1. NLMK
Q4 AND 12M 2012
US GAAP CONSOLIDATED RESULTS
Moscow, 26 March 2013
1
2. 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
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basis of, or be relied on in connection with, any contract or investment decision.
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representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the
accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents.
This document is for distribution only in the United Kingdom and the presentation is being made only in the United Kingdom to persons having professional
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“Order”) or high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2) of the Order (all such
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This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regarding
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prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements
are not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity and the development of the
industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In
addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are
consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in
future periods. The Company does not undertake any obligation to review or confirm analysts’ expectations or estimates or to update any forward-looking
statements to reflect events that occur or circumstances that arise after the date of this presentation.
By attending this presentation you agree to be bound by the foregoing terms.
2
3. INTERNATIONAL MARKETS
2012 OVERVIEW STEELMAKING CAPACITIES UTILISATION
100% - 2.6 p.p. – reduction in global
• Demand markedly deteriorated in H2 2012 capacities run rate for Q4/Q3
90%
• Provoking massive destocking in steel products
80%
• Prices dropped and capacity utilization decreased 70%
Q4 2012 OVERVIEW 60%
50%
• Repetition of H2 2012 key trends
40%
• Steel prices stabilized by the year-end
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
• In Q1 2013 demand somewhat improved driven by stocks
Global average China North America EU (27)
replenishment and growth in iron ore prices
Sources: World Steel Association
STEEL INVENTORIES PRICES FOR HRC BY REGION
1,3 Quarterly inventory change $900 $/ metric tonne Quarterly dynamics
Index, January 2011=1 adjusted for
Germany: -6.2%
1,2 China : -14.6% Production / sales cycle
$800
USA: - 5.6%
1,1
$700
1
0,9 $600
Germany
0,8
China $500
0,7
USA
0,6 $400
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Russia USA EU China
Sources: CRU, Bloomberg (China statistic, Metals Service Center Inst.) Sources: Steel Business Briefing 3
4. RUSSIAN MARKET
2012 OVERVIEW CRUDE STEEL OUTPUT, CONSUMPTION AND PRICES
• Steel consumption went up by 5% m t/month seasonal decline in $/t 900
6,0 demand
800
• Construction market is the largest steel consuming sector – its
5,0 700
share in steel demand expanded by 4 p.p.
600
• NLMK became the largest steel producer in Russia. with 20% 4,0
500
share in the country steel output 3,0 400
300
• NLMK is one of the niche products suppliers 2,0
Steel consumption
+ 5%, y/y 200
-8% q/q
Q4 2012 OVERVIEW 1,0 100
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
• Steel demand was seasonally weaker by 8% q/q
• Steel prices weakened by 2-7%
Steel output ASU HRC prices rhs Re-bar prices rhs
• … and stabilizing in Q1 2013
Sources: Metal-Expert (prices, consumption), WSA (steel production)
RUSSIA’S STEEL DEMAND STRUCTURE NLMK MARKET POSITION IN RUSSIA
~+5 %
growth in steel demand
40 m t Pipe producers 100%
38 m t
~70%
34 m t 15%
18% 39% 42%
20% 13% Machinery
14% 7%
13% 7% 20% 24% ~20%
7% 21%
Steel processing and coating 12%
+4 p.p.
61% 65%
60% constr.
market
Construction and
production
HRC
CRC
Galvanised
Pre-painted
Transformer
Dynamo
Rebars
Metallware
infrastructure
Steel
2010 2011 2012
Production data for 12M 2012
Sources: Chermet, Metall-Expert, Company’s data 4
6. SALES GEOGRAPHY
12M 2012: +18% GROWTH IN SALES TO 15.2 MT REVENUE BY REGION
• Driven by the launch of new steel capacity
14
$ million
4
• Intercompany slab sales were up +47% to 2.6 million t 11,728 12,157
12 3,094 3,257 3,002 2,803
1,07 1,31
3 0,30
• Growth in sales to growing Russian market 10 1,00
1,19
1,36 0,29
0,36
0,33 0,34
0,38
1,65 0,49 0,45
8 1,24 0,46 0,23
0,90
• Increase in sales to S.E. Asia 6
2
0,27
0,19 0,40
0,20
0,30
0,24
2,77 2,54 0,74
0,70 0,52 0,58
• In Q4 seasonal decline in domestic demand offset by growth in 4 1
2 4,46 4,40 1,02 1,20 1,09 1,09
exports
0 0
2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012
+14% Y/Y SALES GROWTH IN RUSSIA TO 4.9 MT Other regions Asia
North America Middle East incl. Turkey
• Over 80% - share of sales to construction sector EU Russia
• About 11% - share of sales to automotive (+100% growth)
SALES BY REGION
million t 15,184
16 5
14 12,840 1,61 3,872 3,818 3,816 3,678
1,04 2,41 4
12 0,30 0,37
1,33 0,43 0,50
10 2,18 0,63 0,55
1,73 3 0,73 0,51
8 1,61 1,28 0,63 0,61 0,45
0,49
2,82 2 0,38 0,33 0,27 0,30
6 2,87
0,83 0,75 0,64 0,60
4
1
2 4,27 4,88 1,10 1,20 1,26 1,32
0 0
2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012
Other regions Asia
North America Middle East incl. Turkey
EU Russia
6
7. SALES STRUCTURE
2012: +22% GROWTH IN FINISHED PRODUCTS SALES SALES AND REVENUE BY PRODUCT IN Q4
100% Revenue from other
1%
9% operations*
• +20% - growth in high value added (HVA) to 5.4 million t 1% Pig iron
80% 34% Slabs
24%
• - 3 p.p. – decline in share of semi-finished to 30%
HRC
60%
Q4 2012: DEMAND FOR SLABS GREW IN GLOBAL MARKET 23% 21% Metalware
2% Long products
• 33% - share in value added products, or -2 p.p. 40% 2%
8%
9% 5% Plate
4%
• Sales of slabs went up supported by better demand in 20% 13%
HVA
products
12% CRC
8% Galvanised
international markets 7% 6%
4% 3% 6%
0% Pre-painted
• Sequential decline in plates sales due to upgrade of rolling Sales Revenue Electrical steel
operations at NLMK DanSteel *Note: Revenue from other operations include revenues from sales of iron ore, coke, scrap
and others
STEEL PRODUCTS SALES CHANGE IN SALES STRUCTURE Q4/Q3
million t
15,184 3,872 3,818 3,816 3,678
16 4 Slabs 26%
14 12,840 Dynamo 12%
4,58 1,11 1,00 1,18
12 3 1,28 Galvanised -3%
4,18 0,33 0,39
10 1,42 0,37 Pre-painted -7%
0,33
8 1,29 2 HRC -8%
5,43 1,40 1,45 1,35
6 1,22 Long products -9%
4,51
4 1 CRC -10%
2 3,76 1,03 0,97 0,91 0,84 Metalware -14%
2,87
0 0 Transformer -17%
2011 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Plates* -22%
Semi-finished Long products HVA Flat -30% -20% -10% 0% 10% 20% 30%
*Lower thick plates sales partially relates to the launch of new mill at NLMK DanSteel 7
8. INVESTMENTS IN 2012
STEEL PRODUCTION GROWTH 5-YEAR CAPEX
• BF#7 capacity of 3.4 m tpa fully ramped up and running $m
100% 2500
• Steel quality improvement, +30 new steel grades
80% 2000
87%
60% 76% 81% 82% 1500
QUALITY IMPROVEMENTS FOR THE NICHE PRODUCTS
77%
• NLMK DanSteel rolling mill revamping 40% 1000
• Niche products development at NLMK Clabecq 20% 500
24% 19% 18% 23%
• Transformer steel development program at Lipetsk site and 0%
13%
0
VIZ-Steel 2008 2009 2010 2011 2012
Maintenance capex Development Total investments
LONG PRODUCTS DIVISION DEVELOPMENT
• NLMK Kaluga mini-mill (EAF+ rolling mill) of 1.5 m tpa
operational in 2013
• Development of scrap collection facilities CAPEX BY SEGMENTS, 2012
VERTICAL INTEGRATION 12% Steel segment
• Iron ore capacity growth with continued expansion of
Long products
Stoilensky 16%
segment
• Coke-chemical projects (PCI, tar pitch, etc.) to reduce 51% Mining segment
energy costs
Foreign rolled
21% products segment
8
9. INVESTMENTS: NLMK KALUGA
MODERN EAF BASED FACILITY WITH TOTAL CAPACITY OF RUSSIAN RE-BAR CONSUMPTION
1.5 MILLION T
2,5 million t/quarter 150%
• 2012 re-bar consumption exceeded all-time record of 2008 record level of 2008 140%
2,0
• Construction sector offers strong demand for NLMK-Kaluga 130%
products: re-bar and sections 1,5 120%
110%
• Favorable location: 90 km from Moscow city 1,0 100%
• Total investments c. $1.2 billion (about 80% has already 0,5
90%
been invested) 80%
0,0 70%
NLMK-KALUGA TO TAP LONG PRODUCTS DEFICIT IN THE
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Q3 12
Q4 12
CENTRAL REGION
Consumption incl. imports Russian self-sufficiency (r.h.)
Sources: Metal Expert
BALANCE OF PRODUCTION AND CONSUMPTION AT NLMK-KALUGA: PRODUCTOIN PLAN
REGIONS
50% 46% long products deficit – 1200
app. 3,8 million t/y
1000
40%
Share in long products production
31% 800
30%
Share in long products consumption
21% 600
17% 18% 1000
20%
12% 400 800
11%
8% 9% 8%
10% 6% 7% 200 380
1% 2% 0% 1%
0% 0
Siberia
North-
Privolzhs
Caucasia
Central
Urals
South
Far East
2013Е 2014Е 2015Е
West
North
ky
n
Sources: Metal Expert. Data for 2012 9
10. KEY HIGHLIGHTS
12М 2012 FINANCIAL RESULTS REVENUE AND EBITDA MARGIN
• Revenue $12,157 m (+4% y/y), $3,4 $ billion 18% 20%
16% 18%
14%
• EBITDA $1,900 m (-16%), $3,2
14% 16%
$3,0
• EBITDA margin 16% (-3,6 p.p.), 14%
$2,8 12%
• Operating cash flow : $1,825 m (+1%), 10%
$2,6 3,26
3,09 8%
• Capex: $1,453 m (-29%), 3,00
6%
$2,4 2,80
12М 2012 OPERATING RESULTS $2,2
4%
2%
• Steel output: 14,923 m t (+25%), $2,0 0%
Q1 2012 Q2 2012 Q3 2012 Q4 2012
• Steel sales: 15,184 m t (+18%),
• Revenue/t: $801 (-12%), Revenue EBITDA margin (r.h.)
Q4 ‘12 FINANCIAL RESULTS
• Sales revenue $2,803 m (-7% q-o-q),
• EBITDA $390 m (-19%),
EBITDA PER TONNE
• EBITDA margin 14% (-2,2 p.p.),
$180 $/t
• Operating cash flow: $333 m (-51%),
$150
• Capex: $296 m (-15%),
$120
• Net debt/EBITDA: 1.88
$90
Q4 ‘12 OPERATING RESULTS 156
$60 127
112
• Steel output: 3.674 m t (-3%), 106
$30
• Steel sales: 3.678 m t (-4%),
$0
• Revenue/t: $762 (-3%), Q1 2012 Q2 2012 Q3 2012 Q4 2012
10
11. PRODUCTION COSTS AND PROFIT
PRODUCTION COSTS DOWN BY 5% COST OF GOODS SOLD
$ million
• Impacted by further reduction in raw materials prices $2 500 2 210 2 205
2 095
1 984
• Strict control over operating expenses and overheads $2 000
SLAB CASH COST AT NOVOLIPETSK WENT DOWN BY 6% TO $1 500
$361/T. $1 000
• Sustainable competitive cost advantage $500
177 171 221 199
Q4 2012 EBITDA IMPACTED BY: $0
Q1 2012 Q2 2012 Q3 2012 Q4 2012
• The major EBITDA decrease applied to the steel segment (-$90 Production expenses Depreciation
million) and long products segment (-$29 million) due to lower
steel prices and sales
EBITDA CHANGE BY SEGMENT STEEL CASH COST GLOBALLY
600
$ million
650 $/t
500 600
-90 +20 550
400 +16
500
-10
300 -29 450
483 400
200 390 350 main production plant, Novolipetsk
300
100
250
0 200
Steel segment
Q3 2012
Long products
segment
Q4 2012
Foreign rolled
Other operations
Mining
intersegmental
3 123 236 342 454 546 632
products
segment
segment
Cumulative capacities, million t/a
incl
Sources: World Steel Dynamics. Average data for 2012г. 11
12. CASH FLOW
12M 2012 12M 2012 CASH BRIDGE
$ million
• Positive impact of working capital release on cash flow from
CHANGE IN CASH 154
operations (+ $ 311 million)
• 2012 Capex fell 29% down to $1,453 million as key capital FX rate change -109
intensive projected completed
Dividends -117
Q4 2012
FREE CASH FLOW TO THE
FIRM 379
• Q4 Capex dropped by 15% q/q to $ 296 million
• Balancing the operating and investment cash flow Other financial operations -13
• Short-term liabilities repayment in Q4 ($1247 million) Net loans +21
• Net financial outflow ($748 million)
Purchase of property plant
-1 453
and equipment
OPERATING CASH FLOW AND CAPEX
800 1 825
$ million OPERATING CASH FLOW
684
600 -305
502 Income tax
453
400 358 347 333 -82
304 Other non cash operations
296
200 Working capital change 311
0 EBITDA 1 900
Q1 2012 Q2 2012 Q3 2012 Q4 2012
Operating cash flow Capex
12
13. DEBT
DEBT POSITION CHANGE IN DEBT POSITION
• Net debt $3.57 billion (+3%) $7 $ billion
• Cash and equivalents 1 $1.058 billion (-42%) $6
+0,5
$5 -1,2 +0,1
• Net debt / 12M EBITDA 1.88
$4 2,4
• Gross debt $4.63 billion (-12%) 1,8
$3
DEBT MANAGEMENT $2
• Settlement of current liabilities In Q4 $1
2,9 ST Debt LT Debt 2,8
• Average debt maturity extended to 3.1 years $0
30 Sep 12 Debt raising Debt FX rates and 31 Dec 12
RATING settlements other factors
• Investment grade rating (S&P, Moody’s, Fitch)
AVERAGE MATURITY AND NET DEBT/EBITDA2 CURRENCY OF THE DEBT AND REVENUE
Weighted average Debt currency2 Revenue currency 3
2,0 Net debt/EBITDA
3,2 maturity period 100%
3,0 100%
19%
3,0 1,9
2,7 3,1 35% 38% 80%
80%
2,8 1,90 1,88
1,8 60% 42%
1,84 60%
2,6 2,5 18% 19%
1,7 40%
40%
2,4 Years
1,6 1,69 47%
2,2 20% 43% 20% 39%
2,0 1,5 0% 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q3 2012 Q4 2012 Q4 2012
2012 2012 2012 2013 2012 2012 2012 2013
1. Cash and equivalents and ST deposits RUR USA Euro
2. As of the end of the quarter
3. Management accounts data 13
14. MATURITY
DEBT MATURITY LIQUID ASSETS AND ST DEBT MATURITY 1
• Substantial liquidity cushion and portfolio of instruments Committed credit
$4 000 $ million
for debt restructuring $3 500
lines
• Short-term debt $1.82 billion $3 000
o Settlement of RUR notes in Q1 2013, $2 500
2 493 Cash and
$2 000 equivalents
o PXF 504
$1 500
• Long term debt $2.82 billion $1 000 478
210
1 816
o Eurobonds $500 1 058
625
$0
o RUR notes, Liquid assets Q1 13E Q2 13E Q3 13E Q4 13E
o Long term part of ECA and liabilities of European assets
INTEREST EXPENSE 3 TOTAL DEBT MATURITY 2
70 67 $m 62 65 68 20% $2 000 $ million
60
50 15% $1 500
40
10%
30 $1 000
20 5%
10 $500
0 0%
Q1 2012 Q2 2012 Q3 2012 Q4 2012
$0
Interest expense Interest expense to EBITDA (right hand) 2013E 2014E 2015E 2016E and onward
PXF Ruble bonds ECA EBRD NLMK Europe Others Eurobonds (USD)
1. The ST maturity payments include interests accrued and bond coupon payments
2. The maturity payments do not include interests
3. Quarterly figures are derived by computational method based on reporting data for the 9M, 12M 2011 and for the 3M, 6M, 9M 2012 and 12M 2012.
14
15. OUTLOOK
MARKET OVERVIEW
• Steel prices somewhat improved in Q1 2013 amid restocking by traders and consumers, and raw materials
prices growth
PRODUCTION
• In Q1 2013: 3.7 million t of steel (flat, q/q)
• 12M 2013: 15.5 million t of steel (+4% y/y)
FINANCIAL RESULTS
• Q1 ‘13 Revenue may decline by roughly 5% q/q
• Q1 ‘13 EBITDA is expected to be sequentially lower
• 2013 Capex to further decline by 20-25% y/y
• Debt level is expected to be at relatively stable level as compared to the last year
15
