2. DISCLAIMER
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basis of, or be relied on in connection with, any contract or investment decision.
No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. No
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.
The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should inform
themselves about, and observe, any such restrictions.
This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regarding
the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity,
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. NLMK GROUP RUSSIAN ASSETS
NLMK Kaluga
Crude steel: Stage 1 – 1.5 m t
Long steel: Stage 2 – 0.9 m t
Stage 3 (option) – 0.6 m t
Moscow
NLMK Kaluga
США
RUSSIA
Moscow
Altai-Koks
Coke: 4.66 m t
Kaluga
VIZ-Steel
Transformer steel:
0.17 m t
NLMK Russia Long
Crude steel: 2.2 m t
Long steel: 2 m t
Novolipetsk
Sinter: 15 m t
Coke: 2.6 m t
Steel: 12.4 m t
Flat products: 5.7 m t
Stoilensky
Iron ore concentrate:
14 m t
Sinter ore: 1.6 m t
NLMK Group’s Russian production assets
NLMK Kaluga
Licences for deposit development
3
4. NLMK RUSSIA LONG STEEL DIVISION
•
Part of NLMK Group since December 2007
•
Capacity:
o
Steel (EAF) – 3.7 million t
o
Long products – 2.9 million t
o
Scrap – 3.5 million t
Moscow
NSMMZ
Long product market share in Russia: c. 20%
•
Sales regions: over 95% of sales to the Russian market
NLMK Russia Long production sites
(Ural, Southern, Central Federal Districts)
CRUDE STEEL AND FINISHED PRODUCT OUTPUT
NLMK RUSSIA LONG STEEL FINANCIALS
$ million
mt
2,5
2500
1837
1794
2,0
1645
1377
1500
1243
882
1000
500
259
46
34
2010
2011
170
1,7
1,3
1,7
1,4
1,4
1,5 1,5
1,8 1,7
1,5
1,4
0,5
83
0,0
0
2008
1,5
1,9
1,0
-69
-500
UZPS
NLMK Kaluga
•
2000
Yekaterinburg
2009
Revenue
2012
EBITDA
9M 2013
2008
2009
Crude steel
2010
2011
2012
9M 2013
Long products and metalware
4
5. STRATEGIC GOALS
•
Strategic priorities
o
o
NLMK RUSSIA LONG MARKET TARGET SHARE IN 2015
Develop scrap-collecting facilities to maximize costefficient sufficiency in scrap
35%
Expand market presence
25%
33%
30%
23%
20%
o
A flexible sales strategy and improved customer
service
o
o
•
Expand the range of long products and metalware
Ensuring high efficiency at all stages of the process
15%
12%
10%
5%
0%
Rebar market
Sections market
Market goals after NLMK Kaluga launch
o
Increase rebar market share from 17% in 2012 to
23% in 2015
o
Enter the sections market
o
Around 1/3 of long steel for construction in
the Central region of Russia
Long products for the
construction market in
the Central region
LONG PRODUCT CONSUMPTION GROWTH RATES
IN RUSSIA, 2010-12
30%
25%
24%
20%
14%
15%
11%
10%
5%
0%
Rebar
Sections
Long products in the
Central region
Average growth rate in 2010-2012
5
6. NLMK KALUGA: COMPANY OVERVIEW
•
CRUDE STEEL AND ROLLED STEEL PRODUCTION
CAPACITIES AT NLMK KALUGA
Location: Kaluga region, Borovsky district, Vorsino
Industrial Park, c.~70 km away from Moscow
1,6
•
Production site area: 202 ha
•
Capacity: 1.5 m t/y of steel,
from 0.9 to 1.5 m t/y* of long steel
m t/y
1,5
1,5
1,5
1,4
1,2
0,9
1
0,8
0,6
•
•
Products: billets and long steel for construction –
rebar, channels, angles
Capex: RUB 38 billion
0,4
0,2
0
Stage 1 and 2
Steel
•
•
•
Logistics: option to deliver products by rail from the
plant’s own station – Vorsino – and by trucks
Beginning of construction: 2008
In Q4 2013, 250,000 tonnes of steel will be
produced, an increase of 138% q-o-q
Stage 3
Rolled products
FINISHED STEEL PRODUCTION PLAN AT NLMK KALUGA
1000
‘000 t/y
900
800
700
600
500
900
400
300
200
~400
100
0
2013E
* Potential to expand rolling capacity by 600,000 t/y
2014E
6
7. NLMK KALUGA COMPETITIVE ADVANTAGES
o A developed construction sector
The market
o High level of long steel consumption
o Shortage of long steel in the region
o Surplus of scrap collection in the region
o Low transportation costs
Efficiency
o Developed scrap collection network
o Energy- and resource-saving production
Products
o An extensive mix of long products in high demand
7
8. CONSTRUCTION SECTOR IN CENTRAL RUSSIA
•
AMOUNT OF CONSTRUCTION ACTIVITIES IN H1 2013
The Central region of Russia has the highest
density of population
o 59.5
average
people/km2,
Moscow and the Moscow
region
16%
7 times higher than the Russian
Central Region w/o Moscow
and the Moscow region
8%
•
The most developed construction sector across all
Russian regions
The rest of Russia
o Share in construction activity: 24% in H1’13
76%
Note: shares in total volume of
construction works given in
rubles
o Share in residential completions: 28% in H1’13
Source: Rosstat
o Moscow and the Moscow region account for
a significant share
•
The construction sector continues to grow
o In H1’13 residential completions in the Central
region grew by 18,5% y-o-y
REGIONAL SPLIT OF
THE RUSSIAN CONSTRUCTION SECTOR, H1 2013
12
10
sq m of residential
completions per 1 sq km of
region area
9,8
7,1
8
7,3
6
4,8
4
1,3
2
1,1
0,5
0
Central
North Southern North
Western
Caucasian
Volga
Ural
Siberian
0,1
Far
Eastern
Source: Rosstat
8
9. LONG PRODUCTS MARKET
•
o
o
•
2,5
mt
record 2008 level
2,0
30%
25%
20%
1,5
15%
10%
A c.30% increase in rebar import vs 9M’12, x2.6 vs 9M’10
0,5
0,0
0%
Q3 13
Q2 13
Q1 13
Q4 12
Q3 12
Q2 12
Q1 12
Q4 11
Q3 11
Q2 11
Q1 11
Q4 10
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q1 09
Q4 08
Q3 08
Q2 08
Q1 08
~3.8 m t/y shortage of long products in the Central region
In 2012, long product consumption in the Central region
+15.6% (+0.7 m t to 5.2 m t/y)
5%
Import
Rebar produced by Russian companies
Import share, rhs
Pricing trends
o
Import, share in % ~20%
1,0
Regional demand/supply imbalance
o
o
•
Consumption of long steel products used in construction in
Russia in 2012 grew by 9% y-o-y to 15.7 m t
In 2013, consumption will grow by 7%*, or by 1.1 m t;
NLMK Kaluga’s share in the gain will be ~35%.
Import substitution potential
o
•
REBAR MARKET, CONSUMPTION IN RUSSIA
Long product consumption exceeds pre-crisis levels
Sustainable price premium to flat steel
Source: Metal Expert
LONG STEEL PRODUCTION/CONSUMPTION BALANCE BY REGION
STEEL PRICES IN THE CENTRAL REGION OF RUSSIA
$/t
50%
46%
850
long steel shortage –
3.8 m t/y
Share in long steel production
Share in long steel consumption
40%
31%
750
30%
21%
20%
650
12%
11%
8%
6% 7%
North
Caucasian
Southern
North
Western
Volga
Central
Source: Metal Expert
Siberian
Nov-13
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
0% 1%
0%
HRC, Moscow
450
* - Company estimates
9%
1% 2%
Ural
Rebar, Moscow
8%
Far
Eastern
10%
550
18%
17%
Source: Metal Expert. Data for 2012.
9
10. SCRAP MARKET
•
Significant export substitution potential in Russia
o
•
Regional demand/supply imbalance
o
•
Export accounts for ~29% (or 5.8 m t/y) of annual
scrap processing volumes
m t/month
3
Scrap exports, m t
In 2012, the share of export in
total scrap processing was ~29%
2,5
5,8
6
5,8
~30%
exported
from the
Central
Region
4,7
4
1,5
Scrap surplus in the Central Federal District is
~3 m t/y
7
5
2
3
1
2
0,5
1
0
Pricing trends
0
Export
Sep-13
May-13
Jan-13
Sales to the Russian market
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
High competition at the international scrap market
May-10
Jan-10
o
SCRAP MARKET BALANCE IN RUSSIA
2010 2011 2012
Source: Metal Expert, Russian
Railways, NLMK estimates
SCRAP MARKET BALANCE IN RUSSIA AND THE CENTRAL REGION
SCRAP PRICES
Russia
January 2010 = 100
25
m t/y
7
20
1,4
Central region
8
~6 m t is
exported
m t/y
6
5
15
10
1,2
5
20,6
3
14,8
2
1
Average prices in Russia
0
0,9
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Source: Metal Expert, Metal Bulletin
1,7
~3 m t surplus
4
1,3
5,2
2,2
0
2012
Scrap collection
Scrap consumption
Srap
Consumption Sales to
generation in the region other regions
of Russia
Export
Source: Metal Expert, Russian Railways, NLMK estimates
10
11. COST ADVANTAGES
•
Low transportation costs for the delivery of raw
materials and finished steel
o Developed captive scrap collection network
“Vtorchermet NLMK” in the region
o In 2013, a new shredder was launched in
Podolsk (Moscow region)
o Located close to key customers
NLMK KALUGA VS. RUSSIAN PEERS
104%
105%
100%
100%
100%
100%
95%
90%
90%
85%
82%
80%
•
Specific energy
consumption
Efficient resource use
o Processing of by-products generated at the
main operations
Specific natural gas
consumption
Average for Russian producers
o Advanced technologies and equipment
NLMK Kaluga
DISTANCE FROM LONG STEEL PRODUCERS TO THE MOSCOW REGION
NLMK Kaluga
o Use of pig iron and waste metal generated at
Novolipetsk as feedstock
Efficiency of raw material
use
70 km from Moscow
Revyakinskiy MZ
Severstal - Vologda
Severstal - Balakovo
Rostovsky EMZ
Abinsky EMZ
NSMMZ
MMK
Mechel
ZSMK
km
0
1000
2000
3000
4000
11
12. EQUIPMENT AND PRODUCTS
•
Equipment suppliers
o Steelmaking - Siemens VAI
o Long product rolling - SMS Meer
•
Universal high performance continuous rolling
mill
o Ability to roll rebar at high speed and produce
small and medium sections at a single line
•
In 2013-2014, NLMK Kaluga is planning to master
over 30 product types:
o Billet 100х100, 125х125, 150х150, 160х160
o Rebar #10-40
o Angle #25-100
А240 bars
#10
#12
#14
#16
Rebar
А500S bars in
compliance with
GOST 52544
#10
#12
#14
#16
#18
#20
#22
#25
o Channel #5-12
- to be mastered in 2013
Sections
Angles
Channels
L25
L32
L35
L40
L45
L50
L63
L70
L75
L80
L90
L100
SH5
SH6,5
SH8
SH10
SH12
- to be mastered in 2014
- already mastered
12
13. CORPORATE RESPONSIBILITY
•
Air protection
o
o
•
Modern dust and gas cleaning systems with efficiency of
at least 99%
Emissions less than 1kg per tonne of steel (almost 7 times
lower than for its Russian peers)
Water protection
o
Closed water supply system
o
Low level of natural water consumption due to cleaning
•
Waste processing
•
New jobs
o
•
1,250 at the plant and 600 at the service companies
Investments into personnel development
o
o
•
About RUB 55 million into personnel training
Additional study programmes to train qualified
professionals at regional learning establishments
Regional development
o
Construction of new apartment buildings for employees
13
