Erdemir Group 2009 Consolidated Financial Results 22 February 2010 1 /28
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. 2 /28
Agenda 2009 Market Overview 2009 Results Management Policies and Measures Against Downturn and Results 3 /28
In EU27 countries, crude steel production increased by 35% in December 2009 YoY. EU27 CRUDE STEEL PRODUCTION ( YoY % )* EU HRC PRICE ( USD/TON )** 40% 1400 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 311 307 576 695 466 641 716 723 488 637 520 1269 1200 1000 800 600 400 200 0 SOURCE: * WSA ** BLOOMBERG 4 /28
In USA, crude steel monthly production is higher than the previous year since November 2009. USA CRUDE STEEL PRODUCTION ( YoY % )* NORTH AMERICA HRC PRICE ( FOB USD/TON )** 50% 30% 10% -10% 600-30% -50% -70% Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 270 313 400 470 525 650 500 510 583 720 1090 620 1200 1000 800 400 200 0 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 SOURCE: * WSA ** BLOOMBERG 5 /28
In CIS, there is an upward trend in falling prices since May 2009. 60% CIS CRUDE STEEL PRODUCTION ( YoY % ) * CIS BLACK SEA/BALTIC EXPORT HRC PRICE ( FOB USD/TON )** 50% 40% 1000 30% 20% 10% 0% 600-10% -20% -30% -40% -50% Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 280 250 380 355 500 585 533 605 505 595 520 533 970 1130 1200 800 400 200 0 SOURCE: * WSA ** BLOOMBERG 6 /28
HRC prices are ramping up. USD/TON 800 700 600 CHINA 2ND QUALITY COKING COAL SPOT EXPORT PRICE CHINA PORT FINE ORE PRICE CFR USD/TON 250 200 500 400 150 300 100 200 100 50 0 0 01.2007 03.2007 05.2007 07.2007 09.2007 11.2007 01.2008 03.2008 05.2008 07.2008 09.2008 11.2008 01.2009 03.2009 05.2009 07.2009 09.2009 11.2009 01.2010 01.2007 03.2007 05.2007 07.2007 09.2007 11.2007 01.2008 03.2008 05.2008 07.2008 09.2008 11.2008 01.2009 03.2009 05.2009 07.2009 09.2009 11.2009 01.2010 EREĞLİ HRC EFFECTIVE PRICE CIS SLAB BLACKSEA/BALTIC EXPORTPRICE FOB USD/TON USD/TON 1.400 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 01.2007 03.2007 05.2007 07.2007 09.2007 11.2007 01.2008 03.2008 05.2008 07.2008 09.2008 11.2008 01.2009 03.2009 05.2009 07.2009 09.2009 11.2009 01.2010 01.2007 03.2007 05.2007 07.2007 09.2007 11.2007 01.2008 03.2008 05.2008 07.2008 09.2008 11.2008 01.2009 03.2009 05.2009 07.2009 09.2009 11.2009 01.2010 RAW MATERIAL PRICES ( AUGUST 2008 JANUARY 2010 ) PELLET - 37 % 135 USD/TONS IRON ORE - 13 % 126 USD/TONS COKE - 52 % 340 USD/TONS SOURCE: BLOOMBERG 7 /28
Idle capacities are being utilized again. (January 2008:100) 110 105 100 95 90 85 80 75 WORLD CRUDE STEEL PRODUCTION WORLD HOT METAL PRODUCTION 70 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 World wide hot metal production is increasing rapidly in last months reaching to 80 million tons in December 2009 from 62 million tons in December 2008. Similarly, world wide crude steel production is up to 106 million tons in December 2009 from 81 million tons in December 2008. SOURCE: WSA 8 /28
Turkish steel market was rapidly developing until global downturn. PRODUCTION ( 000 TONS ) 23.044 19.601 429 343 3.903 3.760 26.095 475 26.700 395 4.257 4.543 25.111 129 4.406 15.498 18.712 21.363 21.762 20.576 2005 2006 2007 2008 2009 Long Flat Alloy Steel Total CONSUMPTION ( 000 TONS ) 20.841 18.365 1.122 23.715 1.258 21.400 908 882 10.937 9.831 10.436 8.859 7.671 1.236 17.963 8.598 9.888 11.520 9.728 9.410 2005 2006 2007 2008 2009 SOURCE: TISPA Long Flat Alloy Steel 9 /28 Total
Turkish Steel Market ( cont d ) IRON AND STEEL PRODUCT EXPORTS ( 000 TONS ) 12.668 13.795 35 9.494 1.394 1.244 1.625 1.630 1.131 1.902 9.645 10.890 6.460 16.806 94 1.368 2.407 12.937 15.885 218 1.648 2.213 11.806 2005 2006 2007 2008 2009 Long Steel Billet, Bloom Flat Steel Slab Total IRON AND STEEL PRODUCT IMPORTS ( 000 TONS ) 9.344 11.745 1.317 13.242 12.923 907 845 975 8.647 8.006 7.957 6.653 9.890 214 5.532 2.497 3.005 3.377 1.527 818 898 943 1.190 1.068 768 2005 2006 2007 2008 2009 Long Steel Billet, Bloom Flat Steel Slab Total SOURCE: TISPA 10 /28
Automotive production and sales have decreased by 24% and 16% respectively in 2009 YoY. AUTOMOTIVE PRODUCTION (000 UNITS) AUTOMOTIVE SALES (000 UNITS) 1.147 870 910 629 527 576 2008 2009 2008 2009 Domestic Sales Export AUTOMOTIVE CAPACITY UTILIZATION RATIO (%) 80 59 2008 2009 Light Vehicles SOURCE: AUTOMOTIVE MANUFACTURERS ASSOCIATION 11 /28
After the contraction in 2009, growth is expected in all markets in 2010. SECTOR DEVELOPMENT INDEX (2000:100) 2008 2009 2010 (e) 2011 (e) 146,3 127,3 133,7 141,7 271,1 269,2 285,0 305,0 142,6 127,5 133,8 147,2 184,2 153,8 164,8 182,8 156,8 126,8 136,8 153,9 216,3 164,4 171,2 195,8 Construction Domestic Appliances Electrical Equipment Machinery Production Metal Goods Automotive In 2009; all sectors have contracted as compared to 2008. In 2010 and 2011, all industries are expected to recover by 5-15%. SOURCE: TSI and ERDEMİR GROUP ANALYSES 12 /28
Sales prices were steady in 2009. HRC PRICES ( USD/Ton ) 1.400 1.200 1.000 800 600 400 200 Çin 2.Kalite Kok Kömürü Spot İhraç Fiyatı ( USD/TON ) Presently, CIS HRC export price is 575 USD, China HRC spot price is 558 USD, US export HRC price is 545 USD. The prices were 390 USD, 577 USD, 515 USD respectively by the end of 2008. 0 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 CIS EXPORT HRC BLACKSEA/BALTIC CHINA SPOT HRC WORLD HRC PRICE TRACKER BILLET PRICES ( USD/Ton ) 1.400 EU HRC USA IMPORT HR ERDEMİR GRUBU 1.200 1.000 800 600 CIS export price is reaching to 465 USD from 365 USD in December 2008. 400 200 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 SOURCE: BLOOMBERG BILLET CHINA EXPORT BILLET EXPORT TURKEY BILLET CIS EXPORT BLACKSEA/BALTIC ERDEMIR GROUP 13 /28
Agenda 2009 Market Overview 2009 Results Management Policies and Measures Against Downturn and Results 14 /28
ERDEMİR GROUP KEY FIGURES 2009 2008 2007 Liquid Steel Production (000 Tons) 6.619 6.122 5.486 Slab Production (1) (000 Tons) 4.569 3.995 3.680 Flat Steel Production (2) (000 Tons) 4.812 4.182 4.206 Long Steel Production (000 Tons) 1.869 1.950 1.652 Flat Steel Shipments (000 Tons) 5.128 3.932 4.295 Long Steel Shipments (000 Tons) 1.858 1.963 1.652 Net Sales Revenue (M. USD) 3.385 5.240 4.117 EBITDA (M. USD) 247 597 843 Net Profit For the Year (M. USD) -109 175 541 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. 15 /28
Liquid steel production increased by 8% in 2009 YoY. LIQUID STEEL PRODUCTION ( 000 TONS ) 1.906 6.619 8% 6.122 5.486 4.713 3.085 1.590 2009 1Q 2009 1H 2009 9M 2009 2008 2007 16 /28
In 2009, finished goods production increased by 8% compared to 2008. PRODUCTION VOLUMES ( 000 TONS ) 3.316 1.092 4.968 1.418 1.160 1. 713 6.681 1.869 1.590 8% 6.132 5.858 1.950 1.652 Long Long Long Long 1.486 CRC CRC 1.632 Cold Cold 1.736 562 299 875 700 1.524 2.390 3.222 HRC 2.696 Hot HRC 2.574 Hot 2009 1Q 2009 1H 2009 9M 2009 2008 2007 Hot Cold Long Total 17 /28
Sales volume increased by 19% in 2009 YoY. SALES VOLUME ( 000 TONS ) 1.725 559 326 840 3.566 1.066 762 1.738 5.155 1.385 1.214 2.556 1. 831 6.986 1.858 1.665 3.464 19 % 5.895 5.947 1.652 1.963 Long Long 1.688 1.471 Cold Cold 2.461 2.607 Hot Hot 2009 1Q 2009 1H 2009 9M 2009 2008 2007 HRC CRC Long Total 18 /28
31% of sales revenue of 2009 was recorded in 4Q09. NET SALES REVENUE ( MILLION TL ) 23 % 6.800 3.607 1. 629 5.236 1.217 1.218 5.357 763 2.304 1.002 5.583 1.065 422 642 785 1.519 2.605 4.019 4.594 2009 1Q 2009 1H 2009 9M 2009 2008 2007 Domestic Export Total 19 /28
Sales to pipe and profile industry increased while sales to automotive, components and household appliances decreased in 2009. FLAT STEEL DOMESTIC SALES BREAKDOWN ( %) FLAT STEEL EXPORTS BREAKDOWN ( %) 2% 5% 4% 5% 15% 12% 13% 44% 10% 2% 2% 3% 5% 74% 26% 8% 12% 58% Pipe and Profile Industry Steel Services Centers EU India Traders Automotive and Components Brazil Egypt Packaging Industry Heating Equipment Vietnam China Household Appliances Other USA Other LONG STEEL DOMESTIC SALES BREAKDOWN ( %) LONG STEEL EXPORTS BREAKDOWN ( %) 14% 15% 8% 3% 13% 67% 40% 4% 4% 4% 5% 10% 33% 46% 22% 12% Debar Producers Commercial Qualities Special Qualities Profile Producers High Carbon Qualities Other Egypt Israel Saudi Arabia EU Iran Syria Indonesia Other 20 /28
In 2009, Erdemir Group average flat and long steel prices were 518 USD/ton and 439 USD/ton respectively. USD/TON Flat Sales Price Flat Cost of Sales 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 USD/TON Billet Sales Price Billet Cost of Sales 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 Flat steel prices increased by 31% on average during 12 months of 2009. Increase in average flat product price was 18% in last quarter of 2009. 21 /28
78% of total EBITDA is generated in 4Q09. EBITDA ( MILLION TL ) 1.097 775 297 382 137 86 85 2009 1Q 2009 1H 2009 9M 2009 2008 2007 NET PROFIT/LOSS ( MILLION TL ) 704 228-164 -196-291 2009 1Q 2009 1H 2009 9H 2009 2008 2007 122-168 22 /28
In 2009, borrowings started to decline for the first time in the last 5 years. BORROWINGS ( MILLION USD ) ST portion of LT Debt Short-Term Debt 2.998 2.768 BORROWINGS MATURITY PROFILE ( MILLION USD ) 1.524 Long-Term Debt 600 Liquid Funds 2.140 537 20 347 907 1.468 264 72 1.076 48 313 2.211 478 399 429 628 1.083 539 1.528 1.491 644 504 708 189 157 356 2005 2006 2007 2008 2009 01.01.2010-31.12.2010 01.01.2011-31.12.2011 01.01.2012-31.12.2012 01.01.2013-31.12.2013 01.01.2014 - After 23 /28
Agenda 2009 Market Overview 2009 Results Management Policies and Measures Against Downturn and Results 24 /28
Lowest level of fixed costs was attained in the year 2009. ( MILLION USD ) Total = 1.276 Total = 1.418 80 88 98 107 112 109 143 93 113 Total = 1.059 111 123 141 194 217 227 265 236 244 276 205 149 139 136 147 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 2009 Fixed Cost Variable Cost 25 /28
Fixed and variable costs decreased in 2009 YoY. FLAT PRODUCTS ( USD/TON ) 207 156 136 138 154 135 131 151 90 85 78 90 70 4.871 59 63 66 72 61 88 99 4.871 73 83 75 94 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 2009 4.816 4.816 LONG PRODUCTS ( USD/TON ) 150 Fixed Cost per Ton Variable Cost per Ton 145 161 102 99 125 115 91 76 100 79 52 33 34 48 53 42 38 62 67 46 51 52 46 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2007 2008 2009 Fixed Cost per Ton Variable Cost per Ton 26 /28
No major capex in 2009 due to the completion of a greater portion of investments in 2008. ( M USD ) 940 116 694 673 362 130 588 37 27 824 332 543 524 205 35 1 12 146 112 80 5 18 129 169 13 94 67 2002-2005 2006 2007 2008 2009 2010 2011 2012 - After İskenderun Investments Erdemir Mining Investments Ereğli Investments As of 2009 year-end, capital expenditures worth 3.0 billion USD have been completed and 0.3 billion USD yet to be completed. 27 /28
Number of employees decreased about 10% YoY and 13% since 2007 due to voluntary redundancies and retirements. NUMBER OF EMPLOYEES 15.015 15.063 14.598 14.637 14.056 13.161 2004 2005 2006 2007 2008 2009 28 /28
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