презентация для инвесторов, сентябрь 2012

Investor Presentation

September 2012

1

Disclaimer

Investor Presentation, September 2012

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.) (collectively, the “Group”) 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, the Group 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 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 the Group’s control that could cause the actual results, performance or achievements of the Group 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 the Group’s 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 the Group’s present and future business strategies and the environment in which the Group 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 each of EVRAZand the Group 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 or the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

Neither the Group, 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.

2

Agenda


HSE Performance

Overview of H1 2012 Results

Liquidity and Financial Position

Operations by Segment

Update on Investment Projects

Key Market Developments and Outlook

3

HSE Performance


0.81

0.94

H1 2011 H1 2012

1.852.02

H1 2011 H1 2012

Increase in LTIFR and FIFR vs. H1 2011

Safety remains a key priority

Key ongoing safety initiatives: Contractor safety management Fall prevention (follow 6S project) PPE (Personal Protective Equipment) Improvement in workplace conditions Tests for drugs and alcoholic intoxication Internal safety training

Key ongoing environmental initiatives: Water use: Wastewater dumping reduction programme

(ZSMK, NTMK, Yuzhkuzbassugol, Evrazruda, DMZP); Air emissions: Air protection equipment upgrade (ZSMK,

DMZ, Claymont); Waste management: Waste recycling and reuse

programmes (ZSMK,NTMK, Vanady Tula)

Lost Time Injury Frequency Rate (LTIFR)

Fatal Injury Frequency Rate (FIFR)

* Calculated as the total number of work-related injuries (which resulted in the loss of work time) – LTIFR or fatalities – FIFR/total number of working hours during the period x 1,000,000

Overview of H1 2012 Results

5

H1 2012 summary


US$ million unless otherwise stated

1 EBITDA represents profit from operations plus depreciation, depletion and amortisation, impairment of assets, foreign exchange loss(gain) and loss (gain) on disposal of property, plant and equipment and intangible assets

2 As at 30 June 2012 and 31 December 2011 respectively; short-term debt includes current portion of finance lease liabilities, including lease liabilities directly associated with disposal groups classified as held for sale

3 Here and throughout this presentation segment sales data refer to external sales unless otherwise stated

H1 2012 H1 2011 Change

Revenue 7,619 8,380 (9)%

EBITDA1 1,175 1,629 (28)%

EBITDA margin 15.4% 19.4% (21)%

Net profit/(loss) (50) 263 (119)%

Dividends for the period (cents/ordinary share) 11c 6.7c 64%

Operating cash flow 1,089 1,594 (32)%

Capex 565 462 22%

Net debt2 6,070 6,442 (6)%

Short-term debt2 1,550 626 148%

Steel sales volumes3 (‘000 t) 7,713 7,946 (3)%

6

H1 2012 financial highlights


The major factor of the decrease in revenue was reduced steel sales volumes and prices

Decrease in revenues and EBITDA was also a result of lower Mining segment contribution because of lower raw materials volumes and prices

(1,954) (1,587)

7,492 7,019

2,0401,383

320263

482541

8,3807,619

H1 2011 H1 2012

Other operations

Vanadium

Mining

Steel

Eliminations

* Vanadium & Other operations consists in H1 2011 of $(3)m Vanadium segment EBITDA and $83m of Other operations EBITDA and in H1 2012 of $4m and $94m respectively

(157) (39)

744 699

962

417

80

98

1,629

1,175

H1 2011 H1 2012

Vanadium & OtheroperationsMining

Steel

Unallocated &Eliminations

Revenue drivers, $m Consolidated EBITDA by segment*, $m

Consolidated revenue by segment, $m

8,380

(437)(324)

7,619

H1 2011 Revenue Volumes Prices H1 2012 Revenue

7

Net profit reconciliation


62

(50)

12

-60

-50

-40

-30

-20

-10

0

10

20

Reported Net loss Special item: impairment due to reduced pricing outlook Net profit w/o special items

$m

8

Group cost dynamics


EVRAZ benefits from high level of vertical integration in iron ore and coking coal

Costs positively impacted by rouble devaluation (more than 50% of the costs are rouble-denominated)

Steel segment costs benefited from lower raw materials prices: costs of raw materials accounted for 45% ofSteel segment revenues in H1 2012 vs. 51% in H1 2011

Implementation of cost saving technologies (e.g. PCI), further development of own power generation, progressof Lean project are expected to help mitigate negative impact of growing energy, transportation and labour costs

H1 2012, % of total CoR

H1 2011, % of total CoR

Raw materials, including 35% 40%Iron ore 6% 8%Coking coal 9% 12%Scrap 14% 14%Other raw materials 6% 6%

Semi-finished products 4% 6%Transportation 6% 7%Staff costs 14% 13%Depreciation 10% 7%Electricity 5% 5%Natural gas 4% 4%Other costs 22% 18%

Consolidated cost of revenues by cost elements Cash Cost*, Slabs & Billets, $/t

* Average for Russian steel mills, integrated cash cost of production, EXWSource: Management accounts

280333 356 369

395438 415 401 379 372298

350378

411437

479448 426 410 403

Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12

Slabs

Billets

Liquidity and Financial Position

10

Liquidity and debt maturity profile


Total debt of $7,833m as of 30 June 2012, having increased as a result of drawing on available credit lines to increase the cash balance

Cash and cash equivalents totalled $1,763m ($801m as at 31 December 2011) $600m 5-year notes issued in April 2012 at 7.4% rate Net debt - $6,070m (6% decrease vs. 31 December 2011) Amendments to financial covenants in syndicated loan facilities provide greater financial flexibility Long-term target net leverage ratio of below 2x

3

3.2

3.4

3.6

3.8

4

4.2

4.4

4.6

4.8

5

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

7.8

8

31/12/2010 31/03/2011 30/06/2011 30/09/2011 31/12/2011 31/03/2012 30/06/2012

% Years

414

1,124981

1,400

1,875

630

1,373

360

500

1,000

1,500

2,000

2012 2013 2014 2015 2016 2017 2018 2019-2023

Q4

Q3

Q2

Q1

Debt cost* and average maturity Debt** maturities schedule (as at 30 June 2012), $m

* Weighted average cost of debt** Principal debt (excl. interest payments)

11

FCF Generation


* Free cash flow comprises cash flows from operating activities less interest paid and cash flows used investing activities

Free cash flow generation of $362m Further release of working capital achieved

$m1,175

(43)1,132

91

(134)1,089

(233)

(565)

92

(21)362

EBITDA H12012

Non-cash items EBITDA (excl.non-cash items)

Changes inworking capital(excl. income

tax)

Income tax paid Cash flows fromoperatingactivities

Net interest paid(incl. realised

gain on swaps &covenants reset

costs)

Capex CF frominvestingactivities

(excl.capex andinterest

received)

Collateral underswaps

Free cash flow

Operations by Segment

13

Steel: CIS


Full economic utilisation of Russian steelmaking capacitymaintained

Overall steel product sales were flat y-o-y with higher salesof construction products

Rail sales volumes were negatively affected by planned 5-month stoppage of the ZSMK rail mill for modernisation sinceApril (production expected to recommence in October)

Prices of steel products remained flat or decreased over theperiod in response to lower raw material prices

Prices for construction steel in the domestic market slightlyincreased from May 2012 due to seasonal improvement inthe construction market

68% 67%

32% 33%

5,541 5,586

H1 2011 H1 2012

Export

Domestic

1,838 1,693

2,378 2,566

813 788

512 539

5,541 5,586

H1 2011 H1 2012

OtherRailwayConstructionSemi-finished

ProductsRevenue, $m Revenue, $/tonne

H1 2011 H1 2012 H1 2011 H1 2012

Semi-finished 1,159 1,028 630 607

Construction 1,833 1,933 771 753

Railway 734 720 903 914

Other 422 410 824 761

Total 4,148 4,091 749 732

Steel product sales volumes, Kt Steel product revenues

Steel product sales, domestic vs. export, Kt

14

Steel: North America


Demand in North America has remained strong and steel product sales were stable

We have successfully expanded into high value added products (head hardened rails, premium connection OCTG tubes, heat

treated seamless pipe)

Record high steel output and sales of rails in H1 2012

Rail quality improvement project is on track

The expansion to the heat treatment facility in Calgary commenced

The Portland spiral mill returned to operation after having been idle for 3 years

ProductsRevenue, US$m Revenue, $/tonne

H1 2011 H1 2012 H1 2011 H1 2012

Construction & othersteel products 153 140 927 909Railway 249 266 1,029 1,043Flat-rolled 578 571 1,131 1,069Tubular 589 579 1,461 1,561Total 1,569 1,556 1,188 1,184

Steel product sales volumes, Kt

165 154

242 255

511 534

403 371

1,321 1,314

H1 2011 H1 2012

Tubular

Flat-rolled

Railway

Construction &other steel

Steel product revenue

15

Steel: Europe, South Africa


H1 2012 EBITDA of European operations was $6m despitethe weak economic environment

The loss making heavy section mill at EVRAZ VitkoviceSteel was shut down effective from February 2012

EVRAZ Highveld launched an optimisation programme toreduce fixed costs

Improved working shift schedules in South Africa areexpected to result in increased workplace safety, reducedovertime and higher productivity

Revenue, $m Revenue,$/tonne

H1 2011 H1 2012 H1 2011 H1 2012European operations

Flat-rolled 598 398 948 788Other 104 37 954 974Total 702 435 949 801

South African operationsConstruction 89 71 824 789Flat-rolled 159 121 869 834Other 36 23 692 657Total 284 215 828 796

Steel product revenuesSteel product sales volumes, South African operations, Kt

Steel product sales volumes, European operations, Kt

631505

109

38

740

543

H1 2011 H1 2012

Other

Flat-rolled

108 90

183145

52

35

343

270

H1 2011 H1 2012

Other

Flat-rolled

Construction

16

Mining: Coal


Sales of coal products in H1 2012 decreased vs. H1 2011due to

lower steam coal volumes mined as a result of longwallrepositionings at both steam coal mines in Q1 2012

decreased volumes of external raw coal and increasedconsumption of own coal in production of coalconcentrate

A debottlenecking programme at Yuzhkuzbassugol waslaunched to stabilise and improve mine production

Coal mine projects (Yerunakovskaya VIII and MezhegeyPhase 1) are proceeding as planned

Washed coking coal (concentrate) self-coverage, Kt Cash cost, Russian washed coking coal, $/t

Note. (1) Self-coverage, %= total production (plus 40% of Raspadskaya production on pro rata basis) divided by total steel segment consumption(2) Self-coverage excl. 40% Raspadskaya share: H1 2010 – 54%, H2 2010 – 62%, H1 2011 – 62%, H2 2011 – 49%, H1 2012 – 69%

Coal product sales, Kt

45

7062

52

70 73

98

81

6779

Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12

1,9452,506 2,404 1,834 2,656

246

1,451 723 998

831

1,066

4,0533,642

4,021

3,229

3,8503,402

3,775

2,665

3,868 3,722

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012

90% 80% 88% 71% 96%

Consumption Production excl. closed and

disposed mines

Raspadskayaproduction

Production byclosed and

disposed mines

2,8802,179

1,295

834

4,175*

3,014

H1 2011 H1 2012

External sales

Intersegment sales

* For comparability the number excludes 767 Kt of raw coal purchased by Trading Company EvrazHolding from market and Raspadskaya for supply to EVRAZ steel mills

17

Mining: Iron ore


In H1 2012 total sales (intersegment and external) of iron ore products were 9.3 mt (-7.6% vs H1 2011) due to decreased use ofexternal raw iron ore in concentrate production in 2012 and destocking at Sukha Balka in H1 2011

Cash costs decreased in line with rouble depreciation

In H1 2012, EVRAZ Russian iron ore operations achieved total $17.5m positive economic effects through operationalimprovements

The project to increase EVRAZ KGOK’s capacity to 55 Mtpa of raw ore is expected to be completed in December 2012

Feasibility study and project documentation were completed to develop the Sobstvenno-Kachkanarskoye ore deposit at EVRAZKGOK and the project is proceeding as planned

Major reconstruction of Sheregesh mine at Evrazruda was launched to increase production 2.5 times to 4.8 Mtpa by 2016

Iron ore self-coverage*, Kt Cash cost, Russian iron ore products (Fe 58%), $/t

* Self-coverage, %= total production divided by total steel segment consumption

54 56 57

64

71 69 7075

80

73

Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12

10,6359,981

10,455 10,232 10,389

9,608 10,191 10,355 10,814 10,462

H1 2010 H2 2010 H1 2011 H2 2011 H1 2012Consumption Production

90% 102% 99% 106% 101%

18

Vanadium


EVRAZ’s external sales of vanadium products decreased vs.H1 2011 by 17% to $251m, primarily due to lower prices

As a result of operational improvements EVRAZ Vanady-Tulaachieved record productivity levels of 40 tonnes of V2O5/dayduring H1 2012, a 15% improvement compared to productionrates in 2010

EVRAZ Stratcor vanadium plant in Arkansas launched useof EVRAZ’s own vanadium slag, to increase synergy levelswithin EVRAZ

Finished Vanadium product sales volumes, t Vanadium product revenues by region, $m

Ferrovanadium prices (FeV), $/kg contained V

Source: LMB

23

11783

244

Russia & CIS

Europe

Americas

Asia

Africa & RoW

30.231.1 30.9 30.4 30.0 29.5

28.9 28.6 28.127.5

25.7

24.223.0

25.326.0 25.6

26.125.6

24.5

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12

9,624 9,599

H1 2011 H1 2012

Update on Investment Projects

20

Key Investment Projects


Iron ore & coal

CAPEX in H2 2012,

$m Project Targets

Steel

Coal & iron ore

Total CAPEX$m

CAPEX in H1 2012

$m Project TargetsProject

Cumulative CAPEX by 30.06. 2012

$m Project targets

Construction of Yuzhny and Kostanayrolling mills

o Capacity: 450 ktpa of construction products each millo On-stream by mid-2013

Reconstruction of rail mill at EVRAZ ZSMK (former NKMK)

o Capacity of 950k tonnes of high-speed rails, including 450k tonnes of 100 metre rails

o On-stream in Q4 2012

Reconstruction of rail mill at EVRAZ NTMKo Production of higher-quality rails o 550k tonnes capacityo On-stream in Q2 2012

Pulverised coal injection (PCI) at EVRAZ NTMK and EVRAZ ZSMK

o 20% lower coke consumptiono Save annually up to 650 mcm of natural gas at NTMK and up to

600 mcm at ZSMKo On-stream by Q1 2013 and Q2 2013 respectively

Reconstruction of mechanical area at EVRAZ NTMK wheel & tyre mill

o Production of higher-quality wheelso Start production in Q1 2013; full capacity in Q2 2013

260 93 34

490 366 84

60 60 4

320 218 55

40 25 3

Yerunakovskava VIII mine construction o Coal production of 2 mtpao Start in Q1 2013, full capacity to be reached in Q1 2014

390 81 47

Development of Mezhegey coal deposit (Tyva, Russia)

o Maintaining self-sufficiency in high-quality hard coking coal after depletion of existing deposits

o On-stream Q4 2013, reaching full capacity by Q4 2014190 23 18

Expansion of Kachkanar mineo Iron ore production to be increased to 55 mtpao On-stream by end 2012

76 60 13

In progress Under considerationFinal stage of completion

150

25

14

113

0

79

8

60

21

Capex dynamics


1,103

441

832

1,281

565

-

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 H1 2012

Maintenance, Steel and other operations** Iron ore mine development

Coal mine development * Investment projects

* Investment into maintaining and developing mining volumes, such as preparation of coal seams

H2 2012 capexexpected in the range of $650-750m

$m

Key Market Developments and Outlook

23

Recent market developments


Full utilisation of Russian steel making capacities continues

Utilisation of non-Russian steelmaking capacities in September:

◦ EVRAZ North America: 90%

◦ EVRAZ Highveld: 60%

◦ EVRAZ Vitkovice Steel: 76%

Low inventories across EVRAZ operations

EVRAZ order book (external sales) currently represents1.1 month’s production on average

Construction product prices slightly increased in August due to seasonal improvement in the Russian construction market

Export prices of semi-finished products decreased in July-August vs. Q2

Iron ore and coking coal concentrate prices have been flat In July-August on June levels

Ferrovanadium prices in Q3 2012 are at the level of 24.5 $/kg of contained Vanadium, slightly down from Q2 2012

Raw material prices (domestic markets), $/t

EVRAZ selling prices, $/t

400

500

600

700

800

900

1,000

1,100

1,200


Slabs, Russia, export* Billets, Russia, export*Rebars, Russia, FCA Plate, North America, FCA

050

100150200250300350400450


Scrap, Russia, CPT Scrap, USA, CPT

Iron ore concentrate, Russia, ExW Coking coal concentrate, Russia, FCA

24

Outlook


Global markets remain volatile resulting in ongoing uncertainty and low visibility in EVRAZ’s key

markets

Capacity utilisation remains high, finished goods inventories at our mills and sales network are

low

We expect our steel production volumes in Q3 2012 to be broadly in line with Q2 2012

Capex in H2 2012 is expected at $650-750m but we retain flexibility

Net leverage ratio expected to increase at year end (within the limits set by our covenants)

before decreasing in 2013 as the benefits of the investment programme are realised

25

Summary


H1 2012 results reflect worsening pricing environment for our products

Continued investment in growth projects to bear fruit in the short-medium term

Stable debt and liquidity position following continued focus on refinancing

Outlook for H2 2012 remains challenging

Appendix

27

Global operating model


North America

South America Africa

Europe

Russia/CIS

Asia

100

1,717

529

231

Sea portsVanadiumCoal miningIron ore miningSteel mills

Mezhegey coal mine in development

150

122

Third party steel products sales* (Kt), H1 2012# Internal supply of slabs and billets from Russian steel mills (Kt)#

580

H1 2012 steel sales volumeby geography

H1 2012 steel sales volumeby product

3,7301,313

* Excluding routes with sales volumes below 50kt each, together totalling 93kt

Russia & CIS48%

Europe8%

Americas17%

Asia22%

Africa and RoW4%

Semi-finished

22%

Construction37%

Railway14%

Flat-rolled18%

Tubular5%

Other4%

28

Revenue: geographic breakdown


Russia40%

Ukraine4%

Other CIS3%

Americas22%

Europe13%

Middle East3%

China1%

Thailand4%

Other Asian7%

Africa & RoW3%

H1 2011

Russia41%

Ukraine3%

Other CIS4%

Americas24%

Europe10%

Middle East2%

China1%

Thailand3%

Other Asian9%

Africa & RoW3%

H1 2012

29

Steel products: sales by market


3,331

431

858

1,4411,586

300

3,324

406632

1,345

1,732

275

Russia CIS Europe Americas Asia Africa & RoW

H1 2011 H1 2012

Kt

2,661

359

758

1,652

1,015

257

2,604

336492

1,582

1,068

214

Russia CIS Europe Americas Asia Africa &RoW

$m

3,331

431

858

1,4411,586

300

3,324

406632

1,345

1,732

275

Russia CIS Europe Americas Asia Africa & RoW

H1 2011 H1 2012

Kt

30

Resilient and profitable asset base


EBITDA, EVRAZ North America, $m

EBITDA, EVRAZ South Africa, $m

EBITDA, EVRAZ Russia, $m

EBITDA, EVRAZ Europe, $m

Note. (1) Consolidated EVRAZ plc EBITDA also includes Unallocated EBITDA of $(109)m in H1 2011 and $(89)m in H1 2012 (2) EVRAZ North America includes EVRAZ Inc. NA, EVRAZ Inc. NA Canada, Stratcor; EVRAZ Ukraine includes EVRAZ DMZP, Sukha Balka and coking plants; EVRAZ Europe includes EVRAZ

Palini e Bertoli, EVRAZ Vitkovice Steel, Nikom and attributable trading margin

265

216

H1 2011 H1 2012

81

(3)H1 2011 H1 2012

29

(6)

H1 2011 H1 2012

EBITDA, EVRAZ Ukraine, $m

1,276

1,051

H1 2011 H1 2012

87

6

H1 2011 H1 2012

31

Cost Structure by Segment


Cost structure of Mining segment, $mCost structure of Steel segment, $m

Cost structure of Vanadium segment, $m

21% 19%

17%15%

17%

16%

7%

5%

6%

4%

4%

4%

8%

9%

3%

4%

8%

9%

9%

15%

6,2375,749

H1 2011 H1 2012

Other

Energy

Depreciation

Staff

Transportation

Semi-finished products

Other raw materials

Scrap

Coking coal

Iron ore 12% 7%

13%10%

24% 23%

15% 30%

13%

11% 23%

19% 1,092

1,177

H1 2011 H1 2012

Other

Energy

Depreciation

Staff costs

Transportation

Raw materials

35%28%

6%12%

13%

5%

5%

12%

13%

30%

41%

304

242

H1 2011 H1 2012

Other

Energy

Depreciation

Staff costs

Transportation

Raw materials

32

EBITDA


US$ million

2012 2011Consolidated EBITDA reconciliation

Profit from operations 430 859Add:

Depreciation, depletion and amortisation 668 501Impairment of assets 80 32Loss on disposal of property, plant & equipment 25 17Foreign exchange (gain) loss (28) 220Consolidated Adjusted EBITDA 1,175 1,629

Six months ended 30 June

33

Net debt


US$ million

30 June 2012 31 December 2011

Net debt calculation

Add:

Long-term loans, net of current portion 6,271 6,593Short-term loans and current portion of long-term loans 1,531 613Finance lease liabilities, including current portion 31 39Less:

Short-term bank deposit 0 (2)Cash and cash equivalents (1,763) (801)Net debt 6,070 6,442

London +44 207 832 8990Moscow +7 495 232 1370 [email protected]

презентация для инвесторов, сентябрь 2012

Documents