Corporate presentation of NLMK. Presented by Grigoriy Fedorishin, CFO, and Sergey Takhiev, Head of IR

1. NLMK
Goldman Sachs Global Metals & Mining, Steel Conference
Grigory Fedorishin, CFO
SERGEY TAKHIEV, HEAD OF IR
20-21 NOVEMBER 2013, NEW YORK

2. DISCLAIMER
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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.
The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should inform
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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.
2

3. 1. Business profile
2. Operating and financial profile
3. Strategy
3

4. BUSINESS PROFILE
•
World’s leading steel producer with 17 mln t capacity
o
o
o
o
•
Balanced business model
o
o
o
o
•
Low cost raw materials with over 80% sufficiency in iron ore*
and scrap, and 100% sufficiency in coke concentrated in Russia
Low cost steelmaking operations concentrated close to raw
materials sources in Russia with BOF/EAF split of 80%/20%
Downstream processing located close to end-users and
integrated with the Russian steel platform
80-90% of finished steel products sold locally (where they were
manufactured)
NLMK CRUDE STEEL PRODUCTION
mt
o
o
Flat/long products 85/15 with over 40% value added steel
products
Presence in high growth (Russian construction) and mature
markets (European and US manufacturing, automotive, etc.)
International/Russian sales 57/43 (in Q3’13)
2012 Operating highlights
o
o
o
o
o
14,9 mln t of steel production, up 25%
Revenue USD12.16 billion, up 4%
16% EBITDA margin
Net debt/EBITDA: 1.88 with over $1 bn of cash
The only M&M major in Russia with investment grade credit
rating
Run rate
of 100%
Run rate
of 100%
14
23%
20%
12
10
18%
14%
13%
8
14,9
6
4
8,2
7,9
8,6
8,9 9,1
8,5
9,1
9,1
8%
12,0
10,5 10,6 11,5
3%
2
0
-2%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
NLMK crude steel production
NLMK share in Russian crude steel output
Diversified product mix and sales structure
o
•
High quality steel producer with highest profitability
Top 10 low cost steelmaker globally
#1 in Russia with over 20% of Russian steel output
70% growth in output during the last 5 years
EBITDA MARGIN NLMK VS GLOBAL AVERAGE
28%
30%
25%
23%
19%
20%
16%
15%
10%
11%
8%
9%
7%
5%
0%
* NLMK is 100% self-sufficient in iron ore concentrate and sinter. Pellets are currently purchased from 3rd parties.
2009
2010
NLMK
2011
2012
Global average
Source: WSD, Company data
4

5. BALANCED AND FAVORABLY LOCATED ASSETS
Russian production platform enhanced with international assets
NLMK USA Strip
1 mini-mill & 2 rolling mills
HRC 2.7 m tpa incl.:
- CRC 0.7 m tpa
- HDG 0.8 m tpa
NLMK Dansteel
Novolipetsk
NLMK Kaluga
Thick plate about
0.5 m tpa
Sinter: 15 m tpa
Coke: 2.6 m tpa
Steel: 12.4 m tpa
Flats: 5.7 m tpa
Steel (EAF): 1.5 m tpa
Longs: 0.9 m tpa
Altai-Koks
Coke: 4.66 m tpa
RUSSIA
Moscow
VIZ-Stal
Denmark
USA
Transformer steel:
0.17 m tpa
Belgium
Stoilensky
France
Italy
Iron ore concentrate:
14 m tpa
Sinter ore: 1.6 m tpa
NLMK Long products
Steel : 2.2 m tpa
Longs: 2 m tpa
NLMK Belgium Holdings (NBH)
HRC 1.7 m tpa incl. rerolling and coating
Thick plates: 0.9 m tpa
- NLMK Russia production and
trading assets
- NLMK International operations
2012 Crude steel
production
NLMK Group
2012 Steel products
sales
14.9 m t
- NBH production assets
- Service centres
- Licenses to develop coal deposits
15.2 m t
* numbers represents effective capacity
5

6. EFFICIENT VERTICAL INTEGRATION
•
Iron ore: 85% self-sufficiency*
NLMK SLAB PRODUCTION COSTS VS GLOBAL
o The Group is over 100% self-sufficient in iron ore concentrate with
over 100 years of mine life
o One of the most efficient iron ore producer globally
•
Coke: over 100% self-sufficient with modern facilities
•
Scrap: 85% self-sufficiency. Largest scrap collecting
network in Russia
•
Energy: 56% self-sufficiency from reuse of by-product
gases ***
•
$/t
650
600
550
500
450
400
350
300
250
200
Slab Price
NLMK
Novolipetsk
3
Coal: Exposure to the local oversupplied market.
Portfolio of coal deposit rights give an option to increase
self-sufficiency
123
236
342
454
546
632
Cumulative BOF capacities, mt/y
Source: WSD. Estimation of slab cash cost for BOF producers w/o overheads
COAL PRICE: DOMESTIC VS INTERNATIONAL
SELF-SUFFICIENCY
350
Self-sufficiency in 2012
Coking coal, Australia, FOB
~115%*
120%
300
100%
250
~85%*
~85%**
80%
200
56%***
60%
150
40%
100
20%
Coking coal, Russia FCA
50
Source: Metal Bulletin, Metal Expert
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
0%
Iron ore
Coke
Scrap
Electricity
* NLMK currently is over 100% self-sufficient in iron ore concentrate, sinter ore and
coke. Pellets are purchased from 3rd parties. From 2016 Group to achieve 100% selfsufficiency in pellets.
** at Russian operations. *** at Novolipetsk
6

7. DIVERSIFIED SALES
•
Russian market remains a key sales region with 80%
exposure into construction and infrastructure
•
Wide product mix with strong value-added share
•
Slabs sales hedged by overseas rolling operations
100%
11%
8%
Rational export/domestic market balance
•
DIVERSIFIED SALES STRUCTURE
•
80%-90% of total finished steel sold to local customers
•
Market penetration through constantly improving
product mix and quality
•
Niche product sales in focus of development
(transformer steel, specialty thick plates, feedstock for
LDP, etc.)
2%
0% 3%
21%
1%
Metalware
38%
HVA
products
HVA
15%
Galvanized steel
12%
Construction
20%
30%
3.72 million tonnes
10%
10%
NLMK Europe
NLMK USA
0%
NLMK Russia
NLMK divisional sales to consuming industries. w/o international trading. Q3 2013 data
Sales – outer
circle
10%
6%
Russia
9%
12%
9%
43%
43%
N.America
Middle East
14%
S.E. Asia
14%
20%
Billets
Pig iron
Europe
4%
HRC
Slabs
Total sales
30%
CRC
Long products
6%
Pipe producers
Machinery
32%
81%
Pre-painted steel
Plate
28%
60%
40%
60%
9%
Electrical steel
8%
29%
Q3 ‘13 SALES AND REVENUE BY REGIONS
SALES BY PRODUCT Q3 ‘13
4%
80%
Others (incl
stockholders)
Other regions
16%
Revenue – inner
circle
Total sales
3.72 million tonnes
Total revenue
$2.83 million
7

8. 1. Business profile
2. Operating and financial profile
3. Strategy
8

9. GLOBAL STEEL MARKET OVERVIEW
•
Supply / Demand
GLOBAL CAPACITY UTILIZATION
o Restocking at the beginning of 2013 followed by a significant
supply growth and increased competition
o Market environment improvement over Q3 supported by
the slightly improved supply-demand balance
80%
Prices
70%
o Prices moved up over the Q3 driven by increased raw
materials prices and strengthened buying activity
o Prices are expected to stabilize in Q4 underpinned by low
inventories
•
60%
50%
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
•
90%
Inventories
o The pace of destocking slowed in Q3, inventories are now
considered to be at a historically low level and in balance with
the demand
Global
STEEL INVENTORIES
North America
EU (27)
PRICES BY REGION
Index, January 2012 = 1
900
1,3
$/t
$/t
800
1,2
160
700
1,1
140
600
1
120
500
0,9
100
400
0,8
0,7
Germany
China
300
USA
HRC USA, EXW
HRC China, EXW
HRC Europe, EXW
Iron ore, China, CFR, (rhs)
200
Source: CRU, Bloomberg
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
0,6
180
80
60
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
1,4
China
Source: World Steel Association
Source: Metal Bulletin
9

10. US MARKET
•
Supply / Demand
US STEEL-CONSUMING SECTORS PERFORMANCE
o LT demand looks strong with construction, machinery and energy
sectors performing relatively well and approaching pre-crisis levels 1 200
o Supply-side provides support to prices on improved producers’
discipline (quick adjustments of run rates) and reduced imports
(YTD imports fell by 8% yoy).
•
‘000 units
million units
1 000
800
Prices
o Steel prices have strengthened significantly since May
o Further price increases introduced by local producers supported
by tight supply
o Lead times for HRC and CRC increased as buying activity improves
US construction starts SAAR
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
o Months of supply are below average at 2.4 in September
May-08
400
Inventories
Jan-08
•
600
17
16
15
14
13
12
11
10
9
8
US auto sales SAAR
Source: US Census Bureau, Ward’s Automotive Group
INVENTORY LEVEL
3,5
US PRICE DYNAMICS
900
US inventory/sales ratio, months
$/metric t
$/metric t
$728/t
700
3
5-year average
level
2,5
500
400
300
500
200
300
2
100
Sep-13
Jul-13
May-13
Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Source: Bloomberg
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
100
1,5
HRC US domestic prices, EXW
Spread US HRC vs scrap (RHS)
Source: Metal Bulletin
HRC Spread US vs China (RHS)
10

11. EUROPEAN MARKET
Emerging signs of recovery in the European industry
o PMI above 50 for the 4th consecutive month
o Strengthening industrial and construction confidence in the
core EU countries
•
70
10
60
0
50
Supply / Demand
o Apparent steel consumption growth is expected to turn positive
in 2014 (+2.9%) driven by the investment improvement*
o Imports pressure eased since Q2 and is expected to remain
essentially stable
•
INDUSTRIAL SECTOR INDICATORS
-10
40
-20
30
-30
20
-40
0
Prices
10
-50
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
•
o Steel prices are expected to stabilize in Q4 on the seasonal
demand slowdown and balanced inventories with the uptick at
the beginning of 2014 due to improved orders
Eurozone Manufacturing PMI
EU-27 industrial confidence
Source: Eurostat
GERMANY: STEEL INVENTORY
3,5
Inventory/sales ratio, months
EU PRICE DYNAMICS
900
$/t
$/t
270
3,0
5-year average
level
800
220
170
700
120
2,5
600
2,0
70
20
500
-30
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Source: CRU. I/S ratio adjusted by CRU (three month moving average)
* Source: Eurofer
-80
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
400
1,5
HRC spread Northern EU domestic EXW vs import CFR
HRC, Northern EU, EXW
Source: Metal Bulletin
Plates, Northern EU, EXW
11

12. RUSSIAN MARKET
•
Growth in steel consumption
DOMESTIC STEEL PRICES, HRC / CRC (EXW)
o 2013 ASU to grow by 3.8% yoy to 43.6 m t (WSA forecast)
1 100
o 9M’13 finished steel consumption up by 3.5% yoy to 31.7 m t
due to increased longs consumption (+5.1% yoy)
1 000
o Key drivers - construction and infrastructure sector,
contributing about 2 m t to ASU, or over 100% of total ASU
growth in 2013
o Long-term fundamentals for steel consumption growth remain
strong
•
$/t
900
800
700
600
500
Slab export, Russia FOB
CRC Russia, EXW
400
Pricing trends
300
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
o Ordinary grades replicate export market situation
HRC Russia, EXW
HDG Russia, EXW
o More stable pricing for value added grades
Sources: Metal Bulletin, Metal Expert
STEEL CONSUMPTION IN RUSSIA
FINISHED STEEL CONSUMPTION
‘000 t
15%
2 100
12%
7%
1 600
Pipes&tubes
industry
Machinery
70
60
mt
Delayed steel consumption from 1995 to 2005 is 170 m t
50
40
30
1 100
66%
600
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
100
Flats
Sources: Metal Expert, NLMK
Столбец1
Processing, incl.
white goods and
construction
20
Construction &
infrastructure
0
10
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013E
2014E
2 600
Longs
Sources: McKinsey, World Steel Association
12

13. RUSSIAN MARKET - Construction
Market overview
o Construction (sq m completions) surpassed pre-crisis peak
levels in 2012
o Residential completions up by 12% yoy in 9M’13
o New house sales supported by robust consumer confidence
o 9M’13 steel consumption in construction and infrastructure
up by 8% yoy
o flat steel +7% yoy
o long steel +8.5% yoy
3 000
‘000 t
2 500
2 000
1 500
1 000
NLMK strategy
o Quality and service improvement
o Ramp up of the launched in mid-2013 NLMK Kaluga with the
crude steel capacity of 1.5 m tpa (0.4 m t to be produced in
2013)
o New long steel products (angles, channels) including niche
one – high strength rebar (A1000)
o Imports substitution
500
0
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Flat steel
HOUSE COMPLETIONS IN RUSSIA
FLOOR SPACE PER CAPITA, M2
80
80
67
70
m square
meters
60
60
48
50
50
%
37
40
30
50
Normal
30
23
20
50
%
10
40
0
20
Obsolete
10
Source: Company estimates
Source: Rosstat, NLMK estimates. Ministry of Economic Development
2013E
2012
2011
2010
2009
2008
2007
Столбец1
2006
Russia
2005
Eastern
Europe
2004
EU
2001
0
US
2000
70
Long steel
Source: Metal Expert
2003
•
STEEL CONSUMPTION IN CONSTRUCTION
2002
•
13

14. RUSSIAN MARKET – Automotive
Market fundamentals
STEEL CONSUMPTION IN AUTOMOTIVE
Flat steel
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
o Technology and experience transfer and synergy with its European
division
May-11
o Downstream development to grow market share
Jan-11
o New steel grades – IF, etc. steels
Sep-10
NLMK strategy
May-10
•
Jan-10
o Auto sales in 10M’13 down by 7% yoy
Sep-09
o YTD steel consumption in automotive sector down as auto
production of local brands remains soft
May-09
Recent developments
‘000 t
Jan-09
•
200
180
160
140
120
100
80
60
40
20
-
Sep-08
o 50% of car fleet is over 10 years old
May-08
o 3.3 times growth in cars production since 2009
Jan-08
•
Long steel
Source: Metal Expert
RUSSIA: PRODUCTION OF CARS AND CAR FLEET
AGE OF CAR FLEET IN RUSSIA
m units
1,97 1,94
m units
< 3 years
12%
2,0
1,7
1,5
1,5
50%
3-5 years
1,0
15%
5-10 years
1,0
1,0
1,1
1,1
1,2
1,3
1,2
40
35
30
25
20
15
0,6
10
0,5
5
23%
> 10 years
0,0
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Е
Passenger cars production, l.h.
Source: Avtostat
Source: Rosstat, Avtostat, ASM-Holding
Car fleet , r.h.
14

15. RAW MATERIALS MARKET
GLOBAL RAW MATERIAL PRICES
•
Prices and demand in international markets
o Correlation between raw material and steel price trends
o In Q3 global prices for iron ore and coking coal recovered
by 13% and 9% respectively underpinning steel prices
upward movement
o Raw materials demand remains solid as steel output continues to
grow
1,2
1,0
0,9
0,8
0,7
0,6
0,5
o Iron ore inventories at Chinese ports hit bottom in
March’13 and started to recover
0,4
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
o Chinese imports of iron ore were up by 9% yoy in 9M’13
•
Jan 2012 index 1.0
1,1
Russian coking coal market remains oversupplied
Iron ore fines (Fe 62%) import China, CFR
Coking coal, export Australia, FOB
Scrap export Europe, FOB
HRC China export, FOB
o 9M’13 exports increased by 30% while domestic shipments went
down by 4%
Sources: Metal Bulletin
RUSSIA: COKING COAL MARKET BALANCE
mt
2,5
2,0
40
2,0
100
30
20
mt
IRON ORE INVENTORIES AT
CHINESE PORTS
700
70
60
300
50
200
40
40,6
39,0
0
-14,2
-17,5
-22,6
-20
2011
Export
2012
Sales to domestic market
Sources: Metal Expert, NLMK estimates
2013E
Import
IRON ORE
SUPPLY
mt
600
-2% 500
in Q3
400
100
90
40,9
10
-10
110
80
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
50
CHINA: IRON ORE IMPORTS AND INVENTORIES
Sources: Bloomberg, NLMK estimates
601
552
274
295
9М '12
9М '13
Iron ore
local production
(Fe 62% equivalent)
Iron ore imports
15

16. OPERATING RESULTS
•
High capacity utilization rates
NLMK CRUDE STEEL PRODUCTION
o Growth in steel production in Q3’13 to 3.9 m t (+3% qoq)
o Average capacity utilization rate 96%
o Lipetsk plant – 99%
o NLMK Indiana*– 91%
o NLMK Russia Long – 90%
•
mt
~4,1**
3,8
3,9
0,2
0,5
0,2
0,5
0,2
0,6
0,9
1,8
3,0
3,1
3,1
12,2
Q1'13
Q2'13
Q3'13
3,7
Steel production outlook
o Q4’13 steel output up by 200,000 t, (+5% qoq) to 4.1 m t
driven by NLMK Kaluga production of 290,000 t
o 2013 steel output of 15.5 m t, +4% yoy (up from 14.9 m t in
2012)
Steel
Q4'13 (P)
Long products
14,9
2012
15,5**
2013 (P)
Foreign rolled products
** Excluding NLMK Verona output in Q4’13
STEELMAKING CAPACITY UTILISATION:
NOVOLIPETSK AND GLOBAL AVERAGE
NLMK: STEELMAKING CAPACITY UTILIZATION
100%
96%
99%
94%
91%
90%
96%
120%
100%
90% 90%
80%
87%
60%
40%
70%
Lipetsk plant capacity
utilization
20%
80%
Global average
0%
NLMK USA
NLMK Long
products
Q2 '13
Novolipetsk
NLMK Group
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
'08 '08 '08 '08 '09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 '12 '12 '12 '13 '13 '13
Q3 '13
* Steelmaking asset of NLMK Foreign rolled product segment
16

17. FINANCIAL HIGHLIGHTS
•
9М ’13 financial results
o
FINANCIAL PERFORMANCE, QUARTERLY
Revenue $8,405 m (-10% yoy)
$ bn
3,4
o
EBITDA $1,096 m (-27% yoy)
o
EBITDA margin 13% (-3,2 p.p.)
3,0
o
Operating cash flow : $1,030 m (-31%)
2,8
o
Investments: $658 m (-43%)
o
Net debt*/12M EBITDA: 1.87
16,1%
14,1%
13,9%
3,2
13,9%
11,1%
2,6
3,00
2,4
2,80
2,86
2,83
2,72
Q4 '12
Q1 '13
Q2 '13
Q3 '13
2,2
2,0
•
Q3 '12
Q3 ’13 financial results
o
EBITDA $379 (-5% qoq)
o
EBITDA margin 13,9% (-0.2 p.p.)
o
Investments: $281 m
Revenue
OPERATING CASH FLOW AND INVESTMENTS**
1 600
Cash flow generation
o
Sustainable free cash generation coupled with
continuous deceleration in Investments
$m
1 491
1 400
1 200
•
EBITDA margin
Revenue $2,72 m (-4% qoq)
o
18,0%
16,0%
14,0%
12,0%
10,0%
8,0%
6,0%
4,0%
2,0%
0,0%
1 158
1 030
1 000
800
658
600
400
200
0
9М'12
Operating cash flow
* Net debt w/o NBH debt (deconsolidated after NBH stake sales to SOGEPA)
** Investments include capitalized interest expense
9М'13
Capex
17

18. DEBT POSITION
•
Financial debt
o
o
o
o
LT AND ST DEBT
Net debt*
Total debt
Cash and equivalents **
Net debt * / 12M EBITDA
$2.77 bn (-19%)
$4.12 bn (-14%)
$1.35 bn (-1%)
1.87x
$5,0
$ bn
$4,0
$3,0
•
NLMK Belgium Holdings (NBH) liabilities
deconsolidation
•
Consistent net debt reduction
$3,8
$2,3
$1,0
$1,4
$1,0
as at 30 Jun 2013
Investment credit rating (Moody’s, Fitch)
ST debt
MATURITY AND NET DEBT/EBITDA
3,8
3,6
3,4
3,2
3,0
2,8
2,6
2,4
2,2
2,0
Weighted average
maturity
3,3
3,6
3,4
3,1
3,0
2,0
1,5
2,7
2,5
Years to
maturity
6
2,15
2,5
1,90
1,69
Cash and equivalents
Committed credit lines
$ bn
+0.40
+0.25
5
1,88
1,84
1,93
1,87
1,0
4
3
0,0
0,99
-0.60
+0.05
0,62
-0.76
0,5
Q1 Q2 Q3 Q4 Q1 Q2 Q3
'12 '12 '12 '12 '13 '13 '132
as at 30 Sep 2013
MATURITY AND NET DEBT/EBITDA
Net debt/EBITDA
3,0
LT debt
$1,4
$0,6
$-
•
$2,3
$3,5
$2,0
3,79
ST debt
3,51
LT debt
2
Q1 Q2 Q3 Q4 Q1 Q2 Q3
'12 '12 '12 '12 '13 '13 '132
* Net debt w/o NBH debt (deconsolidated after NBH stake sales to SOGEPA)
**Cash and equivalents and ST deposits
30 Jun '13 Borrowings
Debt
Reclass. of
NBH
repayments debt for SIF
debt
shares*** deconsolidation
Other
factors
30 Sept '13
18

19. DEBT MATURITY
•
Significant liquidity position
•
Comfortable maturity schedule
LIQUID ASSETS AND ST DEBT MATURITY*
$4 000
o Short term debt $0.62 bn, (-38% qoq)
o Ruble bonds
o Credit lines
o ECA- financing
Undrawn
committed
credit lines
$3 500
$3 000
$2 500
2 331
Cash and
equivalents
$2 000
$1 500
o Long term debt $3.51 bn, (-7% qoq)
o Eurobonds and ruble bonds
o Long term part of ECA
•
$m
$1 000
$500
1351
Liquid assets
68
60
50
40
42
37
33
35
10
35
15%
31
31
27
22
Q4'12
Q1'13
Q2'13
Capitalized interest expense (lhs)
Q3 '14
12M
$m
5%
$500
895
723
2014
2015
27
$0
2013
Non-capitalized interest expense (lhs)
Interest expense to EBITDA (rhs)
* ST maturity payments with interest accrued and debt maturity schedule
** Quarterly figures are derived by computational method on the basis of quarterly reports
2 434
$1 000
Q3'13
0
Q3'12
Q2 '14
$1 500
0%
24
Q1 '14
$2 000
57
30
20
Q4 '13
$2 500
10%
62
25%
20%
64
616
TOTAL DEBT MATURITY***
$3 000
66
212
42
INTEREST EXPENSES**
70
175
$0
Financing costs as a % of EBITDA remain
consistently low
$m
187
RUB bonds
ECA
EBRD
NLMK Dansteel
*** Maturity payments do not include interest expenses
Others ****
**** Credit lines
2016 и and onward
Europbonds (USD)
19

20. OUTLOOK
•
Steel production
o
o
•
Steel output in Q4’13 will grow by 5% to 4.1 m t, driven by production growth at NLMK Kaluga
In 2013 steel production will reach 15.5 m t (or +4% y/y)
Financials
o
In Q4, we expect steel prices to soften due to the seasonal slowdown in demand and projected decline in steel raw material prices
o
The company continues to work on offsetting the negative impact of market conditions by improving technical and business process
efficiency
20

21. 1. Business profile
2. Operating and financial profile
3. Strategy
21

22. GLOBAL MARKET TRENDS
Global overcapacity
GLOBAL OVERCAPACITY
Excess capacity
Capacity utilization rate (RHS)
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
Profitability has slipped from steelmaking to mining
1980
•
2010-2012 average run rate – 77%
1990
o Decline in raw materials leads to cost curve flattening
o Operating costs inflated by other expenses items
o Steel demand becoming more “local”
1980-2007 average run rate – 86%
1988
Production costs inflation
100%
95%
90%
85%
80%
75%
70%
65%
60%
55%
50%
mtpa
1986
•
2 200
2 000
1 800
1 600
1 400
1 200
1 000
800
600
400
200
1984
o Over 0.5 bn t of steelmaking overcapacity
o Capacity growth in EMs and capacity retention in DMs
1982
•
Crude steel production
Source: World Steel Association
PROFITABILITY SHIFT TO UPSTREAM
GLOBAL SLAB CASH COST
$/t
800
2011
700
2012
600
100%
8%
11%
75%
15%
7%
44%
22%
2013
500
17%
50%
81%
400
35%
Cumulative capacities BF/BOF mtpa
200
5
208
389
574
28%
32%
26%
27%
2011
2017Е
0%
1995
2000
Steelmaking
Source: World Steel Dynamics
42%
61%
25%
300
22%
78%
46%
2005
2010
Coking coal
Source: McKinsey Research. EBITDA split for HRC
Iron ore
22

23. STRATEGIC OBJECTIVES OF NLMK GROUP
Maximising upstream
integration into
key resources
1
Operating in a safe, socially
and environmentally
responsible manner
5
2
Maintaining efficient and
sustainable growth
4
3
Developing niche
segments
Improving efficiency
of operations
23

24. MAXIMISING UPSTREAM INTEGRATION IN KEY RESOURCES
•
Iron ore
o
Growth in iron ore concentrate production through brownfield
expansion / debottlenecking
Pelletizing plant of 6 m t – 2016 to cover 100% needs
o
•
Coal
o
Use of alternative technology to improve coke quality and
decrease coal consumption
PCI technology installation to reduce by 20/30% coke and by
70% natural gas consumption per 1 t of steel
o
•
Scrap
o
•
Target self-sufficiency of Russian operations at 80-85%
EXPANSION OF IRON ORE CONCENTRATE AND
PELLETS CAPACITY
20
18
16
14
12
10
8
6
4
2
0
mt
+ over 6 m t
12
6
2
5
New BF#7
4
PCI effect
3
2
1
0
2010
2011
2013-14
2014-15
2013
2016
2013
2016
Pellets
Iron ore concentrate
GLOBAL IRON ORE PRODUCTION COSTS
$/t
180
160
140
120
100
80
60
40
20
0
6
0
0
Efficiency gains and to reduce energy intensity
Reuse of by-product gases to generate electricity in house
mt
+6mt
6
2010
7
mt
4
COKING COAL CONSUMPTION DYNAMICS (LIPETSK)
8
10
8
14
Energy
o
o
>18
NLMK (Stoilensky)
2012 Cumulative capacities: 1.4 bn t
0%
25%
50%
69%
Sources: Bloomberg industries, iron ore production costs in 2012
90%
24

25. MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH
•
Steel capacity expansion is complete
o
o
•
Improved steel grades portfolio
o
o
•
Allows for further improvement in existing portfolio of
downstream products and mastering new ones
To win new contracts and gain market share or enter new
markets
mtpa
1.5
16
3.4
12
4
0
Low cost position supplemented by quality
improvements
o
BF#7
Existing
BF#7
EAF (Kaluga)
EAF (Kaluga)
2014
Crude steel capacity growth for the Russian operations
New gauges of semis added – e.g. 2.5 m tpa of wide slabs
Entering new markets (by geo and by segments)
Improving position in the existing markets (e.g. green
energy, construction, capital goods)
Allowing for the full capacity load through the cycle (90% 100% run rate)
17,2
12.3
Expanded diversity of products
o
o
EAF: 1.5 m tpa
from 2013
BF: 3.4 m tpa
from mid 2011
8
2010
o
•
BF/BOF steelmaking (Russia) : 3.4 m tpa
Brownfield project of ~$500/t* investments (in 2011)
EAF steelmaking (Russia): 1.5 m tpa
Greenfield project of ~$750/t* investments (in 2013)
CRUDE STEEL CAPACITY GROWTH: +40%
INCREMENTAL STEEL SUPPLY HEDGED THROUGH
CAPTIVE ROLLING
100%
%
12%
80%
60%
Finished (Intl)
47%
58%
Finished (Russia)
40%
48%
20%
Semis
30%
5%
0%
Jan-11
* - total investments per annual capacity of the facility
Jan-12
25

26. MAINTAINING EFFICIENT AND SUSTAINABLE GROWTH (2)
NLMK Kaluga project
Russian rebar market overview
o
o
o
•
2,5
Consumption growth in Russia: x1.9 against 1H‘10
Import growth in 1H’13: +60% yoy, x3 vs. 1H’10
Regional demand/supply imbalance
o
o
o
Record level of 2008
2,0
1,5
Modern 1.5 m tpa EAF capacities
o
Offering product mix in demand from construction: rebar and
sections
Favorable location: 90 km from Moscow – consumption cluster
(Central district)
Total investments c. $1.2 billion (90% by 2013)
Cost advantage (logistics, modern production, scrap collection
network)
1,0
0,5
0,0
Russian production
46%
long products deficit –
app. 3,8 million t/y
40%
31%
30%
Share in long products consumption
21%
20%
18%
17%
12%
10%
8%
9%
11%
8%
6% 7%
0% 1%
North
Caucasi
an
Far East
South
NorthWest
Privolzh
sky
Central
Siberia
Crude steel
800
600
200
0%
Urals
000’t
900
400
1% 2%
Sources: Metal Expert. Data for 2012
NLMK KALUGA: PRODUCTOIN PLAN
1000
Share in long products production
Import
Source: Metal Expert
BALANCE OF PRODUCTION AND CONSUMPTION AT REGIONS
50%
Import, share is over 20%
mt
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
Q3 '13
•
RUSSIAN REBAR CONSUMPTION, 2008-2013
400
0
2013Е
2014Е
26

27. EFFICIENCY OF OPERATIONS
•
PRODUCTION COSTS REDUCTION WITHIN “QUICK
WINS” PROGRAM
Cost optimization programs at all sites (effects to
be presented to the market in Q1 2014)
120
•
Optimization of coke making, sintering, BOF
operations (Novolipetsk and Altai Koks)
o
o
o
o
$m
100
80
Maximum use of equipment potential
Minimizing raw material, fuel, material and energy
consumption
Optimizing fuel and raw material balance structure
Reducing environmental footprint, including waste
management
38
60
100
40
80
30
20
0
13
Q1'13
•
Q2'13
Q3'13
9M'13
12M'13 (Е)
Significant economic potential
o
o
o
Target announced in Feb 2013 - $60 m
Effect of $80 m achieved in 9М13
Target level of savings in 2013: c. $100 m*
REDUCED RAW MATERIAL CONSUMPTION
FOLLOWING OPTIMIZATION MEASURES
105%
Lower specific raw material consumption, 100% - Dec’12 level
100%
100%
100%
96,5%
100%
97,6%
95%
93,0%
90%
85%
80%
Coal
Pellets
Before optimization
* Estimation of an effect comparing to 2012 level of utilization rates and prices (for Novolipetsk and Altai-Koks)
* Reduced consumption of purchased scrap
Scrap*
After
27

28. EUROPEAN ASSETS RESTRUCTURING
•
Restructuring workflow
o
o
•
Restructuring program is being implemented since 2008
o Change in asset perimeter and transition to a re-roller
model
o Consistent cost reduction through optimization programs
NLMK La Louviere Restructuring Agreement (March 2013)
o Headcount optimization by 30%, Fixed costs reduction by
$30 m/y (full effect in 2014)
Involvement of the Belgian state-owned company
SOGEPA* as a strategic partner in European assets
o
o
Sale of 20.5% interest in NLMK Belgium Holdings (NBH) for €91
m ($123 m)
SOGEPA participation in governance
FIXED COSTS OF NLMK EUROPE STRIP
200
€m
150
50
Carsid + EAF and
Long products +
Safef Thonville
121 39
12
50
34
10
27
100 102
9
27
75
67
64
2008
100
2009
2010
10
34
$m
000’t
92
9
27
92
9
31
66
56
52
2011
2012
2013(Е)
0
NBH IMPACT ON THE 9M NLMK RESULTS
STEEL SALES
Service centers
111 27
$m
EBITDA
2500
2 297
2000
1 300
7 537
13.0%
7 611
-125
1500
1 221
1 096
1 235
1000
500
1 062
-124
Revenue
9М'13
1
-125
EBITDA
9М'13
0
NLMK NBH Sales Slab sales
Group fact
to NBH
NLMK
Group
without
NBH
* Societe Wallonne de Gestion et de Participations S.A.
NLMK La Louviere
and total overheads
for division
NLMK Europe Strip
NLMK FOREIGN ASSET FINANCIALS
15.0%
-1 226
NLMK Coating and
NLMK Strasbourg
NLMK Group NBH impact NLMK Group
fact
without NBH
-500
800
700
600
500
400
300
200
100
0
-100
$m
750
409
341
Revenue
Q3'13
NBH
NLMK USA and NLMK Dansteel
-35
11
-46
EBITDA
Q3'13
28

29. 2013 INVESTMENTS
•
Capex programme
o
o
o
o
Lower capital intensity
Focus on efficiency enhancement and niche products
Balanced approach to assessing new projects
Flexibility under various market scenarios
CAPEX DYNAMICS
$m
2000
1500
•
Long products division development
o
•
Strengthening vertical integration
o
o
o
•
NLMK Kaluga launch (EAF+ rolling mill)
Pelletizing plant construction projects launched at Stoilensky
Coke making projects (PCI, etc.) to reduce energy costs
Development of scrap collecting facilities
1000
2020
1936
1462
1453
1115
500
850
69%
31%
0
2008
2009
2010
2011
2012
2013Е
Столбец1
Development
Maintenance capex
Quality improvement and niche products
o
o
o
Mastering the revamped rolling mill at NLMK Dansteel
Niche product development at NLMK Clabecq
Continued GO steel development programmed at
Novolipetsk and at VIZ-Steel
MAINTENANCE CAPEX PER TONNE OF STEEL
$/t
50
40
30
20
45
24
10
30
17
24
20
2012
2013E
0
2008
2009
2010
2011
29

30. APPENDIX
30

31. CASH COST OF SLABS
CONSOLIDATED CASH COST OF SLABS (AT LIPETSK SITE)
Cost item
Coke and coking coal
Q3’13
$84
Q2’13
$91
CASH COST OF SLABS (AT LIPETSK SITE), 2012-2013
∆, $/t
Period
$/t
-$7
Q1 '12
$395
Q2 '12
$411
Iron ore
$60
$64
-$4
Scrap
$29
$37
-$8
Other materials
$27
$31
-$4
Q3 '12
$383
Electricity
$23
$21
+$2
Q4 '12
$361
Natural gas
$21
$18
+$3
Q1 '13
$364
Q2'13
$348
Q3 '13
$329
Personnel
$33
$33
0
Other expenses
$52
$53
-$1
$329
$348
-$19
Total
31

32. NLMK
Investor Relations
18, bldg 1 Bakhrushina str.
115054, Moscow
Russia
t. +7 495 915 15 75
f. +7 495 915 79 04
email: st@nlmk.com
www.nlmk.com