%
6%10%
5%5%
6%10%8%12%
11%8%9%
11%19%
1H09 1H10
Iron ore Coking coal ScrapOther raw materials Semi-finished products TransportationStaff Depreciation EnergyOther
9,011
10,397 10,580
8,8099,955 9,608
0
2,000
4,000
6,000
8,000
10,000
12,000
1H09 2H09 1H10
Consumption Production
23Mining: Vertical Integration
Washed Coking Coal (Concentrate) Self-Coverage*
◦
High level of vertical integration into iron ore sustained and continues to mitigate effect of rising raw material
prices
◦
Coking coal volumes decreased due to postponement of longwall
repositioning at the Ulyanovskaya
mine
◦
Third quarter volumes depressed due to temporary safety shutdowns and safety inspections
‘000 tonnes
3,679
4,504 4,3484,317
5,288
3,642
0
1,000
2,000
3,000
4,000
5,000
6,000
1H09 2H09 1H10
Consumption Production
84%117%
117%
73%**
* Self-coverage, %= total production (for coal, plus 40% of Raspadskaya
production) divided by total steel segment consumption** Coking coal self-coverage excl. 40% Raspadskaya share
Iron Ore Self-Coverage*
‘000 tonnes
98% 96% 91%87%** 50%**
RASPRASP
RASP
48 4940
287 43
71908598
7978
0
50
100
150
200
250
300
1Q10 2Q10 3Q10 4Q10
Semi-finished products Construction products Flat-rolled products Other steel
36 49 29 31
205274
266 247
6
74 5
0
50100
150
200
250300
350
1Q10 2Q10 3Q10 4Q10
Construction products Flat-rolled products Other steel products
104 94 93 89
90 94 94 117
239 206 215 203
193 216 235 259
0100200300400500600700800
1Q10 2Q10 3Q10 4Q10
Construction products Railway products Flat-rolled products Tubular products
1,106 1,282 1,107 1,162
913923
967 1,020
360430
353 3497775
7190
148146149
128
0
500
1,000
1,500
2,000
2,500
3,000
1Q10 2Q10 3Q10 4Q10
Semi-finished Construction Railway Flat-rolled Other steel
24
4Q & FY10 Rolled Products Output by Assets
‘000 tonnes
668
2,5962,856
2,648
Russia North America
638627 630
‘000 tonnes
‘000 tonnes‘000 tonnes
South AfricaEurope
299 283248
330
149 146154 141
2,757
