Annual Report 2010 - Magnitogorsk Iron & Steel Works

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionSupported by global economic recovery andprogressively recovering demand for steel productsthat started in late 2009, investor demand forMMK shares increased in 2010. In June, share pricesdeclined in line with lower prices for steel products asa result of lower export sales. During this period MMKcontinued to implement its strategy of expanding itsexposure to the domestic market.Steady growth in MMK’s share price began in thethird quarter of the year. This was driven by upgradesfrom leading analysts, many of whom recognizedMMK’s shares as the preferable means for gainingexposure to Russian iron and steel companies. Oneof MMK’s key advantages is its increasing degreeof integration into iron ore raw materials and coaland greatpotential for production growth. As of31 December 2010, 12 of 17 analysts had a “Buy”recommendation on MMK shares. The target pricerose by 15% (or USD 2.11) during the year, reachingUSD 16.12 per GDR at the end of the year. In 2010,MMK’s shares outperformed the market. The RTSindex increased by 23%, while the price of MMKshares rose by 20%. On 31 December 2010 the closingprice forMMK GDRs was USD 14.55.The investor relations program implemented in 2010has helped to improve liquidity compared to 2009.The average daily trading volume for the three stockmarkets (RTS, MICEX, LSE) was USD 8.1 million in2010 (in 2009 the average daily trading volume wasUSD 4.9 million). About 75% of transactions with MMKshares/GDRstake place on the LSE.MMK's market cap in 2010, USD mEVENTS AFTER THE ACCOUNTING DATE14 00012 00010 0008 00012 507 12 55012 57512 42111 75911 33810 88211 149 11 12310 41810 745 9 7139 0439 172 9 533 7 9856 0004 0002 000дек янв фев мар апр май июн июл авг сен окт ноя дек янв фев мар(2011) (2011) (2011)*The market capitalization is calculated on the basis of the closing price of the previous month’s trading session.In 2010, MMK’s market capitalization increased by29% to USD 12,507 million as of 31 December 2010,bringing MMK the closest to its historical maximummarket cap among all publicly traded steel companiesin Russia.Relations with Investors and ShareholdersOne of the Company’s priorities is to maintain strongrelations with investors and shareholders through adirect dialogue and in line with existing legislationand globally accepted principles.MMK’s management hasfocused its efforts onbeing responsive to the interests of investors andshareholders, and establishing a relationship basedon trust by improving transparency.In keeping with the principle of transparency andaccessibility of information, the Company publishesstatements of significant events on the websiteof the London Stock Exchange, and also on itsown corporate site. The Company's official sitehas sections devoted to Investor Relations andCorporate Governance, which contain a wide arrayof information in Russian and English, including theCompany's internal documents and bylaws, annualreports, information for shareholders' meetings, dataon the Company's registrar and auditors, informationon dividend payments, as well as quarterly financialstatements under IFRS and RAS. The website alsofeatures a financial calendar with planned events andreporting dates.More detailed information can be found on MMK'sofficial site at: http://www.mmk.ru in the sectionsInvestor Relations and Corporate Governance.An effective dialogue with the capital marketsrequires constant attention from the Company'smanagement. MMK management regularlyparticipates in international conferences andmeetings with investors. Publication of quarterlyfinancial results always include telephoneSteel & Style , 10 MMK ANNUAL REPORT 85