25 June 2013

NLMK statement on credit rating change from Standard & Poor’s

NLMK (LSE: NLMK), a leading global steel company, informs that S&P has downgraded NLMK’s long-term credit rating from ВВВ- (negative outlook) to BB+ (stable outlook). The agency based its decision, among other factors, on the weakening prospects for global steelmaking and a conservative assessment of the country risk for Russia. At the same time, S&P also acknowledged NLMK’s sustainable business model and financial stability on a stand-alone basis, stating that the underlying business profile is in line with its criteria for an investment rating. S&P is also complimentary of NLMK’s conservative financial policy.

NLMK’s official statement:

“NLMK is one of the most competitive and efficient steel companies in the world. Its fundamental competitive advantages, along with the Company’s financial stability and the success of its strategy to boost efficiency, help to consolidate the Company’s leading position in the industry.

“The steel product market is currently experiencing a difficult period. In the short term, this will affect expert outlook for the sector. However, the fact that the market has been sluggish for over twelve months could act as a catalyst for the recovery of the sector through the closure of inefficient production facilities.

“The country risk assessment remains an important factor for rating agencies. In the case of Russian companies, it puts additional pressure on the ratings.

“NLMK does not expect S&P’s decision to have any significant impact on the Company’s operating plans and financial performance. A selective approach to investment, coupled with financial discipline, will help to ensure that the Company will be able to alleviate its debts in the medium term. In 2013, we are not planning to increase our absolute debt levels; borrowings will be targeted at refinancing and used to further improve the structure of our credit portfolio in terms of debt maturities and currency.”

NLMK’s efficient and sustainable financial performance indicators:

· NLMK’s EBITDA margin (16% in 2012) is more than twice that of the global average

· Net debt to EBITDA (1.9х in 2012) is less than half that of the global average

· From the beginning of 2013 to the end of Q1 2013, NLMK’s short-term debt in its overall debt portfolio was reduced by 20% to USD1.48 billion. Net debt was down by 3.5% to USD3.45 billion

· NLMK’s cash funds (USD1.5 billion at the end of Q1 2013) fully cover its short-term debt. NLMK also had USD2.4 billion in untapped credit lines at the end of the period

· NLMK has completed the most capital-intensive stage of its investment programme. In 2012, NLMK’s capex was down by 30% to USD1.5 billion; in 2013, it is expected to reduce even further to USD1.0 billion

About NLMK

NLMK is a vertically integrated steelmaking company with production facilities in Russia, Europe and the USA. Its operating units have a crude steel production capacity in excess of 15 mt/y. The company generated USD12.2 billion in revenue and USD1.9 billion in EBITDA in 2012. NLMK’s ordinary shares are traded on the Moscow Stock Exchange (MICEX-RTS) and its global depositary shares on the London Stock Exchange.


Maria Simonova

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