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NLMK Q2 2013 Financials
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NLMK
Moscow, 12 August 2013
Q2 2013 US GAAP CONSOLIDATED RESULTS
This document is confidential and has been prepared by NLMK (the “Company”) solely for use at the investor presentation of the Company and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in the Company or Global Depositary Shares (GDSs), nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision. No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, its subsidiaries 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 this presentation or its contents. This document is for distribution only in the United Kingdom and the presentation is being made only in the United Kingdom to persons having 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 high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2) 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 presentation or any of its contents. The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should inform themselves about, and observe, any such restrictions. This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the Company’s actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analysts’ expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. By attending this presentation you agree to be bound by the foregoing terms.
DISCLAIMER
2
0,6
0,7
0,8
0,9
1
1,1
1,2
1,3
1,4
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
Dec
-12
Jan
-13
Feb
-13
Mar
-13
Ap
r-1
3
May
-13
Jun
-13
Germany China USA
200
300
400
500
600
700
800
900
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
Dec
-12
Jan
-13
Feb
-13
Mar
-13
Ap
r-1
3
May
-13
Jun
-13
Jul-
13
HRC USA, EXW HRC Europe, EXW
HRC China, EXW HRC Russia, EXW
55%
65%
75%
85%
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
Dec
-12
Jan
-13
Feb
-13
Mar
-13
Ap
r-1
3
May
-13
Global average China North America EU (27)
INTERNATIONAL STEEL MARKET
DEMAND AND SUPPLY
• Q2’13 steel supply continued to grow
o Global steel production was up by 1.6% qoq*
o Traders and consumers started to destock
(in China and USA steel stocks down by 3% and 6% qoq)
• Seasonal pick up in demand did not fully offset the oversupply
PRICES
• Q2’13 steel prices in China, the USA and Europe down by 6-8%
PRICES FOR HOT ROLLED FLAT STEEL
$/t Quarterly global price trends adjusted for the production / sales cycle
Sources: Metal Bulletin * - average daily output growth
Index, January 2012=1
STEEL INVENTORIES
Sources: CRU, Bloomberg (China statistic, Metals Service Center Inst.)
Inventory change qoq/ during the quarter China: -3%/, -16%
USA: -6%, -6% Germany: +4%, +4%
3
STEELMAKING CAPACITY UTILIZATION
Sources: World Steel Association
79.6% (+0.7 p.p qoq) – steelmaking capacities utilization rates in Q2’13
Jun
13
RUSSIAN STEEL MARKET
0%
10%
20%
30%
40%
50%
60%
2,0
2,5
3,0
3,5
4,0
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
No
v-1
1
Jan
-12
Mar
-12
May
-12
Jul-
12
Sep
-12
No
v-1
2
Jan
-13
Mar
-13
May
-13
Apparent consumption of rolled steel Share of imports
STEEL DEMAND IN RUSSIA, MONTHLY
m t
Sources: Metal Expert
DEMAND AND SUPPLY
• Q2’13 seasonal growth in demand of 14% qoq* to 11 m t
o Demand from construction up by 16% qoq
o Demand from pipe producers, machinery and other
industries up 12% qoq
• In 6M 2013 demand grew by 3% yoy to 20.4 m t with construction
(+9% yoy) as the key driver
• Imports represent a significant portion of ASU (or 20% of total)
o Imports contributed about 40% of the extra steel
consumption
PRICES
• Steel prices denominated in Rubles remained flat
Seasonal demand growth: +14% qoq
Import share in consumption – ab. 20%
STEEL DEMAND BY SECTOR IN RUSSIA NLMK’S SHARE IN RUSSIAN STEEL PRODUCT OUTPUT
4
6,4 7,5
1,0
1,2 0,7
0,8 1,4
1,5
0
2
4
6
8
10
12
Q1 '13 Q2 '13
Pipe producers Steel constructions and shaping
Machinery, incl. automotive Construction and infrastructure
m t
Jun
-13
12,6 13,8
2,6 2,2
1,6 1,5 3,0 2,9
02468
101214161820
6M '12 6M '13
m t
Sources: Metal Expert. * - computation for HVA share in the products where NLMK has presence
+16%*
+12%*
Sources: Metal Expert. * - daily average
+9%
-8%
+14%* +3% 11.0
9.5
19.8 20.4
20%
30% 24%
33%
19% 20%
30%
0%
5%
10%
15%
20%
25%
30%
35%
HR coils CR coils HDG Pre-painted Rebar Crude steel HVA*
40
50
60
70
80
90
100
110
Jan
-11
Mar
-11
May
-11
Jul-
11
Sep
-11
No
v-1
1Ja
n-1
2M
ar-1
2M
ay-1
2Ju
l-1
2Se
p-1
2N
ov-
12
Jan
-13
Mar
-13
May
-13
RAW MATERIALS MARKET PRICES AND DEMAND IN INTERNATIONAL MARKETS
• Correlation between raw material and steel price trends
o Global prices for iron ore, coking coal and scrap declined by
15%, 6% and 7%, respectively
o Iron ore and scrap prices improved in July
• Raw materials demand remains solid as steel output expands
o Chinese imports of iron ore were up by 5% yoy
o Iron ore inventories at Chinese ports hit bottom in March’13
and started to recover
RUSSIAN RAW MATERIALS MARKET REMAINS
OVERSUPPLIED
GLOBAL RAW MATERIAL PRICES
Sources: Metal Bulletin
5
0,3
0,4
0,5
0,6
0,7
0,8
0,9
1,0
1,1
1,2
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
Dec
-12
Jan
-13
Feb
-13
Mar
-13
Ap
r-1
3
May
-13
Jun
-13
Jul-
13
Iron ore fines (Fe 62%) import China, CFR
Coking coal, export Australia, FOB
Scrap export Europe, FOB
HRC China export, FOB
CHINA: IRON ORE IMPORT AND INVENTORIES
m t
Sources: Bloomberg
Jul-
13
-27% yoy
+5% in Q2
367 385
100
150
200
250
300
350
400
Импорт ЖРС
6М '12 6М '13
+5%
IRON ORE IMPORT
IRON ORE INVENTORIES AT CHINA PORTS
-4,1 -3,7
11,6 11,3
1,5 1,3
-11
-1
9
19
ImportSales to domestic marketExport
m t
RUSSIA: RAW MATERIALS MARKET BALANCE
Sources: Metal Expert
PELLET MARKET BALANCE
-7,7 -10,0
20,1 19,5
1,2 1,1
-11
-1
9
19
ImportSales to domestic marketExport
COKING COAL MARKET BALANCE
m t
6M ‘12 6M ‘13 6M ’12 6M ‘13
m t
Jan 2012 index 1.0
Global average
0%
20%
40%
60%
80%
100%
120%
Q1'08
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Main production plant, Novolipetsk
PRODUCTION RESULTS HIGH CAPACITY UTILIZATION RATES
• Growth in crude steel production in Q2’13 to 3.785 m t (+2% qoq)
• Average capacity utilization rate: 94%
o Novolipetsk -96%
o NLMK Russia Long - 90%
o NLMK Indiana - 87%
OUTLOOK
• Q3 crude steel production to grow up to 3.9 m t (+4% qoq)
o 100k t will be produced at the newly launched NLMK Kaluga
mini-mill
6
88%
83%
97%
94%
87% 90%
96% 94%
70%
80%
90%
100%
NLMK USA NLMK Longproducts
Novolipetsk NLMK Group
Q1 '13 Q2 '13
NLMK: STEELMAKING CAPACITY UTILIZATION STEELMAKING CAPACITY UTILIZATION
Sources: global capacity utilization rate according to WSA
NLMK: STEEL PRODUCTION
m t
3,0 3,1 3,1 3,0 3,0 3,1
0,4 0,5 0,5 0,4 0,5 0,5
0,3 0,2 0,2 0,2 0,2 0,2
3,6 3,8 3,8 3,7 3,7 3,8
0
1
2
3
4
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Steel segment Long products segment Foreign rolled products segment
77%
9%
14%
0%
20%
40%
60%
80%
100%
Sales by segment
Pipe producers
Machinery
Construction andinfrastructure
SALES GEOGRAPHY SALES IN RUSSIA CONTINUE TO GROW
• Flat total sales volumes in Q2 – 3.77 m t
• Russian sales +7% qoq and +17% yoy
o Long product sales +8% qoq and flat yoy
o Flat product sales +4% qoq and +4% yoy
o Slab sales to pipe producers grew to 0.18 m t
INTERNATIONAL SALES DOWN 3% QOQ
• Sales to external markets: 2.36 m t
o Europe: -6% to 0.61 m t
o N. America: -9% to 0.44 m t
o Higher sales to M. East +16% supported by stable demand
7
NLMK SALES IN RUSSIA BY INDUSTRY and BY PRODUCT
32%
54%
13%
0%
20%
40%
60%
80%
100%
Sales by product
Semi-finishedproducts
Flat products
Long products
REVENUE BY REGION
1,20 1,06 1,13
0,74 0,57 0,56
0,19 0,22 0,25
0,49
0,37 0,32
0,33
0,28 0,24
0,30
0,35 0,32
0
1
2
3
Q2 '12 Q1 '13 Q2 '13
Other regions S.E.Asia
North America Middle East, incl. Turkey
EU Russia
3.26 $ m
2.86 2.83
1,20 1,32 1,41
0,75 0,65 0,61
0,33 0,36 0,42 0,61 0,48
0,44
0,55 0,52 0,46
0,37 0,43 0,43
0
1
2
3
Q2 '12 Q1 '13 Q2 '13
Other regions S.E. Asia North America Middle East(incl. Turkey)
EU Russia
STEEL SALES BY REGION
3.82 m t 3.76 3.77
SALES STRUCTURE SALES STRUCTURE IMPROVED
• Share of finished steel 73% (+4 p.p. qoq)
GROWTH IN SALES OF VALUE ADDED : 1.38 M T, +4% QOQ
• Demand for galvanized steel in Russia increased
• Lower sales of pre-painted steel as sales of more profitable
galvanized steel increased
• Growth in thick plates sales driven by ramp up of the new
rolling capacity in Europe
• Metalware sales were strong supported by the seasonal
uptick in demand
8
SALES BY PRODUCT
* High value added products ** Note: Revenue from other operations include revenues from sales of iron ore, coke, scrap and others
-17%
-10%
2%
5%
6%
7%
8%
8%
11%
-20% -10% 0% 10% 20%
Slabs
Pre-painted
Electrical steel
Thick plates
CRC
HDG
HRC
Long products
Metallware
Q2/Q1 CHANGE IN SALES BY PRODUCT REVENUE BY PRODUCTS
6% 6% 6% 6% 8% 9%
11% 12% 6% 7% 2% 2% 8% 8%
20% 21%
21% 19% 1% 1%
11% 9%
Q1' 13 Q2' 13
0%
20%
40%
60%
80%
100%Revenue from otheroperations**Pig iron
Slabs
HRC
Long products
Metalware
Plate
CRC
Galvanized
Pre-painted
Electrical steel
4% 4% 4% 4% 7% 8%
12% 13% 6% 6%
2% 2% 10% 10%
24% 26%
30% 25%
1% 2%
Q1' 13 Q2' 13
0%
20%
40%
60%
80%
100% Pig iron
Slabs
HRC
Long products
Metalware
Plate
CRC
Galvanized
Pre-painted
Electrical steel
3.763 m t 3.774 m t
$2.86 bn $2.83 bn
HVA products*
HVA products*
1 934
1 121 1 463
2 048
1 453
375
1 000
0
500
1000
1500
2000
08 09 10 11 12 6M '13 13E
31%
69%
Столбец1 Development
Maintenance
2013 INVESTMENTS
9
CAPEX TRENDS
$ m
CAPEX PROGRAMME
• Investments decrease as the Company enters into a less
capital intensive growth phase
• Focus on efficiency improvements and niche product
development
• Conservative investment approach
• Capex flexibility under various market scenarios
NOVOLIPETSK DEVELOPMENT PROGRAMME
• Installation of equipment for pulverized coal injection into
blast furnaces (hot testing at BF#5)
• Construction of a new turbine-generator (to increase self-
sufficiency in electricity)
STRENGTHENING OF VERTICAL INTEGRATION
• Pelletizing plant construction at Stoilensky
• Development of the scrap collecting network
PROTECTION OF THE ENVIRONMENT
• Biochemical cleaning of waste water at Novolipetsk coke
production (2nd stage)
MAINTENANCE CAPEX PER TONNE OF STEEL
24 17
30 24 21
0
5
10
15
20
25
30
35
40
45
09 10 11 12 13E
NLMK maintenance capex Industry maintenance capex*
$/t
* Data for European producers that account for over 10% of the global crude steel production
0%
5%
10%
15%
20%
25%
0,0
0,5
1,0
1,5
2,0
2,5
Q1
'08
Q2
'08
Q3
'08
Q4
'08
Q1
'09
Q2
'09
Q3
'09
Q4
'09
Q1
'10
Q2
'10
Q3
'10
Q4
'10
Q1
'11
Q2
'11
Q3
'11
Q4
'11
Q1
'12
Q2
'12
Q3
'12
Q4
'12
Q1
'13
Q2
'13
ImportRebar produced by Russian companiesImport share, rhs
NLMK KALUGA: RUSSIAN REBAR & SCRAP MARKETS REBAR MARKET IN H1 ‘13
• Consumption of long products used in construction +11%
• Rebar consumption +14% yoy and x1.9 to H1’10
• Rebar Import jumped 60% yoy, x3 to H1’10
• Regional supply/demand imbalance
RUSSIAN SCRAP MARKET: REGIONAL IMBALANCE
• Central region accounts for 25% of total scrap collection and
for 50% of exports
• Shortage in long product supply to Central region
was 3.8 m t in 2012
10
LONG STEEL PRODUCTION/CONSUMPTION BALANCE BY REGIONS
Sources: Metal Expert. Data for 2012.
REBAR MARKET, CONSUMPTION IN RUSSIA
Sources: Metal Expert
m t
record 2008 level
Q2’13 import share is 24%
46%
21%
8% 9% 8% 6%
1% 0%
17% 12%
31%
18%
11% 7%
2% 1%
0%
10%
20%
30%
40%
50%
Ura
l
Sib
eria
n
Cen
tral
Vo
lga
No
rth
Wes
tern
Sou
ther
n
Far
East
ern
No
rth
Cau
casi
an
Share in long steel production
Share in long steel consumption
Long steel shortage – 3.8 m tpy
5,2
2,2
1,3
1,7
0
1
2
3
4
5
6
7
8
Srapgeneration
Consumptionin the region
Sales toother regions
of Russia
Export
20,6
14,8
0
5
10
15
20
25
2012
Scrap collection
Scrap consumption
m tpa
~6 m t is exported
m tpa Russia Central region 2012
~3 m t -surplus
SCRAP MARKET BALANCE IN RUSSIA AND THE CENTRAL REGION
Sources: Metal Expert, Russian Railways, NLMK estimates
0 1000 2000 3000 4000
ZSMK
Mechel
MMK
NSMMZ
Abinsky EMZ
Rostovsky EMZ
Severstal - Balakovo
Severstal - Vologda
Revyakinskiy MZ
NLMK Kaluga
NLMK KALUGA: PROJECT OVERVIEW
11
250
950 1 000
0
200
400
600
800
1000
1200
2013 2014 2015
NLMK KALUGA PRODUCTION PLAN
000’ t
MODERN EAF MINI-MILL WITH A CAPACITY OF 1.5 M TPA
• Product mix in high demand by the construction industry:
rebar and sections
• Favorable geographic location: 70 km from Moscow –
region with a highly concentrated level of consumption
• Total investments: $1.2 billion (80% spent till 2013)
• Cost advantage (logistics, modern equipment, scrap
collecting network)
70 km from Moscow
100% 100%
90%
82%
80%
85%
90%
95%
100%
105%
Specificelectricity
consumption
Specific naturalgas consumption
Average Russian steel producer
NLMK-Kaluga
NLMK KALUGA COMPETITIVE ADVANTAGES
KEY HIGHLIGHTS
FINANCIAL RESULTS
• Revenue $2,829 m (-1% qoq)
• EBITDA $400 m (+26%)
• EBITDA margin 14% (+3 p.p.)
• Net income $34 m
• Operating cash flow $330 m (+32%)
• Investments $221 m (+44%)
• Net debt $3,424 m (-1%)
• Net debt/EBITDA 2.15
3,26 3,00 2,80 2,86 2,83
0,60 0,48 0,39 0,32 0,40
18% 16%
14%
11%
14%
0%
5%
10%
15%
20%
$0,0
$0,5
$1,0
$1,5
$2,0
$2,5
$3,0
$3,5
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Revenue EBITDA EBITDA margin, rhs
REVENUE AND EBITDA MARGIN $ bn
12
OPERATING CASH FLOW AND INVESTMENTS*
304
684
333
251
330
453
347 296
154 221
0
200
400
600
800
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Operating cash flow Capex
$ m
*to ensure comparability, Q1'13 operating cash flow is adjusted to the classification used in H1'13. Interest income from placing cash in depostis in H1'13 is included into cash flow from investing activities. In the statements published in Q1'13, this interest income was included into operating cash flow.
GROUP PROFITABILITY Q2 EBITDA WENT UP BY 26% TO $400 MILLION
EBITDA MARGIN GREW BY 3 P.P. TO 14%
• Revenue was stable qoq (-1%)
o Improved product mix partially offset lower prices
• Production costs down by 3% to $2,058 m, despite higher
value added product sales
o Lower expenses for feedstock materials
o Cost optimization programs effect
o FX rate effect as RUB softened vs. US$ by 4% qoq
• SG&A down by 10% to $372 m driven by, among other
factors, the change in sales geography
13
EBITDA CHANGE BY SEGMENT
318
+130 -36
+4 +12
-28
400
200
300
400
500
Q1
'13
Stee
l seg
men
t
Fore
ign
ro
lled
pro
du
cts
Lon
g p
rod
uct
s
Min
ing
Oth
ers
and
inte
rseg
men
tal
op
erat
ion
sim
pac
t
Q2
'13
$ m
18%
16%
14%
11%
14%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
EBITDA MARGIN
EBITDA: FACTOR ANALYSIS
318
+29
+32
+21
400
200
250
300
350
400
Q1 '13 Sales structure Steel and rawmaterialsspreads
Costoptimizationprograms, FXeffect, other
Q2 '13
$ m
EBITDA
Working capital change
Other and non cash operations
Income tax
OPERATING CASH FLOW
Capital expenditures
Financial debt settlement (net)
Deposits movement (net)
FREE CASH FLOW TO EQUITY
Dividends
FX rate change
CHANGE IN CASH
CASH FLOW
POSITIVE FREE CASH FLOW
• Working capital remains stable
• Investments down x2 yoy to $221 m
o Major investment projects completed
• Net cash outflow related to financial debt
settlement was $150 m
o Settlement of RUB bonds
o Full settlement of PXF, attracted in 2008
• Positive free cash flow to equity
DIVIDEND PAYMENTS FOR 2012
• 2012 dividends are $116 m, or 20 % of net income
o In compliance with NLMK dividend policy
• Q2 dividend cash payments were $111 m
14
$ m
Q2’13 CASH FLOW
21
19
-111
113
+154
-150
-221
330
-110
+53
-13
400
3,0
2,5
2,7
3,1
3,3 3,4
2,0
2,2
2,4
2,6
2,8
3,0
3,2
3,4
3,6
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
DEBT LEVERAGE TRENDS FINANCIAL DEBT
• Net debt $3.42 bn (-1%)
• Total financial debt $4.79 bn (-3%)
• Cash and equivalents1 $1.36 bn (-9%)
• Net debt / 12M EBITDA 2.15
DEBT PORTFOLIO OPTIMIZATION
• Short term debt reduced to $0.99 bn (-33%)
• Average debt maturity increased to 3.4
RATING
• Investment credit rating (Moody’s, Fitch)
15 1. Cash and equivalents and ST deposits
MATURITY AND NET DEBT/EBITDA Weighted average
maturity Years to maturity
1,69 1,90 1,84 1,88 1,93 2,15
0,0
0,5
1,0
1,5
2,0
2,5
3,0
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Net debt/EBITDA
3,4 3,8
1,5
+0,4 -0,5
1,0
$0
$1
$2
$3
$4
$5
$6
31 Mar '13 Debt raising Debt settlementsincl interests
30 Jun '13
ST debt LT debt
$ bn
CHANGE IN DEBT POSITION
NET DEBT CHANGE
3,45
+0,33 -0,22
-0,11 -0,03
3,42
2,0
3,0
4,0
31 Mar '13 Operatingcash flow
Capitalexpenditures
Dividends FX rate andother factors
30 Jun '13
$ bn
790 724 1044
2180
$0
$500
$1 000
$1 500
$2 000
$2 500
2013 2014 2015 2016 and beyond
RUB bonds ECA EBRD NLMK Europe Others Europbonds (USD)
1362 994
2 331
385
443
132 34
$0
$500
$1 000
$1 500
$2 000
$2 500
$3 000
$3 500
$4 000
Liquid assets Q3 '13 Q4 '13 Q1 '14 Q2 '14
SETTLEMENT OF FINANCIAL LIABILITIES MATURITY SCHEDULE
• Substantial liquidity cushion and instruments available for
debt portfolio restructuring
• Short term debt $0.99 bn (-33% qoq)
o ECA financing
o Credit lines for working capital financing
• Long term debt $3.79 bn (+10% qoq)
o Eurobonds and ruble bonds
o Long term part of ECA
o European operations’ long term debt
16
LIQUIDITY AND ST DEBT MATURITY1
TOTAL DEBT MATURITY2
$ m
INTEREST EXPENSES3
67 62
65 68
64 62
0%
5%
10%
15%
20%
25%
0
10
20
30
40
50
60
70
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Interest expenses, lhs Interest expenses to EBITDA, rhs
1. ST maturity payments include interests accrued and bond coupon payments 2. Maturity payments do not include interest 3. Quarterly figures are derived by computational method. Reporting periods are 12M, 9M, 6M and Q1 2012 and Q1, 6M 2013. Including capitalized interest.
$ m Undrawn committed credit lines
Cash and equivalents
$ m
OUTLOOK – Q3’13
17
MARKET OVERVIEW
• Globally run rates remain high aggravating the supply/demand imbalance while the market continues to be soft
• End user demand continues to be anemic due to lower activity in a number of regions. In Russia we expect stable
demand from the construction sector
• Pricing environment for steel products and raw materials remains volatile
STEEL PRODUCTION
• NLMK steel output in Q3 is expected to exceed Q2’13 level with 3.9 m t (+4%) driven by the NLMK Kaluga ramp-up
FINANCIALS
• Q3 ‘13 revenue is expected to remain sequentially flat
• Profitability will be driven by steel/raw material price spreads that continue to be volatile
• The Company will continue to optimize its cost base through the entire value chain to offset the weaker pricing
environment and cost inflation
18
SEGMENTS
-6%
-11%
3%
4%
30%
23%
-3%
3%
SEGMENT FINANCIAL INDICATORS
Steel
segment
Foreign rolled products segment
Long products
segment
Mining segment
Revenue
Production costs
214
23
227
-62 2
400
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Stee
lse
gmen
t
Lon
gp
rod
uct
sse
gmen
t
Min
ing
segm
ent
Fore
ign
rolle
dp
rod
uct
sse
gmen
t
Oth
er
fact
ors
Q2
'13
$ m
318 286 197
83 214
-5 -62 -72 -26 -62
50 61
31
20
23
247 190
207
215
227
-14
7
27
26
-2 -$90
$110
$310
$510
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Steel segment Foreign rolled products segment
Long products segment Mining segment
Others
SEGMENT EBITDA
$ m
19
STEEL SEGMENT
• Two-fold profit growth on the back of the widened steel products/raw materials spread and cost optimization programmes
LONG PRODUCTS SEGMENT
• Stable conditions in the long products market
• Outpacing growth in expenses due to the seasonal increase in scrap prices
MINING SEGMENT
• High level of profitability maintained
FOREIGN ROLLED PRODUCTS SEGMENT
• Segment losses increased due to deteriorated market conditions in Europe and USA and one-off factors, incl. inventory impairment to market value
SEGMENT CONTRIBUTION – Q2 ‘13
SEGMENT CONTRIBUTION TO Q2 EBITDA
Revenue
Production costs
Revenue
Production costs
Revenue
Production costs
26%
18%
7% 5% 5%
4% 4%
1%
9%
14%
8%
Iron ore
Coke and coking coal
Scrap
Ferroalloys
Other raw materials
Electricity
Natural gas
Other energy resources
Personnel
Other expenses incl change in inventory
Depreciation
1,79 1,82 1,84 1,70
1,66 1,68
0,42 0,46 0,30 0,35 0,35 0,37
0,17 0,32 0,29 0,20
0,08 0,21
0,0
0,5
1,0
1,5
2,0
2,5
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Revenue from intersegment salesRevenue from third partiesEBITDA
8% 14%
13%
10% 4%
10%
EBITDA margin
STEEL SEGMENT STABLE SALES VOLUMES
• Domestic steel sales growth, including higher slab sales
• HVA sales growth
PROFITABILITY INCREASE
• Steel products/raw materials spread recovery
• The delay in export revenue recognition partially reflects
Q1 `13 results
• Q2’13 cash cost of slab decreased by 4% to $348/t
FX RATES IMPACT
• Average RUB/USD FX rate decreased by 4% qoq
• 90% of the Segment’s expenses are nominated in RUB
3% 6% 3% 4% 5%
8% 7%
8% 15%
14%
24% 19%
39% 31%
4% 2%
0% 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sales Revenue
Other revenue*
Pig iron
Slab
HRC
CRC
Galvanized
Pre-painted
Dynamo
Transformer
2,364,000 t $1,685 m
* Revenue from the Segment's sales of other products
Sales and revenue from third parties
$ bn
SALES AND REVENUE STRUCTURE IN Q2 ’13
Value added products
Ordinary grades
REVENUE AND EBITDA COST OF SALES STRUCTURE IN Q2 `13
20
275 329 314 281 288 314
73
162
122 88 59
113
28 50 61
31 20 23
0
70
140
210
280
350
420
490
560
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13Revenue from intersegment sales
Revenue from third parties
EBITDA
8%
10%
14%
8% 6% 5%
EBITDA margin
REVENUE AND SALES GROWTH
• Sales volumes up by 9%
• Segment revenue from third parties increased by 9%
• Significant intersegment revenue growth by 92% - due to
increased demand for scrap from the Steel segment
EBITDA MARGIN 5%
• Long products/scrap spread narrowed
PRODUCTION EXPENSE GROWTH
• Long product sales growth lead to higher purchases of
scrap to secure growing production volumes
17% 22%
83% 76%
1%
0%
20%
40%
60%
80%
100%
Sales Revenue
Other revenue*
Long products
Metalware
469,000 t $314 m
$ m
21
64% 2%
3%
6%
8%
11%
5% Scrap
Ferroalloys
Other materials
Electricity
Personnel costs
Other expenses
Depreciation
LONG PRODUCTS SEGMENT Q2 ‘13 SALES AND REVENUE STRUCTURE
Value added grades
Revenue from
ordinary products
* Revenue from other product sales
REVENUE AND EBITDA COST OF SALES STRUCTURE IN Q2 `13
36 86 93
127 92 100
281
274
222 220 245 249
217 247
190 207 215 227
0
100
200
300
400
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13Revenue from intersegment sales
Revenue from third parties
EBITDA
69% 69%
60% 60%
64% 65%
EBITDA margin
SEGMENT REVENUE INCREASED
• Intersegment sales went up - higher Novolipetsk
purchases of iron ore concentrate
PROFIT AND MARGIN GROWTH
• EBITDA margin up to 65% by 1 p.p.
• Iron ore concentrate cash cost was $21.8/t
(-$0.7/t qoq) – due to lower amount of repairs and RUB
depreciation against USD
22
2,86 2,57 3,00
2,62 2,74
0,63 0,74
1,22
0,77 0,75
0,0
1,0
2,0
3,0
4,0
5,0
Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Sales to third parties Sales to Novolipetsk
mt
$ m
8%
25%
0,3% 5%
25%
21%
17%
Raw and other materials
Energy
Natural gas
Other energy
Labour costs
Other costs
Depreciation
MINING SEGMENT IRON ORE CONCENTRATE SALES
REVENUE AND EBITDA COST OF SALES STRUCTURE IN Q2 `13
59 1
92
88 105 100
17 14
21 16
134 94 128
91
224 182 235
192
19 18
19
17
486 454
509
417
0
200
400
600
Sales Revenue Sales Revenue
Semi-finished
Thick plates
HRC
CRC
Pre-painted
Other revenue
274 187
268 175
116
94
110
84
82
68
51
40
12 15
473
362 432
314
0
200
400
600
Sales Revenue Sales Revenue
Other revenue
Pre-painted
CRC
HRC
SALES DECREASED BY 2%
• Lower demand from the USA construction sector
• Plate shipments from NLMK DanSteel increased following
the completion of rolling mill reconstruction
• Higher demand for coated steel in the EU
NEGATIVE FINANCIAL INDICATORS
• Finished products/semi-finished steel spreads narrowed
• One-off factor: semi-finished and finished product
inventory impairment to current market prices (-$15 m) –
will positively contribute to H2 ‘13 results.
000` t $ m
989 1 026
759 692
817 730
-10 -5 -62 -72 -26 -62
-1% 0%
-8% -10%
-3%
-9%
-15%
-10%
-5%
0%
5%
10%
-200
0
200
400
600
800
1 000
1 200
Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13
Revenue from third parties EBITDA EBITDA margin, rhs
$ m 000` t $ m
$ mln $ m 000` t 000` t $ m
23
FOREIGN ROLLED PRODUCTS SEGMENT
NLMK EUROPE SALES AND REVENUE
NLMK USA SALES AND REVENUE
REVENUE AND EBITDA
Q1 ‘13
Q2 ‘13 Q1 ‘13
Q2 ‘13
24
APPENDICES
25
APPENDIX
Q2 ’13 CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE), $/T
Coke and coking coal $91
Iron ore $64
Scrap $37
Other materials $31
Electricity $21
Natural gas $18
Personnel $33
Other expenses $53
Total $348
CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013, $/T
Q1'12 $395
Q2'12 $411
Q3'12 $383
Q4'12 $361
Q1'13 $364
Q2'13 $348
26 1 as at 30.06.2013
2 as at 31.03.2013
SEGMENTAL INFORMATION
Q2 2013
(million USD)
Revenue from external customers 1 685 730 314 100 0 2 829 2 829
Intersegment revenue 371 1 113 249 734 (734)
Gross profit 352 (44) 43 242 0 592 (40) 552
Operating income/(loss) 81 (110) 2 209 (0) 182 (2) 180
as % of net sales 4% (15%) 1% 60% 6%
Income / (loss) from continuing operations
before minority interest253 (182) (42) 211 0 241 (208) 33
as % of net sales 12% (25%) (10%) 60% 1%
Segment assets including goodwill1 13 419 3 662 2 721 2 292 54 22 148 (4 510) 17 638
Q1 2013
(million USD)
Revenue from external customers 1 659 816 288 92 0 2 856 2 856
Intersegment revenue 346 1 59 245 650 (650)
Gross profit 260 (6) 46 232 0 531 (8) 524
Operating income/(loss) (36) (74) (2) 197 (0) 84 26 111
as % of net sales (2%) (9%) (1%) 58% 4%
Income / (loss) from continuing operations
before minority interest(39) (91) (36) 164 0 (2) 37 35
as % of net sales (2%) (11%) (10%) 49% 1%
Segment assets including goodwill2 13 987 3 753 2 791 2 408 56 22 995 (4 485) 18 510
Totals
Intersegmental
operations and
balances
Consolidated
Steel
Foreign
rolled
products
Long
productsMining All other Totals
Intersegmental
operations and
balances
Consolidated
Steel
Foreign
rolled
products
Long
productsMining All other
27
QUARTERLY DATA: CONSOLIDATED STATEMENT OF INCOME
Q1 2013, 6M 2013 and 6M 2012 are official reporting periods. Q2 2013 figures are derived by computational method.
Q2 2013 Q1 2013 6M 2013 6M 2012
(mln USD) + / - % + / - %
Sales revenue 2 829 2 856 (27) (1%) 5 685 6 351 (666) (10%)
Production cost (2 058) (2 125) 67 (3%) (4 183) (4 415) 232 (5%)
Depreciation and amortization (220) (207) (12) 6% (427) (348) (79) 23%
Gross profit 552 524 28 5% 1 076 1 589 (513) (32%)
General and administrative expenses (112) (120) 8 (7%) (231) (237) 5 (2%)
Selling expenses (227) (257) 30 (12%) (484) (592) 107 (18%)
Taxes other than income tax (33) (36) 3 (10%) (69) (81) 12 (14%)
Operating income 180 111 69 62% 291 680 (389) (57%)
Gain / (loss) on disposals of property, plant and equipment (4) (2) (3) 171% (6) (37) 32 (85%)
Gains / (losses) on investments (3) (1) (2) 281% (4) (1) (3) 274%
Interest income 12 10 2 19% 22 12 10 78%
Interest expense (27) (31) 3 (11%) (58) (14) (44) 306%
Foreign currency exchange loss, net (5) (27) 22 (81%) (32) 2 (34) 0%
Other expense, net (10) (8) (2) 23% (18) (32) 14 (43%)
Income from continuing operations before income tax 143 53 90 169% 195 610 (414) (68%)
Income tax (110) (18) (92) 523% (127) (161) 34 (21%)
Equity in net earnings/(losses) of associate 0 0 (0) (4%) 0 0 (0) (57%)
Net income 33 35 (2) (7%) 68 449 (381) (85%)
Less: Net loss / (income) attributable to the non-controlling interest 1 2 (2) 3 1 2 135%#ДЕЛ/0! 0%
Net (loss) / income attributable to OJSC Novolipetsk Steel stockholders 34 38 (4) (11%) 72 451 (379) (84%)
EBITDA 400 318 82 26% 718 1 028 (310) (30%)
Q2 2013/Q1 2013 6M 2013/6M 2012
28
Q1 2013, 6M 2013 and 6M 2012 are official reporting periods. Q2 2013 figures are derived by computational method.
CONSOLIDATED CASH FLOW STATEMENT
*to ensure comparability, Q1'13 operating cash flow is adjusted to the classification used in H1'13. Interest income from placing cash in deposits in H1'13 is included into cash flow from investing activities. In the statements published in Q1'13, this interest income was included into operating cash flow.
Q2 2013 Q1 2013 6M 2013 6M 2012
(mln. USD) + / - % + / - %
Cash flow from operating activities
Net income 33 35 (2) (7%) 68 449 (381) (85%)
Adjustments to reconcile net income to net cash provided by operating Depreciation and amortization 220 207 12 6% 427 348 79 23%Loss on disposals of property, plant and equipment 4 2 3 171% 6 37 (32) (85%)(Gain)/loss on investments 3 1 2 281% 4 1 3 274%Interest income (12) (10) (2) 19% (22) (22)Interest expense 27 31 (3) (11%) 58 58Equity in net ernings of associate (0) (0) 0 (4%) (0) (0) 0 (57%)Defferd income tax (benefit)/expense 41 (40) 81 (202%) 1 (5) 6Loss / (income) on forward contracts 15 (6) 21 8 (0) 9Other movements 12 49 (37) (75%) 61 (20) 82
Changes in operating assets and liabilitiesIncrease in accounts receivables (20) (102) 82 (81%) (122) (106) (16) 15%Increase in inventories 26 75 (49) (65%) 101 49 52 105%Decrease/(increase) in other current assets (3) 5 (8) 2 12 (10) (84%)Increase in accounts payable and oher l iabilities (18) (17) (2) 11% (35) 26 (61)Increase/(decrease) in current income tax payable 2 22 (20) (91%) 24 16 7 44%
Net cash provided from operating activities* 330 251 79 32% 581 807 (226) (28%)
Cash flow from investing activities Proceeds from sale of property, plant and equipment (0) 1 (2) 1 10 (9) (87%)Purchases and construction of property, plant and equipment (221) (154) (67) 44% (375) (810) 435 (54%)Proceeds from sale / (purchases) of investments, net 0 9 (8) (99%) 9 (0) 9(Placement) / withdrawal of bank deposits, net 160 (160) 320 0 231 (231)Prepayment for acquisition of interests in new subsidiaries (157) 157Acquisition of additional stake in existing subsidiary (10) 10 (10) (10)
Net cash used in investing activities (61) (313) 252 (80%) (374) (726) 352 (48%)
Cash flow from financing activities
Proceeds from borrowings and notes payable 362 852 (491) (58%) 1 214 437 777 178%
Repayments of borrowings and notes payable (512) (553) 41 (7%) (1 065) (384) (681) 177%
Capital lease payments (6) (7) 1 (21%) (13) (11) (2) 17%Dividends to shareholders (111) (0) (111) (111) (114) 3 (3%)
Net cash used in financing activities (266) 292 (559) (191%) 26 (72) 98
Net increase / (decrease) in cash and cash equivalents 2 230 (227) (99%) 232 8 223
Effect of exchange rate changes on cash and cash equivalents 19 39 (20) (52%) 58 (36) 94
Cash and cash equivalents at the beginning of the period 1 220 951 269 28% 951 797 154 19%
Cash and cash equivalents at the end of the period 1 241 1 220 21 2% 1 241 769 472 61%
Q2 2013/Q1 2013 6M 2013/6M 2012
29
CONSOLIDATED BALANCE SHEET as at
30.06.2013
as at
31.03.2013
as at
31.12.2012
as at
30.09.2012
as at
30.06.2012
as at
31.03.2012
as at
31.12.2011
(mln. USD)
ASSETS
Current assets 5 537 5 834 5 469 6 287 5 230 5 714 5 504Cash and cash equivalents 1 241 1 220 951 1 803 769 926 797Short-term investments 121 271 107 11 10 11 227Accounts receivable, net 1 497 1 557 1 491 1 559 1 642 1 786 1 573Inventories, net 2 530 2 689 2 827 2 819 2 733 2 904 2 828Deferred income tax assets 121 71 63 54 28 24 19Other current assets, net 27 25 30 42 47 63 59
Non-current assets 12 101 12 677 12 988 12 661 11 873 12 895 11 753Long-term investments, net 17 20 19 13 9 9 8Property, plant and equipment, net 10 981 11 442 11 753 11 458 10 716 11 664 10 570Intangible assets 129 136 142 146 148 159 159Goodwill 753 776 786 778 752 802 760Other non-current assets, net 31 36 38 25 17 17 19Deferred income tax assets 189 266 250 240 230 244 237
Total assets 17 638 18 510 18 458 18 949 17 103 18 609 17 257
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities 2 647 2 940 3 302 4 155 3 579 3 577 2 940Accounts payable and other l iabilities 1 609 1 412 1 462 1 713 1 582 1 783 1 623Short-term borrowings 994 1 484 1 816 2 434 1 971 1 781 1 306Current income tax liability 44 45 24 9 26 12 11
Non-current liabilities 4 695 4 678 4 065 3 875 3 329 3 880 4 212Long-term borrowings 3 792 3 459 2 816 2 850 2 373 2 693 3 074Deferred income tax liability 746 765 792 752 690 762 714Other long-term liabilities 157 454 457 273 266 425 425
Total liabilities 7 342 7 619 7 367 8 030 6 908 7 457 7 152
Stockholders’ equityCommon stock 221 221 221 221 221 221 221Statutory reserve 10 10 10 10 10 10 10Additional paid-in capital 257 257 306 306 306 306 306Other comprehensive income (1 736) (1 224) (997) (1 178) (1 738) (613) (1 489)Retained earnings 11 538 11 620 11 582 11 604 11 437 11 272 11 099
NLMK stockholders’ equity 10 290 10 885 11 123 10 964 10 237 11 196 10 147Non-controlling interest 6 7 (33) (45) (42) (45) (42)Total stockholders’ equity 10 296 10 892 11 090 10 919 10 195 11 151 10 105
Total liabilities and stockholders’ equity 17 638 18 510 18 458 18 949 17 103 18 609 17 257
www.nlmk.com
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