Annual Report 2007 for Growth
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STEEL FOR GROWTH NLMK ANNUAL REPORT ANNUAL REPORT 2007 NOVOLIPETSK STEEL (NLMK) HEAD OFFICE 2, pl. Metallurgov 398040 Lipetsk Russia 2007 Fax +7 4742 432541 MOSCOW OFFICE 18, Bakhrushinaul., bldg 1 115054 Moscow Russia tel +7 495 9151575 email:[email protected] www.nlmksteel.com Our Company NLMK is one of the world’s leading producers of steel and one of Russia’s largest steel companies, with key production capacities located in Russia and the EU. In 2007 NLMK Group exported almost 69% of its products to customers from 80 countries. NLMK accounts for more than 10% of the world slab market and about 20% of the transformer steel market. NLMK is a vertically integrated group controlling every stage of steel production from mining to delivery of finished products to end-users. The Group’s structure and efficient management system help achieve strong financial performance. NLMK is a rapidly growing business with a balanced development strategy. Apart from developing in-house production and mining assets, the strategy envisages a stronger presence in key markets through the acquisition of high-quality rolling assets in these markets. IFC Group overview 20 Market review – Domestic Financial statements 01 Our vision and mission 22 Financial review 56 Report of the Independent Auditors 01 2007 performance highlights 28 Financial review – Risks and 57 Consolidated balance sheets 02 Chairman’s statement uncertainties 58 Consolidated statements of income 04 President’s review 30 Operating review 59 Consolidated statements of 06 Strategic review 40 Corporate social responsibility cash flows 08 Strategy in action 44 Board of Directors 61 Consolidated statement of 12 Group overview 46 Corporate governance stockholders’ equity and 14 Product overview 52 Information for shareholders comprehensive income 16 Key markets – Russia and investors 62 Notes to the consolidated 18 Market review – Global financial statements FOR GROWTH STEEL FOR GROWTH NLMK ANNUAL REPORT ANNUAL REPORT 2007 NOVOLIPETSK STEEL (NLMK) HEAD OFFICE 2, pl. Metallurgov 398040 Lipetsk Russia 2007 Fax +7 4742 432541 MOSCOW OFFICE 18, Bakhrushinaul., bldg 1 115054 Moscow Russia tel +7 495 9151575 email:[email protected] www.nlmksteel.com Our Company NLMK is one of the world’s leading producers of steel and one of Russia’s largest steel companies, with key production capacities located in Russia and the EU. In 2007 NLMK Group exported almost 69% of its products to customers from 80 countries. NLMK accounts for more than 10% of the world slab market and about 20% of the transformer steel market. NLMK is a vertically integrated group controlling every stage of steel production from mining to delivery of finished products to end-users. The Group’s structure and efficient management system help achieve strong financial performance. NLMK is a rapidly growing business with a balanced development strategy. Apart from developing in-house production and mining assets, the strategy envisages a stronger presence in key markets through the acquisition of high-quality rolling assets in these markets. IFC Group overview 20 Market review – Domestic Financial statements 01 Our vision and mission 22 Financial review 56 Report of the Independent Auditors 01 2007 performance highlights 28 Financial review – Risks and 57 Consolidated balance sheets 02 Chairman’s statement uncertainties 58 Consolidated statements of income 04 President’s review 30 Operating review 59 Consolidated statements of 06 Strategic review 40 Corporate social responsibility cash flows 08 Strategy in action 44 Board of Directors 61 Consolidated statement of 12 Group overview 46 Corporate governance stockholders’ equity and 14 Product overview 52 Information for shareholders comprehensive income 16 Key markets – Russia and investors 62 Notes to the consolidated 18 Market review – Global financial statements FOR GROWTH Group overview Group overview OPERATING COMPANIES KEY MARKETS PRODUCTS PRODUCTION HIGHLIGHTS NLMK is one of Russia’s Steel-making and rolling largest producers of steel NLMK Key consumers are: PIG IRON producer of a wide range construction, automotive, 9.2mt NLMK’s core business is steel- SLABS products and is a vertically of steel products machinery, power making and rolling. Crude steel is HOT-ROLLED STEEL CRUDE STEEL equipment and white integrated group with a high produced at NLMK’s main production VIZ-STAL COLD-ROLLED STEEL Russia’s largest producer goods producers. degree of self-sufficiency in site and Maxi-Group facilities, while COATED STEEL 5.3mt key raw materials. Vertical other businesses in the segment of electrical steel (galvanized and produce rolled products, with the DANSTEEL A/S pre-painted) FLAT STEEL PRODUCTS integration and modern bulk of semi-finished rolled stock Danish producer ELECTRICAL STEEL supplied by NLMK Group companies. * technology assure NLMK’s of hot-rolled steel (dynamo and transformer) Having acquired Maxi-Group in heavy plates 0.1mt LONG PRODUCTS position as one of the December 2007, NLMK entered MAXI-GROUP METALWARE LONG STEEL PRODUCTS lowest-cost steel the long products market. long products and AND METALWARE producers worldwide. metalware producer *production volume of Maxi-Group for December 2007 Mining STOILENSKY GOK The mining division IRON ORE CONCENTRATE iron ore producer mainly supplies raw 11.6mt Mining is an important line of SINTER ORE materials to NLMK’s business for NLMK. The Group is STAGDOK FLUXING MATERIALS IRON ORE CONCENTRATE steel-making facilities. 100% self-sufficient in iron ore limestone producer (limestone and dolomite) Intersegmental sales concentrate and fluxing materials. DOLOMITE accounted for 95% of 1.7mt Pellets are currently purchased from dolomite producer iron ore concentrate, third-party suppliers. The Technical 78% of limestone and SINTER ORE Upgrading Programme proposes to 45% of dolomite build a pelletizing facility, which will produced by the division. in part improve sufficiency in pellets. 3.2mt LIMESTONE 2.2mt DOLOMITE Coal and coke ALTAI-KOKS Altai-koks supplied 22% METALLURGICAL COKE coke producer of coke to NLMK. In future, 3.8mt Coke-chemical operations are an CHEMICAL PRODUCTS after closing four obsolete important business for NLMK. ZHERNOVSKOE-1 METALLURGICAL COAL COKE (6% MOISTURE) coking batteries at the The Group is more than 100% coal deposit Lipetsk production site, self-sufficient in coke. supply from Altai-koks is 3.0mt NLMK coal deposit Zhernovskoe-1 has expected to increase reserves of about 240 million tonnes. significantly. CAPACITY OF COKING COAL IN 2011 Zhernovskoe-1 will increase NLMK’s self-sufficency in coal. Others COMMERCIAL SEA In 2007 TMTP handled LOGISTICS AND PORT OF TUAPSE (TMTP) 460,000 tonnes of NLMK TRANSPORTATION 5.5mt Other business operations include fifth-largest sea port in Russia slabs exported. In 2007 SEA PORT OPERATIONS logistics assets and trading operations, TMTP VOLUME OF DRY CARGO TURNOVER over 85% of all shipping as well as insurance services. Logistics INDEPENDENT INSURANCE SERVICES operations of NTK were operations help to streamline the TRANSPORTATION associated with NLMK. movement of commercial cargo and COMPANY (NTK) 14.2mt logistics and transportation reduce Group costs associated with TMTP VOLUME OF OIL CARGO TURNOVER freight of raw materials and products. CHANCE Insurance services 47.5mt NTK VOLUME OF TRANSPORTATION AND FORWARDING Design and Production: Black Sun Plc (London) +44 (0)20 7736 0011 Group overview Group overview OPERATING COMPANIES KEY MARKETS PRODUCTS PRODUCTION HIGHLIGHTS NLMK is one of Russia’s Steel-making and rolling largest producers of steel NLMK Key consumers are: PIG IRON producer of a wide range construction, automotive, 9.2mt NLMK’s core business is steel- SLABS products and is a vertically of steel products machinery, power making and rolling. Crude steel is HOT-ROLLED STEEL CRUDE STEEL equipment and white integrated group with a high produced at NLMK’s main production VIZ-STAL COLD-ROLLED STEEL Russia’s largest producer goods producers. degree of self-sufficiency in site and Maxi-Group facilities, while COATED STEEL 5.3mt key raw materials. Vertical other businesses in the segment of electrical steel (galvanized and produce rolled products, with the DANSTEEL A/S pre-painted) FLAT STEEL PRODUCTS integration and modern bulk of semi-finished rolled stock Danish producer ELECTRICAL STEEL supplied by NLMK Group companies. * technology assure NLMK’s of hot-rolled steel (dynamo and transformer) Having acquired Maxi-Group in heavy plates 0.1mt LONG PRODUCTS position as one of the December 2007, NLMK entered MAXI-GROUP METALWARE LONG STEEL PRODUCTS lowest-cost steel the long products market. long products and AND METALWARE producers worldwide. metalware producer *production volume of Maxi-Group for December 2007 Mining STOILENSKY GOK The mining division IRON ORE CONCENTRATE iron ore producer mainly supplies raw 11.6mt Mining is an important line of SINTER ORE materials to NLMK’s business for NLMK. The Group is STAGDOK FLUXING MATERIALS IRON ORE CONCENTRATE steel-making facilities. 100% self-sufficient in iron ore limestone producer (limestone and dolomite) Intersegmental sales concentrate and fluxing materials. DOLOMITE accounted for 95% of 1.7mt Pellets are currently purchased from dolomite producer iron ore concentrate, third-party suppliers. The Technical 78% of limestone and SINTER ORE Upgrading Programme proposes to 45% of dolomite build a pelletizing facility, which will produced by the division. in part improve sufficiency in pellets. 3.2mt LIMESTONE 2.2mt