Platts 2014 conference presentation (steel sector in russia) berlin, 2-3 june 2014

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an update on the Russian steel sector (2013 results)

Transcript of Platts 2014 conference presentation (steel sector in russia) berlin, 2-3 june 2014

  • PLATTS ANNUAL STEEL MARKETS EUROPE CONFERENCE CIS: how do they interrelate with Europe? Berlin 2-3 June 2014
  • DISCLAIMER This document is confidential and has been prepared by NLMK (Company) solely for use at 10th Annual Platts Annual Steel Markets Europe Conferenceand may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. This document does 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 shares in the Company or Global Depositary Shares (GDSs), nor shall it or any part of it nor the fact of its presentation or distribution form the 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 authors intentions, beliefs or current expectations concerning, among other things, the companys 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 companys 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 companys 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 and viewing this presentation you agree to be bound by the foregoing terms. 2
  • RUSSIA: #5 CRUDE STEEL PRODUCER GLOBALLY [3] 111 87 81 69 66 43 China Japan USA India Russia South Korea Germany 779 Source: Worldsteel Association, 2013. million t 4% of global crude steel was produced in Russia in 2013 2013 RESULTS
  • RUSSIA: #6 STEEL CONSUMER GLOBALLY Source: Worldsteel Association, 2013. [4] 96 74 65 52 43 38 China USA India Japan South Korea Russia Germany 700 million t Russia accounted for 3% of apparent finished steel use in the world in 2013 2013 RESULTS
  • INDUSTRY CONCENTRATION [5] 71% 29% Top 4 steelmakers Other steelmakers Median size of the plants below 0.5 mln tpa output Over 70% of crude steel in Russia is produced by four companies Four largest Russian steel companies are in Top-30 of global steelmakers 69 m t NLMK 14.6 m t MMK 11.9 m t Evraz 11.9 m t Severstal 10.7 m t TOP 4 2013 RESULTS
  • 34 35 37 39 40 41 42 41 39 38 42 44 46 46 9 9 9 9 11 11 16 19 20 16 18 19 21 21 16 16 14 14 15 15 13 12 12 6 7 7 4 259 59 60 61 66 66 71 73 69 60 67 69 70 69 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 OHF EAF BOF CRUDE STEEL PRODUCTION BY ROUTE [6] 4% 30% 66% Russian steelmakers have modernized the assets to produce steel in a more effective and environment-friendly way million t
  • Surplus of steel is exported from Russia mostly as semi-finished products Net exports of finished steel are declining as domestic steel demand grows attracting imports STEEL TRADE BALANCE [7] 15,7 13,6 15,1 12,1 14,8 13,6 6,5 11,2 7,4 5,2 4,0 3,4 0 5 10 15 20 25 30 2008 2009 2010 2011 2012 2013 Semi-finished steel net exports Finished steel net exports Exports Imports million t Source: Research market agencies 2013, Russian statistics, NLMK estimates
  • EXPORTS STRUCTURE BY PRODUCT [8] 36% 21% 19% 13% 11% Slabs Billets HRC Other flat products Long products 24 m t Semi-finished products account for 57% of exports 74% of finished steel exports are flat steel products Source: Research market agencies 2013, Russian statistics, NLMK estimates
  • KEY EXPORT DESTINATIONS [9] 38% 21% 19% 10% 8% 4% Europe Middle East South-East Asia CIS North America Other 24 m t Europe, Middle East and South-East Asia are key export destinations of Russia Source: Research market agencies 2013, Russian statistics, NLMK estimates
  • KEY IMPORTING REGIONS [10] 58% 20% 19% 3% CIS Asia Europe Other 7 m t Imports accounted for 16% of steel consumption in 2013 Imports mainly come from CIS countries 19% is imported from Europe Source: Research market agencies 2013, Russian statistics, NLMK estimates
  • EUROPE AS A TRADING PARTNER [11] 54% 4% 19% 14% 2% 7% Slabs Billets HRC CRC Other flat products Long products EXPORTS TO EUROPE IMPORTS FROM EUROPE 30% 12% 24% 14% 11% 8%1% Pre-painted sheet Galvanized sheet Other flat products Sections Rails Other long products Semi-finished steel 8.7 m t 1.0 m t Russia accounts for over 80% of European slab imports Europe exports high value-added flat steel and long steel in Russia Source: Research market agencies 2013, Russian statistics, NLMK estimates 5 m t
  • 23 31 29 36 81 101 122 128 204 173 159 188 176 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 RUSSIAN STEEL SECTOR INVESTMENTS [12] Significant investments in modernization, including in minimization of environmental footprint, energy efficiency and transport infrastructure billion RUB Fixed asset investments of Russian steel companies Source: Russian steel consortsium estimates, companies data * Data for Russian steel consortsium members, excluding OMK
  • 53,5% 48,5% 43,5% 43% 2000 2005 2008 2013 RUSSIAN STEEL SECTOR MODERNIZATION [13] Source: Russian statistics Russian steel companies have substantially restructured and revamped fixed assets Fixed assets depreciation has declined by 10 p.p. over the decade Fixed assets depreciation
  • PRODUCTIVITY GROWTH AND MINIMIZATION OF ENVIRONMENTAL FOOTPRINT: NLMK CASE [14] NLMK has a track record of environmental footprint reduction o Since 2007 air emissions have reduced by 40% and waste utilization has increased by 20% o Zero waste water discharge at Lipetsk site achieved Labour productivity growth of over 2.5 times since 2001 AIR EMISSION AND WASTE WATER DISCHARGE 37,5 30,5 30,4 28,5 27,9 22,6 19,4 1,09 0,02 0 0,0 0,5 1,0 1,5 0 10 20 30 40 2007 2008 2009 2010 2011 2012 2020E Air emissions per tonne of steel Waste water discharge per tonne of steel, rhs Note: NLMK Russia average. BAT = Best available technology. kg/t of steel BAT 18.9 *Russian Flat Products LABOUR PRODUCTIVITY AND ENERGY EFFICIENCY 5 5,5 6 6,5 7 7,5 100 150 200 250 300 350 400 450 2001 2007 2008 2009 2010 2011 2012 2013 Gcal/t t of steel per employee Labour efficiency Energy efficiency (RHS) Source: Company data
  • RUSSIAN STEEL SECTOR PROFITABILITY [15] Source: Companies data, Bloomberg, NLMK estimates Profitability margins to stagnate at single digit numbers capping ability to expand capacity and leading to capacity rationalization and restructuring EBITDA margin of the top-4 steelmakers 0% 5% 10% 15% 20% 25% 30% 35% 2007 2008 2009 2010 2011 2012 2013 2014 9.5%
  • 35 36 34 17 12 11 2,1 3,0 3,1 0 1 2 3 4 0 10 20 30 40 2011 2012 2013 Net debt EBITDA Net debt/EBITDA (x-times) RUSSIAN STEEL SECTOR DEBT [16] Source: Russian steel consortsium data Capex is expected to decline due to high debt leverage, lower profitability and focus shift from growth to efficiency improvements billion RUB Debt leverage of Russian steel companies* -35%
  • STEEL DEMAND IN RUSSIA [17] 0 10 20 30 40 50 60 70 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E million t Source: Worldsteel Association 2013. Steel consumption has increased by 2.7x times since 1994 to 43 million t Huge pent-up demand from the 1