2018 9 Months Investor Presentation 25.10.2018
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, forwardlooking 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
2018 Market Overview
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-16 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-16 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-16 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Crude Steel Production 15,0% EU28 Crude Steel Production (% yoy) 15,0% China Crude Steel Production (% yoy) 10,0% 10,0% 5,0% 5,0% 0,0% 0,0% -5,0% -5,0% -10,0% -10,0% 15,0% CIS Crude Steel Production (% yoy) 10,0% 5,0% 0,0% -5,0% -10,0% 5 Source: Worldsteel
Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Coking Coal, Iron Ore & Scrap Prices 300 250 200 150 100 Coking Coal Prices (HCC Peak Downs Region FOB Australia) 100 90 80 70 60 50 40 Iron Ore Prices (IODEX 62% Fe CFR North China Mid) Scrap Prices (HMS CFR Turkey Mid) 400 350 300 250 200 150 6 Source: Platts / IODEX
Turkish Steel Production & Consumption Production (mn tons) 36.4 36.1 36.9 36.9 39.2 9.9 10.4 10.4 10.9 13.0 26.5 25.7 26.5 26.0 26.2 +4.7% 25.6 26.8 8.4 10.3 17.2 16.5 2013 2014 2015 2016 2017 8M 2017 8M 2018 Consumption (mn tons) 31.3 30.8 14.6 14.6 34.4 16.5 34.1 16.5 36.1 17.7 +0.4% 23.0 23.1 16.7 16.2 17.9 17.6 18.4 11.2 11.8 12.2 10.9 2013 2014 2015 2016 2017 8M 2017 8M 2018 Flat Long 7 Source: TSPA
Turkish Steel Exports & Imports Exports (mn tons) 15.2 2.3 1.6 11.3 14.1 2.5 0.6 11.0 13.1 2.6 0.3 10.2 13.4 3.1 0.3 10.0 14.4 0.1 4.3 0.7 9.3 9.9 0.1 3.0 0.5 6.3 +6.1% 10.5 0.0 3.6 0.3 6.6 2013 2014 2015 2016 2017 8M 2017 8M 2018 Imports (mn tons) 14.0 2.3 7.1 3.1 1.5 2013 13.0 1.8 6.7 3.0 1.5 2014 18.1 2.9 8.6 5.0 1.6 2015 16.5 1.6 8.7 4.6 1.6 2016 15.3 2.4 9.0 2.4 1.5 2017 +4.1% 9.7 10.1 1.3 2.7 5.8 5.5 1.7 0.9 0.9 1.0 8M 2017 8M 2018 Slab Flat Steel Billet Long Steel 8 Source: TSPA
2018 9M Results
Operational and Financial Highlights Operational Highlights 2016 2017 9M 2017 9M 2018 Growth (YoY) Liquid Steel Production (000 tons) 9,373 9,392 6,998 6,949-0.7% Flat Steel Production* (000 tons) 7,072 7,713 5,728 5,887 2.8% Long Steel Production (000 tons) 1,572 1,328 993 684-31.1% Flat Steel Shipments (000 tons) 7,163 7,594 5,590 5,591 0.0% Long Steel Shipments (000 tons) 1,587 1,364 1,006 656-34.8% Financial Highlights 2016 2017 9M 2017 9M 2018 Growth (YoY) Net Sales Revenue (USD mn) 3,855 5,115 3,701 4,225 14.2% EBITDA (USD mn) 895 1,496 1,038 1,364 31.4% Net Profit (USD mn) 502 1,030 713 852 19.5% All figures are on IFRS consolidated basis unless stated otherwise. (*) Total flat steel production of Ereğli and İskenderun Plants. 10
Liquid Steel Production (000 tons) 9,122 9,373 9,392 6,998 6,949 2,318 2,316 2,233 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 11
Crude Steel Capacity Utilization Ratio 93% 96% 100% 97% 97% 96% 78% 76% 70% 69% 72% 2013 2014 2015 2016 2017 9M 2018 Erdemir World* 12 As of August 2018, Worldsteel no longer publishes global capacity utilization ratio for anti-trust reasons. Source: Worldsteel
Production (000 tons) HRC production increased by 7.8% YoY in Q3 2018. 8,963 1,563 8,644 1,572 9,041 1,328 1,820 1,781 1,822 6,721 6,571 993 684 5,580 5,291 5,891 1,356 4,372 1,304 4,583 2,229 2,164 2,197 366 201 232 447 435 438 1,416 1,528 1,527 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 Hot Cold Long 13 Slab production for 3rd parties was included in HRC production.
Sales Volume (000 tons) HRC sales increased by 3.3% YoY in 9M 2018. 8,781 8,750 8,958 1,552 1,587 1,364 1,845 1,860 1,908 6,596 1,006 6,247 656 5,384 5,303 5,686 1,418 4,172 1,282 4,309 2,220 2,013 2,048 362 173 234 464 429 395 1,394 1,411 1,419 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 Hot Cold Long 14 Slab sales for 3rd parties were included in HRC sales.
Net Sales Revenue (USD mn) Net sales revenue increased by 14.2% YoY in 9M 2018. 5,115 4,382 435 3,947 3,855 517 3,338 733 4,382 +14,2% 4.225 3.701 812 557 3.144 3.413 1.248 114 +10,6% 1.423 1.380 282 326 1.134 1.141 1.054 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 Export Domestic 15
Flat & Long Steel Domestic Sales Breakdown Flat Steel Domestic Sales 13% (578) 11% (542) 19% (852) 4,536K ton 9M 2018 51% (2.334) Pipe&Profile and Rolling Distribution Chains General Manufacturing Industry 18% (838) 4,769K ton 9M 2017 52% (2.503) 17% (772) Automotive 19% (886) Long Steel Domestic Sales 33% (195) 601K ton 9M 2018 24% (146) 43% Rebar and Profile Producers (260) General Manufacturing Industry High Carbon and Special Qualities 23% (199) 23% (207) 879K ton 9M 2017 54% (473) 16
Steel Exports Breakdown By Region 7% (83) 1% (9) 9% (102) 3% (31) 1,110K 9M 2018 80% (885) EU MENA North America Asia South America Other 10% (93) 6% (59) 6% (60) 4% (34) 2% (16) 948K 9M 2017 72% (686) 17
EBITDA & Net Profit EBITDA (USD mn) 17.6% 23.2% EBITDA Margin (%) 29.2% 28.1% +31,4% 32.3% 33.8% 27.0% 32.2% 770 895 1,496 1.038 1.364 337 481 445 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 Net Profit (USD mn) Net Profit Margin (%) 9.4% 13.0% 20.1% 19.3% 20.2% +19.5% 18.1% 24.7% 16.0% 414 502 1,030 713 852 226 351 221 2015 2016 2017 9M 2017 9M 2018 Q3 2017 Q2 2018 Q3 2018 18
EBITDA Net Profit 1.364 (140) 56 1.280 120 (510) (38) 852 EBITDA 9M 2018 Depreciation Interest Inc. from Overdue Sales- Rediscount Inc./(Exp.) Net Operating Income Finance Inc./(Exp.) Tax Inc./(Exp.) Non-Controlling Interests Net Profit 9M 2018 19
EBITDA Net Cash 1.364 (418) 23 48 (357) (163) 497 (23) (16) (660) (66) (268) EBITDA 9M 2018 Changes in Working Capital Interest Inc. from Overdue Sales Interest Inc./(Exp.) Net Taxes Paid Net Cash used in Investing Activities Free Cash Flow Contribution to the Capital Increase of Linde Gaz A.Ş. Credit Usage/ (Payment) Net Dividend Paid Other Change in Cash 9M 2018 20
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 EBITDA per Ton* (USD/ton) 223 219 174 179 197 120 105 96 85 138 119 141 143 51 43 Main Product 21 *One-off income/expense items are excluded.
Financial Figures Consolidated Net Assets (USD mn) 31.12.2017 30.09.2018 Growth (Year-to-Date) Cash and Cash Equivalents 1,865 1,597-14% Working Capital 1,740 2,158 24% Tangible and Intangible Assets 3,549 3,540-0% Financial Liabilities (1,190) (1,175) -1% Provisions and Other (866) (904) 4% Net Assets 5,098 5,216 2% Working Capital (USD mn) 31.12.2017 30.09.2018 Growth (Year-to-Date) Trade Receivables 685 808 18% Inventories 1,336 1,553 16% Trade Payables (250) (265) 6% Other (31) 62 300% Working Capital 1,740 2,158 24% 22
Financial Borrowings (USD mn) 693 947 1,283 891 368 654 828 868 529 581 655 460 362 307 14 (190) (675) (422) 2013 2014 2015 2016 2017 9M 2018 Net Debt Short-Term Debt Long-Term Debt 23
Net Debt (USD mn) 675 497 (660) (90) 422 Net Cash Dec. 2017 Free Cash Flow Dividend Paid Other Net Cash Sep. 2018 24
Borrowings Maturity Profile (USD mn) 1,597 625 16 304 6 205 93 410 149 199 141 8 51 39 22 47 4 37 2 21 1 Sep. 2018 Cash Oct.-Dec. 2018 2019 2020 2021 2022 2023 Principal Revolving Trade Financing Loans Interest 25
Cost of Sales Breakdown* (%) 5 5 7 7 7 8 12 14 70 64 6 5 6 5 5 4 11 9 73 76 Raw Materials Personnel Expenses Purchased Energy Expenses Depreciation and Amortization Exp. Other 2015 2016 2017 9M 2018 Raw Materials Breakdown (%) 27 24 20 21 13 13 12 13 27 27 35 34 33 36 33 32 Iron Ore&Pellet Coal Scrap Other 2015 2016 2017 9M 2018 26 * Excluding inventory writedowns and provision released.
Capital Expenditures (USD mn) 1,017 961 634 576 264 242 200 201 208 158 171 162 162 162 153 159 143 140 107 82 113 110 165 83 56 59 57 93 83 55 80 88 17 52 43 70 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 9M 2018 Capital Expenditures Fixed Assets Acquisition 27
Number of Employees 12,872 12,801 12,659 12,277 11,975 11,655 2013 2014 2015 2016 2017 Sep. 2018 28
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