Key Financials

In 2014, the Company's management ensured the stability of Metalloinvest's financial position in spite of challenging external conditions and declining global iron ore prices. We focus on meeting our operating efficiency targets and on the implementation of our investment programme. This lays the foundation for sustainable development of the Company as a producer of metallised and iron ore products with high added value”.
Pavel Mitrofanov,
Deputy CEO — Chief Financial Officer

Revenue

In 2014, the Company's revenue dropped by 13.1% to USD 6,367 million from USD 7,324 million in 2013.

The revenue of the Mining Segment made up 48.7% of the Company's consolidated revenue in 2014 as compared to 54.1% in 2013. The revenue of the Mining Segment decreased by 21.6% during the year to USD 3,103 million, primarily because of the declining global iron ore and pellet prices, and devaluation of the ruble.

The revenue of the Steel Segment amounted to 48.1% of the Company's consolidated revenue in 2014 compared to 43.7% in 2013. The revenue of the Steel Segment declined by 4.5% in 2014 and amounted to USD 3,060 million due to the weaker ruble.

Revenue by Product in 2013–2014, %

In 2014, the share of the domestic market in the Company's revenue decreased to 41.1% from 45.6% in 2013, primarily due to the devaluation of the ruble. The shares of Europe and the Middle East in the Company’s total revenue in 2014 amounted to 21.0% and 16.1% respectively. Asia (including China) generated 7.1% of the revenue.

Revenue by Sales Markets in 2013–2014, USD million

Cost of Sales and commercial expenses

In 2014, costs of sales amounted to USD 3,381 million (representing 53.1% of the revenue for the period compared to 53.4% in 2013), a 13.6% decrease from 2013. Cost of sales dynamics was a result of the ruble depreciation and the implementation of a programme of operational improvements aimed at optimisation of costs of natural gas, electricity and other items of expenditures.

In 2014, distribution expenses decreased by 15.8% to USD 965 million, primarily due to the weakening of the ruble, changes in the geography of supplies and optimisation of rolling stock costs in the course of implementation of a cost-cutting programme.

In 2014, general and administrative expenses decreased by 4.2% to USD 451 million. The general and administrative expenses amounted to 7.1% of the revenue, slightly above the level of 6.4% in 2013.

Profitability

The Company's EBITDA stood at USD 1,961 million, representing a decrease of 14.4% year-onyear, while the EBITDA margin remained almost unchanged at 31%. The decrease in EBITDA was primarily caused by the reduction of EBITDA of the Mining Segment (by USD 713 million), which was partially compensated by an increase in EBITDA of the Steel Segment (by USD 399 million).

The EBITDA of the Mining Segment stood at USD 1,366 million (a decrease of 34.3%), or 69.7% of the consolidated EBITDA in 2014 as compared with 90.7% in 2013. The decrease of the EBITDA of the Mining Segment was primarily caused by declining world prices for iron ore.

The EBITDA of the Steel Segment increased by USD 399 million in 2014 to USD 421 million. The share of the Steel Segment made up 21.5% of the consolidated EBITDA in 2014. A significant growth of EBITDA of the Steel Segment is primarily explained by a decline in the prices of raw materials, optimisation of energy and transportation costs, higher volumes of pig iron exports and changes in the structures of steel product shipments.

In 2014, net income amounted to USD 66 million, representing a 93.9% decrease year-on-year. The decline was primarily due to the exchange differences accrued to the USD-denominated part of the Company's debt (USD -1,666 million).

Capital Expenditure

In 2014, the Company's capital expenditure totalled USD 595 million, an increase of 24.5% year-on-year. The increase in the capital expenditure is associated with the implementation of large investment projects: purchase of open-pit mining machinery for the Company’s Mining Segment, construction of HBI-3 Plant (Lebedinsky GOK), Pellet Plant #3 (Mikhailovsky GOK), oxygen station (OEMK), and Coke Oven Battery #6 (Ural Steel).

Capital Costs in 2014, USD million

Statement of financial position

As of December 31, 2014, the Company's assets stood at USD 7,266 million, having declined by 30.5% from USD 10,451 million as of December 31, 2013. The decrease in assets figure was primarily due to the asset value conversion into USD for reporting purposes.

As of December 31, 2014, the Company's net debt decreased to USD 4,185 million, which reduced its net debt/EBITDA ration to 2.13x vs. 2.38x as of December 31, 2013.

The share of long-term debt dropped to 86.4% at the end of the reporting period as compared with 96.8% as of December 31, 2013. The decrease was caused by conversion of a part of long-term debt to the category of short-term debt due to the execution of a put option on RUB-denominated bonds for series 01, 05 and 06, in March of 2015. The Company used its own funds to repurchase 24,957,182 bonds at par value of RUB 1,000. As a result of the transaction, the Company reduced its debt by USD 420 million and has almost no debt to be repaid in 2015.

As of December 31, 2014 cash and cash equivalents totalled USD 550 million compared to USD 523 million as of December 31, 2013 (an increase of 5.2%).

Dividends

When taking a decision on dividend payments, the Company considers the long-term business development prospects and current debt level. In June 2014, the Annual General Meeting of Shareholders of Holding Company METALLOINVEST JSC decided to pay dividends from its 2013 net income and retained profit of the previous years. The amount of dividend payments was USD 502 million. The money has been spent to repay loans issued by the Company to its shareholders earlier.

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