Annual Report 2014 Worldreginfo - C8ea3edc-8A73-4Fb7-A590-C28ae19061b8 Worldreginfo - C8ea3edc-8A73-4Fb7-A590-C28ae19061b8 Aperam Annual Report 2014 1
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Annual report 2014 WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 Aperam Annual Report 2014 1 Table of Contents Message from the Chairman of the Board of Directors 02 Message from the Chief Executive Officer 03 Management Report 04 Company overview 06 Introduction 06 The creation of Aperam 07 Our facilities 07 Our key competitive strengths 08 Our key strategic priorities 10 Our profit driving pillars 12 Market analysis 14 Board of Directors 20 Senior Management 26 Corporate responsibility 32 Operational review 34 Liquidity 40 Summary of risks and uncertainties 47 Corporate Governance 48 Luxembourg Takeover Law disclosure 58 Share Capital 74 Shareholder information 78 Financial statements 2014 82 Responsibility Statement 85 Consolidated Financial Statements as of and for the year ended December 31, 2014 86 Report of the réviseur d’entreprises agréé on the Consolidated Financial Statements 165 Annual Accounts of the Parent Company as of and for the year ended December 31, 2014 168 Report of the réviseur d’entreprises agréé on the Annual Accounts 191 Proposed allocation of the results for 2014 193 Risks and uncertainties related to the company and the stainless and specialty steel industry 195 Disclaimer – Forward Looking Statements In this Annual Report Aperam has made certain forward-looking statements with respect to, among other topics, its financial position, business strategy, projected costs, projected savings, and the plans and objectives of its management. Such statements are identified by the use of forward-looking verbs such as ‘anticipate’, ‘intend’, ‘expect’, ‘plan’, ‘believe’, or ‘estimate’, or words or phrases with similar meanings. Aperam’s actual results may differ materially from those implied by such forward-looking statements due to the known and unknown risks and uncertainties to which it is exposed, including, without limitation, the risks described in this Annual Report. Aperam does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved. Please refer to the ‘Summary of risks and uncertainties’ section of this report as well as ‘Risks and uncertainties related to the company and the stainless and specialty steel industry’. Such forward-looking statements represent, in each case, only one of many possible scenarios and should not necessarily be viewed as the most likely to occur or standard scenario. Aperam undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events or otherwise. Unless indicated otherwise or the context otherwise requires, references in this Annual Report to ‘Aperam’, the ‘Group’ and the ‘Company’ or similar terms refer to Aperam, ‘société anonyme’, having its registered office at 12C, Rue Guillaume Kroll, L-1882 Luxembourg, Grand Duchy of Luxembourg, and to its consolidated subsidiaries. WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 2 Aperam Annual Report 2014 Message from the Chairman of the Board of Directors March 18, 2015 Dear Shareholders, Whilst 2014 was another challenging year for the stainless steel industry, Aperam continued to focus on its own resources to become more resilient to the environment and is now in a stronger financial position, ready to support its customers with sustainable and high quality stainless steel supply. Before I go into detail on the global environment and our initiatives, I would first like to update you on our health and safety results. We continue to make progress, with our lost time injury frequency rate improving from 1.3 in 2013 to 1.1 in 2014. Zero accidents remain our ultimate goal; more needs to be done and more will be done. Although the stainless steel demand continued to grow globally by about 5% in 2014, primarily led by China, the industry was impacted by the volatility of nickel prices and continued import pressure from Asia. The price of nickel increased by 50% in the first months of the year as a consequence of the Indonesian nickel ban and supply shortage fears before declining at year end as the shortage did not materialize. In Europe, the market was heavily impacted in 2014 by a surge of Asian imports which continued to increase during the year, leading EUROFER to file anti-dumping and anti subsidy proceedings to the European Commission. I am pleased that in this overall challenging and volatile market environment, Aperam succeeded in further improving its operational efficiency and financial results and reducing its net debt. In 2014, Aperam delivered EBITDA of $547 million, compared with $292 million throughout 2013 and returned to a positive net income of $95 million compared with a loss of $100 million previous year. Net debt was $536 million at the end of 2014 compared with $690 million at the end of 2013.These results were mainly the consequence of Aperam’s strategy to focus on operational efficiency, product innovation and cash rather than counting on any positive market development. As part of the main initiatives we launched at the creation of Aperam, was our Leadership Journey®, a program aimed at improving our competitiveness over the near and medium term. At the end of 2014, the Leadership Journey® had contributed a total amount of $428 million to EBITDA since the beginning of 2011 and our goal is to achieve $475 million by the end of 2015. Another key initiative is our Top Line strategy which continues to leverage our unique stainless steel product portfolio and service differentiation. Looking forward our focus must remain on the improvement of our operational performance and balance sheet. In particular, we believe it is a priority to further reduce our debt level in order to come back to an acceptable level of financial charges and to reach a balance sheet allowing Aperam to be in a good position to capture any potential opportunity. With this in mind, we will propose at our next shareholders’ meeting paying no dividend for another year. Finally, I would like to thank the Aperam employees, the Leadership Team and my colleagues in the Board of Directors, for their support, hard work and contribution to the Company’s performance improvements in 2014. In particular I would like to express my gratitude to Philippe Darmayan for everything he has done in his capacity as Chief Executive Officer of Aperam. I am confident that under the leadership of Timoteo Di Maulo, our newly appointed CEO, Aperam will continue to progress and prosper and offer favorable and sustainable prospects for all our stakeholders. Lakshmi N. Mittal, Chairman of the Board of Directors WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 Aperam Annual Report 2014 3 Message from the Chief Executive Officer March 18, 2015 Dear Shareholders, As the new CEO of Aperam it’s a great honor for me to present you Aperam’s 2014 Annual Report. I am very proud to lead this dynamic Company which has established itself only in a few years time as a leading manufacturer of the stainless steel industry. Aperam has demonstrated its capability to deliver a robust performance in a challenging industry and market environment. My ambition as the new CEO of Aperam is to continue to make Aperam an even stronger and competitive Company by further improving its operational efficiency, reducing its cost of debt and aiming to become the preferred choice of our customers. Before I comment our performance and prospects, you can be ensured that my first and non negotiable priority is Health and Safety. Although we improved our lost time injury frequency rate on an annual basis we need to further progress and we will emphasize our efforts in 2015 on behaviours, processes and leveraging the commitment of our managerial line. As highlighted by the Chairman of the Board of Directors we were able in 2014 to improve once again our operational efficiency, financial performance as well as reducing our net debt in challenging market conditions. Yet our journey to unlock Aperam’s full potential is not over. We will continue to improve our operational efficiency and we target to improve by the end of 2015 the contribution of our Leadership Journey® to EBITDA by $47 million. With this additional improvement, our Leadership Journey® is expected to reach by the end of 2015 a total contribution to EBITDA of $475 million since 2011. We also aim to continue to further improve our customer orientation. As part of our strategy to become the preferred choice of our costumers we target to leverage our unique stainless steel product portfolio, drive additional value through our Services & Solutions segment and grow our Alloys & Specialties segment. With respect to our debt we have launched early 2015 a journey to further reduce our cost. The key initiatives are first of all a new $500 million Secured Borrowing Credit Facility which will refinance our existing Borrowing Base Facility and secondly, our intention to redeem in the second quarter 2015 our expensive High Yield Bonds of $250 million maturing in 2018. I am convinced that under the leadership of our Board of Directors and thanks to our highly motivated employees we will continue to reinforce Aperam’s resilience to the challenging market environment and be well prepared us to take advantage of growth opportunities when they become available. Timoteo Di Maulo, CEO WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 Management Report The Board of Directors has the pleasure in presenting its report, which constitutes the management report (“Management Report”) as defined by Luxembourg Law, together with the audited consolidated financial statements and annual accounts as of December 31, 2014, and for the year then ended. As permitted by Luxembourg Law, the Board of Directors has elected to prepare a single Management Report covering both the Company and the Group. WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 WorldReginfo - c8ea3edc-8a73-4fb7-a590-c28ae19061b8 6 Aperam Annual Report 2014 Company Overview Introduction We are a leading global stainless and specialty steel producer based on our annual production capacity of 2.5 million tonnes in 2014.