Annual Report 2007 - Severstal

OAO Severstal and subsidiaries
Notes to the consolidated financial statements
for the year ended December 31, 2007
(Amounts expressed in thousands of US dollars, except as otherwise stated)
December 31, 2006
Euro USD GBP CHF CAD Other
Available-for-sale financial assets – 70 – – – –
Held-to-maturity securities and deposits 351,448 198,205 – – – –
Held-for-trading securities – – – – – –
Loans and receivables 61,593 151,404 37,689 1,051 14,156 –
Cash and cash equivalents 158,841 432,877 983 356 2,815 2,894
Debt finance (428,811) (1,200,729) – – – –
Finance lease liabilities (685) (3,161) – – – –
Trade and other payables (28,126) (124,671) (17,994) (2,937) (1,891) (943)
Net exposure 114,260 (546,005) 20,678 (1,530) 15,080 1,951
December 31, 2005
Euro USD GBP CHF CAD Other
Available-for-sale financial assets – 67 – – – –
Held-to-maturity securities and deposits – 477,901 – – – –
Held-for-trading securities – – – – – –
Loans and receivables 109,888 105,135 8,927 547 8,791 –
Cash and cash equivalents 181,883 356,228 429 231 5,151 2,589
Debt finance (164,111) (1,279,302) – – – –
Finance lease liabilities – – – – – –
Trade and other payables (223,441) (91,234) (1,405) (56,052) (1,096) (311)
Net exposure (95,781) (431,205) 7,951 (55,274) 12,846 2,278
Sensitivity analysis
A 10 percent strengthening of the following currencies against the functional currency at December 31, 2007 would have increased (decreased) profit or
loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and no translation
difference into the presentation currency is included. The analysis is performed on the same basis for 2006 and 2005.
Year ended December 31,
2007 2006 2005
Net profit or loss
Euro 14,331 8,561 4,145
USD (56,012) (40,785) (34,021)
GBP (22) 1,415 533
CHF (166) (116) (4,201)
CAD 94 1,010 861
Other 178 148 173
A 10 percent weakening of the following currencies against the functional currency at December 31, 2007 would have had the equal but opposite effect on
the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk
Interest rates on the Group’s debt finance are either fixed or variable, at a fixed spread over LIBOR or Euribor for the duration of each contract. Changes
in interest rates impact primarily loans and borrowings by changing either their fair value (fixed rate debt) or their future cash flows (variable rate debt).
Management does not have a formal policy of determining how much of the Group’s exposure should be to fixed or variable rates. However, at the time
of raising new loans or borrowings management uses its judgment to decide whether it believes that a fixed or variable rate would be more favorable to the
Group over the expected period until maturity.
Severstal Annual Report 2007 115