- 1. EVRAZ GROUPCorporate PresentationApril 2010
2. Disclaimer02This 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 oracquire securities of Evraz Group
S.A. (Evraz) or any of its subsidiaries in any jurisdiction or an
inducement to enter into investment activity. No partof this
document, nor the fact of its distribution, should form the basis
of, or be relied on in connection with, any contract or commitment
orinvestment decision whatsoever. No representation, warranty or
undertaking, express or implied, is made as to, and no reliance
should be placedon, 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 thisdocument 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)
investmentprofessionals falling within Article 19(5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order
2005 (the Order) or (iii) highnet worth companies, and other
persons to whom it may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all suchpersons together
being referred to as relevant persons). Any person who is not a
relevant person should not act or rely on this document or anyof
its contents.This document contains forward-looking statements,
which include all statements other than statements of historical
facts, including, withoutlimitation, 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 Evrazs control that could cause the actual
results, performance or achievements of Evraz to bematerially
different from future results, performance or achievements
expressed or implied by such forward-looking, including, among
others, theachievement of anticipated levels of profitability,
growth, cost and synergy of recent acquisitions, the impact of
competitive pricing, the ability toobtain necessary regulatory
approvals and licenses, the impact of developments in the Russian
economic, political and legal environment, volatilityin stock
markets or in the price of our shares or GDRs, financial risk
management and the impact of general business and global
economicconditions.Such forward-looking statements are based on
numerous assumptions regarding Evrazs present and future business
strategies and theenvironment in which Evraz Group S.A. will
operate in the future. By their nature, forward-looking statements
involve risks and uncertaintiesbecause they relate to events and
depend on circumstances that may or may not occur in the future.
These forward-looking statements speakonly as at the date as of
which they are made, and Evraz expressly disclaims any obligation
or undertaking to disseminate any updates or revisionsto any
forward-looking statements contained herein to reflect any change
in Evrazs 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 theforward-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. 3. Agenda 03 Strategy and Management Action Plan 2009
Results Summary Liquidity and Financial Position Operations by
Segment Recent Market Developments Outlook Appendices 4. Sound
Long-Term Strategy04Long and railway product leadership in Russia
and the CIS Maintained leadership in Russias construction steel
market Rail mill reconstruction designed to produce high-speed rail
and increase rail production volumesStrong presence in
international flat and tubular markets Continuous integration of
international assets Full order book at Canadian tubular plant for
2010Low cost leadership position Cost of revenue reduced by 35%
compared to 2008 Closure of inefficient production capacity Ongoing
implementation of cost reduction programsVertical integration with
competitive mining business Iron ore self-coverage: 96% Coking coal
self-coverage: 117%* Won tender for Mezhegey coal deposit to
maintain coking coal self-coverage going forwardLeadership in
vanadium business The sole producer of vanadium-rich ore in Russia
Global footprint: five operating units on four continents
Acquisition of Vanady-Tula, Russias largest producer of
ferrovanadium, signals further expansion ofvanadium-processing
capacity * Including 40% equity stake in Raspadskaya coal company,
accounted on pro rata basis. Excluding this stake, integration
would have been 74% 5. Management Actions in 2009 05Production
optimisation Closure of inefficient capacity Flexible product mix
designed to maximise demand and pricing opportunities Full Russian
and Ukrainian capacity utilisation since 1 July 2009Cost savings
Cash cost of one tonne of Russian semi-finished steel products
reduced by 37% to approximately260 US$/t compared with 2008 Labour
costs decreased by 27% Costs of services and auxiliary materials
decreased by 28%CAPEX reduction CAPEX in 2009 totalled US$441m (60%
down vs. 2008) well within US$500mFY2009 guidanceFinancial
management US$654m released from working capital Total debt reduced
by US$2bn to US$7.9bn, net debt decreased to US$7.2bn 5-year
convertible bond and GDR issue in July raised US$965m 5-year
RUB20bn bond issue in October 2009 and 3-year RUB15bn bond issue in
March 2010 3-year US$950m loan committed from Gazprombank in
October 2009 Covenants reset with ample headroom 6. 2009 Financial
Summary 06US$ mln unless otherwise stated20092008ChangeRevenue
9,77220,380(52)%Cost of revenue(8,756) (13,463)(35)%SG&A
(1,268) (1,751) (28)%Adjusted EBITDA*1,2376,206 (80)%Adjusted
EBITDA margin 13% 30%Net Profit/(loss)**(1,261) 1,859Net Profit
margin n/a9%EPS (US$ per GDR) (3.10)4.85Net Debt*** 7,2269,031
(20)%Sales volumes**** (000 tonnes)14,28217,021(16)% * Adjusted
EBITDA represents profit from operations plus depreciation and
amortisation, impairment of assets and loss (gain) on disposal of
PP&E.Excluding one- off items, adjusted EBITDA would have been
US$1,330 million ** Net loss before changes in accounting policy
would have been US$207 million. Negative effect included additional
impairment (US$76 million), a revaluation deficit (US$420 million)
and an increase in depreciation expense of US$558 million *** As of
the end of the period **** Here and further in this presentation
steel segment sales data refer to third parties sales 7. 2009
Financial Highlights 07 Group revenue decreased by 52%, driven
largely by Consolidated Revenue by Segmentdecrease in average
prices and sales volumes of steel US$ mlnproducts7,0005,133
Recovery of export demand for semi-finished steel 6,000 4,639
343225422804helped to fully utilise Russian assets from 1 July 2009
5,0001386524,000 Improvement in prices and volumes in the second
half of 3,000 4,6874,2912009 led to EBITDA margin progression from
10% in 2,0001,0001H09 to 15% in 2H09 0(785)(1,005) (1,000)
(2,000)1H09 2H09Steel Mining Vanadium Other operations
EliminationsRevenue, 2008-2009Consolidated Adjusted EBITDAUS$
mlnUS$ mln24,000 1,00020,38021,000 769800449718,000600 468
18515,0007012,000400 94 (6,895)9,7729,000(3,574)514 (139)200
3896,000 0 (34) (71)3,000(51) 0 (200) 2008PricesVolumes
Other20091H092H09RevenueRevenue Steel Mining Other
operationsVanadiumUnallocated & Eliminations 8. Maintaining
Cost Leadership 08 Control of raw material costs through cost
efficient Cash Cost*, Slabs & Billetsvertical integration US$/t
Constant review of product and resources flows to450402 430identify
potential efficiency gains400 420394 Approximately 75% of
consolidated cost is rouble 350denominated300 285253 Russian-based
assets have benefited from declines in 250268utilities and staff
costs200224 In 2H09 costs were negatively affected by raising
scrap1501H08 2H081H092H09prices SlabBillet*Average for Russian
steel mills, integrated cash cost of production, EXW Consolidated
Cost of Revenue, 2009 Cash Cost, Russian Coal and Iron Ore
Products5%6% US$/t17% 10% 7063 6056 5%17% 6%5047 43 46 50 8%408%4%
11% 3%3035 30Iron ore Coking coal Scrap 20FerroalloysPurchased
semis Auxiliary materials 1H082H08 1H09 2H09ElectricityNatural gas
Staff costsTransportation DepreciationOther Coking coalIron ore
products 58% Fe Source: Management accounts 9. Cash Flow Generation
in 200909US$ mln2,0006541,7001,600 (141) 1,187624 1,2121,200 800
(671) 400 (441)0 Adjusted Changes in Income tax CF from Interest
paidCAPEX CF from Free cash EBITDAWC operating&
covenantinvesting flow*(excl. non- activitiesresetactivitiescash
items)charges (excl. CAPEX)* Free cash flow comprises cash flows
from operating activities less interest paid, covenant reset
charges, plus cash flows from investing activities 10. Capital
Market Developments in 2009 10 Concurrent GDR and 5-year
convertible bond offerings in July raised US$965m RUB20bn 5-year
bonds issued in October (equivalent to US$700m) US$950m credit
facility committed by Gazprombank in October US$225m 4-year
revolving credit facility for Evrazs US subsidiary agreedin
December Potential covenant compliance issue successfully
addressed: Banks-lenders approved covenant amendments in November
2009 Bondholders approved covenant amendments in December 2009
US$800m loan to VEB repaid in December 11. Debt Maturities and
Liquidity Profile 11Total debt of approx. US$7.9 billion, net debt
of US$7.2 billion as of 31 December 2009Short-term debt is approx.
US$1.9 billionCash and cash equivalents amounted to US$675 million
as of 31 December 2009Total liquidity as of 31 December 2009 is in
excess of US$2bn, including undrawn credit facilities and bank
depositsRUB15bn (equivalent US$500m) 3-year bonds issued in March
2010Negotiation of long-term loans with Russian banks at advanced
stage Debt Maturities Schedule Debt Maturities Schedule Breakdown
of Short-term DebtBreakdown of Short-term DebtUS$ mlnUS$
mln2,5004171,909 1,8342,000 8051,500 1,240 1,3391,000704595505500
1715 0 6872010201120122013 2014 2015 2016 2017 2018 2019
1Q2Q3Q4Q$3.2bn syndicated loan Revolving debt Term loans Source:
Management accounts 12. Increase in Export and Geographic
Diversification 12 Sales to customers outside Russia increased from
61% Steel Products Sales Volumes by Product Steel Products Sales
Volumes by Productto 71% of total revenues 000 tonnes Sales of
steel products to Asia exceeded sales to6,0005,188 5,273
5,314Russia and the CIS, reflecting production flexibility and
4,218increasing cost competitiveness4,000 Geographical
diversification of the business helped to2,3672,6472,110stabilise
operations in crisis environment 2,0001,588919 667 Change in the
product mix towards semi-finished586 426 0products had limited
effect on margins due to exportSemi- ConstructionRailway
Flat-rolled TubularOther steelparity pricing of Russian domestic
finished steel finished20082009productsSteel Products Sales by
MarketSteel Products Sales by MarketSteel Products Sales by
OperationsSteel Products Sales by Operations000 tonnes000
tonnes8,00016,0006,56912,3935,6656,00012,00010,7374,465 4,1234,000
8,0002,723 1,8892,0732,000 1,215 4,000 2,699 712 642663
5642,0751,261 885 668 58500Russia CISEuropeAmericas Asia Africa
&Russian & North American European South African
RoWUkrainian2008200920082009 13. Steel: CIS Domestic 13 Apparent
domestic demand for finished steel stabilised at approximately 70%
ofpre-crisis volumes with some fluctuations due to
destocking-restocking cycles A decrease in sales to the CIS was
partially offset by an increase in export sales Prices of key
products remain close to export parity level Government
infrastructure spending is supporting demand for construction steel
andrailway products in the Russian market Revival of seasonal
demand should support higher finished steel prices in RussiaSteel
Product Sales VolumesSteel Product Sales000 tonnesUS$
mln8,0008,0007,2156,638 737 6836,0006,000 1,875
4,7651,7075154,0004,000 1,1852,490 3,8023,610 2602,0002,455 2,000
7291,250801 6106382500 0 2008 2009 2008 2009Semi-finished
Construction Railway Other steel Semi-finished Construction Railway
Other steel 14. Steel: CIS Export 14 Export sales volumes increased
by 15% Increasing production of billets due to more favourable
pricing environment Continued growth of billet prices driven by an
increase in world scrap, iron ore and cokingcoal prices Delayed
effect of rising steel prices due to the fact that export prices
are typically fixed oneto three months ahead of productionSteel
Product Sales Volumes Steel Product Sales000 tonnes US$
mln5,9726,000 4,000 5,178404 3,4127371,182 4013,0004,000 686444
2,418209 1,821 2,9692,000 1,091 5322,0001,0001,119 1,9341,476
1,41755800 20082009 2008 2009 Slabs Billets Construction Other
steelSlabs Billets Construction Other steel 15. Steel: North
America15Volumes bottomed out in the middle of 2009 with subsequent
stabilisation and some signs of recovery at the beginning of
2010Stable demand for large diameter pipes in Canada due to long
contractsDestocking is largely over with apparent demand remaining
distinctly limitedWell-positioned to benefit from expected
government infrastructure investmentsEvraz Inc. NAs Steel Sales
Volumes Evraz Inc. NAs Steel Sales000 tonnes US$ mln3,000
4,5002,699 4,0224,0002,5002,075 3,5001,0312,000 3,000 1,876
6692,1532,5001,500 8912,0001,0006881,500 1,0141,3521,000553500465
386 500 484 369 312 332 310 217 0 02008200920082009 Construction
Railway Flat-rolled Tubular Construction Railway Flat-rolled
Tubular 16. Steel: Europe, South Africa 16Destocking of traders is
largely overDomestic demand in Europe remains weak and mostly
related to public projectsPositive trend registered with public
works and energy sector in EuropeIncreased share of production is
exported to the Middle East and North AfricaHigh utilisation of
South African operation achieved due to sharp increase in export
salesSales Volumes, European AssetsSales Volumes, South African
Assets000 tonnes000 tonnes1,400800 1,2616681,200 76 700 10
5851,000600 19 885131 5003728001,037400600 300 294776400 1 200200
286 100 160 14890 0 0200820092008 2009 Construction Flat-rolled
Other steel Construction Flat-rolled Other steel 17. Mining:
Well-placed to Benefit from Recovery17 Full self-coverage in raw
materials enabled cash preservation during downturn Mining segment
remained EBITDA positive even at the bottom of raw materialprices
cycle Sustainability of vertically-integrated model in market
downturn Benefiting from growth of iron ore and coking coal
priceIron Ore and Coal ProductionMining Segment Revenue* and
EBITDA000 tonnes US$ mln20,0004,0003,63416,0002,210 2,1312,015
3,0002,69112,0004,788 5,3014,9984,2772,0001,3951,456
8,00010,1748,735 9,127 1,000 4,000 8,2802790 01H082H08 1H09 2H09
20082009 Iron oreCoking coal Steam coal Revenue EBITDA* Includes
intersegment sales and purchases 18. Vanadium18Global leader with
five operating units on four continents and geographically
diversified revenuesVanadium follows steel market trends, being
impacted by market downturnAcquisition of Vanady-Tula, Russias
largest ferrovanadium producer, signals further expansion of
vanadium-processing capacityVanadium Sales* by Products Vanadium
Products Sales* by Regiontonnes of VUS$ mln 10185316.1 451614
11.61210.310 8 6.573 6 4 169 2 0Vanadium in slagVanadium in alloys
and chemicals 2008 2009 Russia & CIS Europe Americas Asia
Africa & RoW * Third parties sales 19. Key Investment
Projects19 CAPEX in 2010 expected to be around US$800m vs. US$441m
in 2009 Approximately US$450m of 2010 CAPEX to be directed to
increasing productivityand development projects, key projects
being:ProjectTotal CAPEX Cum CAPEX by 2010 CAPEX Project Targets
31.12.09Reconstruction of rail US$440m US$30mUS$220m Capacity of
950k tonnes of high-speed rails, includingmill at NKMK 450k tonnes
of 100 metre rails On-stream by 2013Reconstruction of rail
US$55mUS$28mUS$27m Production of higher-quality railsmill at NTMK
550k tonnes capacity On-stream by 2012Pulverised coal injection
US$320mUS$0m US$10m Lower coke consumption from 420 to 320
kg/tonne(PCI) at NTMK andZSMK No need for gas consumption On-stream
by 2013BOF workshop US$260m US$230m US$20m Modernisation of
productionreconstruction NTMK Increasing capacity from 3.8 to 4.2
mtpa On-stream by 2010Reconstruction of CCMUS$60mUS$5m US$40m
Modernisation of productionSlab 3 NTMK Further increase in
steelmaking capacity from 4.2 to 4.5 mtpa On-stream by
2010Reconstruction of wheel US$100mUS$87mUS$13m Production of
higher-quality wheels& tyre mill (heattreatment shop) NTMK
On-stream by 2010Development of TBD US$1m Less than US$50m,
Maintaining self-sufficiency in high-quality hard cokingMezhegey
coal depositincluding license coal after depletion of existing
deposits cost On-stream by 2015 20. Key Market Developments20
Recovery in prices for semi-finished steel is driven byEvraz
Selling Pricesgrowing input costs and by demand from
emergingUS$/tmarkets in Asia, the Middle East and North Africa700
Demand in all markets improving550 Russian domestic demand for
construction steel in 1H10400expected to be higher than in 2H09
Expected steelmaking capacity utilisation in 1H10:250 Russia to
remain 100% 100 Jan-09Mar-09 May-09 Jul-09 Sep-09Nov-09 Jan-10
Mar-10 Ukraine to remain 100% Slabs, Russia, export*Billets,
Russia, export* North America from nadir of 50-55% in 3Q09 to
90%Rebars, Russia, FCA Plate, North America, FCA Czech Republic
from 30% in 2Q09 to 75%*Contract prices South Africa from 45% in
1H09 to near 100% Vanadium Prices, FeV, LMB Russian mining assets
are running at 100% capacity in US$/kg Vcoal and 90% in iron ore40
Prices for semi-finished products in 1H10 are expected tobe higher
than 2H0930 Vanadium expected to perform better than steel due
toincrease of vanadium usage rates in the emergingmarkets steel
production sector closer to the levels of20industrially developed
countries Expected 1Q10 EBITDA of approximately US$400m
10Jan-09Mar-09May-09 Jul-09 Sep-09 Nov-09Jan-10 Mar-10 21. Outlook
for 201021 Continuation of favourable pricing trends driven by
higher raw material costs, growth in emerging markets and moderate
recovery in mature markets Russian and Ukrainian operations
expected to continue running at full capacity, utilisation of
overseas assets expected to increase in response to improved demand
Growth of raw material prices provides support to steel prices
Russian construction market displaying positive dynamics. Seasonal
upturn in demand expected from May Asian, Middle Eastern and
African markets to remain important sources of revenue for Russian
and Ukrainian operations Favourable fundamental trends being offset
by lag effect between raw material price increase and delayed
growth of steel sales prices Global demand for long products is
expected to continue to strengthen on the back of infrastructure
investments driven by various governments stimulus packages,
designed to combat economic recession 22. Summary 22 2009 results
were heavily impacted by global recession Increased geographical
diversification of business helped to stabilise cash flows
Vertically integrated business model demonstrated its viability
through the price cycle Improved global demand for semi-finished
steel allowed us to fully utilise Russiansteelmaking capacity with
effect from 1 July 2009 Successful execution of management action
plan, including cost savings, CAPEX reductionand working capital
release Net debt reduced by 20% to US$7.2 billion Lenders supported
debt covenant reset with ample headroom Stable demand, the improved
pricing environment and our cost leadership credentialsleave us
well positioned to fully capitalise on the market recovery 23.
Appendices 24. Evrazs Global Business 24 25. Revenue by Geography
of Customers 2520082009South AfricaSouth Africa& RoW&
RoW4%4% Other Asia Other Asia13% 13%China Russia 1%31%Middle Russia
China East 37%5% 3%EuropeMiddle 13% East 8% Ukraine2%Other
CISEurope 3% Ukraine 4%9% Other Americas CIS Americas 22%3% 25% 26.
+7 495 [email protected] www.evraz.com
