Investor Presentation September 2014 DISCLAIMER THIS PRESENTATION - - PowerPoint PPT Presentation

Investor Presentation

September 2014

2

DISCLAIMER

THIS PRESENTATION IS FOR INFORMATION ONLY AND IS CONFIDENTIAL. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OF FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE RUSSIAN FEDERATION OR ANY JURISDICTION WHERE SUCH RELEASE, PUBLICATION OR DISTRIBUTION IS UNLAWFUL THIS PRESENTATION DOES NOT, AND IS NOT INTENDED TO, CONSTITUTE AN OFFER OR A PART THEREOF, OR INVITATION TO SELL OR TO ISSUE, OR TO SUBSCRIBE FOR OR OTHERWISE PURCHASE ANY SHARES IN THE COMPANY OR ANY OTHER SECURITIES AND NOTHING CONTAINED HEREIN SHALL FORM THE BASIS OF ANY CONTRACT OR COMMITMENT WHATSOEVER. THIS PRESENTATION IS CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, RETRANSMITTED, FORWARDED, FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, BY ANY MEDIUM OR IN ANY FORM FOR ANY PURPOSE AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON (AS DEFINED IN THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR TO ANY U.S. ADDRESS OR TO ANY PERSON AND/OR IN ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS

• UNAUTHORISED. FAILURE TO COMPLY WITH SUCH LIMITATIONS MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

THIS PRESENTATION IS ONLY ADDRESSED TO AND DIRECTED AT PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA THAT HAVE IMPLEMENTED THE PROSPECTUS DIRECTIVE (DIRECTIVE 2003/71/EC, AS AMENDED) WHO ARE "QUALIFIED INVESTORS" WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE IN PARTICULAR, IN THE UNITED KINGDOM, THIS PRESENTATION IS FOR DISTRIBUTION ONLY TO AND DIRECTED ONLY AT (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER") OR (II) HIGH NET WORTH ENTITIES, AND OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED, FAILING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER (ALL SUCH PERSONS IN (I)-(II) ABOVE BEING "RELEVANT PERSONS"). BY ACCEPTANCE OF THIS INFORMATION THE RECIPIENT HEREOF CONFIRMS THAT HE OR SHE IS A RELEVANT PERSON. THE INFORMATION IN THIS PRESENTATION HAS NOT BEEN INDEPENDENTLY VERIFIED. THE OPINIONS PRESENTED HEREIN ARE BASED ON GENERAL INFORMATION GATHERED AT THE TIME OF WRITING AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE COMPANY RELIES ON INFORMATION OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE BUT DOES NOT GUARANTEE ITS ACCURACY OR COMPLETENESS. THE INFORMATION CONTAINED IN THIS PRESENTATION IS SUBJECT TO VERIFICATION, COMPLETION AND MAY BE SIGNIFICANTLY CHANGED. NONE OF THE COMPANY OR ANY OTHER PERSON IS LIABLE TO UPDATE OR MAINTAIN TOPICALITY OF THE INFORMATION CONTAINED IN THIS PRESENTATION OR TO PROVIDE THE RECIPIENT WITH ACCESS TO ANY ADDITIONAL INFORMATION OR TO CORRECT ANY INACCURACIES IN ANY SUCH INFORMATION WHICH MAY BECOME APPARENT. THIS PRESENTATION CONTAINS STATEMENTS ABOUT FUTURE EVENTS AND EXPECTATIONS THAT ARE FORWARD-LOOKING STATEMENTS, BASED ON CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS. THESE STATEMENTS TYPICALLY CONTAIN WORDS SUCH AS "BELIEVES", "INTENDS", "EXPECTS" AND "ANTICIPATES" AND WORDS OF SIMILAR IMPORT. ANY STATEMENT IN THESE MATERIALS THAT IS NOT A STATEMENT OF HISTORICAL FACT IS A FORWARD-LOOKING STATEMENT THAT INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NONE OF THE FUTURE PROJECTIONS, EXPECTATIONS, ESTIMATES OR PROSPECTS IN THIS PRESENTATION SHOULD BE TAKEN AS FORECASTS OR PROMISES NOR SHOULD THEY BE TAKEN AS IMPLYING ANY INDICATION, ASSURANCE OR GUARANTEE THAT THE ASSUMPTIONS ON WHICH SUCH FUTURE PROJECTIONS, EXPECTATIONS, ESTIMATES OR PROSPECTS HAVE BEEN PREPARED ARE CORRECT OR EXHAUSTIVE OR, IN THE CASE OF THE ASSUMPTIONS, FULLY STATED IN THE PRESENTATION. NEITHER THE COMPANY NOR ANY OTHER PERSON ASSUMES ANY OBLIGATIONS TO UPDATE THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ACTUAL RESULTS, CHANGES IN ASSUMPTIONS OR CHANGES IN FACTORS AFFECTING THESE STATEMENTS. BY ACCEPTING OR ACCESSING THIS PRESENTATION OR ATTENDING ANY PRESENTATION OR DELIVERY OF THIS PRESENTATION YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS AND CONDITIONS AND, IN PARTICULAR, WILL BE TAKEN TO HAVE REPRESENTED, WARRANTED AND UNDERTAKEN THAT YOU HAVE READ AND AGREE TO COMPLY WITH THE ABOVE LIMITATIONS.

• 1. MMK at a Glance

3

• 2. Business Overview 8
• 3. Strategic overview

12

• 4. Financial overview

20

• 5. Appendices 24

TABLE OF CONTENTS

4

KEY CREDIT HIGHLIGHTS

Leading position in the Russian steel market  MMK is the second largest steel producer in Russia by volume of production  Moreover, MMK not only managed to maintain its share but also grow it over the recent years Dominant portion of sales to domestic market  MMK sales (by volume) to fast growing Russian and CIS market amount to 84% of total sales (as of 2013FY)  MMK benefits from premium pricing with respect to domestic sales - 177 USD/tonne in 2013 Diversified sales mix  Low customer concentration  Top ten customers account for only 1/4th of MMK„s total shipments* Competitive cost position  Slab costs are among the lowest in the industry - USD356 per tonne (as of Q4 2013)  MMK benefits from long-term iron-ore contracts World class corporate governance  5 out of 10 directors on Board are independent in compliance with the UK Corporate Governance code The largest single sight facility in Russia  The large size of Magnitogorsk site allows the company to exploit economies of scale and reduce costs in areas, such as logistics through lower transportation costs Leader among peers  Strong positioning among peers is reflected by well-invested, best rolling facilities as well as the highest portion of HVA products

*Note: Top 10 customers are based on Total MMK shipments, i.e. domestic and exports

5

ММК – GLOBAL PLAYER WITH STRONG RUSSIAN PRESENCE

Benefits from central location with proximity to local and export markets

2.3 mln tpy capacity. Steel making complex and two service centers. 664 th tonnes of steel products output in 2013 Metals service center and stamped-product factory with 250 th. tpy capacity. 3.6 mln tonnes of coking coal mined in

• 2013. Covered 36% of

MMK needs in coal concentrate in 2013

Interkos-IV MMK Metalurji Belon

One of Russia‟s largest hardware producers. 535 th. tonnes produced in 2013.

ММК Metiz Profit

Covers 100% of MMK scrap needs. ММК trading house 84% >1% 9% 6% >1%

ММК (2013)

Leading producer of rolled products in Russia 11.94 mln tonnes of steel 10.67 mln tonnes of finished products in Russia

%

Share of MMK shipments, mln tonnes Profit‟s scrap collecting yards ММК owns 5% оf Fortescue Metals Group, one of Australia's largest iron-

• re producers.

Fortescue MG

Source: MMK

ММК Group consist of 3 main segments

Russian Steel Segment Turkish Steel Segment Coal Segments

6

78 162 150 156 225 158 190 243 231 177 50 100 150 200 250 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

OJSC MMK DOMINANT SHARE OF SALES TO EMERGING MARKET HIGH GROWTH COUNTRIES AND RUSSIA IN PARTICULAR

The portion of Russian & CIS sales has been gradually increasing

Source: MMK

Domestic Price Premium(1) Based on Average Price, USD/tonne Regional Sales Structure based on Volumes, 2013

Source: MMK reports Source: MMK

Domestic price premium makes Russian market attractive

Note: Domestic price premium is calculated in comparison to export prices

Total: 10,667 kt

69% 67% 77% 84% 31% 33% 23% 16% 0% 25% 50% 75% 100% 2010 2011 2012 2013 Domestic Exports

Russia 73,0% CIS 11,3% Middle East 8,6% Far East & Asia 0,6% Europe 5,7% Africa 0,5% Americas 0,4% Flat Steel Use Growth

Source: CRU

• 4,0%
• 2,0%

0,0% 2,0% 4,0% 6,0% 2014e 2015e 2016e 2017e 2018e

• N. America

Europe Middle East China CIS

7 19% 36% 100% 71% 81% 64% 29% 0% 25% 50% 75% 100% Iron Ore Coal Scrap Electricity Own Purchased

COMPETITIVE COST POSITION

MMK benefits from relatively low input materials prices

Slab Cash-cost and Raw-material Price, USD/tonne

Source: MMK reports

Limited vertical integration benefits MMK in the current market Self-sufficiency Level, 2013  Limited vertical integration levels in raw materials do not pose a weakness to the company  Weak raw materials prices in the current market are beneficial to MMK‟s profit margins  MMK holds long-term iron ore off-take contracts with ENRC and Metalloinvest‟s subsidiaries until 2017 and 2015 respectively MMK’s Slab Cash-Cost vs. peer, USD/tonne

Source: MMK and Company reports Source: MMK

MMK MMK (Belon) MMK (Profit) MMK

450 495 490 459 442 413 385 374 399 385 363 356 361 406 405 405 395 411 383 361 364 348 329 349 300 400 500 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 ММК Russian Peer 459 442 413 385 374 399 385 363 356 40 80 120 160 200 100 200 300 400 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Slab Cash-cost Scrap Iron ore (RHS) Pellets (RHS) Coal (RHS)

• 1. MMK at a Glance

3

• 2. Business Overview 8
• 3. Strategic overview

12

• 4. Financial overview

20

• 5. Appendices 24

TABLE OF CONTENTS

9

Long steel products 17% H/r steel 44% Thick plate 8% C/r steel 14% Downstream products 17%

RUSSIAN STEEL SEGMENT

Main revenue contributor – 92% of Group’s revenue*

• All significant assets of the segment are located in Magnitogorsk, Russia
• Magnitogorsk Steel is the major production site:

 Russia‟s second largest integrated plant with more than 14m tonnes of crude steel production capacity  Ranks among country‟s most competitive producers with a diverse mix and strong focus on flat products  Enjoys proximity to some of its biggest customers (Chelyabinsk Pipe and Uralvagonzavod) and main supplier (ENRC – 300km away)  Includes wide-gauge plate Mill 5000 and cold-rolling rolling Mill 2000 with annealing, pickling and galvanising facilities

• MMK-METIZ Metalware and Sizing Plant (Magnitogorsk)
• The downstream steel processing plants MMK-Profil-Moscow Region and

Intercos-IV (Spb Region)

• Trading companies – wide network all over Russia
• –
• –

Note: * as per 2012 FY results

• MMK’s Russian steel segment finished products composition, 2013FY

–

Source: MMK

–

MMK's share in Russia Place in Russia Hot-rolled sheet 36% 1

• incl. thick plate

26% 2 Cold-rolled sheet 27% 3 Galvanized flat products 28% 1 Tin plate 100% 1 Colour-coated rolled products 25% 3 Leading Domestic Market Position

Source: MMK, Metal Courier

Total: 10,667 th. tonnes

prospectus: „

• f volume …

10

TURKISH STEEL SEGMENT

Poised to become #2 flat steel producer in Turkey

ММК Metalurji  Located at two sites in Turkey: Iskenderun and Istanbul  Favourable geographic position (growing markets of Turkey and

• ther Middle East countries)

 Good logistics (own sea port and up-to-date production logistics in place)  Key production site (Iskenderun) – capacity of 2.3 million of crude/finished tons per year  Production start of operation: 2010  Finished products: hot-rolled steel, galvanized and color-coated steel

• Steel-making and manufacturing of hot-rolled products was

suspended in November 2012

• –
• –

MMK will benefit from the structural shortfall of flat steel in Turkey Istanbul

Iskenderun Europe Middle East Africa Priority export markets Important export markets

Locations of Key Markets MMK Metalurji production breakdown, 2013FY

Source: MMK operational results

• Text comes from Moody’s
• Total: 664 th. t
• Source: MMK

MMK Facilities in Turkey

Hotrolled steel 9% Galvanized flat products 44% Color-coated rolled products 47% HVA Products, 91%

11

23,4 7,9 17,5 5,2 >30 >30 >30 10-12 10 20 30 40 5 10 15 20 25 Chertinskaya- Koksovaya Chertinskaya- Yuzhnaya Kostromovskaya Novobachatsky Operational reserves, mt Reserves life (RHS), years

COAL SEGMENT

Belon is one of Russia’s largest coal producers

Belon Group comprises coal mining and processing assets  Located in Belovo, Kemerovo Region, Russian Federation  Assets include

• 3

underground mines: Chertinskaya-Koksovaya, Chertinskaya-Yuzhnaya and Kostromovskaya

• 1 open pit mine: Novobachatsky
• Belovskaya coal washing plants with production capacity of

6.2mt of coal  Aggregate output: 4.0 mt of coking coal and 3.3 mt of coal concentrate  Covered 36% of Group‟s requirements in 2013  MMK Group holds 95% stake in Belon

• –
• –

Integration in Coking Coal

 company‟s

• Source: MMK

Source: MMK

MMK Coal reserve life vs. operational reserves (as of 2012)

• Acquisition of Belon

Acquisition cost USD 0.543 bn Market Russia Profile Growing producer of high-quality coal Capacity, mtpy coking coal 4.0 in 2012, 6.2 by 2017 Rationale Vertical integration and higher profitability 4.0 in 2012,

3,6 4,2 4,2 4,0 3,6 2,5 3,0 3,2 3,3 2,9 1 2 3 4 5 2009 2010 2011 2012 2013 Coking coal production Concentrate production

• 1. MMK at a Glance

3

• 2. Business Overview 8
• 3. Strategic overview

12

• 4. Financial overview

20

• 5. Appendices 24

TABLE OF CONTENTS

13

STRATEGIC OBJECTIVES OF MMK GROUP

Focus on organic growth 1 Emphasized direct exposure to niche segments 2 Maximising share of domestic sales 3 Maintaining good progress achieved in self-sufficiency 4 Achieving quality balance sheet 5

14

5 000 10 000 2010 2011 2012 2013 2014Е ММК MMK Metalurji 0% 10% 20% 30% 40% 50% 60% 70% 2 000 4 000 6 000 8 000 10 000 12 000 2010 2011 2012 2013 2014Е MMK MMK Metalurji HVA products share 18% 19% 23% 27% 11% 9% 11% 14% 9% 8% 7% 8% 54% 53% 48% 40% 6% 9% 10% 12% 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013

Downstream products Flat cold-rolled products Thick plate (Mill 5000) Flat hot-rolled products Long products Slabs and billets

MMK Group Steel Output Growth, th. tonnes

Source: MMK

MMK Group Increasing Share of HVA Products, th. tonnes

Source: MMK Source: MMK Source MMK

HVA Products

≈49%

MMK Group Finished Product Output, %

HVA 11 419 12 195 13 037 11 941 11 060 11 937 11 158 10 409 ≈12 200 ≈12 600

FOCUS ON ORGANIC GROWTH

…with increasing share of high value added products in MMK production

1

15

1 482 70 100 543 HRC CRC H/r Plate Thick Plate (m. 5000) 799 843 200 400 600 800 1 000 2012 2013 1 000 2 000 3 000 4 000 2011 2012 2013E 2014E 2015E 2016E 2017E Domestic demand Domestic supply Estimated LDP export

EMPHASIZED DIRECT EXPOSURE TO NICHE SEGMENTS

Strong positions in Pipe sector

LDP Demand/Supply in Russia, th. tonnes

Source Metal Expert, Broker reports

MMK Share in Supplies to Russian Pipe Industry in 2013

Demand for LDP remains strong

2

Mill 5000 Utilization rates, th. tonnes

Source: MMK

Higher demand for thick plate in 2013 supported Mill 5000 utilization rates +6%

Import; 9% MMK; 38% Others; 53%

Product Mix Supplied to Pipe Industry in 2013, th. tonnes

Source: MMK Source: MMK

16

H/r steel 38% Long steel products 20% Thick plate 9% Coated & Downstream products 20% C/r steel 13% 2,1 9,0 3,7 1,7 2 4 6 8 1996 2000 2004 2008 2012 Domestic market (Russia + CIS) Export

MMK Domestic and Export Sales, mln tonnes

Source MMK

MMK Domestic Sales by Region, 2013

Source MMK

MAXIMISING SHARE OF DOMESTIC SALES

... in order to enhance profit margins and reduce exposure to the seaborne market 3

MMK organically grows its share in Russian market while demand in export markets remains sustainable

MMK is located in most intensive steel consuming region of Russia

MMK Domestic Sales Structure, 2013

Source MMK 2013 reports

MMK Domestic Sales by Sector, 2013

HVA Products, 42%

Total: 8,993 kt Total: 8,993 kt

Source MMK 2013 reports

Pipe production 24,5% Spot sales in Russia 25,7% Spot sales in CIS 13,4% Construction sector 9,4% Machine / Railcar building 11,5% Metalware and semi-integrated factories 9,8% Automobile sector 3,9% Ship building 0,6% Bridge building 0,7% Other 0,4%

17

MMK has been active in terms of increasing the level of vertical integration, particularly in respect of raw materials, since its IPO

• Acquisition of 100% share in “Profit” scrap company in June 2009
• Increase of stake in Belon coal company to 82.6% in October 2009 and to 95% in September 2013
• Increase of in-house production of iron ore (mining and tailings processing)
• Generation of c. 71% of electricity supplies in 2013

MAINTAINING GOOD PROGRESS ACHIEVED IN SELF-SUFFICIENCY

Levels remain balanced across all business segments

2007 Self-sufficiency Level, %

Source MMK

Impressive progress has been achieved over the past 5 years 2013 Self-sufficiency Level, %

Source MMK

4

10% 85% 90% 100% 100% 15% 0% 25% 50% 75% 100% Iron Ore Coal Scrap Electricity Own Purchased 19% 36% 100% 71% 81% 64% 29% 0% 25% 50% 75% 100% Iron Ore Coal Scrap Electricity Own Purchased

18

697 1 216 2 112 1 613 2 209 1 154 674 622 500 1 000 1 500 2 000 2 500 2006 2007 2008 2009 2010 2011 2012 2013

ACHIEVING QUALITY BALANCE SHEET

Continuous deleveraging 5

• The group of focussed on achieving quality balance sheet by

continuous deleveraging

• MMK has adopted a debt tolerance principle of Total Debt / EBITDA

<=2x at any time through the cycle

• In order to manage its leverage at a comfortable level within the limit,

MMK can use the following levers:  Capex revision by almost half y-o-y  Limitation of M&A activity  Improving operating performance led by cost cutting initiatives  Sustainable cash-flow due to improved operational performance (including cost effects) Healthy deleveraging, mln USD

Source MMK annual and semi-annual reports

Adequate liquidity, mln USD

Source MMK

CAPEX has dropped by more than 3 times from its peak, mln USD

Source MMK

3 992 3 518 3 026 2,99 2,59 2,47 2,00 3,00 1 000 2 000 3 000 4 000 31.12.2011 31.12.2012 31.12.2013 Net Debt Net Debt / EBITDA (RHS) 154 1 010 1 813 801 1 000 2 000 3 000 Available Liquidity Short-term Debt Cash Credit Lines FMG Stake

• 1. MMK at a Glance

3

• 2. Business Overview 8
• 3. Strategic overview

12

• 4. Financial overview

20

• 5. Appendices 24

TABLE OF CONTENTS

20

FINANCIAL HIGHLIGHTS

Demonstrating relative financial strength

Summary of key results MMK Group Financials, USD mln

Source MMK

Revenue growth continued into 2013, USD mln

Source MMK

2013 2012 2011 2010 Crude steel output, kt 11,941 13,037 12,195 11,419 Finished steel, kt 11,060 11,937 11,158 10,409 Revenues, $ mln 8,190 9,328 9,306 7,719 EBITDA, $ mln 1,223 1,356 1,336 1,606 EBITDA margin, % 14.9% 14.5% 14.4% 20.8% Net profit, $ mln

• 2,429
• 94
• 125

232 Net margin, %

• 29.7%
• 1.0%
• 1.3%

3.0% Assets, $ mln 14,406 16,292 16,295 16,738 Debt, $ mln 3,180 3,880 4,416 3,548 short-term 1,010 1,631 1,334 1,087 long-term 2,170 2,249 3,082 2,461 Shareholder capital, $ mln 6,828 9,665 9,289 10,257 Cash, $ mln 154 362 424 515 Net debt, $ mln 3,026 3 518 3 992 3 033 Net Debt / EBITDA (x) 2,47 2,86 3,31 2,21

5 081 7 719 9 306 9 328 8 190 1 309 1 606 1 336 1 356 1 223

• 500

1 500 3 500 5 500 7 500 9 500 11 500 2009 2010 2011 2012 2013 Revenues EBITDA 2 283 2 161 1 877 1 869 381 297 233 312

16,7% 13,7% 12,4% 16,7%

0% 4% 8% 12% 16% 20% 500 1 000 1 500 2 000 1Q 13 2Q 13 3Q 13 4Q 13

Revenues EBITDA EBITDA margin (RHS)

21

PRUDENT FINANCIAL POLICY

Debt Tolerance Target leverage <= 2.0x through the cycle Management’s commitment to Gross Debt/ EBITDA below 2x on a long-term basis Key management considerations CAPEX In accordance with leverage target Flexible Capex which can be adapted to market conditions Funding of the planned CAPEX mostly with internal cash flow Flexibility to revise CAPEX to bring it down to maintenance only (below USD300 mln) Liquidity and debt management Cash on hand Available committed lines Good relationship with banks and willingness to enter the bond market as an alternative source of funding Keep cash on balance sheet of USD154m at the end of 2013 Available bank lines amount to USD1.8bn as of 2013YE M&A Focus on organic growth Management is focused on organic growth and does not envisage external growth Dividends 20% payout ratio Commitment to 20% payout ratio, can be soften in case of stressed financial profile. Additional liquidity 5% stake of Fortescue Metals Group The Group holds liquid stock on its balance sheet, i.e. 5% of Fortescue Metals Group shares, worth close to USD800m as of the end of 2013 Principles Accounting IFRS as external and internal standard Independent Audit Use of IFRS Risk Management Regular monitoring Regular monitoring and active management of various risks

22

925 879 519 833 347 1 154

• 576

314 674 99 622 310

• 800
• 600
• 400
• 200

200 400 600 800 1000 1200 1400 FFO 2011 WoC PPE FCF 2011 FFO 2012 WoC PPE FCF 2012 FFO 2013 WoC PPE FCF 2013

MMK FREE OPERATING CASH FLOW GENERATION

Sound Free Operating Cash Flow Generation to support deleveraging

Free Operating Cash Flow Generation Bridge 2011 – 2013, USD mln

• Despite the difficult economic conditions and unlike in prior years, MMK generated strong FCF in 2012 and 2013
• MMK expects to continue generating sound level of free cash flow that will support the deleveraging objectives of the

Company

FY 2013 FY 2012 FY 2011

Note: FFO = cash flow from operations before change in working capital and after tax on interest paid FCF excludes other investing and financing items PPE: property, plant and equipment

• 1. MMK at a Glance

3

• 2. Business Overview 8
• 3. Strategic overview

12

• 4. Financial overview

20

• 5. Appendices 24

TABLE OF CONTENTS

• 298
• 177

4 217 3 821 335 305 190 141

• 300

700 1 700 2 700 3 700 4 700 1H 2013 1H 2014 Coal Steel (Turkey) Steel (Russia) Eliminations

• 98
• 79

1 774 2 047 134 171 69 72

• 200

300 800 1 300 1 800 2 300 Q1 2014 Q2 2014 Coal Steel (Turkey) Steel (Russia) Eliminations

MMK Group revenue q-o-q, million USD

24

MMK Group revenue y-o-y, million USD

Q2 and H1 2014 KEY FINANCIAL HIGHLIGHTS

1,879 2,211 Source: ММК 4,444 4,090

• 8.0%

17.7%

• MMK Group revenue for Q2 2014 increased by 17.7% q-o-q to USD

2,211 million, due to growth of domestic prices (+8.8%) and growth in sales volume (8.9%).

• However, revenue for H1 2014 decreased by 8% y-o-y due to

generally lower steel prices in 2014, which are pressured by continued global excess steel capacity and decrease in iron ore prices. 2 211 1 879 166 166 500 1000 1500 2000 Q1 2014 Revenue Price change effect Products volumesQ2 2014 Revenue

Analysis of MMK Group’s revenue, million USD

508 670 6 15 33 7 131 1 15,3% 16,9% 0,0% 4,0% 8,0% 12,0% 16,0% 20,0%

100 200 300 400 500 600 700

1H 13 1H 14 Eliminations Coal Mining Steel (Turkey) Steel (Russia) EBITDA margin 15

• 8

267 403 13 2

• 1

2 15,6% 18,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0%

• 1 0

90 19 0 29 0 39 0

Q1 14 Q2 14

Eliminations Steel (Turkey) Steel (Russia) Coal Mining EBITDA margin

ММК Group H1 2014 EBITDA y-o-y, million USD

25

ММК Group Q2 2014 EBITDA q-o-q, million USD

Q2 and H1 2014 KEY FINANCIAL HIGHLIGHTS

399 294 Source: ММК 678 693

EBITDA/t vs. metal products sale price, USD/t

96 126 90 111 565 604 653 585 100 200 300 400 500 600 700 Q1 14 Q2 14 1H 13 1H 14

EBITDA/tonne MMK Steel Price

31,2% 23,3%

• MMK Group‟s EBITDA for Q2 2014 amounted to USD 399 million, with a

margin of 18%, which increased by 2.4 p.p. q-o-q.

• A significant percentage of MMK Group‟s EBITDA is generated in the

Russian steel segment. The segment‟s EBITDA growth in Q2 2014 was 50.9% q-o-q.

337 326 325 322 322

• 10
• 1
• 4

Slab cash-cost Q1 2014 Raw materials price Raw materials structure Other factors* Slab cash-cost Q2 2014 26

Q2 2014 free cash flow, million USD Slab cash-cost trends, USD/tonne

40

ANALYSIS OF Q2 and H1 2014 KEY FINANCIAL HIGHLIGHTS

Source: ММК

* - fuel and power, services, payroll, etc.

• 4.5%

333 41

• 150

224 100 200 300 400 FFO WoC PPE FCF Q2 '14

• Net profit for Q2 2014 amounted to USD 159 million, which allowed the

Group to post a positive net profit for H1 2014 of USD 80 million.

• Cash cost of slab in Q2 2014 decreased by 4.5% q-o-q to USD 322 per

tonne due to decreasing raw materials prices and implementation of initiatives to reduce costs.

• Effective working capital management and moderate capex allow MMK

Group to generate significant free cash flow.

Net profit/loss y-o-y, million USD

• 79

159

• 136

80

• 150
• 110
• 70
• 30

10 50 90 130 170 Q1 14 Q2 14 1H 13 1H 14

14,5% 13,5% 16,8% 14,0% 18,7% 17,2% 14,2% 18,2% 12,3% 13,5% 9,6% 10,3% 10,8% 9,0% 3,1% 4,3% Q1 14 Q2 14

Power from outside sources Fuel from outside sources Auxiliary materials Other main materials Scrap Сoals Iron ore (pellets) Iron ore (sinter)

STRUCTURE OF OPERATING COSTS AND CASH COSTS

Operating costs of MMK Group, million USD Material expenditures, MMK, million USD

27 Source: ММК 1 148 1 178 Q1 14 Q4 14 +/- % Cost of sales 1 764 1 529 235 15% Selling and distribution expenses 146 144 2 1% General and administrative expenses 109 110

• 1
• 1%

Other operating (expenses)/income, net 3 18

• 15
• 83%

Total operating costs 2 022 1 801 221 12%

• In Q2 2014 the share of energy resources and metal scrap increased in the structure of OAO MMK‟s material costs. At the same time, the share of iron ore

and coal decreased.

• Notwithstanding growth in shipments in Q2 2014 by 10.6% q-o-q, the Company managed to keep selling expenses flat.

496 962 844 242 136 514 400 800 1 200 1st year* 2nd year 3rd year 4th year 5th year and beyond To be repaid Has been repaid/refinanced 360 1 010 137 1 629 637 1 000 2 000 3 000 Liquidity sources Short-term Debt Cash Sort-term deposit Credit lines FMG Stake 3 992 3 518 3 026 2 702 2 065 3,0 2,6 2,5 2,2 1,7 0,0 1,0 2,0 3,0 4,0 1 000 2 000 3 000 4 000 31.12.2011 31.12.2012 31.12.2013 30.06.2014 30.06.2014

Net Debt Net Debt/EBITDA (RHS)

Debt repayment, million USD Liquidity profile, million USD

28

MMK GROUP DEBT PROFILE

Source: ММК 2,763

Reduced debt burden, million USD

Debt, adjusted by FMG stake value as of 30.06.2014 г. * - year, starting from July 1st 1,010

• MMK Group net debt at the end of Q2 2014 was USD 324 million lower

compared to the end of 2013.

• The volume of liquid funds in MMK Group‟s balance sheet exceeds the

amount of short-term debt.

• Debt maturity schedule does not envisage any significant one-off

payments.

Past balance sheet events: in July-August 2014 MMK Group refinanced USD 514

• million. Loans with 3 year maturity were

used mostly

1 216 2 112 1 613 2 209 1 154 674 622 500 1 000 1 500 2 000 2 500 2007 2008 2009 2010 2011 2012 2013 2014F 130 91 130 270 131 150 100 200 300 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14

ММК Group 2014 CAPEX reduction, million USD

29

ММК Group CAPEX, million USD

MMK GROUP CAPEX

Source: ММК

Depreciation reduction, million USD

Maintenance 246 242 237 244 184 202 50 100 150 200 250 300 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Depreciation Average level for 2013

≈550-600

• In Q2 2014, MMK Group‟s capex amounted to USD 150 million, which is

in line with the annual level of USD 550-600 million USD, which was announced previously.

• An increase in depreciation in Q2 2014 by USD 18 million q-o-q was due

to commissioning of new fixed assets during H1 2014, as well as revision of depreciation terms of a number of fixed assets towards its decrease.

30

CASH FLOWS, MILLION USD

Source: ММК

154 360 80 167 386 7

• 16
• 86

41

• 369
• 4

200 400 600 800 Balance as of 31.12.2013 Profit/Loss for the period Adjustments for non-cash operations Amortization Change of working capital Income tax paid Interest paid Financing activities Investing activities Effect of exchange rate changes Balance as of 30.06.2014

Cash and cash equivalents reached USD 360 million due to Q2 2014 strong operating results. In H1 2014 the company invested USD 369 million, incl. USD 281 million in PPE and USD 129 million in short-term deposits