Annual report and accounts 2012

Shareholders’ equity

OAO Severstal and Subsidiaries
Notes to the Consolidated Financial Statements
26. Shareholders’ equity

for the years ended December 31, 2012, 2011 and 2010
(Amounts expressed in thousands of US dollars, except as otherwise stated)

Share Capital

The Parent Company’s share capital consists of ordinary shares with a nominal value of RUB 0.01 each. Authorized share capital of Severstal at December 31, 2012 comprised 837,718,660 issued and fully paid shares (December 31, 2011 and 2010: 1,007,701,355).

The nominal amount of initial share capital was converted into US dollars using exchange rates during the Soviet period, when the Government contributed the original capital funds to the enterprise. These capital funds were converted into ordinary shares on September 24, 1993 and sold by the Government at privatization auctions.

The total value of issued share capital presented in these consolidated financial statements comprised:

 Number of shares, mln.US$'000
Share capital at December 31, 20101,007.73,311,288
Share capital at December 31, 20111,007.73,311,288
Share capital at December 31, 2012837.72,752,728

All shares carry equal voting and distribution rights.

The reconciliation of the number of shares outstanding at the beginning and at the end of the period is presented below:

 Number of shares, mln.
Number of shares outstanding at December 31, 20111,005.2
Gold segment separation effect(192.9)
Repurchase of issued shares(1.7)
Number of shares outstanding at December 31, 2012810.6

Treasury shares

In March 2012, the Group completed the separation of the Gold segment resulting in the increase of the Group’s treasury stock by 192,900,120 shares (Note 27).

On July 26, 2012 ОАО Severstal’s share capital was reduced by cancellation of 169,982,695 shares. As a result, the Group’s share capital decreased by US$ 558.6 million, treasury shares decreased by US$ 1,475.0 million, and additional capital decreased by US$ 916.4 million.

The movement of the Group’s treasury shares is presented below:

 Treasury
shares
Balance before Gold segment separation26,303
Gold segment separation effect: 
Gold segment's net identifiable assets2,290,388
Net identifiable assets attributable to non-controlling interests(274,892)
Disposal costs12,507
Intercompany debts(364,164)
Repurchase of issued shares20,480
Cancellation of shares(1,474,965)
Balance at December 31, 2012235,657

Earnings/(loss) per share

The calculation of basic and diluted earnings/(loss) per share is presented below:

Year ended December 31,
 201220112010
Profit/(loss) for the period attributable to shareholders of
OAO Severstal
761,9622,034,833(574,914)
Interest expense on convertible bonds, net of tax6,574--
Diluted profit/(loss) for the period attributable to shareholders of
OAO Severstal
768,5362,034,833(574,914)
Basic weighted average number of shares outstanding
during the period (millions of shares)
839.81,005.21,005.2
Effect on conversion of convertible bonds (millions of shares)6.6--
Diluted weighted average number of shares outstanding
during the period (millions of shares)
846.41,005.21,005.2
Basic earnings/(loss) per share (US dollars)0.912.02(0.57)
Diluted earnings/(loss) per share (US dollars)0.912.02(0.57)

Capital management

The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. This policy includes compliance with certain externally imposed minimum capital requirements. The Group’s management constantly monitors profitability and leverage ratios and compliance with the minimum capital requirements. The Group uses the return on capital employed ratio which is defined as profit before financing and taxation for the last twelve months divided by capital employed and the leverage ratio calculated as net debt, comprising of long-term and short-term indebtedness less cash, cash equivalents and short-term bank deposits, divided by shareholder’s equity. The level of dividends is also monitored by the Board of Directors of the Group.

There were no changes in the Group’s approach to capital management during the year.

Dividends

The maximum dividend payable is restricted to the total accumulated retained earnings of the Parent Company determined according to Russian law.

On December 20, 2010 an Extraordinary Meeting of Shareholders approved an interim dividend of RUB 4.29 (US$ 0.14 at December 20, 2010 exchange rate) per share and per GDR for the nine months of 2010.     

On June 27, 2011 the Meeting of Shareholders approved an annual dividend of RUB 2.42 (US$ 0.09 at June 27, 2011 exchange rate) per share and per GDR for the year 2010 and an interim dividend of RUB 3.9 (US$ 0.14 at June 27, 2011 exchange rate) per share and per GDR for the first quarter of 2011.

On September 30, 2011 the Meeting of Shareholders approved an interim dividend of RUB 4.37 (US$ 0.14 at September 30, 2011 exchange rate) per share and per GDR for the first six months of 2011.

On December 30, 2011 an Extraordinary Meeting of Shareholders approved an interim dividend of RUB 3.36 (US$ 0.10 at December 30, 2011 exchange rate) per share and per GDR for the first nine months of 2011.

On June 28, 2012 the Meeting of Shareholders approved an annual dividend of RUB 3.56 (US$ 0.11 at June 28, 2012 exchange rate) per share and per GDR for the year 2011 and an interim dividend of RUB 4.07 (US$ 0.12 at June 28, 2012 exchange rate) per share and per GDR for the first quarter of 2012.

On September 27, 2012 the Meeting of Shareholders approved an interim dividend of RUB 1.52 (US$ 0.05 at September 27, 2012 exchange rate) per share and per GDR for the first six months of 2012.

On December 20, 2012 an Extraordinary Meeting of Shareholders approved an interim dividend of RUB 3.18 (US$ 0.10 at December 20, 2012 exchange rate) per share and per GDR for the nine months of 2012.