EVRAZ Investor Day. 11 June 2014, London

Transcription

1 EVRAZ Investor Day 11 June 2014, London

2 Disclaimer This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of EVRAZ plc ( EVRAZ ) or any of its subsidiaries in any jurisdiction (including, without limitation, EVRAZ Group S.A.) (collectively, the Group ) or an inducement to enter into investment activity. No part of this document, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of EVRAZ, the Group or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document or its contents or otherwise arising in connection with the document. This document contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words targets, believes, expects, aims, intends, will, may, anticipates, would, could or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Group s control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of the Group s shares, financial risk management and the impact of general business and global economic conditions. Such forward-looking statements are based on numerous assumptions regarding the Group s present and future business strategies and the environment in which the Group will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and each of EVRAZ and the Group expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in EVRAZ s or the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. Neither the Group, nor any of its agents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forwardlooking statements contained in this document. The information contained in this document is provided as at the date of this document and is subject to change without notice. 1

3 Today s speakers Alexander Abramov Chairman Sir Michael Peat Senior Independent Non-Executive Director Alexander Frolov Chief Executive Officer Giacomo Baizini Chief Financial Officer Marat Atnashev Vice-President, Iron Ore Division Sergey Stepanov Vice-President, Coal Division Ilya Shirokobrod Vice-President, Railway Products Division Pavel Tatyanin Senior Vice-President, International Business Division 2

4 Agenda EVRAZ highlights Corporate governance EVRAZ strategy Coking coal business Iron ore business Russian steel business Railway products business North American business Capital management 3

5 EVRAZ highlights Alexander Abramov Chairman of the Board

6 EVRAZ highlights One of the largest vertically integrated steel and mining companies in the world Top-20 steel producer in the world based on crude steel production of 16.1 mt in 2013 Revenue of $14.4bn, EBITDA of $1.8bn in 2013 Leader in the Russian and CIS construction and railway product markets No 1 producer of rails and large diameter pipes in North America The largest coking coal producer in Russia 5

7 Corporate governance Sir Michael Peat Senior Independent Non-Executive Director

8 Board composition and corporate governance framework EVRAZ plc Board of Directors Alexander Abramov Chairman Sir Michael Peat Senior Independent Director, Chairman of the Nominations Committee The majority of the Board (excluding the Chairman) is independent Alexander Frolov Chief Executive Officer Terry Robinson Chairman of the Audit Committee All Board committees are chaired by experienced Independent Non-Executive Directors Olga Pokrovskaya Eugene Shvidler Eugene Tenenbaum Duncan Baxter Chairman of the Remuneration Committee Karl Gruber Chairman of the Health, Safety and Environment Committee Alexander Izosimov Board and committees meet on regular basis and run in depth discussions of key matters EVRAZ complies with most provisions of the UK Corporate Governance Code Corporate governance policies and implementation are continuously reviewed to ensure that company s procedures are promptly aligned with new requirements and best practice Directors Independent Non-Executive Directors 7

9 Committed to further improve corporate governance practices The Board held 12 scheduled meetings in 2013 and 4 so far in 2014 with the major topics discussed being: Health and safety reports and plans Strategy Main investment projects implementation Compliance matters including the UK Bribery Act, greenhouse gas emissions, gender diversity, etc. Remuneration policy of the company Internal assessment of the effectiveness of the Board 8

10 EVRAZ strategy Alexander Frolov CEO

11 EVRAZ strategic continuity Our strategy fundamentals remain unchanged despite market challenges over the last 2 years EVRAZ Strategy Selective Growth Search for the most appealing investments to create value for shareholders EVRAZ Business System Ongoing effort to maintain and enhance leadership positions in operational efficiency and costs Customer Focus Respond to evolving needs of our clients to build long term relationships Human Capital Development and loyalty of our employees Health, Safety & Environment (HSE) Remains a priority of our business 10

12 Global steel industry outlook Global steel industry earnings are being driven by: excess steel capacity and low utilisation rates China steel overproduction and exports raw materials prices Reduction in new capacity coming on-line and continuing urbanisation of developing countries including China should resolve the problem of overcapacity in 3-5 years and provide support for steel margins Pricing pressure is expected to persist in the near term Global steel overcapacity, % Median EBITDA margin of major steelmakers, % 3,000 2,500 3% 8% 18% 12% 10% 12% 13% 13% 12% 7% 25% 20% 2,000 1,500 1,000 15% 10% 500 5% Apparent crude steel use, mt Overcapacity* Source: World Steel, Morgan Stanley, EVRAZ estimates * Implied 85% as a target capacity utilisation Crude steel capacity 0%

13 Cautious view on raw material prices Iron ore market will be determined by: the rate of commissioning of new low-cost iron ore supply predominantly in Australia and Brazil Chinese marginal costs of domestic iron ore production global steel production growth rate Coking coal market will be driven by: lack of investment in new projects and depletion of existing assets capacity shutdowns, as 35% of seaborne supply is currently unprofitable shift to consumption of cheaper coking coal grades and blends, including PCI EVRAZ raw material price assumptions are in line with market consensus Iron ore price, 62%, CFR China, $/t 250 Coking coal price, HCC, FOB Australia, $/t $/t in $/t real prices 100 in 2013 real prices Source: CRU, IB Consensus, EVRAZ analysis 12

14 Core EVRAZ markets have growth potential Russian long steel market: low saturation of the housing market based on square meters per capita investment in infrastructure to modernise and compensate for previous underinvestment North American market of steel products for oil & gas industry: US policy on decreasing dependency on oil & gas supplies from other countries shale gas revolution increased drilling and transportation of oil products from remote regions to main areas of consumption Long steel consumption in Russia, mtpa Consumption of tubular products (LD and OCTG)* in North America, mtpa E 2017E * LD - large diameter, OCTG - Oil Country Tubular Goods Source: Metal Expert, Morgan Stanley, EVRAZ estimates Е 2017Е LD pipes OCTG 13

15 Reaction to market trends is based on EVRAZ strengths Market Trends EVRAZ Strengths EVRAZ Response Steel industry margins are below historic averages Low cost and well invested steelmaking assets 1 Selective investments low risk / high return projects IRR > 40% size < $100m Neutral to negative outlook for iron ore price Neutral to mildly positive outlook for coking coal price Low cost long life EVRAZ KGOK iron ore deposit Leading positions in the Russian coking coal market 2 Cost-cutting initiatives to reinforce competitiveness of assets Russia and North America are attractive steel markets Unique full product range proposition in the Russian construction long steel market Global leadership in the rail market 3 Customer focus to leverage leading market positions Exposure to oil & gas boom in North America 14

16 Delivering results on EVRAZ strategy EVRAZ Response 1 2 Selective investments Costcutting initiatives Current Status Key development projects realised investment cycle is nearly complete (rail mills upgrades, PCI projects in Russia, launch of Yerunakovskaya VIII, Vostochny mill) Divestiture/closure of unprofitable mining assets Idled rolling operations in markets with low growth Priorities Low capex / fast payback projects focused on decreasing costs Maintenance capex in steel stable, in mining depends on volumes Cost reduction in mining G&A reduction by $100m from 2015 Capex reduction, $m < E 2015E Maintenance Sustainable cost-cutting effect, $m Development E 2013 initiatives 2014 initiatives G&A cost reduction 3 Customer focus 6 new types of rails developed 30% tubular goods in North America sold under long term contracts Obtained certificates for coal shipments to new customers Expansion into new rail markets High value-added products in North America New blends of coking coal Sales of tubular and railway products, mtpa E 2015E Railway Tubular 15

17 Deleveraging is a priority EVRAZ has demonstrated a consistent track record of decreasing net debt EBITDA and Net debt, $bn 3.6x 3.1x 3.1x Net debt grew in 2013 due to consolidation of Raspadskaya, while on a like-for-like basis it decreased by $300m to $6.1bn x x The current financial aim is to decrease Net debt / EBITDA to below 3.0x LT EBITDA Net debt Raspadskaya Net debt Net debt/ebitda Source: EVRAZ Financial Statements 16

18 Safety and human development ensure sustainability of business Human capital HSE Development of employees to secure the long-term stability of the business Safety remains a key strategic priority with target of zero fatality incidents Successful productivity improvement Consistent reduction in lost time injury frequency rate through enhanced safety procedures Intensive training programmes to support shift in attitude towards safety Labor productivity, % Lost Time Injury Frequency Rate* 107% 111% % E m2014 * Calculated as number of lost working hours due to injuries, excluding fatalities, per 1 million hours worked 17

19 Summary Our strategy fundamentals remain unchanged despite market challenges during last 2 years Global steel industry margins are low but have upside potential in the medium term Cautious outlook towards raw material prices Core EVRAZ markets in Russia and North America have growth potential Three key strategic priorities: 1. Selective investments through low risk / high return projects with limited capex 2. Cost-cutting initiatives to reinforce competitiveness of assets 3. Customer focus to leverage leading market positions Deleveraging is a priority with the target ratio of Net debt / EBITDA below 3.0x 18

20 Coking coal business Sergey Stepanov Vice-President, Coal Division

21 Snapshot on Russian coking coal market Sustainable domestic coking coal consumption at ~41 mtpa Up to 30% of production is sold to export markets (>20 mtpa) Russian coking coal concentrate consumption and net export, mt EVRAZ is the leader in the Russian coking coal market with highest production volumes and domestic market share of 23% E 2015E Domestic consumption Net export Russian coking coal concentrate production volumes, mt Domestic coking coal market consumption,% % % EVRAZ Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Source: EVRAZ estimates, MetalExpert, Rosinformugol EVRAZ Other 20

22 Coking coal business at a glance Attractive portfolio of premium hard and semi-hard coking coal grades (Zh+GZh, K, KO) Map of coking coal operations Asset P&P reserves*, mt Yuzhkuzbassugol 504 Strong competitive position on coking coal cost curve of Russian producers Raspadskaya 1,365 Mezhegey 194 Low risk long term growth options underpinned by 2.1bn tonnes of high quality P&P reserves EVRAZ NTMK Yuzhkuzbassugol EVRAZ ZSMK Raspadskaya Mezhegey Nakhodka Steel mills Operating coking coal mines EVRAZ s port Brownfield project Russian coking coal concentrate cash cost, $/t EXW Raw coking coal production volumes, mt EVRAZ Peer 1 Peer 2 EVRAZ 2013 Peer 3 Peer E * In accordance with JORC as of 1 July 2013 Source: EVRAZ estimates E 2015E Yuzhkuzbassugol Raspadskaya 21

23 Yuzhkuzbassugol: strong operational profile Main achievements Cash cost of coking coal concentrate, $/t EXW Kuzbass Shutdown / divestments of high cost mines (Abashevskaya, Tagaryshskaya, Yubileinaya) Growth of mining volumes by 2.6 mt in 2013 vs (3) 70 (15) 55 Ramp-up of the Yerunakovskaya VIII mine: commissioned in Feb 2013, fully ramped up to 2.5 mtpa in Feb 2014 cash costs $55/t EXW Kuzbass future CAPEX $13/t pa Key priorities Operational improvement programmes: more efficient degassing of mines debottlenecking at coal washing plants shift from third-party washing and development of new product blends headcount optimisation E Capex & raw coking coal production * E 2015E Maintenance, $m Development, $m Production volumes, mt * Growth of maintenance capex in 2015 due to transfer of part of Yerunakovskaya VIII investments in maintenance 22

24 Raspadskaya: attractive growth potential Main achievements Cash cost of coking coal concentrate, $/t EXW Kuzbass Synergies from Raspadskaya integration into EVRAZ yielded $30m in Growth of output: open pit Razrez Raspadsky (7) (7) 48 Raspaskaya-Koksovaya mine new longwalls at Raspadskaya underground mine Key priorities Growth of output: E operating at 4 longwalls at Raspadskaya underground mine with 2 longwalls already commissioned Capex & raw coking coal production development of field 2 at Raspadskaya- Koksovaya Operational improvement programmes: changing product mix to meet customer demand beginning of mining of hard coking coal Capex can be altered based on actual production profile * ** E 2015E Maintenance, $m Development, $m Production volumes, mt * Increase due to development works at Raspadskaya underground mine ** Increase mainly due to increase in production volumes at Raspadskaya underground and Raspadskaya-Koksovaya mines 23

25 Ramp-up of Raspadskaya underground mine Gradual growth of production at Raspadskaya underground mine is on track with 2014 target of 4.2 mtpa and 5.5 mtpa in 2015 Main achievements Raspadskaya underground mine raw coking coal production volumes, mt 46 km of roadways built since May Longwall commissioned in December Longwall commissioned in March Key targets 35 km of roadways to be built in Longwall 5a to be launched by the end of June Longwall 5a-7-28bis to be launched in August E 2015E 24

26 Update on Mezhegey project The project is being implemented in anticipation of a grade Zh coal deficit in the medium term World class coking coal deposit in the largest undeveloped coal region in Russia Raw coking coal production outlook, kt 2,000 2, mt P&P reserves of hard coking coal $195m project finance loan obtained for the development of Phase I of the project Underground mining works started in December E 2015E 2016E 2017E Capex, $m 68 Cash cost of coal concentrate is $90/t EXW Kuzbass at full capacity Potential for cash cost reduction to $60/t in case of infrastructure development in the region 2014E 2015E 2016E 2017E 25

27 Coking coal: new markets and products Increase in Russian market share through enhancement of the quality of products (+1.4 mtpa of coking coal concentrate sales in vs. 2013) EVRAZ current and target markets in Eurasia Shift to the premium & semi-premium markets of South Korea, Japan, Ukraine and Turkey (+2.4 mtpa of coking coal concentrate sales in vs. 2013) Current markets Target markets Europe & Turkey 35.4 mt X mt China 55.5 mt Annual coking coal seaborne imports Other Asia 79.9 mt Sufficient coal handling capacity in the Russian Far East, plans to increase shipments through the proprietary port Coking coal concentrate sales by regions, mt E 2015E Russia Ukraine Premium Asia China Source: EVRAZ, Wood Mackenzie 26

28 Summary Leading market positions in coking coal and good quality assets Cost cutting and optimisation plan to strengthen profitability Raspadskaya is a low cost growth story with capex being flexible and dependent on volumes Reinforced sales and marketing strategy 27

29 Iron ore business Marat Atnashev Vice-President, Iron Ore Division

30 Iron ore business at a glance EVRAZ KGOK is a large, stable low cost operation organically integrated with EVRAZ NTMK Map of iron ore operations Asset P&P ore reserves*, mt KGOK 8,225 Evrazruda is re-emerging as a compact operation after a major turnaround programme, feeding 40% of EVRAZ ZSMK s needs at competitive costs EVRAZ KGOK EVRAZ NTMK Evrazruda 100 Timir** 682 High cost assets closed or sold in Timir is a strategic reserve base of cost competitive open pit iron ore for EVRAZ ZSMK in the long term Steel mills Operating iron ore mines Greenfield project EVRAZ ZSMK Evrazruda Timir Russian iron ore producers average cash cost, $/t EXW Production of saleable iron ore products, kt ,364 15,397 2,319 1,664 12,554 12,912 4,395 3,889 2,608 3,335 ~40% EVRAZ ZSMK needs covered by Evrazruda 9,650 9,845 9,946 9, % EVRAZ NTMK needs covered by EVRAZ KGOK Peer 1 Peer 2 EVRAZ 2014E Peer 3 Peer 4 EVRAZ 2013 Peer 5 * In accordance with JORC as of 1 July 2013 ** A+B+C1 reserves of Tayezhnoe deposit under Russian geological classification *** Excluding Evrazruda s production of concentrate from 3rd parties iron ore Source: EVRAZ estimates E*** 2015E*** EVRAZ KGOK Evrazruda VGOK 29

31 EVRAZ KGOK: focus on preserving low cost positions Main achievements Cash costs of saleable iron ore products, $/t EXW Successfully delivered debottlenecking programme, boosting crude ore production from 50 mtpa to 57 mtpa (vs. original target of 55 mtpa) Cost reduction initiatives: 5% labour productivity improvement lower downtime through introduction of lean practice at repair shops and beneficiation plant E Key priorities Capex and saleable iron ore products output Further cost cutting initiatives will be centered on: operational improvements in blasting, crushing and primary beneficiation energy efficiency labor productivity auxiliary materials E 2015E* Maintenance, $m Development, $m Production volumes, mt * Maintaining current operations, excludes development of Sobstvenno-Kachkanarskoye deposit 30

32 Evrazruda: a turnaround story Main achievements Cash costs of saleable iron ore products, $/t EXW Asset restructuring programme completed: : 6 mines with span over 600 km, 2 beneficiation plants, 9,962 employees, 4.4 mtpa 81 1 mine shutdown; 2 mines, a beneficiation plant and non-core assets divested Today: compact mining operation with 3 mines located within 180 km from EVRAZ ZSMK, single beneficiation plant, 5,600 employees, 4.2 mtpa capacity from H Key priorities E Capex and saleable iron ore products output* Major expansion project in Sheregesh mine to be completed in July 2014 adding 1.5 mtpa capacity with cash cost of $70/t Operational improvement programme with a target to reach $75/t across Evrazruda s operations E 2015E Maintenance, $m Development, $m Production volumes, mt * Excluding production of concentrate from 3rd parties iron ore in 2014,

33 Timir project JV between EVRAZ (51%) and Alrosa Project timeline 680 mt 42% Fe suitable for open pit mining Located within 5 km from the railway, motorway and power grid infrastructure JV with Alrosa Feasibility study Start of construction works Start of mining 3 mtpa run of mine 3mtpa mining capacity with stripping ratio of 1.1x Raw iron ore to be processed at Evrazruda s beneficiation plant Capex c.$180m, cash costs of $70/t CPT EVRAZ ZSMK Location of Timir Execution is subject to project finance availability EVRAZ KGOK EVRAZ NTMK Steel mills Timir EVRAZ ZSMK Evrazruda Operating iron ore mines Greenfield project 32

34 Summary Iron ore requirements of EVRAZ NTMK are covered by EVRAZ KGOK for the foreseeable future at low costs After a major turnaround programme Evrazruda is re-emerging as a compact operation, ensuring c.40% of EVRAZ ZSMK s needs at competitive costs Cost cutting and optimisation plans in place for further improvement of EVRAZ KGOK s and Evrazruda s cash cost position Main capex projects are being completed Timir project will be executed subject to securing project finance 33

35 Russian steel business Ilya Shirokobrod Vice-President, Railway Products Division

36 Russian steel business at a glance Russian steel operations account for 74% of EVRAZ s total steel and steel products output Russian steelmaking assets are low cost and well invested Map of steel operations in Russia Cash cost of EVRAZ NTMK s slabs is one of the lowest in Russia Full product range proposition in the Russian long steel market EVRAZ NTMK Steel mills EVRAZ s port EVRAZ ZSMK Nakhodka Russian producers cash cost of slab, $/t EXW Output of steel products, mt ,821 11,056 11,454 11, ,328 4,311 4,263 4,250 6,493 6,745 7,191 7,100 Peer 1 EVRAZ 2014E EVRAZ 2013 Peer 2 Peer 3 Peer 4 Source: EVRAZ estimates E 2015E EVRAZ ZSMK EVRAZ NTMK 35

37 Cost reduction initiatives at Russian steel mills Main achievements Slab cash costs at EVRAZ NTMK, $/t PCI project completed at EVRAZ NTMK (detailed description on slide 37) Shutdown of inefficient/unprofitable production assets: Plate mill at EVRAZ ZSMK in 2013: NPV effect $30m Coke-chemical plant EKS-2 at EVRAZ ZSMK in 2014: NPV effect $10m E Slab cash costs at EVRAZ ZSMK, $/t Key priorities PCI project at EVRAZ ZSMK (detailed description on slide 37) Energy efficiency programmes and growth of in-house production of electricity Productivity growth programmes targeting savings of c.$15m in 2014 vs E 36

38 Outlook for maintenance and development capex Capex on Russian steel assets in the short-to-medium term will be limited Capex EVRAZ NTMK, $m 126 Key investment projects have been completed or nearing completion: PCI projects at EVRAZ NTMK (completed in 2013) and EVRAZ ZSMK (Q3 2014) E 2015E Maintenance Development Vostochny rolling mill in Kazakhstan to start Capex EVRAZ ZSMK, $m production in Q E 2015E Maintenance Development 37

39 Case studies: PCI projects at Russian steel mills EVRAZ NTMK: Successful implementation of PCI technology First successfully launched PCI project in Russia Total capex of $172m NPV of $273m, IRR 33% One of the low cost steel mills in Russia, EVRAZ NTMK has become even more efficient as a result of PCI introduction EVRAZ ZSMK: PCI project is on track PCI technology is to be launched in Q Most of $199m of total capex already spent NPV of $407m; target IRR 30% 1.2 mtpa the largest PCI capacity installed in Russia First coal injections commenced in June 2014 EVRAZ NTMK blast furnace productivity vs peers, t/m3/day PCI installation capacity in Russia, mtpa 1.2 EVRAZ NTMK Peer EVRAZ NTMK Peer 3 +6% Peer Peer Peer Peer Peer Peer Peer Peer Source: EVRAZ estimates EVRAZ ZSMK Peer 1 EVRAZ NTMK Peer 2 Peer 3 Peer 4 Peer 5 38

40 Unique proposition in construction long steel products EVRAZ benefits from wide proprietary distribution network in Russia 81% clients consider EVRAZ s service the best in Russia (+6% y-o-y)* Loyalty level of steel traders and end users increased to 85% (+3%)* Share of permanent clients is 88%* Products 2013 EVRAZ Market position Peer group proposition sales volume and share*** in Russia, kt** EVRAZ Peer 1 Peer 2 Peer 3 Peer 4 Rebars 1,743 #1 19% Channels and angles 1,106 #1 44% Beams 789 #1 79% * According to Gfk 2013 report ** Excluding intercompany sales *** EVRAZ estimates for

41 Potential for growth of steel products share in construction Overall share of steel frame buildings in Russia is expected to almost double from current 12% to 20% by 2020 Share of buildings using steel frame in 2013* 65% 65% 68% 48% Potential for growth of the steel beam market by 200 ktpa, or by 20% till % 20% 26% 30% Russia Russia 2020 E France Italy Norway USA Sweden UK Building construction for 2013 in Russia*, million m % 3% 10% 35% Housing Social, others Retail and offices Industrial and agricultural * According to SCI, Rosstat ** EVRAZ estimates Building construction %, steel frames** 40

42 Summary Low cost assets with further potential for cost position improvements Reduced development capex going forward, selective implementation of investment projects Leading market positions in Russia across construction steel products Further potential for wider usage of steel in construction in Russia 41

43 Railway products Ilya Shirokobrod Vice-President, Railway Products Division

44 Rails: a high margin business No 1 position in the Russian and North American rail markets Product portfolio has been expanded through development of new high tech products Asset Location Capacity, kt Rails EVRAZ ZSMK rail mill Russia 950 Head-hardened Low-temperature High speed 100 meter First ever certified producer in Russia of headhardened and 100m rails capable of substituting imports in the Russian market EVRAZ NTMK rail mill EVRAZ Pueblo rail mill Russia 510 Standard USA 526 Head-hardened Standard Rails average selling prices vs. variable costs, $/t Production volumes, kt c.$360 1, , , , ,090 1, E Average prices Variable costs E 2015E Russia North America 43

45 Rails are a well invested product line across geographies C.$630m invested in EVRAZ s railway facilities globally to improve quality and increase output of rails Rail mill modernisation projects CAPEX $m NPV $m EVRAZ ZSMK IRR % Capacity increased by 350 ktpa in Russia and 50 ktpa in the USA EVRAZ NTMK After finalising payments for the projects already implemented, maintenance capex requirements are expected to be limited EVRAZ Pueblo Capex in rails, $m Premium pricing for new higher quality rails to further improve profitability and ensure investment returns on projects E 2015E Maintenance Development 44

46 Opportunities for further development of rail business Comprehensive range of rail products to meet any customer requirements: Heavy-haul EVRAZ rail business across the globe High speed Public urban traffic Low temperature For specialised applications (cranes, etc.) Global footprint allows for efficient customer servicing in any geography C.70% of production is covered by long-term agreements International certificates: EN, TSI (Europe), DB specific homologation process, AREMA certification, TRA qualification (Taiwan),TCDD specific qualification Current markets Target markets Current customer base Potential customer base 45

47 Summary Russia and North America are home markets for EVRAZ rails Superior product line with high margins and growing volumes High historic investments in modernisation with best in class assets New products launched Loyal customer base: c.70% production covered by long-term contracts 46

48 North American business Pavel Tatyanin Senior Vice-President, International Business Division

49 North American highlights No 1 producer of rail and large diameter pipe in North America Map of North American operations Well-placed to serve growing oil & gas industry and infrastructure development supported by unique location and long-term customer relationships EVRAZ Red Deer EVRAZ Camrose EVRAZ Calgary EVRAZ Regina EVRAZ Portland EVRAZ Pueblo Diversified product portfolio enhanced by targeted investments into quality and product expansion Steel and pipe mills Production volumes, kt 2,662 2,759 2,570 2,715 Idling of Claymont Steel in Delaware ,085 1, E 2015E Long Claymont Flat ex. Claymont Tubular 48

50 Leader in the North American rail market Successful completion in 2013 on time and within budget of the Pueblo rail mill modernisation: expansion of capacity from 476 ktpa to 526 ktpa currently meeting Japanese level of quality and potentially exceeding it with the next generation rail Research & development in next generation rail and advanced welding technology to be completed in 2014, increasing weld life and quality Shift from standard to premium rails supports profitability growth North American rail demand and domestic capacity, kt Product mix in rails, % CAGR : 4% 1,161 1,182 21% 20% ArcelorMittal 49% 318 SDI 79% 80% 526 EVRAZ 51% E Capacities E Premium Standard 49

51 Large diameter pipe market poised for growth Largest North American market share in large diameter (LD) pipes (47%) favourable locations strong customer relationships Made in Canada advantages pipe leading research & development capability LD pipe market is expected to grow strongly through 2018: growing oil & gas drilling in North America Canadian deposits need the pipelines for development Canadian pipeline capacity utilised at 90% High utilisation of large diameter pipe mills: Regina: fully booked through year end 2014; key focus on productivity and yield Camrose: full crewing from June 2014; key focus on yield Portland: recommissioned in 2013; expected full run from Q1 2015; quality improvements completed North American large diameter pipe market, kt EVRAZ LD pipe mills % 628 Share of announced LD pipe projects by region* 12% 957 2% 8% 3% 1,785 2, E 2015E 2016E 2017E EVRAZ sales Total market 2013 Utilization: EVRAZ Regina (average): 90% EVRAZ Camrose and Portland (average): 35% Main peers (average): 30% Source: EVRAZ estimates, market data * Total demand in = 5.5mt LD pipe mills of peers Share of LD pipe project 50

52 Enhanced presence in the growing OCTG* market Unique location in Western Canada, Colorado and the Dakotas in the US supports Canada, Colorado and Bakkens - key areas of oil and gas renaissance in North America Growth in horizontal and unconventional drilling shifted OCTG demand to high-engineered products premium threading and connections, and heat-treated pipe Challenging market due to unfairly traded imports of OCTG pipe in North America (over 40% imported) Our response: doubled capacity of premium threading in Red Deer (+27 ktpa) in 2013 further development of proprietary premium connections family in expansion of the pipe heat treatment capacity in Calgary (+54 ktpa) by mid-2015 (capex $13m) working on feasibility to install heat treatment capacity in Red Deer (91 ktpa; capex $63m) Market growth by region, mt per year Own heat treat and threading capacity**, kt per year CAGR E 8% 9% 439 Heat treat Threading % E 2013 Heat treat 2017E Heat treat Colorado Dakotas Western Canada * Oil Country Tubular Goods ** Heat treat and threading additions include Red Deer expansion project that is currently under feasibility study 2013 Threading Premium threading Red Deer project Other API threading 2017E Threading 51

53 Summary Uniquely positioned to benefit from the oil & gas renaissance in North America North America s leading rail business with strong customer relationships Strong market fundamentals in large diameter business in Canada for the next 4-5 years Repositioning of the OCTG product portfolio to meet the growing requirements of customers in Western Canada and Colorado / Dakotas (US) Asset optimisation programme largely complete to give additional boost to earnings 52

54 Capital management Giacomo Baizini Chief Financial Officer

55 A reminder of our financial highlights US$ million Change Revenue 14,411 14,726 (2)% EBITDA* 1,821 2,027 (10)% EBITDA margin 12.6% 13.8% (1.1)% CAPEX 902 1,261 (28)% Cash and short-term deposits** 1,611 2,064 (22)% Free cash flow (39)% Total debt*** 8,166 8,440 (3)% Net debt 6,534 6,376 2% * EBITDA represents profit from operations plus depreciation, depletion and amortisation, impairment of assets, foreign exchange loss (gain) and loss (gain) on disposal of property, plant and equipment and intangible assets ** Includes cash and cash equivalents, cash of disposal groups classified as held for sale and short-term bank deposits *** As at 31 December 2013 and 31 December 2012 respectively. Total debt represents nominal value of loans and borrowings plus unpaid interest, finance lease liabilities, nominal effect of cross-currency swaps on principal of rouble-denominated notes. Net debt represents Total debt less cash and liquid short-term financial assets, including those relating to disposal groups classified as held for sale 54

56 In 2013 leverage increased with Raspadskaya debt consolidation $ in millions Total debt 8,440 8,166 Cash 2,064 1, (458) Net debt 6,376 6,534 Debt at 31-Dec-12 Free cashflow (sign reversed) Exchange differences - effect on total debt and cash Other changes in net debt Debt at 31-Dec-13 LTM EBITDA Net leverage 2, , Note: These calculations should not be considered for covenants purposes * Includes inter alia, debt acquired with Raspadskaya of $558m 55

57 Deleveraging is a priority On 31 December 2013 the Group s net leverage* was 3.6x, but there is a clear commitment to reduce this to below 3.0x The plan includes the following actions to achieve this target: 1. Cost reduction of $400m in Reduced capex spending in to no more than $900m per year 3. Continued asset portfolio rationalisation The dividend policy has been revised to allow further regular dividend payments only with a reported net leverage of below 3.0x * Calculated as Net debt divided by LTM EBITDA 56

58 Comprehensive cost cutting plan: update on progress Initiative Q achievements Q1 2014* vs. Q actual results, $m Restructuring of production assets Shutdown and disposal of inefficient iron ore and coal mines in Russia (45) Operating cost savings plan is $350m in 2014 Decrease in coal production expenses Optimisation of raw materials in steelmaking Staff cost optimisation Optimisation in steelmaking Optimisation of tunneling works, maintenance and degassing and ventilation costs at Yuzhkuzbassugol Changes in iron and ferroalloys mix and improved coke yields at EVRAZ ZSMK. Decrease of coke consumption per tonne of pig iron at EVRAZ DMZ at the same production volumes Decrease in average headcount by 2,000 persons in Q vs 2013 (net effect, excluding disposals) Decrease in EVRAZ North America s flat mill costs due to supply of additional slab grades from EVRAZ NTMK Decrease in repairs Optimisation of repairs at EVRAZ ZSMK and EVRAZ NTMK steel mills (15) (11) (8) (6) (5) Cost savings in Q are $94m G&A expenses to be reduced by $100m on an annualised basis from 2015, with $50m already to be achieved in 2014 Decrease in iron ore production expenses Lower mineral extraction and land tax rates at Evrazruda and decrease in prices for auxiliary materials at EVRAZ KGOK (3) Decrease in energy costs Lower electricity consumption at EVRAZ DMZ and Yuzhkuzbassugol (2) Optimisation of other costs Decrease in overtime at EVRAZ North America (2) Total: (94) * Actual results without changes in FX rates 57

59 Limited capex Capex historic performance and outlook, $m excl. VAT Maintenance capex is sustainable at <$600m 1,400 1,200 1,261 Growth in maintenance capex in vs is driven mostly by coal division 1, <900 Coal capex can be flexed depending on market conditions and mining volumes Steel assets are well-invested and capex is mostly channelled to maintenance Major modernisation wave is nearing completion with EVRAZ ZSMK rail mill and PCI capex <$6m in No new major modernisation programmes planned E 2015E Maintenance, Steel & other Maintenance, Coal Maintenance, Iron ore Development, Steel & other Development, Mining Main priority is given to the cash cost reduction projects with IRR >40% Q capex is $158m 58

60 Managing the debt maturity profile Debt* maturities schedule (as at 31 December 2013), $m Q commercial short-term debt covered by cash of >$1.6bn and is rolled over 1,807 Q Rouble bond being refinanced through new PXF of $ m 1,406 1,211 1,276 1,065 1,119 Q maturities to be partially repaid by cash flow and partially refinanced opportunistically: banks (US, EU, Russia, China) and/or capital markets (good track record) Q1 Q2 Q3 Q4 * Principal debt (incl. debt of assets held for sale and excl. interest payments) 59

61 Summary Committed to reduce net leverage to below 3.0x The current levers include: Cost improvements of $400m in 2014 Limitations on capex spending in to $0.9bn per annum Further asset portfolio optimisation Limitations on regular dividends Operational savings of $94m in Q1 2014, on track of meeting 2014 guidance Q capex is $158m Debt maturities are being proactively managed 60