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July 2016
This document and its contents are confidential and may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose. If this
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The Company’s securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”).
The Company does not intend to register any portion of the offering of its securities in the United States or to conduct a public offering of any securities in the United States. This presentation may not be
published, released or distributed in the United States or to any U.S. person (as defined in Regulation S under the Securities Act).
This communication is directed solely at (a) persons who have professional experience in matters relating to investments falling within article 19(1) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the “Order”) or (b) high net worth entities falling within article 49(2)(a) to (d) of the Order, and other persons to whom it may be lawfully communicated, falling within
article 49(1) 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. Any
investment activity to which this communication relates will only be available to and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this
communication.
This presentation is not for publication, release or distribution in Australia, Canada or Japan.
This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to sell securities of the Company, or the solicitation of an offer to subscribe for or purchase
securities of the Company, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. Any decision to purchase any securities of the
Company should be made solely on the basis of the final terms and conditions of the securities and the information to be contained in the prospectus or equivalent disclosure document produced in
connection with the offering of such securities. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of the Company
and the nature of the securities before taking any investment decision with respect to securities of the Company. The prospectus (or equivalent disclosure document) may contain information different
from the information contained herein.
The information in this presentation has not been independently verified. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or fairness of the presentation
and the information contained herein and no reliance should be placed on such information. None of the Company, its advisers, connected persons or any other person accepts any liability for any loss
howsoever arising, directly or indirectly, from this presentation or its contents.
This presentation contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or
including the words “targets”, “believes”, “expects”, “aims”, “intends”, “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 the Company’s control that could cause the Company’s actual results, performance or achievements to be materially different from
future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s
present and future business strategies and the environment in which it will operate in the future. These forward-looking statements speak only as at the date of this presentation. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any
change in events, conditions or circumstances on which any of such statements are based.
This presentation is not a public offer or advertisement of securities in the Russian Federation and is not an invitation to make offers to purchase any securities in the Russian Federation. The
information and opinions in this presentation are subject to change without notice. All information not separately sourced in this presentation is from Company data.
The financial information set out in this presentation has, except where expressly stated otherwise, and subject to rounding, been derived from the consolidated financial statements of the Company,
which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and include the financial results of the
Company and its subsidiaries.
DISCLAIMER
2
IMH AT A GLANCE
33% 33%
29%
25% 24%
18%16%
31%
27%
20%
27%
23%
11%
18%
31%
19%
15% 16%14%
9%
13%
Metalloinvest Severstal MMK IMH(3) NLMK Mechel EVRAZ
FY 2015
FY 2014
FY 2013
EBITDA margin, %
COMPANY HIGHLIGHTS
4
Leading global merchant pig iron exporter with 15%
market share in 2015
Leading merchant pig iron supplier in CIS with 26%
market share in 2015
Leading merchant coke exporter in CIS with 36% market
share in 2015
Global leader in
merchant pig iron
with strong positions
in merchant coke in
CIS
Attractive portfolio of modern strategically located assets
with access to well-developed transportation infrastructure
Multi-decade raw materials base with resource life of ca.
126 years for coking coal and ca. 57 years for iron ore
High-quality assets
portfolio
Diverse base of long-term customers of merchant pig iron,
well balanced between traders and end users
Reputation for product quality, consistent on-time delivery
and ability to meet customer requirements
Diversified and
established customer
base
Over 100% self-sufficient in coke, 71% self-sufficient in
iron ore, 37% self-sufficient in coking coal and 43% in coal
concentrate
High degree of vertical integration mitigates fluctuations in
raw materials prices leading to high quality of end
products
Vertically integrated
business model
Among the most profitable Russian metals and mining
companies with EBITDA margin of 25% in 2015
Robust financial
performance
Strong focus on Group’s leverage and liquidity
management
Precise leverage
management and
credit quality control
One of the most profitable among peers(1)
B3
July 2016
B-
June 2016
B
Apr 2016
Improved credit quality(2)
Leverage, Net Debt / loan covenant EBITDA, x
(1) Regional peers with publicly available IFRS results
(2) Long-term issuer rating in foreign currency
Source: Company data, Companies’ reports, Metal Expert
4,0x 3,8x
3,1x
3,9x
2012 2013 2014 2015
GLOBAL MERCHANT PIG IRON EXPORT LEADER
IMH15%
Other Russia26%
Brazil22%
Ukraine18%
India4%
RoW15%
CIS merchant pig iron market 2015: 7.9 mln tMerchant pig iron exports globally 2015: 12.5 mln t
Largest merchant pig iron exporter in the world Largest merchant pig iron supplier in CIS
Key competitive advantages
Vertical integration – most of IMH’s principal competitors do not have own raw material base and are highly exposed to commodity price movements
Quality – stable and high quality raw material base in both captive coal and iron provides stable high quality of IMH’s pig iron
New markets – desulfurization station launched in 2015 will provide even higher quality to IMH’s pig iron opening new markets for prime grade pig iron
Cost – key Brazilian competitors use charcoal instead of coke which limits production efficiency
Flexibility – large integrated steel mills are focused on internal consumption and are not willing to make frequent adjustments in their production process
Scale – smaller producers cannot achieve significant economies of scale (logistics, raw material purchases, etc.)
IMH26%
Metalloinvest22%
Metinvest Holding
19%
Donetskstal Group
8%
Kosaya Gora Iron Works
6%
NLMK8%
Other11%
Source: Metal Expert, Company 5
LEADING PLAYER IN MERCHANT COKE IN CIS
CIS merchant coke market 2015: 7.2 mln tMerchant coke exports CIS 2015: 2.8 mln t
Largest merchant coke exporter in CIS Leading merchant coke supplier in CIS
Key competitive advantages
Vertical integration / quality – own resource base allows IMH to limit key inputs in production process and to achieve and maintain high quality of its coke
products
New markets – new grades of high CSR level coke open new markets for IMH
Flexibility – excess of coke production capacity over internal demand and enhanced export infrastructure allow to achieve operational and sales flexibility
Source: Metal Expert, Company
IMH36%
Others64%
IMH22%
Donetskstal Group12%
Altai-Koks12%
Moscow Coke and Gas Plant
10%
EVRAZ Bagliykoks
8%
Mechel-Coke3%
Gubakhinsky Koks5%
EVRAZ NTMK5%
Others23%
6
External Sales
Tulachermet-Stal
Steel products
Scrap
Pig iron - 100%
Steel production(2)
External Sales
Tulachermet
0.9 mt
2.1 mt Pig iron
Liquid pig iron
External Suppliers
Pig iron production
Iron ore concentrate
Iron ore concentrate – 71%Energy – 95%
External Suppliers
External Sales
Kemerovo coking plant
1.6 mt
1.2 mt
2.1 mt Coal concentrate
Coke and coking products
Coke
Coke production
Coke > 100%
External Sales
Berezovskaya washing plant
0.24 mt (4)
1.3 mt
Coking coal processing
Coking coal
Coking coal – 50%
Own coking coal mines
External Suppliers
1.5 mt (3)
1.5 mt
5 mtOwn iron ore mines
Coking coal – 50%Iron ore – 71%
Coking coal
Iron ore
Self sufficiency
Coking coal & iron ore mining
Coking coal
VERTICAL INTEGRATION (1)
2.2 mt
Coal concentrate
Iron ore concentrate
(1) All volumes are given for 2015
(2) Commissioning in 4Q16 – 1Q17
(3) Coal self-sufficiency will increase along with the commissioning of Butovskaya mine 2nd stage (2017) and Tikhova mine (2018)
(4) “K” grade coking coal used for production of coke without preparation
KMAruda
Iron ore – 71%
Iron ore processing
7
Coke production
• Coke – 2.7 mln t
STRATEGICALLY LOCATED HIGH QUALITY ASSETS
8
Ore and Pig Iron(1)
Moscow
Tula
Belgorod
Coke(1)
Kemerovo
KMAruda
Iron ore mining and
processing
• Iron ore concentrate –
2.2 mln tCOF Berezovskaya
Kemerovo coking plant
Coking coal mines
Coking coal processing
• Coal concentrate –
2.2 mln t
1. Uchastok Koksovy
• Mining: open pit
• Production: 0.9 mln t
• Stage: construction
1
3
2. Butovskaya mine
• Mining: underground
• Production: 1 mln t
• Stage: ramp-up
Ilyichevsk
Yuzhny
Vladivostok
Novorossiysk
Tuapse
St.Petersburg
Tula-Steel (2)
High-quality steel
production
• Planned capacity –
1,8 mln t
Novokuznetsk
Metal powders and
other metal products
• Metal powders and
products – 717 t
Polema
Other(1)
2
Ports
Railway
Key assets (coke and coal)
Key assets (ore and pig iron)
Major cities
Coking coal mines
Legend
Key assets (other)
Coal(1)
Ust-Luga
3. Tikhova Mine
• Mining: underground
• Production: –
• Stage: development
Tulachermet
Pig iron production
• Pig iron – 2.1 mln t
(1) All production data provided for 2015
(2) Tulachermet-Stal (“Tula-Steel”) is a BOF steel mill project expected to be commissioned in 2017. Tula-Steel is not consolidated into the Group
Source: Company data
Cast iron production
• Iron wares – 75 kt
Krontif-Centre
1
DIVERCIFIED CUSTOMER BASE
9
Source: Metal Expert
Traders – 63% (2,3) End users – 37% (2,3)
IMH key export markets (merchant pig iron)
IMH pig iron export sales(1,2)
Saudi Arabian
Ductile
. .
Imports 2014: 12.5 mln t
(1) Totals may not equal 100% due to rounding
(2) Share in pig iron export sales by volume through
trader Alpicom
(3) Data for 2015
Source: Metal Expert, Company data
US37%
Italy14%
Spain2%
Other Europe
14%
Asia18%
Africa & Middle East10%
RoW5%
33%
49% 46%38%
7%
8% 18%25%
46%
36% 29% 29%
13%7% 8% 8%
2012 2013 2014 2015
Asia
Europe
Turkey andMiddle East
US
Volume
Key customers (merchant pig iron)
Mikhail Zubrilin
Vice President
Chief Legal Officer
13 years
EXPERIENCED MANAGEMENT TEAM
10
Sergey Frolov
Vice President
Strategy & Communications
10 years
Sergey Cherkaev
Vice President
CFO
12 years
Evgeniy Zubitskiy
CEO
27 years
- years with IMH or subsidiaries (if joined prior to establishment of IMH)
Vyacheslav Morozov
First Vice President
24 years
Andrey Zubitskiy
Senior Vice President
17 years
Boris Bulaevskiy
Managing Director
JSC Koks
42 year
Sergey Dyakov
Managing Director
PJSC Tulachermet
31 years
Sergey Solodiankin
Managing Director
JSC Kombinat KMAruda
16 years
Viktor Shevtsov
Managing Director
LLC Koks-Mining
1 year
Ore and Pig Iron
Coke
Exe
cu
tive
te
am
(1)
Op
era
tio
na
l te
am
Polema
Mikhail Smirnov
Managing Director
CJSC Krontif-Centre
3 years
Alexey Lapynin
Managing Director
JSC Polema
10 years
Coal
(1) Members of the Management Board of Managing Company IMH
Source: Company data
1,92,2
2,7
2,2 2,1
Coal Coal сoncentrate
Coke Iron ore concentrate
Pig iron
1,1
Coal Coal сoncentrate
Coke Iron ore concentrate
Pig iron
EVOLUTION AS AN INDUSTRY LEADING PLAYER
11
1993 – 2000
Min
ing
Pro
ce
ssin
g
2001 – 2005 2010 – present2006 – 2009
Establishment and development
of coke operations
Building an integrated
metallurgical holding
Achieving leadership on global
merchant pig iron market
Modernization and maximization of
vertical integration
1993, mln t 2015, mln t
• Kemerovo coke plant privatized and
JSC Koks established
• Stake in Berezovskaya washing
plant acquired (coal concentrate)
• Initial stake in Tulachermet
acquired (pig iron)
• Initial stake in Krontif-Centre
acquired (pig iron wares)
• Initial stake in Polema acquired
(powder metallurgy)
• New coke oven battery #6
commissioned
• Control over Tulachermet
established
• Pig iron production launched
• IMH becomes #1 merchant pig iron
exporter globally
• New coke battery #3 commissioned
• Full control over Krontif-Centre and
Polema established
• Reconstruction of Blast Furnace 1 (in
progress)
• Power generating facilities installed at
Tulachermet and Koks
• Krontif-Centre and Polema facilities upgraded
• Tula-Steel project initiated
• Non-core steel and nickel assets disposed of
• Raw materials purchased from third
parties
• Coal mine licenses acquired:
• Uchastok Koksovy
• Butovskaya mine
• Tikhova mine
• Coal mining started at Uchastok
Koksovy
• Full control over KMAruda
established (iron ore mine and
processing plant)
• Coal mining started at
Romanovskaya-1 mine
• Butovskaya mine commissioned
• Koksovy Glubokiy coal mine license acquired
• Inefficient high-cost mines closed
Source: Company data
OUR MARKETS
GLOBAL MERCHANT PIG IRON MARKET
13
Demand
Favorable outlook supported by EAF production growth (CAGR of
3.3% from 2014 till 2020)
– Large mini-mill projects in the US (Big River Steel, U.S.
Steel’s Fairfield Works project, etc.), MENA (Gulf Tubing
Company, Algerian Qatari Solb Company, etc.) and other
Declining scrap availability / quality
– Global scrap supplies are deteriorating in quality
accumulating impurities with each recycling period
Europe
South America
North America
Global import / export balance, mln t
Merchant pig iron prices
China
(1) Includes India, Japan and other Asia
Source: Metal Expert
CAGR
(1.5%)
CAGR
+5.8%
CAGR
+1.0%
.
Net imports
Net exports
Key IMH markets
Asia (ex. China) (1)
CAGR
+9.4%
RussiaCAGR
(9.2%)
Africa and Middle East
CAGR
(5.0%)
.
CAGR
41.9%
0.5 0.4
2014 2020F
2.9 2.6
2014 2020F
4.9 5.2
2014 2020F
0.71.2
2014 2020F
4,62,6
2014 2020F
0,0 0,4
2014 2020F
2,63,6
2014 2020F
Supply
Tight global merchant pig iron supply with at least 4 mln t of
merchant pig iron capacity taken off market in 2012-2014.
Additionally, further 1 mln t is expected to be cut in 2015-2016
Brazil
Declining supply of merchant pig iron (Sidepar and Vetorial
Siderurgia reallocated ca. 780 ths. t of pig iron capacity to
internal consumption in 2013-2014, additionally Margusa plans to
launch steel plant by 2016)
Ukraine
Halt of pig iron production by Donetsk Metallurgical Plant due to
lack of raw materials and railroad disruptions
Cut of merchant pig iron output by Metinvest by ca. 300 ths. t in
2013-2014 due to higher internal consumption for steel-making
(Azovstal) and military actions (Yenakiieve Steel)
India
Reduction of the volume of pig iron available for trade by
ca. 800 ths. t expected as major merchant pig iron producer
MMTC to expanded steel making capacity. Total Indian exports
to decline by a third by 2020
Key market trends
423,75
276,5
240
165100
200
300
400
500
Jan-2013 Jan-2014 Jan-2015 Jan-2016
USD
/t.
USA import, CFR, Gulf CIS export, FOB, Baltic Sea Brazil exports, FOB, Ponta da Madeira
Source: Metal Bulletin (as of 5 May 2016)
14,3
5,43,7
2004 2014 2020F
20 23 25
47 4852
6771
77
2010 2014 2020F
EAF steel BOF and other steel
RUSSIAN MERCHANT PIG IRON MARKET
14
0,8
1,6
2014 2020F
Decreasing volume of internal scrap due to modernization of
steel-making facilities
Deficit of obsolete scrap resulting from low steel consumption
in 1990s
Negative local scrap price dynamics in 2012-2014 which
resulted in lower collection and recycling of scrap
Domestic merchant pig iron supplies, mln t Crude steel production in Russia, mln t
Russian ferrous scrap exports, mln t
CAGR
+12.0%
CAGR
+1.4%
CAGR
(8.1%)
Positive outlook for Russian merchant pig iron market …
… and decreasing availability of scrap
... on the back of stable EAF steel production growth…
Source: Metal Expert
4,6 4,9
2014 2020F
3,9
8,5
2014 2020F
MERCHANT COKE MARKET
Supply
Relatively stable supply over the last several years affected by closure
of a large number of inefficient coke batteries following the global
economic crisis of 2008-2009 and Chinese coke export policies
Ukraine
Significantly reduced output due to geopolitical instability in the region:
– Largest coke producer, Avdiivka coke plant (Metinvest), cut
production by 30% in 2014
– Donetsk coke plant and Enakievskiy coke plant significantly
reduced output
– Alchevskiy, Yasinovskiy and Gorlovskiy coke plants stopped
operations
China
Chinese producers are gradually returning to market after abolition of
the 40% export tax in 2013
Demand
Overall demand expected to grow steadily (CAGR of 3.4% for imports
in 2014-2020) as vertically integrated steel makers are expected to
increase the share of coke purchased from independent suppliers
Ukraine
Steel-makers were forced to increase imports from Russia in 2014 due
to domestic production disruptions and coke oven halts
India
Pig iron demand expected to increase due to growing BOF steel
production (7.4% CAGR 2014-2020)
Russia
Stable demand from Russian integrated steels
CAGR
+14.0%
CAGR
+1.0%
Indian import outlook – strong growth Russian consumption outlook – stable
demand
Positive outlook for IMH key merchant coke markets, mln t Key market trends
Metallurgical coke (China, FOB), $/t.
Source: Metal Bulletin (as of 5 May 2016)
100
110
120
130
140
150
160
170
180
Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16
STRATEGY
STRATEGIC HIGHLIGHTS
17
Further development
of the HAV(1)
segments
Prudent financial
policy
Vertical integration
and key resources
self-sufficiency
maximization
Operating and cost
efficiency
enhancement
Maximize profitability by developing existing and entering new premium niche product and industry
segments
Achieve continuous product quality improvements and develop the competitive edge and know-how
Maintain conservative capital structure with target Total Debt / Loan Covenant EBITDA below 3.0x on
a long-term basis and comply with the company’s internal leverage ceiling of 3.2x
Pursue flexible CAPEX program in accordance with target leverage
Focus on organic growth
Continue to maximize efficiency of Group’s assets through modernization and upgrades
Focus on continuous improvement through lean management and total optimization programs
Maintain strict cost controls
Enhance business processes and functions, upgrade IT infrastructure
Enhance upstream integration by developing the production and reducing the consumption of key
feedstock
(1) High added value
Source: Company data
8%15%
28% 31%
48%
2012 2013 2014 2015 2016(F)
FURTHER DEVELOPMENT OF THE HVA SEGMENTS
18
Iron ore
Iron ore concentrate
Coking coal
Basic coke
Basic pig iron
Basic raw
materials
Basic
grades
Premium
grades and
high value
added
products
Cast iron wares
Premium coke (CSR > 60%)
Powder metallurgy products
Semi-nodular / nodular pig iron
Foundry grade pig iron
AD
DE
D V
ALU
E
Desulfurization station at Tulachermet
Out-of-furnace desulfurization facility to lower the sulfur
content in high-quality pig iron grades to 0.01%
Expected to increase the premium pig iron output up to
700 ths. t
High value added long steel products,
SBQ(1) and other
Growing share of premium products
Tula-Steel(3)
Innovative brownfield steel making mill at industrial site of
Tulachermet
Expected to produce SBQ and high value added long steel
products (phase 1)
Selected initiatives
Share of premium quality pig iron(2)
Coking coal concentrate
Growth
+23 p.p.
(1) Special Bar Quality
(2) Foundry grade pig iron
(3) Tula-Steel is not consolidated into the Group
Growth
+40 p.p.
PRUDENT FINANCIAL POLICY
19
Management strives to maintain conservative capital structure with target
Total Debt / Loan Covenant EBITDA below 3.0x on a long-term basis and not
to exceed the company’s internal leverage ceiling of 3.2xCapital structure
CAPEX
M&A
Target leverage < 3.0x on
a long-term basis
Flexibility to revise CAPEX to bring down to maintenance (RUB 0.8-1.0 bn
p.a.(1)) subject to market conditions and target leverage
Focus on high return strategic development projects with regular review of the
projects portfolio
Prudent control over maintenance capex
Flexible investment
program subject to target
leverage
Focus on organic growth
Focus on achieving organic growth
Vertical integration strategy
Prudent investment management in accordance with the target leverage
(1) Expected maintenance CAPEX for 2015
Source: Company data
OPERATING AND COST EFFICIENCY ENHANCEMENT
20
• IMH has been consistently pursuing the policy of cost reduction and operating efficiency maximization
• In recent years, the Company implemented a number of initiatives in order to enhance operating performance, including optimization of
asset portfolio and headcount as well as projects aimed to increase self-sufficiency in power and introduce lean management program
Lean management
Total optimization effect
• Suggestions received from
employees in 2014-1Q2015 –
ca. 90, implemented – ca. 50
In 2014, IMH introduced a
total optimization program
and some other lean
techniques like 5S
Employees are encouraged to
contribute ideas on how to
increase the operating
efficiency of the Group
Asset portfolio optimization
Portfolio management results
Inefficient mines closed
IMT (Swiss trader) terminated
IMH is focused on
development of most efficient
assets
Several underperforming
assets were sold or closed
At the same time, the output
of low-cost high-quality mines
was increased
Headcount optimization
16 237 15 62214 064
2012 2013 2014
Reduction of headcount
IMH targets gradual
optimization of the Group
headcount and increase of
productivity
Total number of employees
Decline
13.4%
Power
Growing power self-sufficiency
at key facilities
Tulachermet power
self-sufficiency
Kemerovo coking
plant power self-
sufficiency
IMH aims to reach high power
self-sufficiency of its major
producing assets
− Tulachermet blast-furnace
gas power production –
86 MW in 2015 (95% self-
sufficiency)
− Kemerovo coking plant
expected to reach 60-85%
self-sufficiency from 2017
2014 2015
0%
2014 2017
95%
60-85%100%
Source: Company data
1,5 1,5
0,61,2
2,2
2,8
2014 2018F
BF3 BF2 BF1
KEY PROJECTS PIPELINE
21
1,7
5,9
2014 2022F
Capacity, mln t p.a.
Overview
Investment project
Coal Pig ironIron ore
2.5-2.7(1) 2.3 7.0 1.3
• Construction of a new
level at Gubkin mine
• New coal projects to reach full self-sufficiency
in high quality coking coal
• Modernization of pig
iron production capacity
BF-1 reconstructionExpansion of Gubkin mineTikhova mineButovskaya mine
Commissioning
Completion
Remaining CAPEX, RUB bn
Production(2), mln t
5.8(5)7.8
2021
2026
2017
2018(4)2017
2013
2.1 1.0
2019
4,97,0
2014 2022F
Invested CAPEX
as of March 2016, RUB bn4.59.65.4 3.3
Growth
+28%
Growth
+43%Growth (3)
+239%
(1) Ash content of coal extracted at the mine is expected to decrease from 35% in 2014 to 25% in 2018
(2) Assuming 100% capacity utilization
(3) Production at Butovskaya, Tikhova mine first stage and Uchastok Koksovy open pit
(4) Commissioning of the first stage
(5) Considering new construction contracts
Source: Company data
CORPORATE GOVERNANCE AND
TRANSPARENCY
Executive directors5
Independent non-executive directors
2
BALANCED BOARD STRUCTURE
23
Total 7
Christoph Schaerer
• Chairman
• Independent director
Evgeniy Zubitskiy
• Director
Vyacheslav Morozov
• Director
Andrey Zubitskiy
• Director
Mikhail Zubrilin
• Director
Richard Witt
• Independent director
Sergey Frolov
• Director
Audit Committee
Nomination and Remuneration Committee
Board of directors composition
– Independent director
Source: Company
• Advises the Board of directors on the remuneration of the sole executive body (Managing Company IMH) and senior managers, terms and conditions of management and employment agreements with the sole executive body and senior managers and criteria for candidates to the board of directors
• Evaluates performance and effectiveness of the sole executive body
• Consists of three members of the board of directors and is chaired by an independent director
• Supervises the Group’s financial and accounting activities and reviews and evaluates its annual reports
• Evaluates internal control procedures
• Consists of three members of the board of directors and is chaired by an independent director
HIGH LEVEL OF TRANSPARENCY
24
Regular credit rating updates by international rating agencies
IFRS reports audited by PwC since 2004
Financial disclosures and conference calls
Annual reports
Regularinvestor
roadshows
Corporate site,regular news and press-releases
Regular broker comments (ING, Rosbank, Uralsib and others)
Source: Company
FINANCIAL & OPERATING
PERFOMANCE
2 241 2 201 2 181 2 227
4 800 4 828 4 885 4 962
2012 2013 2014 2015
Iron ore concentrate Iron ore
2 121 2 098
2 184
2 059
2012 2013 2014 2015
OPERATING RESULTS REVIEW
26
1 592 1 661 1 7471 889
2 1612 403 2 412
2 201
2012 2013 2014 2015
Coking coal Coal concentrate
2 5952 552
2 601
2 727
2012 2013 2014 2015
Pig iron production, x000 t.
Coking coal and coal concentrate production, x000 t.
Coke production, x000 t.
Iron ore and ore concentrate production, x000 t.
Source: Company data
7 085
9 797
12 34212 787
2012 2013 2014 2015
Net cash from operating activities
6 651 7 016
12 58713 385
15% 16%
27% 25%
2012 2013 2014 2015
Loan covenant EBITDA margin, %
Loan covenant EBITDA, RUB mln
FINANCIAL RESULTS REVIEW
27
45 70443 036
47 233
53 550
2012 2013 2014 2015
Revenue, RUB mln
34 765
30 842 30 616
36 437
2012 2013 2014 2015
COGS, RUB mln
1 997
(2 436)
(7 701)
(3 358)
2012 2013 2014 2015
Net Income / Loss, mln RUB
Net Income / (loss), RUB mln
8 776
6 779 6 8577 489
2012 2013 2014 2015
CAPEX (1), RUB mln
(1) Capital expenditures comprise additions to property, plant and equipment and intangible assets, including acquisitions resulting from business combinationsSource: Company data
Iron ore and pig iron
61%
Coke31%
Coal8%
SEGMENT RESULTS OVERVIEW
28
2 288
3 681
7 467
3 353
8%13%
22%
11%
2012 2013 2014 2015
Adjusted EBITDA margin, %
1 9881 570
2 838
5 158
8% 8%
14%
19%
2012 2013 2014 2015
Adjusted EBITDA margin, %
1 310 1 097
859
2 904
16%16%
10%
27%
2012 2013 2014 2015
Adjusted EBITDA margin, %
25 46927 651
33 10331 364
2012 2013 2014 2015
11 638
10 016 10 474
16 018
2012 2013 2014 2015
1 734 1 778
2 170
4 172
2012 2013 2014 2015
(1) (1) (1)
Key segments performance(2) – External revenue, RUB mln
Revenue structure(2), RUB mln
Key segments performance(2) – Adjusted EBITDA, RUB mln
Coal Coke Iron ore and pig iron
Coal Coke Iron ore and pig iron
By key segment, 2015
Total51 554
(1) Adjusted EBITDA margin calculated as Adjusted EBITDA / total revenue (including intra-segment sales)(2) IMH Coal, Coke, Iron and pig iron divisions accounts for 96% of total IMH revenueSource: Company
632 612697
798898 829
705
858 782 784
794 727778
Credit facilities Net debt
29,01 30,24 30,48 32,20 30,37 32,73
56,26 55,52
72,8864,26
USD exchange rate
18 333 18 509 21 245 25 705 27 279 27 146
39 65147 660
57 01850 347
44 10652 984 49 969
Credit facilities Net debt
IMH DEBT PORTFOLIO(1)
29
IMH debt portfolio in RUB mln IMH debt portfolio in USD mln
29,01 30,24 30,48 32,20 30,37 32,73
56,26 55,52
72,8864,26
USD exchange rate
Debt portfolio by banks, % Debt maturity profile, RUB mln
(1) as of 30.06.2016 (management accounting report)Source: Company, Bloomberg
Sberbank, 35%
Eurobond+ECP, 25%Gazprombank, 14%
Absolut Bank, 7%
Bank Rossiya, 7%
Credit Bank of Moscow, 6%
Rosselykhozbank, 4%
Other, 2%
Sberbank Eurobond+ECP Gazprombank
Absolut Bank Bank Rossiya Credit Bank of Moscow
14903
10773
5095
29621891
865 845832
11817
2016 2017 2018 2019 2020 2021 2022
Credit facilities Eurobonds + ECP
December 2018
TULA-STEEL PROJECT
TULA-STEEL – PROJECT AT A GLANCE
31
Brief description
Production process overview (Phase 1)
Ultra low cost production
Strategic location
High quality product mix
Project highlights
Environmentally friendly
Innovative brownfield steel making millOverview
Tula (at the industrial site of Tulachermet)Location
1.8 mln t p.a. Production
capacity
Basic oxygen furnace (BOF)Production
process
SBQ and hot rolled long products and structures to replace imports in the Russian market
Products
Key equipment to be supplied by SMS Group (Germany), including:
− BOF (160 t)
− Ladle furnace
− Vacuum vessel
− 6-strand caster with CONVEX technology
Equipment
Start of construction – October 2013
Commissioning – 2017Timeline
Central Federal District of RussiaTarget markets
BOF (160 t)
Long product mix
Tulachermet1.6 mln t p.a.
Pig iron
Ladle furnace
Vacuumvessel
6-strand caster
Rolling andwire mills
1.8 mln t p.a.
ScrapExternal suppliers
Source: Company
Pig iron pricing
Arms-length pricing
Pig iron supplies
Tulachermet is expected to fully cover pig iron consumption of Tula-Steel
At full production, Tula-Steel is expected to consume up to 1.6 mln t of liquid pig iron p.a. (first phase) which may reduce the volume of pig iron for sale to other customers
Total CAPEX
RUB 30-40 bn
Participants’ share
Ca. RUB 12 bn
TULA-STEEL – SELECTED CONSIDERATIONS
32
CAPEX
Integration with IMH
Debt
The project is expected to be funded by project financing from banks for approximately 70%
The project does not contemplate any form of recourse to the IMH assets
Equity
Approximately 30% of funding to be sourced from the participants in Tula-Steel on a pro rata basis
At present Tula-Steel is not consolidated into IMH
In the future the management of IMH may consider consolidation of Tula-Steel into IMH if its financial leverage level is considered acceptable for the company
Consolidation
In August 2013, Tulachermet established a new company, LLC "Tulachermet-Stal" ("Tula-Steel"). In December 2014, Tulachermet together with LLC "Stal" and DILON Cooperatief U.A. (“DILON”) established a joint venture on the basis of the new company with 33.3% stake in Tula-Steel belonging to each participant. In July 2015 Tulachermet sold its share in Tula-Steel to LLC "Stal".
Ownership
Financing
APPENDIX
0
10
20
30
40
50
60
70
80
100
200
300
400
500
600
700
800
900
1 000
Jan-08 Aug-08 Mar-09 Nov-09 Jun-10 Feb-11 Sep-11 May-12 Dec-12 Jul-13 Mar-14 Oct-14 Jun-15
Pig iron (Black sea, FOB), US$/t (l.h.s.)
RUB/US$ (r.h.s)
CURRENCY/PRICE ARBITRAGE
34
Rev
enu
e d
rive
rsR
aw m
ater
ial c
ost
dri
vers
0
100
200
300
400
500
0
100
200
300
Jan-08 Aug-08 Mar-09 Nov-09 Jun-10 Feb-11 Sep-11 May-12 Dec-12 Jul-13 Mar-14 Oct-14 Jun-15
Iron Ore (China, 62% Fe), US$/t (l.h.s.)
Hard coking coal (FOB, Australia), US$/t (r.h.s.)
Natural hedge
Decline
Natural hedge
Natural hedge
Decline
Source: Metal Courier (as of 20 Nov 2015), Central Bank of the Russian Federation (“CBR”)
Local currency depreciation mitigates pig iron price movements
SUSTAINABLE DEVELOPMENT
35
New modern mines constructed using up-to-date safety equipment and technologies
The amount of accidents decreased year-on-year due to strong safety control system implemented at the Group’s plants:
Number of work days lost due to accidents decreased by 12% in 2012-2014 from 1,651 to 1,454 respectively
Number of accidents resulting in death(s) decreased in 2012-2014 from 4 to 1 respectively
Health and safety
Kemerovo coking plant, Uchastok Koksovy open pit mine and Berezovskaya washing plant are certified under ISO 14001, which sets best practice standards for environmental management systems
Kemerovo coking plant won the first position in the fundamental efficiency rating released by Interfax-ERA agency and the ‘100 Best Russian Enterprises – Environmental Management’ federal contest
Succesful implementation of modern technologies allowed Tulachermet and KMAruda to significantly reduce environmental impact
Environmentprotection
The Group’s largest plants have entered into social partnership agreements with local administrations
The Group pursues a number of social programmes, including mandatory and voluntary medical coverage for employees and their families, recreation, construction of housing and other activities
The Group participates in a large charity programme including assistance to boarding schools, nursery and secondary schools and a children’s hospital in Tula region
Social partnership
The Group is conducting a corporate training program for employees at different management levels
“Initiative from bottom” is supported by total optimization program, competitions, training coursesEmployee trainings
RESERVES & RESOURCES (1)
36
MinesUchastok
KoksovyButovskaya Tikhova Total
Gubkin
Existing level New level (2) Total
Proved reserves 1,369 12,735 - 14,104 49,031 202,285 251,316
Probable reserves 5,359 10,140 64,620 80,119 2,921 30,510 33,431
Proved and probable reserves 6,728 22,875 64,620 94,223 51,952 232,796 284,748
Measured resources 23,563 34,867 25,055 83,485 207,102 415,903 623,005
Indicated resources 36,041 76,259 169,526 281,826 12,340 62,729 75,069
Measured and indicated resources 59,604 111,126 194,581 365,311 219,442 478,632 698,074
Inferred resources 3,340 - 5,006 8,346 - - -
Extracted since 30 September 2010 3,407 1,398 - 4,805 20,505 - 20,505
Extracted in 2010 since 30 September 2010 113 - - 113 1,213 - 1,213
Extracted in 2011 634 - - 634 4,779 - 4,779
Extracted in 2012 880 - - 880 4,800 - 4,800
Extracted in 2013 898 533 - 1,431 4,828 - 4,828
Extracted in 2014 882 865 - 1,747 4,885 - 4,885
Coal Iron orex000 t.
(1) According to JORC as of 30 September 2010(2) IMH intends to expand its iron ore operations in the Gubkin mine through construction of a new working levelSource: Company
EBITDA CALCULATION
37
RUB mln 2012 2013 2014 2015
Profit \ (loss before tax) 2,603 (1,883) (8,802) (4,660)
Finance income (95) (90) (323) (1,089)
Interest expenses 1,662 2,174 1,967 4,756
Exchange loss/(gain), net (647) 1,155 14,417 8,680
Depreciation and amortisation 2,725 2,421 3,017 3,407
Impairment of property, plant and equipment and intangible
assets- 1,379 856 -
Impairment of goodwill - - 89 -
Loss on disposal of ownership share in SIJ (1) - 1,227 - -
Gain on disposal of investment in subsidiary (112) - (112) (50)
Loss arising on revaluation of derivative financial instruments,
net(141) 212 383 -
Adjusted EBITDA 5,995 6,595 11,492 11,044
Capitalized interest expense 427 285 611 948
Finance income 95 90 323 1,089
Allowance for unused vacation 40 5 25 217
Allowance for unrecoverable accounts receivable 78 25 27 123
Inventory allowance 16 16 230 (2)
Long-term accounts receivable discount amortization - - (81) -
Investments in associates - - (40) (4)
Dividend received - - - (30)
Loan Covenant EBITDA 6,651 7,016 12,587 13,385
The Company defines Adjusted EBITDA as the profit/loss for the year adjusted for income tax, finance income, interest expense, exchange loss/gain, depreciation and amortization, impairment of property, plant and equipment and intangible assets, impairment of goodwill, gain/loss on disposal of ownership shares and investment in subsidiary
Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue
In addition to Adjusted EBITDA the Company also uses the term Consolidated EBITDA defined in the Loan Agreement of the Information Memorandum. The definition of Consolidated EBITDA differs from that of Adjusted EBITDA, as shown herein
Consolidated EBITDA is used in certain covenants relating to the USD 350,000,000 7.75% Notes due 2016 issued by the Company in June 2011
(1) Slovenska industrija jeklaSource: Company
FINANCIALS SUMMARY (1/3)
38
Profit and loss statement, RUB mln Balance sheet, RUB mln
2012 2013 2014 2015
Revenue 45,704 43,036 47,233 53,550
Cost of sales (34,765) (30,842) (30,616) (36,437)
Gross profit 10,939 12,194 16,617 17,113
Distribution costs (4,120) (4,093) (3,492) (3,967)
General and administrative expenses (2,755) (3,210) (3,414) (4,564)
Impairment of property, plant and equipment
and intangible assets- (1,379) (856) -
Impairment of goodwill - - (89) -
Obsolete stock provision - (16) (230) 2
Loss on disposal of ownership in SIJ (1) - (1,227) - -
Taxes other than income tax (547) (597) (598) (601)
Gain on disposal of investment in subsidiary 112 - 112 50
Other operating income / (expenses), net (247) (196) 41 (6)
Operating profit 3,382 1,476 8,091 8,027
Finance expenses, net (779) (3,359) (16,893) (12,687)
Profit / (loss) before income tax 2,603 (1,883) (8,802) (4,660)
Income tax (expense) / benefit (606) (553) 1,101 1,302
Profit / (loss) for the year 1,997 (2,436) (7,701) (3,358)
December
31, 2012
December
31, 2013
December
31, 2014
December
31, 2015
Non-current assets
Property, plant and equipment 33,915 36,172 38,125 41,567
Goodwill 4,586 4,586 4,497 4,497
Other intangible assets 5,935 5,611 5,298 5,037
Available-for-sale financial assets 2,877 - - -
Other non-current assets 2,507 2,939 5,027 14,149
Total non-current assets 49,820 49,308 52,947 65,250
Current assets
Inventories 4,250 3,766 3,961 4,190
Trade and other receivables 1,537 1,345 2,411 3,761
Cash, cash equivalents and
restricted cash894 503 855 4,125
Other current assets 2,675 3,014 2,137 2,030
Total current assets 9,356 8,628 9,364 14,106
Total assets 59,176 57,936 62,311 79,356
Equity
Share capital 213 213 213 213
Treasury shares (5,928) (5,928) (5,928) (5,928)
Retained earnings 26,139 23,769 15,245 11,949
Reserves 1,230 739 758 848
Equity attributable to the
Company’s equity holders21,654 18,793 10,288 7,082
Non-controlling interest 583 590 695 689
Total equity 22,237 19,383 10,983 7,771
Non-current liabilities
Long-term borrowings 6,955 7,432 14,158 12,923
Long-term bonds 14,378 10,580 17,300 6,583
Other non-current liabilities 2,632 2,319 2,287 2,229
Total non-current liabilities 23,965 20,331 33,745 21,735
Current liabilities
Short-term borrowings and current
portion of long-term borrowings5,730 4,432 7,819 21,997
Short-term bonds 117 4,630 275 14,618
Trade and other payables 6,060 7,604 8,699 12,221
Other current liabilities 1,067 1,556 790 1,014
Total current liabilities 12,974 18,222 17,583 49,850
Total liabilities 36,939 38,553 51,328 71,585
Total liabilities and equity 59,176 57,936 62,311 79,356
(1) Slovenska industrija jeklaSource: Company
FINANCIALS SUMMARY (2/3)
39
Cash flows from operating activities, RUB mln Cash flows from investing activities, RUB mln
2012 2013 2014 2015
Profit / (loss) before income tax 2,603 (1,883) (8,802) (4,660)
Depreciation of property, plant and
equipment2,444 2,141 2,743 3,133
Amortisation of intangible assets 281 280 274 274
Gain on disposal of investment in
subsidiary(112) - (112) (50)
Gain on disposal of investment in joint
venture - - - (4)
Finance income (95) (90) (323) (1,089)
Interest expense 1,662 2,174 1,967 4,756
Loss arising on revaluation of derivative
financial instruments, net(141) 212 383 -
Impairment of property, plant and
equipment and intangible assets- 1,379 856 -
Impairment of goodwill - - 89 -
Gain on disposal of share in SIJ (1) - 1,227 - -
Accrual of vacation reserve 40 5 25 217
Obsolete stock provision 16 16 230 (2)
Accrual of bad debt provision 78 25 27 123
Exchange loss, net (647) 1,155 14,417 8,680
Non-cash transactions 53 7 (28) (5)
Other effects 324 (104) 78 (33)
Operating cash flows before working
capital changes6,506 6,544 11,824 11,340
(Increase) / decrease in trade and other
receivables1,235 843 (536) (531)
(Increase) / decrease in inventories 734 554 (89) (99)
Increase in trade and other payables (609) 2,259 1,948 2,883
Increase in taxes other than income tax
payable(157) 218 35 248
Decrease in other liabilities (1) (3) (2) (1)
Cash from operating activities 7,708 10,415 13,180 13,840
Income tax paid (623) (618) (838) (1,053)
Net cash from operating activities 7,085 9,797 12,342 12,787
2012 2013 2014 2015
Purchase of property, plant and
equipment(7,875) (6,007) (6,204) (6,476)
Proceeds from sale of property, plant
and equipment12 137 97 34
Proceeds from disposal of subsidiaries,
net of cash disposed (57) - 137 -
Changes in restricted cash (533) 555 - -
Loans issued (624) (832) (2,226) (7,471)
Repayment of loans issued 1,309 4 3,116 1,204
Interest received on loans issued 49 31 668 116
Dividend received - 3 9 30
Proceeds from disposal of other
investments- 1 6 -
Proceeds from sale of financial assets at
fair value through profit and loss2 - - -
Acquisition of intangible assets and
other non-current assets(1) (1) (97) (21)
Net cash used in investing activities (7,718) (6,109) (4,494) (12,584)
(1) Slovenska industrija jeklaSource: Company
FINANCIALS SUMMARY (3/3)
40
Cash flows from financing activities
RUB mln 2012 2013 2014 2015
Settlement of payables on treasury shares (221) (71) (289) -
Proceeds from borrowings and bonds 39,634 16,014 23,599 29,579
Repayment of borrowings and bonds (36,463) (17,360) (26,482) (22,388)
Interest paid on borrowings and bonds (1,630) (2,102) (2,169) (4,586)
Dividends paid (43) - (1,317) -
Proceeds from disposal of shares in subsidiary - - - -
(Repayment) / proceeds from derivative financial instruments,
net85 82 (780) -
Purchase of non-controlling interest in subsidiaries 1 (2) (11) (3)
Net cash from / (used in) financing activities 1,363 (3,439) (7,449) 2,602
Net increase in cash and equivalents 730 249 399 2,805
Effects of exchange rate changes on cash and equivalents 155 11 94 175
Net cash and equivalents at the beginning of the year,
including (783) 102 362 855
Cash and equivalents 162 338 503 855
Bank overdraft (945) (236) (141) -
Net cash and equivalents at the end of the year, including 102 362 855 3,835
Cash and equivalents 338 503 855 4,125
Bank overdraft (236) 141 - (290)
Source: Company
Management Company
«Industrial Metallurgical Holding»
2nd Verkhniy Mikhailovskiy proezd, 9
Moscow, 115419, Russia
Tel.: +7 (495) 725-56-80
Fax: +7 (495) 633-13-12
E-mail: [email protected]
www.metholding.ru
THANK YOU FOR YOUR ATTENTION!
