Annual Report 2007 - Severstal

Key performance indicators
2007 2006 Change
year-on-year %
Production of crude steel (Thousand tonnes) 1,980 2,548 (22.3)
Sales of steel products (Thousand tonnes) 2,327 2,649 (12.2)
Revenue (US$ million) 1,691.9 1,868.4 (9.4)
Gross profit (US$ million) 27.8 156.5 (82.2)
Profit from operations (US$ million) 1.6 134.2 (98.8)
Operating margin (%) 0.1 7.2
EBITDA (US$ million) 21.5 142.1 (84.9)
EBITDA per tonne (US$/tonne) 9 54 (83.3)
EBITDA margin (%) 1.3 7.6
Average steel product price (US$/tonne) 707 692 2.2
Hot-rolled flat products (US$/tonne) 605 629 (3.8)
Cold-rolled flat products (US$/tonne) 721 705 2.3
Galvanised and other metallic coated sheet (US$/tonne) 865 820 5.5
The company expects to realise substantial synergies between
the new additions and existing US operations in Dearborn,
Michigan and Columbus, Mississippi. The addition of Esmark to
Severstal’s US portfolio also offers significant operational and
financial synergy potential with recently acquired Sparrows Point
in Baltimore, Maryland and the Warren, Ohio based WCI Steel. In
addition, full ownership of Mountain State Carbon will increase the
company’s domestic coke making capacities and further solidify
its raw material supply base.
Strategy
Strategic objectives of Severstal North America are:
– To become a low-cost supplier of high-value steel products.
This is being accomplished with significant investments at SNA
and SeverCorr
– To secure a raw material supply which assures low cost
– To improve margins and acquire downstream outlets for steel.
The sales revenue in 2007 amounted to US$1,692 million,
which is 9.4% lower than in 2006. EBITDA in 2007 amounted to
US$21.5 million, which is 84.9% lower than in 2006. Profitability
decrease in 2007 compared with 2006 is primarily related to the
production shortfalls in steel making operations, which resulted
from the planned reline and modernisation of the C-Blast Furnace.
This was completed in October 2007 and was successfully
restarted.
At the end of the year 2007, 2,165 employees worked at SNA,
compared to 2,171 in 2006.
Operational results
In 2007, C-Blast Furnace was fully rebuilt to increase its capacity
up to 5,900 tonnes of hot metal per day. It was under renovation
for 97 days, from July to October 2007. Additionally, repairs and
maintenance work implemented at B-Blast Furnace required a
temporary outage of the furnace. These outages resulted in the
reduction of total hot metal production by 21.8% compared to
2006, down from 2,119,000 tonnes to 1,656,000 tonnes.
As a result of the reduction in steel production, slab production
decreased by 22.3% compared to 2006 – from 2,548,000 tonnes
to 1,980,000 tonnes.
Even with the blast furnace outage, we were able to use
inventory and purchase slabs, so that production of hot-rolled steel
only decreased by 8.2% compared to 2006, from 2,747,000
tonnes to 2,522,000 tonnes. Production of cold-rolled steel also
decreased, from 1,213,000 tonnes in 2006 to 1,191,000 tonnes
in 2007.
In November 2006, we increased line furnace capacity in Hot-
Dip Galvanising (HDG) at Spartan Steel, to allow for approximately
100,000 more tonnes of production annually. As a result, total
production of galvanised products increased in 2007 by 12.7%
compared to 2006, replacing products with lower margins.
The B-Blast Furnace, which was scheduled for a complete
reline in 2010, experienced a production incident on 5 January
2008 which resulted in an outage of its production that will last
until late 2009. Our primary C-Blast Furnace was completely
unaffected by this incident.
When B-Blast Furnace resumes production, the crude steel
capacity of the Dearborn production facilities will be restored to
3.1 million tonnes per year.
Severstal Annual Report 2007 47