3. Christopher Clark
Chairman of the Board
of Directors
Alexey Kulichenko
Chief Financial
Officer
Today’s Presenting Team
Alexey Mordashov
Chief Executive
Officer
Vadim Larin
Chief Operating
Officer
6. The Board
Balance of Executive and Non-Executive / Independent
Directors
Board composition:
We aim for full compliance with the UK Corporate
Governance Code
Three committees with an Independent Director chairing
each:
Executive*
40%
Non-Executive
60%
Audit: Financial and operational performance,
monitor risk
Health and Safety: ensure appropriate systems in
place to manage all health/safety/environmental
risks
Nomination and Remuneration: reviewing Board
composition/effectiveness and policies for senior
executives’ remuneration
Quarterly formal Board meetings plus year end Budget
Review meetings; committees meet quarterly
Independent**
50%
Non-Independent
50%
The roles of the company’s Chairman and CEO are separate and
their responsibilities clearly defined
Note:
* Board constituents include a Non-Executive Chairman, 5 NonExecutive Directors and 4 Executive Directors
** Board constituents include an Independent Chairman, 4
Independent Directors and 5 Non-Independent Directors
Page 6
7. Further Governance Enhancements
In 2012, the Board commissioned its second independently facilitated audit of its
effectiveness by Heidrick & Struggles:
High-performing with particular strengths identified overall composition, stability and
process
Good engagement and healthy dynamic between Non-Executive Directors and
management
Continued focus on Board development:
Review of training for new and existing directors
Increased frequency of ‘deep-dives’ on key projects and topics
Commitment to regular performance reviews
Continue to ensure good governance translates into superior investor recognition
Continue to support initiatives to develop Russian corporate governance
Page 7
10. Our Strategic Priorities
Our mission remains intact: We strive to be a leader in value creation
In this market environment building a healthy and high-quality business
generating positive FCF enables stable dividends
How do we intend to achieve that?
Key focus is efficiencies and low-cost position at existing operations
Smart CAPEX: further optimized maintenance, highly selective
development
Higher customer satisfaction via services, quality, and better product mix
Page 10
11. Our Targets
Cost Position
Middle-to-the-left position of all our assets on
the cost curve
Margins
Targeting cycle-average EBITDA margin of c. 20%
CAPEX
Medium-term target of $1.0bn
Net debt
Striving to keep Net debt/EBITDA below 1.5x
Dividends
Payout of not less than 25% of Net Income
FCF
Stable positive free cash flow
Page 11
12. Demand to Grow Across All Our Key Markets, but…
Russian ASU (mt): good fundamentals
CAGR
41
42
44
11
12
13E
EU-27 ASU (mt): on the way of recovery
CAGR
4.1%
14F
47
46
49
51
145
155
1.8%
140
135
138
139
141
145
12
13E
14F
15F
16F
17F
120
36
25
09
10
15F
16F
17F
09
US ASU (mt): growth in non-res. construction
CAGR
80
89
96
CAGR
2.5%
97
100
103
105
3.1%
107
551
10
11
12
11
Chinese ASU (mt): slower but stable growth
59
09
10
13E
14F
Source: Worldsteel, Goldman Sachs, Macquarie, Severstal analysis
15F
16F
17F
588
09
10
641
660
700
11
12
13E
721
747
770
792
14F
15F
16F
17F
Page 12
13. …Industry Overcapacity Challenge is Still There,
Coupled With…
Global steel overcapacity is expected to remain in medium term despite the following
positive factors:
Decelerating CAPEX spending across the global steel industry
Stable global steel demand growth – CAGR 3%+ (2012-2018E)
Potential for margin expansion in the future will depend on capacity discipline and
progress in the industry consolidation
Global crude steel overcapacity
35%
1000
Overcapacity, mmt (r.h.s.)
30%
900
Overcapacities, % of total capacities
25%
25%
800
700
537
20%
600
500
15%
400
300
10%
200
5%
100
0%
0
00
01
Source: OECD, Worldsteel, Severstal estimates
02
03
04
05
06
07
08
09
10
11
12
13E
Page 13
14. …Volatility of Commodity Prices
High volatility without any clear
trend
Mines depletion would compensate negative
impact from the new supply
Iron ore price, 62%, CFR China, $/t
Chinese steel production still remains
high in absolute volumes
$180
$160
High market concentration
$140
$120
Sizable announced pipeline of new
supply
$100
$80
$60
1
3
5
7
2012
9
11
1
3
5
7
9
Delays in projects realization
2013
Depletion of mining assets
Prepared for price volatility and downside scenarios
Source: Severstal analysis
Page 14
15. Coking Coal Prices have Upside Potential
Prices are on the floor
Consensus expects price growth
Supply constraints will drive HCC prices up
Hard coking coal price, FOB Australia, $/t
Steel production growth in coal-deficit
countries: India, Brazil, South Korea
$260
$210
Depletion of mining assets
$160
$110
Closure of inefficient mines
$60
1
3
5
7
2012
9
11
1
3
5
2013
7
9
Cost cutting initiatives by mining
companies
Potential for mid-term price upside
Source: Severstal analysis
Page 15
16. How Do We Achieve Those Targets?
Proceed from “Investment Stage”
to “Harvesting Stage”
G&A optimization: target is 20% by Q4 2013 to the level of
2012
New leadership across all levels
Business
System of
Severstal
Costs
reduction
initiatives
Raising
customer
satisfaction
Operational improvement at
all divisions
Smart
CAPEX
Development of services and
customer care projects
Medium term CAPEX target of
$1bn
Product mix and quality
improvement
Prudent approach to
greenfields
Page 16
17. Business System: Time to Deliver
Focused to embed competitive advantage through creating a continuous improvement
culture
Since August 2013
April 2010 – July 2013
“HARVESTING STAGE”
“INVESTMENT STAGE”
Pilot projects at the key sites
Rising tangible contribution to the
top-line and cost reduction
Extensive training at all levels
Lean tools
Customer Care
Leadership skills
Growing engagement from all levels
The priority is to ensure that our
strong performance is sustainable
Page 17
18. Our CAPEX Priorities
Optimization of Maintenance CAPEX:
Prudent control over repair costs
Medium term CAPEX
target is $1.0bn
Higher efficiency of Development CAPEX:
Focus on projects with the highest return
Severstal’s CAPEX evolution, $bn
Targeting over 20% IRR for all projects
$1.7
No additions in crude capacities after the
Balakovo Mini-Mill launch
$1.4
$1.3
$1.0
Investments limited to low-risk,
quality/efficiencies raising projects
Prudent approach to greenfields within our
strategic framework
2011
2012
2013E
2014E
Page 18
19. Achievements in Challenging Market
Among Top-10 by
EBITDA
One of the highest
EBITDA margin
FY2012 EBITDA margin, %
FY2012 EBITDA, $m
ArcelorMittal
POSCO
2nd
Nippon Steel
& Sumitomo
3rd
ThyssenKrupp
4th
JFE
5th
Baoshan
6th
CSN
7th
Tata Steel
Severstal
7,080
1st
Gerdau
5,522
Jindal SP
1st
CSN
2nd
One of the lowest
debt leverage
globally
Consistently in Top-3
by ROCE
ROCE* FY2012, %
26.8%
Jindal SP
1st
Nucor
34.1%
2nd
14.2%
11.8%
Net debt/EBITDA FY2012, x
Ternium
1st
Nucor
2nd
1.3 x
1.5 x
NLMK
3rd
15.6%
Severstal
3rd
11.1%
Severstal
3rd
1.8 x
Severstal
4th
15.3%
Voestalpine
4th
10.6%
NLMK
4th
1.9 x
2,831
Ternium
5th
15.0%
Ternium
5th
10.5%
Voestalpine
5th
2.5 x
2,676
MMK
6th
14.5%
NLMK
6th
Jindal SP
6th
2.7 x
2,324
Evraz
7th
13.7%
Tata Steel
7th
6.7%
Gerdau
7th
8th
2,266
Voestalpine
8th
12.6%
ThyssenKrupp
8th
6.4%
MMK
8th
2.9 x
9th
2,158
Mechel
9th
11.8%
POSCO
9th
6.1%
Baoshan
9th
2.9 x
10th
2,142
Hyundai Steel
10th 11.3%
Hyundai Steel
10th
Evraz
10th
3,811
3,099
7.7%
5.3%
Source: Companies’ data, Bloomberg. * Hereafter ROCE is calculated using the financial year basis by the following formula: LTM profit from operations/total assets minus current liabilities (average for the period)
2.8 x
3.1 x
Page 19
21. Severstal is Well-Placed for Investment Returns
WHY
SEVERSTAL?
Consistent dividend payments
Consistent quarterly payments
throughout the cycle
Highest EBITDA margin among
the Russian peers (H1 2013)
Dividends paid by Severstal and the Russian
peers in 2007-1H’13, $m
2007-08
2009-12
2,083
971
133
Russian peer 1
2,192
956
0
Russian peer 2
1,546
800
111
Russian peer 3
786
627
Russian peer 4
860
335
High liquidity
1H’13
Severstal
Russian efficiency leader
Free
float, %
21%
Russian peer 1
33%
7,135
96
Russian peer 2
25%
3,781
Russian peer 3
13%
7,241
Russian peer 4
13%
1,842
12.6%
10,187
n/a
12.8%
Total equity turnover
in 2012 in Russia, UK
and US, $m
Severstal
13.5%
12.3%
Severstal
Peer 1
Peer 2
Peer 3
Highest ROCE among the
Russian peers (H1 2013)
8.5%
The only steel stock in
MSCI Russia
(0.8% weight)
Source: Companies’ data, Bloomberg.
Peer group includes Evraz, Mechel, MMK, NLMK
Rising credit ratings:
BB+/Stable at S&P
Ba1/Positive at Moody’s
5.2%
1.3%
0.0%
Severstal
Peer 1
Peer 2
Peer 3
Page 21
22. Photo: Methane gas power station
at Vorkutaugol
Photo: Converter shop modernization
at the Cherepovets Steel Mill
Photo: Wind energy generation at Vorkutaugol
Photo: Methane gas power station at Vorkutaugol
Sustainability
23. Safety
Safe Working Culture is a Key
Lost Time Injury Frequency Rate (LTIFR)
Single HSE policies for all assets
Thorough investigation of the
Vorkutinskaya mine tragedy
1.76
1.54
1.41
Strategic objective to eliminate all fatal
accidents
2010
2011
2012
Page 23
24. Leadership and Talent Development
Personnel Development and Ethical Standards
Corporate Code of Conduct and Ethical Committee in
Place
Annual 360° feedback including the Company CEO
In 2012, 43% of our staff passed through training
courses, and 100% of top three management levels
passed through special development exercises
Management development programme “Achieve More
Together” in place to develop leaders of the future
Employee rewards for the best saving ideas
Page 24
25. Reducing Resources Consumption and Emissions
ISO 14001 Environmental Management Systems at 9 key assets in Russia and
the USA
Raising efficiency of the Cherepovets Steel Mill: 2012 consumption vs 2000:
River water consumption, m3/ t of rolled products - down by 44%
Energy consumption, Gcal/t of steel – down by 17%
Natural gas consumption, m3/t of steel – down by 19%
Cherepovets Steel Mill tomorrow – projects to be completed in 2013-2015:
Radical reduction of air emissions at Converter Shop, EAF#1, Sinter
Production
Severstal Columbus achieves 25 million kilowatt hours in energy savings:
On 8 Oct 2013, the Tennessee Valley Authority awarded $2.5m to Severstal
Columbus for achieving significant energy efficiencies
Page 25
26. Conclusions
Focus on FCF generation and stable dividend payments
Momentum in raising efficiency of operations
Target to reduce capital intensity
Business System embedding operational excellence
Continuing focus on more attractive markets
Maintaining high margins and low debt profile
Page 26
31. Vorkutaugol (Coking Coal)
Completed to date
In progress
Declining cash costs
Further production growth
Constant production growth
Inclined shaft at Zapolyarnaya in 2014
Headcount reduced from 14,000 to 8,000 people over
last 5 years
Inclined shaft at Vorgashorskaya in 2014
First Russian power station on coal methane launched in
2013 (16MW)
Internal and external benchmarking
Evaluation of further upgrade of the washing
plant
Pechorskaya washing plant upgraded from 7 to 9 mtpa
throughput in 2013
EBITDA margin in Q3 2013 = 22%
Vorkutaugol is a unique Russian coal miner that has
decreased its cash costs in the recent 4 years
Costs decline continue in 2013-2014
2012 2013E 2014E
Cash costs CAGR 2008-2012, RUB %
14%
-1%
Vorkuta
Peer 1
Peer 2
Peer 3
Peer 4
13.1 14.0
Hard coking coal (2Zh grade) concentrate
production, mt
4.0
4.5
4.8
Hard coking coal (2Zh grade) concentrate total
cash cost, $/t
17%
13.0
102
92
89
Semi-hard coking coal concentrate blend
(Zh+GZhO grades) total cash cost, $/t
11%
13%
Raw coal output, mt
76
71
67
Page 31
32. Karelsky Okatysh (Iron Ore Pellets)
Completed to date
In progress
Volume reached 10.6 mt (annualized volume
run rate) and will remain at this level
Stripping ratio passed peak in 2012 and will be
further declining
Headcount reduced by 10% to 4,700 people in
2013
5 mt of higher quality pellets after separate milling
of Korpanga ore: fluxed pellets Fe goes up from
63.7% to 66.0%
All 4 grinders replaced in 2013
Costs of drilling & blasting, excavation, hauling will
get down to Olkon levels in 2014
$20m CAPEX focused on cost improvements with
IRR 25-60%
Costs set on a declining trend
2012
2013E
2014E
Pellet output, mt
10.3
10.5
10.6
Stripping ratio, m3/t
1.22
1.18
1.10
Pellet cash cost, $/t
58
55
53
Page 32
33. Olkon (Iron Ore Concentrate)
Completed to date
In progress
Latest JORC audit confirmed 261 mt
reserves: 16 years at the current
production rate
Stripping ratio passed its peak in 2013 and
will be further declining
High-angle conveyor and the new dryer
will be launched in 2014 for further cost
reduction
Quality more stable after Derrick screens
installation
Olkon is now on the stable path
2012
2013E
2014E
Iron ore concentrate production, mt
4.78
4.73
4.73
Stripping ratio, m3/t
1.26
1.48
1.26
Iron ore concentrate cash cost, $/t
50
48
47
Page 33
34. Strategic Priorities for Russian Steel Sales
1. Increase market share in the high-margin segments
Increase the share in the highmargin segments: Automotive,
Machinery, Large Diameter Pipes
It will require better client
service:
‒ Advanced quality
‒ Just-in-time delivery
Sales to the automotive sector (Russia), kt
+9%
187
1H 12
Sales via JVs, %
204
1H 13
4%
11%
2. Focus on Home Markets
Redirect export sales to the
domestic market
In the domestic markets focus on
the regions with logistics
advantage:
‒ North-West
‒ Center
It will require improvements of our
sales and distribution system
The Russian Steel Divisions' Sales Volume Structure , %
Forecast
56%
61%
44%
39%
1H 12
1H 13
80%
Domestic
Export
20%
…
2017
Page 34
35. Recent Achievements in Automotive
International Brands
Steel shipments for production
of new models in 2013: Renault
Logan, Nissan Almera, Skoda
Octavia
Launch of a surface quality
control system for HDG steel
Severstal’s share in procurement of localized
international brands in Russia, %
44%
33%
2012
2013E
Local Brands: KAMAZ example
5 new steel grades introduced
Sales to KAMAZ increased from
14 kt in 2012 to 62 kt in 2013
Delivery time decreased by 2.2x
through the joint project with
Russian Railways
62
14
2012
2013E
Page 35
36. Production priorities for Russian Steel
Top-level production priorities include:
Continue cost-cutting effort
Increase the “first-time through” (FTT) ratio at each stage of production
Increase best practice sharing with industry leaders
Area
Priorities
Iron Making
Steel Making
Replace sinter with cheaper Fe-containing additions
Synchronize maintenance between the sinter plant and the BF to reduce sinter fines formation
Increase sinter plant productivity by 10%+
Align melting temperature regimes of sinter and pellets mix to increase BF productivity
Further increase share of pig iron
Reduce the amount of breakouts
Increase steel making process stability: stable temperature regimes, alloy consumption modeling
Increase Mill 2000 productivity to 6.5 mtpa
Increase efficiency of pre-heat ovens: reduce gas pressure, close ovens, optimize gas-oxygen mix
Implement best practices in greasing and grinding (higher precision, better materials and
automation)
Upgrade the 4-stands mill
Improve quality to better match client requirements
Increase FTT ratio
Hot Rolling
Cold Rolling
Long Products
Launch Balakovo Mini-Mill
Maintenance
Introduce reliability maintenance approach
Continue headcount reduction
Delegate responsibility for equipment condition to production personnel and specialize
maintenance force on larger or more specialized repair tasks
Page 36
37. Russian Steel: Examples of Continuous Improvement
Majority of our efforts are continuous
Selected examples
Effect, $m
2013
2014
Substitution of purchased iron ore
with metallic from recycled slag
14
7
Increased share of pig iron in BOF
15
10
Labor productivity improvement
60
37
Page 37
38. Balakovo: Major Capacity Expansion Project
Favorable Market Environment
Favorable market
Scrap surplus of about 3 mtpa in the Volga region
Excess electricity capacity in the region
Environment-friendly technology: 99.5% gas cleaning
system and closed-loop water recirculation
Well-developed transport infrastructure
Balakovo Electric Arc Furnace
Balakovo Mini-Mill
First production
Rolling in December 2013
EAF in April 2014
Location: Balakovo, Saratov region, Volga district
Capacity: 1 mt of crude steel and long products: rebar,
angles, channels
Equipment: EAF (Siemens VAI), rolling mills (Danieli)
Scrap yard in place and functioning
Page 38
39. Severstal North America: Resilient Assets on a
Healthy Market
The North American market is expected to demonstrate sound growth. SNA is well-positioned to
capture this growth
Favorable Factors
US Finished Steel Consumption, mt
US steel demand is growing
120
SNA assets are best in class in the USA
100
In progress
100
103
2015F
97
2014F
96
2013F
105
107
110
20
2018F
2017F
0
2016F
Ongoing operational improvements despite
expensive raw materials
80
89
59
2010
Procurement savings: scrap and energy
40
98
2009
Has been completed to date
112
2007
SNA efficiency improvements
2012
60
2011
80
2008
We know how to run those assets properly
SNA key financial dynamics
Non-prime reduction at Dearborn
2012
9M 2013
41
44
(107)
10
Scrap mix optimisation/copper scheduling
Further optimisation of logistics
Revisiting the sales and marketing strategy
EBITDA per tonne, $/t
Free cash flow, $m*
* Excluding intercompany interest paid
Page 39
40. Example: Scrap Purchasing in SNA
Scrap purchasing brought savings of $16/t in Columbus and $10/t in Dearborn in 2 years
Spread to national market ($/t, normalized for mill mix)
54
49
43
44
43
32
29
22
51
40
28 26
22
28
27
24 26 22
21
5
2011: $37
8
5
Dearborn
2
4
6
2
4
8
4
3
14
7
4
1
(4)
2011: $6
17
2013: $21
8
(1)
Average
22 22 22 20
14
12
10
2
26
2012: $27
13
8
22
2
Columbus
Average
27 27
21
(6)
(4)
2012: $2
(3)
(1)
(4) (3)
(4) (4)
(7)
(9)
2013: ($4)
Page 40
41. Smart CAPEX
Continuous reduction of CAPEX
Development projects in mining to be completed in 2014
Only reconstruction of the 4-stand mill remains among the large-scale development projects in Steel
Prudent control over maintenance costs
Greenfields investments into concept development/feasibility study only
Total Capital Expenditures, $bn
$1.4
$1.3
$1.0
$0.8
$0.7
$0.4
$0.6
$0.6
$0.6
2012
2013E
2014E
Maintenance CAPEX
Development CAPEX
Page 41
42. Greenfields
Our greenfield projects do not require significant CAPEX at the moment
Going forward we will not jeopardize our balance sheet under any conditions
Greenfield
Status
Iron Ore
Putu Range, Liberia
Feasibility Study in progress
Amapa, Brazil
Divestment
Coal
Tyva, Russia
Pre-Feasibility Study completed
Usinskoye, Russia
Pre-Feasibility Study completed
Metallics
IMBS/IIBG, South Africa
First production at a trial plant by year end
Page 42
46. Financial Priorities Remain Intact
Decreasing production costs in steel and mining
20% G&A expenses cut program
Net debt/EBITDA of 2.2x – above the target of 1.5x, but still in the
comfort zone. With lower CAPEX next year we will try to return to 1.5x
Mitigating the
challenges
High level of liquidity maintained with growing share of
committed credit lines with cash decreasing to c. $1bn
Cash at hand 1.4x times covers short-term debt
High interest coverage – close to 7.0x EBITDA/Interest (Q3 2013)
Ratings – one notch from Investment Grade at S&P and Moody’s
Recent placements with a record low interest rate for the
company
Page 46
47. Efficiency Initiatives
Working capital optimized over the recent years…
Target G&A cut by 20% to the level of FY 2012…
… with the turnover markedly reduced since beginning
of 2011…
… which should fully materialize by FY 2014 and have
a positive EBITDA effect of c. $150m, as compared to
FY 2012
… as well as average NWC/Revenue ratio, constantly
since 2011 well below the target level of 18%
Major areas for cost cutting have been personnel
number, consultancy services, travel expenses, etc.
G&A expenses developments at Severstal, $m
100
25,0%
23.4%
80
60
20,0%
15.2%
85
55
40
Decrease
410 of 13%
14.9%
14.5%
54
53
14.3%
15.0%
55
52
347
372
357 Decrease
339
of 17%
298
15,0%
10,0%
20
5,0%
0
0,0%
H1 11
H2 11
H1 12
H2 12
Net working capital turnover, days (lhs)
H1 13
Target
level
NWC/Revenue, %
H1 11
H2 11
H1 12
H2 12
H1 13
H2 13
Page 47
48. FCF is a Key Focus
Over the recent years Severstal has consistently
delivered a meaningful positive FCF*
Focus on FCF is key priority going forward
CAPEX is traditionally covered by operational cash flow
Free cash flow will be used for further deleveraging
and dividend payments
Cash flows in FY 2012
Cash flows in FY 2011
Cash flows in 9M 2013
Positive FCF of $953m
Positive FCF of $431m
2,579
Positive FCF of $141m
1,750
89
930
2,013
128
(1,716)
1,864
(1,101)
55
1,726
(1,448)
(568)
(844)
1,014
(853)
Cash & CE Operating
EOY 2010 CF 2011
CAPEX
2011
Other adj Other Cash & CE Operating
to FCF investing & EOY 2011 CF 2012
financing
CF
CAPEX
2012
Other adj Other Cash & CE Operating CAPEX 9M Other adj Other Cash & CE
to FCF investing & EOY 2012 CF 9M
2013
to FCF investing & end of 9M
financing
2013
financing
2013
CF
CF
* Free cash flow is determined as an aggregate amount of the following lines: Net cash from operating activities, CAPEX, proceeds from disposal of PPE, interest
received and dividends received
Page 48
49. Decreasing Cost of Debt
Significantly better terms of refinancing
on the public markets…
…due to stable financial position,
streamlined strategy and investor
recognition
WHAT WAS
WHAT’S NOW
EUROBOND
2013
EUROBOND
2014
EUROBOND
2017
EUROBOND
2018
EUROBOND
2022
CONVERTIBLE
BOND
Year of
issuance
2008
2004
2010
Year of
issuance
2013
2012
2012
Maturity
5 years
10 years
7 years
Maturity
5 years
10 years
5 years
Amount
$544m
$375m
$1,000m
Amount
$600m
$750m
$475m
Rate
9.75%
9.25%
6.70%
Rate
4.45%
5.90%
2.00%
Page 49
50. Comfortable Payment Schedule
Total debt to be paid in 2014-15 is only $572m, of which the
only bond bullet is 2014 Eurobond of $375m
Cash at hand of c. $1,000m 1.4 times covers debt payments
until 2016
Available liquidity of $2,706m, of which 63% represented by
committed credit lines
Cash at hand to be maintained around $1bn going forward,
supported by a large amount of credit lines
1,692
1,513
Total 2014 debt
repayments of $530m
1,129
860
1,014
447
166
$m
Liquidity as
of Q3 2013
756
4Q 13
Cash & CE
5
6
1Q 14
2Q 14
72
42
3Q 14
4Q 14
2015
Short-term Debt to be Repaid
2016
Unused Committed Credit Lines
2017
2018
2019+
Long-term Debt to be Repaid
Page 50
51. Deleveraging on Track
Rising available liquidity by increasing committed credit lines
3000
2,706
2500
2000
2,758
2,257
393
922
1,112
1,264
1,864
2,261
248
2,664
1,726
1,552
1,494
Q1 2013
Q2 2013
Available liquidity up 19% since EOY 2010 to
$2,706m…
1,692
2,648
… with committed credit lines up almost 7x times to
$1,692m…
1500
1000
2,013
500
… and cash on balance decreasing by 50% to
$1,014m
1,014
0
EOY 2010
EOY 2011
EOY 2012
Cash on balance to hover around $1bn going
forward as a comfort cushion, supported by
significant amount of committed credit lines
Q3 2013
Unused committed credit lines, $m
Cash and cash equivalents, $m
Steadily decreasing debt, stabilizing net debt/EBITDA
6 500
6,025
6 000
5,710
5 500
5 000
4 500
2,5
2.2x
5,976
1.8x
1.4x
2.2x
5,454
4,977
1.1x
4,212
4,112
4 000
3,983
3,960
3,963
2
1,5
3 000
Gross debt down 17% since EOY2010
1
0,5
3 500
Higher net debt/EBITDA due to lower LTM EBITDA,
although already stabilized and set to decrease
Net debt down 6% since EOY2010
0
FY 2010
FY 2011
Gross debt, $m
FY 2012
Net debt, $m
1H 2013
9M 2013
Net debt/EBITDA, x
Page 51
52. Key Debt Elements
Key debt parameters:
preference for public, USD, fixed and unsecured
EUR RUB
7% 2%
Float
15%
Private
15%
Secured
17%
Fixed
85%
Public
85%
USD
91%
Unsecured
83%
Severstal’s interest coverage dynamics
700
600
Average interest
coverage in 2012-13 is
5.1x
681
568
541
500
430
8,0
543
7,0
479
6,0
5,0
368
400
4,0
300
200
Interest coverage as of
Q3 2013 was 6.9x
3,0
111
110
105
100
115
100
99
79
0
2,0
1,0
0,0
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Interest payments have
been decreasing post
the lower-cost bond
placements
Q3 2013
EBITDA, $m
Interest, $m
Coverage, x (rhs)
Average coverage, x (rhs)
Page 52
54. Conclusions
Resilient business model combining low cost production and strong market
positions
Focus to ensure building healthy and high-quality business
Further improve cost positions via G&A reduction and operating efficiency
initiatives
Target reduce a capital intensity of operations
Committed to prudent debt management and gradual deleveraging
Improved FCF profile to target higher dividend payments
Page 54
56. Disclaimer
These materials are confidential and have been prepared by OAO
Severstal (Severstal) solely for your information and may not be
reproduced, retransmitted or further distributed to any other person or
published, in whole or in part, for any other purpose.
These materials may contain projections and other forward-looking
statements regarding future events or the future financial performance of
Severstal. You can identify forward-looking statements by terms such as
“expect,” “believe,” “estimate,” “intend,” “will,” “could,” “may” or
“might”, or other similar expressions. Severstal cautions you that these
statements are only predictions and that actual events or results may
differ materially. Severstal will not update these statements to reflect
events and circumstances occurring after the date hereof. Factors that
could cause the actual results to differ materially from those contained in
projections or forward-looking statements of Severstal may include,
among others, general economic and competitive environment conditions
in the markets in which Severstal operates, market change in the steel and
mining industries, as well as many other risks affecting Severstal and its
operations.
These materials do not constitute or form part of any advertisement of
securities, any offer or invitation to sell or issue or any solicitation of any
offer to purchase or subscribe for, any securities of Severstal in any
jurisdiction, nor shall they or any part of them nor the fact of their
presentation, communication or distribution form the basis of, or be relied
on in connection with, any contract or investment decision. No
representation or warranty, express or implied, is given by Severstal, its
affiliates 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 these materials
or their contents.
