MMK CORPORATE PRESENTATION

Transcription

1 MMK CORPORATE PRESENTATION dbaccess CEEMEA CONFERENCE LONDON 2-22 JANUARY 216

2 TABLE OF CONTENTS 9 (1) MMK strategy overview (2) MMK Group 9 months 215 financial results (3) Appendix 2

3 ММК IS A GLOBAL STEEL PLAYER AND THE LARGEST ROLLED STEEL SUPPLIER IN RUSSIA ММК No.1 Supplier of rolled steel in Russia with a market share of ~2% 13.3 mln tonnes of steel mln tonnes of finished products in Russia % Share of shipments to MMK, mln tonnes Profit Belon 1 market share for metal scrap collection in Russia MMK Metalurji Capacity of 2.3 mln t per year Iron & Steel Works and two service centres Volume of finished goods output in ths tonnes 6% 1% 1% 82% Leading position on the Russian market, 214 1% ММК-Metiz Top-3 metalware producer in Russia Output volume in ths t Coking coal production in mln t, covers 37% of coal concentrate consumption by ММК (214) MMK share in Russia Position in Russia Source: ММК Hot-rolled steel 35% 1 Cold-rolled steel 32% 2 Galvanised Steel 39% 1 Tin-plate 98% 1 Polymer-coated steel 22% 3 3

4 TIMELINE: FROM LARGE-SCALE INVESTMENT TO EFFICIENCY AND ENVIRONMENT Transition to continuous casting, substitution of openhearth furnaces with EAFs Reconstruction of rolled steel production (mills 17, 37, 45) Listing of MMK s shares on London Stock Exchange MMK receives controlling stake in Belon MMK acquires 1% of ZAO Profit, Russia s largest scrap collector Commissioning of thick-plate Mill 5 Commissioning of EAF with annual capacity of 2.3 mln tonnes of steel in Turkey; increase of share in the Turkish project to 1% Launch of the first stage of cold-rolling mill 2 Major environmental project - sludge decantation complex of oxygen-converter plant Commissioning of two major environmental facilities: coke gas chilling plant and sulphur capture unit Decrease in Debt Debt/EBITDA ratio to.6x Launch of reversing cold-rolling mill and continuous hot-dip galvanizing unit MMK forms a JV with Atakas (Turkey) to construct a plant with capacity of 2.3 mln tonnes of steel Launch of pressed components mill and service metal centre in St. Petersburg Launch of the second stage of cold-rolling mill 2 Historical record in pig iron production 1.3 mln tonnes per year Launch of new labour efficiency and cost optimisation programmes Mln USD M215 Revenue 1,713 1,733 2,65 3,47 4,829 5,38 6,424 8,197 1,55 5,81 7,719 9,36 9,328 8,19 7,925 4,658 EBITDA ,15 1,735 1,511 2,5 2,47 2,24 1,39 1,66 1,336 1,363 1,223 1,67 1,393 EBITDA margin 25.9% 16.5% 2.2% 33.3% 35.9% 28.1% 31.2% 29.4% 2.1% 25.8% 2.8% 14.4% 14.6% 14.9% 2.2% 29.9% CAPEX ,216 2,112 1,613 2,29 1, FCF , Source: ММК 4

5 LARGE INVESTMENTS RESULTED IN MOST MODERN PRODUCTION ASSETS Facility Capacity, th. tonnes Start-up Date EAF (2+1 units), steel making 4,6 26 Long product mills (3 units) 2, , mm Mill 1, CR Reversing Mill 8 22 HDGL (2 units) 95 22, 28 CCL (3 units) 4 24, 29 Metallurgical Complex in Turkey 2, , mm CR Mill 2, Source: ММК 5

6 OGRANIC GROWTH DUE TO INVESTMENT IN LARGE-SCALE PROJECTS FOR HVA* PRODUCTS OUTPUT Increase in metal production with increasing share of HVA products was due to the construction of: Continuous hot-dip galvanizing line-1 (launch in 22), Continuous hot-dip galvanizing line -2 (28) with overall capacity of 95 ths t Polymer coating plant-1 (24) and Polymer coating plant-2 (29) with overall capacity of 4 ths t Construction of thick-plate Mill 5 (launch in 29) with capacity up to 1.5 mln t per year Construction of cold-rolling Mill 2 (launch in ) with capacity up to 2 mln t per year OJSC MMK finished goods sales structure, mln tonnes ,7,9 1,4 1,3 HVA 2,3 1,2 1,5 1,4 1,5 1,1 HVA 3, 1,2 1,1,9 1,1 1,1 HVA 3,4 11,1 1,9 1,3 1,7 HVA 4,3 Продуцкция Downstream глубокой products переработки Х/к C/r прокат steel Mill 5 Продукция стана Thick plate 5 Сортовой Long steel прокат 2 4,2 5,6 5,5 5,1 Г/к H/r прокат steel,9,4,2, F Semi finished Полуфабрикаты steel products * HVA High Value Added Source: ММК 6

7 THIS ENABLED MMK TO INCREASE SHARE OF SALES TO ITS STRATEGIC MARKET OF RUSSIA AND THE CIS ММК more than doubled Russian sales, while cutting exports In 215, ММК increased its share of sales to Russia from 41% to 76%... 1% MMK Group sales structure, mln tonnes 12 mln t 11,1 1,2 1,2 8,7 8 5,1 3,5 6,4 8,4 4 5,1 5,1 3,9 2, F Changes in 215/2 Рынок Russia РФ and (с СНГ) CIS mln Экспорт Export mln 75% 5% 25% % % 59% mln t 2,4 1,1 5% 5% 2,8 62% 38% 3,7 2,3 2,7 76% 24% F 4,5 3, F Рынок Russia РФ and (с CIS СНГ) Экспорт Export also due to the increase in share of premium HVA* products to 47% 32% 45% 42% 47% Продукция Ordinary базовых products переделов Продукция HVA HVA products Share of HVA products in structure of MMK sales on the Russian market, % Source: ММК * - CAGR - Compound Annual Growth Rate 7

8 MMK HAS ACHIEVED SIGNIFICANT IMPROVEMENTS IN LABOUR PRODUCTIVITY, SAFETY AND ENVIRONMENTAL IMPACT Headcount at OJSC declined by 45% (ths people) LTIFR fell by 47% (incidents per 1, people/y) Emission rate fell by 51 % (kg/t) -45% -47% -51% 33,5 1,4 36,6 18,5,55 18, F F Source: ММК 8

9 A STRATEGIC PROJECTS PORTFOLIO HAS BEEN DEVELOPED TO ENACT FURTHER OPERATIONAL EFFICIENCY GROWTH Priority areas Position strengthening on priority markets Increase in operational and functional efficiency Increase in investment attractiveness Strategic projects portfolio 1 supplier for the most demanding clients in the automotive industry in Russia Sales. Just in time (+/-3 days) Supply. Delivery just in time Material flow: modern level of automatization and accounting Lean production Big Data (mathematical modelling) Focus on core business, sale of non-core assets Independence of business units leaders Safe operations Zero tolerance of health and safety violations Professional personnel development Engaging employees in improving operational efficiency at ММК Personalisation in resource management (Micro Cost Centre project) Social strategy specification Solution of the single-industry city issue Clean city program Employees health promotion Implementing strategic projects will decrease cost of sales by 3-5% per year Source: ММК 9

10 INVESTMENT IN WILL BE AIMED AT INCREASING EFFICIENCY AND DECREASING COST OF SALES Investment programme principles: CAPEX of MMK, Rigorous approach to projects selection, based on DCF valuation and with risk assessment 2,5 2,1 2,2 Balanced costs distribution, with no peaks Investment not exceeding operational profit Debt/EBITDA ratio of no more than 2x Dividend payment of no less that 2% IFRS net profit 2, 1,5 1,,5,7 1,2 1,6 1,2,7 From 216 till 225 MMK Group plan to maintain its CAPEX within the range of.4-.6 USD bln per year (including maintenance CAPEX of USD bln), subject to FX.,6,5,4, Oxygen unit Reconstruction of Mill Metal desulphurization plant New sintering plant New continuous hot-dip galvanizing unit New coke battery New blast-furnace Modernization at sintering-cokingblast furnace production capacities Infrastructure, energy and environmental projects Modernization and launch of new rolling capacities Source: ММК 1

11 TABLE OF CONTENTS 9 (1) MMK strategy overview (2) MMK Group 9 months 215 financial results (3) Appendix 11

12 KEY HIGHLIGHTS FOR MMK GROUP Q3 215 Financial results Revenue USD 1,52 mln down 8.7% q-o-q Cost of sales USD 1,36 mln down 6.4% q-o-q EBITDA USD 43 mln down 12.8% q-o-q EBITDA margin 28.6% down 1.4 p.p. q-o-q Net profit USD 78 mln down 71.3% q-o-q Cash-cost of slab USD 196 per tonne down 18.3% q-o-q Free cash flow (FCF) USD 571 mln up 219.% q-o-q CAPEX USD 85 mln down 6.6% q-o-q 9M 215 Financial results Revenue USD 4,658 mln down 25.2% y-o-y Cost of sales USD 3,161 mln down 35.6% y-o-y EBITDA USD 1,393 mln up 14.7% y-o-y EBITDA margin 29.9% up 1.4 p.p. y-o-y Net profit USD 546 mln up by over 5 times y-o-y Net debt USD 1,125 mln down by USD 913 mln compared to Net debt / EBITDA x.63 down from х1.27 as of Free cash flow (FCF) USD 94 mln up by over 2 times y-o-y CAPEX USD 24 mln down 38.9% y-o-y Source: ММК 12

13 HIGH CAPACITY UTILISATION Key production indicators, ths tonnes Q3 15 Q2 15 % 9M 15 9M 14 % Cast Iron 2,656 2,578 3.% 7,59 7,84-2.7% Crude Steel, incl. 3,141 2, % 9,338 9, % ММК 3,141 2, % 9,338 9, % MMK Metalurji - - Steel Products, incl. 2,89 2, % 8,519 9, % ММК 2,894 2, % 8,415 8, % ММК-Metiz* % % ММК Metalurji* % % HVA Products 1,35 1, % 4,1 4,135-3.% MMK Group s finished steel products output in 9M 215 was down 8.2% y-o-y. MMK Group High Value Added (HVA) steel products output in 9M 215 was down 3.% y-o-y. The share of HVA products in total output volume increased to 47.1% in 9M 215. The total steel-making capacity utilisation rate at the main production site in Magnitogorsk in 9M 215 was approx. 89%. Belon Coke Concentrate % 2,25 2,55-1.5% * - incl. made from ММК steel MMK Group finished products dynamics, ths tonnes Key capacities utilisation rates in Q3 215, % ,4% 6,% Blast Furnace 45,4% 1% 43,9% 46,1% 46,3% 3 48,3% 46,7% 5,% Steel BOF 1% 2 5 4,% Steel EAF 28% 2 3,% Long Steel 99% ,% HRC 87% 1 5 1,% CRC 72%,% Coated steel products 92% Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Total by products 89% Steel products HVA Products Share Source: ММК % 25% 5% 75% 1% 13

14 MMK GROUP SALES STRUCTURE ON THE RUSSIAN AND CIS MARKET Total sales volume on the Russian and CIS market in Q3 215 was 2,327 ths tonnes, up 38 ths tonnes q-o-q. This was primarily due to overall seasonal recovery in the domestic demand for steel during the quarter. Sales of thick plate produced at Mill 5 decreased by 32 ths tonnes, or 11.%, q-o-q, which was due to the irregular supply schedule of largediameter pipes for the construction of major Gazprom projects Sales of long steel in Q3 215 increased by 36% q-o-q to 48 ths tonnes due to increasing demand for construction products since July 215. Sales structure on the Russian and CIS market, ths tonnes HVA 47% % 22% 13% HVA 43% 1% 15% 11% 35% 36% Downstream products Flat cold-rolled products Mill 5 products Flat hot-rolled products 19% 21% Long products Q2 215 Q3 215 Russia and CIS market sales by region, ths tonnes Russia and CIS market sales by sector, ths tonnes % 11% 6% 6% 8% 1% 9% 9% CIS Other Siberia % 11% 2% 2% 8% 11% 1% 4% 1% 3% 7% 6% CIS sales Other Construction sector Railway build. 24% 24% Central Region 32% 31% Automobile sector 4% 4% 2Q 215 3Q 215 Volga Region Ural 9% 24% 7% 28% 2Q 215 3Q 215 Machine building Pipe production Hardware and semiintegrated factories Service metal service Source: ММК 14

15 MMK GROUP POSITION ON KEY INTERNATIONAL MARKETS Sales on international markets in Q3 215 amounted to 567 ths tonnes. Hotrolled products accounted for 54.5% of exports, while the share of HVA products increased to 43%. Sales structure on the international markets, ths tonnes Decrease in sales of cold-rolled products in Q3 215 as compared to the previous quarter was due to decline in relevant demand on international markets. In Q3 215, the Company increased its proportion of sales to the Middle East as compared to the previous quarter. This made up for the decrease in sales to Europe. HVA 39% 28,1% 11,3% 53,4% HVA 43% 33,9% 9,% 54,5% Downstream products Flat cold-rolled products Flat hot-rolled products Long products International sales structure by region, ths tonnes 4,3% 2,6% 2,9%,% Q2 215 Q3 215 Sales share by market, ths tonnes Slabs and billets % 14,8% 11,3% Africa 26% 22% 22% 23% 2% 13% 12% 18% 21% 18% 16% 16% 23% 27% 2% 32,5% 24,4% Europe 75% 5% 48,5% 62,4% Middle East 25% 74% 78% 78% 77% 8% 87% 88% 82% 79% 82% 84% 84% 77% 73% 8% Asia and Far East Source: ММК 2,1% 1,9% 2Q 215 3Q 215 % Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Domestic market (Russia + CIS) Q1 14 Q2 14 Q3 14 Export Q4 14 Q1 15 Q2 15 Q

16 KEY FINANCIAL HIGHLIGHTS OF MMK GROUP Revenue for Q3 215 amounted to USD 1,52 mln, down 8.7% q-o-q. The key factors were the rouble s weakening versus US dollar during the quarter, as well as decrease in the average sales price (down 15.5%). Steel segment revenue (Russia), mln USD Steel segment revenue (Turkey), mln USD % % Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Coal segment revenue, mln USD Consolidation, mln USD % Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Source: ММК 16

17 KEY FINANCIAL HIGHLIGHTS OF MMK GROUP Decrease in global steel prices and the rouble s weakening versus US dollar in Q3 215 resulted in decline in average sales prices and EBITDA/tonne indicator. EBITDA for the steel segment (Turkey) in Q3 215 amounted to USD 12 mln, slightly down q-o-q. This was mainly due to sales decline. EBITDA of the coal segment remained at a high level in Q3 215, resulting in over 1 times y-o-y growth for this indicator in 9M Quarterly EBITDA dynamics, mln USD MMK Group s EBITDA for Q3 215 amounted to USD 43 mln, down 12.8% q-o-q Steel (Russia) Steel (Turkey) Coal Mining Eliminations Q2 15 Q3 15 EBITDA/t vs metal sale price, USD/t Annual EBITDA dynamics, mln USD MMK Group s EBITDA for 9M 215 grew 14.7% y-o-y Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q Steel (Russia) Steel (Turkey) Coal Mining Eliminations COGS EBITDA/tonne 9M 14 9M 15 Source: ММК 17

18 Q2 215 Revenue Price change effect Products volumes FX Other factors MMK Metalurji + Coal Mining Q3 215 Revenue ANALYSIS OF KEY FINANCIAL HIGHLIGHTS The key factors impacting revenue in Q3 215 were growth in sales volumes and the rouble weakening vs the US dollar. Analysis of revenue, Q3 215 q-o-q, mln USD In Q3 215, the Company s net profit decreased to USD 78 mln. This was mainly due to FX losses of USD 135 mln In 9M 215, profit amounted to USD 546 mln, up by over 5 times y-o-y The cash-cost of slab decreased by 18.3% in Q3 215, mainly due to the decrease in raw material prices and changes in the raw materials structure. Cash-cost of slab dynamics, USD/t Net profit dynamics, mln USD Net profit has remained positive in Slab cash-cost Q2 215 Raw materials price % Raw materials structure -6 Other factors 196 Slab cash-cost Q Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q Source: ММК 18

19 DEPRECEATION AND CAPEX DYNAMICS MMK Group s CAPEX in Q3 215 amounted to USD 85 mln (down 6.6% q-o-q). In 9M 215 CAPEX decreased by 38.9% y-o-y to USD 24 mln. Quarterly depreciation dynamics, mln USD 25 The Company confirms its plans to invest approx. USD 4 mln into fixed asset purchases in Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Quarterly CAPEX dynamics, mln USD Annual CAPEX dynamics, mln USD Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 ' F Source: ММК 19

20 LOWER CAPEX REMOVES PRESSURE FROM CASH FLOWS CAPEX structure in 214, mln USD Planned CAPEX structure for 215, mln USD Service MMK 3% Metalurji 2% Belon 9% Others 7% 497 mln Service 3% MMK Others Metalurji 8% 2% Belon 8% 4 mln MMK 79% MMK 79% Due to the absence of major investment projects in the investment programme for the upcoming 2-3 years, more than 8% of CAPEX is denominated in roubles. The rouble devaluation will result in a decrease of that amount, in USD terms, as compared to the planned sum. Source: ММК 2

21 MMK BENEFITS FROM ONE OF THE HIGHEST FREE CASH FLOW YIELDS IN THE SECTOR Net working capital dynamics, mln USD High level of FCF generation, mln USD As of the end of Q3 215 net working capital / revenue ratio amounted to 12.4% 2 FCF (annualised) 1,253 MC as of ,468 FCF yield 36.1% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 EBITDA WoC Net financial cost, tax, etc. FFO PPE FCF 9M '15 Source: ММК 21

22 HIGH OPERATIONAL PERFORMANCE SUPPORTS EFFICIENT DECREASE OF THE DEBT LOAD, mln USD MMK Group s net debt as of the end of Q3 215 decreased to USD 1,125 mln, down by USD 913 mln compared to At the end of 9M 215, net debt / EBITDA decreased to x.63, which the Company s management sees as a comfortable level, but somewhat higher than the debt load level of key peers. By the end of 215, 'the Company plans to further decrease debt load by using its cash funds and cash flow from operations. 3,5 4 2,99 3, 2,59 3 2,47 2, , ,27 1, ,63 1,, Source: ММК Total Debt Net Debt Net Debt/EBITDA (RHS), 22

23 ММК GROUP S DEBT PROFILE Debt and cash funds structure by currency, mln USD Reduction in debt load remains the priority task for the Company s management. The share of debt which is denominated in foreign currencies (USD+EUR) amounted to approx. 79% as of The volume of cash funds and short-term deposits in the MMK Group s balance sheet (USD 933 mln) fully covers the short-term debt of MMK Group. The debt maturity schedule does not presume any significant onetime payments Debt C&CE and Deposits High level of liquidity, mln USD USD EUR RUB Debt maturity schedule, mln USD USD EUR RUB TYR Liquidity sources 98 Short-term Debt Cash Sort-term deposit Credit lines FMG Stake and beyond Q1 Q2 Q3 Q4 Source: ММК

24 STRUCTURE OF OPERATING COSTS AND CASH COSTS In Q3 215, the share of metal scrap (due to increase in output volume and high capacity utilisation of EAFs) increased in the structure of OJSC MMK s material costs. The share of coal decreased due to growth in efficiency of blast-furnace production following completion of repairs at blast-furnace No.8. The 7.% decrease in operating costs in Q3 215 q-o-q was due to the rouble weakening and cost-optimisation efforts. MMK Group operating costs, mln USD Q3 15 Q2 15 +/- % Cost of sales 1,36 1, % Selling expenses % G&A % Other operating expenses % Total operating expenses 1,26 1, % Cost of sales, mln USD OJSC MMK material costs, USD/t ,8% 2,9% 5,% 2,5% 2,5% 1,3% 12,6% Change in work in 8,7% 9,1% 11,9% progress 9,6% 9,8% 13,7% 13,3% Other production costs 18,8% 17,9% Power from outside sources Fuel from outside sources Auxiliary materials 69,9% 68,6% Depreciation Labour costs 8,7% 1,8% 24,2% 22,6% Other main materials Scrap Сoals 14,7% 14,1% Iron ore (pellets) Material costs 12,6% 13,2% Iron ore (sinter) Q2 215 Q3 215 Q2 215 Q3 215 Source: ММК 24

25 TABLE OF CONTENTS 9 (1) MMK strategy overview (2) MMK Group 9 months 215 financial results (3) Appendix 25

26 PROFESSIONAL MANAGEMENT TEAM FOUNDATION OF THE BOARD OF DIRECTORS Board of Directors is strengthened by presence of key MMK managers Victor Rashnikov Chairman of the Board of Directors of OJSC Magnitogorsk Iron and Steel Works. Education: Magnitogorsk Institute of Mining and Metallurgy. Experience: works at MMK since In 1997 Mr Rashnikov was appointed General Director of OJSC MMK. Since April 25 serves as Chairman of the Board of Directors of OJSC MMK Pavel Shilyaev CEO of OJSC Magnitogorsk Iron and Steel Works. Education: Chelyabinsk State Technological University, Stockholm School of Economics in Russia (St. Petersburg). Experience: acting Chief Engineer of OJSC MMK, Deputy General Director for Production. Nikolai Lyadov Deputy General Director for Sales of OJSC Magnitogorsk Iron and Steel Works. Education: Magnitogorsk Institute of Mining and Metallurgy. Experience: Director for Security of OJSC MMK, Business Director of OJSC MMK, Director for Sales. Sergey Sulimov Deputy CEO for Finance and Economy of OJSC Magnitogorsk Iron and Steel Works. Education: Financial University under the Government of the Russian Federation, INSEAD (France). Experience: McKinsey & Company, member of the Supervisory Board of Delta Bank in Ukraine, MMK Group, MMK Metalurji (Turkey), Bank Svyaznoy. Olga Rashnikova Director for Finance of OJSC Magnitogorsk Iron and Steel Works. Education: Franklin College (Lugano, Switzerland), State Management University. Experience: Economics Department of OJSC MMK, integration projects, analysis of sales markets of MMK Group, Government Relations and Markets Protection Department of OJSC MMK. In 211, Ms Rashnikova was appointed Director for Finance of OJSC MMK. 26

27 RECOGNISED PROFESSIONAL IMPROVE EXPERTISE OF MMK BOARD OF DIRECTORS 5 % of MMK s Board of Directors are independent directors Morgan Ralph Tavakolian Partner at Baring Vostok Capital Partners. Education: Yale University. Experience: Ernst & Young, McKinsey & Company, Norilsk Nickel, Goldman Sachs. Valeriy Martsinovich CEO at Hay Group Eastern Europe. Education: Gdańsk University (Poland). Experience: CEO at Hay Group Ukraine, associate of Hay Group Global. Ruben Aganbegyan President of Otkritie Holding. Education: Moscow State Law Academy. Experience: Renaissance Capital, CJSC MICEX, member of the Board of Directors of the statutory self-regulatory (non-profit) organization NAUFOR, member of the Board of Directors of OJSC Rostelecom. Zumrud Rustamova Deputy General Director of OJSC Polymetal. Education: Moscow Economic and Statistics Institute Experience: Russian Federation State Committee for Government-Owned Property Administration, Russian Federal Property Fund, Deputy Minister for Property Relations of the Russian Federation, Siberian Coal Energy Company, etc. Kirill Liovin Deputy Chairman of the Management Board of OJSC Rosselkhozbank. Education: Moscow Aviation Institute named after Ordzhonikidze. Experience: CJSC Gazprombank, Renaissance Capital Managing Company LLC, OJSC Sberbank of Russia, OJSC PIK Group, OSJC Aeroflot, etc. 27

28 STEEL SEGMENT (RUSSIA) All significant assets of the segment are situated in Magnitogorsk (Russia) Magnitogorsk mill is the largest enterprise: Second largest Russian mill with capacity of more than 14 mln tonnes of crude steel One of the most competitive players on the Russian markets: wide products mix, mainly flat products Geographical proximity to key consumers (ChelPipe, UralVagonZavod and others) and key supplier (ENRC, 3 km) Thick-plate Mill 5; Cold-rolling mill 2 cold rolling, annealing, pickling and galvanising Metalware plant (Magnitogorsk) Further processing stages enterprises: MMK-Profile (Moscow Region) and Intercos- IV (Leningrad Region) Wide network of trading companies across Russia Leading positions on the domestic market, 214 MMK's share in Russia Place in Russia Hot-rolled sheet 35% 1 Cold-rolled sheet 32% 2 Galvanized flat products 39% 1 Tin plate 98% 1 Colour-coated rolled products 22% 3 MMK share in Russian steel consumption Products structure of Russian steel segment Import; 12% Others; 33% MMK; 18% Downstream products 17% Slabs 1% Long steel products 16% Total: 11,65 ths tonnes Severstal; 14% C/r steel 12% ChelMK; 5% NLMK; 8% Uralsteel; 2% Thick plate 8% H/r steel 46% Source: MMK, Metal Expert NTMK; 3% ZSMK; 6% 28

29 MAXIMISING DOMESTIC SALES SHARE MMK sales by market, mln tonnes MMK domestic sales structure 1 8 MMK has been organically increasing share of domestic sales, while maintaining a significant share of export 9,6 C/r steel 12% H/r steel 39% ,7 2, Domestic market (Russia + CIS) Export 2,1 Продукция HVA, 42% Coated & Downstream products 2% Thick plate 1% MMK domestic sales by region, 214 MMK domestic sales structure by sector, 214 Total: 9,588 ths tonnes Long steel products 19% Ship building,8% Automobile sector 3,6% Bridge building,5% Other,5% Pipe production 29,1% Metalware and semi-integrated factories 9,2% Spot sales in Russia 25,% Machine / Railcar building 9,7% Construction sector 9,2% Spot sales in CIS 12,6% Total: 9,588 ths tonnes Source: MMK 29

30 DIVERSIFIED DOMESTIC SALES Top eight clients, ths tonnes Share of top eight clients in shipments, % Autovaz; 16 ChTPZ; 578 1% 16% Naberezhnochel n. Pipe Plant; 238 Lysvenski Steel Plant; 264 Uraltrubprom; 288 Stalepromyshlen ay Company; 359 Total: 2,585 ths tonnes The largest external client accounts for less than 5% Volzhski Pipe Plant; 362 Severski Pipe Plant; 39 75% 5% 25% % 6% 24% 214 Top eight clients account for just 24% in MMK sales Shipments to end-customers (9%) Key clients Domestic sales Dealers Spot sales (1%) Minor clients Export sales MMK Steel Trade AG MMK Trading 1% Regional distribution network Source: MMK 3

31 EMPHASIZED DIRECT EXPOSURE TO NICHE SEGMENTS LDP & MDP Demand in Russia, m tonnes Mill 5 Production Dynamics, th. tonnes ,5 4,8 5,1 4,3 4,6 Demand for LDP remains strong 2,6 2,4 2,5 1,8 1, E 218E Deamand for LDP Demand for MDP ,5% ,6% Higher demand for thick plate in 214 supported Mill 5 utilization rates MMK Share in Supplies to Russian Pipe Industry in 214 Product Mix Supplied to Pipe Industry in , th. tonnes Import; 9% MMK was the biggest supplier to Russian pipe industry in MMK; 4% Others; 51% HRC Thick Plate (m. 5) H/r Plate CRC Source: MMK 31

32 STEEL SEGMENT (TURKEY) MMK Metalurji Two enterprises in Turkey in Iskenderun and Istanbul Favourable geographical location (growing markets of Turkey and Middle East) Strong logistics (own port and modern logistics centre) Launch of production: 21 Finished products: Hot-rolled products, galvanised products, polymer-coated products o Steelmaking and hot-rolled metal production suspended in November 212 Production capacities of MMK in Turkey Production structure of MMK Metalurji Color-coated rolled products 36% Key sales markets Hotrolled steel 9% Total: 69 ths tonnes HVA products, 91% Galvanized flat products 55% Europe Istanbul Iskenderun Middle East Priority markets Important export markets Africa Source: MMK 32

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