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

0
2007 saw significant price rises for ferroalloys, pellets and scrap. The average yearly price for ferroalloys grew by
42% against 2006, for pellets, by 34% and for scrap, by 31%.
•
•
•
•
•
•
•
•
6,000
5,000
4,000
3,000
2,000
1,000
0
Cost of products sold (exclusive of depreciation and amortization)
USD million
2004 2005 2006 2007
Overheads and other
expenses
Wages
Main materials
MMK aims at improving production efficiency and decreasing expenditures through :
expansion of the scale of production of steel products and decrease of expenditures thanks to the economies
of scale;
introduction of the state-of-the art technology for management of reference and standards data and
decrease of expenditures through the use of the best practices in the field of steel products manufacture;
introduction of new technologies and use of modern equipment lowering the consumption rate of the
material and fuel -and -energy resources;
optimization of raw materials and finished products’ inventories;
rationalization of warehousing and material handling operations;
effective use of secondary resources;
revamping of weighing equipment and devices for measuring fuel and power consumption;
perfection of labour management.
Commercial and distribution costs in 2007 grew by USD 136 million, or 33%,primarily due to transportation
costs for delivery of larger quantities of steel products for sale by the MMK Group steel trader companies.
Administrative expenses went down USD 7 million, or 2%.
Social expenses increased by USD 6 million, or 8%.
A USD 22 million increase in other taxes million is related to the growth in the scale of MMK’s operations.
including those connected with the commissioning of new production assets.
Inventories Turnover Periods
According to the results of 2005, 2006 and 2007, the raw and input materials turnover periods in the steel
division of MMK are shorter than those of the main competitors, such as NLMK and Severstal. The turnover period
at OJSC MMK was 24 days in 2005, 27 days, in 2006, and in 2007 returned to the level of 2005. As can be seen from
the diagram, the inventories turnover period at OJSC NLMK in 2005 was 53 days, in 2006, 62 days, and in 2007
amounted to 55 days; for OJSC Severstal the figures were 34, 46 and 39 days, respectively. It should be noted that
OJSC MMK has historically had a turnover period that is more than 2 times less than at OJSC Severstal and around
1.5 times less than at OJSC NLMK.