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Key performance indicatorsIn 2008, Russian Steel’s revenue grew by US$2.81billion. This was 33.3% up on 2007, due to a growthin sales prices. The average price for steel productsincreased by US$275 per tonne in 2008. Productioncosts grew significantly in 2008 due to a rise in thecost of raw materials and energy – as well as a higheraverage wage.Key performance indicatorsRussian Steel averaged 49,551 full-time equivalentemployees in 2008, down 0.6% compared to 2007.Despite various acquisitions, the number of employeesremained stable due to a deliberate downsizingpolicy. Cherepovets Steel Mill reduced its workforceby 8.4%, with some employees transferring to servicecompanies. Russian Steel’s management has takenseveral measures to mitigate the effects of the globaleconomic downturn, leading to a reduction in thenumber of employees of approximately 9 thousand inthe last quarter of 2008 and the first quarter of 2009.But this was partly offset by increased prices for rolledproducts, so our 2008 operating margin decreased to26.1%.In 2008, overall EBITDA grew by 29.7%. EBITDA pertonne grew by 34.6% to US$318.3. The EBITDA margindecreased slightly, from 31% to 30.1%.2008 2007 Change year-on-year %Revenue (US$ million) 11,245.7 8,435.5 33.3Gross profit (US$ million) 4,260.8 3,201.1 33.1Profit from operations (US$ million) 2,935.9 2,242.8 30.9Operating margin (%) 26.1 26.6 n/aEBITDA (US$ million) 3,389.3 2,613.0 29.7EBITDA per tonne (US$/tonne) 318.3 236.4 34.6EBITDA margin (%) 30.1 31.0 n/aAverage steel product price (US$/tonne)* 942 667 41.2Semifinished products (US$/tonne) 681 430 58.4Hot-rolled strip and plate (US$/tonne) 962 649 48.2Cold-rolled sheet (US$/tonne) 910 671 35.6Galvanized and other metallic coated sheet (US$/tonne) 1,153 928 24.2Color coated sheet (US$/tonne) 1,472 1,249 17.9Long products (US$/tonne) 867 610 42.1Others tubes and pipes, formed shapes (US$/tonne) 1,049 801 31.0Metalware products (US$/tonne) 1,126 845 33.3Average scrap price (US$/tonne) 385 234 64.5* excluded scrapProduction resultsIn 2008, Russian Steel produced 8.1 million tonnes ofhot metal (7.2% less than in 2007), 11.1 million tonnesof crude steel (6.7% less than in 2007) and 10.1 milliontonnes of steel products (6.4% less than in 2007).Production resultsProduction volumes, thousand tonnes 2008 2007 Change year-on-year %Total outputHot metal 8,125 8,759 (7.2)Crude steelBasic oxygen furnaces 8,141 8,323 (2.2)Elictric arc furnaces 1,895 2,076 (8.7)Open hearth furnaces 1,061 1,500 (29.3)Total crude steel 11,097 11,899 (6.7)Production for saleSemifinished products 909 872 4.2Rolled productsHot-rolled strip and plate 4,680 5,004 (6.5)Cold-rolled sheet 1,358 1,435 (5.4)Galvanized and other metallic coated sheet 669 735 (9.0)Color coated sheet 220 230 (4.3)Long products 1,808 2,022 (10.6)Total rolled products 8,735 9,426 (7.3)Other tubes and pipes, formed shapes 439 470 (6.6)Metalware products 41 43 (4.7)Total production for sale 10,124 10,811 (6.4)The first nine months of 2008 were quite successfulfor Russian Steel. Crude steel production was 600thousand tonnes higher than for the same period in2007.Production cuts started in October 2008. In the fourthquarter of 2008, crude steel production was down48% quarter-on-quarter, mainly due to lower domesticdemand. As a result, the open-hearth furnace wasclosed on November 1, 2008.Sales and marketingIn 2008, revenues rose by 33.3% compared to 2007,despite a slight decrease in shipments. This isexplained by a decrease in steel consumption in thelast quarter of 2008. The increase in revenue is duemainly to a considerable increase in average salesprices for steel products in the first nine months of2008, compared to the same period in 2007.Russian Steel’s sales by productIn 2008, sales of hot-rolled strip and plate accountedfor 42.2% of overall sales volume (41.2% of revenue),long products for 17.3% of volume (15.3% of revenue),cold-rolled sheet for 12.0% of volume (11.1% ofrevenue), semi-finished products for 8.2% of volume(5.7% of revenue) and galvanized and other metalliccoated sheet for 6.1% of volume (7.1% of revenue).58 59