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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Public Joint Stock Company "Novolipetsk Steel"    NLMK

PUBLIC JOINT STOCK COMPANY "NOVOLIPETSK STEEL"

(NLMK)
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Novolipetsk Steel : NLMK ESG presentation – November 2020

11/21/2020 | 02:33pm EST

Leadership in

sustainability

November 2020

DISCLAIMER

2

This document is confidential and has been prepared by NLMK (the "Company") solely for use at the 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.

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.

  • Key highlights
    • Corporate governance
    • Health & Safety
    • Environment
    • Tailings dam management
    • Social
    • ESG Ratings

LEADERSHIP IN SUSTAINABILITY - KEY HIGHLIGHTS

4

NLMK's key principles of sustainable

development:

- Creating long-term shareholder value

-

Caring about health, wellbeing and

development of employees

-

Treating environment responsibly

NLMK IS THE UN GLOBAL COMPACT'S PARTICIPANT

ENVIRONMENT

HEALTH & SAFETY

- Delivering value-added products to our

customers

- Adhering to high ethical standards in

conducting business

- Developing, supporting and respecting

the interests of local communities

- Maintaining transparency & high quality

information disclosure

Selected non-financial indicators for 2019 were independently verified

1.91 t/t

97%

4th

53%

92%

NLMK's CO2 specific emissions target by 2023

of water used in production is recycled

Every 4th tonne of steel is made of scrap

Reduction in air emissions intensity (per tonne of steel) 2000-2018

of generated waste is reused

56%

16k

18k

5.6%

Reduction in

LTIFR since 2013

More than 16K employees passed safety trainings in 2019

SOCIAL

In 2019, 18,000 of training sessions were achieved at NLMK's Corporate University

Turnover rate

    • Key highlights
  • Corporate governance
    • Health & Safety
    • Environment
    • Tailings dam management
    • Social
    • ESG Ratings

NLMK ADHERES TO HIGH CORPORATE GOVERNANCE STANDARDS

6

The Group's governance structure and

practices are aligned with G20/OECD Principles of Corporate Governance, Russia's Corporate governance code

Focus is on superior shareholder returns - dividend policy provides visibility and predictability

Voting rights: "one share/one vote", equitable treatment for all shareholders

The company's Board of Directors:

  • Reputable board with superior track record
  • Directors are not over-boarded with mandates
  • Board performance is evaluated annually

Remuneration system based on clear KPIs, including ESG targets

THE MAJORITY OF THE

THE MAJORITY OF THE COMMITTEES

BOARD IS INDEPENDENT

ARE CHAIRED BY INDEPENDENT DIRECTORS

Independent directors

Independent directors

63%

44%

33%

67%

?

67%

38%

56%

33%

2014

2019

2014

2019

COMMITTEES WITH A MAJORITY OF

INDEPENDENT DIRECTORS

Independent directors

33%

67%

67%

33%

20142019

NLMK'S BOARD OVERSIGHT OF KEY SUSTAINABILITY ASPECTS

7

NLMK's approach to sustainability management is governed by

Corporate governance

BOARD OF DIRECTORS

Business ethics &

countering corruption

Sustainable Development Policy (SDP) approved by the Board in October 2019

The Board's activity covers every ESG

aspect

The Board is responsible for the complying with Sustainable Development Policy as well as for defining goals and objectives

STRATEGIC PLANNING

COMMITTEE

Sustainability risks assessment

Environmental targets and respective investment program:

  • Emissions, including greenhouse gases
  • Discharges and waste
  • Resource utilization

AUDIT COMMITTEE

Sustainability performance monitoring and reporting

Audit oversight of non-financial information

HR, REMUNERATION &

SOCIAL POLICIES COMMITTEE

Personnel and social issues:

  • Employment and work
  • Occupational health and safety
  • Training and development
  • Social policy
  • Diversity and equal opportunities
  • Non-discrimination
  • Local communities

Integration of sustainability KPIs within the remuneration system

    • Key highlights
    • Corporate governance
  • Health & Safety
    • Environment
    • Tailings dam management
    • Social
    • ESG Ratings

SAFETY IS A TOP PRIORITY FOR THE GROUP

9

NLMK's governing document: Integrated Management System Policy in Quality, Environmental Protection, Energy Efficiency, Occupational Health and Safety

OHSAS 18001:2077 certified; ISO 45001:2018 is in process

In 2019, about $100 m was invested in safety systems and equipment

"No blame" policy for incidents reporting The company is signatory of "Vision Zero"*

Safety development programs

  • Safety culture programs and communications
  • Contractors management
  • Safety risk management

Targets:

  • Zero fatalities
  • LTIFR of 0.5 (vs. 0.84 in 2018 as per WSA)

LOST TIME INJURY FREQUENCY RATE (LTIFR*)

1.60

NLMK Group

World**

1.17

1.01

1.12

1.39

0.84

0.86

1.15

0.97

0.85

0.5

0.77

2014

2015

2016

2017

2018

2019

2023

Target

  • LTIFR refers to Lost Time Injury Frequency Rate, the number of lost time injuries? occurring in a workplace per 1 million
    man-hours worked, employees and contractors
  • Worldsteel data
    • Key highlights
    • Corporate governance
    • Health & Safety
  • Environment
    • Tailings dam management
    • Social
    • ESG Ratings

REDUCING CARBON FOOTPRINT - 2023 TARGET

11

Measurable target to reduce CO2 emissions by 2023

NLMK's (Lipetsk site) CO2 intensity will be close to 30% of the most efficient mills in the world by 2023

NLMK joined Worldsteel's Step Up program to search ideas for further improvement in CO2 efficiency

Portfolio of projects for future footprint reduction

NLMK is a strategic partner for Russia's first green startup accelerator

DIRECT & INDIRECT CO2 EMISSIONS DYNAMICS

t/t NLMK Group (Scope 1+2)

2.04

1.98

1.91

2015

2019*

2023 target

*Adjusted for temporary production decrease at the Lipetsk site, based on 2018 Group's steel output

CO2 EMISSIONS INTENSITY TARGET

t/t NLMK Group, (Scope 1+2)

0.03

-0.04

1.98

-0.04

-0.02

1.91

2019*

Output growth

Captive energy

Fe content

Other projects

2023 target

(integrated)

generation

increase

IMPROVING AIR QUALITY

NLMK has reduced air emissions intensity by more than two times since 2000

The Group operates more than 500 modern dust and gas purifying facilities

ISO 14001:2015 standard implemented at 14 of the Group's facilities

Targets:

  • Reaching the EU BAT level for air emissions intensity

12

AIR EMISSIONS INTENSITY

kg/t, NLMK Group

20.1

20.0

20.2

19.5

18.9*?

18.9

18

2015

2016

2017

2018

2019

2023

Target

INCREASING ENERGY EFFICIENCY

ISO 50001:2011 certified (recertification under ISO 50001:2018 is underway)

Improved energy intensity was achieved via equipment upgrade and better processes

Higher share of captive electricity generation contributes to lower CO2 emissions

Targets:

  • Attaining a minimum level of economically and technologically feasible level
  • Increasing electricity self-sufficiency to 94%

In 2019, the use of electrical power generated from renewables accounted for 5.1% of total power consumption*

*The share of renewables in the total volume of electrical power generation is shown without transit flows; NLMK Group companies made no direct purchases from renewable energy suppliers

13

ENERGY INTENSITY

GCAL/t, NLMK Lipetsk

-0.4%

5.7

5.6

5.5

5.5

5.6

BAT

5.1

2015

2016

2017

2018

2019

GROSS ENERGY CONSUMPTION

PJ, NLMK Group

?

-10%

590.3 587.9 590.5 579.6

532.8

2015

2016

2017

2018

2019

CASE STUDY: INTEGRATED PRODUCTION CHAIN - ENERGY SELF - SUFFICIENCY

14

Strategy 2022 envisages construction of the 3rd captive power plant at NLMK Lipetsk:

  • The power plant will run on by - product fuel gases
  • Leveraging successful experience of by-product gases reuse
  • Unique technology for Russia of utilizing basic oxygen furnace gas
  • Positive environmental impact

In 2019, NLMK Group signed the contracts for the supply of the main equipment, and design of the plant is in progress

ENERGY SELF-SUFFICIENCY TARGETS, NLMK LIPETSK

Captive energy generation

Secondary fuel gas recovery

94%

89%

100%

65%

2019

2023

2019

2023

Target

Target

ADDITIONAL PROJECT INDICATORS

Power plant capacity

300 MW

Reduction in CO2 emissions per annum

650k t

Investments

$420 M

CASE STUDY: ELECTRICAL STEEL FOR LOW CARBON FUTURE

15

NLMK targets to increase production of electrical steel (GO and NGO) at its Russian facilities for global markets to benefit from growing energy demand and shift to low carbon economies:

  • +0.1 m t of high grade GO for more efficient power and distribution transformers
  • +0.1 m t of premium grade NGO for electric vehicles and energy-efficient motors

TARGET ELECTRICAL STEELS SALES, m t

+35%

0.8

0.6

0.5

2018

2019

2023

Target

Photo source: World Economic Forum

CASE STUDY: PREMIUM PLATES FOR LOW CARBON FUTURE

16

NLMK's Dansteel (Denmark) is a leading producer of steel plates used for wind energy equipment in Northern Europe

The wind energy market trends in the EU:

  • Steel consumption by the wind energy sector is expected to rise significantly in the EU driven by the Clean Energy for All Europeans legislative package

NLMK's targets:

  • +0.2 m t production growth

TARGET PREMIUM PLATES SALES BY DANSTEEL, m t

3.6x

0.3

0.10.1

2018

2019

2023

Target

Photo source: World Steel Association

MINIMIZING THE USE OF WATER RESOURCES

17

NLMK has substantially reduced water consumption in relative (per tonne of steel produced) and absolute terms

The Group doesn't operate in water- stressed areas

All of NLMK's production facilities are equipped either with closed loop water systems (no waste water discharge) or water recycling solutions

Target:

  • Minimizing water consumption

WATER CONSUMPTION & USE INTENSITY

Water сonsumption, m m3

Specific consumptive water use, m3/t of steel

5.7

5.5

4.9

4.7

5.3

4.7 *

91

91

84

81

82

2015

2016

2017

2018

2019

WATER REUSE IN TOTAL WATER CONSUMPTION

% of water reuse

96.6%

96.5%

96.4%

96.3% 96.3%

2015

2016

2017

2018

2019

*Adjusted for temporary production decrease at the Lipetsk site, based on 2018 Group's steel output

MINIMIZING WASTE GENERATION AND REUSING BY-PRODUCTS

18

NLMK targets lower waste generation and higher share of

WASTE RECYCLING

%, NLMK Russia, excl. mineral waste

waste reuse in its operations to 96% by 2023

Briquetting plant launched in May 2019:

96%

94%

92%

89%

- All newly accumulated Fe

containing waste will be reused for

briquettes production at NLMK

Lipetsk as feedstock in BOFs

- This project will help to achieve the

Group's Environmental Programme

2022 target of increasing waste

87%

?

2015

2016

2017

2018

2019

WASTE GENERATION INTENSITY

t/t, NLMK Group

utilization to 96%

4.0

3.63.43.6

2.9

2015

2016

2017

2018

2019

    • Key highlights
    • Corporate governance
    • Health & Safety
    • Environment
  • Tailings dam management
    • Social
    • ESG Ratings

NLMK'S TAILINGS DAM - SAFETY IS NUMBER ONE PRIORITY

20

NLMK's tailings dam was put into operation in 1984

Tailings dam development plan was independently audited

Emergency preparedness is regularly assessed and response procedures are developed

Safety drills are regularly performed with the participation

of Russia's Ministry of Emergency Situations

Water recycling system is in place

NLMK responded to the Church of England Pensions Board request

    • Key highlights
    • Corporate governance
    • Health & Safety
    • Environment
    • Tailings dam management
  • Social
    • ESG Ratings

DEVELOPING OUR TEAM

22

NLMK Group employs 52.8 thousand people

Employee turnover rate increased in 2019 due the implementation of the program to increase labor productivity

Regular staff satisfaction surveys are conducted

Feedback channels were developed and launched

Group employees completed 52.9 training sessions in 2019

NLMK GROUP'S EMPLOYEE TURNOVER RATE

8.8%

4.7%

4.4%

4.7%

5.6%

?

2015

2016

2017

2018

2019

STAFF BREAKDOWN BY GENDER & CATEGORY

NO. OF TRAININGS COMPLETED BY EMPLOYEES

NLMK Group, %

NLMK Group, thousand trainings

15

22

25

47

58

85

78

75

53.4

55.4

52.5

52.9

53

42

47.7

Managers Specialists

Office

Shop floor Total NLMK

2015

2016

2017

2018

2019

employees

employees

Group

Men Women

DEVELOPING LOCAL COMMUNITIES & SUPPORTING EMPLOYEES

23

Tools for community engagement:

INVESTMENTS IN SOCIAL PROGRAMMES IN 2019

  • Assessment of existing social programmes
  • Direct engagement via dedicated channels
  • Public hearings
  • Cooperation with regional governments
  • "Steel tree" project - a grant competition for social and environmental public initiatives

3%

10%

6%

25%

10%

$88.2 m

7%

39%

Monetary support and benefits

Medicine and health improvement

Transport to/from work

Local communities development?

Corporate meals

Mass sports and cultural events Pensions co-financing

RESPECTING HUMAN RIGHTS

24

Adhering to UN Global Compact principles on human rights and labor

  • Human Rights Policy and Corporate Ethics Code are in place to reflect issues around respect of human rights

Key developments 2019:

  • NLMK Group joined the UN Global Compact
  • Participated in the BHR Peer Learning Series hosted by the Office of the UN High Commissioner for Human Rights and the UN Working Group on Business and Human Rights
  • Member of the Committee on Corporate Social Responsibility and Demographic Policies of the Russian Union of Industrialists and Entrepreneurs (RSPP)

FUNDAMENTAL HUMAN RIGHTS PRINCIPLES AT NLMK

Fundamental principles

Areas of activity

Prohibition of forced and

NLMK only signs employment contracts with individuals that meet the minimum age

child labor

requirements stipulated by prevailing legislation. The Company does not make use of

child labor. The Company also forbids the use of forced labor, penal and military labor,

slavery, and human trafficking. All employment at the Company is exclusively

voluntary in nature.

Prohibition of discrimination

NLMK does not tolerate discrimination based on sex, religion, or any other grounds in

its staff management activities, including hiring, and adheres to the same principles

when determining wages.

Respect for the right to a

Ensuring decent working conditions, including competitive salaries, and providing

minimum wage

both employees and retirees with a social benefits package are key priorities for

the Group.

Support for freedom of

NLMK fulfils all of the requirements set forth in collective agreements, and regularly

association and collective

engages with trade unions. The Company also ensures that conditions are in place to

bargaining

facilitate the creation of associations to represent NLMK employee interests by

making corporate communications tools available and by supporting employee

volunteering initiatives.

Providing safe working

The health and safety of employees is a priority for NLMK. The Company's

conditions

management monitors and reduces risks associated with working conditions,

increasing safety levels at the production sites of every operating unit of the Group.

    • Key highlights
    • Corporate governance
    • Health & Safety
    • Environment
    • Tailings dam management
    • Social
  • ESG Ratings

RECOGNITION OF NLMK'S RESULTS IN THE AREA OF SUSTAINABILITY

26

Continuous improvements across the board resulted in NLMK's ESG ratings upgrades by the leading research agencies in the area of sustainability

Sustainalytics revised NLMK's ESG rating score from the 31.5 in 2019 to 28 this year: the lower the number - the stronger management of ESG issues by a company

NLMK is currently ranked among top-3 steel companies analyzed by Sustainalytics

NLMK remained a constituent of the FTSE4Good Index following June 2020 review

Out of 100

33

45

36

22

NLMK NLMK NLMK Industry

2018 2019 2020 average score

FTSE RUSSELL ESG RATING

Max 5

3.4

2.2

2.1

NLMK

Industry

Subsector

average

average

Out of 100

83

77

53

NLMK

NLMK

NLMK

2018

2019

2020

Max AAA

BВB

BВB

BB

NLMK

NLMK

Industry

2018

2019/2020

relative score

THE COMPANY'S IR CONTACTS

Dmitriy Kolomytsyn, CFA

Director, IR, Capital Markets

Address

40, Bolshaya Ordynka Str., Bldg. 3

Moscow, 119017, Russia

IR E-mail Address

ir@nlmk.com

Phone Number

Office: +7 495 504 05 04

nlmkonair

nlmk_group

nlmk group

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

OAO NLMK - Novolipetskiy Metallurgicheskiy Kombinat published this content on 17 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 November 2020 19:32:04 UTC


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Financials (USD)
Sales 2020 9 307 M - -
Net income 2020 1 177 M - -
Net Debt 2020 2 066 M - -
P/E ratio 2020 15,4x
Yield 2020 7,94%
Capitalization 17 704 M 17 704 M -
EV / Sales 2020 2,12x
EV / Sales 2021 1,89x
Nbr of Employees -
Free-Float -
Chart PUBLIC JOINT STOCK COMPANY "NOVOLIPETSK STEEL"
Duration : Period :
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Technical analysis trends PUBLIC JOINT STOCK COMPANY "NOVOLIPETSK STEEL"
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 14
Average target price 26,77 $
Last Close Price 29,54 $
Spread / Highest target 11,7%
Spread / Average Target -9,37%
Spread / Lowest Target -39,1%
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NameTitle
Grigory Vitalyevich Fedorishin President & Chairman-Management Board
Vladimir Sergeevich Lisin Chairman
Ben de Vos Vice President-International Operations
Shamil Ravilyevich Kurmashov Chief Financial Officer
Nikolai Alexeevich Gagarin Director