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Transcript of Magnitogorsk Steel (MMK) · Crude Steel Growth Drivers, th. tonnes Finished Steel Products...
October 2012
Magnitogorsk Steel (MMK)
2
MMK – Russian Steel Leader
Largest single-site steelmaker in Russia with current crude steel capacity of 14 mln tonnes
HVA products share currently expected to reach 45% of total production volumes by 2013
Import substitution strategy: favorable geographical location to meet strong demand from the most intensive steel
consuming regions of Russia – the Urals and Volga regions
Great play on Russian infrastructure:
• 18% domestic steel market share enables MMK to benefit from premium pricing for domestic sales
• Largest exposure to pipe-manufacturing, auto-building and heavy machinery
Disciplined investment strategy with priority given to investments in high-return projects and high-quality assets
investments approach
The most modern asset base – over USD 7 bn of investments over the last 4 years
Mill 5000 Shop Mill 5000 Galvanizing Line
3
ММК Geography
2.3 mln tpy capacity.
Steel making complex
and two service
centers.
Metals service center
and stamped-product
factory with 250 th.
tpy capacity.
4.2 mln tonnes of
coking coal mined in
2011. Covers 40% of
MMK needs. Largest iron-ore
deposit, more than 2
bn tonnes of reserves.
Interkos-IV
Prioskolsky GОК
MMK Metalurji
ENRC
Belon
One of Russia’s
largest hardware
producers.
465 th. tonnes
produced in 2011.
ММК Metiz
Profit
Source: MMK
Covers 100% of MMK
scrap needs.
ММК trading house
67%
3% 21%
6%
1%
High-priority (domestic)
Priority (export)
Markets
Other (export)
ММК (2011)
№1 by rolled products output in Russia
11.7 mln tonnes of steel
10.6 mln tonnes of finished products in Russia
% Share of MMK shipments,
mln tonnes
Profit’s scrap collecting yards
CAGR (2010-15) = 5.5%
CAGR (2010-15) = 5.0%
CAGR (2010-15) = 6.7%
Currently MMK’s main
iron-ore supplier.
Long-term agreement
with ММК (until 2017).
ММК controls 5%
оf Fortescue Metals
Group, one of
Australia's largest
iron-ore producers.
Fortescue MG
MMK benefits from a central location,
with proximity to Russian industrial
heartland and proximity to export
markets
5,8% 5,6%
3,4% 3,2%
3,9%
2%
3%
4%
5%
6%
CIS Turkey China EU-15 World
1130
1295
1373
1422
1486
1000
1100
1200
1300
1400
1500
2009 2010 2011 2012E 2013E
Global Steel Industry Highlights
World Steel Consumption, mln tonnes Steel Demand CAGR 2011-2020, %
World Steel Production, mln tonnes Crude Steel Capacity Utilization, %
4
Source: WSA, HSBC
Source: WSA Source: WSA
15%
6%
4%
World steel consumption
continues to grow MMK domestic market demonstrates
the highest growth rates
5%
791
627
830
683
845
715
873
745
0
250
500
750
1 000
ROW China
2010 2011 2012E 2013Е
83% 83%
86% 89%
74%
79% 79% 80%
60%
55% 58%
59%
76%
80% 80% 82%
50%
75%
2010 2011E 2012E 2013E
Russia United States Middle East World
Source: WSA, HSBC
0,9 1,2 1,2 0,8 1,4 1,6 1,6
0,3 0,4 0,3
0,2
0,4 0,5 0,5 1,0
1,3 0,9
0,9
1,1 1,1 1,3 0,7
0,6 0,5
0,4
0,7 0,9 0,8 1,7
2,7
1,9
1,0
1,7
2,1 2,0
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011 2012E
Coated products CRC Thick plate HRC Long products
-5 381
-1 583
453
995
-5 932
-1 746
500
1 097
-6 496
-1 911
547 1 202
-7 000
-6 000
-5 000
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
Hot-rolled steel Long product Thick plate Coated steel
2010 2011E 2012E
MMK Growth Prospects
Russian Import / Export Balance, th. tonnes MMK Product Structure Dynamics, %
Russian Import Structure, mln tonnes Russian Steel Consumption by Industry, mln tonnes
5 Source: Metal Expert, MMK
Source: Metal Courrier Source: Metal Courrier
Russia remains net exporter of ordinary steel,
while shortage of HVA products persists
HVA products Russia sees solid import
volumes, mostly of HVA
products
13% 14% 13% 18% 19% 20%
12% 11% 10% 9% 8% 10%
5% 13% 11% 14% 14% 14%
58% 50% 51%
45% 43% 42%
11% 10% 14% 15% 15% 15%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012E 2013Е 2014Е Downstream products Flat cold-rolled products Thick plate (incl. Mill 5000)
Flat hot-rolled products Long products Slabs and billets
7,1
3,7
1,29
6,7
3,8
1,32
7,0
4,1
1,33
7,3
4,4
1,31
7,5
4,8
1,35
0,0
2,0
4,0
6,0
8,0
Pipe making Machine building (incl. carmaking)
Rail-cars and ship building
2011 2012E 2013E 2014E 2015E
Source: MMK
0
5 000
10 000
15 000
20 000
2010 2011 2012E 2013E 2014Е
ММК, currently run capacities MMK, upside on current capacities
MMK, new capacities MMK Metalurji
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
2009 2010 2011 2012E 2013E 2014Е
MMK MMK Metalurji HVA products
MMK Growth Prospects
MMK Facilities in Turkey EBITDA per ton of Finished Steel Products, USD
Crude Steel Growth Drivers, th. tonnes Finished Steel Products Structure Evolution, th. tonnes
6
HVA share ≈ 45% by 2013
34 %
Sourсe: MMK Sourсe: MMK
45 %
95 76
96
147
306 339
277
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
50
100
150
200
250
300
350
400
Long steel HR flatsteel
CR flatsteel
Mill 5000plate
Galvanizedsteel
Formedsections
Colour -coated steel
EBITDA/t (LHS) EBITDA margin (RHS)
HVA (Higher Value-Added products)
Sourсe: MMK, Q2 2012
Iron ore; 35%
Coal; 26% Scrap purchased;
11%
Other raw materials; 11%
Fuel and energy
purchased; 9%
Wages; 3%
Others; 4%
Competitive Cost Position
Galvanizing line Slab Cash-Cost Structure, Q2 2012
Slab Cash-cost and Raw-material Price, USD/tonne
7
Cash cost: 414 USD/t
Slab Cash-Cost Sensitivity, Q2 2012, USD/tonne
Sourсe: MMK
Sourсe: MMK
* - Q2 2012 slab cash-cost
459 442
414
60
80
100
120
140
160
180
200
220
200
300
400
500
Q4 11 Q1 12 Q2 12
Slab Cash-cost Scrap Iron ore (RHS)
Pellets (RHS) Coal (RHS)
Iron Ore Price Change
-50% -40% -30% -20% -10% 0% 10% 20%
Cokin
g C
oal P
rice C
hange
-30% 300 318 337 355 374 392 410 429
-20% 308 326 344 363 381 399 418 436
-10% 315 333 352 370 389 407 425 444
0% 323 341 359 378 396 414* 433 451
10% 330 348 367 385 403 422 440 459
20% 337 356 374 393 411 429 448 466
0
1 000
2 000
3 000
4 000
2008 2009 2010 2011 2012E 2013E
M. Kuibas Podotvalnoe Slag Processing
3,6 4,2 4,2 3,9 3,9
4,6 5,1 5,1
6,2
2,5 3,0
3,2 2,8 2,8
3,4 3,7 3,7
4,5
0
1
2
3
4
5
6
7
2009 2010 2011 2012Е 2013Е 2014Е 2015Е 2016E 2017E
Coking coal production Concentrate production
Competitive Cost Position (Continued)
30% 40%
100%
75% 10%
70%
50%
25%
0%
25%
50%
75%
100%
Iron ore Coal Scrap Electricity
Own Purchased
Self-sufficiency Level, % MMK Facilities in Turkey
Integration in Coking Coal, mln tonnes Integration in Iron Ore, th. tonnes
8
-19
Sourсe: MMK
Others
Others
Federal
Grid
MMK
MMK
(Belon)
MMK
(Profit) MMK RASP
Sourсe: MMK
Sourсe: MMK
Coal concentrate production to grow by
more than 40% by 2017 compared to 2011
7 000
8 000
9 000
10 000
11 000
12 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
ММК Severstal NLMK
Leading Positions in the Russian Steel Industry
Diversified Product Mix Leading Position on Domestic Market
Leader in Finished Steel Production, th. tonnes MMK Share of Russian Steel Market, %
9
Hot-rolled sheet: 5.7 mln tonnes (54%)
Cold-rolled sheet: 1.0 mln tonnes (10%)
Long products: 1.5 mln tonnes (14%)
Downstream: 1.4 mln tonnes (13%)
Plate (mill 5000): 0.9 mln tonnes (8%)
Picture
Picture
Picture
Picture
Source: Company data Source: ММК, Metal Courier, 2011
Source: ММК, Metal Courier
MMK retains leadership in Russia
while drastically changing its
product mix
Source: ММК, 2011
MMK's share
in Russia
Share in MMK's
total production
Place in
Russia
Hot-rolled sheet 37% 62% 1
incl. thick plate 27% 11% 1
Cold-rolled sheet 21% 10% 3
Galvanized flat products 23% 5% 3
Tin plate 100% 1% 1
Colour-coated rolled products 28% 3% 2
ММК; 18%
Severstal; 17%
NLMK; 15%
Urals Steel; 3% ZSMK; 9%
NTMK; 7%
Chelyabinsk MK; 5%
NKMK; 2%
Others; 25%
Pipe production
30,0%
Spot sales in Russia 18,1%
Spot sales in CIS
9,6%
Construction sector 12,9%
Machine building 12,5%
Metalware and semi-
integrated factories
9,1%
Automobile sector 6,4%
Food industry 0,6%
Fuel and energy
companies 0,4%
Bridge building 0,4%
H/r steel 40%
Long steel products
18%
Thick plate 12%
Coated & Downstream
products 19%
C/r steel 11%
2,1
7,3 7,2
3,7
4,9
3,5
2
3
4
5
6
7
8
1996 1999 2002 2005 2008 2011
Domestic market (Russia + CIS) Export
MMK’s Dominating Domestic Market Position
Domestic Sales by Region, 2011 Domestic Sales by Sector, 2011
MMK Domestic and Export Sales, mln tonnes Domestic Sales Structure, 2011
HVA
Products,
42%
Total: 7,181 kt
Source: MMK
Source: MMK Source: MMK
Source: MMK
MMK organically grows its share in
Russian market as demand in export
markets remains sustainable
Total: 7,181 kt
MMK is located in most intensive
steel consuming region of Russia
10
78
162
150 156
225
158
190
243
50
75
100
125
150
175
200
225
250
2004 2005 2006 2007 2008 2009 2010 2011
Strong Presence on Export Markets
Domestic Price Premium, USD/tonne Regional Sales Structure, 2011
Share of Export Sales in Shipments, % Export Sales Structure, 2011
11
Total: 3,465 kt
Total: 10,646 kt
Source: ММК Source: ММК
Source: ММК Source: MMK
Domestic price premium makes Russian market
attractive. 2011 domestic market price premium
equaled to 243 USD/t
54% 59% 61% 66% 72% 64% 69% 67%
46% 41% 39% 34% 28% 36% 31% 33%
0%
25%
50%
75%
100%
2004 2005 2006 2007 2008 2009 2010 2011
Domestic Exports
Hot-rolled steel 81%
Cold-rolled steel 6%
Downstream products
1%
Long products 5%
Slabs and billets 5%
Thick plate 2%
Russia &CIS 67%
Middle East 21%
Far East & Asia 3%
Europe 6%
Africa 1%
Americas 2%
CAPEX USD 1.5 bn
Market Russia, EU, automotive industry,
construction, white goods production
Profile HVA rolling facilities
Capacity, mtpy finished steel 2
Product types CR galvanized high strength steel
Rationale #1 supplier to automotive sector, imports
replacement
Acquisition cost USD 0.543 bn
Market Russia
Profile growing producer of high-quality coal
Capacity, mtpy coking coal 4.2 in 2010, 6.2 by 2017
Rationale Vertical integration and higher profitability
CAPEX USD 1.5 bn
Market Russian oil&gas infrastructure, ship and
bridge building
Profile HVA rolling facilities
Capacity, mtpy finished steel 1.5
Product types Heavy plates up to x120 strength class
Rationale #1 supplier to pipe sector
imports replacement
Investments USD 2.1 bn
Market Middle East, EU, Africa
Profile state-of-the-art full-cycle steel
production
Capacity, mtpy finished steel 2.3
Product types HRC, galvanized, colour-coated
Rationale
increase presence in key export
regions
geographical diversification
Building Value
Belon (RUSSIA) Mill 2000 (RUSSIA)
MMK (TURKEY) Mill 5000 (RUSSIA)
12
MMK’s investment approach is…
HIGH RETURN RATE VALUE - ADDING
ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIP FOCUSED BEATING THE CYCLE
HIGH RETURN RATE CREATING SYNERGIES VALUE - ADDING
CONSISTENT TARGETTING KEY MARKETS WELL - THOUGHT OUT ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIP FOCUSED BEATING THE CYCLE
Plate Mill 5000
Consumers of Mill 5,000 Products
ММК is one of 10 producers of premium quality thick plates globally Use of Thick Plate in Russia by Sector, th. tonnes
• Project completion time under SMS Demag contract - 32 months
• November 2007 – May 2009: construction of the mill
• July 2009: first production start up
• December 2009: launch of Continuous Slab Caster # 6
• February 2010: launch of secondary steel-treatment complex
Agreements with major customers
• Cooperation agreement with Gazprom
• Strategic cooperation agreement with TMK
• Cooperation agreement with ChTPZ
• Government suggested pipemakers to reduce share of imported
plate
13
Specifications
Start-up 2009
Capacity, mln tpy 1,5
Max Plate Width, mm up to 4,800
Plate Length, m 24
Plate Thickness, mm 8-160
Rolling force, tonnes 12 000
Strength class up to Х120
Source: pipe-producers’ estimates, ММК
0%
30%
60%
90%
120%
0
2 000
4 000
6 000
2008 2009 2010 2011Е 2012Е 2013Е 2014Е 2015Е
LDP Bridge building
Boiler building Ship building
Other MMK market share (RHS)
MMK; 36%
Import; 16%
Others; 48%
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2009 2010 2011Е Nord Stream Yamal-Europe
Sakhalin-Khabarovsk-Vladivostok VSTO-2
BTS-2 Current pipelines replacement
Export
-1 000
0
1 000
2 000
3 000
4 000
Production of LDP LDP imports
LDP exports Consumption of LDP in Russia
Mill 5000 - Strengthening Positions in Pipe Sector
Use of LDP Produced in Russia by Project, th. tonnes Geography of Main Pipelines
Growth in LDP Consumption in Russia, th. tonnes Key Steel Suppliers to Pipe-builders in Russia, 2011
14
BTS-2
VSTO-2
Sakhalin-Khabarovsk-Vladivostok
Yamal-Europe*
Nord Stream
Russia
1 882
3 025
Source: pipe-producers’ estimates, MMK
Source: pipe-producers’ estimates, MMK Source: MMK
MMK produces 35% of
steel, used for pipe-making
in Russia
MMK steel is used in
construction of all pipelines
Demand for LDP remains
strong
3 400
* - Incl. Pochinki-Gryazovets and Bovanenkovo-Uhta
South Stream
765
565 519
426 399
261
156
67 12 10
0
100
200
300
400
500
600
700
800
Strengthening Position in Auto Industry
Russian Vehicle Fleet by Age, %
Mill 2,000 Complex Private Car Ownership, vehicles per 1,000 people
15
Key Mill 2,000 specifications
Capacity, th. tpa 2,000
Sheet width, mm 850-1,880
Sheet thickness, mm 0.28 – 3.0
Steel grades HSLA, IF, HSS, BH, DP, CP,
ТRIP
Production volumes:
• 700,000 tpy of galvanized steel annealed
• 1,300,000 mln tonnes of cold-rolled steel
Key customers:
• Car-makers, White goods producers, Construction sector
Source: Rosstat, 2010
Source: UNO, 2010
Russia is on the way to
diminish the lag to
developed countries
less than 10 yrs; 44%
more than 10 yrs; 33%
more than 20 yrs; 23%
Current situation: • Products with thickness from 0.28 mm and width up to 1860 mm are launched
in production;
• Products for galvanizing at MMK facilities or at facilities of other companies
are launched in production;
• Quality of mill 2000 products (calibration, surface quality, etc.) is better than of
Russian peers;
• Samples of the products were shipped to major MMK clients
• Annealing and galvanizing lines were commissioned on July 16, 2012
Further steps: • Launch production of all the product mix of the mill, including high-strength
steels;
• Mill 2000 products supply to foreign car makers
3 678
4 240
0
1 000
2 000
3 000
4 000
2008 2009 2010 2011Е 2012Е 2013Е 2014Е 2015Е 2020Е
All vehicle types output, th.pieces Steel consumption by car-makers
75%
51% 40%
17%
24%
10%
7%
22%
40%
2% 3% 10%
0%
25%
50%
75%
100%
2010 2015Е 2020Е
Mild Steel AHSS HSS UHSS
Mill 2000 Cold Rolled Steel Complex
High Strength Steels Use Russian Car-makers Steel Consumption
Russian Cold-rolled Automotive Steel Consumption, % Car-making Projects in Russia by 2015E, %
16
Source: boronextrication.com
Mild Steel 30.8%
UHSS 9.1%
HSS 44.5%
AHSS 15.6%
High strength steel
types to reach 60% in
overall consumption
Source: WSA
Source: MMK estimates Source: MMK estimates
60%
15%
13%
12% Volga federal region
North-west federalregion
Central federal region
Other
Steel consumption to reach 2.7 mln tonnes by
2012 and more than double by 2020 from 2010
60%
25%
49%
Entry to Growing Turkish Market
Flat Steel Market in Turkey, mln tonnes Long Steel Market in Turkey, mln tonnes
Locations of Key Markets
17 Source: TIPSA, Credit Suisse
Source: ING
Istanbul
Iskenderun
Europe
Middle East
Africa
Priority export markets
Important export markets
Turkish Flat Steel Market Structure, %
MMK will focus on flat steel in
Turkey, where there is a
structural shortfall
Pipe production;
25%
Metal Service Centers; 19%
Spot sales; 18%
Auto industry; 13%
Packaging; 7%
Boiler making; 6%
Other; 12%
Source: TIPSA, Credit Suisse
4,3 4,5 4,4
6,6
9,1 8,6
11,0 10,4
8,3
11,9 13,2 13,2
-6,7 -5,9
-3,9 -5,3
-4,1 -4,6 -7
-5
-3
-1
1
3
5
7
9
11
13
2007 2008 2009 2010 2011 2012 (an-d)
Flat - Production Flat - Consumption Balance
21,4 21,8 20,6
19,7
22,9
25,3
11,5 9,7 9,7
11,7
13,7 14,2
9,8
12,1 10,9
8,0 9,1
11,0
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 (an-d)Long - Production Long - Consumption Balance
0
100
200
300
400
500
600
2009 2010 2011 1H 2012
Flat hot-rolled products Galvinized steel Colour-coated steel
2008 2009 2010 2011 2012
• Steel service center
Iskenderun site
Istanbul site
Start-up schedule
• Reversing mill
• Hot-dip galvanizing line
• Pickling line
• Polymer coating line
• Steel service center • Hot-dip galvanizing line
• Polymer coating line
• Steel making facilities
68
156
505
18
Project Ramp-up and Growth Plans
Ramp-up schedule • Key production line (Iskenderun) – 2.3 million tons per year
• Two service centers: Iskenderun & Istanbul
• Output: hot-rolled steel, galvanized and color-coated steel products
• Production launch: 2010
• Investments in the project: US$ 2.1 bn
• Hot rolling mill
538
19
MMK METALURJI Sea Port
The largest private seaport in Turkey, it is capable to
berth and handle any kind of vessels up to 100.000 DWT.
This significantly expands exporting abilities and
facilitates supplies of raw materials for steel-making.
The port can berth and handle:
• Dry bulk vessels
• General Cargo vessels
• Scrap iron carriers
• Container ships
• Ro-Ro vessels
Key characteristics
• The port has 1800 meters of berthing length
• Total 12 vessels can be berthed simultaneously
• Ships Berthing Capacity: 600 Ships / Year
• Cargo Handling Capacity: 12 million tons per year
• Main and auxiliary handling equipment is in place
• On April 5, 2010 the port was certified and since then is in
operation
Berths Characteristics
Poz. No. Lenght m. Width m. Min. Water
Dept.
Max. Water
Dept.
Biggest Ship
to Berth
1 265 42 (-13,50 m.) (-14,00 m.) 100.000DWT
2 265 42 (-12,00 m.) (-13,50 m.) 80.000DWT
3 155 30 (-5,00 m.) (-6,20 m.) 10.000DWT
4 200 17 (-6,20 m.) (-9,00 m.) 20.000DWT
5 200 17 (-9,00 m.) (-11,50 m.) 40.000DWT
6 160 17 (-11,50 m.) (-12,00 m.) 60.000DWT
7 265 42 (-12,00 m.) (-13,50 m.) 80.000DWT
8 265 42 (-13,50 m.) (-14,00 m.) 100.000DWT
Financials
Financial Highlights, USD mln
Consolidated IFRS Summary Financial Highlights, USD mln
20
Source: MMK
Source: MMK
Source: MMK 2006-2007 financials under US GAAP, from 2008 – under IFRS
BB+, outlook Negative
(Changed from “stable” on May 16, 2012)
Ba3, outlook Stable
(outlook changed to “stable” on December 22, 2011)
MMK credit ratings
10 550
5 081
7 719
9306
2 204
1 309 1 606 1336 1 081
219 232
-125 -500
1 500
3 500
5 500
7 500
9 500
11 500
2008 2009 2010 2011
Revenues EBITDA Net profit
H1 2012 2011 2010 2009
Crude steel output, kt 6,711 12,195 11,419 9,618
Finished steel, kt 6,082 11,158 10,245 8,764
Revenues, $ mln 4,941 9,306 7,719 5,081
EBITDA, $ mln 662 1,336 1,606 1,309
EBITDA margin, % 13.4% 14.4% 20.8% 25.8%
Net profit, $ mln -35 -125 232 219
Net margin, % -0.7% -1.3% 3.0% 4,3%
Assets, $ mln 15,551 16,295 16,738 14,833
Credit & loans, $ mln 3,696 4,416 3,548 2,118
short-term 1,263 1,334 1,087 828
long-term 2,418 3,082 2,461 1,290
Shareholder capital, $ mln 9,199 9,289 10,257 9,957
Cash, $ mln 196 424 515 165
2243
2425 2516
1987 2099 2101
9,1%
12,1%
14,7%
8%
10%
12%
14%
16%
18%
1000
1500
2000
2500
4Q11 1Q 12 2Q 12
Revenues COGS EBITDA margin
21
Investment Highlights
• Growing volumes and share of HVA products (≈45% by 2013) to secure sustainably high efficiency
• Focus on specialty steel products to replace imports in Russia and to capture domestic market price
premium
• Access to lucrative Turkish flat steel market with high-quality steel products
• Emphasized direct exposure to growing industry sectors in the domestic market – pipe-building,
automotive and heavy machinery industries
• Technological flexibility to address raw-material market fluctuations – crude steel production using
iron ore/coking coal vs. scrap
• Plans for further strengthening in commodities
Magnitogorsk Steel (MMK)
0
500
1 000
1 500
2 000
2 500
3 000
Q1 10Q2 10Q3 10Q4 10Q1 11Q2 11Q3 11Q4 11Q1 12Q2 12
High value-added (HVA) products Flat hot-rolled products
Long products Slabs and billets
23
Key operational indicators • MMK Group finished products output in H1
2012 rose 14% y-o-y and amounted to 6.1 mln
tonnes
• H1 2012 MMK Group HVA products output
amounted to 2,392 ths. tonnes, 17% higher y-
o-y
• Belon's production of coking coal concentrate
in H1 2012 was 1,537 ths. tonnes, 3% lower q-
o-q
OJSC MMK finished products sales
th. tonnes
Growth Output Driven by HVA Products
Q2 '12 Q1 '12 % H1 12 H1 11 %
Cast iron 2 557 2 479 3% 5 037 4 780 5%
Crude steel incl. 3 294 3 417 -4% 6 711 5 905 14%
MMK 3 012 3 117 -3% 6 129 5 884 4%
MMK Metalurji 282 300 -6% 582 21 x28
OJSC MMK Finished products output
incl. 2 776 2 766 0,4% 5 542 5 234 6%
Slabs and billets 0,7 45 -98% 46 55 -16%
Long products 451 401 12% 852 648 31%
Flat hot-rolled products 1 416 1 380 3% 2 797 2 818 -1%
High value-added (HVA) products 908 939 -3% 1 847 1 713 8%
Thick plate (Plate Mill 5000) 195 248 -21% 444 550 -19%
Flat cold-rolled products 304 316 -4% 621 481 29%
Downstream products* 409 374 9% 783 682 15%
MMK-Metiz finished products 142 110 29% 251 237 6%
ММК Metalurji finished products 284 253 12% 538 112 х4,8
Belon coking coal concentrate 761 776 -2% 1 537 1 486 3%
* - galvanized steel products, colour-coated steel products, formed section, band, tin plate, etc.
459
442 442 442
427422
414 414
-17
2
-2
-15
-5
-8
400
425
450
Slab cash-cost Q4
2011
Pricedecrease
effect
Rawmaterialsstructure
Otherfactors
Slab cash-cost Q12012
Pricedecrease
effect
Rawmaterialsstructure
Otherfactors
Slab cash-cost Q2
2012
267
373
-18 -8
42
5
2
-1
-100
0
100
200
300
400
Q1 2012 Q2 2012
Steel (Russia) Steel (Turkey) Coal mining Eliminations
Revenue analysis, USD mln
24
MMK Group EBITDA structure, USD mln
Cash-cost of slab evolution, USD
• Q2 2012 revenue increased q-o-q mainly due to sales
volumes growth at the Magnitogorsk site, MMK Metiz and
MMK Metalurji, and also due to some growth of selling
prices
• MMK Group EBITDA increase in Q2 2012 is due to growth
of Russian steel segment (40%) and 2 fold decrease in loss
at the EBITDA of Turkish segment
• Q2 2012 cash-cost of slab declined mainly due to
decreasing raw materials prices
USD 369 m
USD 293 m
MMK Key Performance Indicators Analysis
26%
2 471 2 4782 504 2 516
2425
49 -3
21
-14
26
12
2 300
2 400
2 500
Q1 2012Revenue
Pricegrowtheffect
Productsvolumes
andstructure
MMKMetalurji
Belon MMKMetiz
Otherfactors
Q2 2012Revenue
66%
34%
Long-term debt
Short-term debt and current portion of long-term debt
32%
46%
22%
30.06.2012
RUR USD Euro
424
196
717
814
0
200
400
600
800
1000
1200
31.12.2011 30.06.2012
Cash and cash equivalents Securities
1260
1041
587
291
498
0
200
400
600
800
1000
1200
1-st year 2-nd year 3-rd year 4-th year 5-th year andbeyond
Debt structure breakdown by maturity profile Debt maturity profile, USD mln
MMK Group liquid assets, USD mln
1 010 1 141
25
3,696 USD mln*
* Lease incl.
Debt structure by currency
3,696 USD mln*
30.06.2012
MMK Debt Profile
* Lease not incl.
Capex in Q2 2012 amounted to USD 135 mln
Main investment projects for 2012 are c/r mill 2000, modernization of h/r mill 2500 and Belon’s investment programme
Working capital decreased by USD 432 mln, including USD 253 mln or 14% in inventories reduction
MMK Cash Flow, USD mln
26
424
196-35
102
478
432
-9
-101
-679
-383-33
0
500
1 000
1 500
Bala
nce a
s o
f
31.1
2.2
011
Pro
fit fo
r th
e p
eriod
Adju
stm
ents
for n
on-
cash
op
era
tions
Am
ortiz
ation
Change
of w
ork
ing
capita
l
Incom
e tax
Inte
rest
Fin
an
cin
g a
ctiv
itie
s
Invest
ing a
ctiv
ities
Effe
ct o
f e
xchange
rate
changes
Bala
nce a
s o
f
30.0
6.2
012
Contacts
THIS PRESENTATION IS FOR INFORMATION ONLY.
•THIS PRESENTATION IS FOR DISTRIBUTION IN UK ONLY AMONG THE PEOPLE HAVING PROFESSIONAL SKILL IN THE ISSUES RELATED TO INVESTMENTS WITHIN THE MEANING OF ARTICLE 19(5) OF DIRECTIVE ON FINANCIAL ADVERTISEMENT APPROVED IN 2005 ON THE BASIS OF LAW ON FINANCIAL SERVICES AND MARKETS 2000, OR THOSE PEOPLE, AMONG WHICH IT MAY BE LAWFULLY DISTRIBUTED. THIS INFORMATION IS CONFIDENTIAL AND PROVIDED TO YOU EXCLUSIVELY FOR YOUR REFERENCE. BY ACCEPTANCE OF THIS INFORMATION THE RECIPIENT HEREOF CONFIRMS THAT HE OR SHE IS A SPECIALIST IN THE SPHERE OF INVESTMENTS WITHIN THE MEANING OF ARTICLE 19(5) OF DIRECTIVE ON FINANCIAL ADVERTISEMENT APPROVED IN 2005 ON THE BASIS OF LAW ON FINANCIAL SERVICES AND MARKETS 2000, ACTING IN HIS OR HER NATURE.
•THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER OR A PART THEREOF, OR INVITATION TO SELL OR TO ISSUE, OR TO SUBSCRIBE FOR OR OTHERWISE PURCHASE ANY SHARES IN THE COMPANY OR ANY OTHER SECURITIES AND NOTHING CONTAINED HEREIN SHALL FORM THE BASIS OF ANY CONTRACT OR COMMITMENT WHATSOEVER.
•THE INFORMATION CONTAINED HEREIN IS SUBJECT TO VERIFICATION, COMPLETION AND MAY BE SIGNIFICANTLY CHANGED. NONE OF THE PERSONS IS LIABLE TO UPDATE OR MAINTAIN TOPICALITY OF THE INFORMATION CONTAINED HEREIN, AND THIS INFORMATION AND OPINIONS REFLECTED THEREIN COULD BE CHANGED WITHOUT ANY NOTIFICATION THEREABOUT.
•THIS PRESENTATION SHOULD REMAIN CONFIDENTIAL UNTIL THE REPORT IS PUBLISHED. SOME INFORMATION CONTAINED HEREIN IS STILL A DRAFT INFORMATION AND WAS NOT LEGALLY CONFIRMED AND WILL BE FINALY DETERMINED ONLY AT THE MOMENT OF FILING THE APPLICATION FOR FINAL ACCEPTANCE FOR TRADING AT THE STOCK EXCHANGE.
•THIS INFORMATION DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES TO BE SOLD IN RUSSIA, THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933,AS AMENDED, AND MAY NOT BE OFFERED OR SOLD INTO THE UNITED STATES EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT, OR NOT REQUIRED TO BE REGISTERED THERE UNDER, OR PURSUANT TO AND EXEMPTION FROM REGISTRATION REQUIREMENTS THEREOF. NO OFFERING OF SECURITIES IS BEING MADE INTO THE UNITED STATES. NO SECURITIES WILL BE REGISTERED UNDER THE APPLICABLE SECURITIES ACT OF ANY STATE OR TERRITORIAL ENTITY OF CANADA AND JAPAN. THIS PRESENTATION IS NOT SUBJECT TO MAILING, TRANSFERRING OR OTHER TYPE OF DISTRIBUTION IN THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, OR TO THE TERRITORY OR FROM THE TERRITORY OF THE SPECIFIED COUNTRIES TO THE NAME OF ANY ANALYST IN THE SPHERE OF SECURITIES OR OTHER PERSON IN ANY OF THE SPECIFIED JURISDICTIONS. YOU AGREE TO AVOID FROM DISTRIBUTION OF ANY REPORT RESULTING FROM THE SURVEY OR SIMILAR DOCUMENTS ON THE TERRITORY OF THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, SAVE AS IN ACCORDANCE WITH THE FEDERAL LAWS OF THE UNITED STATES ON SECURITIES INCLUDING SECURITIES ACT, AS WELL AS THE APPLICABLE LAWS OF CANADA, AUSTRALIA AND JAPAN, ACCORDINGLY.
•THIS PRESENTATION INCLUDES THE STATEMENTS RELATED TO THE FUTURE, WHICH REPRODUCE THE INTENTIONS, OPINIONS AND CURRENT EXPECTATIONS OF THE COMPANY. THE STATEMENTS FOR THE FUTURE INCLUDE ANYTHING, WHICH IS NOT A FACT OCCURED. THE COMPANY TRIED TO HIGHLIGHT SUCH STATEMENTS RELATED TO THE FUTURE BY MEANS OF THE WORDS, SUCH AS “MAY”, “WILL”, “SHOULD”, “EXPECT”, “INTEND”, “EVALUATE”, “ASSUME”, “PLAN”, “TO HAVE AN OPINION”, “TRY”, “FORECAST”, “CONTINUE” AND SIMILAR WORDS OR THEIR NEGATIVE FORMS. SUCH STATEMENTS HAD BEEN DONE BASING ON THE ASSUMPTIONS AND ASSESSMENTS, WHICH MAY OCCUR FAULTY, THOUGH THE COMPANY CONSIDERS THEM REASONABLE AT THE CURRENT MOMENT.
•SUCH STATEMENTS RELATED TO THE FUTURE ARE LINKED TO THE RISKS, UNCERTAINTIES AND ASSUMPTIONS, AS WELL AS TO OTHER FACTORS, WHICH MAY LEAD TO THE EVENT THAT ACTUAL RESULTS OF THE COMPANY’S ACTIVITY AND ACTIVITY OF THE MARKETS, ON WHICH IT OPERATES OR INTENDS TO OPERATE IN, THEIR FINANCIAL STATUS, LIQUIDITY, CHARACTERISTICS, PROSPECTS AND ABILITIES COUILD MATERIALLY DIFFER FROM THOSE, WHICH ARE EXPRESSED WITH THE HELP OF SUCH STATEMENTS RELATED TO THE FUTURE. THE IMPORTANT FACTORS, WHICH MAY RESULT IN SUCH DIFFERENCES, INCLUDE, INTER ALIA, CHANGING BUSINESS CONDITIONS AND OTHER MARKET CONDITIONS, COMMON ECONOMIC CONDITIONS IN RUSSIA, EU COUNTRIES, THE UNITED STATES OF AMERICA OR ANYWHERE ELSE, AS WELL AS THE ABILITY OF THE COMPANY TO MEET THE TRENDS IN THE INDUSTRY. THE MATERIAL DIFFERENCE OF THE ACTUAL RESULTS, FEATURES AND ACHIEVEMENTS MAY BE THE RESULT OF ADDITIONAL FACTORS. THE COMPANY AND ALL ITS DIRECTORS, OFFICERS, EMPLOYEES AND ADVISORS HEREWITH STATE THAT THEY ARE NOT OBLIGED TO ISSUE ANY UPDATE OF OR REVISE ANY STATEMENTS RELATED TO THE FUTURE CONTAINED HEREIN, OR DISCLOSE ANY CHANGES IN THE FORECASTS OF THE COMPANY OR EVENTS, CONDITIONS AND CIRCUMSTANCES, WHICH SUCH STATEMENTS RELATED TO THE FUTURE ARE BASED ON, SAVE AS IN THE CASES PROVIDED FOR BY THE APPLICABLE LAWS.
•RECEIPT OF ANY COPY OF THIS INFORMATION TESTIFIES THE ACCEPTANCE OF THE ABOVE LIMITATIONS.
Disclaimer
GDR Depositary - BNY Mellon
Contact person at the depositary
Ludmila Leliavskaia Vice President
Tel +1.212.815.4493 [email protected]
MMK (Magnitogorsk Iron & Steel works)
Ordinary shares listed at MICEX and RTS in June 2006.
GDRs listed at LSE in April 2007
ISIN / СUSIP US5591892048/559189105
Andrey Serov Head of IR
Tel +7 (3519) 24 52 97 [email protected]
www.mmk.ru
Contacts at MMK
Tickers
MICEX, RTS: MAGN
LSE: MMK
Bloomberg: MMK:LI
27