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Resources create opportunitiesResources create opportunities
2019 IFRS Financial ResultsMarch 17, 2020
2
Disclaimer
The following USD/RUB exchange rates were used for the presentation of those financial results:
Average over the period: Q1 2018 – 56.8803; Q2 2018 – 61.7998; Q3 2018 – 65.5323; Q4 2018 – 66.4822;
Q1 2019 – 66.1271; Q2 2019 – 64.5584; Q3 2019 – 64.5685; Q4 2019 – 63.7192.
End of the period: H1 2018 – 62.7565; 2018 – 69.4706; H1 2019 – 63.0756; 2019 – 61.9057
This presentation of Metalloinvest’s financial results for 2019 (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 publicly available in the Russian Federation and cannot be the 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
I. Key Highlights………...….……….………………..………………………………….. 4
II. Operational Results..…….....……………………………………………………….. 7
III. Financial Results …...…………………………………………………………………. 11
IV. Debt & Ratings ……...………………………………………………………………….. 15
Appendix…………………………………………………………………………………… 20
4
KEY HIGHLIGHTS
5
180
270
360
450
2016 2017 2018
Pig iron, FOB Black Sea HBI, import Italy
• China is continuing to consolidate its steel industry, and the various cuts, location shifts, and mergers make for an unpredictable long-term outlook
• The current economic environment is highly uncertain and is constraining supply growth, despite a deficit, due to uncertainty of demand going forward with slowing investment
Iro
n o
re &
p
ell
ets
Me
tall
ics
(pig
iro
n &
HB
I)S
tee
l p
rod
uct
s
Main drivers
• Supply disruptions in Brazil and Australia pushed prices up
• Uncertainty with recovery of Brazilian operations led to price stability amid falling demand in China
• Iron ore suppliers cut prices on fears of declining global demand due to coronavirus outbreak
• Due to strict environmental requirements in Europe pig iron consumption is being replaced by scrap and HBI/DRI
• Deficit of DR grade pellets due to incident in Brazil combined with rapid growth of DRI production leads to moderate growth of metallic prices
2.112.17
2.252.13 2.15
2.21
1.6
1.8
2.0
2.2
2.4
2017 2018 2019Demand Supply
Iron ore products market balance, bn t
Market trends
94.4 97.6 91.9
12.2 14.2 12.3
10.3 11.59.7
116.9 123.3 114.0
0
50
100
150
2017 2018 2019
Scrap Pig iron HBI/DRI
0.77 0.84 0.90
0.85 0.870.88
1.63 1.711.78
0.0
0.7
1.4
2.1
2017 2018 2019China RoW
Price dynamics
Trade of metallics, mn t
Steel product consumption, bn t
50
100
150
200
2016 2017 2018 2019
Pellets, 65% Iron ore, 62% Iron ore, 65%
USD/t, CFR China, indices
Source: data provided by analytical industry agencies, ISSB, WSA
300
400
500
600
2016 2017 2018 2019
Steel billet, FOB Black Sea
Market review
USD/t, index
USD/t, indices
2017 2018 2019
2017 2018 2019
2017 2018 2019
6
Highlights
Key financials, USD mnUSD mn 2019 2018 Change
Revenue 6,960 7,187 (3.2%)
Gross profit 3,766 3,919 (3.9%)
EBITDA1 2,514 2,934 (14.3%)
EBITDA margin 36.1% 40.8% (4.7 p.p.)
Net income 1,731 1,647 5.1%
Capex 517 441 17.2%
USD mn, eop 31.12.2019 31.12.2018 Change
Total debt 4,059 4,051 0.2%
Short-term debt 70 221 (68.3%)
Cash & equivalents 304 693 (56.1%)
Net debt 3,755 3,358 11.8%
Net debt / EBITDA 1.49x 1.14x 0.35x
Notes: 1 Hereinafter EBITDA stands for EBITDA adjusted according to IFRS requirements. For more details please refer to IFRS Statements2 The indicator has an informational character and does not contain adjustments as per loan documentation
Source: Fastmarkets
Global iron ore & steel prices, USD/t
6,2317,187 6,960
Revenue2017 2018 2019
2,1202,934 2,514
EBITDA2017 2018 2019
Net Debt/EBITDA2
1.91x1.14x 1.49x
300
375
450
525
600
60
80
100
120
140
03-Jan-17 03-Jan-18 03-Jan-19 03-Jan-20Iron ore index (65% Fe, CFR China)Steel billet index (FOB Black Sea), RHS
2017 2018 2019
88 90
104436
489
407
7
OPERATIONAL RESULTS
8
40.3
25.1
7.0
2.7
4.8
40.4
27.7
7.8
3.0
5.1
40.2
28.1
7.9
2.7
4.9
Iron ore
Pellets
HBI/DRI
Hot metal
Crude
steel
2017 2018 2019
-0.3%
+1.5%
+0.5%
-9.1%
x%
2019 key developments
• Iron ore production volumes totaled 40.2 mn tonnes
and remained almost flat (a decrease of 0.3% y-o-y1)
following product mix changes in favour of high value-
added concentrate and changes in mined ore quality
• Pellet production increased by 1.5% y-o-y to 28.1 mn
tonnes mostly due to completion of major maintenance
works at Pellet Plant #2 at LGOK and reconstruction of
Pellet Plant #3 at MGOK
• HBI/DRI output increased by 0.5% y-o-y to 7.9 mn tonnes
mostly driven by increase in production at HBI-3 Plant at
LGOK
• Hot metal production totaled 2.7 mn tonnes, a decrease of
9.1% y-o-y following maintenance works at blast furnaces
at Ural Steel
• Crude steel production totaled 4.9 mn tonnes, a decrease
of 3.7% y-o-y mostly due to plant reconstruction and hot
tests of the FMF2 at Ural Steel
Production volumes
mn t
Data on major plants: LGOK, MGOK, OEMK, Ural Steel
Iron ore refers to iron ore concentrate and sintering ore1 Hereinafter comparison with FY20182 Flexible Module Furnace
y-o-y change
-3.7%
9
7.6 7.4
14.0 14.9
4.2 4.4
25.9 26.7
2018 2019
HBI/DRI
Pellets
Iron ore
1.1 0.61.5 0.91.1 5.8
5.5
5.4
16.814.0
25.9 26.7
2018 2019
Russia
Europe
Asia
MENA
Others 2.31.6
0.40.4
1.10.9
1.11.5
1.91.9
6.86.3
2018 2019
Russia
MENA
Europe
Asia
Others
Shipment structure
Data on major plants: LGOK, MGOK, OEMK, Ural Steel
Iron ore products
Iron ore products
Mining Segment Steel Segment
Pig iron & steel products
mn t
mn t
mn t
mn t
71% 72%
HVA share
Steel products
2.3 2.5
0.3 0.31.1 0.90.3 0.20.6 0.6
4.6 4.6
2018 2019
Plate HVA
Plate
SBQ HVA
Semi-finished product HVA
Semi-finished product
10
Capital expenditure breakdown in 2019
489441
517
450 area
2017 2018 2019 2020F
USD mn
The Company is implementing its Industry 4.0 business
transformation programme. Current progress includes:
• Successful operation of the integrated financial andbusiness management system using the SAPS/4HANA business suite at LGOK and MGOK since July2018 and at OEMK, Ural Steel and the Company’strading and logistics operators since July 2019
• Operation of data centre in Stary Oskol
USD 19 mn
Mining Segment
Construction of HBI-3 Plant infrastructure facilities at LGOK
Steel Segment
USD 13 mn
Purchase of new high productivity mining vehicles at LGOK & MGOK USD 96 mn
Construction of conveyor facilitiesat MGOK & LGOK USD 47 mn
Technical re-equipping of CCM #3 at OEMK
Reconstruction of EAFs2 at Ural Steel
Notes:
Capex data on the graph for 2017, 2018 and 2019 refers to IFRS Statements, all other figures reflect management accounting1 Blast Furnace2 Electric Arc Furnace
Project to develop wet magnetic separation with the launch of fine screening at MGOK
USD 13 mn
Construction of medium pressure boilers for the thermal power plant at Ural Steel
USD 26 mn
Construction of external electric power supply facilities at LGOK
USD 22 mn
USD 20 mn
USD 13 mn
USD 15 mn
Modernisation of BF1 #2 and BF #3at Ural Steel
Construction of the heat treatment facility for hot-rolled steel (SBQ) at OEMK USD 32 mn
11
FINANCIAL RESULTS
12
2,880
1,632
421
782
1,471
2,834
1,474
966
803
884
Russia
Europe
Asia
Middle East
Other
countries2018
2019
Revenue composition
2019 Revenue: USD 6,960 mn
USD mn
7%
20%
18%
12%
41%
2%
9%
25%
16%9%
38%
3%
Iron ore Pellets
HBI Pig iron
Steel products Other revenue
2019 – outer circle2018 – inner circle
Revenue by region
Export share59% in 2019
vs.60% in 2018
1 Others include Americas and CIS countries
1
13
1,742
406
2,267
654
2,426
118
Mining Steel
2017 2018 2019
2,934
2,514
73
19
(227)
(228)
(57)
EBITDA 2018
Revenue
Cost of sales
Distribution
expenses
G&A expenses
Other
EBITDA 2019
EBITDA y-o-y dynamics
EBITDA composition
2019 EBITDA: USD 2,514 mn
USD mnDriven by positive dynamics of iron ore prices and
negative performance of steel prices in 2019,
Metalloinvest’s EBITDA remained resilient,
demonstrating margin of 36%
EBITDA by segment dynamics
36.1%
40.8%
EBITDA margin
USD mn
14
1,325 1,414
2,934
69
2,514
201
9
(317)
(460)
(461)
(441)
(290)
(504)
(517)
EB
ITD
A
Inte
rest
Taxe
s
Ch
g.
in N
WC
Ca
pe
x
Oth
ers
FCF
EB
ITD
A
Inte
rest
Taxe
s
Ch
g.
in N
WC
Ca
pe
x
Oth
ers
FCF
Positive Free Cash Flow
USD mn
2018 2019
Notes:
EBITDA stands for EBITDA adjusted according to IFRS requirements. For more details, please refer to IFRS Statements
15
DEBT & RATINGS
16
Debt profile as of 31 December 2019
Sources: IFRS data, management accounts1 Total Debt as of 31 December 2019 includes USD 115 mn of operational lease payments
due to the implementation of a new IFRS 16 standard since 1 January, 2019 2 Undrawn credit lines
Cash
USD mn
Cash
*
0.3 0.2 0.3 0.3 0.2
0.62
0.70.7
0.9
0.20.1
0.9
0.04
0.40.7
0.9
1.2
0.50.3
0.02
Liquidity 2020 2021 2022 2023 2024 2025 2026 After 2026
RUBUSD/EUR
Debt maturity schedule as of 31 December 2019
USD bn
4,446
4,051 4,05914,056
3,358
3,755
1.91x
1.14x1.49x
31-Dec-17 31-Dec-18 31-Dec-19
Total Debt Net Debt Net Debt/EBITDA
Cash
1.91x
USD mn
Net Repayment of borrowings (252)
Operational lease payments (IFRS 16 adoption)
+115
Other (incl. FX changes) +145
Total debt change (y-o-y) +8
Total debt performance, y-o-y
17
Upgrade of all credit ratings in 2019
In 2019, the Big Three international credit agencies – S&P, Moody’s and Fitch, and the Russian credit agency Expert RA upgraded Metalloinvest by one rating notch
Mar. 2019Feb. 2019 May 2019 May 2019
Stable Stable Stable StableBa1BB+ BB+ ruAA
S&P Gl Moody's Fitch
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Ba1/BB+
Ba2/BB
Ba3/BB–
Rating history
Ba3 stable
BB–stable
BB–positive
Ba1 stable
BB+stable
BB+stable
Note: Credit ratings of AO Holding Company METALLOINVEST as of 31 December 2019
Scale
18
Date Rationale Description
Q3 2018 –Q2 2019 Refinancing
– RUB 32 bn (Sberbank)+ RUB 27 bn (Gazprombank)+ RUB 5 bn (series BO-09 bond)
Q2 2019 Reprice USD 250 mn(PXF-2017 tranche B)
Q2 2019 Debt repayment– USD 62 mn(Eurobonds partial redemption)
Q3 2019 –Q4 2019 Refinancing
– USD 60 mn (PXF-2017)– USD 271 mn (Eurobonds-2020)+ EUR 300 mn (PXF-2019/1)
Q4 2019 Refinancing – RUB 10 bn (series BO-01 bond)+ RUB 10 bn (series BO-03 bond)
Q4 2019 Refinancing– USD 165 mn (PXF-2017)– RUB 3.3 bn (Sberbank)+ EUR 200 mn (PXF-2019/2)
Q1 2020 Refinancing – RUB 10 bn (Sberbank, PXF)+ RUB 10 bn (series BO-04 bond)
New instruments
Apr. 2019
Sustainability Improvement Loan
Aug. 2019
ECA-Framework
general agreement with12 international banks
on ECA-financing
Interest rate depends onEcoVadis rating level
Oct. 2019
1st ECA-backed deal with MUFG under
the framework agreement (~EUR 10 mn)
USD mn
100or EUR equivalent
Proactive debt management and new sources of funds
Key recent debt transactions
Subsequent event
57 points 60 points
19
ESG is an important element of the Company’s strategy
1 CSR - Corporate Social Responsibility
In December 2019, Metalloinvest's'Silver' CSR rating from EcoVadis,
the international independent rating agency, was confirmed
Metalloinvest is in the top-12% of companies rated by EcoVadis
globally and is in the top 8% in the 'environment' category and in the
top 4% in the 'labour & human rights' category among the producers in the manufacture of basic iron and
steel industry
The Sustainable Development Report was prepared in accordance with the GRI (the Global Reporting
Initiative)
The report is assured by an independent auditor (PwC)
The report also has an official verification from the Russian Union of Industrialists and Entrepreneurs
(RSPP)
Metalloinvest undertakes programmes under the trilateral
contracts of the Social and economic partnership with municipal and
regional administrations in all regions where it is present
In August 2019, Metalloinvestjoined the United Nations Global
Compact (UNGC) – an international initiative in the fields of corporate
sustainability and social responsibility
Metalloinvest has undertaken voluntary commitments to comply with the fundamental principles
of the UNGC
In December 2019, the Company achieved 4th place in the WWF’s
2019 transparency ratings of Russian M&M companies
in the field of environmental responsibility
This is the leading ranking for companies in the ferrous metallurgy industry. Last year the Company was
ranked 6th
In December 2019, Metalloinvestwas once again included as
a leader in the RSPP Sustainability Indices for 2019 in the
‘Responsibility and Transparency’ and ‘Sustainable Development
Vector’ categories
The index judges how well companies disclose CSR info
In December 2019, Metalloinvesttook 45th place in Interfax-ERA’s
Fundamental Efficiency (environmental & energy) rating
The rating covers the top 150 companies in Russia and
Kazakhstan. Moreover, Metalloinvestranked 2nd among the top-5 steel
companies in terms of steel production
In April 2019, Metalloinvest signed a sustainable finance credit line for up
to USD 100 mn (or EUR equivalent)until 30 November 2020.
The interest rate of the ‘Sustainability Improvement Loan’ depends on the level of CSR rating
from EcoVadis
20
APPENDIX
21
Well-balanced debt structure
Source: management accounts1Credit facility guaranteed by Export Credit Agencies (ECA)
By source
8%8%
7%
29%32% 40%
25%
28% 20%
16%
14% 18%
21%15% 14%
31-Dec-17 31-Dec-18 31-Dec-19
RUB bank loans
RUB bonds
Eurobonds
PXF
ECA
Other
Public debt
41%42%
38%
By currency
63%70% 67%
37%30% 33%
31-Dec-17 31-Dec-18 31-Dec-19
RUB
USD/EUR
1
22
Committees
Name Category Company AuditFinance, Budgeting
& StrategyRemuneration
Ivan StreshinskyChairman
Non-executive
Galina Aglyamova
INDEPENDENTValery Kazikaev
Dmitry Tarasov
Uluç Ergin
Non-executive
Gleb Kostikov
Irina Lupicheva
Pavel Mitrofanov
Vakhtang KocharovVice Chairman
Executive
Andrey Varichev
C
C
CMember of a committee Committee Chairman
C
30% of BoD
30% of the Board of Directors is independent
23
Key financial indicators
USD mn H1 2018 H2 2018 FY 2018 H1 2019 H2 2019 FY 2019 Y-o-Y
Revenue 3,779 3,408 7,187 3,584 3,376 6,960 (3.2%)
Gross profit 1,977 1,942 3,919 1,969 1,797 3,766 (3.9%)
EBITDA 1,491 1,443 2,934 1,410 1,104 2,514 (14.3%)
EBITDA margin 39.5% 42.3% 40.8% 39.3% 32.7% 36.1% (4.7 p.p.)
Net Income 870 777 1,647 1,020 711 1,731 5.1%
Capex 234 207 441 221 296 517 17.2%
Total Debt 4,287 4,051 4,051 4,109 4,059 4,059 0.2%
Short-term Debt 581 221 221 414 70 70 (68.3%)
Cash & cash equivalents 477 693 693 528 304 304 (56.1%)
Net Debt 3,811 3,358 3,358 3,581 3,755 3,755 11.8%
Net Debt / EBITDA LTM1 1.49x 1.14x 1.14x 1.25x 1.49x 1.49x 0.35x
1 Net Debt / EBITDA LTM is calculated based on EBITDA for the last 12 months;
the indicator has an informational character and does not contain adjustments as per loan documentation
24
Investor Relations & Corporate Ratings Department
Contacts
Artem Lavrischev
Director of Investor Relations & Corporate Ratings
T: +7 (495) 981 55 55, ext. 7243
www.metalloinvest.com
mailto:[email protected]://www.metalloinvest.com/