#1Novolipetsk Steel London, September 4, 2008 HSBC's 8th Annual CEEMEA Investor Forum NLMK#2Disclaimer This document is confidential and has been prepared by NLMK (the "Company") solely for use at the investor presentation of the Company and may not be reproduced, retransmitted or further distributed to any other person or published, in whole or in part, for any other purpose. This document does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any shares in the Company or Global Depositary Shares (GDSS), nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision. No reliance may be placed for any purpose whatsoever on the information contained in this document or on assumptions made as to its completeness. No representation or warranty, express or implied, is given by the Company, its subsidiaries or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents. This document is for distribution only in the United Kingdom and the presentation is being made only in the United Kingdom to persons having professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. The distribution of this document in other jurisdictions may be restricted by law and any person into whose possession this document comes should inform themselves about, and observe, any such restrictions. This document may include forward-looking statements. These forward-looking statements include matters that are not historical facts or statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forwarding-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward-looking statements are not guarantees of future performance and that the Company's actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this document. In addition, even if the Company's results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analysts' expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. By attending this presentation you agree to be bound by the foregoing terms. 2#3Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 3#4NLMK today > NLMK Key facts DanSteel A/S Thick plate: 0.5 mln t Key Facts NLMK - Key Russian steel company with growing international presence Novolipetsk Steel RUSSIA Maxi-Group Steel: 9.1 mln t Slabs: 3.7 mln t Flats: 4.8 mln t Moscow Zhernovskoe-1 3 mln t of coking coal by 2012 Steel: 2.4 mln't Long products: 1.3 mln t Altai-koks JMC Tubes & pipes Carsid S.A. Slabs Denmark •Lipetsk Coke: 3.8 mln t Belgium La Louviere S.A. о Czech Rep. France HRC, Long products EU Clabecq S.A. Italy Tuapse Sea Port Plates USA HDG Sharon Coating Duferco Coating S.A.S. Duferco Farrell CRC, HRC - Sorral - Beautor CRC, EG, HDG, Pre-painted Verona Steel Heavy plates Forging ingots VIZ-Stal Electrical steel: 0.2 mln Stoilensky GOK Iron ore concentrate: 11.6 mln t NLMK Group production and trading facilities (with 2007 production results) Duferco JV production facilities • Duferco JV distribution and service centers (9 centers located in France, Belgium, Czech Republic) Crude steel 9.2m t Rolled steel 5.4m t JV with Duferco Crude steel 2.1m t2 Rolled steel 4.2m t³ NLMK Group¹ 1. 2007 production includes Lipetsk production site, DanSteel, VIZ-Stal and Maxi-Group (December 2007 production results) 2007 production volumes 123 2. 3. 2007 shipments including Sharon Coating 4#5. • • Compelling Investment Case Gaining international leadership NLMK today > Compelling investment case Efficiency leader with sustainable performance · Highly efficient steel company with superior EBITDA/tonne generation. • · Sustainable EBITDA margin over 40% for the last 5 years Revenues +28% y-o-y, operating income +34% y-o-y, EBITDA +28% y-o-y (2007) Securing leadership in the Russian market • • - Increasing exposure to the dynamic domestic market – Maxi-Group acquisition An ambitious growth plan covering the period of up to 2015 - USD8.5 bn Technical Upgrade Program* Present in highly dynamic and diversified market segments Strengthening vertical integration • 100% iron ore concentrate requirements covered internally . 100% self-sufficiency in coke • Over 80% self-sufficiency in scrap** • Over 40% self sufficiency in electricity on the main production site 50% of the Group's rail freight handled by own logistics asset Increasing High Value Added (HVA) production • • Production +51% in transformer steel, +11% in galvanized steel y-o-y (2007) New downstream facilities commissioning on-track *Excluding Maxi-Group and raw materials assets capex **Requirements of the main production site in Lipetsk 5#6NLMK - Key Facts NLMK today > Key Facts Market leadership in slabs and value-added products Sales revenue: ...by region¹ 13.9% 6.8% 9.7% 2.9% 13.3% 7.1% 7.5% 43.4% 21.3% ■Domestic market Global market position World EU Top 5 producers (market share) 75% 80% 75% ■ EU 25% ■North America 20% 20% 15% ■Middle East, incl. 15% 13% Turkey 10% Asia and Pacific 5% #1-2 #1-2 Other 0% Slabs 2 Transformer steel HR thick plate ...by product¹ 8.1% 4.6% ■ Pig iron Domestic market position³ 7.5% ■Slabs and Billets 75% 16.0% 61% ■Hot-rolled 60% Cold-rolled 45% ■Galvanized ■Pre-painted 30% ■Transformer 15% --23% -22% 22% 9%- 18.1% 4.3% 11.5% 4.0% ■Dynamo ■Longs and metalware ■ Coke ■Other 0% Electrical steel Pre-painted Galvanized steel steel CRC HRC 1. Q1 2008 US GAAP financial results 2. including JV with Duferco Group production volumes 3. Metal Expert, company estimates 6#7Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 7#8Domestic growth > Russia Russia: Market Development Trends Sustainable growth and attractive opportunities • A GDP growth of 135% from 2007 to 2012* supported by ... • industrial production growth of 6.3% y-o-y 21% y-o-y growth of fixed assets investments Steel demand by industry • . Projected finished steel consumption to grow by 100% from 36 m t to over 70 m t** in 2015, a CAGR of 8% Substantial incremental demand for steel will come from Construction industry (18%) 7% • ■Construction 20% 33% ■Machinebuilding Infrastructure ■ Automotive 20% 20% ■ Other • Power utilities sector (5%)** • Machine-building (19.3%) • Consumer goods (16%) Equipment and vehicles (16%)*** Governmental initiatives in... • • Housing space per person to increase 60% by 2020 Infrastructure spending over USD 550 bn by 2015 Power generation to grow by 200 m kWh/h (2007-20) Investments in infrastructure*,** Roads (2008-30) Power grids (2008-12) Ports (2008-20) 3.8 Railways (2008-30) 185 330 500 100 200 300 400 500 USD, billion * Ministry for Economic Development report, May 2008 **Company estimates, RenCap, Mi *** 2007 sector growth on y-o-y basis 8#9. • . Domestic growth > Construction Domestic Market Strategy - Construction (64% of sales) Growing multi-product segment Sector highlights: Steel consumption by product in construction industry*** Government plans to increase new housing construction from 50m m² in 2006 to • 170m m² by 2020* Fast development of mortgage market NLMK's plans for output growth by 2015 • Flats: 6.9 m t** • Long: 4.4 mt Main steps • M&A: Maxi-Group acquisition • Capex to increase output and quality 80 • Market position in 2007 #60 Over 30% share in the Russian construction flat steel segment . Targeted market position*** Over 30% in flat Over 30% in long products * Ministry for Economic Development report, May 2008 **Main production site in Lipetsk *** Company estimates 35% ■Long products 65% ■Flat products Construction growth ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ 80 70 61 50 44 25 40 28 30 17 19 22 20 2003 2004 2005 2006 ■Non-residential Source: Goskomstat, company estimates - - - 2007 2008E 2009E 2010E ■Residential 9#10Domestic growth > Machinery Domestic Market Strategy - Machinery (23% of Maintain leadership and capture growth sales) . • • Sector highlights • Machine building and white goods segments enjoy strong investment inflow and government support Investments into machinery and equipment manufacturing increased 2 fold (y-o-y)* NLMK plans for output growth +30% saleable products (HRC, CRC, galvanized and pre-painted steel) increase by 2012 Main steps Our products go to: • Machinery and equipment. Automotive • White goods • Yellow goods Condition of industrial fixed assets* 3 CR mills, 1 pre-painting and 1 galvanizing line 100% 10% • High grade transformer steel output increase 80% . Market share in 2007 C.35% in machine-building ■Fully depreciated 70% 60% 90% 40% • C.50% in white goods manufacturing 20% In useful life 30% 0% Developed countries Russia *Goskomstat, company estimates 10#11Domestic growth > Automotive Domestic Market Strategy - Automotive (9% of sales) Bid for higher quality and for global customers Sector highlights Auto manufacturing in Russia annual growth of 6% for 2007-15 ,000 pcs. Fifth largest auto market and the largest sales market in Europe (USD 34.0 bn in H1 2008)* 2,000 1,500 . 67% market growth in 2007 to c.USD53 bn in money terms and by 35% to 2800 pcs** 656 803 1,000 457 1,033 1,117 1,160-1,197-1,231- 264- 218 . Russia will contribute 12% in global growth of auto production during 2007-15* 500 760 787 761 725 550 475 420 394 368 375 • . • Government targets 80% local production of cars sold to domestic market Increase in disposable income coupled with booming financing markets boost market growth NLMK plans for output growth 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E ■Traditional Russlan brands ■Foreign brands assembled In Russla Source: Company estimates Russian auto-steel market ,000 tonnes 1600 • +30% saleable products (HRC, CRC, galvanized and pre-painted steel) increase by 2012 413 1200 • Main steps 800 629 44 • Investing in quality 400 440 73 203 84 209 • Long-term contracts with Russian and global producers 0 2007 2015F Cooperation with stamping parts producers *H1 2008 results. PWC report. **Including produced and imported cars. Company estimates. ■Electro-galvanized ■Cold-rolled Source: company estimates ■Hot dip galvanized ■ Hot-rolled 11#12Domestic growth > Portfolio development Portfolio Development and Earnings Growth A key supplier of HVA products in Russia to meet accelerating demand NLMK main site production 2007 vs. 2012E • HVA products sales are concentrated in Russia 9% 1% • Domestic economy growth drives earnings 100% 7% 6% increase 80% 9% 16% Other ■Electrical 6% 7% 14% 60% 12% Coated • Customer base located in the European 16% 26% ■ P&O 40% Russia close to main production site ■ HRC 20% 40% 31% ■CRC 0% ■Slabs 2007 2012E NLMK domestic market sales (2002-2007E) Domestic sales revenue distribution ,000 USD 83% 3750 CAGR = 30% 80% ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ 2900 61% 62% 63% 3000 59% 2474 60% 41% 2250 --1883- 39% 38% 1628 37% 40% 1500 -1043- 662 20% 17% 750 0 0% 2002 2003 2004 2005 2006 2007 2004 2005 2006 2007 2012E 1. includes CRC, HDG, pre-painted and electrical steels ■High value-added products (HVA) Pig iron and HRC 12#13Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 13#14• Global Growth > Global Growth Strategy Global Growth Strategy Improving earnings quality by increasing internal slab re-rolling Long term volatility of slab market is high Slab supply NLMK aims to secure slab supply to rolling facilities in its main markets Slab processing helps to increase earnings and penetrate stable markets 2007 2012E DanSteel A/S Duferco JV Free market¹ 0.6 m t 0.6 m t 0.3 m t 3.6 m t 2.8 m t 2.3 m t Share of sales 30% 19% USD Earnings per tonne³ 500 million t 7.5 ●▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ Slab distribution balance 400 350 300 6.0 ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ 2.3 3.6 ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ 4.5+ 215 1.1 185 200 3.0 1.4 1.6 134 2.8 4.3 100 1.5 3.2 3.2 2.2 2.4 0.9 0.0 HDG CRC HRC Slabs 2007 2008E 2009E 2010E 2011E 2012E ■Internal supply ■Free market 1. excluding sales to DanSteel and Duferco JV companies 2. supply to DanSteel and Duferco JV companies 3. FY 2007 results for Lipetsk production site based on Russian Accounting Standards (RAS) management accounts 14#15• Domestic growth > Global HVA Market Presence Global High-value-added Market Presence Global niche player - high-margin product development NLMK commands 20% of global transformer steel market . • 2007 Key facts: Over 20% EBITDA generated from only 5% of sales by volume • 328,000 t of transformer steel 4 producers maintain over 60% global transformer steel market share • 395,000 t of dynamo steel Margins in the segment are protected by high entry barriers ~USD400 m Capex to upgrade to higher grades World electric power generation NLMK's transformer steel production KWh/hours, bn ,000 t 40,000 500 CAGR = 11% 30 364 400 30,000 24 959 22 289 300 19 554 20,000 16 424 17 350 280 200 328 10,000 100 120 0 0 + 2004 2005 2010E 2015E 2020E 2030E 2007 2015E ■Transformer steel ■Transformer steel (high grades) 15 Source: Energy Information Administration (EIA); World Markets Research Center, company estimates#16Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4 8 14 4. Development Plans 17 5. Financial Strength 21 6. Outlook 7. Appendices 25 28 16#17Development Plans > Enhancement of Production Platform Enhancement of Production Platform Capex drives output growth and improvements in efficiency Over USD 10 billion¹ Total Investment Capex 2007-15 2015 output Upstream Downstream Midstream, 123 Crude steel • 22 m t Main Goals • Increase steel production Quality improvements Fast growth of HVA products Efficiency gains Change > 100% • • Major projects² BF #7 (+3.4 m tpy) - Novolipetsk EAF (+1.5 m tpy) - Novolipetsk EAF (+3.6 m tpy) - Maxi-Group (to reach 6.0 m tpy) • 6.9 m tpy of HRC >30% Finished steel products . • 0.6 m tpy of HR thick plate (Flat and long steel) • 5.9 m tpy of longs and pipes³ >20% 3 x • • 3 CR mills (+0.57 m tpy) - Novolipetsk Pre-painting line (+0.2 m tpy) - Novolipetsk Galvanizing line No.4 (+0.3 m tpy) - Novolipetsk Wire-rod (+1.0 m tpy) - Maxi-Group Rebar and shaped profile (+2m tpy) - Maxi-Group Pelletizing plant - Stoilensky GOK Coal deposit development - Zhernovskoe 1 Pellets Coking coal Coke • 6.0 m tpy • 3 m tpy (by 2012) • 6.5 m tpy ~30% • Battery #6 construction - Altai-koks Scrap Energy Excluding raw materials assets capex; ~7.8 m tpy >60% of requirements4 Go to slides #30-31 for more detailed information; The numbers are preliminary and could be further changed; 4. Numbers for the main production site ~160% ~40% • Scrap collecting yards expansion - Maxi-Group Additional electric generating capacities to be installed - Novolipetsk 17#18Joint Venture with Duferco Group Pursuing growth in finished output Development Plans > Joint Venture with Duferco . . . Production profiles make NLMK and Duferco natural partners Access to distribution and service network Technology transfer and certification of upstream products with EU customers Total investment capex of EUR400 million JV slab supply balance JV internal slabs 2007 2012E 1.7 m t 2.8 m t NLMK slabs to JV 0.4 m t 3.6 m t External slabs to JV 2.1 m t 0 Duferco JV production by 2012E: +39% of finished products +56% of HVA products JV saleable product mix 2007 vs. 2012E 4.6 m t 6.3 m t 5% 100% Other 14% 20% 80% Plates 11% 7% 10% Long 60% 15% 18% Pre-painted 14% 40% 10% ■CRC+FH 14% 20% HRC P&O 35% 26% ■ HRC 0% 2007 product mix 2012E product mix 18#19Future M&A Approach Pursuing value enhancing opportunities Downstream vertical integration Niche market share gains Key drivers • Securing slab supply • Improving earnings quality • Technology transfer • • Development Plans > Future M&A Approach • Examples Sharon Coating (former Winner Steel) acquisition Definitive agreement to acquire John Maneely Co (JMC) signed Commercial synergies due to • VIZ-Stal acquisition • Dan Steel plate market share market share increase Optimization of product mix and logistics Cost savings on R&D • Fast growth of earnings . Regional and product diversification • Regional and product diversification • • One-time sizable growth . Maxi-Group acquisition Joint venture with Duferco Definitive agreement to acquire John Maneely Co (JMC) signed 19#20Development Plans > JMC acquisition Acquisition of John Maneely Co (JMC) Corporate headquarters Atlas division Wheatland division Duferco Farrell JMC • • • • • Agreement to acquire 100% in JMC for USD3.53 on a cash/debt free basis. The deal to be closed in Q4 2008. Attractive valuation of 6.6x EV/Ebitda A leading pipe manufacturer with 3.0 m tpa capacity with a diversified portfolio of value-added products and modern facilities Financial performance: o Revenue: USD2.4 m* and Ebitda: USD USD485 m* Last 12M as of 06.2008 Rationale 。 Enhances vertical integration of US assets and 。 Strengthens positions in USA and diversifies product portfolio Synergistic effect o of c. USD35 m per year coming from... 。 better working capital management at JMC and improved production efficiency at Duferco Farrell Source of finance of the deal: 。 Syndicated loan of USD1.6 bn (Libor +1.2%) and USD2.0 bn bridge facility Positively accepted by leading credit rating agencies and investment community S&P reaffirmed BBB- NLMK being the only Russian steel company with investment grade rating * Last 12 months ending of June 2008 20#21Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 221 21#22Sustainable Financial Performance Strong cash generation through the cycle Financial Strength > Sustainable Financial Performance Historical performance 2001-2007 EBITDA USD, bn . EBITDA CAGR of 50% 4 -53% 60% 48% 44% 44% Average EBITDA margin above 40% Average ROE of ~35% 41% 3 -36% 45% 3.4 25% 2 2.4 30% 2.1 2.6 1 15% 0.3 0.6 1.0 0 0% • 2007 financial highlights. 2001 2002 2003 2004 2005 2006 2007 EBITDA -Margin Sales revenue of USD 7,719 m • EBITDA of USD 3,366 m, margin of 44% EBITDA per tonne, 2007 Operating cash flow of USD 2,524 m USD million t • Net income of USD 2,247 m 18 367 17.5 380 -16.4 340 15 13.3 EPS USD 0.375 (+9%) 12 300 9.2 261 9 Operating cash flow: USD 2,524 million 260 6 204 188 220 3 0 180 NLMK Severstal MMK Evraz Steel USD 22#23Strong Cost Position One of the lowest cost producers worldwide USD . FY2007 slab cash cost on a consolidated basis is USD 221 550 450 Iron ore accounts for 7.2% of consolidated 350 production cost 250 150 • Major cost items: coal, scrap, labour and energy Cash cost by product USA Mini Canada Mexico Brazil W. Europe USD 300 221 197 200 147 133 124 100 282 249 14.5% 7.2% 217 -0.7% 1.0% 4.9% 17 16 19 21 7.8% 0 2007 Q1 2007 Q4 2007 ■Slabs Coke Q1 2008 9.4% Iron ore concentrate O 4.5% Financial Strength > Strong Cost Position 2007 slab cost E.Europe CIS India Australia Japan S.Korea (intg) China Global Av. NLMK Source: World Steel Dynamics Consolidated cash cost, Q1 2008 33.7% 17.8% Iron ore Coke and coal ■Scrap ■Ferrolalloys Other raw materials Electric energy ■Natural gas Other energy sources Other expenses and change in finished and semi-finished balances ■Labour 23#24• • • • Financial Strength > Solid Basis for Industry Leadership Solid Basis for Industry Leadership Key company's strengths Balanced portfolio of efficient assets • Main site with optimal size and composition of modern facilities (Novolipetsk) • Lowest cost iron ore producer in Russia (Stoilensky GOK) • Largest and most efficient coke-making facility in Russia (Altai-koks) • EAF production expansion platform (Maxi-Group, Novolipetsk) . Highly efficient auxiliary assets (transport & logistics, secondary raw materials, sales & distribution) Continuous investment into asset modernization since 1998 Geographic location . • . Main production located in regions with developed infrastructure Easy access to ports in Baltic and Black sea for export efficiency Major domestic customers within 1,500 km from the main production site Immediate proximity to iron ore and other raw materials High degree of vertical integration Group is self-sufficient in main raw materials (iron ore, scrap, coke) and is planning to develop a captive coking coal production Well-diversified sales and products mix • . Efficient balance between export and domestic sales tapping growth opportunities A wide variety of steel products from slabs to HVA protects margins in variable market conditions 24#25Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 25#26Outlook Revised steel price forecast for 2008 • • Outlook > Revised steel price forecast for 2008 Current forecast . Favorable market situation with global steel prices stable or increasing compared to 2007 We expect 2008 revenue to grow up to 70% y-o-y EBITDA is expected to exceed the 2007 level by 60% Key market drivers • Commodities cycle on the rise with iron ore and coal prices to grow in 2008 • Slowdown in the growth rate of Chinese steel industry. Removal of export tax rebates by the Chinese government Growing demand in the Russian market supported by strong economic growth, infrastructure boom. No significant plans announced to introduce new rolling capacity in 2008 Price discipline due to high degree of concentration in core markets (EU, US, Russia, Brazil) and ongoing industry consolidation 26#27Strategic Outlook Long-term sustainable development Outlook > Strategic Outlook . Increase efficient self-sufficiency in basic raw materials . Maintain key competitive advantage in low cost production of slabs Fully capture growing demand in the Russian market Strengthen market presence in HVA product niches in core export markets Sustain profitability leadership in steel industry . Participate in international industry consolidation 22 27#28Table of Contents 1. NLMK Today 2. Domestic Growth 3. Global Growth 4. Development Plans 5. Financial Strength 6. Outlook 7. Appendices 4 8 14 17 21 25 28 28#29Appendices > Sustainable Operating Performance Sustainable Operating Performance supported by NLMK's resilience to rising input costs Backwards vertical integration mitigates increasing cost inflation Iron ore Coke Self-sufficient in iron ore (except iron ore pellets) Plan to develop a pelletising plant on Stoilensky GOK with 3 m tpy capacity, which would cover 60% of NLMK's requirements > 100% self-sufficient Scrap Coking coal Own scrap collecting facilities allow substantially cover scrap requirements No integration in coking coal mitigated by the positive correlation between steel prices and coking coal prices and Altai-koks' strategic location near Russia's main coking coal mining area (Kuzbass Region) Potential project to develop the Zhernovskoe-1 coal mine by 2011 with reserves estimated at 240 m t, covering 22% of needs Energy 43% self-sufficient at the Lipetsk site Plan to increase the self-sufficiency to 60% by 2012 29#302007 Sales Domestic vs. export, tonnes Galvanized 15% Pre- painted 10% Transformer steel Domestic market 2% Dynamo steel 3% Pig-iron 4% Pickled 7% Total Domestic sales in 2007 2.8 million tonnes Appendices > 2007 Sales Export market Pickled 5% Cold-rolled 11% Cold-rolled 27% Thick plate 8% Hot-rolled 6% Pig-iron 12% Dynamo steel 5% Transformer steel 5% Hot-rolled 32% Slabs 49% Galvanized 0.3% Pre-painted 1% Total Export sales in 2007 6.3 million tonnes 30 30#31Appendices > Enhancement of Production Platform Enhancement of Production Platform Capex drives output growth and improvements in efficiency Main Goals Increase steel production • Quality improvements • Fast growth of HVA products Efficiency gains Pre-painting line No.3 (200,000 t) Blast furnace No.7 (3.4 m t) Pulverized coal injection (PCI) Cold-rolling mills (110,000 t x 2) Cold-rolling mill (350,000 t) Vacuum degasser Galvanizing line No.4 (300,000 t) 2 Ladle furnaces 60% energy self- sufficiency Pelletizing plant (3.0 m tpy) EAF steel & flats (1.5 m tpy) 2011E 11.7 m t BF No.4 revamp Pelletizing plant (6 m tpy) Zhernovskoe-1 (3 m t of coking coal) 2012-15E 16 m t 6.9 m t 2,3 2 Ladle furnaces 2008E 9.4 m t 5.3 m t³ 3 2010E 5.8 m t 3 2009E 11.3 m t 3 5.4 m t 9.5 m t 5.3 m t 1. Excluding Maxi-Group and raw materials assets capex 2. Numbers for the main production site 23 3. Projected production capacity by the end of 2015 Crude steel production Flat steel production² 31#32Appendices > Maxi-Group Development Plan Maxi-Group Development Plan Pursuing capacity growth and value enhancing opportunities Urals Central Russia Siberia Existing facilities (2007 capacity) Billets: 2.4 mt Re-bar: 1.32 m t Metal-ware: 0.55 m t Urals Scrap Division* 300 scrap yards: 3 m t scrap New facilities 2008-2011 Capex: USD 1.8 bn1 Seamless pipes: 0.45 m t Wire rods: 1.0 mt (2008) Long products: 0.9 m t Billets: +1.5 m t Center Scrap Division* New facilities 2012-2015 Capex: USD 2.0 bn¹ Channels: 0.5 m t Seamless pipes: +0.5 m t (TBC) Billets: +2.0 m t Long products: +0.8 m t Flat products: +1.9 m t (TBC) Siberia Scrap Division* Seamless pipes: 1.0 m t (TBC) 1. 2. 10 million t 10 8 10 7.8 2 8 5.9 2 2 6 4.5² 6 3.9 3.02 2.4 2 3.22 4 4 1.3 NO 2 2 2 0 0 Scrap Steel Long Scrap Steel Long Scrap Steel Long Maxi-Group investment program is currently under review and may therefore undergo material changes. Volumes does not include to-be-confirmed (TBC) projects. 32#33Appendices > Automotive industry Automotive industry Russia is at the top of the agenda for global automotive producers European Russia Vsevolozhsk Ford Motor Company S.Peterburg 1 - Toyota 2- GM (Chevrolet, Opel) 3 - Nissan 4 - Suzuki 5 - Hyundai Kaluga - 1 Volkswagen 2- Mitsubishi 3 - PSA Peugeot Citroen Moscow 1 Avtoframos (Renault). - 2 SeAZ (Oka) - Nizhniy Novgorod 1 GAZ (Volga, Siber) 2 - GAZ-GM 3 - ZAZ Taganrog Tagaz (Hyundai) Vsevolozhsk S. Petersburg Kaluga MOSCOW Nizhniy Novgorod Alabuga -Izhevsk 1 Izh-Avto (KIA) 2- Izh-Avto (Lada) Special economic zone Elabuga 1- Great Wall 2 Severstal-Avto Izhevsk Naberezhnye Chely Naberezhnye Chelny ZMA (Severstal-avto) - Ssang Yong Fiat Novouralsk Autos and engines of Urals (AMUR) (Geely, ZX) Taganrog Ulyanovsk Togliatti Novoura sk Ulianovsk UAZ Togliatti 1 - Avto VAZ 2 GM-AvtoVAZ 33#34Appendices > "White goods" sector "White goods" sector ... and for manufacturers of domestic appliances European Russia S.Peterburg 1 "BSH" 2- "Electrolux" Kaliningrad 1 - Snaige Smolensk 1 - "Smolensk" Ruza 1- "LG" Podolsk 1 - "Exquisit" Lipetsk 1- "Indesit" Kaliningrad Smolensk S. Petersburg Ruza Podolsk Alexandrov NLMK Kirzhach Lipetsk Kirov Saratov Saratov 1- "SEPOZES" Zelenodolsk Alexandrov 1 - "Vestel" Kirzhach 1- "Beko" Zelenodolsk 1- "Pozis" Kirov 1 - "Vesta" 34#351. • • • Maxi-Group Financial Highlights 2007 highlights - Revenue USD 1,068 m EBITDA USD 156 m EBITDA margin 15% External debt USD 1.7 bn as at 31.12.2007 Production costs are 77% scrap, 1H 2008 ,000 USD - 100% of scrap supplied internally - New technology and equipment lower costs 2,500 Appendices > Maxi-Group Financial Highlights Revenue and EBITDA¹ 2,000 1,500 1,000 1068 500 156 0 Low transportation costs due to local scrap collection and customers Production costs, 1H 2008 - Billets USD 526 per tonne - Rebar USD 570 per tonne - Wire rod USD 581 per tonne Management estimate based on Russian Accounting Standards (RAS) Based on non-consolidated Russian Accounting Standards 2007 ■Revenue 2600 EBITDA ~21% 2008E ■ EBITDA 540 Billets cost structure H1 2008 Scrap 77% Alloys 10% Energy 5% Personnel 1% Depreciation 1% Repair 4% Other 2%#36Appendices > Maxi-Group Business Model • Maxi-Group Business Model Dynamic regionalized production and distribution model Maxi-Group's targets supply of simple product mix to regional consumers using cost advantages in local scrap sourcing, local mini-mill production and local distribution Maxi-Group wins customers when proximity to demand and quick turnaround times are important Maxi-Group targets regions with demand/supply imbalances to develop new production facilities Well-developed scrap collecting and processing facilities provide efficient raw materials supply Central Russia Urals .40% of rebar consumption D St. Petersburg Moscow PU 8-10% annual demand growth for long products Siberia •W.Siberia is a leading pipe market • Far East development plans Yekaterinburg Novosibirsk Scrap collection area Sales area Production facilities Scrap collecting facilities 36#37Financial Position Strong balance sheet and corporate ratings Highest credit ratings among Russian peers NLMK targets 30% gearing Appendices > Maxi-Group Financial Position Net Debt, 2007 USD, bn 6.5 6.3 4.5 • Strong financial position and cash flow provides flexibility for further growth 2.5 0.9 0.3 MMK 0.5 . Capex coverage ratio for 20071 is 2.6 NLMK Severstal -1.5 -0.5 Evraz Source: Bloomberg LP S&P BB- BB BBB- Net debt / EBITDA, 12M 07 Evraz MMK NLMK USD, bn Severstal 2 1.46 Moody's Ba3 Ba2 Ba1 1 MMK NLMK 0.24 Severstal 0.09 -0.21 Evraz 0 NLMK MMK Severstal Evraz Fitch BB- BB BB+ -1 Severstal Evraz MMK NLMK 1 12 Capex coverage ratio = Free cash flow from operations/Capex Free cash-flow = Cash flow from operations - total Capex Source: Bloomberg LP 37#38Consolidated Statement of Income Appendices > P&L Q4 2007/ 2007 2006 2007/2006 Q4 2007 Q3 2007 Q3 2007 (mln. US D) Sales revenue Production cost Depreciation and amortization Gross profit General and administrative expenses Selling expenses +/- % +/- % 7,719 6,046 1,673 27.7% 2,174 1,936 237 12.2% (3,569) (2,716) (853) 31.4% (1,044) (862) (182) 21.1% (408) (358) (50) 13.9% (111) (99) (11) 11.2% 3,742 2,971 771 25.9% 1,019 975 44 4.5% (215) (189) (26) 13.9% (56) (52) (4) 8.4% (443) (325) (117) 36.1% (125) (106) (18) 17.4% Taxes other than income tax (80) (57) (23) 39.8% (21) (19) (2) 8.1% Impairment losses (137) 137 (100.0%) Accretion expense on asset retirement obligations (6) (20) 14 (68.7%) (0.1) (0.0) (0.0) 66.7% Operating income 2,998 2,243 755 33.7% 817 797 19 2.4% Loss on disposals of property, plant and equipment (27) (4) (24) 661.7% (3) (5) 2 (43.4%) Gains/(losses) on investments (24) 401 (424) (105.9%) (20) () (20) Interest income 100 112 (12) (10.8%) 32 23 8 34.3% Interest expense (31) (30) (2) 5.8% (17) (3) (14) 511.0% Foreign currency exchange loss, net 80 (75) 155 (207.4%) 25 41 (16) (39.3%) Gain from disposal of subsidiaries 83 83 1 1 66.3% Other expense, net (23) (27) 4 (14.5%) (19) (5) (15) 299.5% Income from continuing operations before income tax and minority interest 3,157 2,621 536 20.4% 815 850 (34) Income tax (837) (707) (130) 18.5% (196) (217) $བ (4.0%) 21 (9.8%) Income from continuing operations before minority interest Minority interest 2,320 1,914 405 21.2% 619 632 (13) (2.1%) (23) (26) 2 (8.9%) (5) (6) 1 (20.4%) Equity in net earnings/(losses) of associate (50) 1 (51) (24) (34) 9 (27.0%) Income from continuing operations Income from discontinuing operations Net income EBITDA 2,246 1,889 357 18.9% 590 592 (3) (0.4%) 1 177 2,247 2,066 (176) 181 (99.3%) 8.8% 590 592 (3) (0.4%) 3,366 2,631 735 27.9% 903 893 10 1.2% 38#39Consolidated Balance Sheet (mln. USD) ASSETS Current assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories, net Other current assets, net Restricted cash Current assets, held for sale Non-current assets Long-term investments, net Property, plant and equipment, net Intangible assets Goodwill Other non-current assets, net Non-current assets, held for sale Appendices > BS as at 31.12.2007 as at 30.09.2007 as at 30.06.2007 as at 31.03.2007 as at 31.12.2006 4,388 3,904 3,629 3,484 1,155 1,388 1,349 898 3,050 665 153 144 137 37 37 1,696 1,194 1,110 1,252 1,150 1,236 1,043 936 874 857 147 134 97 370 331 9 8 44 8,688 6,105 5,783 5,821 819 880 861 856 5,667 810 6,450 4,409 4,128 3,985 3,988 189 192 191 195 199 1,189 591 571 567 560 41 33 32 104 110 114 Total assets 13,076 10,009 9,412 9,305 8,717 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities 3,002 992 980 943 Accounts payable and other liabilities 1,395 860 830 718 Short-term borrowings 1,537 52 72 Current income tax liability 71 80 78 $ཡྔོ ྂ 993 664 99 84 249 80 Current liabilities, held for sale 41 Non-current liabilities Long-term borrowings Deferred income tax liability Other long-term liabilities Non-current liabilities, held for sale 975 640 597 819 781 73 19 19 51 48 586 593 564 552 538 317 28 14 41 195 175 Total liabilities 3,978 1,631 1,576 1,762 1,774 Minority interest 107 119 109 136 133 Stockholders' equity 8,992 8,258 7,726 7,406 6,809 Common stock 221 221 221 221 221 Statutory reserve 10 10 10 10 10 Additional paid-in capital 52 52 52 52 2 Other comprehensive income 1,182 1,038 738 680 590 Retained earnings 7,526 6,936 6,704 6,443 5,986 Total liabilities and stockholders' equity 13,076 10,009 9,412 9,305 8,717 39#40Consolidated Cash Flow Statement Appendices > CF 2007 2006 2007/2006 Q4 2007 Q3 2007 (mln. USD) +/- Cash flow from operating activities Net income 2,247 2,066 181 % 8.8% 590 592 Q4 2007/ Q3 2007 +/- % (3) (0.4%) Adjustments to reconcile net income to net cash provided by operating activities Minority interest 25 26 (1) (4.6%) 5 6 (1) Depreciation and amortization 408 358 50 13.9% 111 99 11 (20.3%) 11.2% Loss on disposals of property, plant and equipment 27 4 24 661.7% 3 5 (2) (43.4%) (Gain)/loss on investments 24 (401) 424 (105.9%) 20 20 Gain from operations of discontinued subsidiary Gain from disposal of subsidiaries Equity in net earnings of associate Defferd income tax (benefit)/expense Gain on loan restructuring Impairment losses Accretion expense on asset retirement obligations Other movements Changes in operating assets and liabilities Increase in accounts receivables Increase in inventories Decrease/(increase) in other current assets Increase in loans provide by the subsidiary bank Increase in accounts payable and oher liabilities. Increase/decrease) in current income tax payable (83) (83) (1) (82) 81 (1) (228) 226 (99.4%) () 80 50 (1) 51 (10142.3%) 24 38 (39) 77 (197.9%) (19) 34 10 (80) (9) (29) (100.0%) (27.0%) (300.8%) 137 (137) (100.0%) 166 20 (14) (68.7%) 66.7% 21 (5) (23.6%) 12 6 6 100.1% (92) (141) 49 (34.9%) (30) (44) 13 (30.7%) (200) (160) (40) 25.1% (48) (72) 24 (33.3%) (44) (17) (27) 158.1% (1) (33) 32 (97.6%) (106) (70) (36) 52.3% (1) (1) (1) 66.3% 243 (23) 266 (1150.1%) (106) 11 (118) (34) 32 (66) (204.1%) (13) (0.2) (13) Net cash provided from operating activities 2,524 1,585 939 59.2% 545 612 (67) (11.0%) Cash flow from investing activities Acquisitions of subsidiaries Acquisitions of associates 24 (1,348) (806) 1,348 (100.0%) 830 Proceeds from disposal of discontinued operations 303 (303) (103.0%) (100.0%) 24 24 24 Proceeds from adjustment of the original purchase price of subsidiaries 37 37 (1) (1) Proceeds from sale of property, plant and equipment 12 16 (3) Purchases and construction of property, plant and equipment (958) (619) (339) Proceeds from sale of investments 12 465 (454) Purchase of investments Loan issued (199) (55) (145) (21.1%) 54.8% (97.5%) 264.3% 5 5 (327.0%) 1700.0% (342) (221) (121) 54.9% 5 5 (154) (9) (145) 1548.3% (134) (134) 2 (3) 6 (164.8%) Disposal of subsidiaries, net of cash disposed $106,800 Movement of restricted cash (60) (60) (0.2) (0.4) 0.2 (51.2%) (1) (1) (400.9%) Net cash used in investing activities (1,268) (2,043) 775 (37.9%) (461) (233) (227) 97.4% Cash flow from financing activities Proceeds from borrowings and notes payable 269 225 44 19.6% 229 10 219 2226.6% Repayments of borrowings and notes payable (452) (183) (268) 146.5% (193) (34) (159) Capital lease payments (3) (3) (1) (1) () 472.8% 87.5% Proceeds from disposal of assets to the company under common control 78 78 Payments to controlling shareholders for transfer of interests in subsidiary Dividends paid to previous shareholder of acquired company Dividends paid to minority shareholder of existing subsidiaries Dividends to shareholders (104) 104 (100.0%) (84) 84 (100.0%) (19) (20) 1 (5.3%) 2 (13) 16 (117.9%) (703) (767) 64 (8.3%) (355) (343) (12) 3.5% Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period (830) (933) 104 (11.1%) (318) (381) 63 (16.6%) 427 (1,391) 1,818 (130.7%) (234) (2) (231) 9799.9% 63 132 (69) (52.4%) (0.3) 42 (43) (100.7%) 665 1,924 (1,259) (65.4%) 1,388 1,349 40 3.0% 1,155 665 489 73.6% 1,155 1,388 (234) (16.8%) 40#41www.nlmksteel.com NLMK Investor Relations 18, bldg 1 Bakhrushina str. 115054, Moscow Russia t. +7 495 915 15 75 f. +7 495 915 79 04 email: [email protected]