pdf, 1.4 Mb

Investor presentation

January 2015

1

Disclaimer

Investor presentation, January 2015

This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of

EVRAZ plc (“EVRAZ”) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.) (collectively, the “Group”) or an inducement to

enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or

commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on,

the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of EVRAZ, the Group or any of its affiliates, advisors

or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or

otherwise arising in connection with the document.

This document contains “forward-looking statements”, which include all statements other than statements of historical facts, including, without limitation, any

statements preceded by, followed by or that include the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would”, “could” or similar

expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the

Group’s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or

achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy

of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian

economic, political and legal environment, volatility in stock markets or in the price of the Group’s shares or GDRs, financial risk management and the impact of

general business and global economic conditions.

Such forward-looking statements are based on numerous assumptions regarding the Group’s present and future business strategies and the environment in which

the Group will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on

circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and each of EVRAZ

and the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to

reflect any change in EVRAZ’s or the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements

are based.

Neither the Group, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-

looking statements contained in this document.

The information contained in this document is provided as at the date of this document and is subject to change without notice.

2

One of the world’s largest vertically integrated steel and mining companies

Top-20 steel producer in the world based on crude

steel production

Leader in Russian and CIS construction steel

products

Global leader in railway product markets

No 1 producer of rails and large diameter pipes in

North America

Listed in the London Stock Exchange; constituent of

the FTSE 250 index

EVRAZ employs more than 90,000 people

Key financial indicators, $m (IFRS)

2013 1H 2014

Revenue 14,411 6,805

EBITDA(2)

1,821 1,080

Dividends paid - 90.4

Net debt(3)

6,534 6,095

(1) Total EVRAZ’s Iron ore saleable products

(2) EBITDA represents profit from operations plus depreciation and amortization, impairment of

assets, loss (gain) on disposal of PP&E and foreign exchange loss (gain)

(3) Net Debt represents long-term loans, net of current portion, plus short-term loans and current

portion of long term loans less cash and cash equivalents (excluding restricted deposits).

Key operational indicators, mtpa

2013 2014

Crude steel Production 16.1 15.5

Iron ore(1)

22.6 22.8

Raw coking coal 18.9 21.1

Moscow

Chicago

NTMK

KGOK

Evrazruda

ZSMK Timir

Highveld Steel and

Vanadium

DMZ

Sukha

Balka Stratcor Pueblo

Portland

Regina

Camrose Red Deer

Calgary

Legend

Steel production

Iron ore mining

Coal mining

Vanadium production

Logistics and Trading

Map of EVRAZ operations


Segmental and Geographical

Overview

4

Production of steel and steel products 3Q vs 4Q 2014, kt Production of steel and steel products 2013 vs 2014, kt

Steel: consolidated production

Decrease in consolidated crude steel and steel product output y-o-y as a result of the disposal of EVRAZ

Vitkovice Steel and the shutdown of EVRAZ Claymont

Growth in production of semi-finished goods driven by the rouble devaluation

6% increase q-o-q in production of steel products, net of re-rolled volumes, mostly driven by a higher production

of semi-finished products due to more profitable export shipments of billets and slabs

Seasonally weaker demand in Q4 2014 for construction products in Russia and decreased orders from Russian

railcar producers

The EVRAZ Caspian Steel rolling mill in Kazakhstan was commissioned and began mass production of rebars

from EVRAZ ZSMK’s billets


Source: Company data

3,843 4,314

5,186 5,105

1,903 1,830

1,989 1,017

936 1,065

825 618

16,121 15,535

14,683 13,949

2013 2014

Other steel products

Tubular products

Flat-rolled products

Railway products

Constructionproducts

Semi-finishedproducts

Crude Steel

1,066 1,327

1,302 1,250

410 377

221 224 257 279 152 156

3,859 3,884

3,408 3,613

3Q2014 4Q2014


Tubular products


Railway products

Constructionproducts

Semi-finishedproducts

Crude Steel

5

Rebar prices Production of steel and steel products, kt

Steel: Russia

Crude steel and steel products output was broadly flat

in 2014 vs 2013

2014 production of semi-finished products increased

by 6% with production of finished steel products

decreasing by 4%, due to higher export sales driven

by weakening Russian rouble

Construction product volumes were stable despite

increased competition, due to strong demand and

lower imports

Average cash cost of slabs was $292/t in H1 2014


Source: Company data, Metal Expert

Billet prices

350

400

450

500

550

600

Billet CFR East Asia import $/t Billet FOB Black Sea export $/t

4,517 4,787

4,185 4,187

1,409 1,292 687 529

11,904 11,798

10,799 10,795

2013 2014


Railway products

Construction products

Semi-finished products

Crude steel

20,000

21,000

22,000

23,000

24,000

25,000

26,000

27,000

300350400450500550600650700750800

Jan-1

3F

eb

-13

Ma

r-1

4A

pr-

13

Ma

y-1

3Jun-1

3Jul-

13

Aug-1

3S

ep-1

3O

ct-

13

No

v-1

3D

ec-1

3Jan-1

4F

eb

-14

Ma

r-1

4A

pr-

14

Ma

y-1

4Jun-1

4Jul-

14

Aug-1

4S

ep-1

4O

ct-

14

No

v-1

4D

ec-1

4

RU

B/t

$/t

Rebar, CPT Moscow USD/t (lhs) RUB/USD

Rebar, CPT Moscow RUB/t (rhs)

30.26RUB/$ 33.46RUB/$ 55.54RUB/$

6

Market steel prices, $/t Production of steel and steel products, kt

Steel: North America

No 1 producer of rail and large diameter pipe in North America

Diversified product portfolio enhanced by targeted investments

into quality and product expansion

Strong customer relationships

Asset optimisation programme complete including suspension of

unprofitable EVRAZ Claymont operations

Increase of production of steel products by 4% in 2014 vs 2013

14% growth in production of tubular products driven by strong

demand for small diameter pipe and operational improvements

implemented at EVRAZ North America’s OCTG facilities

2.5% y-o-y increase in production of LD pipes due to another

strong year for large diameter market


Source: Company data, North American Steel Market Tracker

*Production volumes excluding EVRAZ Claymont

** Total demand in 2014-2017 = 5.5mt

200

300

400

500

600

700

800

900

1000

20

13

Jan-1

4

Feb

-14

Ma

r-1

4

Apr-

14

Ma

y-1

4

Jun-1

4

Jul-1

4

Aug-1

4

Sep-1

4

Oct-

14

No

v-1

4

Plate Wire rod Scrap, shredded, Midwest

EVRAZ LD pipe mills

75%

12%

8%

Share of LD pipe project

Share of announced LD pipe projects by region**

LD pipe mills of peers

3%

2%

940 1,065

665 621

493 537

348 324

1,940 1,999

2,447 2,548

2013* 2014

Construction products

Railway products


Tubular products

Crude steel

7

Coking coal production, kt

Market coking coal prices Cash cost of washed coking coal, $/t*

Coal

Low risk long-term growth options underpinned by 2.1bn

tonnes of high quality P&P reserves

Focus on quality, attractive portfolio of premium hard and

semi-hard coking coal grades (Zh+GZh, K, KO)

Efficient stable operations at Yuzhkuzbassugol

Successful ramp-up of Raspadskaya mine

Washed coking coal (concentrate) self-coverage of 171%

in H1 2014

Domestic prices expected to increase 20-25% in Jan-Feb

2015 due to rouble devaluation which also supports

export sales profitability

*The data in this chart is derived from the unaudited monthly management accounts of EVRAZ in respect of the indicated periods

73 74

66 63

55

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014H1 2012 H2 2012 H1 2013 H2 2013 H1 2014


2500

2550

2600

2650

2700

2750

2800

2850

2900

2950

3000

100

105

110

115

120

125

130

135

140

145

150

HCC Australia FOB, $/t GZh coal Russia FCA, RUB/t

11,110 10,789

7,824 10,223

51 18,933 21,062

2013 2014

Yuzhkuzbassugol Raspadskaya Mezhegeyugol

+11%

8

Raspadskaya & Yuzhkuzbassugol production in 2014

Longwall 4-9-25 was launched in November at

Raspadskaya mine which is currently operates at four

longwalls

Ramp-up of Raspadskaya mine was successfully

completed in 2014

Raspadskaya coal company’s total raw coking coal

output increased by 31% to 10.2 mtpa with

12 mtpa as a target for 2015 (including 5.2 mtpa from

Raspadskaya mine)


2012 2013 2014

Raspadskaya mine 2,675 1,380 4,091

Raspadsky open-pit 2,324 4,062 3,657

MUK-96 1,315 1,489 1,261

Raspadskaya-Koksovaya 687 892 1,214

7,002 7,824 10,223

Raw coking coal production volumes by mines, kt

Raspadskaya Yuzhkuzbassugol

Stable production volumes by Yuzhkuzbassugol in

2014

Yerunakovskaya VIII mine launched in 2013

successfully ramped up to the 3 mtpa capacity in

2014

Raw coking coal production volumes by mines, kt

2012 2013 2014

Yesaulskaya 1,502 1,835 1,239

Ossinikovskaya 1,310 1,252 1,180

Yerunakovskaya VIII 300 1,393 2,948

Uskovskaya 2,100 2,352 2,564

Alardinskaya 1,758 3,325 2,759

Abashevskaya 1,546 952 65

8,517 11,110 10,754

9

68 70 66

61

52

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014

Iron ore

EVRAZ KGOK is a large, stable low cost operation

organically integrated with EVRAZ NTMK

Evrazruda is re-emerging as a compact operation

after a major turnaround programme, feeding 40% of

EVRAZ ZSMK’s needs at competitive costs

Expansion project in Evrazruda’s Sheregesh mine to

be completed by 2017

High cost assets closed or sold in 2013-2014

Iron ore self-coverage of 77% in H1 2014

Timir is a strategic reserve base of cost competitive

open pit iron ore for EVRAZ ZSMK in the long term

* Production volumes of iron ore in 2013, excluding EVRAZ VGOK

** A+B+C1 reserves of Tayezhnoe deposit under Russian geological classification

*** The data in this chart is derived from the unaudited monthly management accounts of EVRAZ in respect of the indicated periods

Cash cost, Russian iron ore products (Fe 58%), $/t***

H1 2012 H2 2012 H1 2013 H2 2013 H1 2014

Production of iron ore products in Russia, kt

EVRAZ ZSMK

EVRAZ NTMK

EVRAZ KGOK

Evrazruda

Timir

Steel mills

Operating iron ore mines

Greenfield project

Map of iron ore operations in Russia

Asset P&P ore reserves*, mt

KGOK 8,225

Evrazruda 100

Timir** 682


11,224 11,134

6,301 6,444

17,524 17,578

2013 * 2014

Sinter Pellets

Liquidity and Financial Position

11

Liquidity and debt maturity profile

Cash and short-term deposits of $1,353m as at 30 June 2014 compared to short-term debt of $1,244m

Debt currency (as at 30 June 2014) composition: USD – 96% (incl. synthetic USD); RUB – 3%, other – 1%

In August 2014, EVRAZ signed a $425m syndicated pre-export financing facility which was upsized to $500m in

October 2014

RUB 20bn bonds due 2019 (with an investor put in October 2014) were fully repaid in October 2014

8.25% Eurobonds due in 2015 were partly bought back in the amount of $439m in December 2014 - January 2015

* Figures based on management accounts

Debt* maturities schedule for next 4 years (as at 31 December 2014), $m


976

1,369

1,226

1,577

0

300

600

900

1,200

1,500

2015 2016 2017 2018

Q1 Q2 Q3 Q4

Overview of H1 2014 Results

13

Consolidated EBITDA by segment, $m

(161) (111)

651 771

109

132 231

216 34 20 61 52 925

1,080

H1 2013 H1 2014

Total

Other operations

Vanadium

Iron ore

Coal

Steel

Eliminations andunallocated*

Revenue drivers, $m

Consolidated revenue by segment, $m

H1 2014 financial highlights

(1,429) (1,106)

6,393 5,898

722 665

900 659

268

255

465

434

7,319 6,805

H1 2013 H1 2014

Total

Other operations

Vanadium

Iron ore

Coal

Steel

Eliminations

* Includes unallocated expenses and intersegment unrealised gains/(losses)

Consolidated revenue decreased primarily due to

lower prices in line with negative global price

trends and a lag in domestic steel prices in Russia

and Ukraine in adjusting to the depreciation of

local currencies

H1 2014 EBITDA margin was 15.9% vs. 12.6% in

H1 2013

7,319

(71) (58)

(267)

92

(73) (18) (28) (92)

6,805

RevenuesH1 2013

Steel,quantity

Steel, mix Steel,prices

Coal,volumes

Coal,prices

Iron ore,volumes

Iron ore,prices

Other RevenuesH1 2014


14

Analysis of cost of revenue

Source: Management accounts

Item H1 2014,

$m % of

revenue H1 2013,

$m % of

revenue Relative change

Comments on changes

Revenue 6,805 7,319 (7)%

Cost of revenue 5,192 76% 5,886 80% (12)%

Raw materials, incl. 1,731 25% 1,819 25% (5)%

Iron ore 432 6% 371 5% 16% Higher external purchases following disposals of iron ore assets

Coking coal and coke

272 4% 368 5% (26)% Lower prices

Scrap 636 9% 710 10% (10)% Lower prices and decreased consumption due to suspension of EVRAZ Claymont

Other 391 6% 370 5% 6%


95 1% 217 3% (56)% Increase of slab internal consumption at EVRAZ North America and EVRAZ Vitkovice Steel

Auxiliary materials 393 6% 516 7% (24)% Effect of cost optimisation, primarily in Coal segment and

rouble depreciation

Services 360 5% 351 5% 3%

Goods for resale 276 4% 298 4% (8)%

Transportation 340 5% 437 6% (22)% Lower production volumes and rouble weakening partially offset by tariff increase

Staff costs 851 13% 988 13% (14)% Headcount reduction, asset disposal and optimisation, rouble depreciation

Depreciation 379 6% 487 7% (22)% Changes in accounting for the depletion of coal mining assets; revision of asset life of Russian and Ukrainian steel plants; rouble and hryvnia depreciation

Electricity 238 3% 258 4% (8)% Lower consumption due to asset optimisation and operational improvements

Natural gas 175 3% 225 3% (22)% Reduced consumption due to operational improvements at EVRAZ DMZ as well as asset disposals and suspensions

Other costs* 354 5% 290 4% 22% Decrease in stock of WIP and finished goods

* Includes taxes, change in WIP and finished goods, certain items of energy costs

Note: See details on cost optimisation on slides 8 and 29


15

98

59

36

Cost cutting initiatives atongoing operations

Optimisation of assetportfolio

Increase in production

Efficiency improvement plan: H1 2014 progress update

* Actual results excluding effect of forex rates

Implementation of efficiency savings plan resulted in savings of $193m*

Total 2014 target is $400m

Cost cutting initiatives at ongoing operations: $98m

Reduction of headcount and related G&A costs $33m

Optimisation of coal mining costs $20m

Improving yields, raw material and conversion costs in steel mills $40m

Cost optimisation at iron ore mines $5m

Optimisation of assets portfolio: $59m

Mines shutdown and disposal at Evrazruda and Yuzhkuzbassugol $38m

Suspension of EVRAZ Claymont, disposal of Central Heat and Power

Plant and shutdown of plate rolling mill at EVRAZ ZSMK $21m

Increase in production: $36m

Growth in volumes at EVRAZ North America at ongoing assets

$30m

Recovery of production at Raspadskaya mine $6m

Efficiency improvement, $m

193


16

H1 2014 FCF generation

Working capital increased by $175m due to the repayment of a $312m payable to Yuzhny GOK (supplier of

sinter to EVRAZ DMZP) which was offset by other improvements

Interest payments were $235m compared to $273m last year due to lower debt and refinancing at lower rates

Capex reduced to $365m from $492m as a result of the ongoing capex optimisation programme

Proceeds from disposals (mainly EVRAZ Vitkovice Steel) amounted to $296m

Strong cash flow of $444m

US$ million

1,080

(175)

(94)

33 844

(235)

(365)

(102)

296 19

(13)

444

EBITDA Changes inworking capital,excl. income tax

Income tax paid Other Cash flows fromoperatingactivities

Interest andsimilar

payments

Capex, inclrecorded infinancingactivities

Purchases ofsubsidiaries, net

of cashacquired, andpurchase ofinterests in

associates/jointventures

Proceeds fromsale of disposal

groupsclassified asheld for sale,

net oftransaction

costs

CF from otherinvestingactivities

Equitytransactions

Free cash flow


17

H1 2014 debt bridge and net leverage

US$ million


Capex and Investment Projects

19

Capex historic performance and outlook, $m excl. VAT H1 2014 capital expenditure breakdown by projects, $m

Capex


No major capital spending in 2014 as key investment projects were completed in 2013

Significantly increased capex flexibility going forward

Capex is mostly channelled to maintenance

Priority is given to cash cost reduction projects with projected IRR of >40%

In 9 months of 2014, capital expenditures amounted to $540m, including $365m in H1 2014 and $175m* in Q3

2014

The company is on track to meet its commitment to achieve capital expenditure of less than US$900 million per

annum for 2014 and beyond

30 22

15

7

6

48

237

Yerunakovskaya VIII mine

Mezhegey (Phase I) coal project

PCI at EVRAZ ZSMK

EVRAZ ZSMK rail millmodernisation

EVRAZ Caspian Steel

Other development projects

Maintenance

365

1,261

902 825

<900

0

200

400

600

800

1,000

1,200

1,400

2012 2013 2014E 2015E

Maintenance, Steel & other Maintenance, Coal

Maintenance, Iron ore Development, Steel & other

Development, Mining * Management accounts

Appendix

21

Performance by regions

EBITDA, EVRAZ South Africa, $m

Note. (1) Consolidated EBITDA also includes Unallocated EBITDA of $(100)m and $(115)m and Other regions EBITDA of $(1) and $(2)m in H1 2013 and H1 2014

respectively

(2) EVRAZ North America includes EVRAZ Inc. NA, EVRAZ Inc. NA Canada, Stratcor; EVRAZ Ukraine includes EVRAZ DMZ, Sukha Balka and coking

plants; EVRAZ Europe includes EVRAZ Palini e Bertoli, EVRAZ Vitkovice Steel (before its disposal in April 2014), Nikom and attributable trading margin

EBITDA, EVRAZ Europe, $m EBITDA, EVRAZ Ukraine, $m

EBITDA, EVRAZ Russia, $m EBITDA, EVRAZ North America, $m

870

1,000

H1 2013 H1 2014

81

129

H1 2013 H1 2014

40

53

H1 2013 H1 2014

16

27

H1 2013 H1 2014

21

(12)

H1 2013 H1 2014


22

Steel sales volume breakdown (H1 2014)

Russia & CIS, 49% Americas,

19%

Asia, 22%

Europe, 6%

Africa & ROW,

4%

By geography

Semi-finished

30%

Construction 36%

Railway 14%

Flat-rolled 10%

Tubular 7%

Other 3%

By product

Global vertically integrated steel, mining and vanadium business with strong positions in highly attractive markets

EVRAZ’s global business

North America

South America Africa

Europe

Russia/CIS

Asia

349

1,716

124

237

16

479

3,718 1,301

Sea ports

Vanadium

Coal mining

Iron ore mining

Steel mills

Mezhegey coal mine in development

Third party steel products sales (Kt)* #

Internal supply of slabs and billets

from Russian steel mills (Kt) #

7.7 Mt 7.7 Mt

* Excluding routes with sales volumes below 35kt each, together totalling 67kt


141

23

Steel market in Russia – key drivers


Source: Metal Expert, Agency for Housing Mortgage Lending, Rosstat

Rebar and sections import volumes, kt

Mortgage market in Russia

656 153 380

717 1,032

1,354

770

16.9 14.3 14.6

17.6 20.9

24.6 26.4

0

5

10

15

20

25

30

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 H1 2014

Amount of mortgage loans granted, bln RUB

share of mortgage deals on the housing market, %

12%

20% 26%

30%

48%

65% 65% 68%

Russia Russia2020 E

France Italy Norway USA Sweden UK

Share of buildings using steel frame in 2013

Construction in Russia, 2014E

By financing By type

95%

3% 2%

Privateconstruction

State

Mixed

74%

26%

Residential

Industrial /infrastructure /commercial

0

25

50

75

100

125

150

175

200

Jun-1

3

Jul-1

3

Aug-1

3

Sep-1

3

Oct-

13

No

v-1

3

De

c-1

3

Jan-1

4

Feb

-14

Ma

r-1

4

Apr-

14

Ma

y-1

4

Jun-1

4

Jul-1

4

Aug-1

4

Sep-1

4

Oct-

14

No

v-1

4

Rebar Sections

24

Unique proposition in construction long steel products

EVRAZ benefits from wide proprietary distribution network in Russia

81% clients consider EVRAZ’s service the best in Russia (+6% y-o-y)*

Loyalty level of steel traders and end users increased to 85% (+3%)*

Share of permanent clients is 88%*

* According to Gfk 2013 report

** Excluding intercompany sales

*** EVRAZ estimates for 2013

Rebars

Channels

and angles

Beams

1,743

789

1,106

19%

79%

44%

Products Market position and share***

2013 EVRAZ sales volume in Russia, kt** EVRAZ Peer 2 Peer 3 Peer 4

Peer group proposition

Peer 1

#1

#1

#1


25

0

20

40

60

80

100

120

140

160

0 500 1000 1500 2000тыс.

Cautious view on global iron ore market prospects

Source: CRU, IB Consensus, EVRAZ analysis

Long-term outlook is conservative as market

fundamentals are changing

China steel production could be close to peak

Flattening of global cost curve due to new low

cost capacities entering and high cost mines

shutting down

EVRAZ anticipated smoother transition to the new

reality – the 2014 year iron ore price dynamics was

surprisingly weak

However, current expectations comprehend

possibility of short-term price fall to $50-60/t levels

(due to tactical reasons)

Long-term price forecast $90-100/t

Iron ore price, 62%, CFR China, $/t

Flattening of global cost curve, $/t (ExW)

2013

2018

Cash costs are 62% Fe equivalent

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


26

Vertical integration in Russia

Fundamentally the best production model for integrated steel mills is to have resources nearby

That’s how Russian steelmaking capacities were built during the Soviet time: iron ore and steelmaking facilities

were set in clusters

As a result, Russian steelmaking companies are usually vertically integrated in iron ore

Non-integrated iron ore market is limited

Iron ore self-coverage, 2014E

15%

61%

74%

87%

>100%

>100%

>100%

0% 50% 100% 150%

MMK (SSGPO)

Mechel

ERVAZ

NLMK

CherMK (Severstal)

Ural Steel (Metalloinvest)

OEMK (Metalloinvest)

Main Russian vertically integrated metallurgical clusters

Legend:

Metallurgical plant

ZSMK

Iron ore deposit

EVRAZRuda

EVRAZ NTMK

KGOK

EVRAZ

SGOK NLMK

NLMK

LGOK MGOK OEMK

Metalloinvest

MMK

CherMK

Olkon

Karelskiy ok.

Severstal


27

16% 21%

1% 12% 13% 4%

4% 12% 13%

34% 32%

78% 84%

H1 2013 H1 2014

Other

Energy

Depreciation

Staff costs

Transportation

Raw materials

Cost structure of Vanadium segment, % of segment revenue

Cost structure of Coal segment, % of segment revenue Cost structure of Steel segment, % of segment revenue

Cost structure by segment


16% 14%

11% 9%

11% 11%

6% 6% 3% 2%

4% 4%

9% 8%

4% 3%

7% 7%

13% 15%

82% 79%

H1 2013 H1 2014

Other

Energy

Depreciation

Staff costs

Transportation


Other raw materials

Scrap

Coking coal

Iron ore

Revenue: 6,393 5,898

CoR: 5,260 4,649

12% 13%

26% 25%

24% 20%

4% 4%

23% 22%

89% 84%

H1 2013 H1 2014

Other

Energy

Depreciation

Staff costs

Transportation

Raw materials

Revenue: 722 665

CoR: 640 557

Note. Numbers may not add to totals due to rounding. Percent changes based on numbers prior to rounding

Cost structure of Iron ore segment, % of segment revenue

6% 10% 12% 7%

21% 19%

6% 6%

14% 14%

15% 11%

74% 67%

H1 2013 H1 2014

Other

Energy

Depreciation

Staff costs

Transportation

Raw materials

Revenue: 900 659

CoR: 669 441

Revenue: 268 255

CoR: 210 215

28

Efficiency improvement plan: update on progress

Operating cost

savings plan is

$350m in 2014

Actual result in 1H

2014 is $193m

G&A expenses to

be reduced by

$100m on an

annualised basis

from 2015, with

$50m already to be

achieved in 2014

Initiative H1 2014 achievements H1 2014* vs. H1 2013

actual results, $m

Restructuring of

production assets

Shutdown and disposal of inefficient Russian iron ore, coal mines,

workshop at ZSMK, Central Heat and Power Plant and mill at EVRAZ

North America

(59)

Optimisation in

steelmaking

Decrease in EVRAZ North America’s costs, including volume

increase effect and improved yields TPG

Decrease in overtime, fixed costs and quality claims at EVRAZ North

America

(36)

Staff cost

optimisation

Reduction of headcount and related G&A costs at Russian, Ukraine

and North America assets (33)

Optimisation of

raw materials in

steelmaking

Changes in iron and ferroalloys mix and improved coke yields at

EVRAZ ZSMK. Decrease of coke consumption per tonne of pig iron

at EVRAZ DMZ at the same production volumes (28)

Decrease in coal

production

expenses

Optimisation of tunneling works, maintenance, degassing and

ventilation costs at Yuzhkuzbassugol

And increasing volumes at Raspadskaya

(24)

Decrease in iron

ore production

expenses

Lower mineral extraction and land tax rates at Evrazruda and

decrease in prices for auxiliary materials at EVRAZ KGOK (5)

Decrease in

repairs

Optimisation of repairs at EVRAZ ZSMK and EVRAZ NTMK steel

mills (5)

Decrease in

energy costs Lower electricity consumption at EVRAZ DMZ and Yuzhkuzbassugol (3)

Total: (193)

* Actual results excluding effect of forex rates


29

EVRAZ’s public debt structure


EVRAZ plc Raspadskaya, OJSC

US$ 400m 7.75% Loan Participation Notes due 2017

Evraz Group S.A.

US$ 138m 8.25% Notes due 2015 Guaranteed by Mastercroft S.à r.l.

US$ 600m 7.40% Notes due 2017

US$ 509m 9.50% Notes due 2018

US$ 850m 6.75% Notes due 2018

US$ 1,000m 6.50% Notes due 2020

Mastercroft S.à r.l.

Evraz North

America

plc

EVRAZ Inc.N.A.

Canada

US$ 350m 7.50% Senior Secured Notes due 2019

Operating

companies Guarented by EVRAZ NORTH AMERICA plc, EVRAZ Inc. NA and

their subsidiaries

EvrazHolding

Finance, LLC

RUB 3.9bn* 8.75% Bonds due 2015

RUB 15.0bn 9.95% Bonds due 2015

RUB 20.0bn 8.40% Bonds due 2016

Guarented by Evraz Group S.A.

London +44 207 832 8990

Moscow +7 495 232 1370

[email protected]

www.evraz.com

January 2015

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