The Picture Is Steel Product Metallograph
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The picture is steel product metallograph Disclaimer: The information contained in this English version of 2012 Annual Report is provided as a reference only with the understanding that Baoshan Iron & Steel Co., Ltd. makes no warranties, either expressed or implied, concerning the accuracy of the translation. For full information, please refer to Baosteel’s Chinese version of 2012 Annual Report. To Our Investors 2012 was an extremely difficult year for the steel industry. Prices for fuel and raw materials fluctuated at high levels, intensity of the homogeneity competition was ever growing, the steel market remained gloomy and steel enterprises saw continued business deterioration. Confronted with the severe industrial environment, Baosteel stepped up operation to solidify its advantages in differentiated product competitiveness, and enforced strict cost control to pursue production and sales balance under economic operation. The Company made a good performance in production and sales in 2012. It sold 22.995 million tons of steel, including 1.955 million tons and 2.34 million tons of exclusive products and exported products respectively, reporting a 6.6% gross sales profit for major steel products. The Company maintained a comparatively stable level of profitability, and kept its best performance among domestic peers. While carrying out the daily business carefully, the Company’s managerial staff were actively seeking ways to enhance its long-term competitiveness and investment value. In response to the shareholders’ requests and to boost the market confidence, in August 2012, the Company’s BOD announced the decision to repurchase the Company stock at a price not more than 5 RMB/share, with the total spending within RMB 5 billion. The total repurchase, if completed, would amount to 1 billion shares, accounting for 5.7% of the Company’s overall capital stock, or 22.8% of the shares in public circulation. By the end of 2012, the Company had repurchased 414 million shares accumulatively at the total cost of RMB 1.917 billion. The stock price at the end of 2012 was 20% higher than that before the repurchase announcement. Being helpful in lifting investors’ confidence, and enhancing corporate return on assets in a long run, the Company’s huge-amount repurchase scheme won favorable comments from the capital market and was listed as one of the top ten pieces of news of the 2012 securities market by China Securities News. Seizing the opportunity of Shanghai Baoshan district industry planning adjustment, the Company accomplished a series of major asset reorganization in 2012. In the first quarter, an overall transfer of the stainless steel and special steel business to Baosteel Group was made, with a settlement amount of RMB 44 billion. In September after the Luojing Area shut down, the Company sold the Corex furnace and related technical assets to Baosteel Group at a price of RMB 2.73 billion. By peeling off the business and assets of these sections with relatively low profitability, Baosteel has given prominence to the strategic focus on carbon steel, remarkably improved the overall asset quality, and raised its long-term profitability. In May 2012, the Guangdong Zhanjiang Steel Base Project was approved by National Development and Reform Commission to launch construction. The Company announced in August the plan of investing RMB 40 billion in Zhanjiang Steel Base construction. Considering the location of Zhanjiang Steel Project in the region with a high consumption potential, and with certain advantage in cost and logistics, our goal is to establish the Zhanjiang Base as an efficient and cost-effective flat product production base. Basing itself in the Pearl River Delta, and exporting to the market in Southeast Asia, Zhanjiang Project can form a synergy with Baosteel headquarters to bring their complementary strength into full play, and to enhance the Company’s long-term competitiveness. In the new round strategic planning that has already been made, the Company will focus on carbon steel flat products, and construct three closely collaborated production bases for premium steel products, namely, the Headquarters, Meishan Steel, and Zhanjiang Steel. By actively promoting the strategic upgrading featuring a focus expansion “from steel products to materials, from manufacturing to service, and from China to the world”, the Company is committed to developing itself into the world’s most competitive steel company and the most valuable listed company. Important Notice The Board of Directors and the Board of Supervisors of Baoshan Iron & Steel Co., Ltd. (hereinafter “the Company”), along with their directors, supervisors and senior executives, hereby guarantee that the 2012 Annual Report (hereinafter the Report) is free from false statement, misleading information or grave material omission, and assume relevant separate and joint responsibilities in regard to the truth, the accuracy and the integrity of the contents of the Report. All members of the Board of Directors attended the board meeting. Deloitte Touche Tohmatsu Certified Public Accountants Ltd. (special general partnership) gave standard unqualified audit report for the Company. He Wenbo, Chairman of the Company, Zhu Kebing, chief accountant, and Li Qiqiang, Director of the Finance Department in charge of the accounting affairs, attest to the truthfulness and completeness of the financial statements in thisReport . Here is the proposed profit appropriation plan for the reporting period approved by the Board of Directors: According to the Company’s policy that the annual dividend distribution should not be lower than 40% of the year’s net profit, with the total cash dividend not less than RMB 4,194,918,871.73. Taking into account the realized stock repurchase, the Company plans to dispatch a total dividend of RMB 2,278,400,000.00 (tax included) to all shareholders as registered on the equity registration date. The proactive future plans and developing strategies in this Report do not constitute actual promises to investors. Investors are kindly reminded that investment involves risks. No capital was found in the Company to be occupied by the controlling shareholder and its related parties. No guarantee was found in the Company to be provided in manner that is against the stipulated decision-making procedures. Table of Contents Important Notice 001 Term Explanation and Major Risk Warning 002 I. Company Profile 003 II. Accounting and Financial Highlights 005 III. Directors’ Report 006 IV. Significant Events 021 V. Capital and Shareholders 027 VI. Directors, Supervisors, Senior Executives, and Employees 031 VII. Corporate Governance 040 VIII. Internal Control 043 IX. Financial Statements 044 X. Documents Available for Reference 146 2 Term Explanation and Major Risk Warning Term Explanation Term Meaning High strength automotive steel with better elongation compared with the first generation of The 3rd generation advanced high strength automotive steel such products EVI Early Vendor Involvement This refers to the non-oriented silicon steel with higher magnetic induction compared to those Efficient high-grade non-oriented silicon steel of the same grade with the same iron loss. The high-grade non-oriented silicon steel usually refers to non-oriented silicon steel with a grade above B50A400 (B35A360). This refers to the oriented silicon steel that contains more than 3.35% silicon, with a magnetic High silicon high magnetic induction oriented silicon steel induction of B8≥1.88T. Low-temperature high magnetic induction oriented silicon steel This refers to the oriented silicon steel produced by low-temperature heating. Heavy plate TMCP It refers to the heavy plate produced by thermo mechanical control process. Heavy plate DQ Refer to the heavy plate produced by direct quenching Deloitte Deloitte Touche Tohmatsu Certified Public Accountants Ltd. (special general partnership) Major Risk Warning The complicated steel market poses many uncertainties for the Company’s operation environment. In 2013, pressure from energy and environmental protection gets more prominent for the Company and it is faced with many challenges in controlling the newly started major projects and in enhancing the comprehensive competitiveness. The Company has already taken measures to reduce and control risks. 3 Part I. Company Profile I. Company Name Chinese Name 宝山钢铁股份有限公司 Chinese Abbreviation 宝钢股份 English Name Baoshan Iron & Steel Co., Ltd. English Abbreviation Baosteel Legal Representative He Wenbo II. Contact Information Secretary to Board of Directors Representative of Securities Affairs Contact Zhu Kebing Yu Hong Board of Directors of Baoshan Iron & Steel Co., Ltd., Board of Directors of Baoshan Iron & Steel Co., Ltd., Address Baosteel Administration Center, 885 Fujin Rd. Baoshan District, Shanghai Baosteel Administration Center, 885 Fujin Rd. Baoshan District, Shanghai Te l 86-21-26647000 86-21-26647000 Fax 86-21-26646999 86-21-26646999 Email [email protected] [email protected] III. Company Information Registered Address Baosteel Administration Center, 885 Fujin Rd. Baoshan District, Shanghai Zip Code 201900 Office Address Baosteel Administration Center, 885 Fujin Rd. Baoshan District, Shanghai Zip Code 201900 Company Website http://www.baosteel.com/plc/ Email [email protected] IV. Company Announcements or Disclosures & Copies of the Report Company Announcements or Disclosures published in China Securities News, Shanghai Securities News, and Securities Times Annual Report Website Designated by China Securities Regulatory