Annual Report • Dec 31, 2016
Annual Report
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13.5 mt crude steel output in 2016
raw coking coal output in 2016
output in 2016
• Russia
• USA • Canada • South Africa
Headquarters
| Product type | Customer type |
|---|---|
| > Steel rolling facilities | |
| Construction products | > Wholesale companies, traders |
| Railway products | > Railways, rail carriers |
| Industrial products | > Industrial companies |
| Coking coal concentrate | > Steelmaking facilities |
| Raw coking coal | > Steelmaking facilities |
| Tubular products | > Energy transmission operators |
This annual report ("the Report") presents the results for EVRAZ plc and its subsidiaries for 2016, divided into segments: Steel; Steel, North America; and Coal. It details the Group's social responsibility activities in 2016.
The Report has been prepared in accordance with the information disclosure requirements of the United Kingdom and the Financial Conduct Authority: the Companies Act 2006, the Listing Rules, the Disclosure and
Transparency Rules, Competition and Market Authority Order. The Report has also been prepared taking into account the International Integrated Reporting Framework, the GRI G4 Sustainability Reporting Guidelines and ESMA Guidelines on Alternative Performance Measures. It has been approved by the Board of Directors.
The main theme of the Report is EVRAZ' strategic priorities, as detailed in the Strategic report section.
| 08 | |
|---|---|
| EVRAZ' business model 10 | |
| Success factors and KPIs 14 | |
| Strategic priorities 18 | |
| Market overview22 | |
| Financial review 24 | |
| CSR review 30 | |
| Principal risks and uncertainties 32 | |
| EVRAZ business system 37 |
| DEVELOPMENT of product portfolio and customer base |
RETENTION of low-cost position |
|---|---|
| 18 | 19 |
| PRUDENT CAPEX strategy |
DEBT reduction |
| 20 | 21 |
EVRAZ is a leader in infrastructure steel products globally and in the Russian coking coal market.
| Our approach 74 | |
|---|---|
| Health, safety and environment 75 | |
| Energy-saving measures 84 | |
| Social policy 86 | |
| Anti-corruption 94 |
| Board of Directors 98 | |
|---|---|
| Management 102 | |
| Corporate governance report 104 | |
| Remuneration report 120 | |
| Directors' report 130 | |
| Directors' responsibility statements 135 |
| Independent Auditor's report to members | |
|---|---|
| of EVRAZ Plc 138 | |
| with notes 146 | |
| with notes 246 |
ADDITIONAL
| performance measures 260 | |
|---|---|
| Data on mineral reserves 262 | |
| Terms and abbreviations 263 | |
| QR codes to additional information 266 | |
| Contact details 266 |
Online version of the Annual Report 2016
10% yoy US\$ 4,802million 0% yoy US\$ 428million CAPEX4
Net debt
Net loss
74% yoy US\$188million
3 4
% United Kingdom 35 Europe (excl. United Kingdom, Russia) 26 Russia 22 North America 16 Rest of the World 1
See Additional information on pages 258 for more details.
I am pleased to introduce EVRAZ' annual report for 2016, a year in which the Group delivered a solid performance and
Market sentiment was shaped by several factors in 2016, including positive global price trends in steel and bulk commodities, driven by developments in China. At the same time, Russian and North American steel consumption declined amid unfavourable economic conditions, lower Russian GDP and falling oil prices.
While the outlook for metal prices remains uncertain, the and we hope that it marks the start of a sustained recovery.
In 2016, despite a substantial reduction in fatal incidents, and ongoing declining trends in the total number of Lost Time injuries, six people lost their lives. I would like to express my heartfelt condolences to the families and friends of the deceased. Safe working conditions remain a constant focus and an absolute priority for the Group and our executive management. We continue to strive to reduce the number of fatalities and injuries to zero and ensure that every one of our employees goes home safe every day. See pages 76-77
The Board continues to enhance its oversight of the Group's corporate governance and compliance with regulations and guidelines.
Over 2016, the Board focused on the execution of EVRAZ' strategy, its own effectiveness and the management of risks, including those arising from currency volatility, geopolitical instability and lower economic activity.
In the second half of the year, an evaluation of the Board's effectiveness was conducted. The results underline that the Board is well balanced and diverse, with the right mix of international business skills, experience and independence. See page 106
The composition of the Board is reviewed regularly.
As disclosed in the 2015 annual report, Olga Pokrovskaya and Duncan Baxter stepped down from the Board in March 2016, following the strategic decision to streamline the Board in response to challenging market conditions. While this reduced the number of members from 10 to 8, the Board and I feel that we currently have the right balance of skills, experience and backgrounds to support and challenge the management team.
I would like to take this opportunity to thank my fellow directors for their support and the vision and intellect that they bring to the Board.
Our people are our greatest asset. EVRAZ' strength derives from the hard work and productivity of all of those at the Group. On behalf of the Board, I would like to thank everyone at EVRAZ for their hard work and contribution to delivering another set of positive results in 2016.
Since 2014, the global metals and mining sector has experienced extremely challenging conditions. However, commodity prices appear to be stabilising and even showing modest signs of recovery. In the near term, the prospect of a better balance between demand and supply for most commodities should underpin this.
Nevertheless, the overall operating environment remains complex and volatile. The Board and management continue to scrutinise all realistically conceivable scenarios opportunities, obstacles and risks and incorporating them into the Group's planning.
EVRAZ will celebrate its 25th anniversary of operation in 2017, and I look forward to the year with optimism.
We believe that we have the right assets focusing on the right commodities, as well as the capability and culture to build even more momentum and prosper in 2017 and beyond.
Alexander Abramov Chairman of the Board EVRAZ plc
| 08 | |
|---|---|
| 10 | |
| 14 | |
| 18 | |
| 22 | |
| 24 | |
| 30 | |
| 32 | |
| 37 | |
EVRAZ is a leader in infrastructure steel products globally and in the Russian coking coal market.
Alexander Frolov
Alexander Frolov
Shareholders.
Employees.
Customers.
Local communities.
of iron ore
Internal consumption (13,728 kt) and 3rd parties' iron ore products purchases (5,228 kt).
EVRAZ' Steel segment receives the coking coal products from the Coal segment (concentrate and raw coal) and from 3rd parties (2,770 kt of concentrate and 1,144 kt of raw coal in 2016). All raw coal is processed at EVRAZ ZSMK washing plant (1,808 kt of concentrate produced in 2016).
Sales to Steel segment, kt
Sales to Steel segment, kt
3 3 Including 466 kt from Steel segment and 19 kt from 3rd parties.
Interactive business model and operational model are available in the online version of the Annual Report 2016.
The Steel segment's EBITDA fell amid negative steel price trends and a reduction in sales volumes. This was partly offset by lower expenses in US dollar terms due to rouble depreciation, as well as the effects of cost-cutting initiatives implemented in 2016 as part of the ongoing productivity improvement programme.
The Coal segment's EBITDA increased yearon-year on the back of higher sales prices and volumes, accompanied by the effects of costcutting initiatives and rouble depreciation, which was favourable for costs.
The Steel, North America segment's EBITDA was impacted by lower sales volumes and prices, stemming from a downturn in the OCTG and rail markets.
Alexander Kuznetsov Vice President, Corporate Strategy and Performance management
Strategic goal.
Overview.
Outlook.
Despite the Group's efforts, there were 6 fatalities (6 employees and 0 contractors) at its sites during the year, and the lost-time injury frequency rate (LTIFR) reached 2.36, compared with 2.18 in 2015. One of the reasons for the increase in these statistics is the improved reporting through the implementation of an incident reporting system that the Group developed in-house and implemented in 2015. EVRAZ remains committed to the goal of reaching zero fatalities at its sites and will continue efforts to improve reporting transparency.
Strategic goal.
Overview.
Outlook.
Labour costs per tonne of steel products decreased once again in 2016, down by 12.4% to US\$36.5 per tonne compared with US\$41.6 per tonne in 2015, due to the ongoing labour productivity improvement project pipeline.
Please see page 261 for details.
Strategic goal.
Overview. (see page 42)
Outlook.
Strategic goal.
Overview. (see page 62)
Outlook.
Strategic goal.
Overview. (see page 69)
Outlook.
Strategic goal.
Overview.
Outlook.
Strategic goal.
Overview.
Outlook.
Strategic goal.
Overview.
Outlook
KPI See page 19
Strategic goal.
Overview.
Outlook.
Number of EBS transformations
Please see pages 260-261 for details.
implemented in 2016
Premium infrastructure steel products, a wide range of coking coal grades, and modernised large-scale production sites make EVRAZ the leader in the markets where it operates.
Rails sales on the Russian market remain stable through the cycle. With its key client, Russian Railways, EVRAZ targets securing a leading market share despite the increase in domestic competition.
Rails export sales volumes (excl. CIS),
EVRAZ' efforts to increase its presence on overseas rail markets boosted volumes to 75 kt in 2016. We target to reach c. 250 kt of rail exports.
In 2016, EVRAZ substantially increased its value-added slabs and billets sales to the domestic and export markets with an average premium of US\$10-12 per tonne to the base grade margin.
Please see page 261 for details.
coking coal concentrate
KPI Average annual EBITDA effect from cost-cutting initiatives totalled US\$316 million. Plan to keep the current pace of improvement with annual cost-cutting programme at the level of at least 2-3% from cost base. Cost-cutting programme ,US\$ million 420 321 316 2-3% of COGS
2014 2015 2016 3-5 year
Breakdown of cost-cutting programme effect in 2016
US\$185 per tonne in 2016, down by 4.7% from US\$195 per tonne in 2015 due to operational improvements, volume stability and product mix optimisation.
Coking coal concentrate cash cost , US\$/t
target
The Coal segment's cash cost was US\$30 per tonne in 2016, down by 2.5% from US\$31 per tonne in 2015 due to increased volumes, mine optimisations, and G&A synergies.
G&A expenses have been reduced by c. 50% during the last three years, mainly due to the introduction of a new business unit management personnel reduction, and local currency devaluations. Further administrative cost reduction are in the pipeline for the next couple of years.
Please see page 261 for details.
The Group's investment projects are aimed at further developing its competitive advantages, while maintenance investments are focused on supporting the sustainability of EVRAZ' operations.
| Project | Effect | Total CAPEX, US\$ million |
Launch year |
|---|---|---|---|
| Construction of blast furnace 7 at EVRAZ NTMK |
|||
| Regina steel and rolling upgrade |
|||
| Construction of an LDP mill at Regina |
|||
| Grinding ball mill construction at EVRAZ NTMK |
| Project | Effect | Total CAPEX, US\$ million |
Launch year |
|---|---|---|---|
| Construction of Yerunakovskaya VIII coal mine |
|||
| Mezhegey project | |||
| EVRAZ Caspian Steel (Vostochny rolling mill, Kazakhstan) |
|||
| Sheregesh iron ore mine expansion |
76 | ||
| Reconstruction of continuous casting machines (CCM) at EVRAZ ZSMK |
Investment projects have been implemented with an aim to support EVRAZ' leadership on the Russian coking coal market and to increase our presence on the CIS infrastructure steel market.
Launch year means that facilities were built and started to operate, however stated capacity could not have been achieved that year
Debt repayment remains a priority over dividends and excessive CAPEX. EVRAZ was able to reduce net debt by US\$0.5 billion in 2016, in addition to the US\$0.5 billion reduction in 2015.
2010 2011 2012 2013 2014 2015 2016/01 2016/12 0
50 100
(see page 42) (see page 42). (see page 65) (see page 65). (see page 55) (see page 55).
Nikolay Ivanov
| Segment | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| Total | 7,713 | 8,767 | (1,054) | (12.0) |
| Region | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| Total | 7,713 | 8,767 | (1,054) | (12.0) |
| Segment | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| 67 | ||||
| Total | 1,542 | 1,438 | 104 | 7.2 |
| Effect | 2016 |
|---|---|
| Cost-cutting initiatives and productivity improvements, including | 184 |
| 6 | |
| Optimisation of asset portfolio | 13 |
| Reduction of general and administrative (G&A) costs and non-G&A headcount | 119 |
| Total | 316 |
| 2016 | 2015 | Change, % | |
|---|---|---|---|
| Steel segment | |||
| Steel, North America segment | |||
| Coal segment | |||
| Other operations | |||
| Unallocated | |||
| Eliminations | |||
| Total | 2,192 | 2,184 | 0.4 |
| Item | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| 2,192 | 2,184 | 8 | 0.4 | |
| 463 | (24) | 487 | n/a | |
| Loss before tax | (92) | (707) | 615 | (87.0) |
| Net loss | (188) | (719) | 531 | (73.9) |
| Item | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| 1,503 | 1,622 | (119) | (7.3) | |
| (340) | (359) | 19 | (5.3) | |
| (1,369) | (962) | (407) | 42.3 | |
| (216) | 289 | (505) | n/a |
| Item | 2016 | 2015 | Change | Change, % |
|---|---|---|---|---|
| EBITDA excluding non-cash items | 1,549 | 1,420 | 129 | 9.1 |
| 1,503 | 1,622 | (119) | (7.4) | |
| 659 | 799 | (140) | (17.5) |
please refer to page 260
| Steel mill upgrade | |
|---|---|
| Construction of an LDP mill | |
| Blast furnace 7 | |
| Iron ore capacity expansion | |
| Coal deposit development | |
| Grinding ball mill construction | |
| Maintenance | 264 |
| Total | 428 |
on pages 74-94
EVRAZ' LTIFR started to grow in 2015 as a result of the Group's systemic effort to ensure full transparency in reporting.
Environmental targets are based on 2011 performance levels. In 2014, the HSE Committee of the Board of Directors reviewed the implementation of environmental targets and agreed to re-base fresh water consumption and air emission targets by excluding data related to the disposed assets due to its material effect on performance.
Including nitrogen oxides (NOx), sulphur oxides (SOx), dust and volatile organic compounds only
| Diversity of employees, senior management and directors, % (number of people) |
||
|---|---|---|
| Board | 88 (7) | 12 (1) |
| Senior management | 95 (21) | 5 (1) |
| Employees | 71 (55,268) | 29 (22,574) |
| Men | Women | |
| For more information, see page 86 |
Reduction is mainly due to labour productivity improvements, outsourcing support functions, and asset optimisations.
For more information, see page 90
EVRAZ: City of Friends –
EVRAZ for Cities
yoy
For more information, see the risk management and internal control section of the corporate governance report on pages 107-109
assessment and management of risks at corporate level
assessment and management of risks at regional and site levels and across functions
| # | Risk | Description | Mitigating/risk management actions in 2016 | Direction/ Reason for change |
|---|---|---|---|---|
| Global economic factors, industry conditions, industry cyclicality Related with: |
||||
| Product competition Related with: |
||||
| Cost effectiveness Related with: |
||||
| Treasury: availability Related with: |
| # | Risk | Description | Mitigating/risk management actions in 2016 | Direction/ Reason for change |
|---|---|---|---|---|
| Functional currency devaluation Related with: |
||||
| 6 HSE: environmental Related with: |
||||
| 7 HSE: health, safety Related with: |
||||
| Potential government action Related with: |
||||
| Business interruption Related with: |
on pages 34-35
–
–
ts
.
Rapid improvement event
This indicator did not change year-on-year because the initiative ended in 2016.
Alexander Frolov 28 February 2017
| Contents | |||||
|---|---|---|---|---|---|
| Steel segment 40 | |
|---|---|
| Coal segment 54 | |
| Steel, North America segment 64 |
Annual Report & Accounts 2016
EVRAZ is a leader in infrastructure steel products globally and in the Russian coking coal market.
Ensuring the safety of people and equipment is EVRAZ' top priority in underground mining.
See about EVRAZ' coal mining methods on page 59
EVRAZ is No 1 among rail suppliers and the leader in the construction steel market in Russia. The Steel segment's primary focus is producing steel in the CIS from closely located raw materials to serve the domestic infrastructure and construction market while
| EVRAZ NTMK | EVRAZ KGOK | |
|---|---|---|
| EVRAZ Caspian Steel |
EVRAZ ZSMK | EVRAZRUDA |
| KAZAKHSTAN |
| Revenues | |
|---|---|
| US\$ 5,497 million |
8.2% yoy |
| EBITDA | |
| US\$1,004million | 7.1% yoy |
| EBITDA margin | |
| 18.3% | 0.2pp yoy |
| CAPEX | |
| US\$163 million |
10.9% yoy |
| PRODUCTION HIGHLIGHTS | |
| Crude steel | |
| 12,157 kt |
2.0% yoy |
| 11,182 kt |
0.9% yoy |
| 19,701 kt |
3.6% yoy |
| 12,861 mtV |
12.4% yoy |
5,601 kt 0.02% yoy
6,191 kt 6.6%yoy
4,218 kt 4.6% yoy
11,394 mtV 18% yoy
Russia's economy contracted by a further 0.2% in 2016, driving steel consumption down by 4% to 34.6 million tonnes, compared with 36.0 million tonnes in 2015. Demand decreased by 3% for long steel and 11% for tubular products, but increased by 3% for 12% for rebar, angles and channels, while consumption of beams strengthened by 10%. The Russian rail market delivered the highest segmental growth, consumption surging by 52% to 1,050 thousand tonnes, compared with 690 thousand tonnes in 2015.
mt
Russian export volumes increased by 4% to 29.7 million tonnes for the year despite the to high export prices and a weaker Russian rouble year-on-year. The combination of these negative and positive effects left overall Russian steel product output mostly unchanged.
During 2016, Russian steel prices were trends. The rebar price CPT Moscow averaged US\$386 per tonne, up 10% from US\$352 per tonne in 2015. The price for channels remained mostly unchanged, averaging US\$417 per tonne. Hot-rolled coil averaged US\$430 per tonne CPT Moscow, up 9% from US\$394 per tonne in 2015. Plates averaged US\$422 per tonne, down 2% from US\$433 per tonne in 2015.
In Ukraine, domestic steel consumption rose by 26% to 3.7 million tonnes in 2016, up from 2.9 million tonnes in 2015, on the back of a nascent economic recovery following the political instability of 2014-2015. Export volumes edged up by 2% to 17.9 million tonnes.
Kazakh steel consumption dropped by 20% to 2.2 million tonnes in 2016, compared with 2.7 million tonnes in 2015, due to economic headwinds. Steel product exports climbed by 30% to 2.6 million tonnes on the back of favourable export conditions, including a surge in prices and local currency devaluation.
Business review Annual Report & Accounts 2016
72% domestic market share in 2016
75 kt Rails export sales volumes in 2016 (excl. CIS)
913 kt total Steel segment rail sales in 2016
676 kt sales to Russian Railways in 2016
rails on next page
EVRAZ ZSMK produces 100-metre rails
Three minutes of compressed-air quenching gives the rails the following properties:
www.evraz.com 45
Expanding the client base (auto manufacturing and pipe makers) by increasing marketing activity.
Planned expansion of value-added semi offering by using more complex steel grades.
also cut by US\$40 million. Productivity growth generated an additional US\$26 million. Reduction of G&A costs saved US\$7 million. A reduction in auxiliary material consumption and the use of industrial services helped lower costs by US\$4 million. Repair work optimisations led to an additional cost savings of US\$0.4 million. Asset optimisation lowered expenses by US\$0.4 million.
Additionally, a series of measures were undertaken to reduce energy costs by US\$16 million. See pages 84-85
Actions in 2016:
Fe content in the sinter were increased and the coal charge was optimised.
Increased concentrate output at the processing plant, coal charge optimisation, involvement of slag in the production line.
Actions in 2016: Construction completed.
A key event in 2016 was the increase in iron ore production volumes at Evrazruda's Sheregesh mine following the implementation of an investment project. Primary concentrate production totalled 2.8 million tonnes for the year, which is a new record for the mine.
Key maintenance
In May, EVRAZ ZSMK conducted upgrade work on blast furnace 1 ahead of the beginning of the construction season in Russia. The work was completed ahead of schedule and was planned for May due to the cold winter in the region where the plant is located. The repair work helped stabilise the blast furnace's operations and reduce
The annual category-3 overhaul of blast furnace 6 took place
The annual category-3 overhaul of blast furnace 5 took place in
projects
EVRAZ ZSMK
EVRAZ NTMK
in August.
October.
EVRAZ NTMK. The project is aimed at supporting production during the overhauls of blast furnaces 5 and 6.
The foundations have been laid for the blast furnace itself, as well as the air heaters. The foundations are being laid for the casting yards. The belts are being installed for the blast-furnace jackets and air heaters.
at EVRAZ NTMK. Construction of a new ball mill at EVRAZ NTMK targeting an increase in ball production and sales volumes.
Status:
General contractor has been selected, project documentation has been completed, the basic and detailed engineering designs have been prepared, and the working documents
The project is aimed at increasing Evrazruda's ore production volumes to 4.8 million tonnes per year. Production will be carried out using new sublevel caving technology and self-propelled equipment.
Raw ore production is 4.6 million tonnes per year. Primary concentrate production is 2.8 million tonnes per year. Share of raw ore produced using self-propelled equipment increased to 60% of overall production volumes.
CAPEX US\$76 million IRR 13%
Several measures are being implemented to maintain the operational capabilities of the current tailings storage facility.
The tender procedures have been completed, some of the project work is done.
CAPEX US\$24 million IRR –
Maintaining production volumes at the Gusevogorskoye deposit.
Eight 130-tonne dump trucks have been purchased. Rail lines and contact systems have been built.
External steel product sales volumes at EVRAZ' Steel segment fell by 3.6% in 2016. The reduction explained mainly by sales volumes of construction products decrease by 9.8% year-on-year amid continued weak demand on the Russian market. Sales volumes of remained mostly unchanged in 2016. Railway products sales volumes rose 12.6% due to an uptick in purchases by Russian Railways and increased export shipments.
in Russia decreased in 2016. Russian rebar sales fell by 18% year-on-year, and angle and channel sales were down by 7% due to the ongoing construction industry slowdown. However, beam sales in Russia increased by 4% year-on-year thanks to portfolio development. Wheel sales in Russia rose by 3% due to increased new railcar production. Meanwhile, despite a competitor ramping up a mill in 2016, Russian rail sales climbed
| 2016 | 2015 | ||
|---|---|---|---|
| Russia | 4,998 | 5,413 | (7.7) |
| Asia | 3,285 | 3,020 | 8.8 |
| Europe | 1,302 | 1,617 | (19.5) |
| CIS | 883 | 987 | (10.5) |
| Africa, America and rest of the world | 1,323 | 1,190 | 11.2 |
| Total |
| 2016 | 2015 | ||
|---|---|---|---|
| 5,601 | 5,600 | 0.0 | |
| Construction products | 4,135 | 4,583 | (9.8) |
| Railway products | 1,134 | 1,007 | 12.6 |
| Flat-rolled products | 351 | 383 | (8.4) |
| Other steel products | 571 | 654 | (12.7) |
| 521 | 560 | ||
| Vanadium in slag | 5,261 | 4,082 | 28.9 |
| Vanadium in alloys and chemicals | 11,394 | 13,992 | (18.6) |
| Pellets | 1,672 | 1,388 | 20.5 |
| Iron ore concentrate | 36 | 14 | n/a |
by 6% on the back of greater demand from Russian Railways, which bought 7% more rails from EVRAZ than in 2015. Sales of grinding balls increased by 3% due to stable demand.
Despite slower domestic shipments during the year, the Group sustained its strong positions in key high-value-added product segments. Its share of the domestic beam market held stable at 63%.
The market shares for rebars, structural shapes (channels and angles) and wheels dipped slightly by a respective 14%, 43% and 27%. The grinding ball market share expanded to 70%. EVRAZ remained the leader in rail production with a 72% market share in 2016, albeit down from 97% in 2015 due to the entrance of a new player.
EVRAZ Caspian Steel rebar sales decreased by 30% to 180 thousand tonnes in 2016 due to low demand amid Kazakhstan's economic crisis.
Sales at EVRAZ DMZ increased by 5% to 975 thousand tonnes due to the improved local market situation and stable export sales volumes.
The Group's vanadium product sales volumes decreased by 7.5%, from 18,074 thousand tonnes of pure vanadium in 2015 to 16.722 thousand tonnes in 2016.
EVRAZ sold 1.7 million tonnes of iron ore pellets to third parties in the year, up by 20.5% from 2015, due to an increased demand in Russian market. Other external iron ore product volumes dropped by 15.9%.
The Steel segment's revenues fell, mainly due to lower revenues from sales of steel products. The main drivers were lower prices (down 4.9%, volumes (down 3.7%, primarily of construction products).
products dropped by 9.3% due to lower average prices (down 9.3%). External sales of billets rose, while volumes of slabs and pig iron
decreased compared with 2015, as billets had mainly to the Russian and European markets, were partially offset by increased billet shipments to Africa.
Revenues from sales of construction products to third parties dropped, mostly due to reduced volumes (down 9.8%) as a result of weaker demand in the CIS (including Russia) and lower average prices (down 1.0%).
| 2016 | 2015 | ||
|---|---|---|---|
| Russia | 2,222 | 2,342 | (5.1) |
| Asia | 1,001 | 1,047 | (4.4) |
| Europe | 438 | 578 | (24.2) |
| CIS | 384 | 437 | (12.1) |
| Africa, America and rest of the world | 424 | 448 | (5.4) |
| Total |
Revenues from external sales of railway products increased due to higher sales volumes (up 12.6%), partially offset by lower average prices (down 6.4%). The increase of railway products sales volumes in 2016 was attributable to operational improvements at EVRAZ ZSMK's rolling mill, an improved product mix, higher demand for rails from Russian Railways and export customers, as well as higher demand for railcar sections.
dropped. This was mostly due to lower sales volumes (down 8.4%) and average prices (down 1.1%) following the deconsolidation of EVRAZ Highveld Steel and Vanadium, as well as to reduced demand.
Revenues from external sales of steel products in Russia decreased by 5.1% year-on-year, mainly due to reduced sales volumes (down 7.7%). However, the share of Russia in external sales of steel products increased from 48.3% in 2015 to 49.7% in 2016, mainly due to shifting sales from Europe and the CIS to the domestic market.
The Steel segment's revenues from sales of iron ore products fell by 7.2%. This was due to a decrease in sales volumes (down 4.5%) following the deconsolidation of EVRAZ Highveld Steel and Vanadium, as well as to lower iron ore prices (down 2.7%). Prices for iron ore products generally subsided in 2016, moving in line with global benchmarks.
The Steel segment's revenues from sales of vanadium products slipped by 0.7% due to a decrease in sales volumes (down 7.5%), which stemmed from the deconsolidation of EVRAZ Highveld Steel and Vanadium. This was partially offset by higher sales prices (up 6.8%), in line with market trends.
The Steel segment's cost of revenues fell by 8.2% year-on-year in 2016. The main reasons for the decline were:
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| 81.0 | |||||
| 1 | 1,694 | 30.8 | 1,867 | 31.2 | (9.3) |
| Construction products2 | 1,783 | 32.4 | 1,999 | 33.4 | (10.8) |
| Railway products3 | 584 | 10.6 | 550 | 9.2 | 6.2 |
| Flat-rolled products4 | 162 | 2.9 | 179 | 3.0 | (9.5) |
| Other steel products5 | 246 | 4.6 | 257 | 4.3 | (4.3) |
| 184 | 4.0 | ||||
| Including sales to Steel, North America | 176 | 3.2 | 232 | 3.9 | (24.1) |
| 155 | 2.8 | 167 | 2.8 | ||
| 5.5 | 5.1 | ||||
| Other revenues | 7.1 | 426 | 7.1 | ||
| Total | 100.0 | 100.0 |
1 2
Includes rebar, wire rods, wire, beams, channels and angles
3 Includes rail, wheels, tyres and other railway products 4
5
Includes rounds, grinding balls, mine uprights and strips
This was partially offset by rouble and hryvnia weakening, as well as the deconsolidation of EVRAZ Highveld Steel and Vanadium.
Auxiliary material costs were down by 8.2%, primarily due to the rouble's weakening and the deconsolidation of EVRAZ Highveld Steel and Vanadium. This was partly offset by higher prices in local currencies (mainly for refractories).
Lower service costs were driven by the rouble and hryvnia weakening, as well as the deconsolidation of EVRAZ Highveld Steel and Vanadium.
Other costs decreased, primarily due to changes in goods for resale, intragroup URP, and the rouble and hryvnia weakening.
by 8.2% year-on-year, driven primarily by lower revenues from sales of steel products.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| Cost of revenues | 74.0 | 74.0 | |||
| Raw materials | 1,720 | 31.3 | 1,782 | 29.8 | (3.5) |
| Iron ore | 289 | 5.3 | 349 | 5.8 | (17.2) |
| Coking coal | 826 | 15.0 | 749 | 12.5 | 10.3 |
| Scrap | 274 | 5.0 | 295 | 4.9 | (7.1) |
| Other raw materials | 331 | 6.0 | 389 | 6.6 | (14.9) |
| Auxiliary materials | 314 | 5.7 | 342 | 5.7 | (8.2) |
| Services | 221 | 4.0 | 276 | 4.6 | (19.9) |
| Transportation | 347 | 6.3 | 384 | 6.4 | (9.6) |
| Staff costs | 456 | 8.3 | 532 | 8.9 | (14.3) |
| Depreciation | 213 | 3.9 | 229 | 3.8 | (7.0) |
| Energy | 393 | 7.1 | 448 | 7.5 | (12.3) |
| Other1 | 404 | 7.4 | 438 | 7.3 | (7.8) |
1
Leader in Russian coking coal market
The product portfolio includes a wide range of coking coal blends, including hard, semi-hard, and semi-soft.
| FINANCIAL HIGHLIGHTS | |
|---|---|
| Revenues | |
| US\$1,322 million |
23.8% yoy |
| EBITDA | |
| US\$ 644 million |
83.5% yoy |
| EBITDA margin | |
| 48.7% | 15.8pp yoy |
| CAPEX | |
| US\$ 93 million |
8.3% yoy |
Russian coking coal producers. The Group offers integrated solutions for optimising the coal blend to a global clientele, and prides itself on being a reliable supplier. Coal and concentrate products are used by EVRAZ' steelmaking divisions, as well as by third-party domestic customers and export clients in Ukraine, Japan, South Korea, Vietnam and China.
| PRODUCTION HIGHLIGHTS | |
|---|---|
| 22,257kt | 6.6% yoy |
| 12,492 kt |
4.9% yoy |
| 1,569kt | 17.6% yoy |
|---|---|
| 8,298kt | 9.6% yoy |
Russian coking coal concentrate consumption edged down by 1% to 38.3 million tonnes in 2016, compared with 38.8 million tonnes in 2015, due to the planned blast furnace overhauls at some steel plants. Export shipments rose by 15% to 20.8 million tonnes in 2016, up from 18.1 million tonnes in 2015, due to increased demand from Ukraine, Japan and South Korea.
Local coking coal prices improved in 2016, driven by global benchmark trends. Premium coking coal (Zh grade) averaged US\$91 per tonne FCA Kuzbass, up by 9% from US\$84 per tonne in 2015. Semi-soft coking coal (GZh grade) averaged US\$69 per tonne, up by 18% year-on-year.
mt
In 2016, EVRAZ maintained leading positions on the Russian coking coal market thanks to the following developments:
EVRAZ has substantially increased shipments to the Ukrainian market, reaching a market share of 12% in 2016.
To reach 3 mt of annual sales to Ukraine and gain a c. 20% market share.
EVRAZ reached its ambitious 2016 export sales targets thanks to:
In 2016, productivity growth generated an additional US\$36 million. Payroll optimisations totalled US\$23 million. Improving auxiliary material usage, industrial services and G&A saved another US\$21 million. Asset optimisation lowered expenses by US\$12 million.
measures have reduced costs by US\$2 million. For more information see page 85
Tunnelling rates grew c. 30% year-on-year in equipment:
Actions in 2016:
Introduce production time accounting and analysis systems to improve productivity at tunnelling faces by 25% year-on-year in 2017.
Installed new equipment for additional production processes (hydrocyclones, highfrequency screening machines, chamber
Continue optimising equipment operations.
The coal division's main investments have gone towards ensuring stable production production processes by using more modern equipment (eg increasing tunnelling rates, degassing volumes, and concentrate output), as well as preparing new blocks and seams as future mining reserves.
Additional capacity of 1.5 mtpa of hard coking
Status: Construction completed, start of room-andpillar mining.
CAPEX US\$148 million IRR 12%
The Group plans to begin implementing investment projects aimed at maintaining current output levels in 2017.
www.evraz.com
Market share of Russia's high-vol coking coal grades by volumes
semi-hard coking coal hard coking coal
33%
High-quality product portfolio with >80% of hard coking coal and semi-hard coking coal
Diversified client portfolio
on next page
59
Implementing measures to reduce injuries from tight working spaces and risk of collapse
Increasing working time at the coal face
Razrez Raspadsky is currently EVRAZ' only open-pit coal mining operation.
As the longwall mining equipment moves forward, overlying rock that is no longer supported by coal is allowed to fall behind the operation in a controlled manner.
EVRAZ' coking coal product sales climbed by 2% to 15.6 million tonnes in 2016, compared with 15.2 million tonnes in 2015, due to stable local and export demand, as well as higher production volumes at the Group's Mezhegeyugol facility following the launch of room-and-pillar mining operations in 2016.
Intersegment coking coal product sales remained mostly unchanged at 5.7 million tonnes. Total external coking coal product sales rose by 4% year-on-year 9.9 million tonnes, compared with 9.5 million tonnes in 2015, thanks to the expanded customer base and stable coal quality.
Coking coal product sales on Russia's domestic market remained mostly unchanged 9.8 million tonnes, with around 49% consumed by EVRAZ' steelmaking facilities.
The Group's coal products export shipments increased by 8% in 2016 to 5.8 million tonnes, compared with 5.3 million tonnes the year before. EVRAZ was able to increase sales to the South Korea and Japan by 32%, from 3.6 million tonnes in 2015 to 4.8 million tonnes in 2016.
In 2016 EVRAZ maintained its leading position in domestic market with 33% market share in high-volatile hard-coking coal grades and 51% in high-volatile semi-hard grades.
Hard coking coal high-volatile
| 2016 | 2015 | ||
|---|---|---|---|
| External sales | |||
| 4.1 | |||
| Coking coal | 1,569 | 1,905 | (17.6) |
| Coal concentrate | 8,298 | 7,569 | 9.6 |
| Inter-segment sales | |||
| Coking coal | 1,249 | 1,348 | (7.3) |
| Coal concentrate | 4,452 | 4,388 | 1.5 |
| 2.4 |
The segment's overall revenues increased amid growth of sales prices due to the recovery of global demand. Additional support came from the accident at Vorkutaugol's Severnaya mine. Sales volumes rose due to higher annual output at the Erunakovskaya-8 mine in 2016, following longwall moves and unfavourable geological conditions in 2015. In addition, productivity at the Uskovskaya and Osinnikovskaya mines
improved, and annual output at Mezhegeyugol rose following the launch of room-and-pillar mining operations in 2016.
Revenues from internal sales of coal products increased due to higher prices (up 15.9%), partially offset by lower sales volumes (down 0.6%). Revenues from external sales of coal products also rose due to higher prices (up 21.7%) and sales volumes (up 4.1%).
In 2016, the Coal segment's sales to the Steel segment amounted to US\$483 million (36.5% of sales), compared with US\$419 million (39.2%) in 2015.
During the reporting period, roughly 48% of EVRAZ' coking coal consumption in steelmaking came from the Group's own operations, compared with 51% in 2015.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| External sales | |||||
| 756 | 57.2 | 601 | 56.2 | 25.8 | |
| Coking coal | 66 | 5.0 | 58 | 5.4 | 13.8 |
| Coal concentrate | 690 | 52.2 | 543 | 50.8 | 27.1 |
| Inter-segment sales | |||||
| 451 | |||||
| Coking coal | 42 | 3.2 | 47 | 4.4 | (10.6) |
| Coal concentrate | 409 | 30.9 | 344 | 32.2 | 18.9 |
| Other revenues | 115 | 8.7 | 76 | 7.2 | |
| Total | 100.0 | 100.0 |
The main factors behind the decrease in the segment's cost of revenues compared with 2015 were:
offset by an increase in costs due to higher sales volumes in 2016.
to US\$621 million in 2016, up from US\$310 primarily due to the increase in sales prices and volumes, cost-cutting initiatives and rouble
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| Cost of revenues | 701 | 758 | 71.0 | ||
| Auxiliary materials | 113 | 8.5 | 106 | 9.9 | (6.6) |
| Services | 85 | 6.4 | 74 | 6.9 | 14.9 |
| Transportation | 126 | 9.5 | 146 | 13.7 | (13.7) |
| Staff costs | 163 | 12.3 | 194 | 18.2 | (16.0) |
| Depreciation/Depletion | 135 | 10.2 | 156 | 14.6 | (13.5) |
| Energy | 37 | 2.8 | 38 | 3.6 | (2.6) |
| Other1 | 42 | 3.3 | 44 | 4.1 | (4.5) |
1
THE LONG DIVISION is the US' largest domestic producer of premium rail and the only rail producer in Western North America.
THE TUBULAR DIVISION is the largest North American producer of LDP, which is used for oil and gas pipelines, and the only supplier of fully "Made in Canada" LDP. It is also the largest OCTG producer in Western Canada.
THE FLAT DIVISION operates the only plate mill on the US West Coast.
EVRAZ is the largest producer by volume in the North American rail and largediameter pipe (LDP) markets and holds leading positions in Western Canada's oil country tubular goods (OCTG) and small-diameter pipe (SDP) markets, as well as in the US West Coast plate market.
| Revenues | |
|---|---|
| US\$1,464 million | 35.5% yoy |
| EBITDA | |
| US\$ 28 million |
49.1% yoy |
| EBITDA margin | |
| 2% | 0.4pp yoy |
| CAPEX | |
| US\$165 million |
20.4% yoy |
| Crude steel | |
|---|---|
| 1,370kt | 23.7% yoy |
| 1,650kt | 26.2% yoy |
1,672kt 24.8% yoy
US steel product consumption decreased by 4.2% to 91.2 million tonnes in 2016, down from 95.1 million tonnes in 2015. Demand products and 30.2% for tubular products. Despite fairly strong large-diameter pipe (LDP) market fundamentals during the reporting period, demand fell to 1.1 million tonnes from 1.5 million tonnes in 2015 due to pipeline project delays. Amid low oil prices, the oil country tubular goods (OCTG) market bottomed out in 2016 with Canadian consumption estimated at 0.5 million tonnes. North America consumed 1.1 million tonnes of rails in 2016, a 24% decline from 2015 levels, amid reduced CAPEX spending at Class-I railroads due to weak energy E&P activity and lower coal shipments. Demand for wire rod and plate was stable.
Finished steel product imports, which in 2015, dropped by 16% year-on-year to 23 million tonnes in 2016 amid anti-dumping duties and pending trade cases against certain producers.
Despite efforts to promote healthy competition and eliminate import dumping activity, weak North American demand undermined local steel prices. Prices dropped in 2016 by 2% to US\$586 per tonne for rebar, and by 22% to US\$881 per tonne for OCTG.
During the year, our operations focused on adjusting controllable costs to bring them in-line with reduced volumes. Reduction of G&A costs saved US\$42 million. A reduction in auxiliary material consumption and the use of industrial services helped lower costs by US\$22 million. Repair work optimisations led to an additional of raw and basic materials saved US\$5 million. Payroll expenses were also cut by US\$4 million.
Continue streamlining incidental and nonvalue adding processes.
vs. prior year
maintenance activities in the Pueblo and Portland sites, maintenance CAPEX and OPEX decreased 30% and 22% respectively compared to 2015
Continue rationalisation on maintenance CAPEX in the long and tubular divisions to align to production volumes.
Annual Report & Accounts 2016
Regina steel mills upgrades. Install
a vacuum degasser, upgrade rolling mill, down coiler, and cooling bed in Regina. Status:
CAPEX US\$147 million IRR >35%
Status:
CAPEX US\$73 million IRR 30%
During 2016, the Group's operations completed important maintenance projects:
EVRAZ North America's steel product sales volumes fell by 24.8% from 2.2 million tonnes in 2015 to 1.7 million tonnes in 2016 due to market headwinds. Construction product sales volumes decreased by 12.2% to 281 thousand tonnes. EVRAZ sold 321 thousand tonnes of railway products in 2016, down by 38% from 518 thousand tonnes in 2015, amid lower demand from major customers. Flat product volumes slipped by 6% to 536 thousand tonnes in 2016, compared with 2015 volumes of 570 thousand tonnes.
Tubular products sales slid by 34.4% to 534 thousand tonnes in 2016, down from 814 thousand tonnes in 2015, primarily due to a 42% decline in OCTG products sales as a result of subdued oil and gas exploration and production activity in North America. LDP sales volumes declined 16% to 305 thousand tonnes due to approval delays on key pipelines.
EVRAZ North America maintained its leadership in rails and LDP during 2016 with market shares of roughly 28% by volume and 27%, respectively. In 2016, the Group almost completed the construction of an LDP mill at Regina, which should underpin its leadership position in LDP in 2017.
| 2016 | 2015 | ||
|---|---|---|---|
| Construction products | 281 | 320 | (12.2) |
| Railway products | 321 | 518 | (38.0) |
| Flat-rolled products | 536 | 570 | (6.0) |
| Tubular products | 534 | 814 | (34.4) |
| Total |
The segment's revenues from steel product sales decreased due to lower sales volumes (down 24.8%) and the impact of lower sales prices (down 11.1%). Output declined mainly due to weak tubular and rail markets, along with extended planned outages in 2016.
Revenues from sales of construction products fell by 26.9%, primarily due to lower sales prices (down 14.7%) and sales volumes (down 12.2%). The fall in sales volumes was attributable to reduced demand for rod
and bar products, as well as to the disposal of a structural tubing facility in Portland in March 2015.
Railway product revenues declined by 46.7%, driven by a 38.0% drop in volumes and a 8.7% reduction in average prices, in line with the general price trend in the US steel market. The rail market fundamentals were less positive, given moderate CAPEX of the surplus inventory of rails.
due to lower prices (down 9.1%) and sales volumes (down 6.0%), which was caused by deteriorating conditions in the segment.
Revenues from tubular product sales decreased by 42.1%, primarily due to lower sales volumes (down 34.4%) and sales prices (down 7.7%). The drop in sales volumes was driven by weaker demand for OCTG, which in turn was caused by a slowdown in drilling activities due to the slump in oil prices.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| 92.2 | 92.7 | ||||
| Construction products1 | 158 | 10.8 | 216 | 9.5 | (26.9) |
| Railway products2 | 232 | 15.8 | 435 | 19.2 | (46.7) |
| Flat-rolled products3 | 372 | 25.4 | 438 | 19.3 | (15.1) |
| Tubular products4 | 588 | 40.2 | 1,016 | 44.7 | (42.1) |
| Other revenues5 | 114 | 7.8 | 165 | ||
| Total | 100.0 | 100.0 |
1 Includes beams, rebar and structural tubing
2 Includes rails and wheels
3
4 Includes large-diameter line pipes, ERW pipes and casing, seamless pipes, casing and tubing, and other tubular products
5 Includes scrap and services
The Steel, North America segment's cost of revenues fell by 37.1% year-on-year in 2016. The main drivers were:
tubular products and a decline in prices for purchased slab.
back of lower inventory write-offs and slowmoving adjustments as a result of reduced inventory volumes, accompanied by the decline in transportation costs and changes in goods for resale.
The Steel, North America segment's gross from US\$293 million in 2015. The decline was primarily due to lower sales volumes amid the downturn on the OCTG and rail markets.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| US\$ million | US\$ million | ||||
| Cost of revenues | 84.9 | 87.1 | |||
| Raw materials | 390 | 26.6 | 643 | 28.3 | (39.3) |
| 196 | 13.4 | 354 | 15.6 | (44.6) | |
| Auxiliary materials | 102 | 7.0 | 162 | 7.1 | (37.0) |
| Services | 106 | 7.2 | 160 | 7.0 | (33.8) |
| Staff costs | 196 | 13.4 | 254 | 11.2 | (22.8) |
| Depreciation | 100 | 6.8 | 107 | 4.7 | (6.5) |
| Energy | 85 | 5.8 | 106 | 4.7 | (19.8) |
| Other6 | 68 | 4.7 | 191 | 8.5 | (64.4) |
6
| Our approach 74 | |
|---|---|
| Health, safety and environment 75 | |
| Energy-saving measures 84 | |
| Social policy 86 | |
| Anti-corruption 94 |
Annual Report & Accounts 2016
EVRAZ is a socially responsible company, addressing and monitoring all aspects of corporate social responsibility that are relevant to the business
See more about EVRAZ actions on minimising the impact on the air and water on page 79
EVRAZ is a socially responsible company, addressing and monitoring all aspects of corporate social responsibility (CSR) that are relevant to the business. This section of the report provides an overview of the Group's policies and performance in 2016 in key areas of CSR, including human rights, health and safety, the environment, human capital management and community engagement, and an outline of how the Group intends to improve its performance in the years ahead.
EVRAZ follows the OECD Guidelines for Multinational Enterprises to ensure a uniform approach to business standards across its global operations. The Group's commitments are based on internationally recognised standards and respect for all human rights, including civil, political, economic, social, and cultural rights. In particular, EVRAZ fully endorses the provisions of the United Nations' Universal Declaration of Human Rights and strives at all times to uphold them.
EVRAZ seeks to develop and maintain a work environment that is free from discrimination and ensures equal rights, where every employee has the opportunity to contribute to the Group's overall results, and to realise his/ her abilities and potential.
internal codes and principles, including the Business Conduct Policy, "The EVRAZ Way", available on the corporate website at www.evraz.com/governance/documents/
EVRAZ is devoted to improving occupational and industrial safety, as well as to protecting the environment wherever it operates. The Group aims to never stop improving HSE management at its assets by implementing technological improvements to its production processes, with a clear management and control system and hierarchy.
EVRAZ manages health, safety and environment (HSE) at every level of its business, from adopting strategy to responding to operational management issues. In 2010, the management created a HSE Committee that reports to the Board of Directors and is responsible for monitoring all HSE strategies, policies, initiatives and activities. In March 2011, EVRAZ introduced its Health, Safety and Environment Policy. In March 2016, EVRAZ revised its Health, Safety and Environment Policy and added a fourth cardinal rule to the all-Company safety rule list.
The HSE Committee deals with HSE issues at the executive level, and has appointed a vicepresident of HSE to coordinate all activities in the area. Each individual enterprise has an HSE team to consider such issues that reports to the sites' management with a dotted line to the vice president of HSE. HSE compliance is the responsibility of each and every plant manager.
EVRAZ plays an active role in the World Steel Association's Environmental Policy (EPCO), Technology Policy (TPCO) and Safety and Health (SHCO) committees, as well as the HSE committees of Russian Steel, a Russia-based non-commercial partnership, and the Russian Union of Industrialists and Entrepreneurs.
steel mills under the ISO 14001 and OHSAS 18001 standards.
The HSE system's primary functions are to identify potential sources of environmental harm, as well as health and safety risks to personnel throughout the production cycle,
product sales, as well as planning, distributing resources, collecting, analysing and submitting indicators.
The HSE management process operates in a continuous cycle that includes:
forecasting and assessing primary HSE risks;
EVRAZ establishes, measures and assesses the primary indicators for HSE KPIs. The system is continuously improved by monitoring, promptly analysing and adjusting where needed.
EVRAZ' HSE reporting system is tasked with improving the collection and sharing of appropriate data organisation-wide. Constant monitoring is ensured by subsidiaries submitting monthly, quarterly and annual HSE performance data to the corporate HSE functions.
Periodic internal audits are undertaken to assess the Group's HSE policy compliance. Government agencies also perform external control functions. Any recommendations that follow from the inspections are analysed in detail to allow the necessary remedial actions to be taken.
EVRAZ' incident reporting rules are applied universally organisation-wide. All injuries involving any lost time and/or fatalities are distributed to all affected managers. Standard 'lean' format investigations are then conducted and lessons learnt are subsequently disseminated to concerned parties. Every fatality, severy injury or serious incident is then reviewed by the HSE Committee, which also monitors the completion of all respective corrective actions.
HSE releases a monthly special report regarding the past month's injuries and incidents that includes relevant HSE KPIs like the lost-time injury frequency rate, fatalities and cardinal rule violations. The reports are distributed to all EVRAZ employees.
www.evraz.com 75
As for all steelmakers, EVRAZ' employees and contractors work in an environment that has inherent health risks. Among these risks are moving machinery, excessive heat, high noise levels, high levels of dust and gas stress. EVRAZ' underground operations have
The health and safety of employees is the Group's highest priority. Therefore, the Group takes every effort to manage and effectively mitigate the risks typical of the sectors EVRAZ is operating in. This is done through the implementation of enhanced production processes, as well as with new management and control systems. The Group strives to create a safe workplace at all enterprises and continues to develop relevant projects, provide employees with personal protective equipment and install cutting-edge safety equipment. More importantly, EVRAZ pays increasing attention to employees' behaviour, thus developing a safety culture to reinforce this effort. Regular safety conversations are aimed at increasing safety awareness among steelworkers and miners with regard to themselves and their colleagues.
Apart from increasing the safety of its own employees, the Group also works rigorously with contractors to improve their safety programmes. EVRAZ aims to reduce the number of contractors at all EVRAZ operations and gives preference to more established companies with clear safety-management practices. The audits and post-assignment assessments helped this approach cut the number of LTIs among contractors in half compared with 2015 and drove the number of fatalities involving contractor employees down to zero.
The Group's LTIFR, which excludes fatalities, rose to 2.36 in 2016, up 8% year-on-year, after EVRAZ started to enforce transparency in reporting in 2015. While the total number of fatalities and severe injuries taken together has been decreasing over the recent years, the relative increase in recorded minor incidents is an indicator of an overall improvement in reporting transparency.
LTIFR. EVRAZ' LTIFR started to grow in Q2 2015 as a result of the Group's systemic effort to ensure full transparency in reporting. Since then, several LTIs that were not duly reported have led to serious consequences for the managers involved, which sent a clear message to both blue-collar employees and managers at all levels that the practice would no longer be tolerated.
The Group believes that it is much more important for the management team to have the full picture of the injury rates to be able to step in with corrective actions rather than to prop up statistics, and will therefore facilities as inappropriate at any level. There is a clear temporal correlation between disciplinary action taken for falsifying facts or circumstances regarding an occupational injury and subsequent increase in the number of injuries reported.
increase is the gradual reduction of total manhours worked, which is mainly achieved through staff reductions in the administrative personnel that operates in a lower-risk environment and are therefore less prone to LTIs.
Fatalities. Although the number of fatalities is gradually going down, EVRAZ has faced six fatal incidents in 2016. Three of the above fatalities resulted from unsafe operations on moving machinery, one employee was fatally injured by a falling object, and another was killed by electric shock after unsafe actions on a rock collapse in a coal mine, the employee died in the hospital several days after the incident due to multiple fatal injuries.
LTIFR (excluding fatalities), per 1 million hours
All occupational diseases are treated under the Group's mandatory work-related accident and occupational disease insurance. EVRAZ is required by law to pay the premiums for this programme. Employees diagnosed with occupational diseases receive temporary assistance to such employees, depending on their circumstances and medical condition: for example, if they require lengthy medical treatment, they may receive compensation for moral harm. However, employees may not use these funds to arrange their own medical treatment.
Number of registered occupational diseases.
In 2016, there was a gradual decrease in the number of occupational diseases registered reduction of man-hours, this is also a result of a closer look at working conditions and a corporate effort to eliminate highest-risk
Corporate Communications Lifestyle Nomination Winner. With its
Design and implementation of the "Daily Feedback" IT Solution to ensure visual training material demonstration and express knowledge testing of employees before each shift.
Implementation of the Lock out - Try out system in coal mines.
EVRAZ believes that the safety initiatives implemented across the Group are helping it support the development of its safety culture and will therefore have a lasting effect on its safety performance. The two key initiatives in 2016 were targeted at reducing the number of unsafe actions through safety conversations on help of standard safe work procedures.
Safety conversations. Regular safety conversations taking place among employees for building a positive safety culture. Recognising that such conversations are an essential part of promoting safe behaviour, EVRAZ introduced a system of scheduling such conversations regularly across its sites. Every manager, from a target to conduct a certain number of such conversations. This is in essence similar to the concept of behaviour safety audits, but EVRAZ chose to focus the attention of managers on the conversation aspect to make sure that they talk to their reports about safety right at the workplace.
In 2016, EVRAZ managers completed over 500,000 safety conversations with the Group's employees, many of them having at least one suggestion to improve safety at work. All these suggestions are analysed by the relevant supervisors and the key ones are tracked through completion.
Standard safe work procedures. One of the key principles of safe work is making sure that the respective process is initially designed in a safe way and all employees are trained to follow the procedure. To support this approach, EVRAZ decided that each structural unit should design 10 standard safe work procedures and implement them in accordance with the corporate requirements. These requirements imply employees' participation in developing these procedures, as well as proper training and
EVRAZ has designed and implemented over 2,000 standard safe work procedures in 2016. Key risk localisation programmes. To make tailor-made to the needs of respective facilities, EVRAZ suggested that business divisions design key risk localisation programmes. These consist of activities targeted at the areas that are of greatest concern from a safety perspective. Some divisions are investing extra efforts in gas safety, some are breakthroughs in working at height etc. This ongoing initiative was launched in 2016, but most of the activities are planned for 2017 and on.
In 2017, in addition to continuing the key risk localisation programmes, EVRAZ plans to continue implementing the key initiatives targeted at developing safe employee behaviour – safety conversations and standard safe work procedures.
The two initiatives' methodologies are described in the section above. The key change in the safety conversations methodology is adding extra focus to the quality of such conversations, which will be monitored in two ways.
On the one hand, safety teams will be observing whether managers follow the safety conversations methodology when running such conversations. On the other hand, operations managers will be auditing the conversations run by their reports by checking whether they in fact took place, whether the non-conformities found by the unit, and whether corrective actions suggested by employees were actually implemented and tracked though completion. Checklists have been designed to ensure consistency in both areas.
EVRAZ also plans to continue LOTO projects aimed at preventing machinery from releasing hazardous energy by physically locking the controls, as well as rolling out alcohol testing at the gate to ensure strict enforcement of EVRAZ' zero-tolerance policy.
EVRAZ believes that these programmes and initiatives will help the Group reduce its LTIFR down to 2.0 or lower, which is its overall target approved for 2017.
EVRAZ' steel and mining operations have can potentially impact the environment through waste generation, wastewater discharge, air emissions and land contamination.
Environmental legislation strictly regulates these operations and requires the Group to obtain environmental permits and licences. EVRAZ must maintain compliance with their terms for them to remain valid and be extended. This generally requires implementing certain environmental commitments, recruiting equipment and environmental monitoring systems, and periodically submitting information to environmental regulators. Noncompliance on any of these fronts carries the potential for the environmental permits and licences to be suspended, amended, terminated or not renewed, or could entail remedy any such violations.
EVRAZ strives to continuously improve its environmental management systems, including via its ongoing ISO 14001 audit programme. requirement, nine of the Group's sites are including such key operations as EVRAZ NTMK, EVRAZ ZSMK and EVRAZ DMZ.
EVRAZ conducts an Environmental and Social Impact Assessment (ESIA) of all new operations and projects, during which it consults with local and regional governments, businesses and community members in the affected area. The ESIAs evaluate any potential direct and indirect impacts that the new operation may have on the local community and surrounding environment. The ESIA process entails creating mitigation plans to minimise and manage any
potential impact, as well as consulting with local communities regarding any decisions that may be made throughout the project's life.
EVRAZ supports the European Union's health and environmental goals as established in Regulation (EC) No. 1907/2006 of the European Parliament and of the Council, which governs the registration, evaluation, authorisation and restriction of chemicals ("REACH"1 ). The Group strives to maintain REACH compliance.
The Group's environmental strategy aims to minimise any negative impacts caused by its waste management solutions. Environmental compliance is a top long-term priority.
In 2012, after determining the key challenges and focus areas, EVRAZ voluntarily adopted aimed at:
The Group's non-compliance-related by 7 % to US\$2.1 million in 2016 from US\$2.0 million as it was in 2015. licences were missing or revoked in 2016, although the Russian government has tightened the requirements for obtaining environmental permits and licences. This was the reason for the delay in issuing some of the new permits, which led to non-compliance levies of US\$ 0.5 million. EVRAZ' assets had material environmental claims during the reporting period.
implementing these programmes was estimated at
US\$ 24 million on measures to ensure environmental compliance
US\$12 million on projects to improve its environmental performance
17.3%water consumption
120%of waste being recycled
waste from prior periods)
1
2
3
EVRAZ' top environmental priorities include decreasing air emissions. The primary air emissions comprise nitrogen oxides (NOx), sulphur oxides (SOx), dust and volatile organic compounds.
environmental targets , the Group had already substantially reduced its air emissions. The current strategy for reducing air emissions envisages upgrading gas treatment systems, introducing modern technologies and eliminating obsolete equipment.
In 2016, key air emissions were down by 3.5 thousand tonnes (or 2.6%) compared with 2015.
The management has also decided to conduct a like-for-like analysis that rebases the target by excluding data related to divested assets (EVRAZ VGOK, EVRAZ Vitkovice Steel, Evrazruda's Krasnoyarsk mines, EVRAZ ZSMK's central power plant, EVRAZ Highveld and EVRAZ NTMK's Nizhnesaldinsky metal mill), which shows that key air emissions at current assets have risen by 18.8% since 2011. This has been driven primarily by an increase in sulphur content in the coal and ore used at EVRAZ ZSMK's power and sinter plants, which has resulted in higher SOx emissions, and higher NOx emissions at EVRAZ KGOK.
However, EVRAZ' emission reduction initiatives are expected to decrease key air emissions over the coming years.
EVRAZ key air emissions, kt 2012 2013 2014 2015 2016 122.11 119.12 124.24 134.17 130.68
EVRAZ' operations also generate carbon dioxide and other greenhouse gas (GHG) emissions.
The Group understands the urgency of climate change prevention and supports the global effort to reduce the emission of GHGs into the atmosphere. In compliance with the Companies Act 2006 (Strategic and Directors' Report) Regulations 2013, EVRAZ measures the full GHG emissions its facilities and has taken part in the CDP Climate Change Programme since 2011.
The Group measures direct (Scope 1) emissions of all seven "Kyoto" GHGs1 and indirect (Scope 2) emissions from the use of electricity and heat. The inventory approach2 was based on the 2006 IPCC Guidelines for National Greenhouse Gas Inventories (IPCC 2006) and the WRI/WBCSD GHG Protocol Corporate Accounting and Reporting Standard. EVRAZ reports data in tonnes of carbon dioxide (CO2 ) equivalent (tCO2 e), calculated using the IPCC Fourth assessment report (2007) global warming potentials.
Data on GHG emissions were collected for 2016 and compared with 2013-2015 levels. The Steel segment continues to generate more than half of gross GHG emissions from Group operations. Nearly 92% of the Coal segment's full emissions come from fugitive methane (CH4 ) leakage, which is caused by methane ventilation from underground mines and postmining emissions from coal.
Overall GHG emissions from EVRAZ' operations fell by about 5% year-on-year in 2016. Emissions of CO2 remain at the 2015 level due to the cumulative effect of a minor increase at the Steel segment (up around 0.4 million tCO2 e) and the cease in operations at EVRAZ Highveld Steel and Vanadium in 2016. In the Coal segment, CH4 emissions dropped by 10% due to a lower methane content in the coal mined as well as lower coal extraction at some mines.
All told, EVRAZ brought down its Scope 1 emissions by 2% and its Scope 2 emissions by roughly 19%, due to the cease in operations at EVRAZ Highveld Steel and Vanadium in 2016 (which accounted for some 6%) and lower volumes of energy purchased by EVRAZ NTMK and EVRAZ ZSMK in 2016.
EVRAZ reports an intensity ratio relating its annual GHG emissions to its activities: total Scope 1 and 2 emissions per consolidated revenue for the Group overall and each operating segment (see graphs). In addition, tonne of steel cast for 2013-16 are compared GHG emissions in the Steel segment may be due to the key role played by integrated iron and steel works (which inherently emit more GHGs than rolling mills) in EVRAZ' steel production.
1 2
| 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|
| Direct (Scope 1) | 42.92 | 39.05 | 36.87 | 35.95 |
| CO2 | 33.78 | 31.08 | 29.13 | 28.95 |
| CH4 | 9.06 | 7.89 | 7.67 | 6.94 |
| N2O | 0.08 | 0.08 | 0.07 | 0.07 |
| PFC+HFC | 0.0002 | 0.0002 | 0.0002 | 0.0001 |
| SF6 | — | — | — | — |
| NF3 | — | — | — | — |
| Indirect (Scope 2) | 8.05 | 7.96 | 6.17 | 5.02 |
| Total GHG emissions | 50.97 | 47.00 | 43.04 | 40.98 |
resources and prevent any negative water quality impacts through environmental incidents.
In 2016, almost 84% of EVRAZ total water intake for production needs was from surface sources, including rivers, lakes and reservoirs – the same result as in 2015.
In 2016, the ongoing water management performance improvement programmes at 3.3% year-on-year reduction in fresh water consumption (down by 11.3 million cubic
metres compared to 2015). Given the HSE Committee's decision to re-base the target by excluding data related to disposed assets, fresh water consumption was down by 78.2 million cubic metres (17.3%) compared with the 2011 adjusted baseline. Water discharge was reduced by 45.15 million cubic metres over 2012-2016.
Water pumped from mines (dewatering) is not included in the fresh water consumption target, although pumped water is partly used for technological needs. In 2016, 20.3 million cubic metres of mine water were pumped out and used, compared with 20.5 million cubic metres in 2015.
EVRAZ fresh water consumption, million m3
Mining and steelmaking operations produce rock, spent ore and tailings (waste from processing ore and concentrates). EVRAZ aims to reduce the amount of waste that it produces, re-use natural resources where possible and dispose of waste in a manner that minimises the environmental impact while maximising
In line with the Group's strategy to reduce waste storage volumes and enhance waste disposal, EVRAZ enterprises regularly review opportunities for waste recycling and reuse.
In 2016, EVRAZ steel mills generated 9.65 million tonnes of metallurgical waste (slag, sludge, scale etc) and recycled or reused 11.59 million tonnes. Overall, the Group recycled or reused 120.1% of non-mining waste and by-products in 2016, compared with 126% in 2015.
The main reason for the lower waste recycling rate is that EVRAZ ZSMK sold its slag processing plant and slag disposal facility to an external recycling company.
EVRAZ' strategy for dealing with nonhazardous mining wastes, such as depleted rock, tailings and overburden, is to use them where possible for land rehabilitation and the construction of dams or roads. In 2016, 18.2% or 28.7 million tonnes of such waste material were reused, compared with 17% or 24.6 million tonnes in 2015.
All non-recyclable waste is stored in facilities that are designed to prevent any harmful substances contained in the waste from escaping into the environment. Safety at such facilities is monitored extremely closely, and steps have been taken to mitigate as far as possible any danger to third parties in an emergency.
| MINIMISE AT THE SOURCE | ||
|---|---|---|
| Order of preference | RE-USE | |
| RECYCLE | ||
| BURN AS A FUEL / GENERATE HEAT |
||
| STORE | Store waste that cannot be used today safely, retaining the option | |
| BURN | It is forbidden to: "burn production and consumption waste without special facilities |
EVRAZ ZSMK
Winner in the Urban Ecology category at the XIII Vernadsky National Ecological Awards for the project titled "Modernising EVRAZ ZSMK".
Winner in the Environmental and Resource Protection category at the Company awards.
EVRAZ Portland Oregon Industries Environmental Excellence Award for Portland Riverbank Cap project.
In addition, EVRAZ has received six regional awards in Russia's Kemerovo region.
operations in 2016 by generating more electricity in-house and reducing the share of energy resources that it purchased. Initiatives to optimise the use of light, heat, fuel, compressed
continued in 2016, including measures aimed at reducing the amount of electricity used to compress air at the Prokatnaya compressor station, shutting off natural gas supplies to some equipment at oxygen convertor shop 1 during operational downtime, and using less steam in the rail yard.
Natural gas consumption totalled 611.4 million cubic metres in the reporting period, a decrease of 40 million cubic metres year-on-year, due to fuel balance optimisation. Overall electricity usage amounted to 4,132 million kWh, which is 36 million kWh less than in 2015, thanks to the measures mentioned above.
EVRAZ NTMK implemented several projects as to a 66% reduction in electricity purchases, of
which a 42% reduction came from outsourcing oxygen production, 12% was the result of increasing on-site electricity generation, and another 12% was due to lower consumption.
A total of 446 million kWh was purchased from external producers during the reporting period, which is 461 million kWh less than in 2015 as a result of these measures.
Natural gas consumption totalled 1,178 million cubic metres in 2016, up by 69 million cubic metres year-on-year as a result of increased gas usage by the blast furnaces, which was required to maintain the optimal balance of energy costs.
In 2016, EVRAZ DMZ undertook numerous initiatives to reduce spending on energy purchases and maximise its consumption of associated gases (from blast furnaces and coking facilities).
The power plant's energy structure was optimised by increasing the usage of associated gases from the blast furnaces and coking facilities. This reduced natural gas consumption to 16.8 million cubic metres. Further measures were undertaken to improve the accounting of energy sources (natural gas, electricity, and drinking water) in order to better monitor resource usage.
Overall, 37.9 million cubic metres of natural gas were used in 2016, which is 6.5 million cubic metres less than in 2015. Electricity consumption totalled 312.3 million kWh, down by 9.4 million kWh year-on-year.
programme included: shutting down underequipment, and installing frequency convertors on pumps in a number of production units.
These measures reduced electricity consumption by roughly 995 thousand kWh in 2016, to a total of 51.6 million kWh, of which 11.5 million kWh were purchased and 40.1 million kWh were generated on-site.
Total consumption for the year was up by 3 million kWh compared with 2015. The increase was due to the need to use equipment with high energy consumption during major repairs that were conducted in 2016: gas and air blowers, as well as gas pipelines. Without the programme, overall consumption would have been 52.5 million kWh.
for 2016 included reducing electricity consumption by replacing incandescent light bulbs with LEDs in the underground tunnels of the Tashtagolskaya and Kazkaya mines, as well as changing the bearing material in the ball mills at the Abagursky branch.
Total electricity consumption was 434 million kWh, which was 12 million kWh less than in 2015 as a result of the programme.
Installing energy saving lighting in the main haulageways as part of the energy consumption by 0.65 million kWh to 139.76 million kWh.
aimed at reducing heat energy and electricity consumption:
The result was a 49 million kWh overall reduction in energy consumption to 295 million kWh.
EVRAZ North America's operations continued implementing energy-saving measures in 2016.
During the rebuild of the slab reheat furnace in Portland, our technical team upgraded the than other technologies. As a result, we expect energy savings of approximately four therms per short ton, or ca. 371 TJ in energy savings annually at full utilisation.
For 2016, electricity and natural gas consumption declined year-on-year in-line with production volumes from 1,623 GWh to 1,059 GWh and from 9,120 TJ to 6,357 TJ, respectively.
EVRAZ continues to focus on working both with and for people. The Group's management recognises that reaching their business targets depends on carefully selecting new hires, providing quality training and ensuring that staff are properly motivated.
Staff recruitment policy
The Group's in-house HR function meets 99% of its recruiting needs, regardless of the type specialist or management).
With a view toward attracting talented graduates and providing professional development for staff, EVRAZ has launched several initiatives in cooperation with leading universities:
The Group prefers to promote from within, but when necessary goes outside the organisation to
Candidate assessments follow EVRAZ principles of safety, respect for people, customer orientation, accountability and teamwork, as well as the world-renowned Korn Ferry Learning AgilityTM model.
Staff development
Staff development strategy. In 2016, EVRAZ continued its "From Foreman to Managing Director" program. This corporate selection, assessment and development procedure aims to improve the managerial skills of manager.
In 2016, the Group launched a project focused on The project's scope has been expanded to also include area managers. EVRAZ has developed the requirements for the area manager position, as well as a quarterly assessment system covering three areas: health and safety, people management, and process management.
Performance management. To encourage outstanding performance and ensure that corporate and individual goals are clearly linked, the Group has implemented performance management systems throughout its operations. The performance management process' business tasks and development targets include key performance indicators (KPIs) of certain business units aligned with EVRAZ' strategic principles and personal development plans. The performance management plans are used to create further initiatives to motivate staff and ensure career growth.
Training and development. EVRAZ places an emphasis on selecting, developing and promoting high-potential employees, as set out
EVRAZ draws on the technical expertise of its staff by obtaining their input when developing in-house educational materials and training courses to ensure that all employees are ready to tackle even the toughest issues that may arise in the course of doing business.
We have competed in the WorldSkills Hi-Tech championship for several years now, and our results keep getting better with each passing year. It makes me happy to see how the EVRAZ team spirit is already showing itself at international competitions. I would like to see more of our employees take part and win in future years.
Alexei Yuryev Managing director of EVRAZ ZSMK
The Group launched its "Retaining and Developing Engineering Competency" programme in 2012 to establish a pool of subject matter experts with unique knowledge and empower them to maintain and transfer their expertise to their successors.
In 2016, youth technical conferences were held at all EVRAZ business units to brainstorm loss-reduction solutions. Technical directors and experts judged the solutions and the best of them are being implemented. At an HSE conference that was held at Raspadskaya, attendees came up with technical solutions and content to help improve safety.
Young specialists who attended the Group's problems that EVRAZ NTMK's oxygen plant has been facing using the "Theory of Inventive Problem Solving" (Russian abbreviation: TRIZ) method. Two young engineers' clubs also meet at EVRAZ ZSMK and Raspadskaya. The Group estimates that nearly 40% of the solutions developed using the TRIZ method have been implemented in production.
WorldSkills championship and took part for the third time in the Russian Federation's WorldSkills hi-tech national championship. EVRAZ staff took silver prizes in three of the
three sessions of the "Chief Engineer School" were held, as well as a technical forum dedicated
The solutions that EVRAZ' experts and young professionals have come up with have been structured, collected into an engineering materials library, and posted on the corporate intranet.
In 2016, Russian, Ukrainian, US and Canadian engineers graduated the sixth EVRAZ New Leaders Programme, which is hosted by the Skolkovo Moscow School of Management to design and implement initiatives to improve process performance.
As part of the "Retaining and Developing Engineering Competency" programme that was established in 2012, the Group gathered its top 360 experts to take part in training programs and technical forums, as well as to set tasks for and supervise projects involving young professionals.
From 2012 to 2016, a total of 63 sessions of the Chief Specialist School have been held. The Chief Specialist School is an engineering expertise development and improvement project programme for Group's employees.
For example, four of the programs developed and curated by the Group's experts as part of EVRAZ ZSMK's Chief Specialist School have already saved more than RUB10 million, according to preliminarily estimates.
The Group honours its experts, which already number 693 across the Russian and Ukrainian assets.
board was also created under the guidance of the Group's CEO so that experts could benchmark the progress of technology and development of technological solutions.
Technical forums have become excellent venues for the Group's specialists to discuss and analyse technical issues, seek outside opinions, and develop implementation and action plans.
In 2016, three engineering forums involving international and Russian industry experts were held at the request of technical directors. The Group's specialists devised plans to reduce pig iron production costs, improve mining spent on treatment and tunnelling faces.
Each year, talent committees meet to approve the talent pool. In 2016, this process was automated using SAP's Success Factors system, which gathered all necessary information into one system, making it more intuitive, complete and accessible for the talent committees.
Various assessment methods are applied depending on the goals and category of personnel:
Personal development plans are created and included in the corporate training programme based on the assessments.
In 2016, EVRAZ had 77,842 employees, a reduction of 8% from 84,467 in 2015. This was mainly due to staff optimisation including the outsourcing of support functions and the closure of a poorly performing mine in the Coal segment (630 employees).
EVRAZ sees diversity as a crucial business driver and strives to ensure that all employees' rights receive equal protection, regardless of race, nationality, gender or sexual orientation. The Group also strongly values diversity in its recruitment efforts. People with disabilities are given full consideration to ensure that their unique aptitudes and abilities are taken into account.
EVRAZ pays great attention to its internal communications processes and constantly increase employee loyalty and motivation.
EVRAZ strives to maintain constructive and positive relations with the labour unions that represent its employee's rights. Overall, there is a relatively high level of unionisation at the Group's enterprises (c. 73%), albeit with countries.
Foremen's councils have also been established at such enterprises as EVRAZ KGOK and Raspadskaya, as well as a master's council at EVRAZ NTMK, which are not intended to replace labour unions but rather to offer recommendations for improving labour conditions and other issues.
EVRAZ' relationship with labour unions is founded on the principle of social partnership. Members of the management regularly meet with union representatives for both formal and informal discussions at every EVRAZ facility, both in Russia and around the world.
The labour unions at EVRAZ' enterprises are part of nationwide industrial unions (in Russia, this includes the Russian Mining and Metallurgical Union and the Russian Coal Industry Workers Union), and are also members of the Russian Federation of Independent Unions and international industrial union associations.
At the industry level, EVRAZ cooperates with labour unions through industry employer associations. The Group is a member of the Russian Coal Mining Industry Employers Association and the Russian Metallurgists
% (number of people)
In 2016, the hotline received about place belongs to housekeeping services number of questions regarding personal
Association. It is also part of the negotiations on agreements with employee associations at the industry level (coal and steel mining).
Collective bargaining agreements are in force at most EVRAZ operations. They are based on industry agreements and cover employment, welfare. They also guarantee labour unions' bargaining agreements offer supplemental privileges and social programmes for employees and their families, as well as retirees and veterans (voluntary health insurance for employees, workplace accident insurance, housing improvement assistance, recreation and holiday vouchers, holiday gifts etc). Social programmes are region and and relevance for employees. Sporting and cultural events are held together with trade unions. Labour unions also help distribute packages for stays at health resorts.
The bargaining agreements include sections on HSE that outline the employer's responsibility for providing employees a healthy and safe work environment. This includes providing personal protection equipment that exceeds the minimum government requirements, as well as offering medical check-ups and healthcare services at the employees' workplaces, providing public amenities, conducting HSE training and examinations, and more.
Industry-wide agreements with labour unions contain dedicated HSE sections.
Tracking employee engagement
Managing employee engagement is an motivation.
At the end of Q3 2016, phase one of the "Tracking Employee Engagement" project began. An employee engagement index has been measured based on AON Hewitt's model.
A large pilot survey was conducted as a part of the project at four business units in the Urals and Siberia. The project seeks to paint an accurate picture of the level of employee employee engagement. Future surveys are planned for additional EVRAZ business units.
Awarding organisations: Russian Mining and Metallurgical Trade Union, Association of Russian Industrialists and Entrepreneurs, Russian Ministry of Industry and Trade.
Winner of the "Environment and natural resource protection" award in the XIII national competition "Most Socially Effective Metal and Mining Company"
Winner of the "Work with Youth" award in the XIII national competition "Most Socially Effective Metal and Mining Company"
The staff costs in the 2017 budget have been kept at the level of the costs for 2016, in line with the target. Optimisation measures have been implemented at enterprises to ensure wage rises, including indexation stipulated in labour agreements.
Transform HR: the HR Service Solutions Centre (SSC) project has been launched with a goal of fully standardising and automating all core HR quality and transparency, and to reduce related costs. To date, three Group enterprises have been transferred to SSC.
The primary goal is conforming with best HR practises, maintaining high process quality and ensuring that the Group has engaged, motivated, loyal and competent staff.
Recruitment. The main focus in recruitment is to build on what has already been achieved and to improve university outreach.
EVRAZ aims to improve employee engagement organisation-wide.
Financial motivation. Projects are underway to improve the payroll system, including analysing and revising incentive tools organisation-wide to ensure that they are properly motivating employees while remaining aligned with business goals and simultaneously simplifying payroll procedures.
Transform HR. The HR SSC project has been launched and will be expanded to business units in the Urals.
Headcount. In 2017, the key focus will be on combining the efforts of HR and other vital corporate functions to develop a sustainable process improvement system through EBStransformation projects.
EVRAZ strives to maintain an open dialogue with the communities surrounding its areas of operation. The Group pays its taxes responsibly and cares for the wellbeing of its employees. Organisation-wide, operations are conducted in accordance with federal and local legislation. Managing directors and regional vice presidents take responsibility for communicating with local governments. HSE directors' duties include ensuring that plant operations meet all applicable organisations on charity, environmental, social, educational and sport projects.
EVRAZ' numerous contributions to local operations are based.
The Group fosters lasting partnerships with these local communities and aims to improve the quality of life in the many regions where it conducts business. It has implemented special needs children, veterans and the elderly, and children's homes, as well
as cultural, educational and sport projects, city infrastructure, and environmental impact reduction programmes. EVRAZ honours its responsibilities as a taxpayer and employer, providing development, training programmes, social protection and regionally competitive salaries to its employees. EVRAZ values its partnership with local governments and is committed to solving the issues facing the regions where it operates.
Alexey Kushnarev, managing director of EVRAZ NTMK, has received a letter of gratitude for his contribution towards improving children's health. Every year, about 1,200 children of NTMK employees attend a health-focused youth camp.
"Best Philanthropists of Sverdlovsk region". EVRAZ NTMK was awarded as best philanthropist of the Sverdlovsk region among the companies from ferrous metallurgy.
"Mining and steel enterprise of high social effectiveness". Evrazruda "Work with young people"
This programme's main goal is to support children who have special needs and/or are socially vulnerable. EVRAZ organises special treatment and voluntary support for children with cerebral palsy and their families in the Urals and Siberia, and supports socially vulnerable children. Every year, EVRAZ sponsors specialised medical treatment for more than 500 children with special needs. The company has implemented cutting-edge treatment techniques, including phototherapy, art therapy, aquatic therapy, hippotherapy, and adaptive sports programmes, as well as massage courses for the children and training programmes for their parents, volunteers and teachers.
Each year, EVRAZ provides holiday presents for children in Russia. It also organises annual volunteer
This programme's main goal is to improve the quality of life in Kachkanar, Russia, by developing culture, sport, and education, as well as by helping the elderly and children with special needs. receive up to RUB100,000 to implement their projects.
EVRAZ supports the local infrastructure in the cities where it operates by donating funds to reconstruct roads, parks and theatres, as well as to equip schools, colleges and medical centres.
EVRAZ supports amateur and professional sports teams, as well as individual youth and adult athletes, by providing sport equipment and donating money to help them prepare for and participate in tournaments.
www.evraz.com 93
use of steel structures as a substitute for concrete and other non-steel
It unites steelmakers, steel fabricators and erectors, research institutes, design
EVRAZ is committed to strict compliance with the Law of the Russian Federation #273 "On Preventing Corruption," the UK Bribery Act, the US Foreign Corrupt Practices Act and other relevant local legal equivalents. EVRAZ has implemented internal policies on these matters to comply with both the letter and the spirit of these laws. The compliance team provides internal monitoring and control over areas generally perceived as holding risks of corruption at all EVRAZ assets.
The compliance manager routinely reports to the senior vice president for business support and interregional relations and delivers regular updates on the status of anti-corruption efforts to the Audit Committee.
EVRAZ subsidiaries in the Russian Federation, Ukraine, the US and Canada enforce a Code of Conduct and Anti-corruption policy, which are and responsible behaviour of employees in all circumstances.
All policies are available on the corporate intranet and employees are required to adhere to them by taking personal responsibility for compliant behaviour. Employees are encouraged to approach compliance managers whenever they have questions about expected course of to voice concerns about known policy violations.
All elements of EVRAZ' compliance system have been implemented across its Russian and Ukrainian sites, which were considered priority targets for anti-corruption compliance efforts in 2016. This is explained by the admittedly higher risk of corruption in these countries as reported by Transparency International.
In March 2016, the esteemed organization assessed emerging market multinationals and published their research paper "Transparency in Corporate Reporting". The document mentioned the high results achieved by EVRAZ in building up its anti-corruption program. EVRAZ achieved a score of 85%, which compares favourably with the average of 74% for the technology sector or the average of 48% for all companies considered in the assessment.
The Code of Conduct is the key document that all employees are requested to adhere to and day of work. The document is available on the intranet and stresses the ultimate importance of ethical behaviour in all circumstances. Anti-corruption training and the tone set from the top of the organization emphasise the role of the Code of Conduct in the company's daily life.
EVRAZ' Anti-corruption policy sets and explains key principles that have been adopted at all assets to prevent corruption. The policy is easily accessible on the corporate intranet for employees, interested parties and partners, who are all expected to be compliant with relevant anti-corruption legislation and principles upheld by EVRAZ.
Consistent efforts in the area of anti-corruption education are an integral element of a well-thought-out compliance system. The policy adopted what positions and levels of authority are to undergo training in anti-corruption managers and specialists from compliance, legal, controlling, asset protection, investor and government relations, and HR are to receive training and pass a corresponding test. The same refers to all decision making and/or client managers from procurement and sales. Compliance managers are assigned discreet authority to analyse risk areas and decide who else needs to be trained.
All aspects of EVRAZ' sponsorship and charity efforts are regulated as necessary by this policy. Under it, the Group may consider supporting lowincome or physically challenged individuals, and those suffering disasters. EVRAZ may choose to support certain projects in education, sport, health care, culture, and environment protection. All petitions are carefully considered in terms of legitimacy and transparency of purpose, the amount sought, and the reputation of the petitioner. The decisions are then taken by the Group CEO. When support is granted, sponsorship being its preferred form, such instances are followed up by experts under the vice president for corporate communications and compliance managers. This ensures full accountability and strict adherence of those supported to EVRAZ policy requirements.
EVRAZ believes that business gifts and hospitality are accepted ways to demonstrate and further develop good relationships. At the same time, adequate consistent control over such expenses is very important and is among the key areas for anti-corruption compliance to watch. The approval procedures to be followed when extending or receiving gifts and hospitality. In particular, all amounts above US\$100 for a personal gift (received or given) and US\$500 for hospitality (received or extended to a person) must be approved by the responsible compliance manager. To this system has been developed. The Internal Audit function conducts regular checks of the completeness and accuracy of records, either planned or requested by a compliance manager, and compliance specialists act on any recommendations promptly.
EVRAZ encourages employees to raise concerns to their line managers if they believe the company's policies or cardinal principles are somehow violated. If employees, clients, or contractors feel unable to do so via other means and procedures,
In 2016, the Group developed a set of measures to ensure compliance with the EU Market Abuse Regulation (the "MAR") which came into force in July 2016, including development of new Rules on securities dealings. All procedures relating to share dealings have been communicated to Persons Discharging Managerial Responsibility (PDMRs) and their Closely Associated Persons (CAPs). All PDMRs and permanent insiders have completed online training modules dedicated to MAR and Rules on securities dealings and passed relevant assessment.
EVRAZ consistently performs thorough background and criminal record checks on all potential employees. Among other requirements and norms, necessary effort is invested only after the candidate gives written permission to work with his/her personal data. The company is committed to protecting each individual's privacy and works in full compliance with relevant laws on personal data.
of circumstances in which other personal considerations that may compromise or judgment or integrity in carrying out their work responsibilities. situations with signs of such considered, and duly taken care of. HR together with compliance managers routinely check if in the company, whereas employees and particularly their managers are expected to provide information about any potentially risky situations. Special commissions consider cases that are reported and found to come up with the best possible solutions to each individual situation.
To guard against unscrupulous, unreliable, or suspicious would-be agents and partners, the company runs comprehensive due diligence checks on a business or person prior to signing a contract. EVRAZ fervently upholds a know-your-partner/client policy and in doing so is fully compliant with the applicable anti-corruption laws. The investigation includes but is not limited to checking business reputation and solvency of the company, as well as the management.
All business processes bearing high corruption risk are now duly covered by corresponding corporate regulations and policies, either updated or developed anew. The areas of concern include procurement of goods, works and services, government relations, archiving of tendering documentation, recruitment, sponsorship and charity payments, selling of goods, works and services. The effectiveness of these policies is closely monitored by the compliance and asset protection, internal audit and legal departments.
All EVRAZ sites have Anti-Corruption Compliance units. They routinely run checks on candidates, conduct investigations into possible non-compliance with policies; monitor charity payments and hospitality spending; and act on whistleblower allegations of possible fraud, bribery or corruption.
recommendations to local Managing Directors. Each month, the managers report all results to the the Senior Vice President for Business Support. They review and analyse them and liaise with senior management as necessary.
Once a year, all Compliance Managers conduct comprehensive anti-corruption and fraud risk analyses to local managers, who undertake corrective then presents a consolidated analysis to the Audit Committee. The 2016 analysis, which found no major violations of anti-corruption statutes or cases of noncompliance with Group policies, was presented to the Committee in early February 2017.
Additional compliance control over payments to now also in place at Russian and Ukrainian assets. The Group has developed electronic means for compliance managers to approve such payments. Gifts and hospitality to be provided or accepted are also approved in the same fashion.
At EVRAZ North America, the Risk Committee employees will be required to complete annually.
Anti-corruption training is progressing steadily. In 2016 alone, some 4,200 managers and specialists in Russia and Ukraine completed an online course developed by Thomson Reuters. Overall, the number of employees who have received training to date is close to 6,000. The programme is due to be developed further in 2017.
| Board of Directors 98 | |
|---|---|
| Management 102 | |
| Corporate governance report 104 | |
| Remuneration report 120 | |
| Directors' report 130 | |
| Directors' responsibility statements 135 |
Alexander Frolov Chief Executive Eugene Shvidler Non-Executive
Karl Gruber Independent Non-Executive Deborah Gudgeon Independent Non-Executive Alexander Izosimov Independent
Non-Executive
Sir Michael Peat Non-Executive
Alexander Abramov Non-Executive
Appointment: Alexander Abramov has been a Board member since April 2005. He was CEO and chairman of EVRAZ Group SA until
Skills and experience: degree in 1982, and he holds a PhD in Physics and Mathematics. He founded EvrazMetall in 1992. Mr Abramov is a Bureau
of the Board of Skolkovo Institute for Science and Technology, and a member of the Board of Moscow University of Physics and Technology.
Alexander Frolov Chief Executive
Appointment: Alexander Frolov has been a Board member since April 2005. He was chairman of the Board of EVRAZ Group SA from May 2006 until December 2008, and was appointed CEO with effect from January 2007. Mr Frolov was appointed CEO of EVRAZ plc on 14 October 2011.
Committee membership: Mr Frolov is a member of the Health, Safety and Environment Committee. Skills and experience: in 1987 and received a PhD in Physics and Mathematics in 1991.Prior to joining EVRAZ, he worked as a research fellow at the I.V.
Eugene Shvidler Non-Executive
Committee membership: Mr Shvidler is a member of the Nominations Committee.
then as senior executive vice president of EVRAZ Group SA from 2004 to April 2006.
Skills and experience: Mr Shvidler currently serves as chairman of Millhouse LLC and Highland Gold Mining Ltd. He is also on the Board of AFC Energy plc. Mr Shvidler served as president of Sibneft from 1998 to 2005 having previously been senior vice president from 1995. He holds an MSc and an MBA.
Eugene Tenenbaum Non-Executive
Appointment: Eugene Tenenbaum has been a Board member of EVRAZ Group SA since August 2006. He was appointed to the Board of EVRAZ plc on 14 October 2011.
Committee membership: None.
Skills and experience: International in Moscow. Mr Tenenbaum was an accountant in the business advisory group at Price Waterhouse in Toronto from 1987 until 1989. He is a chartered accountant.
Karl Gruber Independent Non-
Appointment: Karl Gruber has been a Board member of EVRAZ Group SA since May 2010. He was appointed to the Board of EVRAZ plc on 14 October 2011.
Committee membership: Mr Gruber serves as chairman of the Health, Safety and Environment Committee. He is also a member of the Audit Committee and Nominations Committee.
Skills and experience: Mr Gruber has extensive experience in the international metallurgical mill business and holds a diploma in mechanical engineering. He has held various management positions, including eight years as a member of the Managing Board has executed various consultancy projects for the steel industry and served as CEO and chairman of the Management Board of LISEC Group.
Deborah Gudgeon Independent Non-
Committee membership: Ms Gudgeon serves as chairman of the Audit Committee and is a member of the Remuneration Committee.
Skills and experience: a senior accountant for Salomon Brothers International. She is a chartered accountant. From 1987 to 1995, Ms Gudgeon served Since 2011, Ms Gudgeon has served as managing director of Gazelle Corporate Finance Limited.
Alexander Izosimov Independent Non-
Appointment: Alexander Izosimov was appointed to the Board of EVRAZ plc on 28 February 2012. Committee membership: Mr Izosimov is chairman of the Remuneration Committee. He is also a member of the Nominations Committee and the Audit Committee.
Skills and experience: positions at Mars Inc and was regional president for CIS, Central Europe and Nordics, and a member of the executive board. Prior projects in the transportation, mining, manufacturing and oil businesses. Until recently, Mr Izosimov served on the boards of MTG AB, Dynasty Foundation, LM Ericsson AB and Transcom SA. He also previously served as director and chairman of the GSMA (global company Teleopti AB. He holds an MBA from INSEAD.
Sir Michael Peat
Appointment: Sir Michael Peat was appointed to the Board of EVRAZ plc on 14 October 2011.
Committee membership: Sir Michael Peat serves as chairman of the Nominations Committee and is a member of the Remuneration Committee
Skills and experience: Private Secretary to HRH The Prince of Wales from 2002 until 2011. Prior to this, he spent nine years as the Royal Household's Director of Finance and Property Services and then Treasurer to The Queen and Keeper of the Privy Purse. Sir Michael Peat was of M&C Saatchi plc, a director of Architekton Limited, chairman of the Regeneration Group Limited and chairman of the Advisory Board of BellAziz Holdings Limited. He holds an MA and MBA, and is a fellow of the Institute of Chartered Accountants in England and Wales.
Alexander Frolov
Our organisational structure enables EVRAZ to most reduction of costs, improving the quality of products and services to strengthen the Company's leading position in the
Leonid Kachur
New appointment
Nikolay Ivanov
Alexander Kuznetsov
Ilya Shirokobrod
Natalia Ionova
Stepanov
Sergey
Alexey Soldatenkov
Maksim Andriasov
Denis Novozhenov
Michael Shuble
Anton Yegorov
Sergey Vasiliev
Vsevolod Sementsov
Artem Natrusov
listed company on the Main Market of the London Stock Exchange and is a member of the FTSE 250 Index. EVRAZ is committed to high standards of corporate governance and control.
www. evraz.com. www.frc.org.uk.
EVRAZ' approach to corporate governance is primarily based on the UK Corporate Governance Code published by the Financial Listing Rules of the UK Listing Authority. The Company complies with the UK Corporate Governance Code or, if it does not comply, with all the principles and provisions of the 2016 UK Corporate Governance Code (the Governance Code is available at www.frc.org.uk following exceptions:
Provision D.1.1 of the Governance Code remuneration schemes should include malus and clawback provisions. The Company does not operate clawback arrangements is set out in the Remuneration Report on pages 120-129.
Corporate Governance Code, Olga Pokrovskaya was a member of the Audit Committee until her cessation as a Board member on 14 March 2016, but did not meet the independence criteria set out in the UK Corporate Governance Code. More than 50% of EVRAZ' activities and operations are based in the Russian Federation and Olga Pokrovskaya's technical as a past senior audit manager at Arthur at Russian oil company Sibneft, continues to be of value to the Committee. Accordingly, she is invited to attend Board meetings in an advisory capacity and to attend Audit Committee meetings as an observer. Since 14 March 2016, the Audit Committee has all independent, which complies with the Code, and the Board considers that, as a whole, the Committee has competence relevant to the industry sector in which the Group operates.
The Board and management of EVRAZ aim to pursue objectives in the best interests of EVRAZ, its shareholders and other stakeholders, and particularly to create Board is responsible for the following key aspects of governance and performance:
the Board considered a wide range of matters, including:
HSE updates
investment project reviews
The Board determines the division of responsibilities between the chairman and
The chairman's principal responsibility is the effective running of the Board, ensuring that the Board as a whole plays a full and constructive part in the development and determination of the Group's strategy and overall commercial objectives. The Board is chaired by Alexander Abramov.
The CEO is responsible for leading the Group's management of the Company and its subsidiaries. The Company's CEO is Alexander Frolov.
The CEO is supported by the executive team.
EVRAZ plc held 10 scheduled Board meetings conference calls during 2016. In 2017, up to the date of this report's publication, two Board meetings were held.
vice president (commerce and business with other members of senior management attending meetings by invitation to deliver presentations on the status of projects and performance of business units.
The table below sets out the attendance of each current director at scheduled EVRAZ plc Board and Board Committee meetings in 2016.
the chairman, one executive director, and six independent director. On 14 March 2016, Duncan Baxter and Olga Pokrovskaya stood down as directors, and Terry Robinson (who retired adviser to the Board. This change was agreed following a review of the composition of the without compromising the quality of the Group's governance. Olga Pokrovskaya is invited to attend Board meetings in an advisory capacity and to attend Audit Committee meetings as an observer.
As a result, a number of changes were made to Board Committees: Alexander Izosimov assumed the chairmanship of the Remuneration Committee, Deborah Gudgeon and Sir Michael Peat joined the Remuneration Committee, and Karl Gruber stepped down
from the Remuneration Committee. In addition, Karl Gruber joined the Audit Committee.
directors (Karl Gruber, Alexander Izosimov, independent in character and judgement, and free from any business or other relationship that could materially interfere with the exercise of their independent judgement, in compliance with the UK Corporate Governance Code.
the majority on and chair all Board Committees.
is no compromise to the independence of, directors who serve together as directors on the boards of outside entities.
| % | |
|---|---|
| 50 | |
| 25 | |
Executive Director 12.5
| Board | Remco | HSECo | Auditco | Nomco | AGM | |
|---|---|---|---|---|---|---|
| Total Number of Meetings | 10 | 3 | 2 | 9 | 2 | 1 |
| Alexander Abramov | 9/10 | 2/2 | 1 | |||
| Alexander Frolov | 10/10 | 2/2 | 1 | |||
| Karl Gruber | 10/10 | 1/1 | 2/2 | 6/6 | 2/2 | 1 |
| Deborah Gudgeon | 10/10 | 2/2 | 9/9 | 1 | ||
| Alexander Izosimov | 10/10 | 8/9 | 2/2 | 1 | ||
| Sir Michael Peat | 10/10 | 2/2 | 2/2 | 1 | ||
| Eugene Shvidler | 10/10 | 2/2 | 1 | |||
| Eugene Tenenbaum | 10/10 | 1 |
www.evraz.com 105
In addition to the ten scheduled Board meetings held in 2016, two meetings were held by conference call to consider were each unable to attend one Board or Committee
1
The following changes were made to the composition of the
meetings attendance during the year was Board 3/3,
EVRAZ recognises the importance of diversity both at the Board level and throughout the whole organisation. The Company remains committed to increasing diversity across its global operations and takes diversity into account during each recruitment and appointment process, working to attract outstanding candidates with diverse backgrounds, skills, ideas and culture. For more detailed information, see the Nominations Committee report on pages 116-117 and CSR report on pages 72-95.
The Company believes that the Board structure provides an appropriate balance of skills, knowledge and experience. The members comprise a number of different nationalities with a wide range of skills, capabilities and experience from a variety of business backgrounds. Biographies of the Board members are provided in the Board of Directors section.
The Board has determined that, as a whole, it has the appropriate skills and experience necessary to discharge its functions. Executive experience required to contribute meaningfully to the Board's deliberations and resolutions. constructively challenging and helping develop strategy proposals. Most of the directors have been in post since the date of EVRAZ plc incorporation in October 2011.
The chairman is responsible for ensuring that there is a properly constructed and timely induction for new directors upon joining the Board. Directors have full access to a regular supply of information to help them discharge their responsibilities. For more detailed information, see the Nominations Committee report.
An internally facilitated annual Board evaluation was conducted in December 2016. As in the previous year, the review was carried out with the initiative and participation of the Company's Nominations Committee. Questionnaires were distributed to all Board directors for their response and comment. The results were discussed at three levels: and Alexander Abramov (as chairman of whole. Board performance was deemed to be satisfactory, notwithstanding the reduction in Board membership from 10 to 8 in 2016, and in overall terms the review was encouraging and useful. The Company undertakes regular performance evaluations of the Board in line with the requirements of the UK Corporate Governance Code and an externally facilitated review is planned for 2017.
| Name | Position | Committee membership | Years of tenure |
|---|---|---|---|
| Executive Director | |||
| Alexander Frolov | CEO | HSEC | 5 |
| Non-Executive Directors | |||
| Alexander Abramov | Chairman | NC | 5 |
| Eugene Shvidler | Director | NC | 5 |
| Eugene Tenenbaum | Director | None | 5 |
| Non-Executive Independent Directors | |||
| HSEC | |||
| Karl Gruber | Director | AC | 5 |
| NC | |||
| AC | |||
| Deborah Gudgeon | Director | RC | 1 |
| RC | |||
| Alexander Izosimov | Director | NC | 4 |
| AC | |||
| Senior Independent | NC | ||
| Sir Michael Peat | Director | RC | 5 |
NC HSEC AC RC
The Board is supported in its work by the following principal committees: the Audit Committee, the Remuneration Committee, the Nominations Committee and the Health, Safety and Environment Committee.
Each committee has written terms of reference, approved by the Board, summarising its role and responsibilities.
| Committee name |
Function | Composition |
|---|---|---|
| Audit Committee |
management and controls | See pages 110-115 |
| Nominations Committee |
Selection and nomination of Board members |
See pages 116-117 |
| Remuneration Committee |
Remuneration of Board members and top management |
See pages 120-129 |
| HSE Committee |
HSE issues | 1 an independent chairman who is also See pages 118-119 |
www.evraz.com.
1
detailing the Group's internal control and risk management systems and activity. The manual was last updated in December 2016. In line with the Financial Reporting Council Internal Control and Related Financial and Business Reporting issued in September 2014. The aim of the risk management process is to identify, evaluate and manage potential and actual threats to the Group achieving its objectives.
process is designed to identify, quantify, respond to and monitor the consequences of these threats. The management maintains a risk register that encompasses both internal and external critical threats. The level of risk appetite approved by the Board is used to identify particular risks and oversight. In 2016, regarding principal risks and uncertainties, this process was consistent with the UK Corporate Governance Code, the FRC Guidance on the Strategic Report issued in June 2014, and the FRC Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014.
The executive management is responsible for introducing the agreed internal controls and mitigating actions related to risk management throughout EVRAZ' business and operations, as well as at all levels of management and supervision. This serves to
EVRAZ applies the following core principles to identifying, monitoring and managing risk throughout the organisation:
mitigation at a regional level, as well as at EVRAZ' major steel and mining operations. The Risk Management Group maintains a corporate risk register representing a summary of this information. Business unit management teams and other relevant bodies are accountable to the Risk Management Group by way of membership of the latter (vice presidents of business
All acquired businesses are brought within the Group's system of internal control as soon as practicable.
on pages 32-36
| Component | Basis for assurance | Action in 2016 |
|---|---|---|
| Assurance framework controls to prevent and detect error or material fraud, ensure effectiveness of operations and compliance with principal external and internal regulations |
operations audit function |
and reviewed the internal control system; more straightforward connection between the result the management and an internal audit plan has been established |
| Investment project management | Monitored by established management Reviewed by internal audit |
Continuous enhancement of procedures regarding quality and reporting control, as well as other elements of the project oversight process |
| Operating policies and procedures | Implemented, updated and monitored by management Reviewed by the internal audit function |
Operating policies and procedures were updated as per the internal initiatives by operational management and in response to recommendations from the internal audit function |
| Operating budgets | Monitored by controlling unit Reviewed by the internal audit function Approved by the Board |
Operating budgets were prepared, and approved by the Board |
| Accounting policies and procedures as per the corporate accounting manual |
Developed and updated by the reporting department Reviewed by the internal audit function |
Accounting policies and procedures were updated as part of the standard annual review process |
The Board has delegated primary oversight of the Group's internal control process to the Audit Committee. The committee has tabled for the directors' consideration the major internal risk appetite has been exceeded.
To ensure that control is exercised effectively across operations, the Group has adopted annual control system using the EVRAZ Assurance the individual components of the framework. In having effective internal control.
A department headed by Senior Vice President preventing and detecting business fraud and abuse, including fraudulent behaviour by employees, customers and suppliers that may cause a direct economic loss to the business. Solid internal controls help minimise the risk, and EVRAZ' Business Security department ensures that appropriate processes are in place to protect the Group's interests.
Internal audit is an independent appraisal function that the Board has established to evaluate the adequacy and effectiveness of controls, systems and procedures at EVRAZ to reduce business risks to an acceptable level
The Board approved the latest version of the internal audit charter on 28 February 2017.
The internal audit function's role in the Group is to provide an independent, objective, innovative, audit service. This is achieved through a systematic and disciplined approach based on assisting management in controlling risks, monitoring compliance, and improving the systems and governance processes. Once a year, the function provides an opinion of the overall effectiveness of the Group's internal controls.
In 2016, EVRAZ' head of internal audit, as secretary of the Audit Committee, attended all the committee's meetings and addressed as required by the committee. The committee continued to engage with executive management during the year to monitor the effectiveness of internal control and, consequently, considered
internal control together with management's
The internal audit planning process starts with the Group's strategy; includes the formal risk assessment process, consideration of the management concerns based on the results of previous audits; and ends with an internal audit plan, which the Audit Committee then approves. Audit resources are predominantly allocated to areas of higher risk and, to the extent considered processes, with appropriate resource reservation
In 2016, internal audit projects covered the following Group risks:
EVRAZ' internal audit function is structured on a of the Group's operations. The Group's internal audit function works to align common internal audit practices throughout the Group via quality assurance and improvement programmes.
Risk appetite is an important part of the risk management process that serves as a measure of the risks EVRAZ' management is willing to accept in pursuit of value. The Board has approved a risk appetite in accordance with the risk management methodology adopted by EVRAZ.
Risk appetite is considered in evaluating strategies and setting objectives within the Group's strategic cycle, in decision making and in developing risk management actions and methods, as well as in identifying particular risks oversight. The strategic objectives of the Group
are aligned with and risk mitigation actions are Group. The Group adopts a robust approach in relation to risk management. Risk appetite for security, bribery and corruption, as well as in the and evaluated separately from the rest of the processes.
The management reassesses the risk appetite at least annually via the Risk Committee/Risk Management Group. The Risk Management Group reports on the analysis performed to the Audit Committee, which makes recommendations to the Board regarding the level of risk appetite. The Risk Management Group and the Audit in January 2017. Based on the results of the most recent review, the management concluded that the approach for acceptance of risks within the company had not changed and that the risk appetite remained the same as in the prior year. An appropriate recommendation regarding the level of risk appetite was made to the Audit Committee and to the Board.
Further risk management training for the Group's top management took place in early 2017.
In addition to the objective of inducting new members of the top management team into the corporate risk management process and practices, this training session supported the improved risk management reporting procedure that has been introduced as part of the transformation of the Risk Committee into the Risk Management Group. Further training on risk management and development of risk management system is planned for 2017.
www.evraz. com/governance/control.
see pages 110-129.
Deborah Gudgeon
http://www.evraz.com/governance/
directors/committees/
Dear Shareholders, I am pleased to present the Audit Committee to welcome Karl Gruber as a member of the Audit Committee allowing us course of the last year, I have visited our operations at NTMK, ZMSK and the Uskovskaya mine at Raspadskaya and will continue a rolling programme to visit all the key assets over the coming year. Once again, I would like to extend the thanks of the Committee to the department and EY, our external auditor, for their continuing diligence and valued contributions to the work of the Committee.
During 2016, the Audit Committee reviewed latest regulatory developments and the transformation of the Risk Committee into the Risk Management Group as detailed on page 33. The revised terms of reference for both the Audit Committee and the Risk Management Group were approved by the Board.
The Audit Committee minutes are tabled at the Board meeting for consideration, and the Chairman updates the Board orally on the Committee proceedings, making recommendations on areas covered by its terms of reference if appropriate.
During the year, the Committee members consider the performance and composition of the Committee, its duties and responsibilities, and access to management. The results of this assessment were judged satisfactory. An external assessment will be undertaken during 2017.
the provisions of the Competition and Markets Authority Order 2014 on mandatory tendering and audit committee responsibilities.
On 14 March 2016, Olga Pokrovskaya stood down from the Board and was replaced on the Audit Committee from that date by Karl Gruber. As a result, all of the Audit Committee Directors. Karl Gruber has extensive experience in the steel industry and enhances the sectoral expertise of the Audit Committee. As disclosed in the Corporate Governance Report page 114, Olga Pokrovskaya continues to attend Audit Committee meetings as an observer, providing additional technical expertise and valuable regional expertise.
function, the head of Group Internal Audit (who acts as secretary to the Audit Committee and auditors also attend Committee meetings. Key members of the management team and Risk Management Group are also invited to attend Committee meetings when appropriate; in 2016, these included the CEO and VP's of Strategy, Steel, IT, Security, Legal, Compliance and Personnel, the CFO of EVRAZ North of Investor Relations. Other members of the EVRAZ management team and the Internal Audit Function were also invited to attend Committee meetings as appropriate.
The Audit Committee met 9 times during 2016 and 4 times in early 2017 before the publication of this Annual Report.
on page 105
During 2016, the Audit Committee has continued reporting, the related internal control framework operations, regulatory compliance and fraud. These areas were comprehensively reviewed on an ongoing basis and the Committee received and operational management, Internal Audit, the external auditors.
In line with regulatory guidance, the Audit Committee undertook a tender process to appoint an external auditor for the years recommended the reappointment of EY to the Board. Further details of the tender process are included later in this report.
The Committee monitored the progress of the includes migration of the operations of three Russian accounting centres to one shared service centre in Novokutznetzk and changes to the operational model of the accounting function, and considered the implications for reporting through the transition process and in were prepared under the existing reporting structure and the Committee will continue to monitor the migration process during 2017.
The Committee monitored the process for collating information and reviewed the disclosure required in support of the Payment a payment to government.
management, and reviewed by EY, to review the completeness and accuracy of the disclosure and an updated report was uploaded to the
party transaction in respect of the prior year. Although the transaction itself was not material, management reviewed and updated the process for capturing, monitoring and approving related party transactions. This review, and the accuracy and completeness statements, were considered by the Committee and will be reviewed again during 2017.
The Committee reviewed and updated its own terms of reference, the internal audit charter and the Group Financial Reporting Procedures compliance controls were reviewed throughout the course of the year, together with progress to meet the governance requirements of the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.
At the request of the Board, the Audit Committee also considered the proforma Viability Statement and supporting analysis produced by management and reviewed by the Risk Management Group.
In December 2016, EVRAZ received advance notice from the Financial Reporting Council of its intention to review the judgements and statements as part of its thematic review.
The primary objective of the Audit Committee is to support the Board in ensuring the integrity Annual Report including review of:
standards and governance requirements;
and governance requirements
The Audit Committee considered a number the Interim Results for H1 2016 and the the appropriateness of accounting policies adopted, disclosures and of management's estimates and judgements. The Committee considered papers produced by management reviewed reports by the external auditor on the full year and half year results which highlight any issues with respect to the audit work.
of the business (primarily the Russian rouble against the US dollar, the presentation currency As a result, challenging the consistency and separate out where appropriate the forex impact
Going concern (Note 2) and the viability statement
EVRAZ is exposed to a range of risks and inherent uncertainties as set out on pages 34-35, many of which are outside the control of the
coking coal prices and steel prices rising 80% over the year. The Audit Committee reviewed management's going concern analysis which downside scenario which is based upon forward pricing close to the bottom of the range of current investment analyst forecasts, and a reduced level of budgeted capital expenditure. The Committee carefully considered the projected Use and Sources of Funds for the period to June 2018 which includes scheduled loan repayments, new committed funding Given the volatility of the current global supply/ demand environment, the Committee again focused on the pessimistic downside case
Following these detailed considerations, the Audit Committee resolved to recommend the going concern basis of preparation for the to the Board.
The Committee reviewed the analysis supporting the viability statement before it was considered by the Board. The Committee reviewed the scenarios that might challenge viability, the key assumptions in each scenario and the proposed disclosures in the viability statement.
judgement and management estimates
(Notes 5 and 6). The Committee considered management's impairment recommendations in the context of the current and future trading environment. Testing was undertaken continued weakness of the rouble means that the carrying values of Russian cash generating units remain low in US dollar terms and are largely not challenged by the value in use comparisons used to determine impairment, even in a negative pricing environment During H1 2016, the organisational, cash business was reassessed for the purpose of impairment testing and the constituent plants allocated to 5 new cash generating units based upon the end markets they serve.
As a result of deteriorating market conditions in North America during H2 2016, management undertook a detailed review which resulted in the reduction of both volume and price forecasts used in the impairment testing of these assets. Of the \$465 million impairment charge in 2016, \$446 million relates to the goodwill and PPE impairment of operations in North America. The balance of \$19 million at other cash generating units including unutilised assets at Raspadskaya and Yuzhny Stan, and increased site restoration provisions at Evrazruda and Yuzhkuzbassugol. As the operation of Palini e Bertoli has been restarted, the VIU was reassessed resulting in a partial reversal of the impairment already recognised on the idling of this asset. The Audit Committee considered this reversal and concluded that it was appropriate.
In October 2016, Evraz entered into a contract to sell EVRAZ Yuzhkoks with consideration payable in a number of instalments to August 2017. Completion of the transaction requires the control of the parties to the transaction. Management consider that the agreement has not yet become unconditional and continue to treat EVRAZ Yuzhkoks as an asset held for sale "advances from customers" in the statement completion, the Audit Committee accepted management's proposed treatment.
Property tax accrued and paid by production general and administrative expenses to cost of revenue, and the costs and related expenses more comparable with industry peers. The Committee reviewed the implications of the change and the adequacy of the disclosure and are set out in Note 2.
EVRAZ internal policy is to undertake a valuation of mineral reserves on a regular basis, at least every three years, but the valuation due in 2016 was postponed due to cost reduction initiatives. A valuation will be undertaken during 2017 and expected long term prices.
In considering whether the Annual Report is fair, balanced and understandable, the Committee reviewed the information it had received, discussions held with management throughout the year and the preparation process adopted. Management agreed the key overall messages of the Annual Report at an early stage to ensure a consistent message Regular meetings were held to review the draft Annual Report and for management and Committee members to provide comments, and detailed review of the appropriate draft sections were undertaken by the relevant Directors and external advisers. The Committee particularly considered whether the description of the business, principal risks and uncertainties, strategy and objectives were consistent with the understanding of the Board, and whether the controls over the consistency and accuracy of the information presented in the Annual Report are robust.
Taking into account the disclosure implications of the issues discussed in this report, the Committee recommended to the Board that, taken as a whole, it considers the Annual Report to be fair, balanced and understandable. The Audit Committee recommended approval of the Group's 2016 Consolidated Financial Statements by the Board. Both recommendations were accepted by the Board.
UK Bribery Act ("UKBA")
The Committee continued to monitor the status of the procedures, controls and data policy and Code of Conduct, including the regulation of interaction with state authorities introduced by the Company in November 2014, and progress in respect of the areas for the external audit in 2014. A comprehensive framework for annually monitoring compliance identifying risk was developed during 2016 by the compliance, legal and internal audit teams. Using this framework, compliance was tested in November and December 2016 indicating further progress in reducing risk. Internal audit also tested the procedure and
completeness for maintaining registers of entertainment costs, business gifts, charitable and sponsorship expenditure at a number of key entities during the year. Based upon the output, the mitigation plan and training increasing maturity of these processes.
In March 2016, Transparency International produced a report on "Transparency in Corporate Reporting: Assessing Emerging Market Multinationals". EVRAZ achieved a compared to an average score of 48% for all
Compliance with the control processes, procedures and reporting framework established to minimise the risk of breaching sanctions was tested by Internal Audit during the year, along with progress against the recommendations of the Group's external legal advisers, and found to be satisfactory. The controls and processes for monitoring compliance are regularly updated to incorporate the latest guidance from the Group's external legal advisers and there is a process of continuing education of compliance personnel and executive management.
on pages 107-109.
EVRAZ has an integrated approach to risk management to ensure that the review and consideration of risks inform the management of the business at all levels, the design of internal controls and internal audit process. During 2016, the Risk Committee was replaced by the Risk Management Group with presidents and chaired by the CEO.
internal controls, risk management systems and activities are documented in a comprehensive Financial Reporting Procedures December 2016 and reviewed by the Audit Committee in December 2016.
The Risk Management Group attended the Audit Committee in October 2016 and presented the updated Risk Register and their recommendation on the level of Risk Appetite. These were reviewed by the Audit Committee, along with the draft Statement of Principal Risks and Uncertainties to be included in the Annual Report, prior to the Board's consideration.
exceed the Group's risk appetite are reported to the Board by the Audit Committee and followed up by the Group's Management Committee and the progress on resolving issues is monitored regularly.
The Audit Committee continues to receive together with a security report on the progress whistleblowing report is reported to the Committee on an ad hoc basis when it arises.
Assessment of the Group's risk
Internal Audit reviews the Group's risk and is considered by the Risk Management Group and the Audit Committee. In particular, the Audit Committee considered whether the transformation project had implications for the risk and control environment.
The Chairman of the Audit Committee tables the Internal Audit report judgement on the risk and control environment to the Board.
The Group continued the implementation of the IT security risk mitigation plan during 2016 and an external risk reassessment was progress. The mitigation plan will be updated by March 2017 to recalibrate the mitigation
The EVRAZ policy on the level and economic terms of external insurance cover was reviewed by the Audit Committee in January 2017 and approved by the CEO. The Risk Register was amended in 2016 to acknowledge the level
The Audit Committee reviewed the internal audit plans for 2017 and recommended certain revisions in view of the macroeconomic resources available. The plan was revised to prioritise key business cycles and controls from a risk perspective. Overall, the Committee considers the current Internal Audit resource to be adequate for the internal control and risk management assurance requirements.
The Audit Committee reviewed and updated the Internal Audit Charter and Key Performance Indicators of the Internal Audit function in early 2017. An annual assessment of the effectiveness, independence and quality of the Internal Audit function was undertaken by way of a questionnaire to Committee members, management and the external auditors and was again found to be very satisfactory. An external assessment of the Internal Audit function in the Russian Federation, CIS and Europe was undertaken during 2015 International Standards for the Professional Practice of Internal Auditing, Code of Ethics of Internal Auditors.
The Head of Internal Audit is secretary to both the Audit Committee and Risk Management Group and prepares the minutes.
The Audit Committee is responsible for monitoring the ongoing effectiveness and independence of the external auditor, and making recommendations to the Board as
The Audit Committee has an established framework through which it monitors the effectiveness, independence, objectivity and compliance of the external auditor with ethical, professional and regulatory requirements. These include:
review and approval of the external audit audit, including consideration of the audit scope, key audit risks and audit materiality measures, and compliance with best practice;
accelerated compared to 2015, and the Audit Committee gave particular consideration to the implications for the external audit process and the resulting early hard close, acceleration forward procedures.
Following completion of the 2015 audit, Mr Ken Williamson was replaced as Senior Statutory Auditor by Mr Steven Dobson. Management and members of the Audit Committee also completed a questionnaire to assess the effectiveness and independence of the external audit process in 2015, which was found to be satisfactory.
The Audit Committee holds regular meetings with the external auditor at which management are not present to consider the appropriateness of the Company's accounting policies and audit process. During 2016, policies and processes were appropriate. The Committee Chairman also meets the Senior Statutory Auditor regularly outside of Audit Committee meetings.
audit services is managed in accordance with the Group's policy which can be found on the Company's website: www.evraz.com. This which are prohibited on the basis that they might compromise the independence of the external auditor, establishes threshold to audit fees and authorisation processes for and were primarily in relation to capital
market transactions and cyber security risk 2016 audit fee of \$4.1 million. Irrespective of prior approval of the CFO and Audit Committee Chairman, all fees are reported to the Audit Committee for noting and comment.
The Audit Committee continues to consider EY to be effective and independent in their role as auditor.
Re-appointment of the external auditor
In view of the UK Governance Code guidance the EU legislation on audit regulation, the Audit Committee resolved in 2015 to undertake a tender process during 2016 to allow for the appointment of an external auditor for the year
who were judged to have suitable, relevant experience. Interested candidates who could of meetings with key management and with the Chairman of the Audit Committee before the deadline for submission of their proposals in the middle of July 2016. Based upon these submissions, management selected two candidates to make a presentation to a special meeting of the Audit Committee. The Audit Committee considered both proposals and presentations in accordance with a number steel and mining experience in Russia and worldwide, experience of comparable complex organisations, quality control and local team delivery. Based upon this review, the Audit Committee concluded that Ernst & Young recommended their reappointment as external auditor to the Board for the years ending
Sir Michael Peat
Since EVRAZ' Board was reduced to eight directors in early 2016, the Nominations Committee has monitored the Board's composition to ensure that it remains appropriate and continues to uphold the integrity of this is the case but will continue to keep this in view during 2017. Although we anticipate that there will be a period of stability in the Board's membership for the foreseeable future, the Nominations Committee is directors are brought on to the Board who can maintain and, where appropriate, further enhance the skills, experiences and perspectives brought to bear on the Board's business and decisions.
The Nominations Committee is responsible for making recommendations to the Board on the structure, size and composition of the Board and its committees, and overseeing succession planning for directors and senior management.
The members of the Nominations Committee Alexander Abramov, and Eugene Shvidler. Sir Michael Peat served as the chairman of the Nominations Committee throughout the year.
The committee met on two occasions during 2016.
The CEO attended all meetings and the company secretary acted as the committee's secretary.
During 2016, the committee considered the following issues.
In early 2016, the committee reviewed the output from the internally facilitated Board and committee evaluation process undertaken at the end of 2015. The committee conducted a further evaluation exercise in late 2016 and considered whether there were any issues that needed to be reviewed in relation to the composition of the Board. Whilst committee continues to monitor any evolving needs in relation to Board membership. The committee also considered the results of the Board Committees Effectiveness review questionnaires issued in October 2016 and collated for review in December 2016.
The composition of the Board and its committees
Following the resignations from the Board in March 2016, the committee considered the composition of the Board and the new composition of the Audit and Remuneration committees, and agreed that the size and composition of each was appropriate to the ongoing needs of the Board and the Group. The committee agreed that the Board represented a good mix of skills and from having a stable board and a group of people who interact well.
The committee considered succession directorate, recognising the length of service executive directors. The committee noted that the process of succession planning would need to begin in the next three years.
In August 2016, members of the committee joined the members of the Remuneration Committee to receive a presentation from planning among the senior executive team. The committee also received reports from appointed in November 2016.
Independence of non-executive directors
The committee undertook a review of the directors based on the provisions in the UK the appropriateness of the independent status directors.
Best practices for Nominations Committee
The committee undertook a detailed review of the most recent developments in corporate governance impacting the work of the Nominations Committee. This included the FRC feedback statement published in May 2016 on 'UK Board Succession Planning'; and the
The committee also discussed the joint report issued by Ernst & Young and the ICSA in May 2016, entitled "Coming out of the Shadows" and used the 12 questions for Boards and Nomination Committees set out in that report as a basis for identifying future areas for development in relation to the role of the committee.
director sought views from all directors about the performance and contribution of the chairman. The conclusions of this review were directors at a meeting on 27 January 2017. It was concluded, as previously, that the chairman continues to make an important contribution to the Group, including his knowledge and experience of, and contacts in, the industry. Prior to the Nominations Committee meeting on 27 January 2017, the chairman of the Group and the chairman of the Nominations Committee discussed the performance of the individual directors, including time available to devote to the Group's business.
The Board's diversity policy is to have board nature of the Group's operations and at least two women as board members. Following Olga Pokrovskaya ceasing to be a director on 14 March 2016, this objective has been representation of women on the Group's board by 2020.
2017 priorities
particular emphasis on compliance with the UK Corporate Governance Code, board diversity and succession planning. In addition, it will continue to consider development and succession planning for senior management. It will also provide and encourage training for directors and implement the recommendations from the forthcoming external review of the Board's performance.
Karl Gruber
The members of the Health, Safety and and Olga Pokrovskaya.
The Health, Safety and Environment Committee leads the Board's thinking on health and safety issues, as well as maintaining responsibility for environmental and local community matters.
Responsibilities of the Health, Safety and Environment Committee are:
Each year, we evaluate our HSE strategy's strengths and weaknesses to ensure that our performance measures up to our stakeholders' expectations and addresses their concerns. EVRAZ' HSE We monitor the leadership team's activities to understand accountability and the overall efforts to change the safety culture. Identifying and evaluating environmental risk continues to guide measurable improvements related to air emissions, water consumption and discharge, as well as reducing and recycling solid waste streams. I believe the EVRAZ team demonstrates a willingness for continuous improvement, and as a committee, we believe the progress over the last
raised and, where appropriate, making recommendations to the Board concerning the same;
Making whatever recommendations it deems appropriate to the Board on any area within its remit where action or improvement is needed.
The committee met on two occasions during 2016 at EVRAZ' headquarters in Moscow, Russia.
As per the 2016 plan, the committee chairman together with the HSE vice president has visited EVRAZ North America production sites to review HSE practices, as well as a European safety workshop conducted in Helsinki.
In addition to scheduled meetings, Committee members receive a monthly HSE summary report and a quarterly HSE report is provided to the Board.
The committee has considered and approved the matrix with roles and responsibilities of the corporate HSE team, reviewed HSE initiatives supported the initiatives carried out by the Group in recent years.
Since August 2016, the committee has started vice presidents to discuss the current initiatives.
The committee has reviewed the HSE reporting procedure and noted the effort taken by EVRAZ to improve the quality and transparency of health and safety reporting. It has recommended to improve the report by shaping it to be more target oriented, both for each division and for EVRAZ globally. The committee has also supported the decision to extend the
The following sections summarise how the
Health & Safety Performance
Health & Safety performance is measured by the following metrics:
The HSE Committee has continued to review the causes of all fatalities and serious property damage incidents within the Group, as well as the follow up actions taken by the management. On the HSE Committee's
suggestion, each fatality case was animated using video format to provide a detailed description of the incident scene, sequence of events, root cause analysis and corrective actions taken. This practice will continue further if any fatality occurs.
The committee members have reviewed the status of 2016 H&S initiatives, and decided that priority HSE initiatives are generally on track. It was noted separately that extra focus should be added to improving the quality of safety conversations.
The committee has reviewed the alcohol testing process at various Group facilities and has suggested steps for further improvement of the procedure.
Additionally, the committee has reviewed the Coal Division's HSE initiatives, presented by Sergey Stepanov, the division vice president. The committee has noted that key initiatives have been developed to mitigate the major industrial safety risks related to coal mining:
The committee has reviewed the plan and procedures for industrial safety audits of processes and structural units at EVRAZ facilities. Its suggestions include improving the existing plan for audits at steel and ore mining facilities: the audits shall be organised operations from other EVRAZ facilities, as decided by the HQ Industrial Safety Team; the audit intensity should correlate with the risks highest on the risk matrix.
In 2016, the committee reviewed EVRAZ' environmental performance twice, including its progress in achieving the environmental targets set in 2012:
Air emissions (nitrogen oxides – NOx, sulphur oxides – SOx, dust and volatile
The Committee has focused on the management of air, water and waste issues, as well as related projects designed to minimise environmental risks (such as air emissions reduction, water usage and discharged water return into production, concluded that in most areas the initiatives that have been started need to be implemented further.
The committee has reviewed the risks and opportunities related to introduction of new Russian regulations. It was noted that the risk due to environmental regulatory changes have been reviewed in the framework of the Russian Steel HSE Committee and consolidated positions have been provided to the regulator.
In addition, the extent of the Group's environmental compliance has been evaluated by analysing a set of compliance metrics:
In order to improve environmental compliance management, the committee has discussed a new approach in assessing the probability of environmental risks, and has agreed to update the Risk Assessment Methodology by adding a time limits for possible risk realisation. This is intended to help management review and set priorities for environmental CAPEX expectations.
The committee has reviewed the corporate environmental initiatives and site risk mitigation It was noted that the corporate environmental management system has been developed to prevent and mitigate environmental risks, as well as coordinate environmental liabilities, to ensure regulatory compliance and improve environmental performance. It was noted that the risk level has decreased due to the implementation of mitigation measures.
The committee members have reviewed the environmental performance: key air emissions, waste recycling. The model that was presented was developed taking into consideration the future effects of environmental projects and investment projects with environmental effects development scenarios and asset disposal plans affecting the reduction of emissions and freshwater intake were also taken into account
on pages 75-83.
EVRAZ operations are subject to HSE compliance inspections undertaken by governmental supervisory agencies. The consequential risks of violating HSE withdrawal of mining or plant environmental licences, which would halt operations.
The committee members reviewed:
Alexander Izosimov
The current Remuneration Policy was approved by shareholders at the AGM in June 2014. The Regulations require that shareholders formally approve the Remuneration Policy every three years and so it is intended that an updated Remuneration Policy will be put before shareholders for approval by way of a binding vote at the Company's AGM on 20 June 2017. If approved by shareholders, the updated Remuneration Policy will have effect immediately thereafter. Prior to that date, the Company's existing Remuneration Policy will continue to apply.
The Company reviewed the Remuneration Policy during the year and believes that it remains appropriate. As such, the 2017 Remuneration Policy will remain broadly unchanged from the Remuneration Policy approved by shareholders at the 2014 AGM.
The second part of the report, the Annual remuneration report, sets out details of remuneration paid in 2016 and how the Group intends to apply its Remuneration Policy in 2017. This section will be put to an advisory shareholder vote at the forthcoming AGM.
In the current competitive environment, the Group aims to ensure that its Remuneration Policy is aligned with its business
In line with its commitment to good corporate governance, EVRAZ will continue to monitor and market trends on executive remuneration. These will be taken into account when deciding on executive remuneration at EVRAZ to ensure that its Remuneration Policy remains appropriate in the context of business performance and strategy.
Details of the Remuneration Policy relating to out in the following section. In accordance with binding shareholder resolution to approve this report will be proposed at the Annual General Meeting of the Company to be held in 2017. If approved by shareholders, the Remuneration Policy will have effect immediately thereafter. Prior to that date, the Company's existing Remuneration Policy will continue to apply.
The main objectives of the Remuneration Policy are to attract, retain and reward talented staff and management, by offering compensation that is competitive within the industry, motivates management to achieve the Company's business objectives, encourages a high level of performance, and aligns the interests of management with those of shareholders.
| Element | Purpose and link to strategy |
Operation | Maximum potential value | Performance metrics |
|---|---|---|---|---|
| Executive director | ||||
| Base salary | Provides a level of base individual experience and role to attract and retain high calibre talent. |
Normally reviewed annually, taking into account individual and market conditions, including: size and nature of the role, relevant market pay levels, individual experience and pay increases for employees across the Group. For the current CEO, base salary incorporates a director's fee (paid to all directors of the Company for participation in the work of the Board committees and Board executive Director Remuneration paid in a currency other than US dollars, the Committee may make additional payments to ensure that the total annual salary equals the level of annual salary in US dollars. |
Generally, the maximum increase per year will be in line with the overall level of increases within the Group. However, there is no overall maximum opportunity as increases may be made above this level at the Committee's discretion, to take account of individual circumstances such as increases in scope and individual's development and performance in the role. |
None |
| To provide a market level appropriate for individual circumstances to recruit and retain executive talent. |
healthcare. Committee considers it appropriate. The current CEO does not participate in any pension scheme during the reporting period. In the event that an executive director is required by the Group to relocate, or following recruitment, limited to a relocation, housing, travel and education allowance. |
generally be in line with that for the senior management team. However, the cost of insurance to year depending on the individual's circumstances. be set at a level the Committee considers proportionate and circumstances, in line with market practices. There is no total maximum opportunity. |
None |
| Element | Purpose and link to strategy |
Operation | Maximum potential value | Performance metrics | |
|---|---|---|---|---|---|
| Annual bonus |
Aligns executive remuneration to Company strategy through rewarding the achievement of and strategic business targets. |
The Company operates an annual bonus arrangement under which awards are generally delivered in cash. Targets are reviewed annually and linked to corporate performance based on predetermined targets. |
200% of base salary in respect Company |
The bonus is based on achievement of operational and strategic measures in the year to ensure focus is spread across the key aspects of Company performance and strategy. The exact measures and associated weighting will be determined on an annual basis, according to the Company's strategic priorities, however at least 60% will be based on Group For achievement of threshold performance, 0% of maximum will be paid, rising straight line to 50% of maximum for target performance and 100% of maximum for outstanding performance. The Committee retains discretion to overall performance of the Company. |
|
| Non-executive directors | |||||
| Chairman executive director remuneration |
To provide remuneration to attract and retain high executive talent |
executive directors. | for directly by the Company, including any tax due on the costs. This may include travel expenses, professional fees incurred in the furtherance of duties as a director, and the provision of training and development. |
||
The Committee reserves the right to make any remuneration payments and payments for loss out above where the terms of the payment were agreed before the policy came into effect or at a time when the relevant individual was not a director of the Company and, in the opinion of the Committee, the payment was not in consideration of the individual becoming a director of the Company.
The CEO's incentive arrangements are subject to "malus", under which the Committee may the overall performance of the Company. The Committee does not operate clawback arrangements on directors' remuneration on the basis that such arrangements would not be enforceable under the Russian Labour Code. The Committee will keep this under review and should the Russian Labour Code change, they will revisit the inclusion of such provisions in
the Group's variable remuneration plans in order to comply with Provision D.1.1 of the 2016 Corporate Governance Code. This is noted in the Corporate Governance report on page 104.
The Committee may make minor amendments to the Remuneration Policy set out above (for regulatory, exchange control, tax or administrative purposes or to take account shareholder approval for that amendment.
Performance measures and targets
Annual bonus measures and targets are selected to provide an appropriate balance between incentivising the director to meet key operational objectives. They are reviewed annually by the Committee to ensure that the measures and weightings are in line with the strategic priorities and needs of the business.
Remuneration arrangements throughout the Group
This remuneration approach and philosophy is applied consistently at all levels, up to and including the executive director. This ensures that there is alignment with business strategy throughout the Group. Remuneration the seniority of the role and local market practices, and therefore the components and remuneration levels for different employees may differ in parts from the policy set out above.
For instance, in addition to a base salary, reference to KPIs aligned with the Group's incentive programme. This is designed to align the interests of these individuals to the value. The current CEO already holds a substantial shareholding in the Group and therefore does not participate in this plan.
The chart below provides an indication of what could be received by the executive director under the proposed Remuneration Policy.
In the event of hiring a new executive director, remuneration would be determined in line with the following Remuneration Policy. This Remuneration Policy has been developed to enable the Company to recruit the best candidate possible who will be able to contribute to the Company's performance and will help to reach its goals.
The Committee's intention would be for subject to performance conditions. Where term incentive awards to a candidate, the Committee would seek appropriate shareholder approval for a new share plan in accordance with the Listing Rules.
When setting salaries for new hires, the Committee will take into account all relevant factors, including the skills and experience of the individual, the market from which they are recruited and the market rate for the role. For interim positions, a cash supplement may executive director taking on an executive
Where an executive director is appointed from within the organisation, the normal policy is that any legacy arrangements would be honoured in line with the original terms and conditions. Similarly, if an executive director is appointed following an acquisition of, or merger with another company, legacy terms and conditions will be honoured.
On the appointment of a new chairman or typically be in line with the Remuneration Policy arrangements delivered to the chairman or elements.
| Minimum | In line with expectations |
Maximum | |||
|---|---|---|---|---|---|
| Base pay | |||||
| Annual bonus | 0% of salary | 100% of salary | 200% of salary |
The CEO has a service contract with a subsidiary of EVRAZ plc.
| Executive | Date | Notice |
|---|---|---|
| director | of contract | period |
| Alexander V. Frolov |
2016 | N/A |
The CEO's service contract does not provide the event of termination, the applicable notice period will be as provided for in the Russian Labour Code from time to time (where the termination is at the Company's initiative, the entitlement to pay in lieu of notice is currently Committee may determine that a termination payment of up to 12 months' base salary should be paid, taking into consideration the circumstances of departure. Going forward, all new executive directors' contracts will normally provide for a notice period of no more than 12 months and for any compensation provisions for termination without notice to be capped at 12
There is no automatic entitlement to annual bonus and executive directors would not normally receive a bonus in respect of the
where an executive director leaves by reason that the Committee may determine, a bonus may be awarded. Any such bonus would normally be subject to performance and time otherwise.
of appointment setting out the terms and conditions covering their appointment. They AGM following their appointment and, subject to the outcome of the AGM, the appointment this arrangement, the appointment may be terminated by the director giving three months' notice or in accordance with the Articles of Association. Letters of appointment do not provide for any payments in the event of loss
at the AGM on 20 June 2017.
Copies of the directors' letters of appointment or, in the case of the CEO, the service contract, are available for inspection by shareholders at
Consideration of conditions elsewhere in the Company
Management prepares details of all employee pay and conditions, and the Committee considers them on an annual basis. The Committee takes this into account when setting the CEO's remuneration. However, the Committee does not consider any direct comparison measures between the executive director and wider employee pay. The Group does not formally consult with employees on executive director remuneration.
Consideration of shareholder views
When determining the Remuneration Policy, the Committee takes into account investor body guidelines and shareholder views.
| Non-executive directors | Date of contract | Notice period |
|---|---|---|
| Alexander G. Abramov | 14 October 2011 | Three months |
| Karl Gruber | 14 October 2011 | Three months |
| Alexander Izosimov | 28 February 2012 | Three months |
| Sir Michael Peat | 14 October 2011 | Three months |
| Deborah Gudgeon | Three months | |
| Eugene Shvidler | 14 October 2011 | Three months |
| Eugene Tenenbaum | 14 October 2011 | Three months |
This section summarises remuneration paid and details of how the Remuneration Policy will
In 2016, the CEO, Alexander Frolov, was entitled Board, he is also entitled to a directors' fee participation in the work of the Board Committees director remuneration. However, the Committee considers these fees to be incorporated in his base salary. Alexander Frolov's current shareholding (10.68% of issued share capital value. As such, the Committee does not consider it necessary for the CEO to participate in any shareholding guidelines. However, the Committee will continue to review this on an ongoing basis.
of remuneration (audited)
| Alexander V. Frolov |
2016 (US\$) | 2015 (US\$) |
|---|---|---|
| Salary and director fees1 |
2,500,000 | 2,500,000 |
| 21,184 | ||
| Bonus | 666,650 | |
| Total | 4,560,054 |
The current CEO salary was approved by the (which includes, for the avoidance of doubt, the directors' fee, fees paid for Committee membership and any salary from an EVRAZ plc
For 2016, the CEO's salary will remain unchanged at US\$2,500,000.
The CEO does not currently receive any of private healthcare.
bonus that is paid in cash following the year end, subject to the agreement of the Committee and approval by the Board of Directors. The bonus is linked to achieving performance conditions based on predetermined targets set by the Board of Directors. The target bonus is 100% of base salary with a maximum potential of 200% of base salary.
The bonus is linked to the Group's main strategic measures during the year to ensure alignment with the key aspects of Group performance and strategy. For 2016, the weighting of 20%, were taken into account when determining the CEO's annual bonus: LTIFR, EBITDA, Free Cash Flow (adjusted for
Cost Index and Board assessment of overall performance against strategic objectives.
The Committee reviews the resulting bonus payout to ensure that it is appropriate in light of the Group's overall performance.
Despite a highly volatile business environment in 2016, EVRAZ generally outperformed bonus payout of 40.78% of the maximum. Management focused on best utilisation of temporary market improvements: domestic steel price growth in Q2 and export coal and iron ore price rises in Q4. These efforts, along and investments, have helped to overcome the market fall in Q1 and mitigate logistics affected by transaction costs associated with earlier debt repayment. However, the working capital optimisation drive fully compensated for this.
The Committee determined that this level of with the shareholder experience.
| Result Measurement | Actual | Bonus | |||
|---|---|---|---|---|---|
| KPIs | Threshold | Planned level (% of target) |
Outstanding | 2016 | payout (% of max) |
| LTIFR | 2.09 | 1.74 | 0.0 | ||
| EBITDA | US\$1,160m | US\$1,450m | US\$1,740m | US\$1,542m | 65.9 |
| FCF | US\$500m | US\$625m | US\$750m | US\$659m | |
| Cash cost index | 110% | 100% | 90% | 105% | 24.4 |
| BoD discretion | Committee assessment of overall Company performance during the year, including consideration of operational performance, creation, outcome of key projects and stakeholder relationship management. |
See section Board assessment of overall performance on page 126 |
50.0 | ||
| Total | 40.78 |
1
Board assessment of overall performance
EVRAZ' Remuneration policy stipulates that the the CEO's performance in relation to the Group's key strategic priorities, as well as his efforts to award the discretionary portion of the bonus in full are:
Annual bonus for 2017
For 2017, the bonus framework will be in line with 2016. Forward targets are considered by the Board to be commercially sensitive; however, they will generally be disclosed in the subsequent year. In line with previous years, a malus arrangement will apply under which bonus payouts may be adjusted downwards to
in respect of 2016 and 2015 is set out in a table below.
consists of an annual fee of US\$150,000 and a fee for Committee membership for chairmanship of the Audit Committee For reference, the fees payable for the chairmanship of a Committee include the membership fee, and any director elected as chairman of more than one Committee is generally entitled to receive fees in respect of one chairmanship only. The fee for the chairman of the Board amounts to US\$750,000 from 1 March 2012 (this fee includes, for the avoidance of doubt, directors' fees and fees paid for Committee
Fees will remain unchanged for 2017
The aggregate amount of directors' remuneration payable in respect of qualifying services for the
As set out earlier in this report, there are no formal minimum shareholding requirements shareholding in EVRAZ.
| 2016 (US\$ thousand) | 2015 (US\$ thousand) | |||||
|---|---|---|---|---|---|---|
| Non-executive director | Total fees1 |
Admin2 | Total | Total fees1 |
Admin2 | Total |
| Alexander G. Abramov | 750 | 780 | 750 | 780 | ||
| Alexander Izosimov | 242.6 | 272.6 | 212.2 | 242.2 | ||
| Eugene Shvidler | 174 | 204 | 174 | 204 | ||
| Eugene Tenenbaum | 150 | 180 | 150 | 180 | ||
| Karl Gruber | 248 | 278 | 268 | |||
| Duncan Baxter3 | 84 | 6.25 | 90.25 | 224 | 254 | |
| Olga Pokrovskaya3 | 74.25 | 6.25 | 80.5 | 198 | 228 | |
| Sir Michael Peat | 219 | 249 | 216.2 | 246.2 | ||
| Deborah Gudgeon | 269 | 299 | 154 | 20 | 174 | |
| Terry Robinson4 | 190 | 15 | 205 |
1
2
3
4
| Directors | Number of shares |
Total holding, Ordinary shares, % |
|---|---|---|
| Alexander Abramov |
||
| Alexander Frolov |
10.68% | |
| Eugene Shvidler |
||
| Alexander Izosimov |
80,000 | 0.01% |
There have been no changes in the directors' 28 February 2017.
The shares held by Alexander Izosimov were acquired in 2012 when he was appointed as an
All shares held by directors are held outright, with no performance or other conditions attached to them, other than those applicable to all shares of the same class.
Other directors do not currently hold any shares in the Company.
The Committee believes that the Company companies, offering executive directors the opportunity to broaden their experience and knowledge. Company policy is to allow executive directors to retain fees paid from any such appointment. The CEO does not currently hold a
The graph below shows comparison of total cost of remuneration paid to all employees between current and previous years and chosen for the comparison as it is a KPI which
see page 260.
The graph below shows the Group's performance measured by total shareholder return compared with the performance of admission to the premium listing segment of the London Stock Exchange on 7 November selected as an appropriate benchmark, as it constituent member.
CEO's total remuneration over the past six years, along with a comparison of variable payments as a percentage of the maximum bonus available.
Relative performance of spend on pay, US\$ million
| Annual bonus payout (as a % of maximum opportunity) | ||
|---|---|---|
| 2016 | 4,560,054 | 40.78% |
| 2015 | ||
| 2014 | 5,808,752 | 77% |
| 4,894,286 | 50% | |
| 2012 | 2,141,000 | 0% |
| 2011 | 1,667,000 |
Percentage change in remuneration
The table on the right sets out the percentage change in the elements of remuneration for the director undertaking the role of CEO based administrative personnel. This group of employees has been selected as an appropriate comparator, as they are based in the same geographic market as the CEO, so are subject to similar external environment/pressures.
This section gives details of the composition of the Committee and activities undertaken over the past year.
Members of the Committee
The composition of the Committee changed during the year. The current members of the Remuneration Committee are set out below:
Karl Gruber stepped down from the Committee and joined the Audit Committee on 14 March 2016.
Duncan Baxter who was Committee Chairman till 14 March 2016 stepped down from the Board of Directors on 14 March 2016.
No directors are involved in deciding their own remuneration. The Committee may invite other individuals to attend Committee meetings, in particular the CEO, the head of human resources and external advisers for all or part of any Committee meeting as and when appropriate and necessary.
| CEO | Russian administrative personnel |
|
|---|---|---|
| Salary | 0% | 5% |
| 6% | ||
| Annual bonus |
Role of the Committee
The Committee is a formal committee of the Board and can operate with a quorum of two Committee members. It is operated according to its Terms of Reference, a copy of which can be found on the Group's website.
The main responsibilities of the Committee are:
such compensation is determined in accordance with the relevant contractual terms and Remuneration Policy, and that such compensation is otherwise fair and not excessive for the Group;
to oversee any major changes in employee
During 2016, the Committee met three times. The purpose of the meetings was to consider and make recommendations to the Board in relation to the remuneration packages of the executive director and key senior managers; to approve the annual bonus for the 2015 results;
The Committee received advice during the year from Deloitte LLP, which it selected to provide independent remuneration consultancy services to the Group. Deloitte is a member of the Remuneration Consultants' Group and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK. The code of conduct can be found at www.remunerationconsultantsgroup.com.
During the year, Deloitte advised the Committee on developments in the regulatory environment and market practice and on the development and disclosure of the Group's pay arrangements. The total fee for advice provided to the Committee during the year was GBP29,900. Other parts of Deloitte provided unrelated tax and regulatory advisory services during the year.
executive on the Board of Deloitte LLP. Both the chairman of the Board and the Committee chairman recognise the need to ensure that appointment of Deloitte LLP as independent remuneration consultants.
of Sir Michael's role at Deloitte LLP does not appropriate internal controls and segregation of duties in place. Sir Michael did not play a part in the tender and selection process.
they have received has been objective and independent.
Shareholder considerations
EVRAZ remains committed to ongoing shareholder dialogue and takes an active interest in feedback received from its shareholders and from voting outcomes.
Where there are substantial votes against resolutions in relation to directors' remuneration, the Group shall seek to understand the reasons for any such vote and will detail any actions in response to these.
The table on the left sets out actual voting results from the Annual General Meeting, which was held, in respect of the previous remuneration report and Remuneration Policy.
| Number of votes | For | Against | Withheld | Total votes as % of issued share capital |
|---|---|---|---|---|
| To approve the Annual remuneration report section of the directors' | 1 | 10,684,012 | 20,000 | |
| That the Directors' Remuneration Policy contained in the directors' approved |
1,024,608,770 | 6,996,299 | 10,265,194 | 68.48% |
1
These results illustrate the strong level of shareholder support for the directors' remuneration framework.
Signed on behalf of the Board of Directors,
Alexander Izosimov
In accordance with section 415 of the Companies Act 2006, the Directors of EVRAZ plc present their report to shareholders 2016, which they are required to produce by applicable UK company law. The Directors' Report comprises the Directors' Report section of this report, together with the sections of the Annual Report incorporated by reference. As permitted by legislation, some of the matters
normally included in the Directors' Report have instead been included in other sections of the Annual Report, as indicated below.
The Company was incorporated under the name EVRAZ plc as a public company limited on the London Stock Exchange in November 2011 and is a member of the FTSE 250 Index.
| Dividends | The Company's current dividend policy was adopted on 8 April 2014. It allows payment of regular dividends only |
|---|---|
| Share capital | Details of the Company's share capital are set out in Note 20 to the Consolidated Financial Statements, including details on the movements in the Company's issued share capital during the year. which 87,015,166 ordinary shares are held in treasury. Therefore, the total number of voting rights in the Company is 1,419,512,128. The Company's issued ordinary share capital ranks pari passu in all respects and carries the right to receive all dividends and distributions declared, made or paid on or in respect of the ordinary shares. There are currently no |
| Authority to purchase own shares and transfer of treasury shares to Company's Employee Share Trust |
Details of the Company's authority to purchase its own shares, which will be sought at the Company's forthcoming Annual General Meeting, will be set out in the notice of meeting for that AGM. Share Trust, which represented 0.76% of the Company's issued share capital. Details are set out in Note 20 to the Consolidated Financial Statements. |
| Directors | Biographies of the directors who served on the Board during the year are provided in the Governance section on pages 100-101. In addition, Duncan Baxter and Olga Pokrovskaya served as directors until 14 March 2016. |
| Directors' appointment and re-election |
The Board has the power at any time to elect any person to be a director, but the number of directors must not exceed retire at the next AGM and then be eligible for election. In accordance with the UK Corporate Governance Code, the For additional information about directors' appointment and resignation, see the Corporate Governance Report on pages 105. |
| Directors' interests | Information on share ownership by directors can be found in this Report and in the Remuneration Report on pages 127. |
| Directors' indemnities and liability insurance |
any liability that attaches to them in defending proceedings brought against them, to the extent permitted by the |
| Powers of directors | Subject to the Company's Articles of Association, UK legislation and to any directions given by special resolution, the business of the Company is managed by the Board, which may exercise all the powers of the Company. The Articles of to make purchases of any of its own shares. The directors have the authority to allot shares or grant rights to subscribe for or to convert any security into shares in the Company. Further details of the proposed authorities are set out in the Notice of the AGM. |
| Major interests in shares |
| Research and development |
EVRAZ is constantly engaged in process and product innovation. EVRAZ research and development centres located and to ensure that the Company remains competitive in the global and local markets. For examples of the Company's efforts in R&D in different operations, please refer to the Business Review on pages 38-71. |
|---|---|
| Sustainable development |
The Corporate Social Responsibility section of this report focuses on the health and safety, environmental and employment performance of the Company's operations, and outlines the Company's core values and commitment to the principles of sustainable development and development of community relations programmes. Details of the Company's policies and performance are provided in the CSR Report on pages 74-94. |
| Payments to governments |
EVRAZ published its report on payments to governments in June 2016. The report provides citizens, authorities and independent users with information on payments made to governments where the Company conducts its extractive activities. The report is prepared in accordance with the requirements of the Disclosure and Transparency Rules Instrument 2014 "Report on payments to governments", issued by the UK Financial Conduct Authority. The report is available on the Company's website at www.evraz.com. |
| Political donations | No political contributions were made in 2016. |
| Greenhouse gas emissions |
control. Details can be found in the CSR Report on pages 80-81. |
| Employees | Information regarding the Company's employees can be found in the Our People section on pages 86-89. |
| Overseas branches | Consolidated Financial Statements. |
| Financial risk management and |
Consolidated Financial Statements, the Corporate Governance, Risk Management and Internal Control section on pages 107-109, and the Financial Review on pages 24-29. |
| Going concern | the report on pages 24-29. into account reasonably possible changes in trading performance, show that the Group will continue in operation for the foreseeable future and has neither the intention nor the need to liquidate or materially curtail the scale of its operations. on page 155 |
| Auditor | The Audit Committee conducted a tender for the external audit of the Group in July 2016. In November, the Board tender process are set out in the Audit Committee Report on page 115. be proposed at the forthcoming AGM. |
| Future developments | Information on the Group and its subsidiaries' future developments is provided in the Strategic Report on pages 8-37. |
| Events since the reporting date |
on pages 237. |
| Annual general meeting (AGM) |
The 2017 AGM will be held on 20 June 2017 in London. At the AGM, shareholders will have the opportunity to put questions to the Board, including the chairmen of the Board committees. Full details of the AGM, including explanatory notes, are contained in the Notice of the AGM, which will be distributed at least 20 working days before the meeting. The Notice sets out the resolutions to be proposed at the AGM and an explanation of each resolution. All documents relating to the AGM are available on the Company's website at www.evraz.com. |
| Electronic communications |
A copy of the 2016 Annual Report, the Notice of the AGM and other corporate publications, reports and announcements are available on the Company's website at the following links: http://www.evraz.com/investors/information/general_meeting/ http://www.evraz.com/investors/annual_reports/ website instead of receiving paper copies. |
| Corporate governance statement |
set out in a company`s Directors' Report. In common with many companies, EVRAZ has an existing practice of issuing, within requirement of DTR 7.2 is located in the EVRAZ Corporate Governance Report (and is incorporated into this Directors' Report by |
1,506,527,294 ordinary shares, of which 87,015,166 ordinary shares are held in treasury. Thus, the total voting rights are 1,419,512,128 ordinary shares.
to the Company under Disclosure and Transparency Rule 5.
| Number of ordinary shares | % of issued ordinary shares | |
|---|---|---|
| Lanebrook Ltd.1 | 905,487,416 | |
| Kadre Enterprises Ltd.2 | 5.90 | |
| Verocchio Enterprises Ltd.3 | 82,887,014 | 5.84 |
1 2
3
| Number of ordinary shares | % of issued share capital | |
|---|---|---|
| Roman Abramovich | ||
| Alexander Abramov | ||
| Alexander Frolov | 10.68 | |
| Gennady Kozovoy | 5.90 | |
| Alexander Vagin | 82,887,014 | 5.84 |
| Eugene Shvidler |
For the purposes of LR 9.8.4CR, the information required to be disclosed by LR 9.8.4R can be found in the following locations:
| Item | Location |
|---|---|
| Interest capitalised | Note 9 to the Consolidated Financial Statements |
| Not applicable | |
| Note 21 to the Consolidated Financial Statements, Remuneration Report |
|
| Waiver of emoluments by a director | None |
| Waiver of future emoluments by a director | None |
| None | |
| None | |
| Parent participation in a placing by a listed subsidiary | None |
| None | |
| Relationship Agreement section on pages 133-134 | |
| Provision of services by a controlling shareholder | None |
| Shareholder waiver of dividends | None |
| Shareholder waiver of future dividends | None |
| Agreements with controlling shareholder | Relationship Agreement section below |
The Controlling Shareholder and the Company have entered into a Relationship Agreement them, ensures that the Company is in compliance with the provisions of the Listing Rules and capable of carrying on its business independently of the Controlling Shareholder, and ensures that any transactions and relationships between the Company and the Controlling Shareholder are at arm's length and on normal commercial terms. This Agreement was last amended and restated in December 2014 in order to comply with certain changes to the Listing Rules.
This Agreement terminates if the Controlling Shareholder ceases to own or control (directly or if the Controlling Shareholder ceases to have a larger interest in the Company than the interest of any other shareholder of the Company.
Under the Relationship Agreement, the Controlling Shareholder and the Company agree that:
Controlling Shareholder or a member of the Controlling Shareholder Group (on the on arm's length terms and on a normal commercial basis, unless otherwise agreed Executive Directors of the Company whom the Board considers to be independent in accordance with paragraph B.1.1 of the UK Corporate Governance Code (the
the quorum for any Board meeting of the Company shall be two, of which at least one must be a Director other than a Controlling Shareholder Director and/ or a Director who has (or had, in the 12 business or other relationship with the Controlling Shareholder or any member of the Controlling Shareholder Group that could materially interfere with the exercise of his or her independent judgement in matters concerning the Company (''Lanebrook
the Controlling Shareholder shall not, and shall procure, insofar as it is legally able to do so, that each member of the Controlling Shareholder Group shall not, subject to Company's status as a listed company, compliance with the Listing Rules and Disclosure and Transparency Rules;
is capable of carrying on its business independently of the Controlling Shareholder and that the Board makes its decisions in a manner consistent with its duties to the Company and stakeholders of EVRAZ plc.
of the Company have conducted an annual review to consider the continued good standing of the Relationship Agreement Relationship Agreement are being fully observed by both parties. In accordance
The 9.50% per annum notes due 2018, issued by EVRAZ Group S.A. on 24 April 2008, contain change of control provisions. If a change of control occurs under the terms of these notes, note holders will have the option to require EVRAZ Group S.A. to redeem notes together with interest principal amount of these notes amounted to US\$125 million.
by EVRAZ Inc. NA Canada on 7 November 2014 contain change of control provisions. If a change of control occurs under the terms of these notes, the Issuer should make an offer to purchase all outstanding notes together with accrued interest, if any.
The change of control provisions contained in several loan agreements with a total principal amount of US\$1,088 million outstanding change of control occurs, each lender under these agreements has a right to cancel their commitments and request prepayment of their portion of the respective loans.
The Company's Articles of Association were adopted with effect from June 2012 and contain, amongst others, provisions on the rights and obligations attaching to the Company's shares, including the redeemable subscriber shares. The Articles of Association may only be amended by special resolution at a general meeting of the shareholders.
Without prejudice to any rights attached to any existing shares, the Company may issue shares with rights or restrictions as determined by either the Company by ordinary resolution or, if the Company passes a resolution, the Directors. The Company may also issue shares that are, or are liable to be, redeemed at the option of the Company or the holder and the directors may determine the terms, conditions and manner of redemption of any such shares.
There are no other restrictions on voting rights or transfers of shares in the Articles other than those described in these paragraphs. Details of deadlines for exercising voting rights and proxy appointment will be set out in the 2017 Notice of the AGM.
At a general meeting, subject to any special rights or restrictions attached to any class of shares on a poll, every member present in person or by proxy has one vote for every share that he or she holds.
A proxy is not entitled to vote where the member appointing the proxy would not have been entitled to vote on the resolution had he or she been present in person. Unless the directors decide otherwise, no member shall be entitled to vote either personally or by proxy or to exercise any other right in relation to general meetings if any sum due from him or her to the Company in respect of that share remains unpaid.
The trustee of the Company's Employee Share Trust is entitled, under the terms of the trust shares held on trust.
The Company's Articles provide that transfers writing, and duly signed by or on behalf of the transferor and, except in the case of fully paid shares, by or on behalf of the transferee. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect of may be effected by means of CREST unless the CREST Regulations provide otherwise.
The directors may refuse to register an allotment or transfer of shares in favour of more than four persons jointly.
Each of the Directors who were members of the Board at the date of the approval of this report
interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
The EVRAZ Directors' Report has been prepared in accordance with applicable UK company law and was approved by the Board on 28 February 2017.
By the order of the Board
Alexander Frolov
Each of the directors whose names and functions are listed on pages 100-101 that to the best of their knowledge:
The Board considers that the report and accounts taken as a whole, which incorporates the Strategic Report and Directors' Report, is fair, balanced and understandable, and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
The directors are responsible for preparing the Annual Report and the Group and parent with applicable United Kingdom law and regulations. Company law requires the directors law, the directors are required to prepare Group by the European Union and applicable law and have elected to prepare the parent company
Under the Companies Acts the directors must not approve the Group and parent company that they give a true and fair view of the state of affairs of the Group and parent company and company for that period. In preparing each statements the directors are required to:
The directors are responsible for keeping to show and explain the Group's and parent company's transactions and disclose with position of the Group and parent company statements comply with the Companies Act statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible for preparing the Directors' Report, the Directors' Remuneration Report and the Corporate Governance Report in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules of the United Kingdom Listing Authority. Legislation in the United Kingdom governing the preparation and differ from legislation in other jurisdictions.
By the order of the Board
Alexander Frolov
| Consolidated Financial Statements 146 | |
|---|---|
| --------------------------------------- | -- |
| Consolidated Statement of Operations 146 | |
|---|---|
| Consolidated Statement of Comprehensive Income 147 | |
| Consolidated Statement of Financial Position 148 | |
| Consolidated Statement of Cash Flows 149 | |
| Consolidated Statement of Changes in Equity 150 | |
| Notes to the Consolidated Financial Statements 154 | |
| 1. Corporate Information 154 | |
| 154 | |
| 3. Segment Information 173 | |
| 4. Changes in Composition of the Group 180 | |
| 5. Goodwill 182 | |
| 183 | |
| 7. Income and Expenses 187 | |
| 8. Income Taxes 189 | |
| 9. Property, Plant and Equipment 191 | |
| 193 | |
| 195 | |
| 12. Disposal Groups Held for Sale 197 | |
| 199 | |
| 14. Inventories 200 | |
| 15. Trade and Other Receivables 200 | |
| 16. Related Party Disclosures 201 | |
| 17. Other Taxes Recoverable 203 | |
| 203 | |
| 19. Cash and Cash Equivalents 203 | |
| 20. Equity 204 | |
| 21. Share-Based Payments 205 | |
| 22. Loans and Borrowings 207 | |
| 211 | |
| 24. Provisions 220 | |
| 25. Other Long-Term Liabilities 221 | |
| 26. Trade and Other Payables 223 | |
| 27. Other Taxes Payable 223 | |
| 28. Financial Risk Management Objectives and Policies 223 | |
| 29. Non-Cash Transactions 231 | |
| 30. Commitments and Contingencies 231 | |
| 233 | |
| 32. Material Partly-Owned Subsidiaries 233 | |
| 33. Subsequent Events 237 | |
| 238 |
| Separate Financial Statements 246 | |
|---|---|
| Separate Statement of Comprehensive Income 246 | |
| Separate Statement of Financial Position 247 |
| Separate Statement of Financial Position 247 | |
|---|---|
| Separate Statement of Cash Flows 248 | |
| Separate Statement of Changes in Equity 249 | |
| Notes to the Separate Financial Statements 250 |
| Group | Company |
|---|---|
| the related notes 1 to 34. | the related notes 1 to 10. |
| Materiality | 1 |
|---|---|
| misstatement to be higher, for a further ten components. have performed other procedures appropriate to respond to the risk of material misstatement. We have obtained an understanding of the entity-level controls of the Group which assisted us in identifying and assessing risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy. |
|
| Goodwill and non-current asset impairment Going concern Completeness of related party transactions |
|
| What has changed | treatment was a once-off event and considered to be appropriate, we have concluded that this is no longer an area of audit focus in 2016. |
1 Management's EBITDA in the annual report does not include social and charitable expenditure.
These expenses have been included in adjusted EBITDA used for our calculation of materiality as they are incurred every year.
on pages 139 to 140.. This is not a complete associated with each focus area to have increased, decreased or stayed the same compared to 2015.
Changes from the prior year
The accounting treatment of a Praxair contract is no longer an area of focus for the current year as the determination of the accounting treatment was a once-off and was considered to be appropriate in the prior year.
| Area of focus | Our audit approach | What we reported to the Audit Committee |
|---|---|---|
| Goodwill and non-current asset impairment | Risk direction: | |
| Refer to the Group Audit Committee report on page 110, the estimates and judgments on page 158 to 162. and the disclosures of impairment in note 6 of the Consolidated Financial Statements |
||
| recognised impairment charges in respect of goodwill, in addition to the impairment charge already recognised, a reasonably possible change in discount rates, sales prices, sales volumes and cost control measures, could is currently recognised. carrying value of the assets being assessed, the number and size of recent impairments, the current economic because the assessment of the recoverable amount of business and the discount rates applied to future cash with the largest carrying values, those for which an impairment had been recognised in the year and those with the lowest headroom. This year we performed a detailed evaluation of |
We performed audit procedures on all impairment models relating to material cash generating units. Our audit procedures were performed mainly by the Group audit which were assessed by the component teams. their impairment models. The assumptions to which the models were most sensitive Discount rates. where applicable, external benchmarks. We tested the integrity of models with the assistance of our own specialists and sought appropriate evidence for any anticipated improvements in major assumptions such as production volumes or cost reductions. We corroborated previous forecasts with actual data. We tested the appropriateness of the related disclosures provided in the Consolidated Financial Statements. In particular we tested the completeness of reasonably possible change in certain variables could lead to impairment charges. 36 and the actual business operations, and challenged the extent and nature of underlying changes driving the reassessment. |
We consider the to be reasonable for the current year with assumptions within an acceptable range. Management has also in the circumstances of for forthcoming periods. We concluded that the related disclosures provided in the Consolidated Financial Statements are appropriate. and are appropriately disclosed in the Financial Statements. |
| Area of focus | Our audit approach | What we reported to the Audit Committee |
|---|---|---|
| Going concern | Risk direction: | |
| Refer to the Group Audit Committee report on page 110, the Directors' report on page 130 Consolidated Financial Statements |
on page 155 of the | |
| regular debt repayments and a number of restrictive covenants over a proportion of its debt. the Group can operate as a going concern for at least approved. During 2016 management negotiated covenant holidays for the periods ranging from 31 December 2017 to 30 June 2018 for the loan balances that consider the level of risk in relation to Going Concern to have decreased. |
procedures on this area were performed directly by the Group audit team. Covenant compliance testing was split between the Group and component teams as appropriate. model. The main procedures performed on the models and areas where we We tested the appropriateness of the assumptions that had the most material impact. In challenging these assumptions we took account of actual results, We tested the arithmetic integrity of the calculations including those related to We also performed our own sensitivity calculations to test the adequacy of the We agreed the sources of liquidity and uses of funds to supporting documentation. We considered the appropriateness of the disclosures made in the Consolidated Financial Statements in respect of going concern. |
Based on audit procedures performed we agree with the conclusion reached by management that there is no material uncertainty in relation to the going concern assumption for the preparation of the |
| Completeness of related party transactions | Risk direction: | |
| Refer to the Group Audit Committee report on page 110 and note 16 of the Consolidated Financial Statements | ||
| transactions with a company controlled by a key management person had been erroneously omitted from in the Consolidated Financial Statements. and investor interest in this area coupled with the risk that this might not be an isolated incident, we considered |
and approval of related party transactions. length basis by reviewing a sample of agreements and comparing the related party transaction price to those quoted by comparable unrelated companies. |
Based on our procedures performed we consider the related party disclosure provided in the Consolidated Financial Statements not to be materially misstated. |
value transactions with unknown counterparties.
We randomly selected a sample of key management personnel and ran a search an independent register of all companies based in the CIS and their directors of entities included in related party listing provided to us by management and investigated the differences between the listings.
our audit risk had increased. We therefore reassessed the risk of completeness of related party transactions as
We consider the increased risk to be limited to the Russian entities within the Group where external business interests, especially in relation to local product suppliers, are more common amongst members of key management.
misstatements on the audit and in forming our audit opinion.
Materiality Performance materiality Reporting threshold US\$41.0 million US\$20.5million US\$2.1 million
the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
calculation for materiality purposes because these are costs that are incurred every year. Our materiality amount provides a basis for determining the nature and extent of risk assessment procedures, identifying and assessing the risk of material misstatement and determining the nature and extent of further audit procedures. Materiality is assessed on both quantitative and qualitative grounds. With respect to disclosure and presentational matters, amounts in excess of the quantitative thresholds above may not be adjusted if their effect is not considered to be material on a qualitative basis.
the Group in the assessment of the performance of management. We also noted that market and analyst commentary on the performance of the performance metric on which to base our materiality calculation as we considered that to be the most relevant performance measure to the stakeholders of the entity.
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
the component relative to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year the range of performance materiality allocated to components was \$4.1 million to \$13.3 million.
as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we analyse the implications for our report.
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group which, when taken together, enable us to form an opinion on the Consolidated Financial Statements under International Standards of work to be performed at each entity.
operational data and other routine processes.
In assessing the risk of material misstatement to the Consolidated Financial Statements, and to ensure we had adequate quantitative coverage of
the component that we considered had the potential for the greatest impact on the amounts in the Consolidated Financial Statements either because of
components compared to key metrics of the Group is provided below.
1 revenue but individually have a negative adjusted EBITDA. procedures, including analytical review, review of internal audit reports, testing of consolidation journals, and intercompany eliminations and foreign
We have obtained an understanding of the entity-level controls of the Group as a whole which assisted us in identifying and assessing risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.
scope entities.
Russian based full scope components including internal valuation specialists used in the audit to discuss the audit approach and issues arising from their work.
In establishing our overall approach to the Group audit we determined the type of work that needed to be undertaken at each of the components for our opinion on the Group as a whole.
discussing the audit approach with the component team and any issues arising from their work. The Group audit team participated in key discussions, during various stages of the audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed at group level, gave us appropriate audit evidence for our opinion on the Consolidated Financial Statements.
on page 135, the directors are responsible for the preparation of the
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
| ISAs (UK and Ireland) reporting | apparently materially incorrect based on, or materially inconsistent with, our knowledge of the otherwise misleading. on page 135 taken as a whole is fair, balanced and understandable and provides the information necessary |
We have no exceptions to report. |
|---|---|---|
| the annual report appropriately addresses those matters that we communicated to the audit committee that we consider should have been disclosed. |
||
| Companies Act 2006 reporting | In light of the knowledge and understanding of the Company and its environment obtained on pages 8-37, 130-135, 104-119 http://www.evraz.com/ |
We have no exceptions to report. |
| adequate accounting records have not been kept by the parent company, or returns adequate we have not received all the information and explanations we require for our audit. a Corporate Governance Statement has not been prepared by the company. |
||
| Listing Rules review requirements | on page 131, and longer-term viability, set out on page 36 |
We have no exceptions to report. |
| ISAs (UK and Ireland) reporting | We are required to give a statement as to whether we have anything material to add or to draw of the principal risks facing the entity, including those that would threaten its business model, the disclosures in the annual report that describe those risks and explain how they are being appropriate to adopt the going concern basis of accounting in preparing them, and their of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over |
We have nothing material to add or to draw attention to. |
|---|---|---|
| the period of their assessment, including any related disclosures drawing attention to any | ||
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor London 28 February 2017
(IN MILLIONS OF US DOLLARS, EXCEPT FOR PER SHARE INFORMATION)
| Year ended 31 December | ||||
|---|---|---|---|---|
| Notes | 2016 | * 2015 |
2014* | |
| Revenue | ||||
| Sale of goods | 3 | \$ 7,477 | \$ 8,552 | \$ 12,745 |
| Rendering of services | 3 | 236 | 215 | 316 |
| 7,713 | 8,767 | 13,061 | ||
| Cost of revenue | 7 | (5,521) | ||
| 2,192 | 2,184 | 3,327 | ||
| Selling and distribution costs | 7 | (623) | 930 | |
| General and administrative expenses | 7 | (469) | 822 | |
| Social and social infrastructure maintenance expenses | (23) | |||
| Loss on disposal of property, plant and equipment | (22) | |||
| Impairment of assets | 6 | (465) | ||
| (48) | ||||
| Other operating income | 22 | 28 | 35 | |
| Other operating expenses | 7 | (101) | ||
| 463 | ||||
| Interest income | 7 | 10 | 9 | 17 |
| Interest expense | 7 | (481) | ||
| 11 | (23) | 10 | ||
| 7 | (9) | 48 | ||
| 12 | – | 21 | 136 | |
| Loss of control over a subsidiary | 4 | – | – | |
| 7 | (52) | 3 | – | |
| Loss before tax | (92) | 707 | ||
| 8 | (96) | 12 | ||
| Net loss | \$ (188) | 719 | ||
| Equity holders of the parent entity | \$ (215) | 644 | ||
| Non-controlling interests | 27 | 103 | ||
| \$ (188) | 719 | |||
| 20 | \$ (0.15) | 5 |
* described in Note 2.
| Year ended 31 December | ||||
|---|---|---|---|---|
| Notes | 2016 | 2015 | 2014 | |
| Net loss | \$ (188) | 19 | ||
| Other comprehensive income/(loss) | ||||
| Exchange differences on translation of foreign operations into presentation | ||||
| currency | 543 | 8 | ||
| 4,12 | – | 142 | ||
| 13 | – | – | ||
| 543 | 7 | |||
| associates | 11 | 13 | ||
| 13 | ||||
| 23 | 11 | 1 | ||
| Income tax effect | 8 | – 11 |
15 | |
| Decrease in revaluation surplus in connection with the impairment of property, plant and equipment Income tax effect |
9 8 |
– – – |
– | – – – |
| Total other comprehensive income/(loss) | 567 | 7 | ||
| Total comprehensive income/(loss), net of tax | \$ 379 | ,42 | ||
| Equity holders of the parent entity | \$ 341 | 1,340 | ||
| Non-controlling interests | 38 | 8 | ||
| \$ 379 | 1,42 | |||
(IN MILLIONS OF US DOLLARS)
| Notes | 2016 | 2015 | 2014 | |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 9 | \$ 4,652 | \$ 4,302 | \$ 5,796 |
| Intangible assets other than goodwill | 10 | 297 | 324 | 441 |
| Goodwill | 5 | 880 | 1,176 | 1,541 |
| Investments in joint ventures and associates | 11 | 64 | 74 | 121 |
| Deferred income tax assets | 8 | 156 | 119 | 97 |
| 13 | 91 | 79 | 98 | |
| Other non-current assets | 13 | 45 | 56 | 40 |
| 6,185 | 6,130 | 8,134 | ||
| Current assets Inventories |
14 | 984 | 899 | 1,372 |
| Trade and other receivables | 15 | 502 | 447 | 654 |
| Prepayments | 60 | 50 | 82 | |
| Loans receivable | 13 | 5 | 24 | |
| Receivables from related parties | 16 | 8 | 6 | 53 |
| Income tax receivable | 43 | 44 | 23 | |
| Other taxes recoverable | 17 | 192 | 127 | 158 |
| 18 | 33 | 35 | 40 | |
| Cash and cash equivalents | 19 | 1,157 | 1,375 | 1,086 |
| 2,992 | 2,988 | 3,492 | ||
| 12 | 27 | 1 | 4 | |
| 3,019 | 2,989 | 3,496 | ||
| Total assets | \$ 9,204 | \$ 9,119 | \$ 11,630 | |
| EQUITY AND LIABILITIES Equity Equity attributable to equity holders of the parent entity |
||||
| Issued capital | 20 | \$ 1,507 | \$ 1,507 | \$ 1,507 |
| Treasury shares | 20 | (270) | – | |
| 20 | 2,517 | 2,501 | 2,481 | |
| Revaluation surplus | 112 | 124 | 155 | |
| 415 | 644 | 1,299 | ||
| Translation difference | (3,790) | |||
| 491 | 136 | 1,798 | ||
| Non-controlling interests | 186 | 133 | 218 | |
| 677 | 269 | 2,016 | ||
| Non-current liabilities | ||||
| Long-term loans | 22 | 5,502 | 5,850 | 5,470 |
| Deferred income tax liabilities | 8 | 348 | 352 | 471 |
| 23 | 317 | 301 | 364 | |
| Provisions | 24 | 205 | 146 | 173 |
| Other long-term liabilities | 25 | 94 | 116 | 442 |
| 6,466 | 6,765 | 6,920 | ||
| Current liabilities | ||||
| Trade and other payables | 26 | 935 | 1,070 | 1,379 |
| 266 | 228 | 155 | ||
| Short-term loans and current portion of long-term loans | 22 | 392 | 497 | 761 |
| Payables to related parties | 16 | 226 | 143 | 108 |
| Income tax payable | 39 | 17 | 86 | |
| Other taxes payable | 27 | 169 | 107 | 151 |
| Provisions | 24 | 26 | 23 | 41 |
| 12 | 2,053 8 |
2,085 – |
2,681 13 |
|
| 2,061 | 2,085 | 2,694 | ||
| Total equity and liabilities | \$ 9,204 | \$ 9,119 | \$ 11,630 | |
| Year ended 31 December | |||
|---|---|---|---|
| 2016 | 2015 | 2014 | |
| Net loss | \$ (188) | ||
| (87) | |||
| 521 | 585 | 833 | |
| Loss on disposal of property, plant and equipment | 22 | 41 | 48 |
| Impairment of assets | 465 | 441 | 540 |
| 48 | 367 | 1,005 | |
| Interest income | (10) | ||
| Interest expense | 481 | 475 | 563 |
| 23 | 20 | ||
| 9 | 48 | 583 | |
| – | |||
| Loss of control over a subsidiary | – | 167 | – |
| 52 | 3 | – | |
| Bad debt expense | 1 | 18 | 41 |
| (7) | |||
| 16 | 20 | 30 | |
| Other | (3) | – | |
| 1,343 | 1,293 | 1,976 | |
| Inventories | (17) | 204 | |
| Trade and other receivables | (38) | 55 | |
| Prepayments | (1) | 9 | |
| Receivables from/payables to related parties | 136 | 66 | |
| Taxes recoverable | (32) | 33 | |
| Other assets | (3) | 11 | |
| Trade and other payables | 40 | 3 | 150 |
| 20 | 100 | 27 | |
| Taxes payable | 62 | 100 | |
| Other liabilities | (7) | 1 | |
| 1,503 | 1,622 | 1,957 | |
| Issuance of loans receivable to related parties | (1) | ||
| Issuance of loans receivable | – | – | |
| Proceeds from repayment of loans receivable, including interest | 2 | 7 | 3 |
| – | – | ||
| – | – | ||
| Restricted deposits at banks in respect of investing activities | 1 | 1 | |
| Short-term deposits at banks, including interest | 4 | 4 | 8 |
| Purchases of property, plant and equipment and intangible assets | (382) | 12 | |
| Proceeds from disposal of property, plant and equipment | 7 | 10 | 14 |
| 27 | 44 | 311 | |
| Dividends received | 1 | – | 2 |
| Other investing activities, net | 1 | 6 | 19 |
| (340) | (359) | (389) |
Continued on the next page
(IN MILLIONS OF US DOLLARS)
| Year ended 31 December | |||
|---|---|---|---|
| 2016 | 2015 | 2014 | |
| \$ – | |||
| Proceeds from issue of shares by a subsidiary to non-controlling shareholders | 13 | 6 | – |
| Proceeds from loans provided by related parties | – | – | 267 |
| Repayment of loans provided by related parties | – | – | |
| – | – | ||
| – | – | ||
| – | 1 | – | |
| Proceeds from bank loans and notes | 1,301 | 3,801 | 2,579 |
| Repayment of bank loans and notes, including interest | (2,428) | ||
| (5) | |||
| Payments under covenants reset | (4) | – | – |
| Payments for purchase of property, plant and equipment on deferred terms | – | ||
| (250) | |||
| 14 | 5 | – | |
| – | 7 | 14 | |
| (1) | |||
| (9) | |||
| (1,369) | |||
| Effect of foreign exchange rate changes on cash and cash equivalents | (10) | ||
| (216) | 289 | ||
| Cash and cash equivalents at the beginning of the year | 1,375 | 1,086 | 1,604 |
| (2) | – | 7 | |
| Cash and cash equivalents at the end of the year | \$ 1,157 | \$ 1,375 | \$ 1,086 |
| Interest paid | \$ (413) | ||
| Interest received | 6 | 4 | 10 |
| Income taxes paid by the Group | (149) |
| Attributable to equity holders of the parent entity | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Issued capital |
Treasury shares |
Additional paid-in capital |
Revaluation surplus |
Other reserves |
Unrealised gains and losses |
Accumulated | Translation difference |
Total | Non controlling interests |
Total equity |
|
| At 31 December 2015 Net loss |
\$ 1,507 – |
\$ (305) – |
\$ 2,501 – |
\$ 124 – |
\$ – – |
\$ – – |
\$ 644 (215) |
\$ (4,335) – |
\$ 136 (215) |
\$ 133 27 |
\$ 269 (188) |
| Other comprehensive | – | – | – | – | – | – | 11 | 545 | 556 | 11 | 567 |
| revaluation surplus to respect of the disposed items of property, plant and equipment |
– | – | – | (12) | – | – | 12 | – | – | – | – |
| Total comprehensive | – | – | – | (12) | – | – | (192) | 545 | 341 | 38 | 379 |
| controlling interests in subsidiaries |
– | – | – | – | – | – | (2) | – | (2) | 2 | – |
| Contribution of a non controlling shareholder to subsidiary |
– | – | – | – | – | – | – | – | – | 13 | 13 |
| Transfer of treasury shares to participants of the |
– | 35 | – | – | – | – | (35) | – | – | – | – |
| Share-based payments | – | – | 16 | – | – | – | – | – | 16 | – | 16 |
| At 31 December 2016 | \$ 1,507 | \$ (270) | \$ 2,517 | \$ 112 | \$ – | \$ – | \$ 415 | \$ (3,790) | \$ 491 | \$ 186 | \$ 677 |
| Attributable to equity holders of the parent entity | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Issued capital |
Treasury shares |
Additional paid-in capital |
Revaluation surplus |
Other reserves |
Unrealised gains and losses |
Accumulated | Translation difference |
Total | Non controlling interests |
Total equity |
|
| At 31 December 2014 Net loss |
\$ 1,507 – |
\$ – – |
\$ 2,481 – |
\$ 155 – |
\$ – – |
\$ – – |
\$ 1,299 | – | \$ 1,798 | \$ 218 \$ 2,016 | |
| Other comprehensive | – | – | – | – | – | ||||||
| revaluation surplus to respect of the disposed subsidiaries |
– | – | – | – | – | 28 | – | – | – | – | |
| revaluation surplus to respect of the disposed items of property, plant and equipment |
– | – | – | – | – | 2 | – | – | – | – | |
| Total comprehensive | |||||||||||
| the period | – | – | – | – | – | ||||||
| Derecognition of non controlling interests in connection with the loss of control over |
– | – | – | – | – | – | – | – | – | ||
| Non-controlling interests arising on sale of ownership interests in subsidiaries |
– | – | – | – | – | – | – | 2 | |||
| Contribution of a non controlling shareholder to share capital of the |
– | – | – | – | – | – | – | – | – | 6 | 6 |
| Purchase of treasury | |||||||||||
| Transfer of treasury shares to participants of the Incentive Plans |
– | – | – | – | – | – | – | ||||
| Share-based payments | – | 31 | – | – | – | – | – | – | – | – | |
| – | – | 20 | – | – | – | – | – | 20 | – | 20 | |
| At 31 December 2015 | \$ 1,507 | \$ 2,501 | \$ 124 | \$ – | \$ – | \$ 644 | \$ 136 | \$ 133 | \$ 269 |
| Attributable to equity holders of the parent entity | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Issued capital |
Treasury shares |
Additional paid-in capital |
Revaluation surplus |
Other reserves |
Unrealised gains and losses |
Accumulated | Translation difference |
Total | Non controlling interests |
Total equity |
|
| At 31 December 2013 | \$ 1,473 | \$ 2,326 | \$ 162 | \$ 156 | \$ 12 | \$ 2,589 | \$ 5,032 | \$ 431 | \$ 5,463 | ||
| Net loss | – | – | – | – | – | – | – | ||||
| Other comprehensive | – | – | – | – | – | ||||||
| revaluation surplus to respect of the disposed items of property, plant and equipment |
– | – | – | – | – | 7 | – | – | – | – | |
| Total comprehensive the period |
– | – | – | – | |||||||
| Issue of shares | 34 | – | 122 | – | – | – | – | – | – | – | |
| controlling interests in subsidiaries |
– | – | 3 | – | – | – | – | – | 3 | – | |
| Purchase of treasury | – | – | – | – | – | – | – | – | |||
| Transfer of treasury shares to participants of the Incentive Plans |
– | 14 | – | – | – | – | – | – | – | – | |
| Share-based payments | – | – | 30 | – | – | – | – | – | 30 | – | 30 |
| Dividends declared by the parent entity to its |
– | – | – | – | – | – | – | – | |||
| Dividends declared subsidiaries to non-controlling |
|||||||||||
| – | – | – | – | – | – | – | – | – | |||
| At 31 December 2014 | \$ 1,507 | \$ – | \$ 2,481 | \$ 155 | \$ – | \$ – | \$ 1,299 | \$ 1,798 | \$ 218 | \$ 2,016 |
iron ore mining. In addition, the Group produces vanadium products. The Group is one of the largest steel producers globally. Lanebrook Limited
| Effective ownership interest, % |
Business | ||||
|---|---|---|---|---|---|
| Subsidiary | 2016 | 2015 | 2014 | activity | Location |
| 100.00 | 100.00 | 100.00 | Steel production | Russia | |
| 100.00 | 100.00 | 100.00 | Steel production | Russia | |
| – | – | 85.11 | Steel production | ||
| 97.73 | 96.94 | 96.90 | Steel production | ||
| 100.00 | 100.00 | 100.00 | Steel production | ||
| 100.00 | 100.00 | 100.00 | Steel production | Canada | |
| Raspadskaya | 81.95 | 81.95 | 81.95 | Coal mining | Russia |
| Yuzhkuzbassugol | 100.00 | 100.00 | 100.00 | Coal mining | Russia |
| 100.00 | 100.00 | 100.00 Ore mining and processing | Russia | ||
| Evrazruda | 100.00 | 100.00 | 100.00 | Ore mining | Russia |
| 99.42 | 99.42 | 99.42 | Ore mining |
statements.
Exceptions include, but are not limited to, property, plant and equipment at the date of transition to IFRS accounted for at deemed cost, available-for-
debt and proactively manages its debt covenants compliance.
Based on the currently available facts and circumstances the directors and management have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
selling expenses to general and administrative expenses and from selling expenses to cost of revenues.
statements more comparable with industry peers.
The effects of the restatement on the previously reported amounts are set out below.
| Year ended 31 December 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| As previously reported |
Property tax | Staff costs | Other expenses |
Restated | |||||
| Statement of Operations | |||||||||
| Cost of revenue | \$ 48 | ||||||||
| 2,172 | 48 | 2,184 | |||||||
| Selling and distribution costs | – | 47 | 20 | ||||||
| General and administrative expenses | 27 |
| Year ended 31 December 2014 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| As previously reported |
Property tax | Staff costs | Other expenses |
Restated | |||||
| Statement of Operations | |||||||||
| Cost of revenue | \$ 58 | ||||||||
| 3,327 | 58 | 3,327 | |||||||
| Selling and distribution costs | – | 60 | 19 | ||||||
| General and administrative expenses | 50 |
compared with those applied in the previous year, except for the adoption of new standards and interpretations and revision of the existing standards as of 1 January 2016.
The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted.
method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets.
apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016. These amendments do not have any impact to the Group as the Group does not have any bearer plants.
subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.
Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides applied by the investment entity associate or joint venture to its interests in subsidiaries.
These amendments are applied retrospectively and do not have any impact on the Group as the Group does not apply the consolidation exception.
The amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate that change retrospectively.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Standards Issued But Not Yet Effective in the European Union
| Effective for annual periods beginning on or after |
|---|
| 1 1 January 2017 |
| 1 1 January 2017 |
| 1 January 20181 |
| 1 1 January 2018 |
| 1 1 January 2018 |
| 1 1 January 2018 |
| 1 January 2018 |
| 1 January 2018 |
| 1 1 January 2018 |
| 1 1 January 2019 |
1 Subject to EU endorsement
The Group assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Group independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is
The determination of impairments of property, plant and equipment involves the use of estimates that include, but are not limited to, the cause, timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current competitive conditions, expectations of current replacement costs and other changes in circumstances that indicate that impairment exists.
The determination of the recoverable amount of a cash-generating unit involves the use of estimates by management. Methods used to determine including the methodologies used, may have a material impact on the value in use and, ultimately, the amount of any impairment.
and equipment and on depreciation expense for the period.
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating
The carrying amount of goodwill at 31 December 2016, 2015 and 2014 was \$880 million, \$1,176 million and \$1,541 million, respectively. In 2016, 2015 and 2014, the Group recognised an impairment loss in respect of goodwill in the amount of \$316 million, \$251 million and \$330 million, are provided in Note 6.
Estimation of reserves in accordance with the JORC Code involves some degree of uncertainty. The uncertainty depends mainly on the amount of reliable geological and engineering data available at the time of the estimate and the interpretation of this data, which also requires use of subjective judgement and development of assumptions. Mine plans are periodically updated which can have a material impact on the depletion charge for the period.
The amount recognised as a provision is the best estimate of the expenditures required to settle the present obligation at the end of the reporting period based on the requirements of the current legislation of the country where the respective operating assets are located. The carrying amount
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Considerable judgement is required in forecasting future site restoration costs.
evidence that they will occur.
service cost. This involves the use of demographic assumptions about the future characteristics of the current and former employees who are
The Group makes allowances for doubtful receivables to account for estimated losses resulting from the inability of customers to make required payments. When evaluating the adequacy of an allowance for doubtful accounts, management bases its estimates on the current overall economic conditions, the ageing of accounts receivable balances, historical write-off experience, customer creditworthiness and changes in payment terms.
available to allow all or part of the deferred tax asset to be utilised. The estimation of that probability includes judgements based on the expected performance. Various factors are considered to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plans, expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these the assessment of future utilisation of deferred tax assets must be reduced, this reduction will be recognised in the statement of operations.
into the presentation currency at the rate of exchange ruling at the end of the reporting period, and their statements of operations are translated at the exchange rates that approximate the exchange rates at the dates of the transactions. The exchange differences arising on the translation cumulative amount recognised in equity relating to that particular subsidiary is recognised in the statement of operations.
| 2016 | 2015 | 2014 | ||||
|---|---|---|---|---|---|---|
| 31 December | average | 31 December | average | 31 December | average | |
| 60.6569 | 67.0349 | 72.8827 | 60.9579 | 56.2584 | 38.4217 | |
| 63.8111 | 74.2336 | 79.6972 | 67.7767 | 68.3427 | 50.8150 | |
| 1.0541 | 1.1069 | 1.0887 | 1.1095 | 1.2141 | 1.3285 | |
| 1.3427 | 1.3248 | 1.3840 | 1.2788 | 1.1601 | 1.1048 | |
| 13.6282 | 14.7073 | 15.5742 | 12.7550 | 11.5719 | 10.8488 | |
| 14.3342 | 16.2840 | 17.0078 | 14.1552 | 14.0668 | 14.4054 | |
| 25.5458 | 27.1909 | 24.0007 | 21.8290 | 15.7686 | 11.9064 | |
| 0.3807 | 0.4483 | 0.3293 | 0.3534 | 0.2803 | 0.3050 |
Transactions in foreign currencies in each subsidiary of the Group are initially recorded in the functional currency at the rate ruling at the date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at
the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Subsidiaries, which are those entities in which the Group has an interest of more than 50% of the voting rights and over which the Group has control, or otherwise has power to exercise control over their operations, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases.
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in
Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling
Business combinations are accounted for using the acquisition method.
The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in the acquiree either at
within equity.
assets, liabilities and contingent liabilities and the cost of the combination. If the initial accounting for a business combination can be determined only assets, liabilities or contingent liabilities or the cost of the combination can be determined only provisionally, the Group accounts for the combination using those provisional values. The Group recognises any adjustments to those provisional values as a result of completing the initial accounting within twelve months of the acquisition date.
Comparative information presented for the periods before the completion of initial accounting for the acquisition is presented as if the initial accounting had been completed from the acquisition date.
The differences between the carrying values of net assets attributable to interests in subsidiaries acquired and the consideration given for such statements.
Purchases of Controlling Interests in Subsidiaries from Entities under Common Control
Purchases of controlling interests in subsidiaries from entities under common control are accounted for using the pooling of interests method.
originally acquired by the Predecessor.
The Group derecognises non-controlling interests if non-controlling shareholders have a put option over their holdings. The difference between the
Investments in associates are accounted for under the equity method of accounting and are initially recognised at cost including goodwill. Subsequent charges, if any.
recognise further losses, unless the Group has legal or constructive obligations to make payments to, or on behalf of, the associate. If the associate recognised.
unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
depreciation and any impairment in value. Such cost includes the cost of replacing part of plant and equipment when that cost is incurred and recognition criteria are met.
capitalised site restoration costs. Mineral reserves represent tangible assets acquired in business combinations. Mine development and construction costs represent expenditures incurred in developing access to mineral reserves and preparations for commercial production, including sinking shafts and underground drifts, roads, infrastructure, buildings, machinery and equipment.
cost to sell and its value in use. The carrying amount is reduced to the recoverable amount, and the difference is recognised as impairment loss in
Land is not depreciated. Depreciation of property, plant and equipment, except for mining assets, is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives of items of property, plant and equipment and methods of their depreciation are reviewed, and
| Useful lives (years) |
Weighted average remaining useful life (years) |
|
|---|---|---|
| Buildings and constructions | 15–60 | 21 |
| Machinery and equipment | 4–45 | 10 |
| Transport and motor vehicles | 7–20 | 5 |
| Other assets | 3–15 | 4 |
Depletion of mining assets including capitalised site restoration costs is calculated using the units-of-production method based upon proved and probable mineral reserves. The depletion calculation takes into account future development costs for reserves which are in the production phase.
Maintenance costs relating to items of property, plant and equipment are expensed as incurred. Major renewals and improvements are capitalised, and the replaced assets are derecognised.
The Group has the title to certain non-production and social assets, primarily buildings and facilities of social infrastructure, which are carried at their recoverable amount of zero. The costs to maintain such assets are expensed as incurred.
Exploration and evaluation expenditures represent costs incurred by the Group in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. The expenditures include acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling, activities in relation to evaluating the technical feasibility and commercial viability of extracting mineral resources. These costs are expensed as incurred.
When the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, the Group commences recognition of expenditures related to the development of mineral resources as assets. These assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date as to whether
the commencement of the lease term at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. the remaining balance of the liability. Finance charges are charged to interest expense.
The depreciation policy for depreciable leased assets is consistent with that for depreciable assets which are owned. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term or its useful life.
payments are recognised as an expense in the statement of operations on a straight-line basis over the lease term.
Goodwill represents the excess of the aggregate of the consideration transferred for an acquisition of a subsidiary or an associte and the amount value of the net assets of the acquiree, the difference is recognised in the consolidated statement of operations.
Goodwill on acquisition of a subsidiary is included in intangible assets. Goodwill on acquisition of an associate is included in the carrying amount of the investments in associates.
frequently, if events or changes in circumstances indicate that the carrying amount may be impaired. For the purpose of impairment testing, goodwill irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Impairment is determined by assessing the recoverable amount of the cash-generating unit, or the group of cash-generating units, to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditures on internally generated intangible assets, excluding capitalised development costs, are expensed as incurred.
economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and
unit level.
The table below presents the useful lives of intangible assets.
| Useful lives (years) |
Weighted average remaining useful life (years) |
|
|---|---|---|
| Customer relationships | 1–15 | 7 |
| Contract terms | 10 | 7 |
| Other | 5–19 | 7 |
maturity, and available-for-sale. When investments are recognised initially, they are measured at fair value plus, in the case of investments not at fair
are carried at amortised cost using the effective interest method. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
less than 12 months from the end of the reporting period or unless they will need to be sold to raise operating capital, in which case they are included as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of operations. Reversals of impairment losses in respect of equity the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the statement of operations.
prices at the close of business on the end of the reporting period. For investments where there is no active market, fair value is determined using
generally established by regulation or convention in the market place are recognised on the settlement date i.e. the date the asset is delivered by/to the counterparty.
The Group establishes an allowance for impairment of accounts receivable that represents its estimate of incurred losses. The main components
Inventories are recorded at the lower of cost and net realisable value. Cost of inventory is determined on the weighted average basis and includes work in progress includes an appropriate share of production overheads based on normal operating capacity, but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
Cash and cash equivalents comprise cash at bank and in hand and deposits with an original maturity of three months or less.
recognised as interest expense over the period of the borrowings.
operations on the purchase, sale, issue or cancellation of the treasury shares.
Dividends are recognised as a liability and deducted from equity only if they are declared before the end of the reporting period. Dividends are disclosed when they are proposed before the end of the reporting period or proposed or declared after the end of the reporting period but before the
Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
the increase in the provision due to the passage of time is recognised as an interest expense.
Provisions for site restoration costs are capitalised within property, plant and equipment.
statutory rates in force based on gross salary payments. The Group has no legal or constructive obligation to pay further contributions in respect of
and/or in the plan documents.
recognises restructuring-related costs.
consolidated statement of operations.
The Group recognises current service costs, past-service costs, gains and losses on curtailments and non-routine settlements in the consolidated
principally represent an implicit cost of employment and, accordingly, have been charged to cost of sales.
are granted. The fair value is determined using the Black-Scholes-Merton model. In valuing equity-settled transactions, no account is taken of any conditions, other than market conditions.
of operations for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest. Once a share-settled transaction is vested, no further accounting entries are made to reverse the cost already charged, even if the instruments that are the subject of the transaction are subsequently forfeited. In this case, the Group makes a transfer between different components of equity.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the paragraph.
Cash-settled share-based payments represent transactions in which the Group acquires goods or services by incurring a liability to transfer cash instruments.
The cost of cash-settled transactions is measured initially at fair value at the grant date using the Black-Scholes-Merton model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date with changes in fair value recognised in the statement of operations.
measured reliably. The moment of transfer of the risks and rewards of ownership is determined by the contract terms.
rendered.
Interest is recognised using the effective interest method.
Dividends
Rental income is accounted for on a straight-line basis over the lease term on ongoing leases.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period.
of operations.
Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred income taxes are provided for the deferred income tax arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and,
differences can be utilised. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
and production of vanadium products, iron ore mining and enrichment and certain energy-generating companies are also included in this segment as they are closely related to the main process of steel production.
Other operations include energy-generating companies, shipping and railway transportation companies.
Management and investment companies are not allocated to any of the segments. Operating segments have been aggregated into reportable segments if they show a similar long-term economic performance, have comparable production processes, customer industries and distribution channels, operate in the same regulatory environment, and are generally managed and monitored together.
Management monitors the results of the operating segments separately for the purpose of making decisions about resource allocation and
period is used.
Segment revenue segments.
Segment expense is expense resulting from the operating activities of a segment that is directly attributable to the segment and the relevant portion of an expense that can be allocated to it on a reasonable basis, including expenses relating to external counterparties and expenses relating to transactions with other segments. Segment expense does not include social and social infrastructure maintenance expenses.
Segment result that segment.
Segment EBITDA depreciation, depletion and amortisation expense. Management believes that this measure is more useful and relevant for the users and is more comparable with the Russian steel peers.
| US\$ million | Steel | Steel, North America |
Coal | Other operations | Eliminations | Total |
|---|---|---|---|---|---|---|
| Revenue | ||||||
| Sales to external customers | \$ 5,528 | \$ 1,464 | \$ 484 | \$ 63 | \$ – | \$ 7,539 |
| Inter-segment sales | 194 | – | 676 | 233 | (1,103) | – |
| Total revenue | 5,722 | 1,464 | 1,160 | 296 | (1,103) | 7,539 |
| Segment result – EBITDA | \$ 986 | \$ 22 | \$ 613 | \$ 15 | \$ (44) | \$ 1,592 |
| US\$ million | Steel | Steel, North America |
Coal | Other operations | Eliminations | Total |
|---|---|---|---|---|---|---|
| Revenue | ||||||
| Sales to external customers | \$ 6,018 | \$ 2,253 | \$ 380 | \$ 89 | \$ – | \$ 8,740 |
| Inter-segment sales | 242 | 10 | 572 | 304 | – | |
| Total revenue | 6,260 | 2,263 | 952 | 393 | 8,740 | |
| Segment result – EBITDA | \$ 1,033 | \$ 51 | \$ 348 | \$ 16 | \$ 110 | \$ 1,558 |
| US\$ million | Steel | Steel, North America |
Coal | Other operations Eliminations |
Total | ||
|---|---|---|---|---|---|---|---|
| Revenue | |||||||
| Sales to external customers | \$ 9,135 | \$ 3,159 | \$ 540 | \$ 128 | \$ – | \$ 12,962 | |
| Inter-segment sales | 570 | – | 676 | 446 | – | ||
| Total revenue | 9,705 | 3,159 | 1,216 | 574 | 12,962 | ||
| Segment result – EBITDA | \$ 1,777 | \$ 283 | \$ 314 | \$ 31 | \$ 2 | \$ 2,407 |
| US\$ million | Steel | Steel, North America |
Coal | Other operations | Eliminations | Total |
|---|---|---|---|---|---|---|
| Revenue | \$ 5,722 | \$ 1,464 | \$ 1,160 | \$ 296 | \$ (1,103) | \$ 7,539 |
| (225) | – | 162 | 67 | 170 | 174 | |
| \$ 5,497 | \$ 1,464 | \$ 1,322 | \$ 363 | \$ (933) | \$ 7,713 | |
| EBITDA | \$ 986 | \$ 22 | \$ 613 | \$ 15 | \$ (44) | \$ 1,592 |
| (11) | – | (3) | – | 2 | (12) | |
| 29 | 6 | 34 | 2 | – | 71 | |
| 18 | 6 | 31 | 2 | 2 | 59 | |
| \$ 1,004 | \$ 28 | \$ 644 | \$ 17 | \$ (42) | \$ 1,651 | |
| (109) | ||||||
| \$ 1,542 | ||||||
| Social and social infrastructure maintenance | ||||||
| expenses | (21) | – | (2) | – | – | (23) |
| Depreciation, depletion and amortisation | ||||||
| expense | (219) | (155) | (141) | (3) | – | (518) |
| Impairment of assets | (11) | (430) | (24) | – | – | (465) |
| Loss on disposal of property, plant and | ||||||
| equipment and intangible assets | (8) | (5) | (9) | – | – | (22) |
| (43) | 14 | 107 | – | – | 78 | |
| \$ 702 | \$ (548) | \$ 575 | \$ 14 | \$ (42) | \$ 592 | |
| (129) | ||||||
| \$ 463 | ||||||
| \$ (471) | ||||||
| associates | (23) | |||||
| (9) | ||||||
| (52) | ||||||
| \$ (92) |
| US\$ million | Steel | Steel, North America |
Coal | Other operations | Eliminations | Total |
|---|---|---|---|---|---|---|
| Revenue | \$ 6,260 | \$ 2,263 | \$ 952 | \$ 393 | \$ 8,740 | |
| 7 | 116 | 40 | 137 | 27 | ||
| \$ 5,987 | \$ 2,270 | \$ 1,068 | \$ 433 | \$ 8,767 | ||
| EBITDA | \$ 1,033 | \$ 51 | \$ 348 | \$ 16 | \$ 110 | \$ 1,558 |
| 62 | 2 | – | – | 21 | ||
| 2 | 3 | – | ||||
| 48 | 4 | 3 | 10 | |||
| \$ 1,081 | \$ 55 | \$ 351 | \$ 14 | \$ 67 | \$ 1,568 | |
| \$ 1,438 | ||||||
| Social and social infrastructure maintenance | ||||||
| expenses | – | – | – | |||
| Depreciation, depletion and amortisation | ||||||
| expense | – | |||||
| Impairment of assets | – | – | ||||
| Loss on disposal of property, plant and | ||||||
| equipment and intangible assets | – | – | ||||
| 4 | – | |||||
| \$ 438 | \$ 15 | \$ 67 | ||||
| 134 | ||||||
| associates | ||||||
| for sale | 21 | |||||
| Loss of control over a subsidiary | ||||||
| US\$ million | Steel | Steel, North America |
Coal | Other operations | Eliminations | Total |
|---|---|---|---|---|---|---|
| Revenue | \$ 9,705 | \$ 3,159 | \$ 1,216 | \$ 574 | \$ 12,962 | |
| 1 | 102 | 74 | 108 | 99 | ||
| \$ 9,519 | \$ 3,160 | \$ 1,318 | \$ 648 | \$ 13,061 | ||
| EBITDA (restated) | \$ 1,777 | \$ 283 | \$ 314 | \$ 31 | \$ 2 | \$ 2,407 |
| Exclusion of management services from segment | ||||||
| result | 128 | – | 10 | 1 | – | 139 |
| 9 | 1 | – | ||||
| 19 | 51 | 5 | – | 73 | ||
| 156 | 62 | 6 | 168 | |||
| (restated) | \$ 1,933 | \$ 280 | \$ 376 | \$ 37 | \$ 2,575 | |
| \$ 2,355 | ||||||
| Social and social infrastructure maintenance | ||||||
| expenses | – | – | ||||
| Depreciation, depletion and amortisation | ||||||
| expense | – | |||||
| Impairment of assets | – | |||||
| Loss on disposal of property, plant and | ||||||
| equipment and intangible assets | – | – | ||||
| 84 | 4 | – | ||||
| \$ 1,391 | \$ 35 | \$ 651 | ||||
| associates | 10 | |||||
| for sale | 136 | |||||
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Steel | |||
| Construction products | \$ 1,783 | \$ 1,999 | \$ 3,286 |
| Flat-rolled products | 162 | 179 | 487 |
| Railway products | 584 | 550 | 1,022 |
| 1,694 | 1,867 | 2,359 | |
| Other steel products | 246 | 257 | 356 |
| Other products | 331 | 366 | 604 |
| Iron ore | 155 | 167 | 278 |
| Vanadium in slag | 33 | 19 | 27 |
| Vanadium in alloys and chemicals | 268 | 285 | 456 |
| Rendering of services | 31 | 30 | 58 |
| 5,287 | 5,719 | 8,933 | |
| Steel, North America Construction products |
158 | 216 | 337 |
| Flat-rolled products | 372 | 438 | 619 |
| Railway products | 232 | 435 | 513 |
| Tubular products | 588 | 1,016 | 1,499 |
| Other products | 103 | 153 | 178 |
| Rendering of services | 10 | 12 | 12 |
| 1,463 | 2,270 | 3,158 | |
| Coal | |||
| Coal | 756 | 601 | 722 |
| Other products | 12 | 4 | 2 |
| Rendering of services | 70 | 44 | 65 |
| 838 | 649 | 789 | |
| Other operations | |||
| Rendering of services | 125 | 129 | 181 |
| 125 | 129 | 181 | |
| \$ 7,713 | \$ 8,767 | \$ 13,061 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| CIS | |||
| Russia | \$ 3,080 | \$ 3,104 | \$ 5,279 |
| 184 | 237 | 384 | |
| 296 | 242 | 333 | |
| Others | 150 3,710 |
185 3,768 |
209 6,205 |
| America | |||
| 826 | 1,566 | 1,727 | |
| Canada | 682 | 779 | 1,589 |
| Mexico | 192 | 203 | 173 |
| Others | 22 | 18 | 40 |
| 1,722 | 2,566 | 3,529 | |
| Asia | |||
| Taiwan | 376 | 323 | 485 |
| Indonesia | 195 | 197 | 429 |
| Thailand | 138 | 121 | 285 |
| 123 | 123 | 254 | |
| Japan | 117 | 97 | 120 |
| China | 67 | 131 | 103 |
| Singapore | 66 | 13 | 25 |
| Philippines | 65 | 85 | 51 |
| Vietnam | 47 | 28 | 8 |
| Jordan | 30 | 81 | 88 |
| 18 | 40 | 43 | |
| Mongolia | 10 | 11 | 26 |
| Others | 120 | 104 | 37 |
| 1,372 | 1,354 | 1,954 | |
| Europe | |||
| Turkey | 213 | 392 | 242 |
| Czech Republic | 100 | 28 | 58 |
| Italy | 85 | 114 | 114 |
| Germany | 38 | 45 | 74 |
| Poland | 34 | 27 | 37 |
| 26 | 50 | 139 | |
| Slovakia | 19 | 38 | 60 |
| 88 | 97 | 143 | |
| Others | 37 | 24 | 49 |
| 640 | 815 | 916 | |
| Africa | |||
| Egypt | 138 | 43 | 12 |
| 78 | 44 | 37 | |
| 4 | 100 | 363 | |
| Others | 45 | 71 | 35 |
| 265 | 258 | 447 | |
| Other countries | 4 | 6 | 10 |
| \$ 7,713 | \$ 8,767 | \$ 13,061 |
None of the Group's customers amounts to 10% or more of the consolidated revenues.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Russia | \$ 3,553 | \$ 3,105 | \$ 4,273 |
| Canada | 1,233 | 1,162 | 1,553 |
| 877 | 1,347 | 1,468 | |
| 144 | 195 | 302 | |
| 53 | 60 | 118 | |
| Czech Republic | 31 | 32 | 35 |
| Italy | 22 | 5 | 54 |
| 17 | 15 | 130 | |
| Other countries | 8 | 11 | 6 |
| \$ 5,938 | \$ 5,932 | \$ 7,939 |
winding down under the supervision of a business rescue practitioner to maximise the return to creditors and other affected parties.
and to stop business rescue procedures would create no economic value for the Group. Therefore, in the opinion of management, the potential voting rights that the Group has in Highveld have no economic substance.
in the future.
\$167 million, including \$142 million of translation loss recycled to the statement of operations. In addition, non-controlling interests of \$4 million IFRS 5 and concluded that this is not the case.
operations, at the date of derecognition.
| US\$ million | 13 April 2015 |
|---|---|
| Property, plant and equipment | \$ 77 |
| Other non-current assets | 23 |
| Inventories | 74 |
| 59 | |
| Cash and cash equivalents | 1 |
| Total assets | 234 |
| Non-current liabilities | 61 |
| Current liabilities | 144 |
| Total liabilities | 205 |
| Non-controlling interests | 4 |
| Net assets | \$ 25 |
Goodwill relates to the assembled workforce and synergy from integration of the acquired subsidiaries into the Group. The table below presents movements in the carrying amount of goodwill.
| US\$ million | Gross amount |
Impairment losses |
Carrying amount |
|---|---|---|---|
| At 31 December 2013 | \$ 2,981 | \$ (993) | \$ 1,988 |
| Impairment | – | ||
| Oregon Steel Portland Mill | – | (171) | (171) |
| Calgary | – | (90) | (90) |
| EVRAZ Palini e Bertoli | – | ||
| – | |||
| – | |||
| Translation difference | 236 | ||
| At 31 December 2014 | \$ 2,628 | \$ (1,087) | \$ 1,541 |
| Impairment | – | ||
| OSM Tubular – Camrose Mills | – | (157) | (157) |
| Oregon Steel Portland Mill | – | ||
| Red Deer | – | ||
| 17 | – | ||
| – | |||
| Translation difference | 105 | ||
| At 31 December 2015 | \$ 2,392 | \$ (1,216) | \$ 1,176 |
| Impairment | – | ||
| Flat rolled products | – | (188) | (188) |
| Seamless pipes | – | (111) | (111) |
| Oil Country Tubular Goods | – | (17) | (17) |
| 28 | – | ||
| Translation difference | 3 | 17 | 20 |
| At 31 December 2016 | \$ 2,367 | \$ (1,487) | \$ 880 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 808 | \$ 1,109 | \$ 1,459 | |
| Oregon Steel Portland Mill | û | 188 | |
| Rocky Mountain Steel Mills | û | ||
| OSM Tubular – Camrose Mills | û | – | 157 |
| General Scrap | û | ||
| Others | û | 1 | 1 |
| Calgary | û | 92 | 109 |
| Red Deer | û | – | |
| Regina Steel | û | 288 | |
| Regina Tubular | û | 98 | 118 |
| Others | û | 19 | |
| Large diameter pipes | ùúú | – | – |
| Oil Country Tubular Goods | õùö | – | – |
| Long products | ùõô | – | – |
| 33 | 28 | 36 | |
| 6 | 6 | 9 | |
| 29 | 30 | 33 | |
| Others | 4 | 3 | 4 |
| \$ 880 | \$ 1,176 | \$ 1,541 |
| US\$ million | Goodwill and intangible assets |
Property, plant and equipment |
Taxes receivable | Total |
|---|---|---|---|---|
| \$ (299) | \$ (88) | \$ – | \$ (387) | |
| (17) | (26) | – | (43) | |
| Raspadskaya | – | (17) | – | (17) |
| – | (16) | – | (16) | |
| – | 19 | – | 19 | |
| Yuzhny Stan | – | (5) | – | (5) |
| Evrazruda | – | (10) | – | (10) |
| Others, net | – | (8) | 2 | (6) |
| \$ (316) | \$ (151) | \$ 2 | \$ (465) | |
| (316) | (151) | 2 | (465) |
| US\$ million | Goodwill and intangible assets |
Property, plant and equipment |
Taxes receivable | Total |
|---|---|---|---|---|
| \$ – | \$ – | |||
| – | ||||
| Raspadskaya | – | – | ||
| – | – | |||
| Yuzhny Stan | – | – | ||
| Evrazruda | – | – | ||
| Others, net | – | |||
| – | – |
| US\$ million | Goodwill and intangible assets |
Property, plant and equipment |
Taxes receivable | Total |
|---|---|---|---|---|
| \$ – | ||||
| – | – | |||
| – | – | |||
| – | ||||
| Raspadskaya | – | |||
| Yuzhkuzbassugol | – | – | ||
| Others, net | – | – | ||
The Group recognised the impairment losses as a result of the impairment testing at the level of cash-generating units. In addition, the Group made a
For the purpose of the impairment testing the Group assessed the recoverable amount of each cash-generating unit to which the goodwill was 31 December in the respective years. In 2016, impairment test was performed as of 30 September, the conclusions were reassessed at 31 December
The recoverable amounts have been determined based on calculation of either value-in-use or fair value less costs to sell. Both valuation techniques capital expenditure costs.
The major drivers that led to impairment were the changes in expectations of long-term prices for iron ore and steel products, the increase in forecasted costs and changes in forecasted production volumes. Management lowered their forecasts for periods after 2016, because the
The key assumptions used by management in the value-in-use calculations with respect to the cash-generating units to which the goodwill was allocated are presented in the table below.
| Period of forecast, years |
Pre-tax discount rate, % |
Commodity | Average price of commodity per tonne in 2017 |
Recoverable amount of CGU, US\$ million |
Carrying amount of CGU before impairment, US\$ million |
|
|---|---|---|---|---|---|---|
| Large diameter pipes | 5 | 10.69 | steel products | \$978 | 1,288 | 877 |
| Oil Country Tubular Goods | 5 | 10.36 | steel products | \$887 | 362 | 379 |
| Seamless pipes | 5 | 10.22 | steel products | \$1,111 | 25 | 136 |
| Flat rolled products | 5 | 9.77 | steel products | \$592 | 294 | 509 |
| Long products | 5 | 10.08 | steel products | \$572 | 686 | 549 |
| 5 | 12.98 | vanadium products | \$10,990 | 393 | 58 | |
| 5 | 14.59 | ferrovanadium products ferrovanadium |
\$16,247 | 33 | 17 | |
| 5 | 10.74 | products | \$12,568 | 43 | 33 |
In addition, the Group determined that there were indicators of impairment in other cash generating units and tested them for impairment using the following assumptions.
| Period of forecast, years |
Pre-tax discount rate, % |
Commodity | Average price of commodity per tonne in 2017 |
|
|---|---|---|---|---|
| 5 | 23.5 | steel products | \$312 | |
| 5 | 15.01 | steel products | \$314 | |
| 8 | 15.70 | steel products | €480 | |
| 5 | 12.62 | vanadium products | \$33,803 | |
| Raspadskaya | 18 | 12.71 | coal | \$51 |
| Mezhegeyugol | 25 | 11.88 | coal | \$58 |
| 23 | 13.88 | ore | \$37 | |
| 17 | 24.92 | ore | \$24 | |
| Evrazruda - Sheregesh mine | 10 | 16.64 | ore | \$40 |
| 30 September 2016 |
31 December 2015 |
|---|---|
| 362 | – |
| 25 | 169 |
| 294 | – |
| 20 | 45 |
| 24 | 5 |
The value in use of Oil Country Tubular Goods and Flat rolled products at 31 December 2015 has not been disclosed, because of the changes in the has not been re-presented as it is no longer directly comparable.
of this cash-generating unit was measured at \$5 million as fair value less costs of disposal, which was determined based on non-binding offers at
to an additional impairment of \$120 million.
in the impairment test were 10% lower, this would lead to an additional impairment of \$37 million.
Management assumed that the sales volumes of steel products in 2017 will increase by 7.6% and future dynamics will be driven by a gradual market the impairment test, this would lead to an additional impairment of \$12 million.
the impairment test, this would lead to an additional impairment of \$139 million.
For the cash-generating units, which were not impared in the reporting period and for which the reasonably possible changes could lead to impairment, the recoverable amounts would become equal to their carrying amounts if the assumptions used to measure the recoverable amounts
| Discount rates | Sales prices |
Sales volumes | Cost control measures |
|---|---|---|---|
| – | – | 5.9% | |
| – | – | – | 3.8% |
| – | – | – | 9.3% |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Cost of inventories recognised as expense | \$ (2,761) | ||
| Staff costs, including social security taxes | (1,200) | ||
| Depreciation, depletion and amortisation | (521) |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Wages and salaries | \$ 864 | \$ 1,025 | \$ 1,611 |
| Social security costs | 212 | 254 | 398 |
| 43 | 45 | 31 | |
| Share-based awards | 16 | 20 | 30 |
| Other compensations | 65 | 110 | 140 |
| \$ 1,200 | \$ 1,454 | \$ 2,210 |
| 2016 | 2015 | 2014 | |
|---|---|---|---|
| Steel | 56,974 | 63,126 | 69,404 |
| 3,193 | 3,847 | 3,936 | |
| Coal | 14,808 | 18,042 | 20,460 |
| Other operations | 896 | 1,312 | 1,465 |
| 2,080 | 2,901 | 3,270 | |
| 77,951 | 89,228 | 98,535 |
| US\$ million | 2016 | 2015 | 2014 | |
|---|---|---|---|---|
| Idling, reduction and stoppage of production, including termination | ||||
| \$ (81) | ||||
| Restoration works and casualty compensations in connection with | ||||
| accidents | (1) | |||
| Other | (19) | |||
| \$ (101) |
| US\$ million | 2016 | 2015 | 2014 | |
|---|---|---|---|---|
| Bank interest | \$ (133) | |||
| Interest on bonds and notes | (306) | |||
| – | – | |||
| (22) | ||||
| (14) | ||||
| Other | (6) | |||
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Interest on bank accounts and deposits | \$ 6 | \$ 4 | \$ 9 |
| Interest on loans and accounts receivable | 2 | 3 | 4 |
| Other | 2 | 2 | 4 |
| \$ 10 | \$ 9 | \$ 17 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ (2) | |||
| (50) | |||
| 23 | |||
| 14 | 5 | – | |
| Other | 6 | 12 | |
| \$ (9) |
| 2016 | 2015 | 2014 | |
|---|---|---|---|
| Russia | 20.00% | 20.00% | 20.00% |
| Canada | 26.06% | 25.89% | 25.61% |
| Cyprus | 12.50% | 12.50% | 12.50% |
| Czech Republic | 19.00% | 19.00% | 19.00% |
| Italy | 31.40% | 31.40% | 31.40% |
| 28.00% | 28.00% | 28.00% | |
| Switzerland | 9.09% | 9.72% | 9.65% |
| 18.00% | 18.00% | 18.00% | |
| 37.72% | 37.41% | 37.78% |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Current income tax expense | \$ (185) | ||
| 2 | 1 | ||
| of temporary differences | 87 | 87 | 163 |
| operations | \$ (96) |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ (92) | |||
| 18 | 141 | 217 | |
| 2 | 1 | ||
| Deferred income tax expense arising on the adjustment to current income | |||
| tax of prior periods and the change in tax base of underlying assets | (2) | 2 | |
| Effect of non-deductible expenses and other non-temporary differences | (63) | ||
| (157) | |||
| Effect of the difference in tax rates in countries other than the Russian | |||
| Federation | 110 | 88 | 170 |
| (4) | 2 | ||
| operations | \$ (96) |
| US\$ million | 2016 | Change recognised in statement of operations |
Change recognised in other comprehen sive income |
Change due to disposal of subsidiaries |
Transfer to disposal groups held for sale |
Translation difference |
2015 |
|---|---|---|---|---|---|---|---|
| Valuation and depreciation of property, plant and equipment | \$ 567 | (62) | – | – | – | 66 | \$ 563 |
| Valuation and amortisation of intangible assets | 81 | (11) | – | – | – | 3 | 89 |
| Other | 58 | 5 | – | – | – | 5 | 48 |
| 706 | (68) | – | – | – | 74 | 700 | |
| Tax losses available for offset | 226 | (5) | – | – | – | 23 | 208 |
| 138 | 4 | (1) | 8 | 127 | |||
| Impairment of accounts receivable | 10 | (1) | – | – | – | 2 | 9 |
| Other | 140 | 21 | – | – | (2) | (2) | 123 |
| 514 | 19 | – | – | (3) | 31 | 467 | |
| Net deferred income tax asset | 156 | 28 | – | – | (3) | 12 | 119 |
| Net deferred income tax liability | \$ 348 | (59) | – | – | – | 55 | \$ 352 |
| US\$ million | 2015 | Change recognised in statement of operations |
Change recognised in other comprehen sive income |
Change due to disposal of subsidiaries |
Transfer to disposal groups held for sale |
Translation difference |
2014 |
|---|---|---|---|---|---|---|---|
| Valuation and depreciation of property, plant and equipment | \$ 563 | – | – | \$ 741 | |||
| Valuation and amortisation of intangible assets | 89 | – | – | 112 | |||
| Other | 48 | 3 | – | – | – | 59 | |
| 700 | – | – | 912 | ||||
| Tax losses available for offset | 208 | 19 | – | – | 247 | ||
| 127 | – | 177 | |||||
| Impairment of accounts receivable | 9 | 2 | – | – | 13 | ||
| Other | 123 | 22 | – | 6 | – | 101 | |
| 467 | 31 | – | 538 | ||||
| Net deferred income tax asset | 119 | 53 | – | 97 | |||
| Net deferred income tax liability | \$ 352 | 4 | – | – | \$ 471 |
| US\$ million | 2014 | Change recognised in statement of operations |
Change recognised in other comprehen sive income |
Change due to disposal of subsidiaries |
Transfer to disposal groups held for sale |
Translation difference |
2013 |
|---|---|---|---|---|---|---|---|
| Valuation and depreciation of property, plant and equipment | \$ 741 | – | – | – | \$ 1,120 | ||
| Valuation and amortisation of intangible assets | 112 | – | – | – | 145 | ||
| Other | 59 | 13 | – | – | – | 68 | |
| 912 | – | – | – | 1,333 | |||
| Tax losses available for offset | 247 | 101 | – | – | – | 274 | |
| 177 | 29 | 15 | – | 173 | |||
| Impairment of accounts receivable | 13 | 4 | – | – | – | 16 | |
| Other | 101 | – | 5 | – | – | 115 | |
| 538 | 115 | 15 | – | – | 578 | ||
| Net deferred income tax asset | 97 | 46 | 3 | – | – | 86 | |
| Net deferred income tax liability | \$ 471 | – | – | \$ 841 |
provided for, as management does not intend to distribute accumulated earnings in the foreseeable future. The current tax rate on intra-group dividend income varies from 0% to 15%. The temporary differences associated with investments in subsidiaries were not recognised as the Group is able to control the timing of the reversal of these temporary differences and does not intend to reverse them in the foreseeable future.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Land | \$ 100 | \$ 97 | \$ 124 |
| Buildings and constructions | 1,755 | 1,512 | 1,908 |
| Machinery and equipment | 4,446 | 3,961 | 5,094 |
| Transport and motor vehicles | 223 | 193 | 249 |
| Mining assets | 2,440 | 2,100 | 2,572 |
| Other assets | 38 | 37 | 60 |
| 424 | 302 | 428 | |
| 9,426 | 8,202 | 10,435 | |
| Buildings and constructions | (872) | ||
| Machinery and equipment | (2,637) | ||
| Transport and motor vehicles | (144) | ||
| Mining assets | (1,093) | ||
| Other assets | (28) | ||
| (4,774) | |||
| \$ 4,652 | \$ 4,302 | \$ 5,796 |
| US\$ million | Land | Buildings and constructions |
Machinery and equipment |
Transport and motor vehicles |
Mining assets |
Other assets |
Assets under construction |
Total |
|---|---|---|---|---|---|---|---|---|
| accumulated depreciation | \$ 97 | \$ 822 | \$ 1,798 | \$ 79 | \$ 1,192 | \$ 12 | \$ 302 | \$ 4,302 |
| – | 1 | 5 | – | – | 2 | 442 | 450 | |
| – | 64 | 209 | 14 | 43 | 3 | (333) | – | |
| Disposals | (1) | (5) | (12) | (2) | (9) | (4) | – | (33) |
| Depreciation and depletion charge | – | (72) | (309) | (21) | (79) | (4) | – | (485) |
| Impairment losses recognised in | ||||||||
| statement of operations | (4) | (42) | (90) | (2) | (30) | – | (11) | (179) |
| Impairment losses reversed through | ||||||||
| statement of operations | 2 | 5 | 17 | – | 3 | – | 1 | 28 |
| Transfer to assets held for sale | – | (4) | (10) | – | – | – | (10) | (24) |
| Change in site restoration and | ||||||||
| decommissioning provision | – | – | (3) | – | 20 | – | – | 17 |
| Translation difference | 6 | 114 | 204 | 11 | 207 | 1 | 33 | 576 |
| accumulated depreciation | \$ 100 | \$ 883 | \$ 1,809 | \$ 79 | \$ 1,347 | \$ 10 | \$ 424 | \$ 4,652 |
| US\$ million | Land | Buildings and constructions |
Machinery and equipment |
Transport and motor vehicles |
Mining assets |
Other assets |
Assets under construction |
Total |
|---|---|---|---|---|---|---|---|---|
| accumulated depreciation | \$ 124 | \$ 1,118 | \$ 2,461 | \$ 102 | \$ 1,548 | \$ 15 | \$ 428 | \$ 5,796 |
| – | – | 4 | – | 1 | 1 | 480 | 486 | |
| – | 40 | 234 | 28 | 176 | 3 | – | ||
| Disposals | – | |||||||
| Depreciation and depletion charge | – | – | ||||||
| Impairment losses recognised in statement of operations |
– | – | ||||||
| Impairment losses reversed through statement of operations |
– | 2 | 2 | – | 3 | – | 13 | 20 |
| Impairment losses recognised in other comprehensive income |
– | – | – | – | – | – | ||
| Loss of control over a subsidiary | ||||||||
| Transfer to assets held for sale | – | – | – | – | ||||
| Change in site restoration and decommissioning provision |
– | 6 | – | – | 45 | – | – | 51 |
| Translation difference | ||||||||
| accumulated depreciation | \$ 97 | \$ 822 | \$ 1,798 | \$ 79 | \$ 1,192 | \$ 12 | \$ 302 | \$ 4,302 |
| US\$ million | Land | Buildings and constructions |
Machinery and equipment |
Transport and motor vehicles |
Mining assets |
Other assets |
Assets under construction |
Total |
|---|---|---|---|---|---|---|---|---|
| accumulated depreciation | \$ 157 | \$ 1,655 | \$ 3,781 | \$ 188 | \$ 2,690 | \$ 27 | \$ 992 | \$ 9,490 |
| – | 1 | 8 | 1 | – | – | 609 | 619 | |
| – | 198 | 450 | 22 | 172 | 5 | – | ||
| Disposals | – | |||||||
| Depreciation and depletion charge | – | – | ||||||
| Impairment losses recognised in statement of operations |
– | – | ||||||
| Impairment losses reversed through statement of operations |
– | 5 | 10 | – | – | – | 2 | 17 |
| Transfer to assets held for sale | – | – | – | – | – | |||
| Change in site restoration and decommissioning provision |
– | 6 | – | 61 | – | 4 | 67 | |
| Translation difference | ||||||||
| accumulated depreciation | \$ 124 | \$ 1,118 | \$ 2,461 | \$ 102 | \$ 1,548 | \$ 15 | \$ 428 | \$ 5,796 |
\$24 million and \$22 million as of 31 December 2016, 2015 and 2014, respectively.
in a \$52 million decrease in depreciation expense as compared to the amounts that would have been charged had no change in estimate occurred.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Customer relationships | \$ 663 | \$ 651 | \$ 981 |
| Water rights and environmental permits | 57 | 57 | 57 |
| Contract terms | 25 | 20 | 26 |
| Other | 90 | 83 | 65 |
| 835 | 811 | 1,129 | |
| Customer relationships | (460) | ||
| Water rights and environmental permits | – | – | – |
| Contract terms | (8) | ||
| Other | (70) | ||
| (538) | |||
| \$ 297 | \$ 324 | \$ 441 |
| US\$ million | Customer relationships |
Water rights and environmental permits |
Contract terms | Other | Total |
|---|---|---|---|---|---|
| amortisation | \$ 232 | \$ 57 | \$ 16 | \$ 19 | \$ 324 |
| – | – | – | 3 | 3 | |
| (35) | – | (2) | (4) | (41) | |
| Translation difference | 6 | – | 3 | 2 | 11 |
| amortisation | \$ 203 | \$ 57 | \$ 17 | \$ 20 | \$ 297 |
| US\$ million | Customer relationships |
Water rights and environmental permits |
Contract terms | Other | Total |
|---|---|---|---|---|---|
| amortisation | \$ 339 | \$ 57 | \$ 23 | \$ 22 | \$ 441 |
| – | – | – | 6 | 6 | |
| – | |||||
| Loss of control over a subsidiary | – | – | – | ||
| Translation difference | – | ||||
| amortisation | \$ 232 | \$ 57 | \$ 16 | \$ 19 | \$ 324 |
| US\$ million | Customer relationships |
Water rights and environmental permits |
Contract terms | Other | Total |
|---|---|---|---|---|---|
| amortisation | \$ 448 | \$ 57 | \$ 44 | \$ 39 | \$ 588 |
| – | – | – | 4 | 4 | |
| – | |||||
| Impairment loss recognised in statement of operations | – | – | – | ||
| Transfer to assets held for sale | – | – | – | ||
| Translation difference | – | ||||
| amortisation | \$ 339 | \$ 57 | \$ 23 | \$ 22 | \$ 441 |
The Group accounted for investments in joint ventures and associates under the equity method.
| US\$ million | Timir | Streamcore | Other associates | Total |
|---|---|---|---|---|
| Investment at 31 December 2013 | \$ 141 | \$ 40 | \$ 10 | \$ 191 |
| – | 8 | 2 | 10 | |
| Dividends paid | – | – | ||
| Translation difference | ||||
| Investment at 31 December 2014 | \$ 82 | \$ 29 | \$ 10 | \$ 121 |
| 4 | – | 3 | ||
| Impairment of investments | – | – | ||
| Translation difference | ||||
| Investment at 31 December 2015 | \$ 40 | \$ 26 | \$ 8 | \$ 74 |
| 5 | – | 3 | ||
| Impairment of investments | – | – | ||
| Translation difference | 7 | 6 | – | 13 |
| Investment at 31 December 2016 | \$ 19 | \$ 37 | \$ 8 | \$ 64 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 3 | \$ 3 | \$ 10 | |
| Impairment of investments | – | ||
| consolidated statement of operations | \$ 10 |
Timir under the equity method.
In 2014 and 2015, the parties amended the payment schedule. The latest schedule effective at 31 December 2016 provides for an execution of payments of 500 million roubles in each of January 2017 and 2018 and 480 million roubles in 2019. From the dates of the amendments the Group incurs interest charges on the unpaid liability.
\$28 million and \$36 million, respectively.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Mineral reserves and property, plant and equipment | \$ 55 | \$ 101 | \$ 202 |
| 8 | – | 1 | |
| Total assets | 63 | 101 | 203 |
| Deferred income tax liabilities | – | 5 | 21 |
| Current liabilities | 25 | 17 | 21 |
| Total liabilities | 25 | 22 | 42 |
| Net assets | 38 | 79 | 161 |
| Net assets attributable to 51% ownership interest | \$ 19 | \$ 40 | \$ 82 |
Due to the postponement of the major project activities, the Group assessed the recoverability of its investment in Timir at 30 September 2016 and and 2015, the Group partially impaired its investment in Timir. The major drivers that led to impairment were the decrease in the expected long-term prices for iron ore, the increase in the amount of the required capital expenditures to maintain the production at the budgeted capacities and the postponement of the start of production for 2 years.
In the value-in-use calculation management assumed that the railway tariffs for the iron ore transportation in the Yakutia region, which are established by the local railway companies, will be reduced to the general level of the tariffs in Russia. These tariffs have not been agreed yet by the parties. If the assumption were not valid, this would lead to an additional impairment of \$55 million which would give a \$19 million effect on the
procurement and processing in Siberia, Russia.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ 24 | \$ 19 | \$ 27 |
| Inventories | 4 | 3 | 5 |
| 91 | 51 | 51 | |
| Total assets | 119 | 73 | 83 |
| Deferred income tax liabilities | 1 | 1 | 1 |
| Current liabilities | 44 | 20 | 24 |
| Total liabilities | 45 | 21 | 25 |
| Net assets | \$ 74 | \$ 52 | \$ 58 |
| Net assets attributable to 50% ownership interest | \$ 37 | \$ 26 | \$ 29 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Revenue | \$ 286 | \$ 278 | \$ 478 |
| Cost of revenue | (270) | ||
| Other expenses, including income taxes | (6) | ||
| \$ 10 | \$ 8 | \$ 16 | |
| \$ 5 | \$ 4 | \$ 8 |
The major classes of assets and liabilities of the disposal groups measured at the lower of carrying amount and fair value less costs to sell were as follows as
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ 15 | \$ 1 | \$ 3 |
| Other non-current assets | 3 | – | – |
| Inventories | 1 | – | 1 |
| 6 | – | – | |
| Cash and cash equivalents | 2 | – | – |
| 27 | 1 | 4 | |
| Non-current liabilities | 5 | – | 13 |
| Current liabilities | 3 | – | – |
| 8 | – | 13 | |
| Non-controlling interests | – | – | – |
| \$ 19 | \$ 1 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 27 | \$ 1 | \$ 4 | |
| Steel production | 27 | – | 1 |
| Coal | – | 1 | 3 |
| 8 | – | 13 | |
| Steel production | 8 | – | – |
| – | – | 13 |
The table below demonstrates the carrying values of assets and liabilities, at the dates of disposal, of the subsidiaries and other business units disposed of during 2014–2016.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ 9 | \$ 25 | \$ 178 |
| Other non-current assets | – | – | 19 |
| Inventories | – | 13 | 79 |
| – | – | 64 | |
| Cash and cash equivalents | – | – | 20 |
| Total assets | 9 | 38 | 360 |
| Non-current liabilities | – | 17 | 28 |
| Current liabilities | – | – | 100 |
| Total liabilities | – | 17 | 128 |
| Non-controlling interests | – | – | – |
| Net assets | \$ 9 | \$ 21 | \$ 232 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 9 | \$ 38 | \$ 360 | |
| Steel | 9 | 6 | 330 |
| – | 31 | 9 | |
| Coal | – | 1 | – |
| Other operations | – | – | 21 |
| – | 17 | 128 | |
| Steel | – | 4 | 126 |
| – | 13 | – | |
| Other operations | – | – | 2 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Net cash disposed of with subsidiaries | \$ – | ||
| Cash received | 27 | 57 | 331 |
| \$ 27 | \$ 44 | \$ 311 |
The disposal groups sold during 2014–2016 are described below.
In 2015, the Group sold assets of Portland Structural Tubing for a cash consideration of \$51 million. The Group recognised \$20 million as a gain on
comprehensive income to the consolidated statement of operations. Cash disposed with the subsidiary amounted to \$20 million.
consolidated statement of operations.
Non-current Financial Assets
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 3 | \$ 5 | \$ 17 | |
| Restricted deposits | 11 | 5 | 7 |
| Receivables from related parties | – | 1 | 1 |
| Loans receivable | 21 | 23 | 21 |
| Trade and other receivables | 4 | 5 | 4 |
| Other | 52 | 40 | 48 |
| \$ 91 | \$ 79 | \$ 98 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Income tax receivable | \$ 7 | \$ 18 | \$ 4 |
| 2 | 6 | 12 | |
| Other | 36 | 32 | 24 |
| \$ 45 | \$ 56 | \$ 40 |
In 2016, 2015 and 2014, impairment losses relating to the decline in market quotations of Delong shares in the amount of \$Nil, \$Nil and \$12 million, respectively, were recorded through other comprehensive income and \$2 million, \$11 million and \$1 million, respectively, were recognised in the statement of operations.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Raw materials and spare parts | \$ 434 | \$ 402 | \$ 588 |
| Work-in-progress | 173 | 188 | 307 |
| Finished goods | 377 | 309 | 477 |
| \$ 984 | \$ 899 | \$ 1,372 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Trade accounts receivable | \$ 518 | \$ 472 | \$ 684 |
| Other receivables | 31 | 23 | 25 |
| 549 | 495 | 709 | |
| (47) | |||
| \$ 502 | \$ 447 | \$ 654 |
Related parties of the Group include associates and joint venture partners, key management personnel and other entities that are under the control relationship, attention is directed to the substance of the relationship, not merely the legal form.
| Amounts due from related parties |
Amounts due to related parties |
|||||
|---|---|---|---|---|---|---|
| US\$ million | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 |
| Loans | ||||||
| Timir | \$ 7 | \$ 5 | \$ 4 | \$ – | \$ – | \$ – |
| Trade balances | ||||||
| Vtorresource-Pererabotka | 1 | 1 | 11 | 39 | 10 | 5 |
| – | – | 37 | 185 | 129 | 96 | |
| Other entities | – | – | 3 | 2 | 4 | 7 |
| 8 | 6 | 55 | 226 | 143 | 108 | |
| – | – | – | – | – | ||
| \$ 8 | \$ 6 | \$ 53 | \$ 226 | \$ 143 | \$ 108 |
In 2016 and 2014, the Group did not recognise any expense or income in relation to bad and doubtful debts of related parties. In 2015, a \$2 million reversal of bad and doubtful debts allowance was recognised in the consolidated statement of operations.
| Sales to related parties |
Purchases from related parties |
|||||
|---|---|---|---|---|---|---|
| US\$ million | 2016 | 2015 | 2014 | 2016 | 2015 | 2014 |
| Genalta Recycling Inc. | \$ – | \$ – | \$ – | \$ 8 | \$ 14 | \$ 24 |
| Interlock Security Services | – | – | 1 | 19 | 24 | 39 |
| Vtorresource-Pererabotka | 7 | 8 | 17 | 281 | 274 | 465 |
| 25 | 29 | 42 | 77 | 70 | 125 | |
| Other entities | – | – | 3 | 11 | 12 | 24 |
| \$ 32 | \$ 37 | \$ 63 | \$ 396 | \$ 394 | \$ 677 |
In addition to the disclosures presented in this note, some of the balances and transactions with related parties are disclosed in Notes 4, 11, 13 and 25.
Genalta Recycling Inc. is a joint venture of a Canadian subsidiary of the Group. It sells scrap metal to the Group.
Interlock Security Services is a group of entities controlled by a member of the key management personnel, which provide security services to the parties and they ceased to be related parties to the Group.
to sell these shares back to Lanebrook Limited for the same amount. In January 2014, the Group sold 0.14% of the shares to Lanebrook Limited for \$6 million. The put option for the remaining shares expires on 31 December 2017.
scrap processing and other services. In 2016, 2015 and 2014, the purchases of scrap metal from Vtorresource-Pererabotka amounted to
sinter from the entity. In 2016, 2015 and 2014, the volume of purchases was 1,619,745 tonnes, 1,517,580 tonnes and 1,486,415 tonnes, respectively.
The transactions with related parties were based on prevailing market terms.
In 2016, 2015 and 2014, key management personnel totalled 34, 46 and 51 people, respectively. Total compensation to key management personnel
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Salary | \$ 14 | \$ 16 | \$ 20 |
| Performance bonuses | 9 | 9 | 29 |
| Social security taxes | 3 | 4 | 4 |
| 8 | 10 | 14 | |
| – | – | 1 | |
| – | – | 1 | |
| \$ 34 | \$ 39 | \$ 69 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 89 | \$ 61 | \$ 71 | |
| Other taxes | 103 | 66 | 87 |
| \$ 192 | \$ 127 | \$ 158 |
of input value added tax and believes it is fully recoverable within one year.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 32 | \$ 32 | \$ 32 | |
| Restricted deposits at banks | 1 | 3 | 1 |
| – | – | 7 | |
| \$ 33 | \$ 35 | \$ 40 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 1,058 | \$ 1,196 | \$ 943 | |
| Russian rouble | 71 | 121 | 108 |
| Canadian dollar | 2 | 29 | 6 |
| 2 | 20 | 3 | |
| Other | 24 | 9 | 26 |
| \$ 1,157 | \$ 1,375 | \$ 1,086 |
respectively.
| 31 December | ||||
|---|---|---|---|---|
| Number of shares | 2016 | 2015 | 2014 | |
| Ordinary shares of \$1 each, issued and fully paid | 1,506,527,294 | 1,506,527,294 | 1,506,527,294 |
in Raspadskaya.
These shares were valued at their market quotation at the date of acquisition of Corber. The excess of the market value of shares issued over their nominal value in the amount of \$478 million was recognised in a merger reserve within additional paid-in capital under section 612 of the Companies
during the period from the date of issue of the warrants until the date of their exercise. The fair value of warrants issued amounting to \$156 million
| 31 December | ||||||
|---|---|---|---|---|---|---|
| 2016 | 2014 | |||||
| Number of treasury shares | 87,015,878 | 98,481,249 | – |
On 31 March 2015, the Board resolved to announce a return of capital to be effected by a tender offer to shareholders at \$3.10 per share in the
Subsequently, in 2016 and 2015, 11,465,371 shares and 9,977,259 shares, respectively, were transferred to the participants of Incentive Plans. The cost of treasury shares transferred to the participants of Incentive Plans, amounted to \$35 million and \$31 million in 2016 and 2015, respectively.
Earnings per share are calculated by dividing the net income attributable to ordinary shareholders by the weighted average number of ordinary shares weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the potential dilutive ordinary shares into ordinary shares.
| 2016 | 2015 | 2014 | |
|---|---|---|---|
| Weighted average number of ordinary shares for basic and diluted earnings per share |
1,414,906,412 | 1,437,134,241 | 1,505,833,080 |
| \$ (215) | |||
| \$ (0.15) |
basic earnings per share for 2014 starting from the date of their issue.
| Date of declaration | To holders registered at |
Dividends declared, US\$ million |
US\$ per share | |
|---|---|---|---|---|
| Special for 2014 | 08/04/2014 | 06/06/2014 | 90 | 0.06 |
In addition, certain subsidiaries of the Group declared dividends. The share of non-controlling shareholders in those dividends was \$Nil, \$Nil and \$3 million in 2016, 2015 and 2014, respectively.
The vesting date for each tranche occurs within the 90-day period after announcement of the annual results. The expected vesting dates of the
| Total | Incentive Plan 2016 | Incentive Plan 2015 | Incentive Plan 2014 | Incentive Plan 2013 | |
|---|---|---|---|---|---|
| March 2017 | 12,813,209 | 2,076,677 | 3,151,362 | 4,007,054 | 3,578,116 |
| March 2018 | 10,810,789 | 2,076,677 | 4,727,042 | 4,007,070 | – |
| March 2019 | 7,842,200 | 3,115,023 | 4,727,177 | – | – |
| March 2020 | 3,115,151 | 3,115,151 | – | – | – |
| 34,581,349 | 10,383,528 | 12,605,581 | 8,014,124 | 3,578,116 |
loses the entitlement for the shares that were not gifted up to the date of termination.
fair value of these awards was estimated at the date of grant and measured at the market price of the shares of a parent company reduced by the present value of dividends expected to be paid during the vesting period. The following inputs, including assumptions, were used in the valuation of
| Incentive Plan 2016 |
Incentive Plan 2015 |
Incentive Plan 2014 |
Incentive Plan 2013 |
Incentive Plan 2012 |
Incentive Plan 2011 |
|---|---|---|---|---|---|
| n/a | 7.3 – 9.1 | 3.6 – 4.8 | 4.0 – 8.8 | 1.9 – 5.4 | 3.6 – 4.8 |
| 0.5 – 3.5 | 0.6 – 3.6 | 0.6 – 3.6 | 0.6 – 3.6 | 0.6 – 2.6 | 0.5 – 2.5 |
| \$1.73 | \$1.36 | \$1.68 | \$2.13 | \$3.61 | \$51.57 |
The following table illustrates the number of, and movements in, share-based awards during the years.
| 2016 | 2015 | 2014 | |
|---|---|---|---|
| 43,767,553 | 36,608,052 | 27,692,062 | |
| Granted during the year | 10,383,528 | 20,610,611 | 20,220,620 |
| Forfeited during the year | (8,104,361) | ||
| Vested during the year | (11,465,371) | ||
| Outstanding at 31 December | 34,581,349 | 43,767,553 | 36,608,052 |
withholding taxes and other deductions.
The weighted average share price at the dates of exercise was \$1.78, \$2.59 and \$1.72 in 2016, 2015 and 2014, respectively.
The weighted average remaining contractual life of the share-based awards outstanding as of 31 December 2016, 2015 and 2014 was 1.2, 1.5 and 1.6 years, respectively.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Expense arising from equity-settled share-based payment transactions | \$ 16 | \$ 20 | \$ 30 |
| US\$ million | 2016 | Non current |
Current | 2015 | Non current |
Current | 2014 | Non current |
Current |
|---|---|---|---|---|---|---|---|---|---|
| Bank loans | \$ 2,067 | \$ 1,799 | \$ 268 | \$ 2,236 | \$ 1,958 | \$ 278 | \$ 1,662 | \$ 1,441 | \$ 221 |
| US dollar-denominated | |||||||||
| 8.25% notes due 2015 | – | – | – | – | – | – | 138 | – | 138 |
| 7.40% notes due 2017 | – | – | – | 286 | 286 | – | 600 | 600 | – |
| 7.75% bonds due 2017 | 26 | – | 26 | 186 | 186 | – | 392 | 392 | – |
| 9.5% notes due 2018 | 125 | 125 | – | 353 | 353 | – | 509 | 509 | – |
| 6.75% notes due 2018 | 528 | 528 | – | 796 | 796 | – | 850 | 850 | – |
| 7.5% senior secured notes due 2019 | 350 | 350 | – | 350 | 350 | – | 350 | 350 | – |
| 6.50% notes due 2020 | 1,000 | 1,000 | – | 1,000 | 1,000 | – | 1,000 | 1,000 | – |
| 8.25% notes due 2021 | 750 | 750 | – | 750 | 750 | – | – | – | – |
| 6.75% notes due 2022 | 500 | 500 | – | – | – | – | – | – | – |
| Rouble-denominated | |||||||||
| 8.75% rouble bonds due 2015 | – | – | – | – | – | – | 69 | – | 69 |
| 9.95% rouble bonds due 2015 | – | – | – | – | – | – | 267 | – | 267 |
| 8.40% rouble bonds due 2016 | – | – | – | 165 | – | 165 | 356 | 356 | – |
| 12.95% rouble bonds due 2019 | 247 | 247 | – | 206 | 206 | – | – | – | – |
| 12.60% rouble bonds due 2021 | 247 | 247 | – | – | – | – | – | – | – |
| Other liabilities | – | – | – | – | – | – | 1 | – | 1 |
| Fair value adjustment to liabilities assumed in | |||||||||
| business combination | 1 | – | 1 | 7 | 7 | – | 20 | 20 | – |
| (44) | (44) | – | – | ||||||
| Interest payable | 97 | – | 97 | 66 | 12 | 54 | 74 | 7 | 67 |
| \$ 5,894 | \$ 5,502 | \$ 392 | \$ 6,347 | \$5,850 | \$ 497 | \$ 6,231 | \$ 5,470 | \$ 761 |
| Long-term borrowings | Short-term borrowings | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |
| 6.85% | 6.87% | 6.78% | 3.31% | 2.86% | 2.72% | |
| Russian rouble | 12.71% | 11.84% | 9.00% | – | – | – |
| Euro | 3.94% | 5.57% | 3.55% | – | – | – |
| – | – | – | – | – | 9.98% |
| US\$ million | 2016 | 2015 | 2014 | |
|---|---|---|---|---|
| \$ 4,911 | \$ 5,412 | \$ 5,387 | ||
| Russian rouble | 809 | 621 | 700 | |
| Euro | 217 | 368 | 193 | |
| Other | 1 | – | 8 | |
| (44) | ||||
| \$ 5,894 | \$ 6,347 | \$ 6,231 |
these contracts can be used to satisfy the obligations under the loan agreements in the event of a default.
a \$350 million liability under 7.5% senior secured notes due 2019. The subsidiaries represent approximately 28% of the consolidated assets at 31 December 2016 and generated almost 19% of the consolidated revenues in 2016. In addition, property, plant and equipment and inventory
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ 1,013 | \$ 1,107 | \$ 1,263 |
| Inventory | 315 | 383 | 607 |
In June 2016, the Group issued 6.75% notes due 2022 in the amount of \$500 million. The the purchase of 7.40% notes due 2017, 9.50% notes due 2018, 6.75% notes due 2018 and 7.75% bonds due 2017 at the tender offer settled on
which bear interest of 12.60% per annum and mature on 23 March 2021. The currency risk exposure of these bonds was not hedged.
In December 2015, the Group issued 8.25% notes due 2021 in the amount of \$750 million. The proceeds from the issue of the notes were
which bear interest of 12.95% per annum and have the next put date on 26 June 2019. The currency risk exposure of these bonds was hedged
In November 2014, the Group issued 7.5% senior secured notes due 2019 notes in the amount of \$350 million. The proceeds from the issue of the notes were used for the partial repayment of the 8.25% notes maturing on 10 November 2015.
Repurchase of Rouble-Denominated Bonds
In 2016, the Group fully settled its 8.40% rouble bonds due 2016, there was no gain or loss on this transaction.
gain or loss on this transaction.
There was no gain or loss on this transaction.
In 2014, the Group partially repurchased 8.25% notes due 2015 for a cash consideration of \$437 million. The nominal value of the notes was and liabilities in the consolidated statement of operations. During 2015 the Group repurchased the remaining \$138 million. There was no gain or loss on these transactions.
through a tender offer and market transactions an additional \$206 million at par. The difference between the carrying value of these bonds and statement of operations.
that used by management for evaluation of performance.
in turn may trigger cross default events under other debt instruments of the Group. The terms of certain facilities also set certain limitations on
Transaction costs relating to these amendments amounted to \$4 million.
plc, have covenants restricting the incurrence of indebtedness by the issuer and its consolidated subsidiaries conditional on a gross leverage ratio. While the ratio level itself does not constitute a breach of covenants, exceeding the threshold triggers a restriction on incurrence of consolidated indebtedness subject to certain conditions.
and its other subsidiaries that are not part of the Raspadskaya Group.
and notes.
Unutilised Borrowing Facilities
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Committed | \$ 187 | \$ 317 | \$ 439 |
| 883 | 663 | 1,225 | |
| Total unutilised borrowing facilities | \$ 1,070 | \$ 980 | \$ 1,664 |
Certain Russian subsidiaries of the Group provide regular lifetime pension payments and lump-sum amounts payable at retirement date. These
statutory rates in force, based on gross salary payments. The Group has no legal or constructive obligation to pay further contributions in respect of
fund to employees who worked under harmful and hard conditions. The amount of such pension depends on years of service and salary.
use a measurement date for plan assets and obligations of 31 December.
plans. Eligible participants were provided with a one-time opportunity to choose either a lump-sum settlement immediately, or to begin receiving their
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 212 | \$ 254 | \$ 398 |
notes, the Group is also exposed to equity market risk.
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| Current service cost | \$ (2) | \$ (2) | \$ (19) | \$ – | \$ (23) |
| Net interest expense | (9) | (5) | (8) | – | (22) |
| 1 | – | – | – | 1 | |
| Past service cost | (1) | 1 | – | – | – |
| Curtailment/settlement gain | 1 | – | – | – | 1 |
| \$ (10) | \$ (6) | \$ (27) | \$ – | \$ (43) |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| Current service cost | \$ – | ||||
| Net interest expense | – | ||||
| – | – | – | |||
| Past service cost | 7 | 2 | – | 6 | |
| Curtailment/settlement gain | 2 | – | 1 | – | 3 |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| Current service cost | \$ – | ||||
| Net interest expense | |||||
| 22 | – | – | – | 22 | |
| Curtailment gain | 6 | – | – | – | 6 |
| \$ 6 |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| Return on plan assets, excluding amounts | |||||
| included in net interest expense | \$ (1) | \$ – | \$ 7 | \$ – | \$ 6 |
| 3 | 8 | (6) | – | 5 | |
| \$ 2 | \$ 8 | \$ 1 | \$ – | \$ 11 |
| Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total | |
|---|---|---|---|---|---|
| Return on plan assets, excluding amounts | |||||
| included in net interest expense | \$ – | \$ – | \$ – | ||
| 24 | – | 11 | |||
| \$ 14 | \$ – | \$ 1 |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| Return on plan assets, excluding amounts | |||||
| included in net interest expense | \$ – | \$ – | \$ 46 | \$ – | \$ 46 |
| 15 | |||||
| Effect of asset ceiling | – | – | 2 | – | 2 |
| \$ 15 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 25 | \$ 13 | \$ 73 | |
| 26 | 13 | 73 | |
| Russian plans | (1) | – | – |
| 31 December 2016 | |||||
|---|---|---|---|---|---|
| US\$ million | Russian Plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
| \$ 108 | \$ 31 | \$ 711 | \$ 2 | \$ 852 | |
| Plan assets | – | – | (535) | – | (535) |
| 108 | 31 | 176 | 2 | 317 | |
| 31 December 2015 | |||||
|---|---|---|---|---|---|
| US\$ million | Russian Plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
| \$ 90 | \$ 45 | \$ 691 | \$ 2 | \$ 828 | |
| Plan assets | – | – | |||
| 89 | 45 | 165 | 2 | 301 |
| 31 December 2014 | |||||
|---|---|---|---|---|---|
| US\$ million | Russian Plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
| \$ 110 | \$ 58 | \$ 790 | \$ 14 | \$ 972 | |
| Plan assets | – | – | – | ||
| 110 | 58 | 182 | 14 | 364 |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| At 31 December 2013 | \$ 231 | \$ 83 | \$ 164 | \$ 14 | \$ 492 |
| of operations | 10 | 25 | 2 | 31 | |
| Contributions by employer | |||||
| comprehensive income | 17 | 30 | 1 | 33 | |
| – | – | – | |||
| Translation difference | |||||
| At 31 December 2014 | \$ 110 | \$ 58 | \$ 182 | \$ 14 | \$ 364 |
| of operations | 6 | 6 | 32 | 1 | 45 |
| Contributions by employer | |||||
| comprehensive income | 8 | 5 | – | ||
| – | – | ||||
| Translation difference | |||||
| At 31 December 2015 | \$ 89 | \$ 45 | \$ 165 | \$ 2 | \$ 301 |
| of operations | 10 | 6 | 27 | – | 43 |
| Contributions by employer | – | ||||
| comprehensive income | – | ||||
| – | – | – | |||
| Translation difference | 18 | 2 | – | 15 | |
| At 31 December 2016 | \$ 108 | \$ 31 | \$ 176 | \$ 2 | \$ 317 |
| US\$ million | Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Total |
|---|---|---|---|---|---|
| At 31 December 2013 | \$ 232 | \$ 83 | \$ 728 | \$ 14 | \$ 1,057 |
| 15 | 7 | 33 | 2 | 57 | |
| Current service cost | 7 | 3 | 19 | – | 29 |
| changes in demographic assumptions | – | 1 | 17 | – | 18 |
| 13 | 71 | 1 | 64 | ||
| experience adjustments | 3 | – | |||
| Curtailment gain | – | – | – | ||
| – | – | – | |||
| Translation difference | |||||
| At 31 December 2014 | \$ 110 | \$ 58 | \$ 790 | \$ 14 | \$ 972 |
| 11 | 6 | 30 | – | 47 | |
| Current service cost | 4 | 2 | 23 | – | 29 |
| Past service cost | 3 | – | |||
| changes in demographic assumptions | – | – | |||
| 14 | 2 | 1 | – | ||
| experience adjustments | 3 | 1 | – | ||
| Curtailment/settlement gain | – | – | |||
| – | – | ||||
| Settlement of lump-sum payments | – | – | – | ||
| Translation difference | |||||
| At 31 December 2015 | \$ 90 | \$ 45 | \$ 691 | \$ 2 | \$ 828 |
| 9 | 5 | 27 | – | 41 | |
| Current service cost | 2 | 2 | 19 | – | 23 |
| Past service cost | 1 | – | – | – | |
| – | |||||
| changes in demographic assumptions | – | – | – | ||
| 14 | – | 7 | |||
| experience adjustments | 2 | – | |||
| Curtailment/settlement gain | – | – | – | ||
| – | – | – | |||
| Translation difference | 18 | 11 | – | 24 | |
| At 31 December 2016 | \$ 108 | \$ 31 | \$ 711 | \$ 2 | \$ 852 |
| Years | 2016 | 2015 | 2014 |
|---|---|---|---|
| Russian plans | 11.21 | 10.93 | 9.8 |
| 8.26 | 8.76 | 10.4 | |
| 13.79 | 14.35 | 14.6 | |
| Other plans | 9.12 | 9.66 | 20.3 |
| Russian | Ukrainian | US & Canadian |
Other | ||
|---|---|---|---|---|---|
| US\$ million | plans | plans | plans | plans | Total |
| At 31 December 2013 | \$ 1 | \$ – | \$ 564 | \$ – | \$ 565 |
| Interest income on plan assets | – | – | 27 | – | 27 |
| – | – | 46 | – | 46 | |
| Contributions of employer | 13 | 6 | 34 | 2 | 55 |
| Effect of asset ceiling | – | – | 2 | – | 2 |
| Translation difference | – | – | – | ||
| At 31 December 2014 | \$ – | \$ – | \$ 608 | \$ – | \$ 608 |
| Interest income on plan assets | – | – | 23 | – | 23 |
| – | – | – | |||
| Contributions of employer | 9 | 3 | 30 | 1 | 43 |
| Settlement of lump-sum payments | – | – | – | ||
| Translation difference | – | – | – | ||
| At 31 December 2015 | \$ 1 | \$ – | \$ 526 | \$ – | \$ 527 |
| Interest income on plan assets | – | – | 19 | – | 19 |
| – | 7 | – | 6 | ||
| Contributions of employer | 7 | 3 | 17 | – | 27 |
| – | |||||
| Translation difference | – | – | 9 | – | 9 |
| At 31 December 2016 | \$ – | \$ – | \$ 535 | \$ – | \$ 535 |
| 2016 | 2015 | 2014 | ||||
|---|---|---|---|---|---|---|
| Quoted | Unquoted | Quoted | Unquoted | Quoted | Unquoted | |
| Equity funds and investment trusts | 45% | 40% | 50% | 34% | 31% | 49% |
| Corporate bonds and notes | 13% | – | 13% | 1% | 13% | 1% |
| Property | – | – | – | – | – | – |
| Cash | 2% | – | 2% | – | 6% | – |
| 60% | 40% | 65% | 35% | 50% | 50% |
| 2016 | 2015 | 2014 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Russian Plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
|
| Discount rate | 8.2% | 17.5% | 3.9-4.2% | 2.8-9.1% | 9.6% | 13.0% | 3.9-4.5% | 2.8-9% | 11% | 15.0% | 3.6-4.9% | 2.8-8.8% |
| increases | 7% | 11% | – | 3% | 8% | 8% | – | 3% | 8% | 10% | – | 3% |
| Future salary | ||||||||||||
| increase | 7% | 11% | 3% | – | 8% | 8% | 3–3.3% | – | 8% | 10% | 3-3.3% | – |
| expectation, | ||||||||||||
| male, years | 68.6 | 65.5 | 85.8-86.6 | 77.1-81 | 68.5 | 65.5 | 86.3-87.5 | 78.1-79 | 68.0 | 65.2 | 86.4-87.8 | 74.9-79 |
| expectation, | ||||||||||||
| female, years | 79.0 | 75.5 | 88.6-89.3 | 77.1-87 | 78.9 | 75.5 | 89-89.3 | 75.2-85 | 78.5 | 75.3 | 88.9-89.8 | 73.4-85 |
| Healthcare | ||||||||||||
| costs increase | ||||||||||||
| rate | – | – | 5-7% | 8.6% | – | – | 5.4-7% | 8.8% | – | – | 5.5-7% | 7.5-7.7% |
| at 31 December 2016, US\$ million |
at 31 December 2015, US\$ million |
at 31 December 2014, US\$ million |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Reasonable change in assumption |
Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
Russian plans |
Ukrainian plans |
US & Canadian plans |
Other plans |
|
| Discount rate | 10% | \$(8) | \$(4) | \$(41) | \$– | \$– | |||||||
| 10 | 5 | 44 | – | 10 | 6 | 37 | – | 14 | 7 | 58 | 6 | ||
| Future | |||||||||||||
| increases | 10% | 7 | 1 | – | – | 7 | 1 | – | – | 9 | 2 | – | – |
| (7) | (1) | – | – | – | – | – | – | ||||||
| Future salary | |||||||||||||
| increase | 10% | 1 | 1 | 1 | – | 1 | 2 | 2 | – | 1 | 3 | 3 | – |
| (1) | (1) | (1) | – | – | – | ||||||||
| expectation, | |||||||||||||
| male, years | 1 | 1 | – | 13 | – | 1 | – | 14 | – | 1 | – | 15 | – |
| (1) | – | (13) | – | – | – | – | – | ||||||
| expectation, | |||||||||||||
| female, years | 1 | 1 | – | 5 | – | 1 | – | 4 | – | 1 | – | 4 | – |
| (1) | – | (5) | – | – | – | – | – | ||||||
| Healthcare costs |
|||||||||||||
| increase rate | 10% | – | – | 1 | – | – | – | – | – | – | – | – | 3 |
| – | – | (1) | – | – | – | – | – | – | – | – | – |
| 2016 | 2015 | 2014 | |||||
|---|---|---|---|---|---|---|---|
| US\$ million | Non-current | Current | Non-current | Current | Non-current | Current | |
| Site restoration and decommissioning costs | \$ 204 | \$ 20 | \$ 145 | \$ 20 | \$ 171 | \$ 34 | |
| Legal claims | – | 3 | – | 2 | – | 3 | |
| Other provisions | 1 | 3 | 1 | 1 | 2 | 4 | |
| \$ 205 | \$ 26 | \$ 146 | \$ 23 | \$ 173 | \$ 41 |
| US\$ million | Site restoration and decom-missioning costs |
Legal claims |
Other provisions | Total |
|---|---|---|---|---|
| At 31 December 2013 | \$ 280 | \$ 9 | \$ 10 | \$ 299 |
| 56 | 4 | 19 | 79 | |
| Increase from passage of time | 15 | – | – | 15 |
| Effect of change in the discount rate | – | – | ||
| Effect of changes in estimated costs and timing | 72 | – | – | 72 |
| – | – | |||
| Translation difference | ||||
| At 31 December 2014 | \$ 205 | \$ 3 | \$ 6 | \$ 214 |
| 13 | 3 | 4 | 20 | |
| Increase from passage of time | 13 | – | – | 13 |
| Effect of change in the discount rate | 35 | – | – | 35 |
| Effect of changes in estimated costs and timing | 19 | – | – | 19 |
| – | – | |||
| – | – | |||
| Translation difference | – | |||
| At 31 December 2015 | \$ 165 | \$ 2 | \$ 2 | \$ 169 |
| 15 | 5 | 8 | 28 | |
| Increase from passage of time | 14 | – | – | 14 |
| Effect of change in the discount rate | 17 | – | – | 17 |
| Effect of changes in estimated costs and timing | 5 | – | – | 5 |
| Translation difference | 26 | – | – | 26 |
| At 31 December 2016 | \$ 224 | \$ 3 | \$ 4 | \$ 231 |
Site Restoration Costs
measured based on estimates of restoration costs which are expected to be incurred in the future discounted at the annual rate ranging from 1.5% to
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Derivatives not designated as hedging instruments | \$ – | \$ 274 | \$ 713 |
| Hedging instruments | 22 | 59 | – |
| Contingent consideration payable for the acquisition of Stratcor | – | – | 2 |
| Dividends payable under cumulative preference shares of a subsidiary to | |||
| a related party | 18 | 16 | 15 |
| Employee income participation plans and compensations | 5 | 2 | 6 |
| Tax liabilities | 3 | 5 | 5 |
| Finance lease liabilities | 5 | 5 | 4 |
| Other liabilities to related parties | 1 | 1 | 1 |
| Other liabilities | 66 | 43 | 48 |
| 120 | 405 | 794 | |
| (26) | |||
| \$ 94 | \$ 116 | \$ 442 |
notional amount. The exchange is exercised on approximately the same dates as the payments under the bonds.
The swap contracts, which were effective at 31 December 2014-2016, are summarised in the table below.
| Year of issue |
Bonds principal, millions of roubles |
Hedged amount, millions of roubles |
Swap amount, US\$ million |
Interest rates on the swap amount |
||
|---|---|---|---|---|---|---|
| 13.5 per cent bonds due 2014 | 2009 | 20,000 | 14,019 | 475 | 7.50% - 8.90% | |
| 9.95 per cent bonds due 2015 | 2010 | 15,000 | 14,997 | 491 | 5.65% - 5.88% | |
| 8.40 per cent bonds due 2016 | 2011 | 20,000 | 19,996 | 711 | 4.45% - 4.60% | |
| 8.75 per cent bonds due 2015 | 2013 | 3,885 | 3,735 | 121 | 3.06% - 3.33% |
The aggregate amounts under swap contracts translated at the year end exchange rates are summarised in the table below.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Bonds principal | \$ – | \$ 165 | \$ 692 |
| Hedged amount | – | 165 | 688 |
| Swap amount | – | 430 | 1,323 |
In 2014–2016, upon repayment of the 8.40%, 9.95%, 8.75% and 13.5% bonds, the related swap contracts matured.
proceeds from the bonds within the Group. To manage the currency exposure, the Group entered into a series of cross currency swap contracts with notional amount, totaling approximately \$265 million, in exchange for rouble-denominated interest payments at the rate of 12.95% per annum plus
| Year of issue |
Bonds principal, millions of roubles |
Hedged amount, millions of roubles |
Swap amount, US\$ million |
Interest rates on the swap amount |
||
|---|---|---|---|---|---|---|
| 12.95 per cent bonds due 2019 | 2015 | 15,000 | 14,948 | 265 | 5.90% - 6.55% |
is recognised in other comprehensive income and the remaining loss on the hedging instrument is recorded through the statement of operations.
Contingent consideration represents additional payments for the acquisition of Stratcor in 2006. This consideration could be paid each year up to 2019. The payments depend on the deviation of the average prices for vanadium pentoxide from certain levels and the amounts payable for each year are limited to maximum amounts. In 2014–2016, the Group was not required to pay this consideration due to the movements in the vanadium pentoxide market relative to the levels set in the agreement.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Trade accounts payable | \$ 737 | \$ 621 | \$ 774 |
| 134 | 122 | 196 | |
| 26 | 289 | 352 | |
| Other payables | 38 | 38 | 57 |
| \$ 935 | \$ 1,070 | \$ 1,379 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 104 | \$ 51 | \$ 78 | |
| Social insurance taxes | 39 | 30 | 40 |
| Property tax | 9 | 10 | 15 |
| Land tax | 4 | 4 | 4 |
| Personal income tax | 7 | 7 | 7 |
| 6 | 5 | 7 | |
| \$ 169 | \$ 107 | \$ 151 |
that potentially expose the Group to concentrations of credit risk consist primarily of cash and trade accounts receivable.
banks. Management periodically reviews the creditworthiness of the banks in which it deposits cash.
not require collateral in respect of trade and other receivables, except when a customer applies for credit terms which are longer than normal. In this case, the Group requires bank guarantees or other collateral. The Group has developed standard credit terms and constantly monitors the status of accounts receivable collection and the creditworthiness of the customers.
customers. The Group has no practical ability to terminate the supply to these customers and negotiates with regional and municipal authorities the terms of recovery of these receivables.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 12 | \$ 8 | \$ 8 | |
| Financial instruments included in other non-current and current assets | |||
| 52 | 40 | 55 | |
| 35 | 37 | 49 | |
| 506 | 452 | 658 | |
| Loans receivable | 34 | 28 | 45 |
| 8 | 7 | 43 | |
| 1,157 | 1,375 | 1,086 | |
| \$ 1,804 | \$ 1,947 | \$ 1,944 |
Receivables from related parties in the table above do not include prepayments in the amount of \$Nil, \$Nil and \$11 million as of 31 December 2016, 2015 and 2014, respectively.
The ageing analysis of trade and other receivables, loans receivable and receivables from related parties at 31 December is presented in the table below.
| 2016 | 2015 | 2014 | |||||
|---|---|---|---|---|---|---|---|
| US\$ million | Gross amount | Impairment | Gross amount | Impairment | Gross amount | Impairment | |
| Not past due | \$ 408 | \$ (1) | \$ 385 | \$ – | \$ 537 | \$ – | |
| Past due | 187 | (46) | 150 | 266 | |||
| less than six months | 130 | (2) | 95 | 178 | |||
| between six months and one year | 7 | (2) | 9 | 46 | |||
| over one year | 50 | (42) | 46 | 42 | |||
| \$ 595 | \$ (47) | \$ 535 | \$ 803 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ (48) | |||
| Charge for the year | (1) | ||
| 5 | 5 | 14 | |
| Disposal of subsidiaries | 5 | 8 | 1 |
| Translation difference | (8) | 14 | 28 |
| \$ (47) |
The Group manages liquidity risk by maintaining adequate cash reserves and borrowing facilities, by continuously monitoring forecast and actual cash
developed standard payment periods in respect of trade accounts payable and monitors the timeliness of payments to its suppliers and contractors.
payments.
| US\$ million | On demand | Less than 3 months |
3 to 12 months |
1 to 2 years | 2 to 5 years | After 5 years |
Total |
|---|---|---|---|---|---|---|---|
| Fixed –rate debt | |||||||
| Loans and borrowings | |||||||
| Principal | \$ – | \$ – | \$ 26 | \$ 656 | \$ 2,763 | \$ 726 | \$ 4,171 |
| Interest | – | 74 | 250 | 295 | 563 | 28 | 1,210 |
| Finance lease liabilities | – | – | – | – | 1 | 5 | 6 |
| Financial instruments included in long-term liabilities | – | 17 | 5 | 19 | 58 | 19 | 118 |
| – | 91 | 281 | 970 | 3,385 | 778 | 5,505 | |
| Loans and borrowings | |||||||
| Principal | 142 | 12 | 114 | 196 | 893 | 312 | 1,669 |
| Interest | 1 | 25 | 74 | 91 | 154 | 21 | 366 |
| Finance lease liabilities | – | – | 1 | – | – | – | 1 |
| Total variable-rate debt | 143 | 37 | 189 | 287 | 1,047 | 333 | 2,036 |
| Non-interest bearing debt | |||||||
| Financial instruments included in other liabilities | 2 | – | – | 1 | 1 | 1 | 5 |
| Trade and other payables | 118 | 650 | 7 | – | – | – | 775 |
| Payables to related parties | 209 | 13 | – | – | – | – | 222 |
| Total non-interest bearing debt | 329 | 663 | 7 | 1 | 1 | 1 | 1,002 |
| \$ 472 | \$ 791 | \$ 477 | \$ 1,258 | \$ 4,433 | \$ 1,112 | \$ 8,543 |
| US\$ million | On demand | Less than 3 months |
3 to 12 months |
1 to 2 years | 2 to 5 years | After 5 years |
Total |
|---|---|---|---|---|---|---|---|
| Fixed –rate debt | |||||||
| Loans and borrowings | |||||||
| Principal | \$ – | \$ 4 | \$ 188 | \$ 498 | \$ 3,012 | \$ 780 | \$ 4,482 |
| Interest | – | 8 | 301 | 309 | 517 | 35 | 1,170 |
| Finance lease liabilities | – | – | – | – | 1 | 5 | 6 |
| Financial instruments included in long-term liabilities | – | 9 | 278 | 11 | 124 | 17 | 439 |
| – | 21 | 767 | 818 | 3,654 | 837 | 6,097 | |
| Loans and borrowings | |||||||
| Principal | 85 | 80 | 86 | 197 | 1,353 | 45 | 1,846 |
| Interest | – | 26 | 73 | 93 | 133 | 1 | 326 |
| Finance lease liabilities | – | – | 1 | 1 | – | – | 2 |
| Total variable-rate debt | 85 | 106 | 160 | 291 | 1,486 | 46 | 2,174 |
| Non-interest bearing debt | |||||||
| Financial instruments included in other liabilities | 3 | – | – | 2 | 1 | 1 | 7 |
| Trade and other payables | 152 | 502 | 5 | – | – | – | 659 |
| Payables to related parties | 133 | 9 | – | – | – | – | 142 |
| Total non-interest bearing debt | 288 | 511 | 5 | 2 | 1 | 1 | 808 |
| \$ 373 | \$ 638 | \$ 932 | \$ 1,111 | \$ 5,141 | \$ 884 | \$ 9,079 | |
| US\$ million | On demand | Less than 3 months |
3 to 12 months |
1 to 2 years | 2 to 5 years | After 5 years |
Total |
| Fixed –rate debt | |||||||
|---|---|---|---|---|---|---|---|
| Loans and borrowings | |||||||
| Principal | \$ – | \$ 73 | \$ 430 | \$ 410 | \$ 2,836 | \$ 1,032 | \$ 4,781 |
| Interest | – | 9 | 358 | 320 | 589 | 70 | 1,346 |
| Finance lease liabilities | – | – | – | – | – | 2 | 2 |
| Financial instruments included in long-term liabilities | – | 63 | 305 | 467 | 7 | 24 | 866 |
| – | 145 | 1,093 | 1,197 | 3,432 | 1,128 | 6,995 | |
| Loans and borrowings | |||||||
| Principal | 82 | 86 | 25 | 606 | 543 | 71 | 1,413 |
| Interest | – | 13 | 36 | 43 | 33 | 3 | 128 |
| Finance lease liabilities | – | – | 1 | 1 | 1 | – | 3 |
| Total variable-rate debt | 82 | 99 | 62 | 650 | 577 | 74 | 1,544 |
| Non-interest bearing debt | |||||||
| Financial instruments included in other liabilities | – | – | – | 1 | 2 | 2 | 5 |
| Trade and other payables | 174 | 615 | 42 | – | – | – | 831 |
| Payables to related parties | 78 | 29 | 1 | – | – | – | 108 |
| Total non-interest bearing debt | 252 | 644 | 43 | 1 | 2 | 2 | 944 |
| \$ 334 | \$ 888 | \$ 1,198 | \$ 1,848 | \$ 4,011 | \$ 1,204 | \$ 9,483 |
Payables to related parties in the tables above do not include advances received in the amount of \$4 million, \$1 million and \$Nil as of 31 December 2016, 2015 and 2014, respectively.
optimising the return on risk.
obligations.
constant.
In estimating reasonably possible changes the Group assessed the volatility of interest rates during the reporting periods.
| 2016 | 2015 | 2014 | ||||
|---|---|---|---|---|---|---|
| Basis points | Effect on PBT | Basis points | Effect on PBT | Basis points | Effect on PBT | |
| US\$ millions | US\$ millions | US\$ millions | ||||
| Liabilities denominated in US dollars | ||||||
| Decrease in LIBOR | (11) | \$ 1 | \$ 2 | \$ – | ||
| Increase in LIBOR | 11 | (1) | 50 | 2 | – | |
| Liabilities denominated in euro | ||||||
| (4) | – | – | – | |||
| 4 | \$ – | 25 | \$ – | 7 | \$ – | |
| Liabilities denominated in roubles | ||||||
| Decrease in Bank of Russia key rate | (200) | 6 | 13 | – | – | |
| Increase in Bank of Russia key rate | 700 | \$ (21) | 550 | – | \$ – |
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in currencies other than the functional currencies of partly secured from currency risks as foreign currency denominated sales are used to cover repayment of foreign currency denominated borrowings.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 1,242 | \$ 304 | ||
| (75) | |||
| 335 | 312 | 372 | |
| (116) | 119 | 109 | |
| (672) | |||
| (1) | |||
| 6 | 6 | 1 | |
| (4) | |||
| – | – | 10 | |
| (136) | |||
| 4 | 1 | 2 | |
| (161) | |||
| Sensitivity Analysis |
The following table demonstrates the sensitivity to reasonably possible changes in the respective currencies, with all other variables held constant, reporting periods.
| 2016 | 2015 | 2014 | |||||
|---|---|---|---|---|---|---|---|
| Change in exchange rate |
Effect on PBT |
Change in exchange rate |
Effect on PBT |
Change in exchange rate |
Effect on PBT |
||
| % | US\$ millions | % | US\$ millions | % | US\$ millions | ||
| (20.02) | (325) | 126 | |||||
| 20.02 | 198 | 40.00 | 3 | 28.74 | |||
| (20.68) | 16 | 60 | 65 | ||||
| 20.68 | (16) | 43.00 | 29.58 | ||||
| (22.38) | (75) | ||||||
| 22.38 | 75 | 35.00 | 109 | 28.37 | 105 | ||
| (9.16) | 10 | ||||||
| 9.16 | (11) | 12.50 | 14 | 6.23 | 7 | ||
| (9.16) | 62 | 30 | 29 | ||||
| 9.16 | (61) | 14.50 | 6.21 | ||||
| (0.65) | – | – | – | ||||
| 0.65 | – | 3.50 | – | 2.43 | – | ||
| (9.17) | (1) | – | |||||
| 9.17 | 1 | 12.50 | 1 | 6.84 | – | ||
| (21.23) | 1 | – | 4 | ||||
| 21.23 | (1) | 38.00 | 11.33 | ||||
| (19.62) | – | – | |||||
| 19.62 | – | 43.00 | – | 11.34 | 1 | ||
| (9.88) | 13 | 20 | 72 | ||||
| 9.88 | (13) | 67.00 | 28.90 | ||||
| (22.29) | (1) | – | |||||
| 22.29 | 1 | 50.00 | – | 39.93 | 1 | ||
| (12.13) | 20 | 31 | 26 | ||||
| 12.13 | (20) | 60.00 | 17.37 |
of currency risk on the fair value of these derivatives is disclosed below.
| 2016 | 2015 | 2014 | |||
|---|---|---|---|---|---|
| Change in exchange rate |
Effect on PBT |
Change in exchange rate |
Effect on PBT |
Change in exchange rate |
Effect on PBT |
| % | US\$ millions | % | US\$ millions | % | US\$ millions |
| (20.02) 20.02 |
65 (43) |
40 | 55 | 28.74 | 228 |
short-term loans receivable and payable and promissory notes, approximate their fair value.
| 2016 | 2015 | 2014 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| US\$ million | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Assets measured at fair value | |||||||||
| 3 | – | – | 5 | – | – | 17 | – | – | |
| Liabilities measured at fair value | |||||||||
| Derivatives not designated as hedging | |||||||||
| – | – | – | – | 274 | – | – | 713 | – | |
| – | 22 | – | – | 59 | – | – | – | – | |
| Contingent consideration payable for | |||||||||
| – | – | – | – | – | – | – | – | 2 |
During the reporting period, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
| 2016 | 2015 | 2014 | ||||
|---|---|---|---|---|---|---|
| US\$ million | Carrying amount | Fair value |
Carrying amount | Fair value |
Carrying amount | Fair value |
| \$ 390 | \$ 402 | \$ 397 | \$ 385 | \$ 254 | \$ 251 | |
| Long-term variable-rate bank loans | 1,516 | 1,528 | 1,680 | 1,564 | 1,235 | 1,059 |
| USD-denominated | ||||||
| 8.25% notes due 2015 | – | – | – | – | 139 | 140 |
| 7.40% notes due 2017 | – | – | 290 | 299 | 606 | 531 |
| 7.75% bonds due 2017 | 27 | 26 | 195 | 190 | 417 | 278 |
| 9.50% notes due 2018 | 126 | 137 | 354 | 379 | 507 | 471 |
| 6.75% notes due 2018 | 533 | 554 | 802 | 804 | 856 | 730 |
| 7.50% bonds due 2019 | 349 | 359 | 347 | 328 | 345 | 345 |
| 6.50% notes due 2020 | 1,010 | 1,066 | 1,009 | 955 | 1,008 | 801 |
| 8.25% notes due 2021 | 772 | 856 | 746 | 747 | – | – |
| 6.75% notes due 2022 | 515 | 544 | – | – | – | – |
| Rouble-denominated | ||||||
| 8.75% rouble bonds due 2015 | – | – | – | – | 71 | 70 |
| 9.95% rouble bonds due 2015 | – | – | – | – | 271 | 250 |
| 8.40% rouble bonds due 2016 | – | – | 167 | 165 | 358 | 299 |
| 12.95% rouble bonds due 2019 | 247 | 260 | 205 | 208 | – | – |
| 12.60% rouble bonds due 2021 | 255 | 269 | – | – | – | – |
| – | – | – | – | – | – | |
| \$ 5,740 | \$ 6,001 | \$ 6,192 | \$ 6,024 | \$ 6,067 | \$ 5,225 |
| 2016 | 2015 | 2014 |
|---|---|---|
| 3.7 – 6.4% | 4.1 – 9.8% | 8.9 – 14.7% |
| 1.8 – 4.0% | 1.8 – 6.2% | 1.9% |
| 11.03% | 12.77% | – |
Capital includes equity attributable to the equity holders of the parent entity. Revaluation surplus which is included in capital is not subject to capital management because of its nature.
performance indicators. There were no changes in the objectives, policies and processes during 2016.
The Group manages its capital structure and makes adjustments to it by the issue of new shares, dividend payments to shareholders, and the
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Liabilities for purchases of property, plant and equipment | \$ 71 | \$ 63 | \$ 45 |
| Loans provided in the form of payments by banks for property, plant and | |||
| equipment | 46 | – | – |
Operating Environment of the Group
risks. Steel consumption is affected by the cyclical nature of demand for steel products and the sensitivity of that demand to worldwide general economic conditions.
sanctions imposed on Russia caused the depreciation of national currencies, economic slowdown, deterioration of liquidity in the banking sector,
currently determinable.
Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has accrued tax liabilities based
amount of \$172 million.
The Group is involved in a number of social programmes aimed to support education, healthcare and social infrastructure development in towns
exposures requires an assessment of many factors, including changing laws and regulations, improvements in environmental technologies, the quality in remediation or settlement.
The Group has a number of environmental claims and proceedings which are at an early stage of investigation. Environmental provisions in relation to these proceedings that were recognised at 31 December 2016 amounted to \$12 million. Preliminary estimates available of the incremental costs indicate that such costs could be up to \$263 million. The Group has insurance agreements, which are expected to provide reimbursement of the
In addition, the Group has committed to various environmental protection programmes covering periods from 2017 to 2022, under which the Group programmes are estimated at \$119 million.
Legal Proceedings
The Group exercises judgement in measuring and recognising provisions and the exposure to contingent liabilities related to pending litigations or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of provision. These estimates are subject to change as new information becomes available, primarily with the support of internal specialists or with the
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| \$ 2 | \$ 2 | \$ 2 | |
| 2 | 3 | 5 | |
| Total assurance services | 4 | 5 | 7 |
| Services in connection with capital market transactions | – | – | 2 |
| Total other services | – | – | 2 |
| \$ 4 | \$ 5 | \$ 9 |
Financial information of subsidiaries that have material non-controlling interests is provided below.
| Country of | Non-controlling interests | ||||
|---|---|---|---|---|---|
| Name | incorporation | 2016 | 2015 | 2014 | |
| Raspadskaya | Russia | 18.05% | 18.05% | 18.05% | |
| Republic of | |||||
| – | – | 14.89% | |||
| 10.00% | 10.00% | 10.00% |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Raspadskaya | \$ 92 | \$ 56 | \$ 108 |
| – | – | 4 | |
| 98 | 101 | 98 | |
| Others | (4) | 8 | |
| 186 | 133 | 218 | |
| Raspadskaya | 23 | ||
| – | 1 | ||
| (3) | 3 | 9 | |
| Others | 7 | ||
| \$ 27 |
eliminations.
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Revenue | \$ 503 | \$ 420 | \$ 444 |
| Cost of revenue | (306) | ||
| 197 | 86 | 7 | |
| Operating costs | (67) | ||
| Impairment of assets | (17) | ||
| 77 | |||
| 190 | |||
| (31) | |||
| 159 | |||
| (33) | 44 | 77 | |
| \$ 126 | |||
| Other comprehensive income/(loss) | 90 | ||
| Total comprehensive income/(loss) | 216 | ||
| attributable to non-controlling interests | 1 | ||
| dividends paid to non-controlling interests | – | – | – |
EVRAZ Highveld Steel and Vanadium Limited
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Revenue | \$ – | \$ 145 | \$ 544 |
| Cost of revenue | – | (138) | |
| – | 7 | 5 | |
| Operating costs | – | (21) | |
| Impairment of assets | – | – | |
| – | (2) | ||
| – | (16) | ||
| – | 20 | ||
| – | 4 | ||
| – | – | 13 | |
| \$ – | \$ 4 | ||
| Other comprehensive income/(loss) | – | (1) | |
| Total comprehensive income/(loss) | – | 3 | |
| attributable to non-controlling interests | – | – | |
| dividends paid to non-controlling interests | – | – | – |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Revenue | \$ 384 | \$ 635 | \$ 922 |
| Cost of revenue | (391) | ||
| (7) | 70 | 154 | |
| Operating costs | (48) | ||
| Impairment of assets | – | – | – |
| – | – | – | |
| (55) | 18 | 105 | |
| 21 | 20 | 18 | |
| (34) | 38 | 123 | |
| 9 | |||
| \$ (25) | \$ 26 | \$ 86 | |
| Other comprehensive income/(loss) | (4) | 4 | |
| Total comprehensive income/(loss) | (29) | 30 | 76 |
| attributable to non-controlling interests | (3) | 3 | 8 |
| dividends paid to non-controlling interests | – | – | – |
Raspadskaya
| US\$ million | 2016 | 2014 | ||
|---|---|---|---|---|
| Property, plant and equipment | \$ 1,004 | \$ 883 | \$ 1,316 | |
| Other non-current assets | 30 | 51 | 32 | |
| Current assets | 655 | 279 | 117 | |
| Total assets | 1,689 | 1,213 | 1,465 | |
| Deferred income tax liabilities | 65 | 54 | 93 | |
| Non-current liabilities | 52 | 507 | 530 | |
| Current liabilities | 952 | 247 | 107 | |
| Total liabilities | 1,069 | 808 | 730 | |
| Total equity | 620 | 405 | 735 | |
| equity holders of parent | 528 | 348 | 627 | |
| non-controlling interests | 92 | 57 | 108 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ – | \$ – | \$ 80 |
| Other non-current assets | – | – | 30 |
| Current assets | – | – | 149 |
| Total assets | – | – | 259 |
| Deferred income tax liabilities | – | – | – |
| Non-current liabilities | – | – | 64 |
| Current liabilities | – | – | 169 |
| Total liabilities | – | – | 233 |
| Total equity | – | – | 26 |
| equity holders of parent | – | – | 22 |
| non-controlling interests | – | – | 4 |
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Property, plant and equipment | \$ 184 | \$ 214 | \$ 237 |
| Other non-current assets | 957 | 967 | 929 |
| Current assets | 117 | 125 | 186 |
| Total assets | 1,258 | 1,306 | 1,352 |
| Deferred income tax liabilities | 30 | 42 | 85 |
| Non-current liabilities | 81 | 81 | 86 |
| Current liabilities | 166 | 173 | 201 |
| Total liabilities | 277 | 296 | 372 |
| Total equity | 981 | 1,010 | 980 |
| equity holders of parent | 883 | 909 | 882 |
| non-controlling interests | 98 | 101 | 98 |
Raspadskaya
| US\$ million | 2016 2015 |
2014 | ||
|---|---|---|---|---|
| Operating activities | \$ 176 | \$ 107 | \$ 120 | |
| Investing activities | (100) | |||
| Financing activities | (89) |
EVRAZ Highveld Steel and Vanadium Limited
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Operating activities | \$ – | \$ – | |
| Investing activities | – | ||
| Financing activities | – | 7 |
New CF&I
| US\$ million | 2016 | 2015 | 2014 |
|---|---|---|---|
| Operating activities | \$ 5 | \$ 101 | \$ 154 |
| Investing activities | (5) | ||
| Financing activities | – | – | – |
| Country of | effective ownership |
||||
|---|---|---|---|---|---|
| incorporation | Name | Relationship | in 2016, % | Registered address | Notes |
| Hochvanadium Handels GmbH | indirect subsidiary | 85.11% | Renngasse 1, Freyung 1013 Wien | Note 4, Deconsolidation of subsidiaries Note 4, |
|
| Deconsolidation of | |||||
| indirect subsidiary | 85.11% | Renngasse 1, Freyung 1013 Wien | subsidiaries | ||
| British Virgin Islands |
Cassar World Investments Corporation | indirect subsidiary | 100.00% | Geneva Place, Waterfront Drive, PO Box 3469, Road Town, Tortola |
liquidated |
| Canada | Camrose Pipe Corporation | indirect subsidiary | 100.00% | 8735 Harborgate Portland, OR 97203 | |
| Canada | Canadian National Steel Corporation | indirect subsidiary | 100.00% | ||
| Canada | indirect subsidiary | 100.00% | Ontario M5H 3S1 | ||
| Canada | indirect subsidiary | 100.00% | Suite 5800 Toronto, ON. M5H 3S1 |
||
| Canada | Evraz Wasco Pipe Protection Corporation | indirect subsidiary | 51.00% | 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 |
|
| Canada | Genalta Recycling Inc. | joint venture | 50.00% | ||
| Canada | General Scrap Partnership | indirect subsidiary | 100.00% | 308 Highway 2 East Minot, ND 58702 | |
| Canada | Genlandco Inc. | indirect subsidiary | 100.00% | 360 Main Street 30th FL Winnipeg, Manitoba R3C 4G1 |
|
| Canada | joint venture | 50.00% | |||
| Canada | indirect subsidiary | 100.00% | 30th Floor, 360 Main Street, Winnipeg, MB, R3C 4G1 |
||
| Canada | joint venture | 50.00% | Suite 3000 | ||
| Canada | New Gensubco Inc. | indirect subsidiary | 100.00% | 30th Floor, 360 Main Street, Winnipeg, MB, R3C 4G1 |
|
| Canada | indirect subsidiary | 100.00% | 387 Broadway Winnipeg MB R3C 0V5 |
||
| China | Delong Holdings Limited | investment | 15.04% | 55 Market Street Level 10 Singapore 048941 |
|
| Cyprus | indirect subsidiary | 60.02% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
||
| Cyprus | Crownwing Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | East Metals Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Laybridge Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Malvero | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Mastercroft Finance Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Mastercroft Mining Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | associate | 42.61% | 4 Themistokli Dervi, Julia House, 1066, Nicosia |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| Cyprus | Sinano Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Steeltrade Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Streamcore Limited | joint venture | 50.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Tuva Railway Limited | indirect subsidiary | 60.02% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | indirect subsidiary | 100.00% | 3021, Limassol | ||
| Cyprus | Vanston Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Cyprus | Velcast Limited | indirect subsidiary | 100.00% | 3 Themistokli Dervi, Julia House, 1066, Nicosia |
|
| Czech Republic | Nikom, a.s. | indirect subsidiary | 100.00% | Czech Republic, Mnisek pod Brdy, Prazska 900, 25210 |
|
| Italy | Evraz Palini e Bertoli S.r.l | indirect subsidiary | 100.00% | via E. Fermi 28, 33058 San Giorgio di | |
| Evraz Caspian Steel | indirect subsidiary | 65.00% | 110000 | ||
| indirect subsidiary | 100.00% | ||||
| Luxembourg | Corber Enterprises S.à r.l | indirect subsidiary | 100.00% | 13, avenue Monterey, L2163, Luxembourg liquidated | |
| Luxembourg | direct subsidiary | 100.00% | 13, avenue Monterey, L2163, Luxembourg liquidated | ||
| Luxembourg | direct subsidiary | 100.00% | 13, avenue Monterey, L2163, Luxembourg | ||
| Luxembourg | Mastercroft S.à r.l | indirect subsidiary | 100.00% | 13, avenue Monterey, L2163, Luxembourg liquidated | |
| Malta | indirect subsidiary | 100.00% | 198 Old Bakery Street, Valleta VLT 1455 | liquidated | |
| Malta | indirect subsidiary | 100.00% | 198 Old Bakery Street, Valleta VLT 1455 | liquidated | |
| Malta | Mae Dake Maritime Limited | indirect subsidiary | 100.00% | 198 Old Bakery Street, Valleta VLT 1455 | liquidated |
| Mexico | indirect subsidiary | 100.00% | Pedro Garza Carcia, Nuevo Leon, 66269 | ||
| Netherlands | ECS Holdings Europe B.V. | indirect subsidiary | 65.00% | ||
| Netherlands | Palmrose B.V. | indirect subsidiary | 100.00% | ||
| Old Pretoria Road, Portion 93 of the Farm Schoongezicht 308 JS eMalahleni |
Note 4, Deconsolidation of |
||||
| Evraz Highveld Steel and Vanadium Limited | indirect subsidiary | 85.11% | subsidiaries | ||
| indirect subsidiary | 59.07% | ||||
| indirect subsidiary | 59.07% | ||||
| indirect subsidiary | 59.07% | ||||
| indirect subsidiary | 62.98% | Old Pretoria Road, Portion 93 of the Farm Schoongezicht 308 JS eMalahleni |
Note 4, Deconsolidation of subsidiaries |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| Note 4, | |||||
| Mapochs Mine Community Trust | indirect subsidiary | - | Portion 93 of the farm Schoongezicht No.308 JS, eMalahleni |
Deconsolidation of subsidiaries |
|
| Russia | indirect subsidiary | 100.00% | 654007 | ||
| Russia | indirect subsidiary | 100.00% | 654018 | ||
| Russia | indirect subsidiary | 100.00% | 1, ul. Metallurgov, Nizhny Tagil, 622025 | merged | |
| 20, Silikatnaya, Novokuznetsk, | |||||
| Russia | indirect subsidiary | 100.00% | 2, ul. Promstroevskaya, Novokuznetsk, | ||
| Russia | indirect subsidiary | 100.00% | |||
| Russia | indirect subsidiary | 51.00% | Sverdlovskaya obl., 624350 | ||
| 64, ul. Sumskaya, Belgorod, | |||||
| Russia | Beltrans | indirect subsidiary | 100.00% | Belgorodskaya obl., 308015 | merged |
| Russia | Blagotvoritelniy fond Evraza - Sibir | indirect subsidiary | - | 1, ul. Ploshad Pobedy, Novokuznetsk, | |
| Russia | indirect subsidiary | - | Sverdlovskaya obl., 622001 | ||
| Russia | Blagotvoritelniy fond Veteran Evraz Sibir | indirect subsidiary | - | liquidated | |
| Russia | Briyanskmetallresursy | indirect subsidiary | 99.96% | 14, ul. Staleliteinaya, Bryansk, 241035 | |
| Russia | indirect subsidiary | - | 1, ul., Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025 |
||
| 1, ul., Metallurgov, Nizhny Tagil, | |||||
| Russia | indirect subsidiary | - | Sverdlovskaya obl., 622025 | ||
| Russia | Centr Servisnykh Resheniy | indirect subsidiary | 100.00% | 1, ul. Rudokoprovaya, Novokuznetsk, | |
| Centralnaya Obogatitelnaya Fabrika | 12, Tupik Strelochny, Novokuznetsk, | ||||
| Russia | indirect subsidiary | 92.10% | |||
| Russia | Centralnaya Obogatitelnaya Fabrika | indirect subsidiary | 100.00% | 16, Shosse Severnoe, Novokuznetsk, | |
| Russia | Consortium Tuvinskie dorogi | indirect subsidiary | 60.02% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | DakService | indirect subsidiary | 100.00% | Rostovskaya obl., 347913 | merged |
| Russia | DaksSoft | indirect subsidiary | 100.00% | Rostovskaya obl., 347913 | liquidated |
| Russia | indirect subsidiary | 87.20% | |||
| Russia | Evraz Consolidated West-Siberian metallurgical Plant |
indirect subsidiary | 100.00% | 654043 | |
| Russia | Processing Plant | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624350 | |
| Russia | Evraz Nakhodka Trade Sea Port | indirect subsidiary | 100.00% | 22, ul. Portovaya, Nakhodka, Primorsky krai, 692904 |
|
| 1, ul., Metallurgov, Nizhny Tagil, | |||||
| Russia | Evraz Nizhny Tagil Metallurgical Plant | indirect subsidiary | 100.00% | Sverdlovskaya obl., 622025 |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| Russia | indirect subsidiary | 100.00% | 1, ul. Przhevalskogo, Tula, 300016 | ||
| Russia | indirect subsidiary | 100.00% | |||
| Russia | Evrazenergotrans | indirect subsidiary | 100.00% | 4, ul. Rudokoprovaya, Novokuznetsk, | |
| Russia | EvrazHolding LLC | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | EvrazHolding-Finance | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | EvrazMetall Centr | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | merged |
| Russia | EvrazMetall Chernozemie | indirect subsidiary | 100.00% | 5, Montazhny proezd, Voronezh, 394028 | merged |
| Russia | EvrazMetall Dalniy Vostok | indirect subsidiary | 100.00% | merged | |
| Russia | indirect subsidiary | 100.00% | 196641 | merged | |
| Russia | EvrazMetall Sibir | indirect subsidiary | 100.00% | 30, Shosse Severnoe, Novokuznetsk, | |
| Russia | indirect subsidiary | 100.00% | Sverdlovskaya obl., 620075 | merged | |
| Russia | EvrazMetall Volga | indirect subsidiary | 100.00% | 4, ul. Novikova-Priboya, Nizhny Novgorod, 603058 |
merged |
| Russia | EvrazMetallService | indirect subsidiary | 100.00% | 30, Shosse Severnoe, Novokuznetsk, | merged |
| Russia | Evrazruda | indirect subsidiary | 100.00% | obl., 652990 | |
| Russia | Evraz-Service | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Evraztekhnika | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Gurievsky rudnik | indirect subsidiary | 100.00% | obl., 652780 | |
| Russia | Industrialnaya Vostochno-Evropeiskaya company |
indirect subsidiary | 100.00% | Rostovskaya obl., 347913 | |
| Russia | Information systems | indirect subsidiary | 100.00% | 22, ul. Portovaya, Nakhodka, Primorsky krai, 692904 |
liquidated |
| Russia | Inprom | indirect subsidiary | 100.00% | Rostovskaya obl., 347942 | |
| Russia | Issledovatelsky centr | associate | 20.00% | Sverdlovskaya obl., 624351 | sold |
| Russia | company | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624350 | |
| Russia | indirect subsidiary | 90.947% | sold | ||
| Russia | indirect subsidiary | - | 20, Prospect Metallurgov, Novokuznetsk, | ||
| Russia | indirect subsidiary | 94.50% | 18, ul. Promyshlennaya, Novokuznetsk, | ||
| Russia | indirect subsidiary | 100.00% | 4, ul. Rudokoprovaya, Novokuznetsk, |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| Russia | Mezhdurechensk | indirect subsidiary | 100.00% | ||
| Russia | Medsanchast Vanady | indirect subsidiary | 100.00% | obl., 624350 | |
| Russia | Mekona | indirect subsidiary | 100.00% | 22, ul. Portovaya, Nakhodka, Promorsky krai |
|
| Russia | indirect subsidiary | 100.00% | 4, ul. Rudokoprovaya, Novokuznetsk, | ||
| Russia | Metalloservisnie centry | indirect subsidiary | 100.00% | Rostovskaya obl., 347913 | |
| Russia | Metallurg-Forum | indirect subsidiary | 75.00% | 1, ul., Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025 |
|
| Russia | Metpromstroy | indirect subsidiary | 100.00% | 5, p. Metallostroy, St. Petersburg, 196641 |
merged |
| Russia | Mezhegeyugol Coal Company | indirect subsidiary | 60.02% | Republic, 667000 | |
| Russia | Mezhegeyugol LLC | indirect subsidiary | 60.02% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | indirect subsidiary | 100.00% | |||
| Russia | indirect subsidiary | 100.00% | |||
| Russia | Mine Esaulskaya | indirect subsidiary | 100.00% | ||
| Russia | indirect subsidiary | 100.00% | 4, ul. Nevskogo, Novokuznetsk, | ||
| Russia | indirect subsidiary | 100.00% | |||
| Russia | Mine Osinnikovskaya | indirect subsidiary | 100.00% | 3, ul. Shakhtovaya, Osinniki, | |
| Russia | indirect subsidiary | 100.00% | |||
| Russia | joint venture | 51.00% | 4, Prospect Geologov, Neryungri, Republic | ||
| Russia | Montajnik Raspadskoy | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Mordovmetallotorg | indirect subsidiary | 99.90% | Respublica Mordovia, 430006 | |
| Russia | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | ||
| Russia | Novokuznetskmetallopttorg | associate | 48.51% | 16, ul. Chaikinoi, Novokuznetsk, | |
| Russia | Nizhny Tagil Telecompany Telecon | indirect subsidiary | 100.00% | 74, ul. Industrialnaya, Nizhny Tagil, Sverdlovskaya obl., 622025 |
|
| Russia | Obogatitelnaya Fabrika Raspadskaya | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Ohothichie hozyaistvo | indirect subsidiary | - | 1, ul. Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025 |
|
| Russia | Olzherasskoye shakhtoprokhodcheskoye upravlenie |
indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Osinnikovsky remontno-mekhanichesky zavod indirect subsidiary | 84.43% | obl., 652810 | ||
| Russia | Penzametalltorg | indirect subsidiary | 100.00% | 100, ul. Baidukova, Penza, 440015 |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| 4, ul. Nevskogo, Novokuznetsk, | |||||
| Russia | Promuglepoject | indirect subsidiary | 100.00% | ||
| Russia | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624356 | ||
| Russia | Raspadskaya | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Raspadskaya logisticheskaya company | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Raspadskaya ugolnaya company | indirect subsidiary | 81.95% | ||
| Russia | Raspadskaya-Energo | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | ||
| Russia | Razrez Raspadskiy | indirect subsidiary | 81.95% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Regional Media Company | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Regionalniy Centr podgotovki personala Evraz-Sibir |
indirect subsidiary | - | 4, ul. Nevskogo, Novokuznetsk, | |
| Russia | Rembytcomplect | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624350 | |
| Russia | Remontno-stroitelny complex | indirect subsidiary | 100.00% | 1, ul. Metallurgov, Nizhny Tagil, 622025 | merged |
| Russia | Salda Energo | indirect subsidiary | 100.00% | 2, ul. Engels, Nizhnya Salda, Sverdlovskaya obl. |
merged |
| Russia | Samarskiy mekhanicheskiy zavod | indirect subsidiary | 100.00% | ||
| Russia | indirect subsidiary | - | Lenevka, Prigorodny raion, Sverdlovskaya obl., 622911 |
||
| Russia | Sibirskaya registratsionnaya company | investment | 10.06% | 57, Prospect Stroiteley, Novokuznetsk, | |
| Russia | joint venture | 50.00% | |||
| Russia | Sibmetinvest | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Specializirovannoye Shakhtomontazhno naladochnoye upravlenie |
indirect subsidiary | 79.14% | ||
| Russia | indirect subsidiary | - | 36, Gvardeisky bulvar, Nizhny Tagil, 622005 |
||
| Russia | Tagilteplosbyt | indirect subsidiary | 100.00% | 67, Prospect Lenina, Nizhny Tagil, Sverdlovskaya obl., 622034 |
|
| Russia | Tomusinskoye pogruzochno-transportnoye upravlenie |
indirect subsidiary | 48.01% | 106, ul. Mira, Mezhdurechensk, | |
| Russia | Torfagregat | indirect subsidiary | 100.00% | 1B, ul. Poselok Mekhzavoda, Ryazan, 390007 |
|
| Russia | Trade Company EvrazHolding | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Trade House EvrazHolding | indirect subsidiary | 100.00% | 4, ul. Belovezhskaya, Moscow, 121353 | |
| Russia | Tulametallopttorg | indirect subsidiary | 100.00% | ||
| Russia | TV-Most | indirect subsidiary | 100.00% | ||
| 35, ul. Ordzhonikidze, Novokuznetsk, | |||||
| Russia | TVN | indirect subsidiary | 100.00% |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| Russia | indirect subsidiary | 99.37% | 432072 | ||
| Russia | indirect subsidiary | 100.00% | 63, Prospect Octyabrsky, Novokuznetsk, | ||
| Russia | indirect subsidiary | 100.00% | |||
| Russia | remontu gornoshakhtnogo oborudovaniya | indirect subsidiary | 100.00% | obl., 652810 | |
| Russia | Vanadyservice | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624350 | |
| Russia | Vanady-transport | indirect subsidiary | 100.00% | Sverdlovskaya obl., 624350 | |
| Russia | Vladimirmetallopttorg | indirect subsidiary | 95.63% | 57, ul. P. Osipenko, Vladimir, 600009 | |
| Russia | Vtorresurspererabotka | joint venture | 50.00% | ||
| Russia | upravlenie | indirect subsidiary | 100.00% | ||
| Russia | Yuzhny Stan | indirect subsidiary | 100.00% | Rostovskaya obl., 346550 | |
| Russia | associate | 42.61% | Severny Promuzel, Irkutsk, 664053 | ||
| Russia | associate | 42.61% | Severny promuzel, Irkutsk, 664053 | ||
| Russia | indirect subsidiary | 100.00% | 654043 | ||
| Russia | associate | 50.00% | 1, ul., Metallurgov, Nizhny Tagil, Sverdlovskaya obl., 622025 |
||
| Switzerland | indirect subsidiary | 100.00% | |||
| Switzerland | indirect subsidiary | 100.00% | |||
| Bon Life | indirect subsidiary | 97.73% | 26, ul. Starokazatskaya, Dnepr, Dnepropetrovskaya obl., 49000 |
||
| Evraz Dneprovsk Metallurgical Plant | indirect subsidiary | 97.73% | 3, ul. Mayakovskogo, Dnepr, Dnepropetrovskaya obl., 49064 |
||
| Evraz Sukha Balka | indirect subsidiary | 99.4193% | Dnepropetrovskaya obl., 50029 | ||
| indirect subsidiary | 100.00% | Dnepropetrovskaya obl., 49064 | |||
| Evraz Yuzhkoks | indirect subsidiary | 94.96% | Dnepropetrovskaya obl., 51909 | ||
| indirect subsidiary | 100.00% | 3, ul. Mayakovskogo, Dnepr, Dnepropetrovskaya obl., 49064 |
|||
| indirect subsidiary | 100.00% | ||||
| indirect subsidiary | 99.42% | Dnepropetrovskaya obl., 49064 | |||
| indirect subsidiary | 99.90% | 3, ul. Mayakovskogo, Dnepr, Dnepropetrovskaya obl., 49064 |
| Country of incorporation |
Name | Relationship | effective ownership in 2016, % |
Registered address | Notes |
|---|---|---|---|---|---|
| 20-22 Bedford Row | |||||
| London England |
|||||
| indirect subsidiary | 100.00% | WC1R 4JS | |||
| Viscaria 2 Limited | indirect subsidiary | 100.00% | 20 – 22 Bedford Row, London WC1R 4JS | ||
| indirect subsidiary | 90.00% | ||||
| Colorado and Wyoming Railway Company | indirect subsidiary | 90.00% | 2100 S. Freeway Pueblo, CO 81004 | ||
| East Metals Services Inc. | indirect subsidiary | 100.00% | 200 E. Randolph Drive Suite 7800 Chicago, IL 60601 |
||
| Evraz Claymont Steel, Inc. | indirect subsidiary | 100.00% | 4001 Philadelphia Pike, Claymont, Delaware 19703 |
||
| indirect subsidiary | 100.00% | 200 E. Randolph Drive Suite 7800 Chicago, IL 60601 |
|||
| Evraz Stratcor, Inc. | indirect subsidiary | 100.00% | 71901 | ||
| 200 E. Randolph Drive Suite 7800 | |||||
| indirect subsidiary | 100.00% | Chicago, IL 60601 | |||
| Fremont County Irrigating Ditch Co. | investment | 13.80% | 113 W. 5th Street Florence, CO 81226 | ||
| General Scrap Inc. | indirect subsidiary | 100.00% | 3101 Valley Street Minot, ND 58702 |
||
| indirect subsidiary | 90.00% | ||||
| Oregon Ferroalloy Partners | indirect subsidiary | 60.00% | 14400 Rivergate Blvd. Portland, OR 97203 |
||
| Oregon Steel Mills Processing Inc. | indirect subsidiary | 100.00% | 200 East Randolph Drive, #7800 Chicago, IL 60601 |
||
| OSM Distribution Inc. | indirect subsidiary | 100.00% | 200 E. Randolph Drive Suite 7800 Chicago, IL 60601 |
||
| Strategic Minerals Corporation | indirect subsidiary | 78.76% | 71901 | ||
| indirect subsidiary | 57.59% | 113 W. 5th Street Florence, CO 81226 | |||
| indirect subsidiary | 78.76% | 4285 Malvern Road, Hot Springs, |
(IN MILLIONS OF US DOLLARS)
| 31 December | ||||
|---|---|---|---|---|
| Notes | 2016 | 2015 | ||
| General and administrative expenses | \$ (7) | |||
| Operating income | 7 | 11 | 6 | |
| Impairment of investments | 3 | (21) | ||
| 3 | (4) | 9 | ||
| Interest expense | 3,7 | (14) | ||
| Dividend income | 8 | – | 350 | |
| 4,9 | (39) | 2 | ||
| (74) | 211 | |||
| Total comprehensive income/(loss) | \$ (74) | \$ 211 |
(IN MILLIONS OF US DOLLARS)
| 31 December | ||||
|---|---|---|---|---|
| Notes | 2016 | 2015 | ||
| ASSETS | ||||
| Non–current assets | ||||
| Investments in subsidiaries | 3 | \$ 3,165 | \$ 2,880 | |
| Investments in joint ventures | 3 | 18 | 40 | |
| Receivables from related parties | 7 | 18 | 24 | |
| 3,201 | 2,944 | |||
| Current assets | ||||
| Receivables from related parties | 7 | 14 | 12 | |
| Cash and cash equivalents | 2 | 16 | ||
| 16 | 28 | |||
| TOTAL ASSETS | 3,217 | 2,972 | ||
| EQUITY AND LIABILITIES | ||||
| Capital and reserves | ||||
| Issued capital | 5 | 1,507 | 1,507 | |
| Treasury shares | 5 | (270) | ||
| Reorganisation reserve | 3,5 | (584) | ||
| Merger reserve | 5 | 127 | 127 | |
| Share-based payments | 6 | 117 | 101 | |
| 1,958 | 2,067 | |||
| 2,855 | 2,913 | |||
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Trade and other payables | 3,9 | 41 | 20 | |
| Loan payable to related parties | 7 | 274 | – | |
| Financial guarantee liabilities | 7 | 18 | 21 | |
| 333 | 41 | |||
| Current liabilities | ||||
| Trade and other payables | 3,9 | 17 | 8 | |
| Loan payable to related parties | 7 | 3 | – | |
| Financial guarantee liabilities | 7 | 9 | 10 | |
| 29 | 18 | |||
| TOTAL LIABILITIES | 362 | 59 | ||
| TOTAL EQUITY AND LIABILITIES | \$ 3,217 | \$ 2,972 |
The Financial Statements on pages 246 to 255 were approved by the Board of Directors on 28 February 2017 and signed on its behalf by
(IN MILLIONS OF US DOLLARS)
| Notes | 2016 | 2015 | |
|---|---|---|---|
| \$ (74) | \$ 211 | ||
| Operating income | 7 | (11) | |
| Impairment of investments | 3 | 21 | 145 |
| 3 | 4 | ||
| Interest expense | 3,7 | 14 | 3 |
| 9 | 39 | ||
| Dividend income | 8 | – | |
| (7) | |||
| Receivables from related parties | 7 | 11 | 1 |
| Trade and other payables | 9 | (8) (4) |
– |
| Investments in subsidiaries | 3 | (300) | |
| 4 | – | 8 | |
| Loans issued to related parties | 7 | – | |
| Proceeds from repayment of loans issued to related parties | 7 | – | 16 |
| Dividends received | 8 | – | 350 |
| Return of funds by subsidiaries | 3 | 32 | 60 |
| (268) | 330 | ||
| Purchase of treasury shares | 5 | – | |
| Proceeds from loans provided by related parties | 7 | 305 | – |
| Repayment of loans provided by related parties, including interest | 7 | (39) | – |
| Payments for investments on deferred terms, including interest | 3 | (8) | |
| 258 | |||
| Net decrease in cash and cash equivalents | (14) | ||
| Cash and cash equivalents at the beginning of the year | 16 | 34 | |
| Cash and cash equivalents at the end of the year | \$ 2 | \$ 16 | |
| Interest paid | (8) |
Notes Issued capital Treasury shares Reorganisation reserve Merger reserve Sharebased payments Accumulated Total At 31 December 2014 \$ 1,507 \$ – \$ 57 \$ 81 \$ 1,960 \$ 3,021 – – – – – 211 211 Reversal of impairment of the investment in Corber 3 – – – 70 – – Share-based payments 6 – – – – 20 – 20 Purchase of treasury shares 5 – – – – Transfer of treasury shares to participants of the Incentive Plans 5 – 31 – – – – At 31 December 2015 \$ 1,507 \$ (305) \$ (584) \$ 127 \$ 101 \$ 2,067 \$ 2,913 – – – – – (74) (74) Share-based payments 6 – – – – 16 – 16 Transfer of treasury shares to participants of the Incentive Plans 5 – 35 – – – (35) – At 31 December 2016 \$ 1,507 \$ (270) \$ (584) \$ 127 \$ 117 \$ 1,958 \$ 2,855
th
iron ore mining. In addition, the Group produces vanadium products. The Group is one of the largest steel producers globally.
the rate on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange at the
Investments in subsidiaries, associates or joint ventures are initially recorded at acquisition cost. Write–downs are recorded if, in the opinion of the management, there is any impairment in value.
less than 12 months from the end of the reporting period or unless they will need to be sold to raise operating capital, in which case they are included in component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the statement of operations. Reversals of impairment losses in respect of equity instruments are not value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the statement of operations.
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
recognised as interest expense over the period of the borrowings.
the obligation. Where the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
Financial guarantee liabilities issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs receivables from related parties. Subsequently, the liability is amortised over the lives of the guarantees through the statement of comprehensive income, unless it is considered probable that a guarantee will be called, in which case it is measured at the value of the guaranteed amount payable, if higher.
| Ownership interest | Cost, net of impairment US\$ million |
|||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Subsidiaries | ||||
| 100% | 100% | 3,165 | 2,849 | |
| – | 100% | – | 31 | |
| 3,165 | 2,880 | |||
| OJSC Mining and Metallurgical Company Timir | 51.00001% | 51.00001% | 18 | 40 |
| \$US million | Evraz Group S.A. | Development S.A. | Corber | Timir | Total |
|---|---|---|---|---|---|
| 31 December 2014 | \$ 2,250 | \$ 254 | \$ 421 | \$ 92 | \$ 3,017 |
| 88 | – | – | – | 88 | |
| Reduction of investments | – | – | – | ||
| Share-based compensations | 20 | – | – | – | 20 |
| – | 70 | ||||
| Sale of Corber investment | 491 | – | – | – | |
| 31 December 2015 | \$ 2,849 | \$ 31 | \$ – | \$ 40 | \$ 2,920 |
| 300 | – | – | – | 300 | |
| Share-based compensations | 16 | – | – | – | 16 |
| Liquidation of investments | – | – | – | ||
| – | 1 | – | |||
| 31 December 2016 | \$ 3,165 | \$ – | \$ – | \$ 18 | \$ 3,183 |
Evraz Group S.A.
and \$491 million in the form of the ownership interest in Corber.
respectively.
In 2015, EGD decreased the share capital and returned \$60 million to the Company in cash.
driver that led to impairment was the change in expectations of long-term prices for coal.
and its carrying value before liquidation.
In company Raspadskaya, for \$964 million. In 2014, the investment was impaired by \$543 million recognised in the statement of comprehensive income and transferred out of the merger reserve.
The value of the share in Corber was assessed based on the value-in-use calculation and the Company recognised a reversal of impairment amounting to \$70 million.
In 2016 and 2015 the Company recognised \$3 million and \$3 million within interest expense, respectively, representing interest charges on the postponed installments.
In 2016 and 2015, the Company recognised \$4 million foreign exchange losses and \$9 million of foreign exchange gains, respectively, on liabilities for Timir.
\$28 million, respectively.
drivers that led to impairment were the decrease in the expected long-term prices for iron ore, the increase in the amount of the required capital expenditures to maintain the production at the budgeted capacities and the postponement of the start of production for 2 years.
statements.
\$8 million in cash. The bonds were purchased in 2014 for \$6 million. The gain of \$2 million was recognised in the statement of comprehensive
Share Capital
| 31 December | |||||
|---|---|---|---|---|---|
| Number of shares | 2016 | 2015 | |||
| Ordinary shares of \$1 each, issued and fully paid | 1,506,527,294 | 1,506,527,294 |
Buy-back of shares
On 31 March 2015, the Board resolved to announce a return of capital to be effected by a tender offer to shareholders at \$3.10 per share in the
The merger reserve arose in 2013 in connection with the purchase of 50% in Corber. Impairments of the carrying value of this investment were transferred to the merger reserve.
does not meet the criteria for qualifying consideration. The balance of the merger reserve will be presented as a separate component of equity in the
The Company have not declared dividends for the years 2016 and 2015.
| \$US million | 2016 | 2015 |
|---|---|---|
| 1,958 | 2,067 | |
| Reorganisation reserve | (584) | |
| 31 December | 1,374 | 1,483 |
be gifted shares of the Company.
In 2016 and 2015, the Company recognised \$16 million and \$20 million, respectively, share-based compensation expense as a cost of investment
Related parties of the Company include its direct and indirect subsidiaries, associates and joint venture partners, key management personnel and
per annum and matures in June 2018. During 2016 the Company repaid an amount of \$32 million. In addition, the Company received a loan of
In 2016, the Company received loans of \$200 million from Evrazholding Finance, an indirect subsidiary of the Company. The loans bear interest repaid.
the period from 2015 to 2023. The Company earns guarantee fees in respect of these guaranties and in 2016 it accrued \$9 million of such income
Finance Limited, both indirect subsidiaries of the Company, and \$1 million of guarantee fees for the issued guaranties to several banks for liabilities
under a long-term take-or-pay supply contract of a former indirect subsidiary of the Company.
| Stock performance indicators | |
|---|---|
| and shareholder information 258 | |
| performance measures 260 | |
| 262 | |
| 263 | |
| QR codes to additional information 266 | |
| Contact details 266 |
The issued share capital of EVRAZ plc ("the Company") is 1,506,527,294 ordinary shares December 2016, the current number of shares outstanding is 1,419,512,128. The Company holds 87,015,1661 ordinary shares in treasury. to the ordinary shares of the Company is therefore 1,419,512,128.
shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company's ordinary shares under the FCA's Disclosure and Transparency Rules.
| EVR LN |
|---|
| SETS |
| MAINMARKET |
| Premium Equity Commercial Companies |
| FTSE All-Share,FTSE 350 Low Yield,FTSE 250,FTSE All-Share (ex IT),FTSE 350 (ex IT), FTSE MID 250 (ex IT),FTSE 350 |
| Industrial Metals & Mining |
| Iron & Steel |
| GB |
| STMM |
| Regulated Market |
| B71N6K8 |
| GB00B71N6K86 |
1
Shareholder structure
%
31.03
21.38
10.68
5.90
5.84
3.09
1 2 3 4
a discount, or offers of free reports about the Company. These are typically from shareholders, offering to sell them what often turns out to be worthless or high risk shares. These operations are commonly known as
Details of any share dealing facilities that the company endorses will be included in Company mailings.
primary means of communication with its communications may be sent or supplied in that manner in accordance with the Companies Act 2006.
Electronic communications allow shareholders to access information instantly as well as helping EVRAZ reduce its costs and its impact www.investorcentre.co.uk.
any time by contacting the Company's registrar, Computershare.
Free Cash Flow represents EBITDA, net of noncash items, less changes in working capital, on early repurchase of bonds and realised gain/(losses) on interest payments under swap contracts, interest income and debt issue costs, less capital expenditure, including recorded in net of cash acquired, proceeds from sale of transaction costs, less purchases of treasury
Free Cash Flow is not a measure under IFRS calculation of Free Cash Flow may be different from the calculation used by other companies and therefore comparability may be limited.
from operations adjusted for social and social infrastructure maintenance expenses, impairment plant and equipment and intangible assets, foreign exchange gains/(losses) and depreciation, depletion and amortisation expense.
of segment expense and EBITDA to make these indicators more comparable with the Russian steel peers. Starting from the 2015 expense does not include social and social infrastructure maintenance expenses, and result, the Group restated EBITDA based on both IFRS and management accounts for the years ended 31 December 2014 and 2013.
on page 173
Cash and short-term bank deposits is not a measure under IFRS and should EVRAZ' calculation of cash and short-term bank deposits may be different from the calculation used by other companies and therefore comparability may be limited.
loans and borrowings plus unpaid interest, effect of cross-currency swaps on principal of rouble-denominated notes. Total debt is not a measure under IFRS and should not calculation of total debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation is different from that used
| 31 December 2016 | 31 December 2015 | Change | Change, % | |
|---|---|---|---|---|
| 1,157 | 1,375 | (218) | (16) | |
| Cash of disposals | 2 | - | 2 | n/a |
| Collateral under swaps | - | - | - | - |
| Cash and short-term bank deposits |
1,159 | 1,375 | (216) | (16)% |
| 31 December 2016 | 31 December 2015 | Change | Change, % | |
|---|---|---|---|---|
| Long-term loans, net of current portion |
5,502 | 5,850 | (348) | (6) |
| Short-term loans and current portion of long-term loans |
392 | 497 | (105) | (21) |
| debt issue costs and to liabilities assumed in business combination |
43 | 47 | (4) | (9) |
| Nominal effect of cross-currency swaps on principal of rouble denominated notes |
19 | 325 | (306) | (94) |
| Finance lease liabilities, including current portion |
5 | 5 | - | - |
| Total debt | 5,961 | 6,724 | (763) | (11) |
Net debt represents total debt less cash and sale. Net debt is not a measure under IFRS and calculation of net debt may be different from the calculation used by other companies and therefore comparability may be limited. The current calculation is different from that used
S - Labor Costs (asset and A-category
V V - metal products shipped.
The KPI is calculated on a year-to-date basis for the company employees only.
X is the total number of occupational injuries resulted in lost time among the company employees in the reporting period. Fatalities are not included.
Y is the actual total number of man-hours worked by all company employees in the reporting period.
| 31 December 2016 | 31 December 2015 | Change | Change, % | |
|---|---|---|---|---|
| Total debt | 5,961 | 6,724 | (763) | (11) |
| Short-term bank deposits | - | - | - | - |
| (1,157) | (1,375) | 218 | (16) | |
| as held for sale | (2) | - | (2) | n/a |
| Collateral under swaps | - | - | - | - |
| Net debt | 4,802 | 5,349 | (547) | (10) |
Raw materials from EVRAZ coal and iron ore producers are accounted for on at-cost-basis.
of EVRAZ NTMK, EVRAZ ZSMK are then
Cash cost of coking coal concentrate
Number of EBS transformations implemented at the key assets during the reporting year.
Each project effect is calculated as an depending on project's focus.
Yuzhkuzbassugol JORC Equivalent Coal Reserves as at 31 December 20161 , kt
| Mine | Proved and Probable |
|---|---|
| Alardinskaya | 93,533 |
| Yesaulskaya | 14,377 |
| 62,309 | |
| 129,050 | |
| 126,276 | |
| Total | 425,545 |
| Mine Proved and Probable |
|
|---|---|
| Raspadskaya | 876,627 |
| 131,876 | |
| 179,513 | |
| 134,417 | |
| Total | 1,322,433 |
| Mine | Proved and Probable | Fe, % | S, % |
|---|---|---|---|
| Tashtagol | 1,984 | 38 | 1 |
| Sheregesh | 61,332 | 29.8 | 0.9 |
| 5,589 | 32.9 | 0.9 | |
| Total | 68,905 | 28.0 | 0.8 |
| Mine | Proved and Probable | Fe, % | V2 O5 , % |
|---|---|---|---|
| Main pit | 408,820 | 16.1 | 0.14 |
| Southern pit | 34,592 | 16.6 | 0.16 |
| Northern pit | 540,573 | 15.6 | 0.12 |
| Western pit | 131,354 | 16.1 | 0.16 |
| 6,904,420 | 16.5 | 0.14 | |
| Total | 8,019,758 | 16.4 | 0.14 |
| Proved and Probable | |
|---|---|
| Total | 68,371 |
1
| Basic oxygen furnace | Basic oxygen furnace is a frunace used in a method of primary steelmaking in which carbon-rich molten pig iron is made into steel. Blowing oxygen through molten pig iron lowers the carbon content of the alloy and changes it into |
|---|---|
| Beam | 40-k beam, 60Sh beam, 70Sh beam as mentioned in this report. |
| Billet | wire rod and other rolled products are made from billets. |
| Blast furnace | The blast furnace is the classic production unit to reduce iron ore to molten iron, known as hot metal. It operates as a counter-current shaft system, where iron ore and coke is charged at the top. While this charge descends towards coke, coal or other carbon containing materials are sometimes injected with this hot air. |
| By-product | A secondary product which results from a manufacturing process or chemical reaction. |
| Cash cost of coking coal concentrate |
|
| Capex | Capital expenditure. |
| CFR | |
| Channel | |
| Coal washing | |
| Coke | (coke) has a strong porous structure which makes it ideal for use in a blast furnace. |
| Coke battery | |
| Coking coal | |
| Concentrate | A product resulting from iron ore / coal enrichment, with a high grade of extracted mineral. |
| Construction products | Include beams, channels, angles, rebars, wire rods, wire and other goods. |
| Converter | A type of furnace that uses pure oxygen in the process of producing steel from cast iron or dry mix. |
| Conversion costs | |
| Continuous casting machine | |
| Crude steel | can change its properties. |
| Debottlenecking | |
| Deposit | |
| Electric arc furnace |
| Feasibility study | |
|---|---|
| Finished products | |
| Flat products or Flat-rolled steel products |
|
| Grinding balls | Balls used to grind material by impact and pressure. |
| Head-hardened rails | High strength rails with head hardened by heat treatment. |
| Heat-treatment | A group of industrial and metalworking processes used to alter the physical, and sometimes chemical, properties of a material. |
| HiPo | High potential employee. |
| Iron ore | Chemical compounds of iron with other elements, mainly oxygen, silicon, sulphur or carbon. Only extremely pure (rich) iron-oxygen compounds are used for steelmaking. |
| ISO 14001 | |
| ISO 9001:2008 | The International Standardisation Organisation's standard for a quality management system. |
| JORC Code | |
| Kt | Thousand tonnes. |
| Labour productivity | |
| Ladle furnace | |
| Lean | |
| Long products | |
| Longwall | |
| LTIFR | by the total number of hours worked expressed in millions of hours. |
| Lumpy ore | |
| Model line | Company to monitor lean implementation. |
| Mt | Million tonnes. |
| Mtpa | Million tonnes per annum. |
| Open pit mine | |
| OCTG pipe | |
| Pellet | An enriched form of iron ore shaped into small balls or pellets. Pellets are used as raw material in the steel making process. |
| Pig iron | metal. |
| Pipe blank |
| Plate | A long thin square shaped construction element made from slabs. |
|---|---|
| Pulverised coal injection (PCI) |
A cost-reducing technique in iron-making, where cheaper coal is prepared to replace normal coking coal in the blast |
| Railway products | Include rails, rail fasteners, wheels, tyres and other goods for the railway sector. |
| Rebar | Reinforcing bar, a commodity grade steel used to strengthen concrete in highway and building construction. Rebar A500SP is a type of reinforcing bar that allows for a reduction in the metallic component of reinforced concrete, |
| Rolled steel products | |
| Rolling mill | |
| SG&A | |
| Saleable products | Products produced by EVRAZ mines or steel mills which are suitable for sale to third parties. |
| Self-coverage | |
| Scrap | Iron containing recyclable materials (mainly industrial or household waste) that is generally remelted and processed into new steel. |
| The initial product forms in the steel making process including slabs, blooms, billets and pipe blanks that are further | |
| Sinter | |
| Slab | |
| Slag | Slag is a byproduct generated when non-ferrous substances in iron ore, limestone and coke are separated from the hot metal in metallurgical production. Slag is used in cement and fertiliser production as well as for base course material in road construction. |
| Steam coal | coal. |
| Tailings | additional minerals. |
| Tubular products | Include large diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products |
| purchased from segments other than the reportable segment between the end and the beginning of the reporting period. |
|
| Vanadium | A grey metal that is normally used as an alloying agent for iron and steel. It is also used to strengthen titanium based alloys. |
| Vanadium pentoxide | |
| Vanadium slag |
of Annual Report and Accounts 2016 http://ar2016.evraz.com/
Annual reports http://www.evraz.com/investors/ annual_reports/
http://www.evraz.com/governance/ documents/
Information for http://www.evraz.com/investors/
Registered Name and Number EVRAZ plc (Company No. 07784342)
5th Floor, 6 St. Andrew Street, London EC4A 3AE
Karl Gruber Deborah Gudgeon Sir Michael Peat Eugene Tenenbaum Secretary Prism Cosec
Tel: London: +44 (0) 207 832 8990 Moscow: +7 (495) 232 1370
Auditors Ernst & Young LLP
Solicitors Linklaters LLP
in personal details, shareholders should contact the Company's registrar
Bridgwater Road Bristol BS13 8AE Tel: +44 (0) 870 873 5848 Fax: +44 (0)870 703 6101 Email: [email protected]
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