Annual Report 2007 - Severstal

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Financial statements OAO Severstal and subsidiaries Consolidated income statement Year ended December 31, 2007 (Amounts expressed in thousands of US dollars, except as otherwise stated) Year ended December 31, 2007 2006 2005 Note (restated) (restated) Sales Sales – external 14,543,043 11,723,318 9,786,057 Sales – to related parties 15 701,868 725,714 665,589 4 15,244,911 12,449,032 10,451,646 Cost of sales (10,541,571) (8,601,227) (6,831,138) Gross profit 4,703,340 3,847,805 3,620,508 General and administrative expenses (691,210) (654,987) (524,662) Distribution expenses (909,510) (697,308) (657,684) Indirect taxes and contributions (153,614) (142,109) (95,343) Share of associates’ loss (89,397) (1,193) (4,190) Net income from securities operations 6 25,564 28,263 24,443 Loss on disposal of property, plant and equipment (35,280) (39,292) (36,780) Net other operating expenses (7,520) (27,109) (20,344) Profit from operations 2,842,373 2,314,070 2,305,948 Impairment of property, plant and equipment 19 (29,109) (57,736) (111,384) Net gain on restructuring of tax liabilities 26 – 14,669 174,178 Negative goodwill, net 12,223 4,213 7,630 Net other non-operating expenses 7 (58,576) (53,536) (52,753) Profit before financing and taxation 2,766,911 2,221,680 2,323,619 Interest income 8 172,937 102,402 65,134 Interest expense 8 (288,293) (244,977) (203,057) Foreign exchange difference 2,900 33,324 (60,231) Profit before income tax 2,654,455 2,112,429 2,125,465 Income tax expense 9 (681,269) (635,298) (500,907) Profit from continuing operations 1,973,186 1,477,131 1,624,558 Profit from discontinued operations 29 433 32,849 602 Profit for the year 1,973,619 1,509,980 1,625,160 Attributable to: shareholders of OAO Severstal 1,936,423 1,454,198 1,561,182 minority interest 37,196 55,782 63,978 Weighted average number of shares outstanding during the period (millions of shares) 1,007.7 928.4 912.2 Basic and diluted earnings per share (US dollars) 1.92 1.57 1.71 These consolidated financial statements were approved by the Board of Directors on March 14, 2008. The accompanying notes form an integral part of these consolidated financial statements. 72 Severstal Annual Report 2007
OAO Severstal and subsidiaries Consolidated balance sheet December 31, 2007 (Amounts expressed in thousands of US dollars) December 31, December 31, December 31, 2007 2006 2005 Note (restated) (restated) Assets Current assets: Cash and cash equivalents 10 1,546,881 1,701,022 1,327,887 Short-term bank deposits 11 665,977 1,147,270 674,512 Short-term financial investments 12 267,633 321,842 267,851 Trade accounts receivable 13 1,674,618 1,324,585 1,174,193 Amounts receivable from related parties 14 162,719 127,703 173,808 Inventories 16 2,537,470 2,222,372 1,725,528 VAT recoverable 283,745 339,392 442,297 Income tax recoverable 75,993 35,904 28,671 Assets held for sale 29 461,196 – – Other current assets 17 321,362 259,208 181,685 Total current assets 7,997,594 7,479,298 5,996,432 Non-current assets: Long-term financial investments 21 152,866 199,940 89,541 Investment in associates and joint ventures 20 589,092 354,906 210,652 Property, plant and equipment 19 7,292,811 6,470,385 5,319,568 Intangible assets 18 611,261 61,666 56,523 Assets held for sale 29 – 113,516 66,117 Deferred tax assets 9 52,324 30,150 35,076 Amounts receivable from related parties 14 – – 35,095 Other non-current assets 21,474 3,844 3,105 Total non-current assets 8,719,828 7,234,407 5,815,677 Total assets 16,717,422 14,713,705 11,812,109 Liabilities and shareholders’ equity Current liabilities: Trade accounts payable 1,090,884 1,038,901 866,629 Bank customer accounts 22 – 31,143 98,867 Amounts payable to related parties 14 58,915 175,740 491,957 Short-term debt finance 23 972,079 957,564 996,125 Income taxes payable 41,381 44,348 86,001 Other taxes and social security payable 200,424 199,963 257,678 Dividends payable 107,485 23,243 12,275 Liabilities related to assets held for sale 29 91,750 – – Other current liabilities 24 600,580 506,848 379,218 Total current liabilities 3,163,498 2,977,750 3,188,750 Non-current liabilities: Long-term debt finance 23 2,354,823 2,048,035 1,931,694 Deferred tax liabilities 9 374,636 403,076 356,739 Retirement benefit liability 25 387,398 442,954 338,486 Liabilities related to assets held for sale 29 – 1,792 172 Other non-current liabilities 26 226,388 286,090 281,075 Total non-current liabilities 3,343,245 3,181,947 2,908,166 Equity: Share capital 27 3,311,288 3,311,288 3,311,254 Additional capital 1,165,530 1,165,530 60,367 Foreign exchange differences 1,176,321 535,591 34,368 Retained earnings 4,082,834 2,983,954 1,818,475 Total equity attributable to shareholders of parent 9,735,973 7,996,363 5,224,464 Minority interest 474,706 557,645 490,729 Total equity 10,210,679 8,554,008 5,715,193 Total equity and liabilities 16,717,422 14,713,705 11,812,109 The accompanying notes form an integral part of these consolidated financial statements. Severstal Annual Report 2007 73
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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
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A process technician at Spartan Ste
Page 23 and 24: Severstal Annual Report 2007 21
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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 and 72: OAO Severstal and subsidiaries Cons
Page 73: Independent Auditors’ Report Boar
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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