Alexander Frolov - Chief Executive Officer Pavel Tatyanin - Senior Vice President, CFO

Seth Rosenfeld - Jefferies Neri Tollardo - Morgan Stanley Sergey Donskoy - Societe Generale Nikolay Sosnovskiy - UBS Barry Ehrlich - Citibank Vladimir Sergievsky - Barclays Kay Hope - Bank of America Merrill Lynch Mikhail Priklonsky - Credit Suisse

Thank you. Dear ladies and gentlemen, I would like to welcome you to our conference call to discuss financial and operational results of Evraz for the first half of 2015.

I hope you have had an opportunity to download the webcast presentation which is available on our Web site evraz.com, as we will be following them during the call. Additionally, before I begin I would like to remind everyone that the matters discussed on this call will include forward-looking statements that are subject to many factors, risks and uncertainties that are described in detail on the second page of the presentation.

We undertake no obligation to update any forward-looking statements. I am joined on this call today by Pavel Tatyanin, our CFO.

I will begin today's presentation with a brief overview of our half year results followed by a strategic update. I will then turn the call over to Pavel, he will go through the results in greater detail.

Turning to the first half financials shown on the Slide 4. We have reported EBITDA of US$922 million, a drop of 14.6% is mainly due to weak markets in Russia and North America.

Our consolidated EBITDA margin expanded to 18.8%, reflecting the results of [followed] [ph] cost optimization efforts. Our coal segment EBITDA showed 10% increase reflecting positive effects of the recoverable and the other cost initiatives and shutdown or disposal of non-core steam coal operations.

I am also pleased to see the continuing positive free cash flow generation and ongoing progress on net debt reduction. On the next Slide I would like to draw your attention to health and safety.

The lost time injury frequency rate in the first half of 2015 was 1.93. It is higher than year before but we think it reflects our continuous effort to improve transparency of our reporting.

Number of fatalities is lower than for the same period of 2014 but our target remains the same, zero fatalities. On Slide 7, we present short summary of our strategic priorities and the results achieved.

Customer focus is one of the main areas of our attention. We have expanded our portfolio of high value added products and we have reached new export markets with our rails and wheels during the first half of 2015.

This year we have already achieved additional EBITDA of US$38 million as a result of customer focus initiatives. Our full year target here is $75 million.

The fundamental part of our strategy is to remain low cost producer. We delivered $149 million of cost reduction in the first half of this year and we expect to reach $280 million by the end of 2015.

As a result of comprehensive review of company's investment program, we are trying to keep our critical expenditures at relatively low level, targeting $500 million for this year. So now I will hand over this call to Pavel Tatyanin.

So Pavel, please.

Thank you, Alexander and good afternoon everybody and good morning to you who are dialing in from the United States and Canada. On Slide 9, where I am going to start, we show revenue analysis.

As a result of a negative trend in steel pricing which eventually led to a decline in steel segment revenues, consolidated revenue dropped 28% to $4,894 million. Steel segment revenues decreased in the first half of 2015 largely due to lower revenue from steel product sales which declined by 32%.

Revenues from sales of steel products were also impacted by changes in the company's sales volume and product mix. The shift in the sales mix reflected higher sales of semi-finished products and lower sales of finished goods.

Since production volumes of flat-rolled and railway products declined, Evraz switched some of the semi-finished goods produced from internal consumption to external sales. Revenues from the steel North America segment fell by 21% including 22% decrease of revenue from sales of steel products.

It was driven by a declining prices, sales volumes and change in product mix. Notably sales of tubular goods declined as a slowdown in drilling activity impacted demand for oil country tubular goods, or OCTG.

Coal segment revenues fell as a result of lower sales prices and volumes. In the first half 2015, the company decreased its production and made adjustments to production plans in response to weak market conditions.

Now please turn to Slide 10 to discuss our cost of revenue. Our cost cutting initiatives and Russian ruble devaluation positively impacted the group's cost of revenue bringing it down by 31%.

This was mostly due to a 32% fall in raw material costs impacted by lower iron ore and scrap costs, and a 16% fall in staff costs reflecting the effect of the disposal and optimization of assets, personnel optimization programs and the impact on costs of the Russian ruble and Ukrainian hryvnia weakening. Moving to Slide 11.

Here we show our EBITDA dynamics and breakdown. We see decline of 15%, mostly attributable to our steel and steel North America segments.

Steel segment EBITDA decreased compared to the first half of '14 as a result of lower sales prices for steel products in export markets in Russian and Ukraine, partially offset by falling expenses and Russian/Ukrainian subsidiaries in U.S. dollar terms due to the depreciation of the local currencies.

Lower prices for iron/ore, coking coal and scrap, the de-consolidation of Evraz's Highveld Steel and Vanadium as well as the disposal of Evraz's Vitkovice Steel in 2014, all had a positive effect on this segment's results. EBITDA from steel North America segment diminished its contribution to the consolidated EBITDA, largely influenced by downturn in OCTG and flat-rolled product markets.

Coal segment EBITDA rose 10% reflecting the positive effects of the Russian ruble devaluation on cost. The implementation of the efficiency improvement program and asset optimization at Yuzhkuzbassugol and the Raspadskaya Coal Company which compensated the decline in coal product sales prices.

Now let's turn to Slide 12. As Alexander has already mentioned, we have managed to implement our efficiency savings plan which resulted in US$149 million savings with the main contributors being improvements in raw material consumption yields and in productivity, the energy efficiency program, maintenance procedures, G&A expenses and asset optimization.

A fundamental part of Evraz's strategy is to remain a low cost producer with simple and efficient operational processes. On Slide 13, I would like to take a moment to update you on our cash flow generation.

Our net operating cash flow remains strong reaching relatively same amounts as last year. Free cash flow for the period was a positive US$372 million.

In April 2015, the company completed a share buyback via a tender offer of 108 million ordinary shares approximately for $3.10 per share. The total cash used amounted to US$339 million.

Now on Slide 14, I would like to highlight our focus on continued debt reduction. Net debt was reduced to US$5.7 billion with net leverage of 2.6 times compared to very similar 2.5 times as the end of 2014.

Moving to Slide 15. Now through active refinancing of short term maturities and cost efficient use of cash for total debt, resulted in $228 million total debt reduction to the level of $6,679 million as of June 30, 2015.

Importantly, cash on hand and committed credit facilities are sufficient to cover all of our refinancing needs for the remainder of 2015. Committed credit lines after the reporting date and cash drawn under the existing facilities that include our ruble bond of 15 billion and two bank loans along with the cash draw downs, cover all our 2016 needs for debt repayment.

Our debt structure is presented on Slide 16. Our debt is mostly fixed rate with the average cost being generally stable at about 6.4% per year.

Average duration of our liabilities has been gradually falling, so our primary task shall be extending our maturity profile. Our refinancing interest rates are very close to our weighted average cost of debt allowing us to stay flat in cost of borrowings.

Going to Slide 17, I would like to elaborate on CapEx in our key projects. In the first half of this year, we continued to reduce our total expenditures due to devaluation, completion of capital intensive projects outlined in the table on the bottom right of the Slide as well as prudent capital management.

So our CapEx as of the first half of 2015 reached US$251 million with investment CapEx of $114 million and $137 million spent on maintenance. Now I would like to have a brief discussion about our segment performance.

Please turn to Slide 19. As Russia remains the core market for Evraz, our Russian sales are experiencing some limitations.

Russian demand for steel products dropped 8% in the first half of the year to 19.7 million tons all together. In particular, consumption of rebars in construction profiles fell by 15% and 27% respectively.

Consumption of our rail decreased by just 2%. Russian steel production remained stable in H1 2015 as new electric arc furnace steel making facilities increased output and export volumes of steel products rose 12% to reach 14.3 million tons due to the ruble devaluation which gave Russian producers the cost advantage over global peers.

Russian steel prices came under pressure from the dynamics of the global steel market, slowing domestic consumption and currency fluctuations. In H1 2015, construction and railway product prices decreased by 30% in U.S.

dollar terms compared with H1 2015. In the first half of '15, Evraz demonstrated greater flexibility in reallocating volumes from the Russian to export markets, maintaining production levels and helping increase profitability margins.

Export shipments increased to 54% of total sales in the period from 42% last year, in the first half of last year. Despite the rise in export volumes, the company's market share in Russia remained at 23% in the first half of this year, pretty much unchanged from similar period a year before.

Crude steel output at Evraz's Russian steel mills was largely unchanged in the first half of 2015, reaching 5.8 million tons. Revenue from external steel product sales in Russia decreased by 43% compared with the first half of 2014, mainly due to lower prices, while sales volumes fell by 21%.

Please also have a look at Slide 20 for the sales mix of our external steel sales for more detail. Moving now to iron ore on Slide 21.

Russian iron ore production was stable in the first half of the year, output of saleable iron ore concentrate totaled 26 million tons while that of pellets rose by 3% to 16.2 million tons. Evraz consumed 90% of its Russian iron ore product internally in the first half of this year, so only 10% was really exposed to market fluctuations.

64%, around two-thirds of our iron ore consumption was supplied by the group's own operations. While domestic iron ore prices denominated in rubles remained stable due to the currency devaluation, prices in U.S.

dollars declined by 40%. Despite that decline, Evraz's iron ore business remains free cash flow positive due to its beneficial cost position.

Our cash cost of iron ore products is $31 per ton versus $48 per ton a year ago and we believe that vertical integration still remains value creating reducing our overall steel segment costs. Slide 22 speaks about our coal segment.

Overall revenues in this segment decrease amidst a reduction in sales prices due to sluggish demand and lower coal prices globally as well as higher output in other coal exporting countries. Sales volumes also decreased as the company mined lesser coal due to optimization of our production program.

While steam coal mines that we used to own have been closed or sold, sales volumes of coking coal concentrate increased by 6%. Cash costs of coking coal concentrate were dropped to $32 per ton from $55 per ton in the first half of '14.

The decrease in the internal coal consumption resulted from the shutdown of two coke batteries and a greater use of the launched PCI plant, we managed to ship more to our customers. In the first half of '15, the coal segment sales to the Steel segment amounted to $210 million or 39% of sales compared to $280 million or 39.5% of sales in the first half of '14.

Evraz's steel mills remain the largest buyer of our coal while two-thirds of our coal are sold externally. During the period around 78% of the coking coal consumed by Evraz is still making operations -- came from its own operations compared with 73% in the first half of '14.

Please turn now to page 23 for steel North America segment. Steel North America is a segment which includes production of steel and steel products in the United States and Canada.

Evraz remains the leading producer of large diameter pipes and rails in North America with a market share of 50% and 40% respectively. Over the next three to five years, we expect the large diameter pipe market to continue to expand from the current 0.8 million tons per annum to 1.7 million tons per annum due to the upcoming pipeline of major gas exploration projects in western Canada and the upcoming pipeline of gas and oil transmission line projects in western Canada and the United States.

In addition, the rail market should be supported by the ambitious class-I railway corporate investment project plans. The performance of our large diameter pipe and OCTG segments diverged significantly in the first half of this year.

For LDP, volumes strengthened as midstream infrastructure companies initiated new projects to satisfy demand from energy producers seeking lower cost access to markets. For the OCTG, the rapid decline in drilling activity stemming from lower oil prices and higher inventories at distributors, forced Evraz to curtail a significant part of its OCTG operations in Canada and Colorado in the United States.

Revenues of the steel North America segment decreased by 21% to US$1.25 billion compared to US$1.58 billion a year before, driven primarily by OCTG sales. Finally, I would like to say a few words on our 2015 year outlook.

Looking at Slide 24 and 25. Main points here are as follows.

Our results will continue to be effected by weak global steel and raw material markets and current volatility. We expect a moderate decline in demand for our steel products due to the reduced investment activity in Russia.

China's weakening demand and recent foreign exchange devaluation should further impact pricing in Chinese export competitiveness. Our outlook for North America remains stable with a key focus on LDP, large diameter pipe, and rail.

Importantly, Evraz continues to expect positive free cash flow and hence progress towards further reducing net debt in absolute terms. With this, I would like to thank you for listening to our presentation and we are now ready to take your questions.

Thank you.

This is Seth Rosenfeld at Jefferies. I have a couple of questions on your Russian business.

Can you provide a bit more color on the margins you are seeing in your Russian export sales? I remember as of the beginning of this year, I think you mentioned exports were surprisingly high margin, perhaps comparable to your domestic sales but I would assume this has come under quite a bit of pressure, given the falls in Chinese export prices.

Can you just confirm what sort of margins you are seeing on your exports, at least relative to your domestic sales? And then to follow up on that, you mentioned earlier that you are now focused on targeting some new export destinations such as Turkey and Brazil.

Can you give a bit more color on your strategy for expanding into these regions and in what time frame you think you can ramp up these sales? Thank you.

This is Alexander Frolov. Thank you for your questions.

I think earnings and margins, I think you are correctly mentioned the general dynamics since beginning of the year. I don’t think that we would be able to provide you with more detailed information because those margins, let's say product specific and of course we realize for different products in different regions.

And even inside Russia, let's say these margins are different depending on the destination of the product. Obviously one we sell to the regions which are close to our production sites, we have higher margin.

If we sell for kind of longer distances, we have lower margins. So it' more or less complex picture and probably you should just look at the average number and [indiscernible] EBITDA margin.

Speaking about, let's say, our strategy in new market development, our main focus there is export sales of our rails and railcar wheels. So basically the markets which we are targeting there are America.

So I mean both sales in North America, and also for rails it is Middle East which have been traditionally a big market for this type of product and we even have a history of supplying there. But obviously because rails is a complex product, it requires a lot of customer communication, certification, let's say [tailoring] [ph] around the deliveries to the customer needs.

So the volumes would not go very quickly there but I think that for us it's important, especially having in mind potential weakness of rail demand in Russia and especially in CIS countries.

Great. Thank you.

If I can just ask one follow up question, shifting over to the U.S. business.

Can you just give us a sense of your current order backlog, both in large diameter pipes and OCTG pipes as well, focus on the large diameter side. Has anything changed since your capital markets day when you first gave guidance for significant forecast market growth, given the fact that you have subsequently seen a big collapse in oil and gas prices?

Thank you.

Yes. Here is Pavel, let me tackle that one.

As far as LD, large diameter pipe market is concerned, we have not seen or heard anything new since the recent volatility in the oil prices. We remain in close contact with the customers -- our key customers which are major transmission line builders and operators, are normally taking a very long-term view on their projects and most of the projects go-through a very long planning phase which probably takes two to three years.

So we don’t anticipate any immediate knee-jerk reaction in any negative way that would affect our overall backlog. So we are booking into 2016 right now, as far as our Canadian and Portland mills are concerned.

OCTG, the last capital day we had in London in June, we spoke about slight improvement in the demand which allowed us to re-hire crews both in Canada and also Pueblo, Colorado in the United States. We are limited to one to two crew operation in most of our OCTG mills.

We don’t see that improving in the next quarter or so. The immediate effect of the recent oil price drop, especially on our Canadian operations is still yet to be assessed.

But, again, we are starting from a very low number, so even if we need to curtail it back again, we don’t think that will significantly impact our overall North America profitability in a negative way.

A few questions from my side. First, on CapEx.

Not assuming we enter a better case scenario and you need to cut some CapEx to preserve free cash flow, which development project would you say are most expandable or at least can be delayed more easily? Second question, on your iron ore and coking coal, if you can give some guidance on volumes, of production volumes, for this year and maybe next year.

And if you can remind us what the transportation costs are for external sales of both iron ore and coking coal? And last question.

There has been news in recent weeks about Raspadskaya managing some coal assets of Sibuglemet. Can you give us a little bit of detail on that?

What the strategic rationale is and what the impact could be on Evraz. Thank you.

This is Alexander Frolov speaking about our CapEx. We don’t have a lot of big sized development projects which are currently under execution.

So we have finished almost all of them basically during the last year and during prior years. So all projects which we conduct right now, they are sort of medium size.

I think that basically all of them could be delayed in case of need. Where we might have a difficulty in delaying spending is our Regina steel mill with the reconstruction which we are doing there is strongly linked to demand of our large diameter pipe customers.

But on the other hand we believe that this project is not so risky because its backed up by strong order book for large diameter pipes we have in U.S. and Canada.

So speaking about our coal and iron ore production volume, I don’t think that we expect any major changes in the near future. I believe that volumes would remain flat in general.

Probably one thing which is important to mention, it is increased production of Evrazruda on the back of completion of our expansion project in Sheregesh mine. I think that this volume increase is already reflected in our first half results.

You can see that in our presentation. So speaking about transportation cost, I think it's probably important for our coal sales to [fight] [ph].

Let's say with the current exchange rate it probably equals to $25, then you should take another 10 for port handling charges. I think for the other products, especially for iron ore, I think transportation cost is not so relevant because these products do not, especially in Evraz, they do not travel over the long distance.

You know that [indiscernible] is situated very close to [indiscernible] and Evrazruda is situated very close to [indiscernible] and we don’t have too much of third party sales in our iron ore portfolio. So speaking about your last question and rumors, I would probably say rumors about Evraz managing Sibuglemet, I think that what we have there is more like exchange of information and also in the first half of 2015, we have increased volumes of coal we purchase from Sibuglemet and we see a further possibilities for us buying more coal from this company.

We consider it being a reliable supplier and low cost producer so we are adjusting [particularly] [ph] to continue this kind of more commercial cooperation and I don’t think that, again, this remarks about management have any relevance to the real situation.

Thank you. So just a follow-up then on your coal.

So your cash costs in the first half were $32 per ton and on top of that we should add then another effectively $35 per ton to get to [indiscernible] kind of cost, correct?

That’s right.

Yes, it's absolutely that. But we should not forget that production cost is basically ruble dominated cost.

So you should, if let's say, we speak about current situation, you should correct to the weaker ruble-dollar exchange rate.

I have three small questions. First of all, could you remind me of the reason for discrepancy between the IFRS and the management accounts in respect of EBITDA?

I think that the first half EBITDA according to management accounts was about $15 million lower than what was reported and what was based on IFRS numbers. Second, could you give us some guidance for your full year production in the coal division, if that is possible separately for Raspadskaya and for Yuzhkuzbassugol.

And, lastly, just a housekeeping question. Could you tell me what is currently the transportation costs for your semi-finished products from Nizhny Tagil [indiscernible]?

Thank you.

This is Pavel. Thank you Sergey for this question.

Let me tackle the first one. The key element, let me ask you a quick one, do you refer to the relevant section of our financial statements and disclosure which talk about the differences between management accounts and IFRS?

Yes. Actually, this is one of the first opening sections of the IFRS section.

Okay. Yes.

I guess the key thing is basically explained by the fact that for our management accounting purposes which basically drive our day to day decision making and business decision making, we don’t account for change in the unrealized profit adjustment, which basically is the unrealized profit that we accumulate in our inventory as our vertically integrated business contains a significant part of it at various parts of the value chain. So as our inventory grow lower or and/or our overall locked in profit that sits in our inventory decreased due to the general reduced profitability of our overall operations.

This URP adjustment is unlocked, i.e. that basically translates in the first half additional profit, so that as of June 30, we had less URP sitting in our inventory.

So for day to day decision making which is basically what we use the management accounts for, we don’t account for this unlock of the URP. As we close our books on a quarterly basis for our internal reporting purposes, we are more accurate in unlocking this URP, unrealized profit adjustment.

And basically that’s the reason for the change. And you can refer to page 48 of our financial statements which basically show the unrealized profit adjustment of $73 million, which is basically the key discrepancy.

Understood.

On the volume side I guess, on the coal volume side, referring to what Alexander has mentioned earlier on the second half of this year, our overall view is that our coal sales will be largely flat [indiscernible]. And to tackle your third one which is the delivery cost for our slabs from Nizhny Tagil to the Far East, that will be between US$70 to US$75 per ton.

This is based on the current exchange rate?

More or less -- yes, let's say 65-67. It can be a little over if it climbs to 72 again.

I actually have several questions. First of all on your EBITDA.

Considering we had lots of changes in the market for the first half, can you please just maybe roughly split your first half EBITDA into first and second quarter? What was earned in first and second quarter?

Yes. Here is Pavel.

I am afraid we don’t do it otherwise we would have reported on a quarterly basis. Sorry about that.

Even roughly. I mean 50/50, 60/40, no?

I am afraid my title disallows me from doing rough calculations, sorry about that.

Okay. So the second one is on your debt.

Basically your cost of borrowing has been quite stable throughout several years but now you have lots of coming repayments and you need to refinance. Can you please elaborate on what's the current difference between your existing cost of borrowings and the rates that are offered by the market currently?

And what would be the potential impact if the whole situation stays for, I don't know, next couple of years, what would be the cost of borrowing and on interest payments?

Okay. Thank you for this.

Just to reiterate again what I think, maybe I was not clear in the main presentation on that. Statement one, as of now our cash on hand plus signed facilities which we will draw in the next 30 to 60 days, fully committed, will cover all of the financial requirement to redeem our debt between now and end of 2016.

That’s statement one. Statement two is that post the balance sheet date, we signed and we drew partially against three bilaterals which are disclosed in our financial statement.

There is an Alpha Bank loan and there are two facilities, one from Nordea Bank and the other one with UniCredit. All are Russian subsidiaries of the international banks.

And to add to that, we did place a five-year ruble bond which was a $15 billion ruble bond with a 12.95% ruble coupon which we all swapped into U.S. dollars through a series of currency hedges.

All of these facilities come at/or below the average cost of debt as it stands now. So the new money that we are borrowing now shows that banks have apatite to lend money to us at the rates which are at or even below our weighted average cost of debt.

So as debt comes out and the debt that will be coming out will be debt which will be around or even higher than our weighted average cost of debt, we believe that in the next, what is this, 16 months between now and end of 2016, our average cost of debt will not be adversely impacted.

Okay. That's very clear.

Thank you. And the third question on your North American operations.

You've reported quite a noticeable decline in earnings there. So my question is what would be the first half amount of free cash flow considering your maintenance and expansion CapEx there and also interest payments, if any.

What was the free cash flow and if it's negative, what was the amount?

Yes, let me -- okay, I don’t think I want to disclose the exact number as our North American business will have a separate earnings call tomorrow on the back of their second quarter results. So I would invite you to log in to their webcast tomorrow and the details are available on their Web site.

We can put it up on our Web site as well for your reference. But as most of the decline in the EBITDA generation by North America came out as a result of the overall decline in volumes, particularly from the OCTG market segment, and as a result we had to curtail our operations at the [seamless] [ph] mill in Pueblo and our OCTG mills in Canada.

This reduced our overall requirement of working capital and that created a significant improvement for our overall free cash flow generation. So all in all, we were free cash flow positive in North America in the first half.

Okay, thanks. And the final one on the Russian construction market.

I assume you have got books visible to like more or less the end of September or even maybe early October. So what are the major points in terms of price negotiations?

Are you able to increase domestic ruble prices for construction products or are your customers already locked in to accept any increases as construction season is coming to its end?

This is Alexander Frolov. I think that let's say your point about construction seasonality is quite correct point.

So we don’t see any real possibilities for material price increase during September. We are speaking to our customers but for the moment I think market is more or less stable.

So is it fair to assume that the current ruble prices for construction products will hold for, let's say, the entire fourth quarter and maybe beginning of first quarter and only in, I don't know, February, we can see something changing?

I think that is probably a little bit early to say because of the recent ruble weakening has happened more or less, or was whatever, couple of weeks. So we need more time for the market to digest and to see what will be the supply demand balance.

Can you give us a little bit more sense of how you see steel volume sales in key domestic product categories, such as rail and rebar, developing in second-half? And to what degree is there visibility on those key markets?

Second question, are there any discussions or efforts that you are aware of at the government policy level that might suggest some infrastructure project work being put in place for next year? And finally, the cost optimization efforts that you've discussed and you've been working on, how much further do they have to run in your view, going into 2016?

Let me start. Speaking about domestic volumes.

I will start from rails. As you probably know, we have five-year contract with Russian railroads.

Volumes are fixed on an annual basis. So we have quite good transparency on the volumes till the end of the year.

They are going to be slightly lower than we have seen in the first half but not very material difference, I would expect. On rebar side, again, I would not expect any major difference because as you have seen probably in our presentation, volumes did not change even to compare with the first half of 2014.

Regarding other products, I think it would be very difficult to make any forecasts and, again, we have to see how the market would develop. Talking about potential government efforts and potential big projects for the next year, again, I don’t think that we know anything which would be different from kind of public domain knowledge.

On cost cutting efforts, Pavel, maybe you could give...?

Yes. I guess on the cost cutting, we have a yearly target, which is slightly under $300 million which we believe that we will meet for the full year and we delivered $149 million for the first half.

And that includes the same areas such as overall raw material consumption yield improvement, energy efficiency, G&A reduction and inventory and transportation cost optimization. So we have all this now in a very detailed way, in a very advanced stage internally, so we believe that we will get there.

A quick question on working capital from me. At least in the first half, nicely supported cash flow generation.

So what we should assume or think about the second half of the year? And within this, are you seeing any changes in the quality of your receivables?

Have you seen any changes in the recent months? Thanks a lot.

This is Pavel, let met tackle that one again. Let me start in reverse order because I think that will take me logically to the overall second half working capital release number.

For the time being we are not seeing any significant deterioration or reduction in the quality of our receivables. Our overall, overdue receivables do not grow and we are in very focused mode where we control and review that on a 10 day to 15 day basis throughout the entire group.

And coming to the first part of your question, for the time being it's a little early to understand what type of impact the recent volatility in the Russian exchange rate will make on our customers and their ability to continue to pay on time or provide advance payments for our shipments. Therefore, I think there will be a combination of tailwind and headwind developments but overall view is that the amount of capital that we will deploy or redeploy from the working capital allocation will be less than the one we had in the first half of the year.

A couple of quick questions related to the debt. First, can you give a breakdown of the debt due in 2016, say first half versus second half?

And then I do see it says cash on hand and committed credit facilities cover refinancing for the remainder of 2015, but I thought you said on the call 2016. Can you just clarify for me there?

And then, finally, with the debt you are drawing in the next 30 to 60 days and with the facilities you've drawn recently, can you give a sense of where you expect gross debt to be at the end of the year?

Okay. Let me tackle that in order of appearance.

Most of our debt of '16 is coming due in the second quarter of the year. We had about $550 million of outstanding ruble bonds that also include the swap agreements.

Most of them come due at the very last days of May and early June 2016. The remaining part, and if you refer to page 15 of the presentation, is basically a combination of smaller amounts of various amortizing loans that are pretty much equally distributed throughout the rest of the year.

So the main key bullet is basically 550 -- sorry, 450, I mistakenly said that, it's 450 that’s coming due in the second quarter of the year. So as we are referring to the sources and uses of our debt.

So what we say in our page 15, the last bullet, is basically the position we had as of June 30, whereby cash in hand and committed credit facilities were sufficient to cover our requirement for cash for debt refinancing needs for the remainder of 2015. Post the balance sheet date, we did place the ruble bonds.

We drew against a $200 million loan from Alpha bank and we did sign but we haven't drawn yet under the UniCredit and the Nordea facilities which we will draw in the next 30 to 60 days, again. So all of this draw downs will come against, basically, the requirement to redeem debt as it comes due between now and end of the year.

So as far as the total debt levels are concerned, I don’t see this number changing in any significant fashion as we are looking at December 31, 2015.

This is Mikhail Priklonsky from Credit Suisse. Thank you very much for the presentation.

I have two questions. First one is on the volumes for the rolled steel.

Given that we have already saw quite a weak quarter, quite a weak second-quarter, what are the volumes in the third quarter? And given that the first quarter is usually seasonally weaker, do you expect that fourth quarter will be even weaker than the second one in terms of volumes?

Thank you.

Thanks. I think we have already answered a similar question a few minutes ago.

As I said, seasonality is a factor. In order to understand better what the volumes are going to be for majority of products with an exception of rails, we just need to see how the market would develop and I don’t think that we could make any kind of intelligent forecast there.

Okay. And another question about potential return money to shareholders in any way in dividends or the buybacks.

Is there any chance that something may happen in 2015? And if you will be doing it in 2016, what sort of decision making or what should trigger your decision to do dividends or buybacks?

I guess our overall dividend policy remains unchanged. We committed to considering paying dividends only if two conditions are met.

First of all, our overall net debt to EBITDA needs to be below three times. And for every given period which is basically our six months as we reported on a semi-annual basis, we need to continuously show reduction in absolute amount of net debt.

Therefore depending on these two conditions being met, we will be ready to present our views to our board. However, our overall focus remains on continuous net debt reduction and that will be the primary use of our free cash flow, not only in the second half of the year but I would imagine in 2016 as well.

This remains our key focus and commitment and that is how we will be driving our decision making.

And just a small follow up here. Just looking at the performance of the share price, could you potentially consider buyback in the near term, maybe in 2016, not as a tender offer but maybe a buyback from the market in order to support the share price, as usually companies do in similar situations?

Well, this is Pavel again. I guess there are different schools of thought in the market that would address this type of pricing development and not all of the schools of thought would immediately support the idea of the shareholder buyback.

I guess we remain focused and committed to maintaining our overall free float. We think the liquidity of our shares is a very important factor that determines the overall share price and the overall market positioning.

Therefore, we would need to take this into consideration very carefully before we make any decision on any buybacks or any similar actions to support the share price. Our key focus will be on making sure that we will redeem our debt and continue to redeem our debt and the key focus will be to deliver against our cost cutting and operational improvement initiatives.

That is the key management focus now.

And then you mentioned that the management board will be presenting and your decision making -- your result of your decision making process to the board. When is the date of this presentation to the board?

Sometime in 2016.

So not in 2015. Okay.

Thank you.

Yes, I have a follow up question on your cash flow statement. You had $123 million cash outflow from loss on derivatives, which is quite sizable compared to the size of your overall free cash flow for the first half.

I was just wondering if you can give us a little bit of detail what these derivatives are and which variables we should be looking at to sort of estimate whether it's going to be a loss or a gain and of this size especially?

Yes. Thank you for this question.

One would argue, this may be called wonders of IFRS accounting. I guess the underlying situation is as follows.

When we borrow in rubles and we do that primarily and exclusively as we place the ruble bonds in the Russian market. Around the same date we immediately enter into some hedging or swap agreements with the financial institutions where we would hedge our overall ruble exposure and effectively convert this debt to be a U.S.

dollar -- debt with a U.S. dollar bearing interest.

So basically as we are redeeming our ruble bonds, we had in the first half of the year, we had also to unwind the respective swaps that came due in the similar period. So the gain that we had in the overall debt, we never show as part of the overall ash flow statement.

But the fact that our swaps were kind of out of the money, in a sense that basically we had to pay additional amounts under the swaps because of the exchange rate moves, had to be shown as a separate line item. So in similar terms, if we borrow at the date of borrowing, about $500 million worth of ruble bonds, we hedge this to be the $500 million worth of ruble bonds and as we will be redeeming this say in five years, we will be showing the respective amounts of redeem at the exchange rate at the date of redemption, whatever the exchange rate will be.

And the difference basically will show as the outflow under the hedging agreement. So this is not something that we are doing because we are playing with the market or playing with the derivative instrument, this is basically what accounting tells us to disclose in the financial statements.

The underlying business decision is basically as per my explanation earlier. Does it answer your question?

Yes. So as far as I understand, it's the unwinding of the swap and whether it's in the money or not, and then you have, whatever you have to pay to settle it.

I mean similar terms. If it's $500 million worth of ruble bonds and if these ruble bonds devalue, reduce in dollar value because ruble value changes, we have to pay 300 million in U.S.

dollar terms to repay the same amount of rubles at the redemption date. But the difference between 500 million and 300 million we will pay as the cost of unwinding the derivative, basically the hedging instrument.

So it will be the same 500 million but we will break this down into two different lines and we will show lower value of redeemed loan because the fundamentally ruble but we will show the difference as the cost of unwinding the derivatives. So it will be in aggregate the same 500 million as if we borrowed in U.S.

dollars from day one.

Ladies and gentlemen, thank you very much for joining us on the call. If you have any further queries, please call and write to the IR department.

Thanks again and good evening.