TIDMEVR
RNS Number : 0210C
Evraz Plc
25 April 2012
PUBLICATION OF AUDITED 2011 ANNUAL REPORT AND ACCOUNTS
25 April 2012 - Further to the preliminary announcement of its
results for the year ended 31 December 2011, EVRAZ plc announces
that it has today published its 2011 Annual Report and Accounts
(the "2011 Annual Report") for the same period.
The 2011 Annual Report is now available to view or download in a
pdf format from the Company's website at www.evraz.com and a copy
has been submitted to the National Storage Mechanism, which will
shortly be available for inspection at
http://www.morningstar.co.uk/uk/NSM.
The 2011 Annual Report and the Notice of the Company's Annual
General Meeting, which will be held on 18 June 2012 in London, will
be posted to shareholders on or around 8 May 2012.
A condensed set of the Company's financial statements were
included in the Company's preliminary results announcement.
That information, together with the Appendix to this
announcement, which is extracted from the 2011 Annual Report,
constitutes the material which is required to be communicated to
the media in unedited full text through a Regulatory Information
Service for the purposes of compliance with DTR 6.3.5. It should be
read in conjunction with and is not a substitute for the full 2011
Annual Report.
References to page numbers and notes to the accounts made in the
following Appendices refer to page numbers in the 2011 Annual
Report.
APPENDIX A - PRINCIPAL RISKS AND UNCERTAINTIES
Effective management of risk is essential to achieving EVRAZ's
objective of delivering long-term value to shareholders and to the
protection of its assets, people and reputation. Identifying,
evaluating and managing business risks is integral to the way EVRAZ
runs its business.
Risk Type Risk Mitigation
--------------------------- ----------------------------------------- -------------------------------
Strategic Risks
-------------------------------------------------------------------------------------------------------
Global Economy The steel and mining industries Regular strategic
and Industry Cyclicality are cyclical and strongly planning, global
influenced by global economic operations diversifying
conditions. As a result, risk across a number
EVRAZ's business is highly of key economic markets,
dependent on, and sensitive increasing the number
to, the global macroeconomic of medium and long
environment. If macroeconomic term customer contracts,
conditions deteriorate or maintaining a competitive
a significant economic contraction low product cost
take place in any of the structure, prudent
Group's key geographic markets, financial management.
the Group's business, financial
condition and prospects could
be materially affected.
The industries in which the
majority of our steel customers
operate, are themselves cyclical
in nature and sensitive to
economic conditions. Renewed
weakness in these industries
would adversely affect EVRAZ's
business.
The prices of EVRAZ's primary
commodities and its steel
products are influenced by
many factors including demand,
worldwide production capacity,
capacity utilisation rates,
raw material costs, exchange
rates and trade barriers.
Prices for these commodities
may experience significant
fluctuations as a result
of these and other factors,
any of which could have a
material adverse effect on
the Group's business, financial
condition, the results of
operations and future prospects.
--------------------------- ----------------------------------------- -------------------------------
Dependency on In 2011, EVRAZ derived around Regular strategic
Russian and North 40% of its consolidated revenues planning, increasing
American Markets from sales to customers in the number of medium
Russia and about 22% from and long-term customer
sales to customers in North contracts, maintaining
America. The overall success a competitive low
of EVRAZ's operations is cost product structure,
therefore closely tied to matching contract
the business and operating product pricing to
environments from these two key input costs,
regions. Any significant increasing product
decrease in demand for steel portfolio and customer
products or decline in the focus strategies
price of these products in to more robust infrastructure
these territories could result market categories.
in significantly reduced
revenues, thereby materially
adversely affecting EVRAZ's
business, financial condition,
results of operations and
future prospects.
--------------------------- ----------------------------------------- -------------------------------
Political Adverse consequences from Regular strategic
specific or general political planning, positive
actions hindering the Group's investment in social
long-term planning ability and community projects,
and limiting its capacity effective sustainability
to obtain financing in the activity in health,
international markets which safety and environmental
could have a material adverse programmes, careful
effect on EVRAZ's business, and diligent attention
financial condition, results to local and international
of operations and future regulations, laws
prospects. and taxation regimes.
--------------------------- ----------------------------------------- -------------------------------
Capital Expenditure Steel production and mining In addition to the
are capital intensive businesses. mitigation actions
EVRAZ plans to continue to described above regarding
invest in its production global economic risks,
facilities, maintaining and the Group has established
upgrading existing facilities, procedures and dedicated
developing new mines and management for investment
investing in new projects. project planning,
In 2011, the Group had capital realisation and commissioning
expenditure of US$1.28 billion. of capital
The Group expects to be able projects. The Group
to fund its current planned aims to minimise
capital expenditures from short term debt and
cash generated from operations secure liquidity
and external funding. However, to ensure funding
planned capital expenditures of the necessary
may be adversely affected capital expenditure.
by the following factors:
changes in the terms of existing
financing arrangements; changes
in economic conditions; fluctuations
in the Russian or global
steel markets; regulatory
developments; delays in project
completion; cost overruns;
and defects in design or
construction. It is possible
that EVRAZ may have difficulty
in financing its capital
expenditures and external
sources of financing may
not be available. The failure
to fully finance its planned
capital expenditures at a
level intended to grow its
business, or to finance such
expenditures at an acceptable
cost or at all, may have
an adverse impact on EVRAZ's
business, financial condition,
results of operations and
future prospects.
--------------------------- ----------------------------------------- -------------------------------
Operational Risks
-------------------------------------------------------------------------------------------------------
Health, Safety EVRAZ's operations are subject The Group has introduced
and Environmental to a wide range of health, a management structure
Risks safety and environmental to appropriately
(HSE) laws, regulations and escalate material
standards. Any breach of HSE issues to board
existing laws and regulations level. The Group
resulting from health, safety is actively assessing
or environmental incidents its environmental
may result in the imposition impacts and potential
of fines, penalties, or other liabilities to improve
actions, which could have management of those
a material adverse effect exposures.
on the Group's business,
financial condition, results
of operations and future
prospects.
The introduction of new laws
and regulations may result
in increased costs, or in
the event of non-compliance,
also lead to the imposition
of substantial penalties
or other actions that could
have a material adverse effect
on the Group's business,
financial condition, results
of operations and future
prospects.
--------------------------- ----------------------------------------- -------------------------------
Labour Relations EVRAZ's business depends There are established
on good labour relations Group and local HR
with employees. Labour disputes, procedures, channels
restrictive labour and employment for timely communications
laws, as well as increasing and negotiations
costs of skilled labour, with Trade Unions,
could have a material adverse other representative
impact on EVRAZ. bodies and authorities.
Although EVRAZ believes its
labour relations with its
employees are good, a strike
or a work stoppage could
occur at any of the Group's
facilities or greenfield
operations. At most of the
Group's business units, there
are collective bargaining
agreements in place with
labour unions. However, existing
agreements may not prevent
future strikes, work stoppages
or other labour-related disputes
which could result in a decrease
in EVRAZ's production levels.
They could also lead to adverse
publicity or an increase
in costs, which could have
a material adverse effect
on EVRAZ's business, results
of operations, financial
condition and future prospects.
--------------------------- ----------------------------------------- -------------------------------
Cost Competitiveness EVRAZ operates in markets Management reporting
that are highly competitive. framework, Group
Competitors include major and site operational
international steel producers KPI's, regular Management
and mining companies, as Committee meetings,
well as other Russian steel PMR (Product and
and mining producers and Resource Management)
producers in other emerging meetings. Proactive
market countries. The Group's HR skills and management
competitive position as one gap analysis, site
of the world's lowest cost and group level in-house
steel producers is dependent training and established
on, among other factors, Lean management processes.
its ability to manage its The above management
cost base and increase the mitigation action
efficiency and productivity is supported by specific
of its employees. Competition investment projects
for skilled labour is intense to deliver reduced
in the steel and mining industries, cost per tonne; a
and labour costs are increasing key example being
significantly, particularly the investment in
in Russia. Continued high PCI facilities at
demand for skilled labour EVRAZ NTMK and EVRAZ
and labour cost inflation ZSMK.
could make it difficult for
the Group to attract qualified
employees at a commercially
reasonable cost and such
a difficulty could thus have
a material adverse effect
on EVRAZ's business, results
of operations, financial
condition and future prospects.
In addition, EVRAZ's Russian
subsidiaries are in many
instances the largest employers
in the cities in which they
operate, which means its
ability to reduce the numbers
of its employees may be subject
to political and social considerations.
Any inability to make planned
reductions in workforce numbers
in order to increase efficiency
could have a material adverse
effect on EVRAZ's business,
financial condition, results
of operations and future
prospects.
--------------------------- ----------------------------------------- -------------------------------
Business Interruption The mining, smelting and The Group has established
refining operations of EVRAZ protocols and procedures
are subject to a number of across the Group
operational risks which can as a whole such that
cause prolonged shut downs plans are in place
or production delays. These to ensure business
include: the availability continuity in the
of raw materials, water and Group's operations
power, geological and technical in the event of a
challenges, climatic conditions major disruption
such as flooding and earthquakes, to the Group's operations.
equipment failure, interruptions The Group also carries
to power supplies, or limitations business interruption
or disruptions to transportation insurance except
services such as railways. for mining operations.
Any such disruptions could
have a material adverse effect
on EVRAZ's operating performance,
production levels, financial
condition and future prospects.
In addition, long term business
interruption may result in
a loss of customers and damage
to the Group's reputation.
--------------------------- ----------------------------------------- -------------------------------
Financial Risks
-------------------------------------------------------------------------------------------------------
Treasury Risks EVRAZ, like many large multinational EVRAZ manages liquidity
companies, faces a variety risk by maintaining
of treasury risks including adequate cash reserves
liquidity risk, credit risk, and borrowing facilities,
currency risk and interest by continuously monitoring
rate risk. Adverse events forecast and actual
or uncertainties affecting cash flows and matching
the global financial markets the maturity profiles
could adversely affect EVRAZ's of financial assets
ability to raise new debt and liabilities.
or refinance existing debt EVRAZ reviews cash
facilities in the capital flow forecasts, debt
markets. It could also in profile and funding
future lead to higher borrowing options by financial
costs. team and top management,
EVRAZ needs ongoing access by the Audit Committee,
to liquidity funding in order in respect of Going
to meet its trading requirements, Concern deliberations,
support its existing operations and by the board.
and invest in new investment To manage credit
projects. There is a risk risk related to cash,
that the Group may be unable EVRAZ maintains its
to obtain the necessary funds available cash, mainly
when required or that such in US dollars, in
funds will only be available reputable international
on unfavorable terms. EVRAZ's banks and major Russian
borrowing facilities include banks. Management
a requirement to comply with periodically reviews
certain specified covenants the creditworthiness
in relation to the level of the banks in which
of net debt and interest it deposits cash.
cover. A breach of these EVRAZ's trade receivables
covenants could result in consist of a large
a significant proportion number of customers,
of the Group's borrowings spread across diverse
becoming repayable immediately. industries and geographical
EVRAZ transacts with a variety areas. There are
of commercial and financial no significant concentrations
counterparties including of credit risk within
customers, financial institutions the EVRAZ customer
and suppliers. Accordingly, base.
the failure or default of Some of EVRAZ's sales
a counter party could give are made on terms
rise to a material loss which of letter of credit.
may have an adverse impact In addition, EVRAZ
on EVRAZ's business, financial requires prepayments
condition, results of operations from certain customers.
and future prospects. EVRAZ does not require
The mix of EVRAZ's revenues collateral in respect
and costs is such that it of trade and other
is exposed to fluctuations receivables, except
in exchange rates, particularly when a customer asks
between the Rouble and the for a payment period
US dollar. The appreciation which is longer than
of the Rouble against the normal terms. In
US dollar tends to result this case, EVRAZ
in an increase in the EVRAZ requires bank guarantees
Group's costs relative to or other liquid collateral.
its revenues. Therefore, The Group developed
adverse currency movements standard payment
may materially adversely terms and constantly
affect EVRAZ's financial monitors the status
condition and results of of accounts receivable
operations. collection and the
EVRAZ borrows on both a fixed creditworthiness
and variable rate basis and of the customers.
has other interest-bearing Natural hedging against
liabilities, such as finance foreign exchange
lease liabilities and other risk. The majority
obligations. of EVRAZ revenues
EVRAZ incurs interest rate are received in roubles
risk on liabilities with (for sales in Russia)
variable interest rates. and US dollars (almost
all sales in other
countries). However,
roubles prices in
the Russian domestic
market are linked
to export parity,
so viewed as effectively
US dollar prices
with a domestic premium
in times of higher
demand. Also, domestic
sales in Russia are
generally
more profitable compared
to exports due to
the effect of transportation
costs. When the Russian
market performs well,
the roubles appreciates,
which leads to both
increased costs and
increased revenues
in US dollar terms
due to both the domestic
premium and the higher
proportion of domestic
sales. On the other
hand, when the Russian
economy weakens,
rouble production
costs fall, while
steel prices usually
follow the RUB/USD
exchange rate trend
and more steel is
exported. Finally,
almost all of EVRAZ's
debt is US dollar
denominated (including
the rouble bonds
which are swapped
into US dollars).
EVRAZ's treasury
function performs
analysis of current
interest rates. In
the event of changes
in market fixed or
variable interest
rates management
may consider the
refinancing of a
particular debt on
more favourable terms.
--------------------------- ----------------------------------------- -------------------------------
Taxation EVRAZ is exposed to tax compliance The procedures of
and tax management processes tax risk identification
in multiple tax jurisdictions. and tax compliance
The integrated nature of are established.
EVRAZ's worldwide operations The Audit Committee
can give rise to uncertainty reviews tax risk
with regards to the Group's and compliance each
tax liabilities and produce half year.
conflicting claims from revenue
authorities in relation to
the profits to be taxed in
specific jurisdictions. Failure
to manage tax risks could
lead to additional tax charges.
It could also lead to reputational
damage or a financial penalty
for failure to comply with
required tax procedures or
other aspects of tax law.
--------------------------- ----------------------------------------- -------------------------------
Other Risks
-------------------------------------------------------------------------------------------------------
Control Exercised EVRAZ is controlled by Lanebrook The board has a balance
by the Major Shareholder (the "Major Shareholder"), of 50% independent
a limited liability company non executive directors
incorporated under the laws who have a duty to
of Cyprus. As at 31 December protect the 'minority
2011, the Major Shareholder shareholder' regarding
held a 72.34% stake in EVRAZ. General Meeting resolutions,
As a result of its controlling also to oversee and
interest in EVRAZ, the Major where appropriate
Shareholder has the ability seek independent
to exert control over certain valuations of any
actions requiring shareholder proposed 'related
approval, including increasing party' transactions.
or decreasing the authorised The Nomination Committee
share capital of the Company is charged with the
(and disapplying pre-emptive selection of the
rights), the election of Chief Executive,
directors, the declaration succession plans
of dividends, the appointment for key senior management
of management and other policy and selection of
decisions. While transactions Independent non-executive
with the Major Shareholder directors.
can benefit the Company,
the interests of the Major
Shareholder could at times
conflict with the interests
of the other shareholders.
Any such conflict of interest
could adversely affect EVRAZ's
business, financial condition
and results of operations.
--------------------------- ----------------------------------------- -------------------------------
APPENDIX B - RESPONSIBILITY STATEMENT
The directors who were members of the board at the time of
approving the directors' report are listed on pages 58 to 59.
Having made enquiries of fellow directors and of the Company's
auditors, each of these directors confirm that:
-- To the best of each director's knowledge and belief, there is
no information (that is, information needed by the Group's auditors
in connection with preparing their report) of which the Company's
auditors are unaware; and
-- each director has taken all the steps a director might
reasonably be expected to have taken to be aware of relevant audit
information and to establish that the Company's auditors are aware
of that information.
Pursuant to the Disclosure and Transparency Rules, each of the
directors listed on pages 58 to 59 of the Annual Report confirm
that to the best of their knowledge:
-- The consolidated financial statements of EVRAZ plc, prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole (the 'Group');
-- the Directors' Report and the Financial Review on pages 74 to
77 and 52 to 55 include a fair review of the development and
performance of the business and the position of the Company and the
Group, together with a description of the principal risks and
uncertainties that they face.
The directors are responsible for preparing the Annual Report
and the Group and parent company financial statements in accordance
with applicable United Kingdom law and regulations. Company law
requires the directors to prepare Group and parent company
financial statements for each financial year. Under the law, the
directors are required to prepare Group financial statements under
IFRSs as adopted by the European Union and applicable law and have
elected to prepare the parent company financial statements on the
same basis.
Under Company Law the directors must not approve the Group and
parent company financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and parent company and of the profit or loss of the Group and
parent company for that period. In preparing each of the Group and
parent company financial statements the directors are required
to:
-- Present fairly the financial position, financial performance
and cash flows of the Group and parent company;
-- Select suitable accounting policies in accordance with IAS8
Accounting Policies, changes in Accounting Estimates and Errors and
then apply them consistently;
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Make judgements and estimates that are reasonable;
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs as adopted by the European Union is
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the Group's and parent
company's financial position and financial performance; and
-- State that the Group and parent company financial statements
have been prepared in accordance with IFRSs as adopted by the
European Union, subject to any material departures discloses and
explained in the financial statements.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and
parent company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and parent company
and enable them to ensure that the financial statements comply with
the Companies Act 2006 and, with respect to the Group financial
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 Director's
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 dissemination of financial statements
may differ from legislation in other jurisdictions.
ENDS
For further information:
Investor Relations: Alexander Boreyko Director, Investor
Relations
London: +44 207 832 8990 Moscow: +7 495 232 1370
ir@evraz.com
Media Relations: Oleg Kuzmin VP, Corporate Communications
London: +44 207 832 8998 Moscow: +7 495 937 6871 media@evraz.com
Regulatory enquiries:
For information about proxy voting, dividends and to report
changes in personal details, shareholders should contact the
Company's registrar:
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
United Kingdom
Tel: +44 (0) 870 873 5848
Fax +44 (0)870 703 6101
Email: webqueries@computershare.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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