Annual Report 2007 - Severstal

Business review
Key performance indicators
2007
Production of pipes (Thousand tonnes) 299
Revenue (US$ million) 550.7
Gross profit (US$ million) 170.9
Profit from operations (US$ million) 127.1
Operating margin (%) 23.1
EBITDA (US$ million) 150.6
EBITDA per tonne (US$/tonne) 501
EBITDA margin (%) 27.3
Average product price (US$/tonne) 1,764
Sales and marketing
Izhora Pipe Mill’s priority sales target is the Russian domestic
market. In 2007, the plant sold 95.4% of its total output in Russia.
Export accounted for 4.6% of sales, with deliveries going to
Uzbekistan. The principal consumers of the plant’s products are
Russia’s gas and oil industries.
Gazprom is the principal client, accounting for almost 65%
of shipments, or 195,231 tonnes. The mill also delivered 60,000
tonnes of pipes for the construction of a trunk gas pipeline from
Novatek’s Yurkharovsky field, and another 15,000 tonnes of pipes
for the construction of East Siberia-Pacific Ocean oil pipeline
system (which Transneft is building). 16,000 tonnes of pipes
were exported to Uzbekistan.
The mill has all the necessary certificates confirming the
quality of the plant’s products. At the end of 2007, the enterprise
successfully completed a certification procedure for its products’
compliance with the Det Norske Veritas (DNV) offshore pipeline
quality standard.
Capital investments
In 2007, capital investments totalled US$23 million – 82% less
than in 2006. The reduction was mainly because we finished
constructing the plant’s principal facilities.
Costs
Total 2007 costs amounted to US$379.8 million, 87.4% of which
was raw materials. Depreciation costs were 6% of the total, and
labour costs were 4.7%.
Cost of sale structure
2007
US$ % of
million Total
Materials
Plate 296.1 78.0
Other materials 35.9 9.4
Total materials 332.0 87.4
Energy
Natural gas 0.1 0.0
Electric power 1.8 0.5
Other energy resources 0.3 0.1
Total energy 2.2 0.6
Staff costs 17.8 4.7
Depreciation and amortisation 22.8 6.0
Services 2.3 0.6
Other 2.7 0.7
Total 379.8 100
56 Severstal Annual Report 2007