New leader in Russian Steel
Magnitogorsk Steel (MMK)
0
100
200
300
400
500
600
2
World Steel Industry 2009-2010 Highlights
0
100 000
200 000
300 000
400 000
500 000
600 000
ROW China
2009 Jan-Aug 2010Source: WSA
1 2221 205
1 125
1 272
1 340
1 000
1 100
1 200
1 300
1 400
2007 2008 2009 2010* 2011*
‘m tons
World Steel Production
World Steel Consumption
13%
5%
* - 2010 - 2011 World steel Association forecast
ММК
Slab Cash-cost
Source: World Steel Dynamics, 2009 :
‘000 tons ‘000 tons
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
Rus
sia
Ukr
aine
Kaz
akhs
tan
Oth
er C
IS EU
Oth
er E
urop
ean
Cou
ntrie
s
Nor
th A
mer
ica
Sout
h Am
eric
a
Indi
a
Japa
n
2009 Jan-Aug 2010
-100%
-40%
20%
80%
140%
0
1 000
2 000
3 000
4 000
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
% change, yoy'000 tonnes
Total Change, yoy
Russian Steel Dynamics
3
Source: Metal Expert
Monthly Apparent Steel Consumption in Russia Russian Import Structure
Flat and Long Steel Price Performance in RussiaFlat and Long Steel Demand Performance in Russia
0%
50%
100%
150%
200%
250%
Jan-
09
Feb-
09M
ar-0
9
Apr
-09
May
-09
Jun-
09
Jul-0
9
Aug
-09
Sep
-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10
Feb-
10M
ar-1
0
Apr
-10
May
-10
Jun-
10
Jul-1
0
Aug
-10
Sep
-10
Flat steelLong steel
132%
Source: Metal Expert
Source: Metal Courrier * - 2010 annualized figures based on 9 months results
0
1 000
2 000
3 000
4 000
5 000
6 000
2004 2005 2006 2007 2008 2009 2010*
Long productsH/r productsThick plateC/r productsCoated products
HVA products
Source: Metal Expert
-20%
0%
20%
40%
60%
80%
Jan-
09
Feb-
09
Mar
-09
Apr
-09
May
-09
Jun-
09
Jul-0
9
Aug
-09
Sep
-09
Oct
-09
Nov
-09
Dec
-09
Jan-
10
Feb-
10
Mar
-10
Apr
-10
May
-10
Jun-
10
Jul-1
0
Aug
-10
Sep
-10
Oct
-10
HRC, Black Sea export FOBRebar, Black Sea export FOB
22%
4
MMK – Russian Steel Leader
Largest single-site steelmaker in Russia with current crude steel capacity of 14 mlntons
Production growth of more than 60% by 2014
Share of HVA products to grow from current 35% to 50% by 2014
Import substitution strategy: favorable geographical location to meet solid demand from the most intensive steel consuming regions of Russia – the Urals and Volga regions
Great play on Russian infrastructure:
• 16% of the domestic steel market - domestic sales are priced with premium
• Largest exposure to pipe-manufacturing, auto-building and heavy machinery
• More than 50% of steel production for pipes output in Russia
Disciplined investment strategy with “high-return projects” and “high-quality assets” investments approach
The most modern asset base – above USD 5 bn of investments for the last 5 years
ММК Geography
2.3 mln tpy production.New, modern steel making complex and two service
centers.
Metals service center and stamped-product factory.
630 mln tons coal reserves5.9 mln tons mined in 2009.Largest iron-ore deposit,
more than 2 bln tons of reserves.
Interkos-IV
Prioskolsky GОК
MMK Atakas
ENRC
Belon
One of Russia’s largest metalware producers
ММК Metiz
Profit
Source: MMK
Covers 100% of MMK’s scrap needs.
ММК trading house
59%
14%18%
5%
2%
High-priority (domestic)Priority (export)Major (export)
Markets
Other (export)
ММК1st by steel output in Russia (2009)1st by rolled products in Russia (2009)9,6 mln tons of steel (2009)8,8 mln tons of finished products (2009)
% Share of sales, mln tons
Profit’s scrap collecting yards
CAGR (2010-15) = 2,3%CAGR (2010-15) = 5,5%
CAGR (2010-15) = 5,0%
5
CAGR (2010-15) = 6,7%
Long-term agreement withММК (to 2017).
Currently MMK’s main iron-ore supplier.
ММК controls 5%оf Fortescue Metals Group,
one of Australia's largest iron-ore producers.
Fortescue Metals Group
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
2009 2010E 2011E 2012E 2013E 2014Е
MMK MMK-Atakas HVA products
8066
182 190
246
280
343
0
100
200
300
400
Long steel HR flat steel CR flat steel Mill 5000 plate Formedsections
Galvanizedsteel
Colour-coatedsteel
0%
20%
40%
EBITDA/t EBITDA margin
34%
66%
0%
10%
20%
30%
40%
50%
60%
70%
MMK
2011 2012 2013 2014
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
2010E 2011E 2012E 2013E 2014Е
ММК, currently run capacities MMK, operational upside on current capacities
MMK, new capacities MMK-Atakas
MMK Growth Prospects
Finished Steel Products Structure Evolution
Crude Steel Growth Drivers
Sourсe: MMK
Sourсe: ММК6
8 831
17 252
Crude Steel Output Growth Plans18 617
MMK suggests highest growth potential among its Russian peers
EBITDA per ton of Finished Steel Products
Thousand tons
HVA share ≈ 50% starting from 2012
≈ 50 %44 %
38 %
34 %27 %
46 %
HVA (Higher Value-Added products)
> 60% growth
Thousand tons
Unique Cost PositionSlab Cash-cost and Raw-material Price Changes
454
243223
240 250280
320
0
50
100
150
200
250
300
350
400
450
500
2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10-100%
-80%
-60%
-40%
-20%
0%
20%
40%
Slab cash cost, $/ton Iron ore, % Coal, % Scrap, %
USD/t
Slab Cash-cost Structure, 2Q10Material and Resource Self-sufficiency
0%
25%
50%
75%
100%
Iron ore* Coal** Scrap ElectricityOwn Purchased
* 70% comes under contract with ENRC till 2017** including sales to third parties
7
Key Raw-material Suppliers Structure
30%
70%
Iron ore
MMK10-year contract till 2017 with ENRC
Coal 6%11%
35%
48%
MMKSiberian Businness Union (f iv e-y ear contracts)Raspadskay aOthers
Scrap
100%
MMK
Electricity
75%
25%
ММК Others
Other
7%
Coal
24%
Other
resources
7%
Fuel & energy
purchases
10%
Wages
3%
Iron ore 29%
Scrap
purchased
17%
Cash cost: 320 USD/t
1H2010
* - cost of purchased electricity **- cost of electricity production for MMK
~ $0,03**(kWHrs)
~ $0,07*(kWHrs)
Leading Positions in the Industry
Source: ММК, Metal Courier
MMK’s share in Russia
163%37%Hot-rolled sheet
26%Color-coated rolled products 2%
30%Galvanized flat products
24%Cold-rolled sheet
65%Cold-rolled narrow strip
6%
100%Tin plate 2%
12%
1%
47%Special sections 1%
1
1
2
1
3
3
Place in Russia
Leading Position on Domestic Market
Hot-rolled sheet5.51 mln tons (63%)
Cold-rolled sheet1.09 mln tons (12%)
Long products1.00 mln tons (11%)
Downstream1.15 mln tons (13%)
Billets and slabs0 mln tons (0%)
Picture
Picture
Picture
Picture
Various Product Types
Source: ММК, 2009
Share in MMK’s total production
8
6%
13%
7%
16%
5% 5%4%
15%28%
ММК
Severstal
NLMK
Urals Steel
ZSMK
NTMK
Chelyabinsk MK
Others
Imports
MMK’s Share of Russian Steel Market, 2009
6,000
8,000
10,000
12,000
1999 2001 2003 2005 2007 2009
ММК Severstal NLMK
th. tonsThe Leader in Finished Steel Production
Source: Company Source: ММК, Metal Courier
Pipe production32%
Spot sales15%
Spot sales in CIS9%
Machine building18%
Construction sector11%
Metalware and semi-integrated
factories9%
Automobile sector
5%
Food industry1%
Fuel and energy companies
0,4% Bridge building0,3%
57%
19%
14%
11%
H/r steel (Thick plate incl.)
Downstream products
Long steel products
C/r steel
Source: MMK
MMK’s Strong Positions on the Domestic MarketDomestic Sales Structure
Russian Sales by Sector
Total: 5,112 kt
Source: MMK
4813 4876
7155
5112
50034761
41854198
3532
28132599
2678
2141
6071
4903
7327
5275
3861
5088
513353125482
5146
48704164
383737223755
0
1000
2000
3000
4000
5000
6000
7000
8000
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Domestic market (Russia + CIS) Export
Dynamics of Domestic and Export Sales, ‘000 tons
Source: MMK
9
Domestic Price Premium
78
162150 156
225
158
223
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 9M2010
USD/t
Source: MMK
9M2010
9M2010
8%1%
2%
77%
12%
Hot-rolled steel
Cold-rolled steel
Downstream products
Long products
Slabs and billets
Strong Presence on Export MarketsExport Development Strategy
Regional Sales Structure
Africa1%
America4%
Europe7%
Far East & Asia7%
Middle East15%
Domestic66%
Source: ММК
Export Sales Structure
Total: 2,625 kt
54% 59% 61% 66% 72%64%
46% 41% 39% 34% 28%36%
71%
29%
0%
50%
100%
2004 2005 2006 2007 2008 2009 1H2010
Domestic Exports
Share of Export Sales in Revenues
• Company successfully managing export sales
• Key export markets – rapidly-growing markets of Middle-East, Asia and Far-East.
• MMK expanding presence on most promising markets such as Turkey by building new steel making operations and expanding service center network.
Source: ММК
Total: 7,737 kt
Source: ММК
10
9M2010
9M2010
Производство толстого листа - Стан 5000
CAPEX USD 1.7 bnMarket Middle East, EU, AfricaProfile state-of-the-art full-cycle steel productionCapacity, mtpy finished steel 2.3Product types HRC, galvanized, colour-coated
Rationale increase presence in key export regionsgeographical diversification
IRR 14%
Building on the Value
11
Mill 2000 (RUSSIA)Belon (RUSSIA)
MMK-Atakas (TURKEY) Mill 5000 (RUSSIA)
Acquisition cost USD 0.543 bnMarket Russia, EU
Profile growing producer of high-quality coal
Capacity, mtpy coal 5.9 in 2009, 9.8 by 2013Product types coking coal 6.8, thermal coal 3.0
Rationale better business profile and higher profitability
IRR 19.5%
CAPEX USD 1.5 bnMarket Russian oil&gas infrastructureProfile HVA rolling facilitiesCapacity, mtpy finished steel 1.5Product types Heavy plates up to x120 strength class
Rationale #1 supplier to pipe sectorimports replacement
IRR 25%
CAPEX USD 1.5 bnMarket Russia, automotive industryProfile HVA rolling facilitiesCapacity, mtpy finished steel 2.0
Product types CR & galvanized automotive steel
Rationale #1 supplier to automotive sectorimports replacement
IRR 20.6%
What is MMK investment style?
HIGH RETURN RATESYNERGETICVALUE-ADDING
CONSEQUENTTAPPING KEY MARKETSWELL-THOUGHT
ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIPFOCUSEDBEATING THE CYCLE
HIGH RETURN RATESYNERGETICVALUE-ADDING
CONSEQUENTTAPPING KEY MARKETSWELL-THOUGHT
ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIPFOCUSEDBEATING THE CYCLE
Производство толстого листа - Стан 5000
• Project completion time under SMS Demag contract - 32 months• November 2007–May 2009: construction of new mill• July 2009: first production• December 2009: launch of Continuous Slab Caster # 6• February 2010: launch of secondary steel-processing complex
ММК is one of ten premium quality producers of thick plates worldwide (in China, Germany, France, Russia and Japan)
which are able to manufacture comparable thick plate
SpecificationsLaunch 2009Capacity, mln tpy 1.5Width, mm up to 4,800Thickness, mm 8-160
Rolling force, tons 12 000
Length, m 24Strength class up to Х120
Plate Mill 5000
Future Use of Mill 5,000 Products
• Cooperation agreement with Gazprom
• Strategic cooperation agreement with TMK
• Cooperation agreement with ChTPZ
• Government asked pipemakers to reduce share of imported plate
12
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
1 000
2 000
3 000
4 000
5 000
6 000
2008 2009 2010Е 2011Е 2012Е 2013Е 2014Е 2015Е
Mill 5,000 products Other
Ship building Boiler building
Bridge building LDP
MMK, % of domestic market
’000 tons
Use of Thick Plate in Russia by Sector
Source: pipe-producers’ estimates, ММК
Agreements
MMK44%
Import17%
Other39%
Mill 5000 - Strengthening Positions in Pipe Sector
Growth in LDP Consumption in Russia
(1,000)
(500)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2002 2003 2004 2005 2006 2007 2008 2009 2010Е 2011Е 2015Е
Production of LDP LDP importsLDP exports Apparent consumption of LDP in Russia
‘000 ton
Key Steel Suppliers to Pipe-builders in Russia
Total: 2.415 kt
1H2010
0
500
1 000
1 500
2 000
2 500
2009 2010Е
Export
Gazprom, Transneft, other
BTS-2
VSTO-2
Sakhalin-Khabarovsk-Vladivostok
Yamal Europe
Nord Stream
Use of LDP Produced in Russia by Project
Source: MMK
Source: pipe-producers’ estimates, MMK13
Geography of Main Pipelines
BTS-2
VSTO-2
Sakhalin-Khabarovsk-Vladivostok
Yamal-EuropeNord Stream
Source: pipe producers’ estimates, ММК
Russia
Source: MMK
1 846
2 312
Укрепление позиций в автопромеStrengthening Position in Auto Industry
Capacity, ’000 tpy 2,000
Width, mm 850-1,880
Thickness, mm 0.28 – 3.0
Steel grades HSLA, IF-HSS, BH, biphase, monophase, ТRIP
Key Mill 2,000 specifications
Key equipment supplier - SMS DemagMill 2,000 Complex
14
Production volumes:• 700,000 tpy of galvanized steel annealed• 400,000 tpy cold-rolled (after annealing) products• 900,000 tpy unannealed productsKey customers:• Carmakers• White goods
575
522
447424
384
233215
11289
20 110
100
200
300
400
500
600
Private Car Ownership
Private car ownership, vehicles per 1,000 people
Russian Vehicle Fleet by Age
Source: AUTO-Consulting, 2010
Source: Rosstat, 2009
33%
44%
23%
less than 10 yrs
more than 10 yrs
more than 20 yrs
1 037
3 388
1 515
4 559
0
1 000
2 000
3 000
4 000
5 000
2009 2010 2011 2012 2013 2014 2015 2020
All vehicle types output, th.pieces
Steel consumption by car-makers
12%
13%
60%
15%
Volga federal region
North-w est federal region
Central federal region
Other
Укрепление позиций в автопромеMill 2000 Cold Rolled Steel ComplexHigh Strength Steels Use
Cold-Rolled Automotive Steel Consumption in Russia*
15Source: ММК
Car-making Projects in Russia by 2015E
Steel Consumption Forecast by Auto-makers in Russia
Source: MMK
Source: World Steel Association
Source: boronextrication.com
Mild Steel30,8%
UHSS9,1%
0
500
1 000
1 500
2 000
2 500
3 000
2010 2015 2020
UHSS (MS, TWIP, HS)
HSS (IF - HS, MA, BH,HSLA)
AHSS (DP, CP, TRIP)
Mild Steel (03-10, IF, IS)25%
700
1 290
2 451
High strength steel types to reach 60% in overall
consumption
≈ 60% by 2020
60%
49%
* Data for motor cars only
HSS44,5%
AHSS15,6%
Выход на быстрорастущий рынок Турции
Locations of Key Markets
Source: TUIK – Turkish Institute of Statistics
Entry to Rapidly Growing Turkish Market
Istanbul
Iskenderun
Flat Steel Market in Turkey, mln tons Turkish Flat Steel Market Structure
Source: ING
6%
12%
13%
28%
18%
13%
7%
Pipe production
Metal Service Centers
Spot sales
Auto industry
Packaging
Boiler making
Other
Europe
Middle East
Africa
16
Priority export markets
Important export markets
8,9
10,110,9
10,3
7,88,5 8,7
9,310,4
-5,1-6,0
-6,6-5,8
-3,2-2,6
11,1
9,710,8
4,64,54,34,13,8
5,9
7,58,5
-0,7-1,2 -0,8 -0,3
-8,0
-4,0
0,0
4,0
8,0
12,0
2005 2006 2007 2008 2009 2010Е 2011Е 2012Е 2013Е 2014Е
Consumption Production Balance
Schedule of MMK-Atakash Project and Construction Costs
•Announcement on the realization of the joint venture
Total construction expenses: $1,175 mln
2007 2008 2009 2010 2011 2012
•Launch of metal service center
•Launch of hot galvanizing line
•Launch of etching line•Launch of reverse mill
•Launch of polymer coating line
•Launch of metals service center
•Launch of galvanized line•Launch of color-coating line
Iske
nder
unIs
tanb
ul
Source: MMK estimates
$100 mln $195 mln $265 mln $572 mln $43 mln
•Launch of mill for hot rolled coil and steel production
Project highlights
17
Start of production – 2010
Ramp up to reach full capacity - 2012
Project CAPEX – USD 1.7 bn
Main production site – near Iskenderun (2.3 mtpa)
2 service centres: Iskenderun, Istanbul
Product types: HRC, galvanized & colour-coated steel
Belovskaya Concentration Plant
Source: MMK estimates
Steam Coal Segment
Coking Coal Segment
Source: MMK estimates
MMK owns 82.6% of Belon
Belon Coal Company
‘000 tons
‘000 tons
18
Belon development programme will result in:• increase in coking coal production to 6.8 mln tons by 2013
• increase in coal concentrate production to 4.3 mln tons by 2013
Advantages of the deal for MMK: • Guaranteed supplies of deficit high grade coking coal
• Stable chemical properties of coal used in steelmaking process, lower consumption of coke
• Natural hedge against rising coal prices
Following the growth strategy Belon acquired license to develop Nikitinsky site with 200 mln reserves of rare “Zh” grade coals in June 2010
Uch. Erunakovsky-2
84
Novobachtsky Slit (KC)
10
Chertinskaya-Koksovaya (Zh)
43
Listviazhnaya (DR)260
Prisalairskaya stripe
11
Kostomov-skaya (Zh)
156
Chertinskaya-Yuzhnaya (2h)
66
Novobachatsky vent
Uch. Erunakovsky
Chertinskaya-Yuzhnaya mine
TsOF BelovskayaChertinskaya-Koksovaya mine
Listvyazhnaya mineKostromovskayamine
OF Listvyazhnaya
Kemerovo
Belovo
Compact location (with a 60 km radius) secures effective
management and logistics
•Securing the delivery of the necessary volumes of coking and steam coal.
•Stability in the coal mixture content, reduction in coking coal expenses.
•Natural hedging of MMK financials from changes in coal concentrate prices.
Synergies for MMK
Coking coal mine
Steam coal mine
Concentration plant
Transport distance – 2,125
Coal Reserves, mln tons
Total: 630 mln tons
Structure of OAO BelonCoking coal segment
Extraction2008 - 3,082,000 tons2009 - 3,404,000 tons
Processing2008 - 4,977,000 tons2009 - 4,892,000 tons
Extraction2008 – 2,449,000 tons2009 – 2,460,000 tons
Processing2008 – 2,812,000 tons2009 – 3,082,000 tons
Steam coal segment
19
Uch. Nikitinsky
Geography of Belon Assets
2Q10 1Q10 2009 2008 2007
Crude steel output, kt 2 984 2 732 9 618 11 957 13 261
Finished steel, kt 2 623 2 453 8 764 10 911 12 203
Revenues, $ mln 2 068 1 652 5 081 10 550 8 197
EBITDA, $ mln 437 374 1 285 2 204 2 407
EBITDA margin, % 21% 22,6% 25% 21% 29%
Net profit, $ mln 53 94 219 1 081 1 306
Net margin, % 3% 6% 4% 10% 16%
Assets, $ mln 15 594 15 822 14 833 14 197 15 887
Credit & loans, $ mln 2 880 2 438 2 118 1 726 1 454
short-term* 931 866 828 1 295 1 224
long-term* 1 949 1 572 1 290 431 230
Shareholder capital, $ mln 9 673 10 415 9 957 9 663 11 634
Cash, $ mln 220 173 165 1 106 256
5 081
10 550
8 197
1 285
2 2042 407
219
1 0811 306
0
2 000
4 000
6 000
8 000
10 000
12 000
2007 2008 2009
Revenues EBITDA Net profit
Key Indicators Trends Key Indicators
Source: Company
$ mln
* includes leasingSource: Company. 2006-2007 financials under US GAAP, starting from 2008 – under IFRS
Financials
20
100213
309437
2 068
1 404
1 038965
1 6521 674
374
670
537659
-110
94219
-500
0
500
1 000
1 500
2 000
2 500
1Q09 2Q09 3Q09 4Q09 1Q10 2Q2010
Rev enues EBITDA Net prof it
BB, outlook positive(outlook changed from “stable” on Sep 17, 2010)
Ba3, outlook positive(outlook changed from “stable” on July 22, 2010)
MMK credit ratings
$ mln
21
ENRC
Investment Highlights
21
• Key beneficiary of steel market recovery – more than 60% production growth
within next 4 years
• Growing volumes and share of HVA products (50% by 2014) to secure
sustainably high efficiency
• Focus on specialty steel products to replace imports in Russia and to enjoy
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
• Strong balance to secure further growth
• Plans for further strengthening in commodities
Appendices
MAGNITOGORSK STEEL
811
1 161
1 447
1 154
1,611,17
2,57
4,13
0
2
4
6
8
10
0
500
1000
1500
ММК NLМК Severstal Evraz
EBITDA Debt/EBITDA
616
207
484
630624
0
100
200
300
400
500
600
700
2011 2012 2013 2014 2015 и далее
931 575 9891 756
1 966
5 303
6 180
1 949
1 1222 660
4 287
7 261
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
MMK NLMK Sev erstal Ev raz
$ mln
Short-term debt Long-term debt Net debt
Показатели Группы ММК в сравнении с конкурентами
Steel Companies’ Debt Loads Debt/EBITDA
MMK Group Indicators Compared to its Competitors
23
At 1 July 2010
Maturity of Long-term Borrowings
$ mln
Source: Company data, 6 months 2010Source: Company data, 6 months 2010
$ mln
Source: MMK
400
1 224 1 295828 931
606
230431 1 290
1 949
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2006 2007 2008 2009 1H2010
Short-term debt Long-term debt
Debt Structure by Maturity$ mln
At 1 July 2010
MMK-Atakas Production PlanTo
tal P
rodu
ctio
n,
‘000
tons
per
yea
rPr
oduc
tion
Cap
acity
, ‘0
00 to
ns p
er y
ear
Source: MMK estimates 24
Total: 2 252 kt
100
60
HR
gal
vani
zed
Pol
ymer
s in
shee
ts
Hot Rolled Coil Mill2,317
Pickling Aggregate
1,165
Cold Rolled Coil mill759
Galvanizing Line867
636 460 300 196
Gal
vani
zed
coil
Color-coating line403
160 340
2,252
Gal
vani
zed
coil
Pol
ymer
s In
coi
l
1,096 300 456 400
Hot
rolle
d co
il
Hot
rolle
d sh
eet
HR
pic
kled
coil
coil
20%
62%
18%
Hotrolled steel
Galvanized flatproducts
Color-coated rolledproducts
Finished Products Structure
Question Answer
How much is MMK vertically integrated?
MMK has been most active in increasing its vertical integration in the last 12 months. Iron ore: MMK is 100% covered with stable supplies of iron ore. 30% comes from captive sources (up from 20% in 2008), 70% comes under 10-year agreement with ENRC (till 2017). Options for the development of Prioskol depositCoking coal: through acquisition of Belon MMK has covered 50% of its requirement of coking coal to bring up the self-coverage rate up to 80% by 2013 through the development of Belon asset baseScrap: MMK owns the largest scrap collector in Russia – 100% self-sufficiency in scrapElectricity: 85% self-sufficiency.
What are growth plans of MMK in terms of volumes?
MMK presents highest growth bid among Russian steel names through existing leverage, organic growth and expansion projects – more than 60% by 2014.
How would you assess MMK corporate governance standards?
MMK pursues best corporate governance and disclosure practices (recognized by S&P as #3 in Russia for 2009). Half of the Board members are independent. 4 BoD committees are in place, HR & Remuneration Committee and Audit Committee are built entirely of independent directors.
Why does MMK focus its development strategy on the domestic market?
Domestic market suggests price premiums and best growth prospects. It is a privilege for MMK to be able to maintain high domestic sales volumes. It took a decade of technical overhaul to turn from a mere exporter (63% of overall production in 1999 was exported) to a key supplier to the domestic pipe industry, heavy engineering and automotive industry (domestic shipments stood at 65% in H1 2010).
How much can MMK benefit from infrastructure and construction recovery?
Besides indisputably high exposure to infrastructure and corporate spending in Russia due to high quality flat steel products (currently MMK supplies to construction of all the pipe-line projects of Gazprom and Transneft), MMK has the most modern in Europe facilities to produce 2 mtpy of the widest possible range of long steel products.
What are MMK exporting abilities?
MMK historically exported around 4.7 mtpa on average to customers in more than 60 countries. Given weaker demand in international markets this year the Company plans to export 3,6 mt in 2010. In terms of global expansion MMK finalizes its MMK-Atakas project in Turkey to produce 2.3 mtpa of finished steel goods in order to increase shipments to MMK key export region – Middle East – and get bigger exposure to the EU market.
Key Q&A
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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 2005ON 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. 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SOME INFORMATION CONTAINED HEREIN IS STILL A DRAFT INFORMATION AND WAS NOT LEGALLY CONFIRMED AND WILL BE FINALY DETERMINED ONLY AT THE MOMENTOF 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 OF1933,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 REGISTRATIONREQUIREMENTS 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. THISPRESENTATION 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 THENAME 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 TERRITORYOF 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 ANDJAPAN, 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 FACTOCCURED. 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 CURRENTMOMENT.•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 THEMARKETS, 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 STATEMENTSRELATED 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, THEUNITED 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 OFADDITIONAL 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
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GDR Depositary - BNY MellonContact person at the depositary Ludmila Leliavskaia Vice PresidentTel 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 2007ISIN / СUSIP US5591892048/559189105
Evgeny Kovtunov Head of IRTel +7 (3519) 24 93 55 [email protected] +7 909 747 99 00 www.mmk.ru
Contacts at MMK
TickersMICEX, RTS: MAGNLSE: MMKBloomberg: MMK:LI
Dmitry Usanov Director for Capital MarketsTel +7 (495) 662 35 52 [email protected] +7 985 998 75 61 www.mmk.ru