ZŁOMREX S.A. 2009 Business and financial performance May 11, 2010
Content 1. Introduction 2. Business overview 3. 2010 outlook 4. Q&A 2
ZŁOMREX S.A. Introduction Section 1
Introduction Speakers Krzysztof Krzysztof Walarowski Zola Commercial CFO Member of the Director Board Member of the Age – 38 Board 8 yrs with Age – 53 Złomrex 6 yrs with Złomrex 4
Introduction 2009 Highlights � Very difficult market conditions with price declining and demand falling throughout H1 then stabilization on low levels in Q3 and further demand drop in Q4. � Broad cost cutting and restructuring programs � Completion of restructuring within Polish part of the Distribution Division; � Unsuccessful divestiture of Zeljezara Split. Sales process still going on. � Limited capital expenditures, sales of certain non-core or non-operational assets � Management of short-term financing 5
Introduction 2009 Highlights – P&L INCOME STATEMENT Y 2009 Y 2008 Y 2007 Y 2006 '000 PLN Revenue 1 969 813 4 027 950 3 366 004 1 942 514 Cost of sales -1 933 190 -3 542 471 -2 935 936 -1 691 157 Gross profit 36 623 485 479 430 068 251 357 Other income 24 186 17 547 18 221 11 166 Distribution expenses -161 392 -194 534 -148 703 -31 650 Administrative expenses -112 398 -142 139 -115 311 -79 528 Other gains/(losses) - net -21 465 -206 -2 572 Other expenses -44 000 -26 310 -19 138 -5 618 EBIT -278 446 139 837 167 709 145 727 Financial income 100 722 39 893 33 455 150 Financial expenses -84 891 -177 397 -94 523 -32 662 Net financing costs 15 831 -137 504 -61 068 -32 512 Share of profits of associates -2 170 739 2 121 Excess in the net fair value of acquired assets over cost 0 0 125 795 5 894 Profit before tax -264 785 3 072 234 557 119 109 Income tax expense 35 723 -9 105 -20 457 -22 009 Profit/loss for the period from discontinued operations -60 178 -193 755 0 0 Profit for the period -289 240 -199 788 214 100 97 100 Depreciation and amortization -73 051 -69 811 -59 654 -34 622 EBITDA -205 395 209 648 227 363 180 349 6
Introduction 2009 Highlights – balance sheet ASSETS Y 2009 Y 2008 Y 2007 Y 2006 Y 2005 '000 PLN A. TOTAL NON-CURRENT ASSETS 830 700 976 319 1 219 445 525 854 318 352 I. Intangible assets 42 175 46 267 45 973 26 494 19 953 II. Property, plant and equipment 713 988 855 713 1 125 729 479 956 280 970 III. Other receivables 3 295 1 533 2 979 1 947 2 473 IV. Investment property and other investments 14 044 41 472 22 292 5 308 4 111 V. Deferred tax assets 57 198 31 334 22 472 12 149 10 845 B. TOTAL CURRENT ASSETS 742 542 1 291 014 1 474 070 607 008 274 029 I. Inventories 256 901 565 726 692 210 284 519 103 632 II. Receivables 214 092 369 360 512 448 294 284 155 774 1. Trade receivables 171 343 295 226 424 423 232 067 122 526 2. Other receivables 42 749 74 134 88 025 62 217 33 248 III. Cash and cash equivalents 32 496 99 505 263 416 27 626 14 623 IV. Assets classified as held for sale 239 053 256 423 5 996 579 0 TOTAL ASSETS 1 573 242 2 267 333 2 693 515 1 132 862 592 381 7
Introduction 2009 Highlights - balance sheet EQUITY AND LIABILITIES Y 2009 Y 2008 Y 2007 Y 2006 Y 2005 A. EQUITY '000 PLN 250 998 538 579 698 595 409 078 294 980 I. Issued share capital 47 691 47 691 47 691 47 691 47 691 II. Reserves and retained earnings 111 355 345 700 492 624 325 516 231 468 III. Minority interest 91 952 145 188 158 280 35 871 15 821 B. LIABILITIES 1 322 244 1 728 754 1 994 920 723 784 297 401 I. Non-current liabilities 592 043 826 200 842 797 116 505 54 691 1. Debt securities 507 691 625 635 584 479 0 0 2. Interest-bearing loans and borrowings 26 576 73 744 71 399 65 302 52 653 3. Other 57 776 126 821 186 919 51 203 2 038 II. Current liabilities 575 269 753 228 1 152 123 606 999 242 405 1. Interest-bearing loans and borrowings 299 599 358 676 543 031 353 910 158 335 2. Other financial liabilities 0 5 257 7 858 1 063 1 320 3. Trade payables 271 030 381 299 350 604 202 715 73 405 4. Defered payment for acquired entities 0 40 527 151 569 12239 - 5. Bills of exchange payables 0 - 6 741 9 168 - 6. Income tax payable 323 3 591 17 858 843 1065 7. Employee benefits 2 338 3 039 3 656 5 405 1 853 8. Other 0 87 707 66 851 21 656 5 719 9. Provisions for payables 834 171 3 955 - 708 III. Deferred income 1 145 1 195 386 280 305 IV. Liabilities of disposal group 154 932 149 326 - - - TOTAL EQUITY AND LIABILITIES 1 573 242 2 267 333 2 693 515 1 132 862 592 381 8
Introduction 2009 Highlights – Cash flow & main metrics CASH FLOW Y 2009 Y 2008 Y 2007 Y 2006 '000 PLN A. FROM OPERATING ACTIVITIES 130 746 411 184 150 909 107 313 B. FROM INVESTING ACTIVITIES 11 876 -252 800 -248 205 -223 292 C. FROM FINANCING ACTIVITIES -224 774 -276 427 -246 766 102 198 NET INCREASE IN CASH -82 152 -118 043 -344 062 -13 781 MAIN METRICS Y 2009 Y 2008 Y 2007 Y 2006 Liquidity ratio 0,88 1,37 1,28 1,00 Quick ratio 0,43 0,62 0,68 0,53 Inventories turnover (days) 49 58 86 61 Receivables turnover (days) 40 33 56 55 EBITDA margin -10,4% 5,2% 6,8% 9,3% Nett profit margin -14,7% -5,0% 6,4% 5,0% Equity 250 998 538 579 698 595 409 078 Net debt 801 370 963 807 943 351 392 649 n/a 4,6 Net debt / EBITDA 4,1 2,2 9
Introduction Financial performance by divisions SCRAP PRODUCTION DISTRIBUTION P&L ACCOUNT OTHER FERR + HSJ + OMS ZELJ COGPL COGAUT ZLMET ZW-WB HSJTL '000 PLN Revenues 339 553 412 882 242 644 32 452 20 501 345 835 861 207 46 500 Gross profit 15 707 -34 958 -19 190 3 708 -8 904 22 767 39 574 28 279 EBIT -2 773 -81 170 -38 614 990 -34 750 -29 953 -113 168 26 077 Net financing costs 1 947 13 537 8 010 -228 -14 040 19 423 32 388 -90 338 Profit before tax -826 -67 633 -30 604 762 -48 790 -10 530 -82 950 -64 261 Profit for the period -56 626 -26 781 577 -48 790 -207 -9 421 -71 821 -62 634 EBITDA 6 714 -56 626 -18 638 1 569 -34 750 -23 165 -98 331 30 275 10
Introduction Financial performance summary � Gross profit from continued operations was down by PLN 448,9 million – 92,5% less then in 2008. Zejezara Split (ZJEL) contributed negatively to our net result by PLN 60,2 million bringing our consolidated net loss down to PLN 289,4 million. The negative results were partially offset by financial income at PLN 97,2 million resulting in repurchase of our senior secured notes from an open market and further cancellation of those � Interest bearing loans and borrowings net of cash adjusted for liabilities related to the acquisition of subsidiaries and employee benefits have gone down by PLN 179,6 million and 16,8% primarily as a result of the debt reduction, including the Bonds’ repurchase. � The Company generated positive cash flow form operating activities primarily due to release of working capital by PLN 372,8 milion. This was however much offset by a loss from operations. � Investing activities cash flow was positive primarily due to proceeds from sale of subsidiaries at PLN 23,2 million and sales of tangible and intangible assets at PLN 18,6 million. This was however offset by capital expenditures PLN 36,8. � Negative financing cash flow resulted from repayment of principal at PLN 149,5 million and interest at PLN 71,1 million related to the Company’s indebtedness. 11
Introduction Strategy � Emphasis on distribution of steel products – further development and integration of retail division � Strengthening the position in production of special application and niche products � Reduction of indebtedness. 12
ZŁOMREX S.A. Business overview Section 2
Business overview Market environment – steel production CRUDE STEEL PRODUCTION Y 2009 % YoY Y 2008 Y 2007 Y 2006 ‘000 000 tons Poland 7,2 -26% 9,7 10,6 10,0 EU (27) 139,0 -30% 198,6 210,2 207,6 China 567,8 13% 500,5 489,2 422,7 World 1 220,0 -8% 1 329,7 1 344,0 1 244,0 14
Business overview Market environment – production and consumption of finished products PRODUCTION OF FINISHED PRODUCTS Y 2009 % YoY Y 2008 Y 2007 Y 2006 ‘000 000 tons Poland, thereof: 7,2 -26% 9,7 10,3 10,0 flat products 3,1 -22% 4,0 4,5 4,4 long products 4,1 -28% 5,7 5,8 5,6 STEEL USE Y 2009 % YoY Y 2008 Y 2007 Y 2006 ‘000 000 tons Poland, thereof: 8,0 -30% 11,4 12,0 9,7 flat products 4,2 -31% 6,1 6,1 5,0 long products 3,8 -28% 5,3 5,9 4,8 15
Business overview Market environment - prices merchant bars Prices 2009 - FERR billets (pln/tone) scrap metal 2 500 2 000 1 939 1 909 1 794 1 714 1 697 1 724 1 674 1 642 1 646 1 660 1 625 1 489 1 500 1 433 1 419 1 413 1 402 1 402 1 363 1 369 1 304 1 274 1 217 1 220 1 159 1 000 783 722 704 690 629 641 620 593 593 608 609 550 500 0 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec flat products Prices 2009 - HSJ long products (pln/tone) 4 000 3 576 3 500 3 104 3 048 3 000 2 963 2 893 2 895 2 784 2 514 2 410 2 482 2 650 2 550 2 500 2 406 2 348 2 333 2 464 2 299 2 381 2 431 2 116 2 095 2 086 2 114 2 000 1 916 1 500 Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec 16
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