Resources create opportunities
Resources create opportunities
Sberbank CIB “Russia: The Inside Track” Moscow Conference April 2015
2
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Disclaimer
The following RUB/USD exchange rates were used for the presentation of those financial results:
Average over the period: 2012 – 31.0930; 2013 – 31.8480; 2014 – 37.6248.
End of the period: 2012 – 30.3727; 2013 – 32.7292; 2014 – 56.2584.
This presentation (the “Presentation”) contains certain forward-looking statements, particularly those relating to anticipated demand and consumption, global economic
conditions, commodity prices, management aims and objectives, strategy, production, anticipated investments and anticipated completion of previously announced
transactions. Metalloinvest will not update these statements to reflect events and circumstances occurring after the date hereof. By their nature, forward-looking
statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from
those expressed in such statements depending on a variety of factors, including future levels of industry product supply, demand and pricing, operational problems,
general economic conditions, political stability and economic growth in relevant areas of the world, changes in laws and governmental regulations, exchange rate
fluctuations, development and use of new technology, changes in public expectations and other changes in business conditions, the actions of competitors, natural
disasters and adverse weather conditions, wars and acts of terrorism or sabotage, other factors discussed elsewhere in this document, as well as other risks affecting
Metalloinvest and its operations.
The contents of this Presentation do not constitute or form part of any advertisement of securities, any offer or invitation to issue, sell, purchase, exchange or transfer or
any solicitation of any offer to purchase or subscribe for, any securities of Metalloinvest in any jurisdiction, nor shall this Presentation nor any part of it nor the fact of its
presentation, communication or distribution form the basis of, or be relied on in connection with, any contract or investment decision. Any foreign securities which are
mentioned in this Presentation are not and will not be registered in the Russian Federation by any state authority responsible for registration of such securities and such
securities shall not be admitted to subscription nor shall be publically available in the Russian Federation and cannot be subject of any offer in the Russian Federation,
except in the cases permitted by the law of the Russian Federation. No representation or warranty, express or implied, is given by Metalloinvest, 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.
3
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
1 Industry Update
2 Our Business
Strategy 3
4
5
Financials
Leadership
6 Summary
7 Appendices
4
40
70
100
130
160
31/12/12 31/03/13 30/06/13 30/09/13 31/12/13 31/03/14 30/06/14 30/09/14 31/12/14 31/03/15
02 03
05 06
08 09
11 12
14 15
17 18
20 21
Dramatic iron ore price decline…
USD/t
97 (2014)
Source: Bloomberg (Platts 62% Fe, CFR China)
62 (Q1 2015)
135 (2013)
47.5 (as o f 10.04.2015)
5
0
10
20
30
40
50
60
70
80
90
100
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Production volumes, mn t
Iron ore price decline may cause closure of high-cost mines
…brings challenging time for high-cost producers
Note: FOB cash costs in 2014 Source: AME * Platts 62% Fe, CFR China as of 10 April 2015
USD 48/t
FOB
ca
sh c
ost
s in
20
14
, U
SD
/t
current iron ore price*
6
Africa (Sierra Leone) (30.5 mn t) • Marampa mine (London Mining) shut down (5.5 mn t)
• Tonkolili mine (African Minerals) shut down (25.0 mn t)
South America (7.5 mn t) • MMX Mineração e Metalicos closed Serra
Azul Unit (6.0 mn t), Brazil
• BellaVista mine shutdown (1.5 mn t), Chile
USA (5.6 mn t) • Cliffs Natural Resources closed
Wabush Mines (5.6 mn t)
• US Steel processing plant Minntac Taconite plans to stop (9.0 mn t pellets)
Russia (1.7 mn t) • IRC iron demonstrate losses in 2013, 2014
year and expect s greater losses (1.7 mn t)
Sweden (6.2 mn t) • Kaunisvaara mine (Northland Resources) shut-down (5.0 mn t)
• Dannemora mine AB bankruptcy (1.2 mn t)
Canada (8.9 mn t) • Labrador Iron Mines Holding stopped ore mining at
the Schefferville deposit (1.7 mn t)
• Bloom lake mine (Cliffs) shut down (7.2 mn t)
India (40 mn t) • Closure of 26 mines in state Odisha (40 mn t)
• 5 iron ore pellet makers stopped production (15 mn t)
China (80-85 mn t)
• Banks forecasts: Credit Suisse: “Domestic production will
decline 16% to 310 mn t in 2014”
JPM: “China will need to cut about 85 mn t of
output in 2014, and a further 85 mn t to
2017”
• Rio Tinto estimated mine closures: 80 mn t
• CISA said China's iron ore supply is likely to fall by 70 mn t this year
Announcement of mines closure and production readjustment in 2014-2015
Announcement of mines closure and production readjustment since 2014: > 200 mn t
* Russia, Canada, Sweden, USA
mn t
Source: company data, JPM report, Rio Tinto investor day presentation
Australia (28.1 mn t)
• BHP Billiton closed Yarrie mine (1.0 mn t) • IMX Resources closed Cairn Hill (1.6 mn t) • Franches Creek mine shut down in Nov. 2014 (1.5 mn t) • Roper Bar mine (Western Desert Resources) shut down (2.0 mn t) • Atlas iron has announced production curtailments (13.0 mn t) • China`s Sinosteel suspend iron ore production (~2 mn t in 2014) • Koolan island mine (Mount Gibson Iron) shutdown (2.0 mn t) • Arrium closed one of its two iron ore mines (3.5 mn t) • Kimberly Metals production curtailments (1.5 mn t)
• Break-even for Mount Gibson, Grange ~ USD 55-65/t • FMG cash flow break-even is about USD 50/t
40
129
> 200
8 28
31 22
80
Ind
ia
So
uth
Am
eri
ca
Au
stra
lia
Afr
ica
Oth
er*
Wo
rld
(e
x-C
hin
a)
Ch
ina
Wo
rld
7
Market environment affects financial results and leverage
Company EBITDA, USD mn Net Debt / LTM EBITDA
2014 2013 % 2014 2013 ∆
Peer 1, Australia 30,335 32,594 (7%) 0.8x 0.8x (0.0x)
Peer 2, Australia 18,840 20,953 (10%) 0.7x 0.9x (0.2x)
Metalloinvest, Russia 1,961 2,291 (14%) 2.1x 2.4x (0.3x)
Peer 3, Brazil 1,780 2,306 (23%) 4.0x 2.9x +1.1x
Peer 4, Australia 3,856 5,661 (32%) 1.9x 1.5x +0.4x
Peer 5, USA 930 1,428 (35%) 2.9x 1.9x +1.0x
Peer 6, South Africa 2,016 3,163 (36%) 0.3x 0.1x +0.3x
Peer 7, Sweden 1,000 1,641 (39%) - - -
Peer 8, Brazil 13,353 22,560 (41%) 1.8x 1.0x +0.8x
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Source: Companies’ data
Vu
lne
rab
ilit
y t
o ir
on
ore
pri
ce d
rop
in 2
01
4 (
-28
% y
-o-y
)
8
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
2 Our Business
1 Industry Update
Strategy 3
4
5
Financials
Leadership
6 Summary
7 Appendices
9
Product Fe grade Shipments in 2014
65 - 70% (oxide Fe)
11.0 mn t
63 - 65% (oxide Fe)
13.9 mn t
~ 90%
(Fe)
2.3 mn t
~ 95%
(Fe)
1.8 mn t
up to 100%
(Fe)
4.2 mn t
Metalloinvest has its own unique business-model…
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Lebedinsky GOK (LGOK)
Iron ore reserves 3.9 bn t
Mikhailovsky GOK (MGOK)
Iron ore reserves 10.5 bn t
Notes: - HBI – Hot Briquetted Iron, DRI – Direct Reduced Iron - Iron ore – iron ore concentrate and sintering ore - Proven and probable reserves as of 1 July 2010 adjusted by production until 31 December 2014 - Production volumes refer to 2014
Oskol Electrometallurgical Plant (OEMK)
Ural Steel
Key production assets Production and shipments in 2014
Iron ore production 38.7 mn t
Shipments
RUSSIA Moscow
Iron ore
Pellets
HBI / DRI
Pig iron
Steel products
Iro
n o
re p
rod
uct
s M
eta
llic
s S
tee
l
10
0
100
200
0 50 100 150 200 250
…based on the lowest cash costs in pellets and HBI/DRI globally
HBI/DRI production cost curve*
Pellets production cost curve*
Metalloinvest (LGOK)
Production, mn t
Production, mn t
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Co
st, U
SD
/dm
tu
Co
st, U
SD
/t
Metalloinvest (MGOK)
Metalloinvest (LGOK)**
Metalloinvest (OEMK)
* CRU, Company data, 2012 ** LGOK – the most efficient HBI plant globally
0
200
400
0 5 10 15 20 25 30 35
11
Prudent stance on long-term relations with customers
199
187
181
210
201
196
221
214
211
180
170
157
195
187
177
210
204
196
159
148
138
153
143
134
197
191
185
127
115
104
153
143
134
178
171
164
106
106
109
136
136
138
166
166
167
162
177
200
181
193
211
199
208
222
118
133
145
145
157
167
173
182
189
244 / 036 / 052
255 / 183 / 042
Note: Percentages represent the Company’s revenue structure in 2014
Russia 41%
21%
Asia
7% MENA 16%
Europe
Key Customers: • NLMK • MMK • Koks Group • Evraz • Severstal • Kosogorsky MZ
Key Customers: • US STEEL KOSICE • ArcelorMittal • Tata Steel • Ferriere Nord
Key Customers: • Kobe Steel • SUIFENHE • XILIN
Key Customers: • Erdemir • ICDAS • Izmir
New contracts signed in 2014 – 2015
Revenue from other regions
15%
12
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
3 Strategy
1 Industry Update
Our Business 2
4
5
Financials
Leadership
6
7
Summary
Appendices
13
~65% ~29%
~6%
Further intragroup processing into hot metal
Strategic focus on pellets and HBI/DRI…
4.5 4.6 4.7 5.2 5.2 5.3 5.3
2008 2009 2010 2011 2012 2013 2014 2017F
20.0 19.4
22.0 22.4 22.6 22.6 22.7
2008 2009 2010 2011 2012 2013 2014 2016F
Pellet production
HBI/DRI production
mn t
mn t
Pellet Plant 3:
+5 mn t
HBI-3: +1.8 mn t
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Iron ore production
Iron ore shipments to third parties
Further intragroup processing into pellets and HBI/DRI
14
…brings more value to the Company
Capex
~450* USD mn
Design capacity
5.0 mn t
of pellets p.a. Pellet
Plant #3 at MGOK
Purpose of the project:
• To increase high value-added product volumes
• To meet market demand in high-grade pellets
87%
13%
Financing of the project as of
31.12.2014 (% of the budget)
* Estimated capex on the basis of 2013 prices and FX rates ** Estimated capex on the basis of 2014 prices and FX rates
Capex
~650** USD mn
Design capacity
1.8 mn t
of HBI p.a.
Purpose of the project:
• To satisfy the growing demand of
mini-mills for high-quality raw
materials
• To maintain leading global
position in the production of
merchant HBI
HBI #3 at LGOK
17%
83%
Financing of the project as of
31.12.2014 (% of the budget)
199 187 181
210 201 196
221 214 211
180 170 157
195 187 177
210 204 196
159 148 138
153 143 134
197 191 185
127 115 104
153 143 134
178 171 164
106 106 109
136 136 138
166 166 167
162 177 200
181 193 211
199 208 222
118 133 145
145 157 167
173 182 189
244 / 036 / 052
255 / 183 / 042
15
1,004
307
392
512 463 478
595
0
400
800
1,200
2008 2009 2010 2011 2012 2013 2014
USD mn
Moderate CAPEX as a major part of prudent financial policy
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
High flexibility in capital expenditures:
• Focus on 1-2 value-creating projects
• Flexible terms of the contracts
• Headroom for adjusting maintenance and expansion CAPEX in both directions determined by market environment
• Experience in CAPEX optimisation (in 2009)
CAPEX optimisation programme is in place
Internal cap of USD750-800 mn per annum
16
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
4 Financials
1 Industry Update
Our Business 2
3
5
Strategy
Leadership
6
7
Summary
Appendices
17
59%
41%
Export sales
Domestic sales
Revenue in 2014: USD 6,367 mn
Revenue is strongly linked to hard currencies…
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Support from rouble depreciation Diversified product mix
17%
24%
11% 7%
37%
4% 14%
21%
11% 11%
39%
4%
Iron ore Pellets HBI
Pig iron Steel products Other revenue
2014 – outer circle 2013 – inner circle
Large share of revenue comes from export…
103
90
74
62
3,591
3,264
3,524
3,881
3,000
4,100
5,200
20
60
100
Q2 2014 Q3 2014 Q4 2014 Q1 2015
Platts in USD Platts in RUB*
USD/t RUB/t
/ t
Sources: Company’s IFRS data, Bloomberg, Central Bank of Russia. *Quarterly-average Platts in USD multiplied by quarterly-average USD/RUB rate
/ t
Mining segment Steel segment
Contracts include global iron
ore indices dynamics as well
as USD/RUB exchange rate
change.
Correlation of domestic prices
with export netback
…domestic market pricing also includes FX component
18
97% 86% 90%
3%
14% 10%
6.0
4.7 4.2
0.0
2.0
4.0
6.0
8.0
10.0
31 December 2013 31 December 2014 31 March 2015
Short-term debt Long-term debt
USD bn
-21%
Ensuring long-term financial stability
*Weighted Average Life of debt **As of 31 December 2014 ***Ruble bonds were repurchased in March 2015
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Decrease in total debt ensuring lower leverage
-12%
0.2 0.5 0.3
1.0
0.0 0.0 0.0
0.3
0.1
0.8
0.1 0.3
0.5 0.6
1.3
0.1 0.0
0.4
0.8
1.2
1.6
2.0
Liquidity as of
31 March 2015
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 2017 2018 2019 2020 2021
RUB USD / EUR
USD bn
undrawn
committed credit lines
0.3 cash
Incl. USD 0.7 bn of Eurobonds
and USD 0.1 bn of PXF
PXF
PXF
Incl. USD 1.0 bn of Eurobonds
Incl. RUB 10.0 bn of Rouble bonds
PXF
Debt maturity schedule as of 31 March 2015 (USD 4.2 bn of total debt)
Increase in WAL* and decrease in cost of debt
0.0%
3.5%
7.0%
0
30
60
31 December 2013 31 December 2014 31 March 2015
WAL Average interest rate
months
PXF
PXF
19
Rating Agency 31.12.2011 31.12.2012 31.12.2013 31.12.2014 10.04.2015
Ba3 stable
Ba3 positive
Ba2 stable
Ba2 under
review
Ba2 stable
BB- stable
BB- positive
BB- positive
BB stable
BB negative
BB- stable
BB- stable
BB- positive
BB stable
BB stable
Metalloinvest’s rating remains in ‘BB’ category despite challenging times
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
20
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
5 Leadership
1 Industry Update
Our Business 2
3
4
Strategy
Financials
6
7
Summary
Appendices
21
High quality assets…
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
UTH Russia is one of the fastest growing commercial television broadcasters operating in Russia
is the largest Internet company in the Russian-speaking world and the Internet leader in Russia in monthly users
is Russia’s 2nd largest mobile operator
MEGAFON PETER-SERVICE
MAIL.RU GROUP, PORTFOLIO INVESTMENTS
WITH DST
UTH RUSSIA
Telecoms Steel & Mining Internet Media
Alisher Usmanov
Founder (48% shares)
Farhad Moshiri
Partner
Vladimir Skoch
Partner
Others
Partners
USM Holdings • USM Holdings was formed in Dec. 2012 in order to bring the assets together under one holding company
The most important asset (historically)
METALLOINVEST
is Russia’s 2nd largest mobile operator
22
…with a top-notch corporate governance
3
4
2 Independent Non-Executive directors
Non-Executive directors
Executive directors
Board of Directors composition
Board of Directors structure
Ivan Streshinsky
Chairman, Non-Executive Director
Vadim Levin
Independent Non-Executive Director
Natalia Chumachenko
Non-Executive Director
Galina Aglyamova
Independent Non-Executive Director
Irina Lupicheva
Non-Executive Director
Andrey Varichev
Executive Director
Valeriy Kazikaev
Independent Non-Executive Director
Dmitry Tarasov
Executive Director (joined in 2014)
Sergey Soldatenkov
Non-Executive Director (joined in 2014)
Board of Directors
General Meeting of Shareholders
Audit committee
Head: • Galina Aglyamova (Independent director) Members: • Irina Lupicheva (Non-executive director) • Sergey Soldatenkov (Non-executive director)
Chairman Ivan Streshinskiy
CEO Andrey Varichev
Finance, Budgeting and Strategy
committee
Head: • Natalia Chumachenko (Non-executive director) Members: • Valeriy Kazikaev (Independent director) • Andrey Varichev (Executive director) • Dmitry Tarasov (Executive director)
Moving towards best corporate governance practice
Remuneration committee
(since 2014)
Head: • Sergey Soldatenkov (Non-executive director) Members: • Galina Aglyamova (Independent director) • Natalia Chumachenko (Non-executive director)
Management
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
23
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
6 Summary
1 Industry Update
Our Business 2
3
4
Strategy
Financials
5
7
Leadership
Appendices
24
Metalloinvest’s key strengths
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Top tier global
iron ore producer
#2 iron ore reserve base
in the world
Top-10 global iron ore player
& regional champion
Diversified customer
base with focus on
Emerging Markets
Direct sales to world’s
largest steel producers
Development
of logistics solutions
Resilient financials 1st quartile in
FCA cost curve
in pellets & HBI
Robust
profitability metrics
High level of
vertical integration
High level of processing:
pig iron and steel contribute
50% of revenue
Global leadership in
high value-added products:
Top-3 pellets producer
#1 HBI supplier
25
CONTENTS
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
7 Appendices
1 Industry Update
Our Business 2
3
4
Strategy
Financials
5
6
Leadership
Summary
26
Top tier iron ore reserve base
2.4 bn t
Metalloinvest
FMG
14.4 bn t
Vale 18.1 bn t
Note: Proven and probable reserves on a JORC equivalent basis (companies’ data, 2014); Metalloinvest’s reserves represent adjusted reserves (1 July 2010 JORC reserves adjusted by production until 31 December 2014)
Ferrexpo 1.4 bn t
ENRC 1.3 bn t
Cliffs Natural Resources 2.5 bn t
Kumba 0.9 bn t
3.9 bn t
Rio Tinto
c. 150 years
c. 50 years
- estimated reserve life based on 2014 iron ore mined production, companies’ data
c. 20 years
c. 20 years
c. 15 years
BHP Billiton
2.9 bn t
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
27
Product mix: focus on high value-added products
Fe content:
65 - 70% (oxide)
Utilisation:
Iron & Steel Works
(sinter plant)
Steel products for:
o Bridge manufacturers
o Automobile
manufacturers
o Pipe manufacturers
o Hardware industry
o Rolling-bearing
industry
Fe content:
63 - 67% (oxide)
Utilisation:
Iron & Steel Works
(Blast Furnace feed,
no sintering required)
Iron ore concentrate HBI / DRI Pellets Steel products
Fe content:
90% (pure iron),
direct scrap substitute
Utilisation:
Mini-Mills (EAF) /
Iron & Steel Works (BOF)
Environmentally-friendly
product
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
28
Key financial indicators
USD mn Q1 2014 Q2 2014 Q3 2014 Q4 2014 FY 2014 FY 2013 Change
Revenue 1,805 1,728 1,571 1,263 6,367 7,324 (13.1%)
Gross profit 853 804 683 646 2,986 3,411 (12.5%)
EBITDA 551 542 440 428 1,961 2,291 (14.4%)
EBITDA margin 30.5% 31.4% 28.0% 33.9% 30.8% 31.3% (0.5 ppt)
Net Income 115 434 59 (542) 66 1,080 (93.9%)
Capex 103 183 176 132 595 478 24.5%
Total Debt 5,712 5,848 5,377 4,734 4,734 5,965 (20.6%)
Short-term Debt 931 951 780 644 644 190 3.4х
Cash and cash equivalents 608 993 1,097 550 550 523 5.2%
Net Debt 5,105 4,855 4,280 4,185 4,185 5,443 (23.1%)
Net Debt / EBITDA LTM 2.26x 2.27x 2.08x 2.13x 2.13x 2.38x (10.5%)
Notes: EBITDA stands for EBITDA adjusted according to IFRS requirements. For more details please refer to IFRS Report Capex means purchase of property, plant and equipment and intangible assets Net Debt / EBITDA is calculated based on EBITDA for the last 12 months
29
Debt profile as of 31 March 2015
65%
34%
1%
72%
27%
2%
USD
RUB
EUR
24%
36%
13%
20%
7% 28%
41%
4%
22%
5% PXF
Eurobonds
RUB bonds
Sberbank
Other
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Note: Management data as of 31 March 2015 *Pre-export financing
Total Debt: USD 4,2 bn
Breakdown by source Breakdown by currency
2015 key developments
Decrease in total debt by USD 0.5 bn q-o-q due to RUB bonds
repurchase in March 2015 (series 01, 05, 06). As a result:
• Decrease in share of short-term debt
• Increase in share of USD debt
Q1 2015 eop – outer circle FY 2014 eop – inner circle
86%
14%
90%
10%
Long-term
Short-term
30
01 02 03
04 05 06
07 08 09
10 11 12
13 14 15
16 17 18
19 20 21
00
Phone: +7 (495) 981 55 55
Fax: +7 (495) 981 99 92
E-mail: [email protected]
Web: www.metalloinvest.com
CONTACTS
Top Related