TIDMEVR
RNS Number : 4061E
Evraz Plc
09 April 2014
EVRAZ ANNOUNCES PRELIMINARY AUDITED FINANCIAL RESULTS FOR
2013
9 April 2014 - EVRAZ plc ("EVRAZ" or "the Company") (LSE: EVR)
today announces its preliminary audited results for the year ended
31 December 2013 ("the Period").
The financial information contained in this document for the
year ended 31 December 2013 does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006. The audited
statutory accounts for the year ended 31 December 2012 have been
delivered to the Registrar of Companies and those for 2013 will be
delivered following the Company's annual general meeting convened
for 12 June 2014.
The auditor has reported on the statutory accounts for year
ended 31 December 2013. The auditor's report was unqualified.
2013 HIGHLIGHTS
Commenting on the financial results in respect of 2013,
Alexander Frolov, Chief Executive of EVRAZ, stated:
"2013 was another challenging year for the global steel and coal
mining industries, characterised by strong cyclical headwinds,
which EVRAZ was not immune to. Although we managed to increase
external steel sales by 1% to 15.5 million tonnes and substantially
grew the output of coking coal by 22% to 18.9 million tonnes, our
EBITDA was US$1,821 million in 2013, 10% less than in 2012.
Whereas many factors are beyond our control, EVRAZ possesses
certain fundamental value drivers that we believe will define the
Company's future performance and ultimately create value for our
shareholders. Management's response to the current market situation
has encompassed a thorough review of EVRAZ's balance sheet,
strategic options and business portfolio.
In terms of the financial strategy, our priority was to address
the debt leverage by focusing on the generation of positive free
cash flow, which reached US$458 million in 2013. Important
contributors to the free cash flow in 2013 were the positive
effects of the operating efficiency and cost cutting programmes
which we initiated during the year - all of which yielded total
savings of approximately US$303 million."
Full year to 31 December
(US$ million) 2013 2012 Change
------------------------------------------ ----------------- ----------------- --------
Consolidated revenue 14,411 14,726 (2.1)%
------------------------------------------ ----------------- ----------------- --------
Consolidated EBITDA* 1,821 2,027 (10.2)%
------------------------------------------ ----------------- ----------------- --------
Net loss (572) (425) 34.6%
------------------------------------------ ----------------- ----------------- --------
Loss per share, (US$) (0.35) (0.30) 16.7%
------------------------------------------ ----------------- ----------------- --------
Net cash flows from operating activities 1,900 2,143 (11.3)%
------------------------------------------ ----------------- ----------------- --------
CAPEX 902 1,261 (28.5)%
------------------------------------------ ----------------- ----------------- --------
31 December 2013 31 December 2012
------------------------------------------ ----------------- ----------------- --------
Net debt** 6,534 6,376 2.5%
------------------------------------------ ----------------- ----------------- --------
Total assets 17,704 17,732 (0.2)%
------------------------------------------ ----------------- ----------------- --------
* Please refer to Appendix 1 for reconciliation of profit/(loss)
from operations to EBITDA
** Hereinafter debt and cash balances include the amounts held
at operations that were classified as assets/liabilities held for
sale, which were separately presented in the statement of financial
position as of 31 December 2013, and include US$35 million of cash
and cash equivalents and US$78 million of debt (including US$76
million of short-term debt). Please refer to Appendices 4 and 5
Steel:
-- Steel segment revenue of US$12,541 million (-7% vs. 2012)
-- Crude steel production of 16.1 million tonnes (+1%)
-- Total external sales of steel products of 15.5 million tonnes (+1%)
-- Decline in steel and steel products prices led to a US$798
million decrease in consolidated revenue
Mining:
-- Mining segment revenue of US$3,120 million (+18% vs. 2012)
-- Raw coking coal production of 18.9 million tonnes (+22%)
including 7.8 million tonnes from Raspadskaya
-- Production of saleable iron ore products was 20.4 million
tonnes (-1%) on the back of lower output by the Russian operations
largely driven by the disposal of high cost operation EVRAZ
VGOK
-- Decline in prices for mining products led to a US$182 million
decrease in consolidated revenue
Vanadium:
-- Vanadium segment revenue of US$550 million (+6% vs. 2012)
-- The vanadium division produced 21,077 tonnes (+0.1%) of
vanadium slag and sold 23,287 tonnes (+10%) of vanadium
products
Investments:
-- Capital expenditure of US$902 million (vs. US$1,261 million
in 2012) following the thorough revision of investment plans
-- Rail mill modernisation at EVRAZ ZSMK completed in January 2013 with ramp-up mostly finished
-- PCI project at EVRAZ NTMK fully reached design parameters in
May 2013, while construction work on PCI at EVRAZ ZSMK
continued
-- Yerunakovskaya VIII coking coal mine launched in February
2013 and fully ramped up by February 2014
-- Development of Mezhegey coking coal deposit continued
-- Hot tests at Vostochny rolling mill in Kazakhstan commenced
M&A developments:
-- Completion of acquisition of an indirect controlling interest
in OJSC Raspadskaya bringing effective interest to 81.95% for
US$964 million in equity and cash
-- Acquisition of the 51% stake in Timir iron ore project for a
US$159 million cash consideration
-- Disposal of structurally high costs assets in iron ore and
coal mining - EVRAZ VGOK, Abakan and Teya mines of Evrazruda and
the Gramoteinskaya steam coal mine for cash consideration of
ca.US$20 million
-- Disposal of EVRAZ Vitkovice Steel based on the enterprise value of US$287 million
Debt and liquidity:
-- Net debt of US$6,534 million vs. US$6,376 million as at 31
December 2012 including additional US$400 million of net debt
contributed in 2013 from the consolidation of Raspadskaya
-- Cash and short-term deposits of US$1,611 million (see Appendix 2 for calculation)
-- Placed US$1,000 million Eurobonds due in 2020 with the lowest
ever coupon rate achieved by EVRAZ of 6.50% p.a.
-- Prepaid US$950 million structured credit facility due 2015
with certain covenants on net leverage
Dividends:
-- The directors recommend a dividend of 6 cents per share to be
consistent with their intention of distributing, where appropriate,
a proportion of the margin on disposals as dividends, and as an
indication of confidence in the Company's position. The US$90.4
million represents the approximate cash portion of the proceeds
from the sale of EVRAZ Vitkovice Steel, leaving US$196.6 million
for the reduction of debt
-- Revised dividend policy set out (see below)
Chief Executive Officer's Report
Through the sound fundamentals of our business and our vision we
endeavour to deliver sustainable ongoing growth and value. However,
2013 was another challenging year for the global steel and coal
mining industries, characterised by strong cyclical headwinds,
which EVRAZ was not immune to. Although we managed to increase
external steel sales by 1% to 15.5 million tonnes and substantially
grew the output of coking coal by 22% to 18.9 million tonnes, our
EBITDA was US$1,821 million in 2013, 10% less than in 2012. Due to
the relatively high financial leverage of the Company, shareholder
value also came under pressure during the course of 2013.
Whereas many factors are beyond our control, such as the
cyclicality of the broad commodity market, EVRAZ possesses certain
fundamental value drivers that we believe will define the Company's
future performance and ultimately create value for our
shareholders.
Overview of Health, Safety and Environmental performance
The safety of our employees remained the key priority in 2013.
Although the number of fatalities decreased compared to 2012, the
fact that 18 employees lost their lives at work is deeply
regrettable. All of the incidents have been meticulously
investigated and analysed in order to mitigate against recurrence
and identify other workplace risks. We remain committed to our
strategic goal of zero fatality incidents.
We have been focusing on sustained training to underline the
importance of adherence to our improved operating standards as we
endeavour to progress towards a zero-harm environment. We have also
adopted a proactive approach to the promotion of more disciplined
behaviour at the workplace, accompanied by continual engagement, on
the part of workers and managers, in appropriate training courses.
In line with this, we have engaged a significant number of
mid-level managers from various business areas to impart their
appreciation of the importance of safety awareness across all key
production sites.
Balance sheet deleverage strategy, cost cutting and capex
revision
Management's response to the current market situation has
encompassed a thorough review of EVRAZ's balance sheet, strategic
options and business portfolio.
In terms of the financial strategy, our priority was to address
the debt leverage by focusing on the generation of positive free
cash flow, which reached US$458 million in 2013. The ratio of net
debt to EBITDA amounted to 3.6x, which we consider as being high.
The current target, through organic deleveraging and disposals, is
to reduce the net debt to EBITDA ratio to below 3.0x by 2016
year-end.
Important contributors to the free cash flow in 2013 were the
positive effects of the operating efficiency and cost cutting
programmes which we initiated during the year. The plan provided
for staff optimisation, including a headcount reduction and the
implementation of more efficient work shifts; reduced maintenance
downtime at our steel mills and the efficient repositioning of
longwalls in coking coal mines; enhanced extraction yields and
reduced conversion costs - all of which yielded total savings of
approximately US$303 million.
In 2014, we will extend our operating costs' reduction programme
to save US$350-400 million and, post a comprehensive review of
general and administrative costs, we are aiming to reduce costs by
an additional US$100 million on an annualised basis from 2015
compared to 2013 level, including a reduction of US$50 million to
be achieved in 2014.
In addition, we significantly revised our investment plans and
doubled the Internal Rate of Return threshold with regard to the
suspension of projects below 40% compared with 20% we used to have
previously. As a result, capex in 2013 was reduced by approximately
US$400 million from the originally budgeted US$1.3 billion to
US$902 million. Deferred projects included the construction of the
Yuzhny rolling mill and expenditures on certain higher cost coal
mines. In 2014, we expect to achieve a further reduction in capital
spending and end up with less than US$900 million.
Disposals and closure of high cost and other assets
In the current market reality, certain aspects of our steel and
mining asset base have become economically inefficient and
structurally high cost. During 2013 management refined and
commenced implementation of an action programme focused on the
divestment or closure of specific high cost and/or loss making
assets. Key developments included the shutdown of the Irba mine,
the sale of the Abakan and Teya mines at Evrazruda, the disposal of
EVRAZ VGOK, preparations for the shutdown of the Abashevskaya coal
mine, the closure of the plate rolling mill at EVRAZ ZSMK and the
suspension of EVRAZ Claymont Steel.
In addition we temporarily suspended EVRAZ Palini e Bertoli, our
Italian plate rolling mill, in order to release significant working
capital.
We have continued to negotiate with an expanded list of
potential purchasers of EVRAZ Highveld Steel and Vanadium in South
Africa and we will update the market on developments in due
course.
On 3 April 2014, we successfully completed the sale of EVRAZ
Vitkovice Steel, our Czech subsidiary, based on the enterprise
value of US$287 million, including US$89 million for equity. The
sale reflected management's belief that strategic options for the
development of the operation within EVRAZ were limited.
Value drivers
We believe that our value drivers are our fundamental low cost
positions with access to proprietary raw materials, which enables
us to secure the required quantities and quality of iron ore and
coking coal at costs which are below the market's conservative
estimates of long run pricing.
Iron ore
Our core iron ore business, EVRAZ KGOK, has historically been an
important contributor to the Company's free cash flow with cash
costs for iron ore products (58% Fe) of US$46 per tonne before
credits from a vanadium by-product. The mining volumes of EVRAZ
KGOK fully cover the requirements of EVRAZ NTMK. It is anticipated
that the low cost position of EVRAZ KGOK will be sustained
throughout the current operations and during the development of the
new Sobstvenno-Kachkanarskoye iron ore deposit, located in close
proximity to the current open pits, with an estimated mine life of
more than 100 years.
In addition, the successful implementation of cost savings and
operational improvements at all of the Company's iron ore mining
assets, together with the sale and shutdown of high cost
operations, resulted in a reduction of blended cash costs (58% Fe)
from US$69/tonne in 2012 to US$61/tonne in 2013 with potential
further savings in 2014 and beyond.
EVRAZ has also entered the Timir iron ore joint venture
arrangement focused on the development of iron ore deposits in
Southern Yakutia. The rationale behind our acquisition of a 51%
interest in the project is the prospect of securing adequately
priced supplies of iron ore for EVRAZ ZSMK, our major Russian steel
mill situated in Western Siberia, post the depletion of Evrazruda's
reserves in 5-7 years. Timir's substantial iron ore resources and
proximity to the existing infrastructure provide for the efficient
development of the project as a low cost operation.
Coking coal
With regard to coking coal the Company took a major step forward
in 2013 with the acquisition of Raspadskaya, a transaction designed
to harden the competitive advantage of being the market leader in
the Russian coking coal market; primary attractions include the
long life of the mineral resources and a broad customer base.
Raspadskaya, even at its current relatively low levels of raw
coal production, is one of Russia's lowest cost coking coal
companies, with an average cash cost of concentrate of $54.9/t in
2013. The Raspadskaya mine possesses exceptional assets of high
quality semi-hard coking coal with proven and probable reserves
extending to upwards of 100 years; production, however, has yet to
return to the levels achieved prior to the tragic accident in 2010.
Our investment to date has been largely focused on mine restoration
and the implementation of measures designed to ensure safe working
conditions. The underground mine is now operating with two
longwalls and the production plan envisages the commissioning of
two additional longwalls in 2014. Overall, Raspadskaya expects to
increase its output of raw coking coal by up to 40% to 11 million
tonnes in 2014.
We commissioned the new coking coal mine Yerunakovskaya VIII in
February 2013 ahead of schedule and on budget with nameplate
capacity of 3 million tonnes of semi-hard coking coal at mined raw
coal cash costs of less than US$40/t -- one of the lowest among CIS
coal mines. The mine, with an estimated life span of approximately
63 years, was fully ramped up with effect from February 2014.
Looking to the future and given the current tough coking coal
market, our mine portfolio optimisation programme will result in
the growth of capacity at low cost mines which will replace the
high cost operations, thereby enabling a further decrease in
blended cash costs.
We have undertaken to execute only the first stage of our
greenfield Mezhegey project involving a limited cash commitment.
However, Mezhegey is one of the key drivers of our long-term plan
to develop EVRAZ's coking coal base and possesses the potential to
become a reliable, quality coal, export-oriented operation.
Steel
In the steel segment we enjoy the benefit of owning high quality
steel assets with strong market positions in multiple geographies
and product lines.
As the market leader in the Russian construction long product
market and the leading manufacturer of rails in Russia and North
America we are intent on continuing to improve our product mix
through selective investments. For example, the successful launch
of the rail mill at EVRAZ ZSMK in 2013 following a major
modernisation programme allows us to produce premium head hardened
rails, including 100 metre rails suitable for high speed railways.
In order to strengthen our global leadership in rail production, we
are also progressing a rail mill project in EVRAZ North America
which will allow us to improve rail quality, increase the mill's
capacity and expand technical customer support and product
development. The modernisation programme is proceeding as planned
with project completion expected in mid-2014.
EVRAZ NTMK sustainably improved its profitability in 2013 as a
result of the implementation of Pulverised Coal Injection (PCI)
technology which led to reductions in the consumption of natural
gas and coke of 42% and 22% respectively, accompanied by an
increase in pig iron production capacity of 100,000 tonnes per
annum. Based on this positive experience we have been adopting PCI
technology at our second steelmaking plant in Russia, EVRAZ ZSMK,
despite some delays.
The fundamental advantage enjoyed by EVRAZ North America is the
geographical location of the facilities in the western part of the
USA and Canada, regions that are light in steel production but well
exposed to demand from the oil and gas industry and premium rail
infrastructure customers. EVRAZ's focus on research and development
strengthens the portfolio of high value-added rail and tubular
products, thereby safeguarding our dominant market positions.
Vanadium
The processing operations of EVRAZ NTMK benefit from its ability
to utilise the proprietary technology and vanadium rich iron ore
produced by EVRAZ KGOK located nearby. Due to the nature of EVRAZ's
iron ore assets and its ownership of vanadium processing facilities
we will continue to be a major player in the global vanadium
market.
Dividends and dividend policy
The directors recommend a dividend of 6 cents per share to be
consistent with their intention of distributing, where appropriate,
a proportion of the margin on disposals as dividends, and as an
indication of confidence in the Company's position. The US$90.4
million represents the approximate cash portion of the proceeds
from the sale of EVRAZ Vitkovice Steel, leaving US$196.6 million
for the reduction of debt.
Going forward, the dividend policy has been revised to support
the financial strategy of deleveraging and envisages that the
regular dividends will be paid only when the net leverage (net
debt/EBITDA) target of below 3.0x is achieved. The Board reserves
the right to propose special dividends in the event of asset
disposals.
Update on Ukrainian situation
The geopolitical developments around Ukraine could have an
impact on our operations, as we have assets both in Ukraine and
Russia. However, to date our operations have not been adversely
affected. We will update the market as appropriate.
Outlook
2014 has started mildly positively in most regional steel
markets - long steel volumes in Russia are picking up fuelled by
the start of the construction season, prices for railway products
are stable, while the severe winter in North America is pushing
prices higher. There have been also growth in prices for our
semi-finished products in Asian markets.
However, certain risks remain, in particular the growth of
seaborne supply of steelmaking raw materials over the medium term
and geopolitical risks. Management's response to potential
continued volatility in markets consists of comprehensive cost
cutting programmes, deleveraging and the disciplined development of
growth options in order to be well prepared for the next upturn of
the cycle.
Overall, taking into account market conditions and management's
initiatives, the Board is comfortable with expectations for the
year.
Alexander Frolov
Chief Executive Officer
EVRAZ plc
Financial Review
Giacomo Baizini, Chief Financial Officer, commented:
"Management's focus on the cost optimisation, disposal and closure
of structurally unprofitable assets and free cash flow generation
to achieve the debt reduction started to bear the fruits in 2013.
Despite challenging market environment, we managed to decrease the
cost of revenue, achieve solid positive free cash flow and
demonstrate healthy debt management results."
Overview
As a result of the challenging conditions in the market for
steel and steelmaking raw materials, the Company recorded a net
loss of US$572 million for 2013, compared to a net loss of US$425
million in 2012. Falling prices in 2013 caused revenue to decline
by 2.1% to US$14,411 million; consequently EBITDA decreased by 10%
to US$1,821 million.
Free cash flow for the period was positive at US$458 million,
however net debt increased by 2.5% to $6,534 million, as a result
of the consolidation of Raspadskaya's debt. As of today we have no
debt with maintenance covenants that require testing prior to 30
June 2014.
As of 31 December 2013, the Company's cash and short-term
deposits amounted to US$1,611 million, compared to short-term debt
of US$1,893 million. The Company has already started to work on
refinancing the major maturities due in the second half of
2014.
Corporate developments
In January 2013, we completed the acquisition of a controlling
interest in the Raspadskaya coal company for US$964 million, a
transaction which was primarily financed by equity accompanied bya
US$202 million cash component payable in equal quarterly
instalments ending on 15 January 2014.
In addition, in April 2013 we acquired a 51% stake in Timir, a
joint-venture with Alrosa (the shareholder agreement gives joint
control), created for the development of major iron ore deposits in
Yakutia, Russia, for RUB4,950 million (ca. US$159 million) payable
in quarterly instalments until 15 July 2014.
In 2013, in line with our mining asset optimisation programme,
we disposed of EVRAZ VGOK iron ore and processing plant for a US$20
million cash consideration; of a number of Evrazruda's iron ore
assets and utilities companies for a total cash consideration of
approximately US$306,000; and of the Gramoteinskaya thermal coal
mine for a RUB10,000 cash consideration.
As part of a strategic realignment of our asset base, the Group
was proceeding with disposals of EVRAZ Highveld Steel and Vanadium
and the EVRAZ Vitkovice Steel operations initiated at the end of
2012. Accordingly these assets were accounted for as assets held
for sale at the end of the period. The Company completed the sale
of EVRAZ Vitkovice Steel on 3 April 2014 for a consideration of
US$89 million adjustable for the actual level of the working
capital. In addition the buyers assumed US$198 million of debt
liabilities, including the repayment of US$128 million of EVRAZ's
inter-company debt. The sale of EVRAZ Highveld Steel and Vanadium
is expected to be completed in 2014.
In addition, in 2013 the Company suspended operations at EVRAZ
Claymont Steel and EVRAZ Palini e Bertoli, which had a certain
impact on our financial results.
Statement of Operations
Revenues
(US$ million)
------------------------------------------------------------------
Segment 2013 2012 Change Relative change
------------------ -------- -------- -------- ----------------
Steel 12,541 13,543 (1,002) (7.4)%
------------------ -------- -------- -------- ----------------
Mining 3,120 2,650 470 17.7%
------------------ -------- -------- -------- ----------------
Vanadium 550 520 30 5.8%
------------------ -------- -------- -------- ----------------
Other operations 928 1,046 (118) (11.3)%
------------------ -------- -------- -------- ----------------
Eliminations (2,728) (3,033) 305 (10.1)%
------------------ -------- -------- -------- ----------------
Total 14,411 14,726 (315) (2.1)%
------------------ -------- -------- -------- ----------------
Group revenues for 2013 decreased by 2.1% to US$14,411 million,
with revenues from the Group's steel segment amounting to US$12,541
million or 87% of total Group's revenue.
Steel sales volumes slightly increased to 15.5 million tones
compared to 15.3 million tonnes in 2012. The decline in revenues
was largely due to a decrease in prices, in line with the general
negative trend in steel pricing. Average Steel segment revenue per
tonne decreased by 8.6% in 2013 compared to 2012 reflecting weak
market environment.
Steel revenues were also impacted by changes in the Group's
product mix during 2013 due to the suspension of operations of
EVRAZ Claymont Steel and EVRAZ Palini e Bertoli and closure of
EVRAZ ZSMK plate rolling mill. While sales volumes of flat-rolled
steel products declined, a part of semi-finished production was
switched from internal consumption to external sales.
Mining revenues increased by 17.7% to US$3,120 million in the
period, compared to US$2,650 million in 2012. The growth in
revenues was primarily the result of the consolidation of
Raspadskaya.
Revenue by region
(US$ million)
Region 2013 2012 Change Relative change
------------------- ------- ------- ------- ----------------
Russia 6,136 6,191 (55) (0.9)%
------------------- ------- ------- ------- ----------------
Americas 3,242 3,571 (329) (9.2)%
------------------- ------- ------- ------- ----------------
Asia 2,062 2,115 (53) (2.5)%
------------------- ------- ------- ------- ----------------
Europe 1,385 1,450 (65) (4.5)%
------------------- ------- ------- ------- ----------------
CIS 1,175 996 179 18.0%
------------------- ------- ------- ------- ----------------
Africa 404 397 7 1.8%
------------------- ------- ------- ------- ----------------
Rest of the world 7 6 1 16.7%
------------------- ------- ------- ------- ----------------
Total 14,411 14,726 (315) (2.1)%
------------------- ------- ------- ------- ----------------
EBITDA
(US$ million)
-------------------------------------------------------------
Segment 2013 2012 Change Relative change
------------------ ------ ------ ------- ----------------
Steel 1,329 1,338 (9) (0.7%)
------------------ ------ ------ ------- ----------------
Mining 646 625 21 3.4%
------------------ ------ ------ ------- ----------------
Vanadium 19 (19) 38 (200.0%)
------------------ ------ ------ ------- ----------------
Other operations 110 189 (79) (41.8%)
------------------ ------ ------ ------- ----------------
Unallocated (226) (199) (27) 13.6%
------------------ ------ ------ ------- ----------------
Eliminations (57) 93 (150) (161.3%)
------------------ ------ ------ ------- ----------------
Total 1,821 2,027 (206) (10.2%)
------------------ ------ ------ ------- ----------------
Steel segment EBITDA in 2013 is slightly lower than in 2012 as a
result of declining prices for all steel products all over the
world, partly offset by lower raw material prices.
Mining EBITDA was positively impacted by additional coking coal
sales volumes, contributed by the consolidation of Raspadskaya.
This factor was partly offset by falling prices for coal and iron
ore products.
The increase in Vanadium EBITDA largely reflected the recovery
in prices of vanadium in alloys and chemicals.
The decrease in the Other operations segment EBITDA is mainly
attributable to the disposal of our transportation subsidiary
Evraztrans at the end of 2012.
Eliminations mostly reflect unrealised profits or losses of the
Mining segment in transactions with the subsidiaries relating to
the Steel segment. In 2012, the amounts were positive due to high
levels of intersegment inventory at the end of 2011 which were
realised during the year. In 2013, there was an increase in the
balances of steel products, which included higher margins of mining
subsidiaries, and this led to a deduction from the sum total of all
segments EBITDA to arrive at the realised consolidated EBITDA.
Cost of revenues, expenses and results
(US$ million)
----------------------------------------------------------------------------------------------------------
Item 2013 2012 Change Relative change
--------------------------------------------------------- --------- --------- ------- ----------------
Cost of revenue (11,468) (11,803) 335 (2.8%)
--------------------------------------------------------- --------- --------- ------- ----------------
Gross profit 2,943 2,923 20 0.7%
--------------------------------------------------------- --------- --------- ------- ----------------
Selling and distribution costs (1,183) (1,211) 28 (2.3%)
--------------------------------------------------------- --------- --------- ------- ----------------
General and administrative expenses (877) (839) (38) 4.5%
--------------------------------------------------------- --------- --------- ------- ----------------
Impairment of assets (446) (413) (33) 8.0%
--------------------------------------------------------- --------- --------- ------- ----------------
Foreign exchange gains/(losses), net (258) (41) (217) 529.3%
--------------------------------------------------------- --------- --------- ------- ----------------
Other operating income and expenses, net (160) (161) 1 (0.6%)
--------------------------------------------------------- --------- --------- ------- ----------------
Profit from operations 19 258 (239) (92.6%)
--------------------------------------------------------- --------- --------- ------- ----------------
Interest expense, net (676) (631) (45) 7.1%
--------------------------------------------------------- --------- --------- ------- ----------------
Gain/(loss) on financial assets and liabilities, net (43) 164 (207) (126.2%)
--------------------------------------------------------- --------- --------- ------- ----------------
Gain on disposal group classified as held for sale, net (25) 18 (43) (238.9%)
--------------------------------------------------------- --------- --------- ------- ----------------
Other non-operating gains/(losses), net 112 (5) 117 n/a
--------------------------------------------------------- --------- --------- ------- ----------------
Loss before tax (613) (196) (417) 212.8%
--------------------------------------------------------- --------- --------- ------- ----------------
Income tax benefit/(expense) 41 (229) 270 n/a
--------------------------------------------------------- --------- --------- ------- ----------------
Net loss (572) (425) (147) 34.6%
--------------------------------------------------------- --------- --------- ------- ----------------
The Group's cost of revenue decreased by 2.8% to US$11,468
million in 2013 compared with US$11,803 million in 2012. This was
mostly due to a 12% fall in raw material costs and a 16% reduction
in depreciation charges which, in turn, were partially offset by
higher staff costs and services purchased.
The consolidation of Raspadskaya in 2013 added US$463 million to
cost of revenues, while decreasing the expense on coking coal by
US$93 million.
A detailed breakdown of the cost of revenue as follows:
(US$ million)
---------------------------------------------------------------------------------------------------
% of % of
Item 2013 revenue 2012* revenue Change Relative change
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Revenue 14,411 14,726 (315) (2)%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Cost of revenue 11,468 80% 11,803 80% (335) (3%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Raw materials, incl. 3,539 25% 4,026 27% (487) (12%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Iron ore 787 6% 681 5% 106 16%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Coking coal 640 4% 1,028 7% (388) (38%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Scrap 1,333 9% 1,570 11% (237) (15%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Other raw materials 779 6% 747 4% 32 4%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Semi-finished products 456 3% 485 3% (29) (6%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Auxiliary materials 1,027 7% 983 7% 44 4%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Services 736 5% 666 5% 70 11%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Goods for resale 678 5% 652 4% 26 4%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Transportation 836 6% 787 5% 49 6%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Staff costs 1,940 13% 1,743 12% 197 11%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Depreciation 919 6% 1,100 7% (181) (16%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Electricity 633 4% 574 4% 59 10%
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Natural gas 405 3% 416 3% (11) (3%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
Other costs 299 3% 371 3% (72) (19%)
------------------------------ ------- ---------- ------- ---------- ------- ----------------
*There are some differences in figures for 2012 published in the
previous annual report due to adjustments in pension liability
accruals and minor corrections of intersegment eliminations between
cost items
The cost of raw materials, the largest single cost item,
decreased by US$487 million in 2013 driven mostly by lower coking
coal and scrap costs which fell by US$388 million and US$237
million respectively. This decrease was partially offset by an
increase in iron ore costs by US$106 million mainly due to lower
intragroup sales resulting from the EVRAZ VGOK disposal in
September 2013 and closure of the Irba mine at Evrazruda. The
reduction in coking coal costs in 2013 was attributable to
reduction in the price of purchased coking coal, consolidation of
Raspadskaya (US$93 million) and lower volumes of coking coal
purchased from the market following the disposal of the Ukrainian
coking plant DKHZ in 2012 (US$84 million). A decrease in scrap
costs was primarily due to lower volumes of purchases from third
parties in North America, in addition to lower prices in Russia and
North America. EVRAZ has also implemented operational improvement
plans that resulted in optimisation of yields at the Russian steel
mills.
The costs for semi-finished products fell by 6% primarily due to
lower prices and lower consumption of pig iron by EVRAZ Vitkovice
Steel as a result of lower production volumes.
Auxiliary material costs increased by 4%, or US$44 million, due
to the consolidation of Raspadskaya, which accounted for US$115
million of additional costs, which was offset primarily by the
effect from cost optimisation programmes.
Expenditure on services increased by 11%, or US$70 million,
primarily as a result of the consolidation of Raspadskaya which
added US$38 million and higher volumes of coal processed at third
party coal washing facilities which increased costs by US$33
million.
The cost of goods for resale increased by 4%, or by US$26
million. The increase of US$36 million is due to the purchase by
EVRAZ Metal Inprom, the Company's retail trading arm, of more third
party products to meet customer demand.
Transportation costs increased by 6%, or by US$49 million, due
to the consolidation of Raspadskaya which added US$45 million in
costs.
Staff costs increased by 11%, or by US$197 million, due to the
consolidation of Raspadskaya, which was responsible for US$133
million of the rise, and higher wages at the Group's ongoing
operations, which rose in accordance with collective bargaining
agreements. The increase in staff costs was partially offset by the
personnel optimisation programme.
Total depreciation, depletion and amortisation in cost of goods
sold amounted to US$919 million in 2013 compared to US$1,100
million in 2012. The depletion charge was significantly reduced in
2013 compared to 2012, from US$467 million to US$194 million
despite a US$32 million charge due to the Raspadskaya acquisition
in January 2013. The decrease in the depletion expense was caused
by the revision and detailing of mining plans as part of the
independent JORC valuations performed during the year. The overall
mining plans for ore bodies with extraction plans going beyond
40-100 years were disaggregated into separate components of proved
and probable reserves that are excluded from the calculation of the
depletion charge until actual production begins. This resulted in a
better matching of the current depletion charge with the estimated
costs of extraction. The decrease was partially offset by
consolidation of Raspadskaya (US$109 million).
Electricity costs increased by 10%, or by US$59 million, due to
higher electricity prices across all regions and higher consumption
of electricity by Russian operations, partially compensated by
implementation of operational improvements. Natural gas
expenditure, on the contrary, decreased by 3%, or by US$11 million
due to operational improvements resulting in reduced consumption of
gas by the Russian and Ukrainian operations, including lower
consumption at EVRAZ NTMK following the implementation of the PCI
technology.
Other costs include taxes, change in WIP and finished goods, and
minor items of energy costs. The decrease in other costs in 2013 by
19% is mostly driven by increase in stock of WIP and finished
goods.
Selling and distribution expenses were 2.3% lower than in 2012
mainly due to suspension of amortisation of intangibles for assets
classified as held for sale and the lower volumes of long distance
sales that were partially offset by Raspadskaya consolidation.
General and administrative expenses were 4.5% higher than in
2012 mainly due to Raspadskaya consolidation (which accounted for
6.6% of total general and administrative expenses for 2013) that
was partially offset by disposal of EVRAZ VGOK in October 2013 and
reduction of expenses at Evrazruda and EVRAZ Highveld Steel and
Vanadium as a result of significant cost saving initiatives.
Impairment loss of US$(446) million consisted mostly of a
US$(326) million impairment of assets of EVRAZ Claymont Steel
suspended due to soft demand in the market and US$(96) million
relating to several mines of Yuzhkuzbassugol, where the production
plans were revised, and other mines of Yuzhkuzbassugol
(Kusheyakovskaya, Abashevskaya and Gramoteinskaya) standing
idle.
Foreign exchange losses increased from a US$(41) million loss in
2012 to a US$(258) million loss in 2013. This, in large part, is
due to the currency fluctuations in respect of intra-group debts
between subsidiaries with different functional currencies. Since
there is no IFRS concept of a Group's functional currency,
gains/(losses) of one subsidiary recognised in the Statement of
Operations are not offset with the exchange differences of another
subsidiary with a different functional currency and thus these
amounts cannot be eliminated on a consolidated level.
Interest expenses incurred by the Group have fallen steadily
over the last two years as a result of the refinancing of debt at
lower interest rates on a comparative basis. The increase in
interest expenses from US$654 million in 2012 to US$699 million in
2013 is mostly caused by the consolidation of Raspadskaya (US$42
million).
In accordance with IFRS 3 "Business Combinations" with regard to
a business combination achieved in stages, the acquirer shall
remeasure its previously held equity interest in the acquiree at
its acquisition-date fair value and recognise the resulting gain or
loss in the income statement. In 2013 the Group recorded a US$89
million gain on derecognition of the equity interest related to
equity interest in Raspadskaya ($94 million) and MediaHolding
Provincia ($(5) million loss) held before the business
combinations.
Losses on financial assets and liabilities amounted to US$(43)
million and comprised mostly unrealised losses of US$(106) million
and realised gains of $51 million on the change in the fair value
of derivatives - currency and interest rate swaps for the
rouble-denominated bonds.
The Company had an income tax benefit of only US$41 million,
notwithstanding a loss before tax of US$(613) million. This was
mostly due to losses at certain subsidiaries that could not be
offset against profits of other subsidiaries, as well as the fact
that some expenses are not deductible for tax purposes.
Cash flow
Cash Flow
(US$ million)
----------------------------------------------------------------------------------------------------------------------
Item 2013 2012 Change Relative change
--------------------------------------------------------------------- -------- --------- -------- ----------------
Cash flows from operating activities before change in working
capital 1,535 1,733 (198) (11.4)%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Changes in working capital 365 410 (45) (11.0)
--------------------------------------------------------------------- -------- --------- -------- ----------------
Net cash flows from operating activities 1,900 2,143 (243) (11.3)%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Short-term deposits at banks, including interest 677 (656) 1,333 n/m
--------------------------------------------------------------------- -------- --------- -------- ----------------
Purchases of property, plant and equipment and intangible assets (902) (1,261) 359 (28.5)%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Other investing activities (39) 373 (412) n/m
--------------------------------------------------------------------- -------- --------- -------- ----------------
Net cash flows from / (used in) investing activities (264) (1,544) 1,280 (82.9)%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Net cash flows from / (used in) financing activities (1,367) (42) (1,325) 3,154.8%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Effect of foreign exchange rate changes on cash and cash equivalents (48) 32 (80) n/m
--------------------------------------------------------------------- -------- --------- -------- ----------------
Net increase in cash and cash equivalents 221 589 (368) (62.5)%
--------------------------------------------------------------------- -------- --------- -------- ----------------
Cash flows from operating activities before changes in working
capital fell by 11.4% in 2013 to US$1,535 million reflecting lower
product prices compared to 2012.
In 2013, US$365 million were released from working capital
reflecting lower prices of the Company's products, better inventory
management and debts collection efforts.
Free cash flow for the period was a positive US$458 million.
Calculation of Free Cash Flow
(US$ million)
--------------------------------------------------------------------------------------------- ------
Item 2013
--------------------------------------------------------------------------------------------- ------
EBITDA 1,821
--------------------------------------------------------------------------------------------- ------
Non-cash items (37)
--------------------------------------------------------------------------------------------- ------
EBITDA (excluding non-cash items) 1,784
--------------------------------------------------------------------------------------------- ------
Changes in working capital 365
--------------------------------------------------------------------------------------------- ------
Income tax paid (249)
--------------------------------------------------------------------------------------------- ------
Net Cash flows from operating activities 1,900
--------------------------------------------------------------------------------------------- ------
Interest and similar payments (501)
--------------------------------------------------------------------------------------------- ------
Capital expenditure (902)
--------------------------------------------------------------------------------------------- ------
Purchases of subsidiaries (net of cash acquired) and interests in associates/joint ventures (30)
--------------------------------------------------------------------------------------------- ------
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs 1
--------------------------------------------------------------------------------------------- ------
Other cash flows from investing activities (10)
--------------------------------------------------------------------------------------------- ------
Free Cash Flow* 458
--------------------------------------------------------------------------------------------- ------
* Please refer to Appendix 3
Capex and key projects
In 2013, we reduced our total capital expenditure to US$902
million compared to US$1,261 million in 2012 as a result of a
comprehensive review of the Company's investment programme. In
2013, we finalised the modernisation of the rail mill at EVRAZ
ZSMK, commissioned the Yerunakovskaya VIII coking coal mine and saw
our PCI project at EVRAZ NTMK become fully operational. We also
made good progress with the Mezhegey Phase I and the Vostochny
rolling mill projects, while the Yuzhny rolling mill project was
put on hold in light of the current market environment.
A summary of our capital expenditure for 2013 in millions of USD
is as follows:
Construction of Yerunakovskaya VIII mine 66 Ramp-up completed in Q1 2014. Production of 3 million tonnes of raw
coking coal per annum
------------------------------------------ ---- --------------------------------------------------------------------
Mezhegey (Phase I) 54 First batches of coal mined. Ramp-up to be completed by 2016.
Capacity of 1.5 mtpa
------------------------------------------ ---- --------------------------------------------------------------------
EVRAZ ZSMK rail mill modernisation 46 Ramp-up largely completed. Obtained certification for head hardened
rails. Rail mill capacity
increased to 950 ktpa
------------------------------------------ ---- --------------------------------------------------------------------
PCI at EVRAZ ZSMK 43 Reduction of coke and natural gas consumption in blast furnaces. To
be launched in Q3 2014
------------------------------------------ ---- --------------------------------------------------------------------
Vostochny Rolling Mill (Kazakhstan) 42 Hot tests commenced in Q1 2014. Production capacity of 450 ktpa of
long steel products
------------------------------------------ ---- --------------------------------------------------------------------
Other development projects 192
------------------------------------------ ---- --------------------------------------------------------------------
Maintenance 459
------------------------------------------ ---- --------------------------------------------------------------------
Total 902
------------------------------------------ ---- --------------------------------------------------------------------
Financing and liquidity
We started 2013 with total debt of US$8,440 million. This number
does not include the debt of Raspadskaya of US$558 million which
was consolidated from 16 January 2013. Due to favourable capital
markets conditions in the first half of 2013 we issued a 7-year
US$1 billion Eurobond with a record-low coupon of 6.50%. The
proceeds were used to refinance rouble bonds of approximately
US$399 million and prepay the outstanding balance of US$759 million
of the US$950 million syndicated pre-export facility, whose
original final maturity was in November 2015. Later in the year, we
also used some excess liquidity coming from the Eurobond and
operating cash flows to repay a number of shorter term facilities,
including a US$150 million bank loan at Raspadskaya.
As a result of these actions, total debt decreased by US$274
million to US$8,166 million as at 31 December 2013, while our net
debt increased by US$158 million to US$6,534 million at 31 December
2013 compared to US$6,376 million as at 31 December 2012. Interest
expense accrued in respect of loans, bonds and notes was US$617
million for 2013, compared to US$588 million for 2012.
Following the syndicated loan repayment, the remaining debt
having maintenance financial covenants comprises only a few
bilateral facilities totalling approximately US$260 million. In
view of the continuing uncertainty, in June 2013 we agreed with the
lenders to suspend financial covenants testing as at 30 June 2013
and as at 31 December 2013. These covenants include only two key
ratios calculated on the basis of Evraz Group S.A.'s consolidated
financials: a maximum net leverage and a minimum EBITDA interest
cover. The ratios will be tested again starting from 30 June 2014
with the levels of 3.5x and 3.0x respectively.
The risk of breaching financial covenants based on the
consolidated figures as at 30 June 2014 and as at 31 December 2014
remains in place. However, management believes that, if necessary,
it will be possible to agree with the lending banks and export
credit agencies (ECAs) either to further suspend the testing of the
financial covenants, or to amend the levels so that the risk of
breach is removed. These negotiations may be held in parallel to
negotiations on a potential new pre-export financing. Our Eurobond
covenants currently do not limit our ability to refinance EVRAZ's
consolidated indebtedness.
Our cash and deposits on 31 December 2013 amounted to US$1,611
million and our short-term debt on December 2013 stood at US$1,893
million.
Restatement of 2012 Financial Statements
As reported in presenting our semi-annual accounts we identified
a classification error in the 2012 annual financial statements
which related to foreign exchange movements attributable to certain
subsidiaries disposed of in 2012. These foreign exchange losses had
not been recycled from the equity reserve back through the
statement of operations, as required by the relevant accounting
standard. The error represents a one-off non-cash item, does not
affect 2012 EBITDA, CAPEX, free cash flow, or net assets of the
Company, and does not have an impact on the measurement of any of
the group's covenants. For more details, please refer to Note 2 of
the Financial statements.
IAS 19 "Employee Benefits", which was revised in 2011 and became
effective for annual periods beginning on or after 1 January 2013,
introduced full recognition of defined benefit obligations in the
statement of financial position whereas under the previous standard
we accounted for a part of the obligation relating to unrealized
actuarial gains/losses under the corridor approach. The revised
standard also changed the accounting for certain components of
defined benefit obligations. The comparatives for the annual
results have been restated to reflect this revision to the standard
and for further details see Note 2 of the consolidated financial
statements.
Dividends
The directors recommend a dividend of 6 cents per share to be
consistent with their intention of distributing, where appropriate,
a proportion of the margin on disposals as dividends, and as an
indication of confidence in the Company's position. The US$90.4
million represents the approximate cash portion of the proceeds
from the sale of EVRAZ Vitkovice Steel, leaving US$196.6 million
for the reduction of debt.
Going forward, the dividend policy has been revised to support
the financial strategy of deleveraging and envisages that the
regular dividends will be paid only when the net leverage (net
debt/EBITDA) target of below 3.0x is achieved. The Board reserves
the right to propose special dividends in the event of asset
disposals. The Board reserves the right to propose special
dividends in case of asset disposals.
Giacomo Baizini
Chief Financial Officer
EVRAZ plc
Review of operATIONS by SEGMENT
STEEL
Sales review
Steel Segment Revenues
Year ended 31 December
-------------------------------
2013 2012 Change
--------------------- --------- --------- ---------
To third parties 12,432 13,333 (6.8)%
--------------------- --------- --------- ---------
To mining segment 80 129 (38.0)%
--------------------- --------- --------- ---------
To vanadium segment 3 2 50.0%
--------------------- --------- --------- ---------
To other operations 26 79 (67.1)%
--------------------- --------- --------- ---------
Total Steel segment 12,541 13,543 (7.4)%
--------------------- --------- --------- ---------
Steel Segment Revenues by Products
Year ended 31 December
------------------------------------------------------------------------------------------
2013 2012* 2013 v 2012
------------------------------------- ------------------------------------- ------------
US$ % of total segment US$ % of total segment
million revenue million revenue % change
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Steel products, external
sales 11,476 91.5% 12,298 90.8% (6.7)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Semi-finished
products(1) 2,028 16.2% 2,066 15.3% (1.8)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Construction products(2) 4,157 33.0% 4,335 32.0% (4.1)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Railway products(3) 1,791 14.3% 1,751 12.9% 2.3%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Flat-rolled products(4) 1,776 14.2% 2,321 17.1% (23.5)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Tubular products(5) 1,299 10.4% 1,364 10.1% (4.8)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Other steel products(6) 425 3.4% 461 3.4% (7.8)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Steel products,
intersegment sales 46 0.4% 51 0.4% (9.8)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Other revenues(7) 1,019 8.1% 1,194 8.8% (14.7)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
Total 12,541 100.0% 13,543 100.0% (7.4)%
-------------------------- --------- -------------------------- --------- -------------------------- ------------
* The figures for 2012 differ from those published in FY2012
press release due to reclassification of sales by EVRAZ North
America
(1) Includes billets, slabs, pig iron, pipe blanks and other
semi-finished products
(2) Includes rebars, wire rods, wire, beams, channels and
angles
(3) Includes rail, wheels, tyres and other railway products
(4) Includes commodity plate, specialty plate and other
flat-rolled products
(5) Includes large diameter line pipes, ERW pipes and casing,
seamless pipes, casing and tubing, other tubular products
(6) Includes rounds, grinding balls, mine uprights and
strips
(7) Includes coke and coking products, refractory products,
ferroalloys, scrap, energy, services and Mapochs mine's iron ore
fines
Sales Volumes of Steel Segment
('000 tonnes) Full year to 31 December
------- ---------------------------
2013 2012 Change
-------------------------------- ------- ------------ -------------
Steel products, external sales 15,539 15,292 1.6%
-------------------------------- ------- ------------ -------------
Semi-finished products 4,013 3,636 10.4%
-------------------------------- ------- ------------ -------------
Construction products 5,731 5,658 1.3%
-------------------------------- ------- ------------ -------------
Railway products 1,929 1,843 4.7%
-------------------------------- ------- ------------ -------------
Flat-rolled products 2,358 2,725 (13.5)%
-------------------------------- ------- ------------ -------------
Tubular products 939 879 6.8%
-------------------------------- ------- ------------ -------------
Other steel products 569 551 3.3%
-------------------------------- ------- ------------ -------------
Intersegment sales 60 115 (47.8)%
-------------------------------- ------- ------------ -------------
Total 15,599 15,407 1.2%
-------------------------------- ------- ------------ -------------
Geographic Breakdown of External Steel Products' Sales
US$ million 000 t
---------------------------- ----------------------------
2013 2012 Change, % 2013 2012 Change, %
-------------- ------- ------- ---------- ------- ------- ----------
Russia 4,835 5,128 (5.7)% 6,575 6,570 0.1%
-------------- ------- ------- ---------- ------- ------- ----------
Americas 2,919 3,254 (10.3)% 2,764 2,746 0.7%
-------------- ------- ------- ---------- ------- ------- ----------
Asia 1,638 1,895 (13.6)% 3,151 3,249 (3.0)%
-------------- ------- ------- ---------- ------- ------- ----------
Europe 921 1,006 (8.4)% 1,476 1,450 1.8%
-------------- ------- ------- ---------- ------- ------- ----------
CIS 803 645 24.5% 1,065 802 32.8%
-------------- ------- ------- ---------- ------- ------- ----------
Africa & RoW 360 370 (2.7)% 508 475 6.9%
-------------- ------- ------- ---------- ------- ------- ----------
Total 11,476 12,298 (6.7)% 15,539 15,292 1.6%
-------------- ------- ------- ---------- ------- ------- ----------
The Steel segment's revenues decreased by 7.4% to US$12,541
million in 2013 compared to US$13,543 million in 2012, which was
largely a result of lower steel product prices during the
period.
Revenues from sales of semi-finished products decreased due to a
significantly lower price level in spite of growth in sales volumes
by 10.4%, which reflected the changes in Group product mix. Sales
volumes of flat-rolled steel products declined while the part of
semi-finished production was switched from internal consumption to
external sales.
Railway products revenues grew as a result of higher sales
volumes after modernisation of EVRAZ ZSMK's rail mill in spite of
lower sales prices for railway products which slightly fell down in
2013 compared to 2012.
Revenues from tubular product sales decreased in 2013 as a
result of significantly lower market prices in spite of growth in
sales volumes.
Revenues from construction products sales decreased by 4.1% as a
result of reduced prices at the domestic Russian market whereas
sales volumes slightly increased by 1.3% in 2013.
Flat rolled product revenues in 2013 were significantly lower
than in 2012 due to lower prices and volumes. Prices of flat rolled
products were particularly impacted by continuing economic
stagnation in the Eurozone and shrinking spreads between the
finished and semi-finished products in the USA.
Revenues from other steel products decreased by 7.8% in 2013
compared to 2012 as a result of significantly lower prices.
Lower revenues from sales in Russia, which accounted for 42% of
external steel sales, were mainly attributable to lower prices,
whereas sales volumes were stable compared year to year.
MINING
Sales review
Mining Segment Revenues
(US$ million) Year ended 31 December
---------------------------
2013 2012 Change
---------------------- ------- ------- ---------
To third parties 1,205 635 89.8%
---------------------- ------- ------- ---------
To steel segment 1,894 1,973 (4.0)%
---------------------- ------- ------- ---------
To other operations 21 42 (50.0)%
---------------------- ------- ------- ---------
Total Mining segment 3,120 2,650 17.7%
---------------------- ------- ------- ---------
Mining Segment Revenues by Products
Year ended 31 December
-----------------------------------------------------------------------------------
2013 2012 2013 v 2012
--------------------------------- ---------------------------------- ------------
% of total segment % of total segment
US$ million revenue US$ million revenue % change
--------------------- ------------ ------------------- ------------ -------------------- ------------
External sales
--------------------- ------------ ------------------- ------------ -------------------- ------------
Iron ore products* 389 12.5% 347 13.1% 12.1%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Iron ore
concentrate - - 2 0.1% (100.0)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Sinter 11 0.4% 13 0.5% (15.4)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Pellets 143 4.6% 137 5.2% 4.4%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Other 235 7.5% 195 7.3% 20.5%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Coal products 732 23.5% 211 8.0% 246.9%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Raw coking coal 47 1.5% 8 0.3% 487.5%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Coking coal
concentrate 616 19.7% 96 3.6% 541.7%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Raw steam coal 64 2.1% 36 1.4% 77.8%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Steam coal
concentrate 5 0.2% 71 2.7% (93.0)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Intersegment sales
--------------------- ------------ ------------------- ------------ -------------------- ------------
Iron ore products 1,198 38.4% 1,377 52.0% (13.0)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Iron ore
concentrate 442 14.2% 492 18.6% (10.2)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Sinter 286 9.2% 392 14.8% (27.0)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Pellets 470 15.0% 493 18.6% (4.7)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Coal products 649 20.8% 580 21.9% 11.9%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Raw coking coal 154 4.9% 102 3.8% 51.0%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Coking coal
concentrate 495 15.9% 457 17.3% 8.3%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Raw steam coal - - 21 0.8% (100.0)%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Other revenues** 152 4.8% 135 5.0% 12.6%
--------------------- ------------ ------------------- ------------ -------------------- ------------
Total 3,120 100.0% 2,650 100.0% 17.7%
--------------------- ------------ ------------------- ------------ -------------------- ------------
(*) External sales of iron ore produced at the Mapochs mine,
part of EVRAZ Highveld, are accounted for in the Steel segment
(**) Includes crushed stone
Sales Volumes of Mining Segment
('000 tonnes)
2013 2012 Change
--------------------------------- ------- ------- ---------
External sales
--------------------------------- ------- ------- ---------
Iron ore products 4,371 3,900 12.1%
--------------------------------- ------- ------- ---------
Iron ore concentrate 2 22 (90.9)%
--------------------------------- ------- ------- ---------
Sinter 108 111 (2.7)%
--------------------------------- ------- ------- ---------
Pellets 1,257 1,201 4.7%
--------------------------------- ------- ------- ---------
Other 3,004 2,566 17.1%
--------------------------------- ------- ------- ---------
Coal products 8,189 2,189 274.1%
--------------------------------- ------- ------- ---------
Raw coking coal 784 162 384.0%
--------------------------------- ------- ------- ---------
Coking coal concentrate 6,133 701 774.9%
--------------------------------- ------- ------- ---------
Raw steam coal 1,220 729 67.4%
--------------------------------- ------- ------- ---------
Steam coal concentrate 52 597 (91.3)%
--------------------------------- ------- ------- ---------
Intersegment sales
--------------------------------- ------- ------- ---------
Iron ore products* 13,463 14,737 (8.6)%
--------------------------------- ------- ------- ---------
Iron ore concentrate 4,701 5,565 (15.5)%
--------------------------------- ------- ------- ---------
Sinter 3,724 4,295 (13.3)%
--------------------------------- ------- ------- ---------
Pellets 5,038 4,872 3.4%
--------------------------------- ------- ------- ---------
Other - 5 (100.0)%
--------------------------------- ------- ------- ---------
Coal products 7,185 5,376 33.6%
--------------------------------- ------- ------- ---------
Raw coking coal 2,602 1,439 80.8%
--------------------------------- ------- ------- ---------
Coking coal concentrate 4,579 3,285 39.4%
--------------------------------- ------- ------- ---------
Raw steam coal - 652 (100.0)%
--------------------------------- ------- ------- ---------
Steam coal concentrate 4 - n/a
--------------------------------- ------- ------- ---------
Total, iron ore products* 17,834 18,637 (4.3)%
--------------------------------- ------- ------- ---------
Total, coal products 15,374 7,565 103.2%
--------------------------------- ------- ------- ---------
* External sales of iron ore produced at the Mapochs mine, part
of EVRAZ Highveld, are accounted for in the Steel segment
Total mining segment revenues increased by 17.7% to US$3,120
million in 2013 compared to US$2,650 million in 2012, primarily as
a result of additional volumes from the consolidation of
Raspadskaya in January 2013, which offset the decrease in iron ore
and coking coal prices.
External sales volumes of iron ore products increased by 12.1%
in 2013 compared to 2012, driven by higher volumes from EVRAZ Sukha
Balka. Intersegment sales volumes decreased by 8.6% as a result of
disposal of EVRAZ VGOK in October 2013. The closure of the Irba
mine at Evrazruda also contributed to lower iron ore volumes being
supplied to the Steel segment.
External sales volumes of coal products increased in 2013 by
274.1% due to an additional 4 million tonnes of coking coal
concentrate from Raspadskaya and higher sales of coking coal
concentrate after involvement of the second longwalls at
Alardinskaya and start of production from Yerunakovskaya VIII.
Steam coal volumes decreased by 4% as a result of stem coal
production optimisation in 2013.
In 2013, Mining segment sales to the Steel segment amounted to
US$1,894 million and 60.7% of sales, compared to US$1,973 million
and 74.5% of sales in 2012. The lower share of sales to the Steel
segment reflects the additional coal volumes sold to market from
Raspadskaya.
During the period, approximately 68% and 80% of EVRAZ's
respective iron ore and coking consumption were satisfied by the
Group's own operations compared with 74% and 70% (including coal
from Raspadskaya) in 2012.
Third party sales of coal products by the Mining segment to
customers in Russia in 2013 increased to approximately 53% of total
external sales of coal products compared to 2012. The increase is
primarily attributable to the consolidation of Raspadskaya in 2013.
Approximately 55% of external sales of Raspadskaya in 2013 were to
customers in Russia.
VANADIUM
Sales review
Vanadium Segment Revenues
(US$ million)
Year ended 31 December
-------------------------------
2013 2012 Change
------------------------ -------- -------- -----------
To third parties 529 505 4.8%
------------------------ -------- -------- -----------
To steel segment 21 15 40.0%
------------------------ -------- -------- -----------
Total Vanadium segment 550 520 5.8%
------------------------ -------- -------- -----------
Vanadium Segment Revenues by Products
Year ended 31 December
--------------------------------------------------------------------------------------------
2013 2012 2013 v 2012
-------------------------------------- -------------------------------------- ------------
% of total segment % of total segment
US$ million revenue US$ million revenue % change
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
External sales
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Vanadium products 523 95.1% 496 95.4% 5.4%
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Vanadium in slag 46 8.4% 31 6.0% 48.4%
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Vanadium in alloys and
chemicals 477 86.7% 465 89.4% 2.6%
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Intersegment sales,
vanadium products 18 3.3% 15 2.9% 20.0%
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Other revenues 9 1.6% 9 1.7% -
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Total 550 100.0% 520 100.0% 5.8%
------------------------ ------------ ------------------------ ------------ ------------------------ ------------
Sales volumes of vanadium segment
(tonnes of pure Vanadium)
2013 2012 Change
----------------------------------- ------- ------- --------
External sales
----------------------------------- ------- ------- --------
Vanadium products 23,287 21,100 10.4%
----------------------------------- ------- ------- --------
Vanadium in slag 6,264 3,253 92.6%
----------------------------------- ------- ------- --------
Vanadium in alloys and chemicals 17,023 17,847 (4.6)%
----------------------------------- ------- ------- --------
Intersegment sales 215 438 (50.9)%
----------------------------------- ------- ------- --------
Total 23,502 21,538 9.1%
----------------------------------- ------- ------- --------
Vanadium segment revenues increased by 5.8% to US$550 million in
2013 compared to US$520 million in 2012 reflecting increase in
sales prices of vanadium products. Sales of vanadium slag by EVRAZ
NTMK to China and Austria increased significantly in 2013. Sales
volumes in 2012 were relatively low due to the time that was
required to receive an export license and difficult market
conditions.
OTHER BUSINESSES
EVRAZ's other operations include trading, logistics, port
services, electricity and heat generation and other auxiliary
activities.
Sales review
(US$ million) Year ended 31 December
-------------------------------
2013 2012 Change
-------------------------------- -------- -------- -----------
To third parties 246 253 (2.8)%
-------------------------------- -------- -------- -----------
To steel segment 444 568 (21.8)%
-------------------------------- -------- -------- -----------
To mining segment 238 225 5.8%
-------------------------------- -------- -------- -----------
Total Other operations segment 928 1,046 (11.3)%
-------------------------------- -------- -------- -----------
Revenues from other operations decreased by 11.3% to US$928
million in 2013 as compared to US$1,046 million in 2012,
principally driven by the disposal of Evraztrans. Revenue of other
operations segment includes the following (sales figures shown
below include sales within the same segment):
-- Sales of EVRAZ Nakhodka Trade Sea Port, which provides
various sea port services to the Company, totaled US$93 million in
2013 and US$92 million in 2012.
-- Metallenergofinance ("MEF") supplies electricity to EVRAZ's
steel and mining segments as well as third parties. MEF's sales
amounted to US$469 million in 2013 compared to US$381 million in
2012. Intersegment sales accounted for 77% and 87% of MEF's revenue
in 2013 and 2012 respectively. ZabSibTets generates electricity and
heating. Most sales are classified as intersegment for purpose to
supply internal energy requirements of EVRAZ ZSMK. Sales were
US$124 million in 2013, compared to US$187 million in 2012.
-- Evraztrans acted as a railway transport provider for EVRAZ's
steel segment. Sales of Evraztrans (including Russian and Ukrainian
operations) amounted to US$145 million in 2012.
COST OF REVENUE AND GROSS PROFIT
Cost of Revenue and Gross Profit by Segments
Year ended 31 December
----------------------------------------------------------------------------------------
2013 2012* 2013 v 2012
------------------------------------ ------------------------------------ ------------
US$ million % of segment revenues US$ million % of segment revenues % change
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Steel segment
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Cost of revenue 10,235 81.6% 11,164 82.4% (8.3%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Gross profit 2,306 18.4% 2,379 17.6% (3.1%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Mining segment
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Cost of revenue 2,496 80.0% 2,302 86.9% 8.4%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Gross profit 624 20.0% 348 13.1% 79.3%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Vanadium segment
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Cost of revenue 470 85.5% 493 94.8% (4.7%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Gross profit 80 14.5% 27 5.2% 196.3%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Other operations segment
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Cost of revenue 750 80.8% 780 74.6% (3.8%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Gross profit 178 19.2% 266 25.4% (33.1%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Unallocated
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Cost of revenue 13 10 30.0%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Gross profit (13) (10) 30.0%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Eliminations - cost of
revenue (2,496) (2,946) (15.3%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Eliminations - gross
profit (232) (87) 166.7%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Consolidated cost of
revenue 11,468 79.6% 11,803 80.2% (2.8%)
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
Consolidated gross profit 2,943 20.4% 2,923 19.8% 0.7%
-------------------------- ------------ ---------------------- ------------ ---------------------- ------------
* Hereinafter in the tables to segment's cost of revenue there
are some differences in figures for 2012 published in FY2012 press
release due to adjustments in pension liability accruals and minor
corrections of intrasegment eliminations between cost items
EVRAZ's consolidated cost of revenue amounted to US$11,468
million, representing 79.6% of the Company's consolidated revenues
in 2013 compared to US$11,803 million, or 80.2% of consolidated
revenues in 2012. The increase in the gross profit margin in 2013
compared to 2012 was primarily due to lower prices for raw
materials and reduction in depreciation charges, which was
partially offset by lower average prices of steel and mining
products.
Steel Segment Cost of Revenue
Year ended 31 December
--------------------------------------------------------------------------------------
2013 2012 2013 v 2012
----------------------------------- ----------------------------------- ------------
US$ million % of segment revenue US$ million % of segment revenue % change
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Cost of revenue 10,235 81.6% 11,164 82.4% (8.3%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Raw materials 5,205 41.5% 5,757 42.5% (9.6%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Iron ore 1,941 15.5% 1,992 14.7% (2.6%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Coking coal 1,220 9.7% 1,508 11.1% (19.1%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Scrap 1,332 10.6% 1,569 11.6% (15.1%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Other raw materials 712 5.7% 688 5.1% 3.5%
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Semi-finished products 450 3.5% 478 3.5% (5.9%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Transportation 496 4.0% 551 4.1% (10.0%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Staff costs 1,083 8.6% 1,062 7.8% 2.0%
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Depreciation 451 3.6% 452 3.3% (0.2%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Energy 911 7.3% 909 6.7% 0.2%
-------------------------- ------------ --------------------- ------------ --------------------- ------------
Other* 1,639 13.1% 1,955 14.5% (16.2%)
-------------------------- ------------ --------------------- ------------ --------------------- ------------
* Includes repairs and maintenance, industrial services,
auxiliary materials, goods for resale, taxes in cost of revenue,
and effect of changes in work-in-progress and finished goods
inventories.
EVRAZ's steel segment cost of revenue decreased to US$10,235
million or 81.6% of steel segment revenue in 2013, compared to
US$11,164 million or 82.4% of steel segment revenue in 2012.
The principal factors affecting the change in the steel segment
cost of revenue, in absolute terms, in 2013 compared to 2012were as
follows:
-- Raw material costs decreased by 9.6% due to a decline in
prices for all main raw materials (particularly coking coal and
scrap). Other factor influencing this decrease was the disposal of
DKHZ (consumption of coal in 2012 of US$84 million).
-- Costs of semi-finished products decreased by 5.9% primarily
due to lower prices and lower consumption of pig iron by EVRAZ
Vitkovice Steel as result of lower production volumes.
-- Transportation costs decreased by 10.0%. This decrease was
partially attributable to lower intrasegment sales and related
transportation costs.
-- Staff costs increased by 2.0% largely due to higher wages and
salaries of production staff in accordance with the trade union
agreements.
-- Depreciation and depletion costs are in line with 2012.
Increased depreciation costs at EVRAZ ZSMK due to cessation of
capitalisation of expenses following the completion of EVRAZ ZSMK
rail mill modernisation investment project offset stoppage of
depreciation cost accrual at the assets classified as held for sale
(EVRAZ Highveld Steel and Vanadium Limited and EVRAZ Vitkovice
Steel).
-- Energy costs increased by 0.2%. The increase of electricity
and natural gas prices was almost offset by reduced consumption
volume of natural gas at NTMK (US$(21) million) as a result of PCI
implementation and consumption of own produced coke gas at DMZ due
to technological changes.
-- Other costs decreased by 16.2% primarily due to an increase
in stock of WIP and finished goods.
Steel segment gross profit decreased by 3.1% to US$2,306 million
in 2013 from US$2,379 million in 2012. Gross profit margin amounted
to 18.4% of steel segment revenue in 2013 compared with 17.6% in
the corresponding period last year, reflecting the decline in steel
segment revenues by 7.4%, while cost of revenues decrease by
8.3%.
Mining Segment Cost of Revenue and Gross Profit
Year ended 31 December
--------------------------------------------------------------------------------------
2013 2012 2013 v 2012
----------------------------------- ----------------------------------- ------------
US$ million % of segment revenue US$ million % of segment revenue % change
----------------- ------------ --------------------- ------------ --------------------- ------------
Cost of revenue 2,496 80.0% 2,302 86.9% 8.4%
----------------- ------------ --------------------- ------------ --------------------- ------------
Raw materials 92 2.9% 127 4.8% (27.6%)
----------------- ------------ --------------------- ------------ --------------------- ------------
Transportation 337 10.8% 267 10.1% 26.2%
----------------- ------------ --------------------- ------------ --------------------- ------------
Staff costs 717 23.0% 548 20.7% 30.8%
----------------- ------------ --------------------- ------------ --------------------- ------------
Depreciation 426 13.7% 593 22.4% (28.2%)
----------------- ------------ --------------------- ------------ --------------------- ------------
Energy 300 9.6% 260 9.8% 15.4%
----------------- ------------ --------------------- ------------ --------------------- ------------
Other* 624 20.0% 507 19.1% 23.1%
----------------- ------------ --------------------- ------------ --------------------- ------------
* Includes primarily contractor services and materials for
maintenance and repairs and certain taxes
The mining segment cost of revenue increased to US$2,496 million
or 80.0% of mining segment revenue in 2013 compared with US$2,302
million or 86.9% of mining segment revenue in 2012.
The principal factors affecting the change in mining segment
cost of revenue, in absolute terms, in 2013 compared to
2012were:
-- Raw material costs decreased by 27.6% primarily due to switch
to a tolling scheme of sinter production by EVRAZ VGOK instead of
purchasing the raw material from EVRAZ NTMK (-US$26 million), and
decrease of coke consumption by EVRAZ VGOK (-US$6 million) due to
disposal in October 2013.
-- Transportation costs increased by 26.2% due to the
consolidation of Raspadskaya (+US$45 million), higher intercompany
sales and related transportation costs.
-- Staff costs increased by 30.8%. The increase was largely
attributable to consolidation of Raspadskaya (US$133 million) and
the increase in wages and salaries in accordance with trade union
agreements.
-- Depreciation and depletion costs decreased by 28.2% mainly
due to a lower depreciation and depletion expense at
Yuzhkuzbassugol caused by the revision and detailing of mining
plans as part of the independent JORC valuations performed during
the year (net effect of US$189 million) and a significant reduction
in depreciation at Evrazruda due to impairment of assets (net
effect of US$43 million). This decrease was partially offset by an
increase of depreciation due to consolidation of Raspadskaya
(US$109 million).
-- Energy costs increased by 15.4% primarily due to higher
electricity and natural gas prices, the consolidation of
Raspadskaya (US$16 million) and higher production volumes at
Yuzhkuzbassugol and EVRAZ KGOK.
-- Other costs increased by 23.1%, primarily due to an increase
of auxiliary material costs and expenditure on services as result
of consolidating Raspadskaya (US$153 million) and higher processed
volumes of concentrate at third party facilities by Yuzhkuzbassugol
(US$33 million). This increase was partially offset by lower
repairs and maintenance costs as well as decrease of other costs
due to disposal of EVRAZ VGOK and closure of the Irba mine.
The Mining segment's gross profit increased to US$624 million in
2013 from US$348 million in 2012. The increase in the gross profit
margin was primarily attributable to lower depreciation and
depletion at Yuzhkuzbassugol, and additional gross profit from
consolidation of Raspadskaya (US$38 million).
Vanadium Segment Cost of Revenue and Gross Profit
Year ended 31 December
--------------------------------------------------------------------------------------
2013 2012 2013 v 2012
----------------------------------- ----------------------------------- ------------
US$ million % of segment revenue US$ million % of segment revenue % change
----------------- ------------ --------------------- ------------ --------------------- ------------
Cost of revenue 470 85.5% 493 94.8% (4.7%)
----------------- ------------ --------------------- ------------ --------------------- ------------
Raw materials 180 32.7% 189 36.3% (4.8%)
----------------- ------------ --------------------- ------------ --------------------- ------------
Staff costs 71 12.9% 65 12.5% 9.2%
----------------- ------------ --------------------- ------------ --------------------- ------------
Depreciation 12 2.2% 22 4.2% (45.5%)
----------------- ------------ --------------------- ------------ --------------------- ------------
Energy 73 13.3% 68 13.1% 7.4%
----------------- ------------ --------------------- ------------ --------------------- ------------
Other 134 24.4% 149 28.7% (10.1%)
----------------- ------------ --------------------- ------------ --------------------- ------------
The vanadium segment cost of revenue decreased by 4.7% to US$470
million, or 85.5% of vanadium segment revenue in 2013 from US$493
million, or 94.8% of vanadium segment revenue in 2012. The decrease
in EVRAZ's vanadium segment's cost of revenue in 2013 as compared
to 2012, in absolute terms, was attributable to a decrease in sales
volumes of vanadium in alloys and chemicals and the depreciation of
the South African Rand against the U.S. dollar (-18%), a large part
of the costs was denominated in this currency.
In 2013, gross profit of EVRAZ's vanadium segment increased to
US$80 million compared with US$27 million in 2012 primarily due to
higher prices for final vanadium products and depreciation of the
South African Rand.
Other operations segment Cost of Revenue and Gross Profit
The other operations segment's cost of revenue amounted to 80.8%
of other operations revenue, or US$750 million in 2013 compared to
74.6%, or US$780 million in 2012.
The major components of cost of revenue at EVRAZ Nakhodka Trade
Sea Port are staff and inventory costs. The major component of
MEF's cost of revenue is the purchase of electricity from power
generating companies. The major components of ZapSib Power Plant's
and Central Heat and Power Plant's cost of revenue are steam coal
for power generation, depreciation and staff costs, while the major
component of Sinano's cost of revenue is ship hire fees.
PRINCIPAL RISKS AND UNCERTAINTIES
Like all businesses, EVRAZ is affected by, and must manage,
risks and uncertainties that can impact its ability to deliver its
strategy. While the risks can be numerous, the principal risks
faced by the Group as identified by the Board are described below
along with the corresponding mitigating actions and changes in the
risk level during the year.
To date the Group has not been significantly impacted by recent
geopolitical developments relating to Ukraine. There is a risk,
however, that, if these events were to escalate, there could be an
impact on EVRAZ's operations in the country (EVRAZ generated 7% of
consolidated revenue from its Ukrainian business). In addition,
EVRAZ may be affected by government sanctions if they are broadened
from the current level.
Risk Risk description Risk level 2012 -
2013 and Mitigating
actions
---------------------- ----------------------------------- -----------------------------
Global economic EVRAZ Steel, Mining and
factors, industry Vanadium operations are Risk direction:
conditions and highly dependent and
cost effectiveness sensitive to the global EVRAZ has a focused
macroeconomic environment, investment policy
economic and industry aimed at reducing
conditions, eg global and managing the
supply/demand balance cost base with the
for steel and particularly objective of being
for iron ore and coking among the sector's
coal which has the potential lowest cost producers.
to significantly affect
both product prices and
volumes across domestic
and export markets. As
EVRAZ's operations have
a high level of fixed
costs, global economic
and industry conditions
can impact the Company's
operational performance
and liquidity.
---------------------- ----------------------------------- -----------------------------
Health, safety Safety and environmental
and environmental risks are inherent to Risk direction:
(HSE) issues the Company's principal
business activities of HSE issues have direct
steelmaking and mining. oversight at Board
Furthermore, EVRAZ operations level and HSE procedures
are subject to a wide and material issues
range of HSE laws, regulations are given top priority
and standards, the breach at all internal management
of any of which may result level meetings. Management
in fines, penalties or KPIs include a material
other sanctions. Such factor for safety
actions could have a performance. EVRAZ
material adverse effect has instigated a
on the Company's business, programme to improve
financial condition and the management of
business prospects. safety risks across
all business units
with the objective
of embedding a new
safety, harm-free
culture at all management
and operational levels.
Safety training has
been reviewed and
strengthened and
an operational safety
assessment is undertaken
for all new projects.
---------------------- ----------------------------------- -----------------------------
Dependency on certain The Company's profitability Risk direction:
key markets is highly dependent on
limited geographical The strategic risks
markets, i.e. 43% of and opportunities
EVRAZ revenues are derived within these regions
from Russia, and 22% are regularly reviewed,
from North America; and including consideration
also dependent on the of the quality and
mix between semi-finished nature of the Company's
and finished steel products. product portfolio,
relative cost effectiveness
and the sustainability
of industry sector
market positioning
together with effective
in-house (EVRAZ Metall
Inprom) and external
distribution networks.
---------------------- ----------------------------------- -----------------------------
Capital projects EVRAZ's maintenance and Risk direction:
and expenditure development capital expenditure,
in addition to capital Project delivery
expenditure focused on is closely monitored
improving the Company's against project plans
cost effectiveness, is resulting in high
aligned to the Company's level action to manage
and external market expectations project investment
for each particular project both for timely delivery
and to maximise levels and for planned project
of investment returns. expenditure.
In the course of
Economic issues outside 2013 the Company
those factored into the revisited key assumptions
Company's business plans of the main investment
including regulatory projects and performed
approvals, may negatively scenario analysis,
impact the Company's which resulted in
anticipated free cash the suspension and/or
flow and cause certain postponement of certain
elements of the planned projects.
capital expenditure to
be re-phased, deferred
or abandoned with consequential
impact on the Company's
planned future performance.
---------------------- ----------------------------------- -----------------------------
Human Resources The principal HR risk Risk direction:
is the quality and availability
of critical operational Succession planning
and business skills of is a key feature
EVRAZ management and of EVRAZ's human
employees, particularly resources management.
in certain regions and EVRAZ seeks to meet
for particular business its leadership and
units, eg mining professionals skill needs through
including engineers, retention of its
mining experts and project employees, internal
managers. Associated promotion, structured
risks involve selection, professional internal
recruitment, training mentoring and external
and retention of employees development programmes.
and qualified executives.
There is also a risk
of employee union action.
Union relations are largely
stable, although the
Company had a short-lived
labour action at its
vanadium operations in
South Africa in 2013,
and an extended period
of negotiations with
certain labour unions
in Russia.
As a result of HR risks,
the Company's growth
plans might be jeopardised.
---------------------- ----------------------------------- -----------------------------
Potential Actions EVRAZ operates in a number
by Governments of countries and there Risk direction:
is a risk that governments Although these risks
or government agencies are mostly not within
could adopt new laws the Company's control,
and regulations, or otherwise EVRAZ and its executive
impact the Company's teams are members
operations. of various national
industry bodies and,
New laws, regulations as a result, contribute
or other requirements to the thinking of
could have the effect such bodies and,
of limiting the Company's when appropriate,
ability to obtain financing participate in relevant
in international markets, discussions with
or selling its products. political and regulatory
authorities.
---------------------- ----------------------------------- -----------------------------
Business Interruption Prolonged outages or
production delays, especially Risk direction:
in coal mining, could The Company has defined
have a material adverse and established business
effect on the Company's continuity plans,
operating performance, procedures and protocols
production, financial which are subject
condition and future to regular review
prospects. In addition, and audit of their
long term business interruption appropriateness and
may result in loss of effectiveness. The
customers, competitive Company carries certain
advantage being compromised business interruption
and damage to the Company's insurance, except
reputation. for particular mining
events.
Business interruptions
in mining mainly
relate to production
safety. Measures
to mitigate these
risks include methane
monitoring and degasing
systems, timely mining
equipment maintenance,
employee safety training.
In 2013 EVRAZ had
to suspend mining
works at the Raspadskaya
underground mine
in May-July due to
increased levels
of carbon monoxide.
A set of safety measures
was undertaken in
order to alleviate
the causes of hazards.
---------------------- ----------------------------------- -----------------------------
Treasury EVRAZ, as with many other Risk direction:
large and multi-national
corporates, faces various EVRAZ employs skilled
treasury risks including specialists to manage
liquidity, credit access, and mitigate such
currency fluctuations, risks and the management
and interest rate and of such risks is
tax compliance risks. embedded in internal
controls. Oversight
of the key risks
is reported within
the monthly Board
reports and by the
review of compliance
of such internal
controls by a management
independent internal
audit function, which
reports to the Audit
Committee on a monthly
basis.
In 2013 EVRAZ undertook
certain actions in
order to extend the
debt maturity profile
and lower short term
external funding
needs, i.e. through
issuing US$1,000
million Eurobonds
due in 2020, as well
as. proactively managing
the remaining portion
of debt subject to
maintenance covenants.
The EVRAZ Treasury
management team and
the directors regularly
and pro-actively
review all funding
requirements and
exposures.
---------------------- ----------------------------------- -----------------------------
Taxation EVRAZ operates in various Risk direction:
jurisdictions, and changes
to national tax laws, EVRAZ has a taxation
including those which control function
could be adopted based which monitors planned
on recommendations by changes to tax laws,
international organisations analyses their impact
(eg OECD's BEPS project on EVRAZ's operations
etc) are not within management's and reports them
control. to the Company's
management on a quarterly
Russian tax legislation basis. Management's
is developing and undergoes possible actions
frequent changes; tax to address tax challenges
law enforcement is subject include making provisions
to varying interpretations. (if applicable) in
Management's interpretation the financial statements;
of such legislation may implementing if necessary,
be challenged by the changes to the Company's
relevant regional and organisational structure
federal authorities, and adjustments to
which could adversely cash flow structure.
affect the financial
position of EVRAZ's Russian
subsidiaries, despite
any planning efforts.
---------------------- ----------------------------------- -----------------------------
You can view the press release with the images in the Principal
Risks and Uncertainties section in the following attachment.
http://www.rns-pdf.londonstockexchange.com/rns/4061E_-2014-4-9.pdf
STATEMENT OF DIRECTORS' RESPONSIBILITIES
Each of the directors listed in the Governance section of the
Annual report confirm that to the best of their knowledge:
-- the consolidated financial statements of EVRAZ plc, prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole (the 'Group');
-- the Annual Report and Accounts, including the Strategic
Report include a fair review of the development and performance of
the business and the position of the Company and the Group,
together with a description of the principal risks and
uncertainties that they face.
By order of the Board
Alexander Frolov
Chief Executive Officer
EVRAZ
Appendix 1
EBITDA
EBITDA represents profit from operations plus depreciation,
depletion and amortisation, impairment of assets, loss (gain) on
disposal of property, plant and equipment, and foreign exchange
loss (gain). EVRAZ presents an EBITDA because it considers EBITDA
to be an important supplemental measure of its operating
performance and believes that EBITDA is frequently used by
securities analysts, investors and other interested parties in the
evaluation of companies in the same industry. EBITDA is not a
measure of financial performance under IFRS and it should not be
considered as an alternative to net profit as a measure of
operating performance or to cash flows from operating activities as
a measure of liquidity. EVRAZ's calculation of EBITDA may be
different from the calculation used by other companies and
therefore comparability may be limited. EBITDA has limitations as
an analytical tool and potential investors should not consider it
in isolation, or as a substitute for an analysis of our operating
results as reported under IFRS. Some of these limitations
include:
-- EBITDA does not reflect the impact of financing or financing
costs on EVRAZ's operating performance, which can be significant
and could further increase if EVRAZ were to incur more debt.
-- EBITDA does not reflect the impact of income taxes on EVRAZ's operating performance.
-- EBITDA does not reflect the impact of depreciation and
amortisation on EVRAZ's operating performance. The assets of
EVRAZ's businesses which are being depreciated and/or amortised
will have to be replaced in the future and such depreciation and
amortisation expense may approximate the cost of replacement of
these assets in the future. EBITDA, due to the exclusion of these
costs, does not reflect EVRAZ's future cash requirements for these
replacements. EBITDA also does not reflect the impact of a loss on
disposal of property, plant and equipment.
Reconciliation of profit (loss) from operations to EBITDA is as
follows:
Year ended 31 December
-------------------------
2013 2012
------------ -----------
(US$ million)
------------------------------------------------- -------------------------
Consolidated EBITDA reconciliation
------------------------------------------------- -------------------------
Profit from operations 19 258
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation, depletion and amortisation 1,051 1,259
------------------------------------------------- ------------ -----------
Impairment of assets 446 413
------------------------------------------------- ------------ -----------
Loss on disposal of property, plant & equipment 47 56
------------------------------------------------- ------------ -----------
Foreign exchange loss/(gain) 258 41
------------------------------------------------- ------------ -----------
Consolidated EBITDA 1,821 2,027
------------------------------------------------- ------------ -----------
Steel segment EBITDA reconciliation
------------------------------------------------- ------------ -----------
Profit from operations 331 857
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation and amortisation 549 556
------------------------------------------------- ------------ -----------
Impairment of assets 349 58
------------------------------------------------- ------------ -----------
Loss on disposal of property, plant & equipment 27 38
------------------------------------------------- ------------ -----------
Foreign exchange loss/(gain) 73 (171)
------------------------------------------------- ------------ -----------
Steel segment EBITDA 1,329 1,338
------------------------------------------------- ------------ -----------
Mining segment EBITDA reconciliation
------------------------------------------------- ------------ -----------
(Loss)/profit from operations 100 (452)
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation, depletion and amortisation 447 611
------------------------------------------------- ------------ -----------
Impairment of assets 86 354
------------------------------------------------- ------------ -----------
Loss on disposal of property, plant & equipment 19 17
------------------------------------------------- ------------ -----------
Foreign exchange loss/(gain) (6) 95
------------------------------------------------- ------------ -----------
Mining segment EBITDA 646 625
------------------------------------------------- ------------ -----------
Vanadium segment EBITDA reconciliation
------------------------------------------------- ------------ -----------
(Loss)/profit from operations 3 (67)
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation and amortisation 14 47
------------------------------------------------- ------------ -----------
Loss on disposal of property, plant & equipment 1 1
------------------------------------------------- ------------ -----------
Foreign exchange (gain)/loss 1 -
------------------------------------------------- ------------ -----------
Vanadium segment EBITDA 19 (19)
------------------------------------------------- ------------ -----------
Other operations EBITDA reconciliation
------------------------------------------------- ------------ -----------
Profit from operations 64 150
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation and amortisation 35 38
------------------------------------------------- ------------ -----------
Impairment of assets 11 1
------------------------------------------------- ------------ -----------
Other operations EBITDA 110 189
------------------------------------------------- ------------ -----------
Unallocated EBITDA reconciliation
------------------------------------------------- ------------ -----------
Loss from operations (422) (323)
------------------------------------------------- ------------ -----------
Add:
------------------------------------------------- ------------ -----------
Depreciation and amortisation 6 7
------------------------------------------------- ------------ -----------
Foreign exchange (gain)/loss 190 117
------------------------------------------------- ------------ -----------
Unallocated EBITDA (226) (199)
------------------------------------------------- ------------ -----------
Intersegment eliminations
------------------------------------------------- ------------ -----------
Eliminations of intersegment EBITDA (57) 93
------------------------------------------------- ------------ -----------
Appendix 2
Cash and short-term bank deposits
Cash and short-term bank deposits is not a measure under IFRS
and it should not be considered as an alternative to other measures
of financial position. EVRAZ's calculation of Cash and short-term
bank deposits may be different from the calculation used by other
companies and therefore comparability may be limited.
31 December 2013 31 December 2012
----------------- -------------------
(US$ million)
----------------------------------------------------- --------------------------------------
Cash and short-term bank deposits Calculation
----------------------------------------------------- --------------------------------------
Cash and cash equivalents 1,576 1,320
----------------------------------------------------- --------------------- ---------------
Cash of disposal groups classified as held for sale 35 70
----------------------------------------------------- --------------------- ---------------
Short-term bank deposits - 674
----------------------------------------------------- --------------------- ---------------
Cash and short-term bank deposits 1,611 2,064
----------------------------------------------------- --------------------- ---------------
Appendix 3
Free Cash Flow
Free Cash Flow represents EBITDA, net of non-cash items, less
changes in working capital, income tax paid, interest paid and
covenant reset charges, conversion premiums, premiums on early
repurchase of bonds and realised gain on swaps, interest income and
debt issue costs, less capital expenditure, short-term deposits of
acquiree (at the date of business combination), purchases of
subsidiaries, net of cash acquired, proceeds from sale of disposal
groups classified as held for sale, net of transaction costs, plus
other cash flows from investing activities. Free Cash Flow is not a
measure under IFRS and it should not be considered as an
alternative to other measures of financial position. EVRAZ's
calculation of Free Cash Flow may be different from the calculation
used by other companies and therefore comparability may be
limited.
Free Cash Flow has been calculated as follows:
Calculation of Free Cash Flow
(US$ million)
--------------------------------------------------------------------------------------------- ------
Item 2013
--------------------------------------------------------------------------------------------- ------
EBITDA 1,821
--------------------------------------------------------------------------------------------- ------
Non-cash items (37)
--------------------------------------------------------------------------------------------- ------
EBITDA (excluding non-cash items) 1,784
--------------------------------------------------------------------------------------------- ------
Changes in working capital 365
--------------------------------------------------------------------------------------------- ------
Income tax paid (249)
--------------------------------------------------------------------------------------------- ------
Net Cash flows from operating activities 1,900
--------------------------------------------------------------------------------------------- ------
Net interest and similar payments (501)
--------------------------------------------------------------------------------------------- ------
Capital expenditure (902)
--------------------------------------------------------------------------------------------- ------
Purchases of subsidiaries (net of cash acquired) and interests in associates/joint ventures (30)
--------------------------------------------------------------------------------------------- ------
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs 1
--------------------------------------------------------------------------------------------- ------
Other cash flows from investing activities (10)
--------------------------------------------------------------------------------------------- ------
Free Cash Flow 458
--------------------------------------------------------------------------------------------- ------
Appendix 4
Total Debt
Total Debt represents nominal value of loans and borrowings plus
unpaid interest, finance lease liabilities, loans of assets
classified as held for sale, the nominal effect of cross-currency
swaps on principal of rouble-denominated notes. Total Debt is not a
measure under IFRS and it should not be considered as an
alternative to other measures of financial position. EVRAZ's
calculation of Total Debt may be different from the calculation
used by other companies and therefore comparability may be limited.
The current calculation shall not be considered for covenant
compliance reasons.
Total Debt has been calculated as follows:
Total Debt Calculation 31 December 2013 31 December 2012
----------------- -----------------
(US$ million)
-------------------------------------------------------------------------------- ------------------------------------
Long-term loans, net of current portion 6,039 6,373
-------------------------------------------------------------------------------- ----------------- -----------------
Short-term loans and current portion of long-term loans 1,816 1,783
-------------------------------------------------------------------------------- ----------------- -----------------
Add back: Unamortised debt issue costs and fair value adjustment to liabilities
assumed in
business combination 41 116
-------------------------------------------------------------------------------- ----------------- -----------------
Nominal effect of cross-currency swaps on principal of rouble-denominated notes 186 76
-------------------------------------------------------------------------------- ----------------- -----------------
Loans of assets classified as held for sale 78 79
-------------------------------------------------------------------------------- ----------------- -----------------
Finance lease liabilities, including current portion 6 13
-------------------------------------------------------------------------------- ----------------- -----------------
Total Debt 8,166 8,440
-------------------------------------------------------------------------------- ----------------- -----------------
Appendix 5
Net Debt
Net Debt represents total debt less cash and liquid short-term
financial assets, including those related to disposal groups
classified as held for sale. Net Debt is not a measure under IFRS
and it should not be considered as an alternative to other measures
of financial position. EVRAZ's calculation of Net Debt may be
different from the calculation used by other companies and
therefore comparability may be limited. The current calculation
shall not be considered for covenant compliance reasons.
Net Debt has been calculated as follows:
Net Debt Calculation 31 December 2013 31 December 2012
----------------- -----------------
(US$ million)
-------------------------------------------- ------------------------------------
Total Debt 8,166 8,440
-------------------------------------------- ----------------- -----------------
Short-term bank deposits - (674)
-------------------------------------------- ----------------- -----------------
Cash and cash equivalents (1,576) (1,320)
-------------------------------------------- ----------------- -----------------
Cash of assets classified as held for sale (35) (70)
-------------------------------------------- ----------------- -----------------
Collateral under swaps (21) -
-------------------------------------------- ----------------- -----------------
Net Debt 6,534 6,376
-------------------------------------------- ----------------- -----------------
###
The 2013 Annual Report will shortly be available to view or
download in a pdf format from the Company's website at
www.evraz.com. A copy of the 2013 Annual Report will be submitted
to the National Storage Mechanism and will shortly be available for
inspection at http://www.morningstar.co.uk/uk/NSM.
For further information:
Media Relations:
Vsevolod Sementsov
VP, Corporate Communications
London: +44 207 832 8998 Moscow: +7 495 937 6871
media@evraz.com
Investor Relations:
Sergey Belyakov
Director, Investor Relations
London: +44 207 832 8990 Moscow: +7 495 232 1370
ir@evraz.com
The financial statements of EVRAZ plc (registered number
7784342) on pages 116-200 of the Annual Report were approved by the
Board of Directors on 8 April 2014 and signed on its behalf by
Alexander Frolov, Chief Executive Officer.
EVRAZ plc
Consolidated Statement of Operations
(in millions of US dollars, except for per share
information)
Year ended 31 December
2013 2012 2011
restated* restated*
--------- ---------- ----------
Continuing operations
Revenue
Sale of goods $ 14,071 $ 14,367 $ 16,077
Rendering of services 340 359 323
--------- ---------- ----------
14,411 14,726 16,400
Cost of revenue (11,468) (11,803) (12,480)
Gross profit 2,943 2,923 3,920
Selling and distribution costs (1,183) (1,211) (1,154)
General and administrative expenses (877) (839) (903)
Social and social infrastructure maintenance expenses (50) (51) (61)
Loss on disposal of property, plant and equipment (47) (56) (50)
Impairment of assets (446) (413) (104)
Foreign exchange gains/(losses), net (258) (41) 269
Other operating income 53 75 50
Other operating expenses (116) (129) (96)
--------- ---------- ----------
Profit from operations 19 258 1,871
Interest income 23 23 17
Interest expense (699) (654) (715)
Share of profits/(losses) of joint ventures and associates 8 1 55
Gain/(loss) on derecognition of equity investments, net 89 - -
Gain/(loss) on financial assets and liabilities, net (43) 164 (355)
Gain/(loss) on disposal groups classified as held for sale, net (25) 18 8
Other non-operating gains/(losses), net 15 (6) (4)
Profit/(loss) before tax (613) (196) 877
Income tax benefit/(expense) 41 (229) (420)
--------- ---------- ----------
Net profit/(loss) $ (572) $ (425) $ 457
========= ========== ==========
Attributable to:
Equity holders of the parent entity $ (522) $ (398) $ 465
Non-controlling interests (50) (27) (8)
--------- ---------- ----------
$ (572) $ (425) $ 457
========= ========== ==========
Earnings/(losses) per share:
basic, for profit/(loss) attributable to equity holders of the parent entity, US
dollars $ (0.35) $ (0.30) $ 0.36
diluted, for profit/(loss) attributable to equity holders of the parent entity,
US dollars $ (0.35) $ (0.30) $ 0.36
* The amounts shown here do not correspond to the 2012 and 2011
financial statements and reflect adjustments made in connection
with the obligatory change in the accounting policies and a
correction of a prior period error.
EVRAZ plc
Consolidated Statement of Comprehensive Income
(in millions of US dollars)
Year ended 31 December
2013 2012 2011
restated* restated*
Net profit/(loss) $ (572) $ (425) $ 457
Other comprehensive income/(loss)
Other comprehensive income to be reclassified to profit or loss in subsequent
periods
Exchange differences on translation of foreign operations into presentation
currency (198) 281 (615)
Exchange differences recycled to profit or loss (90) 96 -
Net gains/(losses) on available-for-sale financial assets 7 4 (20)
Net (gains)/losses on available-for-sale financial assets reclassified to profit
or loss - - 20
(281) 381 (615)
Effect of translation to presentation currency of the Group's joint ventures and
associates (11) 44 (35)
Net gains/(losses) on available-for-sale financial assets of the Group's joint
ventures and
associates - 1 -
(11) 45 (35)
Items not to be reclassified to profit or loss in subsequent periods
Gains/(losses) on re-measurement of net defined benefit liability 119 (74) (97)
Income tax effect (30) 14 31
-------- ---------- ----------
89 (60) (66)
Gains/(losses) on re-measurement of net defined benefit liability recognised by
the Group's
joint ventures and associates - (2) (1)
Decrease in revaluation surplus in connection with the impairment of property,
plant and equipment (9) - (1)
Income tax effect 2 - -
-------- ---------- ----------
(7) - (1)
Total other comprehensive income/(loss) (210) 364 (718)
-------- ---------- ----------
Total comprehensive income/(loss), net of tax $ (782) $ (61) $ (261)
======== ========== ==========
Attributable to:
Equity holders of the parent entity $ (697) $ (33) $ (235)
Non-controlling interests (85) (28) (26)
-------- ---------- ----------
$ (782) $ (61) $ (261)
======== ========== ==========
* The amounts shown here do not correspond to the 2012 financial
statements and reflect adjustments made in connection with the
obligatory change in the accounting policies and a correction of a
prior period error .
EVRAZ plc
Consolidated Statement of Financial Position
(in millions of US dollars)
31 December
2013 2012 2011
restated* restated*
------------- ------------- -------------
Assets
Non-current assets
Property, plant and equipment $ 9,251 $ 7,792 $ 8,306
Intangible assets other than goodwill 525 586 838
Goodwill 1,988 2,180 2,180
Investments in joint ventures and associates 191 551 655
Deferred income tax assets 86 70 82
Other non-current financial assets 140 92 53
Other non-current assets 62 64 79
------------- ------------- -------------
12,243 11,335 12,193
Current assets
Inventories 1,641 1,978 2,188
Trade and other receivables 873 895 971
Prepayments 122 143 176
Loans receivable 21 19 44
Receivables from related parties 13 12 8
Income tax receivable 59 59 83
Other taxes recoverable 281 329 412
Other current financial assets 71 712 57
Cash and cash equivalents 1,576 1,320 801
------------- ------------- -------------
4,657 5,467 4,740
Assets of disposal groups classified as held for sale 804 930 9
------------- ------------- -------------
5,461 6,397 4,749
------------- ------------- -------------
Total assets $ 17,704 $ 17,732 $ 16,942
============= ============= =============
Equity and liabilities
Equity
Equity attributable to equity holders of the parent entity
Issued capital $ 1,473 $ 1,340 $ 1,338
Treasury shares (1) (1) (8)
Additional paid-in capital 2,326 1,820 2,289
Revaluation surplus 162 173 171
Other reserves 156 - -
Unrealised gains and losses 12 5 -
Accumulated profits 2,566 3,004 3,406
Translation difference (1,687) (1,424) (1,846)
------------- ------------- -------------
5,007 4,917 5,350
Non-controlling interests 427 200 236
------------- ------------- -------------
5,434 5,117 5,586
Non-current liabilities
Long-term loans 6,039 6,373 6,593
Deferred income tax liabilities 827 855 960
Employee benefits 481 577 518
Provisions 194 257 285
Other long-term liabilities 230 181 311
------------- ------------- -------------
7,771 8,243 8,667
Current liabilities
Trade and other payables 1,395 1,414 1,473
Advances from customers 179 157 154
Short-term loans and current portion of long-term loans 1,816 1,783 613
Payables to related parties 458 257 98
Income tax payable 57 48 92
Other taxes payable 202 195 188
Provisions 39 32 53
Amounts payable under put options for shares of subsidiaries - - 9
Dividends payable by the Group's subsidiaries to non-controlling
shareholders 5 8 9
------------- ------------- -------------
4,151 3,894 2,689
Liabilities directly associated with disposal groups classified as held
for sale 348 478 -
------------- ------------- -------------
4,499 4,372 2,689
------------- ------------- -------------
Total equity and liabilities $ 17,704 $ 17,732 $ 16,942
============= ============= =============
* The amounts shown here do not correspond to the 2012 financial
statements and reflect adjustments made in connection with the
obligatory change in the accounting policies and a correction of a
prior period error.
EVRAZ plc
Consolidated Statement of Cash Flows
(in millions of US dollars)
Year ended 31 December
2013 2012 2011
restated* restated*
-------- ---------- ----------
Cash flows from operating activities
Net profit/(loss) $ (572) $ (425) $ 457
Adjustments to reconcile net profit/(loss) to net cash flows from operating
activities:
Deferred income tax (benefit)/expense (Note 8) (290) (38) 12
Depreciation, depletion and amortisation (Note 7) 1,051 1,259 1,153
Loss on disposal of property, plant and equipment 47 56 50
Impairment of assets 446 413 104
Foreign exchange (gains)/losses, net 258 41 (269)
Interest income (23) (23) (17)
Interest expense 699 654 715
Share of (profits)/losses of associates and joint ventures (8) (1) (55)
Gain/(loss) on derecognition of equity investments, net (89) - -
(Gain)/loss on financial assets and liabilities, net 43 (164) 355
(Gain)/loss on disposal groups classified as held for sale, net 25 (18) (8)
Other non-operating (gains)/losses, net (15) 6 4
Bad debt expense 8 12 49
Changes in provisions, employee benefits and other long-term assets and
liabilities (68) (55) (40)
Expense arising from equity-settled awards (Note 21) 25 22 23
Share-based payments under cash-settled awards (Note 21) - - (1)
Other (2) (6) (4)
-------- ---------- ----------
1,535 1,733 2,528
Changes in working capital:
Inventories 229 121 (204)
Trade and other receivables 65 (78) 167
Prepayments 15 37 (2)
Receivables from/payables to related parties 131 141 (61)
Taxes recoverable 48 120 (123)
Other assets (17) 18 (3)
Trade and other payables (135) 96 367
Advances from customers 30 (1) (44)
Taxes payable 4 (43) 44
Other liabilities (5) (1) (22)
Net cash flows from operating activities 1,900 2,143 2,647
Cash flows from investing activities
Issuance of loans receivable to related parties (2) (5) (3)
Proceeds from repayment of loans issued to related parties, including interest - 1 46
Issuance of loans receivable (2) - (4)
Proceeds from repayment of loans receivable, including interest 3 4 4
Return of capital by a joint venture (Note 11) - 38 -
Purchases of subsidiaries, net of cash acquired (Note 4) 31 (12) (36)
Purchases of interest in associates/joint ventures (Note 11) (61) - -
Restricted deposits at banks in respect of investing activities (2) - (1)
Short-term deposits at banks, including interest 677 (656) 5
Purchases of property, plant and equipment and intangible assets (902) (1,261) (1,281)
Proceeds from disposal of property, plant and equipment 7 9 23
Proceeds from sale of disposal groups classified as held for sale, net of transaction costs
(Note 12) 1 311 5
Dividends received 1 88 54
Other investing activities, net (15) (61) -
----- ------- -------
Net cash flows used in investing activities (264) (1,544) (1,188)
Cash flows from financing activities
Purchase of treasury shares in the course of the Group's reorganisation (Note
20) $ - $ (4) $ -
Purchase of treasury shares (Note 20) (6) - (22)
Sale of treasury shares (Note 20) - - 3
Payments relating to conversion of bonds into shares (Note 22) - - (161)
Proceeds from issue of shares by a subsidiary to non-controlling shareholders - - 1
Purchases of non-controlling interests (Note 4) - (1) (51)
Dividends paid by the parent entity to its shareholders (Note 20) - (375) (491)
Dividends paid by the Group's subsidiaries to non-controlling shareholders (1) (1) (1)
Proceeds from bank loans and notes 1,976 2,706 3,507
Repayment of bank loans and notes, including interest (3,978) (2,716) (3,815)
Net proceeds from/(repayment of) bank overdrafts and credit lines, including
interest 621 292 (283)
Payments under covenants reset (Note 22) (1) (7) -
Gain on derivatives not designated as hedging instruments (Note 25) 51 81 66
Collateral under swap contracts (Note 18) (21) 10 (10)
Restricted deposits at banks in respect of financing activities - 2 (1)
Payments under finance leases, including interest (8) (29) (24)
Net cash flows used in financing activities (1,367) (42) (1,282)
Effect of foreign exchange rate changes on cash and cash equivalents (48) 32 (59)
Net increase in cash and cash equivalents 221 589 118
Cash and cash equivalents at the beginning of the year 1,320 801 683
----------- ----------- -----------
Add back: decrease/(increase) in cash of disposal groups classified as assets
held for sale
(Note 12) 35 (70) -
=========== =========== ===========
Cash and cash equivalents at the end of the year $ 1,576 $ 1,320 $ 801
=========== =========== ===========
Supplementary cash flow information:
Cash flows during the year:
Interest paid $ (586) $ (559) $ (586)
Interest received 23 7 8
Income taxes paid by the Group (249) (298) (443)
* The amounts shown here do not correspond to the 2012 financial
statements and reflect adjustments made in connection with the
obligatory change in the accounting policies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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