Annual Report 2007 - Severstal

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Financial statements OAO Severstal and subsidiaries Consolidated financial statements for the year ended December 31, 2007 Contents Page Independent Auditors’ Report 71 Consolidated income statement 72 Consolidated balance sheet 73 Consolidated statement of cash flows 74 Consolidated statement of changes in equity 75 Notes to the consolidated financial statements 76-116 1 Operations 76 2 Presentation of the consolidated financial statements 76 3 Summary of the principal accounting policies 78 4 Sales 83 5 Staff costs 83 6 Net income from securities operations 84 7 Net other non-operating expenses 84 8 Financing 84 9 Taxation 84 10 Cash and cash equivalents 86 11 Short-term bank deposits 86 12 Short-term financial investments 86 13 Trade accounts receivable 87 14 Related party balances 87 15 Related party transactions 88 16 Inventories 88 17 Other current assets 88 18 Intangible assets 89 19 Property, plant and equipment 90 20 Investment in associates and joint ventures 91 21 Long-term financial investments 92 22 Bank customer accounts 92 23 Debt finance 93 24 Other current liabilities 93 25 Retirement benefit liability 94 26 Other non-current liabilities 96 27 Share capital 97 28 Subsidiaries, associates and joint ventures 98 29 Discontinued operations and assets held for sale 103 30 Subsequent events 104 31 Segment information 105 32 Commitments and contingencies 111 33 Financial instruments 111 70 Severstal Annual Report 2007
Independent Auditors’ Report Board of Directors OAO Severstal KPMG Limited 18 Krasnopresnenskaya Naberezhnaya, Block C Moscow 123317 Russia Telephone +7 (495) 937 44 77 Fax +7 (495) 937 44 00/99 Internet www.kpmg.ru Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of OAO Severstal (the “Company”) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet as at 31 December 2007, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. We have also previously audited the corresponding figures for 2006 and 2005 before the adjustments described in Note 3 c and our report thereon dated 30 March 2007 expressed an unqualified opinion on those statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2007, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. Emphasis of Matter Without qualifying our opinion, we draw attention to the fact that during the year the Group changed its accounting policy for property, plant and equipment. The reason for and the effects of the change are described in Note 3 c to these consolidated financial statements. We have also audited the adjustments described in Note 3 c that were applied to restate the 2006 and 2005 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. KPMG Limited 14 March 2008 KPMG Limited, a company incorporated under the Guernsey Companies Act and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. Severstal Annual Report 2007 71
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Annual Report 2007
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We are a leading international stee
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Sales by delivery destination 2007
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Corporate structure In April 2008,
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Dividend payments were 40.1% of 200
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Our strategy for growth is to: - Re
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Principal events of 2007 January Ch
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Reconstructed in 1996 using steel p
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The mining area of Vorkutaugol cons
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Severgal, Cherepovets is equipped w
Page 21 and 22: A process technician at Spartan Ste
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Page 25 and 26: Severstal Annual Report 2007 23
Page 27 and 28: In 2007, Izhora Pipe Mill produced
Page 29 and 30: Crude steel production Million tonn
Page 31 and 32: Pipe industry In 2007, the steel co
Page 33 and 34: Risks Operational risks Investment
Page 35 and 36: Severstal revenue by segments,* 200
Page 37 and 38: Mining Severstal’s Mining segment
Page 39 and 40: Mining segment, sales by products,
Page 41 and 42: Mining segment, export sales, FCA b
Page 43 and 44: Russian Steel Crude steel productio
Page 45 and 46: Sales by products 2007 2006 Change
Page 47 and 48: Costs 2007 2006 US$ % of US$ % of C
Page 49 and 50: Key performance indicators 2007 200
Page 51 and 52: SNA revenues by industries Automoti
Page 53 and 54: Sales by products 2007 2006 Change
Page 55 and 56: Metalware Sales by industry in Russ
Page 57 and 58: Izhora Pipe Mill Production of larg
Page 59 and 60: Severstal on the capital markets Sh
Page 61 and 62: Eurobond issues Interest Date Date
Page 63 and 64: Corporate social responsibility Our
Page 65 and 66: Clockwise from above: We have spons
Page 67 and 68: Christopher Clark Independent Chair
Page 69 and 70: When joining the Board, Directors a
Page 71: OAO Severstal and subsidiaries Cons
Page 75 and 76: OAO Severstal and subsidiaries Cons
Page 77 and 78: OAO Severstal and subsidiaries Cons
Page 79 and 80: OAO Severstal and subsidiaries Note
Page 119 and 120: Shareholder information and financi
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Annual Report 2007 - Severstal

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