Annual Report & Accounts 2013
Severstal Annual Report 2013 Home > Company overview > Chairman statement
 

Chairman statement

Since listing we have been committed to the highest standards of corporate Governance and aim for full compliance with the UK Corporate Governance Code. This includes having a proper balance between Executive and Non-Executive/Independent Directors. The Board has three committees, each Chaired by an Independent Director, providing oversight of key areas. These are Audit, Health & Safety and Nomination & Remuneration. In 2013 we held our third annual Capital Market Day for buy and sell side audiences in London. This is a further demonstration of the priority we give to regular and transparent communications with our stakeholders.

Dear Shareholders,

I am pleased to report that Severstal made significant progress in 2013, particularly in increasing efficiency by lowering costs. We also achieved higher exposure to more attractive market segments. As a result we were able to deliver a resilient performance which maintained operating margins and led to reduced debt despite challenging market conditions.

Health & safety is a top priority; the objective is to eliminate all fatal accidents. We aim to achieve this by continuing to employ international best practice to be the leading Russian company in this field. Over 2013 the annual lost-time injury frequency rate (“LTIFR”) was almost unchanged at 1.45 compared to 1.41 in 2012. We also made progress with our environmental programmes further reducing energy consumption and emissions across many of our key operating units.

Our capital expenditure programme continued to be prudent and focussed on enhancing operational efficiency, further improving product mix, embedding customer care projects and health and safety. Major projects included the virtual completion of the Balakovo mini-mill, the revamping of our cold rolling mill at Cherepovets, the completion of our St. Petersburg service center, the modernization and expansion of the Pechorskaya Plant at Vorkuta and construction of an inclined shaft at Vorgashorskaya.

Our Business System initiatives launched in 2010 are now embedded across the Group. These are delivering significant benefits and competitive advantage through the creation of a continuous improvement culture that is delivering measurable contributions to revenue and cost reduction.

Since listing we have been committed to the highest standards of corporate Governance and aim for full compliance with the UK Corporate Governance Code. This includes having a proper balance between Executive and Non-Executive/Independent Directors. The Board has three committees, each Chaired by an Independent Director, providing oversight of key areas. These are Audit, Health & Safety and Nomination & Remuneration. In 2013 we held our third annual Capital Market Day for buy and sell side audiences in London. This is a further demonstration of the priority we give to regular and transparent communications with our stakeholders.

In July we announced changes to management and our organisational structure in line with the Company’s focus on further improving efficiency and reducing costs. Vadim Larin, formerly CEO of Severstal Resources, was appointed Chief Operating Officer and Deputy Chief Executive. Alexander Grubman and Sergei Kuznetsov both stepped down from the Board. I would like to thank both for their significant contributions to the Group.

Global economic conditions did improve during the second half of 2013 with Europe experiencing a period of relative stability while the United States economy accelerated. This was balanced by more subdued growth in Russia. Overall we remain cautious about the outlook for 2014. However, we believe that global steel demand will continue to grow driven by an anticipated bottoming-out of European demand, further improvements to the US economy and continuing investment in China. This should lead to higher industry utilization rates although supply growth for both iron ore and coking coal may result in slightly lower commodity prices.

Our objective remains the continued development of the business to maximise free cash flow and deliver stable dividends. This will be done by driving efficiency and re-enforcing our low-cost position, highly selective development projects and delivering higher customer care and better product mix. With well invested operations and an integrated model, we are confident that Severstal will continue to make good progress in 2014.

Christopher Clark
Non-Executive Chairman of the Board of Directors

CEO statement

Our strategic goal remains the same: we aim to be a leader in value creation. In the current volatile and challenging market environment, this means the ability to generate solid positive free cash flow throughout the market cycle.

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COO statement

We have three simple operational priorities: to have low-cost production across all of our operations at all times; to increase our share of high-margin products; and to ensure that all our assets have low CAPEX requirements.

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CFO statement

Reflecting the confidence in the outlook and the financial strength of the company, the Board of Directors has recommended a dividend payment of 3.83 roubles per share and per GDR (approximately US$0.11) for the 12 months ended 31 December 2013.

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