3 FINANCIAL AND OPERATIONAL RESULTS
Despite the drop in global iron ore prices, the Company’s EBItDA margin remains consistently high
of products are high added value 88 %
of the Company’s costs denominated in roubles80 %
of revenue in USD57 %
Drop in Company revenue (2015 vs 2013)–36 %Drop in EBItDA (2015 vs 2013)–36 %
2014 2015
%USD/t
130
100
70
2013
10
20
EBITDA margin
Source: Bloomberg (62% Fe, CFR China), Company data
Adjusting to market conditions
Ore price
31.3 % 30.8 % 32.6 %
30
Maintaining operational efficiency despite the changing market environment with an EBITDA margin of over 30%
Drop in global iron ore prices (2015 vs 2013)–54 %
/ CONtENt
FINANCIAL AND OPERATIONAL REsULTs
A major part of the Company’s revenue is earned from
shipments to Russian consumers, which is why the state
of the Russian economy has a significant impact
on the Company’s performance.
International sanctions and low oil prices resulted in lower
economic growth rates forecast by the International
Monetary Fund for Russia (-3.7% in 2015, -1.0% in 2016,
1.0% in 2017).
However, the obvious need to support economic activity
in Russia will result in the development of infrastructure
projects. In view of this, Metalloinvest closely monitors
the largest federal investment programmes and strives
to take advantage of the opportunities provided by these
projects.
In 2015, the Company continued to implement its initiatives
aimed at decreasing ore extraction and processing costs
and improving competitiveness in the global market through
the optimisation of ore processing and by increasing
operational efficiency.
The modernisation of the Company’s production assets
and better operational efficiency enabled us
to achieve our production targets in 2015. With
the commissioning of key production facilities, we are
able to expand production and improve the quality of our
iron ore, HBI/DRI and steel products.
Andrey UgarovFirst Deputy CEO, Production Director
«
» IN 2015, tHE COMPANY CONtINUED tO WORK tOWARDS DECREASING ORE EXtRACtION AND PROCESSING COStS.
Production at Lebedinsky GOK in 2011–2015, million tonnes
CONCENTRATE
PELLETS
HBI
2011 2012 2013 2014 2015
21.8
8.9
2.3
21.2
8.8
2.4
20.3
8.9
2.6
20.5
9.0
2.4
21.1
9.0
2.6
Production at Mikhailovsky GOK in 2011–2015, million tonnes
CONCENTRATE
PELLETS
SINTERING ORE
2011 2012 2013 2014 2015
16.4
9.9
2.0
17.0
10.1
1.6
16.6
9.9
1.5
16.7
9.9
1.5
16.8
11.0
1.5
Production
In 2015, the Company increased output
of key products y-o-y:
Annual HBI production at Lebedinsky GOK increased
by 8.1% y-o-y (in 2014, the enterprise was undergoing
long-term renovation and partial upgrade of HBI-2 Plant).
Operational results
Mining segment
Both Lebedinsky GOK and Mikhailovsky GOK increased
concentrate production. At Lebedinsky GOK, this was
due to higher magnetic iron content in the ore and its
recovery into concentrate. At Mikhailovsky GOK, the results
came on the back of shorter repair times and higher
production rates driven by a change in the physical,
mechanical and technological properties of the ore
mixture. In 2015, concentrate production at Mikhailovsky
GOK grew by 0.6% to 16.8 million tonnes.
The launch of Pellet Plant #3 and the scheduled
reduction in repair time significantly increased pellet
production at Mikhailovsky GOK (up 10.3% y-o-y). Pellet
production at Lebedinsky GOK increased by 0.3% due
to optimisation works at the pellet plants.
Core products, million tonnes
IRON ORE (INC. SINTERING ORE)
PELLETS
HBI/DRI
hot metal
crude steel
38.7
22.7
5.3
2.34.5
39.5
23.8
5.4
2.54.5
2014 2015
«
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5150
/ CONtENt
Steel segment
Pellet production at OEMK reached 3.8 million tonnes
(up 2.4% y-o-y) on the back of shorter repair times
and the improved performance of the pellet plant.
OEMK saw a record growth in steel production: up 2.6%
y-o-y to 3.5 million tonnes due to improved productivity
at its electric arc furnaces. steel production at Ural
steel dropped by 8.1% y-o-y, down to 1.0 million tonnes
following changes in the demand structure.
scheduled renovation of metallisation units led to a minor
drop in OEMK’s DRI production by 1.1% y-o-y.
Improved blast furnace processes resulted in higher output
at the blast furnace shop at Ural steel, thus boosting pig
iron production by 7.6%.
Production volumes at OEMK in 2011–2015, million tonnes
DRI
STEEL
PELLETS
2.7
3.3
3.7
2.8
3.3
3.7
2.8
3.2
3.8
2.9
3.4
3.7
2.8
3.5
3.8
2011 2012 2013 2014 2015
Production volumes at OEMK in 2011–2015, million tonnes
2011 2012 2013 2014 2015
STEEL
PIG IRON
2.6
2.5
2.3
2.1
1.5
2.2
1.1
2.3
1.0
2.5
» RECORD GROWtH IN StEEL PRODUCtION At OEMK: 3.5 MIL-LION tONNES
Shipments
Iron ore product shipments
In 2015, pellets accounted for the majority of iron ore
products shipped by Metalloinvest (52.2% of the total
volume), with iron ore (concentrate and sintering ore),
HBI/DRI and other products making up 39.1%, 8.6%
and 0.1%6, respectively.
Iron ore product shipments, billion tonnes
2011 2012 2013 2014 2015
IRON ORE
PELLETS
HBI/DRI
OTHER
12.7
13.6
2,3
0.4
12.5
14.1
2.3
0.3
11.1
13.7
2.4
0.04
11.0
13.9
2.3
0.2
10.8
14.4
2.4
0.2
2011 2012 2013 2014 2015
Iron ore product shipments in 2011–2015,
27.627.5 29.2
27.3
29.1
billion tonnes
In 2015, the share of domestic iron ore shipments grew
to 66% (59% in 2014). These changes are attributable
to an increase in shipments to Russian consumers
(MMK, NLMK, Evraz and severstal). shipments
to European and Asian customers decreased on a pro-
rata basis by 4 p.p. and 1 p.p., respectively, amounting
to 19% and 10%. shipments to the Middle East and North
Africa (MENA) remained flat y-o-y.
Shipments from Lebedinsky GOK in 2011–20157,
2011 2012 2013 2014 2015
IRON ORE
PELLETS
HBI/DRI
OTHER
11.2
5.3
2.4
0.5
10.7
5.2
2.4
0.5
9.5
5.0
2.6
0.5
9.6
5.4
2.4
0.5
10.4
5.2
2.6
0.3
billion tonnesShipments from Mikhailovsky GOK in 2011–20158, billion tonnes
2011 2012 2013 2014 2015
CONCENTRATE
PELLETS
SINTERING ORE
5.4
10.1
1.7
5.8
10.2
1.4
5.7
9.9
1.9
5.8
9.9
1.3
4.7
10.9
1.3
6 HBI and pellet fines.7 Including intra-group shipments.8 Including intra-group shipments.
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5352
/ CONtENt
Iron ore product shipments by region in 2011–2015, billion tonnes
2011 2012 2013 2014 2015
РОССИЯ ЕВРОПА АЗИЯ БЛИЖНИЙ ВОСТОК И СЕВЕРНАЯ АФРИКАПРОЧИЕ
9,1
7,0
10,9
1,1 0,9
14,8
6,6 6,9
0,6 0,3
16,2
5,44,7
0,7 0,3
16,2
6,3
3,1
1,1 0,7
18,3
5,2
2,7
1,00,4
Shipments of pig iron and steel products
steel products still account for 70% of steel
segment shipments. In 2015, this figure fell slightly
with a proportional increase in pig iron shipments.
Pig iron and steel product shipments in 2011–2015, %
2011 2012 2013 2014 2015
1.1
5.2
0.8
5.1
1.4
4.3
1.8
4.2
1.8
4.2
PIG IRON
STEEL PRODUCTS 2011 2012 2013 2014 2015
Pig iron and steel product shipments in 2011–2015, million tonnes
6.05.95.95.7
6.4
Shipments from OEMK and Ural Steel in 2011-2015, million tonnes
2011 2012 2013 2014 2015
DRI (OEMK)
PIG IRON (URAL STEEL)
STEEL PRODUCTS (URAL STEEL)STEEL PRODUCTS (OEMK)
0.1
1.1
2.1
3.1
0.1
0.8
2.0
3.1
0.1
1.4
1.2
3.1
0.2
1.8
1.0
3.2
0.1
1.8
0.9
3.3
Domestic shipments accounted for 28% of the total
volume of steel product shipments (down 4 p.p. y-o-y).
At the same time, shipments to European customers grew
to 20% (up 8 p.p.), mainly driven by increased shipments
to Italy. In 2015, an increase in shipments to Algeria,
Tunisia and Turkey triggered a 3 p.p. y-o-y growth to 29%
in the share of shipments to the MENA region.
Steel product shipments by region in 2011–2015, million tonnes
2011 2012 2013 2014 2015
РОССИЯ ЕВРОПА АЗИЯ БЛИЖНИЙ ВОСТОК И СЕВЕРНАЯ АФРИКАПРОЧИЕ
2,4
0,6 0,5
1,6
1,2
2,3
0,4
0,6
1,4
1,2
2,0
0,6
0,2
1,6
1,4
1,9
0,7
0,2
1,5 1,6 1,7
1,2
0,2
1,7
1,3
повторяющийс абзац
IN 2015, DOMESTIC STEEL PRODUCT SHIPMENTS
INCREASED BY 12.9%, WHILE SHIPMENTS
TO EUROPEAN CUSTOMERS DROPPED BY 17.4%
Over the last four years, pig iron shipments have consistently
grown, while steel product shipments have decreased.
High-margin product shipments remain largely unchanged
since 2012.
Domestic shipments of steel products have substantially
declined over the last five years. In 2015, they declined
by 10%. At the same time, 2015 shipments to the MENA
region grew by 13%.
STARTING FROM 2014, THE SHARE OF PIG IRON
SHIPMENTS FROM URAL STEEL AS A PROPORTION
OF THE TOTAL GREW SUBSTANTIALLY.
IN 2014, IT AMOUNTED TO 28%
AND 1.8 MILLION TONNES, REMAINING
UNCHANGED IN 2015.
2011 2012 2013 2014 2015 2015 vs 2014
Russia 9.1 14.8 16.2 16.2 18.3 +13.0%
Europe 7.0 6.6 5.4 6.3 5.2 –17.5%
Asia 10.9 6.9 4.7 3.1 2.7 –12.9%
MENA 1.1 0.6 0.7 1.1 1.0 –9.1%
Other 0.9 0.3 0.3 0.7 0.4 –42.9%
2011 2012 2013 2014 2015 2015 vs 2014
Russia 2.4 2.3 2.0 1.9 1.7 –10.5%
Europe 0.6 0.4 0.6 0.7 1.2 +71.6%
Asia 0.5 0.6 0.2 0.2 0.2 0.0%
MENA 1.6 1.4 1.6 1.5 1.7 +13.0%
Other 1.2 1.2 1.4 1.6 1.3 –18.7%
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5554
/ CONtENt
IN 2015, METALLOINVEST WORKED TO SUSTAIN
ITS LIQUIDITY POSITION AND OPTIMISE
THE COMPANY’S DEBT STRUCTURE. FUNDS RAISED
ON THE DOMESTIC AND INTERNATIONAL CAPITAL
MARKETS ALLOWED THE COMPANY TO IMPROVE
ITS DEBT REPAYMENT SCHEDULE.
Revenue
In 2015, the Company’s revenue dropped by 31.0%
to UsD 4,393 million (2014: UsD 6,367 million) due to a sharp
slump in global iron ore and steel prices (by 42% and 32%,
respectively).
The mining segment generated revenue of UsD 2,089 million
or 47.6% of the Company’s consolidated revenue
(2014: 48.7%). The 32.7% y-o-y decrease in the segment’s
revenue was due to declining prices for iron ore products an
d the depreciation of the rouble.
20 %
12 %
11 %
41 %
4 % 12 %
2015 revenue by product
IRON ORE
PELLETS
HBI
PIG IRON
STEEL PRODUCTS
OTHER
42.7 %
22.0 % 21.0 %
14.7 %
13.1 % 41.1 %
2014–2015 revenue by market
RUSSIA
EUROPE
ASIA (INCL. CHINA)
MENA
OTHER
16.1 %
16.4 %
5.8 %
7.1 % 2014
2015
The steel segment accounted for 48.3% of the Company’s
consolidated revenue (2014: 48.1%). The decrease
in the segment’s revenue by 30.6% to UsD 2,123 million was
triggered by declining prices for pig iron and steel products
and the depreciation of the rouble.
In 2015, the domestic market share of the Company’s
consolidated revenue increased to 42.7% from 41.1%
in 2014. Europe and the Middle East accounted for 22.0%
and 16.4% of the Company’s revenue, respectively.
Asia generated 5.8% of revenue.
Cost of sales, distribution, general and administrative expenses
In 2015, the Company’s cost of sales amounted
to UsD 2,275 million or 51.8% of revenue (2014:
53.1%). The 32.7% decrease (2014: UsD 3,381 million)
is attributable to the rouble depreciation and implementa
tion of an operational improvement programme to reduce
the cost of natural gas, energy and other items.
Distribution expenses totalled UsD 690 million,
representing a 28.5% decrease y-o-y, primarily due
to the rouble depreciation and partial shift
of iron ore shipments to the domestic market under
existing long-term contracts. In 2015, distribution expenses
made up 15.7% of the Company’s revenue compared
to 15.2% in 2014.
General and administrative expenses in 2015 decreased
by 35.9 % to UsD 289 million, amounting to 6.6%
of the Company’s revenue, which is slightly lower
than the 7.1% figure in 2014.
Cost item, % 2014 2015
Raw materials and supplies 45.4 48.2
Energy costs 20.8 18.5
Labour costs 18.8 18.9
Depreciation,
amortisation and impairment costs9.2 8.9
Land, property and other taxes 2.5 2.5
Amortisation of mineral rights 1.6 1.5
Repair and maintenance 0.4 0.2
Other 1.4 1.2
» GENERAL AND ADMINIStRAtIVE EXPENSES DROPPED BY 35.9%
Despite the challenging conditions in the global
iron ore market and rouble fluctuations, the Company
continued to deliver solid financial results.
Pavel MitrofanovDeputy CEO, Chief Financial Officer
«
«
Cost of sales in 2014–2015
Financial performance
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5756
/ CONtENt
Financial position
As at 31 December 2015, the Company’s total assets
amounted to UsD 6,619 million (as at 31 December 2014:
UsD 7,266 million). The 8.9% decline in the Company’s
Us dollar-denominated total assets is mainly attributable
to the rouble depreciation.
At the end of the reporting period, cash and cash
equivalents stood at UsD 424 million (31 December 2014:
UsD 550 million). The Company’s total liquidity amounted
to UsD 824 million, including short-term bank deposits
of UsD 400 million.
At the end of the reporting period, the Company’s net debt
decreased to UsD 3,563 million (2014: UsD 4,185 million).
The net debt/EBITDA ratio amounted to 2.49x compared
to 2.13x as at 31 December 20149. The share of long-term
debt fell slightly to 83.9% of the total (2014: 86.4%).
In 2015, net cash generated from operations amounted
to UsD 952 million, a 29.4% decrease compared
to UsD 1,348 mn in 2014.
Funds used for investment activities amounted
to UsD 987 mn (2014: UsD 427 million).
Funds used for financing activities totalled UsD
24 million (2014: UsD 550 million). This decrease was
mainly driven by dividend payments in 2014.
9 To calculate the net debt/EBITDA ratio, short-term bank deposits
of USD 400 million were accounted for as cash and cash equivalents.
Margin and net income
In 2015, the Company’s EBITDA declined by 27.0%
to UsD 1,432 million (2014: UsD 1,961 million). The EBITDA
margin grew by 1.8 p.p. y-o-y amounting to 32.6%.
The decrease in consolidated EBITDA was primarily due
to lower EBITDA in the mining segment, hit by a sharp
drop in global iron ore prices. The mining segment’s
EBITDA totalled UsD 872 million, representing a 36.2%
or UsD 494 mn decrease y-o-y. The share of the mining
segment in consolidated EBITDA reduced from 69.7%
in 2014 to 60.9% in 2015.
In 2015, the steel segment share of consolidated EBITDA
was 27.4%. The steel segment’s EBITDA also decreased
y-o-y, amounting to UsD 392 million. However, this decline
was much lower than that of the mining segment due
to lower prices for supplies used in steel production.
In addition, the Company grew sales of merchant pig
iron and changed the structure of its steel product
shipments.
In 2015, the Company earned net income
of UsD 218 million compared to UsD 66 million in 2014.
Despite a considerable decline in operating income,
the Company’s net income increased by 3.3 times,
mainly due to decreases in foreign exchange rate
differences accrued on the Us dollar-denominated part
of the Company’s debt and lower net interest payments.
Capex programme
In 2015, the Company’s capex decreased by 29.9%
to UsD 417 million (2014: UsD 595 million).
A major part of the Company’s capex
(UsD 33 million or 7.9% of total expenditures) was used
for the construction of Pellet Plant #3 at Mikhailovsky GOK,
which was completed in 2015.
At the end of the year, the construction of HBI-3
Plant at Lebedinsky GOK accounted for a large part
of the Company’s capex. In 2015, UsD 161 million or 38.6%
of the total capex was invested in this project.
In 2015, apart from major investment projects,
Metalloinvest continued to purchase high-capacity
equipment for mining and transport operations,
as well as upgrade and modernise existing
production facilities.
» For more details on the Company’s investment projects, see Strategic
Investment Programmes on p. 42.
» EBItDA MARGIN GREW BY 1.8 P.P. tO 32.6%
In July, we signed a USD 750 million long-term pre-export
credit facility agreement with a syndicate of international
banks, which will be drawn on to fully repay all amounts
maturing in 2016.
Pavel MitrofanovDeputy CEO, Chief Financial Officer
«
«
ANNUAL REPORT 2015
COMPANY PROFILE
DEVELOPMENT OVERVIEW
FINANCIAL AND OPERATING RESULTS
CORPORATE GOVERNANCE
SUSTAINABLE DEVELOPMENT
CONTACTS W W W. M E T A L L O I N v E s T . C O M / E N
/ 5958