Annual Report & Accounts 2013
Severstal Annual Report 2013 Home > Performance > Severstal Resources > Operational and financial overview
 

Operational and financial overview

Safety

Over the past five years we have reduced our LTIFR by 30 per cent, but the pace of improvement has been slowing. Two years ago we started a safety programme as an integral part of the Severstal Business System. This takes a systematic approach to safe conditions and safe behaviour.

Despite continued efforts to increase the safety of our operations, we were shocked on February 11 2013 when an explosion at the Vorkutinskaya mine at Vortukaugol resulted in 19 fatalities and 3 other casualties, and mining was suspended at the shaft. We have greatly enhanced the mine’s safety systems, maintenance and production supervision to prevent any incident of this kind occurring in the future.

Financial overview

The 2013 pricing environment was challenging for steel-related commodities, especially for coking coal, with realised prices down by around 20 per cent compared with 2012. Iron ore prices were more resilient, following the global benchmark, and retreated by only 2-5 per cent year on year.

As a result, our iron ore shipments remained almost flat year on year at 15.1 mt, while overall coking coal concentrate sales volumes decreased by 4.7 per cent year on year to 7.2 mt. PBS’ contraction (31 per cent down year on year) was the key reason behind this drop, while Vorkuta increased its coking coal concentrate shipments by 6.5 per cent year on year to 5.6 mt. Consequently the division’s revenue was 11.3 per cent lower than a year ago at US$2,665 million (FY12: US$3,005 million). FY13 EBITDA of US$813 million fell by 17.5 per cent year on year(FY12: US$985 million).

In 2013, the average headcount at Severstal Resources was 15,909.

EBITDA drivers in 2013, US$m

Key performance indicators20132012Change %
Revenue (US$ million)2,664.73,004.6(11.3%)
Gross profit (US$ million)1,012.71, 279.7(20.9%)
Profit from operations (US$ million)554.1743.1(25.4%)
Operating margin (%)20.8%24.7%n/a
EBITDA (US$ million)812.9985.5(17.5%)
EBITDA margin (%)30.5%32.8%n/a
EBITDA margin (%)   
Coking coal concentrate15.1%30.2%n/a
Iron ore concentrate40.1%35.9%n/a
Pellets47.8%45.6%n/a

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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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.

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Performance review 2012

Severstal achieved a solid set of results in 2012, despite worsening economic conditions, maintaining the Group’s EBITDA margin at 15.0%, reflecting the resilience of the business.

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Performance review 2012 - Severstal Resources

Our strong asset base enables us to capture excellent margins and generate significant free cash flow in strong markets, but it is also resilient enough to provide positive results even in the current weak markets.

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