EVRAZ GROUPEVRAZ GROUPEVRAZ GROUPEVRAZ GROUP
Corporate PresentationCorporate PresentationCorporate PresentationCorporate Presentation
January 2010January 2010January 2010January 2010
Deutsche BankDeutsche BankDeutsche BankDeutsche Bank OneOneOneOne----onononon----One Conference, LondonOne Conference, LondonOne Conference, LondonOne Conference, London
2Evraz Group in BriefEvraz Group in BriefEvraz Group in BriefEvraz Group in Brief
◦ World-class steel and mining company, one of the 15 largest steel companies in the world in 2008
◦ Leader in the Russian and CIS construction and railway products markets
◦ A lead player in the European and North American plate and large diameter pipe markets
◦ One of the world’s lowest cost steel producers due to production efficiency and high level of vertical integration
◦ One of the leading producers in the global vanadium market
◦ In 2009, Evraz produced 15.3 million tonnes of crude steel, 11.3 million tonnes of pig iron and 14.3 million tonnes of rolled products
◦ 2008 consolidated revenue amounted to $20.4 billion
◦ 2008 EBITDA reached $6.3 billion
3EvrazEvrazEvrazEvraz’’’’s Global Businesss Global Businesss Global Businesss Global Business
4
Source: Management accountsSource: Management accountsSource: Management accountsSource: Management accounts
* Adjusted EBITDA represents profit from operations plus depreciation and amortisation, impairment of assets and loss (gain) on disposal of PP&E, forex
gains/(losses).
** As of the end of the period
*** Segment sales volumes to third parties
9M09 Financial Summary9M09 Financial Summary9M09 Financial Summary9M09 Financial Summary
Revenue 7,1187,1187,1187,118 17,100 (58)(58)(58)(58)%%%%
5,951 (85)(85)(85)(85)%%%%Adjusted EBITDA* 874874874874
Adjusted EBITDA margin 12%12%12%12% 35%
9M 20099M 20099M 20099M 2009 9M 20089M 20089M 20089M 2008US$ mln unless otherwise stated ChangeChangeChangeChange
(24)(24)(24)(24)%%%%7,2567,2567,2567,256 9,565
13.7Steel Sales*** (million tonnes) 10.710.710.710.7 (22)(22)(22)(22)%%%%
Net Debt**
59M09 Financial Highlights9M09 Financial Highlights9M09 Financial Highlights9M09 Financial Highlights
◦ Group revenue decreased by 58% vs. 9M08 to
US$7.2bn driven largely by decrease in average prices
and sales volumes of steel products
◦ Geographical diversification of the business helped to
stabilise operations in crisis environment
◦ International assets bottomed out in 2Q with
subsequent gradual recovery
◦ Recovery of export demand for semi-finished steel
helped to fully utilise Russian assets as from 1 July
2009
9M09 Steel Segment Revenue by Product9M09 Steel Segment Revenue by Product9M09 Steel Segment Revenue by Product9M09 Steel Segment Revenue by ProductUS$ mln‘000 tonnes
3,1081,482
4,415
1,544
1,737
820
2,628
1,082
8221,040
158
528
0
2,500
5,000
7,500
10,000
12,500
15,000
9M08 9M09Semi-finished Construction RailwayFlat-rolled Tubular Other steel
13,49813,49813,49813,498
5,8665,8665,8665,866
9M09 Steel Segment Sales Volumes by Product9M09 Steel Segment Sales Volumes by Product9M09 Steel Segment Sales Volumes by Product9M09 Steel Segment Sales Volumes by Product
4,163 4,112
4,439 3,110
1,830
1,166
2,146
1,495528
579
296
516
0
2,500
5,000
7,500
10,000
12,500
15,000
9M08 9M09
Semi-finished Construction Railway Flat-rolled Tubular Other steel
13,67313,67313,67313,673
10,70710,70710,70710,707
Consolidated Revenue and EBITDAConsolidated Revenue and EBITDAConsolidated Revenue and EBITDAConsolidated Revenue and EBITDA
6,533
3,2802,413 2,226 2,479
372 305 163 406
2,251
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
3Q08 4Q08 1Q09 2Q09 3Q09
Revenue EBITDA
US$ mln
Source: Management accounts
6Execution of Management Action PlanExecution of Management Action PlanExecution of Management Action PlanExecution of Management Action Plan
◦ Production Production Production Production optimisationoptimisationoptimisationoptimisation
◦ Shutdown of inefficient capacity
◦ Shift of production to semi-finished products, where demand is relatively high
◦ Take advantage of flexibility between billet and slab production depending on market situation
◦ Full utilisation of available capacity in Russia (13.2 mtpa of crude steel) achieved from 1 July 2009
◦ Cost saving measuresCost saving measuresCost saving measuresCost saving measures
◦ Cash cost of one tonne of semi-finished steel products in Russia decreased by 35%
◦ Labour costs decreased by 32% compared to 1H08
◦ Services and auxiliary materials costs decreased by 42% compared to 1H08
◦ Capex savingsCapex savingsCapex savingsCapex savings
◦ Capex in 9M09 was US$321 million (64% down vs. 9M08) out of US$500m FY2009 guidance
◦ Exit from Cape Lambert Project in Australia
◦ Financial managementFinancial managementFinancial managementFinancial management
◦ Total debt decreased to US$8.2 billion, net debt decreased to US$7.4 billion as of 31 December 2009
◦ US$965m raised from concurrent GDR and five-year convertible bond offerings in July 2009
◦ RUB20 billion (approx. US$688m) raised from five-year bond offering in October 2009
◦ One-year extension of US$1.8 billion VEB loan due in 4Q09 approved
48%
68% 5%
4%8%
9%12%
4%7%
8%
18%
9%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1H08 1H09
Raw materials Transportation Staff costs Depreciation Energy Other
7Maintaining Cost LeadershipMaintaining Cost LeadershipMaintaining Cost LeadershipMaintaining Cost Leadership
◦ Constant review of product and resources flows for
potential efficiency gains
◦ Mining segment cash costs have reduced significantly:
◦ Approximately 75% of consolidated cost is rouble
denominated
◦ Russian-based assets have benefited from
declines in utilities and staff costs
◦ Low proportion of fixed costs in the US operations with
key raw materials being scrap and our own slab
Cost of Revenue, Steel SegmentCost of Revenue, Steel SegmentCost of Revenue, Steel SegmentCost of Revenue, Steel Segment Cash Cost, Coal Products and Cash Cost, Coal Products and Cash Cost, Coal Products and Cash Cost, Coal Products and
100% Fe Iron Ore Products100% Fe Iron Ore Products100% Fe Iron Ore Products100% Fe Iron Ore Products
Cash Cost*, Slabs & BilletsCash Cost*, Slabs & BilletsCash Cost*, Slabs & BilletsCash Cost*, Slabs & BilletsUS$/t
US$/t
Source: Management accounts
* Average for Russian steel mills, excl. SG&A and amortisation
US$ mln
6,1726,1726,1726,172
3,9533,9533,9533,953
50
107
30
73
0
30
60
90
120
Coal products Iron ore products, 100% Fe
1H08 1H09
345375
221248
0
100
200
300
400
Slab, Russia Billet, Russia
1H08 1H09
%% is given to total Steel Segment Cost of Revenue
8
◦ Total debt of approx. US$8.2 billion, net debt of US$7.4 billion as of 31 December
2009
◦ Short-term debt is approx. US$1.9 billion
◦ Cash and cash equivalents amounted to approximately US$746 million as of 31
December 2009
Debt Maturities and Liquidity ProfileDebt Maturities and Liquidity ProfileDebt Maturities and Liquidity ProfileDebt Maturities and Liquidity Profile
Debt Maturities ScheduleDebt Maturities ScheduleDebt Maturities ScheduleDebt Maturities ScheduleDebt Maturities ScheduleDebt Maturities ScheduleDebt Maturities ScheduleDebt Maturities Schedule
US$ mln
Breakdown of ShortBreakdown of ShortBreakdown of ShortBreakdown of Short----term Debtterm Debtterm Debtterm DebtBreakdown of ShortBreakdown of ShortBreakdown of ShortBreakdown of Short----term Debtterm Debtterm Debtterm Debt
US$ mln
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1Q 2Q 3Q 4Q
805
648
417
$3.2bn syndicated loan Revolving debt Term loans
Source: Management accounts
1,8701,8701,8701,870 1,8831,8831,8831,883
595595595595
17171717 15151515
509509509509661661661661675675675675
1,2401,2401,2401,240
704704704704
9
◦ One-year extension of VEB US$1.8 billion loan facility initially due in 4Q09 approved
◦ RUB20 billion (approx. US$688 million) five-year bond issued in October
◦ Evraz signed US$950 million three-year credit facility with Gazprombank in October
(currently not utilised)
◦ VTB RUB10 billion (approx. US$344 million) loan was repaid in November 2009
◦ US$225 million 4-year ABL facility signed for Evraz Inc. NA in December 2009
◦ The remaining current maturities are expected to be covered by free cash flows and
refinancing of current debts
◦ Evraz successfully amended certain covenants on bonds and bank debt, allowing flexibility
to implement current strategy
Recent Capital Market DevelopmentsRecent Capital Market DevelopmentsRecent Capital Market DevelopmentsRecent Capital Market Developments
10Market Improvement in 2009Market Improvement in 2009Market Improvement in 2009Market Improvement in 2009
◦ Recovery in prices for semi-finished products is driven by demand from Asia, the Middle East and North Africa
◦ Steelmaking capacity utilisation at the beginning of 2010 :
◦ Russia – 100%
◦ Ukraine – 100%
◦ North America – 87%
◦ South Africa – 90%
◦ Russian mining assets are running at 100% capacity in coal and 87% in iron ore
◦ Crude steel output in 2H09 grew by 25% and rolled product output grew by 15% compared to 1H09 due to the restart of blast furnace in Russia and gradual recovery in some steel markets
◦ Prices for semi-finished products in 2H09 were higher than 1H09
Steel Prices in 2009Steel Prices in 2009Steel Prices in 2009Steel Prices in 2009
US$/t
200
250
300
350
400
450
500
550
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Slabs, FOB Far EastBillets, FOB Far EastRebars, RF market
Source: Metal Courier
114Q09 and FY09 Operational Results4Q09 and FY09 Operational Results4Q09 and FY09 Operational Results4Q09 and FY09 Operational Results
Production of Rolled Products by QuarterProduction of Rolled Products by QuarterProduction of Rolled Products by QuarterProduction of Rolled Products by Quarter
◦ In 4Q09, consolidated crude steel output was flat at
4.3 mt vs. 3Q09 with a 7% increase in North America
and a 6% increase in South Africa
◦ Consolidated rolled product production was
marginally unchanged q-o-q and decreased 11% y-
o-y
◦ Compared to 3Q09, 4Q09 production of railway
products increased by 15%, of tubular goods – by
19%, of flat-rolled goods – by 6% and declined by
approximately 4% for semi-finished and construction
products.
◦ Production of semis grew by 22% in 2009 vs.2008‘
‘000 tonnes
0
300
600
900
1,200
1,500
Semi-finished
products
Construction
products
Railway products Flat-rolled products Tubular products Other steel
products
1Q09 2Q09 3Q09 4Q09
0
1,000
2,000
3,000
4,000
5,000
6,000
Semi-
finished
Construction Railway Flat-rolled Tubular Other steel
2008 2009
‘000 tonnes
Production of Rolled Products, 2008Production of Rolled Products, 2008Production of Rolled Products, 2008Production of Rolled Products, 2008----2009200920092009
+22%+22%+22%+22% ----18%18%18%18%
----36%36%36%36% ----22%22%22%22%
----20%20%20%20% ----29% 29% 29% 29%
12Steel Production: RussiaSteel Production: RussiaSteel Production: RussiaSteel Production: Russia
◦ Low stock levels after winter holidays and expectations of export price growth
◦ The main growth driver for billet prices is increasing world scrap and iron ore prices. Finished products
started following the same trend as well
◦ Demand for semis is coming mainly from the Far East and Middle East
◦ Revival of seasonal demand should support higher finished steel prices in Russia
◦ Russian government infrastructure spending can become a major driver of demand for construction
steel and railway products in the Russian market in 2010
Production of Rolled ProductsProduction of Rolled ProductsProduction of Rolled ProductsProduction of Rolled Products‘000 tonnes
1,046 1,0841,497 1,455
843 798
936 868306 285
263 32179
7143
76
122
12772
125
1Q09 2Q09 3Q09 4Q09
Semi-finished Construction Railway Flat-rolled Other steel
2,3092,3092,3092,309 2,3642,3642,3642,364
2,8972,8972,8972,8972,8452,8452,8452,845
13Steel Production: North AmericaSteel Production: North AmericaSteel Production: North AmericaSteel Production: North America
Evraz Inc. Evraz Inc. Evraz Inc. Evraz Inc. NANANANA’’’’ssss Production of Rolled ProductsProduction of Rolled ProductsProduction of Rolled ProductsProduction of Rolled Products
◦ Relatively good performance at the beginning of 2009 with subsequent deterioration and gradual
improvement in line with market trends through the year
◦ Overall economic conditions in the steel market are better now than in 2009, but are still at less than
normal levels across all Evraz steel consuming markets
◦ Steel prices are likely to recover in 2010 on account of higher input costs
◦ Stability of demand for large diameter pipes in Canada due to long contracts (Keystone XL project)
◦ Evraz is expected to benefit from government infrastructure investments
69 65 108 92
112 121 79 71
160 115186 195
266
153117 139
1Q09 2Q09 3Q09 4Q09
Construction products Railway products Flat-rolled products Tubular products
606606606606
454454454454490490490490 498498498498
‘000 tonnes
14Steel Production: Europe and South AfricaSteel Production: Europe and South AfricaSteel Production: Europe and South AfricaSteel Production: Europe and South Africa
Production of Rolled Products, EuropeProduction of Rolled Products, EuropeProduction of Rolled Products, EuropeProduction of Rolled Products, Europe
‘000 tonnes
Production of Rolled Products, South AfricaProduction of Rolled Products, South AfricaProduction of Rolled Products, South AfricaProduction of Rolled Products, South Africa
‘000 tonnes
16
183 168
226246
17 33 33
47
64
1Q09 2Q09 3Q09 4Q09
Other steel products
Flat-rolled products
Construction products
64 59
1234
50 62
42
55
98107
3
2
2 5
6
1Q09 2Q09 3Q09 4Q09
Other steel products
Flat-rolled products
Construction products
Semi-finished products
202202202202192192192192
264264264264
121121121121
149149149149157157157157
284284284284
175175175175
10%
31%9%
6%
26%
20%
27%
16%
14%
9%
14%
18%
0
200
400
600
800
1000
1200
1400
1H08 1H09
Raw materials Transportation Staff costs Depreciation Energy Other
6,250
12,147
8,859
3,597
11,271
8,809
4,7954,915
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1H08 1H09 1H08 1H09
Coking coal Iron ore
Consumption Production
15Leveraging Recovery in Commodity PricesLeveraging Recovery in Commodity PricesLeveraging Recovery in Commodity PricesLeveraging Recovery in Commodity Prices
Iron Ore and Coking Coal Coverage*Iron Ore and Coking Coal Coverage*Iron Ore and Coking Coal Coverage*Iron Ore and Coking Coal Coverage*
* Self-coverage is calculated as a sum of coking coal production by Mine 12, Yuzhkuzbassugol production and pro rata to Evraz’s ownership production of Raspadskaya , in coal
concentrate equivalent, divided by Group’s total coking coal consumption excluding coal, used in production of coke for sale to third parties
◦ Full self-coverage in raw materials achieved,
allowing cash preservation
◦ Mining segment remained EBITDA positive
even at the bottom of raw material prices’
cycle
◦ Benefitting from growth of iron ore and coking
coal prices
Mining Segment PerformanceMining Segment PerformanceMining Segment PerformanceMining Segment Performance
Cost of revenue, Mining SegmentCost of revenue, Mining SegmentCost of revenue, Mining SegmentCost of revenue, Mining Segment
133%133%133%133%
US$ mln
2,012
652
94
837
0
500
1,000
1,500
2,000
2,500
1H08 1H09
Revenue EBITDA
99%99%99%99%
79%79%79%79%
93%93%93%93%
Source: Management accounts
‘000 tonnes US$ mln
1,1961,1961,1961,196
685685685685
%% is given to total Mining Segment Cost of Revenue
16SummarySummarySummarySummary
◦ Gradual improvement of economic environment compared to the first half of 2009
◦ Increased geographical diversification of business helped to stabilise the situation
◦ Strengthening global demand for semi-finished steel allows us to fully utilise Russian
steelmaking
◦ Prices for semi-finished steel products are improving on the back of higher input costs
◦ Vertical integration into iron ore and coking coal allows to leverage market recovery and
benefit from the growth of raw material prices
◦ Effective management of business in terms of cost savings and working capital release
◦ Decrease in debt level and amendment of debt covenants allow the management
sufficient flexibility to continue implementation of its strategy
AppendicesAppendicesAppendicesAppendices
18Revenue by MarketRevenue by MarketRevenue by MarketRevenue by Market
First Half of 2008First Half of 2008First Half of 2008First Half of 2008 First Half of 2009First Half of 2009First Half of 2009First Half of 2009
4%
12%
2%16%
14%
4%
1%2%
5%
40%
Russia Ukraine Other CIS Americas
Europe Middle East China Thailand
Other Asian Africa & RoW
3%7%
3%
5%
10%
9%
30%
3%
2%
28%
Russia Ukraine Other CIS Americas
Europe Middle East China Thailand
Other Asian Africa & RoW
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 Group S.A. (Evraz) or any of its subsidiaries in any jurisdiction 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 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 communication is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) investment
professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high
net worth companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such
persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this document or any
of its contents.
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 Evraz’s control that could cause the actual results, performance or achievements of Evraz 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 our 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 Evraz’s present and future business strategies and the
environment in which Evraz Group S.A. 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 Evraz 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 expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based.
Neither Evraz, 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.
DisclaimerDisclaimerDisclaimerDisclaimer 19
+7 495 232+7 495 232+7 495 232+7 495 232----13131313----70 70 70 70 [email protected]@[email protected]@evraz.com
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