Q3 2008 Business and Financial Performance December 12, 2008 - - PowerPoint PPT Presentation

ZŁOMREX S.A.

Q3 2008 Business and Financial Performance

December 12, 2008

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Content

• 1. Introduction
• 2. Business overview
• 3. Financials
• 4. Q4 2008 outlook
• 5. Q&A

ZŁOMREX S.A.

Introduction

Section 1

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Krzysztof Walarowski Commercial Director Member of the Board Age – 51 4 yrs with Złomrex Krzysztof Zola CFO

Member of the Board

Age – 35 6 yrs with Złomrex

Introduction

Speakers Dominik Barszcz Chief Accountant Age - 32 8 yrs with Złomrex

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Introduction

Q3 2008 Highlights

• Fair market conditions; good sales and financial results, however slightly

below the budget.

• Further work on restructuring of Distribution Division and Zeljezara Split.
• Management of short-term financing.
• GDP growth of 4,8% in Poland
• Total Polish steel consumption at the level of Q3 2007 but long products down

by 11%.

• Sharp demand and prices collapse starting September 2008.

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Introduction

Q3 2008 Highlights

11,4% 5,4% 7,1% EBITDA margin 64 007 51 506 81 335 EBITDA

• 9 044
• 14 710
• 19 478

Depreciation and amortization 44 053 15 726 20 908 Profit for the period

• 8 890
• 1 320
• 8 352

Income tax expense 52 943 17 046 29 260 Profit before tax 5 894 1 590 17 Excess in the net fair value of acquired assets over cost

• 7 914
• 21 340
• 32 614

Net financing costs

• 9 839
• 20 423
• 32 034

Financial expenses 1 925

• 917
• 580

Financial income 9,8% 3,9% 5,4% EBIT margin 54 963 36 796 61 857 EBIT

• 1 812
• 4 883
• 6 430

Other expenses

• 20 560
• 38 158
• 45 194

Administrative expenses

• 9 097
• 35 942
• 45 597

Distribution expenses 933 1 267 4 003 Other income 85 499 114 512 155 075 Gross profit

• 475 693
• 836 703
• 996 623

Cost of sales 561 192 951 215 1 151 698 Revenue '000 PLN Q3 2006 Q3 2007 Q3 2008 INCOME STATEMENT

ZŁOMREX S.A.

Business overview

Section 2

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Business overview

Steel production

(1) Source: IISI (2) Source: HIPH

310,7 330,3 2% 337,2 Global 50,1 49,8 1% 50,4 EU (27) 2,7 2,6 4% 2,7 Poland million tones Q3 2006 Q3 2007 % YoY Q3 2008 CRUDE STEEL PRODUCTION (1) 1,5 1,3 12% 1,5 long products 1,2 1,1 8% 1,2 flat products 2,6 2,4 10% 2,7 Poland million tones Q3 2006 Q3 2007 % YoY Q3 2008 PRODUCTION OF FINISHED PRODUCTS (2)

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Business overview

Steel use

(1) Source: HIPH

0,33 0,26 2% 0,27

• ther

1,37 1,54 7% 1,66 flat products 1,13 1,04

• 11%

0,92 long products 2,84 2,85 0% 2,85 Poland million tones Q1 2006 Q2 2007 % YoY Q3 2008 STEEL USE (1) 0,16 0,08 0% 0,08

• ther

0,41 0,43 8% 0,47 flat products 0,41 0,41

• 28%

0,29 long products 0,97 0,92

• 9%

0,84 Poland million tones Sep-06 Sep-07 % YoY Sep-08 STEEL USE (1)

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Business overview

Prices

(1) Source: ZŁOMREX

2 009 1 977 29% 2 542 Bars 1 489 1 644 40% 2 301 Billets 763 763 40% 1 067 Scrap metal PLN / Tone Q3 2006 Q3 2007 % YoY Q3 2008 UNIT PRICES (1)

2008 Prices

803 835 858 1 024 1 231 1 275 1 180 1 081 928 711 1 525 1 595 1 674 1 714 2 107 2 284 2 305 2 338 2 203 1 890 1 816 1 993 2 036 2 179 2 254 2 491 2 569 2 642 2 403 2 051 500 1 000 1 500 2 000 2 500 3 000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Scrap metal Billets Bars

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Business overview

Q3 2008 performance drivers

262 192 57 170 20 093 37 077 229 007 286 177 FINISHED PRODUCTS 48 169 7 004 7 004 68 800 75 804 BILLETS 46 685 593 593 49 816 50 409 SCRAP Tones TOTAL ZJEL STX REPORTED NEW ACQUISITIONS’ CONTRIBUTION HISTORICAL ZLOMREX REPORTED Q3 2007 Q3 2008 SALES 99 336 1 191 1 191 70 900 72 091 OTHER 733 710 121 939 51 631 70 308 561 439 683 378 FINISHED PRODUCTS 83 113 18 034 18 034 165 049 183 083 BILLETS 35 056 580 580 54 010 54 590 SCRAP 000 PLN TOTAL ZJEL STX REPORTED NEW ACQUISITIONS’ CONTRIBUTION HISTORICAL ZLOMREX REPORTED Q3 2007 Q3 2008 SALES

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Business overview

Segments

35 056 54 590 TOTAL SALES in '000 PLN 46 685 50 409 TOTAL SALES in TONNES 179 923 219 393 TOTAL INTERNAL USE in TONNES 262 140 243 680 TOTAL PURCHASES in TONNES 35 056 54 590 CONSOLIDATED SALES (‘000 PLN) 443 961 OTHER 17 007 49 448 ZLMET 29 235 ZLOM SALES TO EXTERNAL CUSTOMERS (Tones) N/C 31 826 ZJEL 70 454 67 727 HSJ 39 728 ZLMET 109 469 80 112 ZLOM INTERNAL USE (Tones) OTHER N/C 29 670 ZJEL 46 767 52 430 HSJ 52 999 161 580 ZLMET 162 374 ZLOM PURCHASES FROM EXTERNAL SUPPLIERS (Tones) Q3 2007 Q3 2008 SCRAP METAL

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Business overview

Segments

83 113 183 083 TOTAL SALES in '000 PLN 48 169 75 804 TOTAL SALES in TONES 109 281 116 074 TOTAL INTERNAL USE in TONES 157 885 184 333 TOTAL PRODUCTION in TONES 8 098 TOTAL PURCHASES in TONES 83 113 183 083 CONSOLIDATED SALES (‘000 PLN) N/C ZJEL N/C 7 004 STX 3 156 11 271 HSJ 5 158 FERR 45 013 52 371 ZLOM SALES TO EXTERNAL CUSTOMERS (Tones) N/C 22 926 ZJEL 57 974 51 886 HSJ 15 060 FERR 51 307 26 202 ZLOM INTERNAL USE (Tones) N/C 26 327 ZJEL 61 130 58 334 HSJ 96 755 99 672 FERR PRODUCTION (Tones) 8 098 EXTERNAL SOURCES PURCHASES (Tones) Q3 2007 Q3 2008 BILLETS

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Business overview

Segments

733 710 683 378 TOTAL SALES in '000 PLN 134 462 140 381 TOTAL BULK PRODUCT SALES in TONES 127 730 145 796 TOTAL RETAIL SALES in TONES 93 932 112 142 TOTAL PRODUCTION in TONES 733 710 683 378 SALES ('000 PLN) 46 322 48 133 Bulk product 127 730 145 796 Retail DISTRIBUTION DIVISION (Tones) N/C 20 093 ZJEL 44 634 40 728 HSJ 9 438 FERR 477 1 943 ZLMET 43 029 20 046 ZLOM SALES TO EXTERNAL CUSTOMERS (Tones) N/C 1 256 ZJEL 2 753 1 352 HSJ 5 080 FERR 9 393 26 665 ZLOM SALES OF PROD. DIV. TO DISTR. DIV. (Tones) N/C 25 297 ZJEL 47 539 44 998 HSJ 14 607 11 832 FERR 31 786 30 015 ZWWB PRODUCTION (Tones) Q3 2007 Q3 2008 FINISHED PRODUCTS

ZŁOMREX S.A.

Financials

Section 3

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Financials

P&L

3,6% 5,1%

• 2,2%

9,9% 7,1% EBITDA margin 734 2 183 20 144

• 2 570

60 844 81 335 EBITDA

• 1 068
• 1 312
• 3 179
• 1 175
• 12 744
• 19 478

Depreciation and amortization

• 336
• 1 764

5 683

• 5 822

23 147 20 908 Profit for the period 121

• 1 218
• 66
• 7 189
• 8 352

Income tax expense

• 457
• 1 764

6 901

• 5 756

30 336 29 260 Profit before tax 17 17 Excess in the net fair value of assets over cost

• 123
• 2 635
• 10 081
• 2 011
• 17 764
• 32 614

Net financing costs 3 173

• 3 299
• 8 115
• 1 415
• 22 378
• 32 034

Financial expenses

• 3 296

664

• 1 966
• 596

4 614

• 580

Financial income 1,4% 4,3%

• 3,1%

7,8% 5,4% EBIT margin

• 334

871 16 965

• 3 745

48 100 61 857 EBIT

• 859
• 1 498

311

• 4 384
• 6 430

Other expenses

• 203
• 3 583
• 11 655
• 5 624
• 24 129
• 45 194

Administrative expenses

• 630
• 25 114
• 3 026
• 16 827
• 45 597

Distribution expenses 474 842

• 16

2 703 4 003 Other income

• 131

5 469 54 390 4 610 90 737 155 075 Gross profit 36 585

• 55 440
• 340 840
• 114 530
• 522 398
• 996 623

Cost of sales

• 36 716

60 909 395 230 119 140 613 135 1 151 698 Revenue '000 PLN ELIMIN ZJEL VASTH STX ZLX HIST REPORTED INCOME STATEMENT Q3 2008

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Financials

Assets

2 132 112 2 682 602 2 636 128 2 740 753 2 555 548 TOTAL ASSETS 603 5 996 5 996 5 996 5 996

• IV. Assets classified as held for sale

144 534 263 416 88 072 35 138 71 247

• III. Cash and cash equivalents

513 341 506 684 647 760 722 424 581 852

• II. Trade and other receivables

655 160 697 974 687 781 775 174 689 772

• I. Inventories

1 313 638 1 474 070 1 429 609 1 538 732 1 348 867

• B. TOTAL CURRENT ASSETS

16 474 22 472 22 330 20 870 18 965

• V. Deferred tax assets

23 029 22 292 22 813 28 217 28 842

• IV. Investment property and other investments

1 990 2 979 2 992 9 318 3 044

• III. Other receivables

718 849 1 114 816 1 113 788 1 099 609 1 111 319

• II. Property, plant and equipment

58 132 45 973 44 596 44 007 44 511

• I. Intangible assets

818 474 1 208 532 1 206 519 1 202 021 1 206 681

• A. TOTAL NON-CURRENT ASSETS

'000 PLN Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 ASSETS

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Financials

Equity and Liabilities

2 132 112 2 682 602 2 636 128 2 740 753 2 555 548 TOTAL EQUITY AND LIABILITIES 228 386 496 5 673 847

• 7. Deferred grants and other deferred income

453 072 575 379 650 070 761 346 633 336

• 6. Trade and other payables

3 955 3 018 1 945 1 465

• 5. Provisions for payables

20 482 17 858 18 498 14 346 7 613

• 4. Income tax payable

1 815 3 656 3 139 3 161 3 296

• 3. Employee benefits

4 786 7 858 7 936 12 895 9 960

• 2. Other financial liabilities

242 502 543 031 441 356 415 227 342 041

• 1. Interest-bearing loans and borrowings

722 885 1 152 123 1 124 513 1 214 593 998 558

• II. Current liabilities

22 879 66 408 66 735 65 948 67 256

• 5. Deferred tax liabilities

2 447 2 783 2 877 2 985 3 685

• 4. Deferred grants and other deferred income

26 054 69 544 44 074 37 390 35 275

• 3. Other payables

40 367 46 298 46 471 45 516 46 772

• 2. Employee benefits

754 755 655 878 652 510 630 361 637 350

• 1. Interest-bearing loans and borrowings

846 502 840 911 812 667 782 200 790 338

• I. Non-current liabilities

1 569 387 1 993 034 1 937 180 1 996 793 1 788 896

• B. LIABILITIES

135 754 148 023 147 059 144 307 143 159

• III. Minority interest

379 280 493 854 504 198 551 962 575 802

• II. Reserves and retained earnings

47 691 47 691 47 691 47 691 47 691

• I. Issued share capital

562 725 689 568 698 948 743 960 766 652

• A. EQUITY

'000 PLN Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 EQUITY AND LIABILITIES

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Financials

Cash Flow & Working Capital

• 9 701
• 48 352
• 28 987
• 74 153

From financing activities

• 11 293
• 32 401
• 32 042
• 22 166

From investing activities 30 094 87 076 26 032 200 864 From operating activities '000 PLN Q3 2006 Q3 2007 Q2 2008 Q3 2008 NET CASH 780 848 733 695 770 552 673 308 WORKING CAPITAL 423 810 601 846 727 046 598 316 Trade and other payables* 506 684 647 760 722 424 581 852 Trade and other receivables 697 974 687 781 775 174 689 772 Inventories '000 PLN Q4 2007 Q1 2008 Q2 2008 Q3 2008 WORKING CAPITAL

* adjusted for short term liabilities related to deferred payment for acquired entities

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Financials

Metrics

4,7 5,1 4,5 3,4 Net debt / LTM pro forma EBITDA 200 491 197 971 227 572 270 520 LTM pro forma EBITDA 4,4 4,8 4,1 3,3 Net debt / LTM EBITDA 216 759 212 403 250 343 280 799 LTM EBITDA 156 478 144 273 181 700 206 761 LTM EBIT 943 351 1 013 730 1 023 345 918 104 Net debt 263 416 88 072 35 138 71 247 Cash 1 206 767 1 101 802 1 058 483 989 351 Debt 689 568 698 948 743 960 766 652 Equity 6,1% 1,3% 5,5% 1,8% Net profit margin 6,4% 5,7% 9,0% 7,1% EBITDA margin 56 55 52 45 Receivables turnover (days) 86 66 66 62 Inventories turnover (days) 0,67 0,66 0,63 0,66 Quick ratio 1,28 1,27 1,27 1,35 Liquidity ratio Y 2007 Q1 2008 Q2 2008 Q3 2008 MAIN METRICKS 6,1 5,8 5,0 3,8 Adjusted net debt / LTM pro forma EBITDA 5,6 5,4 4,6 3,7 Adjusted net debt / LTM EBITDA 1 213 561 1 154 793 1 143 079 1 037 912 Adjusted net debt 49 954 49 610 48 677 50 068 Pensions & other employee benefits 68 687 43 229 36 757 34 720 Acquisition long term liabilities 151 569 48 224 34 300 35 020 Acquisition short term liabilities Y 2007 Q1 2008 Q2 2008 Q3 2008 PROFORMA AND OTHER METRICKS

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Financials

Q3 2008 v. Budget

1 231 053 1 037 912 Adjusted net debt 1 109 375 918 104 Net debt

• 20 000
• 21 029

CAPEX

• 33 447
• 37 865

Net interest expenses (cash-flow wise) 867 826 673 308 Working capital 30 208 20 908 Net profit 90 000 81 335 EBITDA 1 327 983 1 151 698 Revenues '000 PLN BUDGETED REPORTED Q3 2008

ZŁOMREX S.A.

Q4 2008 Outlook

Section 4

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Q4 2008 outlook

• Polish GDP below 4%
• Further decrease in Polish steel consumption in comparison to Q3 2008 and Q4 2007
• Sharp decrease in scrap and finished product prices
• Pressure on profitability due to inventory loses
• Q4 budgeted EBITDA will not be accomplished. This will result in 2008 EBITDA

underperformance

994 975 1 037 912 Aadjusted net debt 644 893 673 308 Working capital 107 656 102 710 net profit

• 26 914
• 33 310

Income tax 134 570 136 020 profit before tax 300 000 254 318 EBITDA 4 623 182 3 460 335 Revenues '000 PLN 2008 BUDGET Q1–Q3 2008 REPORTED BUDGET SUMMARY

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Q4 2008 outlook

Restructuring of STX and ZELJ

STX

• Introduction of purchasing platforms starting 1st of January 2009
• Further headcount reductions – up to 100 employees will leave the company in Q4 2008 and Q1 2009;
• Reduction of fab-shop capacities;
• Introduction of new motivation system
• Final court’s ruling on ZSS merger appeal
• Negative EBIDTA in 2008
• CONGNOR - introduction of new corporate identity for all distribution companies

ZELJ

• Problems with gas supplies; steel melting halted for over a month
• Introduction of IFS ERP IT system starting 1st of January 2009
• Finalization of necessary environment CAPEX. New dedusting station: 1st stage completed in Q4 2009,

second in Q1 2009.

• Austrian approvals expected end of Q1 2009 – utilizing sales synergies
• Negative EBIDTA in 2008 due to inventory losses

Together reach more

ZŁOMREX S.A.

Q&A

Section 4