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92.4% of 2008 total sales volumes were shipped to theUS domestic market, which is almost the same as in2007. Consequently, export sales accounted for 7.6%of 2008 total sales volumes. The Canadian marketaccounted for around 50.3% of exports, compared with98% in 2007. This decrease was due to Columbus andSparrows Point sales to Western Europe and SouthAmerica in 2008.Capital expenditureTotal capital expenditure in 2008 was US$694 million,which is 71.0% of the amount spent in 2007. Themajority of this (US$358 million) relates to modernisingDearborn’s ‘C’ blast furnace, and the remaining partrelates to capital expenditure at Severstal Columbus(US$263 million) and newly acquired entities (SparrowsPoint, Warren and Wheeling).CostsTotal cost of sales in 2008 was US$5,842 million, whichis three times higher than in 2007. The majority of thisincrease relates to newly acquired entities – SparrowsPoint, Warren, Wheeling and Northern Steel Group– which together amount to US$3,141 million. Also,the cost of sales at Severstal Columbus exceeded the2007 level by US$978 million, as it attained postconstructionfull capacity.Decisive management actionsSNA has undertaken initiatives to mitigate the effectof deteriorating general economic conditions in NorthAmerica. These include a selective reduction in meltand finishing operations, optimisation of productionschedules across North American facilities, effortsto align SNA’s supply base more consistently withdownscaled production requirements, and labour andoverhead cost reductions. We have also taken steps toimprove liquidity – including curtailing all discretionalcapital expenditure, and other measures to promotegreater working capital efficiency, such as trade creditextension and inventory optimisation.SNA revenues by industriesAutomotive 24.2%Service centres 21.9%Converters 31.1%Other customers 22.8%We have also introduced Total Operating Performance(TOP) and Total Cost of Ownership (TCO) initiatives,to help eliminate waste and inefficiencies in sales,purchasing, production, and staff departments – andwe expect these to have a beneficial impact on costs.Severstal International:LucchiniLucchini is the second largest steel group in Italy and one of the largest Europeanproducers of special quality steel long products by volume of production.Lucchini has 4.0 million tonnes of annual crudesteelmaking capacity, serving more than 1,000customers in niche markets such as automotive, rails,bearings, springs and wire rod.In 2008, we produced 3.0 million tonnes of crude steeland 3.2 million tonnes of finished products for sale,including 2.2 million tonnes of rolled steel, 0.6 milliontonnes of semifinished products and 0.4 million tonnesof hot metal and pig iron. Sales revenues in 2008 wereUS$3,989.5 million and EBITDA was US$429.8 million.Lucchini operates two principal businesses – Piombinoin Italy and Ascometal in France.Lucchini Piombino, ItalyPiombino is a European leader in long specialty steelproducts, including round bars, rolled blooms, andbillet and flat products. It is also a leading Italianproducer of high-quality wire rod, including drawingwire rod, cold heading steel and welding steel.StrategyPiombino has approximately 20% of European marketshare and 80% of domestic market share for rails andrail stocks, based on Eurofer data.Piombino’s main production facilities include plantsin Piombino, Trieste, Bari, Condove and Lecco (all inItaly), with headquarters located in Brescia, Italy. At theend of 2008, Piombino had 3,327 employees (full-timeequivalent).Lucchini Ascometal, FranceAscometal is a European leader in long special steelsand operates four integrated EAF-based mills, two coldfinishing centres and a distribution centre in France. Itsfacilities are strategically located near scrap collectionand processing centres. Its headquarters are in Paris,France. At the end of 2008, the company employed2,882 people (full-time equivalent).Lucchini’s overall strategic objectives are:• Continue to diversify the customer base.• Specialise in customised, high-quality products for the automotive, machinery, appliances and rail sectors.• Identify and realise the synergies of operating within Severstal.Piombino’s strategic objectives are:• Enhance the product offering with long products.• Alter the balance of production from semi-finished products and low-added-value long products, towardhigh-added-value flat products.• Improve operational efficiency.• Ascometal’s strategic objectives are:• Achieve significant growth in profitability.• Broaden the product offering.70 71