Q2 2008 Business and Financial Performance September 1, 2008 - - PowerPoint PPT Presentation

ZŁOMREX S.A.

Q2 2008 Business and Financial Performance

September 1, 2008

2

Content

• 1. Introduction
• 2. Business overview
• 3. Financials
• 4. Q2 2008 outlook
• 5. Q&A

ZŁOMREX S.A.

Introduction

Section 1

4

Krzysztof Walarowski Member of the Board Age – 51 4 yrs with Złomrex Krzysztof Zola CFO Age – 35 6 yrs with Złomrex

Introduction

Speakers

5

Introduction

Q2 2008 Highlights

• Very good market conditions; record breaking sales and financial results,

much over the budget.

• Work on restructuring of Distribution Division and Zeljezara Split.
• Management of short-term financing.
• GDP growth of 5,6% in Poland
• Steel consumption decline by 9% in Poland after extremely strong Q2 2007

when it went up by 31% YoY.

• Sharp increase of scrap prices – by 47% and product prices by 10-15% YoY.

6

Introduction

Q2 2008 Highlights

10,3% 7,5% 9,0% EBITDA margin 51 615 73 391 112 167 EBITDA

• 8 939
• 17 543
• 18 892

Depreciation and amortization 27 354 35 479 68 504 Profit for the period

• 7 431
• 11 417
• 16 626

Income tax expense 34 785 46 896 85 130 Profit before tax 1 132 793 Excess in the net fair value of acquired assets over cost

• 7 891
• 10 084
• 8 938

Net financing costs

• 10 121
• 35 430
• 38 754

Financial expenses 2 230 25 346 29 816 Financial income 8,6% 5,7% 7,5% EBIT margin 42 676 55 848 93 275 EBIT

• 3 607
• 4 266
• 10 357

Other expenses

• 17 990
• 39 338
• 42 797

Administrative expenses

• 6 917
• 36 134
• 46 353

Distribution expenses 1 412 4 708 7 884 Other income 69 778 130 878 184 898 Gross profit

• 429 026
• 849 652
• 1 063 161

Cost of sales 498 804 980 530 1 248 059 Revenue '000 PLN Q2 2006 Q2 2007 Q2 2008 INCOME STATEMENT

ZŁOMREX S.A.

Business overview

Section 2

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Business overview

Business environment

(1) Source: IISI (2) Source: HIPH (3) Source: ZŁOMREX S.A.

311,7 332,3 7% 355,3 Global 53,6 54,0

• 1%

53,2 EU (25) 2,5 2,8 0% 2,8 Poland million tones Q2 2006 Q2 2007 % YoY Q2 2008 CRUDE STEEL PRODUCTION (1) 0,212

• 2%

0,207

• ther

0,962

• 2%

0,946 flat products 0,944

• 18%

0,772 long products 2,118

• 9%

1,925 Poland million tonnes Q2 2007 % YoY Q2 2008 STEEL USE (April-May)(2) 1 826 2 144 8% 2 310 Bars 1 457 1 775 14% 2 022 Billets 703 808 47% 1 186 Scrap metal PLN / Tone Q2 2006 Q2 2007 % YoY Q2 2008 UNIT PRICES(3)

9

Business overview

Q2 2008 performance drivers

249 626 71 127 29 554 41 573 287 400 358 527 FINISHED PRODUCTS 45 466 1 373 1 373 42 273 43 646 BILLETS 60 111 690 690 58 380 59 070 SCRAP Tones TOTAL ZJEL STX REPORTED NEW ACQUISITIONS’ CONTRIBUTION HISTORICAL ZLOMREX REPORTED Q2 2007 Q2 2008 SALES 108 716 1 879 1 879 79 573 81 452 OTHER 743 467 164 360 66 057 98 303 838 870 1 003 230 FINISHED PRODUCTS 79 892 2 797 2 797 91 198 93 995 BILLETS 48 455 692 692 68 690 69 382 SCRAP 000 PLN TOTAL ZJEL STX REPORTED NEW ACQUISITIONS’ CONTRIBUTION HISTORICAL ZLOMREX REPORTED Q2 2007 Q2 2008 SALES

10

Business overview

Segments

48 455 69 382 TOTAL SALES in '000 PLN 60 111 59 070 TOTAL SALES in TONNES 175 382 216 695 TOTAL INTERNAL USE in TONNES 238 993 288 346 TOTAL PURCHASES in TONNES 48 455 69 382 CONSOLIDATED SALES ('000 PLN) 78 909 OTHER N/C 58 161 ZLMET 60 033 ZLOM SALES TO EXTERNAL CUSTOMERS (Tones) N/C 32 427 ZJEL 71 412 69 061 HSJ N/C ZLMET 103 970 115 207 ZLOM INTERNAL USE (Tones) OTHER N/C 37 678 ZJEL 50 366 60 963 HSJ N/C 189 705 ZLMET 188 627 ZLOM PURCHASES FROM EXTERNAL SUPPLIERS (Tones) Q2 2007 Q2 2008 SCRAP METAL

11

Business overview

Segments

79 892 93 995 TOTAL SALES in '000 PLN 45 466 43 646 TOTAL SALES in TONNES 127 290 157 876 TOTAL INTERNAL USE in TONNES 152 983 188 777 TOTAL PRODUCTION in TONNES 19 773 12 745 TOTAL PURCHASES in TONNES 79 892 93 995 CONSOLIDATED SALES ('000 PLN) N/C ZJEL N/C 1 373 STX 2 516 1 327 HSJ FERR 42 950 40 946 ZLOM SALES TO EXTERNAL CUSTOMERS N/C 27 704 ZJEL 59 547 58 155 HSJ 67 743 72 017 ZLOM INTERNAL USE (Tones) N/C 27 704 ZJEL 62 063 59 482 HSJ 90 920 101 591 FERR PRODUCTION (Tones) 19 773 12 745 EXTERNAL SOURCES PURCHASES (Tones) Q2 2007 Q2 2008 BILLETS

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Business overview

Segments

743 467 1 003 230 TOTAL SALES in '000 PLN 132 000 186 650 TOTAL BULK PRODUCT SALES in TONNES 117 626 171 877 TOTAL RETAIL SALES in TONNES 97 641 147 275 TOTAL PRODUCTION in TONNES 743 467 1 003 230 SALES ('000 PLN) 3 680 1 608 OTHER retail 124 824 145 908 VASTH retail + bulk product N/C 41 573 STX retail + bulk product 11 045 12 411 COPO retail + bulk product 6 875 14 287 CGÓR retail + bulk product 16 454 17 557 CDG retail + bulk product N/C 29 554 ZJEL 45 184 47 791 HSJ 41 564 47 838 ZLOM SALES TO EXTERNAL CUSTOMERS (Tones) 2 134 1 904 HSJ 10 235 13 645 ZLOM SALES OF PRODUCTION TO DISTIBUTION (Tones) N/C 34 278 ZJEL 50 185 52 221 HSJ 25 380 23 122 FERR 22 076 37 654 ZWWB PRODUCTION (Tones) Q2 2007 Q2 2008 FINISHED PRODUCTS

ZŁOMREX S.A.

Financials

Section 3

14

Financials

P&L

5,4%

• 3,0%

8,3% 11,5% 9,0% EBITDA margin

• 528

3 787

• 3 428

35 528 76 808 112 167 EBITDA

• 541
• 1 337
• 1 428
• 3 129
• 12 457
• 18 892

Depreciation and amortization

• 9 133
• 443
• 6 031

28 303 55 808 68 504 Profit for the period 240

• 39
• 5 420
• 11 407
• 16 626

Income tax expense

• 9 373
• 443
• 5 992

33 723 67 215 85 130 Profit before tax 793 793 Excess in the net fair value of assets over cost

• 8 304
• 2 893
• 1 136

531 2 864

• 8 938

Net financing costs 5 053

• 2 487
• 2 802
• 6 170
• 32 348
• 38 754

Financial expenses

• 13 357
• 406

1 666 6 701 35 212 29 816 Financial income 3,5%

• 4,2%

7,6% 9,7% 7,5% EBIT margin

• 1 069

2 450

• 4 856

32 399 64 351 93 275 EBIT

• 1 159
• 2 553
• 1 063
• 5 582
• 10 357

Other expenses

• 756
• 3 172
• 8 100
• 7 890
• 22 879
• 42 797

Administrative expenses

• 629
• 3 784
• 29 625
• 12 315
• 46 353

Distribution expenses 579 595 1 449 5 261 7 884 Other income

• 313

6 831 8 986 69 528 99 866 184 898 Gross profit 29 705

• 62 768
• 105 635
• 357 618
• 566 845
• 1 063 161

Cost of sales

• 30 018

69 599 114 621 427 146 666 711 1 248 059 Revenue '000 PLN ELININ ZJEL STX VASTH ZLX HIST REPORTED INCOME STATEMENT Q2 2008

15

Financials

Assets

2 202 370 2 636 128 2 740 753 TOTAL ASSETS 603 5 996 5 996

• IV. Assets classified as held for sale

147 922 88 072 35 138

• III. Cash and cash equivalents

543 026 647 760 722 424

• II. Trade and other receivables

695 848 687 781 775 174

• I. Inventories

1 387 399 1 429 609 1 538 732

• B. TOTAL CURRENT ASSETS

10 399 22 330 20 870

• V. Deferred tax assets

18 299 22 813 28 217

• IV. Investment property and other investments

1 988 2 992 9 318

• III. Other receivables

752 819 1 113 788 1 099 609

• II. Property, plant and equipment and usufruct of land

31 466 44 596 44 007

• I. Intangible assets

814 971 1 206 519 1 202 021

• A. TOTAL NON-CURRENT ASSETS

'000 PLN Q2 2007 Q1 2008 Q2 2008 ASSETS

16

Financials

Equity and Liabilities

2 202 370 2 636 128 2 740 753 TOTAL EQUITY AND LIABILITIES 246 496 5 673

• 7. Deferred grants and other deferred income

455 403 650 070 761 346

• 6. Trade and other payables

13 983 3 018 1 945

• 5. Provisions for payables

12 147 18 498 14 346

• 4. Income tax payable

8 240 3 139 3 161

• 3. Employee benefits

4 876 7 936 12 895

• 2. Other financial liabilities

254 353 441 356 415 227

• 1. Interest-bearing loans and borrowings

749 248 1 124 513 1 214 593

• II. Current liabilities

35 344 66 735 65 948

• 5. Deferred tax liabilities

2 267 2 877 2 985

• 4. Deferred grants and other deferred income

28 581 44 074 37 390

• 3. Other payables

39 444 46 471 45 516

• 2. Employee benefits

777 190 652 510 630 361

• 1. Interest-bearing loans and borrowings

882 826 812 667 782 200

• I. Non-current liabilities

1 632 074 1 937 180 1 996 793

• B. LIABILITIES

140 299 147 059 144 307

• III. Minority interest

382 306 504 198 551 962

• II. Reserves and retained earnings

47 691 47 691 47 691

• I. Issued share capital

570 296 698 948 743 960

• A. EQUITY

'000 PLN Q2 2007 Q1 2008 Q2 2008 EQUITY AND LIABILITIES

17

Financials

Cash Flow

• 5 106

99 403

• 28 987
• C. FROM FINANCING ACTIVITIES
• 24 829
• 31 816
• 32 042
• B. FROM INVESTING ACTIVITIES

42 787

• 14 655

26 032

• A. FROM OPERATING ACTIVITIES

'000 PLN Q2 2006 Q2 2007 Q2 2008 CASH FLOW

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Financials

Metrics

4,7 5,1 4,5 Net debt / LTM pro forma EBITDA 200 491 197 971 227 572 LTM pro forma EBITDA 4,4 4,8 4,1 Net debt / LTM EBITDA 216 759 212 403 250 343 LTM EBITDA 156 478 144 273 181 700 LTM EBIT 943 351 1 013 730 1 023 345 Net debt 263 416 88 072 35 138 Cash 1 206 767 1 101 802 1 058 483 Debt 689 568 698 948 743 960 Equity 6,1% 1,3% 5,5% Net profit margin 6,4% 5,8% 9,0% EBITDA margin 56 55 52 Receivables turnover (days) 86 66 66 Inventories turnover (days) 0,68 0,66 0,63 Quick ratio 1,28 1,27 1,27 Liquidity ratio Y 2007 Q1 2008 Q2 2008 MAIN METRICKS 6,1 5,8 5,0 Moody's adjusted net debt / LTM pro forma EBITDA 5,6 5,4 4,6 Moody's adjusted net debt / LTM EBITDA 1 217 265 1 154 943 1 144 858 Moody's adjusted net debt 49 610 49 610 48 677 Pensions & other employee benefits 37 791 36 150 33 000 HSJ deferred payment 139 748 13 579 STX purchase price payment 23 141 20 719 19 711 VASTH put / call option 23 624 21 155 20 125 deferred payment for VASTH Y 2007 Q1 2008 Q2 2008 PROFORMA AND OTHER METRICKS

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Financials

Q2 2008 v. Budget

1 195 927 1 144 858 Moody's adjusted net debt 1 071 099 1 023 345 net debt

• 10 000
• 19 096

CAPEX 803 700 768 977 Working capital 48 313 68 504 net profit 95 000 112 167 EBITDA 1 224 683 1 248 059 Revenues '000 PLN BUDGETED REPORTED Q2 2008

• Złomrex will consider increase of 2008 forecast by the end of October in case of possibility
• f substantial excess in realization of main budget items.

ZŁOMREX S.A.

Q3 2008 Outlook

Section 4

21

Q3 2008 outlook

• Polish GDP growth lower at around 5%
• Decrease in Polish steel consumption in comparison to Q2 2008 increase in comparison to

Q3 2007

• Decrease in scrap and product prices
• Good profitability, especially by Production Division

994 975 1 231 053 1 195 927 1 165 604 Moody's adjusted net debt

• 70 000
• 30 000
• 20 000
• 10 000
• 10 000

CAPEX

• 90 938
• 5 840
• 33 447
• 16 003
• 35 647

Net interest expenses 110 486 222 933

• 64 127
• 87 241

38 920 Working capital change 644 893 867 826 803 700 716 459 Working capital 107 656 24 063 30 208 48 313 5 072 net profit

• 26 914
• 6 016
• 7 552
• 12 078
• 1 268

Income tax payment 134 570 30 078 37 760 60 391 6 340 profit before tax 300 000 55 000 90 000 95 000 60 000 EBITDA 4 623 182 1 062 352 1 327 983 1 224 683 1 008 164 Revenues '000 PLN TOTAL Q4 2008 Q3 2008 Q2 2008 Q1 2008 BUDGET SUMMARY

ZŁOMREX S.A.

Q&A

Section 4