New leader in Russian Steel World Steel Industry 2009-2010 - - PowerPoint PPT Presentation
New leader in Russian Steel World Steel Industry 2009-2010 - - PowerPoint PPT Presentation
Magnitogorsk Steel (MMK) New leader in Russian Steel World Steel Industry 2009-2010 Highlights World Steel Production 000 tons 000 tons 160 000 600 000 2009 Jan-Aug 2010 140 000 500 000 120 000 400 000 100 000 80 000 300 000
100 200 300 400 500 600
2
World Steel Industry 2009-2010 Highlights
100 000 200 000 300 000 400 000 500 000 600 000 ROW China 2009 Jan-Aug 2010
Source: WSA
1 222 1 205 1 125 1 272 1 340 1 000 1 100 1 200 1 300 1 400 2007 2008 2009 2010* 2011* ‘m tons
World Steel Production World Steel Consumption
13% 5%
* - 2010 - 2011 World steel Association forecast
ММК
Slab Cash-cost
Source: World Steel Dynamics, 2009 : ‘000 tons ‘000 tons 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 Russia Ukraine Kazakhstan Other CIS EU Other European Countries North America South America India Japan
2009 Jan-Aug 2010
- 100%
- 40%
20% 80% 140% 1 000 2 000 3 000 4 000 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 % change, yoy '000 tonnes Total Change, yoy
Russian Steel Dynamics
3
Source: Metal Expert
Monthly Apparent Steel Consumption in Russia Russian Import Structure Flat and Long Steel Price Performance in Russia Flat and Long Steel Demand Performance in Russia
0% 50% 100% 150% 200% 250% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Flat steel Long steel
132%
Source: Metal Expert Source: Metal Courrier * - 2010 annualized figures based on 9 months results
1 000 2 000 3 000 4 000 5 000 6 000 2004 2005 2006 2007 2008 2009 2010* Long products H/r products Thick plate C/r products Coated products
HVA products
Source: Metal Expert
- 20%
0% 20% 40% 60% 80% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 HRC, Black Sea export FOB Rebar, Black Sea export FOB
22%
4
MMK – Russian Steel Leader
Largest single-site steelmaker in Russia with current crude steel capacity of 14 mln tons Production growth of more than 60% by 2014 Share of HVA products to grow from current 35% to 50% by 2014 Import substitution strategy: favorable geographical location to meet solid demand from the most intensive steel consuming regions of Russia – the Urals and Volga regions Great play on Russian infrastructure:
- 16% of the domestic steel market - domestic sales are priced with premium
- Largest exposure to pipe-manufacturing, auto-building and heavy machinery
- More than 50% of steel production for pipes output in Russia
Disciplined investment strategy with “high-return projects” and “high-quality assets” investments approach The most modern asset base – above USD 5 bn of investments for the last 5 years
ММК Geography
2.3 mln tpy production. New, modern steel making complex and two service centers. Metals service center and stamped-product factory. 630 mln tons coal reserves 5.9 mln tons mined in 2009. Largest iron-ore deposit, more than 2 bln tons of reserves.
Interkos-IV Prioskolsky GОК MMK Atakas ENRC Belon
One of Russia’s largest metalware producers
ММК Metiz Profit
Source: MMK
Covers 100% of MMK’s scrap needs.
ММК trading house
59% 14% 18% 5% 2%
High-priority (domestic) Priority (export) Major (export)
Markets
Other (export)
ММК
1st by steel output in Russia (2009) 1st by rolled products in Russia (2009) 9,6 mln tons of steel (2009) 8,8 mln tons of finished products (2009)
%
Share of sales, mln tons Profit’s scrap collecting yards
CAGR (2010-15) = 2,3% CAGR (2010-15) = 5,5% CAGR (2010-15) = 5,0%
5
CAGR (2010-15) = 6,7%
Long-term agreement with ММК (to 2017). Currently MMK’s main iron-
- re supplier.
ММК controls 5% оf Fortescue Metals Group,
- ne of Australia's largest
iron-ore producers. Fortescue Metals Group
2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 2009 2010E 2011E 2012E 2013E 2014Е MMK MMK-Atakas HVA products 80 66 182 190 246 280 343 100 200 300 400
Long steel HR flat steel CR flat steel Mill 5000 plate Formed sections Galvanized steel Colour-coated steel
0% 20% 40% EBITDA/t EBITDA margin 34% 66%
0% 10% 20% 30% 40% 50% 60% 70% MMK
2011 2012 2013 2014 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000
2010E 2011E 2012E 2013E 2014Е ММК, currently run capacities MMK, operational upside on current capacities MMK, new capacities MMK-Atakas
MMK Growth Prospects
Finished Steel Products Structure Evolution Crude Steel Growth Drivers
Sourсe: MMK Sourсe: ММК
6
8 831 17 252
Crude Steel Output Growth Plans
18 617
MMK suggests highest growth potential among its Russian peers
EBITDA per ton of Finished Steel Products
Thousand tons
HVA share ≈ 50% starting from 2012
≈ 50 % 44 % 38 % 34 % 27 % 46 % HVA (Higher Value-Added products)
> 60% growth
Thousand tons
Unique Cost Position
Slab Cash-cost and Raw-material Price Changes
454 243 223 240 250 280 320 50 100 150 200 250 300 350 400 450 500 2008 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10
- 100%
- 80%
- 60%
- 40%
- 20%
0% 20% 40%
Slab cash cost, $/ton Iron ore, % Coal, % Scrap, %
USD/t
Slab Cash-cost Structure, 2Q10 Material and Resource Self-sufficiency
0% 25% 50% 75% 100% Iron ore* Coal** Scrap Electricity Own Purchased
* 70% comes under contract with ENRC till 2017 ** including sales to third parties
7
Key Raw-material Suppliers Structure
30% 70% Iron ore
MMK 10-year contract till 2017 with ENRC
Coal
6% 11% 35% 48%
MMK Siberian Businness Union (f iv e-y ear contracts) Raspadskay a Others
Scrap
100%
MMK
Electricity
75% 25%
ММК Others
Other 7% Coal 24% Other resources 7% Fuel & energy purchases 10% Wages 3% Iron ore 29% Scrap purchased 17%
Cash cost: 320 USD/t 1H2010
* - cost of purchased electricity **- cost of electricity production for MMK ~ $0,03** (kWHrs) ~ $0,07* (kWHrs)
Leading Positions in the Industry
Source: ММК, Metal Courier
MMK’s share in Russia 1 63% 37% Hot-rolled sheet 26% Color-coated rolled products 2% 30% Galvanized flat products 24% Cold-rolled sheet 65% Cold-rolled narrow strip 6% 100% Tin plate 2% 12% 1% 47% Special sections 1% 1 1 2 1 3 3 Place in Russia
Leading Position on Domestic Market
Hot-rolled sheet 5.51 mln tons (63%) Cold-rolled sheet 1.09 mln tons (12%) Long products 1.00 mln tons (11%) Downstream 1.15 mln tons (13%) Billets and slabs 0 mln tons (0%)
Picture Picture Picture Picture
Various Product Types
Source: ММК, 2009
Share in MMK’s total production 8 6% 13% 7%
16%
5% 5% 4% 15% 28% ММК Severstal NLMK Urals Steel ZSMK NTMK Chelyabinsk MK Others Imports
MMK’s Share of Russian Steel Market, 2009
6,000 8,000 10,000 12,000 1999 2001 2003 2005 2007 2009
ММК Severstal NLMK
- th. tons
The Leader in Finished Steel Production
Source: Company Source: ММК, Metal Courier
Pipe production 32% Spot sales 15% Spot sales in CIS 9% Machine building 18% Construction sector 11% Metalware and semi-integrated factories 9% Automobile sector 5% Food industry 1% Fuel and energy companies 0,4% Bridge building 0,3% 57% 19% 14% 11% H/r steel (Thick plate incl.) Downstream products Long steel products C/r steel
Source: MMK
MMK’s Strong Positions on the Domestic Market
Domestic Sales Structure Russian Sales by Sector
Total: 5,112 kt
Source: MMK 4813 4876 7155 5112 5003 4761 4185 4198 3532 2813 2599 2678 2141 6071 4903 7327 5275 3861 5088 5133 5312 5482 5146 4870 4164 3837 3722 3755
1000 2000 3000 4000 5000 6000 7000 8000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Domestic market (Russia + CIS) Export
Dynamics of Domestic and Export Sales, ‘000 tons
Source: MMK
9
Domestic Price Premium
78 162 150 156 225 158 223
50 100 150 200 250 2004 2005 2006 2007 2008 2009 9M2010 USD/t
Source: MMK
9M2010 9M2010
8% 1% 2% 77% 12% Hot-rolled steel Cold-rolled steel Downstream products Long products Slabs and billets
Strong Presence on Export Markets
Export Development Strategy Regional Sales Structure
Africa 1% America 4% Europe 7% Far East & Asia 7% Middle East 15% Domestic 66%
Source: ММК
Export Sales Structure
Total: 2,625 kt
54% 59% 61% 66% 72% 64% 46% 41% 39% 34% 28% 36% 71% 29%
0% 50% 100%
2004 2005 2006 2007 2008 2009 1H2010
Domestic Exports
Share of Export Sales in Revenues
- Company successfully managing export sales
- Key export markets – rapidly-growing markets of
Middle-East, Asia and Far-East.
- MMK expanding presence on most promising markets
such as Turkey by building new steel making
- perations and expanding service center network.
Source: ММК
Total: 7,737 kt
Source: ММК
10 9M2010 9M2010
Производство толстого листа - Стан 5000
CAPEX USD 1.7 bn Market Middle East, EU, Africa Profile state-of-the-art full-cycle steel production Capacity, mtpy finished steel 2.3 Product types HRC, galvanized, colour-coated Rationale increase presence in key export regions geographical diversification IRR 14%
Building on the Value
11
Mill 2000 (RUSSIA) Belon (RUSSIA) MMK-Atakas (TURKEY) Mill 5000 (RUSSIA)
Acquisition cost USD 0.543 bn Market Russia, EU Profile growing producer
- f high-quality coal
Capacity, mtpy coal 5.9 in 2009, 9.8 by 2013 Product types coking coal 6.8, thermal coal 3.0 Rationale better business profile and higher profitability IRR 19.5% CAPEX USD 1.5 bn Market Russian oil&gas infrastructure Profile HVA rolling facilities Capacity, mtpy finished steel 1.5 Product types Heavy plates up to x120 strength class Rationale #1 supplier to pipe sector imports replacement IRR 25% CAPEX USD 1.5 bn Market Russia, automotive industry Profile HVA rolling facilities Capacity, mtpy finished steel 2.0 Product types CR & galvanized automotive steel Rationale #1 supplier to automotive sector imports replacement IRR 20.6%
What is MMK investment style?
HIGH RETURN RATE
SYNERGETIC VALUE-ADDING
CONSEQUENT
TAPPING KEY MARKETS
WELL-THOUGHT
ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIP FOCUSED BEATING THE CYCLE
HIGH RETURN RATE
SYNERGETIC VALUE-ADDING
CONSEQUENT
TAPPING KEY MARKETS
WELL-THOUGHT
ENJOYING STATE SUPPORT
STRENGTHENING LEADERSHIP FOCUSED BEATING THE CYCLE
Производство толстого листа - Стан 5000
- Project completion time under SMS Demag contract - 32 months
- November 2007–May 2009: construction of new mill
- July 2009: first production
- December 2009: launch of Continuous Slab Caster # 6
- February 2010: launch of secondary steel-processing complex
ММК is one of ten premium quality producers of thick plates worldwide (in China, Germany, France, Russia and Japan) which are able to manufacture comparable thick plate Specifications Launch 2009 Capacity, mln tpy 1.5 Width, mm up to 4,800 Thickness, mm 8-160 Rolling force, tons 12 000 Length, m 24 Strength class up to Х120
Plate Mill 5000
Future Use of Mill 5,000 Products
- Cooperation agreement with Gazprom
- Strategic cooperation agreement with TMK
- Cooperation agreement with ChTPZ
- Government asked pipemakers to reduce share of imported plate
12
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 000 2 000 3 000 4 000 5 000 6 000 2008 2009 2010Е 2011Е 2012Е 2013Е 2014Е 2015Е
Mill 5,000 products Other Ship building Boiler building Bridge building LDP MMK, % of domestic market
’000 tons
Use of Thick Plate in Russia by Sector
Source: pipe-producers’ estimates, ММК
Agreements
MMK 44% Import 17% Other 39%
Mill 5000 - Strengthening Positions in Pipe Sector
Growth in LDP Consumption in Russia
(1,000) (500) 500 1,000 1,500 2,000 2,500 3,000 3,500 2002 2003 2004 2005 2006 2007 2008 2009 2010Е 2011Е 2015Е Production of LDP LDP imports LDP exports Apparent consumption of LDP in Russia
‘000 ton
Key Steel Suppliers to Pipe-builders in Russia
Total: 2.415 kt 1H2010
500 1 000 1 500 2 000 2 500 2009 2010Е
Export Gazprom, Transneft, other BTS-2 VSTO-2 Sakhalin-Khabarovsk- Vladivostok Yamal Europe Nord Stream
Use of LDP Produced in Russia by Project
Source: MMK Source: pipe-producers’ estimates, MMK
13
Geography of Main Pipelines
BTS-2 VSTO-2 Sakhalin-Khabarovsk-Vladivostok Yamal-Europe Nord Stream
Source: pipe producers’ estimates, ММК
Russia
Source: MMK
1 846 2 312
Укрепление позиций в автопроме
Strengthening Position in Auto Industry
Capacity, ’000 tpy 2,000 Width, mm 850-1,880 Thickness, mm 0.28 – 3.0 Steel grades HSLA, IF-HSS, BH, biphase, monophase, ТRIP Key Mill 2,000 specifications Key equipment supplier - SMS Demag
Mill 2,000 Complex
14
Production volumes:
- 700,000 tpy of galvanized steel annealed
- 400,000 tpy cold-rolled (after annealing) products
- 900,000 tpy unannealed products
Key customers:
- Carmakers
- White goods
575 522 447 424 384 233 215 112 89 20 11
100 200 300 400 500 600
Private Car Ownership
Private car ownership, vehicles per 1,000 people
Russian Vehicle Fleet by Age
Source: AUTO-Consulting, 2010 Source: Rosstat, 2009
33% 44% 23%
less than 10 yrs more than 10 yrs more than 20 yrs
1 037 3 388 1 515 4 559
1 000 2 000 3 000 4 000 5 000
2009 2010 2011 2012 2013 2014 2015 2020 All vehicle types output, th.pieces Steel consumption by car-makers 12% 13% 60% 15% Volga federal region North-w est federal region Central federal region Other
Укрепление позиций в автопроме
Mill 2000 Cold Rolled Steel Complex
High Strength Steels Use Cold-Rolled Automotive Steel Consumption in Russia*
15
Source: ММК
Car-making Projects in Russia by 2015E Steel Consumption Forecast by Auto-makers in Russia
Source: MMK Source: World Steel Association Source: boronextrication.com
Mild Steel
30,8%
UHSS
9,1% 500 1 000 1 500 2 000 2 500 3 000 2010 2015 2020
UHSS (MS, TWIP, HS) HSS (IF - HS, MA, BH, HSLA) AHSS (DP, CP, TRIP) Mild Steel (03-10, IF, IS)
25%
700 1 290 2 451
High strength steel types to reach 60% in overall consumption ≈ 60% by 2020
60%
49% * Data for motor cars only
HSS 44,5% AHSS
15,6%
Выход на быстрорастущий рынок Турции
Locations of Key Markets
Source: TUIK – Turkish Institute of Statistics
Entry to Rapidly Growing Turkish Market
Istanbul Iskenderun
Flat Steel Market in Turkey, mln tons Turkish Flat Steel Market Structure
Source: ING
6% 12% 13% 28% 18% 13% 7%
Pipe production Metal Service Centers Spot sales Auto industry Packaging Boiler making Other
Europe Middle East Africa
16
Priority export markets Important export markets
8,9 10,1 10,9 10,3 7,8 8,5 8,7 9,3 10,4
- 5,1
- 6,0
- 6,6
- 5,8
- 3,2
- 2,6
11,1 9,7 10,8 4,6 4,5 4,3 4,1 3,8 5,9 7,5 8,5
- 0,7
- 1,2
- 0,8
- 0,3
- 8,0
- 4,0
0,0 4,0 8,0 12,0 2005 2006 2007 2008 2009 2010Е 2011Е 2012Е 2013Е 2014Е Consumption Production Balance
Schedule of MMK-Atakash Project and Construction Costs
- Announcement on the realization of the joint venture
Total construction expenses: $1,175 mln
2007 2008 2009 2010 2011 2012
- Launch of metal service center
- Launch of hot galvanizing line
- Launch of etching line
- Launch of reverse mill
- Launch of polymer coating line
- Launch of metals service center
- Launch of galvanized line
- Launch of color-coating line
Iskenderun Istanbul
Source: MMK estimates
$100 mln $195 mln $265 mln $572 mln $43 mln
- Launch of mill for hot rolled coil and
steel production Project highlights
17
Start of production – 2010 Ramp up to reach full capacity - 2012 Project CAPEX – USD 1.7 bn Main production site – near Iskenderun (2.3 mtpa) 2 service centres: Iskenderun, Istanbul Product types: HRC, galvanized & colour-coated steel
Belovskaya Concentration Plant
Source: MMK estimates
Steam Coal Segment Coking Coal Segment
Source: MMK estimates
MMK owns 82.6% of Belon
Belon Coal Company
‘000 tons ‘000 tons
18
Belon development programme will result in:
- increase in coking coal production to 6.8 mln tons by 2013
- increase in coal concentrate production to 4.3 mln tons by
2013 Advantages of the deal for MMK:
- Guaranteed supplies of deficit high grade coking coal
- Stable chemical properties of coal used in steelmaking
process, lower consumption of coke
- Natural hedge against rising coal prices
Following the growth strategy Belon acquired license to develop Nikitinsky site with 200 mln reserves of rare “Zh” grade coals in June 2010
Uch. Erunakovsky-2 84 Novobachtsky Slit (KC) 10 Chertinskaya- Koksovaya (Zh) 43 Listviazhnaya (DR) 260 Prisalairskaya stripe 11 Kostomov- skaya (Zh) 156 Chertinskaya- Yuzhnaya (2h) 66
Novobachatsky vent
- Uch. Erunakovsky
Chertinskaya-Yuzhnaya mine TsOF Belovskaya Chertinskaya-Koksovaya mine Listvyazhnaya mine Kostromovskaya mine OF Listvyazhnaya
Kemerovo
Belovo
Compact location (with a 60 km radius) secures effective management and logistics
- Securing the delivery of the necessary volumes of coking and steam coal.
- Stability in the coal mixture content, reduction in coking coal expenses.
- Natural hedging of MMK financials from changes in coal concentrate
prices. Synergies for MMK
Coking coal mine Steam coal mine Concentration plant Transport distance – 2,125
Coal Reserves, mln tons
Total: 630 mln tons
Structure of OAO Belon
Coking coal segment
Extraction
2008 - 3,082,000 tons 2009 - 3,404,000 tons
Processing
2008 - 4,977,000 tons 2009 - 4,892,000 tons
Extraction
2008 – 2,449,000 tons 2009 – 2,460,000 tons
Processing
2008 – 2,812,000 tons 2009 – 3,082,000 tons
Steam coal segment
19
- Uch. Nikitinsky
Geography of Belon Assets
2Q10 1Q10 2009 2008 2007 Crude steel output, kt 2 984 2 732 9 618 11 957 13 261 Finished steel, kt 2 623 2 453 8 764 10 911 12 203 Revenues, $ mln 2 068 1 652 5 081 10 550 8 197 EBITDA, $ mln 437 374 1 285 2 204 2 407 EBITDA margin, % 21% 22,6% 25% 21% 29% Net profit, $ mln 53 94 219 1 081 1 306 Net margin, % 3% 6% 4% 10% 16% Assets, $ mln 15 594 15 822 14 833 14 197 15 887 Credit & loans, $ mln 2 880 2 438 2 118 1 726 1 454 short-term* 931 866 828 1 295 1 224 long-term* 1 949 1 572 1 290 431 230 Shareholder capital, $ mln 9 673 10 415 9 957 9 663 11 634 Cash, $ mln 220 173 165 1 106 256
5 081 10 550 8 197 1 285 2 204 2 407 219 1 081 1 306
2 000 4 000 6 000 8 000 10 000 12 000 2007 2008 2009 Revenues EBITDA Net profit
Key Indicators Trends Key Indicators
Source: Company
$ mln
* includes leasing Source: Company. 2006-2007 financials under US GAAP, starting from 2008 – under IFRS
Financials
20
100 213 309 437 2 068 1 404 1 038 965 1 652 1 674 374 670 53 76 59
- 110
94 219
- 500
500 1 000 1 500 2 000 2 500
1Q09 2Q09 3Q09 4Q09 1Q10 2Q2010 Rev enues EBITDA Net prof it
BB, outlook positive (outlook changed from “stable” on Sep 17, 2010) Ba3, outlook positive (outlook changed from “stable” on July 22, 2010)
MMK credit ratings
$ mln
21
ENRC
Investment Highlights
21
- Key beneficiary of steel market recovery – more than 60% production growth
within next 4 years
- Growing volumes and share of HVA products (50% by 2014) to secure
sustainably high efficiency
- Focus on specialty steel products to replace imports in Russia and to enjoy
domestic market price premium
- Access to lucrative Turkish flat steel market with high-quality steel products
- Emphasized direct exposure to growing industry sectors in the domestic
market – pipe-building, automotive and heavy machinery industries
- Technological flexibility to address raw-material market fluctuations – crude
steel production using iron ore/coking coal vs. scrap
- Strong balance to secure further growth
- Plans for further strengthening in commodities
Appendices
MAGNITOGORSK STEEL
811 1 161 1 447 1 154 1,61 1,17 2,57 4,13 2 4 6 8 10 500 1000 1500 ММК NLМК Severstal Evraz
EBITDA Debt/EBITDA
616 207 484 630 624 100 200 300 400 500 600 700 2011 2012 2013 2014 2015 и далее 931 575 989 1 756 1 966 5 303 6 180 1 949 1 122 2 660 4 287 7 261 1000 2000 3000 4000 5000 6000 7000 8000 9000
MMK NLMK Sev erstal Ev raz
$ mln
Short-term debt Long-term debt Net debt
Показатели Группы ММК в сравнении с конкурентами
Steel Companies’ Debt Loads Debt/EBITDA
MMK Group Indicators Compared to its Competitors
23 At 1 July 2010
Maturity of Long-term Borrowings
$ mln
Source: Company data, 6 months 2010 Source: Company data, 6 months 2010
$ mln
Source: MMK
400 1 224 1 295 828 931 606 230 431 1 290 1 949
500 1 000 1 500 2 000 2 500 3 000 3 500 2006 2007 2008 2009 1H2010 Short-term debt Long-term debt
Debt Structure by Maturity
$ mln
At 1 July 2010
MMK-Atakas Production Plan
Total Production, ‘000 tons per year Production Capacity, ‘000 tons per year
Source: MMK estimates
24 Total: 2 252 kt
100 60 HR galvanized Polymers in sheets Hot Rolled Coil Mill 2,317 Pickling Aggregate 1,165 Cold Rolled Coil mill 759 Galvanizing Line 867 636 460 300 196 Galvanized coil Color-coating line 403 160 340 2,252 Galvanized coil Polymers In coil 1,096 300 456 400 Hot rolled coil Hot rolled sheet HR pickled coil coil
20% 62% 18%
Hotrolled steel Galvanized flat products Color-coated rolled products
Finished Products Structure
Question Answer How much is MMK vertically integrated? MMK has been most active in increasing its vertical integration in the last 12 months. Iron ore: MMK is 100% covered with stable supplies of iron ore. 30% comes from captive sources (up from 20% in 2008), 70% comes under 10-year agreement with ENRC (till 2017). Options for the development of Prioskol deposit Coking coal: through acquisition of Belon MMK has covered 50% of its requirement of coking coal to bring up the self-coverage rate up to 80% by 2013 through the development of Belon asset base Scrap: MMK owns the largest scrap collector in Russia – 100% self-sufficiency in scrap Electricity: 85% self-sufficiency. What are growth plans of MMK in terms
- f volumes?
MMK presents highest growth bid among Russian steel names through existing leverage, organic growth and expansion projects – more than 60% by 2014. How would you assess MMK corporate governance standards? MMK pursues best corporate governance and disclosure practices (recognized by S&P as #3 in Russia for 2009). Half of the Board members are independent. 4 BoD committees are in place, HR & Remuneration Committee and Audit Committee are built entirely of independent directors. Why does MMK focus its development strategy on the domestic market? Domestic market suggests price premiums and best growth prospects. It is a privilege for MMK to be able to maintain high domestic sales volumes. It took a decade of technical overhaul to turn from a mere exporter (63% of overall production in 1999 was exported) to a key supplier to the domestic pipe industry, heavy engineering and automotive industry (domestic shipments stood at 65% in H1 2010). How much can MMK benefit from infrastructure and construction recovery? Besides indisputably high exposure to infrastructure and corporate spending in Russia due to high quality flat steel products (currently MMK supplies to construction of all the pipe-line projects of Gazprom and Transneft), MMK has the most modern in Europe facilities to produce 2 mtpy of the widest possible range
- f long steel products.
What are MMK exporting abilities? MMK historically exported around 4.7 mtpa on average to customers in more than 60 countries. Given weaker demand in international markets this year the Company plans to export 3,6 mt in 2010. In terms of global expansion MMK finalizes its MMK-Atakas project in Turkey to produce 2.3 mtpa of finished steel goods in order to increase shipments to MMK key export region – Middle East – and get bigger exposure to the EU market.
Key Q&A
25
Contacts
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- THIS INFORMATION DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES TO BE SOLD IN RUSSIA, THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF
1933,AS AMENDED, AND MAY NOT BE OFFERED OR SOLD INTO THE UNITED STATES EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT, OR NOT REQUIRED TO BE REGISTERED THERE UNDER, OR PURSUANT TO AND EXEMPTION FROM REGISTRATION REQUIREMENTS THEREOF. NO OFFERING OF SECURITIES IS BEING MADE INTO THE UNITED STATES. NO SECURITIES WILL BE REGISTERED UNDER THE APPLICABLE SECURITIES ACT OF ANY STATE OR TERRITORIAL ENTITY OF CANADA AND JAPAN. THIS PRESENTATION IS NOT SUBJECT TO MAILING, TRANSFERRING OR OTHER TYPE OF DISTRIBUTION IN THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, OR TO THE TERRITORY OR FROM THE TERRITORY OF THE SPECIFIED COUNTRIES TO THE NAME OF ANY ANALYST IN THE SPHERE OF SECURITIES OR OTHER PERSON IN ANY OF THE SPECIFIED JURISDICTIONS. YOU AGREE TO AVOID FROM DISTRIBUTION OF ANY REPORT RESULTING FROM THE SURVEY OR SIMILAR DOCUMENTS ON THE TERRITORY OF THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND JAPAN, SAVE AS IN ACCORDANCE WITH THE FEDERAL LAWS OF THE UNITED STATES ON SECURITIES INCLUDING SECURITIES ACT, AS WELL AS THE APPLICABLE LAWS OF CANADA, AUSTRALIA AND JAPAN, ACCORDINGLY.
- THIS PRESENTATION INCLUDES THE STATEMENTS RELATED TO THE FUTURE, WHICH REPRODUCE THE INTENTIONS, OPINIONS AND CURRENT EXPECTATIONS OF THE COMPANY. THE STATEMENTS FOR THE FUTURE INCLUDE ANYTHING, WHICH IS NOT A FACT
- OCCURED. THE COMPANY TRIED TO HIGHLIGHT SUCH STATEMENTS RELATED TO THE FUTURE BY MEANS OF THE WORDS, SUCH AS “MAY”, “WILL”, “SHOULD”, “EXPECT”, “INTEND”, “EVALUATE”, “ASSUME”, “PLAN”, “TO HAVE AN OPINION”, “TRY”, “FORECAST”,
“CONTINUE” AND SIMILAR WORDS OR THEIR NEGATIVE FORMS. SUCH STATEMENTS HAD BEEN DONE BASING ON THE ASSUMPTIONS AND ASSESSMENTS, WHICH MAY OCCUR FAULTY, THOUGH THE COMPANY CONSIDERS THEM REASONABLE AT THE CURRENT MOMENT.
- SUCH STATEMENTS RELATED TO THE FUTURE ARE LINKED TO THE RISKS, UNCERTAINTIES AND ASSUMPTIONS, AS WELL AS TO OTHER FACTORS, WHICH MAY LEAD TO THE EVENT THAT ACTUAL RESULTS OF THE COMPANY’S ACTIVITY AND ACTIVITY OF THE
MARKETS, ON WHICH IT OPERATES OR INTENDS TO OPERATE IN, THEIR FINANCIAL STATUS, LIQUIDITY, CHARACTERISTICS, PROSPECTS AND ABILITIES COUILD MATERIALLY DIFFER FROM THOSE, WHICH ARE EXPRESSED WITH THE HELP OF SUCH STATEMENTS RELATED TO THE FUTURE. THE IMPORTANT FACTORS, WHICH MAY RESULT IN SUCH DIFFERENCES, INCLUDE, INTER ALIA, CHANGING BUSINESS CONDITIONS AND OTHER MARKET CONDITIONS, COMMON ECONOMIC CONDITIONS IN RUSSIA, EU COUNTRIES, THE UNITED STATES OF AMERICA OR ANYWHERE ELSE, AS WELL AS THE ABILITY OF THE COMPANY TO MEET THE TRENDS IN THE INDUSTRY. THE MATERIAL DIFFERENCE OF THE ACTUAL RESULTS, FEATURES AND ACHIEVEMENTS MAY BE THE RESULT OF ADDITIONAL FACTORS. THE COMPANY AND ALL ITS DIRECTORS, OFFICERS, EMPLOYEES AND ADVISORS HEREWITH STATE THAT THEY ARE NOT OBLIGED TO ISSUE ANY UPDATE OF OR REVISE ANY STATEMENTS RELATED TO THE FUTURE CONTAINED HEREIN, OR DISCLOSE ANY CHANGES IN THE FORECASTS OF THE COMPANY OR EVENTS, CONDITIONS AND CIRCUMSTANCES, WHICH SUCH STATEMENTS RELATED TO THE FUTURE ARE BASED ON, SAVE AS IN THE CASES PROVIDED FOR BY THE APPLICABLE LAWS.
- RECEIPT OF ANY COPY OF THIS INFORMATION TESTIFIES THE ACCEPTANCE OF THE ABOVE LIMITATIONS.
Disclaimer
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GDR Depositary - BNY Mellon Contact person at the depositary Ludmila Leliavskaia Vice President Tel 212.815.4493 ludmila.leliavskaia@bnymellon.com MMK (Magnitogorsk Iron & Steel works) Ordinary shares listed at MICEX and RTS in June 2006. GDRs listed at LSE in April 2007 ISIN / СUSIP US5591892048/559189105 Evgeny Kovtunov Head of IR Tel +7 (3519) 24 93 55 kovtunov@mmk.ru Mobile +7 909 747 99 00 www.mmk.ru Contacts at MMK Tickers MICEX, RTS: MAGN LSE: MMK Bloomberg: MMK:LI Dmitry Usanov Director for Capital Markets Tel +7 (495) 662 35 52 usanov@mmk.ru Mobile +7 985 998 75 61 www.mmk.ru