Presentation of the OJSC MMK Group 1H 2008 US GAAP Financial - PowerPoint PPT Presentation

Presentation of the OJSC MMK Group 1H 2008 US GAAP Financial Statements The presentation contains selected data from the financial statements of MMK Group. Detailed information is provided in the financial statements of the Group 1H 2008 prepared according to US GAAP.

MMK Group Operations and Income Statement 2Q 2008 1Q 2008 Change 1H 2008 1H 2007 Change Revenue 3,484 2,169 1,315 5,653 4,000 1,653 Operating income 974 393 581 1,367 1,077 290 Revenue margin 28.0% 18.1% 24.2% 26.9% Income before income tax and 764 455 309 1,420 1,119 301 minority interest Revenue margin 21.9% 21.0% 25.1% 28.0% Net income 760 271 489 1,031 866 165 Revenue margin 21.8% 12.5% 18.2% 21.7% Comprehensive income 1,432 837 595 2,284 1,045 1,239 Revenue margin 41.1% 38.6% 40.4% 26.1% EBITDA* 1,046 465 581 1,511 1,205 306 EBITDA margin 30.0% 21.4% 26.7% 30.1% * EBITDA = Operating income + Depreciation of assets + Loss on disposal of fixed assets Presentation of the OJSC MMK Group 1H 2008 Financial Statements 2

MMK Group Key Performance Indicators Sales proceeds, USD m Operating income, USD m 1000 30% 3000 800 20% 600 2000 400 10% 1000 200 0 0% 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2006 2007 2006 2007 2008 2008 Operating Income / Proceeds 2008 Operating Income / Proceeds 2006 Operating Income / Proceeds 2007 EBITDA, USD m Net income, USD m 800 25% 1000 30% 600 20% 15% 20% 400 500 10% 10% 200 5% 0 0% 0 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2006 2007 2006 2007 2008 EBITDA / Proceeds 2008 2008 Net Income / Proceeds 2008 EBITDA / Proceeds 2006 EBITDA / Proceeds 2007 Net Income / Proceeds 2006 Net Income / Proceeds 2007 Presentation of the OJSC MMK Group 1H 2008 Financial Statements 3

MMK Group’s Key Financial Indicators MMK Group’s Sales, USDm MMK Group’s Sales in USD 1H 2008 10% 2Q 08 1Q 08 1H 08 1H 07 32% OJSC MMK’s 58% 1,905 1,364 3,269 2,383 proceeds Group’s steel 1,208 584 1,792 1,252 traders’ proceeds OJSC MMK Steel traders* Group’s other companies’ 371 221 592 365 Other companies proceeds Total proceeds 3,484 2,169 5,653 4,000 1H 2007 9% 31% 60% * ММК Steel Trade AG ММК Trading AG Presentation of the OJSC MMK Group 1H 2008 Financial Statements 4

MMK Group’s Key Financial Indicators Proceeds by type of product, USDm Proceeds by type of product in USD 1H 2008 8% 8% 2Q 08 1Q 08 1H 08 1H 07 18% Billets and slabs 278 185 463 131 Flat products 2,037 1,135 3,172 2,293 9% 57% Long products 284 252 536 417 Billets & Slabs Downstream Flats 610 430 1,040 905 products Longs Downstream products Other products and services Other products and 275 167 442 254 1H 2007 services 3% 6% Total proceeds 3,484 2,169 5,653 4,000 23% 10% 58% Presentation of the OJSC MMK Group 1H 2008 Financial Statements 5

MMK Group’s Operating Costs’ Structure MMK Group’s operating costs, USDm MMK Group’s operating costs in USD 1H 2008 1% 1% 5% 2Q 08 1Q 08 1H 08 1H 07 9% Cost of products sold 2,086 1,413 3,499 2,348 3% (excl. of amortization and depreciation) Depreciation and 60 73 133 99 81% amortization 214 162 376 256 Selling and Total: 4,286 USDm distribution expenses COGS (excl. of depr. & amort. ) Depreciation and amortization Administrative 126 85 211 121 Selling and distr. expenses expenses Administrative expenses Social expenses Social expenses 22 18 40 47 Other operating income and loss Taxes other than 24 24 48 40 income tax 1H 2007 2% 2% 4% 9% Loss on disposal of 12 -1 11 29 plant and equipment 3% Other operating -34 2 -32 -17 income and loss 80% Total: 2,923 USDm Presentation of the OJSC MMK Group 1H 2008 Financial Statements 6

Cost Structure Analysis (1) Cost of Goods Sold Breakdown, MMK Group MMK’s Material Costs in USD m Power from outside 1H 2008 Other: 0.9% 1H 2008 100% sources Fuel from outside Sinter 2,3% Salaries: 9.4% sources 90% 8,5% 5,3% 80% Pellets Auxiliary materials 70% 10,8% 9,0% 60% Other main materials 50% 11,7% 40% Raw materials costs: 91.3% Raw materials costs: 86,9% 30% Coals 20% Overheads: (0.2)% 21,4% 10% Inventory changes: (1.4%) Scrap 0% 31,0% -10% Total: 3,499 USD m Power from outside 100% sources Fuel from outside Other: 1.4% 1H 2007 2,5% Sinter 90% sources 1H 2007 Overheads: 2.3% 9,1% 6,2% 80% Salaries: 10.1% Pellets 70% 10,2% Auxiliary materials 60% 13,6% 50% 40% Raw materials costs: 86.9% Coals 30% 16,1% Other main materials 20% 14,5% Inventory changes: (0.7)% 10% 0% Scrap -10% 27,8% Total: 2,348 USD m 1. Includes only OAO MMK raw material expenses, which account for 90% of MMK Group costs Presentation of the OJSC MMK Group 1H 2008 Financial Statements 7

MMK Group’s Balance Sheet, USD m 30.06.2008 31.12.2007 Change % Current assets, including 4 120 4 291 -171 -4,0% Cash and cash equivalents 806 256 550 214,8% Short-term bank deposits 350 1 279 -929 -72,6% Short-term investments 367 393 -26 -6,6% Accounts receivable less allowance for doubtful accounts 864 691 173 25,0% Inventories 1 050 946 104 11,0% Other receivables and current assets 683 726 -43 -5,9% Non-current assets, including 7 739 5 091 2 648 52,0% Property, plant and equipment 5 491 3 879 1 612 41,6% Other non-current assets 2 248 1 212 1 036 85,5% Total assets 11 859 9 382 2 477 26,4% Long-term debt, including 919 550 369 67,1% Long-term loans and capital lease obligations 215 230 -15 -6,5% Other long-term debt 704 320 384 120,0% Current liabilities, including 1 921 14 0,7% 1 935 Short-term borrowings 1 149 1 224 -75 -6,1% Accounts payable 302 326 -24 -7,4% Other accounts payable and current liabilities 484 347 137 39,5% Minority interest 135 87 48 55,2% Shareholders’ equity 8 870 6 824 2 046 30,0% Total liabilities and shareholders’ equity 11 859 9 382 2 477 26,4% Presentation of the OJSC MMK Group 1H 2008 Financial Statements 8

MMK Group’s Cash Flows Change of cash balance during the 1H 2008, USD m working capital Adjustments for non-cash activities Financing operations Change in Investing activities* Effect of exchange rate changes Net income -330 Balance at end of period 34 245 1031 -361 Balance at begin. of period -69 806 256 * - Investing activities: USD 1,079 mln. – Purchase of property, plant and equipment and intangible assets; Presentation of the OJSC MMK Group 1H 2008 Financial Statements 9

MMK Group’s Financial Position Indicators Current liquidity Debt / EBITDA 4 3500 0,8 4000 3000 3 0,6 3000 2500 2000 2 2000 0,4 1500 1 1000 1000 0,2 500 0 0 0 0 2005 2006 2007 1H 2008 2005 2006 2007 1H 2008* Current assets Current liabilities Debt EBITDA Debt/EBITDA Current assets/Current liabilities * EBITDA = 1H 2008 EBITDA * 2 EBIT / Interest Total debt / Equity 2500 35 6000 30 0,4 2000 25 4000 1500 20 15 0,2 1000 2000 10 500 5 0 0 0 0 2005 2006 2007 1H 2008 2005 2006 2007 1H 2008 EBIT Interest EBIT/Interest Total debt Equity Total debt/Equity Presentation of the OJSC MMK Group 1H 2008 Financial Statements 10

OJSC MMK’s Key Production Indicators thousand tons Description 2Q 2008 1Q 2008 Change 1H 2008 1H 2007 Change 6% humidity coke 1,456 1,467 -11 2,923 2,619 304 Pig iron 2,448 2,613 -165 5,060 4,652 409 Crude steel 3,418 3,598 -180 7,015 6,476 539 Incl. EAF steel 889 941 -52 1,829 1,518 311 BOF steel 2,529 2,657 -128 5,186 4,958 228 Presentation of the OJSC MMK Group 1H 2008 Financial Statements 11

Historical Structure of OJSC MMK’s commercial products’ mix thousand tons Description 2Q 2008 1Q 2008 Change 1H 2008 1H 2007 Change Billets and slabs 248 431 -183 679 266 413 Long products 451 485 -34 936 935 1 Flat products 2,087 2,023 65 4,111 4,017 94 Downstream products 361 349 12 709 732 -23 Commercial products 3,147 3,287 -140 6,434 5,951 483 Presentation of the OJSC MMK Group 1H 2008 Financial Statements 12

OJSC MMK’s Historical Product Mix By Market Domestic sales’ growth in tons Export shipments 100% 2Q 2008 5% 4% 1Q 2008 15% 14% 25% 34% 36% 40% 46% 50% 35% 50% 66% 64% 60% 54% 1% 50% 46% Billets & slabs 55% Longs 0% HRC CRC 2005 2006 2007 1H 2007 1H 2008 Downstream products Domestic market Export Total: 981 kt Total: 1,222 kt Changes in shipments’ structure in tons Changes in domestic shipments 12,203 11,346 2Q 2008 14,2% 14% 1Q 2008 10,201 21% 23% 10000 12,3% 13% 8000 6,434 5,951 6000 4000 50,5% 52% 2000 Billets & slabs Longs HRC 0 CRC Downstream products 2005 2006 2007 1H 2007 1H 2008 Total: 2,166 kt Total: 2,065 kt Billets & slabs Longs HRC CRC Downstream products Presentation of the OJSC MMK Group 1H 2008 Financial Statements 13

Contact Persons Press Secretary Yelena Azovtseva email: azovtseva@mmk.ru tel: +7 3519 24 9082 Head of Investor Relations Service Yevgeny Kovtunov email: kovtunov@mmk.ru tel: +7 3519 24 9355 fax: +7 3519 24 9360 Presentation of the OJSC MMK Group 1H 2008 Financial Statements 14