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OAO Severstal and subsidiariesConsolidated income statementsYears ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as otherwise stated)Year ended December 31,Note 2008 2007 (restated) 2006 (restated)SalesSales - external 22,138,418 15,352,404 12,511,561Sales - to related parties 12 254,299 150,984 211,2754 22,392,717 15,503,388 12,722,836Cost of sales (16,486,030) (10,821,582) (8,873,553)Gross profit 5,906,687 4,681,806 3,849,283General and administrative expenses (1,030,140) (766,890) (633,705)Distribution expenses (1,117,776) (942,533) (729,906)Indirect taxes and contributions (178,829) (154,070) (142,484)Share of associates’ (loss)/profit (3,400) 6,240 1,451Net (loss)/gain from securities operations 6 (96,753) 25,564 28,271Loss on disposal of property, plant and equipment (43,826) (35,525) (38,524)Net other operating income/(expenses) 7 790,180 (7,266) (23,174)Profit from operations 4,226,143 2,807,326 2,311,212Impairment of non-current assets 8 (1,540,263) (28,895) (57,820)Net gain on restructuring of tax liabilities 27 - - 14,669Negative goodwill 30 292,685 12,223 4,213Net other non-operating income/(expenses) 9 238,945 (58,676) (53,551)Profit before financing and taxation 3,217,510 2,731,978 2,218,723Interest income 10 155,233 166,639 110,096Interest expense 10 (505,716) (325,580) (255,962)Foreign exchange difference (279,068) 3,206 33,054Profit before income tax 2,587,959 2,576,243 2,105,911Income tax expense 11 (520,373) (700,153) (635,094)Profit from continuing operations 2,067,586 1,876,090 1,470,817Profit from discontinued operations 29 - 433 32,849Profit for the year 2,067,586 1,876,523 1,503,666Attributable to:shareholders of OAO Severstal 2,034,008 1,849,531 1,447,505minority interest 33,578 26,992 56,161Weighted average number of shares outstandingduring the period (millions of shares) 1,007.2 1,007.7 928.4Basic and diluted earnings per share (US dollars) 2.02 1.84 1.56These consolidated financial statements were approved by the Board of Directors on March 05, 2009.The accompanying notes form an integral part of these consolidated financial statements.OAO Severstal and subsidiariesConsolidated balance sheetsDecember 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars)AssetsCurrent assets:NoteDecember 31,2008December 31,2007 (restated)December 31,2006 (restated)Cash and cash equivalents 14 2,653,742 1,622,542 1,743,395Short-term bank deposits 15 818,545 666,327 1,147,270Short-term financial investments 16 112,782 215,494 306,285Trade accounts receivable 17 1,942,268 1,769,038 1,397,144Accounts receivable from related parties 13 63,831 47,193 73,619Inventories 18 4,278,554 2,720,634 2,342,098VAT recoverable 360,838 284,122 357,088Income tax recoverable 172,947 81,963 40,399Other current assets 19 280,082 318,961 266,225Assets held for sale 29 8,872 465,341 -Total current assets 10,692,461 8,191,615 7,673,523Non-current assets:Long-term financial investments 20 69,982 112,959 114,933Investments in associates and joint ventures 21 104,142 202,987 222,830Property, plant and equipment 22 9,868,305 8,289,116 6,970,865Intangible assets 23 1,454,486 687,067 61,666Restricted cash 21,703 13,810 57,406Deferred tax assets 11 227,492 64,185 34,211Other non-current assets 41,615 39,084 20,016Assets held for sale 29 - - 113,516Total non-current assets 11,787,725 9,409,208 7,595,443Total assets 22,480,186 17,600,823 15,268,966Liabilities and shareholders’ equityCurrent liabilities:Trade accounts payable 1,526,818 1,211,373 1,108,831Accounts payable to related parties 13 71,960 91,547 260,809Short-term debt finance 24 1,977,513 1,129,216 1,081,965Income taxes payable 46,958 41,323 44,822Other taxes and social security payable 210,992 199,349 201,743Dividends payable 128,715 107,485 23,243Other current liabilities 25 805,619 620,369 554,544Liabilities related to assets held for sale 29 4 91,750 -Total current liabilities 4,768,579 3,492,412 3,275,957Non-current liabilities:Long- term debt finance 24 6,278,004 2,813,166 2,264,191Deferred tax liabilities 11 509,327 509,409 398,164Retirement benefit liabilities 26 779,296 387,398 442,954Other non-current liabilities 27 591,290 324,652 359,598Liabilities related to assets held for sale 29 - - 1,792Total non-current liabilities 8,157,917 4,034,625 3,466,699Equity:Share capital 28 3,311,288 3,311,288 3,311,288Treasury shares (26,303) - -Additional capital 1,165,530 1,165,530 1,165,530Foreign exchange differences 83,812 1,145,499 537,075Retained earnings 4,495,458 3,951,116 2,939,334Other reserves 18,497 - -Total equity attributable to shareholders of parent 9,048,282 9,573,433 7,953,227Minority interest 505,408 500,353 573,083Total equity 9,553,690 10,073,786 8,526,310Total equity and liabilities 22,480,186 17,600,823 15,268,966The accompanying notes form an integral part of these consolidated financial statements.104 105