1. EVRAZ GROUP
Corporate Presentation
Timur Yanbukhtin, Vice President
ING Conference, Prague
3 December 2009
2. Evraz Group in Brief 2
◦ World-class steel and mining company, one of the 15 largest steel companies in the
world in 2008
◦ 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 2008, Evraz produced 17.7 million tonnes of crude steel, 13.3 million tonnes of
pig iron and 16.1 million tonnes of rolled products
◦ 2008 consolidated revenue amounted to $20.4 billion
◦ 2008 EBITDA reached $6.3 billion
4. Execution of Management Action Plan 4
◦ Production optimisation
◦ Shutdown of inefficient capacity
◦ Shift of production to semi-finished products, where demand is relatively high
◦ Take advantage of flexibility between billet and slab production depending on market situation
◦ Full utilisation of available capacity in Russia (13.2 mtpa of crude steel) achieved from 1 July 2009
◦ Cost saving measures
◦ Cash cost of one tonne of semi-finished steel products in Russia decreased by 35%
◦ Labour costs decreased by 32% compared to 1H08
◦ Services and auxiliary materials costs decreased by 42% compared to 1H08
◦ Capex savings
◦ Capex in 9M09 was US$321 million (64% down vs. 9M08) out of US$500m FY2009 guidance
◦ Exit from Cape Lambert Project in Australia
◦ Financial management
◦ Total debt decreased to US$8.6 billion, net debt decreased to US$7.4 billion as of 15 November 2009
◦ US$965m raised from concurrent GDR and five-year convertible bond offerings in July 2009
◦ RUB20 billion (approx. US$688m) raised from five-year bond offering in October 2009
◦ One-year extension of US$1.8 billion VEB loan due in 4Q09 approved
5. Maintaining Cost Leadership 5
◦ Constant review of product and resources flows for Cash Cost*, Slabs & Billets
potential efficiency gains US$/t
◦ Mining segment cash costs have reduced significantly: 400
345
375
◦ Approximately 75% of consolidated cost is rouble 300
248
denominated 221
◦ Russian-based assets have benefited from
200
declines in utilities and staff costs 100
◦ Low proportion of fixed costs in the US operations with
0
key raw materials being scrap and our own slab Slab, Russia Billet, Russia
1H08 1H09
* Average for Russian steel mills, excl. SG&A and amortisation
Cost of Revenue, Steel Segment Cash Cost, Coal Products and
US$ mln 100% Fe Iron Ore Products
US$/t
7,000 6,172
9%
120 107
6,000
7%
5,000 4% 90
8% 3,953 73
4%
4,000 18%
8% 60 50
3,000 12%
68% 9% 30
2,000 5% 30
1,000 48%
0 0
1H08 1H09 Coal products Iron ore products, 100% Fe
Raw materials Transportation Staff costs Depreciation Energy Other 1H08 1H09
%% is given to total Steel Segment Cost of Revenue
Source: Management accounts
6. Debt Maturities and Liquidity Profile 6
◦ Total debt of approx. US$8.6 billion, net debt of US$7.4 billion as of 15 November 2009
◦ Debt due by end of 3Q10, after VEB credit facility extension and repayment of the VTB
RUB10 billion loan (~US$344 million), is approx. US$1.1 billion
◦ Cash and cash equivalents amounted to approximately US$1.2 billion as of 15 November
2009
Debt Maturities Schedule Breakdown of Debt
Breakdown of Debt
Debt Maturities Schedule Due by 30 September 2010
US$ mln US$ mln Due by 30 September 2010
3000
2,479
2500
276
2000
1,451
1,367
1500 1,185
1000 705 595 57
509
500 302
805
17 15
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1Q 2Q 3Q 4Q $3.2bn syndicated loan Revolving debt Term loans
Source: Management accounts
7. Recent Capital Market Developments 7
◦ One-year extension of VEB US$1.8 billion loan facility initially due in 4Q09
approved
◦ RUB20 billion (approx. US$688 million) five-year bond issued in October
◦ Evraz signed US$950 million three-year credit facility with Gazprombank in
October (currently not utilised)
◦ VTB RUB10 billion (approx. US$344 million) loan was repaid in November 2009
◦ Evraz is currently in compliance with all its financial covenants
◦ On 12 November Evraz received consent from syndicate of bank lenders to
amend debt covenants, allowing flexibility to implement current strategy
◦ On 12 November Evraz launched consent solicitation from bondholders to
amend debt covenants
8. Market Improvement since the Beginning of 2009 8
Steel Prices
◦ Recovery in prices for semi-finished products is US$/t
driven by demand from Asia, the Middle East and
North Africa 500
◦ Expected steelmaking capacity utilisation until
year-end: 450
◦ Russia – 100%
400
◦ Ukraine – 100%
◦ North America – 70% 350
◦ Czech Republic – 65%
300
◦ South Africa – 70%
◦ Russian mining assets are running at 100% 250
capacity in coal and 87% in iron ore
◦ Steel volumes in 2H09 to grow by approximately
200
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov-
10% compared to 1H09 due to the restart of blast
09 09 09 09 09 09 09 09 09 09 09
furnace
◦ Prices for semi-finished products in 2H09 are Slabs, FOB Far East
higher than 1H09 Billets, FOB Far East
Source: Metal Courier
9. 3Q09 Operational Results 9
◦ In 3Q09, consolidated crude steel output increased by 22% vs. 2Q09 reflecting overall higher production
volumes at Evraz’s steel mills (except for Ukraine)
◦ Production volumes of rolled products rose on the back of better demand than in 2Q09
◦ Russia +23%
◦ Europe +38%
◦ North America +8%
◦ South Africa +5%
◦ Growth of production in all major product segments vs. 2Q09 except for railway products in Russia and
North America and tubular products in North America
‘ Production of Rolled Products
‘000 tonnes
+12%* - 8%*
1,500
1,200
- 50%* - 23%*
900
600 - 54%* - 16%*
300
0
Semi-finished Construction Railway products Flat-rolled products Tubular products Other steel products
products products
3Q08 2Q09 3Q09
* year-on-year comparison
10. Steel Production: Russia 10
◦ Destocking/restocking cycle in Russian domestic market completed
◦ Inventories at a normal level
◦ Russian government infrastructure spending, potentially a major driver of demand for construction
steel and railway products, is unlikely to have significant impact this year due to seasonality
Production of Rolled Products
‘000 tonnes
3,110
129 2,897
64 122
567 2,309 2,364 79 263
72 127
1,992 71
70 43 306 285 936
1,058 50
433
843 798
625
1,293 1,497
1,046 1,084
815
3Q08 4Q08 1Q09 2Q09 3Q09
Semi-finished Construction Railway Flat-rolled Other steel
11. Steel Production: North America 11
◦ Relatively good performance at the beginning of 2009 with subsequent deterioration in
line with market trends
◦ Stability of demand for large diameter pipes in Canada due to long contracts (Keystone
XL project)
◦ Destocking in the market is largely over with apparent demand remaining distinctly
limited
◦ Well-positioned to benefit from expected government infrastructure investments
Evraz Inc. NA’s Production of Rolled Products
‘000 tonnes
799
660
253 606
309 490
454
266
117
321 153
183 160 186
115
122 79
112 112 121
103 56 69 65 108
3Q08 4Q08 1Q09 2Q09 3Q09
Construction products Railway products Flat-rolled products Tubular products
12. Steel Production: Europe and South Africa 12
Production of Rolled Products, Europe Production of Rolled Products, South Africa
‘000 tonnes ‘000 tonnes
344
14 176
6
264 157
254 149
6 2 5
135
28 8
202 121
192 97 2 55
4
287 7 98
42
74
226
205 12 34
183 168
73 64
53 59 50
44 21 16 17 33 3
3Q08 4Q08 1Q09 2Q09 3Q09 3Q08 4Q08 1Q09 2Q09 3Q09
Other steel products Other steel products
Flat-rolled products Flat-rolled products
Construction products Construction products
Semi-finished products
13. Mining: Positive Margins Even in the Downturn 13
◦ Full self-coverage in raw materials achieved, Mining Segment Performance
allowing cash preservation US$ mln
◦ Mining segment remained EBITDA positive
2,500
2,000
2,012
even at the lowest levels of raw material prices
1,500
◦ Sustainability of vertically-integrated model in 1,000 837
market downturn 652
500
94
0
1H08 1H09
Revenue EBITDA
Iron Ore and Coking Coal Coverage* Cost of revenue, Mining Segment
‘000 tonnes US$ mln
14,000 12,147
12,000 11,271 1400
8,859
1,196
10,000 8,809 1200
8,000 18%
6,250 1000
9%
6,000 4,915 4,795
3,597 93% 800 16% 685
4,000 99%
600 14%
2,000 133% 20% 14%
79%
0 400 6% 27%
1H08 1H09 1H08 1H09 200 31% 26%
9%
10%
Coking coal Iron ore 0
1H08 1H09
Consumption Production Raw materials Transportation Staff costs Depreciation Energy Other
Source: Management accounts %% is given to total Mining Segment Cost of Revenue
* Self-coverage is calculated as a sum of coking coal production by Mine 12, Yuzhkuzbassugol production and pro rata to Evraz’s ownership production of Raspadskaya , in coal
concentrate equivalent, divided by Group’s total coking coal consumption excluding coal, used in production of coke for sale to third parties
14. 9M09 Financial Summary 14
US$ mln unless otherwise stated 9M 2009 9M 2008 Change
Revenue 7,118 17,100 (58)%
Adjusted EBITDA* 874 5,951 (85)%
Adjusted EBITDA margin 12% 35%
Net Debt** 7,256 9,565 (24)%
Steel Sales*** (million tonnes) 10.7 13.7 (22)%
Source: Management accounts
* Adjusted EBITDA represents profit from operations plus depreciation and amortisation, impairment of assets and loss (gain) on disposal of PP&E, forex
gains/(losses).
** As of the end of the period
*** Segment sales volumes to third parties
15. 9M09 Financial Highlights 15
◦ Group revenue decreased by 58% vs. 9M08 to Consolidated Revenue and EBITDA
US$7.2bn driven largely by decrease in average prices US$ mln
and sales volumes of steel products
7,000 6,533
◦ Geographical diversification of the business helped to 6,000
stabilise operations in crisis environment 5,000
4,000 3,280
◦ International assets performed well in the first quarter 3,000 2,251 2,413 2,226 2,479
with subsequent deterioration due to the later start of 2,000
destocking in the mature markets 1,000 372 305 163 406
0
◦ Recovery of export demand for semi-finished steel 3Q08 4Q08 1Q09 2Q09 3Q09
helped to fully utilise Russian assets as from 1 July
Revenue EBITDA
2009
9M09 Steel Segment Sales Volumes by Product 9M09 Steel Segment Revenue by Product
‘000 tonnes US$ mln
15,000 13,673
516 15,000 13,498
12,500 579 528
2,146 10,707
296 12,500 1,082
10,000 1,830 528 2,628
1,495 10,000
7,500 1,166 1,737
4,439 7,500 5,866
3,110 158
5,000 4,415 822
5,000
1,040 820
2,500 4,163 4,112 2,500 1,544
3,108
0 1,482
0
9M08 9M09 9M08 9M09
Semi-finished Construction Railway
Semi-finished Construction Railway Flat-rolled Tubular Other steel Flat-rolled Tubular Other steel
Source: Management accounts
16. Summary 16
◦ Difficult economic situation in the first half of 2009
◦ Increased geographical diversification of business helped to stabilise the situation
◦ Strengthening global demand for semi-finished steel allowed us to fully utilise Russian
steelmaking starting from 1 July 2009
◦ Post April 2009 improvement in benchmark prices for semi-finished steel products is
reflected only in 2H09 revenues due to the nature of export contracts
◦ Management action plan in line with expectations in terms of cost savings and working
capital release
◦ Decrease in debt level, successful US$965 million capital raising exercise in July and
RUB20 billion five-year bond issue in October
◦ Completion of destocking in our key markets, alongside improvement in Asian demand,
makes us confident of achieving better results in the second half of 2009
18. Revenue by Market 18
First Half of 2008 First Half of 2009
4% 3%
7%
12%
3%
28%
5%
2%
1%
4% 40%
10%
14% 2%
9% 3%
5%
16% 2% 30%
Russia Ukraine Other CIS Americas Russia Ukraine Other CIS Americas
Europe Middle East China Thailand Europe Middle East China Thailand
Other Asian Africa & RoW Other Asian Africa & RoW
19. Disclaimer 19
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.
