Annual Report 2007 - Severstal

Dividend payments were
40.1%
of 2007 net profit
Revenue for 2007
+22.5%
2007 was a strong year for the global steel and mining industry
with steel production increasing 7.5% to over 1.34 billion tonnes.
The continuing rapid growth of the BRIC economies and their
growing need for infrastructure improvements led to an increased
demand for steel. Steel intensive industries in Europe and North
America also remained healthy.
Cost inflation was a major industry theme across the world
in 2007. This was in response to dramatic increases in prices for
coking coal and iron ore. However, as a vertically integrated
steelmaker with its own sources of raw materials, Severstal enjoys
distinct advantages in the current high-priced market
environment.
The industry consolidation that characterised 2006 continued
in 2007 – particularly in North America – as steel companies
aimed to expand, consolidate supply and gain access to new
markets and customers. We believe this trend will continue.
Severstal had a good year in 2007. EBITDA and profit numbers
were all up and we continued to grow our businesses well. The first
half of the year, in particular, exceeded our expectations as we
demonstrated improving trends in all the key areas. Impressive
growth in the Russian economy and stable prices and markets in
Europe led to significant improvements over the year.
Our priority remains to continue to build on our position as
a major profitable player in the global steel industry. The boom
in infrastructure activity in Russia is great for our business there.
In the US, the market is proving surprisingly resilient. We believe
that there is room to grow our US operations in a disciplined
way, achieving synergies and realising untapped potential.
Our European businesses continue to perform well and we
are also committed to growth in Europe.
Our strategy remains to grow our business both through a
disciplined approach to M&A, and through organic investment.
During the year we announced plans for significant capital
investment in our company. We believe growing our business
organically is one of the best ways to create value for our
shareholders, given the robust demand for steel around the
world and our strong balance sheet. There is no shortage of
opportunities to invest in our businesses; our challenge is to
ensure the money is invested in a disciplined way that delivers
outstanding shareholder returns.
We made good progress in improving our health and safety
standards during the year. I believe there is now much greater
focus on this important part of our business at Board level, and
that we are more transparent regarding our plans and the way in
which we measure safety. We recognise that more remains to be
done and we are resolved to improve our performance in this area.
Severstal’s Board of Directors is working well. At the end of
2006 we started a journey together. At the end of the first year I
continue to be impressed by our speed and direction of travel, by
the Board’s level of cohesion and by the depth and scope of our
discussions. Together we have fully embraced high standards of
corporate governance and accountability, and our Independent
Directors contribute a wealth of relevant international and
industry expertise.
I would like to thank the Board and the Executive Team for
their work in 2007 and our shareholders for their support. We have
a lot of very good people working for Severstal and it is our
employees who made the company the success it was last year.
On behalf of the Board, I would like to thank them for all their hard
work, in the certain knowledge that this year, and in the future, we
will all continue to achieve more together.
Christopher Clark
Independent Chairman of the Board of Directors
Severstal Annual Report 2007 7