Annual Report 2007 - Severstal

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Financial statements OAO Severstal and subsidiaries Notes to the consolidated financial statements for the year ended December 31, 2007 (Amounts expressed in thousands of US dollars, except as otherwise stated) The following is summarized financial information in respect of associates and joint ventures: December 31, 2007 2006 2005 Assets 1,797,458 1,269,330 515,409 Liabilities 965,270 615,767 85,206 Equity 832,188 653,563 430,203 Year ended December 31, 2007 2006 2005 Revenues 440,272 373,765 178,655 Net income/(loss) (105,326) 3,262 (2,964) Severstal US Holdings LLC, was created by Severstal and its related parties as a holding company for the SeverCorr project – construction of a mini mill in the United States of America. By December 31, 2007, Severstal have contributed to the project US$ 461.6 million and provided a US dollar denominated loan to SeverCorr LLC in the amount of US$ 60.0 million. The loan is repayable in 2008 and bears interest at 15% per annum. By December 31, 2007, related parties of Severstal have contributed to the project US$ 81.8 million. Having completed those contributions, Severstal and its related parties have fully fulfilled their financing obligations for this project. By December 31, 2006, the Group, through its subsidiary Severstal North America Inc, had contributed US$ 120.0 million to the Mountain State Carbon LLC, a joint venture with Wheeling-Pittsburgh Steel Corporation (“Wheeling-Pittsburgh”). Wheeling-Pittsburgh had contributed to the joint venture all of its coking assets in Follansbee, USA, valued at US$ 86.9 million, and US$ 3.1 million in cash. This cash and US$ 30.0 million of additional contributions from Wheeling-Pittsburgh over the next three years to 2009 will be used to rehabilitate all of the coke batteries of the joint venture and provide the Group’s US integrated steel operations a reliable and competitive supply of metallurgical coke. Each partner has a 50% share in Mountain State Carbon LLC from April 2006. 21. Long-term financial investments December 31, 2007 2006 2005 Loans: Loans to related parties 37,147 76,528 43,003 Loans to third parties 10,305 30,556 31,936 Loans to bank customers: Related parties – 7,078 – Third parties – 19,226 – Available-for-sale securities 26,285 10,315 12,614 Held-to-maturity securities and deposits 79,129 56,237 1,988 152,866 199,940 89,541 22. Bank customer accounts December 31, 2007 2006 2005 Demand deposits – 22,103 30,502 Term deposits – 9,040 68,365 – 31,143 98,867 92 Severstal Annual Report 2007
OAO Severstal and subsidiaries Notes to the consolidated financial statements for the year ended December 31, 2007 (Amounts expressed in thousands of US dollars, except as otherwise stated) 23. Debt finance December 31, 2007 2006 2005 Citibank CLN – Eurobonds 2009 325,000 325,000 325,000 Citibank CLN – Eurobonds 2014 375,000 375,000 375,000 Other issued bonds – 113,934 327,446 Bank financing 2,357,588 1,901,046 1,628,709 Factoring of receivables 201,909 224,049 191,732 Other financing 51,046 29,679 60,674 Accrued interest 40,355 54,748 39,720 Unamortized balance of transaction costs (23,996) (17,857) (20,462) 3,326,902 3,005,599 2,927,819 Total debt is denominated in the following currencies: US Dollars 1,501,465 1,210,753 1,287,620 Roubles 391,196 345,728 338,894 Euro 1,432,490 1,449,118 1,301,305 Other currencies 1,751 – – 3,326,902 3,005,599 2,927,819 Total debt is contractually repayable after the balance sheet date as follows: Less than one year 972,079 957,564 996,125 Between one and five years 1,659,450 1,488,594 1,496,325 After more than five years 695,373 559,441 435,369 3,326,902 3,005,599 2,927,819 Debt finance rose from banks and unused long term credit lines are secured by charges over: – US$ 210.4 million (December 31, 2006: US$ 221.3 million; December 31, 2005: US$ 129.4 million) net book value of plant and equipment; – US$ 515.7 million (December 31, 2006: US$ 1,015.6 million; December 31, 2005: US$ 1,296.2 million) of current assets and revenues from export contracts; and, – US$ 243.4 million (December 31, 2006: US$ 365.9 million; December 31, 2005: US$ 97.1 million) of financial assets. A part of the Group’s debt financing is subject to certain covenants. The Group complied with all debt covenants, including equity ratios, during the years ended December 31, 2007, 2006 and 2005. At the balance sheet date the Group had US$ 983.7 million (December 31, 2006: US$ 422.1 million; December 31, 2005: US$ 319.9 million) of unused long term credit lines available to it. 24. Other current liabilities December 31, 2007 2006 2005 Amounts payable to employees 246,448 186,431 149,757 Advances received 214,405 230,696 156,494 Provisions (Note 26) 43,974 12,011 17,736 Accrued expenses 24,123 41,396 19,525 Lease liabilities 9,926 2,579 1,964 Other liabilities 61,704 33,735 33,742 600,580 506,848 379,218 Severstal Annual Report 2007 93
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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
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Severstal Annual Report 2007 21
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Severstal Annual Report 2007 23
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In 2007, Izhora Pipe Mill produced
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Crude steel production Million tonn
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Pipe industry In 2007, the steel co
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Risks Operational risks Investment
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Severstal revenue by segments,* 200
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Mining Severstal’s Mining segment
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Mining segment, sales by products,
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Mining segment, export sales, FCA b
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