Annual Report 2007 - Severstal

Business review
Lucchini
Key performance indicators
2007 2006 Change
year-on-year %
Production of crude steel (Thousand tonnes) 3,585 3,567 0.5
Sales of iron and steel products (Thousand tonnes) 3,843 3,998 (3.9)
Revenue (US$ million) 3,757 3,357 11.9
Gross profit (US$ million) 562 550 2.2
Profit from operations (US$ million) 216 208 (3.8)
Operating margin (%) 5.7 6.2
EBITDA (US$ million) 416 336 23.8
EBITDA per tonne (US$/tonne) 108 84 28.6
EBITDA margin (%) 11.1 10.0
Lucchini is the second largest steel group in Italy and
one of the largest European producers of special quality
steel long products by volume of production, according
to KWR International, with 15 plants and service centres
throughout Europe.
With more than 1,000 customers in niche markets such
as automotive, rails, bearings, springs and wire rod, we have
a steelmaking capacity of 4 million tonnes of crude steel a year.
In 2007, we produced 3.6 million tonnes of crude steel and
3.6 million tonnes of finished products, including 2.3 million
tonnes of rolled steel, 0.8 million tonnes of semi-finished products
and 0.4 million tonnes of pig iron. Sales revenues in 2007 were
US$3,757 million and EBITDA was US$416 million. Our two
principal businesses are Piombino in Italy and Ascometal in France.
Piombino
We believe Piombino is one of the European leaders of long
speciality steel products, including round bars, rolled blooms
and billet and flat products, and a leading Italian producer of
high-quality wire rod, including drawing wire rod, cold heading
steel and welding steel.
Piombino estimates that it has approximately 20% of
European market share and 80% of domestic market share
for rails and rail stocks based on Eurofer data.
Main production facilities comprise of plants in Piombino,
Trieste, Bari, Condove and Lecco (all in Italy). The headquarters is
located in Brescia, Italy. At the end of the year 2007, Piombino had
3,204 employees (full-time equivalent).
Ascometal
Ascometal is a European leader in long special steels and operates
four integrated EAF-based mills, two cold finishing centres and a
distribution centre in France. Ascometal’s facilities are strategically
located near scrap collection and processing centres.
The headquarters is in Paris, France. At the end of the year
2007, the company employed 3,391 people (full-time equivalent).
Strategy
Lucchini’s business strategies include the following:
– Continue emphasis on diversified customer base
– Focus on customised, high-quality products (automotive,
machinery, appliances and rail)
– Identify and capitalise on synergies with Severstal.
The main objectives of Piombino’s long-term strategy are:
– Enhance product mix for long products
– Shift from producing semi-finished products and low-addedvalue
long products, to producing high-added-value flat products
– Participate in the consolidation of the Italian steel industry
– Increase internal efficiency.
The key objectives of Ascometal’s strategy are:
– Achieve significant growth in profitability
– Maintain and widen the product offer
– Increase sales volume to 1,250,000 tonnes by 2011.
50 Severstal Annual Report 2007