Annual report 2015

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Annual report 2015

Four success factors

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CEO's statement

Dear colleagues and partners,

In 2015, Metalloinvest faced a number of considerable challenges.

Lower steel consumption and a significantly higher global iron ore supply resulted in an almost 50% drop in iron ore prices. To succeed in such an environment, a business must have a strong corporate culture and maintain maximum production efficiency, along with strict financial discipline. Looking back at our performance in 2015, I am pleased to say that our business model incorporates all of these elements.

When developing Strategy 2023, we factored in a possible decline in global iron ore prices. Our analysis has shown that products with low added value are most affected by volatility. So, a sharp drop in ore prices in 2015 and lower volatility in high-quality product prices have reaffirmed our focus on high added value products as a strategic priority for the Company. The stress tests carried out as part of the strategy update showed the viability of investment in high added value products.

Our key investment projects in 2015 included the construction of Pellet Plant No. 3 at Mikhailovsky GOK, which launched in September last year and boosted pellet output capacity by 5 million tonnes per annum, and the construction of a third HBI plant at Lebedinsky GOK.

Both projects are aimed at strengthening Metalloinvest’s position in the global arena, where the Company is the leader in merchant HBI production and No. 3 in pellet production.

Another focus area of Strategy 2023 is improving the Company’s corporate governance framework. We have launched a large-scale transformation programme designed to reduce costs, boost margins and ensure business process transparency and timely decision-making. The programme will also improve and automate business processes, create a cross-functional shared services centre to enhance planning accuracy and manage the implementation of the Company’s plans.

Metalloinvest maintains high standards of corporate social responsibility. We partner with local governments for sustainable development programmes. As part of this long-term social and economic cooperation, we develop and implement social initiatives that address key challenges in local regions. The most effective initiatives and practices are then rolled out across our locations.

Minimising the Company’s environmental footprint is also a top priority for Metalloinvest.

In 2015, the Company passed compliance audits launched across its operations to measure the efficiency of the existing environmental management system.

The audits certified that our production processes are complaint with ISO 14001 requirements. As a member of the World Steel Association’s Climate Action Programme, Metalloinvest collects, calculates and discloses data on greenhouse gas emissions (CO2).

Overall, a balanced development strategy, meaningful governance framework at all levels, high qualifications and the co-ordinated efforts of our people allow us to achieve strong results today and in the future.

I would like to thank our employees, customers and partners for their invaluable cooperation.

Yours faithfully,
Andrey Varichev

CEO
Management Company Metalloinvest

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