Annual report 2007 - Magnitogorsk Iron & Steel Works ...

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22 Scope of Operations As of December 31, 2007, the MMK Group included the Magnitogorsk Iron and Steel Works Open Joint Stock Company (parent company) and 59 subsidiary companies specializing in the support of and services to the core steel-making production, as well as financial and other specialized services. Production and Financial Performance The Magnitogorsk Iron and Steel Works Open Joint Stock Company (OJSC MMK) is one of the leaders of the Russian steel sector and is ranked 21st among the world’s largest steel producers in terms of production levels (according to IISI data). In 2007 OJSC MMK produced 12,203,000 tons of steel products and became the leader of the Russian steel sector in terms of production levels. Production of Steel Products in Russia in 2007* Description Production, thousand tons MMK 12, 203 Evraz Holding, including: 11, 985 West-Siberian Steel Mill 5, 088 Nizhne-Tagil Steel Mill 5, 186 Novokuznetsk Steel Mill 1, 711 Severstal 10, 861 Novolipetsky Steel Mill 9, 202 Chelyabinsk Steel Mill 3, 514 LLC Uralskaya Stal 2, 830 Total for Russia 59, 635 * Chermet Corp. data OJSC MMK’s product mix is one of the broadest in Russia. The share of value added products in OJSC MMK’s mix is also one of the highest among Russian steel producers. . The MMK Group’s sales in 2007 totaled USD 8,197 m, with a sales income of USD 2,079 m. Geographic Distribution OJSC MMK’s key assets are located in the city of Magnitogorsk on the boundary line between Europe and Asia in the south of the Urals. Steel consumption in the Urals region is the highest in Russia. Which means that OJSC MMK has the most favourable location of all the steel suppliers with respect to its consumers. About half of all its domestic sales are made within a radius of 500 km from Magnitogorsk. The MMK Group makes full use of the advantage of its geographic position. Taxes MMK is the largest single tax payer and employer in the city of Magnitogorsk, with its share in the city’s taxes reaching 40%, and in the Chelyabinsk Region’s taxes, 25%. In 2007 the amount of the Group’s taxes paid to the budgets of all levels and non-budget funds totaled USD 0.6 bn.
Human Resources The average payroll personnel number of the MMK Group in 2007 was 58,563. The payroll number as of 31.12.2007 was 60,726. During 2007 the number of employees grew by 2,991. This increase was mainly due to certain new companies, such as LLC Bakal Mine Administration, OJSC Bahsmetallopttorg, CJSC Intercos-IV, joining the Group. Name of rating RepTrak 200, the rating of the largest international companies with the highest reputation globally MMK’s Ratings MMK ranking 14 Source and date of publication of latest rating Reputation Institute’s research published in the Forbes magazine (May of 2007) “Russia’s Leading Enterprises” (multiple criteria) 17 AK&M (October, 2007) “Expert – 400” Russia’s largest companies in terms of sales (according to RAS, IFAS, US GAAP) “25 Russia’s largest companies in terms of net profit ( according to US GAAP statements) “Capitalization 200”, rating of Russia’s largest companies in terms of market value (capitalization) “Russia’s 200 Most Transparent Companies” 16 Rating of Russian companies according to social significance criteria 19 Expert magazine (01.10.2007) 12 Finance magazine (24.09.2007) 16 Expert magazine (01.10.2007) 15 “Sekret Firmy” magazine, Vedomosti daily Dengi magazine, Commersant daily, (27.08.2007) OJSC MMK, the Group’s parent company, won in the Social Programs nomination of the All-Russian Competition of High Social Efficiency Organizations, which attests to the broad recognition that the Company’s social policy won in Russia. MMK Group’s Structure The central company of the Group is the Magnitogorsk Iron and Steel Works OJSC (OJSC MMK, the Company). Its share in the total sales of the Group, counting the sales of the steel traders which are part of the MMK Group, is 92.3%. It is obvious that the OJSC MMK results play a decisive role in the overall financial performance of the Group. The MMK Group companies can be divided into the following subgroups according to their functions: • • • • • • ANNUAL REPORT OPEN JOINT-STOCK COMPANY MAGNITOGORSK IRON & STEEL WORKS Support to the core steel making processes; Maintenance of the steel making equipment; Downstream processing of steel; Steel sales; Financial companies; Other specialized companies. SEASON 2007 After OJSC MMK, the largest Group companies in terms of sales proceeds and personnel numbers are OJSC MMK-METIZ (metalware), CJSC Mekhano-Remontny Kompleks (mechanical repairs), OJSC Tsementno-Orneuporny Zavod (cement and refractories), LLC Orneupor (refractories), CJSC Stroitelny Kompleks (construction). OJSC MMK-METIZ OJSC MMK-Metiz was formed as a result of a merger between two oldest Magnitogorsk steel-processing enterprises, Metizno-Metallurgichesky Plant and Kalibrovochny Plant. These plants, for more than 6 decades, have been among those enterprises which formed the mainstay of the Russian metalware industry. The company produces low carbon steel wire, including welding and reinforcing wire, electrodes, core wire, steel mesh of different design, high strength fasteners, including for mechanical engineering plant, steel ropes, bands, and nails. In 2007 the company reported sales proceeds of USD 589.7 million. The average personnel number of MMK-METIZ in 2007 was 7,851. MMK-METIZ is the second largest company of the Group, with 7,851 employees. 23
Page 2 and 3: DISCLAIMER The present Annual Repor
Page 4 and 5: Victor Rashnikov, Chairman of the M
Page 6 and 7: Description Capitalization (as at y
Page 8 and 9: Content INTRODUCTORY ADDRESS of Vic
Page 10 and 11: In 2007 the Magnitogorsk Iron and S
Page 13 and 14: ANNUAL REPORT OPEN JOINT-STOCK COMP
Page 21: ANNUAL REPORT OPEN JOINT-STOCK COMP
Page 29 and 30: Using these mills, MMK manufactures
Page 33 and 34: as regards the organization of thei
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Page 59 and 60: 1.0 0.8 0.6 0.4 0.2 Trends in OJSC
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72 The changes in the domestic sale
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7 Victor Kutischev, OJSC MMK’s Co
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7 Overview of the Iron Ore and Coal
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ANNUAL REPORT OPEN JOINT-STOCK COMP
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• • Expenditures on major capit
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tons thanks to the installation of
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Currency Risk A significant portion
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Goals Planned value Actual value Ac
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The average wages at MMK are 35% hi
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# Causes of injuries 2003 200 200 2
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Environmental Expenditures 2007 saw
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6.00 5.16 5.00 4.00 3.00 2.00 1.00
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128 Exhaustive, precise and timely
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130 Report on Payment of Declared (
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132
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13 Information on Equity Capital As
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13 Liubov Gamper, OJSC MMK’s Dire
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138 Audit Committee Chairman of the
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1 0 # 5. 6. 7. Provisions of the Co
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1 2 # 18. 19. 20. 21. 22. 23. Provi
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1 # 45. 46. 47. 48. Provisions of t
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1 8 # Provisions of the Code of Cor
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1 0 # 73. 74. 75. Provisions of the
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1 2 Director for Sales Director for
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1 Commercial Director Director for
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1 • • • • • • • •
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1 8 • • • • • • • •
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1 0 Protection Policy which regulat
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1 2 Sergey V. Krivoshchekov (born i
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1 - exercises the authorities of th
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1 Victor A. Kutischev (born in 1958
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172 1. Date of Publication of the L
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• settlement procedure - by insta
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24) Services Agreement # 150577 bet
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• • • validity period - till
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The following persons are recognize
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The following persons are recognize
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61) rental agreement # 152445 betwe
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• validity period - from the date
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days from the receipt of invoice;
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• • • settlement procedure -
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The Body which approved the transac
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• • • validity period - till
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• • • • ANNUAL REPORT OPEN
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• settlement procedure - funds tr
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164) paid service agreement # 16001
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There are no beneficiaries under th
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during the shipment, with a discoun
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• supply period - until next Annu
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CONSOLIDATED BALANCE SHEETS AS OF D
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Note Years ended December 31, 2007
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ASSETS I. NON-CURRENT ASSETS Line c
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LOSS AND PROFIT STATEMENT for 2007
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BREAKDOWN OF INDIVIDUAL PROFITS AND
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3.3 Reporting cycle Date of Publica
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EN10 Percentage and total volume of
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The OJSC MMK’s Annual Report is e
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