Annual Report 2007 - Severstal

Metalware
Sales by industry
in Russia and the Belarus Republic
Construction 24.1%
Mass-scale
retail market 22.9%
Russian railway 12.3%
Automotive industry 8.1%
Engineering
industry 8.1%
Metalware
production 7.3%
Other 17.2%
Our Metalware segment includes Severstal-metiz –
Cherepovets plant, Volgograd plant, Orel plant (Russia),
Dneprometiz (Ukraine), Carrington Wire (Great Britain)
and four other subsidiaries (Russia): Steellace, UniFence,
UniSpring, Orelcord. It has a leading position (25% of the
market share) in the Russian metalware industry, an 18 %
share in the Ukrainian market, and a 23% share in the UK
market. The segment manufactures cold-drawn products
(cold-drawn steel, railway fasteners, steel shapes), highcarbon
products (wire, wire ropes), low-carbon products (wire,
nails, fibre), welding materials (flux cored wire, solid welding
wire, electrodes), mesh (chain-link mesh, woven mesh, welded
mesh, gabions), fasteners for common applications, and
other products including spring blocks, consumer goods and
steel cord.
The Metalware segment’s annual production capacity is
1.5 million tonnes of wire and wire products, with a range including
over 55,000 types of goods. The segment has a diversified
portfolio of suppliers, including almost all large manufacturers of
raw materials in CIS and Europe – such as Cherepovets Steel Mill,
OEMK, MMK, MMZ, ArcelorMittal, Corus, Lucchini and OVAKO.
About 55% of required volume of raw materials used in
metalware production comes from Cherepovets Steel Mill.
In 2007, the segment’s plants manufactured 1,048 thousand
tonnes of metalware. Sales revenues were US$1.01 billion, while
EBITDA was US$87.3 million.
Structure
Severstal-metiz comprises plants in Cherepovets, Volgograd
and Orel:
– The Cherepovets plant focuses on high-value-added products
(cold-drawn, high-carbon, low-carbon segments)
– The Volgograd plant specialises in high-carbon products,
including steel wire and wire ropes
– The Orel plant focuses on welding materials and fasteners.
Severstal’s stake in Severstal-metiz is 97%.
Dneprometiz is located in Dnepropetrovsk, Ukraine. It specialises
in low-carbon products, manufacturing high-value-added products.
In terms of production volumes, Dneprometiz is Ukraine’s largest
manufacturer of metalware. In 2007, Severstal-metiz held 60%+1
of the shares in Dneprometiz, which corresponded to 58.2% of the
Group effective ownership interest at 31 December 2007.
Carrington Wire operates in Elland, Great Britain. The plant
occupies a leading position within the UK steel wire products
market. Its total production capacity, approximately 150,000
tonnes a year, is derived from high-carbon, low-carbon and coldheading
wire. In 2007, Severstal-metiz held all shares in Carrington,
which corresponded to 97% of the Group effective ownership
interest at 31 December 2007.
Metalware segment also includes a number of specialised
subsidiary interests in Russia:
– UniFence (formerly known as Policher)
is located in Orel and Cherepovets, manufactures mesh
– UniSpring (formerly known as ChSPZ-MKR)
is located in Orel and Cherepovets, manufactures spring blocks
– Orelcord (formerly known as TrefilArbed Rus)
is located in Orel, produces steel cord, technical cord for conveyer
belt, brass plated bead wire and hose wire
– Steellace
is located in Orel and Volgograd, manufactures consumer goods.
In 2007, Severstal-metiz increased its shareholding in UniSpring
and Orelcord to 100%, which resulted in the Group having an
effective shareholding of 97% at 31 December 2007, in
accordance with Severstal-metiz’s strategy of increasing highvalue-added
production aimed at the domestic markets.
Strategy
The company’s strategic goals are:
– Concentrating on high-margin products
– Creating additional client services
– Product specialisation and optimising the infrastructure.
Severstal Annual Report 2007 53