Annual Report and Sustainability Report
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ANNUAL REPORT AND LKAB SUSTAINABILITY REPORT ANNUAL REPORT AND SUSTAINABILITY REPORT AND SUSTAINABILITY ANNUAL REPORT CONTENTS Events in brief 2 The LKAB Manifesto 3 Overview of the past year 4 President’s report 6 Group strategies 9 LKAB 2009 11 Economic trends, market 13 Steel demands iron ore 16 International trade 17 The iron ore mines 18 Prospecting, ore reserves 19 From iron ore to pellets 20 Production 2009 21 Research and development 22 Human resources 23 Investments 24 The industrial minerals business 25 Subsidiaries 26 2009 SUSTAINABILITY REPORT 27 Stakeholders and sustainability issues 28 Value creation 29 Control of sustainability activities 30 Urban transformation 31 Environment 34 Co-workers 44 Involvement in local communities 49 About LKAB’s Sustainability Report for 2009 106 GRI index 106 Auditors’ statement of assurance 108 CORPORATE GOVERNANCE REPORT 50 Board of Directors and Group Management 55 FINANCE 58 Group overview 58 Contents, financial statements 59 Report of the Directors 60 Financial reports and notes 68 LKAB, BOX 952, SE-971 28 LULEÅ, SWEDEN Proposed disposition of unappropriated earnings 104 www.lkab.com Auditors’ Report 105 Glossary 109 Addresses 110 Annual General Meeting 20092009 and financial information 111 ANNUAL REPORT AND LKAB SUSTAINABILITY REPORT ANNUAL REPORT AND SUSTAINABILITY REPORT AND SUSTAINABILITY ANNUAL REPORT CONTENTS Events in brief 2 The LKAB Manifesto 3 Overview of the past year 4 President’s report 6 Group strategies 9 LKAB 2009 11 Economic trends, market 13 Steel demands iron ore 16 International trade 17 The iron ore mines 18 Prospecting, ore reserves 19 From iron ore to pellets 20 Production 2009 21 Research and development 22 Human resources 23 Investments 24 The industrial minerals business 25 Subsidiaries 26 2009 SUSTAINABILITY REPORT 27 Stakeholders and sustainability issues 28 Value creation 29 Control of sustainability activities 30 Urban transformation 31 Environment 34 Co-workers 44 Involvement in local communities 49 About LKAB’s Sustainability Report for 2009 106 GRI index 106 Auditors’ statement of assurance 108 CORPORATE GOVERNANCE REPORT 50 Board of Directors and Group Management 55 FINANCE 58 Group overview 58 Contents, financial statements 59 Report of the Directors 60 Financial reports and notes 68 LKAB, BOX 952, SE-971 28 LULEÅ, SWEDEN Proposed disposition of unappropriated earnings 104 www.lkab.com Auditors’ Report 105 Glossary 109 Addresses 110 Annual General Meeting 20092009 and financial information 111 2 EVENTS 2009 09 LKAB wins Finforum’s first prize for the best sustaina- bility report for large companies. 40th anniversary of the miners’ strike. Bolagshotellet in Malmberget is closed. The Swedish government gives the go-ahead for a gas pipeline in the Baltic; Minelco begins delivery of magnetite LKAB decides to build 200 new apartments over for the project. five years in Malmberget. VindIn AB, in which LKAB has ownership interest, opens its first Lars-Eric Aaro is appointed President and CEO wind park, in Skutskär, outside Gävle. as of 1 January 2010. An extra shareholders’ meeting votes to restructure LKAB as a public limited company. The first issue of a new magazine, LKAB Framtid, is released. Website visitors are able to chat with LKAB’s Group manage- V ment for the first time. NO DEC The year begins with three of a total of six pelletizing plants closed. Minelco and the fashion company H&M win the Swedish T 2 export prize in Germany. C 0 Hematite production in the Malmberget mine O 0 is discontinued. 9 Personnel from the closed plants join resource teams that work with preventive maintenance and wherever help is needed. P LKAB posts profit for the third quarter. J E A The number of temporary personnel and S Project SILA in Narvik inaugurated. EVENTS N contractors/consultants is tightly restricted. The first sections of four new IORE-type locomotives arrive in Kiruna. Minelco AB gains environmental manage- ment certification. G F U OF THE YEAR E A LKAB and Banverket sign an implementa- B tion agreement for18 km of new railway in Kiruna. New VP Human Resources joins LKAB. Minelco celebrates IN BRIEF Veteran Party for coworkers who been with 20 years in business. L M the company for 40 and 25 years. U J The Minister of Enterprise, Energy and Communications A initiates the construction of the new railway bypass in Kiruna. R New sewer system in Kiruna officially opened. N A U The first trainload leaves the new loading station at the J P Kiruna terminal. R KGS pours the foundation for a new concrete Y M LKAB signs fines price agreement (-32%) with European A station in Kiruna. customers. LKAB starts a pre-study for Project Ironman with Statoil and Höganäs AB. Complementary rock reinforcement work begins on main level 1045 in Kiruna. All mines and processing plants in the orefields resume production. Deliveries increase. Summer clean-up of Malmberget under FAB’s The pellet kiln mantle is replaced in the The sales and marketing organization is direction. Svappavaara pelletizing plant. strengthened. Summer stop for iron ore operations, except Installation of new survey plinths for The first load is sent to China. EU ambassadors from Brussels visit LKAB; the first of for the Svappavaara pelletizing and concen- monitoring ground deformations begins in many visits during Sweden’s EU presidency. Qmatec Drilling becomes a distributor for trating plants, which resume production after Malmberget. Wassara’s drilling systems on the Norwegian LKAB reaches first price agreement for blast furnace a five-month stop. The first price agreement for iron ore market. pellets with Salzgitter Flachstahl (-48.3%). The Environmental Court sets new permit products is reached between Rio Tinto LKAB and the Municipality of Kiruna collaborate on limits for ground deformations in Kiruna. and Japanese buyers; -33% for fines and a one-year photo project, Ögonblick i Kiruna. The Board votes to build an AggloLab in -44% for lump. The first family moves into a new home in Mellan- Malmberget. Publication of www.lkabframtid.com området in Gällivare. Brazilian Vale and Japanese and Korean buyers reach the first price agreement for blast furnace pellets (-48.3 %). THE LKAB MANIFESTO 3 09 LUOSSAVAARA- KIIRUNAVAARA AB LKAB Deep in the ancient rocks of northern Sweden lies the very source of Sweden’s industrial development; millions upon millions of tonnes of the world’s purest and finest iron ore – a foundation of Swedish primary industry, export and prosperity. Since 1890, LKAB has been mining and processing the ore, one of Sweden’s most important natural resources. And for just as long, the company has been a reliable supplier and partner to the European steel industry. The iron ore has been complemented with other natural mi- nerals, and LKAB is now an international, high-tech minerals group with large-scale operations on a globally competitive market. A reliable resource for its owner and customers, the company is constantly developing and aiming for the future. LKAB is a creative crucible, where people, raw materials, technology, knowledge and expertise drive strongly customer- oriented production, product development and world-class research. These are the success factors that have made LKAB a technology-leading supplier of iron ore pellets. Luossavaara Kiirunavaara AB (publ). President and CEO: Lars-Eric Aaro LKAB is wholly owned by the Swedish state, Chairman of the Board: Björn Sprängare represented by the Ministry of Enterprise, Corporate ID No.: 556001-5835 Energy and Communications. 4 AN OVERVIEW OF THE PAST YEAR 09 LKAB GROUP Group summary MSEK 2009 2008 2007 2006 Net sales 11 558 23 128 16 385 14 615 Operating income 659 10 327 6 148 6 256 - operating margin, % 5.7 44.7 37.5 42.8 Profit after financial items 1 192 10 389 6 344 6 382 - profit margin % 10.3 44.9 38.7 43.7 Tax -473 -2 748 -1 665 -1 785 Net income for the year 719 7 641 4 679 4 597 Fixed assets 23 688 21 414 19 447 14 341 Current assets 11 867 14 915 10 233 11 524 Shareholders’ equity 25 375 25 218 22 251 19 076 Cash flow for the year -3 140 3 948 -1 159 70 Return on equity, %* 2.8 32.2 22.6 27.1 Equity/assets ratio, % 71.4 69.4 75 73.8 Capital expenditures (fixed assets) 3 543 4 716 5 968 4 844 Average number of employees 3 788 4 086 3 885 3 737 * After tax. Net sales and operating income (MSEK) Return on equity (%) Sales per market region (%) 24 000 50 Middle East/Asia 30% 21 000 40 Others 7% 18 000 15 000 30 12 000 20 9 000 6 000 10 3 000 0 0 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Europe 63% Net sales ( 2009) Operating income Return on equity (after tax) Target return on equity (after tax) Europe is the Group’s biggest market. Revenue fell by 50 percent to MSEK 11,558 (23,128), which The targeted return on equity is 8.5% over a business is mainly attributable to lower product prices and volumes. cycle. THE INDUSTRIAL MINERALS BUSINESS Minerals Division SIGNIFICANT EVENTS 2009: Financial highlights – Minerals Sales per market region (%) Delivery of magnetite products for the Nord MSEK 2009 2008 Middle East/Asia 33% Stream project began. Revenue 2 141 2 753 Others 15% A new organization was introduced, effective Operating income -95 216 from October. It covers three major geographic Operating margin % -4.4 7.8 business units and gives Minelco better capa- Operating assets 1 352 2 054 city for efficiency improvement and a greater Operating liabilities 1 029 1 469 market presence. Investments 13 55 Depreciation 47 49 During the final quarter, it was decided that the Write-downs 317 0 Europe 52% olivine mine in Greenland would be closed in Average number of employees 384 417 late 2010.