Erdemir Group 2011 First Quarter Consolidated Financial Results 06 May 2011
2 / 26 DISCLAIMER Ereğli Demir Çelik Fabrikaları T.A.Ş. (Erdemir) may, when necessary, make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its Disclosure Policy and has shared such policy with the public through the Erdemir website, in accordance with the Capital Markets Board regulations. As stated in related policy, information contained in forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts. It should be noted that, actual results could materially differ from estimates taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our Company. As a result, forward-looking statements should not be fully trusted or taken as granted. Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation. Therefore, it should be noted that, when a party is coming to a judgement based on estimates and forward-looking statements, our Company may not have made a revision at that particular time. Our Company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time.
3 / 26 Agenda 2011 Market Overview 2011 1Q Results
In EU, sales price was 837 USD/ton as of April 2011 Mar-04 Mar-04 Jul-04 Jul-04 Nov-04 Nov-04 SOURCE: * WSA ** BLOOMBERG Mar-05 Mar-05 Jul-05 Jul-05 Nov-05 Nov-05 Mar-06 Mar-06 Jul-06 Jul-06 Nov-06 Nov-06 Mar-07 Mar-07 Jul-07 Jul-07 Nov-07 Nov-07 Mar-08 Mar-08 Jul-08 Jul-08 Nov-08 Nov-08 Mar-09 Mar-09 Jul-09 Jul-09 Nov-09 Nov-09 Mar-10 Mar-10 Jul-10 Jul-10 Nov-10 Nov-10 Mar-11 4 / 26 Mar-11 Mar-04 525 540 Mar-04 576 Jul-04 Aug-04 656 690 Nov-04 585 Jan-05 Mar-05 505 580 Jun-05 Jul-05 476 Nov-05 Nov-05 466 380 550 Mar-06 Apr-06 605 Jul-06 650 633 Sep-06 Nov-06 Feb-07 Mar-07 Jul-07 Jul-07 676 560 500 Nov-07 970 Dec-07 1.090 Mar-08 1.020 May-08 510 Jul-08 1.269 383 Oct-08 Nov-08 1.130 840 610 Mar-09 390 Mar-09 524 Aug-09 Jul-09 573 520 Nov-09 558 Jan-10 744 720 Mar-10 715 Jun-10 Jul-10 635 575 Nov-10 Nov-10 Apr-11 837 Mar-11 635 855 75% EU27 CRUDE STEEL PRODUCTION ( YoY % )* 100% USA CRUDE STEEL PRODUCTION ( YoY % )* 50% 80% 60% 25% 40% 0% 20% 0% -25% -20% -40% -50% -60% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% CIS CRUDE STEEL PRODUCTION ( YoY % ) * HRC PRICES ( USD/TON )** 1400 1200 1000 800 600 400 200 0 EU NORTH AMERICA CIS BLACK SEA/BALTIC EXPORT
Raw material prices are increasing 10.2007 10.2007 01.2008 01.2008 04.2008 04.2008 07.2008 07.2008 10.2008 10.2008 01.2009 01.2009 04.2009 04.2009 07.2009 07.2009 10.2009 10.2009 01.2010 01.2010 04.2010 04.2010 07.2010 07.2010 10.2010 10.2010 01.2011 01.2011 04.2011 04.2011 10.2007 10.2007 01.2008 01.2008 04.2008 04.2008 07.2008 07.2008 10.2008 10.2008 01.2009 01.2009 04.2009 04.2009 07.2009 07.2009 10.2009 10.2009 01.2010 01.2010 04.2010 04.2010 07.2010 07.2010 10.2010 10.2010 01.2011 01.2011 04.2011 04.2011 USD/TON 800 CHINA 2ND QUALITY COKE SPOT EXPORT PRICE USD/TON 250 CHINA PORT FINE ORE PRICE CFR 700 600 200 500 150 400 300 100 200 100 50 0 0 USD/TON 1.400 ERDEMIR GROUP HRC EFFECTIVE PRICE CIS HRC BLACKSEA/BALTIC EXPORT PRICE FOB USD/TON 70 BRAZIL TUBARAO ROTTERDAM FREIGHT AUSTRALIA CAPE LAMBERT ROTTERDAM FREIGHT 1.200 60 1.000 50 800 40 600 30 400 20 200 10 0 0 SOURCE: BLOOMBERG 5 / 26
Turkish steel consumption increased by 17% in 2011 3M YoY PRODUCTION ( 000 TONS ) 26.067 26.684 23.359 4.257 4.543 4.122 25.133 26.295 4.421 6.629 5.544 1.275 7.510 1.961 19.237 21.810 22.141 20.712 19.666 4.269 5.549 2006 2007 2008 2009 2010 Long Flat Total CONSUMPTION ( 000 TONS ) 23.771 23.578 21.222 21.454 18.048 11.661 11.944 10.686 11.182 8.349 2010 3M 2011 3M Long Flat Total 6.403 5.465 3.038 3.004 10.536 12.110 10.272 9.699 11.634 2.461 3.365 2006 2007 2008 2009 2010 Long Flat Total 2010 3M 2011 3M Long Flat Total SOURCE: TISPA 6 / 26
Turkish Steel Market ( cont d ) IRON AND STEEL PRODUCT EXPORTS ( 000 TONS ) 13.795 12.668 35 0,1 1.244 1.394 1.625 1.630 16.806 94 1.368 2.407 15.861 218 1.651 2.206 14.486 212 1.519 3.523 3.192 0,1 214 880 3.713 20 578 561 9.645 10.890 12.937 11.786 9.232 2.098 2.554 2006 2007 2008 2009 2010 Long Steel Billet, Bloom Flat Steel Slab IRON AND STEEL PRODUCT IMPORTS ( 000 TONS ) Total 2010 3M 2011 3M 11.745 1.317 13.242 12.923 907 845 9.995 214 10.435 56 2.914 13 2.615 27 7.957 8.647 8.006 5.580 6.834 1.943 1.654 1.527 2.497 3.005 3.430 2.345 943 1.190 1.068 772 1.199 2006 2007 2008 2009 2010 Long Steel Billet, Bloom Flat Steel Slab Total 668 564 291 371 2010 3M 2011 3M SOURCE: TISPA 7 / 26
Automotive production and sales increased by 18% and 31% respectively in 2011 3M YoY SOURCE: AUTOMOTIVE MANUFACTURERS ASSOCIATION 8 / 26 AUTOMOTIVE PRODUCTION (000 UNITS) AUTOMOTIVE SALES (000 UNITS) 406 18% 31% 310 214 258 304 203 107 192 2010 3M 2011 3M 2010 3M 2011 3M Domestic Sales Export AUTOMOTIVE CAPACITY UTILIZATION RATIO (%) 67 78 2010 3M 2011 3M Light Vehicles
White goods domestic sales and production increased by 26% and 12% respectively in 2011 3M YoY SOURCE: WHITE GOODS SUPPLIERS ASSOCIATION 9 / 26 WHITE GOODS DOMESTIC SALES (000 UNITS) WHITE GOODS EXPORTS (000 UNITS) 26% 1.106 1.395 2.880 2.990 2010 3M 2011 3M 2010 3M 2011 3M WHITE GOODS PRODUCTION (000 UNITS) 12% 4.080 4.578 2010 3M 2011 3M
After the contraction in 2009, all markets are expanding CHANGES IN SECTOR DEVELOPMENT INDEX (% YoY) 30,0% 25,0% 23,4% 20,0% 19,6% 15,0% 11,7% 10,0% 0,0% 9,5% 8,3% 5,7% 3,1% 6,0% -3,9% -6,2% -0,7% 18,0% 10,5% 9,0% 11,0% 9,0% 8,5% 7,9% -10,0% -8,1% -16,5% -20,0% -16,3% -30,0% -24,0% 2007 2008 2009 2010 2011 (e) 2012 (e) Construction White Goods Mechanical Machinery Automotive SOURCE: TURKSTAT and ERDEMİR GROUP ANALYSES 10 / 26
Sales prices are going up in 2011 YoY Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 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 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 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 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 HRC PRICES ( USD/Ton ) 1.300 1.200 1.100 1.000 900 800 700 600 500 400 300 200 Çin 2.Kalite Kok Kömürü Spot İhraç Fiyatı ( USD/TON ) As of April 2011, EU HRC price is 837 USD, China HRC spot price is 757 USD, USA export HRC price is 763 USD. The prices were 661 USD, 694 USD, 515 USD respectively by the end of 2010. CIS EXPORT HRC BLACKSEA/BALTIC CHINA SPOT HRC WORLD HRC PRICE TRACKER BILLET PRICES ( USD/Ton ) 1.400 EU HRC USA IMPORT HR ERDEMIR GROUP 1.200 1.000 800 As of April 2011, Turkey export price is 635 USD while it was 615 USD in December 2010. 600 400 200 SOURCE: BLOOMBERG BILLET CHINA EXPORT BILLET EXPORT TURKEY BILLET CIS EXPORT BLACKSEA/BALTIC ERDEMIR GROUP 11 / 26
12 / 26 Agenda 2011 Market Overview 2011 1Q Results
13 / 26 ERDEMİR GROUP KEY FIGURES 2011 1Q 2010 1Q 2010 2009 Liquid Steel Production (000 Tons) 1.837 1.895 7.311 6.619 Slab Production (1) (000 Tons) 1.598 1.362 5.674 4.569 Flat Steel Production (2) (000 Tons) 1.498 1.322 5.373 4.812 Long Steel Production (000 Tons) 187 473 1.420 1.869 Flat Steel Shipments (000 Tons) 1.471 1.234 5.123 5.128 Long Steel Shipments (000 Tons) 197 451 1.393 1.858 Net Sales Revenue (M. USD) 1.291 1.055 4.427 3.404 EBITDA (M. USD) 281 193 948 247 Net Profit For The Year (M. USD) 166 107 511-109 All figures are on IFRS consolidated basis unless stated otherwise. (1) Total slab production of Ereğli and İskenderun Plants. (2) Total flat steel production of Ereğli and İskenderun Plants.
Liquid steel production was 1,8 million tons in 2011 3M 14 / 26 LIQUID STEEL PRODUCTION ( 000 TONS ) 7.311 6.619 6.122 1.884 1.837 1.895 2010 2011 2010 2010 2009 2008 4Q 1Q
Production was 1,7 million tons in 2011 3M 15 / 26 PRODUCTION VOLUMES ( 000 TONS ) 6.793 1.420 Long 6.681 1.869 6.132 1.842 1.685 1.795 187 353 473 443 418 335 1.502 Cold 3.871 Long 1.590 Cold 3.222 1.950 Long 1.486 Cold 2.696 1.046 1.080 987 Hot Hot Hot 2010 2011 2010 2010 2009 2008 4Q 1Q Hot Cold Long Total
CRC sales volume increased by 29% in 2011 1Q YoY 16 / 26 SALES VOLUME ( 000 TONS ) 1.923 1.668 371 197 457 415 1.685 451 321 1.095 1.056 913 6.986 6.516 1.393 1.858 Long Long 1.456 1.665 Cold Cold 3.667 3.464 Hot Hot 5.895 1.963 Long 1.471 Cold 2.461 Hot 2010 2011 2010 2010 2009 2008 4Q 1Q HRC CRC Long Total
Net sales revenue increased by 28% in 2011 1Q YoY 17 / 26 NET SALES REVENUE ( MILLION TL ) 6.633 6.800 890 Exp. 5.266 1.218 Exp. 1.217 Exp. 1.921 325 2.028 414 1.583 162 5.743 4.049 5.583 1.596 1.614 1.421 Dom. Dom. Dom. 2010 2011 2010 2010 2009 2008 4Q 1Q Domestic Export Total
Sales to automotive sector increased in 2011 1Q 18 / 26 2011 3M FLAT STEEL DOMESTIC SALES BREAKDOWN (%) 2010 3M FLAT STEEL DOMESTIC SALES BREAKDOWN (%) 5% 11% 5% 7% 3% 2% 75% 29% 1% 6% 4% 1% 6% 4% 10% 93% 50% 11% 15% 12% 7% 11% Pipe and Profile Industry Secondary Production Packaging Industry Heating Equipment General Manufacturing Steel Service Centers Wholesales Automotive and Components Household Appliances Shipbuilding & Heavy Industry Pipe and Profile Industry Secondary Production Packaging Industry Heating Equipment General Manufacturing Steel Service Centers Wholesales Automotive and Components Household Appliances Shipbuilding & Heavy Industry 2011 3M LONG STEEL DOMESTIC SALES BREAKDOWN (%) 2010 3M LONG STEEL DOMESTIC SALES BREAKDOWN (%) 4% 3% 19% 2% 6% 3% 21% 96% 21% 14% 13% 81% 45% 27% 5% 17% Debar Producers Construction High Carbon Qualities Other Profile Producers Commercial Qualities Special Qualities Debar Producers Construction High Carbon Qualities Other Profile Producers Commercial Qualities Special Qualities
Flat and long steel sales to EU countries increased in 2011 19 / 26 2011 3M FLAT STEEL EXPORTS BREAKDOWN (%) 3% 13% 0,1% 2010 3M FLAT STEEL EXPORTS BREAKDOWN (%) 2% 7% 20% 25% 7% 58% 84% 13% EU MENA S. America Other EU MENA S. America Asia Other 2011 3M LONG STEEL EXPORTS BREAKDOWN (%) 2010 3M LONG STEEL EXPORTS BREAKDOWN (%) 1% 31% 4% 19% 69% 99% EU MENA EU MENA
In 2011 3M, Erdemir Group average flat and long steel prices were 739 USD/ton and 663 USD/ton respectively Jan-08 Jan-08 Feb-08 Feb-08 Mar-08 Mar-08 Apr-08 Apr-08 May-08 May-08 Jun-08 Jun-08 Jul-08 Jul-08 Aug-08 Aug-08 Sep-08 Sep-08 Oct-08 Oct-08 Nov-08 Nov-08 Dec-08 Dec-08 Jan-09 Jan-09 Feb-09 Feb-09 Mar-09 Mar-09 Apr-09 Apr-09 May-09 May-09 Jun-09 Jun-09 Jul-09 Jul-09 20 / 26 Aug-09 Aug-09 Sep-09 Sep-09 Oct-09 Oct-09 Nov-09 Nov-09 Dec-09 Dec-09 Jan-10 Jan-10 Feb-10 Feb-10 Mar-10 Mar-10 Apr-10 Apr-10 May-10 May-10 Jun-10 Jun-10 Jul-10 Jul-10 Aug-10 Aug-10 Sep-10 Sep-10 Oct-10 Oct-10 Nov-10 Nov-10 Dec-10 Dec-10 Jan-11 Jan-11 Feb-11 Feb-11 Mar-11 Mar-11 USD/TON Erdemir Group Flat Sales Price Erdemir Group Flat Cost of Sales USD/TON Erdemir Group Billet Sales Price Erdemir Group Billet Cost of Sales Flat steel prices increased by 16% on average in 2011 3M YoY. Long steel prices increased by 34% on average in 2011 3M YoY.
Net profit increased by 62% in 2011 1Q YoY 21 / 26 EBITDA ( MILLION TL ) 1.600 1.400 1.200 1.000 800 600 400 200 0 369 19,2% 21,7% 441 290 18,3% 1.420 21,4% 382 7,3% 775 48,0% 40,0% 32,0% 24,0% 16,0% 11,4% 8,0% 0,0% -8,0% 2010 2011 2010 2010 2009 2008 4Q 1Q EBITDA EBITDA Margin NET PROFIT/(LOSS) ( MILLION TL ) 800 600 400 200 0-200 -400-600 -800-1.000 12,8% 7,2% 260 138 10,1% 766 11,5% 160-3,2% -169 2010 2011 2010 2010 2009 2008 4Q 1Q Net Profit/(Loss) Net Profit/(Loss) Margin 211 3,1% 18,0% 12,0% 6,0% 0,0% -6,0% -12,0% -18,0% -24,0% -30,0%
1,3 billion USD liquid funds at the end of 2011 1Q 22 / 26 BORROWINGS ( MILLION USD ) 3.785 BORROWINGS MATURITY PROFILE ( MILLION USD ) ST Portion of LT Debt Short-Term Debt Long-Term Debt Liquid Funds 2.998 2.767 1.368 3.022 113 600 1.468 72 313 539 1.083 2.140 347 264 1.528 504 537 20 907 2.211 1.491 644 708 1.114 608 62 1.861 1.284 1.809 1.847 1.024 90 423 76 57 39 21 387 357 324 290 5 1 157 25 1 0,1 12 6 2006 2007 2008 2009 2010 2011 1Q 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Principal Interest
Raw materials made up 66% of the cost of goods sold in 2011 3M COST OF PRODUCTION BREAKDOWN* - % 5% 4% 1% 5% 5% 6% 6% 7% 6% 6% 6% 8% 12% 12% 13% 66% 67% 66% 2011 3M 2010 2009 Raw Materials Personnel Expenses Energy Consumables Depreciation Other RAW MATERIALS BREAKDOWN- % 8% 9% 9% 13% 12% 10% 8% 2% 10% 39% 42% 31% 33% 35% 40% 2011 3M 2010 2009 Coal Iron Ore Slab Scrap Other * EXCLUDING INVENTORY WRITEDOWNS AND PROVISION RELEASED 23 / 26
Flat cost per ton excluding raw materials was realised as 188 USD/ton in 2011 1Q FLAT PRODUCTS ( USD/TON )* 207 135 131 151 72 4.871 61 88 99 90 85 78 73 83 75 94 90 86 89 74 85 101 95 109 111 82 77 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2008 2009 2010 2011 LONG PRODUCTS ( USD/TON )* 161 145 Fixed Cost Per Ton Variable Cost Per Ton 115 100 91 76 79 81 85 71 75 52 60 62 67 66 42 46 51 52 56 59 59 56 46 38 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2008 2009 2010 2011 Fixed Cost Per Ton Variable Cost Per Ton * Conversion Cost 24 / 26
Capital expenditures of 183 million USD is planned for 2011 25 / 26 ( M USD ) 954 116 693 672 361 130 556 36 549 332 543 838 520 183 136 129 12 22 89 125 107 94 385 164 2002-2005 2006 2007 2008 2009 2010 2011 2012 - After İskenderun Investments Ereğli Investments
Number of employees was 13.609 in 2011 March 26 / 26 NUMBER OF EMPLOYEES 15.063 14.637 14.056 13.553 13.609 13.161 2006 2007 2008 2009 2010 2011 March
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