ANNUAL
REPORT
Statement by member
of the NLMK Board of Directors
2
ABOUT THE COMPANY
4
OUR TEAM
Strategy and business review
Our results
Five-year highlights
6
36
45
Stakeholder dialogue
Supply chain management
Human rights
Our employees
Occupational health and safety
Developing local communities
CORPORATE
GOVERNANCE
Corporate governance
Operational control
and risk management
Information for shareholders
and investors
46
48
80
91
ENVIRONMENTAL
PROTECTION
Environmental protection
Climate change
Energy efficiency
94
96
104
112
118
138
150
160
162
186
202
Appendix
212
PRELIMINARILY APPROVED BY
NLMK BOARD OF DIRECTORS,
MINUTES NO. 279 D.D. 22.03.2021
APPROVED BY NLMK GENERAL
MEETING OF SHAREHOLDERS,
MINUTES NO. 62 D.D. 29.04.2021
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STATEMENT BY MEMBER
OF NLMK BOARD
OF DIRECTORS
GRI 102-14
DEAR SHAREHOLDERS,
Here at NLMK Group, sustainable
development considerations are
embedded into the design of our
long-term development strategy.
This is how we make our contribution
to the Sustainable Development
Goals as a UN Global Compact
participant.
Aware of the gravity of global
climate change implications,
we are committed to reducing our
environmental footprint. This year
NLMK Group published its first report
in line with the recommendations of
the Task Force on Climate-related
Financial Disclosures. The report
features a climate risk analysis
and an updated target to reduce
specific greenhouse gas emissions
by 2023 (−3.5% vs. 2019). Over
the past five years we have already
reduced our СО2 emissions per tonne
of product1 by 4%: from 1.98 in 2016
to 1.902 in 2020. The new target
to cut greenhouse gas emissions
is backed up by a portfolio of tangible
projects designed to boost energy
efficiency and reduce consumption
of carbon-based fuels. In addition,
we are testing out innovative
decarbonization technologies and
enhancing environmental and climate
cooperation with our Russian and
international partners.
In 2019–2020, we implemented several environmental projects at our flagship site in
Lipetsk. Their controlled emission reduction effect (for substances other than СО2)
totalled 9,000 tonnes (-3% vs. 2018). Upgrades at our blast furnace and steelmaking
operations enabled these units to reduce their emissions by 95%. The projects
involved best available technologies that can capture 99.9% of dust and reduce
the Company’s environmental impact despite growing output.
Substantial environmental investments ($1.3 billion since 2000) halved NLMK Group’s
specific emissions: from 43.3 to 19.8 kg/tonne of steel. Total emissions decreased
by 10%, even as steel output nearly doubled.
We have also made significant strides in other sustainable development areas.
The Company completed a planned audit of management systems for the environment,
energy efficiency, occupational health, and industrial safety. NLMK Group’s Russian
companies confirmed that their current management systems fully comply with
all the requirements of international standards. In 2020, the Company continued
to introduce new tools and programmes to improve safety. As a result, the rate
of severe injuries among employees and contractors went down by 30% compared
to 2019.
NLMK Group seeks to build long-term partnerships with stakeholders.
In our cooperation we are mindful of all parties complying with legislation
in the field of human rights, occupational health and safety, labour relations,
and environmental protection.
The Company’s performance was reflected in upgrades of our ESG ratings.
In the Sustainalytics rating, NLMK ranks among the top 5 out of 142 companies1.
Likewise, SAM S&P Global increased our sustainable development score year-on-year2.
We also ranked sixth in the World Wildlife Fund (WWF) Russia and National Rating
Agency’s Environmental Transparency Rating of Mining & Metals Companies,
improving our standing by three positions compared to 2019.
I would like to extend my sincere gratitude to all shareholders, clients, and partners
who believe in us and work alongside us.
Oleg Bagrin
Member of the NLMK Board of Directors
1 Specific СО2 emissions are calculated based on steel output taking into account pig iron production, since NLMK’s commercial pig iron output increased
significantly in 2020 compared to previous periods amid concurrent upgrades at steelmaking operations. Pig iron production and operations upstream
of it account for the bulk of СО2 emissions.
2 Specific emissions without the influence of temporary factors associated with a decrease in production.
1 https://www.sustainalytics.com/esg-rating/novolipetsk-steel/1028285007/
2 https://www.spglobal.com/esg/csa/yearbook/ranking/
2
3
ANNUALREPORT 2020 ABOUT THE
6 Strategy and business review
36 Our results
45 Five-year highlights
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STRATEGY AND
BUSINESS REVIEW
2020 KEY PERFORMANCE
INDICATORS
OPERATING INDICATORS 2020
FINANCIAL PERFORMANCE
Production
Sales to third parties
IRON ORE
18.5 m t
flat yoy
0.8 m t
+57% yoy
FLAT STEEL
14.7 m t
+8% yoy
14.9 m t
+5% yoy
LONG STEEL
2.7 m t
−1% yoy
2.6 m t
−7% yoy
REVENUE,
$ BN
NET PROFIT,
$ BN
EARNINGS PER SHARE,
$/SHARE
12.0
10.6
10.1
9.2
−13.2%
7.6
2.2
−7.7%
1.5
0.9
1.3
1.2
0.16
0.37
0.24
0.22 0.21
−4.5%
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
EBITDA,
$ BN
EBITDA MARGIN,
%
NET DEBT / EBITDA,
Х
3.6
+3%
2.7
2.6
2.6
25
26
30
24
+5 p.p.
29
+34.3%
0.94
0.70
1.9
0.39 0.35
0.25
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
FREE CASH FLOW,
$ BN
DIVIDENDS1,
$ BN
DIVIDENDS / FCF,
%
2.0
−26.7%
1.3
1.1
1.5
1.1
1.4
0.9
2.1
1.6
1.7
+6.3%
113
104 104
84
+54 p.p.
158
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
1 Dividends accrued include Q4 2020 dividends in the amount of RUB 7.25 per share recommended by the Board of Directors for paying out on
11 February 2020 and are subject for approval by the Meeting of Shareholders.
6
7
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ABOUT THE COMPANY
GRI 102-7
NLMK Group is the largest integrated steelmaker in Russia and one of the most
efficient in the world GRI 102-1 .
NLMK Group’s steel products are used in various industries, from construction
and machine building to the manufacturing of power-generating equipment
and offshore wind turbines.
NLMK operates production facilities in Russia, Europe, and the United States.
The Company’s steel production capacity is 18.5 m t per year1 GRI 102-4 .
NLMK has a highly competitive cash cost among global manufacturers and one
of the highest profitability levels in the industry. In 2020, the Company generated
$9.2 bn in revenue and $2.6 bn in EBITDA. Net debt/EBITDA stood at 0.94х.
The Company has investment grade credit ratings from S&P, Moody’s, Fitch,
and Expert RA.
NLMK’s ordinary shares with a 20.7% free-float are traded on the Moscow Stock
Exchange (ticker “NLMK”) and its global depositary shares are traded on the London
Stock Exchange (ticker “NLMK:LI”). The Company’s share capital is divided into
5,993,227,240 shares with a par value of RUB 1.
NLMK GROUP
No. 1 steelmaker by volume in Russia
Efficient vertical integration
Cost-efficient steelmaker
High profitability
Sustainable financial position
High sustainability standards
WHAT WE MAKE
GRI 102-2
NLMK is a leading supplier of high-quality steel products in key sales markets.
NLMK has a balanced product mix that includes semi-finished, high value-added,
and niche products. Flat steel accounts for around 85% of total output, while
long steel used in construction makes up 15% of production.
NLMK SALES IN 20201
Sales, m t
Share in total
sales, %
Pig iron
Slabs
Hot-rolled steel
Hot-rolled steel plate
Cold-rolled steel
Galvanized steel
Pre-painted steel
Non-grain-oriented
electrical steel
Grain-oriented
electrical steel
Billet
Long products
Metalware
Total
High value-added products
1.5
3.1
4.9
1.0
1.9
1.4
0.5
0.3
0.3
0.3
2.0
0.3
8
18
28
5
11
8
3
2
2
2
11
2
17.5
100
1 Taking into account the capacity growth at the Lipetsk site following the completion of two-year
large-scale repairs in the end of 2020.
1 NLMK sales to third parties (with NBH)
8
9
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR PRODUCTS
SEMIS
PLATE
HOT-ROLLED STEEL
COLD-ROLLED STEEL
COATED STEEL
ELECTRICAL STEEL
LONG PRODUCTS
METALWARE
Share of total sales
Share of total sales
28%
5%
28%
11%
11%
4%
11%
2%
Description
Pig iron and semi-finished
steel products for further
processing: slabs are
processed into flat steel
products; billets are
processed into long steel
products.
A wide range of semis,
both standard and niche
products with specific
chemical composition,
physical properties, and
dimensions
Consumers
Steelmaking,
pipe industry
Sites
NLMK Lipetsk,
NLMK Kaluga
Market share1
19%
(slabs)
Flat steel products with
higher thickness than that
of hot-rolled steel. A range
of standard products
and niche abrasion-resistant
and high-strength plates.
Produced at NLMK Group’s
European sites from slabs
supplied by NLMK Lipetsk
Flat steel products that have
been hot-rolled. A wide range
of hot-rolled steel in sheets
and coils with a variety of
performance characteristics
Flat steel products that
have been cold-rolled.
A wide range of cold-rolled
steel sheets and coils with
a variety of performance
characteristics, including
niche high-ductility products
Description
Galvanized and pre-painted
steel from hot-rolled and
cold-rolled flats. Coatings
are applied on a production
line to protect the steel from
corrosive environments.
Available in coils, strip,
and sheets
Dynamo (non-grain-oriented)
and transformer (grain-
oriented) electrical steel.
Includes a range of standard
products with conventional
properties, and unique
high-permeability steel (HGO).
Available in coils, strip,
and sheets
Rebar in rods and coils, wire
rod, and sections
A wide range of low-carbon
metalware. This includes wire
and secondary products,
with various coatings
and surface finishes, nails,
and fasteners
Lifting and transport
equipment, offshore wind
turbines, drilling platforms,
shipbuilding, pipelines, boilers,
and tanks for aggressive
environments (pressure,
temperature, load, etc.)
Pipe industry, steel
structures, shipbuilding,
machine building, high-
pressure vessels, yellow
machinery, commercial,
residential, and infrastructure
construction
Automotive industry,
machine building, pipe
industry, yellow machinery
and white goods, and
commercial, residential,
and infrastructure
construction
NLMK DanSteel,
NLMK Clabecq,
NLMK Verona
NLMK Lipetsk,
NLMK La Louvière,
NLMK Indiana,
NLMK Pennsylvania
NLMK Lipetsk,
NLMK La Louvière,
NLMK Pennsylvania
Consumers
Automotive industry,
yellow and white goods,
construction, and facing
materials.
Electrical machines,
transformers,
power engineering,
and instrument making
Construction
Construction and
machine building
Sites
NLMK Lipetsk,
NLMK Strasbourg,
Sharon Coating
Market share1
NLMK Lipetsk,
VIZ-Steel
NLMK Ural,
NLMK Kaluga
NLMK Metalware
Galvanized steel
NGO steel
11%
13%
25%
23%
99%
18%
19%
Pre-painted steel
GO steel
22%
~100%
11%
1 NLMK share in apparent consumption.
Global market
European market
Russian market
10
11
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
NLMK GROUP’S BUSINESS MODEL
NLMK is a vertically integrated group
with a well-balanced value chain
controlling every stage of steel
production, from the mining of raw materials through to finished high-tech product
sales to end-users. During this process we operate with a commitment to corporate
responsibility for all our people, our communities and our environment.
NLMK Group’s vertically
integrated business model
NLMK has created a unique
business model. A key factor
is our ability to make the most
of our strategic advantages
based on the geographical
location of our assets.
Mining and steel production
(the most material- and
resource-intensive aspects
of the metallurgical process)
are concentrated in low-cost
regions, while finished products
are manufactured much closer
to the Group’s client base.
This allows NLMK to minimize
expenditure on production and
logistics while at the same time
swiftly and flexibly adapting
to the changing requirements
of our end users and the situation
in local sales markets.
KEY ACTIVITIES IN OUR PRODUCTION CHAIN
UPSTREAM
MIDSTREAM
DOWNSTREAM
UPSTREAM
The Company has achieved the status
of one of the most cost-efficient
steelmakers in the world through
SELF-SUFFICIENCY IN RESOURCES
a world-class resource base with leading-edge technology for mining and processing,
an optimal process environment, and the NLMK team’s high professionalism.
Up to 100% of raw materials produced are used in the steel production stage further
along the value chain.
ENERGY
SCRAP
COKE
PELLETS
IRON ORE
CONCENTRATE
64%
64%
100%
95%
100%
Captive electric power
is generated primarily
through the recovery
of by-product gases
from coke and blast
furnace operations.
NLMK’s scrap
collection and
processing network
is the largest in Russia,
ensuring the stable
delivery of scrap
to NLMK Group’s
Russian steelmaking
facilities.
Captive coke
production
guarantees NLMK
high-quality coke
products, which
boost the efficiency
of operations
further along
the value chain.
Stoilensky is one of the most efficient iron ore
producers in the world and is located 250 km
from the Group’s main production facility
in Lipetsk. Stoilensky's iron ore reserves
are upward of 5 bn t.
12
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
MIDSTREAM
Leading-edge equipment and finely
tuned business processes enable
the production of high-quality
cost-efficient steel products.
NLMK Group’s steel production
capacity amounts to 18.5 m t
per year1, 95% of which is made
in Russia.
Cost leadership: NLMK is among global
leaders in cost. NLMK Group enjoys
sustainable cost leadership through its
high utilization rates, efficient vertical
integration, and upgraded production capacities. The production cost of Lipetsk
steel in 2020 was $207/t.
Sales vs. further processing: 70% of NLMK steel is processed into finished products,
while 30% is sold as semi-finished steel. NLMK produces both flat and long steel
products, and our reputation as a reliable supplier ensures stable demand for
the Group’s product offering.
High capacity utilization: An expansive product offering and availability of the Company’s
rolling facilities in the regions of consumption, i.e. Russia, Europe, and the United
States.
Optimal logistics: Production facilities located in regions with developed
infrastructure and in close proximity to raw material sources lowers outlay
on logistics as well as related risks.
DOWNSTREAM
Finished products are made locally
in the Company’s strategic markets
of Russia, the EU, and the USA, in close
proximity to consumers. With total
production capacity of finished products
standing at 15.3 m t, NLMK can process
as much as 80% of captive crude steel
at its own rolling facilities.
High quality: The use of captive raw
materials in rolled steel production
guarantees consistent high quality
and short lead times. The Company’s
products are certified according
to international standards.
Optimal production footprint: Due to the location of NLMK Group’s rolling operations
in strategic markets, 60% of steel is sold in the region where it was produced.
This allows the Company to meet the customers’ most challenging delivery timescales
and respond promptly to fluctuations in local demand.
Diversification of sales: An expansive geographical breakdown of sales and a flexible
marketing policy create a global footprint, with the agility to divert sales of steel
products to the most attractive market, ensuring the full utilization of production
capacity throughout the value chain.
Balanced product portfolio: NLMK’s extensive steel product offering, from
conventional hot-rolled steel to custom electrical steels and other niche products,
allows the Company to diversify sales by sector, reducing the dependency of sales
volume on demand fluctuations in individual sectors.
NLMK’S STEELMAKING CAPACITY
ROLLING CAPACITY
BOF
EAF2
RUSSIA
USA
EU
FLAT PRODUCTS
LONG PRODUCTS
RUSSIA
USA
EU
74%
26%
94%
5%
1%
83%
17%
59%
19%
22%
1 Taking into account the capacity growth at the Lipetsk site following the completion of two-year large-scale repairs in the end of 2020.
2 Electric arc furnace.
14
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ASSETS STRUCTURE
MINING
PRODUCTION SITES
PRODUCTION CAPACITY1, M T
● Stoilensky
● Dolomit
● Stagdok
Iron ore concentrate
Sinter ore
Pellets
1.0
6.8
2019/2020
17.9
FUNCTIONS
PRODUCTION, M T
● Covers the Group’s demand
for raw materials
Iron ore
Fluxes
6.4
18.5
0%
−4%
PRODUCTS
INTRAGROUP SALES, M T
● Iron ore concentrate,
pellets, sinter ore, limestone,
and dolomite
Iron ore concentrate
Pellets
Sinter ore
Limestone
Dolomite
1.0
2.8
1.5
9.9
6.7
CONSUMERS
● Internal: NLMK Lipetsk
● External: steelmakers,
road construction,
and agriculture
HEADCOUNT
● 7,000 people
SALES TO EXTERNAL CUSTOMERS, M T
Iron ore concentrate
Limestone
Dolomite
0.8
0.6
0.5
FINANCIALS, $ M
Revenue
EBITDA
Investments
202
0%
−4%
0%
−3%
−6%
+57%
−40%
−33%
+6%
+9%
−7%
1,399
1,064
2019/2020
14.2
NLMK RUSSIA FLAT
PRODUCTION SITES
PRODUCTION CAPACITY, M T
● NLMK Lipetsk
● VIZ-Steel
● Altai-Koks
FUNCTIONS
● Produces steel, including semis
for international companies,
flat products and coke
PRODUCTS
● Coke, pig iron, slabs, hot-rolled
steel, cold-rolled steel, galvanized
steel, pre-painted steel, and
grain-oriented and non-grain-
oriented steel
CONSUMERS
● Internal: international rolling
divisions
Steel1
Flat products
PRODUCTION, M T
Coke2
Pig iron
Steel
Commodity semis
Rolled products
6.3
6.1
7.1
6.1
12.8
12.3
SALES TO EXTERNAL CUSTOMERS, M T
Commodity pig iron
Slabs
Hot-rolled steel
Cold-rolled steel
Galvanized steel
Pre-painted steel
NGOES
GOES
1.5
3.1
2.8
1.5
0.8
0.4
0.3
0.3
● External: construction, pipe
INTRAGROUP SALES, M T
production, automotive industry,
machine building, white goods,
yellow machinery, power
industry, and other sectors
HEADCOUNT
● 30,600 people
Supplies to NLMK Europe
2.7
FINANCIALS, $ M
Total revenue
EBITDA
Investments
1,430
806
6,788
+4%
+9%
+2%
+14%
+7%
+191%
0%
+11%
−2%
+7%
−3%
+6%
+1%
−3%
−7%
−4%
−6%
1 Hereinafter, current capacities are based on current shifts and product mix without the impact of overhauls.
1 Taking into account the capacity growth at the Lipetsk site following the completion of two-year large-scale repairs in the end of 2020.
2 6% moisture.
16
17
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
NLMK RUSSIA LONG
PRODUCTION SITES
● NLMK Vtorchermet scrap collecting facilities
● NLMK Ural
● NLMK Kaluga
● NLMK Metalware
FUNCTIONS
● Processes scrap for the Group’s steelmaking
facilities in Russia
● Produces long products and metalware
PRODUCTS
● Scrap, billets, rebar, wire rod, sections, and metalware
CONSUMERS
● Construction and machine building
HEADCOUNT
● 8,300 people
NLMK USA
PRODUCTION SITES
● NLMK Pennsylvania
● NLMK Indiana
● Sharon Coating
FUNCTIONS
● Produces flat steel
PRODUCTS
● Hot-rolled steel, cold-rolled steel,
and galvanized steel
CONSUMERS
● Construction, pipe production, automotive industry,
machine building, white goods, and yellow machinery
production
HEADCOUNT
● 1,100 people
PRODUCTION CAPACITY, M T
2019/2020
Steel
Long products
PRODUCTION, M T
Scrap processing
Steel
Long products
Metalware
SALES, M T
Billets
Long products
Metalware
FINANCIALS, $ M
0.3
0.3
0.3
3.3
2.6
2.2
2.8
2.4
2.1
+3%
−2%
−1%
–6%
+5%
−9%
−8%
Total revenue
EBITDA
Investments
93
38
1,539
−12%
+4%
−24%
PRODUCTION CAPACITY, M T
2019/2020
Steel
Flat products
0.8
2.9
PRODUCTION, M T
Steel
Flat products
SALES, M T
0.6
1.6
Hot-rolled steel
Cold-rolled steel
Galvanized steel
0.9
0.3
0.4
FINANCIALS, $ M
Total revenue
EBITDA
Investments
76
49
−15%
−25%
−25%
−31%
−28%
−37%
0%
+32%
1,086
NLMK DANSTEEL
PRODUCTION SITES
● NLMK DanSteel
FUNCTIONS
● Produces plates from NLMK Lipetsk
and NLMK DanSteel semis
PRODUCTS
● Niche steel semis and plates, including Q&T
CONSUMERS
● Producers of heavy vehicles and loading
equipment, offshore wind turbines, drilling rigs,
shipbuilding sector, and producers of pipes,
boilers, and reservoirs for hostile environments
HEADCOUNT
● 400 people
NBH
PRODUCTION CAPACITY, M T
2019/2020
Plate
PRODUCTION, M T
Plate
SALES, M T
Plate
SALES GEOGRAPHY
0.6
2.9
0.5
−8%
0.5
−1%
93% of sales
in EU
NBH
PRODUCTION SITES
● NLMK La Louvière
● NLMK Strasbourg
● NLMK Clabecq
● NLMK Verona
FUNCTIONS
● Produces flat steel from slabs coming from the Lipetsk
site and from internally produced semis
PRODUCTS
● Hot-rolled steel, cold-rolled steel, galvanized steel,
and pre-painted steel
CONSUMERS
● Producers of heavy vehicles and loading equipment,
offshore wind turbines, drilling rigs, shipbuilding sector,
and producers of pipes, boilers, and reservoirs for
hostile environments, construction, pipe production,
automotive industry, machine building, white goods.
HEADCOUNT
● 1,700 people
PRODUCTION CAPACITY, M T
2019/2020
0.2
0.2
Steel
Flat products
PRODUCTION, M T
Steel
Flat products
SALES, M T
Hot-rolled steel
Cold-rolled steel
Pre-painted steel
Plate
0.03
0.3
0.6
1.2
SALES GEOGRAPHY
2.8
2.1
+1%
−3%
−4%
−22%
−14%
−1%
93% of sales
in EU
18
19
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
WHERE WE MAKE
AND MARKET STEEL
GRI 102-4, GRI 102-6
Sales
1.6 m t
1.6 m t
Home
market
PRODUCTION CAPACITY, M T
Steel
Flat
Long
2.6
6.3
3.4
2.9
12.6
14.21
3.3
0.8
18.5
Russia Flat
Russia Long
Europe
USA
NLMK Indiana
Sharon Coating
NLMK Pennsylvania
STEEL PRODUCTION, M T
Russia
USA
0.6
Europe
0.2
15.1
SALES2 IN 2020, M T
0.4 0.4 0.4
1.9
6.7
2.2
17.5 m t
2.4
3.1
Russia
EU
North America
Middle East
(incl. Turkey)
LATAM
CIS
Asia & Oceania
Other regions
SALES STRUCTURE BY LOCAL /
EXPORT MARKETS, %
34
38
Russia
EU
USA
Export
100
13
15
1 Accounting for the Lipetsk site capacities growth following the completion of major repairs in the end of 2020
2 Sales with NBH
Upstream assets
BF & BOF Operations
Rolling assets
EAF
20
Slab supplies from Lipetsk to NLMK USA
and NLMK Europe
Intragroup raw material flows in Russia
Sales of steel to third parties on home
and export markets
Intragroup international supplies
6.7 m t
External
market
Sales
13.3 m t
6.6 m t
Home
market
Altai-Koks
NLMK Ural
VIZ-Steel
NLMK Vtorchermet
NLMK DanSteel
NLMK Кaluga
NLMK Lipetsk
NLMK Clabecq
NLMK La Louvière
NLMK Strasbourg
NLMK Verona
Stoilensky
0.1 m t
External market
Sales
2.6 m t
2.5 m t
Home market
NLMK India
21
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR INNOVATIONS
As a modern, high-tech company,
NLMK Group’s development is inextricably
linked to innovation. For us, innovation
is a means of attaining strategic goals.
The Company focuses its resources
on seeking and quickly integrating new
technologies that boost the efficiency
of business processes.
NLMK Group’s approach to innovation
is based on quick project implementation
and tolerance for the risk inherent
in testing potential solutions and
technologies. This approach helps
reduce project implementation costs,
catalyse the development and adoption
of innovative solutions, and minimize
innovation-related risks.
Innovation projects are pursued
and implemented across all of
the Company’s main business processes:
steel production, technologies and
materials for repairs, customer service
improvement, sustainable development,
logistics, energy, HR.
One of the formats that NLMK is
developing to seek out new ideas is open
innovation: building up partnerships with
universities, venture funds, development
institutions, and technology parks
both in Russia and abroad. Innovation-
related changes are systemic in nature,
shaping the culture and the innovation
ecosystem that unites NLMK Group with
its partners.
Additionally, NLMK sees innovation
projects as a way to develop
and fulfil our team’s potential.
Any employee can participate in such
projects. The Company encourages
initiative and provides opportunities
for experimentation by simplifying
the processes and mechanisms of
innovation project implementation.
The open innovation format also
facilitates our employees’ professional
growth: partnerships with leading
universities and venture funds open up
new sources of ideas and access
to one-of-a-kind projects.
Examples of innovative solutions and technologies that the Company adopted in
2020 include 3D printing, photographic mapping via drones, and new wear-resistant
materials for mining and steelmaking. We have also taken the first steps to integrate
robotics into the Group’s production processes. Over 40 innovation projects are
already being implemented.
In mid-2020, we launched the NLMK Innovation Lab online portal (https://lab.nlmk.com/en/).
This new platform creates a simple and quick channel enabling all developers of
innovative products and technologies to communicate with their end customers
at NLMK. All projects are thoroughly evaluated, and efficient ones can then be
implemented at NLMK Group sites. The portal has operated for less than six months
and has already received over 100 applications, of which 50 are currently being
analysed in-depth.
NLMK expands use of drones
NLMK Group has established a centre to process and analyse data collected
using unmanned aerial vehicles (UAVs) at its mining facilities. Drones will be used
in the open-cast mine for prospecting and monitoring the condition of the roads,
heat networks, power lines, and other infrastructure elements. The gain from
expanding the use of UAV technology is estimated at RUB 100 million per year.
RESEARCH AND DEVELOPMENT
The Company develops new products to respond to market demands, analyzing
technological progress trends in the industry and determining the vector of
innovation development. The life cycle of a new product development project includes
computer and physical simulations and the use of advanced tools and methods
to test laboratory prototypes before starting full-scale experiments on industrial
equipment. This approach helps reduce project implementation costs, catalyse
the development and adoption of innovative solutions, and minimise innovation-
related risks.
To achieve the Strategy 2022 goals, the Company has set up an R&D department
and a corporate Centre for Research and Development (R&D Centre) as part
of its innovation activities. The department and centre possess the core capabilities
and resources required to create digital and physical prototypes of new products
and manufacture them at the Group’s facilities. The R&D department operates
in Russia and Belgium. The main laboratory research facility is located at the Lipetsk
site, while computer modelling and premium coating development capabilities are
based in La Louvière (Belgium).
In February 2020, microstructural analysis laboratories were opened at the Lipetsk
site. Their purpose is to analyse the properties of steel produced during physical
simulation and industrial experiments. The unit draws together unique research
competencies and state-of-the-art measurement equipment. Several dozen
high-precision devices support more than a thousand types of microscopy
and chemical analysis measurements. This multi-method research will facilitate
the development of new steel grades and products for the automotive, energy,
and construction sectors.
In December 2020, three laboratories
developing new coatings were opened
at the La Louvière site, enabling
a broad spectrum of physical, chemical,
and analytical studies, simulation of
various technologies and application
modes, and tests of end products
(coated steel).
Apart from researching new
products, we also carry out studies
in the domain of sustainable development.
In December 2020, the Company became
a member of K1-MET, Europe’s leading
metallurgical competence centre,
and commenced a joint project with
Voestalpine to process zinc-containing
dust and sludge. Our industrial waste
recycling project was backed by
the Austrian government through
the COMET programme (Competence
Centers for Excellent Technologies).
NLMK interacts actively with
the innovation ecosystem, creating
mechanisms for cooperation with
venture funds, development
institutions, and technology parks
both in Russia and abroad. The goal
of these efforts is to create a constant
flow of ideas and projects for
subsequent integration and piloting
at Group sites. The Company’s main
body in charge of innovations is
the Innovation Projects Committee
led by NLMK’s CEO (Chairman of
the Management Board). The Committee
has been in operation since 2018.
In 2020, the number of projects
in our research and development
portfolio tripled. The portfolio primarily
focuses on product innovations on
the 2030 horizon. The goal is to ensure
the Company’s competitive advantage
and steady technological development.
The Company’s efforts to expand
its product portfolio are anchored
in the R&D development strategy,
which was approved by the NLMK Board
of Directors in 2018. The Company
is actively developing its process base
to regulate project management
approaches in order to successfully
implement R&D and innovation projects.
TOP RESEARCH AND DEVELOPMENT PRIORITIES UNTIL 2022
Introduce product innovations
Establish a diversified product portfolio for the automotive,
heavy engineering, energy, and industrial
and civil construction industries
In 2020, we developed, patented, and produced a number of innovative steel grades:
● Ultra-high-strength cold-rolled steel with a tensile strength of over 1,000 MPa
for safer car bodies
● High-strength ultra-low-carbon (non-ageing) steel with highly homogeneous
properties manufactured using a cassette technology and annealed in bell-type
furnaces for the production of extra-deep-drawing automotive parts and
undercarriages
● Steel with an anti-corrosion coating of zinc, aluminium, magnesium, and a polymer
finish, 2–3 times more durable than standard zinc coatings
● High-strength steel plate for manufacturing the nodes of heavy-duty vehicles,
ensuring the equipment’s operation under high static and dynamic loads and
in temperatures below -50°С
● Plate for construction equipment with a strength of up to 1,200 MPa, high plasticity
and toughness
● High-strength hot-rolled steel with good formability and increased resistance
to cracking for structural car body elements
NLMK DanSteel supplies steel heavy plates for next-generation
floating offshore wind farm
NLMK DanSteel has supplied its heavy plate for the Wind Float Atlantic project,
the first semi-submersible floating wind farm in the world, located off the north
coast of Portugal. NLMK DanSteel’s high-quality steel is used in the production
of floating platforms and foundations.
Wind Float Atlantic comprises three wind turbines of 8.4 MW each, mounted
on floating platforms. The wind farm will be able to generate enough energy
to supply 60,000 households in Portugal and save almost 1.1 million tonnes
of CO2 emissions per year.
With the aim of participating in such innovative offshore projects, NLMK
DanSteel has improved its production process and developed a special chemical
composition of high-strength steel that ensures strong performance under
high static and dynamic loads at low temperatures. Together with the American
Bureau of Shipping (ABS), the plant has successfully completed product
certification.
22
23
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
DIGITALIZATION
The development of information
technologies and digital solutions
is an essential tool for attaining NLMK
Group’s strategic goals. Dozens of
cross-functional teams are engaged
in the development of over 90 digital
products for production sites and
corporate functions. Every digital
solution is designed to achieve our
first-priority goals and to eliminate
faults. The Company employs machine
learning and machine vision, advanced
analytics, Industrial Internet of Things,
unmanned aerial vehicles, additive
and other technologies that are most
relevant to every given task.
Digitalization in the context
of Strategy 2022
● Leadership in efficiency. Every year,
NLMK Group increases its investment
into the automation of production
processes. Our teams create
solutions to boost the efficiency
of production, repairs, logistics,
and energy. We are successfully
implementing a one-of-a-kind set
of calendar planning and scheduling
programmes, which will enable
reduced lead times for customers
and higher capacity utilization.
Mobile devices are used for planning
and executing production equipment
repairs. Over the course
of the current strategy cycle,
initiatives involving digital solutions
will contribute at least $50 million
to the operational efficiency goal.
● Development of low-cost steel
production. Our active use of BIM
technologies in major investment
projects has allowed for a significant
decrease in the number of project
collisions, optimization of construction
timeframes, and the elimination
of unforeseen risks related
to construction and installation works.
● Sustainable development.
The Company harnesses new
technologies to increase production
safety, reducing human participation
in dangerous operations, improving
automotive and railway transport
safety, and providing employees with
convenient tools for risk identification
when executing dangerous work.
In our efforts to deal with
environmental concerns, we use
technologies that help us more
efficiently clean emissions from harmful impurities. We have also integrated
a digital system for environmental impact monitoring.
● Sales development. Our digital tools and services, including our online sales
platform, ensure prompt customer interaction, increase loyalty, and shorten
feedback loops with our customers. In-depth analytics allow us to build the sales
system around customer experience, reduce order lead times, and create
competitive advantages.
The digital ecosystem we have established ensures effective “ground rules”
for cross-functional teams, sustainable solutions, knowledge accumulation
in the Company, and a seamless collaboration environment with over 30 partner
companies specializing in various subjects and technologies. In terms of digital
ecosystem development, NLMK Group has reached two key objectives in 2020:
● Stabilizing the organizational model of digital product creation and development.
The model is based on the iterative work of cross-functional teams comprising
employees of specialized production units and functions along with technology,
IT, and data specialists. The teams focus on identifying the digitalization potential
of a given production unit or function and are in charge of the entire life cycle
of the solutions they create. Dedicated teams work on end-to-end cross-functional
digital products. The teams are reasonably autonomous, which means that
they are able to experiment with innovative solutions and to engage and develop
high-potential specialists.
● Creating a machine learning platform, which ensures that the dozens of Company
solutions that involve AI technologies operate consistently and continue to develop.
Our DSML (Data Science and Machine Learning) platform is a single environment
for data scientists. It creates a feedback loop between mathematical models.
The Company is actively introducing digital and mobile services for employees.
Such solutions support the full HR cycle: planning vacations and business trips,
training, objective management, performance reviews, career track selection,
and much more.
The digitalization of Stoilensky has allowed for an increase in iron ore
output and an optimisation of the mine development plan
Calculating the optimal opencast mine development plan is always a challenge.
The ore is not hosted evenly, and its ferrum content varies. We have built
a digital 3D model of the mine, visualized the deposit structure and the ore
bedding conditions, and used the model to develop a mining scenario for
thirty years to come. Based on this data, we put together yearly and monthly
plans with replacement tasks and adjust them automatically.
In addition, an optimizer system manages the transport flows in the mine.
It sends messages to every driver, specifying where to load and unload their
truck. The routes are distributed so that ores with different ferrum content
levels are mixed together, forming a homogeneous mass.
The digitalization of NLMK’s BOF operations has helped optimize
ferroalloy consumption
NLMK produces hundreds of steel grades. In order to manufacture a particular
grade, we need to ensure a certain concentration of the required chemical
elements in the composition, which means adding the right amount of ferroalloys.
Our ferroalloy consumption optimizer service determines the optimal composition
and calculates the precise amount of the required additives. Through a user-
friendly interface, it recommends the right amounts to the steel caster,
which can add just enough ferroalloys for producing the steel grade in question.
If there are several options, the most cost-effective one will be selected.
The solution is expected to generate a gain over RUB 90 million per year.
CYBERSECURITY
NLMK Group follows a unified approach
to countering cyber threats. To this
effect, the Company has established
a comprehensive information security
system that has proven its reliability
during the rollout of the remote work
practice. This provides confirmation
that the Company’s cybersecurity
management has taken effective
measures, based on the principle
of the top management’s involvement
in ensuring integrated and centralized
information security management
and risk-based approach implemented
by the Risk Assessment and
Management team.
level of information security processes is also regularly evaluated in accordance
with the COBIT 5 standard to make sure that the Company is well on track towards
its target. As for the level of the corporate network’s resilience to potential attacks,
the Company plans to carry out regular external penetration testing (Pentest).
With a view to counteracting man-made cyber threats, all NLMK employees, when they
join the company, are familiarized with internal regulatory documents on information
security through the electronic document management system and the corporate
portal. The Company also regularly carries out awareness-raising activities (including
informing about incident-related procedures), which include online learning courses,
phishing email recognition tests, publications on cybersecurity matters, and e-mail
newsletters.
Each employee is personally responsible for compliance with the applicable information
security requirements. Employees may be subject to disciplinary or other action for
their violation.
The Company has adopted a practice
of regular internal audits of compliance
with trade secret and personal data
processing requirements. The maturity
NLMK Group sets ambitious strategic goals for the development and digitalization
of its operations, in which countering cyber threats will undoubtedly be of high
importance. The Company will continue to focus on this area to improve
the established information security risk management process.
24
25
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR STRATEGY
STRATEGY 2022
Strategy 2022 is predicated on enhancing NLMK Group’s competitive advantages through boosting
operational efficiency across the entire production chain, growing cost-efficient steel production,
enhancing vertical integration into key raw materials, increasing sales of high value-added (HVA) products,
and pursuing environmental, safety, and human capital development programmes. Strategy 2022 targets
net gains of +$1.25 bn to EBITDA.
STRATEGY IN ACTION
Operational efficiency
Target EBITDA gain by 2023
+$570 m pa
Total EBITDA gain in 2020 (vs. 2019)
+$176 m
Goal:
Reduce cash cost and increase output across the entire
integrated value chain
Results:
The structural gain to EBITDA from operational efficiency
programmes amounted to $176 m vs. the 2019 base
$1.25 bn
BY STRATEGIC GOALS
$1.25 bn
BY TOOLS
0.50
Leadership
in efficiency
0.30
Leadership
in low-cost steel
production
0.45
Leadership
in strategic
markets
0.57
Operational
Efficiency
0.68
Investment
KEY ELEMENTS OF STRATEGY 2022
1. LEADERSHIP IN OPERATIONAL EFFICIENCY
2. GROWTH IN LOW-COST STEEL PRODUCTION
Goal:
Focus on operational efficiency and working towards best
production practices; global leadership in the cash cost
of steel production
Goal:
Growth of steel output at NLMK Lipetsk; maintaining 100%
self-sufficiency in iron ore; growth in energy self-sufficiency
at NLMK Lipetsk; decrease in coal consumption, including
deficit grades
Target structural EBITDA gain:
$0.5 bn
Capex over the strategic period:
$0.05 bn
Target structural EBITDA gain:
$0.3 bn
Capex over the strategic period:
$1.0 bn
3. WORLD-CLASS SALES PORTFOLIO
4. LEADERSHIP IN SUSTAINABILITY AND SAFETY
Goal:
Growth of steel product sales; growth of high value-added
(HVA) product output and sales
Goal:
Minimizing environmental footprint and ensuring safe
operations
Target structural EBITDA gain:
$0.45 bn
Capex over the strategic period:
$1.1 bn
26
EBITDA GAIN BY SEGMENT
IN 2020, $ M
5
2
18
19
+176
These achievements were largely due to the development of NLMK Production System
(NPS). In the reporting year NPS was rolled out to all Russian sites. At key sites, such
as Sintering & Ironmaking and Stoilensky, projects were implemented to increase
NPS maturity with a focus on consistent growth of ideas with an economic effect.
Despite the pandemic, last year’s number of initiatives was surpassed already
in mid-November. Altogether, approximately 27,000 initiatives were submitted in 2020.
The number of initiatives with an economic effect increased by 50%. 98% of ideas
with gains exceeding RUB 100,000 were submitted by blue collars and line managers,
which ensures the system’s stability.
132
NLMK Russia Flat
Mining
NLMK Russia Long
NLMK USA
NLMK EU
NLMK Russia Flat (+$132 m): lower
expenses on coal charge structure;
additional output of slabs, hot-rolled
steel, and galvanized steel; optimization
of metallic charge consumption;
logistics and energy projects.
Significant improvement in the surface
quality of commercial grain-oriented
steel.
Stoilensky (+$19 m): increased output
of concentrate and pellets.
NLMK Russia Long (+$18 m): lower
metallic charge consumption at
NLMK Kaluga and NLMK Ural; process
optimization at NLMK Metalware.
NLMK USA (+$5 m): increased steel
output; lower metallic charge
consumption at the Indiana plant.
NLMK EU (+$2 m): increased efficiency
at the Verona plant.
Using the Control Charts NPS tool, the pelletizing and induration area
of the Stoilensky Pellet Plant stabilized specific gas consumption
per tonne of pellets
While analyzing control charts, specialists at the plant noticed that gas
consumption rates went beyond the control limits, leading to significant
overconsumption. This was due to a malfunction causing the induration unit
to operate at the wrong speed. The speed of pallet cars is regulated by sensors
that measure layer height. The incorrect readings of these sensors led
to the machine’s speed increasing above normal, causing the induration
unit to stop. Measures were taken to determine and formalize the maximum
levels of pellet layer height, and the sensors were recalibrated. This enabled
the stabilization of pallet car speed. Specific gas consumption at the pelletizing
and induration area has become more stable and manageable.
Production System at NLMK Vtorchermet
In 2020 the managing company and four operation companies of NLMK
Vtorchermet implemented the first wave of the NPS development project.
This project has the most unique geography of all NPS projects in the Group:
it involves 12 scrap collection facilities in the Ural region, Siberia, and Central
Russia.
In 2020, a total of 47 initiatives were submitted (vs. 33 in 2019) with a confirmed
economic effect of RUB 168 million (vs. RUB 43.5 million in 2019).
Operation companies that collect, process, and ship scrap mostly use standard
technological processes and equipment, which enables the roll-out of related
best practices across all NLMK Vtorchermet sites. The improvement projects
will result in higher productivity and increased equipment reliability and safety.
27
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Leadership in sustainability
and safety
Goal:
Minimize environmental footprint
and ensure safe operations
Leadership in sustainability and safety
remains a priority for NLMK Group.
Priority areas include:
● Further minimization of our
environmental footprint, including
a reduction in specific emissions
per tonne of steel at NLMK Russia
to the level of the EU best available
technologies
● Further reduction of injury rate
to LTIFR1 0.5 for our own employees
and contractors
● High level of social protection and
employee engagement
STRATEGY IN ACTION
Investments
Target EBITDA gain by 2023
+$680 m pa
Total EBITDA gain in 2020 (vs. 2019)
+$85 m
EBITDA GAIN BY SEGMENT
IN 2020, $ M
2
6
8
9
+85
60
Mining
Long products
Flat products
NLMK EU
NLMK USA
Over 90% of all gains were obtained
at the Group’s Russian companies:
Stoilensky (+$60 m): launching
the additional beneficiation section.
NLMK Russia Long (+$9 m):
commissioning new power complexes
built in 2019. Power complexes
are a new-type of mini power plants
providing NLMK Russia Long sites
with heating, hot water, and chemically
purified water for processes, as well as
captive electricity.
Goal:
Growth in low-cost steel production and growth
of premium product output and sales
● NLMK has relaunched Blast Furnace No. 4 (BF-4) following a large-scale upgrade.
As a result, the maximum output of the furnace increased by 8% to 3.4 million
tonnes of pig iron per year. A new air treatment system captures 99.9% of
dust particles, keeping residual dust content at the level of best available
technologies (BAT) of 5 mg/m3. All of the blast furnace gas formed as a by-product
in the manufacturing of pig iron is used for energy generation at NLMK’s
cogeneration plant, while blast furnace slag is processed into construction
materials. The total CAPEX for the project amounted to over RUB 35 billion.
The furnace is equipped with an advanced automated control system with built-in
artificial intelligence components. The system is able to autonomously select
optimal process parametres, boosting blast furnace performance.
● NLMK has relaunched its Basic Oxygen Furnace No. 3, a steelmaking facility with
a capacity of over 3 million tonnes per year, following an overhaul. The launch
of a new dust and gas collection system in line with best available technologies (BAT)
was tied in with the relaunch of the BOF.
● At NLMK Lipetsk, a new facility for the production of steel products, a continuous
casting machine (CCM-9) was launched. The productivity of CCM-9 is 1.8 million
tonnes of steel per year. The company plans to use the equipment to master
the production of a premium mix of products that will be used to make wind turbine
parts, marine vessels, oil drilling rigs, and large-diameter pipes.
Altai-Koks has launched coal stamp charging unit at an operational
coke battery
Instead of using the top charging method, stamp charging involves feeding
already compacted coal briquettes into the oven horizontally. The technology
has been introduced at Coke Battery No. 5, the most advanced coke oven battery
at Altai-Koks. It has a production capacity of 1.1 million tonnes of coke per year.
The new unit is equipped with an advanced and efficient gas treatment system.
NLMK to increase galvanized steel production capacity
NLMK Russia Flat (+$8 m): operation
of the briquetting plant, which launched
in May 2019; launch of the new logistics
complex at the Lipetsk site.
NLMK Lipetsk has embarked on a project to construct a new continuous hot-dip
galvanizing line (HDGL-5) with a capacity of 450,000 tonnes of steel per year.
The new line will produce high-quality steel for the construction, automotive,
and white goods industries.
In addition, a number of major
projects were completed in 2020,
and we expect to see their positive
impact in 2021–2022. For example,
NLMK Group completed a project
to increase steelmaking capacities
at the Lipetsk site by 1 million tonnes,
up to 14.2 million tonnes per year.
Stoilensky finished hot testing at new additional beneficiation section
Hot testing was performed at three new concentrate grinding lines.
The commissioning of the new additional beneficiation section will enable
Stoilensky to increase its concentrate output from 17.5 million tonnes
to 20 million tonnes per year and its ore processing capacity from 37 million
tonnes to 42 million tonnes by 2021.
28
29
1 Lost Time Injury Frequency Rate.
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SUSTAINABILITY MANAGEMENT
OUR APPROACH
TO SUSTAINABILITY
MANAGEMENT
As one of the largest international
producers of steel and steel
products, NLMK Group is aware
of its responsibility towards society,
nature, and future generations.
Our team is united by corporate
values that shape NLMK’s approach
to responsible leadership.
A number of NLMK Group’s internal
documents regulate sustainability
measures. A more detailed list
of these documents can be found
further in the text of this Report.
Sustainability management is integrated into NLMK Group’s corporate governance
system and is carried out at all the Group’s companies, including international ones.
Sustainability issues consistently feature on the agenda of NLMK Group’s leadership.
The Board of Directors, the Board’s committees, CEO (Chairman of the Management
Board), and the Management Board determine strategic growth priorities and ensure
overall sustainability management.
Vice presidents of functional units are responsible for identifying specific tasks and
initiatives to manage the social, economic, and environmental aspects of the Group’s
activities and monitor their implementation. Departments responsible for developing
approaches and implementing measures in matters concerning sustainability report
to these vice presidents.
The Group’s functional departments and teams are directly responsible for executing
the tasks assigned to them and for the local management of sustainability issues
at the Group’s companies.
The detection, monitoring, and management of sustainability risks is an integral part
of the corporate risk management system (see the Operational Control and Risk
Management section for more details).
NLMK GROUP’S VALUES
GRI 102-16
Value
Description
Continuous improvement
of processes
Client-oriented approach
Continuous improvement of processes and technologies to ensure the sustainable
production of steel products that help improve the quality of life
Production of unique premium quality steel products and development
of engineering solutions that help our customers be on the cutting edge
of innovation and be leaders in their markets
Absolute priority of the health
and safety of our employees
Unwavering commitment to protecting the health and safety of our employees
and contractors and ensuring favourable working conditions that allow our
employees to fulfil their potential for professional and personal growth
Ensuring equal opportunities
for employee development
Ensuring equal opportunities for the professional and personal growth of our
employees and motivating our employees to be proactive and innovation-driven
Sustainable use of resources
Sustainable use of resources and the pursuit of the best available environmental
and energy efficiency standards, which we also expect our partners to comply with
Active approach to social
responsibility
Active approach to social responsibility and care for cultural legacy in the regions
where we operate
SUSTAINABLE
DEVELOPMENT POLICY
In 2019, NLMK’s Board of Directors
approved the Company’s Sustainable
Development Policy (the “Policy”).
This Policy defines the Group’s
principles, goals, and objectives
in matter concerning sustainable
development as well as the mechanism
for managing the relevant agenda
at the level of the Board of Directors.
In particular, the Board’s Strategic
Planning Committee is responsible
for determining the Company’s
goals and strategy for minimizing
its environmental footprint, including
greenhouse gas emissions, and
reviewing and approving the relevant
investment programme. The Board’s
Audit Committee monitors the integrity
of the disclosure of sustainable
development information.
The relevant functions are set in regulations on Committees, which were approved
at NLMK’s General Meeting of Shareholders. For more information, see the Corporate
Governance section.
Leadership in sustainability and safety is one of the four main goals of NLMK
Group’s Strategy 2022, and the changes that have been implemented will contribute
to the successful achievement of this goal. The changes are in line with best
international practices and stakeholder requirements, and confirm NLMK Group’s
commitment to the principles and objectives of the UN Global Compact, to which
the Company is a party.
INTEGRATED MANAGEMENT SYSTEM
In 2020, NLMK Group approved its Integrated Management System Policy (IMS Policy).
This Group-wide document lays out the Company’s intentions in the areas of quality
(ISO 9001), environmental protection (ISO 14001), energy efficiency (ISO 50001),
and occupational health and safety (ISO 45001). The Policy, approved as part of
integrated management system development, complies with international standards
and reflects best global practices of sustainable development. The full text of the Policy
is available on the Company’s website via this link.
ORGANIZATIONAL STRUCTURE FOR MANAGING
SUSTAINABILITY ISSUES AT NLMK
GRI 102-20
Strategic Planning Committee
Internal Audit Service
Board of Directors
Human Resources, Remuneration,
and Social Policy Committee
CEO (Chairman
of the Management Board)
Management Board
Audit Committee
Investment Committee
Risk Management Committee
Functional units and teams at the Group’s Russian and international companies
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Integrated Management
System objectives:
● To be a global leader for the quality
of our steel products and raw
materials by continuously upgrading
and expanding our product mix with
the aim of increasing our customers’
competitiveness
● To comply with industry best
practice concerning the rational use
of material and technical resources
and the safety of our production
processes for both human health
and the environment
● To be a global leader in adopting best practices to make our operations more
energy-efficient, and to reduce energy consumption and cost of production
as far as is technologically and economically feasible
● To ensure efficient production with zero accidents, incidents, and near misses
through global excellence in occupational health and safety and continuous
development and promotion of a safety culture among NLMK Group’s employees
and contractors
● To ensure our operations do no harm to the environment or the climate, and
to respond to changing environmental and climate conditions by balancing them
with social and economic needs
Integrated Management System objectives and management liabilities are published
at NLMK Group’s website.
SUSTAINABILITY AGENDA MANAGEMENT
AT THE BOARD OF DIRECTORS LEVEL
Board Committees
Key aspect of sustainability
Strategic Planning Committee
● Sustainable development risk assessment
● Environment:
— Air emissions
— Discharges and waste
— Use of resources
— Biological diversity
— Climate change
Human Resources, Remuneration,
and Social Policy Committee
Integration of sustainable development KPIs in the remuneration system
●
● Social and employment:
— Operational health and safety
— Training and development
— Social policy
— Diversity and equal opportunities
— Non-discrimination
— Local communities
Audit Committee
● Performance monitoring and sustainability reporting
Board of Directors,
Human Resources, Remuneration,
and Social Policy Committee,
Audit Committee
● Corporate governance:
— Corporate governance
— Business ethics
— Anti-corruption
CONTRIBUTION
TO THE ACHIEVEMENT
OF THE SUSTAINABLE
DEVELOPMENT GOALS
ADOPTED BY THE
UN GENERAL ASSEMBLY
NLMK Group supports the Sustainable Development Goals adopted by the UN General
Assembly in 2015, which aim to address significant economic, social, and environmental
issues faced by the global community.
We believe that the Group makes a valuable contribution to the achievement of global
sustainability goals by engaging in responsible business and targeted activities that
aim to reduce its environmental footprint, support local communities, and ensure safe
and decent working conditions.
NLMK GROUP’S CONTRIBUTION TO ACHIEVING
UN SUSTAINABLE DEVELOPMENT GOALS
UN Goal
NLMK Group’s contribution
Ensure healthy lives and promote wellbeing for all at all ages
●
●
●
●
Implementing programmes aimed to help employees stay healthy and increasing
the availability and quality of medical services for employees
Informing the Group employees and contractors about occupational safety rules
Implementing training programmes in occupational health and safety
Implementing initiatives aimed at reducing water consumption, pollutant emissions,
and overall waste
See the following chapters of the Report: Our team, Developing local communities, Occupational
health and safety, Human rights, Supply chain management, Environmental protection
Ensure inclusive and equitable quality education and promote lifelong
learning opportunities for all
●
●
Implementing training and development programmes to enhance professional skills
of employees
Implementing external social programmes aimed to support education in the regions
where the Company operates
● Cooperating with educational institutions to improve the quality of training programmes
and vocational training for future employment opportunities
See the following chapters of the Report: Our team, Developing local communities
Ensure availability and sustainable management of water
and sanitation for all
●
Introducing water recycling systems
Implementing water treatment technologies
●
● Reducing water intake through equipment upgrades
● Monitoring and disclosing information on the use of water resource
See the following chapters of the Report: Environmental protection
Ensure access to affordable, reliable, sustainable,
and modern energy for all
Improving energy efficiency
●
● Transitioning to captive energy generation
● Consuming energy from secondary resources
● Monitoring and disclosing information on the volume of energy consumed
See the following chapters of the Report: Energy efficiency
32
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
UN Goal
NLMK Group’s contribution
UN Goal
NLMK Group’s contribution
Promote sustained, inclusive, and sustainable economic growth, full and productive
employment, and decent work for all
● Fulfilling tax obligations
● Ensuring equal access for all Group employees to social benefits and creating equal
opportunities for high performance, professional growth, and the development
of creative potential
● Creating jobs in the regions where we operate
●
Implementing training and development programmes to enhance employees’
professional skills
● Ensuring decent and safe working conditions
● Developing NLMK Group’s human rights policy prohibiting forced and child labour,
recognizing the right to a minimum wage, outlawing discrimination, and guaranteeing
safe working conditions
● Ensuring the transparency of procurement procedures
● Supplier’s Code of Business Conduct, which is binding for all counterparties
● Evaluating supplier compliance with applicable occupational health and safety standards
as part of auditing and qualifying suppliers and contractors
Implementing initiatives to minimize the Group’s environmental footprint
●
See the following chapters of the Report: Our team, Developing local communities, Occupational
health and safety, Human rights, Supply chain management, Environmental protection
Ensure sustainable consumption and production patterns
Increasing the efficiency of natural resource usage
●
● Recycling ferrous scrap
●
Implementing a series of measures aimed at improving energy efficiency and the efficiency
of resource use and reducing the environmental footprint of operations
● Upgrading equipment and improving technology in order to minimize their negative impact
on human health and the environment
See the following chapters of the Report: Environmental protection
Climate change
Implementing a set of measures to reduce specific greenhouse gas emissions
●
● Sales of products that enable lower emissions on the consumer side
●
International cooperation on projects aimed at reducing greenhouse
gas emissions
Promote peaceful and inclusive societies for sustainable development, provide access
to justice for all, and build effective, accountable, and inclusive institutions at all levels
● Countering corruption and fraud and preventing conflicts of interest
●
Introducing NLMK employees to the Code of Corporate Ethics and Anti-Corruption Policy
Introducing counterparties to the Supplier’s Code of Business Conduct
●
● Creating and continuously improving efficient corporate governance practices
● Creating and developing a system of government relations
● Ensuring human rights protection
● Complying with applicable laws, including occupational practices
● Openly interacting with stakeholders and informing stakeholders about the Company’s
positive and negative impacts
● Creating feedback channels
● Monitoring and regular reporting on the management of environmental aspects and
disclosing information about legal non-compliance, including with environmental protection
and labour laws
See the following chapters of the Report: Corporate governance, Operational control and risk
management, Information for shareholders and investors, Environmental protection
Strengthen the means of implementation and revitalize the global partnership
for sustainable development
● Cooperating with government authorities to ensure that the interests of local
communities are taken into account in decision-making
● Disclosing information about payments to the state budgets
● Concluding partnerships with NGOs to implement programmes which aim to develop local
communities
● Supporting sustainability initiatives implemented by Russian and international industry
organizations
● Strengthening partnerships with other companies in the industry
See the following chapters of the Report: Stakeholder dialogue, Developing local communities,
Environmental protection, Supply Chain management, About the Report
See the following chapters of the Report: Environmental protection,
Climate change
34
35
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR RESULTS
COVID-19 RESPONSE
The Company focused all of its
efforts on ensuring employee
safety during the pandemic. In view
of the epidemiological situation,
a comprehensive programme to mitigate
the impact of COVID-19 was initiated
in March 2020. The programme
covered all Group companies, whose
total headcount exceeds 50,000
people, as well as certain categories
in the communities of the regions
where the companies operate, such
as socially vulnerable groups and medical
workers. The Group’s Russian companies
instituted an obligatory remote work
mode for all employees over the age
of 60. Approximately 5,000 people
switched to working from home.
The Company provided the necessary
protective equipment and preventive
medication, and organized regular
tests both for employees and
contractors. NLMK Group prohibited all
mass gatherings, events, and meetings
with over 15 people, and placed limits
on business trips. New requirements
included wearing masks, practising social
distancing, measuring temperature,
and obtaining a negative COVID-19 test
result before returning to work after
a long absence (vacation or sick leave).
In addition, NLMK initiated supplementary
assistance programmes in the regions
where it operates, working in close
cooperation with the municipal and
regional authorities.
The Company attached particular
importance to informing its employees
about the current pandemic situation
in a timely manner. One of NLMK’s
first response measures was
the creation of a COVID-19 call centre
that employees could contact in case of
infection risk, as well as a crisis centre
to prevent the spread of COVID-19.
When the epidemiological situation was
at its most difficult, NLMK Group’s CEO
published weekly addresses to employees
on the corporate portal, providing
them with the latest information about
the pandemic and the Company’s
Employee safety
Social assistance
● Over 100,000 COVID-19 tests
for employees
● 5,000 employees switched
to working remotely
● >35,000 PPE units for employees
● Limiting business trips and
in-person meetings, maximizing
online training
● Changing work schedules
to reduce workplace density
● More buses and routes to deliver
employees to work
● RUB 30,000 in additional
payments to staff to compensate
for pandemic-related expenses
● 67 ventilators
● 46 oxygen concentrators
● 4 PCR labs equipped
● >530,000 PPE units provided
to medical facilities
● Vehicles for hospitals, X-ray
machines, and other medical
equipment
● 1,000 families of employees
that have three or more
underage children or are raising
children with disabilities received
financial support
● 25,000 food parcels were
provided to elderly people,
veterans, families with three
or more underage children,
and single parents in the regions
where the Group operates
measures to protect employees’
interests. Additionally, in August,
at the live phone-in event with the CEO,
he spoke about the way that the Company
coped with the crisis period, and
employees could pose their questions
to him directly.
Many of our business processes have
undergone changes. NLMK had two main
goals: employee safety and production
continuity. The Company was successful
in adapting to the new conditions.
For instance, the NLMK Innovation
Lab began holding its idea generation
and project exploration sessions
in an online format. In 2020 the Lab and
the Sessions & Conferences department
of the Corporate University organized
four in-person events for Sintering
& Ironmaking, Rolling Operations,
Steelmaking, and the Procurement
function.
The pandemic became a professional
challenge for our IT departments,
which had to urgently lay a technical
foundation for effective remote work.
It took the IT infrastructure team only
two weeks to deploy remote access
services on a mass scale.
In order to continuously develop our
employees’ qualifications, we transferred
most training activities into an online
format. The Corporate University team
adapted the contents of its programmes
accordingly.
The pandemic also spurred changes
in the processes related to major
repairs at NLMK’s flagship Lipetsk
site. We piloted the Virtual Line Walk
system for monitoring construction
and installation works and successfully
used it during the overhaul of a continuous casting machine in BOF Shop No. 2.
The service is designed to oversee construction works, including those at remote
facilities, compare the actual construction with the 3D project models, and collect
retrospective data for subsequent analysis of the construction process.
The pandemic gave further impetus to the Company’s digitalization process,
stimulated the development of the corporate volunteer movement, with more
volunteers joining its ranks at Company level, and shifted the focus of charitable
activities towards supporting healthcare.
When it comes to the Company’s economic and financial performance, the pandemic
had an adverse impact on overall business activity in Q2 2020, leading to significantly
weaker steel demand at our traditional sales markets and to lower steel product
prices. In April 2020 we had to reduce output at our Long Products Division.
In order to sustain high capacity utilization at NLMK’s flagship Lipetsk site, we adjusted
our regional sales structure (in particular, increasing supplies to Asian markets in
April and May) and diversified our product portfolio. NLMK Group’s flexible business
model enabled it to redirect its supplies, mainly to China, where steel demand had
already started to recover.
We navigated the crisis with confidence by relying on our diversified product line-up
and flexible supply chains. The Company proceeded with its main investment projects
planned for 2020. In this difficult period, our financial performance remained stable.
In 2020, the total programme budget for various measures to combat the pandemic
amounted to more than RUB 4.7 billion, including RUB 4.1 billion — for internal
expenses (measures to reduce the risk of the spread of infection, social support
for employees, etc.), RUB 0.6 billion - for external social expenses (support for
the regions of presence).
Stoilensky provides assistance to Stary Oskol medical professionals
Stoilensky Mining and Beneficiation Plant, an NLMK Group company, provided
three ventilators to medical facilities in Stary Oskol. In order to curb the spread
of COVID-19, the plant assisted the city in purchasing masks, gloves, and
disinfectants for a total of RUB 1.5 million.
NLMK’s social partner, the Miloserdiye Charity Fund, provided 500 protective
suits to health professionals on the frontlines of the fight against the virus.
In order to sensitize local communities on how to prevent the spread of COVID-19,
Stoilensky placed banners with information about key prevention measures
around the city.
36
37
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
MARKET REVIEW
GLOBAL STEEL PRODUCTION,
BN T
PRICE TRENDS
The COVID-19 pandemic has had
a significant impact on the global
steel industry in 2020. A high level
of uncertainty, restrictions to contain
the spread of the infection, partial
suspension of production chains,
and turbulence on raw material
markets have led to substantial supply
and demand imbalances, changing
the structure of global trade flows
in all key regions.
The first country where business activity
began to recover was China. A large-
scale state programme to stimulate
the economy and finance major
infrastructure projects led to a surge
in internal demand for steel products
and, consequently, an increase in steel
product prices globally.
Worldsteel Association estimates
that in 2020 global steel production
decreased by 1% yoy to 1.83 bn t, which
was almost entirely offset by China’s
all-time-high steel output (+5% yoy,
to 1.05 bn t). Average global steelmaking
capacity utilization stood at 82%.
Global apparent demand decreased
by 2% yoy, to 1.75 bn t, while in China
it grew by 8% yoy to 1.02 bn t.
At the same time, exports from China
went down by 17% yoy to 54 m t.
US MARKET
In 2020 steel output in the US decreased by 17% yoy to 73 m t. Capacity utilization
rates averaged 67%, and remained lower than pre-crisis levels at the end of
the reporting period.
Steel consumption in 2020 went down by 19% yoy to 86 m t amid limited demand
from manufacturers due to the COVID-19 pandemic. Demand was recovering
in the automotive and construction sectors towards the end of the reporting period,
but steelmakers’ lead times reached record highs: long-term contracts were prioritized
and there was practically no steel supply on the spot market.
Steel imports in 2020 decreased by 21% yoy to 20 m t, while exports were down by 4%
yoy to 6 m t.
EU MARKET
Steel output decreased by 12% yoy to 139 m t. By the end of the year steel output
bounced back to almost pre-crisis levels as production became highly marginal.
Capacity utilization rates during the pandemic went down to nearly as low as 50%,
but recovered to 70% by the end of the year.
Apparent steel product consumption in the EU was down by 12% yoy to 142 m t in 2020,
as demand was low due to the COVID-19 pandemic and capacities had to be suspended.
At the end of the reporting period demand was recovering in the automotive and
machine building sectors.
Imports of flat and long steel were down by 17% yoy to 21 m t, while exports decreased
by 13% yoy to 18 m t.
RUSSIAN MARKET
In 2020 apparent consumption of finished steel products decreased by 3% yoy due
to limited demand for flat and long products. Demand for coated steel grew by 4%
due to an uptick in construction and renovation of country houses during the COVID-19
pandemic. Internal demand was supported by the state programme of discount
mortgages and subsidies for the automotive industry.
Steel output in Russia remained flat yoy in 2020, totalling 72 m t. Meanwhile, steel
imports were down by 18% yoy to 5.1 m t, and finished steel exports increased
by 6% yoy, reaching 13 m t.
Sources: Bloomberg, Worldsteel, Eurofer, Metal Expert. Preliminary data.
1.63 1.73
1.81
1.87
1.83
2016
2017
2018
2019
2020
STEEL PRODUCTION
BY REGION, %
2 2 5
4
6
8
16
58
China
Asia, excl. China
EU-28
North America
Russia
Middle East
South America
Others
Average global coal prices decreased by 29% yoy in 2020 due to weak demand
from the steel industry during the pandemic and China’s restrictions on imports
of Australian coal. Iron ore prices grew by 15% yoy due to high demand from Chinese
steelmakers amid forecasts of lower raw material supplies from Brazil and Australia.
Market prices for flat products in the US were down by 2% yoy, hitting a local minimum
in early Q3 2020 and later rebounding sharply to multi-year highs. The decrease
in European prices averaged 5% yoy, but starting from early Q3 the region saw
dramatic growth as well. Dollar-denominated steel product prices on the Russian
market decreased by 9-13% yoy following global prices and a weaker ruble.
GLOBAL RAW MATERIALS PRICES, $/T
200
150
100
50
0
250
200
150
100
50
0
Feb
Apr
Jun
Aug
Oct
Dec
Feb
Apr
Jun
Aug
Oct
Dec
2019
2020
Iron ore (CFR China)
Coal (FOB Australia, right axis)
Coal (CFR China, right axis)
HOT-ROLLED STEEL PRICES, EXW, $/T
1,100
900
700
500
300
EXPORTS FROM CHINA, M T
109
76
70
64
54
2016
2017
2018
2019
2020
Feb
Apr
Jun
Aug
Oct
Dec
Feb
Apr
Jun
Aug
Oct
Dec
2019
EU
Russia
USA
China
2020
Source: Bloomberg
38
39
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OPERATING PERFORMANCE
Steel output grew by 1% yoy to 3.9 m t
(+3% yoy) following the increase in
productivity. NLMK Lipetsk capacity
utilization rate remained high at 98%.
Russian Long Products capacities were
running at 84%. The utilization rate of
NLMK’s European companies was 79%.
Consolidated sales grew by 3% yoy
to 17.5 m t supported by a three-fold
yoy increase in pig iron sales to 1.5 m t
amid higher steel output during
BOF overhauls at NLMK Lipetsk. Sales
of semi-finished products to third
parties grew by 25% yoy to 4.9 m t
due to higher pig iron and billet exports.
Slab sales to NBH totalled 2.1 m t
(flat yoy). Finished rolled steel sales
declined by 5% yoy to 10.5 m t amid weak
demand in April-May 2020 and sales
redistribution to semi-finished products.
Sales on ‘home’ markets reduced by 6%
yoy to 10.7 m t, which was mostly due to
lower sales of NLMK USA. Sales in Russia
remained flat year-on-year at 6.7 m t.
Sales on export markets grew by 17% yoy
to 6.8 m t, due mainly to higher pig iron
and billet exports.
Sales in the NLMK Russia Flat Products
segment increased by 7% yoy to 13.4 m t
as export sales of pig iron grew, along
with hot-rolled steel sales on the Russian
market. sales of finished steel reached
6.1 m t (+5% yoy) amid the completion
of repairs at NLMK’s Hot Strip Mill. Sales
of semis to third parties went up by 27%
yoy to 4.6 m t, driven mainly by higher
export sales of pig iron. Sales of semis
to NLMK Group and NBH companies totalled 2.7 m t (-12% yoy) due to lower slab demand
from NLMK’s European companies and suspended slab supplies to NLMK USA.
NLMK Russia Long Products segment sales went down by 7% yoy to 2.6 m t due to
lower demand for long products in 2020. Sales of long products in Russia went down
by 12% yoy to 1.8 m t amid the COVID-19 pandemic. Export sales increased by 4% yoy
to 0.9 m t due to higher billet sales to Turkey, China, and African markets.
Performance of NLMK’s international companies was influenced by the COVID-19
pandemic: NLMK USA sales stood at 1.6 m t (-27% yoy). NLMK Dansteel Sales went down
by 1% yoy to 0.52 m t. NBH deliveries decreased by 5% yoy to 2.1 m t sales.
Iron ore sales from the Mining segment remained flat year-on-year at 18.4 m t.
Sales of iron ore to third parties totalled 0.8 m t (+57% yoy).
FINANCIAL RESULTS
REVENUE
NET PROFIT
Revenue reduced by 12% yoy to $9.2 bn,
due to a reduction in steel product
prices and an increase in the share
of semi-finished products in total sales.
The share of semi-finished products
in the revenue grew by 30% yoy
to 4 p.p. due to higher pig iron and billet
exports; the share of finished products
decreased by 3 p.p. to 65%. The share
of high value-added products decreased
by 2 p.p. to 36%.
The share of the Russian market
in the revenue totalled 41% (flat yoy).
The EU and US share decreased
to 17% and 15% accordingly (−1 p.p. yoy;
−3 p.p. yoy).
EBITDA1
EBITDA reached $2.6 bn (+3% yoy).
Strategy 2022 programme gains,
the accrued refund from the US
Department of Commerce in line
with the settlement agreement, and
a weaker ruble fully offset the narrower
slab/uncoated flat steel spread and
the negative impact of the incident
at Stoilensky in September 2020.
Commercial expenses totalled
$845 m (flat yoy). General and
administrative expenses decreased
by 2% yoy to $346 m.
Net profit reduced by 8% yoy to $1.2 bn mainly due to the recognition of the NBH
investment value impairment in the amount of $120 m in Q2 2020. Without the impact
of this non-cash transaction, net profit would have stood at $1.3 bn.
FREE CASH FLOW
Free cash flow decreased by 28% yoy to $1.1 bn due to working capital financing
as receivables grew.
Cash outflow from working capital totalled $16 m due to:
1. − $177 m: an increase in receivables due to higher prices and increased
slab sales to NBH
2. + $117 m: a decrease in raw material and finished product stocks
3. + $46 m: an increase in payables
INVESTMENT
The Group’s investment went up by 4% yoy to $1.1 m in line with the previous guidance.
The increase of investment was due to the completion of large-scale upgrade projects
at the NLMK Lipetsk blast furnace operations and active phase of investment
programme implementation in line with Strategy 2022.
DIVIDENDS
On 11 February 2021, the Board of Directors recommended that shareholders approve
the payment of Q4 2020 dividends in the amount of RUB 7.25 per share
(for a total of $570 m). Consequently, the Company can accrue 12M 2020 dividends
in the amount of RUB 21.64 per share.
DEBT MANAGEMENT
Total debt in 2020 grew by 31% yoy to $3.5 bn.
Net debt increased by 40% yoy to $2.5 bn due to cash outflow to dividend payments
and increase of investment. Net debt/EBITDA was 0.94x.
1 EBITDA used in NLMK’s financial releases is calculated as operating profit before equity share in net losses of associates and other companies accounted
for using the equity method of accounting, impairment and write-off of assets, adjusted to depreciation and amortization. EBITDA is not an indicator
of operating profit, operating activity or liquidity under IFRS, and NLMK discloses it because equivalent indicators could be used by investors and analysts.
That said, NLMK’s EBITDA should not be viewed on a standalone basis, or in place of profit before tax, or cash flows from operations, as defined by IFRS,
or as an indicator of operational efficiency, or as the sum of free cash funds that NLMK can invest into business development. NLMK’s EBITDA margin
and EBITDA might not be comparable to similar indicators disclosed by other companies as there are no commonly accepted rules for calculating them.
For instance, NLMK’s EBITDA is calculated similar to what is termed as ‘Adjusted EBITDA’ in other companies, as NLMK’s EBITDA excludes other profit/loss
items in addition to interest payments, income tax, depreciation and amortization.
40
41
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SUSTAINABILITY MANAGEMENT
GENERATING ECONOMIC VALUE
By implementing its activities in various areas of sustainable development,
NLMK Group generates additional value for its stakeholders. In 2020, the volume
of distributed economic value amounted to $ 9,230 m1.
ECONOMIC VALUE GENERATED AND DISTRIBUTED, $ M GRI 201-1
Indicator
Stakeholder group
Generated direct economic value
Revenue
Revenue from financial
investments
Income from sale of assets
Distributed economic value
Wide range of stakeholders
Operating expenses
Wide range of stakeholders
2017
10,104
10,065
29
10
(9,773)
(6,994)
2018
12,069
12,046
21
2
(11,565)
(7,967)
2019
10,578
10,554
18
6
(11,111)
(7,516)
2020
9,274
9,245
18
11
(9,230)
(6,201)
SEGMENT RESULTS
NLMK Russia Flat Products
EBITDA decreased by 4% yoy to $1.4 bn amid narrowing price spreads and
higher personnel costs due to additional one-off payments to employees as part
of the COVID-19 pandemic support.
NLMK Russia Long Products
EBITDA grew by 4% yoy to $93 m due to operational efficiency programme gains
and a weaker ruble, as the share of billet exports increased.
Mining and Processing
of Raw Materials
NLMK USA
NLMK DanSteel and plate
distribution network
JV performance (NBH)
EBITDA increased by 9% yoy to $1.1 bn due to higher iron ore prices, a weaker ruble,
and gains from investment and operational efficiency programmes that offset
production losses associated with the September 2020 incident.
EBITDA grew to $76 m, vs. −$37 m in 2019. Without the accrued refund in line with
the settlement agreement with the US Department of Commerce, the Segment’s
EBITDA was −$21 m amid lower output and sales.
EBITDA decreased to −$4 m (vs. $8 m the previous year) due to lower plate prices.
EBITDA totalled −$93 m vs. −$134 m the previous year. Losses in the Segment were
due to low prices for end products coupled with a decrease in output and sales
amid the COVID-19 pandemic. The relative decrease in losses vs. the previous year
was due, among other factors, to last year’s accrual of non-operating provisions
for NLMK Clabecq restructuring.
Employee wages and other
payments and benefits paid
to employees
Payments to providers
of capital
Employees
(960)
(979)
(970)
(909)
(1,354)
(1,946)
including dividends paid
Shareholders and investors
(1,285)
(1,890)
including interests paid
to creditors
Payments to government
Government authorities
Community investments
Local communities
Non-distributed economic value
(69)
(454)
(11)
331
(56)
(662)
(11)
504
(2,169)
(2,120)
(49)
(445)
(11)
(533)
(1,702)
(1,638)
(64)
(372)
(46)
44
42
43
1 Calculated as required by GRI Standard 201.
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SUSTAINABLE DEVELOPMENT RATINGS
The high positions of NLMK Group in the ratings of the leading international
ESG agencies reflect the efforts of the NLMK Group management in the field
of sustainable development.
45/100 – score in 2020
The score increased by 12 points yoy – to a level
higher than the industry average
28/100 – score in 20202
The score improved by 3.3 points yoy. NLMK is in the top-5
among 140 metals & mining companies analysed by the agency
3,5/5 – score in 2020
NLMK’s assessment is higher than the industry average.
The Company’s shares continue to be part
of the FTSE4Good index following the June 2020 revision.
BBB – score in 2019 and 2020
(where CCC – the lowest score, ААА – the highest)
NLMK’s rating is at the industry average level.
CONTACTS
We will be happy to answer additional questions regarding
this Report as well as to receive feedback from our
stakeholders in order to further develop and improve
the content of the Company’s future public reports
GRI 102-53 .
Contact person
Dmitry Kolomytsyn, CFA,
Corporate Finance and Investor Relations Director
Ekaterina Kokareva, CFA,
Head of Investor Relations
Email: ir@nlmk.com
NLMK Representative Office in Moscow
119017 40-3, Bolshaya Ordynka St., Moscow
GRI 102-3
FIVE-YEAR HIGHLIGHTS
Indicators
Financial performance,1 $ m
Revenue
Net profit2
EBITDA
EBITDA margin
Operating cash flow
Investment
Net debt
Free cash flow
Dividends, $ per share
Operating performance,2 ‘000 t
Steel output
Steel output (with NBH)
Steel product sales
Finished steel sales
Sales to home markets
Sustainability performance
NLMK Group headcount, '000 people
Labour productivity, t of steel/pers.,
NLMK Lipetsk
Specific air emissions, kg/t of steel
Specific CO2 emissions, t/t of steel +
merchant pig iron (Scope 1)
2016
2017
2018
2019
2020
7,636
935
1,943
25%
1,699
559
761
1,092
0.1535
16,438
16,641
15,925
10,211
10,225
54.0
482
20.0
1.76
10,065
1,450
2,655
26%
1,899
592
923
1,266
0.2383
16,850
17,076
16,469
10,759
10,650
53.2
502
19.5
1.73
12,046
2,238
3,589
30%
2,741
680
891
2,027
0.3525
17,285
17,493
17,591
10,762
10,573
53.4
503
18.9
1.70
10,554
1,339
2,564
24%
2,623
1,080
1,786
1,523
0.2630
15,531
15,696
17,069
11,056
11,376
52.8
448
9,245
1,236
2,645
29%
2,281
1,124
2,495
1,103
–
15,667
15,833
17,520
10,535
10,744
51.9
461
20.2 (18.9)3
19.8 (18.6)3
1.75
1.72
1 The lower the score, the better the company manages sustainability issues.
44
1 Excluding NBH, unless otherwise specified.
2 Net profit attributable to NLMK shareholders.
3 Specific emissions without influence of temporary factors associated with steel output reduction.
45
ANNUALREPORT 2020
CORPORATE
48 Corporate governance
80 Operational control and
risk management
91
Information for shareholders
and investors
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
SYSTEM
CORPORATE GOVERNANCE
IN ACTION
NLMK Group’s corporate governance
system plays a key role in the Company’s
operations, its successful sustainable
development, risk management, and
in balancing the rights and interests
of shareholders, the Company
management, and other stakeholders.
The system is built on best international
practices, the requirements of
the prevailing Russian legislation and
laws of the countries where the Group
companies operate, the OECD Principles
of Corporate Governance, the listing
rules of the Moscow and London
stock exchanges, GRI information
disclosure standards, and provisions
of the Corporate Governance Code
recommended for useby the Central
Bank of Russia.
The functioning of a well-developed
corporate governance system that
secures the rights of shareholders
and potential investors is considered
a driving force for enhancing NLMK’s
efficiency and investment appeal.
Key principles at the core of our
corporate governance
1. Sustainable development and
long-term growth of return
on equity investment
2. Equal and fair treatment of all
shareholders when they exercise
their right to be involved in
management processes, receive
dividends from the Company,
participate in meetings, vote
on issues on the agenda, and
get up-to-date information
on the activities of the Company
and its governing and controlling
bodies
NLMK’S CORPORATE GOVERNANCE STRUCTURE
GRI 102-18
INDEPENDENT AUDITOR
GENERAL MEETING OF SHAREHOLDERS
BOARD OF DIRECTORS
STRATEGIC PLANNING COMMITTEE
HUMAN RESOURCES, REMUNERATION,
AND SOCIAL POLICY COMMITTEE
CORPORATE SECRETARY
AUDIT COMMITTEE
CEO (CHAIRMAN
OF THE MANAGEMENT BOARD)
INTERNAL AUDIT SERVICE
3. Equal treatment of all shareholders, including non-Russians and minority
shareholders
4. Commitment to ensure reliable and effective registration of title to shares and
guarantee the opportunity to alienate them freely and without encumbrances
5. Compliance with existing laws, principles of the Corporate Governance Code
recommended by the Bank of Russia, and international corporate governance
standards
6. Observing the rights of third parties, including creditors and NLMK employees,
as required by the law, the Charter, and other regulatory documents
7. Adherence to a common corporate policy in respect of subsidiary companies,
affiliates and other legal entities in which NLMK is the founder, a participant,
or a member
8. Open and transparent communications, including by disclosing full and up-to-date
information about the Company to give shareholders and investors an opportunity
to make informed decisions, as well as by providing documents (information)
related to the Company upon shareholders’ request
9. Complying with business ethics in conducting operations
All documents regulating corporate governance practices and principles are available
on NLMK Group’s official website.
CORPORATE GOVERNANCE
STRUCTURE
of the Company’s activities, excluding issues that fall within the purview of the General
Meeting of Shareholders according to the NLMK Charter
● Committees of the Board of Directors, which were established to tentatively review
According to internal Company
documents, NLMK’s corporate
governance structure includes:
● The General Meeting of Shareholders,
key matters concerning the Company’s activities
● The CEO (Chairman of the Management Board) and the Management Board, which
manage the Company’s day-to-day activities and ensure its efficient operation,
while implementing the objectives set by the Board of Directors
which is the Company’s supreme
governing body that makes decisions
on key business issues
● The Company’s Corporate Secretary, who handles interaction with shareholders,
coordinates the Company’s activities that aim to protect shareholders’ rights
and interests, and supports the Board of Directors
● The Board of Directors, which
● The Internal Audit Service, which oversees the Company’s financial and economic
handles the overall management
activities
48
49
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
IMPROVING CORPORATE
GOVERNANCE
PRACTICES IN 2020
In 2020, the Company continued to
improve its corporate governance
system to ensure it complies with
international standards.
In accordance with best Russian and
international corporate governance
practices, the following steps were taken:
● In March 2020 the Board of
Directors approved a new revision
of the Regulations on Insider
Information, which takes into
account the recommendations and
requirements of Russian and EU
legislation. The revision of the insider
information management system
included updating the list of insider
information and the Regulations on
access to insider information, the rules
of protecting its confidentiality and
of internal control over compliance.
COMPLIANCE OF THE GROUP’S
CORPORATE GOVERNANCE
TO CORPORATE GOVERNANCE
CODE RECOMMENDATIONS
10
69
Compliance
ensured
Partial
compliance
● In December 2020 the Board of Directors approved the Internal Control and
Risk Management Policy, a top-level document regulating the functioning
of the Company’s internal control and risk management system and serving
as the basis for further development of internal methodological, organizational
and administrative documents regulating the organization and implementation
of risk management and internal control.
● In February 2020 the Board of Directors approved a new revision of the Corporate
Governance Code to align it with the changes adopted earlier at the Extraordinary
General Meeting of Shareholders to the Regulations on the Board of Directors
regarding the removal of the list of standing committees, which will allow
the Board of Directors, within its competence defined by the NLMK Charter,
to set up and reorganize committees efficiently in accordance with the Company’s
current needs.
Based on its 2020 results, NLMK complies with all principles of the Corporate
Governance Code: 69 principles (87%) are fully observed and 10 principles are
partially observed. The Company uses the recommendations of the Bank of Russia
on preparing a report on compliance with the Corporate Governance Code
as a methodology to assess compliance with corporate governance principles.
At meetings held in 2020, the Company continued to employ an electronic voting
service, which allows shareholders to vote regardless of where their shares are
registered. The total number of shareholders to have used the service in 2020
has doubled since 2019.
In accordance with Federal Law No. 50-FZ dd. 18.03.2020 and a resolution
of the Board of Directors, the Company’s Annual General Meeting of Shareholders
on 2019 performance was held by absentee ballot.
In 2020, the number of NLMK shareholders increased by 1.7 times, and by the end
of the year it exceeded 114,000 (+70% growth over the year).
PLANS FOR 2021 AND THE MEDIUM TERM
In 2021, NLMK will continue to analyze the best corporate governance practices
and evaluate them in terms of their introduction into the Company’s activities.
Further steps in relation with the external evaluation of the Board of Directors and
an analysis of its results are planned in order to improve the efficiency of the corporate
governance system. As always, attention will be paid to the analysis ofrankings and
benchmarking, which allow to assess issuers’ achievements objectively and to identify
practices that might bring the greatest benefit to the Company and are important
for its stakeholders.
GENERAL MEETING OF SHAREHOLDERS
The Company strives to ensure equal
and fair treatment of all shareholders
when they exercise their right to
participate in the management of NLMK.
NLMK shareholders are given an equal
and fair opportunity to participate
in the Company’s profits by receiving
dividends on equal terms.
NLMK'S GENERAL
MEETING
OF SHAREHOLDERS
PROCEDURES
The General Meeting of Shareholders
is NLMK’s supreme governing body
that functions based on the legislation
of the Russian Federation, the NLMK
Charter, and the Regulations on
the General Meeting of Shareholders.
The Federal Law ‘On Joint-Stock
Companies’ and the NLMK Charter
establish the General Meeting’s
competence. The procedure for
preparing, convening, holding, and
summarizing the results of NLMK’s
General Meeting of Shareholders is set
forth in the Regulations on NLMK’s General
Meeting of Shareholders published on
the Company’s official website.
The Company’s internal documents stipulating the General Meeting procedure
contain, among other things, provisions relating to:
● The option for the Company's shareholders to participate in the Meeting
of Shareholders online
● The option to discuss agenda items and make decisions on issues put to a vote
while being absent from the venue where the voting takes place
● The option to complete electronic ballots online
The notice about the General Meeting of Shareholders and documents (materials)
to be provided to persons entitled to participate in the General Meeting of
Shareholders are published in Russian and in English on NLMK’s website according
to the procedure and within the timeframe established by the NLMK Charter
and Russian legislation, at least 30 days before the meeting.
In addition to the mandatory materials required by law, the Company provides
its shareholders with additional information and materials pertaining to the agenda
items of the General Meeting of Shareholders in line with the recommendations
of the Corporate Governance Code recommended by the Central Bank of Russia.
For instance, the Company posts a map of how to get to the General Meeting
of Shareholders, a sample form of a proxy that shareholders may issue to their
representative for participation in the meeting, and information on certifying
such proxy.
The Company also publishes all this information in English to ensure the equal
treatment of all shareholders, including international ones.
The Company’s independent registrar functions as the counting commission
of the General Meeting of Shareholders.
The voting results and resolutions passed by the General Meeting of Shareholders
are disclosed in accordance with the requirements of Russian legislation and
published on the Company's website.
50
51
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ACTIVITIES IN 2020
Five General Meetings of Shareholders
were held in 2020.
NLMK’s Annual General Meeting
of Shareholders on 2019 performance
was held on 24 April 2020 by absentee
ballot. It was attended by shareholders
and shareholder representatives holding
a total of 88.72% of NLMK’s equity,
which meets the quorum requirements.
During the meeting, resolutions were
passed on the issues envisaged by Item 1,
Article 47 of the Federal Law ‘On Joint-
Stock Companies’. The resolution
on the payment of FY 2019 dividends
was not passed (it was later passed
at the Extraordinary Meeting
on 29 May 2020).
NLMK’s 2020 Extraordinary General
Meetings of Shareholders were held
by absentee ballot.
At the NLMK Extraordinary General
Meeting of Shareholders held
on 29 May 2020, shareholders passed
a resolution to pay (declare) FY 2019
dividends on ordinary shares in
the amount of RUB 17.36 per ordinary
share, including out of previous profits.
Taking into account the interim
dividends paid in the amount of RUB 14.24
per ordinary share, the outstanding
amount for payment was RUB 3.12
per ordinary share.
At the NLMK Extraordinary General
Meeting of Shareholders held on
30 June 2020, shareholders passed
a resolution to pay (declare) Q1 2020 dividends on ordinary shares in the amount
of RUB 3.21 per ordinary share, including out of retained earnings.
At the NLMK Extraordinary General Meeting of Shareholders held on
25 September 2020, shareholders passed a resolution to pay (declare) H1 2020
dividends on ordinary shares in the amount of RUB 4.75 per common share,
including out of retained earnings.
At the NLMK Extraordinary General Meeting of Shareholders held on 18 December 2020,
shareholders passed a resolution to pay (declare) 9M 2020 dividends on ordinary
shares in the amount of RUB 6.43 per common share, including out of retained
earnings. They also voted to approve NLMK’s membership in the Tsentrisiskaniya
Self-Regulatory Organization (Central Association of Organizations for Engineering
Construction Survey).
Detailed information on the voting results and resolutions passed by the General
Meetings of Shareholders in 2020 is available on the Company’s website.
NLMK'S GENERAL MEETINGS OF SHAREHOLDERS
HELD IN 2020
General Meeting of Shareholders by status (format)
Number
Annual meeting
(absentee ballot using e-voting technology)
Extraordinary meeting
(absentee ballot using e-voting technology)
1
4
NLMK'S EXTRAORDINARY GENERAL MEETINGS OF SHAREHOLDERS
HELD IN 2020
Date
29.05.2020
30.06.2020
25.09.2020
18.12.2020
Number of votes held by the General Meeting participants,%
89.02
89.19
89.44
90.22
BOARD OF DIRECTORS
NLMK BOARD
OF DIRECTORS
PROCEDURES
The Regulations on the Board of Directors establish the procedure of preparing
for and holding meetings of the Board of Directors, as well as the procedure
for the nomination and selection of potential Board members GRI 102-24 .
A key component of the Company’s
corporate governance system,
the Board of Directors determines
its strategic vectors, lays down
the principles of and approaches
to the risk management and internal
control system, monitors the activities
of executive bodies, and has other
key functions within the Company.
NLMK’s Board of Directors reports
to the Company’s shareholders
and is elected by a resolution
of the Company’s General Meeting
of Shareholders GRI 102-26 .
In addition to the main functions
of the Board of Directors stipulated
by legislation and NLMK’s Regulations
on the Board of Directors, key
importance is attached to such goals
and objectives as assessing political,
financial, and other risks, ensuring
compliance with corporate governance
and sustainable development principles,
and monitoring compliance with
the Sustainable Development Policy.
Members of the Company’s Board
of Directors ensure the reliability and
stability of the Company’s operations,
facilitate the adoption of balanced
decisions by management, and make
objective independent judgements
and decisions that serve the interests
of the Company and its shareholders.
Members of the Company’s Board of Directors have sufficient time to fulfil their
obligations efficiently and in good faith, including for participation in meetings
of the Board of Directors and its committees. The requirement for members
of the Board of Directors to have sufficient time for efficient participation
in the Board’s work is enshrined in NLMK’s Corporate Governance Code.
Meetings of the Board of Directors are held on a regular basis at least six times
a year in accordance with the approved schedule.
The format of NLMK Board meetings is determined based on the importance
of the agenda items. The most important items within the Board’s remit are resolved
at in-person meetings, and as a rule, are first reviewed by the Board’s committees,
thereby ensuring their thorough consideration and informed decision-making.
Amid the pandemic, the prevailing meeting format was via videoconference, which
enabled members to consider agenda items without compromising discussion quality.
The effectiveness of the Board of Directors is facilitated by the following components:
● Planning its activities by approving the meeting schedule
● Optimal Board composition that is balanced in terms of qualifications and
experience
● Inclusion of independent directors on the Board
● Induction procedures for newly elected members of the Board of Directors
● Annual assessment of the Board of Directors and its committees
● Ensuring the succession of the Board of Directors by regularly rotating its
composition while preserving its purview and best practices
The NLMK Charter and the Regulations on the Board of Directors published
on the Company’s official website govern the procedures of the Board of Directors.
Information on the activities of NLMK’s Board of Directors, including information on
its composition, its committees, meetings, and decisions is disclosed on the Company’s
official website.
52
53
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
COMPOSITION OF THE BOARD
OF DIRECTORS
GRI 102-22 The composition of the Company’s Board of Directors is balanced in terms
of qualification, experience, knowledge, business acumen, and diversity. Members
of the Board of Directors have an impeccable business reputation, knowledge, skills,
and experience in steelmaking, mining, finance, investment, corporate governance,
and other areas that are important for governing the Company successfully.
Мembers of the Board of Directors have ample work experience as CEOs, partners,
and management body members of major international companies. The Company
pays particular attention to the diversity of the Board’s composition and the share
of independent directors. The Board of Directors includes a woman and citizens
of various states, ensuring sociocultural and gender diversity.
VLADIMIR LISIN
OLEG BAGRIN
THOMAS VERASZTO
MARJAN OUDEMAN
STANISLAV SHEKSHNIA
BENEDICT SCIORTINO
Chairman of the Board of Directors
Member of the Board of Directors
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
Chairman of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
Member of the Board of Directors,
Independent director
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
Member of the Board of Directors,
Independent director
Member of the Board of Directors,
Independent director
Member of the Board of Directors,
Independent director
Chair of the Audit Committee and
member of the Strategic Planning
Committee
Chairman of the Human Resources,
Remuneration, and Social Policy
Committee and member of the Audit
Committee
Member of the Audit Committee
and member of the Strategic Planning
Committee
DIRECTORS’ EXPERTISE
IN THE STEEL SECTOR
DIRECTORS’ LENGTH
OF TENURE1
COMPOSITION OF THE BOARD
OF DIRECTORS BY DIRECTOR
STATUS1
4
3
3
3
3
NIKOLAI GAGARIN
SERGEY KRAVCHENKO
JOACHIM LIMBERG
Member of the Board of Directors
Member of the Board of Directors,
Independent director
Member of the Board of Directors,
Independent director
Member of the Audit Committee
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
Member of the Strategic Planning
Committee and member of the Human
Resources, Audit Committee
2
> 20 years
10–20 years
< 10 years
3
< 4 years
4–10 years
> 10 years
1 As of 31 December 2020.
54
6
Independent
directors
Non-executive
directors
55
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
CHAIRMAN OF THE BOARD
OF DIRECTORS
GRI 102-23 The Chairman of the Board
of Directors ensures the efficient
functioning of the Board of Directors,
arranges for the preparation of
the Board’s schedule, supervises
the execution of resolutions passed by
the Board, compiles the agenda, and
makes sure that the most efficient
decisions on the agenda items are made.
The Chairman of the Board also
plays a key role in organizing
the Board’s activities and ensuring
that the committees of the Board of
Directors function efficiently.
The Chairman of the Board is elected
by its members among themselves
by a majority vote of the total number
of Board members.
The Chairman of NLMK’s Board of
Directors has extensive experience,
professional expertise, and authority
among the Company’s shareholders,
members of governing bodies, and
employees.
INDEPENDENT
MEMBERS OF THE BOARD
OF DIRECTORS
In order to ensure that the Board
of Directors effectively performs its
functions, including those related
to the protection of shareholders’
interests and risk management,
the Company’s Board of Directors
includes independent directors.
Their participation in the Board’s
activities contributes to the formation
of objective opinions on the items
discussed, improves management
efficiency, and has a positive impact
on the Company’s image.
The fact that the governing body includes independent directors increases the level
of confidence in the Company among shareholders and the investment community.
Independent directors, who have made up the majority of the Company’s Board since
2016, make a decisive contribution to discussions and decision-making on issues
that may affect the interests of shareholders, including devising the Company’s
development strategy, assessing the conformity of its activities with the Company’s
chosen strategy, preventing and resolving corporate conflicts, assessing the quality
of work performed by the executive bodies, establishing an efficient incentive system,
and conducting performance assessments to ensure that the Company’s activities
are in the interest of all its shareholders. In addition, independent directors play a key
role in the operation of the Board’s committees.
The Corporate Secretary regularly conducts a preliminary analysis and assessment
of the Board members’ compliance with independence criteria.
NLMK’s independent directors fully meet the independence criteria stipulated by
the Regulations on the Company’s Board of Directors and the Corporate Governance
Code recommended by the Bank of Russia.
In some exceptional cases, the Board of Directors may recognize the independent
status of a member of the Board of Directors in the assessment process, despite
them having some formal criteria of being affiliated with the Company, as long as such
affiliation does not affect the individual’s ability to exercise independent, impartial,
and fair judgement.
In the course of the independence assessment of Board members, conducted by
the Board of Directors in 2020, five out of six directors were deemed to be fully
compliant with the independence criteria defined by the Regulations on the Company’s
Board of Directors, while one director, who has a formal relationship with NLMK
(Mr. Benedict Sciortino has been a member of the Board for more than seven,
but less than twelve years), was recognized as independent due to the formality
of his affiliation and the fact that it does not influence the director’s decisions and
his work on the Board of Directors.
COMPOSITION OF THE BOARD OF DIRECTORS
GRI 102-22 The share of directors matching the independence criteria stands at 67%,
which is one of the best ratios among public Russian companies with advanced
corporate governance practices.
As of 31 December 2020, the Board of Directors elected at the Annual General
Meeting of Shareholders on 24 April 2020 consisted of nine members, including
six independent directors. In order to maintain the balance of key competencies,
experience, and the optimal Board composition, including the optimal number
of independent directors on the Board, the Company continuously ensures
succession on the Board of Directors. In 2020, Sergey Kravchenko was elected
as a new independent director.
MEMBERS OF NLMK BOARD OF DIRECTORS
AS OF 31 DECEMBER 2020
Board
member
Position
Tenure,
years
Status
Vladimir
Lisin
Oleg
Bagrin
Thomas
Veraszto
Nikolai
Gagarin
Sergey
Kravchenko
Joachim
Limberg
Marjan
Oudeman
Stanislav
Shekshnia
Benedict
Sciortino
Chairman of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
Member of the Board
of Directors
24
16
5
19
1
2
3
6
9
Non-executive
director
Non-executive
director
Independent
director
Non-executive
director
Independent
director
Independent
director
Independent
director
Independent
director
Independent
director
Member
of the Strategic
Planning
Committee
Member
of the Audit
Committee
Member
of the Human
Resources,
Remuneration,
and Social Policy
Committee
✔
Chair
✔
✔
✔
✔
✔
✔
✔
Chair
✔
✔
✔
✔
✔
✔
Chair
56
57
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
COMPOSITION OF NLMK BOARD OF DIRECTORS IN 2020
BIOGRAPHIES OF MEMBERS OF THE BOARD OF DIRECTORS
Composition of NLMK Board of Directors
from 19 April 2019 until 24 April 2020
Composition of NLMK Board of Directors elected
on 24 April 2020
Member of the Board
of Directors
Position
Member of the Board
of Directors
Position
Vladimir Lisin
Chairman of the Board of Directors
Vladimir Lisin
Chairman of the Board of Directors
Oleg Bagrin
Member of the Board of Directors
Oleg Bagrin
Member of the Board of Directors
Thomas Veraszto
Joachim Limberg
Member of the Board of Directors,
independent director
Thomas Veraszto
Member of the Board of Directors,
independent director
Member of the Board of Directors,
independent director
Joachim Limberg
Member of the Board of Directors,
independent director
Nikolai Gagarin
Member of the Board of Directors
Nikolai Gagarin
Member of the Board of Directors
Karen Sarkisov
Member of the Board of Directors
Sergey Kravchenko
Member of the Board of Directors,
independent director
Stanislav Shekshnia
Member of the Board of Directors,
independent director
Stanislav Shekshnia
Member of the Board of Directors
Benedict Sciortino
Member of the Board of Directors,
independent director
Benedict Sciortino
Member of the Board of Directors,
independent director
Marjan Oudeman
Member of the Board of Directors,
independent director
Marjan Oudeman
Member of the Board of Directors,
independent director
KEY COMPETENCIES OF THE NLMK BOARD OF DIRECTORS
GRI 102-27
Competency
Number of Board members
Board
of Directors (9)1
Strategic Planning
Committee (7)
Audit Committee (5)
Human Resources,
Remuneration,
and Social Policy
Committee (5)
Knowledge of industry
Corporate governance
Strategy
Finance and investment
HR management
Risk management
Customers and sales
Digitalization and IT
Sustainability
7
8
7
9
7
8
5
4
6
7
6
7
7
6
6
5
3
5
3
5
3
5
3
5
2
2
4
4
4
4
5
5
4
3
3
3
On 14 December 2020, Benedict Sciortino, who was previously not an NLMK
shareholder, acquired 6,900 global depositary shares (equivalent to 69,000
ordinary shares) making up 0.00115% of NLMK’s charter capital.
Other Board members are not NLMK shareholders.
1 The number in brackets indicates the number of Board members who sit on the executive body.
VLADIMIR LISIN
Year of birth: 1956
Member of the Board of Directors
since 1996, Chairman of the Board
of Directors since 1998
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
OLEG BAGRIN
Year of birth: 1974
CEO (Chairman of the Management
Board) from 2012 until March 2018.
Member of the Board of Directors
since 2004
Chairman of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
THOMAS VERASZTO
Year of birth: 1962
Member of the Board of Directors
since 2016, independent director
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
Dr. Lisin started his career in 1975 as an electrical fitter. At Tulachermet, he worked
his way up from assistant steelmaker to deputy shop manager. In 1986, he went
to work in Kazakhstan, first as Deputy Chief Engineer and later as Deputy CEO
of the Karaganda Steel Plant. He has been a member of boards of directors
at several leading Russian steel companies since 1993.
Dr. Lisin graduated from Siberian Metallurgic Institute, where he majored in ferrous
and non-ferrous foundries. In 1990, he graduated from the Higher School of
Commerce under the Foreign Trade Academy. In 1992, he graduated from
the Academy of National Economy with a major in economics and management.
He holds a Ph.D. in engineering and economic sciences and is a professor. He won
the USSR Council of Ministers Prize for Science and Technology, is an Honorary
Metallurgist of the Russian Federation, and is a holder of the Order of Honour
and the Order of Alexander Nevsky. He serves as President of the International
Shooting Sport Federation.
Member of the Board of Freight One. Director and member of the Board of Directors
of Fletcher Group Holdings Limited.
Oleg Bagrin graduated from the State Management University with a major
in mathematical methods and operations research in economics. He has
a postgraduate degree in economics and a degree in business administration
from the University of Cambridge, UK.
Dr. Veraszto was a Partner and Managing Director with the Boston Consulting
Group (BCG) in 2014–2015, serving primarily clients in the industrial goods sector
on strategy, organizational development, and operational improvement. He
continues to be a Senior Advisor for BCG in this area.
Dr. Veraszto has held senior management positions at large industrial and consulting
companies such as McKinsey & Company, where he spent 15 years serving clients
in various industries.
Dr. Veraszto earned a doctorate in law and a master’s in philosophy in Slavic
languages in 1984 and 1985, respectively, both from the University of Graz (Austria).
In 1988, he also received a diploma from the Bologna Center of the School
of Advanced International Studies at Johns Hopkins University (USA).
NIKOLAI GAGARIN
Year of birth: 1950
Member of the Board of Directors
since 2001
Member of the Audit Committee
In 2003, as a Managing Partner, Mr. Gagarin was appointed Chairman of the Board
at Reznik, Gagarin, Abushakhmin, and Partners Law Offices. He has been Chairman
of the Board and a Managing Partner at Reznik, Gagarin, and Partners Law Offices,
Moscow, since 2009.
Nikolai Gagarin has extensive experience in corporate law, foreign investment,
taxation, finance, real estate, contract law, arbitration proceedings, and civil
litigation.
He is a graduate of Lomonosov Moscow State University with a major in law.
58
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SERGEY KRAVCHENKO
President of Boeing Russia/CIS since 2002.
Year of birth: 1960
Member of the Board of Directors
since 2020, independent director
Member of the Strategic Planning
Committee and member of the Human
Resources, Remuneration, and Social
Policy Committee
JOACHIM LIMBERG
Year of birth: 1954
Member of the Board of Directors
since 2019, independent director
Member of the Strategic Planning
Committee and member of the Audit
Committee
Dr. Kravchenko is in charge of developing all of Boeing’s business areas in Russia,
Ukraine, and the CIS countries. He leads a team consisting of regional department
heads from every company sector. In 2017 he was appointed Innovation Accelerator
Leader at Boeing Global Services.
Before joining Boeing in 1992, Dr. Kravchenko worked as professor and lead scientist
at the Russian Academy of Sciences. He also taught in Moscow and worked as a visiting
professor and research consultant in the United States, Sweden, and South Korea.
Dr. Kravchenko graduated from Moscow Polytechnic University, obtaining his
doctorate degree in engineering in 1991 and his title of professor in 1992. He has
published more than 70 research papers and holds more than 20 patents in various
areas of engineering.
He is an independent director at TMK Group.
Dr. Kravchenko is a member of the Russian Academy of Engineering, member
of the American Institute of Aeronautics and Astronautics, and Doctor Honoris
Causa of the Georgian Technical University. In 2007 he was elected to the Board of
Directors of the American Chamber of Commerce in Russia. In 2009 Dr. Kravchenko
was awarded the Businessman of the Year prize by the American Chamber of
Commerce.
Mr. Limberg was Chairman of the Management Board of the Materials Services
Business Area, CEO and Chairman of the Executive Board of thyssenkrupp Materials
International GmbH from October 2009 until 31 December 2018. He was responsible
for the Materials unit in Germany, North America, Eastern Europe, and Western
Europe/Asia Pacific, Materials Processing Europe, Materials Trading, the Special
Materials units (special steels) of AST and Distribution Stainless, as well as the Special
Services units of Plastics Europe, Aerospace, and Technical Services.
Mr. Limberg began his career in 1976 at Klöckner. He then spent several years
as managing director/CEO of various small and medium-size companies. In 1995,
he joined thyssenkrupp Group, initially as head of the Product Management Steel
and Materials Management departments at thyssenkrupp Schulte. In 1998, he was
appointed to the Executive Board. From 2002 to 2005, he served as Chairman
of the Executive Board of thyssenkrupp Schulte GmbH. On 1 April 2001, Mr. Limberg
was appointed to the Executive Board of thyssenkrupp Materials AG, later
thyssenkrupp Services AG.
In January 2002, he was made additionally responsible for the North American
operations of thyssenkrupp Materials N.A., of which he was chairman. With
the establishment of thyssenkrupp Materials Europe GmbH on 1 June 2005, he took
over as Chairman of the company’s Executive Board and continued in this position
after the company was renamed thyssenkrupp Materials International GmbH.
From October 2006 to September 2009, he was Vice Chairman of the Executive
Board of thyssenkrupp Services AG, where he was primarily responsible for strategic
corporate development. One of his particular focuses was on developing activities
in North America, Eastern Europe and South America, as well as establishing
the aerospace and services business as core activities. This also included business
actions in Asia, which he was in charge of for several years while located in Hong Kong.
Mr. Limberg is a professional exporter. He obtained a degree in economics
(DIPLOM-ÖKONOM) from the Open University of Hagen and has extensive financial
experience.
MARJAN OUDEMAN
Year of birth: 1958
Member of the Board of Directors
since 2018, independent director
Chair of the Audit Committee
and member of the Strategic
Planning Committee
KAREN SARKISOV
Year of birth: 1963
Member of the Strategic
Planning Committee
Ms. Oudeman served as President of the Executive Board of Utrecht University
(The Netherlands) from 2013 until June 2017.
From 2010 to 2013, Ms. Oudeman was a member of the Executive Committee
of AkzoNobel, where she was responsible for HR and organizational development.
From 2007 to 2010, Ms. Oudeman served as a member of the Executive Committee
of Corus Group, and Executive Director of the Corus Strip Products Division.
She also held the positions of CEO at Corus Nederland BV and Managing Director
of Corus Strip Products Ijmuiden from 2004 to 2007, and Managing Director
of Corus Packaging Plus from 2000 to 2004.
Before joining Corus, Ms. Oudeman worked for Hoogovens Group NV, where she
held various corporate staff positions in legal, corporate finance, and controlling,
culminating in 1998–2000 as a Member of the Management Board of the Steel Division
of Hoogovens Group NV and Managing Director of Hoogovens Packaging Steel.
Ms. Oudeman holds positions in the governing bodies of a number of entities:
she is a member of the Boards of Solvay SA, SHV Holdings, Aalberts NV, and
UPM-Kymmene Corporation.
She has extensive experience as a line manager in the steel industry and
considerable financial and international business experience.
Ms. Oudeman has a law degree from Rijksuniversiteit Groningen in the Netherlands
and an MBA in Business Administration from the University of Rochester, New York,
USA and Erasmus University, Rotterdam, the Netherlands.
Aide to the Chairman of the Board of Directors on External Economic Relations
and a member of the Board of Directors of NLMK International B.V.
From 2006 to 2007, Mr. Sarkisov served as the Chairman of the Board of Directors
of VIZ-Steel. From the early 1990s to 2008, he worked at steel trading companies,
where he held various executive positions at a number of international metal trading
entities.
He is a graduate of Tashkent State University, where he majored in oriental studies.
Until 24 April 2020, Mr. Sarkisov served as a member of the NLMK Board of Directors
and Audit Committee. He continues to sit on the Strategic Planning Committee.
60
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STANISLAV SHEKSHNIA
Year of birth: 1964
Member of the Board of Directors
since 2015, independent director
Chairman of the Human Resources,
Remuneration, and Social Policy
Committee and member of the
Audit Committee
BENEDICT SCIORTINO
Year of birth: 1950
Member of the Board of Directors
since 2012, independent director
Member of the Audit Committee and
member of the Strategic Planning
Committee
In 1991–2002, Dr. Shekshnia held senior executive positions at Russian and
international corporations, including HR Director of Otis Elevator in Central and
Eastern Europe, President and CEO at Millicom International Cellular in Russia
and the CIS, COO at VimpelCom, and CEO of Alfa-Telecom. He has extensive
financial experience. He served as Chairman of SUEK, Russian Fishery Company,
and Vimpelcom-R and as a board member of a number of Russian and Ukrainian
companies. Dr. Shekshnia was an independent director at DTEK BV, Ilim Timber
Industry, Naftna Industrija Srbije (NIS), and Ener1. Currently, Dr. Shekshnia is
Chairman of the Board of the Samolet Group. In 2002, he co-founded Zest
Leadership International Consultancy.
From April 2007 until July 2019, Dr. Shekshnia was a Senior Partner of LEADERSHIP
VECTOR, a talent equity consulting practice. He focused on leadership, leadership
development, corporate governance, and business in emerging economies. He is now
a Senior Consultant at Ward Howell. Dr. Shekshnia also provides personal coaching
to business owners and corporate executives.
Dr. Shekshnia is an Affiliate Professor of Entrepreneurship at INSEAD. He has over
15 years of graduate-level teaching experience in Russia, France, and the United
States, and is the author, co-author, or editor of ten books, numerous articles,
executive commentaries, interviews, and case studies on entrepreneurship,
leadership, people management, intercultural management, and business and
management in Russia.
Dr. Shekshnia has a master’s degree in economics, a Ph.D. from Moscow State
University, and an MBA from Northeastern University in Boston.
From 1977 to 1995, Mr. Sciortino worked as an attorney-at-law and a partner with
Baker & McKenzie, New York. He served as a member of the Board of Directors
of Duferco S.A., where he was responsible for Duferco Group North American
and South African business, overseeing trading operations, financial and legal
matters, and mergers and acquisitions. Mr. Sciortino serves as a director of several
companies.
Since March 2013, he has served as CEO and member of the Board of Directors
of DXT Commodities SA (formerly Dufenergy Trading SA).
He graduated from Queens College, New York with a BA degree and received JD and
LLM degrees from New England School of Law (Boston, MA) and New York University
Law School, New York. Mr. Sciortino has extensive financial experience.
BOARD OF DIRECTORS’ ACTIVITY
IN 2020
In 2020, NLMK’s Board of Directors held nine meetings, seven of which were held by
absentee ballot. 28 items were considered at the meetings.
MAIN ISSUES EXAMINED BY THE GROUP’S BOARD OF DIRECTORS IN 2020
Questions
Resolutions
Strategy and
priority areas
● Status of NLMK Group’s 2018-2022 Strategy and approval
of the consolidated budget for 2021
Appointments and
remuneration
● Reviewing proposals on the nomination of candidates to NLMK’s
governing bodies (the Board of Directors, NLMK CEO (Chairman
of the Management Board)) and inclusion of the nominees in
the voting list of people to be elected to these governing bodies
● Providing recommendations to the Annual General Meeting
of Shareholders regarding the payment of remuneration to Board
members
● Election of the Chairman of NLMK’s Board of Directors
● Forming the committees of NLMK’s Board of Directors
● Recognition of the independent status of nominees to NLMK’s Board
of Directors
● Performance evaluation of NLMK’s Board of Directors
● Performance reports of the committees of NLMK’s Board
of Directors
Stakeholders
●
Investors and
shareholders
● Consumers
● Suppliers
● Government authorities
● Employees
● Local communities
●
Investors and
shareholders
● Government authorities
● Employees
Corporate
governance
● Convocation of NLMK's General Meetings of Shareholders
● Approving the agendas, draft documents, and measures necessary
●
Investors and
shareholders
for preparing for and holding the Annual General Meeting of
Shareholders
● Government authorities
● employees
● Providing recommendations to NLMK’s Annual General Meeting
of Shareholders regarding profit distribution/dividend payment
● Providing recommendations to NLMK’s Annual General Meeting of
Shareholders regarding NLMK’s membership in the Tsentrisiskaniya
Self-Regulatory Organization (Central Association of Organizations
for Engineering Construction Survey)
● Approving the 2019 NLMK report on interested-party transactions
● Approving the 2019 NLMK Draft Annual Report
● Providing recommendations to the Annual General Meeting
of Shareholders regarding the approval of NLMK’s Auditor and
remuneration to be paid for the Auditor’s services
● Approving the meeting schedule for NLMK’s Board of Directors
● Approving the following revised documents: Corporate Governance
Code, Regulations on Insider Information, Internal Control and Risk
Management Policy
Financial reporting
● Approving the Company’s annual accounting (financial) statements
for 2019, as well as NLMK’s IFRS 2019 annual consolidated financial
statements
●
Investors and
shareholders
● Consumers
● Suppliers
● Government authorities
● Employees
● Local communities
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
PARTICIPATION OF MEMBERS OF THE BOARD OF DIRECTORS IN ITS MEETINGS
AND THE MEETINGS OF ITS COMMITTEES
Board member
in the reporting year
Independent
director
Participation
in the Board
meetings1
Audit
Committee
Human Resources,
Remuneration,
and Social Policy
Committee
Strategic Planning
Committee
Oleg Bagrin
Thomas Veraszto
Nikolai Gagarin
Vladimir Lisin
Karen Sarkisov2
Stanislav Shekshnia
Benedict Sciortino
Marjan Oudeman
Joachim Limberg3
Sergey Kravchenko4
✔
✔
✔
✔
✔
✔
9 (9)
9 (9)
9 (9)
9 (9)
3 (3)
9 (9)
9 (9)
9 (9)
9 (9)
6 (6)
5 (5)
2 (2)
5 (5)
5 (5)
5 (5)
3 (3)
4 (4)
4 (4)
4 (4)
4 (4)
2 (2)
2 (2)
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
4 (4)
In addition, a seminar on sustainability
was organized for Board members
in March 2020. This event aimed at
enhancing the Board’s ESG competence
underscores the Company’s focus on
sustainability.
and best international practices, the Company has been conducting an annual
assessment (self-assessment) of the Board of Directors’ performance since 2016.
The formal assessment procedure does not only cover the Board of Directors
as a whole, but also assesses the work of the Board’s committees, Chairman and each
individual member. The assessment includes an analysis of the Board’s composition
and qualifications, its agendas, meeting efficiency, and interaction with management
and the Corporate Secretary.
BOARD OF DIRECTORS
PERFORMANCE
ASSESSMENT
GRI 102-28 The Board of Directors
is one of the key bodies in the Company’s
corporate governance system.
The quality of the Company’s
governance depends on the efficiency
of its activities, and its decisions
directly affect the Company’s market
capitalization. The assessment of
the Board of Directors’ performance
is an effective tool for improving
the corporate governance system,
each component of which is related
to the work of the governing body.
In line with the recommendations
of the Corporate Governance Code
recommended by the Bank of Russia
The main purpose of the assessment is to determine the efficiency of the Board’s
performance as a collective governing body and enhance its role in achieving
the Company’s goal of successful development. The assessment of the Board’s
performance helps to determine the focus and changes in the performance
of the Board of Directors and its committees, get a comparative analysis of their
contribution to the Company’s successful development, and identify areas
for the continuous improvement of the Board’s procedures.
If necessary, based on the results of the Board’s performance assessment,
the Chairman of the Board of Directors and the Human Resources, Remuneration,
and Social Policy Committee put forward proposals that aim to improve the work
of the Board of Directors and its committees. Individual assessments of Board
members identify aspects that need to be developed and strengthened.
Recommendations as well as individual training programmes (training sessions)
may be offered to improve the skills of individual Board members.
The Board’s strengths and areas for improvement were analysed as part of
an annual assessment carried out in January 2020 in the form of an online survey
of its members in the format approved by the HR Committee. The assessment
confirmed the effectiveness of the Company’s Board of Directors and its committees
in 2019. Board members commended the meeting agendas, approaches to holding
1 The number in brackets denotes the number of meetings of the Board of Directors or the Board’s committee held during this director’s tenure.
2 Karen Sarkisov was a member of the Board of Directors, the Audit Committee, and the Strategic Planning Committee until 24 April 2020 (he continues
to sit on the Strategic Planning Committee).
3 Joachim Limberg was a member of the Human Resources, Remuneration, and Social Policy Committee until 24 April 2020. He was elected to the Audit
Committee at the 24 April 2020 Board meeting.
4 Sergey Kravchenko was elected to the Board of Directors at NLMK’s Annual General Meeting of Shareholders. He was elected to the Strategic Planning
Committee and the Human Resources, Remuneration, and Social Policy Committee at the 24 April 2020 Board meeting.
A systematic performance
assessment of the Board
ensures:
● An opportunity to make timely
adjustments to the plans and
working methods of the Board of
Directors and its members
● Greater shareholder confidence
in the Board of Directors and
the Company
● An increase in the Company’s
investment appeal
● The possibility of using
the results of the evaluation
as grounds when electing
a new Board at the Annual
General Meeting of Shareholders
● Leveraging the strengths
of the Board of Directors and
developing areas that require
attention
● Analysis of changes in
the Board’s nature
● Board of Directors succession
planning
PERFORMANCE ASSESSMENT OF THE NLMK BOARD OF DIRECTORS
Key goals
Assessment tools
● Achieving a common
understanding of the Board’s
strengths and weaknesses
● Progress assessment to develop
an improvement plan
● Compliance with
the recommendations and best
practices of the Corporate
Governance Code
● Clarification of the goals and
priorities of the Board of
Directors
● Balance of independence and
qualification on the Board
of Directors
● Optimization of each member’s
contribution to the Board’s
activities
Improvement of the Board’s
work and communication
with the management
●
● Recommendations for developing
●
●
the expertise
of the Board of Directors
Identification of areas for
the training and development
of Board members
Identification of the Board’s
staffing requirements
● Development of the target
profile for candidates
to the Board of Directors
● Constructive justification
●
of required changes
Introduction of advanced
technologies and approaches
to the organization of work
● Online survey of members
of the Board of Directors,
as approved by NLMK’s Human
Resources, Remuneration,
and Social Policy Committee
● Discussion at the Board meeting
held in person
Scope of assessment
● Board of Directors
● Committees of the Board
of Directors
Individual Board members
●
● Corporate Secretary
Evaluated components
●
● Professional and personal
qualities of Board members
Independence, coherence,
and degree of personal
participation of Board members
● Process of the Board
of Directors
● Board meeting agendas
Interaction of the Board
●
of Directors with Company
management
● Other factors affecting
the performance of the Board
of Directors
meetings and control over the execution
of instructions, the contribution
of the Board Chairman, and
the Corporate Secretary’s performance.
Recommendations were issued
on developing certain competencies
of the Board of Directors, introducing
certain practices, prioritizing
several issues that are of strategic
importance to the Company, and using
additional formats for engaging with
the management.
The results of the Board’s performance assessment and recommendations on further
improving the work of the Board, its committees, and individual Board members were
reviewed at the in-person Board meeting in March 2020.
In 2020 the activities of the Board and the Corporate Secretary were focused on
implementing the recommendations resulting from the assessment.
Guided by current trends and recommendations of normative bodies, the Company
engaged an independent consulting firm, Spencer Stuart, to carry out an independent
assessment of the Board’s performance. The external assessment of the Board’s
activities included questionnaires, individual interviews with directors, analysis of
the agendas, practices, and internal documents of the Board and its committees, and
a benchmark against the advanced corporate governance practices of international
companies.
64
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ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
INDUCTION PROGRAMME
FOR NEWLY ELECTED
MEMBERS OF NLMK'S
BOARD OF DIRECTORS
AND THE ONBOARDING
PROCESS
An induction course for newly elected
members of NLMK’s Board of Directors
was developed and approved by
the Human Resources, Remuneration,
and Social Policy Committee,
in compliance with best corporate
governance practices to ensure
the efficient functioning of the Board
of Directors.
The programme of the induction
course includes an introduction
to NLMK Group’s key operational and
financial indicators and its systems
of risk management, internal control,
and corporate governance.
Meetings with the CEO (Chairman
of the Management Board), members
of the Board of Directors, members
of the Management Board, and other
senior executives of the Company
are arranged as part of the course.
The newcomers also have an opportunity
to get acquainted with the Company’s
core facilities, processes, and products.
PREVENTING A CONFLICT
OF INTEREST AMONG
BOARD MEMBERS
Members of the Board of Directors
must act in good faith and reasonably
in the interests of the Company and
its shareholders based on sufficient
awareness and with due care and
discretion. Given that the reasonable
and good-faith actions of the Board
members require the adoption of
decisions based on all available information without any conflict of interest and
taking into account the equal treatment of shareholders, the Company has
developed anumber of measures to prevent conflicts of interests. As part of these
requirements, members of the Board of Directors shall:
● Notify the Board in case there is a potential conflict of interest (including an interest
in the Company making a transaction) and put the Company’s interests above their
own under all circumstances
● Refrain from any acts that will or may lead to a conflict between their personal
interests and those of the Company
● Promptly inform the Board of Directors of any conflict of interest and the grounds
for it before the start of a discussion on the item with respect to which the Board
member has a conflict of interest at a Board Meeting or a Board Committee
meeting
● Abstain from voting on items in which they have a conflict of interest. Where
the nature of the item discussed or the specific aspects of a conflict of interest
so require, the Board member experiencing said conflict of interest should not be
present at the Board meeting when the item is discussed.
According to the information available to the Company, there was no conflict
of interest among the members of the Board of Directors in 2020 (including none
related to their participation in the governing bodies of NLMK’s competitors)
GRI 102-25 .
COMMITTEES OF THE BOARD
OF DIRECTORS
GRI 102-22 In order to improve
the efficiency of the decisions taken
by the Board of Directors, ensure
the preliminary examination and
study of the most essential matters in
the Company’s activities, and prepare
the appropriate recommendations,
the Board of Directors has set up
the following standing committees:
● Strategic Planning Committee
● Audit Committee
● Human Resources, Remuneration,
and Social Policy Committee
The committees are structured
around the most important Board
activities. Their composition is
determined with the most effective
application of the members’ expertise
and professional experience in mind.
The committees of the Board of Directors
report to the Board of Directors
and serve as its advisory bodies.
The resolutions of the committees are
advisory in nature.
Due to the need for a comprehensive
discussion of the issues under
consideration, the committees are
composed of Board members with
specialized knowledge and skills.
Committee composition is balanced
to ensure optimal application of
the members’ competencies and
professional experience.
If necessary, a committee chair may
engage experts and consultants to work
with their committee on a temporary or
permanent basis with no right to vote
during decision-making on issues within
the committees’ remit.
The status, goals, objectives, and functions of the committees, as well as the procedures
for their composition, formation, and operation are set out in Regulations on
Committees, which are approved by the Company’s Board of Directors and published
on NLMK’s official website.
In order to balance approaches to problem solving with respect to risk management
and the protection of shareholders’ interests, in two out of three committees
the majority of members, including their chairpersons, are independent directors.
STRATEGIC PLANNING COMMITTEE
The Strategic Planning Committee provides support to the Board of Directors in
resolving matters that involve enhancing the efficiency of the Company’s activities
in the long-term and promoting asset growth, profitability, and investment appeal.
The Committee defines the goals for minimizing the Company’s environmental impact,
including greenhouse gas emissions, and reviews and approves the appropriate
investment programme.
Committee members as of 31 December 2020
The Strategic Planning Committee includes five independent directors. All members
of the Committee, including those who are not members of the Board of Directors,
have the right to vote on the Committee’s agenda items.
The Committee’s composition changed in 2020.
Committee’s activities in 2020
In 2020, the Strategic Planning Committee held five meetings. The Committee reviewed
and passed resolutions on the following issues:
● Development of NLMK Group’s functional areas and key projects of its divisions
● Updated СО2 emission reduction targets for 2023
● Status of NLMK Group’s investment programme and 2021 investment budget
● Strategic Planning Committee schedule for 2020
Plans for 2021
In 2021, the Strategic Planning Committee plans to actively determine development
areas for the new strategy cycle beyond 2023, which includes reviewing the first
draft of NLMK Group’s long-term climate strategy. The Committee will also analyze
the implementation of its instructions and the progress of NLMK Group’s investment
programme.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STRATEGIC PLANNING COMMITTEE MEMBERS IN 2020
Committee members from 19 April 2019 to 24 April 2020
Committee members as of 24 April 2020
Member of the Board
of Directors
Position
Member of the Board
of Directors
Position
Oleg Bagrin
Chair of the Committee
Oleg Bagrin
Chair of the Committee
Thomas Veraszto
Member of the Committee
Thomas Veraszto
Member of the Committee
Helmut Wieser
Member of the Committee
Helmut Wieser
Member of the Committee
Joachim Limberg
Member of the Committee
Joachim Limberg
Member of the Committee
Vladimir Lisin
Member of the Committee
Vladimir Lisin
Member of the Committee
Marjan Oudeman
Member of the Committee
Marjan Oudeman
Member of the Committee
Karen Sarkisov
Member of the Committee
Karen Sarkisov
Member of the Committee
Grigory Fedorishin
Member of the Committee
Grigory Fedorishin
Member of the Committee
Benedict Sciortino
Member of the Committee
Benedict Sciortino
Member of the Committee
Sergey Filatov
Member of the Committee
Sergey Filatov
Member of the Committee
Sergey Kravchenko
Member of the Committee
AUDIT COMMITTEE
The Audit Committee drafts and
submits recommendations to the Board
of Directors on matters concerning
the Board’s active involvement
in the supervision of the Company’s
financial and business activities. These
include recommendations on annual
independent audits of NLMK’s accounting
(financial) statements, the quality
of services provided by the auditor,
compliance with the requirements
forauditor independence, the process
of the independent appraisal of property
in cases stipulated by Russian legislation
and other cases, as well as issues related
to disclosure of the Company’s information about sustainable development GRI 102-32 .
Since 2019, one of the Audit Committee’s responsibilities is monitoring performance
and considering reports related to sustainable development, including matters of
environment and occupational health and safety GRI 102-29 .
The Committee analyzes and evaluates the Company’s information disclosure
system on sustainable development issues and monitors its completeness, accuracy,
and reliability.
Committee members as of 31 December 2020
The Audit Committee is chaired by an independent director. Most of the Committee
members are also independent directors. In addition, the Audit Committee includes
independent directors with a background in the preparation, analysis, evaluation,
and audit of accounting (financial) statements.
The Committee’s composition changed in 2020.
AUDIT COMMITTEE MEMBERS IN 2020
Committee members from 19 April 2019 to 24 April 2020
Committee members as of 24 April 2020
Member of the Committee
Position
Member of the Committee
Position
Marjan Oudeman
Chair of the Committee
Marjan Oudeman
Chair of the Committee
Karen Sarkisov
Nikolai Gagarin
Member of the Committee
Joachim Limberg
Member of the Committee
Member of the Committee
Nikolai Gagarin
Member of the Committee
Stanislav Shekshnia
Member of the Committee
Stanislav Shekshnia
Member of the Committee
Benedict Sciortino
Member of the Committee
Benedict Sciortino
Member of the Committee
Audit Committee’s activities
in 2020
In 2020, the Audit Committee held five
meetings. The Committee reviewed
and passed resolutions on the following
key issues:
● Accounting (financial) statements
with respect to the consideration
of the relevant draft documents
● Risk management, internal control,
and corporate governance, as well
as other reports related to asset
protection and management of
the Company’s significant risks
● Mitigating the risks associated with
COVID-19
● External and internal audits, including
non-audit services provided by
the independent auditor
● Non-financial results of NLMK Group’s
activities prepared in accordance with
GRI standards and quality assessment
of the preparation of the disclosed
GRI indicators
RISK MANAGEMENT
AND INTERNAL CONTROL
The Audit Committee exercises control
over the reliability and efficient
functioning of the risk management,
internal control, and corporate
governance systems, and the drafting
of proposals on their improvement.
In fulfilling its oversight responsibilities,
the Committee reviews reports on
the performance of the internal control
and risk management system prepared
by the external auditor, Internal
Audit Service, and the Group’s other
bodies responsible for fulfilling the risk
management, oversight, and compliance
functions. The Committee holds regular
meetings with the Audit Director and
the external auditor’s team.
Internal Audit
The Audit Committee is responsible for
monitoring the operation and evaluating
the efficiency of the internal audit
function. This is done via discussions
with the Audit Director and approval of
the annual internal audit plan. Progress
“In an era of fast-paced adoption of new technologies, business models, and
growing uncertainty in the world, the Company’s risks are growing more
than ever. Today large companies realize that the strategy of sustainable
development has become an absolute must, and their business objectives
go beyond just making profit: they also include obtaining long-term benefits
associated with the enablement in the field of environmental and socio-economic
sustainable development.
In order to meet the growing expectations of the business, internal audit needs
to maintain a high level of innovation adoption in its processes, expand its role
from following a reactive approach to focusing on the future of the company,
from protecting assets to supporting value creation by developing methods of
continuous audit and transferring innovations to the business.
As it fulfils its task of ‘driving the development of a mature risk management
system’, internal audit needs to strive to become a reliable advisor and business
partner.
The focus of the Audit Committee is expanding to consider the efficiency of
the Company's top risk management, corporate governance practices, business
processes of international companies, business continuity management issues
and improving the company's overall resilience to external threats.”
Marjan Oudeman,
Chair of the Audit Committee
reports, key findings, and recommendations are submitted to the Committee
throughout the year to ensure that the actions taken by the executive management
are efficient.
In an effort to ensure independence, the Audit Director reports directly to the Board
of Directors. The Audit Director has the right to raise any matter that he/she
deems to be important, reports to the Audit Committee, including on audit results
above a certain materiality threshold, and/or in line with other obligatory disclosure
requirements, and meets with the external auditors as required.
The Internal Audit Service undergoes regular independent external quality
assessments (at least once every five years). The results of these assessments are
submitted to the Audit Committee for consideration. The most recent assessment
was in 2017.
External audit
AO PricewaterhouseCoopers Audit (PwC) has been the Group’s Auditor since 2003.
NLMK Group companies hire PwC from time to time to provide non-audit services.
NLMK management is certain that these services do not impair the auditor’s
independence and are not related to the preparation of financial statements. In 2020,
the share of non-audit services was at an acceptable level of no more than 30%
of the total services provided by PwC. PwC regularly rotates key audit staff (at least
once every 7 years) to ensure compliance with independence requirements.
PwC submits quarterly reports to the Audit Committee, and members of the Committee
review and discuss key audit issues with external auditors. As a result of this review,
the Committee concluded that the external audit process is proceeding effectively.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
HUMAN RESOURCES,
REMUNERATION,
AND SOCIAL POLICY
COMMITTEE
The main purpose of the Human
Resources, Remuneration,
and Social Policy Committee
is conducting preliminary reviews
and developing recommendations
for the Board of Directors
to ensure the efficient
operation of its decision-making
on the following issues:
● Appointment of members of the Company’s management and other key employees
and the training of succession candidates for their positions
● Performance assessment of the Company’s management and other key employees
● Remuneration of the Company’s management and other key employees
● Social policy of the Company
Members of the HR Committee as of 31 December 2020
The Committee is chaired by an independent director. Most of the Committee
members are also independent directors. The Human Resources, Remuneration,
and Social Policy Committee includes an independent director who is knowledgeable
in matters concerning motivational management and personnel administration.
The Committee's composition changed in 2020.
HUMAN RESOURCES, REMUNERATION, AND SOCIAL POLICY
COMMITTEE MEMBERS IN 2020
Committee members from 19 April 2019 to 24 April 2020
Committee members as of 24 April 2020
Member of the Committee
Position
Member of the Committee
Position
Stanislav Shekshnia
Chair of the Committee
Stanislav Shekshnia
Chair of the Committee
Vladimir Lisin
Member of the Committee
Vladimir Lisin
Member of the Committee
Thomas Veraszto
Member of the Committee
Thomas Veraszto
Member of the Committee
Oleg Bagrin
Member of the Committee
Oleg Bagrin
Member of the Committee
Joachim Limberg
Member of the Committee
Sergey Kravchenko
Member of the Committee
Committee’s activities in 2020
● Review of proposals to the NLMK Board of Directors on the amount of remuneration
NLMK’s Human Resources, Remuneration,
and Social Policy Committee held
four meetings in 2020, including
two in the form of absentee voting.
The Committee reviewed and passed
resolutions on the following issues:
● Eligibility of nominees proposed
for independent directors to be voted
on at the Annual General Meeting
of Shareholders on the Company’s
2019 results
● Professional background of nominees
to the Board Directors proposed
at the Annual General Meeting
of Shareholders on the Company’s
2019 results
to be paid to Board members
● Progress against target KPIs by the NLMK Group CEO (Chairman of the Management
Board) in 2019 and approval of target project KPIs for 2020
● Progress against target KPIs by Company management in 2019
● Implementation status of Committee instructions
● Managerial competency model
● Labour productivity improvement
● Development of professional competencies
In 2020, the Committee continued to analyze and evaluate the implementation
of the Company’s HR Strategy, the performance of key executives, and the execution
of the Committee’s instructions. The Committee considered the implementation status
of the labour productivity improvement programme and professional competency
development programmes.
“In 2020, the Human Resources,
Remuneration, and Social
Policy Committee reviewed
a number of key matters within
its remit and developed relevant
recommendations for the Board
of Directors.
The Committee reviewed the execution
status of NLMK Group’s HR Strategy,
oversaw the implementation of earlier
instructions, and systematically
tackled related issues.
One important outcome is engaging
the Spencer Stuart consulting firm
to participate in the independent
assessment of the Board. The firm
has an impeccable reputation and international expertise in corporate governance.
Spencer Stuart’s experience will lend a fresh perspective on the Board’s
development prospects and ways to enhance its practices, further strengthening
its performance.
It should be noted that during the pandemic the Committee addressed new
challenges encountered by the Company. At the same time, the Committee
continued to operate with maximum effectiveness, as its members, who have
extensive competencies and international experience, used modern means of
communication and remained highly engaged in the consideration and discussion
of the agenda items. All this ensured in-depth exploration of the relevant issues
discussed and fruitful collaboration with management, facilitating the adoption
of quality resolutions and instructions, effective follow-up of their implementation,
and introduction of best practices into the Company’s activities.”
Stanislav Shekshnia,
Chair of the Human Resources,
Remuneration, and Social Policy Committee
CORPORATE SECRETARY
NLMK’s Corporate Secretary ensures
efficient day-to-day interaction
with shareholders, coordinates
the Company’s activities to protect
shareholders’ rights and interests, and
supports the efficient operation
of the Board of Directors.
The Corporate Secretary’s activities,
rights, and obligations are regulated
by the Regulations on the Corporate
Secretary, developed in accordance
with the Corporate Governance Code
recommendations of the Bank of Russia.
In line with these recommendations,
the Corporate Secretary is also in
charge of the induction course for newly
elected members of the Company’s
Board of Directors, corporate
governance in subsidiaries and
affiliates, working with insiders, and
accounting for affiliates of the Group’s
companies. All these functions enable
the establishment of a dynamic and
balanced corporate governance system
that ensures efficient interaction
between the Company’s shareholders,
Board of Directors, and management.
Functionally subordinate to the Board
of Directors and administratively
to NLMK’s CEO (Chairman of
the Management Board), the Corporate Secretary is appointed and dismissed by
the CEO (Chairman of the Management Board) based on a resolution of the Board of
Directors.
The Corporate Secretary oversees the Corporate Secretary’s Office.
Valery Loskutov has been the Company’s Corporate Secretary since 2005.
VALERY LOSKUTOV
Year of birth: 1969
Mr. Loskutov graduated from the Lipetsk Polytechnic Institute and the Academy
of National Economy under the Government of the Russian Federation with an MBA.
For more than twenty years, he has been a member of the governing bodies of
a number of Russian companies. Mr. Loskutov has been with NLMK since 1998 and
has served as NLMK’s Corporate Secretary since 2005. He has been Secretary of
the Human Resources, Remuneration, and Social Policy Committee since 2017.
Mr. Loskutov is a co-founder of the National Association of Corporate Secretaries.
He was elected to the Board of the National Association of Corporate Secretaries
on 20 December 2019.
He won the 8th Director of the Year national award in the Corporate Governance
Director/Corporate Secretary category.
Mr. Loskutov ranked first in the Best Corporate Governance Director in Metals
and Mining category of the 21st Top 1,000 Russian Managers annual rating by
the Russian Managers Association and Kommersant Publishing House.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
COMPOSITION
OF THE MANAGEMENT BOARD
MANAGEMENT BOARD PROCEDURES
The Management Board is in charge of managing the Company’s day-to-day
operations and implementing the approved strategy and specific resolutions of
the General Meeting of Shareholders and the Board of Directors. The main objective
of the Management Board is to ensure that the Company is operating efficiently.
In its efforts to reach this objective,
the Management Board is guided
by the following principles:
● Efficient and objective decision-
making that favours the interests of
the Company and its shareholders
● Fair, timely, and efficient execution of the decisions of the General Meeting
of Shareholders and the Board of Directors
● Cooperation with trade unions comprised of the Company’s employees in order
to take into account the employees’ interests
● Cooperation with government agencies and local authorities on the most
important issues
The list of issues in the Management
Board’s remit is regulated by
the NLMK Charter and Regulations
on the Management Board, which are
available on the Company’s official
website.
GRIGORY FEDORISHIN
TATYANA AVERCHENKOVA
MIKHAIL ARKHIPOV
SERGEY LIKHAREV
EVGENY OVCHAROV
SERGEY CHEBOTAREV
CEO (Chairman
of the Management Board)
Member of the Management Board
Member of the Management Board
Member of the Management Board
Member of the Management Board
Member of the Management Board
Member of the Strategic Planning
Committee
Vice President,
Operational Efficiency
Vice President,
HR and Management System
Vice President,
Logistics
Vice President,
Risk Management
Vice President,
Energy and Environment
ILYA GUSCHIN
BEN DE VOS
SHAMIL KURMASHOV
Member of the Management Board
Member of the Management Board
Member of the Management Board
Vice President,
Sales
Vice President,
International Operations
Vice President,
Finance
COMPOSITION
OF THE MANAGEMENT
BOARD
NLMK Group’s Management Board
consisted of nine members as of
31 December 2020. The current
composition of the Management
Board was approved by the Board
of Directors at a meeting held
on 24 October 2019.
CEO (CHAIRMAN OF THE MANAGEMENT BOARD)
The CEO (Chairman of the Management Board) is the permanent sole executive body,
whose main responsibility is to manage the Company’s day-to-day activities, arrange
for the execution of resolutions passed by the General Meeting of Shareholders and
the Board of Directors, organize the work of the Management Board, and ensure
the timely adoption of resolutions by the Management Board.
The rights and obligations of the CEO (Chairman of the Management Board) stipulated
by the existing legislation of the Russian Federation as well as the CEO’s contract
with the Company.
The CEO (Chairman of the Management Board) is elected by the General Meeting
of Shareholders for a period lasting until the next Annual Meeting unless otherwise
stipulated by a resolution of the General Meeting of Shareholders.
According to the prevailing corporate documents, the CEO (Chairman of the Management
Board) cannot simultaneously be the Chairman of the NLMK Board of Directors.
Grigory Fedorishin has been the CEO (Chairman of the Management Board) since
12 March 2018.
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Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
BIOGRAPHIES OF MEMBERS OF THE MANAGEMENT BOARD
GRIGORY FEDORISHIN
Year of birth: 1979
Mr. Fedorishin graduated from the State Finance Academy in Moscow. He holds
a master’s degree in business administration from INSEAD business school in France
and Singapore. He is member of the Certified Financial Analysts (CFA) association.
Member of the Strategic
Planning Committee.
CEO (Chairman of the Management
Board) since March 2018
TATYANA
AVERCHENKOVA
Year of birth: 1979
Vice President, Operational Efficiency.
Member of the Management Board
since 2017
ILYA GUSCHIN
Year of birth: 1976
Vice President, Sales.
Member of the Management Board
since 2014
Mr. Fedorishin was Senior Vice President and Deputy Chairman of the Management
Board from March 2017 until March 2018, and Vice President for Finance (CFO) from
2013 until 2017. In 2016, he also headed NLMK Group’s Russia Long Products Division.
From 2011 to 2013, Mr. Fedorishin served as NLMK’s Strategy and Business
Development Director. From 2009 to 2011, he served as an investment manager
at Libra Capital, a Moscow-based investment management company. From 2001
to 2009, he worked for the PricewaterhouseCoopers consulting company, where
he held positions up to director for business restructuring practice.
Ms. Averchenkova graduated from Lipetsk State Technical University with a major
in economics and management.
Ms. Averchenkova has been with NLMK since 2001. She served as Director for
Controlling and held various senior management positions in the Strategy
Department. In 2016, she was appointed Vice President for Operational Efficiency.
Mr. Guschin graduated from the Faculty of Economics at Lomonosov Moscow State
University. He holds a Ph.D. in economics.
Mr. Guschin joined NLMK in 2013. From 2009 to 2013, he worked for SIBUR Group,
including as head of SIBUR International, the group’s export division.
From 2008 to 2009, he served as Financial Director at Skolkovo School of
Management in Moscow. From 2002 to 2007, he held various positions at Microsoft.
BEN DE VOS
Year of birth: 1967
Mr. de Vos holds a bachelor’s degree with a major in electrical engineering
(supplementary training programme) and a master’s degree with a major in process
engineering from the University of Pretoria.
Vice President, International Operations.
Member of the Management Board
since 2016
From 2011 onwards, he has served as Director of NLMK Belgium Holdings as well
as a number of its subsidiaries. He is CEO and Chairman of the Management
Board of NLMK International B.V., leading the turnaround and operating efficiency
programmes.
Mr. de Vos joined Duferco La Louvière in Belgium in 2004 and served as a Management
Board member of the NLMK/Duferco JV from 2007 to 2011.
After starting his career as a production and development engineer in 1990, he held
various management positions at Iscor and Saldanha Steel (now ArcelorMittal South
Africa) between 1995 and 2003, ending with export sales.
SERGEY LIKHAREV
Year of birth: 1964
Mr. Likharev holds a Ph.D. in physics and mathematics and a master’s
of business administration from Cornell University, USA. From 1990 to 1993,
he worked as a researcher at Lomonosov Moscow State University.
Vice President, Logistics.
Member of the Management Board
since 2014
Mr. Likharev joined NLMK in October 2013. From 2012 to 2013, he served as Aviation
Business Director at Russian Machines Group and Chairman of the Board
of Directors of the Aviacor Aviation Plant.
After serving as CEO of Aviacor Aviation Plant in Samara from 2004 to 2007,
he worked as CEO of the Basel Aero airport group from 2008 to 2012.
From 1993 to 2004, he held senior positions at Interros, Ostankino Meat Processing
Plant, Golden Telecom, Cannon Associates, and Coopers & Lybrand.
Mr. Ovcharov is a graduate of Lipetsk State Technical University and holds a Ph.D.
in economic sciences.
Mr. Ovcharov joined NLMK in 1998. He served as Director for Internal Control and
Risk Management and Head of Corporate Finance, and held senior management
positions at the Department of Economics and Finance. In 2016, he was appointed
Vice President for Risk Management.
Mr. Arkhipov graduated with honours from the Faculty of Sociology at Lomonosov
Moscow State University.
Mr. Arkhipov joined NLMK in January 2018 as Vice President for HR and Management
System. From 2013 to 2018, he was a member of the Management Board and Vice
President for HR at MTS Group. From 2009 to 2013, he held various positions in
the HR Department at SIBUR up to HR Director. From 2004 to 2009, Mr. Arkhipov
worked in senior management positions in HR at SUN InBev and KPMG.
Mr. Chebotarev graduated from Lipetsk State Technical University with a major
in applied mathematics. He holds a Ph.D. in engineering sciences.
EVGENY OVCHAROV
Year of birth: 1977
Vice President, Risk Management.
Member of the Management Board
since 2018
MIKHAIL ARKHIPOV
Year of birth: 1982
Vice President, HR and
Management System.
Member of the Management Board
since 2018
SERGEY CHEBOTAREV
Year of birth: 1980
Vice President, Energy and Environment.
Member of the Management Board
since 2018
Mr. Chebotarev joined NLMK in 2000 as an economist in the Fuel and Energy Industry
Department. He served as Head of Energy Policy Management and Director for
Energy Efficiency and Energy Markets, before being promoted to Vice President for
Energy in 2016 and Vice President for Energy and Environment in 2020.
SHAMIL KURMASHOV
Year of birth: 1978
Mr. Kurmashov graduated from Moscow State Institute of International Relations
(MGIMO University), and holds a Ph.D. in economics from the Central Economics and
Mathematics Institute (CEMI RAS).
Vice President, Finance.
Member of the Management Board
since 2019
He is a member of the Board of Directors at NLMK International B.V.
From 2009 to 2018, he was Deputy CEO for Commerce and Finance at Aeroflot. From
2007 to 2009, he served as Deputy CEO for Finance and Investment at Sistema,
where he was also in charge of the group’s investment activities. He has held
executive positions at Norilsk Nickel and Wimm-Bill-Dann.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
REPORT ON REMUNERATION PAID
TO GOVERNING BODIES
The level of remuneration the Company
pays to members of governing bodies
is sufficient to attract, motivate, and
retain persons with the expertise and
qualifications NLMK seeks.
REMUNERATION
AND COMPENSATION
PAID TO MEMBERS
OF THE BOARD
OF DIRECTORS
GRI 102-35 The Company's policy of
remuneration to members of the Board
of Directors serves to align the financial
interests of directors with the long-term
financial interests of shareholders.
Members of the Board of Directors
are paid remuneration during the period
in which they perform their duties, and
they also receive reimbursement of
expenses related to the performance
of their duties as members of the NLMK
Board of Directors. The Regulations
on Remuneration for Members of
the Board of Directors, which was
approved by the General Meeting
of Shareholders, establish the amount of
remuneration and determine the terms
and conditions as well as the procedure
for remuneration payment GRI 102-37 .
The Regulations are available
on the Company’s official website.
The Regulations contain transparent
mechanisms for determining the amount
of remuneration paid to the Board members and govern all types of compensation
and benefits offered to them.
The remuneration system for members of the Board of Directors serves to align
their financial interests with the long-term financial interests of shareholders.
Remuneration is paid to members of the Board of Directors for reasonably and
faithfully exercising their rights and duties in the interests of the Company.
Remuneration to members of the Board of Directors consists of basic remuneration
and a bonus.
The amount of the basic remuneration was approved on 5 June 2015 by a resolution
of the Annual General Meeting of Shareholders in the amount of $160,000
GRI 102-36 .
Members of the Board of Directors are entitled to basic remuneration if they
participated in over half of the Board of Directors meetings over the reporting period.
Members of the Board of Directors are also paid remuneration for performing
the functions of the Chairman of the Board of Directors, a member of one or more
committees of the Board of Directors, or for chairmanship in one or more committees
of the Board of Directors.
A member of the Board of Directors may receive a bonus that shall not exceed
the amount of two basic remuneration packages. The amount of bonuses is
determined based on the member’s contribution to the work of the Board of
Directors and its committees and the recommendations of the Human Resources,
Remuneration, and Social Policy Committee.
Remuneration is paid based on a resolution of NLMK’s General Meeting of Shareholders.
Regulations on the Remuneration of Members of the NLMK Board of Directors outline
the rules for reimbursing Board members’ work-related expenses. The following
expenses are considered to be reimbursable:
● Transportation expenses of Board members incurred while travelling to and from
meetings
● Accommodation costs incurred while attending meetings
● Hospitality expenses
● Costs associated with obtaining the professional advice of experts on issues under
consideration at Board meetings
ACTIVITIES OF THE MANAGEMENT BOARD IN 2020
Member of the Management Board
By member
of the Management
Board
Grigory Fedorishin
Tatyana Averchenkova
Ilya Guschin
Ben de Vos
Sergey Likharev
Evgeny Ovcharov
Mikhail Arkhipov
Sergey Chebotarev
Shamil Kurmashov
41 (41)
41 (41)
41 (41)
41 (41)
41 (41)
41 (41)
41 (41)
41 (41)
41 (41)
NLMK Management Board members had no conflict of interest in 2020.
REMUNERATION FOR MEMBERS OF THE NLMK BOARD OF DIRECTORS
On 19 March 2020, Grigory Fedorishin, who was previously not an NLMK shareholder,
acquired 35,678 of the Company’s global depositary shares (equivalent to 356,780
ordinary shares) making up 0.00595% of NLMK’s charter capital.
On 15 December 2020, Grigory Fedorishin sold 17,839 of the Company’s globaldepositary
shares (equivalent to 178,390 ordinary shares) making up 0.00298% of NLMK’s charter
capital. After that 17,839 of the Company’s global depositary shares (equivalent to
178,390 ordinary shares) making up 0.00298% of NLMK’s charter capital remained in
his ownership.
Other Management Board members are not NLMK shareholders.
Remuneration category
Basic remuneration
Additional remuneration to the Chairman of the Board
of Directors, taking into account their functions related
to organizing the work of the Board of Directors
Remuneration amount
$160,000
Up to 50% of the basic remuneration package
Additional remuneration to a member of any committee
of the Board of Directors (who participated in over half
of its meetings)
Up to 25% of the basic remuneration package, and up to 50%
of the basic remuneration package for a member of two
or more committees
Additional remuneration to the Chairman of any committee
of the Board of Directors (who participated in over half
of its meetings)
Up to 40% of the basic remuneration package, and up to 80%
of the basic remuneration package for the Chairman of two
or more committees
ACTIVITIES
OF THE MANAGEMENT
BOARD IN 2020
The Management Board functions in
accordance with the approved meeting
plan or as necessary. The CEO (Chairman
of the Management Board) determines
the format of the Management Board’s
meetings.
In 2020, the Management Board held
41 meetings, including 13 by absentee
ballot. The following issues were
considered at these meetings:
● Achievement of the Group’s
key performance indicators
in occupational health and safety
● Execution of NLMK Group’s budget
● The Group’s participation in and
withdrawal from other companies
● Execution of NLMK Group’s Strategy:
updates on the development and
implementation of the investment
programme projects; updates
on the execution of the HR and Social
Strategies, Occupational and Industrial
Safety programmes; operational
efficiency improvements; sales
portfolio management; development
of maintenance and repair services
● Development programmes for
functional areas and production
facilities
● Non-core assets portfolio
management
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
The maximum amount of a Board
member’s expenses reimbursed by
NLMK during the reporting period
is determined by a resolution of
the General Meeting of Shareholders
and shall not exceed 30% of the basic
remuneration package. Compensation
shall only be paid if the member
of the Board of Directors participated
in more than half of the meetings held
by the Board of Directors.
The Company does not have other forms of remuneration, including short-term
or long-term incentive programmes that depend on financial performance, or stock
option programmes.
The Annual General Meeting of Shareholders on the results of 2019, which was held
on 24 April 2020, resolved to pay remuneration to members of NLMK Board of Directors
in the amount of $2.272 m.
REMUNERATION TO BOARD MEMBERS1, ‘000 RUB
Indicator
Total payments
Remuneration, incl.:
Basic remuneration
Bonuses
Salary
Commission
Reimbursed expenses
Other types of remuneration
2018
152,482
145,564
92,259
53,305
–
–
6,918
–
INDIVIDUAL AMOUNT OF REMUNERATION TO BOARD MEMBERS1, ‘000 RUB
Member of the Board of Directors
Vladimir Lisin
Stanislav Shekshnia
Oleg Bagrin
Nikolai Gagarin
Karen Sarkisov
Thomas Veraszto
Helmut Wieser
Marjan Oudeman
Benedict Sciortino
Franz Struzl
Joachim Limberg
Sergey Kravchenko
2018
20,705
17,427
19,293
12,982
15,633
16,309
16,423
15,881
17,446
383
–
–
2019
179,066
170,693
108,186
62,507
–
–
8,373
–
2019
24,041
21,655
21,948
15,026
18,031
19,248
400
20,848
18,935
–
18,934
–
2020
169,522
167,846
106,381
61,465
–
–
1,676
–
2020
23,640
19,503
19,503
14,775
17,730
17,730
-
19,503
17,730
-
17,730
-
APPROACH
TO REMUNERATION
AND COMPENSATION
FOR MANAGEMENT
BOARD MEMBERS
AND OTHER
TOP EXECUTIVES
GRI 102-35, GRI 102-36 The material interest
of members of the Management
Board in achieving the Company’s
strategic goals is ensured by short-
term and long-term incentive systems.
Short-term incentives are based on
the existing system of key performance
indicators (KPIs). The amount paid
to members of the Management
Board in bonuses depends on their
achievement of KPIs. The variable part
of remuneration for Management Board
members amounts to approximately
half of the total yearly remuneration.
The KPIs used to determine rewards for senior management are related to NLMK’s
financial and operating performance and are intrinsically linked to shareholder value.
They include operational performance, social responsibility, occupational safety, and
organizational development indicators. KPIs for the CEO (Chairman of the Management
Board) include annual financial indicators, as well as long-term indicators of strategy
implementation, such as the Company’s sustainable development targets.
Top executives, including heads of NLMK Group’s main production sites, have
KPIs related to reducing air emissions and СО2 emissions, as well as increasing
their share of recycled waste. In addition, energy efficiency KPIs are set for
the relevant executives, including heads of sites and the Vice President for Energy
and Environment. For top executives, KPI data is recorded as financial gains from
implementing the corresponding operational efficiency projects.
The Company also has a long-term incentive (LTI) programme for members of
the executive bodies and other senior executives of the Company. The current
programme adopted in March 2019 covers the 2019–2023 strategic management cycle.
Long-term incentive programme payments are made to Management Board members
depending on the Company’s economic performance on the five-year horizon and
the attainment of NLMK’s strategic goals. If KPIs are achieved, all Management Board
members, including the CEO, receive the first advance payment three years after
the programme commences. The final payment net of the advance sum is made
depending on performance after 5 years.
REMUNERATION TO MANAGEMENT BOARD MEMBERS1, ‘000 RUB
Indicator
Total payments, incl.:
Salary
Bonuses2
Commission
Benefits
Reimbursed expenses
Other types of remuneration
2018
524,553
205,195
312,510
–
–
1,481
5367
2019
535,032
238,764
295,455
–
–
813
–
2020
530,830
235,295
295,455
-
-
69
12
1 Data for 2018-2019 is represented in actual amounts. Remuneration to members of the Board of Directors for 2020 is determined based on preliminary
calculations in accordance with the Regulations on Remuneration for Members of NLMK’s Board of Directors.
1 Data for 2018 is represented in the actual amounts and may differ from previously published estimated liabilities by the amount of liabilities for achieving
the Company’s strategic objectives under the long-term incentive programme.
2 The bonus amount for 2018 does not include a part of the amount paid in 2019 for the long-term incentive programme. Bonuses to members
of the Management Board for 2019–2020 include obligations to pay bonuses based on a preliminary calculation reflecting their performance
in the reporting year.
78
79
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OPERATIONAL CONTROL
AND RISK MANAGEMENT
NLMK pays special attention to
the development of its risk management
system in a bid to protect its assets
and ensure timely response to external
and internal factors that may hinder the achievement of strategic and business goals.
The goal of the Company’s risk management and internal control system is to ensure
that the Company successfully adapts to technological, economic, social, and any
other changes.
INTERNAL CONTROL AND
RISK MANAGEMENT SYSTEM
NLMK Group’s approach to operational
control is based on a clear segregation
of authority and functions between
the entities involved in its internal
control and risk management system;
it also provides for ‘three lines of
defence’. Control procedures are used
in the Group’s Russian and international
operations and are an integral
component of key corporate decision-
making activities and processes.
The main principles and approaches
to the organization of risk management
are enshrined in the Internal Control
and Risk Management Policy developed
in accordance with the recommendations
of the Central Bank of the Russian
Federation, professional standards,
and best corporate practices, and
approved by the Board of Directors.
RISK MANAGEMENT COMMITTEE
The Management Board’s Risk Management Committee is a standing collegial body
that ensures effective functioning of the internal control and risk management
system, as well as the promotion of business ethics and anti-corruption principles.
At least once a year the Committee reviews reports on changes in NLMK Group's risk
profile, approves key risk management principles and approaches, and exercises
overall control over the implementation of risk management measures and
the strengthening of the internal control system GRI 102-11 .
BOARD OF DIRECTORS’ AUDIT COMMITTEE
The Audit Committee exercises general oversight over the risk management
effectiveness and reviews the risk report, which includes an overview of the risk
profile, a summary of significant changes in the profile, and the risk management
efficiency analysis GRI 102-30 .
RISK MAP
The Company has developed a Risk Map to systematize its approach to identifying,
analyzing, and monitoring risks. The Risk Map is regularly updated to reflect
the strategy, changing operations, and external context. In 2020, the Risk Map was
significantly expanded, pressured by external circumstances (due to the COVID-19
pandemic some risks (health, retirement of key competencies, supply continuity, IT)
have increased), and in connection with the Group’s heightened focus on internal
measures to ensure business continuity, operational efficiency, security and comfort
of employees, and protect its business reputation.
INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM
BOARD OF DIRECTORS (AUDIT COMMITTEE)
MANAGEMENT BOARD (RISK MANAGEMENT COMMITTEE)
Operations
management
Internal control and
risk management
OHS
Environmental
management
Compliance
Legal support
Corporate
security
Information
security
ВНУТРЕННИЙ
Internal Audit
t
i
d
u
a
l
a
n
r
e
t
x
E
First line of defence
Second line of defence
The management in various
functions identifies risks and
implements controls
Management within
centralized functions that
define risk management
standards for
the entire Group
Third line of defence
Provides independent
verification of the control
environment's efficiency
EXAMPLE OF THE THREE-LINE DEFENCE MODEL:
MANAGING THE RISK OF EQUIPMENT FAILURE
First line:
the operations staff of the first
line is responsible for identifying
deviations in the process
parameters of the equipment,
monitors the degree of wear
of individual components, forms
requests and sets the timing
of scheduled repairs.
Second line:
determines the criticality
of equipment condition from
the main production chain
perspective, develops appropriate
strategies for its maintenance,
and controls the accuracy
and completeness of the work
performed.
Third line:
the internal audit evaluates
the efficiency of tools for
identifying deviations in
the processes of production,
planning, and carrying out
repairs.
80
81
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
RISK FACTORS
OCCUPATIONAL AND INDUSTRIAL SAFETY RISKS
IT AND INFORMATION SECURITY RISKS
Risks of industrial and fire safety, risks of emergency situations, occupational risks.
Why is this risk important?
NLMK Group is a manufacturing company. Our activities involve operating hazardous production facilities and using a large
amount of mechanical equipment, which creates risks related to the health of employees and contractors, as well as the risks
of accidents, fires, equipment breakdown, the decay of buildings and structure, floods, and other natural disasters.
Threats
Management
● Regular audits of the state of production facilities (observations, inspections, surveys)
● Ensuring safe working conditions and preserving the life and health of employees
● Ensuring the reliability of hazardous production facilities
● Carrying out industrial and fire safety trainings for employees, including the non-operations
●
●
employees
Investigating the causes of accidents/ incidents, analyzing the possibility of their recurrence
at similar facilities
Identifying relevant natural risk factors, accounting for seasonal factors for each
production company
● Developing an action plan for the prevention and elimination of natural and man-made
●
emergencies, ensuring annual plan updates, organizing employee training
Implementing Cardinal Safety Rules (10 fundamental principles of safe production developed
by the Company) for employees and contractors
● Developing corporate injury prevention programmes, including: LOTO (the procedure for
the safe use of energy sources during equipment maintenance, repair, or cleaning), safety
at height, eye protection, protection against cuts, protection against falling/slipping
● Verifying the qualification certificates of employees of contracting organizations, setting
knowledge test following the introductory briefing
Implementing pre-work hazard analysis and dynamic risk assessment
●
● Developing a response system for emergency medical care, medical evacuation, first aid,
and resuscitation, including appropriate training of employees
HEALTH SAFETY RISKS
Why is this risk important?
Due to the specifics of the Company processes, the operations at the Group's sites is associated with the impact of harmful
factors. The production operations can lead to the release of substances that pollute the air, water, and soil.
Taking into account the COVID-19 pandemic, there are additional risks for the health of employees, both related to the disease
itself and to its consequences for the body.
Disruption of business continuity due to unavailability of IT systems, data transmission network following technical
and software failures, non-fulfillment of obligations by service providers, faulty or intentional actions of the Company's
employees, actions of third parties.
Damage caused by unauthorized access of third parties to trade secrets.
Why is this risk important?
The Company's business processes and their efficiency directly depend on IT systems and the security of confidential
information in all its forms.
Threats
Management
●
Intrusion and anomaly detection, security analysis of IT resources, collection and
correlation of information security events
● Conducting audits for compliance with the legal requirements in the field of personal
data protection
● Testing the skills of IT system users for bogus phishing attacks
If cyber threats
materialize, they can
disrupt business
and production
processes, damage
the environment, and
tarnish the Company’s
business reputation.
PERSONNEL-RELATED RISKS
Risks of loss of key competencies necessary for business processes.
Why is this risk important?
Human capital is just as important a resource for achieving the Company's strategic and operational goals
as its production facilities.
Threats
Management
The loss of key
competencies can lead
to downtime, increased
costs, and shifts
in project deadlines.
FINANCIAL RISKS
● Development of the workforce planning process by employee profile
● Setting up a talent pool for senior positions
● Tracking employee motivation and satisfaction levels
● Establishing relations with basic educational institutions to improve the quality
of personnel training, incentivizing future graduates to join the Company
● Developing individual employee training and development plans
Risks associated with the Group's financial activities: liquidity risks, currency and price risks, tax risks, credit risks.
Threats
Management
Why is this risk important?
● Early diagnosis and prevention of diseases, development of a conscious attitude of employees
to their health, voluntary medical insurance, insurance against accidents and critical illnesses,
health resort treatment
● Ensuring the availability of high-quality food and dietary regime
● Promoting healthy lifestyle
● Upgrading corporate medical institutions (purchase of medical equipment, training of medical
personnel)
● Organizing various forms of rehabilitation treatment for workers who have suffered from
●
COVID-19 and viral pneumonia, on the basis of corporate medical facilities
Implementing a set of measures to counteract the spread of COVID-19 at the Company's
production facilities, including mass laboratory tests
● Voluntary vaccination against seasonal flu and pneumococcal infection in all regions where
the Company operates
● Handing over medical diagnostic and therapeutic equipment to medical facilities in the regions
where the Company operates
● Additional payments to medical workers’ payroll and organizing catering for them
The key factor determining the size of the Group's revenue are global steel prices. Since most of the Group’s revenue is
denominated in foreign currencies and most of expenses are denominated in rubles, the Group faces currency risk.
In addition, some of the Group's products are sold with deferred payment, which creates credit risk. For the Group to meet
its obligations to employees, customers, and suppliers, it should have sufficient financial reserves and a balanced cash flow.
Threats
Management
If financial risks
materialize, the Group's
financial performance
may deteriorate, and
it may not be able to
fulfil its obligations to
suppliers, contractors,
and customers.
● Creating a risk reserve of unencumbered cash
● Securing confirmed credit lines with first-class Russian and foreign financial institutions
● Natural hedging of price risk by currency risk, maintaining an optimal open currency position
● Using formula-based pricing, concluding long-term contracts
● Government relations and relations with expert communities
● Control of supply contracts with deferred payment, contracts for the purchase of goods/
services with advance payments
● Determining the credit limit based on internal scoring and external ratings
● Using risk transfer tools: bank guarantee, insurance limit, letters of credit, factoring
● Applying a portfolio approach to similar requirements, monitoring the portfolio limit
82
83
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
The Company also identifies
the following risks:
● Environmental risks
(see the Environmental Protection
and Climate Change sections
for details)
● Reputation risks and stakeholder
engagement (including contractors)
risks (see the Stakeholder
Engagement section for details)
● Investment project management risks
● Equipment failure risks
● Inventory risks
● Operational efficiency risks
● Supply continuity risks
● Free trade restriction risks
● Corruption and fraud risks, compliance
risks, and legal and contractual
risks (see the Compliance section
for details)
EMERGING RISKS
The Group pays special attention to
monitoring emerging risks. These are
risks, the impact and probability of which
cannot be reliably and fully assessed
based on statistics or other available
information. Completely new risks
or previously known risks in a rapidly
changing context can be emerging risks.
Emerging risks tend to be external
in nature. At the moment, we identify
geopolitical, social, demographic, and
climate risks, as well as the risks of
rapid technological change. With their
development, emerging risks can be
reconsidered as current risks, which
are managed according to the standard
approaches and practices adopted
in the Group. One example of such a risk
is the risk of information security.
Since there is not enough information
to assess the probability of emerging
risk, the Group has chosen the following
strategy: for the most clearly shaped
risks, it conducts a scenario analysis
of their impact on the Group's goals, and
also increases the stability of the Group's
business to any events, regardless of
their nature.
2020 PERFORMANCE
The COVID-19 pandemic has significantly increased the likelihood of most of the key risks.
In line with the current internal control and risk management system, measures
have been developed and are being implemented to reduce the impact of these risks
on the Company's business continuity and financial performance.
The events that took place in 2020 confirmed the need to shift the Company's focus
from managing individual risks to organizing business continuity and overall resource
protection, regardless of the sources of threats.
RISK STRATEGY AND PLANS FOR 2021
AND THE MEDIUM TERM
NLMK has introduced the practice of regularly updating the internal control and risk
management system. Three main areas of the Company's development for the next
three years were approved in 2020:
1. Business continuity management
Systematic work on continuity management is one of NLMK’s priorities in its risk
minimization activities. In view of this approach, a project is underway to organize
a Business Continuity Management System (BCMS) in accordance with the Business
Continuity international standards and best international practices.
The Company is committed to preventing the negative impact of possible business
interruptions due to external and internal factors, to ensure stability in crisis
situations and to fulfill its obligations to stakeholders.
In 2021, the Company plans to complete the resource and process criticality analysis
at the Group's key sites, and update its business continuity plans.
2. Process maturity
NLMK is consistently increasing the maturity level of its internal control and risk
management system to ensure the achievement of project and process targets.
This includes: improving existing control procedures by analyzing them, identifying
areas for development, redesigning controls; eliminating redundancy; developing
key risk indicators and defining their boundaries; developing approaches to joint risk
modelling, stress testing, and scenario analysis.
In 2021, the Group plans to approve its risk appetite for key risks, develop a system
of key risk indicators, and synchronize them with the goal-setting system.
3. Corporate culture of risk awareness
The Company is committed to creating a risk awareness culture that meets
the principles of engagement, responsibility, and risk prevention. As part of this
commitment, NLMK plans to develop educational solutions, conduct trainings, raise
awareness of employees about the internal control and risk management system,
as well as about communication channels for sharing risk-related information.
Risk management requires specific knowledge and often involves data processing
and modelling. In order to cope with specific local tasks in business units, the Risk Lab
competence centre is being created, which will develop innovative methods and tools
for quantifying risk and making decisions in conditions of uncertainty.
COMPLIANCE
The Company is actively developing
its compliance system, which aims
to ensure that NLMK's operations
comply with applicable legislation and
internal documents. The functioning
of the compliance system is ensured
by the Compliance Division, established
in 2020, as well as profile divisions.
The Compliance Division:
● Implements anti-corruption
programmes and activities
● Implements antitrust risk
management programmes
● Coordinates the implementation
of other compliance procedures
ANTITRUST COMPLIANCE
NLMK Group continues to improve
its antitrust compliance system, taking
into account changes in the legislation
and law enforcement development
trends. The Company has introduced
the practice of continuous monitoring
of antitrust legislation, antitrust
practices and the experience of other
companies in preventing antitrust risks.
With a view to ensuring antitrust
compliance, the Company has
established a number of control
procedures and produced educational
and data analytics materials for
employees. In 2020, all mandatory
procedures enabling effective
functioning of the programme were
implemented. They included risk
monitoring, which did not reveal significant changes in the Company's antitrust risk
map, and regular consultations on antitrust matters for employees. The antitrust
compliance manager participated in the business processes most exposed to
antitrust risks (shaping the trade and sales policy, concluding contracts, interacting
with counterparties).
Employee training is a key element of the compliance system. In 2020, a pilot
training on antitrust requirements was carried out for employees, and a map of
the Company’s key positions was developed for continuous training and testing.
Part of the training was held online expanding the reach to more employees across
different regions. NLMK Group regularly shares information about antitrust
requirements with its employees using various formats to achieve maximum effect.
The Company’s Antitrust Policy declares ‘zero tolerance’ to violations of the antitrust
law. The Company continues to improve its antitrust risk prevention system, and
in 2020, it was included in the Legal Support function.
84
85
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
INTERNAL AUDIT
Internal audit is a source of independent
and reasonable guarantees to the Board
of Directors and management and it
is involved in improving the Group's
performance by:
● Conducting objective audits in line
with the risk-based approach
● Giving recommendations following
the results of audits and knowledge
sharing
The Group’s internal audit function is
built in line with legal requirements and
the recommendations of professional
standards and the Bank of Russia’s
Corporate Governance Code, and meets
the requirements of best international
practices.
Internal audit is a centralized function that fully encompasses the core activities
of NLMK Group companies, including international companies. The unified management
of the internal audit function allows for the use of uniform standard approaches
to planning, auditing and reporting, and also ensures an effective exchange of
information between specialists of the Internal Audit Service and with key stakeholders.
The Internal Audit Service performs the following key functions:
● Assessment of the internal control system
● Evaluation of the risk management system’s effectiveness
● Assessment of corporate governance
In addition, the Internal Audit Service performs consulting activities by providing
professional opinions to internal customers on certain matters concerning financial
and business operations.
The Company’s internal control and risk management system is evaluated taking
into account the principles set forth in international standards for risk management
and internal control, including ISO 31000:2018, COSO ERM:2017, and COSO 2013.
PRINCIPLES OF THE INTERNAL AUDIT SERVICE AND THEIR ENFORCEMENT
Principle of the Internal Audit Service
Tools and mechanisms for enforcing the principles
Independence and objectivity
Audit Director functionally reports to NLMK’s Board of Directors
Systematic and consistent
approach
Audit Director is appointed (dismissed) by a resolution of NLMK's Board of Directors
Audit Director has the right of direct and free access to the Chairman of the Board
of Directors, Chairman of the Audit Committee, and CEO (Chairman of the Management
Board) to provide information on significant risks that have been identified
Third parties are prohibited from interfering in the process and the results
of the audit
The Internal Audit Service is guided by a risk-based Audit Plan
Resources are distributed between targeted (limited scope) and comprehensive
audits of processes and subsidiaries in devising the Audit Plan
The Internal Audit Service prepares recommendations taking into account
the costs/value ratio. Priority is given to systemic measures
Regular monitoring of the execution of post-audit recommendations
Efficient use of resources
Lead auditors are appointed from among the most qualified auditors
Professionalism and a professional
approach to work
Continuous audit quality
improvement
Engagement of internal and external experts (consultants)
Timely status updates to the Company's management about the requirements
(limitations) for the resources needed to conduct audits
Internal auditors have special knowledge, skills, and expertise needed to carry out
practical professional activity in the Company; continuous professional development
and improvement of the said knowledge, skills, and other expertise through
assessment, training, and sharing experience; continuous development of expertise
in IT systems as the key source of information during audits
Annual internal and periodic external (once every five years) assessments of
the internal audit function to determine whether the activities of the Internal Audit
Service and auditors comply with the definition of internal audit, the International
Standards or the Professional Practice of Internal Auditors, and the Code of Ethics
of the Institute of Internal Auditors (IIA), with a view to further improve it.
After its 2017 independent quality assessment, Deloitte provided NLMK with
a positive opinion stating that the Internal Audit Service’s activities are generally
in line with International Standards for the Professional Practice of Internal Auditors
and the IIA Code of Ethics.
The main internal document of
NLMK Group governing the Internal
Audit Service functions is
the Regulations on the Internal Audit
Service. The Regulations have been
approved by the Board of Directors
and are available on the Company's
official website.
The Head of the Internal Audit Service,
as part of their activities, submits
reports to the Audit Committee
on the audit results of the actual
state, reliability, and effectiveness
of the internal control and risk
management system.
2020 PERFORMANCE
In 2020, the Internal Audit Service continued to implement the Internal Audit
Development Strategy through to 2022 and approved by the Audit Committee.
A number of planned activities were carried out with the following key results:
● Evaluation of the effectiveness of the risk management system
● Assessment of the risk management system’s effectiveness
● Assessment of the internal control system’s effectiveness for end-to-end
processes at NLMK Group: Maintenance, Procurement: Raw materials, Operational
efficiency, Qualification, tender, and contract approval, etc.
● Local audits of process control efficiency
PLANS FOR 2021 AND THE MEDIUM TERM
● Assessing the reliability and functioning of risk management and internal control
for NLMK Group’s key business processes according to the Internal Audit Plan,
including the study of end-to-end processes in the Company’s international assets
● Improving compliance with the requirements of antitrust, anti-dumping, and anti-
corruption legislation
● Assessment of corporate governance effectiveness
86
87
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANTI-CORRUPTION ACTIVITIES
NLMK Group is guided by high ethical
standards, principles of business
transparency, and zero tolerance
to any form or manifestation of
corruption in its day-to-day operations.
The Company engages in targeted
work to prevent and counteract
corruption and fraud. The Company’s
management constantly devotes
attention to timely detecting and
responding to wrongdoings GRI 102-16 .
The Company has adopted the Code
of Corporate Ethics and Anti-Corruption
Policy. Whenever a new version
of the Code of Corporate Ethics
or Anti-Corruption Policy comes into
effect, all employees of the Company
review latest version and sign
an acknowledgement form GRI 102-16 .
The Company also expects its business
partners to adhere to basic values
and principles of good business
conduct. The Company’s business
partners familiarize themselves with
the provisions of the Code of Corporate
Ethics during the qualification and
selection of a counterparty as well
as the conclusion of a contract.
The Group imposes a mandatory
requirement on all business partners
that an anti-corruption clause
must be included in the contract,
or an Agreement on Anti-corruption
Terms must be signed GRI 102-16 .
The Audit Committee of the Board
of Directors, the CEO (Chairman
of the Management Board), and
the Risk Management Committee of
the Management Board all play a key
role in establishing an anti-corruption
system that functions efficiently
The Vice President for Risk Management
is in charge of implementing anti-
corruption programmes and countering
corruption within the Company.
The Compliance unit implements
anti-corruption programmes and
activities GRI 102-16 .
The main mechanisms and tools employed by the Company to combat corruption
and fraud are GRI 102-17, GRI 205-2 :
● The drafting, communication to all stakeholders, and implementation of internal
corporate documents
● Informing and training employees about anti-corruption issues
● Efficient feedback mechanisms for collecting and analysing information, including
an anti-corruption hotline and continuous informing of employees about available
feedback channels
● The identification, assessment, and management of corruption and fraud risks
within business processes and mitigating these risks
● The inclusion of the requirement to comply with the provisions of the Anti-corruption
Policy and the Code of Ethics in the job descriptions of employees and agreements
with counterparties
The Company has introduced a number of feedback mechanisms for collecting
and analysing information about any instances of corruption, fraud, unethical
or unfair behaviour, or other wrongdoing that could take place or have taken place.
The most well-known mechanisms are the anti-corruption hotline and the e-mail
for whistleblowers (including anonymous). Contacts are available on the Company's
website GRI 102-17, GRI 205-2 .
All requests are promptly analysed in accordance with the procedure in place
at the Group, and corrective measures are taken if necessary. Any information
that is corroborated about instances of corruption is anonymized and published on
the corporate portal. This procedure serves to inform employees about the result
of the inspections/investigations initiated by hotline reports and to remind employees
that corruption is strictly prohibited (Article 4 of the Anti-Corruption Policy)
GRI 102-17, GRI 205-2 .
The anti-corruption and fraud system
efficiency assessment is performed
as part of audits by the Internal Audit
Service.
Risks associated with corruption and
fraud are identified, analysed, and
assessed at all levels of management
and at all the Group’s companies GRI 205-1 .
Experts from the Compliance unit
together with other departments
are consistently working to identify
the sources of fraud and corruption
risks and prevent them from
materializing GRI 205-1 .
The efficiency of NLMK Group's Code
of Corporate Ethics is assessed
as part of the Internal Audit Service's
audits. In 2020, following the test of
the conflict of interest declaration
procedure among employees,
investigations were conducted against
31 employees. As a result, one real
conflict of interest situation and
nine potential ones were identified.
Corrective measures are taken for
the identified shortcomings.
PREVENTION
AND RESOLUTION
OF CONFLICTS
OF INTEREST
More than 3,000 employees of the Group
working in the areas most exposed
to the risks of fraud and corruption
are required to undergo the conflict
of interest declaration procedure
annually. While other employees have
the opportunity to declare conflict of
interest via an electronic questionnaire
at their own initiative. All situations with
signs of a conflict of interest, declared
by employees or identified by control
services, are promptly analysed in
accordance with the procedure adopted
in the Group. If necessary, measures are
taken to resolve them. As part of this
procedure, employees are also required
to confirm that they have reviewed
the provisions of the Anti-Corruption
Policy, Code of Corporate Ethics,
and Regulations on the Prevention,
Detection, and Settlement of a Conflict
of Interest GRI 205-2 .
2020 PERFORMANCE
In 2020, more than 3,000 employees underwent the conflict of interest declaration
procedure and confirmed that they had reviewed the provisions of the Code of
Corporate Ethics, Anti-Corruption Policy, and Regulations on the Prevention,
Detection, and Settlement of a Conflict of Interest. The rest employees were made
aware of the provisions of these regulations when they were amended, by publishing
the wording of the documents on NLMK's corporate portal. A total of 42 employees
individually took a Conflict of Interest distance learning course (2,458 employees
in total since the launch of the course) GRI 205-2 .
All the Group’s business partners are informed about the principles of good conduct
in the qualification process and when a contract is concluded. In 2020, 14,463 business
partners were informed GRI 205-2 .
Each report about corrupt practices or intentions received through feedback
channels is thoroughly checked in accordance with the Regulation on Conducting
Official Investigations and Inspection GRI 205-2, GRI 205-3 .
NUMBER OF OFFICIAL INSPECTIONS/INVESTIGATIONS INITIATED
AFTER REPORTS VIA FEEDBACK CHANNELS IN 2020
20
45
10
15
Anti-corruption e-mail
Direct request
Hotline
Instances of corruption and fraud that were confirmed in 2020 included, among other
things, the unfair behaviour of suppliers, the provision of false information, unethical
behaviour as well as deliberate actions taken against property and resources
for personal gain GRI 205-2 .
Based on the results of official inspections and investigations in 2020, the total
share of confirmed claims was 36%, seven facts of fraudulent actions were revealed,
five of which were committed with the participation of the Company's employees.
Employment relationships were terminated with 140 employees GRI 205-2, GRI 205-3 .
A total of 599 potential suppliers were rejected in the qualification of supplier
counterparties in 2020 by the corporate security criteria GRI 205-2 .
During the year, no corruption-related legal proceedings were initiated against NLMK
Group or its employees GRI 206-1 .
PLANS FOR 2021 AND THE MEDIUM TERM
The Company’s plans for countering corruption and fraud and introducing good
business practices include further developing all existing procedures and improving
the efficiency of existing measures.
88
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
INDEPENDENT AUDITOR
The Company hires an independent
audit organization to audit and
confirm the accuracy of NLMK
Group’s IFRS (International Financial
Reporting Standards) consolidated
financial statements, and NLMK’s
RAS (Russian Accounting Standards)
accounting (financial) statements.
In April 2020, NLMK’s Annual General
Meeting of Shareholders approved
PricewaterhouseCoopers Audit (PwC)
as the Company’s auditor.
The independent auditor is selected
from among recognized independent
auditors with an impeccable professional
reputation. The main criteria for
selecting an independent auditor
are the qualifications of the audit
organization, the quality of the services
provided as well as compliance with
the audit independence requirements.
The candidate for an independent
auditor is reviewed by the Audit
Committee of the Board of Directors
and the Board of Directors, and is
approved by NLMK’s Annual General
Meeting of Shareholders.
PwC has been the auditor of the Group
since 2003. The Board’s Audit
Committee, which is responsible for
evaluating the efficiency of the current
independent auditor, was satisfied with
the quality of the services provided.
In 2019 it recommended that the Board
of Directors and the General Meeting
of Shareholders re-appoint PwC
as the Group’s auditor for 2020–2022.
Compliance with the auditor's independence principle
In order to comply with the requirements for audit independence and ensure
a high level of professionalism, PwC has several systems that ensure audit
independence and maintain a high level of professionalism and the quality of the
services provided. For example, PwC rotates key audit personnel on a regular
basis (at least once every seven years) with the latest rotation in 2020.
In addition to providing audit services to confirm the reliability of financial statements,
NLMK Group’s companies may hire PwC and other PwC companies to provide
consulting (non-audit) services. The management of NLMK Group and, in particular,
the Audit Committee, performs the necessary procedures and are certain that these
services do not affect the independence of the auditor and are not related to financial
reporting. In 2020, the share of non-audit services in the total volume of services
provided by PwC was at an acceptable level and did not exceed 29% of the total
volume.
REMUNERATION OF INDEPENDENT AUDITOR
NLMK’s Board of Directors has determined the value of remuneration for the provision
of audit (review) services of NLMK’s 2020 interim and annual IFRS consolidated financial
statements as well as for the audit of the 2020 RAS statements in the amount
of RUB 59,100,000 (VAT excluded).
REMUNERATION PAID TO NLMK GROUP'S INDEPENDENT AUDITOR
FOR 2020, $ '000 (VAT EXCLUDED)
Types of services
Audit and reviews
Non-audit services
Remuneration
1,498.1
624.3
INFORMATION
FOR SHAREHOLDERS
AND INVESTORS
ORDINARY SHARES
The Group’s share capital is divided
into 5,993,227,240 shares with a nominal
value of RUB 1 each. NLMK shares
are traded on the Moscow Stock
Exchange as well as in the form
of Global Depositary Shares (GDS)
(1 GDS = 10 ordinary shares)
on the London Stock Exchange (LSE).
The volume of GDS issued by NLMK
and traded on the London Stock
Exchange amounted to 7.52% of share capital as of 31 December 2020. The Company’s
depositary bank is Deutsche Bank Trust Company Americas.
London Stock Exchange (London) Ticker Code
Moscow Stock Exchange (Moscow) Ticker Code
Bloomberg Ticker Code
Reuters Ticker Code
NLMK
NLMK
NLMK LI1
NLMKq.L2
INDICES THAT INCLUDE NLMK SHARES
General indices
14. STOXX Global Total Market
ESG indices
1. RTS Index
2. RTS Metals and Mining Index
3. MOEX Russia Index
4. MOEX Metals and Mining Index
5. MOEX Broad Market Index
6. MSCI Russia Index
7. MSCI Emerging Markets
8. Bloomberg World Index
9. Bloomberg World Iron/Steel Index
10. Bloomberg Europe Iron/Steel Index
11. Bloomberg EMEA – World Index
12. FTSE Russia IOB Index
13. FTSE Emerging Markets Index
SHAREHOLDER NUMBERS
In 2020, the number of shareholders
increased by 73%, reaching 114,000
people. The number of online voting
participants increased to 677 people by
the end of the year (+57% yoy).
Price Index
15. STOXX All Europe Total Market
26. MOEX RSPP Sustainability Vector
Price Index
Index
16. STOXX BRIC 400 Price Index
17. STOXX Global 3000 Price Index
18. STOXX Emerging Markets 1500 Index
19. Russian Depositary Index USD
20. S&P Emerging BMI
21. S&P Global LargeMidCap
22. S&P Global BMI Materials USD
23. DAXglobal Russia+ Price Index EUR
24. DAXglobal Steel EUR Price
25. Dow Jones Emerging Markets Select
Dividend Index USD
27. MOEX RSPP Responsibility and
Transparency Index
28. MSCI Emerging Markets Choice ESG
Screened 5% Issuer Capped Index
29. FTSE Emerging Markets ESG Index
30. FTSE4Good Emerging Total Return
Index
NUMBER OF NLMK SHAREHOLDERS AND ONLINE VOTING PARTICIPANTS
Indicator
As of 25.11.2019
As of 23.11.2020
Variance, %
Total shareholders
Online voting participants
66,045
431
114,181
677
73
57
90
91
1
2
NLMK LI for GDS traded on the LSE; NLMK RX for shares traded on the MICEX platform of the Moscow Exchange
NLMK LI for GDS traded on the LSE; NLMK.MM for shares traded on the MICEX platform of the Moscow Exchange
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SHARE PRICE
NLMK GLOBAL DEPOSITARY SHARE PRICE ON THE LONDON
STOCK EXCHANGE, $
Indicator
Start of year
End of year
Maximum
Minimum
Average
2019
22.9
23.0
28.3
19.3
23.4
ORDINARY NLMK SHARE PRICE ON THE MOSCOW
STOCK EXCHANGE, RUB
Indicator
Start of year
End of year
Maximum
Minimum
Average
2019
157.4
143.7
183.2
123.4
151.9
2020
Change, %
23.0
27.7
29.3
12.3
21.0
2020
143.7
209.1
223.8
101.1
152.8
1
20
3
−36
−10
Change, %
−9
45
22
−18
1
NLMK SHARE PRICES ON THE MOSCOW STOCK EXCHANGE
AND LONDON STOCK EXCHANGE IN 2020
250
210
170
130
90
32
28
24
20
16
12
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
GDS price on LSE (right axis), $
Share price on MOEX (left axis), RUB
2020
NLMK SHARE INDEX AND MOSCOW STOCK EXCHANGE INDEX IN 2020
1.8
1.6
1.4
1.2
1.0
0.8
0.6
92
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
MOEX Russia Index
NLMK share index on MOEX
2020
MARKET CAPITALIZATION
In 2020, the Company’s average market
capitalization on the London Stock
Exchange was $14 bn (−7% yoy).
At the end of 2020, NLMK share prices
stood at $2.8 per share (or $27.74
per GDS), which is consistent with
a capitalization of $16.63 bn (+20% yoy).
TAXATION1
Legal entities
Chapter 25 ‘Tax on Organizations’
Profit’ of the Russian Tax Code governs
the tax treatment of organizations’
revenues received as dividends
on shares. Dividends paid to
organizations that are Russian
taxpayers are subject to a 0% or 13%
income tax (clauses 3.1 and 3.2,
Article 284 of the Russian Tax Code);
foreign organizations are subject
to a 15% income tax (clause 3.3,
Article 284 of the Russian Tax Code)
in line with international taxation
agreements of the Russian Federation.
Individuals
The personal income tax rate for
Russian residents is 13% for income
under RUB 5 million and 15% for income
over RUB 5 million in a calendar year
(clause 1, Article 224 of the Russian Tax
Code; Section 3, Article 2 of Federal
Law dd. 23/10/2020 No. 372-FZ), and 15%
for non-residents (clause 3.2, Article 224
of the Russian Tax Code).
DIVIDENDS
Dividend Policy
According to the current1 dividend policy,
dividends are determined as follows:
● If Net Debt/EBITDA is 1.0x or less:
the payout amount shall be equivalent
to or above 100% of the free cash flow,
calculated based on the Company’s
IFRS consolidated financial statements
for the reporting period
1
Information on taxation is provided for general
information purposes only. Potential and
current investors should consult with their
own advisors regarding the tax consequences
of investing in the Company’s shares,
including GDS.
● If Net Debt/EBITDA exceeds 1.0x:
the payout amount shall be equivalent
to or above 50% of the free cash flow,
calculated based on the Company’s
IFRS consolidated financial statements
for the reporting period
Dividends are paid annually.
If financially stable conditions are
maintained, NLMK will strive to pay
interim dividends on a quarterly
basis. NLMK uses the normalized
investment level of $700 m per year
to calculate the free cash flow
for dividend payments if actual
investments are above this level.
The amount to be paid as dividend
for a specific period is approved
by the Company shareholders in
line with the Board of Directors’
recommendations.
results on a quarterly basis. The annual report is published in electronic form
on the Group’s website, www.nlmk.com, on the day of its official publication.
The Company announces its publication in a special press release. A hard copy
of the annual report is available upon request in the office of the Company.
EQUITY STRUCTURE
Stock share owned by governing bodies members is less than 0.01%.
EQUITY STRUCTURE AS OF 31 DECEMBER 2020, %
20.7
79.3
Fletcher Group Holdings Limited2
Other free-floating shares3
Dividends on GDS
CONTACTS FOR SHAREHOLDERS
Contacts
London: +44 (20) 7547-6500
New York: +1 (212) 250-91-00
Moscow: +7 (495) 642-06-16
Email: adr@db.com
Corporate Secretary
Valery Loskutov
Telephone: +7 (4742) 44-49-89
Email: loskutov_va@nlmk.com
Corporate Finance
and Investor Relations
Telephone: +7 (495) 504-05-04
Email: ir@nlmk.com
GRI 102-53
Registrar
The register of holders
of NLMK securities is maintained
by the Regional Independent
Registrar Agency (RIR Agency).
Registered address: 10b, 9 Maya St.,
Lipetsk, Russia, 398017
Telephone: +7 (4742) 44-30-95
Email: info@a-rnr.ru
Website: http://www.a-rnr.ru/
Depositary bank
Deutsche Bank Trust Company
Americas
New York Headquarters
60 Wall St., New York, NY
10005 USA
London Office
Winchester House
1 Great Winchester St.
London EC2N 2DQ
UK
Any dividends paid on shares certified
by GDS will be declared and paid
to the Depositary in rubles or foreign
currency, converted into US dollars
by the depositary (in the case of
dividend payments in a currency
other than US dollars), and distributed
to the holders of GDS, net of fees
and depositary expenses.
CORPORATE DOCUMENTS
The Group’s corporate documents,
including the NLMK Charter,
are available at www.nlmk.com.
FINANCIAL REPORTING
AND DISCLOSURE
The Group posts announcements of
financial results on the London Stock
Exchange website via the regulatory
news service (RNS) and on the Interfax
Corporate Disclosure Centre website,
and then publishes them on the Group’s
website in the form of press releases
and distributes them to the media.
The Company publishes its financial
1 As of 31 December 2020.
2 The Company’s beneficiary is Vladimir Lisin, according to the definition of ‘beneficiary’ in Russian legislation.
3
Including GDS traded on the London Stock Exchange (Deutsche Bank Trust Company Americas is NLMK’s depositary bank) and shares traded
on the Moscow Exchange.
93
ANNUALREPORT 2020 OUR
96 Stakeholder dialogue
104 Supply chain management
112 Human rights
118 Our employees
138 Occupational health and safety
150 Developing local communities
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STAKEHOLDER DIALOGUE
NLMK STAKEHOLDER MAP IN 2020
OUR APPROACH TO STAKEHOLDER
ENGAGEMENT
R GROUPS’ INFL U E N
E
D
L
O
H
E
K
A
T
S
O M P A N Y
E C
H
N T
C E O
H igh
THE COMPANY’S IN
A C T I V E INVOLVEMENT
F
L
U
E
N
C
E
O
N
T
H
E
S
T
A
K
E
H
O
L
D
E
R
G
R
O
U
P
S
Government
authorities
Shareholders
Investment
community
Employees
Stakeholders
Clients
Suppliers
and contractors
NLMK Group’s sustainable development
is built on a foundation of transparent,
trust-based stakeholder engagement
over the long term GRI 102-16 .
In developing our approach to managing
stakeholder engagement, we are
guided by international and corporate
standards, and we are committed
to identifying and taking into account
the interests and needs of the Company’s
key stakeholders. The general principles
for our communication and engagement
with stakeholders can be found in our
Corporate Ethics Code, Corporate
Governance Code, Supplier Code of
Conduct, Anti-Corruption Policy, Human
Rights Policy, and other NLMK corporate
documents, published on NLMK’s website
GRI 102-43 .
GRI 102-40 NLMK’s key stakeholder groups are:
● Shareholders
● Company clients
● Foreign, national, and regional government authorities
● Investment community
● Company employees
● Trade unions
● Suppliers and contractors
● Local communities
NLMK maintains a list of stakeholders and prioritizes them according to mutual
influence and convergence of interests. The Company’s stakeholder map
is based on the needs and interests of stakeholders and NLMK, as well as expert
assessments from the Company’s management, and is regularly reviewed
and updated as necessary. In 2020, the stakeholder map did not undergo any
significant changes GRI 102-42 .
M
A
I
N
T
A
I
N
I
N
G
S
A
Trade unions
Local
communities
T
I
S
F
A
C
TIO
N LEVEL
T AININ G A W ARENESS
A I N
M
Low
Internal stakeholders
Business partners
Other external stakeholders
Stakeholder target development area
NLMK uses various means to engage with stakeholders, thereby enabling
the Company to promptly identify risks and new opportunities when working
together with its stakeholders. In 2020, the Company continued to maintain
an active dialogue with all of its stakeholders GRI 413-1 .
96
97
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
RESULTS OF STAKEHOLDER ENGAGEMENT
GRI 102-44, GRI 102-21
CONSUMERS
Importance for NLMK
Stakeholder
interests
Forms of engagement
The consumers of NLMK products include manufacturers from various regions of the world and
industrial sectors: steelmaking, construction, automotive industry, machine and shipbuilding,
and pipe manufacturing. By openly engaging with consumers, we are able to increase their
satisfaction and loyalty and help grow sales of NLMK products.
NLMK strives to create a client-centred system that allows us to track and predict changes
in consumer demand and satisfy our clients’ changing needs.
In order to increase customer satisfaction, NLMK Group established a claim consideration
procedure that is fully in compliance with international standards for quality management
systems (ISO 9001:2015 and IATF 16949:2016). All consumer claims are registered in an electronic
filing system with set consideration deadlines. Customers receive constant feedback on
the status of claim consideration and settlement. NLMK staff undergoes specialized training
to enhance the technical service level. All deficiencies detected by consumers are registered
and analysed in order to elaborate corrective measures and to develop actions for continuous
quality and service improvement.
Another principle guiding the Company’s activities is preventing any potential risk of harm
related to the use of our products or packaging. This principle concerns chemical, radiation,
fire, and phytosanitary safety. The framework we use to determine the safety characteristics
of our products includes European Union directives and regulations (RoHS2, ELV, WEEE,
and REACH).
The Company employs a variety of sales channels, including rapidly growing online sales.
Sales managers in all units work with the Company's clients on a daily basis.
● Compliance with contractual obligations
● High-quality products
● Development of a product line policy
● Competitive pricing
● Timely and reliable deliveries
● Developing a sales channel network
● Monitoring customer satisfaction
● Holding coordinating councils
● Addressing customer claims
● Holding and participating in public events, business meetings, and negotiations
● Raising public awareness through materials in the media and on our website
● Customer service. In the current strategic cycle, NLMK has set and is monitoring
the following key customer service indicators:
— Delivery terms, including OTIF
— Product support (new product and service development, technical support,
consideration of claims/complaints)
— Customer interaction (electronic document flow, order status information, etc.)
— Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT)
EMPLOYEES
Importance for NLMK
Our employees are essential to the Company’s stability, ensuring that the business can operate
and grow successfully.
Creating a highly qualified and motivated team is a key goal of our engagement with staff
and an integral factor behind NLMK’s leading position in the industry. The Human Resources
Department works with employees across all NLMK units.
NLMK provides decent working conditions for its employees and continues to develop
financial and non-financial incentive systems. The Company runs various employee training
programmes, including those organized as part of the NLMK Corporate University.
The Company seeks to increase employee engagement by improving feedback channels,
conducting team-building activities, and offering social support.
Effective employee dialogue is supported by the internal corporate communications system.
This system successfully:
● Explains the Group’s strategic goals and values to employees
● Facilitates the inclusion of every team member in the process of continuous
improvements
● Strengthens the Group’s employer brand
● Delivers information in a timely manner and provides a feedback mechanism
● Ensures convenient access to corporate services
● Develops horizontal links between colleagues
Stakeholder
interests
● Decent salaries and an incentive system in place
● Opportunities for professional development and career growth
● Comfortable, safe workspaces
● Compliance with employment laws and other regulations
Forms of engagement
● Offering continuing education, training, and staff development programmes.
For more information on employee training, see the Training and Development section.
● Organizing regular safety training sessions and implementing programmes
to improve workplace conditions.
For more information on the results of these activities, see the Occupational Health
and Safety section.
Implementing measures to provide social support for employees, their families, and
retirees (former employees).
●
● Holding regular meetings with management at various levels.
● Monitoring and sustaining employee engagement.
●
In 2020, our corporate NLMK Pulse Survey had a coverage of over 20,000 employees,
which constituted around 74% of the full-time headcount at the Group’s Russian sites.
The survey highlighted our strong suits as well as areas for development.
See the Social Policy section for more.
Informing employees about the Company’s activities and opportunities for professional
growth through corporate newspapers, magazines, NLMK TV, and social media.
Informing employees about the COVID-19 pandemic situation.
●
●
Amid the pandemic, NLMK seeks to maintain a high level of transparency and provide timely
information to employees about the current situation and the measures taken within
the company. When lockdown measures were at their peak, NLMK’s CEO addressed employees
on the corporate portal every day.
98
99
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SHAREHOLDERS AND THE INVESTMENT COMMUNITY
Importance for NLMK
Shareholders own our business and influence the course of NLMK’s development. The Company
is committed to safeguarding their interests.
GOVERNMENT AUTHORITIES
Importance for NLMK
To ensure that NLMK remains an attractive investment, the Company provides the investment
community with information about our performance that is as complete and up-to-date
as possible.
The key goals of our engagement with investors and shareholders are to establish and maintain
long-term connections and to provide timely information on the Company’s financial and non-
financial performance, as well as its development plans.
The unit in charge of engaging with the investment community is the Corporate Finance and
Investor Relations Department.
Stakeholder
interests
● Consistent improvement in the Company’s financial and non-financial performance
● Growth in the Company’s shareholder value
● Transparency and disclosure
●
Investment appeal and stability
Forms of engagement
● Disclosing information in various public sources: in 2020 the Company continued to publish
its operating and financial performance reports on a quarterly basis
● Official visits for current and potential investors to the Group’s sites: due to the COVID-19
pandemic, investor visits to sites were suspended in the reporting year to ensure
the safety of employees and investors
● Participating in Russian and international investment conferences
● Holding business meetings, both one-on-one and in groups: we held about 450 meetings
with investors in various formats
For more information about shareholder and investor engagement, see the Information
for Shareholders and Investors section.
As a major global manufacturing company that has a presence in seven countries and five
regions of the Russian Federation, NLMK encounters government regulations in various areas
of its operations every day. Given the intense competition and market volatility, it is essential
to have a stable regulatory environment that provides opportunities for long-term planning
and stable business management.
A key goal of our engagement with the government authorities is to identify and manage
risks in order to ensure the Company’s continuous operation and development. We also
strive to assist in the creation of a regulatory environment that would enable the Company
to meet its obligations before society. As represented by its Government Relations
Department, the Company thus engages on an ongoing basis with state authorities, as well
as social, industry, and expert organizations in each country and region where it operates.
For the purposes of regulatory agenda setting, NLMK participates in the formulation and
consolidation of the business community’s position, presenting it at state authority platforms
and participating in industry-specific meetings. The Company also represents and defends
its interests on the internal and external markets through government and public forums,
such as the World Trade Organization, the Russian Union of Industrialists and Entrepreneurs,
the Russian Steel Association, public councils and advisory bodies of federal and regional
authorities, and with the government authorities.
A key component of the Company’s approach is providing assistance to its functional
units on issues concerning the formulation of the Company’s position when engaging with
government authorities. This helps functional experts work more efficiently, respond to
various state authority demands in a more effective and informed manner, and put forward
the necessary regulatory initiatives.
Stakeholder interests
● Compliance with legislative requirements
● Meeting tax obligations
● Monitoring and assessing normative legal risks
● Developing initiatives to improve the Company’s regulatory activities
● Developing local communities
● Enhancing social engagement in areas where the Company operates
● Reducing the environmental footprint
Forms of engagement
● Meetings with representatives of foreign, national, regional, and municipal state
authorities
● Participation in advisory bodies, expert working groups, and public hearings
● Engagement through industry-specific and public associations
● Annual disclosure of information about payments to governments
●
Involvement in policy-making processes in accordance with the procedures
stipulated by law
100
101
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SUPPLIERS AND CONTRACTORS
Importance for NLMK
Stakeholder interests
Forms of engagement
The timely and accurate delivery of quality goods and services by suppliers and contractors
has a direct impact on the quality of our products and the stability of NLMK’s production
processes.
Strong and mutually beneficial relationships with reliable suppliers and contractors
are essential if the Group is to sustain its operations and fulfil its obligations.
The unit responsible for working with suppliers and contractors is the NLMK Procurement
Service.
The Group’s priorities are to ensure that goods and services are of high quality, that
the right goods are purchased at the right time, and that procurement is as competitive
and transparent as possible.
Most of the Company’s tender procedures are conducted electronically using the SAP SRM
and SAP Ariba Network systems, ensuring the transparency of procurement activities.
The Company seeks to develop mutually beneficial long-term relationships with its business
partners, based on the principles of transparency, ethics, and fairness. The fundamental
collaboration principles are contained in the Supplier Code of Conduct, which indicates what
we expect from our suppliers and highlights our aspiration to attain a high level of fairness,
ethical behaviour, and responsibility in all of our business areas. The Code also stipulates
compliance with the requirements of occupational safety, anti-corruption, and conflict-of-
interest management.
● Transparent competitive procurement procedures for goods and services
● Fulfilment of contractual obligations
● An effective system for processing feedback and complaints
● A risk management and anti-corruption system
● Conducting prequalification of suppliers
● Developing competitive procurement procedures for goods and services
● Developing electronic data interchange with EDI suppliers
● Negotiating with potential partners
● Organizing the work of category managers
● Offering a feedback form and a digital assistant based on the QUBO dialogue platform
on the corporate portal for contractors
● Conducting business meetings with suppliers and participating in conferences and industry
associations
strategy and inform them of their role in the strategy
● Carrying out assessments and audits of suppliers and contractors in order to confirm
their reliability, status as suppliers, production capacity, and compliance with occupational
health and safety, industrial safety, and environmental requirements
For more information on the results of supplier and contractor engagement, see the Supply
Chain Management section.
● Organizing online conferences for suppliers to present NLMK Group’s procurement
Stakeholder interests
LOCAL COMMUNITIES
Importance for NLMK
The long-term stability of NLMK’s business is largely dependent on the social and economic
stability of the regions where it operates. NLMK’s contribution to developing local communities
has a positive impact on stakeholder loyalty and the Company’s overall reputation.
NLMK Group enterprises are some of the largest employers and taxpayers in the regions
where they operate.
The Company has an interest in improving the living standards of local people and involving
them in the Group’s social and environmental initiatives. NLMK holds public hearings, conducts
surveys of local people to identify their needs, and organizes various volunteer and charity
programmes. The effectiveness and coverage of these programmes increases each and
every year.
The local community development activities are organized by the HR Department together
with the Government Relations team.
Stakeholder
interests
Jobs for local people
● Company involvement in addressing the problems of local communities
●
● Safe production practices and reducing environmental footprint
● A conscientious approach to doing business
Forms of engagement
● Engaging in a dialogue with local representatives to inform them about the Company’s
activities in the regions where it operates
● Publishing corporate reports
● Publishing information in the media and on the Company’s website
● Holding thematic conferences and events
For more information on the results of local community engagement,
see the Developing Local Communities section.
TRADE UNIONS
Importance for NLMK
Trade unions are important partners for NLMK in providing workers with social welfare
and employment-related guarantees.
A key focus of NLMK’s work with trade unions is the conclusion of collective bargaining
agreements. These agreements are designed to guarantee the provision of decent working
conditions and a bonus and compensation system. NLMK’s effective engagement with trade
unions helps to strengthen its employer brand.
● Compliance with employment legislation and protection of employee interests
● Compliance with the sectoral tariff agreement
● Compliance with the terms of collective bargaining agreements
Forms of engagement
● Conducting collective bargaining: in 2020, we continued a series of collective negotiations
with the trade union organisations of NLMK Group companies. Steps were taken
to harmonize the basic benefits provided under collective bargaining agreements
● Concluding collective bargaining and other agreements and signing joint resolutions:
in 2020, the terms of collective agreements were renegotiated for the Stoilensky Mining
and Beneficiation Plant and VIZ-Steel. Previously, in 2019, collective bargaining agreement
terms were renegotiated for nine NLMK Group sites
● Working jointly on various commissions and committees
● Holding employee conferences
102
103
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANNUAL
REPORT
2020
RUB 153
billion
total volume of goods
and materials procured
from third parties
by NLMK's Russian
companies
33
audits
of suppliers of goods
and services conducted
over the year
SUPPLY
CHAIN
MANAGEMENT1
MAJOR THEME
SUPPLIER ENVIRONMENTAL
ASSESSMENT
KEY EVENTS IN 2020
● Expanded use of electronic document management with suppliers
● Part of investment procurement process automated via SAP Ariba
Sourcing
● Interactive category reporting implemented
● Claim management automation project introduced
● Vice President of Procurement recognized as the best Professional
in Competitive Procurement at the main professional competition
among procurement experts in Russia
UNITED NATIONS GLOBAL
COMPACT PRINCIPLES
● Principle 8. Businesses should undertake initiatives to promote greater
environmental responsibility
● Principle 10. Businesses should work against corruption in all its forms,
including extortion and bribery
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
1
Information on procurement practices is presented for the Group’s Russian companies.
104
105
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
The Group’s efficient supply chain is
crucial to its sustainable operation and
the fulfilment of NLMK’s commitments.
The Group regularly partners with
more than 3,500 suppliers of goods
and materials as well as contractors
from which it procures a wide range of
goods and services, including equipment,
ferroalloys, non-ferrous metals,
refractory products, and spare parts,
among other things.
The main principles governing the Group’s procurement activities are:
● Focus on goals, objectives, and outcomes
● Integrity and transparency
● Mutually beneficial cooperation
● Continuous improvement
● Qualified and motivated staff
● Teamwork and commitment to a company-oriented spirit
● Proactive approach
OUR APPROACH TO SUPPLY
CHAIN MANAGEMENT
The procurement process at the Group
is coordinated by a dedicated team
and designed in such a way as to ensure
that high-quality goods are procured
in a timely and accurate manner
and that the procurement process
is as transparent and competitive
as possible.
The procurement team’s main goal is
to meet the expectations and needs
of specific groups of NLMK stakeholders,
including shareholders, employees,
customers, internal customers, and
regulatory bodies. The procurement
team’s key objectives are to unify and
standardize procurement systems and
processes, ensuring that they all have
the same level of maturity.
The main documents governing
procurement activities at the Group are:
● Supplier Code of Conduct
● Contractor Audit Regulations
● Corporate-level regulations
describing liaising with contractors:
— Contractor Qualification
Regulations
— Contractors Selection Regulations
— Contractor Assessment
Regulations
— Regulations on Contractors
Selection in Cooperation with
the Tender Commission, etc.
● Category strategies
The organizational structure of the Group’s procurement team consists of centralized
and decentralized components, which helps make the procurement process and
cooperation with suppliers as efficient as possible. Interrelated procurement structures,
policies, and procedures ensure that the approaches taken across all of the Group’s
companies are consistent.
The Opex Procurement and Capex Procurement teams are represented by category
managers, who are responsible for the entire procurement process, from the moment
that a procurement request is received from an internal customer to the moment that
a supplier is selected.
SUPPLIER MANAGEMENT PROCESS WITHIN NLMK GROUP
SUPPLIER RELATIONSHIP MANAGEMENT (SRM)
Supplier
qualification
Supplier
segmentation
Supplier
evaluation
Quality control
and identification
of risks
associated
with supply of
products
Distribution
of suppliers
by group
relative to their
importance
to the business
Supplier
performance
assessment
Supplier
efficiency
management
Ensuring
continuous
improvement
of suppliers’ work
to meet NLMK’s
requirements
Preliminary
audits
and audits
of existing
suppliers
RISK MANAGEMENT
Systematic monitoring of potential risks associated with the work of suppliers,
taking measures to minimize threats and losses
In order to ensure a reliable and
uninterrupted flow of goods and
materials to the Group’s companies,
the procurement team has developed
over 50 category-based strategies.
Procurement strategies for certain
categories of goods are developed
to take into account potential risks
and determine scenarios depending
on the level of risk and potential losses,
and they also include plans to prevent
any risks from arising.
Managing risks associated with
the late, incomplete, or incorrect
supply of goods and services is key to
ensuring a reliable supply chain and
the continuity of the Group’s operations.
In 2020, a project to automate claim
management was launched.
Each year, suppliers of goods are
evaluated and then divided into A, B,
C, and D groups. Group D includes
those suppliers that have proven to
be unreliable based on the evaluation
result. These contractors are excluded from the list of suppliers and are not allowed
to participate in tender procedures in the future. As a result of the evaluation,
28 suppliers were assigned the D status in 2020.
The bulk of the Group’s procurement is carried out centrally, with local procurement
classified in a separate category and supervised by the heads of local procurement
departments. The centralized procurement support office in Lipetsk ensures
the efficiency of procurement processes. Having a single service centre for
processing transactions will reduce costs, improve levels of internal customer
satisfaction, and speed up procurement procedures.
The Group is particularly focused on digitalizing and automating procurement
activities. Most key procurement processes have been automated, and the majority
of the Group’s tender procedures are carried out electronically using the SAP SRM
(Supplier Relationship Management) system. NLMK’s achievements in automating
procurement activities were recognized within the broader professional community.
In 2020, NLMK Group Vice President of Procurement was recognized as the best
Professional in Competitive Procurement at the main professional competition among
procurement experts in Russia.
Procurement service managers actively participate in corporate training
programmes, which aim to develop competencies in a period of change, that would
enable employees to prepare for challenges in a situation of uncertainty and
turbulence, to form skills and ambition to be a role model, to learn the tools that
support the Company in its strategic development in new economic conditions, and
to develop expertise in the field of innovation, strategy, and inspiring leadership.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ASSESSING
PERFORMANCE
As part of efforts to increase responsibility across the supply chain, NLMK focuses on:
● Cooperating with suppliers and contractors with a strong commitment tosustainable
A system of key performance indicators
(KPIs) is used to monitor and control
the performance of suppliers and
procurement staff, eliminate losses
sustained in procurement processes,
and achieve savings for the Group.
The KPIs, which are approved on an
annual basis, include the following:
● Availability
● Cost-efficiency
● Cost avoidance
● Inventory turnover
● On-time deliveries
The Procurement team holds regular
meetings with internal customers
to identify the main supply issues.
The Procurement staff also conducts
regular satisfaction surveys of major
internal customers in order to improve
the quality of the procurement process.
Survey results are collected and
carefully analysed, and measures are
then developed to further improve
the team’s work.
SUPPLY CHAIN
RESPONSIBILITY
As a large consumer of a number
of goods and services, the Group
is able to have a positive impact
on reducing social, environmental,
and production risks within the
supply chain.
The Group seeks to cooperate
with suppliers of goods and contractors
that demonstrate a commitment
to sustainability principles. In addition,
in accordance with NLMK Group’s
Procurement Policy, the Group
is committed to purchasing goods
and services that have as few
negative impacts on society and
the environment as possible during
their lifecycle.
development strategy
● Assessing occupational health and safety risks among contractors
● Ensuring that suppliers of goods used in the production of automotive body sheet
hold certificates of compliance under ISO 9001:2015, IАTF 16949, and ISO 45001
● Assessing contractors that provide waste collection services
● Reducing waste through reusing and recycling, as well as through the utilization
of recycled and recovered products and materials
SELECTION AND QUALIFICATION OF SUPPLIERS
AND CONTRACTORS
An efficient and reliable supply chain is essential to the stable operation of all divisions
within the Group. The Group carefully selects and screens suppliers and contractors,
and sets high requirements for its counterparties in terms of complying with
deadlines, OTIF (on-time in-full) requirements, and quality standards for the goods and
materials it supplies. All suppliers and contractors that work at hazardous production
facilities at NLMK companies have to be qualified.
In order to work with NLMK Group, it is imperative that suppliers and contractors
operate ethically and conscientiously. In this regard, all potential counterparties are
invited to familiarize themselves with the Supplier Code of Conduct at the screening
stage and to confirm that they agree with its provisions.
The Group also expects its suppliers and contractors to comply strictly with all
applicable legal requirements, including environmental protection and occupational
health and safety regulations. The check-list developed by the Group for assessing
potential contractors reflects state requirements for occupational safety and
environmental protection, and suppliers and contractors operating at the Group’s
sites must meet these requirements.
EVALUATING AND AUDITING SUPPLIERS
AND CONTRACTORS
The Group annually assesses the quality, efficiency, and reliability of all current
suppliers and contractors. It also monitors compliance with delivery deadlines
throughout the year. If the Group has a negative experience with a supplier,
the Group’s Conciliation Committee may decide to discontinue its partnership with
the supplier or to impose restrictive measures. The procurement team can also work
with the supplier to create a development plan aimed at improving the supplier’s
performance.
Conciliation Committee
The Conciliation Committee is NLMK Group’s collegial body that was set up
to review situations involving inappropriate, unethical, or unreliable supplier
behaviour. Some of the issues that fall within the remit of the committee
include violations of the pricing policy, occupational health and safety rules,
and environmental protection requirements.
CONCILIATION COMMITTEE
Indicator
Number of suppliers on which partnership restrictions were imposed
Number of suppliers with which NLMK Group decided to temporarily suspend relations
Number of suppliers with which NLMK Group decided to terminate relations
2019
2020
18
6
11
15
7
13
Conducting systematic audits of
suppliers and contractors that provide
services to the Group’s Russian
companies is another important tool for
managing partnerships with contractors.
When drawing up annual audit plans,
the Group’s specialists take into account
critical areas that affect the continuity
and safety of production and product
quality, including, among others:
● The contractor’s technical equipment
● Staff competence levels
● Quality control measures
● Maintenance and repairs
● Compliance with legal requirements
for occupational health and safety
and environmental protection, etc.
When auditing suppliers of goods, the Group pays special attention to the counterparty’s
compliance with obligatory standards in matters concerning occupational safety and
reducing its environmental footprint. Audits of contractors include a more detailed
review of issues related to safe working conditions and compliance with environmental
regulations.
When auditing contractors that conduct hazardous work or large volumes of
work, or companies that are the Group’s main contractors, the Group considers
the following aspects in detail:
● Availability of equipment
● Provision of human resources
● Provision of technical resources
● Issues related to occupational health and environmental protection, etc.
Audits of contractors involve checking that the necessary documents are in place
and authentic. They also include directly monitoring the work of contractor
employees and ensuring that they meet the requirements stipulated on the screening
check-list. The contractor’s status is determined and a report is prepared on
the basis of the audit results. The report should specify the measures needed to
eliminate and prevent the reoccurrence of any of the issues that have been identified.
In 2020, the number of audits declined, due to the pandemic.
NUMBER OF SUPPLIER AND CONTRACTOR AUDITS CONDUCTED
Subject of audit
Goods and materials
Services
2016
22
1
2017
35
21
2018
39
17
2019
34
24
2020
13
20
For more detailed information about supplier and contractor environmental assessments,
see the Supplier Environmental Assessment section of the Environmental Protection chapter.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
2020 PERFORMANCE
The Company continued to actively
improve its procurement processes and
centralize the procurement of basic
materials, raw materials, and services.
NLMK Regulations on Category Strategy
Development were updated.
and equipment were diversified. The procurement team and internal customers’
efforts helped to avoid the negative impact of the pandemic on production
performance.
There were no significant changes in the Group’s supply chain structure during 2020
GRI 102-10 .
Due to the COVID-19 pandemic,
suppliers of basic raw materials
In the reporting year, procurement from local suppliers for the Russian companies
accounted for 82%, or RUB 126 billion GRI 204-1 .
PROCUREMENT FROM
SUPPLIERS OF GOODS
AND MATERIALS
BY SUPPLIER COUNTRY,
% OF TOTAL GRI 102-9
0.9
0.8
1.9
3.2
11.0
RUB 153.4
billion
DATA ON PROCUREMENT VOLUME BY KEY PROCUREMENT
CATEGORY IN 2020, RUB M (VAT EXCLUDED) GRI 102-9
Goods and materials category
Coal and coal concentrates
Provision of repairs and maintenance
Raw materials (without the main raw material categories)
Refractory products
Process equipment
Provision of technology
82.3
Coatings
Russia (2,0771)
Europe (139)
Kazakhstan (8)
Ukraine (17)
China (11)
Other countries (39)
Iron ore (concentrate, pellets, and ore)
Fuel and lubricants
Rolls
Coke and chemical raw materials, fluxes
Information technologies
Electrode coke
Other
Total
Procurement volume
45,523
34,413
24,742
15,145
8,352
5,980
5,677
4,016
2,016
2,002
1,448
1,406
1,349
1,356
153,425
PLANS FOR 2021
AND THE MEDIUM TERM
The Group intends to continue
with its work to further automate
procurement processes and to
centralize the procurement of global
categories of materials and raw
materials. More specifically, the Group’s
plans include:
● Expanding the practice of signing
purchase orders in electronic form
● Automating purchase order drafting
● Expanding the practice of using
supplier catalogues and managing
them, which will enable internal
customers to choose the necessary
items themselves
● Enhancing the efficiency of interaction
with suppliers through the digital
assistant functionality
● Expanding SAP Ariba Sourcing functions
to other categories of investment
procurement
● Robotization of standard procurement
procedures
1 Number of suppliers.
Note: data on purchases of goods and materials from third parties for Russian companies. The amount does not include transporation and handling
expenses and customs duties.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANNUAL
REPORT
2020
0
violations
of human rights
recorded during
the reporting year
HUMAN RIGHTS
MAJOR THEMES
NON-DISCRIMINATION
FREEDOM OF ASSOCIATION
AND COLLECTIVE BARGAINING
PROHIBITION OF CHILD LABOUR
PROHIBITION OF FORCED
OR COMPULSORY LABOUR
KEY EVENTS IN 2020
NLMK Group presented its human rights management practices at
the Respect for Human Rights as a Corporate Responsibility Indicator
conference organized by the Russian Union of Industrialists and
Entrepreneurs and attended by representatives of the Office of the United
Nations High Commissioner for Human Rights (OHCHR), the International
Labour Organization, relevant ministries, and Russian and international
companies.
UNITED NATIONS GLOBAL
COMPACT PRINCIPLES
● Principle 1: Businesses should support and respect the protection
of internationally proclaimed human rights.
● Principle 2: Businesses should make sure that they are not complicit
in human rights abuses.
● Principle 4: Businesses should uphold the elimination of all forms
of forced and compulsory labour.
● Principle 5: Businesses should uphold the effective abolition
of child labour.
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
MANAGING HUMAN RIGHTS ISSUES
Respecting human rights is a key
underlying principle in all of NLMK’s
operations. In its activities, the Company
does not tolerate human rights
violations related to discrimination
based on gender, age, religion, race,
ethnicity, physical traits, or identity,
or any other form of discrimination.
NLMK also devotes special attention
to ensuring the right to freedom of
association and collective bargaining,
as well as to issues concerning child
labour and forced or compulsory
labour GRI 407-1, GRI 408-1, GRI 409-1 .
Our corporate ethics dictate that we
consistently adhere to the generally
accepted principles and norms of
international law, as well as applicable
employment laws in all countries of
the world, regardless of the business
practices in those countries. In its
activities, NLMK is governed by
the provisions of the following
documents:
● The International Bill of Human Rights
● The main conventions of
the International Labour
Organization (ILO Conventions)
● The UN Guiding Principles on Business
and Human Rights
● The UN Global Compact
● Transforming our World: the 2030 Agenda for Sustainable Development (UN)
● The ISO 26000 Guidance on Social Responsibility
● The laws of the Russian Federation and other countries in which NLMK Group
companies operate
Along with international norms, our human rights efforts are regulated by internal
corporate documents: NLMK Group’s Corporate Ethics Code, Anti-Corruption Policy,
and collective bargaining agreements. One important component in the Company’s
approach to managing these issues is NLMK Group’s Human Rights Policy. The goal
of the policy is to ensure that human rights are observed in the Group’s activities
everywhere we operate.
NLMK’s efforts to protect human rights in all the regions where it operates are
coordinated by the HR Department, covering 100% of the Company’s assets.
If necessary, experts from other functional areas of the Company are invited
to participate (in particular, the Occupational Health and Safety team) in order
to safeguard its corporate interests and to manage risks. The Company’s senior
management team is always involved in making important decisions GRI 412-1 .
The Company shares its Human Rights Policy with stakeholders, including employees,
subcontractors, and business partners GRI 412-2 .
The Company welcomes information from all stakeholders about any activities
that violate human rights. Employees, clients, suppliers, subcontractors, and other
stakeholders can use any feedback channel, including in languages other than
Russian, listed on the official NLMK website.
In 2020, NLMK received no communications regarding human rights violations
GRI 102-17 .
INTEGRATING FUNDAMENTAL HUMAN RIGHTS PRINCIPLES
INTO NLMK GROUP’S ACTIVITIES
Fundamental principles
Areas of activity
Prohibition of forced labour
and child labour
Prohibition of discrimination
NLMK Group only signs employment contracts with individuals that meet the minimum
age requirements stipulated by prevailing legislation. The Company does not make
use of child labour. The Company also forbids the use of forced labour, penal and military
labour, slavery, and human trafficking. All employment at the Company is exclusively
voluntary in nature.
Prohibition of discrimination NLMK Group does not tolerate discrimination based on
gender, religion, or any other grounds in its staff management activities, including hiring,
and adheres to the same principles when determining wages.
For additional information, see the Our Employees section.
Respect for the right
to a minimum wage
Ensuring decent working conditions, including competitive salaries, and providing both
employees and retirees with a social benefits package are key priorities for NLMK Group.
Support for freedom of
association and collective
bargaining
Provision of safe working
conditions
For additional information, see the Our Employees section.
NLMK Group fulfils all of the requirements set forth in collective agreements, and regularly
engages with trade unions. The Company also ensures that conditions are in place
to facilitate the creation of associations to represent the interests of NLMK employees
by making corporate communications tools available and by supporting employee
volunteering initiatives.
For additional information, see the Our Employees, Stakeholder Dialogue, and Corporate
Communications sections.
In organizing production, the Company prioritizes the health and safety of its employees
above all. The Company’s management team monitors and reduces risks associated with
hazardous working conditions, increasing safety levels at the production sites of every
NLMK company from year to year. The Company is continuously improving its approaches
to environmental policy and energy management, with a view to reducing the negative
impacts of production on the environment and on the health of stakeholders.
For additional information, see the Occupational Health and Safety and Environmental
Protection sections.
Respect for the rights
of indigenous peoples
NLMK Group estimates that there are no indigenous populations in the regions where its
companies operate GRI 411-1 .
NLMK’S HUMAN RIGHTS PRINCIPLES
HUMAN RIGHTS REPORTING CHANNELS
Prohibition
of forced labour
Prohibition
of discrimination
Prohibition
of child labour
Respect
for the right
to a minimum
wage
Provision
of safe working
conditions
Feedback forms
on the NLMK
website
Telephone
hotline
Anonymous
text messages
Anonymous
email
NLMK intranet
portal
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
All messages and complaints are
recorded in an aggregated database
accessible via the NLMK corporate
portal. Each specific instance is examined
separately to ensure that decisions
are made on a case-by-case basis.
The individual that sends a complaint
always receives a written response with
an explanation, except in the case of
anonymous messages.
During the reporting period NLMK
recorded no cases of discrimination
related to human rights violations
GRI 406-1 , including violations of the right
to freedom of association and collective
bargaining or violations concerning
child labour and forced or compulsory
labour GRI 407-1, GRI 408-1, GRI 409-1 .
NLMK is committed to improving its
competency in human rights, drawing
on best practices from colleagues
in various industries and international
organizations to introduce responsible,
fair business principles into our
corporate culture.
In 2020, the Company continued its
efforts to integrate human rights
provisions into the standard terms
of business with contractors. This implies that suppliers and counterparties must
confirm that they adhere to and respect the human rights principles envisaged
by the Russian law and international legal instruments at the time of signing
a contract. Obligatory compliance is required for the following human rights:
● Support for freedom of association
● The right to liberty and security of person
● Respect for the prohibition of child labour and forced labour, and the prohibition
of discrimination
● Ensuring the occupational health and safety of workers, as well as safe working
conditions
● Respect for the right to a minimum wage
In 2020, NLMK Group shared its human rights management experience
at the Russian Union of Industrialists and Entrepreneurs conference dedicated
to the 70th anniversary of the Universal Declaration of Human Rights and
the 75th Anniversary of the United Nations. Conference participants included
representatives from the Office of the United Nations High Commissioner for
Human Rights (OHCHR), the International Labour Organization, relevant ministries,
and Russian and international companies. The companies invited to present
their practices at the conference all have extensive experience in managing human
rights issues and initiatives.
NLMK participates in organizations that support and foster human rights principles.
For example, the Company is a member of the Committee on Corporate Social
Responsibility and Demographic Policies of the Russian Union of Industrialists and
Entrepreneurs.
In 2019, NLMK Group joined the UN Global Compact, an international United Nations
initiative to promote sustainable development and corporate social responsibility.
By signing the Compact, NLMK Group reaffirmed its commitment to the 10 fundamental
principles of the initiative, including those related to human rights.
PLANS FOR 2021
AND THE MEDIUM TERM
Given the international nature of
NLMK’s operations and stakeholders’
interest in protecting human rights,
the Company will continue to enhance
its approach to human rights issues.
In future reporting periods we plan
to perform a number of activities
aimed at implementing the provisions
of NLMK’s Human Rights Policy in
the operations of all Group companies,
including those outside Russia. Another
task will be to develop methodological
approaches to assessing how well our
activities comply with the principles
set out in NLMK’s Human Rights
Policy. Company representatives will
also continue to play an active role
in important events dedicated to
protecting human rights.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR EMPLOYEES
MAJOR THEMES
SAFE WORKING CONDITIONS
DEVELOPMENT OF MANAGERIAL SKILLS
ENGAGEMENT OF EMPLOYEES IN CONTINUOUS
IMPROVEMENT
DEVELOPMENT OF PROFESSIONAL SKILLS
LABOUR PRODUCTIVITY IMPROVEMENT
KEY EVENTS IN 2020
● Developing online trainings, introducing new professional training formats
● Working on an international project to create competency maps and
assessment tools for key steelmaking professions
● Internships for students of basic educational institutions
● The annual HeadHunter1 rating of employers in Russia placed NLMK among
the Top 5 Russian employers in the Production category
UNITED NATIONS GLOBAL
COMPACT PRINCIPLES
● Principle 3: Businesses should uphold the freedom of association and
the effective recognition of the right to collective bargaining.
● Principle 6: Businesses should uphold the elimination of discrimination
in respect of employment and occupation.
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
1 The largest Russian online recruitment company operating in Russia, Belarus,
Kazakhstan, and Ukraine.
RUB 1,383
million
invested in staff training
and development
3.2
million man-hours
of training
6%
voluntary
staff turnover rate
at NLMK Group
Women account for
48%
of management
and administrative staff
Women account for
25%
of the total number
of employees
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR APPROACH
TO STAFF MANAGEMENT
Our key personnel management goals
are to attract and retain the best
professionals in their field and engage
them in the process of continuous
improvement. To do this, NLMK Group
needs to remain as progressive as
possible and attentive to safety, talent,
and innovation.
NLMK has built up a mechanism that allows employees and their representatives
to address top management directly. For instance, during the live call-in with
the NLMK Group CEO any employee can ask a question to the head of the Company.
We also foster a culture of ‘open doors’ and availability of management to address
operational issues during strategy sessions or live call-in events for functional
areas. In addition, NLMK has an internal corporate portal, where employees can
communicate with management of any level. The discussions on the portal are
grouped by theme.
In order to achieve these goals,
the Group continued to work actively in
the following key areas of the HR policy:
● Labour productivity improvement
● Development of managerial skills
● Development of employee initiative
and engagement in the process
of continuous improvement
● Development of the vocational
training system
● Creating a system for independent
employee qualification assessment
● Developing practices of mentorship and
knowledge sharing on production sites
● Working with young specialists and
high-potential employees
● Further integration of international
companies into the Group's HR
processes
● Digitalization and implementation
of best practices in HR processes
● Increasing the share of employees
transferred to open positions within
the Group
● Developing internship programmes
and increasing intern hiring rates
● Increasing employer brand
attractiveness
One of the main focus areas of
the HR strategy is increasing labour
productivity. We achieve this goal by
optimizing business processes, ensuring
the automation and mechanization
of labour, and developing processes
that utilize the expertise of contractors
and suppliers.
A positive driver is the NLMK Production
System project, which focuses on
increasing the Group's efficiency
through continuous improvement,
loss reduction, occupational safety,
respect for each employee, and
the development of a regular dialogue
between management and employees.
In order to maintain the high qualification level of employees we are constantly
enhancing training at NLMK and ensuring its continuity. For many professions,
employees are required to take a range of courses within a certain timeframe,
including courses on the rules of access to equipment and operation of networks,
communications, or complex units. If an employee does not complete the course
in time, they may be not allowed to proceed with their work in line with regulatory
requirements and for safety reasons. That is why we have transferred professional
course training and training aimed at receiving and prolonging OHS permits into
a remote format as a matter of priority.
NLMK opens a multidisciplinary qualification assessment centre in Lipetsk
NLMK Lipetsk, the flagship site of NLMK Group, has opened the first
multidisciplinary qualification assessment centre for the manufacturing
industry in Russia. The centre will independently assess whether the skills
and abilities of NLMK Group employees conform to the requirements
of uniform professional standards.
Irina Efimchuk, NLMK Group Training and Development Director, said:
“In line with the changes in federal legislation, all Russian sites are obliged
to gradually shift to an independent assessment of their employees’
ualifications. NLMK Group actively participates in the activities of industry
councils on professional qualifications, updating professional standards,
and developing the methodological foundations of independent qualification
assessments. By opening this centre we are facilitating the formation of
a base for the state policy of qualification development in the regions where
the Company operates.”
Another notable area of activity is NLMK’s collaboration with basic educational
institutions, with internship programmes organized for students. Internships are
an integral part of their studies. They enable students to develop practical skills
in an actual production environment, gain experience with operating equipment and
production processes, and learn to work in a team. Approximately 2,000 students
from various educational institutions intern at NLMK Lipetsk every year. 2020 was
an exceptional year due to the pandemic: in-person internships were suspended
in March, and students were no longer allowed on site. Certain elements of
the internships were taken online. In addition, we help our basic educational
institutions in the development of the educational and material base, improve
the qualifications of the teaching staff. We also support the process of involving
experts from NLMK departments in training students.
We are committed to applying a unified approach to managing human resources
issues, including at our international companies. NLMK Group’s Human Resources
Department is responsible for all staff-related issues, including hiring and retaining
NLMK GROUP STAFF1 BREAKDOWN BY SEGMENT IN 2020,
THOUSANDS OF PEOPLE GRI 102-8
2.1 1.1
2.8
7.0
8.3
51.9
30.6
NLMK Russia Flat Products
NLMK Russia Long Products
Mining division
Service and auxilliary companies
NLMK Europe
NLMK USA
NLMK GROUP STAFF1 BREAKDOWN BY REGION
IN 2020, % GRI 102-8
2.2 0.4
4.1
93.2
Russia
EU
USA
India, Turkey, Switzerland
NLMK GROUP STAFF2 BREAKDOWN BY CONTRACT TYPE
IN 2020, % GRI 102-8
3
qualified employees, building systems
to reward and motivate them, and
developing their professional skills.
In its HR activities, NLMK Group is guided
by the following internal and external
documents:
● The Constitution and Labour Code
of the Russian Federation
● International declarations, including
the Universal Declaration of Human
Rights and the ILO Declaration on
Fundamental Principles and Rights
at Work
● NLMK Group’s Corporate Ethics Code
● Collective bargaining agreements
● General corporate regulations
on staff management
OUR EMPLOYEES
NLMK Group’s average 2020 headcount
was 51,900 people, of whom 48,500
(93.4%) were employed at the Company’s
Russian companies, 2,100 (4.0%)
at European divisions, 0,200 (0.4%)
at international auxiliary companies,
and 1,100 (2.2%) in the United States
GRI 102-7 .
Approximately 97% of NLMK Group
employees work under permanent
contracts, and around 3% under
fixed-term contracts.
The nature of the steel industry
is such that the proportion of men
in NLMK Group (75%) outweighs
the proportion of women (25%) –
this has always been the case
historically. As for administration
and management staff, women account
for 48% of all specialists, including
50% of specialists and office employees,
22% of office managers and 4%
of shop-floor (revenue-generative)
managers (the total share of female
managers is 15%).
97
Permanent contract
Fixed-term contract
NLMK GROUP2 STAFF BREAKDOWN BY GENDER AND
CATEGORY IN 2020, % GRI 102-8, GRI 405-1
Shop-floor (revenue-generative) managers
Office managers
Specialists and office employees
50
96
4
22
50
22
25
78
78
75
The average work experience of men
and women at NLMK companies is at
a comparable level.
Shop-floor employees
Total NLMK Group
NLMK employees represent various
age groups, which attests to the lack
of age discrimination in NLMK Group’s
HR policy. In 2020, 23% of all employees
were aged over 50, 61% were aged
between 30 and 50, and 16% were
under 30. Of those in management
positions (shop-floor managers and
Men
Women
Administrative and management staff
1 Average headcount.
2 Headcount as of 31.12.2020.
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Our team
Environmental protection
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office managers), 75% were aged
between 30 and 50, and 21% were
aged over 50.
AVERAGE WORK EXPERIENCE
OF NLMK GROUP EMPLOYEES1 IN 2020:
BREAKDOWN BY GENDER, YEARS
NLMK is committed to supporting
gender diversity within its governance
bodies in a way that takes into account
the specific nature of the Company’s
activities. In 2020, NLMK Group’s Board
of Directors and Management Board
were made up of both men and women.
LABOUR PRODUCTIVITY
NLMK pays special attention to increasing
labour productivity. This strategic goal
encourages the implementation of
effective technological and management
processes within the Group, as well as
the use of advanced technical solutions.
In 2020 labour productivity across
NLMK Group stood at 305 tonnes of
steel per person, growing year-on-year
as major investment projects were
implemented to upgrade the sites’ main
equipment. The changes vs. previous
years are due to preliminary hiring and
personnel training in anticipation of
higher output in 2021 (+2 million tonnes
at the Lipetsk site vs. 2020).
Men
Women
NLMK GROUP1 STAFF BREAKDOWN
BY GENDER AND CATEGORY
IN 2020, % GRI 102-8, GRI 405-1
Shop-floor (revenue-generative) managers
Office managers
Specialists and office employees
Shop-floor employees
Total NLMK Group
Under 30
30–50 years
Over 50
11
12
76
75
63
59
61
20
20
21
23
23
4
5
16
18
16
Administrative and management staff
GENDER COMPOSITION
OF NLMK GROUP GOVERNANCE BODIES
AS OF 31.12.2020, PEOPLE GRI 405-1
TURNOVER
Management Board
Board of Directors
In 2020, voluntary staff turnover
decreased year-on-year to 6.0%.
Men
Women
EMPLOYEE VOLUNTARY
TURNOVER3 AT NLMK GROUP
GRI 401-1
6.8
7.0
6.9
LABOUR PRODUCTIVITY,
TONNES OF STEEL/PERSON
482
502
503
6.0
308
321
328
4992
461
4972
448
3222
297
3252
305
2017
2018
2019
2020
2016
2017
2018
2019
2020
8
8
1
1
NLMK Group
Lipetsk site
STRATEGIC PLANNING
FOR LABOUR RESOURCES
In strategic planning for labour resources,
our key objectives are to determine
the qualitative and quantitative employee
composition to ensure site productivity
and to formulate a request for in-demand
specialists on the 3–5 year horizon
for student admissions to specialized
educational institutions.
Resource planning work in 2020 was
carried out jointly with the Lipetsk
region community of employers –
the RUIE1 HR Club. The project ‘HR Club
of Lipetsk Region employers as a tool
for managing the regional qualifications
market’ received special recognition
for its contribution to the region’s
development in the HR project of
the year category of the Crystal
Pyramid 2020 prize. Every year
this competition identifies the leaders
in human capital management.
STAFF RECRUITMENT
The Company understands
the importance of attracting and
retaining experienced and highly
qualified staff in its efforts
to achieve a strong performance.
When assessing applicants, the Company
does not tolerate discrimination based
on gender, age, or any other factors.
NLMK always complies with applicable
legal requirements, particularly with
respect to the employment of women
in hazardous roles. For example, Russian
legislation2 places restrictions on
the use of female labour in hazardous
conditions and in situations involving
the movement of heavy weights.
The Company adheres strictly to these
requirements.
In its efforts to provide social support
to the communities of the regions
where it operates, NLMK pays attention
to employing representatives of low-
income and socially vulnerable groups.
Training programmes developed specifically for this purpose facilitate
the successful adaptation of employees with low social status and no formal
education or qualification.
Amid the COVID-19 pandemic, NLMK Group focused on digitalizing recruitment
processes:
● Video interview technologies based on the Sever.AI platform were introduced
to assess candidates and interns.
● A SAP SF solution for worker selection was further rolled out.
● The Group’s careers page, NLMK.team, runs on the SAP RMK module, enabling
prompt publication of 100% of vacancies for external users.
A project to provide the service of filling in a questionnaire to become a candidate
for employment at NLMK Lipetsk was implemented jointly with the Authorized
Multifunctional Centre for the Provision of State and Municipal Services.
The questionnaires are directly uploaded into the recruitment database so that
relevant candidates can be considered.
In 2020, 3,755 people (7% of the average headcount) joined the NLMK team, 25% of them
women. 94% were hired by the Group’s Russian companies GRI 401-1 .
NLMK GROUP NEW HIRES
BY REGION IN 2020,
PEOPLE
NLMK GROUP NEW HIRES
BY AGE GROUP IN 2020,
PEOPLE
50 123 40
222
1,556
Under 30
30–50 years
Over 50
3,542
1,977
Russia
USA
EU
India, Turkey,
Switzerland
The Company created more than 600 jobs in 2020, the majority of which were linked
to the launch of investment projects.
NLMK is committed to boosting employment in the regions where it operates, thus
we prioritize local applicants during the recruitment process.
NLMK implements targeted employment projects for people with disabilities. In 2020
the share of people with disabilities employed by the Company was 0.1% (29 people)
of the total headcount. Due to the specific nature of roles in the steel industry, which
involve working in hazardous conditions, recruitment specialists pay particular care
and attention to the employment of people with disabilities. The Company complies
with all respective legal requirements in this area.
1 Headcount as of 31.12.2020.
2 Labour productivity without reduction of output at the Lipetsk site associated with large-scale BF and BOF repairs.
3 Voluntary staff turnover occurs when employees leave their positions voluntarily, including retirement. Involuntary staff turnover occurs when employees
leave their positions due to termination or death. In 2020, involuntary turnover stood at 4.4%, with overall turnover at 10.3%.
1 Russian Union of Industrialists and Entrepreneurs.
2 Labour Code of the Russian Federation dd. 30 December 2001 No. 197-FZ (11 October 2018 edition), Art. 253: Labour restrictions for female employees.
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About the Company
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Our team
Environmental protection
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CAREER GUIDANCE
NLMK is launching and implementing
new projects aimed at actively engaging
young people into the Company’s
operations. We introduce schoolchildren
and their parents to world of professions
(Kids Inc.), offer a mobile application
where users can build up their future
carer track in the Company (NLMK
Navigator), and inform schoolchildren
and students about the influence
of the Lipetsk plant on the city’s
environmental situation (Green City).
PERSONNEL TRAINING
IN SPECIALIZED
EDUCATIONAL
INSTITUTIONS
In order to increase the share of highly
qualified specialists on the labour
market, NLMK collaborates with over
30 specialized educational institutions
(vocational schools and universities)
in the regions where it operates.
Our future employees receive in-depth
training in competencies that are relevant
for NLMK, do internships and traineeships
at NLMK Group sites, implement
actual work tasks, and participate
in the Company’s projects. In addition
to their degrees and specializations,
graduates are trained for up to three
professions, enabling their swift
professional and career growth at NLMK.
ACKNOWLEDGEMENT
AND RECOGNITION
PROGRAMMES
In 2020, three NLMK Group sites –
NLMK Lipetsk, Altai-Koks, and the Mining
Division – simultaneously held
the Foreman of the Year corporate
competition. Over 160 employees
competed in the event. The objective
was to form a progressive team
of middle managers and boost
motivation to develop managerial and
professional competencies.
PLANS FOR 2021 AND THE MEDIUM TERM
NLMK’s personnel training and development programmes represent a full cycle
of continuous professional and personal improvement: from vocational social projects
to niche educational solutions for specific production purposes.
The Company plans to further roll out its best practices of career guidance using
modern digital technologies, with production experts personally participating
in teaching schoolchildren and students of specialized educational institutions.
In order to address the need for engineering talent and specialists with higher
education, in 2021 we will launch a new internship programme for university students
and graduates, the Steel Opportunities Academy. Candidates from over 600 leading
specialized universities in Russia will be considered for internship positions, and
the selected applicants will be gradually immersed in NLMK’s corporate culture and
production system.
In 2021 the Company will continue to implement a number of projects aimed
at personnel development and increasing labour productivity. We will prioritize
supporting talents, developing a mentorship system, and building individual career
routes under NLMK’s updated unified employer brand.
The Company intends to further develop acknowledgement and recognition
programmes for young specialists, foremen, and mentors. We will also expand
the system of financial and non-financial incentives for production personnel
involved in occupational safety programmes and production system improvements.
ASSESSMENT AND REMUNERATION
NLMK Group employees receive
competitive remuneration.
We annually collect and analyse
data on industry peers and in
the regions where the Group operates
as well as the purchasing power
of remuneration by personnel
categories and individual professions
to assess the competitiveness
of our remuneration.
Financial remuneration for employees
consists of a basic salary and a bonus.
The NLMK remuneration system
has been developed in accordance
with best Russian and international
practices. The Company also takes
the views of trade union organizations
into account when drafting local
remuneration regulations.
Remuneration management in the Group
is based on employee performance
evaluation. For many years, NLMK Group
was using a ‘flat’ approach to annual
indexation: all employees’ salaries were
increased by the same percentage.
The current approach introduced in
2019 enables the Company to further
encourage the best of the best, while
maintaining a competitive level of salary
indexation for all employees. This way
a more dynamic increase in the salaries
of high-performing employees will help
strengthen the principles of external
competitiveness and the internal equity
of remuneration across the Group’s
companies, while unlocking the potential
and stimulating the professional activity
of each employee. In 2020 this system
covered 96% of NLMK Group’s Russian
company employees.
The average salary of NLMK Group
employees at Russian companies
in 2020 was RUB 70,900, a 10%
increase versus 2019. The increase
was significantly ahead of the inflation
rate due to additional measures to
support employees during the COVID-19
pandemic. At our international
companies, remuneration is determined based on collective bargaining agreements
and employment legislation, and also includes annual income indexation.
AVERAGE EMPLOYEE SALARY AT NLMK GROUP’S RUSSIAN
COMPANIES, RUB '000 GRI 202-1
52.0
9%
56.6
7%
60.8
6%
64.5
10%
70.9
2016
2017
2018
2019
2020
The Company does not tolerate any form of discrimination on grounds of gender
or other factors when implementing or further developing its remuneration system.
In the reporting year, in order to further expand the disclosure of the remuneration
structure, NLMK Group provides data on the average monthly salary of entry-level
employees by gender and category. The methodology for calculating this indicator
implies taking into account the actual payroll by initial grades in each of the categories
of workers.
AVERAGE MONTHLY SALARY OF ENTRY-LEVEL EMPLOYEES
BY GENDER AND CATEGORY AT RUSSIAN NLMK GROUP COMPANIES
IN 2020, RUB ‘000 GRI 202-1
Women
Men
73,402
46,901
42,617
73,266
50,648
48,884
Management
Engineers and technicians
Blue collars
The Company also continues to develop an end-to-end management system that
aims to achieve the Group’s goals (Management by Objectives (MBO)). More than
9,500 employees receive their annual bonus based on their achievement of key
performance indicators (KPIs). All employee KPIs are linked in a single cascade
of the Group’s strategic goals down to functional area goals.
Bonuses for employees not covered by the MBO system are also determined monthly
based on the performance indicators of their unit or position.
In 2020, 47,497 employees of NLMK Group, or 91% of all staff, underwent an official
performance assessment GRI 404-3 .
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
FEATURES OF
THE МВО SYSTEM
● Objectives are discussed and agreed
between the manager and their
employees
● Constructive two-way feedback
throughout the year and at the end
of the year
● Employee development plan that
allows them to improve their
managerial and professional skills
year by year
An active dialogue between managers
and their teams allows each employee
to better understand their goals and
achieve better results. According
to the MBO system, annual performance
is assessed using a scale of ambition:
when a KPI is exceeded, the bonus also
increases. The maximum possible bonus
for a KPI can reach 150%.
PROPORTION OF NLMK GROUP EMPLOYEES WHO RECEIVED
A REGULAR PERFORMANCE AND CAREER DEVELOPMENT REVIEW,
BY CATEGORY AND GENDER AS OF 31.12.2020,
PERSONS GRI 404-3
By category
Of total white collars1
Of total blue collars
By gender
Of total men
Of total women
86%
14,026
15
93%
38,342
63
90%
39,028
91%
13,340
Each employee who has expressed a desire or accepted an offer for relocation
receives an appropriate relocation package and the opportunity to move his/her
whole family to a new and interesting place of work.
360/180 APPRAISAL
By 2022, NLMK Group plans to extend
the MBO system to cover 100%
of employees at all levels, including
blue collars.
Since 2018, the Company has been using the 360/180 personnel appraisal system.
It involves surveying employees using the 360-degree method on SAP Success
Factors. The responses are strictly anonymous and are presented as average data.
The appraisal results are strictly confidential.
Incentive systems for individual groups
of employees are also being developed:
incentives for participating in project
activities, incentives for initiatives,
etc. All of them are coherently linked
to the main remuneration systems,
complement each other, and expand
the opportunities for salary growth.
The criteria used in the 360-degree surveys mainly stem from NLMK’s model
of corporate and managerial competencies, as well as the Leader Standard Work
practice. Subject to approval by their direct superior, any employee may request
this competency model survey and include respondents at their own discretion:
their manager, colleagues, subordinates, clients, and partners. Before the survey,
employees undergo specialized training. The appraisal results are used to determine
development goals and may not serve as grounds for HR decisions (termination,
bonus reduction, etc.).
NLMK has a policy of personnel relocation.
The Company is interested in allowing
employees to move freely to new jobs
in any regions where we operate,
thereby enhancing opportunities for
career and professional growth.
In 2020, 360-degree surveys were carried out for over 800 employees.
Starting with 2021, we plan to regularly implement 360/180 appraisals based on
the competency model for all managers, specialists, and office employees. In addition,
employees with an individual development plan will have access to an annual survey
on the competencies they are developing.
TRAINING AND DEVELOPMENT
Employee proficiency and qualifications
are an important factor in ensuring
sustainable development at NLMK.
A key objective for the Company
vis-à-vis staff development and training
is to ensure that employees receive
the necessary level of training
in vocational knowledge and skills
so that they can perform at a high level.
The Company also makes active use
of the Leaders Train Leaders approach
(see the NLMK Corporate University
section for more information).
NLMK invests considerable resources
in the training and development of its
employees. Investment allocated to staff
training and development measures
in 2020 amounted to RUB 1,383 million,
including 1,112 million alocated to
construction of Corporate University
campus in Lipetsk, RUB 249 million
to training measures and RUB 22 million
to in-house coaches payroll.
In 2020, the NLMK employees received
a total of 3,173,228 man-hours
of training (including OHS training),
with 169,542 of them delivered
to NLMK Group’s Russian companies
via the Corporate University. Divided
by NLMK Group’s average headcount,
this implies 61.1 hours of training
per person (65.1 hours divided by
the average headcount of the Russian
companies). NLMK Lipetsk employees
also provide trainings on the Company's
professional competencies to students
of basic educational institutions.
These trainings promote the development
of the mentors themselves as well as
potential employees for NLMK Group.
Therefore, in the reporting year,
an additional 706,658 man-hours were
included in the total amount.
The overall time of OHS training in 2020 was 661,379 hours (594,877 hours
of centralized training and 66,502 hours in the Corporate University) GRI 404-1 .
The staff training and development process features a number of stages, which
include not only educational programmes for the Company employees, but also
work with potential future employees, such as students from secondary and higher
educational institutions.
INVESTMENT IN NLMK GROUP’S COMPANIES, INCLUDING
FOREIGN ASSETS, BY TYPE OF TRAINING PROGRAMME
IN 2020 GRI 404-2
2%
18%
RUB 1,383
million
Corporate University campus construction
Training measures, incl. foreign assets
In-house coaches payroll
80%
1 White collars are managers, specialists, and office employees
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Corporate governance
Our team
Environmental protection
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COOPERATION
WITH EDUCATIONAL
INSTITUTIONS
As part of its cooperation with
schools and supplementary education
centres, the Company implements
a broad spectrum of informational and
educational initiatives. These include
organizing tours of production sites
and encouraging students to study
technical disciplines via corporate
career guidance projects (steelmaking
camps, School of Professional Skills,
NLMK Class, the Steelmaking for
the Curious community, the NLMK Career
Guidance group on the VKontakte social
network, thematic meetings dedicated to
the Company, training school students
for blue-collar jobs).
NLMK works closely with vocational
training and higher education institutions,
proposing changes to course content
to reflect NLMK practices, organizing
various types of work experience
at the Group’s sites, operating
scholarship programmes for students,
and conducting additional and dual
education programmes.
The Company also organizes NLMK
ReSolve, a corporate case championship
for students of higher educational
institutions and vocational schools aged
16 to 30. In 2019/2020:
● Over 100 student participated
in the championship
● 23 technological development
projects were proposed when
resolving the cases
● 35 NLMK experts acted as team
mentors and experts evaluating
the case solutions
● 20 best students were invited to do
an internship/receive a promotion
● 3 finalists joined the Russian national
team at Metal Cup, the international
steelmaking case championship
Effective cooperation with schools
as well as secondary and higher
education institutions not only allows
NLMK to attract young professionals
who are already familiar with the working
life at NLMK, but also to ensure that
the Company is perceived as an attractive
employer in the regions where it
operates.
STAFF TRAINING AND DEVELOPMENT AT NLMK
5. Mentoring, corporate programmes for the development
of high-potential employees and the talent pool
4. Upskilling, corporate competitions and programmes to identify
high-potential employees and the best professionals
3. Orientation
and internships
3. Vocational training
and orientation
RECRUITMENT
2. Work with students from
secondary and higher
educational institutions
1. Career guidance
for schoolchildren
LABOUR MARKET
VOCATIONAL TRAINING
GRI 404-2
Vocational training and onboarding programmes for NLMK employees, including
specialized ones, play a significant role in the training process given the nature
of the Company’s operations. These programmes include training that qualifies
employees to access production sites and work with equipment as well as specialist
vocational training. Training takes place at NLMK sites or in collaboration with
certified third-party training institutions. For example, NLMK Lipetsk has an educational
centre that holds state-licensed training sessions in over 300 occupations.
NLMK devotes considerable attention to other areas of training that are valuable for
business. During the reporting period the Company proceeded with its corporate
programme of English language training. In-house mentors participate in creating
specialized glossaries for the programmes so that the participants can learn
industry-specific vocabulary and terms.
NLMK CORPORATE
UNIVERSITY
GRI 404-2
NLMK Corporate University (CU)
was established in 2016 in order to
introduce a unified management training
system throughout the Group.
The mission of the Corporate
University is to make the Company
more competitive by helping to develop
the leadership skills of managers
and talent pool candidates, and to
develop the Company’s ecosystem
(representatives of client, partner,
and contractor companies).
Objectives:
● Development of NLMK managers
at all levels, enhancing the management
system by instilling unified working
standards, uncovering managers’
leadership potential, developing
managerial competencies
● Identifying and rolling out NLMK’s
best practices, including via leaders’
participation in training course
development
● Supporting organizational changes
and strategic projects by creating
an integrated information environment
and focusing on cooperation and
teamwork
● Developing NLMK Group’s leadership
capital, creating an environment
of engaging leadership
The target audience
for the NLMK Corporate
University consists of more than
6,300 Company executives and talent
pool candidates for senior positions.
NLMK Corporate University allows
managers of any level to take at least
four training courses every year.
The recommended percentage of
managerial training for one employee
is approximately 5% of their working
hours annually.
On average, employees receive
20.7 hours of training.
Corporate University training
solutions are also used at the Group’s
international companies.
The Leaders Train Leaders approach
Senior and middle managers and key experts at the Group assist in the development
of the Corporate University programmes, and they also deliver training as in-house
coaches for at least four days every year. Company vice presidents act as trainers
at programmes for foremen and line managers in various functional areas.
The Leaders Train Leaders approach is the foundation of training in the Corporate
University, enabling:
● An engaging environment and unity of meanings via sharing personal experiences
● An exchange of views, which ensures an effective two-way feedback channel
during training
● Managers’ development with the help of in-house coaches via repeated
internalization of programme contents
All in-house coaches undergo special training and receive support from professional
trainers in order to ensure that educational programmes are taught according to high
quality standards. Over 300 employees act as the Company’s in-house coaches.
The Leaders Train Leaders approach is developed by scaling up a single methodology
of in-house coach training and development both within the Company and in its
ecosystem (partner companies).
Educational solutions (programmes)
All Corporate University educational solutions represent a synthesis of the knowledge
and best practices of NLMK Group’s experts and cutting-edge international
developments.
At present the Corporate University portfolio includes 150 educational solutions
that are differentiated into the following streams:
● Value strategy and management
● Production system
● People and teams
● Innovation and change
● Level-specific programmes
● Onboarding (as the Company CEO)
● Development of in-house coaches
● Training solutions for the NLMK ecosystem
Level-specific programmes are a new stream that was added to the Corporate
University portfolio of educational solutions in 2020. A level-specific programme
is a product that develops knowledge and skills and forms certain attitudes
of the target audience at one management level (usually the talent pool) in order
to achieve business goals in the most efficient way. In 2020, the Corporate University
ran three level-specific programmes.
One of them is DREAM 100 executive development leadership
(for the top management’s talent pool), a joint development
with INSEAD Business School. The first stream of DREAM 100, which
gathered 49 participants, took place in February–November 2020.
The programme is aimed at training top managers with developed management
competencies who are able to implement the Company's ambitious strategy
in a changing environment.
During the training, DREAM 100 participants work in project teams and solve
specific business tasks in various areas: sales and customer service, cyber capital,
sustainability, ecosystem approach, etc.
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Corporate governance
Our team
Environmental protection
Appendix
The development programme
for the talent pool of mid-level
managers has been in place at NLMK
since 2018, while in the framework
of the Corporate University it is being
implemented since 2020. The third
stream took place in September–
December 2020.
The programme is aimed at preparing
managers for their transition
to the next management level with
the expansion of their area of
responsibility and the scale of tasks.
School of Foremen
(for newly appointed foremen and
the blue-collar talent pool for foreman
positions) was developed in 2020.
The pilot project was tested in
July–November 2020. Cascade training
started in September 2020 and will
be carried out until 2022.
The programme is aimed at developing
managerial competencies among
foremen/talent pool members
to improve their efficiency in solving
work tasks, develop their people and
process management skills, and teach
them to interact within their team
and related departments.
NLMK Corporate University
campus
In 2017, construction of the NLMK
Corporate University building began
at the site of the former Metallurgists’
Palace of Culture in Lipetsk.
NUMBER OF TRAINING
HOURS BY YEAR FOR ALL
CORPORATE UNIVERSITY
EDUCATIONAL SOLUTIONS
(NLMK GROUP RUSSIAN
COMPANIES)1
169,542
145,828
71,828
NUMBER OF EDUCATIONAL
SOLUTIONS, UNITS
45
28
9,460
2
3
2017
2018
2019
2020
2017
2018
2019
2020
NUMBER OF CORPORATE
UNIVERSITY DISTANCE
LEARNING COURSES, UNITS
NUMBER OF SESSIONS
AND CONFERENCES HELD,
UNITS
143
35
28
25
27
36
12
2017
2018
2019
2020
2018
2019
2020
In Q3 2021, the NLMK Corporate University campus, a modern multifunctional cultural
and business centre, unique for the region, is scheduled to open. It is worth noting
that the building preserved its original appearance.
The campus will house a conference hall that can seat 492 attendees, with gradually
rising seating to ensure audience sightlines. The transformed hall system is used:
within 10–15 minutes, the telescopic folding grandstand allows you to completely
free up the space of the stalls. Multi-
level sector seats for the audience,
in the form of an amphitheater, can be
organized on the stage. Glassroom,
a physical space in the form of
a classroom with a video wall, on which
the audience screens are broadcast,
will be installed on the stage.
The exhibition space will be organized
on the first floor of the atrium.
On the third and fourth floors, there
will be two zones for design thinking
sessions. On the fourth floor, under
the glass dome, special rooms where
people can unleash their creativity
will be set up.
The area around the campus will also
be landscaped, and NLMK will build
a children's playground, as the Mayor's
office requested. A beautiful fountain
with a century-old history, well-known
in Lipetsk, is already functioning.
Investments in the project will total
close to RUB 4 billion.
Participation in the work of
international communities
Since 2019, the Corporate University
has been a member of several
international communities, including
the European Foundation for
Management Development (EFMD),
the Executive Corporate Learning
Forum (ECLF), and the Education
and Training Committee (ETCO)
of steeluniversity and worldsteel.
management vacancies. It also aims to further the career aspirations of NLMK
employees and ensure the continuity of knowledge and technology.
In 2020, the Talent Pool process was automated. The Company continues to hold
regular career committees for the positions of foremen and heads of sections.
The talent pool management indicators are automated and available for analysis
to the Company's managers.
The stewardship over the talent pool is assigned to the heads of structural
subdivisions. Managers are being trained in managerial skills evaluation for this
purpose. In 2020, 83% of positions covered by the programme were filled from
the talent pool.
CAREER PLANNING
In 2020, the Company continued to develop its standard career routes system.
The initiative aims to encourage employees to proactively develop the necessary
competencies as they advance in their career within the Company, to provide
guidance on possible growth directions, to support them in gaining interdisciplinary
experience, and to increase the attractiveness of geographical mobility between
the Group companies.
Career planning offers access to career opportunities not only to the talent pool
members, but also to a wider range of employees interested in developing
competencies, gaining new experience and knowledge. This process enabled planning
career routes to adjacent fields and functions, to the positions of specialists and
experts: an expert career gets a new impetus, which is important for preserving
the Company's production culture.
In 2020, a pilot project in the Logistics function was successfully implemented. Close
to 220 managers, specialists, and blue-collar workers selected and discussed with
their immediate superiors possible options for developing their careers, including
changing their specialization, functionality, and geography.
EMPLOYEE SUPPORT
GRI 404-2
PREPARING
A TALENT POOL
Ongoing work to develop the Company’s
talent pool aims to identify, train,
and promote members of the pool.
The fundamental goal of these efforts
is to foster in-house talent to fill
NLMK provides opportunities for career advancement within the Group and offers
free re-skilling programmes. Should an employee wish to switch specialization,
we are ready to provide full support in acquiring new skills. The Company offers
employees the opportunity to proactively apply for company-reimbursed training
in order to gain new qualifications and progress in their careers at NLMK.
Former NLMK employees that are highly skilled and who possess unique
experience have the opportunity to act as expert consultants, passing on their
knowledge and experience to new Company employees on the basis of a paid
services agreement.
1 The stats do not include sessions and conferences
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SOCIAL POLICY
Collective bargaining agreements govern
the following social support measures:
● Medical services for employees
SOCIAL SPENDING FOR NLMK GROUP EMPLOYEES
(INCLUDING INTERNATIONAL COMPANIES)
IN 2020 BY AREA GRI 201-1
NLMK Group’s internal social policy is
a key tool for supporting a high level
of employee engagement and also
helps create additional labour market
advantages. Since 2017, social policy
issues have fallen within the remit
of the Human Resources functional area,
which helps to develop social projects
more effectively and maintain a sharper
focus on employee needs. Company’s
internal social policy aims to support
NLMK’s HR strategy and sustainable
development goals.
In 2020, NLMK Group continued to
implement its Social Strategy through
2022, approved by the Management
Board in 2019. The Social Strategy
is a set of programmes that promote
the long-term sustainability of business
taking into account the interests
of both the Company and its employees.
The Strategy’s key objectives include:
● Achieving a high and well-balanced
level of staff satisfaction and
involvement
● Reducing losses (time, health, personal
efficiency)
● Higher competitiveness/attractiveness
of jobs/employer
The Social Strategy sets out KPIs,
the structure of social programmes,
and key aspects of such key
programmes as Medical Services,
Catering, My Family, Sports, and
Communities.
SOCIAL SUPPORT
NLMK Group has developed social
support measures for its employees
that aim to boost their motivation
and satisfaction levels. We are
committed to constantly improving
the content of these measures
as well as the conditions under which
they are provided.
NLMK Group’s total social investments in 2020, including NLMK Group’s international
assets, stood at RUB 8.4 billion, of which RUB 7.4 billion was allocated to social support
programmes for NLMK Group employees. In 2019, the Company switched to disclosing
social investments for the entire Group, including its international companies.
NLMK GROUP’S SOCIAL SPENDING, RUB BN GRI 201-1
2020
2019
2018
2017
2016
2015
4.79
1.03
2.61
0.00
8.43
2.26
0.56
2.87
0.01
2.44
0.29
2.29
0.39
2.15
0.85
2.11
1.19
5.70
2.73
2.68
3.00
3.30
Social support expenses for the Group's Russian employees
Investment in local community development in Russia1
Social support expenses for the Group's international employees
Investment in foregn local community development1
and their children, including as part
of the voluntary medical insurance
system
● Provision of hot meals on-site
● One-off financial aid for employees
and their family members as well as
a system of compensation payments
● Organizing mass cultural and sporting
events and creative competitions
● Provision of transport to and from
the workplace
● Private pension programme
(at some NLMK Group companies)
● Comprehensive support programme
for retired employees
Along with this, NLMK provides additional
benefits for employees that aim to
support their health, improve working
conditions, and care for their family
members, and also organizes various
corporate events.
The Company also has PRIMEZONE.
NLMK, a corporate loyalty programme
developed for employees at major
Russian companies. As part of
the programme, employees have access
to discounts and special offers from
retailers in the cities where the Group
has companies: Lipetsk, Stary Oskol,
and Moscow.
NLMK Group employees can participate
in private pension programmes at
companies with additional contributions
made by the Company, thus securing
additional pension payments once
they become eligible to receive their
pension GRI 404-2 .
NLMK Group’s Employee Health
Programme was also further enhanced
in 2020 with a special focus on activities
that would ensure employee safety
6% 2%
7%
7%
RUB 7.41
billion
42%
36%
Medicine and wellness
Material assistance and payments to employees
not involved in production
Co-financing for private pension programmes
Meals
Transport to workplace
Sport and cultural activities
amid the spread of the coronavirus pandemic GRI 403-6 . The voluntary health
insurance programme was extended to provide free medicines for the treatment
of COVID-19 and pneumonia, telemedicine, psychological support services, and
additional examinations after COVID-19. Vaccination against flu and pneumococcal
infection was also organized with a target coverage of 75% of the staff
(see the COVID-19 response section for more details).
NLMK GROUP’S EMPLOYEE HEALTH PROGRAMME
WORKING
CONDITIONS
● Healthy eating
●
● Optimizing work-life balance
Improving social conditions at work
● Health training sessions
● Promotion of healthy lifestyle in corporate
LIFESTYLE
media services
● Getting employees involved in sport
and healthy living (gamification)
MEDICINE
●
●
Improving the effectiveness of occupational
medicine
Improving the voluntary medical insurance
system
● Developing preventative and wellness
programmes
1 For more information about investment in the development of local communities, please see the Development of Local Communities section.
1
Including RUB 4.8 bn expenses at Russian assets.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
NLMK Group’s Employee Health
Programme was highlighted by
a number of key projects in 2020.
1. Accident and critical
illness insurance
GRI 403-6, GRI 403-10
consumed less than the normal amount of fruit before completing the programme,
while after the programme their share reduced to less than 5%.
● A total of 40% of the smoking participants quit smoking: 13% of the participants
smoked before the programme, and only 7% after the programme.
● The average number of steps per day taken by participants increased by 25%
during the project.
● As much as 6% of participants improved their body mass index scores.
In 2019, the Company introduced an
accident and critical illness insurance.
The new privilege was introduced as
part of its Social Strategy of NLMK
Group and aims to provide financial
support to employees and their families
in difficult health-related situations.
This insurance covers all accidents,
including ones that occurred outside
of production facilities or office
premises, for example at home or
on vacation, as well as critical illnesses
that are initially identified during
the insurance coverage period (including
oncological diseases). Moreover,
the programme envisages additional
payments for accidents at work
and occupational illnesses that are
diagnosed for the first time, and long-
term disability. In 2020, in the context
of the pandemic, the largest number
of appeals were received from
employees with temporary disability
(more than 21 days), the amount of
payments exceeded RUB 53 million with
a total of 1,649 payments made.
2. Healthy Choice project
GRI 403-6, GRI 403-10
The goal of the Healthy Choice
project is to involve NLMK Group
employees in championing a healthy
lifestyle, developing a healthy lifestyle
culture within the Company, and
promoting global best practices to
this end. During the first stage of
the project, the Company implemented
a set of activities that aim to increase
awareness among the members of
the Healthy Choice project as regards
their health status and build a conscious
attitude towards health management.
The project focuses on the principles of
cascading and the gradual involvement
of new members. In 2020, 600
participants of different age groups
took part in the project, with more
than 90% of them being blue-collars.
In 2020, the results of the first cycle
of the project were summed up:
● More than 70% of the participants
managed to stick to a healthy diet:
for example, 81% of the participants
At the end of the year, the project participants received awards in the form of healthy
lifestyle paraphernalia.
Due to the spread of the coronavirus infection, the second cycle of the Healthy Choice
project was postponed to 2021. Nevertheless, the participants continued to actively
promote healthy lifestyle among their colleagues, participated in online competitions
and training sessions, and continued yoga and volleyball classes initiated before
the outbreak of the pandemic in compliance with anti-epidemic norms.
The Healthy Choice project received the highest award of the People Investor 2020
corporate projects competition in the Healthy Lifestyle category among the best
practices in the field of corporate social responsibility and sustainable development.
RESULTS OF THE HEALTHY CHOICE PROJECT
Signs of depression
disappeared in a third
of the project participants
More than 70%
of participants began
to follow a healthier diet
As much as 6%
of participants improved
their body mass index scores
The participants' risk
of developing chronic
diseases decreased
by more than a third
46% of smokers
quit smoking during
the project
The average number
of steps per day
taken by participants
increased by 25%
during the project
3. Transferring corporate medical assets to professional management
GRI 403-6, GRI 403-10
The Company continued working on reorganizing its medical assets and transferring
them to responsible management in 2020. This measure aims to achieve planned
employee health indicators, enhance the quality of medical service, and also establish
a single cost and analytics center.
Medical services for NLMK Group employees are provided by three infirmaries and
29 medical centers. Employees are also able to undergo treatment at health resorts
and take wellness holiday time, either at NLMK’s resorts and spas or in other regions
of the country GRI 403-3 .
In 2019, a multi-disciplinary medical
holding company that specializes in
emergency medicine evaluation and
optimization conducted a medical risk
assessment for the Group and optimized
the response sequences for the medical
personnel. In 2020, based on the results
of the assessment, the Company
approved its Regulations on Emergency
Medical Care and Medical Evacuation,
trained paramedics in line with modern
standards of emergency medical care
at the hospital stage, prepared a manual
on first aid, developed medical
procedures, and organized training
sessions. The company health centres
are equipped with modern medical
resuscitation equipment GRI 403-3 .
Healthy eating
The Company develops and promotes
a culture of healthy eating at NLMK
sites. In 2020, as part of its strategic
partnership with the best federal
catering companies, NLMK implemented
the following projects:
● Improving the quality of meals
and service at corporate canteens
and cafeterias
● Lunch box deliveries to remote
production sites and offices
● Providing a subsidy to partially
reimburse the cost of meals for
employees
The implementation of the NLMK
Employee Health Programme
in 2018–2020 achieved the following:
● Modifying the voluntary medical
insurance programme to focus more
on early diagnosis and prevention
● Introducing a new type of insurance
for accidents and critical illnesses
● Handing over management
of corporate medical assets to
an external provider
● Conceptualization and launch of
the Health School awareness-raising
project
● Conceptualization and launch of
the first cycle of the Healthy Choice
project, which aims to promote
a conscious attitude to health
NLMK Eats!
As part of its Social Strategy NLMK Group has launched a new corporate
nutrition programme titled “NLMK Eats! Delicious, healthy, accessible.”
The programme will gradually cover all the Group companies during
2020–2021.
What changed for employees?
● Food became cheaper: the employer reimburses part of the cost of lunch
when an employee pays at the canteen.
● Food became more accessible: an employee can order food to be delivered
to their workplace.
● Paying for food became more convenient: an employee can one-touch pay
with their pass.
PULSE OF NLMK CORPORATE SURVEY
In 2019–2020, our corporate Pulse of NLMK survey covered over 20,000 employees,
or close to 74% of the full-time headcount at the Group’s Russian sites. The survey
identified the strengths of the Group’s companies as well as areas for growth.
In addition to the survey itself the cultural diagnostics cycle includes the analysis
of survey results and permanent cultural councils developing and implementing
activities in areas for growth as well as improving employee communication.
The Pulse of NLMK survey will be conducted annually as part of a continuous cultural
diagnostics cycle.
The Company carries out an additional detailed survey on staff satisfaction with
social programmes every three years, with the last one in 2018. The next survey is
scheduled for 2021.
TRADE UNIONS AND COLLECTIVE BARGAINING
AGREEMENTS
As part of its HR policy, the Company fully complies with the requirements set forth
in collective bargaining agreements and holds regular meetings with representatives
from trade unions. Collective bargaining agreements are in force at all the Group’s
companies, including at our international companies. As of 2020, collective bargaining
agreements covered 100% of employees at NLMK Group’s Russian companies.
In 2020, a series of collective negotiations was held with the shop-floor trade union
organizations of NLMK Group’s companies and steps were taken to harmonize basic
benefits provided under collective bargaining agreements.
The main focus of this effort was to provide equal social support to all NLMK Group's
employees.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
NUMBER OF EMPLOYEES COVERED BY
COLLECTIVE BARGAINING AGREEMENTS, % GRI 102-41
NLMK Group region
Russia
EU1
USA 1
2016
100
90
n/a
2017
100
89
n/a
2018
100
88
72
2019
100
88
71
2020
100
87
72
VOLUNTEERING
Three key areas for developing
corporate volunteering were identified
for all the Group’s companies:
● The environment: including taking
action to clean up and improve NLMK
sites and environmentally sensitive
areas, eco-quests for children and
young people, and eco-expeditions
● Healthy living: including events to
promote a healthy lifestyle, involving
local people in regions where NLMK
operates in accessible sporting events,
furnishing sports facilities
● Social assistance: assistance for
vulnerable groups, including helping
children, retirees, and people with
disabilities, and providing urgent
assistance for community needs
without employer involvement
At the end of 2020, about 1,500
NLMK employees took part in
the volunteer movement. The spread
of the coronavirus infection made
it impossible to hold mass volunteer
events, but the Company's volunteers
played an active role in the We are
Here for You corporate campaign
to support veterans and retired
employees (see the Developing local
communities section for more details),
and were able to put their own ideas
into practice in the first corporate
competition of volunteer projects.
In December 2020, the Bonfire at
the Volunteer Lighthouse meeting was
held in an online format for the top 40
corporate volunteers at all the Group
companies.
Volunteer project competition
The first competition of NLMK Group's volunteer projects was held in 2020, with
social assistance as its primary focus. The volunteers offered a wide variety of
projects for the competition: social English lessons, improvement of recreation
areas for the elderly, assistance to special needs children, veterans, people with
disabilities, organization of charity fairs, and much more. Since the competition
was held at a difficult time of the COVID-19 pandemic, the authors of the projects
reflected the risks associated with changes in the epidemiological situation.
Following the competition, 19 winners received cash prizes of up to RUB 100,000
for the implementation of their volunteer project.
VOLNA educational volunteer accelerator
In 2020, at the VOLNA educational accelerator, NLMK Group's corporate
volunteers improved their knowledge and skills in the field of volunteerism
and shaped ideas for new social initiatives with the support of YouSocial
project partner. Depending on their own competence and awareness of
their role, employees could choose the sessions of interest to attend. During
the accelerator, there were meetings and dialogues with representatives
of local administration, as well as team design workshops on social initiatives
ideation. When the epidemiological situation changed, VOLNA went online.
NLMK employees participated in a two-week online campus and received expert
advice on their initiatives, which they subsequently submitted to the volunteer
project competition.
NLMK's corporate volunteering programme was recognized
at the federal level
A team of Lipetsk volunteers led by NLMK employee Maria Trukhacheva won
the Best Eco Volunteer Team national competition in the Eco Youth category.
For two years the activists participated in the Ecopatrol project to clean up
the banks of the Voronezh River from garbage.
1 % of the actual headcount number. In accordance with national legislation, several employee categories do not have the right to a collective agreement,
while for the other categories the coverage is 100%
CORPORATE SPORT
NLMK Group provides its employees
with all the conditions they need to
engage in sports. The Group supports
onsite sports halls and centres at
its companies, maintains corporate
sports facilities, hires external halls
and facilities for team sports, provides
employees with subscriptions to
swimming pools and gyms, and arranges
employee discounts at fitness centres.
Corporate contests and tournaments
are held on a regular basis. Around
400 employees pass Russia’s Ready for
Labour and Defence physical fitness test
every year.
Amid the spread of the new coronavirus
infection, the First Open Multidiscipline
Competition was held online in 2020.
It was held in four disciplines among men, and four disciplines among women, in three
age categories. A total of 60 athletes from main NLMK Group companies participated
in the competition.
NLMK teams also took part in BlitzBusinessChess-2020, the first online chess
tournament among companies.
Nordic walking – a new way of living
NLMK Group companies took part in the Nordic Walking – a new way of
living national project from July to October 2020. Close to 100 employees of
the Group, including about 50 at the Lipetsk site, actively trained and prepared
for competition. As part of the project, NLMK Group fielded seven teams
in four home regions: the Lipetsk, Kaluga, and Sverdlovsk Regions and
the Altai Territory. NLMK Group teams came in first in these regions. According
to the results of the national individual competition among men, NLMK Group
employees won 1st, 4th, and 10th places (of 157 total). Thanks to the project,
NLMK Group companies have formed teams of caring and active employees who
are ready to promote Nordic walking and engage their colleagues in this sport.
PLANS FOR 2021
AND THE MEDIUM TERM
Human resources management is a key
component that impacts NLMK Group's
development. NLMK Group is developing
an action plan to increase awareness
of the NLMK brand in the external and
internal labour market and increase
the share of employees filling internal
vacancies. An important area of
NLMK’s HR policy is the development
of corporate programmes to
attract students for internships and
the creation of standard career routes
and educational programmes for HiPos,
high potential employees.
As far as personnel assessment
and remuneration is concerned,
the Company plans to further
develop the MBO system to ensure
100% coverage of employees at all management levels by 2022. Incentive systems
will also continue to evolve: incentives will be provided for participation in projects,
for submitting initiatives, and more.
NLMK Corporate University plans to create more than 20 new educational solutions
with a focus on personalization and global trends in training and development,
as well as to expand the range of programmes for managers of various levels and
the talent pool. Work will be carried out to improve the online learning environment:
a virtual campus will be opened, personal account functionality will be added
for internal coaches, etc. In 2021, NLMK Corporate University is expected to get
internationally recognized CLIP accreditation, which is testament to the quality
of corporate training. In addition, the opening of the Corporate University campus,
the most modern and innovative space in the region, will take place.
In terms of its social policy, in 2021 the Company plans to develop and carry out
a programme for updating medical equipment and introducing a unified medical
information system, carry out the second cycle of the Healthy Choice project,
continue the VOLNA educational volunteer accelerator, and hold the second
competition of volunteer projects.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OCCUPATIONAL
HEALTH
AND SAFETY
MAJOR THEME
OCCUPATIONAL HEALTH AND SAFETY
KEY EVENTS IN 2020
● Severe injury rate decreased by 30%
● NLMK Group approved its fire safety, industrial healthcare,
and road safety strategies
● Injury prevention programmes for the top risks were developed
● A training programme on the 8 OHS tools was completed,
with the courses adapted to remote format
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
$ 47.8
million
invested in the development
of safe production
16
large-scale
OHS projects
curated by the Company’s
Top 100 executives
5
comprehensive
top risk
programmes
currently underway
to prevent injuries
3
new IT services
launched:
Hazard Reporting, Safety
Behavioural Dialogues,
and Safety Contact
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR APPROACH TO MANAGING
OCCUPATIONAL HEALTH AND SAFETY
GRI 403-1
Occupational safety is a top priority
for NLMK Group. The Company strives
for a zero injury rate at all its operations
by continuously improving the OHS
management system.
The Company’s approach is based
on the following measures:
● Strict compliance with Russian and
international OHS regulations
● Introduction of best practices
● A risk-based approach and control
of key risk factors
● Maintaining and developing a safety
culture among NLMK Group’s
employees and contractors
OHS aspects are integral components
of a large-scale project to develop
the NLMK Production System.
To ensure a high level of safety
at work, the Company is guided
by a set of internal principles that
shape the OHS culture throughout
the Group.
In order to implement these principles,
the Group is committed to:
● Identifying hazards and efficiently
managing risks, thus controlling
the level of risk to the life and health
of the Group’s employees and
contractors
● Constantly increasing the skills
of managers, employees,
and contractors in matters
concerning occupational health
and safety
● Complying with Russian and
international OHS regulations
● Ensuring transparency of OHS
indicators
OHS issues are regulated at all
management levels within NLMK Group.
The Group ensures that all NLMK
employees and contractors are
involved in measures to improve
workplace safety.
NLMK GROUP'S OHS PRINCIPLES
Our employees are our most highly prized asset.
Protecting their lives and health is a priority
in our production operations
Occupational health and safety are an integral part
of our business and at the heart of our decisions to develop
and improve business processes
All injuries, accidents, incidents, and occupational illnesses
can and must be prevented
Safe operations are the responsibility
of every employee
safety. He determines the Company’s OHS development strategy and approves
the fundamental document, the Integrated Management System Policy
(see Sustainability management section for more).
One of the Policy’s objectives is to ensure efficient operations without accidents,
emergencies, and injuries. The Company strives to attain this objective by
introducing best OHS practices and by continuously developing and promoting
a production culture among NLMK Group employees and contractors.
NLMK Group management recognizes its responsibility for ensure safe and
favourable working conditions and protect the life and health of its employees
and contractors. NLMK Group plans its economic activities based on the results
of regular and objective risk analysis of environmental risks. The Company’s
management regularly discusses OHS matters with employee representatives
and labour unions. Structural unit employees can submit proposals related
to safety, safe working methods, and the measures required to improve labour
conditions through their OHS representatives.
The Company’s Management Board is updated on a monthly basis on the status
of the OHS Strategy, OHS projects, and the results of occupational accident
investigations. These reports make it possible to analyse the performance
of the OHS management system and develop next steps to improve it. In addition,
the Management Board reviews the achievement of OHS KPIs.
The CEO (Chairman of the Management
Board) plays a key role in regulating
the Group’s approach to operational
These KPIs are included in the annual assessment system for managers at all levels
and are taken into consideration when promoting candidates to management
positions.
The Occupational Health and Safety
Department manages OHS issues
at all the Group’s companies, including
international ones. Each of the Group's
companies has an OHS team. Dedicated
occupational safety teams operate in
the shops of the largest companies.
A dedicated project office operates
within the Department to develop and
maintain the NLMK Group contractor
safety management system. A separate
unit works on contractor engagement at
major reconstruction and development
investment projects. All participants in
the OHS management structure, including
international companies, collaborate to
ensure that a unified approach is adopted
to improving safety at all NLMK companies.
Requirements for compliance with NLMK
Group’s OHS principles are identical for
Company employees and contractors.
The list of corporate documents
also includes:
● OHS risk management regulations
● Fire safety regulations
● Regulations on machine enclosures
● Road safety regulations
● Regulations governing the safe
operation of lifting equipment
● Contractor management
regulations
A factor analysis of incidents at NLMK Group’s Russian companies over 2018–2020
was completed in the reporting period. It encompassed the following areas:
● Work-related injuries across NLMK Group, functional areas,
and production sites
● Fires and fire safety incidents
● Industrial safety incidents
● Road traffic incidents
● Industrial healthcare
The main objectives of the exercise were to identify problem areas with the highest
injury rate and to conduct an analysis of the root causes of the incidents. The results
of the analysis also formed the basis of the corrective measures for 2021 aimed at
reducing OHS risks.
OHS INVESTMENTS
In order to achieve the objectives that have been set in a timely and high-quality
manner within the framework of the OHS Strategy, the Company invests in this
sphere annually. In 2020, OHS expenses amounted to $47.8 m.
BREAKDOWN OF OCCUPATIONAL HEALTH AND
SAFETY INVESTMENTS IN 2020, %
15.8
4.8
1.0 0.3
1.3
2.5
2.7
5.3
47.8
$ m
Personal protective equipment
Maintenance programme
Industrial safety
Repair of sanitary facilities
Fire safety
Improving workplace conditions
Risk management
Healthy meals
OHS training
Other
● Regulations governing working
5.3
8.7
at height
● Regulations on the use of safety
behavioural dialogues
EFFECTIVENESS
OF OHS EFFORTS
Since 2018, our main focus has been
on developing a culture of safety
at NLMK. Particular attention has been
paid to improving the level of safe
behaviour: internal and external
training sessions have been conducted
for Group employees and contractors.
The Company has established
the following strategic objectives
in matters concerning OHS:
● Zero fatalities involving employees
and contractors
● Achieving a total Lost Time Injury
Frequency Rate (LTIFR) among
employees and contractors of not
over 0.5 by the end of 2022
● Raising awareness among staff
vis-à-vis personal safety
Each NLMK Group company submits its planned measures and projects for OHS risk
management to the Investment Committee for review. As part of the Maintenance
and Major Repairs Programme, the Investment Committee decides on the allocation
of funds for OHS projects. A detailed implementation schedule is prepared for
each project, and a risk assessment is conducted. Maintenance and Major Repairs
Programme projects are prioritized by assessing the risks of personnel injury and
critical equipment malfunctioning.
In 2020, over $15 million was invested into projects to improve production safety
(Russian and international companies) in the following areas:
● Occupational health and safety
● Risk management
● Fire safety
● Improving working conditions for employees
Renovation of sanitary and amenity facilities
In 2020, NLMK Group continued a renovation programme for sanitary
facilities to increase the level of employee satisfaction with their working
conditions.
More than 110 facilities with a total area of more than 6,000 m2 were
renovated at two production sites of the Group. Investment totalled
RUB 380 million.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
MANAGEMENT SYSTEM
AND CERTIFICATION
GRI 403-8
NLMK is committed to establishing
an OHS management system that
operates effectively and covers 100%
of employees and contractors. As of
late 2020, the number of employees
covered by the OHS management
system was 50,000, or almost 100% of
the headcount. Furthermore, in 2020
the Company achieved 100% coverage
of contractor employees under the OHS
management system.
The Company carries out certification
of the OHS management system at
individual enterprises. Initially, the sites
were certified for compliance with
OHSAS 18001:2007 requirements,
with certificates still valid for NLMK
Strasbourg (until 2021) and NLMK
DanSteel (until 2021).
In 2018, a working group was set up to
transform OHS management systems
at sites and ensure ISO 45001:2018
certification. NLMK Lipetsk and VIZ-Steel
were certified in 2019, and NLMK Verona
in 2020. More than 30,000 employees
were covered by the OHS management
system, which was certified by a third
party.
OHS RISK ASSESSMENT
GRI 403-2, GRI 403-7
NLMK Group applies a risk-based
approach to OHS management. A full
risk assessment of operations falling
into the top-5 category (at the sites of
the Production System’s deployment)
was conducted: the Company assessed
the risks for Top 5 operations and
initiated an operation-by-operation
risk assessment for all production
operations. Currently, risks have
been assessed for 80% of production
operations.
The highest injury rate was observed
in materialized risks of same-level falls
(slips, trips, false steps). To reduce
these risks, a programme was developed
to systematically prevent such injuries,
a steering committee was formed,
and a working group was set up
to introduce and implement measures
to reduce injuries.
The most severe injuries occur as a result of falling from heights. In order to prevent
them, a programme was developed to systematically reduce the risks related to
working at heights, a steering committee was formed, and a working group was set
up to introduce and implement measures to reduce injuries.
Industrial Medicine
GRI 403-9
In November 2019, a new occupational health and medicine area was introduced.
In 2020, Regulations on ensuring readiness for medical emergency response
and medical evacuation were adopted, along with a first aid guide and medical
algorithms.
As part of the programme for initial response actions to prevent cardiovascular
disease aggravations, all sites have been equipped with training mannequins
and machines. A dedicated remote training course on CPR was organized and
taken by over 5,000 people, and over 500 employees were trained in person.
59 automatic external defibrillators were installed at 8 NLMK Group sites.
In order to continuously monitor the condition of employees with heart
diseases in real time, NLMK Lipetsk Railway Transport Unit launched an ECG
T-shirt pilot project.
In 2020, 24 electronic check-up system terminals were installed at 5 Group sites.
The electronic check-up system reduces the length of pre-shift and pre-trip
medical check-ups and allows for the analysis of employees’ health condition.
In addition, a pilot project for issuing electronic trip tickets was launched
at Stoilensky. Both projects are being implemented as part of the industrial
healthcare development strategy.
Paramedics were trained in providing aid in case of various diseases and
injuries at production sites. New equipment and workwear was purchased
for the medical units, and training sessions were held.
In the area of managing occupational hazards and diseases, constant
use of personal protective equipment for the eyes became a requirement,
and eye washing stations were installed. The results have been positive:
significantly less patients have come to the medical units with cases of eye
microdamage.
A pilot project was launched at Altai-Koks to prevent occupational deafness.
The launch included determining the risk group, developing individual treatment
programmes, creating videos to raise awareness, organizing training, and
defining the requirements for purchasing noise protection equipment.
STAFF TRAINING AND ENGAGEMENT
GRI 403-4, GRI 403-5
The Group conducts all OHS training programmes prescribed by state regulations.
NLMK also implements additional measures to bolster the safety culture at the Group
and to improve employee engagement.
In order to ensure a systematic approach to organizing employee training,
NLMK develops training plans for employees aimed at developing particular skills
and boosting professional competencies. When organizing and conducting training
sessions, NLMK particularly emphasizes the practical application of the obtained
knowledge at dedicated practice grounds and visits to operating production sites.
Safety culture development: Leadership in OHS
The Company continued to deliver its ‘Safety Culture Development’ training
programme in an online format. Additionally, in 2020 the second part of
the programme was developed, entitled ‘Safety Culture Development 2.0:
Leadership in OHS’. Five e-courses on safety tools were developed for
the programme. The programme’s objective is to introduce OHS leadership
tools to management and develop the skills of applying these tools in practice.
The programme was launched in September 2020 for Top 100 executives.
In 2021 it will be cascaded down to the next management levels.
NLMK Group elaborated development programmes for the personal protective
equipment (PPE) management system:
● Vision protection: developing the culture of safety goggle use. As a result,
there were 45% less lost time injuries compared to the previous period.
● Comfortable safety footwear: individual shoe selection considering
the working conditions, including shoes with anatomic insoles to reduce
pressure on the spine.
● Hand protection: effective hand PPE selection considering work risks and
the life cycle and cost of PPE
Electronic work permit project launched
In 2020 NLMK Lipetsk began implementing an electronic work permit project.
The pilot project included handing out over 3,000 electronic work permits and
training over 300 NLMK employees and over 100 contractor employees.
Modules on highly hazardous works are currently being developed.
In 2021 the electronic work permit system will be rolled out further across
NLMK Group.
LOTO safety system
In 2020, the LOTO (Lock Out Tag Out) system integration methodology for
NLMK Group sites was developed and approved. LOTO is a hazardous energy
management system to protect personnel and processes from unplanned
start-up or energy supply during maintenance and repair of equipment and
power grids. LOTO projects were implemented at 7 NLMK Group sites in 18 units.
Investment in the projects exceeded RUB 42 million.
The system blocks all possible energy sources mechanically and minimizes
risks during equipment maintenance. LOTO will be integrated at all potentially
hazardous production areas.
Within five years, the project will be deployed in all production divisions of
NLMK Group companies.
In 2020, 98% of OHS functional
area employees took professional
development courses. Employees were
trained in two areas: managerial skills
and command of OHS tools. Overall,
employees took 19 different trainings
and seminars in 2020.
In early 2020 NLMK’s OHS Director
officially joined the Safety and Health
Committee of the World Steel
international association. He now
participates in the committee’s
meetings regularly.
In addition, the Group’s representatives
regularly take part in OHS conferences
and seminars organized by various
international and Russian organizations.
NLMK representatives participated
in the 24th Occupational Health and
Safety 2020 international specialized
exhibition, presenting best practices
in safety culture development during
the pandemic, OHS management
leadership, and incident investigation.
As part of its activities, the Group seeks
to integrate innovative technologies,
not only into production processes,
but also into other areas of its activities,
including occupational health and safety.
Theoretical OHS training is conducted
using advanced training technologies,
such as computer-equipped classrooms,
simulators, virtual reality, and effective
media materials.
NLMK’s OHS Director initiated
the cooperation of Russian
and international companies
in the sphere of OHS. EVRAZ,
Severstal, Metalloinvest, MMK,
Rusal, Alrosa, Nornickel, Nordgold,
and OMK have already joined
the collaboration initiative.
The first meeting of leading
company OHS directors was held
on 21st December 2020. Moving
forward, such meetings will be held
on a quarterly basis. In addition,
continuous interaction is envisaged
between specialists in certain OHS
spheres: for instance, fire safety
and working at heights. The main
goal of this collaboration is sharing
best practices in reducing injury
rates and finding the most effective
solutions.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Transparent feedback, instant
responses to messages, and
the resolution of issues enable
the Company to improve working
conditions and prevent injuries.
In 2020, over 450 contractor and subcontractor organizations employing over
25,000 people worked at NLMK Group sites. NLMK Group management understands its
responsibility for providing safe working conditions and protecting the life and health
of contractor employees. Special emphasis is placed on arranging and overseeing OHS
matters when working with contractors.
PARTNERSHIPS WITH
CONTRACTORS
Contractors that interact with NLMK
are fully covered by the Group’s
OHS standards. Information about
contractors is taken into account when
calculating incident statistics and setting
targets, and also when planning OHS
training and awareness activities.
In 2019, the Group drafted and
implemented an Agreement concerning
occupational health, industrial and
fire safety, work performance,
environmental protection, internal
security and access control procedures
(the Agreement), which defines
the division of responsibility between
the contractors and NLMK, regulates
incentives and penalties, and defines
the rights and obligations of the parties.
The Agreement is the first of its kind
to provide contractors with a mechanism
for financial incentives to work safely.
NLMK regularly assesses contractors
that are involved in production at
its enterprises for their compliance
with OHS requirements according to
a specially developed methodology.
Based on the results of the evaluation,
a rating is awarded that may affect
whether the Group decides to continue
working with the contractor in question.
The Group provides tools for motivating
contractor employees to comply with
OHS rules.
Partnership lies at the heart
of the Company’s strategic approach
to working with contractors.
If a contractor is exposed to certain
OHS risks, the Company is willing to help
improve the OHS system in order
to maintain a working relationship
with the contractor.
In order to minimize the risk of incidents, the contractor safety management
system was fully revised in 2020. This included reconsidering the Company’s
approach to counterparty qualification. The new system has an expanded list
of qualification processes and requires that counterparties for low-value operations
and subcontractors go through these processes. It also introduces expanded
qualification requirements for the participants of high-risk projects.
In the Company’s efforts to organize safe contractor operation, special attention
is paid to managing the risks emerging during the performance of works. Analysis
of violations and injuries has highlighted the following high-risk areas that currently
require more thorough consideration and additional measures: work at height, hot
works, handling, and works with electrical equipment. A set of priority programmes
was developed for each of these risks.
In order to verify contractors’ compliance with the legislative and corporate OHS
requirements and to develop measures for strategic contractor development,
a comprehensive check procedure was introduced in 2020. In the course of this
process an audit organization assesses contractor organizations in over 12 OHS
areas using an assessment sheet with more than 270 questions. The assessment
was implemented for five contractors. As a result, corrective action plans were
formed to address any gaps and develop the contractors’ OHS systems.
A dedicated system of financial and non-financial incentives has been developed
to engage the leadership of contractor organizations in OHS management matters
and to attain a high level of contractor safety in NLMK Group. In 2020, two non-
financial incentive programmes were implemented.
A Safety Week was held at all NLMK Group sites. The purpose of the event was
to find places of possible slips, trips, and falls. Over 4,000 contractor employees
were engaged in the process, and they detected over 3,700 hazards in five days.
ASSESSING THE MATURITY OF THE OHS SYSTEM
NLMK has implemented a unified approach to the internal evaluation of the OHS
system. Each year, OHS team employees complete maturity assessment reports.
This report is a tool that is used to assess the extent to which the OHS approaches
that are in place at each company comply with corporate regulations. A quantitative
assessment of the Group's compliance with each of the existing corporate regulations
is compiled based on these reports. In the event of there being any inconsistencies,
remedial measures are developed and changes are made to the current approach
to OHS management. To improve the quality of OHS system assessments, the Group
is working to establish an internal institution of OHS auditors.
EMERGENCY
PREPAREDNESS
AND INCIDENT
REPORTING
NLMK prioritizes efforts to prevent and
respond to emergencies. Each company
has developed regulations on preventing
and managing the consequences of
both man-made and natural disasters.
The schedule of planned emergency
training sessions for 2020 included
sessions on fires, gas leaks, acid/alkali
spills, molten zinc leaks or spillages,
as well as power outages.
In order to ensure prompt incident
reporting, every site has a reporting
algorithm, indicating key process
participants and persons responsible
for the timely identification of first-
and second-level incidents, as well as
reputational incidents, and for informing
the management about such incidents.
The incident reporting algorithm is
presented at the introductory briefing
at all sites and prominently displayed.
In an effort to enable employees to
contact the OHS team promptly, NLMK
companies publish information sheets that
provide the contact details of the persons
responsible for overseeing such issues.
According to the Regulations on
identifying, recording, and investigating
OHS incidents, all first-level and high-
potential second-level incidents, as well as potential reputational incidents should be
immediately reported to the CEO. Incident alerts are sent out in order to promptly
inform employees and contractors about first-level and high-potential second-level
incidents and in order to prevent such incidents in similar production environments
of other units or when working with similar equipment or processes. If a serious
production-related incident is reported in other similar steelmaking companies,
the OHS function drafts an information sheet and sends it out to production sites in
order to raise awareness of the incident and take prompt action where applicable.
The information sheet procedure is identical to the incident alert procedure.
Incidents of all levels are subject to investigation, and corrective measures are taken
to prevent such incidents and mitigate their consequences. The tools ensuring this
process are Lessons Learned and the Action Plan. The head of the site is responsible
for their implementation.
Corrective measure implementation is checked during line walks, step-wise control,
and targeted checks.
The heads of OHS teams at the Group’s companies conduct regular inspections
during which any employee or contractor can ask a question or put forward
a suggestion.
OHS HOTLINE
The OHS hotline launched in December 2019 continued its operation in 2020.
Employees have had a positive response to the new OHS communication tool. During
the reporting period, employees of different sites called the +7 (800) 600-04-74
toll-free number and wrote emails to HSE@nlmk.com over 190 times to ask questions
about OHS standards and requirements, labour conditions, working during
the COVID-19 pandemic, and PPE provision, as well as to report concealed incidents
and any detected breaches or hazards. The OHS team immediately conducted
thorough investigations and staff members were given feedback.
The hotline is available 24/7 for all employees of the Group’s Russian operations,
including contractors, former employees, and trade union representatives.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
2020 PERFORMANCE
LTIFR stood at 1.25 in 2020:
● Most of the year-on-year growth was due to light injuries, with slips and same-level
falls accounting for the absolute majority. The ratio of serious and light injuries was
1:7 vs. 1:3 in 2019.
● The number of light injuries increased by 80%, while the serious injury rate (severe
and group injuries, fatalities) went down by 20% year-on-year.
Having formed a complete base for injury analysis, the Company went on to implement
new targeted programmes to reduce risks and introduce new OHS tools (Q1 2020).
As a result, LTIFR went down consistently throughout the year (see the breakdown
by quarters below).
Among contractors, LTIFR decreased by 30% due to a number of measures addressing
the top risks as part of investment project implementation: training and knowledge
assessments, targeted and comprehensive checks, technical solutions, and work
planning.
NLMK GROUP’S LTIFR IN 2019–2020:
BREAKDOWN BY QUARTERS
1.78
1.12
1.21
1.06
1.02
0.63
0.74
0.89
The Group also keeps records of all
work-related injuries and measures
the Total Recordable Injury Frequency
Rate (TRIFR)1, which is calculated every
month for each subsidiary and includes
data on contractors. In 2020, TRIFR
increased to 3.17 year-on-year due to
an increase in the total number of
registered injuries.
The number of fatalities decreased
year-on-year, from 6 to 3. The Company
deeply regrets these incidents that
occurred to employees and contractors
at its sites in Lipetsk, Zarinsk and Revda.
The accidents were investigated to
identify the root causes and re-evaluate
the relevant risks. In order to avoid
a recurrence of such cases in the future,
the Company is focusing on the top
risks and has also launched a project to
improve the efficiency of work permit
procedures, including an electronic work
permit project. In addition, the Company
is building a process for improving work
with contractors.
TRIFR (RI) FOR NLMK GROUP EMPLOYEES AND CONTRACTORS1
GRI 403-9
5.88
3.97
3.58
5.23
3.50
3.22
2016
2017
Employees
Contractors
Employees and contractors
2.55
2.47
2.12
2018
2.43
2.42
2.37
2019
INJURY SEVERITY, NUMBER OF ACCIDENTS
85
10
2016
98
23
2017
77
12
2018
80
25
2019
Severe and group injuries, fatalities
Light injuries
3.66
3.17
2.01
2020
147
20
2020
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
INJURY RATES IN 2016–2020
NLMK Group (employees and contractors)
NLMK GROUP’S LTIFR GRI 403-9
2.05
1.12
0.97
1.06
0.77
0.69
1.22
0.86
0.76
1.42
1.25
0.85
2017
2018
2019
2020
1.00
0.85
0.82
2016
Employees
Contractors
Employees and contractors
Indicator
2016
2017
2018
Total number of occupational accidents
Employees
Contractors
Number of occupational fatalities
Employees
Contractors
Number of lost time injuries
Employees
Contractors
Total man-hours worked
for employees
Total man-hours worked
for contractors
95
75
20
5
2
3
90
73
17
121
90
31
11
5
6
110
85
25
89
65
24
3
3
0
86
62
24
2019
105
72
33
6
2
4
99
70
29
2020
167
133
34
3
1
2
164
132
32
91,943,948
92,677,015
93,637,091
95,179,559
93,693,124
19,901,080
15,108,161
22,612,132
26,995,931
39,797,555
In 2020 the Company continued to
support a policy of openness for incident
registration at all levels that was
introduced in late 2019. NLMK strives
to determine the systemic causes,
develop corrective measures, and
prevent incidents from happening again.
In 2020 the Company proceeded
with the maintenance programme
aimed at reducing fatal and high
risks. The programme is based on
the Vision Zero concept: all incidents
are preventable.
WORK-RELATED
INCIDENTS
NLMK's efforts to improve the NLMK
safety system, including developing
methods to respond to emergencies and
incidents at work, enable the Company
to minimize the consequences of
incidents.
The system for recording work-related
injuries at NLMK Group is based
on industry-wide methods adopted
by the World Steel Association.
The main injury rate indicator used in
the Group is Lost Time Injury Frequency
Rate (LTIFR).
The year-on-year increase in the number
of injures in 2020 is due to improved
light injury registration. In late 2019,
the Company launched a programme
to prevent incident concealment, which
includes the following actions:
● A large-scale communication
campaign (top management
talking about the inadmissibility of
concealing production incidents,
videos, instruction pamphlets)
● Launching the OHS Hotline
● A moratorium on sanctions for
reporting incidents that were initially
concealed
● Harsher sanctions for concealing
incidents, including contractor
disqualification, dismissal, etc.
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147
1 TRIFR includes fatalities, lost time injuries and cases requiring treatment. It is calculated on the basis of the method adopted by the Group for determining
recordable injuries (RIs).
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
PLANS FOR 2021
AND THE MEDIUM TERM
CONTRACTOR
MANAGEMENT SYSTEM
● Undertake OHS activities on
priority investment projects in line
with the requirements of the new
contractor management system
and the top risk management
programme.
● Develop the top risk management
system: a system for safety
awareness training and assessment
for contractors' employees,
a system of ad hoc inspections
and audits, marking of equipment,
training videos and memos.
● Adopt a new approach to
the assessment of the contractors'
OHS management system maturity.
● Develop IT services for contractor management: the contractor's personal
account, pilot projects for e-training of contractor employees, electronic access
system for contractors, electronic work permit system pilot.
● Develop and implement an incentive system to motivate contractors to develop
their OHS management systems and increase the level of safety culture of their
employees.
INDUSTRIAL HEALTHCARE
● Implement a set of measures on emergency medical response: the Company will
continue to supply advanced and affordable means of emergency medical care
to production facilities, introduce emergency medical response plans, and promote
the accessible defibrillation programme.
● Extend mass training for workers in international standard of cardiopulmonary
resuscitation, set up a network of training centres for practicing first aid skills,
retrofit production sites with fully automatic external defibrillators.
● Supply automated complexes for medical examinations before work to health
centres, identify and monitor risk groups for cardiovascular diseases.
OHS TOOLS AND
INJURY REDUCTION
PROGRAMMES
to control risks and determine coordination arrangements between
the employee and the manager when identifying conditions that prevent
the safe performance of work tasks.
● Develop an electronic work permit system to improve the efficiency
● Continue implementing programmes
and quality of the access control process.
to manage top injury risks.
● Implement benchmarking and ensure exchange of experience with
● Implement projects to roll out OHS
the largest peers.
tools at the Group companies. Roll out
corporate training programmes
on dealing with hazardous events,
near misses, and behavioural
dialogues on safety, among others.
● Set up OHS Committees at the Group
companies to increase the level of
employee engagement in OHS matters
and the management's interest
in implementing industrial safety
measures.
● Extend the OHS Leadership
programme to cover line managers
of the Group companies as part
of an integrated approach to
the development of a culture of
safety.
FIRE SAFETY
● Develop and carry out trainings on fire safety during performance of hot works
to improve the personnel’s expertise.
● Apply advanced approaches to the development of fire protection systems,
including fire risk assessment mechanisms aimed at improving the safety
of people and property and reducing operations downtime.
ROAD SAFETY
● Introduce international practices for the development of personnel driving
automotive, industrial (in-shop), and mining transport and special equipment.
● Introduce and develop a pool of corporate coaches in Defensive driving
as taught in international driving schools.
● Implement a dynamic risk assessment
tool for employees to analyse hazards
at the site of work and assess existing
measures and necessary additions
● Introduce new technologies and digital solutions in railway transport, update
and finetune security/control systems (video analytics, impact sensors, driver
identification, video infrastructure monitoring (signalling, centralization and
blocking devices, track sections, etc.)).
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
DEVELOPING
LOCAL
COMMUNITIES
MAJOR THEMES
INDIRECT ECONOMIC IMPACTS
LOCAL COMUNITIES
KEY EVENTS IN 2020
● Over RUB 577 million allocated to support local communities amid
the COVID-19 pandemic
● The Steel Tree grant competition of the Miloserdiye Charity Fund
won the Best Social Projects of Russia award
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
RUB 8.4
billion
NLMK’s total social
investment
RUB 1.0
billion
investment in external
social programmes
61
projects
supported through
the Steel Tree grant
competition
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR APPROACH TO MANAGING
EXTERNAL SOCIAL ACTIVITIES
As a major extraction, steelmaking,
and steel product manufacturing
company, NLMK has a significant impact
on the environment as well as local
communities. The Company’s extractive
and production facilities are located
in cities and regions across Russia,
Denmark, Belgium, Italy, France, and
the United States GRI 203-2 .
Two business unit coordinate
local community engagement and
the implementation of projects that fall
under NLMK’s external social policy –
the Social Policy Unit within the Human
Resources function, together with
Government Relations, which are
subordinated to Vice President, HR &
Management System and Vice President,
Risk Management accordingly.
The work of these units in terms
of developing local communities is
aimed at determining common interests
shared by NLMK Group, employees, local
communities as well as governmental
and local administrative bodies related
to the sustainable development of
the Company and the regions in which
it operates and creating a positive
environment for both employees and
local communities.
In an effort to improve the approaches
taken to implement social programmes
in 2019, NLMK Group developed and
approved its Sustainable Development
Policy. According to the standards
set forth in this document, one of
NLMK Group’s key goals in sustainable
development is to contribute to the social
development of the regions in which
the Company operates.
NLMK’s social and charitable activities
to support and develop the regions
in which it operates are pursued chiefly
in collaboration with the Company’s social
partner, the Miloserdiye (Mercy) Charity
Fund for Social Assistance. The Fund
supports the development of sport and
healthcare, the preservation of cultural
heritage, and provides assistance to pensioners, veterans, and other vulnerable social
groups. The Miloserdiye Fund is a longstanding trusted partner of NLMK in the Lipetsk
and Belgorod Regions and in Altai Territory.
Over 30,000 people benefit from the Miloserdiye Fund each year. Miloserdiye implements
charity projects in the following key areas:
● Assistance for veterans: supporting veterans’ organizations and former NLMK
employees in their retirement, providing assistance in obtaining medicines and
reimbursing treatment costs, and organizing cultural events.
● Health: providing assistance by paying for expensive operations, targeted funding
for medical organizations, and health resort packages for children with disabilities
and wheelchair users.
● Sport: support for sports federations, funding for children’s and young people’s
sports schools, and purchasing equipment.
● Children: supporting children’s homes and residential schools and conducting
charity campaigns for children.
● Science and culture: supporting gifted children (winners of science Olympiads and
music and art competitions), creative groups, libraries, museums, and art galleries.
● Environment: purchasing specialized equipment, feed, and medicines for use
in nature reserves and parks, forests, and veterinary practices.
● Cultural development: funding charity concerts, drama festivals, and holiday
events for residents of Lipetsk and the Lipetsk Region.
● One-off assistance: providing one-off assistance to public organizations, municipal
institutions, and citizens affected by terrorist attacks or natural or man-made
disasters.
The Miloserdiye Fund has received a number of awards: in particular it was named
Benefactor of the Year by the Lipetsk Chamber of Commerce and Industry, and
is also a two-time recipient of the Golden Badge for Services to the City of Lipetsk.
In 2017, the Chairman of the Miloserdiye Fund Board, Sergey Melnik, was presented
with the Lipetsk Municipality’s highest honour, the Mitrofan Klyuev medal, for his
many years of charitable work.
In 2020, the Steel Tree grant competition of the Miloserdiye Charity Fund won
the Best Social Projects of Russia award. The award has been in place since 2012 and
aims to support social projects and promote the development of partnerships
in the social sphere.
The Miloserdiye Charity Fund was included in the top 20 funds in the first rating
of private and corporate charitable funds in Russia, compiled by the RAEX agency
together with the Association of Rating Compilers (ARC) in 2020.
NLMK Group was awarded the B+ rating (Best Practice) in the Leaders of Corporate
Charity 2020 rating, compiled by Donors Forum, the Association of Grantmaking
Organizations, which confirms the high maturity level of systemic charity in
the Company.
NLMK is committed to enhancing the tools it uses to collaborate and engage with
communities. Since 2017, the Fund, together with NLMK Group, has been implementing
the Steel Tree programme – a grant competition to support social and environmental
public initiatives.
Train of Good Deeds
The year 2020 saw a continued
inflow of charitable contributions by
NLMK staff on the Miloserdiye online
crowdfunding platform. In December
2020, a dedicated campaign webpage
ran Train of Good Deeds, a New Year
donation marathon. The donations
went to the fund’s beneficiaries –
veterans living alone, multi-child
families, severely ill kids. All proceeds
were earmarked for beneficiaries in
the Lipetsk, Belgorod, Sverdlovsk,
Kaluga, and Moscow Regions, as well
as in Altai Territory.
Total personal contributions since
the launch of the programme have
exceeded RUB 8.5 million.
M O S C O W O B L A S T
Train of Good Deeds
Hi and welcome to our
Geed Deeds Train!
Steel Tree grant competition
In 2017, the Miloserdiye Charity Fund launched the Steel Tree grant competition
in Lipetsk. The competition offered local employees the opportunity to develop
their own programmes to support the environment and to obtain grants
to fund them. In 2020, grants were awarded to projects in the following
categories: ecology and urban improvements, family values, science and
culture, sports and health, supporting children and young adults, mercy
and care, and longevity. A jury board was set up to select the best initiatives,
with members to represent NLMK, the Miloserdiye Fund, regional and local
authorities. The number of applications in 2020 set a new record at 189.
A total of 61 grants were awarded to projects, of which NLMK contributed
RUB 17.9 million. The context of the pandemic informed the decision to
change the arrangements for selection and implementation of the projects:
pitch presentations were made online, no mass gatherings were organized,
all participants received personal protective gear.
Theatre for All (City of Yelets)
The project helps children with disabilities to participate in theatre arts.
It was developed by Lidiya Polosina, teacher at Yelets School No. 1, who received
a Steel Tree grant in 2020. The project actively involves children with disabilities
into staging theatre performances. The grant funds went to procure new audio
and visual equipment for the theatre (microphones, a mixing console, and
a video camera), make stage clothes, and build stage designs. A number of new
performances were delivered by young artists from local schools and colleges,
celebrating the days of Russia’s military glory. All performances were organized
in full compliance with the epidemiological precautionary requirements.
LIPETSK OBLAST
STEEL TREE PROJECT
GEOGRAPHY, NUMBER
OF PROJECTS
3
6
23
14
61
15
Lipetsk
Stary Oskol
Sverdlovsk Region
Zarinsk
Kaluga Region
Another charity fund operating
in the Sverdlovsk Region is Zabota,
Pomosch, Miloserdiye (Care, Help,
Mercy).
NLMK also operates various
volunteering and charity programmes
and conducts research on the needs
of local communities in areas where
it operates. It determines such needs
through surveys and public hearings
as well as various internal corporate
communication channels.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
STRATEGY DOCUMENTS
IN CHARITY
LOCAL COMMUNITY IMPACT
ASSESSMENT
A major effort was undertaken in
2020 to draft a Strategy on External
Social Programmes and Charity for
2021–2023 and a Policy on External Social
Programmes and Charity. Contributing
to the strategic goals of the Company,
the new high-level documents are to
become an integral part of the Group’s
package of strategies: Strategy 2022,
Human Resources Strategy, and Social
Strategy. Drafting was done in line
with best Russian and international
practices. It was based also on
the outcomes of evaluating the potential
of the Group key home regions that
was conducted in 2020. The project
included consultations with NLMK
stakeholders in the relevant regions.
In light of the pandemic, the framework
documents of NLMK Group for charitable
activities were discussed at an online
strategy session. A joint discussion
tapping about 40 participants addressed
systemic aspects of charitable activities.
Among the contributors were
managing directors of main NLMK Group
companies, heads of functions, and
invited experts. The documents are
to be adopted in Q1 2021.
Within the reporting period, NLMK Group ran programmes on engaging and developing
local communities in all regions of operation. This included a local community impact
assessment.
As part of developing the Strategy on External Social Programmes and Charity
in 2020, an assessment was done of the key Group geographies potential.
The assessment aimed to identify the most significant social and environmental
issues. The assessment results were discussed with internal stakeholders.
External stakeholders were reached out to with a questionnaire on charity and
human rights. The survey was conducted on the Anketolog platform and received
responses from 23 companies – existing and potential business partners of
the Group. The data obtained informed the priorities for social investment
by the Group and for development of the relevant strategy documents GRI 413-1 .
RESULTS OF THE EXTERNAL STAKEHOLDER SURVEY
ON NLMK CHARITABLE PROJECTS, %
9
69
22
Do you know of the charitable projects
implemented by NLMK?
I know that NLMK pursues charitable activities,
but can not provide any examples
I am aware of NLMK's charitable initiatives
and projects
I am not aware of NLMK's charitable initiatives
and projects
TOOLS USED TO ENGAGE AND DETERMINE THE NEEDS
OF LOCAL COMMUNITIES GRI 413-1
No.
Tool
Description
Assessment of existing
social programmes
NLMK regularly analyses ongoing social programmes in order to determine their
impact and audience reach and to obtain feedback from the intended beneficiaries.
1
2
3
Direct engagement via
internal communication
channels
Working with local
authorities
4
Public hearings
Given that many of NLMK Group’s companies are the main employers in their
respective areas and that a significant proportion of the regional population work
for them, the social needs of local people can be determined with the help
of internal communication channels, including telephone hotlines, text messages,
and the intranet portal. The portal can be used to leave messages, which
a specialist then responds to; these messages can be read and commented on
by all portal users.
For more details about the internal communication channels used,
see the Stakeholder Dialogue section.
The Company works with regional and local authorities that are fully aware
of the current needs and requirements of local communities in the regions
where the Company operates. Using this information, NLMK collaborates with
representatives from these authorities to develop social initiatives that meet
the needs of local communities.
For additional information, see the Stakeholder Dialogue: Government Authorities
section.
Public hearings are held to review the environmental impacts of NLMK investment
projects that are subject to State Environmental Expert Review. The hearings help
identify the expectations of the locals and integrate them into project development
and operations. In 2020, six NLMK projects were heard publicly and approved by
Lipetsk residents.
A public hearing on rezoning was held at Stagdok, also approved by local residents.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
2020 PERFORMANCE
Each year, NLMK allocates significant
resources to social programmes
in a variety of areas. In 2019,
NLMK Group allocated RUB 1.028 billion
to external social programmes,
including support for veterans and
retired employees. In light of
the COVID-19 pandemic, significant
funds went to support healthcare
institutions and most vulnerable
groups.
SUPPORT FOR
HEALTHCARE
Projects in this area aim to promote
development of healthcare institutions,
including through procurement of
medical equipment and targeted
aid to people with severe illnesses
(reimbursement of costly surgery,
medicines, and rehabilitation).
A total of RUB 430.6 million was allocated
to support healthcare in 2020, which
amounted to 42% of the Company’s
total investment in external social
programmes.
SUPPORT FOR SOCIALLY
VULNERABLE GROUPS
IN REGIONS WHERE
NLMK GROUP OPERATES
Social support by the Group is delivered
in the form of targeted aid to people in
need, support to initiatives with positive
social impacts, facilitation for Group
employees and proactive local residents
to participate in social causes, including
through the grant competition.
In light of the pandemic the Group
provided targeted aid to the most
vulnerable groups. It allocated funds to
provide food parcels to groups that are
in need of support today in the cities
where the Group operates, namely
families with three or more children
under the age of 18, families raising
children with disabilities, and single
parents. Around 15,000 parcels was
delivered to families in Lipetsk, Stary
Oskol, and Zarinsk.
INVESTMENT IN EXTERNAL SOCIAL PROGRAMMES IN 2020, % GRI 201-1
10.5
11.7
3.8 1.2
7.1
RUB 1.03
billion
23.8
42.0
Health
Grassroots and children's sports
Support for socially vulnerable groups
Support for veterans and retires employees
Funding education
Social support
Culture and arts
Support to the home regions in the fight against COVID-19
The Group provided funds to counter the spread of the new coronavirus
infection in its home regions in the amount of RUB 577 million. The contributions
were proportionate to the scope of operation in the Lipetsk, Belgorod, Kaluga,
and Sverdlovsk Regions, and in Altai Territory. As agreed with regional and
city administrations, the funds were used to procure highly needed medical
equipment and PPEs (masks, respirators, sanitizers, etc.).
NLMK Lipetsk and its social partner, the Miloserdiye Charity Fund, made
in-kind donations to 13 regional and municipal healthcare institutions
in the Lipetsk Region. The donated medicine, equipment, and PPEs, including
57 ventilators, X-ray machines and oxygen concentrators, totalled over
RUB 392 million.
Families with multiple children under the age of 23 provided for by the parents,
living in seven cities where the Group operates, received targeted financial aid.
A total of RUB 120 million was allocated to support socially vulnerable groups
in regions where NLMK Group operates in 2020, which amounted to 12% of
the Company’s total investment in external social programmes.
SUPPORT FOR VETERANS AND RETIRED EMPLOYEES
NLMK places considerable emphasis on supporting veterans and retired employees.
This includes organizing regular trips and other cultural events, regular exhibitions
of creative works by veterans as well as sporting tournaments and healthy lifestyle
activities. One important aspect of our work with veterans is computer training,
which helps elderly people use computers, mobile apps, and the Internet to find useful
information, access electronic services, and communicate with family and friends
online.
In order to bolster ties between generations, NLMK works with local veterans’
organizations and trade unions to host meetings with veterans, organize visits to war
memorial sites, and give lessons on courage in schools and colleges basic educational
institutions.
Due to the spread of COVID-19 in 2020, the scale of support for this group was
significantly increased.
Helping our veterans
From April to June 2020, the Group ran the We are Here for You corporate
campaign in support of NLMK veterans. It was pursued with the help of
the Group’s social partner, the Miloserdiye Charity Fund, and corporate caterers
Roteks and OMS. The campaign involved 277 corporate NLMK volunteers who
were a tremendous support in the implementation. A total of 15,814 food and
essentials parcels were put together and handed out.
“Thank you for the real support and help to us, the veterans, in this challenging
time. Your help inspires hope and will to live... Kindness and care cure all ills if
we are here for each other. With kind regards, appreciation and best wishes,
G. Sychev, veteran of labour.”
A total of RUB 108 million was allocated
to support veterans and retired
employees in 2020, which amounted to
10.5% of the Company’s total investment
in external social programmes.
GRASSROOTS
AND CHILDREN’S
SPORTS
The development of grassroots and
children’s sport is one of the priorities
within the Company’s social activities.
NLMK creates conditions for engaging
in sports not only for the Company’s
employees and their family members,
but also for local communities,
regularly allocating resources for
the maintenance of sports facilities
and to provide assistance to children’s
and young people’s sporting academies
and groups as well as sports clubs and
promising athletes. For example,
NLMK covers all costs for the Lipetsk
Metallurg sports club in Lipetsk and
for Olympic Reserve School No. 13
for Children and Young People, which
was set up on the core of the club.
The school trains world-class athletes
in skeet shooting: around half of
the current Russian skeet shooting team
are its former students.
In 2020, the Company allocated
RUB 244 million to support grassroots
and children's sports in the regions
where it operates, or 24% of total
investment in the Company's external
social programmes.
Racing yacht for a Lipetsk athlete
NLMK and its social partner, the Miloserdiye Charity Fund, donated
a world-sailing Laser-class dinghy to Ekaterina Zyuzina, a professional sailor
from Lipetsk. Evgeniya Donskikh, Director of the Miloserdiye Fund, officially
presented the memorial certificate to the prize winner of the Russian
Yachting Championship.
At the Sailing World Cup in Japan, Ekaterina Zyuzina won Russia the qualification
for the 2020 Tokyo Olympics, which was pushed to 2021 because of COVID-19.
As the sailor used to have no personal boat, Russian Yachting Federation
approached the Miloserdiye Fund for help. Ekaterina serves as a role model for
young people of Lipetsk and promotes grassroots sailing in the Lipetsk Region.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SUPPORT
FOR EDUCATION
The main focuses of scientific and
educational development pursued
in NLMK Group’s social policy consist
of multifaceted support for certain
educational institutions in the regions
where the Company operates, and
support for high-quality technical
education for young people.
The Company provides targeted funding
for scientific and educational activities
at educational institutions, and also
arranges and sponsors conferences
dedicated to scientific research as well
as scientific and technical competitions
for students. In order to introduce
the next generation of employees
to the Company, NLMK organizes
open days and trips to production
facilities for schoolchildren as well as
industrial internships at the Company’s
enterprises for students from certain
educational institutions. NLMK also
finances a range of grants.
The Company also allocates significant
resources to improving facilities at
nursery schools, schools, secondary
schools, vocational institutions, children’s
centres for the creative arts, children’s
homes, and residential schools.
In 2020, a total of RUB 73 million was
allocated to support science and
education in regions where the Company
operates; this amount represented
7% of the Company’s total investment
in external social projects.
Webinars for MISiS students
The Group hosted a series of
webinars as part of the Career Fair
organized by the National University
of Science and Technology MISiS.
Events like this one help students
learn about the Group’s products
and technologies, and about the jobs
different specialists do at NLMK.
DEVELOPING SOCIAL INFRASTRUCTURE OF REGIONS
WHERE NLMK GROUP OPERATES
The main priorities of NLMK Group’s external social programmes include determining
and facilitating solutions to issues that currently affect the regions where the Company
operates as well as social infrastructure development.
In 2020, a total of RUB 39.4 million was allocated to develop the social infrastructure
of the regions where NLMK Group operates, or 4% of the Company’s total
investment in external social programmes.
Support for improvements at Lipetsk public parks
NLMK and the Miloserdiye Fund launched a public realm improvement programme
for garden squares and recreational areas in Lipetsk.
The Fund paid to manufacture over 180 benches and about 110 sandboxes.
The amenities were installed in the common areas and garden squares of new
and existing residential developments in the Levoberezhny, Pravoberezhny,
Sovetsky, and Yugo-Zapadny districts of Lipetsk. Neighbourhood residents
provided inputs on where to best place the amenities.
Benches and sandboxes are made of modern wear-resistant materials.
All sandboxes came with fresh sand. About 70 volunteers from NLMK helped
with the installation.
SUPPORT FOR CULTURE
AND ARTS
As part of efforts to support culture
and the arts, NLMK Group provides
assistance to organizations that
promote cultural history and education
in the regions where the Company
operates and makes financial
contributions to the preservation and
proper maintenance of cultural and
architectural monuments and other
sites with cultural and historic value.
The Group also supports the activities
of corporate museums, including
NLMK’s Novolipetsk Museum in Lipetsk,
the Demidov Centre in the Sverdlovsk
Region town of Revda, and museum sites
at Stoilensky Mining and Beneficiation
Plant and Altai-Koks.
A total of RUB 12.2 million was allocated
to support culture and the arts in 2020,
which amounted to 1% of the Company’s
total investment in external social
programmes.
A total of RUB 12.2 million was allocated to support culture and the arts in 2020,
which amounted to 1% of the Company’s total investment in external social
programmes.
Support for the construction of the Intercession Church in Lipetsk
NLMK provided more than 7,000 tonnes of building materials and contributed
money for the construction project. NLMK repair workers manufactured four
metal domes and four crosses for the church. Each dome fit with a cross weighs
1.1 tonnes, its height is approximately 9 metres, and base diameter is 5 metres.
The domes have been coated with titanium nitride and mounted on the church.
Online paintings
NLMK Museum opened its first online exhibition with paintings about metal.
The online exposition features artwork by Lipetsk painter Ivan Kolesnikov.
The exhibition is available on the NLMK Virtual City website under “Exhibition
Room”. The collection of NLMK corporate museum holds works by many
well-known artists from Lipetsk, Moscow, and St. Petersburg. It includes
paintings by Ivan Kolesnikov, member of the USSR Artists’ Union, participant
of regional exhibitions. His works are also held by the Lipetsk Art Museum,
private collections in the UK, US, and other countries.
PLANS FOR 2021
AND THE MEDIUM TERM
The following strategy documents are to be adopted in 2021: the Policy on External
Social Programmes and Charity and Strategy 2021–2023, including the implementation
of Stage 1 of the Strategy.
It is planned to further develop the Steel Tree grant contest, including a revision
of the programme based on stakeholder feedback and digitalization of the contest
procedure.
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ANNUALREPORT 2020 ENVIRONMENTAL
162 Environmental protection
186 Climate change
202 Energy efficiency
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANNUAL
REPORT
2020
ENVIRONMENTAL
PROTECTION
MAJOR THEMES
WATER
BIODIVERSITY
ATMOSPHERIC EMISSIONS
WASTE
SUPPLIER ENVIRONMENTAL ASSESSMENT
ENVIRONMENTAL COMPLIANCE
KEY EVENTS IN 2020
● Major overhauls of Blast Furnaces No. 4 and No. 6 and BOFs No. 2 and No. 3
completed at NLMK Lipetsk BOF Shop No. 2 with a total emission reduction
of 9,000 tonnes
● Upgrade of the NLMK Lipetsk local treatment facilities and a set of projects
to reduce wastewater discharge completed; at 2020 year-end, the volume of
domestic wastewater discharge into the Voronezh River was reduced by 73%
(industrial wastewater discharge seized in 2009) compared to the design target
values before the upgrade
● A new section for waterless blast furnace slag cooling built at NLMK Lipetsk
with a 3.5x hydrogen sulfide emissions reduction at the site
UNITED NATIONS GLOBAL
COMPACT PRINCIPLES
● Principle 7: Businesses should support a precautionary approach to environmental
challenges.
● Principle 8: Businesses should undertake initiatives to promote greater
environmental responsibility.
● Principle 9: Businesses should encourage the development and diffusion of
environmentally friendly technologies.
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
$ 430
million
allocated to investment
projects with
an environmental
impact as part
of Strategy 2022
$ 183
million
allocated to operational
and investment projects
with an environmental
impact in 2020
97%
of water in production
is recycled and reused
99%
of waste recycled
Awards
The NLMK Lipetsk slag dump processing
project was shortlisted for the Excellence
in Sustainability category of the Steelie
Awards held annually by the World Steel
Association. Thanks to this project
25 hectares of land were reclaimed
and 6 million tonnes of recyclables
was processed thus avoiding the emission
of 85,000 tonnes of greenhouse gases.
NLMK Lipetsk won the Environmental
Culture. Peace and Harmony
international competition, held under
the auspices of the Vernadsky
Non-Governmental Environmental
Foundation, in the Environmental
Culture in Industry and Energy category.
NLMK Group was awarded the gold
medal of the 26th international
industrial exhibition Metal-Expo 2020
for the construction of a dry slag
cooling complex at NLMK Lipetsk.
For the fourth consecutive year
NLMK Kaluga was a prize-winner
in the regional Eco Organization
competition. In 2020 the company took
second place among major corporations
in the Environmentally Responsible
Organization of Production category.
Altai-Koks won the Metals and Mining
Company with High Social Efficiency
industry competition in the Environmental
Protection and Resource Conservation
category.
NLMK Lipetsk won the Ecology – a Reliable
Partner national competition in the Best
Project for Reducing Harmful Emissions
into the Air, Ensuring Environmental Safety
of the Air category.
NLMK Lipetsk was awarded with
a Certificate of Merit of the Vernadsky
Non-Governmental Environmental
Foundation for active participation
in the Green Spring national community
clean-up and for supporting environmental
initiatives.
NLMK Lipetsk topped the Best Separate
Waste Collection System category of
the Green Healthy Office competition.
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Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
OUR APPROACH TO MANAGING
ENVIRONMENTAL PROTECTION
A responsible attitude towards
the environment and the efficient use
of natural resources are the key
principles of NLMK Group’s Sustainable
Development Policy. The Group
objectively assesses environmental risks
and is committed to minimizing them.
It allocates significant resources
to various environmental programmes
and the implementation of innovative
technologies. Environmental protection
is a top priority of NLMK Group’s
activities.
NLMK takes a comprehensive approach
to environmental management by
focusing on improving energy efficiency,
reducing air emissions by upgrading
equipment, reusing and processing
waste, conserving water resources,
and rehabilitating contaminated land.
STRUCTURE
NLMK’s management team is actively
involved in the environmental
management process:
● The Group’s CEO and Board of
Directors review environmental
performance on an annual basis.
● The Strategic Planning Committee
under the Board of Directors
studies risks related to sustainable
development, including those related
to environment, atmospheric air,
water resources, soil, biodiversity,
and climate change (including
greenhouse gas emissions), and
approves the Environmental
Programme and investments
in environmental protection projects.
● The Management Board reviews key
components of the Environmental
Programme, approves its key
performance indicators, and signs
off on its execution at all the Group
divisions.
● The Management Board’s Investment Committee is directly involved in reviewing
NLMK’s Environmental Programme. The Investment Committee includes vice
presidents and directors of NLMK companies. The Investment Committee devotes
special attention to the results of the annual environmental assessment, approves
the investment budget for projects aimed at reducing environmental impacts,
and oversees the investment budget for the Environmental Programme and its
execution.
● NLMK Vice President for Energy and Environment is responsible for ensuring
the efficiency of environmental and energy management, overseeing the execution
of the approved portfolio of projects, achieving environmental targets, and
resolving key issues in the field of environmental protection.
● The Environmental Department coordinates environmental management,
including managing environmental risks and implementing advanced eco-friendly
technologies, and organizes activities which aim to reduce the Company’s impact on
climate. Each of the Group’s companies has an environmental protection service,
which is responsible for, among other things, daily monitoring of compliance with
environmental requirements, supporting production units, assessing environmental
risks, supporting the implementation of environmental projects, and implementing
systems that assess the maturity of environmental indicators and improve
environmental management.
● Laboratories of production and environmental control, which are part of
NLMK Group’s Environment function, monitor and measure the amount and/or
composition of the emission, state of the air at the border of sanitary protection
zones, the water quality in surface water, groundwater, industrial and household
wastewater, drinking water quality, and soil condition at the NLMK Group
production sites and sanitary protection zones, providing reliable data for
the environment analysis, performed by the environmental protection services.
TARGETS AND KEY PERFORMANCE INDICATORS
NLMK recognizes the importance of efficient environmental management. As part of its
Environmental Programme under Strategy 2022, which is reviewed and supplemented
annually following a risk assessment, the following targets have been established:
● Minimizing the impact that the Group’s Russian and international companies have
on the environment, and complying with all applicable environmental standards and
environmental risk management commitments
● Increasing the waste recycling rate
● Reducing specific air emissions
● Reducing the impact on water resources
An important highlight in 2020 was the update of the Group’s 2023 target to reduce
greenhouse gas emissions. NLMK Group intends to continue reducing greenhouse
gas emissions while increasing its steel output by 2023. The specific emissions target
is 1.91 tonnes of CO2 per tonne of steel vs. 2.00 tonnes in 2018.
In 2020, NLMK Group set additional targets for reducing air emissions of selected
substances and the impact it has on water, and for increasing the use of overburden,
tailings, and iron-containing waste. The target indicators are given in the table.
NLMK Group Environmental Programme envisages the implementation of a portfolio
of projects, which aim to achieve the targets mentioned above.
1 For more details on greenhouse gas emissions see the climate section of the Report.
NLMK GROUP STRATEGIC ENVIRONMENTAL GOALS UNTIL 2023
Target
KPI
Units
2018
(baseline year)
2020
2023
target
Approved earlier
Compliance of environmental
indicators of NLMK Group
with best practices
СО2 emissions reduction
program
Approved in 2020
Air impact reduction
by individual substance
(specific emissions)
Reduction of impact
on water resources
Increased usage
of overburden, tailings,
and iron-containing
wastes
Specific emissions
kg/t of steel
Waste recycling share
%
18.9
89
19.8 (18.61)
95
Specific СО2 emissions,
stationary sources
(Scope 1+2)
CO (NLMK Lipetsk)
NОx (NLMK Lipetsk)
SOx (NLMK Lipetsk)
Dust
1st Class substances
RF Group
Specific water discharge
(NLMK Lipetsk)2
Pollutants discharge
into water bodies
Overburden usage share
(Mining Division)
Share of iron-containing
waste utilization3
t/t of steel
2.00
2.10 (1.981)
kg/t of steel
kg/t of steel
kg/t of steel
kg/t of steel
16.3
16.8 (16.01)
1.2
1.7
1.4
1.3 (1.21)
1.7 (1.71)
1.4 (1.21)
g/t of steel
0.08
0.08 (0.071)
m3/t of steel
0.8
0.7 (0.71)
‘000 t
17.6
12.5 (13.91)
%
%
26
93
29
99
18.0
92
1.91
14.8
1.1
1.6
1.2
0.07
0.6
13.2
30
101
CERTIFICATION
NLMK works continuously to systematize
its environmental management
operations in accordance with modern
international standards. NLMK Group
employs an Environmental Management
System, which enables it to identify
and monitor environmental issues and
the risks of its activities.
The ISO 14001:2015 standard has been
implemented at 14 of the Group’s
facilities.
In order to ensure a systematic
approach to environmental management
at the Group’s facilities, supervision
and recertification audits for compliance
with ISO 14001:2015 are carried out on
a regular basis.
In 2020, NLMK Group was awarded Environmental Product Declaration (EPD)
certificates for rebar
EPD certification will boost the competitiveness of NLMK products in the Northern
Europe market (in Sweden, Norway, Denmark, and Finland), where special attention
is paid to energy efficiency and environmental safety when selecting a product.
The Declaration includes a detailed description of the rebar product and
how it impacts the environment throughout its life cycle: from feedstock and
other materials used in production to the mode of transport used to deliver
the product to consumers. It also discloses the main types of waste generated
in rebar production, its amount and how it is disposed of. The volumes
of emissions into the atmosphere and water bodies and the methods of handling
them are also indicated as well as the recycling possibilities and methods after
rebar loses its consumer properties.
The declaration assessment, carried out by an independent expert from
the declaration developers, confirmed that the environmental performance
in the production of NLMK Long rebar meets international requirements.
1 Without the impact of temporary factors, which have to do with lower production.
2
Industrial and household wastewater, total.
3 Without overburden and tailings taking into account accumulated sludge.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
INVESTMENT
IN ENVIRONMENTAL
PROTECTION
Each year NLMK Group commits
significant resources to ensuring
the accident-free operation of
equipment and the implementation
of investment projects that have
an environmental impact. Spending
on environmental management over
the reporting period totalled more
than $183 million, an increase of 44%
over the past five years.
NLMK GROUP SPENDING
ON ENVIRONMENTAL
PROTECTION, $ M
GRI 103-2
202,0
161,6
121,2
80,8
40,4
0,0
202
124
183
101
175
95
80
78
82
127
73
54
123
90
33
2016
2017
2018
2019
2020
Investment projects
Current expenditures
on environment protection
In 2020, despite the pandemic,
the financing of the Group’s
environmental investment projects
increased by 5% compared to 2019.
Due to these capital investments,
major overhaul of Blast Furnaces
No. 4 and No. 6 and BOFs No. 2 and No. 3
in the NLMK Lipetsk BOF Shop No. 2
was completed with a total impact
on emissions reduction of 9,000 tonnes.
In addition, local treatment facilities
were upgraded, and a new section for
waterless BF slag cooling was built,
enabling a 3.5x reduction in hydrogen
sulfide emissions.
MONITORING, CONTROL, AND COMPLIANCE
NLMK conducts internal audits to assess its environmental impact. It also has
a production control system in place. Internal environmental audits involve
the comprehensive monitoring of operations at the Group’s companies, including
treatment facility performance tests, measures to reduce the environmental
impact of generated waste, and an environmental production plan to reduce
specific air emissions.
The Group employs environmental production monitoring procedures with support
from accredited laboratories in order to monitor the implementation of resolutions,
prevent non-compliance with effluent discharge standards, and monitor sources
of emissions and atmospheric quality at NLMK Group companies. These procedures
have been agreed with state supervisory bodies and are regulated by legal
documents GRI 303-2 .
Supervisory bodies conduct regular annual checks, both scheduled and unscheduled,
of the Group’s companies to ensure they comply with Russian legislation as well as
stakeholder expectations. A total of 39 checks were carried out by local environmental
supervisory bodies in 2020. No significant fines or non-monetary sanctions were
imposed on NLMK Group, and no legal proceedings were brought against the Group
seeking compensation for damage to the environment or to third parties. There were
no environmental accidents since the beginning of NLMK Group’s operations GRI 307-1 .
PAYMENTS FOR NEGATIVE ENVIRONMENTAL IMPACT, $ M
Indicator
Entire Group 1
Russian assets
2016
2017
2018
2019
2020
2.4
1.6
2.6
1.9
2.3
1.3
1.7
1.0
1.8
0.9
The payments have been decreasing over the last five reporting years, which is
evidence of the reduction in the negative impact of the Group’s businesses on
the environment. In 2020, the share of over-limit payments in the structure
of payments for the negative impact on the environment of the Group’s Russian
assets amounted to 19% (compared to 21% in 2018).
In 2020, NLMK Lipetsk implemented a project on video surveillance of the main
sources of the company’s emissions. A system of 63 video surveillance cameras
enables identification of any visible emissions and allows reacting quickly to reduce
the possible negative impact on the atmospheric air. Together with the video
surveillance system, a system for analyzing NLMK’s visible emissions is being
developed using machine vision algorithms and deep learning methods. This will
enable identification of any atypical emissions into the atmosphere recorded by video
surveillance cameras; determine their location, and the estimated volume. Upon
receiving the results, the production department experts and the plant’s Industrial
Environment Department will conduct detailed analysis and determine the causes
of emissions. The video cameras cover the main facilities of the plant with significant
gross emissions, and companies with a significant visible impact on the atmosphere
at the plant border. The cameras also capture the view of the site as seen by
Lipetsk residents. This new system will prevent and eliminate the causes of atypical
emissions into the atmosphere.
1 For the Group’s international companies, costs of procuring permits are taken as payments for negative environmental impact.
The Company also engages its employees
in the environmental control process.
In 2020, NLMK Group’s Lipetsk site
launched a rapid response system
for environmental incidents. By calling
the hotline or leaving a WhatsApp
message, the company employees and
local residents can report an incident
or discrepancy. The hotline for
environmental issues helps to quickly
record appeals and inform the residents
directly about the real state of affairs.
In addition, the solution complements
the internal environmental improvement
system (IEIS), designed to ensure
the environmental safety of the plant.
As part of this system, shop employees
themselves regularly find and eliminate
environmental inconsistencies or their
root causes.
In 2020, NLMK Group launched
a project to equip air emissions
and wastewater disposal sources
with automated monitoring
and data transmission devices.
The Company plans to allocate
close to RUB 800 million for
the implementation of this legislative
requirement in the next five years.
The programme for creating
an automatic control system for
emissions and water runoff for
NLMK Group’s Russian companies was
approved by the Group’s Investment
Committee in November 2020.
TRAINING
NLMK devotes special attention
to fostering a culture of environmental
awareness among employees at
its companies and in communities
in the regions where it operates.
A series of educational courses,
including the Key Rules for Protecting
the Environment document and
Protecting the Environment distance
training course, have been developed
for the benefit of all the Group’s staff.
Special environmental protection
training consists of modules covering
the use of dust and gas cleaning facilities
and treatment equipment, how to
eliminate situations which could lead
to environmental issues, and waste
handling. At least 10% or 5,000
of employees go through environmental
training sessions and development
courses every year.
NLMK Lipetsk introduced continuous environmental monitoring
The NLMK Lipetsk environmental laboratory successfully confirmed its
accreditation following an audit by the Federal Accreditation Service. In addition,
the laboratory was able to perform 17 new measurements of substances and
compounds, as well as measure the level of industrial noise in line with best
international practices.
The plant’s environmental laboratory daily monitors the impact of production
on the environment and assesses the air quality not only at the plant, but
also in the city. Every year, more than 26,000 tests are carried out, or close
to 100 every day.
In 2020, the laboratory started testing the systems for online monitoring
of air pollution. These are software and hardware complexes for live monitoring
of substance concentrations. They include compact automatic measurement
modules and information systems with a reporting function. Following the pilot
tests, it is planned to install ten monitoring complexes in Lipetsk for continuous
monitoring of the state of atmospheric air by meteorological parameters and
21 pollutants. The installation of online monitoring systems will enable NLMK
environmental experts to obtain the most objective and complete information
about the state of the city’s atmosphere, respond to changes, and take
necessary measures in case of deviations.
Also in 2020, the industrial and environmental control laboratories began
implementing the Ecology Laboratory Information System (ELIS), which
is expected to automate processing, storing, and creating reports based on
the measurement results. In the ELIS, measurement data are received directly
from laboratory equipment, measurement protocols are automatically generated,
and data on previous measurements are stored. The implementation of ELIS will
reduce the probability of errors in calculations, confirm the transparency and
reliability of laboratory tests for the regulator, and increase labour productivity
by 10%. In 2020, the project was implemented in three of the six laboratories of
the Group’s Russian companies.
NLMK Lipetsk arranged Green City environmental seminars
The project aimed to raise awareness among residents of Lipetsk about
the current environmental situation in the city and the Company’s projects to
reduce its impact on the environment. Several important topics were covered
at these seminars: health of the residents, areas affected by the industry,
programmes for improving the environment at the plant and in the city, as well
as sustainability tools. In 2020, 15 training sessions were arranged to reach
a wide audience, including representatives of government authorities, the press,
entrepreneurs, students, and schoolchildren. Open communication between
NLMK Lipetsk and the city is key to building an effective partnership in the field
of environmental safety. The Company also plans to hold interactive meetings
on ecology for students of all schools and universities of the city.
Online training is also available on the corporate portal. Two videos are currently
available: ‘Environmental Initiatives’ and ‘Handling Class I and Class II Hazardous
Waste’.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
NLMK Group has been running the Green
Office Programme for several years
already. It aims to enhance
the environmental commitment of
the Group’s employees and teaches
people about how they can contribute
to reducing emissions into the air,
water, and soil, and also reduce
fuel costs in the process. In 2020,
the programme was extended to all
the Group’s Russian companies and
standard Green Office activities became
available for over 30,000 employees
of the Group.
SUPPLIER ENVIRONMENTAL
ASSESSMENT
Starting from 2007, all suppliers
of NLMK Group have been subjected
to audits, which cover compliance
with environmental standards.
All providers of raw materials, supplies,
and equipment to NLMK Group as well
as suppliers of services (contractors),
undergo a qualification procedure,
which also includes assessments
for compliance with environmental
requirements. The environmental
criteria for assessing suppliers include
compliance with legal requirements,
availability of necessary permits and
Environmental Management Systems.
The qualification, assessment, and audit
procedures are set out in NLMK Group’s
regulatory documents. In 2020,
the Company updated its Regulations
on the Qualification of Contractors for
Compliance with the Management Systems
Requirements and the Regulations on
the Contractor Management in the field
of Occupational Health, Industrial and Fire
Safety, Environmental Protection and
Road Safety.
Contractors who have been found
not to meet the established criteria
following the qualification and audit
procedures are not permitted to supply
raw materials, supplies, or equipment
or to provide services to NLMK Group
companies. In 2018–2020, 100% of new
service providers were screened using
the environmental criteria. In addition,
all products supplied to NLMK companies
come with safety data sheets that
regulate potential hazards associated
with the handling of products and
prescribe the respective necessary
precautions.
For contractors, the assessment is carried out on the basis of internal corporate
documents through a specially developed qualification questionnaire GRI 308-1 .
They are obliged to sign the Agreement on occupational health, industrial and fire
safety, work performance, environmental protection as well as onsite and access
control for relations with its counterparties, which will also enable the Group’s
enterprises to deal efficiently with suppliers and contractors on matters concerning
environmental protection and to effectively prevent environmental violations from
their side.
The decline in supplier audits in 2020 is due to the COVID-19 pandemic.
The Group works with its suppliers during the audits to eliminate environmental
deficiencies. In particular, in 2020, based on the audit results for two suppliers,
measures were initiated to finalize the permitting environmental documentation
of the audited facilities in order to ensure compliance with environmental requirements.
SUPPLIERS OF FEEDSTOCK,
MATERIALS, AND EQUIPMENT
TO NLMK GROUP SCREENED
USING ENVIRONMENTAL
CRITERIA DURING AUDITS
GRI 308-2
SUPPLIERS WITH MEASURES
TO IMPROVE ENVIRONMENTAL
COMPLIANCE FOLLOWING
AUDITS, % OF TOTAL AUDITS
CONDUCTED GRI 308-2
39
36
34
80
69
13
41
38
2017
2018
2019
2020
2017
2018
2019
2020
MEMBERSHIP AND
PARTICIPATION
IN ORGANIZATIONS
environmental developments in Europe and is particularly active in the EU carbon
regulation activities. NLMK Group is committed to the sustainable steelmaking principles
promoted by the EUROFER.
NLMK works with Russian and
international associations to establish
an effective dialogue on issues
surrounding the sustainable use
of natural resources. In particular,
NLMK Group is a member of the World
Steel Association (WSA), which
represents over 170 steel producers
across the globe. NLMK is a member of
WSA expert groups on the environment,
sustainable development and climate,
and participates in the Association’s
events and expert meetings. As part of
its collaboration with the WSA, the Group
collects and submits data on sustainable
development indicators on an annual
basis and participates in steel
products life cycle assessment. In 2018,
NLMK Group signed the Sustainable
Development Charter, which spells
out the commitment of WSA members
to treating steel as a key element in
a sustainable world and their willingness
to be guided by environmental, social,
and economic sustainability principles.
In 2020, the Company participated
in the Worldsteel Steelie Awards and
was shortlisted in the Excellence in
Sustainability category.
NLMK Group is also a member of
the Russian Steel industry association
and takes active part in the work
of its environmental committee,
which reviews various environmental
aspects of steelmaking operations and
environmental regulation issues.
NLMK is a member of the Committee
on Ecology and Environment
Management of the Russian Union
of Industrialists and Entrepreneurs,
the main platform for consolidating
the Russian business community’s
position on various environmental
aspects. In addition, NLMK Group
became a member of the newly
created RUIE Committee on Climate
Policy and Carbon Regulation, where
NLMK’s Director of Environmental and
Climate Affairs heads the international
carbon regulation area.
NLMK Europe is a member of
the European Steel Association
(EUROFER), which discusses
In 2020, NLMK Group improved its standing in the World Wildlife Fund (WWF) Russia
and National Rating Agency’s Environmental Transparency Rating of Mining & Metals
Companies. NLMK ranked sixth, improving its standing by three positions compared
to 2019. The main purpose of the report published by WWF Russia was to rank
Russian companies according to their transparency in matters of environmental
responsibility. The research examines the activities of 40 major companies and has
been published since 2015, with the support of the UN Development Programme,
the Global Environment Facility, and the Russian Ministry of Natural Resources and
the Environment.
In 2020 NLMK Group took on the role of a strategic partner for the accelerator,
GreenTech Startup Booster, organized by the Skolkovo Foundation, with the support
of the Russian Ministry of Natural Resources and the Environment. More than
150 companies participated in the project, organized by the Skolkovo Foundation,
with the support of the Russian Ministry of Natural Resources and the Environment,
Ministry of Construction, Ministry of Energy, and industrial partners. Experts from
NLMK, the official industrial partner of the programme, evaluated their projects.
NLMK experts were primarily interested in solutions to respond to the current
environmental and climate protection challenges of the Company. These include
efficient dust suppression systems, emission control systems, air and water
monitoring systems, resource conservation, and waste recycling projects. Among
the finalists of the accelerator, NLMK singled out a technology for producing
marketable products from liquid metal slags for the construction of roads and
housing, production of compact gas treatment plants, and digital solutions for
optimizing waste management processes. These solutions will be further analysed
and the companies may be offered the opportunity to develop their pilot projects
at NLMK Group sites.
NLMK Group also cooperates with other steelmaking companies in exchanging
best practices and promoting sustainability principles. In 2020, NLMK Group
established regular contacts with voestalpine, Tata Steel Group, and SSAB.
At regular meetings, the companies discuss their main environmental indicators,
approaches to environmental protection, implemented and planned projects
to reduce the impact on the environment. NLMK Group is open about environmental
issues, recognizing that environmental protection is a common cause, free from
competition.
NLMK joined the international Competence Centre
for the development of advanced metallurgical
and environmental processes
NLMK Group became an industrial partner of K1-MET, a leading European
Competence Centre for the development of advanced metallurgical and
environmental processes.
The first joint project of NLMK, voestalpine, and K1-MET was launched
in January 2021. The project aims to develop a technology for processing
zinc-containing waste from electric arc furnaces and BOF steelmaking.
The new technology will enable the production of materials with higher
contribution margins from recyclables with the involvement of thousands of
tonnes of iron in the production cycle of the Group companies. An important
environmental impact of using this technology is the replacement of primary
raw materials with secondary resources, which reduces the volume of storage
of associated products and helps to reduce greenhouse gas emissions.
168
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
WATER RESOURCES
GRI 303-1, GRI 303-2
NLMK Group is committed to reducing
the volume of water that it consumes,
and devotes considerable efforts to
lowering its water intake volumes in
favour of reusing water. The Group’s
companies are likewise focused on
reducing the volume and improving
the quality of wastewater produced,
which is in line with the IMS Policy of
NLMK Group.
As part of the climate risk assessment
initiated in 2020 by Carbon Trust
Advisory Limited, an independent,
competent third-party organization,
which has relevant experience with
commercial companies and government
organizations since 2001, a risk
assessment of water availability in
the areas where NLMK Group operates
was carried out. Based on the results
of the assessment, it was found that
in the short and medium term, this
risk has a low probability of affecting
the Group’s activities.
In March 2020, NLMK Lipetsk joined
the initiative to discuss the state of
urban sewage treatment plants and
their potential upgrade with the Lipetsk
city administration and the Lipetsk
municipal WWTP. As part of this initiative,
an upgrade programme was developed
together with NLMK experts, which aims
to improve the quality of wastewater at
the outlet and reduce the emission of substances with an unpleasant smell, a source
of discomfort for residents of nearby areas. In December 2020, the main design
solutions for the upgrade of the structures at two sections of the Lipetsk WWTP were
developed. NLMK experts’ participation in this work allowed finding the most efficient
solutions for the city and significantly optimizing the amount of investment while
maintaining the cleaning targets.
WATER WITHDRAWAL
GRI 303-1, GRI 303-2
NLMK companies withdraw a small proportion of their water from external sources
for production and drinking purposes (less than 4% of the Group’s total water
consumption). Maintaining the same low level of freshwater intake as production
volumes grow is an important objective of NLMK Group. For industrial water supplies,
the companies use water from surface water bodies, underground sources, and
rainfall. NLMK Group companies do not use wastewater from other organizations.
The Group’s companies do not withdraw water from wetlands included on the Ramsar
List of Wetlands of International Importance or from water bodies located within
environmental conservation sites.
The water bodies that supply NLMK companies are assessed as being not particularly
vulnerable given their size, role, or status as being rare, threatened, or endangered.
The Group’s companies withdraw water in accordance with current permits and
have no significant impact on the water sources in question. Water withdrawal by
NLMK Group companies does not exceed 2.5% of the average annual water flow
volume GRI 303-5 .
The Group’s companies are focused on reducing the volume and improving the quality
of wastewater produced, which is in line with the IMS Policy of NLMK Group. In 2020,
the Lipetsk site started working on a project for feeding treated household
wastewater back into the company production water supply, which will reduce
the intake of fresh natural water by 2 to 8 million m3.
TOTAL VOLUME OF WATER CONSUMED BY NLMK GROUP
GRI 303-3, GRI 303-5
7.5
5.5
124
138
7.0
4.9
119
131
6.8
4.7
118
130
7.5
5.3
118
130
7.2
5.1
113
125
91
84
81
82
81
2016
2017
2018
2019
2020
Total water withdrawn for production needs and domestic purposes, m m3
Water consumption for production needs, m m3
Consumptive water use (the difference between total water intake and wastewater disposal), m m3
Specific consumptive water use, m3/t of steel
Specific consumption of fresh water for production needs, m3/t of steel
TOTAL VOLUME OF WATER
WITHDRAWN FOR NLMK GROUP
PRODUCTION NEEDS BY REGION,
2020, M M3 GRI 303-3
In 2020, there was a downward trend in water consumption volumes compared
to 2019, and a five-year low of natural water consumption for industrial and
household needs was reached, thanks to operational measures to control water
consumption and eliminate leaks.
30.0
83.4
Russian companies
International companies
At the same time, 74% of the water consumed for production needs by the Group’s
international companies is direct-flow water for cooling equipment, which is not
polluted during use and is fully returned to the natural environment unchanged.
Over the last 40 years the annual withdrawal of fresh water from the Voronezh River
by the Group’s core site in Lipetsk has been reduced by over nine times down
to 21 million m3/year (from the level of 189 million m3/year in 1980 when production
output was merely 9 million tonnes).
TOTAL VOLUME OF WATER WITHDRAWN FOR NLMK GROUP PRODUCTION
NEEDS BY SOURCE, 2016–2020, M M3 GRI 303-3
Indicator
Surface water
Ground water
Rainwater collected and stored by
organization
Group total
Group total excl. direct-flow water
for cooling equipment and mine drainage
water (not used in the water loop)
2016
61.5
62.6
0.1
124.3
57.0
2017
60.9
58.1
0.1
119.1
54.6
2018
60.1
58.0
0.1
118.2
537
2019
60.9
57.1
0.1
118.2
54.1
2020
58.4
54.9
0.1
113.4
53.1
WATER WITHDRAWAL FROM THE VORONEZH RIVER,
LIPETSK SITE
9.1
189.3
9.8
138.9
8.2
9.3
96.5
21.8
1980
1990
2000
2010
Water withdrawal from the Voronezh river, m m3
Crude steel output, m t
12.3
21.3
2020
WATER WITHDRAWAL
(CONSUMPTION, INCL. FROM
WATER UTILITIES) FOR
POTABLE WATER SUPPLY AT
NLMK GROUP’S COMPANIES,
M M3 GRI 303-3
13.4
12.2 12.3 12.0
11.1
2016
2017
2018
2019
2020
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
The regions where the Group operates
offer a high availability of water
resources. The Group has no operations
in water-stressed areas. According
to the UN methodology, a region or
country is considered water-deficient
if its annual water supply is below
1,700 m3 per person. The regions where
NLMK Group companies are located
are not water-deficient. Only one
location, namely the Belgorod Region
where Stoilensky is situated, is exposed
to a local water shortage as related to
potable and household water supply in
some areas of the region during dry
years (not in the area where Stoilensky
operates). Recognizing the importance
of preserving the water resources
in light of shortage risks, Stoilensky
is implementing projects to cut down
potable water consumption and taking
action to protect water resources
from the harmful effects of operations,
including though better safety and
the reliability of hydraulic structures.
A dedicated certified laboratory
regularly samples and checks the quality
of water withdrawn, sewerage and water
bodies in the area of potential impact.
In 2020, Stoilensky started working on
a roject to redirect pumped clean mine drainage waters directly into the water body
without using them in the water-loop cycle, this way the company plans to return
a valuable resource in the form of non-polluted water to the natural environment.
DISCHARGE
Monitoring of discharge into water bodies at all sites is an important environmental
aspect of NLMK Group’s operations.
The Group’s international companies mainly discharge water that is used for cooling
equipment in once-through systems. This water does not get polluted in use and
is returned into water bodies in the same condition as it was withdrawn, without
disrupting the natural state of the environment.
TOTAL VOLUME OF WATER DISCHARGE BY NLMK GROUP,
INCLUDING RUSSIAN AND INTERNATIONAL COMPANIES,
2020, M M3 GRI 303-4, GRI 306-1
15.8
27.5
Russian companies
International companies
TOTAL VOLUME OF DISCHARGE BY RECEIVING WATER BODY, M M3
GRI 303-4, GRI 306-1
Indicator
Total volume of water discharge
for NLMK Group1
Water discharge as % from total
water supply
Into surface water bodies, including
rivers, lakes, reservoirs, and canals
including into seas and oceans
Transferred to third-party
organizations for treatment
Specific water discharge1,
m3/t of steel
2016
46.5
1
44.4
0.2
2.1
7.5
2017
47.3
1
45.2
0.2
2.1
7.0
2018
49.0
1
46.8
0.3
2.1
6.8
2019
47.7
1
45.7
0.3
2.0
7.5
2020
43.3
1
41.6
0.3
1.7
7.2
RECYCLED AND REUSED
WATER
In order to reduce their negative impact
on water resources, the majority of
NLMK Group’s companies are equipped
with water recycling systems. This also
mitigates the Group’s water-related
risks.
Water recycling solutions have been put
in place at 14 NLMK Group assets. These
solutions include both local systems
for individual facilities and entirely
self-contained subsidiary-wide systems.
This helps to reduce water withdrawal
and effluent discharge into surface
water bodies. The share of recycled
water supply at NLMK Group remains
at a consistently high level. The goal of
Strategy 2022 is to maintain a recycled
water supply of at least 96% amid
increasing production output.
The figures provided for recycled
water supply show the additional water
consumption by NLMK Group that would
have occurred if no water recycling
had been in place at its enterprises.
SHARE OF RECYCLED WATER
IN NLMK GROUP’S TOTAL WATER
CONSUMPTION, %
VOLUME OF WATER RECYCLED
AT NLMK GROUP COMPANIES,
M M3
96.3 96.4 96.5 96.6 96.6
3,193 3,173 3,265 3,312 3,186
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
POTABLE AND PUBLIC WATER CONSUMPTION
AT STOILENSKY, ‘000 M3
1,183
885
650
610
428
391
2015
2016
2017
2018
2019
2020
1 Source: Ministry of Natural Resources and Environment of the Russian Federation, http://www.mnr.gov.ru/en/
1
Industrial and household wastewater, total.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ACTIONS TO REDUCE DISCHARGES OF HOUSEHOLD WASTEWATER
INTO THE VORONEZH RIVER
Actions
Environmental improvement
AIR EMISSIONS
Overhaul of mechanical treatment facilities of NLMK’s LWWTP, local wastewater
treatment plants (repair of the sand traps and grease traps)
Improving the efficiency of NLMK's LWWTP (optimizing the process performance)
Reduction of water disposal through LWWTP due to the redistribution of flows
in the plant's water supply system and restoration of the tightness household
sewerage wells
Monitoring of the state of networks and structures of NLMK’s household sewerage
system (detection and prevention of unauthorized discharges of wastewater into
the plant's sewage networks)
Interaction with the Lipetsk municipal sanitation agency (improvement
of wastewater quality and minimization of residential wastewater discharges
to the plant’s sewage networks)
At 2020 year-end compared to 2019:
● Volume of wastewater disposal
reduced by 0.7 million m3 (−8%)
Inflow of pollutants into the water
body reduced by 1,900 tonnes (−19%)
●
In 2020, actions were taken at
the main site in Lipetsk to reduce
discharges of household wastewater
into the Voronezh River.
Each company makes use of water
purification and treatment technologies
that ensure the quality of wastewater
as well as water used for industrial
and domestic purposes meets the standards set by applicable regulations.
The appropriate methods are applied according to the type of wastewater in
question (mechanical purification, oil/water interceptors, biological purification,
decontamination). All discharged materials have a mineral content of less than
1,000 mg/L. No untreated discharges are made into water bodies GRI 304-4 .
The Company’s Environmental Strategy sets the goal of reducing the discharge of
pollutants with wastewater into water bodies by 25% compared to 2018. The Group
companies develop and implement projects aimed at achieving this target.
POLLUTANTS DISCHARGED
INTO WATER BODIES
WITH WASTEWATER, ‘000 T
16.2
15.7
13.5 12.7
17.6
11.2
15.3
10.0
12.5
8.2
2016
2017
2018
2019
2020
NLMK Group
NLMK Lipetsk
NLMK Lipetsk implemented a project to reduce the discharge
of pollutants into water bodies
NLMK Lipetsk implemented an investment project to upgrade local wastewater
treatment facilities. In line with the project, the cleaning units (aerotanks)
were upgraded and a pontoon pumping station was built to reduce the unbalanced
water and use it for BF slag processing. The goal of the project was to achieve
the standards for 13 substances out of 19 released into the Voronezh River.
The total investment in the project amounted to RUB 118 million. The project
helped to reduce maximum concentrations for all substances, while average
annual concentrations reached the established standards for 15 out of
19 indicators.
Over the last five years, the volume of water disposal at the Lipetsk site was
reduced by 4.2 million m3 (−34%), the mass of substances going into the river
was reduced by 5,300 tonnes (−39%).
Going forward, NLMK Group is considering the possibility of using wastewater
treated in LWWTPs in the technical water supply system to seize the discharge
of household wastewater into the Voronezh River.
NLMK Group devotes considerable
efforts to reducing its air emissions.
The Group’s Strategy 2022 includes
a target of reducing specific air
emissions from 18.9 kg/t in 2018 to
18.0 kg/t of steel by 2023.
In order to attain this target,
the Environmental Programme 2022
envisages over 30 investment projects
that aim to reduce the impact on
the atmosphere. When upgrading its
purification equipment, NLMK seeks
to integrate and utilize best available
technologies (BAT).
In 2020, NLMK Group made an inventory
of all existing de-dusting systems
to check their compliance with
the requirements of environmental
protection and dustiness at
the workplace. Following the inventory,
deficiencies were identified and
a long-term de-dusting system upgrade
programme was developed. The Company plans to start working on priority projects
under this programme already in 2021.
As part of the four-way Cooperation Agreement between NLMK Group, the Russian
Ministry of Natural Resources and the Environment, the Federal Supervisory
Natural Resources Management Service (Rosprirodnadzor), and the Administration
of the Lipetsk Region, signed in summer 2019, by the end of 2020 NLMK Lipetsk
implemented 5 out of 9 activities planned by 2024. They are aimed at implementing
the Ecology National Project and reducing gross air emissions in the atmosphere.
The total emissions reduction was 9,000 tonnes. Substantial environmental investment
of $1.3 billion since 2000 reduced NLMK Group’s specific emissions by more than
a half: from 43.3 to 19.8 kg/tonne of steel. Overall, with almost a two-fold increase in
production the amount of cumulative impact on the environment was reduced by 10%.
Lipetsk: one of Russia’s cleanest steelmaking centres
Since 2014 the city of Lipetsk, which is home to NLMK Group’s largest asset, has
been officially recognized as the ‘cleanest’ steelmaking city in Russia, according
to data from Russia’s Federal Service for Hydrometeorology and Environmental
Monitoring (Roshydromet). Thanks to environmental protection measures
implemented at the Lipetsk site, the Integrated Air Pollution Index (IAPI)1 in Lipetsk
decreased almost ten-fold from 2000 to 2020.
1 The IAPI indicator, which was developed and calculated by Roshydromet, is used by the Russian Ministry of Natural Resources and the Environment
to conduct scientific assessments of air pollution in Russian cities.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ENVIRONMENTAL PROGRAMME EMISSION REDUCTION PROJECTS
IMPLEMENTED IN 2019–2020
Site
Measure
Effect
NLMK Lipetsk
Revamp of de-dusting systems, replacement
of hot-blast stoves and re-tooling of slag
granulation plants during overhauls of Blast
Furnace No. 6
● Reduction of H2S, SO2, dust, and CO, elimination
of visible emissions
● Achieving a 99.9% purification rate, returning 100%
of the captured dust to production
● Total effect – 5,663 tpa
Upgrade of de-dusting systems during
the overhaul of Blast Furnace No. 4
● Dust emissions reduction, elimination of visible
emissions
Reconstruction of off-gas ducts
at BOF No. 2 and 3 and construction
of secondary emission treatment
systems at BOF Shop No. 2
● Achieving a 99.9% purification rate, returning 100%
of the captured dust to production
● Total effect – 234 tpa
● Reduction of dust and CO, elimination of visible
emissions
● Achieving a 99.9% purification rate, returning 100%
of the captured dust to production
● Total effect – 3,096 tpa
Revamp of the de-dusting unit (ATU-24)
in the refractory shop
● Over 90% reduction in dust emissions at the facility
● Performance of de-dusting system up by 20%
Revamp of by-product collection facilities,
including merging of coke gas flows from
coke batteries
Construction of a new section
for waterless slag cooling of all slag
generated in BF Shop No. 1
Stoilensky
Technical re-equipment of the crushing
and screening area de-dusting unit (DU-1),
Beneficiation Plant
to 240,000 m3/h
● Total effect – 81 tpa
● Reduction of phenol by 66%, H2S by 31%
● Full transition to waterless slag cooling, reduction
of H2S emission
● The overall effect is a 3.5x reduction in hydrogen
sulfide emissions at the site
● Additional capture of 700 tonnes of dust was
implemented. The risk of exceeding the maximum
permissible emissions at the source is eliminated,
four-fold reduction in dust concentration at
the workplace ensured
● Emission purification level increased from 35% to 96%
Blast Furnace No. 4 becomes
cleaner
NLMK Lipetsk completed an upgrade
of Blast Furnace No. 4 with a capacity
of 2.1 million tonnes of pig iron per
year.
The project includes an environmental
upgrade of the furnace infrastructure.
All the dust generated during hot
metal production will be captured
by a highly efficient de-dusting
system. The system ensures a purification efficiency of 99.9%, which is in line with
the best available technologies. The new equipment will also enable more efficient
blast furnace gas treatment for it to be utilized as a secondary energy source.
Filtered dust will be utilized in the production of iron-containing briquettes,
or fed back into the blast furnace process. As part of the project, the furnace
was equipped with a new lining, special refractory blocks that will enhance
the resistance of the furnace’s internal surface to thermal loads. Technical
solutions and advanced materials will ensure stable operation of the furnace
for the next 20 years.
After the furnace overhaul, emissions are expected to reduce by 200 tonnes
per year. After the associated upgrade of air heaters is completed in 2022,
the reduction in gross emissions will total 7,700 tonnes per year.
In 2020, gross emissions decreased
by 4,000 tonnes (by 1.3%) compared
to 2019. Specific emissions per tonne
of steel were also reduced, driven
by implemented investment projects.
Specific emissions display a planned
decline towards the target of 18.0 kg/t
of steel in 2023 with production output
kept flat.
74% of NLMK Group’s emissions consist
of carbon monoxide, a low-hazard
substance of hazard class IV, which is
not regulated as a harmful substance
in many countries, and cannot harm
human health, since it comes from high
pipes, is lighter than air, and is dispersed
without forming high concentrations
in the surface layers of the atmosphere.
At the same time, substances of hazard
classes I–II account for only 0.2% of
the Group’s gross emissions.
SPECIFIC VOLUME OF AIR
EMISSIONS BY NLMK GROUP
NLMK GROUP’S EMISSIONS
BY HAZARD CLASS, %
20.0 19.5
18.9
16.6
17.1
17.5
20.2 19.8
18.91
18.61
15.7
15.8
332 334 332
317
313
<1 0.2
7
8
10
2016
2017
2018
2019
2020
Emissions total, '000 t
Steel output, m t
Specific emissions, kg/t
74
IV carbon oxide
III sulfur oxide
III nitrogen oxides
III dust
III-IV other
I-II class
I – Extremely hazardous
II – Highly hazardous
III – Moderately hazardous
IV – Low-hazard substance
Road sweeping machines for NLMK
and the city of Lipetsk
In the summer of 2020, NLMK Lipetsk
purchased two road-sweeping
machines. They will be used to clean
industrial roads with high dust
content on the territory of the plant
and in the city of Lipetsk. They are
able to remove up to 2,000 tonnes of
dust from the plant’s roads annually.
Sergey Evseev, Head of NLMK’s
Industrial Ecology Department, said:
“The new equipment was delivered
to the plant as part of measures
to reduce dust content on site. Dust from production facilities settles on roads
and secondary dusting is possible in windy weather. The new road-sweeping
machines will reduce the dustiness of the plant’s roads and improve the air quality
on its territory and in the city.”
Swiss Aebi Schmidt sweepers work as a washing vacuum cleaner and suck all
the dust into a special hopper when cleaning. The efficiency of road surface cleaning
is 98–99%, which is significantly higher than the usual dry and wet cleaning methods.
The sweeper has a high level of dust suppression. This is achieved through filters
for additional air purification and swirling dust flows. When the machine is running,
the amount of fine dust particles released into the air is significantly lower than
the established standard.
The new sweepers are also equipped with a recirculation system for water, which
can be reused after filtration.
176
177
1 Specific emissions w/o the impact of temporary decline in production output at NLMK EAF assets and NLMK Lipetsk amid overhauls of blast furnace
and steelmaking operations
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
VOLUME OF SIGNIFICANT AIR EMISSIONS BY NLMK GROUP
BY SUBSTANCE TYPE GRI 305-7
Indicator
Total, ‘000 t
NOx emissions, '000 t
per unit of production, kg/t
SO2 emissions, '000 t
per unit of production, kg/t
Particulate matter emissions, '000 t
per unit of production, kg/t
2016
332.4
24.8
1.5
28.9
1.7
25.2
1.5
2017
333.8
27.1
1.6
31.8
1.9
25.7
1.5
2018
331.5
27.2
1.6
31.7
1.8
24.4
1.4
2019
317.0
26.2
1.7
29.5
1.9
22.5
1.4
СО emissions, '000 t
249.6
245.9
244.8
235.3
per unit of production, kg/t
Volatile organic compounds, '000 t
Hazard class 1 substances1, t
per unit of production1, g/t
Hazard class 2 substances1, t
per unit of production1, kg/t
The increase in the specific SO2
emissions compared to previous
periods is due to a change in
the coking charge mix: the share
of additives with a high sulfur content
was increased. This did not lead to
exceeding the maximum permissible
concentrations. The SO2 emission
standards are met. In order to minimize
the consequences of the increase
in the sulfur content in the charge,
NLMK Group started developing
a project for the construction of
a desulphurization plant.
15.0
2.6
1.4
0.09
560
0.04
14.4
2.6
1.2
0.07
552
0.03
14.0
2.7
1.3
0.08
547
0.03
15.0
2.8
1.2
0.08
514
0.03
NLMK Lipetsk cuts Н2S emissions
NLMK Lipetsk has launched an anhydrous cooling system for blast furnace slag
as part of its environmental upgrade programme. This will enable it to reduce
hydrogen sulfide emissions in the corresponding area by 3.5x and keep the smell
from this chemical compound to a minimum.
The implementation of the complex marks the full transition of NLMK Lipetsk’s
Blast Furnace Shop No. 1 (three blast furnaces) to dry slag cooling technology.
The complex was built in place of a slag dump that had been accumulating
since the 1970s. Close to 6 million tonnes of various materials were processed
and more than 300,000 tonnes of iron were fed back into steel production in
the course of the project.
2020
313.3
26.1
1.7
31.0
2.0
23.0
1.4
230.1
14.5
2.6
1.2
0.08
480
0.03
WASTE HANDLING AND SOUND USE
OF NATURAL RESOURCES
WASTE MANAGEMENT
NLMK Group’s waste-handling operations
are orientated towards key modern
steelmaking trends: minimizing waste
generation and increasing the proportion
of waste that is processed, reused, and
safely disposed of. For example, a priority
of the Environmental Programme 2022 is
to increase waste utilization and recycling
at NLMK Group to 92% (not including
such mining waste as overburden and
beneficiation tailings). Utilization includes
reuse, recycling, and disposal.
NLMK Group utilizes some of the waste generated at its sites in the course of its
own activities, and transfers some for reuse by specialized organizations that hold
relevant licences.
The potential environmental impact is minimized through compliance with safe waste-
handling standards and by implementing corresponding measures.
In 2020, total waste generation increased by 14% (by 7.8 million tonnes) due to
increased mining output at Stoilensky. The share of recycled waste in 2020, excluding
overburden and tailings, increased by 3% compared to 2019 and by 6% compared
to the baseline in 2018, thanks to the processing of iron-containing sludge at
the Briquetting Plant built in 2019. The share of processed sludge increased from 47%
in 2018 to 87% in 2020. Going forward, the Company plans to process the entire volume
of generated sludge at the plant and start processing the accumulated sludge.
TOTAL WASTE GENERATED AND UTILIZED BY NLMK GROUP, M T GRI 306-2
2016
2017
2018
2019
2020
Indicator
Waste generation1
Secondary raw materials recycled
by the companies
Secondary raw materials recycled
by third-party organizations
Waste disposal at third-party
landfills, %
Recycling of secondary iron-containing
raw materials, %
1.0
2.2
0.7
4
90
1.5
1.9
1.0
5
91
OVERBURDEN AND BENEFICIATION TAILINGS GENERATED AND UTILIZED
BY THE GROUP, M T GRI 306-2
Indicator
Stoilensky overburden
and beneficiation tailings
Overburden generation2
Share of utilized overburden, %
Generated beneficiation tailings
Utilized beneficiation tailings, %
2016
55.3
50.3
26
17.6
25
2017
53.9
48.5
25
18.2
25
1.5
1.8
1.2
4
93
2018
46.6
39.8
26
19.5
25
1.5
1.9
1.2
4
99
2019
53.7
51.3
29
20.5
26
1.4
2.0
1.2
3
99
2020
61.4
60.5
29
21.4
24
1 Russian assets.
178
1 Without taking into account secondary raw materials recycled by the companies.
2 The total volume of generated overburden is indicated. For Stagdok and Dolomit, overburden is not waste and is used for backfilling post-mining areas
of the mine, as it is developed ‘to the side’, in contrast to Stoilensky, where the mine is being developed primarily ‘into the depths’, and the resulting
overburden is mostly considered waste by Russian law, even though it is a non-hazardous inert material.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
WASTE GENERATED BY
NLMK GROUP BY HAZARD CLASS,
2020, ‘000 T GRI 306-2
1,561.1
63.4
0.6
0.1
64,281.8
62,656.6
Class V
(including 61,393.6
of mining waste)
Class IV
Class III
Class II
Class I
NLMK Lipetsk increased recycling of secondary raw materials
As part of its Environmental Programme, NLMK Lipetsk continued to implement
projects to utilize recyclables and reduce the impact on the surrounding areas.
The plant processed a 25 ha slag dump with the total weight of accumulated
slag exceeding 5 million tonnes.
The slag dump started to accumulate when the first blast furnace was
launched on the left bank of the Voronezh River in 1934. Blast furnace slag
was drained at a special site far from the residential sector and gradually
accumulated, some of it was processed for the needs of road construction.
Targeted processing of the slag dump began in 2018 and was completed
in just two years.
About a tenth of the recyclables in the dump are metal scrap, varying in size,
which was extracted by magnetic separation during processing. The resulting
raw materials were used in ironmaking and steelmaking, while the remaining
waste rock was utilized in construction.
RECYCLING OF SECONDARY
IRON-CONTAINING
RAW MATERIALS1, %
99
99
The Company’s approach is to minimize waste generation, recycle as many secondary
resources as possible in its own process cycle, and ensure that the remaining
unused materials are processed, either internally or by third-party companies.
The implementation of the recycling programme will ensure an increase in the rate of
internal processing of secondary raw materials at the Lipetsk site from 81% to 94%.
93
90
91
Each company of the Group annually develops measures aimed at reducing waste
generation, increasing its upcycling in the companies’ operations, and reducing waste
disposal at landfills.
2016
2017
2018
2019
2020
99.8% of the waste generated
by NLMK Group in 2020 was non-
hazardous.
97.5% of the waste generated by
the Group’s Russian sites is classified
as Hazard Class 5 (non-hazardous).
This waste category has virtually
no impact on ecosystems and requires
no special handling measures, including
licensing.
Currently the Group companies
process the absolute majority
of secondary resources. In order
to attain its targets, the Company
instituted a recycling programme
with over 15 projects.
Crushed stone and crushed stone mixtures obtained during the processing
of steelmaking slags are an example of upcycling material. Construction companies
widely use this type of materials for the construction of roads, reclamation
of disturbed land, and strengthening the banks of reservoirs.
In the reporting year, NLMK Kaluga implemented an initiative to sift the residues
from the cleaning of wagons to obtain man-made soil, which will be used as
a material for reclamation. This will reduce the volume of waste placed at landfills
by 7,000–8,000 tonnes per year.
In 2020, together with its partners NLMK Group managed to produce carbonized
bricks from steel slag with a compression strength of 10 MPa (M100). The properties
of this material enable it to be used in the construction industry, at the same time
reducing greenhouse gas emissions. The Company continues to develop the project
for the transition to industrial production of this material.
Production lifecycle
NLMK Group companies manufacture steel products that can be fully assimilated into
the environment once they are no longer of use to consumers. In this regard, ferrous
metal products are a valuable raw material that can be reused in steelmaking.
All steel produced by NLMK Group companies can be recycled and reprocessed.
About 35% of the liquid steel output is produced from ferrous scrap. NLMK Group’s
operations are part of the circular economy.
1 When calculating the recycling index, data on the total generation and utilization of iron-containing waste and associated products is used. Mining waste is
not factored in. In addition to iron-containing waste, the recycling index takes into account slags, slurries, gas cleaning dust, and ferrous metal scrap, which,
in accordance with the process and national legislation, are not waste and are marketed or used for the company needs.
Class V
(including 61,393.6
of mining waste)
Class IV
Class III
Class II
Class I
Vtorchermet NLMK – a leader
in scrap ferrous metal
reprocessing
One NLMK Group asset, torchermet
NLMK, is an industry leader in scrap
metal processing technology.
It collects and processes scrap
ferrous metals, and supplies
NLMK Ural, NLMK Kaluga, and
NLMK Lipetsk with 85% of the high-
quality scrap metal they need for
steelmaking. The scrap metal that
arrives at Vtorchermet NLMK is
given a second life in the form of
products that are in high demand
across various industries: rebar,
steel duct, brackets, wire, fixing
products, and flat-rolled products.
Processing scrap metal helps both
rid the environment of scrap and
significantly reduce consumption
of natural resources and energy.
Vtorchermet NLMK is a member
of RUSLOM.COM, an organization
whose mission and objectives include
safeguarding Russia’s access to raw
materials and environmental safety
by returning recycled resources
to the economy and creating
a high-tech and efficient sector for
handling scrap metal and industrial
and consumer waste.
TAILINGS DAMS AND HYDRAULIC
ENGINEERING STRUCTURES
The organizational structure of NLMK Group includes dedicated services and units
responsible for the safety of hydraulic structures.
The Stoilenskoye iron ore deposit is mined using the open-pit method. NLMK Group’s
sole tailings dams are located at Stoilensky. They were established in 1984, and are
being built on the upstream slope. Throughout their operation, no environmental
incidents related to the tailings dam systems and structures have been recorded.
The safe operation of the tailings dam is ensured by means of a number of internal
and independent inspections, including:
● Water level control at least twice a day.
● Visual inspection of engineering structures at least once a day.
● Quality control of tailings at least once a quarter.
● Quality control of tailings at least once a quarter.
● Control of water filtration at the dams at least once a month.
● The facility’s safety is checked weekly by inspectors from the Federal .
● Service for Environmental, Industrial and Nuclear Supervision Service
(Rostechnadzor).
● Environmental compliance assessment twice a month.
● Geological survey is carried out annually.
● Planned inspections of the dam’s technical condition and safety are performed
annually involving specialized government agencies.
● Hydraulic engineering structures at the tailings dam are checked involving
government organizations, the general designer, and expert organizations
at least once every three years.
In September 2018, a comprehensive survey of Stoilensky TMF hydraulic engineering
structures was conducted together with representatives of Rostechnadzor,
EMERCOM, and other specialized government agencies and entities. The survey
assessed the ultimate safety level of the Stoilensky tailings hydraulic engineering
structures as ‘normal’ (the best possible option).
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
There is a local warning system in
place at Stoilensky and its operability
is checked monthly by Stoilensky’s own
staff and Rostechnadzor specialists.
A contingency plan for hydraulic
structures at the tailings dam has
been drafted and is updated each year.
Staff training is administered at least
once a month. In April 2019, training
sessions were held with participation
of experts from EMERCOM. There is
no need to monitor seismic activity in
the area according to the appropriate
determination of a specialized state
committee.
The water level in the tailings dam is
maintained at the level more than
2 m below the crest of the dams, which
meets the current safety criteria.
In 2020, 762,000 m3 of tailings, rock
soil, and crushed stone were used in
the construction of the tailings storage
facilities, 5,840 m of slurry pipelines
were installed, and 4 ha of the dam
slopes were reclaimed. In order to
further increase the height of the dump
protection dam, the necessary amount
of engineering and geological surveys
and a verification calculation of the dam
stability were carried out, according
to which the structure design provides
a stability coefficient higher than the standard one. The cost of the tailings storage
maintenance programme amounted to RUB 241 million.
In accordance with the regulatory requirements, a survey of the hydraulic complex of
the tailings storage facility is planned for 2021 with the involvement of state agencies,
the general designer, and expert organizations.
The Group duly informs local communities about the existence of the tailings dam
and holds regular public hearings regarding the development of the facility.
Stoilensky has introduced an Environmental Management System in accordance
with ISO 14001:2015.
EFFICIENT TAILINGS STORAGE TECHNOLOGY
Stoilensky, one of Russia’s leading iron ore producers, uses an efficient and
environmentally friendly treatment process for the beneficiation of waste
rock. It involves liquid extraction followed by the forced transfer of thickened
tailings to storage. This process returns 80% of industrial water used during
transportation back into the beneficiation process. Additionally, the better
resilience of thickened tailings to weathering significantly reduces the dust levels
at the tailings dam. As there is no way for excessive water to come into the facility,
the overflow risk is mitigated and pressure on the dams is reduced. Thus, given
that the tailings are thickened and measures are taken to ensure the safety of
hydraulic structures, the risk of dam failure at Stoilensky is under control and has
a conditionally acceptable level. Estimates indicate that a transition to fully dry
storage of tailings at Stoilensky would inevitability lead to strong dusting, and
it would be impossible to completely curb dust, especially in summer. In light of this,
the Group considers dry tailings storage to be an unacceptable environmental
risk and considers tailings thickening to be the most effective technology for
managing environmental risks.
The perfect recipe to get rid of dust
suppression will be used on dry beaches of the tailing dump. Its main ‘ingredient’
is a special reagent that was tested during a pilot experiment.
In 2021, Stoilensky plans to carry out
dust collection activities on the dry
beaches of the tailing dump. It plans
to build a flexible hose irrigation
system. RUB 135 million were allocated
for the project implementation.
The current system was based
on a rigid metal frame. As a result,
as the compartments were filled, some
of the pipelines were flooded and could
not be used, and the emerging new
beaches were not irrigated.
During the construction of the new
system, an innovative ‘recipe’ for dust
The tailings storage facility occupies an area of 1,000 hectares, where processing
waste, tailings, which are basically fine sand, is stored. Over time, influenced
by the sun and wind, it will dry up and dust in dry, windy periods.
NLMK experts were able to successfully apply the method of spraying a solution
of a special reagent that binds the surface, turning the fine sand into a crust.
The effect after applying the solution persists for three months. The reagent itself
is a kind of non-toxic glue that binds the surface of the material, forming a dense
top layer. At the same time, it makes it possible for water to penetrate through it,
so that there are no puddles and there is no flooding.
Next year, according to the programme for the development of the tailings
workshop, it is planned to treat 120 hectares of the tailings storage facility with
the reagent solution.
BIODIVERSITY
NLMK Group conducts operations
on both industrial lands and residential
areas in line with applicable law.
The Company’s activities have no direct
significant impacts on biodiversity
GRI 304-2 .
In 2020, the area of NLMK Group’s
companies decreased by 2 hectares.
Fluctuations in the area over the years
are insignificant and are associated
with the opening and closing of NLMK
Vtorchermet scrap collection sites.
NLMK Group production sites are not
located on sites that are situated
on environmentally protected land
or on land with a high biodiversity value.
NLMK Group’s activities do not pose
any threat to animal or plant species
registered on the IUCN Red List
or in the Russian Red Book, or
to species threatened with extinction
GRI 304-1, GRI 304-4 . With a view to preserve
biodiversity on the territory of the
Group companies, it is prohibited to
destroy or damage greenery, build
fires, hunt, and fish. These requirements
are the same for both personnel and
employees of contracting organizations.
All places of water intake from surface
water bodies are equipped with fish
protection devices. The sites’ location
does not prevent the movement
of migratory birds.
NLMK Group organized comprehensive
assessment of possible involvement
in biodiversity conservation projects.
NLMK Lipetsk, Stoilensky, and Altai-Koks
developed programmes for biodiversity
conservation.
In 2020, NLMK Group invested close
to RUB 4 million into biodiversity
research and conservation, including
compensatory measures.
AREA OCCUPIED BY GROUP COMPANIES AND
REHABILITATED LAND, HA GRI G4-MM1
Indicator
Area
Land rehabilitated
2019
11,898
15
2020
11,896
10
Swan Lake Environmental Park: a natural indicator of NLMK’s
commitment to a clean environment and biodiversity
Swan Lake Environmental Park was created by NLMK employees in 1978.
It is the only bioindicator in Russia and the former Soviet Union that is situated
on the territory of an industrial site. The lake is filled with process water from
the Lipetsk site that has undergone treatment following its use in production.
The environmental park occupies more than 5 hectares of land situated
between the BOF shops of the Lipetsk site. It is home to come 500 birds of over
40 species, including 20 rare species. The lake is also inhabited by fish (common
and bighead carps), which helps ensure that the waterfowl have a natural diet.
Many bird species can only live in natural or near-wildlife conditions. The quality
of the environment in the park allows these picky and demanding birds to enjoy
long lives and reproduce regularly.
In 2020, joint activities were carried out with the Oka State Natural Biosphere
Reserve, a nursery of rare crane species, as part of the Eurasian Regional
Association of Zoos and Aquariums’ programme for conservation of cranes
of Eurasia.
The Conservation of Cranes of Eurasia programme involves determining the sex
of all cranes kept in captivity and drawing up a genetic ID for each captive bird.
In addition, genetic studies of cranes in Russia are being conducted in order to
identify subspecies, genetic features of individual populations that will help both
breeding in captivity and reintroduction into nature. Under the programme,
the Company sent for research six blood samples from the Japanese crane and
the belladonna crane, both Red Book species, living on the Swan Lake. Thanks
to the genetic database of cranes kept in zoos in Russia, created by the Oka
Reserve, NLMK hopes to find a male Daurian crane not related to NLMK’s female,
for mating.
Swan Lake works closely with other leading Russian zoos and nature reserves
to grow and replenish the animal populations. As part of this cooperation,
in 2021, 127 new birds belonging to 21 different species will move from
the Vorob’i (Sparrows) and Malinki (Raspberries) bird parks, and the Penza
and Lipetsk Zoos to a new place of comfortable residence in Swan Lake.
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
Representatives of Belogorye
Nature Reserve conducted
research at Stoilensky
Stoilensky cooperates with
the Belogorye Nature Reserve
in the study and conservation
of the biodiversity of terrestrial
and aquatic ecosystems. Reserve
experts have compiled a list
of animals and plants that are
found in the area of the floodplain
of the Chufichka River, where
the head dam of the company
is located, and forest areas close
to the Stoilensky territory.
Scientists note that foxes, hare,
weasel, as well as roe deer and
wild boar inhabit these lands, while
in the floodplain of the Chufichka
River there are minks, beavers,
and river otters.
Among the birds, the common
turtledove, quail, and crake, rare
species that are included in the new
lists of the Red Book, have been
noticed. As for the Red Book plants,
forest anemone, whole-leaved
clematis, spring primrose, and
grasshopper can be found on this
territory.
Following the results of the study,
the reserve’s researchers will
develop measures to rehabilitate
the environment and preserve
its biodiversity.
Altai-Koks replenishes fish stocks at the Verkhneobsky basin
NLMK Group’s company located in Zarinsk, Altai Territory has developed a six-
year programme for the conservation of aquatic biological resources and their
habitat. As part of this programme, the company plans to release more than
100,000 juvenile carp into the rivers. In 2020, about 27,000 juvenile fish were
already released to the Verkhneobsky basin within a radius of 30 km from Barnaul
as compensatory measures to offset water intake from the Chumysh River.
The Group regularly implements measures that aim to rehabilitate land disturbed
by the operations of its extractive companies. The treatment of deposit sites includes
phased rehabilitation work to restore the landscape and its plant cover and to
enable plants to grow again in the soil GRI 304-3 . Reclamation programmes have been
developed and are publicly available on the websites of the Mining Division companies.
The programmes are being implemented as planned. In 2020, rehabilitation was
carried out on 10 hectares of disturbed land. More than RUB 10 million was spent
on reclamation and improvement works.
NLMK Lipetsk finished autumn planting of greenery
NLMK Lipetsk completed the autumn stage of its territory landscaping
programme.
With a view to maintain an environmentally efficient green barrier, almost
1,100 trees and about 4,600 shrubs were planted on the industrial site and along
the internal roads, and about 3,000 square meters of lawns and flowerbeds
were arranged and renovated. The territory of the site was decorated with
new seedlings of poplar, maple, and birch, as well as spirea bushes.
The works are carried out as part of a 5-year programme for the inventory
and renewal of the plant’s greenery, developed with the participation of
the Voronezh State Forest Engineering University. Experimental plantings
recommended by the university for the renewal of the green fund of trees are
planned for 2021.
In 2019–2020, 140,000 tree seedlings were planted at NLMK Group’s
production sites.
PLANS FOR 2021–2023
NLMK Group is planning to implement
significant environmental protection
initiatives in future reporting periods
under its Environmental Programme 2022. The initiatives seek to minimize our
environmental impact, including by revamping major production facilities in line
with the best available technologies.
MAIN PROJECTS SCHEDULED FOR 2021–2023
Company
Project
Effect
NLMK Lipetsk
Upgrade of Blast Furnace No. 4 air heaters
Reduction of carbon monoxide emissions
by 7,500 tonnes per year
NLMK Lipetsk
Construction of a waterless slag cooling unit at the Blast
Furnace No. 7 BF slag processing section
Reduction of hydrogen sulfide emissions
at the section
NLMK Lipetsk
Upgrade of Blast Furnace No. 3 foundry yard de-dusting unit
NLMK Lipetsk
Reconstruction of the de-dusting system for capturing
unorganized emissions of the BOF Shop No. 1 mixing
department
NLMK Lipetsk
Technical re-equipment of the Mill 2000 regulating tank
Reduction of dust emissions
by 200 tonnes per year
Reduction of dust emissions
by 100 tonnes per year
Elimination of the risk of soil
contamination with petroleum products
on an area of 400 m2
Stoilensky
Technical re-equipment of the beneficiation plant's medium
and fine crushing department de-dusting system
Reduction of dust emissions
by 791 tonnes per year
NLMK Lipetsk
NLMK Lipetsk
NLMK Lipetsk
Construction of the de-dusting system for capturing
unorganized emissions of the BOF Shop No. 1 mixing
department
Reduction of dust emissions
by 100 tonnes per year Elimination
of the risk of visible emissions
Equipment of the storage area for waste from wagon
cleaning
Eliminating the risk of soil contamination
on an area of 1000 m2
Upgrade of the sludge drying scheme of sludge dewatering
unit No. 6
Eliminating the risk of soil contamination
on an area of 59,800 m2
NLMK Lipetsk
Elimination of the risk of dusting when liming oiled scale
Eliminating the risk of soil contamination
on an area of 120 m2
Altai-koks
Reconstruction of the dust-free coke distribution unit's dust
collection system on Coke Batteries No. 3 and 4
Reduction of dust emissions
by 254 tonnes per year
Stoilensky
Reconstruction of the plant’s storm sewer
NLMK Indiana
Installation of a waste storage warehouse
Eliminating the risk of soil contamination
on an area of 1100 m2
Eliminating the risk of soil contamination
on an area of 500 m2
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANNUAL
REPORT
2020
1.901
t
(−1% yoy)
of CO2-eq. per t of steel
and commercial pig iron
(Scope 1+2)
−158
thousand t
of CO2 through projects
implemented in 2020
(Scope 1+2)
CLIMATE CHANGE
MAJOR THEMES
CLIMATE CHANGE
AIR EMISSIONS
KEY EVENTS IN 2020
● NLMK Group’s climate-related risks and opportunities are estimated
for the first time
● Scope 3 estimates indicating the Company’s other indirect emissions related
to its upstream activities are disclosed for the first time
● Improved detail and completeness of data disclosure under Scope 1 and Scope 2:
emissions are presented by activity and country, data on CO2 emissions are
supplemented with data on methane (CH4) and nitrous oxide (N2O) emissions
● Memorandum of Cooperation to reduce climate impact signed with NOVATEK
● Greenhouse gas emissions reduction target through 2023 updated (Scope 1+2):
targeted specific emissions stand at 1.91 tonnes of CO2 per tonne of steel
(with previous target of 1.94 tonnes of CO2 per tonne of steel)
UNITED NATIONS GLOBAL
COMPACT PRINCIPLESН
● Principle 7: Businesses should support a precautionary approach
to environmental challenges.
● Principle 8: Businesses should undertake initiatives to promote greater
environmental responsibility.
● Principle 9: Businesses should encourage the development and diffusion
of environmentally friendly technologies.
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
1 Specific emissions without the influence of temporary factors associated with a decrease in production.
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of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Climate change is one of the greatest
threats facing the world today,
impacting society, the economy, and
security globally. The main drivers of
climate change are greenhouse gas
emissions. Under the Paris Agreement,
almost 200 countries made commitments
to reduce their emissions, and over
100 countries announced their carbon
neutrality goals.
According to various estimates, the iron
and steel industry accounts for 7–9%
of global greenhouse gas emissions.
Therefore, the decarbonization of iron-
and steelmaking is a major challenge for
all industrial countries. The industry is
currently engaged in active discussions
of the ways to reduce its climate impact
and the financing sources for potential
initiatives.
NLMK Group is fully committed to climate
change action and takes meaningful
steps towards decreasing greenhouse
gas emissions, progressively reducing
the carbon footprint of its products.
Moreover, the Company’s products
(such as steel for wind energy and
energy-efficient electrical steels) enable
a broad range of consumer industries to
reduce their climate impact substantially
and attain their decarbonization goals.
Steel produced by NLMK Group consists
of 35% of recycled ferrous scrap on
average. For the Lipetsk site, where
BOF steel is produced, this indicator
is 17%. Specific CO2 emissions from
scrap steelmaking are approximately
four times lower than from primary
raw materials.
This year NLMK Group published its first
report in line with the recommendations
of the Task Force on Climate-related
Financial Disclosures (TCFD)1. Going
forward, this report will be further
expanded to provide stakeholders with
the fullest and timeliest information
possible about the Company’s progress
in the matter.
OUR APPROACH
NLMK Group recognizes the importance of matters relating to climate change
and the transition to a low-carbon economy. We are progressively reducing our
greenhouse gas emissions by cutting our consumption of fossil fuels, increasing
energy efficiency, and introducing innovative decarbonization solutions.
The Company’s leadership devotes continued attention to climate-related issues,
which are embedded into the corporate governance system. The Board of
Directors, the Board’s committees, СЕО (Chairman of the Management Board),
and the Management Board determine strategic growth priorities and ensure
overall sustainability management. The Company’s climate change initiatives are
deeply intertwined with sustainable development and risk management matters
(see the Sustainability Management section for more detail).
Our climate impact reduction targets are determined by the Strategic Planning
Committee of the Board of Directors (see the Committees of the Board of Directors
section for more detail). By addressing this issue on an annual basis, the Committee
ensures that the Board of Directors pays close attention to the matter. NLMK Director
of Environmental and Climate Affairs is in charge of managing the Company’s impact
on key environmental components, including atmospheric air, water resources,
and climate change. The functional area as a whole is curated by NLMK Vice President
of Energy and Environment, who is a member of the Management Board.
CLIMATE COOPERATION
The Company actively enhances environmental and climate cooperation with its
Russian and international partners.
NLMK Group participates in global decarbonization initiatives
In 2020 NLMK Group joined the dialogue on the Mission Possible Platform,
a World Economic Forum coalition aimed at accelerating the decarbonization
of global industries that account for 30% of greenhouse gas emissions.
Through this platform NLMK engages in discussions of an initiative to reduce
the climate footprint of the iron and steel industry.
The matters discussed include target-setting for impact reduction, the
necessary regulatory base, the market conditions, and key technologies for
the decarbonization of steelmaking.
In 2020, Step Up, a joint project with the WSA, was launched at the Group’s
flagship site in Lipetsk to identify potential areas for reducing greenhouse gas
emissions and implement appropriate measures.
NLMK joins the Net Zero Steel
Pathway Methodology Project1
This project was initiated in 2020
to assist iron and steel companies
in developing a realistic and reliable
approach to setting decarbonization
targets, which would be in line
with climate science and the Paris
Agreement target, while also taking
into account the way the industry
works and interacts with other
sectors.
NLMK participates in the project’s
Technical Working Group along
with approximately twenty other
organizations from the iron and steel
industry, including the World Steel
Association and ResponsibleSteel.
A special methodology was deemed
necessary because the existing
sectoral approach to decarbonization
(SBTi SDA2) doesn’t fully take into
account or makes it impossible
to take into account such factors
as different steelmaking routes
(the possibilities of decarbonizing
integrated steelmaking and EAF
steelmaking differ significantly);
metallurgical by-products replacing
primary materials in other industries,
which significantly reduces their
carbon footprint; emission reduction
at side projects, etc. The objective of
the updated methodology developed
as part of the project is to adequately
factor in all the nuances of ferrous
metallurgy, enabling the creation
of a realistic ‘road map’ for its
decarbonization.
NLMK and NOVATEK sign
Memorandum of Cooperation
to reduce climate impact
In January 2021 NLMK Group and
NOVATEK, the largest independent
natural gas producer in Russia,
signed a Memorandum of Cooperation
in the field of mitigating adverse
climate impacts.
Cutting greenhouse gas emissions is the key focus of cooperation. NLMK Group
and NOVATEK plan to jointly test СО2 capture, use, and storage technologies,
to develop and improve hydrogen production technologies and transportation
methods, as well as the use of hydrogen fuel to reduce GHG emissions.
NLMK and NOVATEK are also exploring the development of new products
required to implement low-carbon technologies.
NLMK Group takes part in first EU-Russia Climate Conference
Sergey Chebotarev, NLMK Group Vice President, and Nikita Vorobyev, Director
of Environmental and Climate Affairs, took part in the EU-Russia Climate Conference
organized by the EU Delegation to Russia and the SKOLKOVO Business School.
Business representatives, officials and experts from Russia and the EU discussed
possible solutions to climate change.
Participating in the “Decarbonization of energy-intensive industries” session,
Sergey Chebotarev talked about NLMK Group’s efforts to reduce its carbon
footprint. NLMK follows a diversified approach to the climate agenda, using
traditional and innovative tools to cut greenhouse gas emissions. In the coming
years, the Company plans to launch a new power plant, which will be fuelled by
recovered steelmaking gases. The project will cut greenhouse gas emissions
by 650,000 tonnes annually. NLMK is also implementing a portfolio of research
projects that focus on the use of hydrogen in the production process, and СО2
recovery and utilization.
Nikita Vorobyev participated in the “Prospects for the Hydrogen Economy” section,
where he shared his outlook on the prospects of using hydrogen in steelmaking
and the necessary conditions for such a scenario. In addition, NLMK took part
in the “Carbon border adjustment mechanism” session, which involved European
Commission representatives, and outlined its vision of the regulation mechanism
planned in Europe for imports of carbon-intensive products. NLMK believes that
any regulation should take into account each company’s individual performance
and avoid creating discriminatory conditions within the industry.
NLMK Group supports first Franco-Russian forum
on low-carbon industrial development
The forum was organized by the Nauka Innov Centre for Technological Cooperation
of the Franco-Russian Chamber of Commerce (CCI France Russie), the trade
mission of the Russian Federation in France, the Climate Partnership of Russia, and
the Russian Ministry of Economic Development.
NLMK Group, a partner of the forum, participated in a session dedicated to green
steelmaking. Nikita Vorobyev, NLMK Group Director of Environmental and Climate
Affairs, presented the Company’s vision of decarbonization prospects and spoke
about current and future projects in the sphere. The session’s participants
included numerous Russian industry leaders and the French companies Fives,
Air Liquide, and Dassault Systèmes, which presented their innovative technological
solutions that can assist Russian manufacturers in reaching their climate impact
reduction targets.
1 The Task Force on Climate-related Financial Disclosures (TCFD) was created in December 2015 by the Financial Stability Board (FSB), an international body
established by the G20 states. In June 2017 the TCFD published its recommendations, which set out the basic principles of climate-related disclosures
for companies and organizations.
1 See https://netzerosteelpathwayproject.com/
2 Science-Based Targets initiative, Sectoral Decarbonization Approach.
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
IMPACT ON STRATEGY
GRI 201-2
RISK MANAGEMENT
Climate change implies a number of
risks and opportunities for the iron
and steel sector, which need to be
identified in order to manage them and
minimize the industry’s climate impact.
Timely identification of climate risks and
opportunities will make it possible to
take them into account when developing
projects for NLMK Group’s next strategy
cycle beyond the 2023 horizon.
In the reporting period NLMK partnered
up with Carbon Trust (United Kingdom),
an independent sustainability consultant,
to analyse risks and opportunities
related to climate change and NLMK
Group’s activities for the first time.
At the initial stage, the team identified
140 risks and opportunities, and later
analysed 90 of them. The risks and
opportunities were grouped by similar
root causes and then classified by
TCFD categories. For every group
the team analysed the probability of
materialization on the 2030 horizon for
various scenarios of global temperature
growth, including the Paris Agreement
scenario (temperature increase limited
to 2˚С). The Company believes that
Strategy 2022 is highly resilient to
climate change according to preliminary
assessments.
Physical risks (extreme weather events,
temperature change, availability of
water resources) have little impact on
NLMK Group’s activities. The risks of
water resource availability only emerge
on the long-term horizon after 2030.
In 2021 the list of risks and their impact
on the Company can be specified once
the project is complete and the climate
strategy is approved by the Board of
Directors.
TCFD DEFINITIONS OF TRANSITION
AND PHYSICAL RISKS
Transition Risks
Transitioning to a lower-carbon economy may entail extensive policy, legal,
technology, and market changes to address mitigation and adaptation requirements
related to climate change. Depending on the nature, speed, and focus of these
changes, transition risks may pose varying levels of financial and reputational risk
to organizations.
Physical Risks
Physical risks resulting from climate change can be event-driven (acute) or longer-
term shifts (chronic) in climate patterns. Physical risks may have financial implications
for organizations, such as direct damage to assets and indirect impacts from
supply chain disruption. Organizations’ financial performance may also be affected
by changes in water availability, sourcing, and quality; food security; and extreme
temperature changes affecting organizations’ premises, operations, supply chain,
transport needs, and employee safety.
Carbon border adjustment in Europe
Since late 2019 the EU is considering the introduction of an additional import
charge for products whose manufacturing is associated with СО2 emissions.
This measure could become the first instance of a cross-border carbon price
in the world.
NLMK Group shares European environmental values and closely monitors
the initiative’s development, participating in consultations and promoting
the principles of fairness and non-discrimination. The Company works
towards step-by-step greenhouse gas emission reduction, convinced that
the mechanism can only be efficient and accepted politically at all levels
if it employs a differentiated approach based on the ‘polluter pays’ principle,
which takes into account every individual supplier’s actual level of carbon
intensity. In addition, the Company believes that any carbon tax should take
into account the practices and mechanisms used in other countries for
emission regulation, which include pricing among other methods. For instance,
not only the mechanism of internal carbon pricing should be taken into account,
but also the entire spectrum of carbon neutrality measures used by companies
and economies, including measures to increase carbon sequestration via
efficient forest management, investment in renewables, and measures to
improve energy efficiency.
Considering the complexity of the issue and the high cost of a mistake, we believe
it would be practical to integrate the mechanism step-by-step, starting with
sectors with the least sophisticated configuration (including in terms of project
portfolios) and with the least inclusion in international trade flows.
The internal control and risk
management system employed by
NLMK is designed to ensure reasonable
certainty that the Group’s strategic
and operational goals will be achieved,
to create and protect value for
the Group, and to ensure sustainable
development by rapidly identifying,
assessing, and effectively managing
risks and opportunities.
The NLMK Board of Directors,
which determines the principles
and approaches to the organization
of the risk management system
and regularly reports on the status
of the Company’s risks, plays
a key role in the risk management
process.
NLMK Group classifies climate
change-related risks (regulatory,
market, reputation) as evolving risks.
All processes to manage such risks
are integrated into NLMK Group’s
overarching risk management system
(see the Operational Control and Risk
Management section for more detail).
The process of analysing NLMK Group’s climate-related risks and opportunities began
in 2020 as an independent project. The idea is to integrate such risks into NLMK
Group’s risk management system more actively as new information becomes available.
PERFORMANCE AND TARGETS
Global climate change challenges us
to reduce greenhouse gas emissions.
To that end, NLMK Group introduces
new technologies, increases production
efficiency, and monitors and controls
its emissions.
We are constantly enhancing the level
and quality of greenhouse gas emission
disclosures. In 2020, we made our
disclosures on Scope 1 and Scope 2
more detailed and complete, breaking
down emissions by type of activity
and by country, and providing data
on methane (CH4) and nitrous oxide (N2O)
emissions in addition to СО2. Moreover,
we presented Scope 3 estimates for
the first time, indicating the Company’s
other indirect emissions related to its
upstream activities.
NLMK Group employs recognized international and industry standards and
methodologies for GHG emission reporting and calculation, including The Greenhouse
Gas Protocol: A Corporate Accounting and Reporting Standard. WRI and WBCSD,
2004 (revised); 2006 IPCC1 Guidelines for National Greenhouse Gas Inventories /
2019 Refinement; WSA CO2 Data Collection User Guide; Methodological guidelines on
calculation of greenhouse gas emissions by organizations engaged in economic or other
activities in the Russian Federation approved by order of the Russian Ministry of Natural
Resources and the Environment dd. 30/06/2015 No. 300; EU Emission Trading System:
The Monitoring and Reporting Regulation – General guidance for installations, and others.
In 2020 the Company introduced a centralized system to collect input data from
all Group sites. It is based on leveraging regular reporting information on the use
of energy and other resources.
Since early 2020, the carbon content of each incoming batch of coal, coke, and
other carbon-containing resources is continuously measured at NLMK Lipetsk and
Altai-Koks via laboratory tests. This has enabled higher precision of СО2 emission
calculations using the carbon balance method. NLMK is the first Russian steel
company to conduct such a detailed analysis of incoming raw materials in order
to determine their carbon footprint.
1
IPCC – Intergovernmental Panel on Climate Change.
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About the Company
Corporate governance
Our team
Environmental protection
Appendix
For an adequate comparison with 2020,
we adjusted СО2 emission data for
the preceding few years (2016 to 2019)
and added data on emissions from
mobile facilities, as well as СН4 and N2O
emissions. The adjustments are due
mainly to more precise information
about carbon content in coal used.
Voluntary reporting standards provide
the possibility of reviewing and specifying
emission data for previous years.
In 2020, direct and indirect energy GHG
emissions (Scope 1 + Scope 2) totalled
33.6 million tonnes of СО2 equivalent across NLMK Group, which is 4% higher compared
to the previous year. The main reason for this growth was higher pig iron output.
Meanwhile, compared to 2018, the baseline year of the strategy cycle, emissions were
5% lower.
The overall contribution of additionally calculated emissions from mobile units and
СН4, N2O emissions to NLMK Group’s total direct GHG emissions is less than 1% in СО2
equivalent.
We also evaluated СО2 emissions from biomass combustion (wood chips and charcoal),
which is used at the Lipetsk site for ferroalloy production. These emissions are
climate-neutral, provided for reference only, and are not included in the overall sum
of reported emissions. The Company is currently considering the prospects of using
sustainable biomass in its key steelmaking processes.
NLMK GROUP DIRECT AND INDIRECT ENERGY EMISSIONS,
‘000 T OF CO2-EQUIVALENT GRI 305-1, GRI 305-2
Indicator
Direct GHG emissions (Scope 1)
СО2
Including from stationary sources
CH4
N2O
Indirect energy emissions (Scope 2)1
Total (Scope 1 + Scope 2)
Including stationary sources of CO2
CO2 emission from biomass combustion
(for reference)
2016
30,356
30,280
30,071
47
28
3,810
34,166
33,879
20
2017
30,740
30,665
30,459
47
28
4,025
34,765
34,481
2018
31,232
31,158
30,956
46
28
4,032
35,264
34,985
2019
28,601
28,531
28,311
42
28
3,621
32,222
31,929
2020
30,036
29,964
29,753
44
28
3,552
33,587
33,302
16
17
25
25
GHG EMISSIONS
(SCOPE 1 + SCOPE 2),
M T OF CO2- EQUIVALENT
34.2 34.8 35.3
4.0 4.0
3.8
30.4 30.7 31.2
32.2 33.6
3.6
3.6
28.6 30.0
DIRECT GHG EMISSIONS BY TYPE
OF ACTIVITY (SCOPE 1) IN 20201, 2, %
1
5
1
<1
<1
30,036
'000 t of
CO2-eq.
50
5
5
7
11
Blast Furnace operations
Energy production
Production of iron ore raw materials
BOF operations
Lime production
Rolled steel production and finishing
Coke production
EAF steelmaking
Mobile sources
Ferroalloy production
Other stationary sources
2016
2017
2018
2019
2020
14
Direct GHG emissions
(Scope 1)
Indirect energy GHG emissions
(Scope 2)
GHG EMISSIONS (SCOPE 3)
UPSTREAM ALONG
THE CORPORATE VALUE CHAIN,
M T OF CO2-EQUIVALENT GRI 305-3
TOTAL DIRECT AND INDIRECT GHG EMISSIONS
(SCOPE 1+SCOPE 2) BY COUNTRY,
‘000 T OF CO2-EQUIVALENT
8.8
7.9
7.6
602
33,587
241
119
89
25
1
32,511
Russia
USA
Belgium
Italy
Denmark
France
India
2018
2019
2020
By type of activity, blast furnace
operations (50%) and energy production
(14%) are the largest contributors
to direct greenhouse gas emissions
(Scope 1).
For the first time, the analysis
includes other indirect greenhouse
gas emissions associated with
the production of the main types
of external resources used by
NLMK Group companies (upstream emissions) and their delivery to the companies’
gates, as well as the transportation of raw materials and semi-finished products
between the Group companies. Calculations are made for the last three years.
Estimated coverage is at least 95%. Emissions associated with the transportation
of finished products shipped to customers, as well as emissions generated during
the use, processing, and disposal of the Company’s products, were not considered
at this stage. Regarding purchased electric energy for Scope 3 disclosure,
we took into account emissions from the extraction, processing, and delivery
of fuel to power plants, as well as losses in transmission networks, but did not take
into account emissions from fuel combustion at the power plants themselves,
since Scope 2 covers the latter.
1 Emissions from fuel combustion in the production of electricity received from the external grid for the needs of the Group’s sites (regional method).
For the Group’s sites in the United States, CH4 and N2O emissions are taken into account in addition to CO2.
1 The CO2 emissions from the combustion of process gases (blast furnace and coke oven gases) outside the sources of these gases, but within the Group’s
facilities, are considered equal to the emissions from the combustion of an energy equivalent amount of natural gas, adjusted for the combustion efficiency.
The corresponding CO2 deduction is made for the production sources of process gases.
2 The “Energy production” category includes emissions from the production of thermal, mechanical, and electrical energy, hydrogen, as well as auxiliary
fuel combustion in the energy, gas, and water supply shops.
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Fluxes and minerals
Corporate governance
Liquid fuel
Pellets and HBI
Truck transportation
Coal coke
Ore and concentrate
Carbon-containing materials
Our team
OTHER INDIRECT GHG EMISSIONS (SCOPE 3)
UPSTREAM ALONG THE CORPORATE VALUE CHAIN
BY TYPE OF RESOURCE IN 2020, %
2.1
2.0
3.5
4.4
5.0
6.5
7.6
38.5
7.6
m t of
CO2-eq.
11.7
16.4
0.7
0.7
0.3
0.3
0.2
0.1
Hard coal
Ferrous metals
Electricity
Natural gas
R/w transportation
Ferroalloys
Non-ferrous metals
Petroleum coke
Sea transportation
Fluxes and minerals
Liquid fuel
Pellets and HBI
Truck transportation
Coal coke
Ore and concentrate
Carbon-containing materials
The largest amount of other indirect
greenhouse gas emissions, 38% of
the total, is associated with coal
production. These are mainly methane emissions from coal mining. The ferrous metals1
emissions are mainly related to the production of slabs purchased from third parties
for NLMK USA, due to current restrictions (Section 232).
SPECIFIC CO2 EMISSIONS, STATIONARY SOURCES2,
T CO2-EQ./T GRI 305-4
Indicator
2016
2017
2018
2019
2020
Direct emissions (Scope 1)
Steel + commercial pig iron, t
Steel, t
Specific indirect energy emissions (Scope 2):
Steel + commercial pig iron, t
Steel, t
Specific total emissions (Scope 1 + Scope 2):
Steel + commercial pig iron, t
Steel, t
1.76
1.81
0.22
0.23
1.98
2.04
1.73
1.78
0.23
0.24
1.95
2.02
1.70
1.77
0.22
0.23
1.92
2.00
1.75
1.80
0.22
0.23
1.72
1.88
0.21
0.22
1.97(1.92)3
1.92(1.90)3
2.03(2.00)3
2.10(1.98)3
In addition to specific emissions per
tonne of steel, a common indicator
among steel companies, our analysis
includes the specific emissions of steel
production, including commercial pig
iron, as the production of commercial
pig iron accounts for a significant share
in the total output of the Group.
At the same time, most of CO2 emissions
(about 75% for the entire Group) are
generated in the operations upstream
of and including pig iron production. Due to that, the Company decided to prioritize
disclosing the joint indicator for steel and pig iron, since it reflects the Group’s actual
emissions and the rate of their reduction more accurately.
The increase in specific СО2 emissions per tonne of steel in 2019 and 2020 compared
to previous periods was due to a temporary decrease in steel output during
the upgrade programme at the NLMK Lipetsk BF and BOF operations. In addition,
2020 figures were impacted by the output decrease at the Company’s European
and US companies amid the COVID-19 pandemic. Taking corresponding output
normalization into account, the Company’s level of specific emissions has been
decreasing throughout the 2016–2020 period.
1 Emissions associated with large-capacity deliveries of ferrous metals mainly from third parties for smelting and rolling at NLMK Group sites.
2 Consistent with the corporate approach for setting CO2 emission targets.
3 Specific emission without the impact of temporary factors, which have to do with lower production.
Environmental protection
Appendix
SPECIFIC CO2 EMISSIONS
(SCOPE 1 + SCOPE 2) FROM
STATIONARY SOURCES GRI 305-4
1.98
1.95
1.92
1.97
1.921
1.92
1.901
2016
2017
2018
2019
2020
t of CO2 per t of steel
and commercial pig iron
The Group will continue to further slash
specific GHG emissions in the period
leading up to 2023. Specific emission
(Scope 1 + Scope 2) target is 1.91 tonnes of
CO2 per tonne of steel versus 2.0 tonnes
in 2019 (5% reduction), per tonne of steel
with commercial pig iron — 1.84 tonnes
of CO2 versus 1.92 in 2019 (4% reduction).
In 2020 the Company reviewed and expanded its portfolio of projects aimed at
reducing greenhouse gas emissions. These include both standard projects to increase
energy efficiency and reduce fuel consumption in blast furnaces and innovative
solutions for the use of secondary carbon-based raw materials and biofuel in BF
operations, as well as new decarbonization technologies of carbon dioxide capture
and utilization. A number of projects has already been launched, and their status and
progress are being monitored regularly.
In 2019–2020 we completed a range of previously planned projects aimed at reducing
СО2 emissions. The effects of each project were calculated based on the achieved
technical effects for the reviewed period (reduction in the consumption of natural
gas, coke and coke fines, energy, oxygen, limestone, dolomite, etc.).
Our new recovery cogeneration plant, which will be launched at NLMK Lipetsk in 2023,
will run on by-product gases from blast furnace and steelmaking operations,
thus cutting CO2 emissions by 650,000 tonnes (35 kg per tonne of steel) annually.
The step-by-step introduction of new ore beneficiation technologies at Stoilensky
in 2020–2023 will increase Fe content in the charge and reduce fuel consumption
at the blast furnaces in Lipetsk, which will bring an additional 790,000-tonne reduction
in CO2 emissions (43 kg per tonne of steel) annually. Besides, NLMK is also implementing
a portfolio of research projects that focus on the use of hydrogen in the production
process, СО2 recovery and utilization, and other decarbonization areas.
ACTUAL 2020 CO2 EMISSION REDUCTIONS FROM PROJECTS
INCLUDED IN THE 2023 STRATEGIC TARGET GRI 305-5
Project
(implemented)
Construction of co-generation boiler-houses
at NLMK Ural in Nizhniye Sergi and Beryozovsky
Construction of a water-heating boiler-house
at NLMK Ural in Revda
Construction of an additional beneficiation section
at Stoilensky1
Start-up date
November 2019
November 2019
July 2020
Turbine blower for Blast Furnace No. 7
November 2019
Use of dynamic stacking model when forming iron ore
stacks and the APCS when metering out fluxes in coal
preparation sections
Stopping the converting process in BOF at set carbon
value (for part of the product mix)
Other
Total
December 2020
August 2020
2019–2020
CO2 emission
reduction
(Scope 1 + Scope 2),
‘000 t
CO2 emission
reduction
(Scope 1 + Scope 2),
kg/t
27
7
81
30
8
2
3
158
1.7
0.5
5.1
1.9
0.5
0.1
0.2
10.0
1 Specific emissions without the impact of temporary factors, which have to do with lower production.
2
Including effects of operational efficiency associated with the project
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
At the Lipetsk site, the specific direct
CO2 emissions per tonne of steel in 2020,
calculated on the basis of the guidance
document1 of the European Union
Emission Trading Scheme (EU ETS),
amounted to 1.72 t СО2/t steel. Compared
to the estimated EU ETS benchmark2
(calculated based on the top 10% of
companies in the EU), this gap is already
only 8% today. NLMK’s goal is to close
the gap with the current benchmark to
6% within the current strategic cycle.
NLMK GROUP’S TARGET FOR SPECIFIC EMISSION REDUCTION
FROM STATIONARY SOURCES (SCOPE 1 + SCOPE 2),
T CO2/T OF STEEL
20193
Crude steel output growth
Captive electricity generation increase
Fe content in the concentrate increase
Other
2023 target
2.00
0.01
–5%
−0.04
−0.04
−0.02
1.91
NLMK PRODUCTS CONTRIBUTE
TO THE TRANSITION
TO A LOW-CARBON ECONOMY
NLMK GROUP’S TARGET FOR SPECIFIC EMISSION REDUCTION
FROM STATIONARY SOURCES (SCOPE 1 + SCOPE 2),
T CO2/T OF STEEL AND COMMERCIAL PIG IRON
20193
Crude steel output growth
Captive electricity generation increase
Fe content in the concentrate increase
Other
2023 target
1.92
0.01
−0.04
−0.04
−0.01
1.84
–4%
CO2 EMISSIONS AT THE LIPETSK SITE
ACCORDING TO EU ETS (SCOPE 1),
T OF CO2/T OF STEEL
NLMK Lipetsk 2020
NLMK Lipetsk 2023
EU ETS benchmark4
1.72
1.68
1.58
Forests are the largest carbon sink
on the planet, they absorb more CO2
than they release into the atmosphere.
However, even in the energy industry,
there are sectors that contribute
to reducing greenhouse gas emissions
in their own way. For example, solar and
wind energy are replacing fossil fuels.
Calculating the impact of consumers
using certain product categories
on curbing CO2 emissions is a common
practice and is widely used in steel and
other industries.
NLMK Group produces plate, which is used in the construction of wind power facilities,
and premium electrical steel, thanks to which consumers are able to reduce specific
magnetic losses in transformers and electric motors. NLMK also produces high-
strength and wear-resistant steel grades that contribute to improving safety
in a number of applications and lightening the weight of steel structures, which,
in turn, leads to lower consumption of fuel and steel itself (replacing lower-quality
grades), and, ultimately, contributes to the transition to a low-carbon economy.
The Company estimates that the target sales volume of such steels during
the 2018–2023 strategy cycle will allow it to prevent approximately 34 million tonnes
per year of CO2 emissions on the consumer side. This volume exceeds the Company’s
emissions from steel production. Taking into account the life cycle of the same steel
volume (20–30 years), it can prevent over 700 million tonnes of emissions.
1 COMMISSION DELEGATED REGULATION (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission
allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council
2 The indicator for converter steel under the ETS is not separately established, but there are established benchmarks for coke, sinter, pig iron, lime, dolomite.
The given data per ton of steel are calculated at the given consumption factors
3 Specific emission without the impact of temporary factors, which have to do with lower production
4 Using the same coke and iron ore consumption rates as at NLMK Lipetsk in 2020
196
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
REDUCTION OF CO2 EMISSIONS
ON THE CONSUMER SIDE THROUGH NLMK PRODUCTS
−0.1
−2.6
−0.5
−13.7
−1.5
−15.1
−8.8
−22.6
0.3
0.6
Flat products with improved
characteristics
Premium GO
electrical steels
1.1
Wear-resistant
and high-strength steel
(Q&T and Q&P)
−239.7
0.2
Premium NGO
electrical steels
1.2
Plate produced
at DanSteel
(used in wind energy
facility construction)
СО2 emission reduction
on consumer side,
annualy
−33.5
m t
СО2 emission reduction
on consumer side,
life cycle
−722.8
m t
Sales
in 2018–2023
3.4 m t
Sales in 2018–2023, m t
−451.7
NLMK DanSteel supplies
steel heavy plates for
next-generation floating
offshore wind farm
NLMK DanSteel, NLMK Group’s plant
in Denmark, supplied its heavy plate
for the Wind Float Atlantic project.
Wind Float Atlantic is the first semi-
submersible floating wind farm
in the world located off the north
coast of Portugal. NLMK DanSteel’s
high-quality steel heavy plates are
used in the production of floating
platforms and foundations.
Wind Float Atlantic comprises three wind turbines 8.4 MW each, mounted on
floating platforms. The third platform was installed in July, and the wind farm will
start operating at full capacity. The wind farm will be able to generate enough
energy to supply 60,000 households in Portugal. Wind Float Atlantic will save
almost 1.1 million tonnes of CO2 emissions per year.
In 2020, NLMK DanSteel delivered more than 150,000 tonnes of steel for
the manufacture of onshore and offshore wind farms, which can generate
close to 3 GWh of ‘green’ electricity per year. The Company’s customers are such
industry leaders as Ørsted, Vattenfall, Equinor, Siemens Gamesa, Vestas,
GE Renewable Energy.
The Company’s share on the European offshore wind energy market has already
reached 14%, and 20% in the onshore segment, attesting to its leadership
in supplies to a key renewable energy sector.
NLMK Verona supplies
special steel for wind power
Mercure, Hywind, etc. The company’s key customer is euskalforging, the world’s
largest manufacturer of offshore wind turbine flanges.
NLMK Verona, the Group’s
Italian plant, supplies steel for
the manufacture of wind turbine
flanges. The flange of a wind turbine
is its central connecting part and is
manufactured by a limited number
of companies in the world due to
strict product requirements. NLMK
Verona supplies about 15,000 tonnes
of steel per year for the wind power
generation sector, including for
such projects as Beatrice, Galloper,
NLMK steel in superpower transformers for Krasnoyarsk HPP
In the reporting year NLMK supplied premium laser-treated electrical transformer
steel to SVEL Group, a leading Russian manufacturer of electrotechnical equipment.
NLMK steel was used to make a 630 MVA three-phase potential transformer for
the Krasnoyarsk Hydro Power Plant.
Currently, the hydroelectric power plant is undergoing a comprehensive upgrade
to install superpower transformers. By 2024, NLMK plans to supply close
to 2,000 tonnes of steel to SVEL for the production of six more transformers.
NLMK steel properties will enable a reduction in specific magnetic losses in
transformers of up to 15% compared to commercial grades.
198
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CO2 TotalANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
PLANS FOR 2021
AND THE MEDIUM TERM
In 2021, the Company plans to start
the development of NLMK Group’s
long-term climate change programme
and to continue assessing the Company’s
risks and opportunities taking various
climate change scenarios into account.
Additionally, NLMK plans to participate
in the Carbon Disclosure Project (CDP)
programme in 2021 for the first time.
TCFD INDEX
TCFD recommendations
GOVERNANCE
Annual report 2020
Page
Disclose the organisation’s governance around climate-related risks and opportunities
Describe the board’s oversight
of climate-related risks and opportunities
Describe management’s role in assessing
and managing climate-related risks and
opportunities.
STRATEGY
Information is presented in sections
Sustainability management and Our approach
to managing environmental protection
Information is presented in sections
Sustainability management and Our approach
to managing environmental protection
p. 30, p. 186,
p. 188
p. 30, p. 186,
p. 188
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy, and financial planning where such information is material
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium, and long term
Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy, and financial planning
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario
RISK MANAGEMENT
Information is presented in sections
Climate change and Impact on strategy
Information is presented in sections
Climate change and Impact on strategy
Information is presented in sections
Climate change and Impact on strategy
Disclose how the organisation identifies, assesses, and manages climate-related risks
Describe the organisation’s
processes for identifying and assessing
climate-related risks
Information is presented in sections
Climate change and Risk management
Describe the organisation’s processes
for managing climate-related risks
Information is presented in sections
Climate change and Risk management
Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organization’s overall
risk management
METRICS AND TARGETS
Information is presented in sections
Climate change and Risk management
p. 186, p. 190
p. 186, p. 190
p. 186, p. 190
p. 186, p. 191
p. 186, p. 191
p. 186, p. 191
Disclose the metrics and targets used to assess and manage relevant climate-related risks
and opportunities where such information is material
Disclose the metrics used by the organisation
to assess climate-related risks and opportunities
in line with its strategy and risk management
process
Information is presented in sections
Climate change and Performance and targets
p. 186, p. 191
Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 GHG emissions, and the related risks
Information is presented in sections
Climate change and Performance and targets
Describe the targets used by the organisation
to manage climate-related risks and
opportunities and performance against targets
Information is presented in sections
Climate change and Performance and targets
p. 186, p. 191
p. 186, p. 191
200
201
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ANNUAL
REPORT
2020
ENERGY
EFFICIENCY
MAJOR THEME
ENERGY
KEY EVENTS IN 2020
● The fourth recovery CGP power unit was launched, with a steam turbocharger
for the air blast supply at Blast Furnace No. 7.
● A project to switch walking beam furnaces in the Hot Rolling Shop to natural gas
was completed.
● К-1500 and К-500 compressors in the NLMK Lipetsk Oxygen shop were upgraded.
● A 220 kV substation was commissioned at the Revda plant (NLMK Ural).
● Supplies of medical oxygen from NLMK Lipetsk to clinics and hospitals in nearby
regions reached record highs amid the COVID-19 pandemic.
● A daily-average record was set in energy generation at NLMK Lipetsk captive
facilities (co-generation plant – 346.5 MW, recovery plant – 160.1 MW).
● NLMK Lipetsk halved its purchases of hot water heat energy by optimizing
its power resource supply arrangements.
● NLMK Ural sites purchased 15 times less heat energy due to using
cogeneration units.
UNITED NATIONS GLOBAL
COMPACT PRINCIPLES
● Principle 7. Businesses should support a precautionary approach
to environmental challenges.
● Principle 8. Businesses should undertake initiatives to promote greater
environmental responsibility.
● Principle 9. Businesses should encourage the development and diffusion
of environmentally friendly technologies.
GLOBAL SUSTAINABLE
DEVELOPMENT GOALS
396.4
PJ
(+3.6% yoy)
NLMK Group’s total energy
consumption in 2020
0.094
Gcal/t
(−1.7% yoy)
reduction in specific energy
intensity of steel production
at NLMK Lipetsk
Our project to boost
the energy efficiency of lighting
at NLMK’s NGOES Shop won
the Golden
Photon Award
in the international
electrotechnical industry
competition of the Eurasian
Economic Community.
202
203
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
CERTIFICATION
The Company’s energy management
system is in compliance with
the international ISO 50001 standard,
as confirmed by its ENMS 598731
certificate.
The system encompasses nine core
production sites:
1. NLMK Lipetsk
2. VIZ-Steel
3. Altai-Koks
4. Dolomit
5. NLMK Kaluga
6. NLMK Metalware
7. NLMK Ural
8. Stagdok
9. Stoilensky
NLMK DanSteel is also certified under
ISO 50001.
In 2020, NLMK Group successfully
completed a cycle of recertification
audits of the energy management
system at its sites. A certificate was
issued to confirm their compliance with
ISO 50001:2018. Additionally, a project
was launched in 2020 to consolidate
the management systems of all
Group companies into an integrated
management system (IMS).
MEMBERSHIP AND PARTICIPATION
IN ORGANIZATIONS
NLMK Group is a member of the Russian Association of Energy Consumers,
a non-profit partnership that aims to protect the interests of member companies
in the energy sector.
NLMK Lipetsk is a member of the NP Market Council organization, which ensures
the Company’s participation in the wholesale electricity and power market.
In November 2010 NLMK Lipetsk joined the non-commercial partnership SRO Union
of Independent Energy Audit and Energy Expert Organizations.
ENERGY RESOURCE CONSUMPTION IN 2020
In 2020 total energy consumption within the Company stood at 396.4 PJ, which is
14 PJ higher than in 2019. The increase is due to the commissioning of new production
capacities at the Lipetsk site (Basic Oxygen Furnace No. 3 in BOF Shop No. 2) and
a new batch annealing furnace at NLMK Metalware.
Non-renewable energy consumption totalled 394.7 PJ.
NLMK Group uses a variety of non-renewable energy resources in its production
activities: 26.0% of all energy consumed comes from natural gas, and 59.9% comes
from coal and coke products (minus marketed coke products).
In addition, we use renewable energy sources (RES), wood chips, and charcoal
to produce ferroalloys.
In 2020 the share of electricity from renewable sources totalled 5.2% of all purchased
electric energy. The share of renewable electric energy in all NLMK Group energy
consumption was 0.42%.
OUR APPROACH TO MANAGING
ENERGY EFFICIENCY
Steelmaking is an energy-intensive
industry. NLMK Group systematically
pursues energy efficiency improvements
in its operations. This includes identifying
and applying integrated solutions
to ensure a reliable supply of energy
resources, as well as using energy
sparingly in order to reduce costs and
minimize the environmental impact.
The Company has adopted
an NLMK Group Integrated Management
System Policy in Quality, Environmental
Protection, Energy Efficiency,
and Occupational Health and Safety
(IMS Policy). This policy sets forth
the vision, goals, principles, and
management commitments related to
the improvement of energy efficiency.
The Group’s commitments under
the IMS Policy go beyond introducing
advanced energy-efficient
technologies and solutions that
reduce the consumption of natural
and secondary energy resources.
The Group is additionally committed to developing power generation capabilities that
utilize metallurgical gases and other secondary energy resources, and to supporting
the use of renewable energy sources where applicable and reasonable (for more
information on our IMS Policy, please follow the link).
The Unified Technical Policy on Energy Complex Management has been in effect
at NLMK Group’s Russian companies since 2014. The objective of this policy is
to introduce the most advanced technical solutions, machinery, and technologies that
bolster the reliability, efficiency, and safety of the Group’s energy complex. The policy
sets out priorities and rules for applying technical solutions related to the utilization of
energy facilities, the implementation of investment programmes for new construction,
the re-tooling of core equipment, overhauls of energy assets belonging to NLMK Group
companies, and the innovative and promising development of these companies.
NLMK Group Vice President for Energy and the Environment and the units reporting
to him work to frame the principles and strategic goals for improving the energy
efficiency of production and developing the Group’s energy facilities in addition
to setting energy consumption KPIs and tracking them. Each year we create and
implement a portfolio of energy efficiency projects aimed at attaining our energy
resource use targets.
A key performance indicator for improving energy efficiency is the specific energy
intensity of production (Gcal/t of output). The targets for these key performance
indicators are determined based on earlier maximum results, taking into account
the potential of optimizing the process to the best technologically achievable level,
as well as the results of benchmarking similar machinery against global best practices.
204
205
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
RENEWABLE ELECTRIC ENERGY CONSUMPTION ACROSS NLMK GROUP
GRI 302-1
Indicator
Share of renewable electric energy
in purchased energy, %
Total share of renewable electric energy
in total energy consumed, %
Total renewable electric energy
consumed, PJ
2016
4.79
0.35
1.42
2017
4.81
0.36
1.50
2018
4.86
0.36
1.51
2019
5.10
0.37
1.43
2020
5.15
0.42
1.68
NLMK Group sites made no direct
purchases from renewable energy
suppliers. The share of generation
from renewables is shown as assumed
for Europe and the US as of the end of 2019 according to the Monthly Energy
Review US report by the Energy Information Administration and The European
Power Sector in 2019 report (available here on p. 120 and here on p. 7).
GROSS ENERGY CONSUMPTION
BY NLMK GROUP1, PJ GRI 302-1
CONSUMPTION FROM
NON-RENEWABLE SOURCES
BY NLMK GROUP2, PJ GRI 302-1
BREAKDOWN OF NON-RENEWABLE
FUEL CONSUMPTION BY NLMK
GROUP IN 20203, % GRI 302-1
409.4 415.6 415.1
385.3 396.4
408.0 414.1 413.6
383.9 394.7
13.2
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
SHARE OF RENEWABLE ELECTRIC ENERGY IN TOTAL PURCHASED ELECTRICITY
BY REGION, WITHOUT TRANSIT FLOWS, %
NLMK GROUP CONSUMPTION OF NON-RENEWABLE FUELS3,
PJ GRI 302-1
Region
Share of renewable
energy
Source
Companies
Russia, Central Unified Energy System
zone (Central and Northwestern
Federal Districts)
Russia, Ural Unified Energy System
zone (Ural and Volga Federal Districts)
USA
Belgium
France
Italy
Denmark
1.9
2.8
17.6
20.6
20.5
40.1
83.9
Hydro
Hydro, wind, solar
Hydro, wind, solar, biofuel
Wind, solar, biofuel
NLMK Lipetsk,
Stoilensky, Stagdok,
Dolomit, NLMK Kaluga
NLMK Ural,
NLMK Metalware, VIZ-Steel
NLMK Indiana LLC,
NLMK Pennsylvania LLC,
Sharon Coating LLC
NLMK La Louvière S.A.,
NLMK Clabecq S.A.
Hydro, wind, solar, biofuel
NLMK Strasbourg S.A.
Hydro, wind, solar, biofuel
NLMK Verona SpA
Wind, solar, biofuel
NLMK DanSteel A/S
Fuel type
Coal and coke products4
Natural gas
Pulverized coal
Motor fuel (petrol, diesel, liquefied gas)
Fuel oil
Total
2016
218.37
99.409
18.10
2.81
0.26
338.93
2017
216.52
91.645
28.40
2.76
0.04
339.37
0.88
0.08
59.9
Coal and coke
products4
Natural gas
Pulverized coal
Motor fuel
Fuel oil
2019
184.30
91.262
36.15
2.91
0.21
2020
196.94
85.499
43.36
2.90
0.27
26.0
2018
207.94
87.750
43.30
2.79
0.04
341.83
314.92
328.97
206
207
1 The methodology for calculating the Company’s energy consumption was adjusted: purchased energy minus sold energy (sales, shipment, transfer)
at every production site; total across all sites.
2 The methodology for calculating non-renewable energy consumption has been adjusted: total energy consumption by the Company minus renewable
electric energy.
3 Consumption of coke products and motor fuel has been adjusted because data sources have changed (added diesel fuel consumption by the Mining Division
in ‘000 litres and coke fine consumption by NLMK Ural). Consumption of non-renewable fuels is shown net of fuel sales/shipment as products.
4 Consumption of coal and coke products is shown net of sales/shipments of coke products (coke breeze, lump coke, coke nut, pitch coke) to 3rd parties.
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
CONSUMPTION, GENERATION, AND SALE OF ELECTRICITY
AND THERMAL ENERGY BY NLMK GROUP, PJ GRI 302-1
Indicator
2016
2017
2018
2019
2020
Electricity and thermal energy obtained for consumption
CAPTIVE ELECTRICITY
GENERATION
Electrical power obtained
Thermal energy obtained as steam
Thermal energy obtained as hot water
Total
In-house electricity and thermal energy generation
Electricity generation
Thermal energy as steam
Thermal energy as hot water
Total
83.06
0.45
1.64
85.15
46.99
23.79
8.68
79.47
Electricity and thermal energy sold to external consumers
Electricity sold and transmitted
Heat energy sold and transmitted as
steam
Heat energy sold and transmitted as hot
water
Total
11.06
0.34
2.69
14.08
SPECIFIC ENERGY INTENSITY1 AT THE LIPETSK SITE,
GCAL/T GRI 302-3
87.32
0.51
1.52
89.35
46.34
23.78
7.96
78.07
11.78
0.36
2.56
14.70
87.30
0.50
1.59
89.39
49.36
21.90
9.81
81.07
10.70
0.35
2.76
13.81
78.47
0.48
1.33
80.28
50.01
21.75
7.44
79.20
8.98
0.37
2.36
11.71
77.68
0.48
1.01
79.17
49.93
22.26
7.59
79.77
8.60
0.40
1.92
10.92
Indicator
Specific energy intensity
2016
5.599
2017
5.491
2018
5.469
2019
5.641
2020
5.546
The Company has managed to reduce
energy costs by implementing
investment projects and optimization
initiatives aimed at increasing captive
generation of electricity and thermal
energy.
Electricity is generated at the Company’s
captive power plants, which are chiefly
powered by recycled fuel gases from
steel production. Approximately 80% of
the electricity generated at the Lipetsk
site (and used for its production
needs only) and 100% of the electricity
generated at Altai-Koks is produced
using NLMK Group’s captive recyclable
resources (steelmaking gases).
Maximizing the utilization of available
recyclable energy is one of the main
challenges faced by NLMK Group.
Overcoming this challenge will make
it possible to not only minimize costs,
but to also reduce our environmental
impact by slashing emissions of harmful
substances and greenhouse gases.
In the reporting period, the total
installed in-house generation capacity
was 733 MW: 522 MW at the Lipetsk
site and 200 MW at Altai-Koks;
the installed capacity of gas-piston
units at NLMK Ural was 11 MW.
SHARE OF CAPTIVE
ELECTRICITY IN TOTAL
ELECTRICITY CONSUMPTION
AT NLMK LIPETSK1, %
CAPTIVE ELECTRICITY GENERATION
AT NLMK GROUP SITES
NLMK LIPETSK, 522 MW
Co-generation plant: fuel – coke oven gas, blast furnace gas,
natural gas.
Recovery co-generation plant: fuel – blast furnace gas, natural gas.
Top pressure recovery turbine station: no fuel is used; instead,
electricity is generated from excess blast furnace gas pressure.
ALTAI-KOKS, 200 MW
Co-generation plant: fuel – coke oven gas
NLMK URAL, 11 MW
Mini gas-piston co-generation plant: fuel – natural gas
In 2020, NLMK Lipetsk generating capacities set an average daily record in electricity
generation: (CGP – 346.5 MW, RCGP – 160.1 MW, total – 506.6 MW).
CAPTIVE ELECTRICITY GENERATED
AT NLMK LIPETSK2
55.0 53.0
58.0
65.0 63.7
81
84
82
79
72
417
417 450 478 480
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Captive electricity generation, MW
Share of captive electricity generation
from secondary fuel gases, %
1 Specific energy intensity = (energy consumption during steel production / extraction and processing of raw materials, Gcal) / (steel production / extraction
and processing of raw materials, t). The following types of energy resources were used in the calculation: purchased – coking coal and additives, pitch
coke, lump coke, coke breeze, pulverized coal, natural gas, fuel oil, thermal energy as hot water, steam, electricity, oxygen (NLMK Kaluga), and heat from
chemically treated water (VIZ-Steel); sold – coke breeze, coke nut, chemical products, blast furnace gas, steam, thermal energy as hot water, oxygen,
nitrogen, compressed air, industrial water, hydrogen, and commercial pig iron.
1 The share of captive electricity generation n 2020 is lower than in 2019 because of the increase in overall energy consumption on the site (start-up
of new equipment for Basic Oxygen Furnace No. 3 in BOF Shop No. 2).
2 The share of captive electricity generation from secondary fuel gases went up in 2020 due to increased utilization of BF gases after repairs at Blast
Furnaces No. 6 and 7 were completed in 2019.
208
209
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Construction works are
ongoing at a new recovery
co-generation plant (RCGP-2)
fuelled by secondary energy
resources, which will bring
NLMK Lipetsk’s self-sufficiency
in electricity to 94%
In 2019, NLMK Group launched
a project to construct a new
recovery co-generation plant
at NLMK Lipetsk. The new plant
will be fuelled by recyclable gases
from steel production: BOF and
BF gases. The installed capacity
of the new recovery co-generation
plant will be 300 MW. The estimated
investment into the project is
RUB 35 billion.
In 2020, design documentation
engineering was completed
for the main facilities in the new
power plant complex, and
the project was approved by
the State Environmental Impact
Assessment Authority
The 2023 launch of this new power
plant running on by-product gases
of blast furnace and steelmaking
operations will cut CO2 emissions
by 650 kt (36 kg per tonne of steel)
annually.
Stoilensky expands energy
capacities in open-cast mine
Stoilensky Mining and Beneficiation
Plant, an NLMK Group company,
has completed construction
of the main step-down substation
(MSDS-15) at its open-cast mine.
The substation generates
electricity to power mining
machinery, traction units, and drain
well equipment. The construction
works were part of an NLMK Group
Strategy 2022 project to boost
the capacity of the open-cast
mine to 42 million tonnes of ore
annually.
IMPLEMENTING ENERGY EFFICIENCY PROJECTS
During the reporting period, NLMK Group implemented a number of energy efficiency
projects at its sites to address the following items:
● Increasing the efficiency of fuel gas utilization in electricity generation
● Improving the efficiency of compressor equipment and cooling equipment
● Replacing pumping equipment with more energy-efficient units
● Optimizing process charts for the production of technical gases
● Optimizing the load and configuration of energy transportation networks,
optimizing the operation modes of energy equipment
As part of the target-oriented programmes, lighting fixtures at NLMK Group sites
were replaced with more advanced and efficient solutions. Previous work to improve
efficiency was continued, such as replacement of pumping equipment and projects
to improve the efficiency of compressor operation.
OPTIMIZATION INITIATIVES UNDERTAKEN
BY NLMK GROUP IN 2020
The energy efficiency and optimization projects carried out in 2020 for
the co-generation and recovery plants at NLMK Lipetsk and the co-generation
plant at Altai-Koks aimed to improve the operation modes and control algorithms
of boilers and turbines, apply a new technology of heating combustion air,
increase the surface area of economizers, and optimize equipment repairs.
REDUCTION OF ENERGY CONSUMPTION AS A RESULT
OF ENERGY-SAVING INITIATIVES (PROGRAMMES)
AT LIPETSK SITE, TJ GRI 302-4
1,392
743
753
1,201
1,851
1,939
1,374
1,521
348
141
68
32
664
329
372
2016
2017
2018
2019
2020
Total amount
of energy saved
Total amount
of fuel saved
Total reduction
in consumption
of energy
NLMK DanSteel to build the most environmentally friendly reheating
furnace in Europe
The new, cleaner furnace will open up new opportunities to expand production.
This major investment is part of a larger strategy, aimed, inter alia, at enhancing
the quality of plate for offshore wind turbines.
The furnace will reduce emissions of CO2 and NOx by 15% and 75%, respectively.
NOx emissions will go down to a quarter of the maximum level permitted by
Danish legislation.
PLANS FOR 2021
AND THE MEDIUM TERM
Improving the energy efficiency
of production is a key goal of Strategy
2022. The main lines of action to boost
energy efficiency in 2021 and the medium
term include:
● Reducing specific energy
consumption at production units;
in the medium term – reaching
the minimum technically feasible
level of consumption
● Improving the efficiency of power-generating equipment
● Optimizing process charts for the production of technical gases
● Improving the efficiency of compressor equipment
● Replacing pumping equipment with more energy-efficient units
● Lighting system upgrades
● Reducing the amount of purchased thermal energy
● Developing and introducing innovative energy solutions
● Increasing the cost-efficiency of energy facilities by outsourcing processes
● Implementing investment projects for infrastructure development, technical
upgrades/construction of facilities with improved energy efficiency performance
210
211
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
ABOUT THE REPORT
SCOPE OF REPORTING ABOUT NLMK OPERATIONS
AND SUSTAINABILITY ACTIVITIES
OUR APPROACH
TO PREPARING REPORTS
NLMK Group’s 2020 Annual Report
(the Report) discloses information
about financial and business operations
along with data on the Company’s
achievements in sustainability
management for the period from
1 January 2020 to 31 December 2020
GRI 102-50 .
NLMK prepares its Annual Report
on a yearly basis. The Report includes
information about the Company’s
sustainability activities in the relevant
topic-specific sections. The Company’s
most recent annual report was
published in April 2020. Electronic
versions of previous reports can
be found on the Company’s official
website GRI 102-51, GRI 102-52 .
Starting from 2018 Company uses
the recommendations of the Global
Reporting Initiative (GRI Standards).
The core option was selected
for information disclosure. The GRI
Content Index listing the disclosures
included can be found in the Appendix
GRI 102-54, GRI 102-55 .
In 2020 Report, the Climate Change section has been published for the first
time, relied on the TCFD (Taskforce on Climate-related Financial Disclosure)
recommendations. New indicators are also provided in accordance with the SASB
(Sustainability Accounting Standards Board).
The Report also covers compliance with the principles of the UN Global Compact
to which the Company acceded in 2019 and the OECD Principles of Corporate
Governance based on which the Group strives to conduct its activities.
The interests of the investment community regarding sustainability management
practices were taken into account during the preparation of this Report.
In particular, the Group relied on the methodology of such rating agencies
as SAM S&P, MSCI, Sustainalytics, FTSE Russell, ISS when disclosing information.
The Report also reflects the Group’s contribution to the achievement
of the Sustainable Development Goals adopted by the United Nations in 2015
in the document Transforming Our World: The 2030 Agenda for Sustainable
Development.
SCOPE OF REPORTING
GRI 102-45 Information about the Group’s financial and business activities
is disclosed in accordance with its 2020 IFRS consolidated financial statements.
Data relating to NLMK’s operating activities and sustainability information
are presented within the scope shown in the table below, unless otherwise
indicated in the text of the Report.
RUSSIA
NLMK RUSSIA FLAT PRODUCTS
NLMK Lipetsk
VIZ-Steel
Altai-Koks
NLMK Trading SA
NLMK RUSSIA LONG PRODUCTS
NLMK Ural
NLMK Kaluga
NLMK Metalware
Vtorchermet NLMK
Other
MINING DIVISION (RUSSIA)
Stoilensky
Stagdok
Dolomit
USA
NLMK USA
Steel and flat products
GO electrical steel
Coke
Trader (located in Switzerland)
Steel and long products
Steel and long products
Metalware
Scrap processing
–
Extraction and processing of iron ore
Extraction and processing of flux limestones
Extraction of flux dolomite
NLMK Pennsylvania LLC & Sharon Coating LLC
Flat products
NLMK Indiana LLC
EU
NLMK DANSTEEL AND PLATE DISTRIBUTION NETWORK
Steel and flat products
NLMK DanSteel A/S
NBH SEGMENT
NLMK Clabecq S.A.
NLMK Verona SpA
NLMK La Louviere S.A.
NLMK Strasbourg S.A.
Other
Plate
Plate
Plate
Strip
Strip
–
SERVICE AND SUPPORTING BUSINESSES
NLMK Trade House
Sales of NLMK Group products
Novolipetsk Steel Service Centre (Metallobaza)
Sales of NLMK Group products, manufacturing
of plastic and steel products
NLMK Engineering
SMT NLMK
NLMK IT
NLMK Communications
VIZ
VIZ-Broker
Gazobeton-48
NLMK INDIA Service Center Pvt Ltd
Other
Design and survey operations
Construction
IT and computing services
Telecom services
Steel baths
Customs brokerage services
Gas-concrete blocks
Cutting and sales of GO steel
–
1 The GRI Standards: Core option requires obligatory disclosure of a selected set of indicators from GRI Standard 102 (General disclosures),
as well as at least one indicator from the selected topic-specific GRI Standards
214
215
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
THE PROCESS
OF DEFINING
MATERIAL TOPICS
GRI 102-46 In the process
of defining the Report’s content,
NLMK identified significant economic,
environmental, and social topics
that are of the greatest importance
to the Company and its stakeholders.
This approach was developed
based on the requirements set out
in the GRI Standards.
For the preparation of the 2020 Report, the heads of NLMK’s functional areas
updated the list of material topics based on an analysis of stakeholder (shareholders,
investors, and analysts) requirements pertaining to the environment, the social
sector, corporate governance, local communities, the authorities, market and social
trends, and GRI Standards.
A total of 21 material topics were identified and approved based on the analysis.
These disclosures were also prioritized on the basis of a survey of internal
stakeholders.
The GRI information disclosure requirements were met to the same extent for all
topics regardless of their level of materiality. At the same time, topics with a high
level of materiality were given special attention: additional detailed information
about them is provided in the Report.
APPROACH TO DEFINING MATERIAL TOPICS
1 Analysis of external
sources
2 Analysis of stakeholder
views
3 Listing material
topics
Analysis of public information
about the Company
and the mining and steel industry
Analysis of the results
of a survey completed by
internal stakeholders
(members of the working group)
Approval of the list
of material topics
by the Group CEO
MATERIAL TOPICS
GRI 102-47
Category
Topic
Level of materiality
Link to Global Sustainable
Development Goals
Economic
201
Economic Performance
High
201-2 Climate change
Medium
203
Indirect Economic Impacts
Medium
205 Anti-Corruption
High
Benchmarking
of material topics that
are disclosed by international
and Russian companies
in the mining and steel industry
Analysis of the requirements
of ESG analysts who determine
ratings for sustainability
practices
Preliminary list of material topics
Amended list of material topics
Approved list of material topics
Environmental
302 Energy
High
303 Water and Effluents
Medium
304 Biodiversity
Medium
305 Emissions
High
306 Effluents and Waste
High
307 Environmental
Compliance
High
308 Supplier Environmental
Medium
Assessment
216
217
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Category
Topic
Level of materiality
Link to Global Sustainable
Development Goals
Social
401 Employment
High
403 Occupational Health
High
and Safety
404 Training and Education
High
405 Diversity and Equal
Opportunity
Medium
406 Non-Discrimination
High
407 Freedom of Association
and Collective Bargaining
Medium
408 Child Labour
Low
409 Forced or Compulsory
Low
Labour
411 Rights of indigenous
Low
peoples
413 Local Communities
High
EXTERNAL ASSURANCE
Proper disclosure of qualitative
and quantitative information
prepared in accordance with the GRI
Standards for selected indicators
(sample information) has been verified
in accordance with the International
Standard on Assurance Engagements
(ISAE) 3000 Revised, Assurance
Engagements Other than Audits
or Reviews of Historical Financial
Information. The independent
auditor's opinion on the results
of the audit, which provides limited
confidence in the sample information,
can be found in the Appendix.
The independent auditor was
AO PricewaterhouseCoopers
Audit GRI 102-56 .
principles and requirements of the GRI Standards based on the Group’s existing
processes for collecting and preparing business information GRI 102-48, GRI 102-49 .
Financial information is presented in US dollars or Russian rubles in accordance
with the financial reporting system used in the Group. In cases where financial
data were recalculated in dollars, the weighted average rate for 2020 was used:
USD 1 = RUB 72.15 or the rate on 31 December 2020: USD 1 = RUB 71.88.
Operating performance indicators and sustainability data are presented
in the International System of Units (SI).
State mandatory statistical reporting forms, which are submitted to the relevant
government agencies on an annual basis, were used as sources of sustainability
information about staff management, occupational health and safety,
and environmental protection.
For the sake of comparing data, the most significant indicators of the Group’s
activities will be presented not only for the reporting period, but also
for the previous four years. The scope of 2020 information disclosure covers both
the Group’s Russian and international companies, unless the text states otherwise.
METHODOLOGY
FOR PREPARING
AND REVISING DATA
In 2020, the Company expanded its disclosure of greenhouse gas emissions,
including Other indirect (Scope 3) GHG emissions. In the next reporting periods,
the Company plans to continue disclosing this information. Major step in 2020 was
disclosure of information about climate change aspect.
The calculation, collection,
and consolidation of the operational,
social, and environmental indicators
presented in the Report were carried
out in accordance with the reporting
In 2020 information about the impact of the COVID-19 pandemic on NLMK Group's
operations was also disclosed. The decision to add this information to the the Report
was made in response to the strong impact of this event at all levels of the global
economy. The list of disclosed indicators of the structure and remuneration
of personnel was also expanded.
ANNUAL REPORT 2020 APPROVAL PROCEDURE
No.
Stage
Document
1
2
Preliminary approval by the Board of Directors
MoM No. 279 dd 22.03.2021
Approval by the General Meeting of Shareholders
MoM No. 62 dd 29.04.2021
218
219
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
SASB INDICATORS
Indicator
Reference / Comment
GREENHOUSE GAS EMISSIONS
EM-MM-110a.2 Discussion of long-term
and short-term strategy or plan to
manage Scope 1 emissions, emissions
reduction targets, and an analysis of
performance against those targets
NLMK Group progressively reducing greenhouse
gas emissions by cutting consumption of fossil fuels,
increasing energy efficiency, and introducing innovative
decarbonization solutions.
The Board of Directors, the Board’s committees,
СЕО (Chairman of the Management Board), and
the Management Board determine strategic growth
priorities and ensure overall sustainability management
ENERGY MANAGEMENT
EM-MM-130a.1 Total energy consumed,
percentage grid electricity, percentage
renewable
Total energy consumed – 396.4 PJ;
Percentage grid electricity – 17%;
Percentage renewable – 0.42%.
WATER MANAGEMENT
EM-MM-140a.1 Total fresh water
withdrawn, total fresh water consumed,
percentage of each in regions with High or
Extremely High Baseline Water Stress
BIODIRVERSITY IMPACTS
EM-MM-160a.1 Description of
environmental management policies
and practices for active sites
EM-MM-160a.2 Percentage of mine
sites where:
Acid rock drainage is predicted
to occur
Total fresh water withdrawn – 11,074 th m3
Ttotal fresh water consumed – 11,074 th m3
The regions of the Group's presence are characterized
by high availability of water resources. The Group does
not operate in water-scarce areas.
NLMK Group conducts operations on both industrial
lands and residential areas in line with applicable law.
The Company’s activities have no direct significant
impacts on biodiversity. NLMK Group production sites
are not located on industrial sites that are leased.
More specifically, they are not located on sites that are
situated on environmentally protected land or on land
with a high biodiversity value.
NLMK Group has one ore mining company, and acid
effluents are not predicted to form there. Drainage
waters as well as bottom waters at Stoilensky GOK pit
mine are collected and pumped out into a buffer tank
or a dam reservoir of the tailing dump. The control
of the physical and chemical composition of drainage
water is carried out both at the stage of entering
the tailing dump and its near-dam reservoirs, and during
the discharge of drainage water into a water body after
biological treatment in natural conditions. The pH value
(measure of acidity) of the drainage water entering
the tailing dump and discharged into the water body is
within the pH range of 7.7–8.0 (alkaline)
Acid rock drainage is actively mitigated
Not applicable. Acid effluents are not formed
Acid rock drainage is under treatment
or remediation
EM-MM-160a.3 Percentage of proved
and probable reserves in or near sites
with protected conservation status or
endangered species habitat
Not applicable. Wastewater treatment is carried out by
sedimentation of suspensions in the tailing dump and
biological treatment in natural conditions.
Percentage of proved and probable reserves in or near
sites with protected conservation status or endangered
species habitat – 0%
All explored reserves are located within the contour
of the mining allotment and do not lie within (or near)
territories that have a conservation status or are
a habitat for endangered species
Page
p. 191, p. 193
p. 203–208
p. 170
p. 183
p. 220
p. 220
p. 220
p. 220
Indicator
Reference / Comment
GREENHOUSE GAS EMISSIONS
EM-MM-110a.1 Gross global Scope 1
emissions, percentage covered under
emissions-limiting regulations
Gross global Scope 1 emissions – 30 mn t CO2-equiv.
Only 1.2% is regulated by legal requirements at factories
in the EU.
AIR QUALITY
EM-MM-120a.1 Air emissions of
the following pollutants: (1) CO, (2) NOx
(excluding N2O), (3) SOx, (4) particulate
matter (PM10), (5) mercury (Hg),
(6) lead (Pb), and (7) volatile organic
compounds (VOCs)
(1) carbon monoxide (CO) - 230.1 thousand tons,
(2) nitrogen oxides (excluding N2O) - 26.1 thousand tons,
(3) sulfur oxides – 31.0 thousand tons, (4) solid particles
23.0 thousand tons, (5) mercury (Hg) – 0 tons,
(6) lead (Pb) – 1 ton, (7) volatile organic compounds (VOC) –
2.6 thousand tons
Page
p. 193
p. 221
WASTE & HAZARDOUS MATERIALS MANAGEMENT
EM-MM-150a.1 Total weight of tailings
waste, percentage recycled
Total weight of tailings – 21.4 million tons
The share of used tailings is 24% of the total volume.
p. 179, p. 221
EM-MM-150a.2 Total weight of mineral
processing waste, percentage recycled
EM-MM-150a.3 Number of tailings
impoundments, broken down by
MSHA hazard potential
LABOR RELATIONS
EM-MM-310a.1 Percentage of active
workforce covered under collective
bargaining agreements, broken down
by local and foreign employees
The total weight of overburden is 60.5 million tons
(including non-waste).
The share of used overburden is 29% of the total volume
NLMK Group operates one tailing dump. Detailed
information is available at the link https://nlmk.com/
upload/iblock/4dc/TSF-management.pdf
p. 221
p. 221
Without local and foreign employees stucture
p. 136
SECURITY, HUMAN RIGHTS, RIGHTS OF INDIGENOUS PEOPLES
Company doesn’t have such reserves
According to the Company estimates, there is
no presence of indigenous peoples in the regions
where NLMK Group operates
EM-MM-210a.1 Percentage of (1) proved
and (2) probable reserves in or near
areas of conflict
EM-MM-210a.2 Percentage of proved
and probable reserves in or near
indigenous land
EM-MM-210a.3 Discussion of engagement
processes and due diligence practices
with respect to human rights, indigenous
rights, and operation in areas of conflict
COMMUNITY RELATIONS
EM-MM-210b.1 Discussion of process
to manage risks and opportunities
associated with community rights and
interests
EM-MM-210b.2 Number and duration
of non-technical delays
There were no non-technical delays
at Russian assets
ACTIVITY METRICS
EM-MM-000.A Production of (1) metal
ores and (2) finished metal products
Saleble iron ore production: 18.5 mn t
Finished metal products production: 17.41
EM-MM-000.B Total number of employees
NLMK Group’s average 2020 headcount
was 51,900 people
p. 221
p. 221
p. 112, p. 115
p. 112, p. 150
p. 221
p. 221
p. 121
220
221
1
Including NBH.
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Indicator
Reference / Comment
BUSINESS ETHICS & TRANSPERANCY
EM-MM-510a.1 Description of
the management system for
prevention of corruption and bribery
throughout the value chain
The Company has adopted the Code of Corporate Ethics
and Anti-Corruption Policy. Whenever a new version
of the Code of Corporate Ethics or Anti-Corruption Policy
comes into effect, all employees of the Company review
latest version and sign an acknowledgement form.
The Company also expects its business partners to
adhere to basic values and principles of good business
conduct. The Company’s business partners familiarize
themselves with the provisions of the Code of Corporate
Ethics during the qualification and selection of
a counterparty as well as the conclusion of a contract.
EM-MM-510a.2 Production in countries
that have the 20 lowest rankings
in Transparency International’s
Corruption Perception Index
NLMK Group does not have production assets
in countries ranked in one of the last 20 places
in the Transparency International Corruption
Perceptions Index
Page
p. 88
p. 222
GRI INDEX
Indicator
Reference / Comment
Page
Independent verification
GRI 102: General Disclosures
1. ORGANIZATIONAL PROFILE
GRI 102-1 Name of the organization
GRI 102-2 Activities, brands, products,
and services
GRI 102-3 Location of headquarters
GRI 102-4 Location of operations
GRI 102-5 Ownership and legal form
GRI 102-6 Markets served
GRI 102-7 Scale of the organization
GRI 102-8 Information on employees
and other workers
GRI 102-9 Supply chain
GRI 102-10 Significant changes
to the organization and its supply
chain
GRI 102-11 Precautionary Principle
or approach
GRI 102-12 External initiatives
GRI 102-13 Membership of associations
2. STRATEGY
GRI 102-14 Statement from senior
decision-maker
3. ETHICS AND INTEGRITY
GRI 102-16 Values, principles, standards,
and norms of behaviour
GRI 102-17 Mechanisms for advice and
concerns about ethics
4. CORPORATE MANAGEMENT
GRI 102-18 Governance structure
GRI 102-20 Executive-level responsibility
for economic, environmental,
and social topics
The organizational
structure of the Company
can be found on its website
at https://www.nlmk.com/ru/
about/group-structure/
The legal form of all
companies belonging to
NLMK Group is presented
in the About the Report
section.
In the reporting period, there
were no significant changes
in the structure and activities
of the Company.
p. 8
p. 9
p. 44
p. 8, p. 20
p. 20
p. 8, p. 121
p. 121, p. 122
p. 110
p. 110
p. 80
p. 236
p. 236
p. 2
p. 30, p. 88,
p. 96
p. 88, p. 114
p. 48
p. 31
✔
The average headcount
(in total); Staff breakdown
(by segment, region,
contract type, gender, age
and category).
✔
Procurement from suppliers
of goods and materials by
supplier country.
222
223
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Independent verification
Indicator
Reference / Comment
GRI 102-55 GRI content index
GRI 102-56 External assurance
MATERIAL TOPICS
GRI 200 ECONOMIC
GRI 201 ECONOMIC PERFORMANCE
GRI 103 Management Approach
GRI 201-1 Direct economic value
generated and distributed
GRI 201-2 Financial implications
and other risks and opportunities
due to climate change
GRI 202 MARKET PRESENCE
GRI 202-1 Ratios of standard entry
level wage by gender compared
to local minimum wage
GRI 203 INDIRECT ECONOMIC IMPACTS
GRI 103 Management Approach
GRI 203-2 Significant indirect
economic impacts
GRI 204 PROCUREMENT PRACTICES
GRI 204-1 Proportion of spending
on local suppliers
GRI 205 ANTI-CORRUPTION
GRI 103 Management Approach
GRI 205-1 Operations assessed for risks
related to corruption
GRI 205-2 Communication and training
about anti-corruption policies and
procedures
GRI 205-3 Confirmed incidents
of corruption and actions taken
GRI 206 ANTI-COMPETITIVE BEHAVIOR
GRI 206-1 Legal actions for anti-competitive
behavior, anti-trust, and monopoly
practices
GRI 300 ENVIRONMENTAL
GRI 302 ENERGY
GRI 103 Management Approach
GRI 302-1 Energy consumption
within the organization
✔
Employees covered
by collective bargaining
agreements, %.
Indicator
Reference / Comment
GRI 102-21 Consulting stakeholders on
economic, environmental, and social topics
GRI 102-22 Composition of the highest
governance body and its committees
GRI 102-23 Chair of the highest
governance body
GRI 102-24 Nominating and selecting
the highest governance body
GRI 102-25 Conflicts of interest
GRI 102-26 Role of highest governance body
in setting purpose, values, and strategy
GRI 102-27 Collective knowledge of highest
governance body
GRI 102-28 Evaluating the highest
governance body’s performance
GRI 102-29 Identifying and managing
economic, environmental, and social
impacts
GRI 102-30 Effectiveness of risk
management processes
GRI 102-32 Highest governance body’s role
in sustainability reporting
GRI 102-35 Remuneration policies
GRI 102-36 Process for determining
remuneration
GRI 102-37 Stakeholders’ involvement
in remuneration
5. DIALOGUE WITH STAKEHOLDERS
GRI 102-40 List of stakeholder groups
GRI 102-41 Collective bargaining
agreements
GRI 102-42 Identifying and selecting
stakeholders
GRI 102-43 Approach to stakeholder
engagement
GRI 102-44 Key topics and concerns raised
6. REPORTING PRACTICE
GRI 102-45 Entities included in
the consolidated financial statements
GRI 102-46 Defining report content
and topic boundaries
GRI 102-47 List of material topics
GRI 102-48 Restatements of information
GRI 102-49 Changes in reporting
GRI 102-50 Reporting period
GRI 102-51 Date of most recent report
GRI 102-52 Reporting cycle
GRI 102-53 Contact point for questions
regarding the report
GRI 102-54 Claims of reporting in
accordance with the GRI Standards
224
Page
p. 98
p. 54, p. 56,
p. 67
p. 56
p. 53
p. 66
p. 53
p. 58
p. 64
p. 68
p. 80
p. 68
p. 77, p. 79
p. 77, p. 79
p. 77
p. 96
p. 136
p. 96
p. 96
p. 98
p. 214
p. 216
p. 217
p. 219
p. 219
p. 214
p. 214
p. 214
p. 44, p. 93
p. 214
Page
p. 214
p. 129
p. 40
p. 43, p. 132,
p. 133, p. 156
p. 190
p. 125
p. 152
p. 152
p. 110
p. 152
p. 89
p. 88, p. 89
p. 89
p. 89
p. 205
p. 206, p. 207,
p. 208
Independent verification
✔
Investment in external social
programmes; Social spending
for employees at the Russian
assets of NLMK Group.
✔
Average employee salary
at the Group.
✔
Proportion of spending
on local suppliers.
✔
Gross energy consumption
by the Company (excluding
fuel consumption from
renewable sources);
Consumption from
non-renewable fuels
by the Company; Breakdown
of non-renewable fuel
consumption by the Company;
Consumption, generation, and
sale of electricity and thermal
energy by the Company.
225
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Independent verification
Indicator
Reference / Comment
GRI 305-3 Other indirect (Scope 3)
GHG emissions
Page
p. 193
Independent verification
✔
Other indirect (Scope 3)
GHG emissions.
GRI 305-4 GHG emissions intensity
p. 194, p. 195 ✔
GRI 305-5 Reduction of GHG emissions
p. 195
GHG emissions intensity.
✔
Reduction of GHG emissions.
Indicator
GRI 302-3 Energy intensity
Page
p. 208
Reference / Comment
The Company considers
it unhelpful to calculate
the energy intensity
indicator for the Group as
a whole due to different
production specifics at its
companies. This indicator is
calculated only for the main
Russian production site –
NLMK Lipetsk.
GRI 302-4 Reduction of energy consumption
GRI 303 WATER AND EFFLUENTS
GRI 103: Management Approach
GRI 303-1 Interactions with water
as a shared resource
GRI 303-2 Management of water
discharge-related impacts
GRI 303-3 Water withdrawal
p. 210
p. 164
p. 170
p. 166, p. 170
p. 170, p. 171
GRI 303-4 Water discharge
p. 173
✔
Total volume of water
withdrawn; Total volume
of water withdrawn for the
Group by needs, by sources
and by region
✔
Total volume of water
discharge by receiving water
body; total volume of water
discharge by regions
GRI 303-5 Water consumption
p. 170, p. 172 ✔
Total volume of water recycled
GRI 304 BIODIVERSITY
GRI 103: Management Approach
GRI 304-1 Operational sites owned,
leased, managed in, or adjacent to,
protected areas and areas of high
biodiversity value outside protected areas
GRI 304-2 Significant impacts of activities,
products, and services on biodiversity
GRI 304-3 Habitats protected
or restored
GRI 304-4 IUCN Red List species
and national conservation list species
with habitats in areas affected
by operations
GRI G4-MM1 land rehabilitated
GRI 305 EMISSIONS
GRI 103: Management Approach
GRI 305-1 Direct (Scope 1) GHG emissions
GRI 305-2 Energy indirect (Scope 2)
GHG emission
p. 164
p. 183
p. 183
p. 184
p. 174, p. 183
p. 183
p. 188
p. 192
p. 192
✔
Hectares of rehabilitation
carries out of contaminated
land.
✔
Direct GHG emissions
(Scope 1).
✔
Indirect energy GHG emissions
(Scope 2).
NLMK Group companies
do not produce, emit
or use ozone-depleting
substances in its processes,
except for the use as
a reagent in chemical
laboratory analyses in
extremely limited quantities,
as well as for refuelling
compressor equipment,
air conditioning and fire
extinguishing systems.
In the course of
the Company's activities
in the reporting year,
no significant spills were
recorded.
NLMK Group's companies
do not import or export
hazardous waste or
ship it internationally.
Transportation of waste
outside the Group's
premises is carried out by
specialized organizations
with appropriate licenses.
GRI 305-6 Emissions of ozone-depleting
substances (ODS)
GRI 305-7 Nitrogen oxides (NOX),
sulfur oxides (SOX), and other
significant air emissions
GRI 306 EFFLUENTS AND WASTE
GRI 103: Management Approach
GRI 306-1 Water discharge by quality
and destination
GRI 306-2 Waste by type and
disposal method
GRI 306-3 Significant spills
GRI 306-4 Transport of hazardous
waste
GRI 307 ENVIRONMENTAL COMPLIANCE
GRI 103: Management Approach
GRI 103-2: The management approach
and its components
GRI 307-1 Non-compliance
with environmental laws and
regulations
✔
Volume of significant air
emissions by the Company
by substance type.
p. 178
p. 164
p. 173
p. 179, p. 180 ✔
Waste generated by the Group
by hazard class; the amount of
recycled materials processed
in-house; amount of secondary
raw materials recycled by third
parties; waste disposal
at third-party landfills.
p. 164
p. 166
p. 166
✔
Spending on environmental
protection (incl. investments
projects and current
expenditures).
226
227
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Indicator
Reference / Comment
Page
Independent verification
Indicator
Reference / Comment
Page
Independent verification
GRI 308 SUPPLIER ENVIRONMENTAL ASSESSMENT
GRI 103: Management Approach
GRI 308-1 New suppliers that were screened
using environmental criteria
GRI 308-2 Negative environmental
impacts in the supply chain
and actions taken
p. 164
p. 168
p. 168
✔
Suppliers of feedstock,
materials, and equipment
to the Company screened
using environmental criteria
during audits;
Suppliers subject to measures
to improve environmental
compliance following audits
(% of total audits conducted).
GRI 404-3 Percentage of employees
receiving regular performance
and career development reviews
GRI 405 DIVERSITY AND EQUAL OPPORTUNITY
GRI 103: Management Approach
GRI 405-1 Diversity of governance bodies
and employees
GRI 406 NON-DISCRIMINATION
GRI 103: Management Approach
GRI 406-1 Incidents of discrimination
and corrective actions taken
GRI 407 FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
GRI 400 SOCIAL
GRI 401 EMPLOYMENT
GRI 103: Management Approach
GRI 401-1 New employee hires
and employee turnover
GRI 403 OCCUPATIONAL HEALTH AND SAFETY
GRI 103: Management Approach
GRI 403-1 Occupational health and safety
management system
GRI 403-2 Hazard identification, risk
assessment, and incident investigation
GRI 403-3 Occupational health services
GRI 403-4 Worker participation,
consultation, and communication
on occupational health and safety
GRI 403-5 Worker training
on occupational health and safety
GRI 403-6 Promotion of worker health
GRI 403-7 Prevention and mitigation
of occupational health and safety impacts
directly linked by business relationships
GRI 403-8 Workers covered
by an occupational health and safety
management system
GRI 403-9 Work-related injuries
GRI 403-10 Work-related ill health
GRI 404 TRAINING AND EDUCATION
GRI 103: Management Approach
GRI 404-1 Average hours of training
per year per employee
GRI 404-2 Programs for upgrading
employee skills and transition
assistance programs
228
p. 120
p. 122, p. 123 ✔
p. 140
p. 140
p. 142
p. 135
p. 142
p. 142
p. 133, p. 134
p. 142
p. 142
p. 142, p. 146,
p. 147
p. 134
p. 127
p. 127
p. 127, p. 129,
p. 131, p. 133
✔
LTIFR for employees
and contractors; TRIFR for
employees and contractors;
Number of occupational
accidents with employees
and contractors; Total
man-hours worked for
employees and contractors.
GRI 103: Management Approach
GRI 407-1 Operations and suppliers
in which the right to freedom of association
and collective bargaining may be at risk
GRI 408 CHILD LABOR
GRI 103: Management Approach
GRI 408-1 Operations and suppliers
at significant risk for incidents
of child labour
GRI 409 FORCED OR COMPULSORY LABOR
GRI 103: Management Approach
GRI 409-1 Operations and suppliers
at significant risk for incidents
of forced or compulsory labour
GRI 411 RIGHTS OF INDIGENOUS PEOPLES
GRI 411-1 Incidents of violations involving
rights of indigenous peoples
GRI 412 HUMAN RIGHTS ASSESSMENT
GRI 412-1 Operations that have been
subject to human rights reviews
or impact assessments
Company conciders there
is no presence of indigenous
peoples in the regions where
NLMK Group operates.
The question about
possible violations
of human rights is included
in the annual corporate
survey "Pulse NLMK",
which covers the largest
enterprises of the company.
In the reporting year,
there were no cases of
human rights violations.
GRI 412-2 Employee training on human
rights policies or procedures
GRI 413 LOCAL COMMUNITIES
GRI 103: Management Approach
GRI 413-1 Operations with local community
engagement, impact assessments, and
development programs
GRI 413-2 Operations with significant
actual and potential negative impacts
on local communities
No such operations.
p. 125, p. 126 ✔
Employees who received
a regular performance.
p. 120
p. 121, p. 122
p. 114
p. 116
p. 114
p. 114, p. 116
p. 114
p. 114, p. 116
p. 114
p. 114, p. 116
p. 115
p. 114
p. 114
p. 152
p. 97, p. 154,
p. 155
229
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
GRI INDICATOR CONSOLIDATION BOUNDARIES
The GRI standard disclosures
101 and 102 set out the reporting
principles for determining the quality
content, and also include information
about the company’s profile, strategy, ethics and integrity, management, stakeholder
engagement practices, and are collected by the NLMK Group. The standard GRI
disclosure of the 103 series cover management approaches for all significant topics
defined in the 200, 300, 400 series.
Indicator
Russia Flat Products
(Russia)
Russia Long Products
(Russia)
Mining Division
(Russia)
Information on employees and other workers
(GRI 102-8)
Supply chain
(GRI 102-9)
Collective bargaining agreements
(GRI 102-41)
The management approach
and its components
(GRI 103-2)
Direct economic value
generated and distributed
(GRI 201-1)
Financial implications and other risks
and opportunities due to climate change
(GRI 201-2)
Ratios of standard entry level wage by gender
compared to local minimum wage
(GRI 202-1)
Market presence;
average employee salary at the Group
(GRI 203-2)
Procurement
(GRI 204-1)
Anti-corruption
(GRI 205-1, 205-2, 205-3)
Anti-competitive behaviour
(GRI 206-1)
Energy
(GRI 302-1)
Energy
(GRI 302-4)
Water
(GRI 303-1, 303-2, 303-3, 303-4, 303-5)
Biodiversity
(GRI 304-1, 304-2, 304-3, 304-4, G4-MM1)
Emissions
(GRI 305-1, 305-2, 305-3, 305-4, 305-5)
Emissions
(GRI 305-7)
Effluents and waste
(GRI 306-1, 306-2)
✔
✔1
✔
✔1
✔1
✔
✔1
✔
✔1
✔
✔
✔1
✔2
✔1
✔1
✔1
✔1
✔1
✔
✔3
✔
✔4
✔
✔
✔
✔
✔3
✔
✔
✔5
–
✔4
✔4
✔5
✔4
✔4
✔
✔6
✔
✔
✔
✔
✔
✔
✔6
✔
✔
✔
–
✔
✔
✔
✔
✔
NLMK USA
DanSteel
and plate distribution
network
NBH Segment
NLMK Clabecq S.A.,
NLMK Verona SpA,
NLMK La Louviere S.A.,
NLMK Strasbourg S.A.
Other companies
Service
and Supporting
Business
✔
–
✔
✔
✔
✔
–
✔
–
✔
✔
✔
–
✔
✔
✔
✔
✔
✔
–
✔
✔
✔
✔
–
✔
–
✔
✔
✔
–
✔
✔
✔
✔
✔
✔
–
✔
✔
✔
✔
–
✔
–
✔
✔
✔
–
✔
✔
✔
✔
✔
✔
–
✔8
–
✔9
✔
–
✔
–
✔
✔
–
–
–
–
✔9
–
–
✔
–
✔
✔11
✔12
✔
✔13
✔
–
✔
✔
–
–
✔11
✔11
✔14
✔11
✔11
230
231
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Indicator
Russia Flat Products
(Russia)
Russia Long Products
(Russia)
Mining Division
(Russia)
NLMK USA
DanSteel
and plate distribution
network
NBH Segment
NLMK Clabecq S.A.,
NLMK Verona SpA,
NLMK La Louviere S.A.,
NLMK Strasbourg S.A.
Other companies
Service
and Supporting
Business
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔10
–
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔15
✔16
✔17
✔
✔
✔
✔
✔
✔
✔
✔
Environmental compliance
(GRI 307-1)
Supplier environmental assessment
(GRI 308-1, 308-2)
Employment
(GRI 401-1)
Occupational health and safety
(GRI 403-1, 403-2, 403-3, 403-4, 403-5,
403-6, 403-7, 403-8, 403-9, 403-10)
Training and education
(GRI 404-1, 404-2, 404-3)
Diversity and equal opportunity
(GRI 405-1)
Non-discrimination
(GRI 406-1)
Freedom of association
and collective bargaining
(GRI 407-1)
Child labor
(GRI 408-1)
Forced or compulsory labor
(GRI 409-1)
Rights of indigenous peoples
(GRI 411-1)
Human rights assessment
(GRI 412-1, 412-2)
Local communities
(GRI 413-1)
✔
✔
✔
✔1
✔1
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔5
✔5
✔1
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔7
✔
✔
✔
✔
✔
✔
✔
✔
1 Excluding NLMK Trading SA
2 Only NLMK Lipetsk
3 Excluding NLMK SORT and Vtorchermet NLMK
4 Excluding NLMK-URAL Service and NLMK SORT
5 Excluding NLMK SORT
6 Excluding Stagdok and Dolomit
7 Excluding Stagdok
8 Excluding NLMK Jemappes Steel Center, NLMK Profil Batiment and NLMK Liege Steel Distribution
9 Only NLMK Manage
10 Excluding NLMK Spain Steel, NLMK Belgium HoldingsSTRIP and Commercial-Plate-WorldQ&T
11 Only VIZ
12 Excluding VIZ-Broker, Blinovskoye, GK Metallurg, Ural'skaya zdravnica Nizhnie Sergi, Demidov Centre, GOK Usinskiy-3
13 Excluding NLMK India Service Center Pvt Ltd
14 Only VIZ and NLMK India Service Center Pvt Ltd
15 Excluding Blinovskoye, GK Metallurg, Ural'skaya zdravnica Nizhnie Sergi, Demidov Centre, GOK Zhernovsky-1, GOK Usinskiy-3
16 Only Novolipetsk metallobaza, NLMK-Engineering, NLMK-IT, NLMK-Svyaz, VIZ and NLMK India Service Center Pvt Ltd
17 Only Novolipetsk metallobaza, NLMK-Engineering, STROITEL'NO-MONTAZHNYJ TREST NLMK, NLMK-IT, NLMK-Svyaz, VIZ, Gazobeton-48 and
NLMK INDIA Service Center Pvt Ltd
232
233
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Independent Limited Assurance Report
To the Management of Novolipetsk Steel:
Introduction
We have been engaged by Novolipetsk Steel (hereinafter – the “Company”) to provide limited
assurance on the selected information listed below and included in the 2020 Annual Report of the
Company (hereinafter – the “Annual Report”). The Annual Report represents information related to the
Company, its subsidiaries and a joint venture (hereinafter together – the “Group”).
Selected information
We assessed quantitative information specified in Appendix 1 (hereinafter – the “Selected
Information”), that is disclosed in the Annual Report and referred to the GRI content index.
The scope of our assurance procedures was limited to the Selected Information for the year ended
31 December 2020 only. We have not performed any procedures with respect to earlier periods or any
other items included in the Annual Report and, therefore, do not express any conclusion thereon.
Reporting criteria
We assessed the Selected Information using relevant criteria, including reporting requirements, in the
respective GRI Standards 102, 103, 201, 202, 204, 302, 303, 304, 305, 306, 308, 401, 403, 404
(hereinafter – the “GRI Standards”) published by the Global Reporting Initiative (GRI) (hereinafter – the
“Reporting Criteria”). We believe that the Reporting Criteria are appropriate given the purpose of our
limited assurance engagement.
The Group’s responsibilities
Management of the Group is responsible for:
•
•
•
•
designing, implementing and maintaining internal control relevant to the preparation of the
Selected Information that is free from material misstatement, whether due to fraud or error;
establishing internal methodology and guidelines for preparing and reporting the Selected
Information in accordance with the Reporting Criteria;
preparation, measuring and reporting the Selected Information in accordance with the Reporting
Criteria; and
accuracy, completeness and presentation of the Selected Information.
Our responsibilities
We are responsible for:
•
•
•
planning and performing the engagement to obtain limited assurance about whether the
Selected Information is free from material misstatement, whether due to fraud or error;
forming an independent conclusion, based on the procedures we have performed and the
evidence we have obtained; and
reporting our conclusion to the management of the Group.
This report, including our conclusion, has been prepared solely for the management of the Group in
accordance with the agreement between us, to assist management in reporting on the Group’s
sustainability performance and activities. We permit this report to be disclosed in the Annual Report,
which may be published on the Company’s website1, to assist management in responding to their
governance responsibilities by obtaining an independent limited assurance report in connection with
the Selected Information. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the management of the Group for our work or this report.
Professional standards applied and level of assurance
We performed a limited assurance engagement in accordance with International Standard on
Assurance Engagements 3000 (Revised) “Assurance Engagements other than Audits and Reviews of
Historical Financial Information’’ issued by the International Auditing and Assurance Standards Board.
A limited assurance engagement is substantially less in scope than a reasonable assurance
engagement in relation to both the risk assessment procedures, including an understanding of internal
control, and the procedures performed in response to the assessed risks.
Our independence and quality control
We have complied with the independence and other ethical requirements of the International Code of
Ethics for Professional Accountants (including International Independence Standards) issued by the
International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour, and the ethical requirements of the Auditor’s Professional Ethics Code and
Auditor’s Independence Rules that are relevant to our limited assurance engagement in respect of the
Selected information in the Russian Federation. We have fulfilled our other ethical responsibilities in
accordance with these requirements
Our firm applies International Standard on Quality Control 1 and accordingly maintains a
comprehensive system of quality control including documented policies and procedures regarding
compliance with ethical requirements, professional standards and applicable legal and regulatory
requirements.
Work done
We are required to plan and perform our work in order to consider the risk of material misstatement of
the Selected Information. In doing so, we:
•
•
•
•
made enquiries of the Group’s management;
conducted interviews of personnel responsible for the preparation of the Annual Report and
collection of underlying data;
performed analysis of the relevant internal methodology and guidelines, gaining an
understanding of the design of the key systems, processes and controls for preparing and
reporting the Selected Information; and
performed limited substantive testing on a selective basis of the Selected Information to check
that data had been appropriately measured, recorded, collated and reported.
1 The maintenance and integrity of the Company’s website is the responsibility of management; the work carried out by us does
not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred
to the reported Selected Information or Reporting Criteria when presented on the Company’s website.
AO PricewaterhouseCoopers Audit
White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047
T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru
234
2
235
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Reporting and measurement methodologies
Reporting and measurement methodologies
The range of different, but acceptable under the GRI Standards, measurement and reporting
The range of different, but acceptable under the GRI Standards, measurement and reporting
techniques can result in materially different reporting outcomes that may affect comparability with other
techniques can result in materially different reporting outcomes that may affect comparability with other
organisations. The Selected Information should therefore be read in conjunction with the methodology
organisations. The Selected Information should therefore be read in conjunction with the methodology
used by management in preparing the Annual Report, described therein, and which the Group is solely
used by management in preparing the Annual Report, described therein, and which the Group is solely
responsible for.
responsible for.
Limited assurance conclusion
Limited assurance conclusion
Based on the procedures we have performed and the evidence we have obtained, nothing has come to
Based on the procedures we have performed and the evidence we have obtained, nothing has come to
our attention that causes us to believe that the Selected Information for the year ended 31 December
our attention that causes us to believe that the Selected Information for the year ended 31 December
2020 has not been prepared, in all material respects, in accordance with the Reporting Criteria.
2020 has not been prepared, in all material respects, in accordance with the Reporting Criteria.
22 March 2021
22 March 2021
Moscow, Russian Federation
Moscow, Russian Federation
A. B. Fomin, certified auditor (licence No. № 01-000059),
AO PricewaterhouseCoopers Audit
A. B. Fomin, certified auditor (licence No. № 01-000059),
AO PricewaterhouseCoopers Audit
Audited entity: Novolipetsk Steel PJSC
Audited entity: Novolipetsk Steel PJSC
Independent auditor: AO PricewaterhouseCoopers Audit
Independent auditor: AO PricewaterhouseCoopers Audit
Record made in the Unified State Register of Legal Entities on 9 July
2002 under State Registration Number 1024800823123
Record made in the Unified State Register of Legal Entities on 9 July
2002 under State Registration Number 1024800823123
Registered by the Government Agency Moscow Registration Chamber
on 28 February 1992 under Nо. 008.890
Registered by the Government Agency Moscow Registration Chamber
on 28 February 1992 under Nо. 008.890
Taxpayer Identification Number 4823006703
Taxpayer Identification Number 4823006703
2, Metallurgov sq., Lipetsk, 398040, Russian Federation
2, Metallurgov sq., Lipetsk, 398040, Russian Federation
Record made in the Unified State Register of Legal Entities on
Record made in the Unified State Register of Legal Entities on
22 August 2002 under State Registration Number 1027700148431
22 August 2002 under State Registration Number 1027700148431
Taxpayer Identification Number 7705051102
Taxpayer Identification Number 7705051102
Member of Self-regulatory organization of auditors Association
«Sodruzhestvo»
Member of Self-regulatory organization of auditors Association
«Sodruzhestvo»
Principal Registration Number of the Record in the Register of Auditors
and Audit Organizations – 12006020338
Principal Registration Number of the Record in the Register of Auditors
and Audit Organizations – 12006020338
Appendix 1
The Selected Information
GRI disclosure
Information
102-8 Information on employees
and other workers
• The average headcount;
• Staff breakdown (by segment, region, contract type,
gender, age and category).
102-9 Supply chain
• Procurement from suppliers of goods and materials by
supplier country.
102-41 Collective bargaining
agreements
103-2 The management
approach and its components
• Number of employees covered by collective bargaining
agreements, %.
• Spending on environmental protection (incl. investments
projects and current expenditures).
201-1 Direct economic value
generated and distributed
Investment in external social programmes;
•
• Social spending for employees at the Russian assets of
202-1 Ratios of standard entry
level wage by gender compared
to local minimum wage
204-1 Proportion of spending on
local suppliers
302-1 Energy consumption
within the organization
303-3 Water withdrawal
303-4 Water discharge
the Group.
• Average employee salary at the Group.
• Proportion of spending on local suppliers.
• Gross energy consumption by the Group (excluding
consumption from renewable fuels);
• Consumption from non-renewable fuels by the Group;
• Breakdown of non-renewable fuel consumption by the
Group;
• Consumption, generation, and sale of electricity and
thermal energy by the Group.
• Total volume of water withdrawn;
• Total volume of water withdrawn for the Group by needs,
by sources and by region.
• Total volume of water discharge by receiving water body;
• Total volume of water discharge by regions.
303-5 Water consumption
• Total volume of water recycled.
305-1 Direct (Scope 1) GHG
emissions
305-2 Energy indirect (Scope 2)
GHG emissions
305-3 Other indirect (Scope 3)
GHG emissions
• Direct GHG emissions (Scope 1).
•
Indirect energy GHG emissions (Scope 2).
• Other indirect (Scope 3) GHG emissions.
305-4 GHG emissions intensity
• GHG emissions intensity.
236
3
3
4
237
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
GRI disclosure
Information
305-5 Reduction of GHG
emissions
305-7 Nitrogen oxides (NOx),
sulphur oxides (SOx), and other
significant air emissions
306-2 Waste by type and
disposal method
• Reduction of GHG emissions.
• Volume of significant air emissions by the Group by
substance type.
• Waste generated by the Group by hazard class;
• Secondary raw materials recycled by the Group;
• Secondary raw materials recycled third-party
organizations;
• Waste disposal at third-party landfills.
308-2 Negative environmental
impacts in the supply chain and
actions taken
• Suppliers of feedstock, materials, and equipment to the
Group screened using environmental criteria during audits;
• Suppliers subject to measures to improve environmental
compliance following audits (% of total audits conducted).
401-1 New employees hires and
employee turnover
403-9 Work-related injuries
404-3 Percentage of employees
receiving regular performance
and career development reviews
G4-MM1 Amount of land
disturbed or rehabilitated
• New employees hires and employee turnover.
• LTIFR for employees and contractors;
• TRIFR for employees and contractors;
• Number of occupational accidents, employees and
contractors;
• Total man-hours worked for employees and contractors.
• Employees who received a regular performance.
• Hectares of land rehabilitated.
NLMK’S INTERNAL AUDIT SERVICE CONCLUSION
ON THE RISK MANAGEMENT AND INTERNAL
CONTROL IN THE COMPANY IN 2020
In 2020, the Internal Audit Service evaluated the reliability and efficiency of risk management and internal control system
to confirm the existence and efficient functioning of the controls necessary to manage material risks in NLMK’s key business
processes.
In its activities, the Internal Audit Service was guided by the Federal Law “On Joint-Stock Companies”, the Bank of Russia
Corporate Governance Code, the Regulations on the Audit Department, International Professional Standards of Internal Audit,
internl audit guidelines and practices, documents of international professional organizations in the field of risk management
and internal control, including ISO 31000:2018, COSO ERM: 2017 and COSO 2013, as well as internal regulatory documents
of the NLMK Audit Department.
In the course of the evaluation, the Internal Audit Service considered whether the Company has functioning controls in place,
that are necessary to implement in practice the relevant principles of material risk management and internal control
in the following processes in the Company: Supply of raw materials, Repairs, Production, Operational efficiency, Contractor
qualification, Procurement procedures, Conclusion of contracts, Compliance with anti-corruption requirements, etc.
Following the evaluation, we have not found any facts that would give us reason to believe that the controls in question preclude
the Company from managing its material risks.
E. Sidorova
Audit Director
(Head of the Internal Audit Service)
Lipetsk, 10 March 2021
238
239
5
ANNUALREPORT 2020
Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
PARTICIPATION IN INDUSTRY ASSOCIATIONS
AND EXTERNAL INITIATIVES
RESPONSIBILITY STATEMENT
NLMK management, having considered the information available regarding the activities of the Company, confirms its
responsibility for:
Preparation and reliability of the Group’s consolidated financial statements, prepared in accordance with IFRS, as of December
31, 2020 and also for the year ended on that data, within balance sheets, profit and loss statements, cash flow statements,
equity statements and the statements on the total income of shareholders and notes to the consolidated financial statements.
Management confirms the reliability of NLMK’s financial status, operational results and cash flow results, as well as that of its
companies and dependent companies in the consolidated financial statements.
The completeness and correctness of the information submitted in the NLMK Group Annual Report for 2020, specifically
the information on the operational results of NLMK Group, the results of its strategic development, risks, and events which
in the near future may have impact on the operations of the Group.
The Company management confirms that the operational and financial indices fully reflect the outcome of NLMK Group’s
operations in 2020 and main changes regarding the previous periods as well as give a comprehensive representation
on the development of NLMK and its companies and dependent companies.
G. Fedorishin
CEO (Chairman of the Management Board)
NLMK Group plays an active part
in the life of the professional
community, helping to address topical
issues in the industry, including
sustainability matters. Participation
in external initiatives is a priority
for NLMK Group.
Representatives of the Group are not only active in a number of industry
associations and relevant commissions and committees, they also head some
of them, which allows the Group to play an active role in shaping the views and values
of the business community. For instance, NLMK Group Chairman of the Board
of Directors Vladimir Lisin is also Chairman of the Commission on Metals
and the Committee on Taxation Policy as well as member of the Management Bureau
of the Russian Union of Industrialists and Entrepreneurs (RSPP).
NLMK GROUP’S PARTICIPATION IN INDUSTRY ASSOCIATIONS
AND EXTERNAL INITIATIVES GRI 102-12, 102-13
Association/Initiative
NLMK Group’s status
World Steel Association, an international association
of iron and steel product manufacturers
Membership in the Association
2018 signatory to the Sustainable Development Charter of the World
Steel Association
Participation in conferences and seminars enabling the sharing
of best practices in occupational health and safety
Provision of information about sustainability indicators
UN Global Compact
Participant in the Global Initiative
The Russian Union of Industrialists
and Entrepreneurs (RSPP)
Russian Steel Association
European Steel Association (EUROFER)
Council of Electricity Consumers
of the Russian Federation
Expert Council of the Committee on Transport
and Construction of the State Duma
of the Russian Federation
RUSLOM.COM (Non-Profit Partnership
National Self-Regulatory Organization
for the Recycling of Ferrous
and Non-Ferrous Metal Scrap and Waste
and Recycling of Vehicles)
Membership in the Management Bureau and the Board
Chairmanship of the Commission on Metals
Participation in other Commissions and Committees, including:
the Commission on Mining, the Committee on Corporate Social
Responsibility and Demographic Policies, the Committee on
Vocational Training and Qualifications, the Committee on Competition
Development, Committee on Ecology and Environment Management,
Committee on Climate Policy and Carbon Regulation
President and Vice President of the Association
Membership in all commissions of the Association, including
the Commission for protection of labour, industrial and environmental
safety
Membership in the Association and on the Board
Participation in working groups
Membership in the Council
Membership in the Council
Participation in the Council as an expert
Party to the Partnership
Anti-Corruption Charter of Russian Business
Party to the Charter
Steel Construction Development Association
Participation in the Association
240
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
REPORT ON COMPLIANCE WITH THE ‘DIRECTIVE
ON INFORMATION DISCLOSURE BY SECURITY
ISSUERS‘
No
Regulation
Reference
to the clause
Status
of compliance
Comments
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Information is represented in part
“About Company”, section Company
Profile
Information is represented in part
“About Company”, section Strategy 2022,
2020 performance review
Information is represented in part
“About Company”, section Strategy in
action
Information is represented in in
Appendix
Information is represented in part
“About Company”, section Strategy 2022
Information is represented in part
“Corporate governance”, section
Information for shareholders and
investors and Appendix
Information is represented in part
“Corporate governance”, section
Operational control and risk
management
Information is represented in Appendix
Information is represented in Appendix
Information is represented in part
“Corporate governance”, section Board
of Directors
Compliance
ensured
Information is represented in part
“Corporate governance”, section
Management Board
1
2
3
4
5
6
7
8
9
10
11
Information about Joint-stock
company position in the industry
Information about strategy
in joint-stock company development
Report of the Board on results
of joint-stock company strategy
development
Information about consumption
of energy resources
Information about development
perspectives
Report on dividends declared
70.3.
70.3.
70.3.
70.3.
70.3.
70.3.
Information about key risk factors
70.3.
70.3.
70.3.
70.3.
70.3.
List of transactions which are
recognized as major transactions in
line with the Federal Law “On Joint-
stock Companies”
List of transactions recognized as
interested-party transactions in line
with the Federal Law “On Joint-stock
Companies”
Composition of the Board of Directors,
changes in Composition of the Board
of Directors, information about Board
of Directors members, Board of
Directors members transactions with
company shares
Information about the person holding
the position (exercising the functions)
of the sole executive body of
the Company and the members
of the collegial executive body,
transactions made by the person
holding the position (exercising
functions) of the sole executive body
and (or) members of the collegial
executive body for the acquisition or
disposal of shares of the joint-stock
company
12
Joint-stock company policy in
the field of remuneration and (or)
compensation of expenses
70.3.
Compliance
ensured
Information is represented in part
“Corporate governance”, section Report
on remuneration paid to governing
bodies
No
Regulation
Reference
to the clause
Status
of compliance
Comments
13
14
15
16
17
18
19
20
21
Report on compliance with
the Corporate Governance Code
principles and recommendations
Information on the approval of
the annual report by the general
meeting of shareholders or the board
of directors of a joint-stock company
Corporate Governance Code:
Statement by the board of directors
(supervisory board) of the joint-
stock company on compliance with
corporate governance principles
stated in the Corporate Governance
Code, and if such principles are not
followed by the joint-stock company
or are not fully respected by them,
indicating these principles and a brief
description of what part they are not
observed
Corporate Governance Code: a brief
description of the most significant
aspects of the corporate governance
model and practice in a joint-stock
company
Corporate Governance Code:
Description of the methodology
by which the joint-stock company
assessed compliance with corporate
governance principles enshrined
in the Corporate Governance Code
Corporate Governance Code:
Explanation of key reasons, factors
and (or) circumstances that should
be specific, due to which the joint-
stock company does not comply or
does not fully comply with corporate
governance principles enshrined in
the Corporate Governance Code
Corporate Governance Code:
Description of corporate governance
mechanisms and tools that are used
by the joint-stock company instead of
those recommended by the Corporate
Governance Code
Corporate Governance Code:
Expected actions and activities of
the joint-stock company to improve
the corporate governance model and
practice, indicating the timing for
the implementation of such actions
and activities
Section on the status of net assets,
if at the end of the second reporting
year or each subsequent reporting
year the value of the net assets of
the joint-stock company is less than
its authorized capital
70.3.
70.3.
70.4.
70.4.
70.4.
70.4.
70.4.
70.4.
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Compliance
ensured
Information is represented in Appendix
Information is represented in Appendix
Information is represented in Appendix
Information is represented in Appendix
Information is represented in Appendix
Compliance
ensured
Information is represented in Appendix
Compliance
ensured
Information is represented in Appendix
Compliance
ensured
Information is represented in Appendix
70.5.
Not applicable
–
242
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Company name
Address
Activity
NLMK Lipetsk share
in charter capital, %
1
16.
17.
18.
2
NLMK Overseas Holdings
Limited Liability Company
3
Lipetsk, Russia
Novolipetskaya Metallobaza
Limited Liability Company
NLMK Construction and
Assembly Trust Limited
Liability Company
Lipetsk, Russia
Lipetsk, Russia
5
100
100
100
4
Developing the growth
strategy for NLMK Group
companies, supporting
relations between the Group’s
Russian and international
businesses
Manufacturing of plastic
and steel products
Contracting of industrial,
housing, utilities, cultural
services, and road
construction works.
Construction of health
facilities and household
natural gas supply lines
19.
20.
NLMK Trading House,
Limited Liability Company
Uralvtorchermet,
Limited Liability Company
AFFILIATED COMPANIES
21.
Neptune Limited Liability
Company
Moscow, Russia
Sale of NLMK Group products
100
Yekaterinburg, Sverdlovsk
Region, Russia
Consulting services re
commercial activities,
management, investing
in securities, leasing
of assets
Lipetsk, Russia, 398005,
1C Adm. Makarova St.,
Office 35
Sports and recreation
services
100
25
NLMK COMPANIES AND AFFILIATES
AS OF 31.12.2020
No.
Company name
Address
Activity
NLMK Lipetsk share
in charter capital, %
1
2
SUBSIDIARY COMPANIES
3
4
1.
Altai-Koks Joint-Stock Company
Zarinsk, Altaisky Region,
Russia
Production and marketing
of coke and by-products,
generation and marketing
of heat and electric power
Dolomit Joint-Stock Company
Stoilensky Mining and
Beneficiation Plant
Joint-Stock Company
Studenovskaya Joint-Stock
Mining Company
Dankov, Lipetsk Region,
Russia
Mining and processing
of dolomite
Stary Oskol, Belgorod
Region, Russia
Mining and processing of
iron ore and other minerals
Studenovskaya industry
area, Vvedensky local
council, Lipetsk District,
Lipetsk Region, Russia
Production of fluxing
limestone for steelmaking,
process limestone for
the sugar industry,
lime-containing materials
and crushed stone for
construction and roadwork
5
100
100
100
100
NLMK Engineering Joint-Stock
Company
NLMK Ural Joint-Stock Company
Lipetsk, Russia
Design and survey operations
100
Revda,
Sverdlovsk Region, Russia
Production of long steel
stock, hot-rolled and forged
flat steel
92.59
VIZ-Steel Limited Liability
Company
Vtorchermet NLMK
Limited Liability Company
Zhernovsky-1 Mining and
Processing Complex
Limited Liability Company
Hotel Metallurg
Limited Liability Company
Yekaterinburg,
Sverdlovsk Region, Russia
Production and marketing
of electrical steel
Yekaterinburg,
Sverdlovsk Region, Russia
Collection, processing,
and sales of ferrous
and non-ferrous scrap
Novokuznetsk,
Kemerovo Region, Russia
Entire range of works related
to coal mining and processing
Lipetsk, Russia
Hotel services
NLMK Information Technologies
Limited Liability Company
Lipetsk, Russia
NLMK Kaluga
Limited Liability Company
Vorsino,
Borovsk District, Kaluga
Region, Russia
NLMK Metalware
Limited Liability Company
Beryozovsky, Sverdlovsk
Region, Russia
IT, computing, and telecom
services
Production of steel,
re-rolling stock (billets),
hot-rolled and forged flats,
unpainted and pre-painted
cold-rolled flat steel
Production of wire,
wire products, fasteners,
and springs
NLMK Communications
Limited Liability Company
NLMK Long Products
Limited Liability Company
Lipetsk, Russia
Telecom services
Yekaterinburg, Sverdlovsk
Region, Russia
Managing company, trading
and procurement activities
100
100
100
100
100
100
100
100
100
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
244
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
USAGE OF ENERGY RESOURCES (FUELS AND COALS)
OF NLMK (NOVOLIPETSK) IN 2019–2020
Name
Electric energy
Natural gas
Heating energy
Gas oil
Benzine
Heating oil
Coking coal
Item
mln kWth
mln of RUB with VAT
mln m3.
mln of RUB with VAT
GCal
mln of RUB with VAT
‘000 liters
mln of RUB with VAT
t
mln of RUB with VAT
t
mln of RUB with VAT
‘000 t
mln of RUB with VAT
2020
2,555
3,713
2,044
11,377
24,237
41
22,311
899
253
14
3,101
16
4,848
36,071
2019
2,442
3,924
2,145
11,689
84,837
146
21,967
930
294
16
1,115
6
4,736
50,375
Change, %
5
−5
−5
−3
−71
−72
2
−3
−14
−10
178
169
2
−28
LIST OF TRANSACTIONS PERFORMED BY NLMK
IN 2020 RECOGNIZED AS MAJOR TRANSACTIONS
IN LINE WITH THE FEDERAL LAW "ON JOINT-STOCK
COMPANIES" AND OF OTHER TRANSACTIONS
FALLING UNDER THE EXTENDED PROCEDURE
FOR APPROVING MAJOR TRANSACTIONS IN LINE
WITH THE COMPANY’S CHARTER
In 2020, NLMK did not perform any
transactions that the Federal Law
“On Joint-Stock Companies”
recognizes as major transactions. NLMK’s Charter does not specify any additional
cases falling under the extended procedure for approval of major transactions
in line with the Federal Law “On Joint-Stock Companies”.
LIST OF TRANSACTIONS PERFORMED
BY NLMK IN 2020 RECOGNIZED
AS INTERESTED-PARTY TRANSACTIONS
IN LINE WITH THE FEDERAL LAW
"ON JOINT-STOCK COMPANIES"
An interested-party transaction
is a transaction involving an interest
of a member of the Board of Directors,
the CEO (Chairman of the Management
Board), the Interim or Acting CEO
(Chairman of the Management Board),
a member of the Management Board
of the Company or a controlling
entity of the Company, or an entity
entitled to give binding instructions
to the Company in accordance
with the Federal Law “On Joint-Stock
Companies”.
A resolution on consent to an interested-
party transaction shall be passed
by the Board of Directors
of the Company, unless otherwise
stipulated in the Federal Law
“On Joint-Stock Companies”.
A resolution on consent to such
a transaction shall be passed
by the Company’s Board of Directors
by the majority of votes of the directors
who are not interested in the transaction,
and who are not, and have not been,
within 1 year prior to such a resolution:
● The CEO (Chairman of the Management Board), the Interim or Acting CEO
(Chairman of the Management Board), the executive manager of the Company,
a member of the Management Board, a person holding offices in management
bodies of the managing entity.
● A person whose spouse, parents, children, full-blood and half-blood brothers
and sisters, adoptive parents, and adoptees are persons holding offices
in the said management bodies of the Company, managing entity of the Company
or holding the office of a manager of the Company.
● A controlling entity of the Company or the Company’s managing organization
(manager) entrusted with the functionality of the Company’s sole executive body
or entitled to give mandatory instructions to the Company.
● Resolution on consent to an interested-party transaction shall be passed
by the General Meeting of Shareholders by the majority of votes of all
the shareholders (owners of the Company’s voting shares participating
in the voting) who are not interested in the transaction, in the following cases:
● In case a transaction or several related transactions are made in respect
of the property with a book value (quotation price of the acquired property)
of 10 or more percent of the book value of the Company’s assets according
to its accounting (financial) statements as of the latest reporting date.
● If a transaction or several related transactions involve the sale of common
shares keeping records of over two percent of the common shares distributed
by the Company earlier, and common shares which earlier distributed securities
convertible into shares can be converted into, unless the Charter provides
for a lower number of shares.
In 2020, neither the General Meeting of Shareholders nor the Board of Directors
passed resolutions regarding interested-party transactions.
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
REPORT ON COMPLIANCE WITH THE CORPORATE
GOVERNANCE CODE PRINCIPLES
AND RECOMMENDATIONS
The present report on observance
of principles and recommendations
of the Corporate Governance Code
was reviewed by NLMK’s Board
of Directors at the 22.03.2021 meeting
[MoM No. 279].
The Board of Directors confirms that
the data given in the present report
contain complete and reliable information
on the Company’s observance
of principles and recommendations
of the Corporate Governance Code
in 2020.
A detailed description of the key
aspects of the corporate governance
model and practices is presented in the Corporate Governance section
of the Annual Report.
Information on compliance with specific principles and key recommendations
of the Corporate Governance Code is presented in the table below in the format
recommended for use by the Bank of Russia.
The methodology for evaluating NLMK's compliance with the principles of corporate
governance enshrined in the Corporate Governance Code is based
on the Recommendations for compiling reports on compliance with Corporate
Governance Code principles and recommendations (Letter of the Bank of Russia
No. IN-06-52/8 dd. 17 February 2016).
Explanations of non-compliance with the criteria of the corporate governance
principles, a description of corporate governance mechanisms and tools, and plans
for its improvement are given in the table below, as well as in the Corporate
Governance section of the Annual Report.
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
1.1
1.1.1.
1.1.2.
The Company shall provide equal and fair treatment to all shareholders exercising their right to participate
in the Company governance.
The Company
creates the most
favourable conditions
for shareholders
to participate in
the General Meeting
of Shareholders,
to elaborate
an informed position on
General Meeting agenda
items, and to coordinate
their actions, as well as
a possibility to express
their opinions in relation
to the items under
consideration.
The procedure of
notifying about
upcoming General
Meetings and
submission of materials
for the General
Meeting enables
shareholders to get
properly prepared for
participation therein.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Company’s internal
document approved by
the General Meeting and
regulating the General Meeting
procedures is publicly available.
2. The Company provides
an accessible way of
communication with
the Company, such as
a hotline, e-mail, or web-based
message board, which allows
shareholders to express their
opinion and ask questions
about an agenda in the course
of the General Meeting
preparation. The Company
ensured the compliance with
the above-mentioned criteria
shortly before the convocation
of every General Meeting
within the reporting period.
1. A notice of the General Meeting
of Shareholders is published
on the Company’s website
at least 30 days ahead of
the date of the meeting.
2. The notice of the General
Meeting specifies the venue
of the meeting and
the documents needed to
access the venue.
3. Shareholders have access
to the information about
who proposed the agenda
items and who nominated
the candidates for election
to the Board of Directors
and audit commission of
the Company.
248
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1.1.3.
1.1.4.
In preparation for
the General Meeting
of Shareholders
and its convocation,
shareholders were able
to receive information
on the meeting and
materials therefor, to
ask executive bodies
and members of
the Company’s Board
of Directors questions,
and to communicate
with each other freely
and in a timely manner.
The shareholders
experienced no
unnecessary
complications in
exercising their
right to convene
a General Meeting
of Shareholders, to
nominate candidates
to the governing
bodies, and to propose
agenda items for
a General Meeting of
Shareholders.
1.1.5.
Every shareholder had
an opportunity for
unhindered exercise
of their voting right
in the simplest and
the most convenient
manner.
1.
In the reporting period
shareholders were given
a chance to ask questions to
members of executive bodies
and of the Company’s Board
of Directors shortly before
and during the Annual General
Meeting of Shareholders.
2. The opinion of the Board of
Directors (including specific
opinions entered into
the MoM) on each agenda
item of the General Meetings
of Shareholders held within
the reporting period was
quoted in the materials
to the General Meeting of
Shareholders.
3. In all cases of General
Meeting of Shareholders
convocation in the reporting
period, the Company
provided access to a list of
persons having the right to
participate in the General
Meeting of Shareholders to
the shareholders entitled to
it starting from the date on
which the Company received it.
In the reporting period,
shareholders had
an opportunity to propose
items for inclusion in
the agenda of the Annual
General Meeting of
Shareholders at least 60 days
after the respective calendar
year-end.
1.
2. In the reporting period
the Company did not
refuse to accept proposals
on the agenda items or
candidates to the Company’s
governing bodies due to
misprints and other minor
faults in a shareholder’s
proposal.
1. The Company’s internal
document (internal policy)
contains provisions according
to which every participant
of the General Meeting of
Shareholders can request
a copy of the ballot they filled
in, certified by the Counting
commission, before the end of
the respective meeting.
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1.1.6.
The General Meeting
rules of procedure
established by
the Company provide
for equal opportunity
for all persons present
at the meeting to
express their opinions
and ask questions.
1. When General Meetings of
Shareholders were held
in the reporting period
in the form of a meeting
(the joint presence of
shareholders), sufficient
time was given for reports
on the agenda items and to
discuss those items.
2. Candidates to the Company’s
management and supervision
bodies were available to
answer questions from
shareholders in those
meetings where their
nominations were put to vote.
3. While taking decisions related
to preparation and holding
of General Meetings of
Shareholders, the Board of
Directors studied the issue
of using telecommunications
to provide shareholders with
remote access to participate
in General Meetings of
Shareholders in the reporting
period.
1.2.
1.2.1
1.2.2.
1.2.3.
The shareholders are provided an equal and fair opportunity to participate in the Company’s profit
by receiving dividends.
The Company developed
and implemented
a transparent and clear
mechanism of dividend
determination and
payment.
The Company does
not make decisions to
pay dividends if such
a decision, though
not violating legal
restrictions formally, is
economically groundless
and can lead to false
representations of
the Company’s business.
The Company does not
allow for deterioration
of its shareholders’
dividend rights.
1. The Dividend Policy was
developed by the Company,
approved by the Board of
Directors, and disclosed.
2. If the Company’s Dividend
Policy uses the Company’s
statement indicators
to determine dividends,
the respective provisions of
the Dividend Policy take into
account consolidated financial
statement indicators.
1. The Company’s Dividend Policy
contains clear indications
of financial/economic
circumstances under which
dividends should not be paid.
1.
In the reporting period,
the Company did not take
any actions resulting in
the deterioration of its
shareholders’ dividend rights.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
250
251
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1.2.4.
1.
The Company seeks to
prevent shareholders
from using other
methods of obtaining
profit (income) at
the Company's expense,
except for dividends and
liquidation value.
In order to prevent
shareholders from using other
methods of obtaining profit
(income) at the Company's
expense, except for dividends
and liquidation value,
the Company's internal
documents establish control
mechanisms ensuring
timely determination and
an approval procedure for
transactions with persons
affiliated with (related to)
material shareholders
(persons entitled to dispose
of the votes attributed to
the issuer’s voting shares) in
cases when such transactions
are not legally recognized as
interested-party transactions
1.3.
1.3.1.
1.3.2.
1.4.
1.4.
The corporate governance system and practices ensure parity for all shareholders owning shares of the same
category (type), including minority shareholders and foreign shareholders, and their equal treatment by
the Company.
The Company has
established conditions
for the fair treatment
of each shareholder
by the Company’s
management
and supervisory
bodies, including
conditions ensuring
the inadmissibility
of abuses of minor
shareholders by major
shareholders.
The company does not
take any actions which
result in or may result in
artificial redistribution
of corporate
governance.
1. During the reporting period,
procedures to manage
potential conflicts of material
shareholders’ interests were
effective, and the Board of
Directors paid due attention
to shareholders’ conflicts, if
any.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. There are no quasi-treasury
shares or they have not
participated in voting within
the reporting period.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Shareholders are provided with a reliable and efficient procedure for registration of their shareholder rights
and a possibility to dispose of their shares in a free and unhindered manner.
Shareholders are
provided with a reliable
and efficient procedure
for registration of their
shareholder rights and
a possibility to dispose
of their shares in a free
and unhindered manner.
2. The quality and reliability
of the Registrar’s activities
in maintaining the Register
of shares comply with
the requirements of
the Company and its
shareholders.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
2.1.
2.1.1.
2.1.2.
2.1.3.
2.1.4.
The Board of Directors performs strategic management of the Company, identifies the basic principles
and approaches to the Company’s risk management and internal control systems, supervises the activity
of the Company’s executive bodies, and performs other key functions.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
The Board of Directors
is responsible for taking
decisions related to
the appointment and
dismissal from office
of executive bodies,
including because of
underperformance.
The Board of
Directors ensures that
the Company's executive
bodies act in compliance
with the approved
development strategy
and core businesses of
the Company.
The Board of Directors
defines the main
reference points
of the Company's
business on a long-term
basis, evaluates and
approves key business
indicators and main
business objectives of
the Company, assesses
and approves strategy
and business plans
related to core activities
of the Company.
The Board of Directors
defines the principles
and approaches of
the Company’s risk
management and
internal control system.
The Board of Directors
defines the Company's
policy on remuneration
and/or reimbursement
of expenses
(compensations) to
members of the Board
of Directors, executive
bodies, and other
key executives of
the Company.
1.
In line with the Company’s
Charter, the Board of
Directors is entitled to appoint
members of executive bodies,
dismiss them from office,
and define their contractual
terms and conditions.
2. The Board of Directors
reviewed the report (reports)
of the sole executive body
and members of the collegial
executive body on execution
of the Company's strategy.
1. Within the reporting period
the Board of Directors
reviewed the following
issues: status and update
of the Company’s strategy;
approval of the Company’s
business plan (budget);
consideration of criteria and
indicators (including interim
ones) of the Company's
strategy and business plan
execution.
1. The Board of Directors defined
the principles and approaches
to the arrangement
of the Company’s risk
management and internal
control system.
2. The Board of Directors
evaluated the Company’s risk
management and internal
control system within
the reporting period.
1. The Company elaborated and
introduced the policy (policies)
approved by the Board of
Directors on remuneration
and reimbursement of
expenses (compensations)
to members of the Board
of Directors, executive bodies,
and other key executives
of the Company.
2. During the reporting
period the issues related
to the above policy (policies)
were reviewed at Board of
Directors meetings.
252
253
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Board of Directors plays
a key role in the prevention,
identification, and settlement
of internal conflicts.
2. The Company established
a system for identifying
transactions related to
a conflict of interests and
a system of measures aimed
at the settlement of such
conflicts.
1. The Board of Directors
approved the Regulations on
Information Policy.
1. The Company appointed
persons responsible for
ensuring compliance with
the Information Policy.
1. During the reporting period
the Board of Directors
reviewed the Company’s
corporate governance
practices.
The Board of Directors
plays a key role in
the prevention,
identification, and
settlement of internal
conflicts between
the Company's bodies,
shareholders, and
employees.
The Board of Directors
plays a key role in
ensuring the Company’s
transparency,
timely and complete
information disclosure,
and easy access
for shareholders
to the Company’s
documents.
The Board of Directors
exercises control
over the corporate
governance practices
in the Company
and plays a key role
in the Company’s
significant corporate
events.
2.1.5.
2.1.6.
2.1.7.
2.2.
2.2.1.
The Board of Directors is accountable to the Company’s shareholders.
Information on
the activities of
the Board of Directors is
disclosed and provided
to shareholders.
1. The Company’s Annual
Report for the reporting
period includes information
on individual directors’
attendance of the Board of
Directors and committee
meetings.
2. The Annual Report contains
information on the key
results of an evaluation
of the Board of Directors’
activities performed during
the reporting period.
1. The Company employs
a transparent procedure
enabling shareholders to ask
questions to the Chairman of
the Board of Directors and
share their opinion on these
matters with them.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
2.2.2.
The Chairman
of the Board of
Directors is available
for communication
with the Company's
shareholders.
The Board of Directors is an effective and professional governing body of the Company, capable of making impartial
independent judgements and decisions that are in the interest of the Company and its shareholders.
2.3.
2.3.1.
Only persons who
have an impeccable
business and personal
reputation, and have
the knowledge, skills,
and experience required
to make decisions within
the Board of Directors’
area of expertise
and necessary
for the effective
performance of its
functions are elected as
members of the Board
of Directors.
2.3.2.
1.
Members of the Board
of Directors are elected
through a transparent
procedure that allows
shareholders to
receive information
on the candidates,
sufficient to get an idea
of their personal and
professional qualities.
1. The procedure for
assessing the efficiency
of the Board of Directors
adopted in the Company
includes an evaluation of
the professional qualifications
of members of the Board
of Directors.
2. In the reporting period,
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
the Board of Directors (or
its Nomination Committee)
evaluated the candidates
to the Board of Directors
in terms of whether they have
the necessary experience,
knowledge and business
reputation, lack of conflict
of interest, etc.
In all cases in the reporting
period when the agenda
of a General Meeting of
Shareholders included
an item on election of
the Board of Directors,
the Company presented to
shareholders the curricula
vitae of all the candidates
to the Board of Directors,
the results of evaluation of
the candidates performed
by the Board of Directors
(or its Nomination Committee),
as well as information on
the candidates’ compliance
with the independence
criteria, in accordance
with recommendations
No. 102 to 107 of the Code,
and the written consent of
the candidates for election to
the Board of Directors.
2.3.3.
The composition of
the Board of Directors
is balanced, including
the qualifications of
its members, their
experience, knowledge,
and business qualities,
and enjoys the trust of
shareholders.
1. As part of the procedures
for the Board of Directors
evaluation held during
the reporting period,
the Board of Directors
reviewed its own needs
in the field of professional
qualification, experience,
and business skills.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
254
255
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1. As part of the Board
of Directors evaluation
procedure carried out
in the reporting period,
the Board of Directors
considered the issue of
compliance of the quantitative
Board composition with
the Company’s needs and
the interests of shareholders.
The quantitative
composition of
the Board of Directors
makes it possible to
arrange the activities
of the Board of
Directors in the most
efficient manner,
including the formation
of the Board’s
committees; it also
provides significant
minority shareholders
an opportunity to elect
a candidate for whom
they vote.
2.3.4.
2.4.
2.4.1.
The Board of Directors has a sufficient number of independent directors.
1. During the reporting period,
all independent Board
members met all
the independence criteria
set out in recommendations
102–107 of the Code or were
recognized as independent
by the decision of the Board
of Directors.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
An independent director
is a person who has
sufficient competence,
experience, and
independence to form
their own opinion, and
is able to make objective
and fair judgments
that are independent
of the influence
of the Company’s
executive bodies, certain
groups of shareholders,
or other interested
parties. It should be
borne in mind, however,
that in ordinary
circumstances
a candidate (elected
member of the Board
of Directors) who
is associated with
the Company,
its significant
shareholder, significant
counterparty,
or a competitor,
or is associated with
the state, cannot
be regarded as
an independent
candidate.
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
2.4.2.
The candidates to
the Board of Directors
are evaluated for
compliance with
the independence
criteria; independent
directors are also
regularly evaluated
for compliance with
the independence
criteria. During this
evaluation, the content
should prevail over
the form.
2.4.3.
2.4.4.
At least one third of
the elected members
of the Board are
independent directors.
Independent directors
play a key role in
preventing internal
Company conflicts
and in the Company’s
execution of material
corporate actions.
1.
In the reporting period,
the Board of Directors
(or the Board’s Nomination
Committee) formed
an opinion of each candidate’s
independence and submitted
a conclusion on the matter
to shareholders.
2. During the reporting period,
the Board of Directors (or
the Board’s Nomination
Committee) evaluated
the independence of
the current Board members
indicated in the Annual Report
as independent directors
at least once.
3. The Company has procedures
in place which define
the necessary actions
for a Board member to take
in case they cease to be
independent, including
the obligation to inform
the Board of this fact
in due time.
1. At least one third of
the members of the Board
are independent directors.
1.
Independent directors
(with no conflict of interest)
give a preliminary evaluation
of material corporate actions
related to a possible conflict
of interest; this evaluation
is submitted to the Board
of Directors.
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
256
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
2.5.
2.5.1.
The Chairman of the Board of Directors promotes the most efficient implementation of the functions assigned
to the Board of Directors.
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
An independent director
is elected Chairman of
the Board of Directors,
or a Senior Independent
Director is chosen from
among the elected
Independent Directors,
who coordinates
the activities of
independent directors
and carries out
interaction with
the Chairman of
the Board of Directors.
1. The Chairman of the Board
of Directors is an independent
director or a Senior
Independent Director chosen
from among independent
directors.
2. The role, rights, and duties
of the Board Chairman
(and Senior Independent
Director, if any) are duly
defined in internal corporate
documents.
1. Non-compliance
The Chairman of the Board
of Directors is not
an independent director;
a Senior Independent Director
has not been chosen from
among independent directors.
The Chairman of the Board
of Directors is a member who
made a significant contribution
to the development of
the Company and has the most
experience, professional
competence, and authority
among shareholders,
members of management
bodies, and employees of
the Company.
Independent Directors, who
make up the majority of
members of the Company’s
Board, have full opportunity
to have face-to-face
communication with
the Chairman of the Board of
Directors.
The Company has opted
for a model whereby having
a majority of independent
directors ensures their key
role in resolving all matters
and eliminates the need for
a Senior Independent Director.
The Company believes that
its Chairman of the Board
of Directors not being
an independent director
and there being no Senior
Independent Director does
not entail additional risks for
the Company.
The Company does not believe
that the mandatory election
of an independent Chairman
of the Board of Directors is
practical when the majority
of directors are independent.
In case independent directors
are no longer in the majority
on the Board of Directors,
the Company will include in its
agenda the matter of electing
a Chairman of the Board
of Directors from among
independent members or
electing a senior independent
director.
The Company recognizes
the expediency of introducing
the position of Senior
Independent Director in case
the number of independent
directors becomes less than
50% of the Board of Directors.
2. Compliance ensured
The Chairman of
the Board creates
a constructive
atmosphere at
meetings, ensures
open discussions
on the agenda
items, and monitors
the implementation of
resolutions passed by
the Board of Directors.
The Chairman of
the Board takes
reasonable measures to
ensure timely submittal
of information required
by the Board members
for taking decisions on
the agenda items.
1. The efficiency of Chairman
of the Board’s performance
was evaluated during
the evaluation of the Board’s
performance in the reporting
period.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The obligation of
the Chairman of the Board
to take measures to ensure
timely submittal of materials
required for taking decisions
on the agenda items to
the Board members is set
out in the Company’s internal
documents.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Members of the Board act reasonably and in good faith in the interests of the Company and its shareholders,
based on sufficient information, with due diligence and care.
2.5.2.
2.5.3.
2.6.
2.6.1.
Members of the Board
make decisions taking
into account all available
information, with no
conflict of interest,
on the condition
of equal treatment
of the Company’s
shareholders, within
the normal business
risk.
2.6.2.
The rights and
obligations of the Board
members are clearly
worded and stated in
the Company’s internal
documents.
1. The Company’s internal
documents state that a Board
member must duly notify
the Board of Directors if
a conflict of interest arises
pertaining to any agenda item
of a Board meeting or a Board
committee meeting before
the start of discussions on
the respective agenda item.
2. The Company’s internal
documents state that a Board
member must refrain from
voting on any item where they
have a conflict of interest.
3. There is a procedure in
place in the Company which
entitles the Board of Directors
to receive professional
consultations on items within
their area of expertise at
the Company’s expense.
1. There is a published document
in effect in the Company which
clearly defines the Board
members’ rights and
obligations.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
258
259
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
2.7.3.
2.7.4.
The format of the Board
meetings is determined
by the degree of
importance of
the agenda items.
The most important
issues are resolved
at meetings held in
praesentia.
Resolutions on the most
important issues
of the Company’s
business are passed at
the Board meetings by
qualified majority or
by a majority of votes
of all the elected Board
members.
1. The Charter or an internal
document of the Company
requires that the most
significant issues (according
to the list specified in
recommendation 168
of the Code) should be
considered at Board meetings
held in praesentia.
1. The Company’s Charter
stipulates that resolutions on
the most important issues
listed in recommendation 170
of the Code are to be passed
at the Board meetings by
qualified majority, at least
75% of votes, or by a simple
majority of votes of all
the elected Board members.
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
2.6.3.
Board members have
enough time to perform
their duties.
1.
Individual presence at
the meetings of the Board
and committee meetings, as
well as the time dedicated
to the preparation for
such meetings, were taken
into consideration during
the Board evaluation in
the reporting period.
2. According to the Company's
1.
internal documents, members
of the Board must notify
the Board of Directors of
their intention to enter
the management bodies of
other organizations (except
the controlled and affiliated
companies) and of the fact of
such an appointment.
In accordance with
the Company's internal
documents, members of
the Board of Directors
have the right to access
documents and make inquiries
regarding the Company and
the companies it controls,
while the Company's executive
bodies are obliged to provide
the relevant information and
documents.
2. The Company has a formal
induction procedure for
newly elected members of
the Board.
All members of
the Board have
equal access to
the documents
and information of
the Company. Newly
elected members of
the Board receive
sufficient information
on the Company and
the Board of Directors’
activities as promptly as
possible.
2.6.4.
2.7.
2.7.1.
2.7.2.
Meetings of the Board of Directors, preparation for them, and attendance by the Board members ensure
the efficient performance of the Board of Directors.
Meetings of the Board
of Directors are
conducted on an ad
hoc basis, taking into
account the scope of
activities and tasks that
the Company is facing at
a given time.
The Company’s
internal documents
set the procedure for
preparing and holding
Board meetings,
enabling Board
members to be properly
prepared.
1. The Board of Directors had
at least six meetings during
the reporting year.
1. The Company has
an approved internal
document in place which sets
the procedure for preparing
and holding Board meetings,
stating, inter alia, that
the notice of the meeting
should be made, as a rule, at
least 5 days in advance.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
In accordance with
the Charter, resolutions on
most of the issues that are in
the competence of the Board
of Directors are made by
open voting of the members
of the Board of Directors
participating in the meeting
with a simple majority, except
in cases stipulated by law.
This way, full compliance with
legislative requirements is
achieved.
The Company believes
that the risks related to
partial compliance with
the requirements of the Code
are offset by the high
attendance of meetings by
members of the Company’s
Board of Directors and
preliminary study of
the most important issues
by independent directors
as part of the activities
of the Board Committees,
as well as the maximum
consideration of the opinions
of all Board members when
taking decisions on the most
important issues concerning
the Company’s activities. Thus,
in practice, compliance with
this Code recommendation is
ensured.
In view of the above,
the Company eliminates
the possibility of any risks
and is not planning to alter
its practices related to this
recommendation.
At the same time, in case
of risk factors, it will take
measures to adjust this
system by amending internal
corporate documents.
260
261
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
2.8.
2.8.1.
The Board of Directors sets up committees for preliminary consideration of the most important issues
of the Company’s activity.
An Audit Committee
consisting of
independent
directors is set up
for the preliminary
consideration of issues
related to the control
over the company’s
financial and economic
activities.
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
1. The Board of Directors has
set up an Audit Committee,
which consists entirely of
independent directors.
2. The Company’s internal
documents define the tasks
for the Audit Committee,
including, among others,
the tasks listed in
recommendation 172 of
the Code.
3. At least one member of
the Audit Committee who is
an independent director has
experience in and knowledge
about the compilation,
analysis, evaluation, and
audit of accounting (financial)
statements.
4. Meetings of the Audit
Committee were held at least
once per quarter during
the reporting period.
1. Partial compliance
The Board of Directors has set
up an Audit Committee chaired
by an independent director;
the majority of Committee
members are independent
directors.
The Audit Committee
was formed based on
the requirements of maximum
effectiveness, taking into
consideration members’
qualifications in order to
attain the optimal balance of
relevant expert competencies
and professional experience.
The Board of Directors does
not limit itself to a formal
Committee formation
approach, considering not
only the independence of
its members, but also their
professional knowledge and
skills necessary to ensure
the Committee’s effective
operation. The Board takes
into account the entirety
of factors related to
the Committee members’
specialized competencies,
including the relevant
professional expertise
and education, and other
important aspects concerning
the ability to form objective,
independent opinions and
judgements and to take
decisions based on the long-
term interests of the Company
and all its shareholders.
Additionally, the Board
considers the effectiveness of
the members’ previous work
on the Committee and their
engagement in its activities.
The Committee member acting
as a non-executive director
has extensive experience,
a deep understanding of
business, and comprehensive
knowledge in areas related to
the Committee’s remit, making
a substantial contribution,
which is required for
the Committee’s functioning.
In order to ensure thorough
consideration of matters
included in the Committee
meeting agenda, the Company
takes into account
the maximum number of
committees that every Board
member can participate
in (stipulated in NLMK’s
Regulations on the Board of
Directors in accordance with
the Corporate Governance
Code recommended by
the Bank of Russia).
Thus, the Company takes
into account the expediency
of attaining maximum
engagement of independent
directors and their required
prevalence in the above
Committees.
In view of the above,
the Company believes that
the optimal Committee
composition has been formed,
with the vast majority of
members (four out of five),
as well as the Chairman,
being independent directors.
The Company holds that
non-compliance with this
recommendation does not
entail additional risks and has
no plans to ensure compliance
with this recommendation in
the near future.
2. Compliance ensured
3. Compliance ensured
4. Compliance ensured
262
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Status
of compliance
with corporate
governance
principle
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
2.8.2.
For the preliminary
consideration of
issues related to
the development
of an efficient
and transparent
remuneration practice,
a Remuneration
Committee has been
set up, which consists
of independent
directors and is chaired
by an independent
director who is not
the Board Chairman.
1. The Board of Directors
has set up a Remuneration
Committee, which consists
entirely of independent
directors.
2. The Chairman of
the Remuneration Committee
is an independent director
who is not the Chairman
of the Board.
3. The Company’s internal
documents define the tasks
of the Remuneration
Committee, including, among
others, the tasks listed in
Recommendation 180 of
the Code.
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
1. Partial compliance
The Board of Directors has
set up the Human Resources,
Remuneration, and Social
Policy Committee chaired
by an independent director;
the majority of Committee
members are independent
directors.
The Human Resources,
Remuneration, and Social
Policy Committee was formed
based on the requirements of
maximum effectiveness, taking
into consideration members’
qualifications in order to
attain the optimal balance of
relevant expert competencies
and professional experience.
The Board of Directors does
not limit itself to a formal
Committee formation
approach, considering not
only the independence of
its members, but also their
professional knowledge and
skills necessary to ensure
the Committee’s effective
operation. The Board takes
into account the entirety
of factors related to
the Committee members’
specialized competencies,
including the relevant
professional expertise
and education, and other
important aspects concerning
the ability to form objective,
independent opinions and
judgements and to take
decisions based on the long-
term interests of the Company
and all its shareholders.
Additionally, the Board
considers the effectiveness of
the members’ previous work
on the Committee and their
engagement in its activities.
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Committee members acting
as non-executive directors,
including the Chairman
of the Human Resources,
Remuneration, and Social Policy
Committee, have extensive
experience, authority among
shareholders, members of
management bodies and
employees of the Company,
a deep understanding of
business, and comprehensive
knowledge in areas related to
the Committee’s remit, making
a substantial contribution,
which is required for
the Committee’s functioning.
In order to ensure thorough
consideration of issues
included in the Committee
meeting agenda, the Company
takes into account
the maximum number of
committees that every Board
member may participate
in (stipulated in NLMK’s
Regulations on the Board of
Directors in accordance with
the Corporate Governance
Code recommended by
the Bank of Russia).
Thus, the Company takes
into account the expediency
of attaining maximum
engagement of independent
directors and their required
prevalence in the Committee.
In view of the above,
the Company believes that
the optimal Committee
composition has been formed,
with the majority of members,
as well as the Chairman,
being independent directors,
and other members being
non-executive.
The Company holds that
non-compliance with this
recommendation does not
entail additional risks and has
no plans to ensure compliance
with this recommendation in
the near future.
2. Compliance ensured
3. Compliance ensured
264
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
2.8.5.
The committees are
composed in such
a way as to enable
comprehensive
examination of issues
under consideration
based on various
opinions.
1. Committees of the Board
are chaired by independent
directors.
2. The company’s internal
documents (polices) contain
provisions stating that
non-members of the Audit
Committee, Nomination
Committee, and Remuneration
Committee may only attend
their meetings when invited
by the respective committee’s
chair.
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1. The Board of Directors
has set up a Nomination
Committee (alternatively,
another committee
performs its tasks, listed
in recommendation 186 of
the Code), which mostly
consists of independent
directors.
2. The Company’s internal
documents define the tasks
of the Nomination Committee
(or another committee
performing related
tasks), including, among
others, the tasks listed
in recommendation 186 of
the Code.
1. During the reporting period,
the Board of Directors has
considered the compliance
of its committees’
composition with the goals
of the Board and objectives
of the Company. Additional
committees have either
been formed or deemed
unnecessary.
2.8.3.
2.8.4.
For the preliminary
consideration of
issues related to
human resources
planning (succession
planning), occupational
structure, and
efficient performance
of the Board of
Directors, a Nomination
(Appointments, Staffing)
Committee has been
set up, which mostly
consists of independent
directors.
Considering the scope
of activities and risk
level, the Board of
Directors has made sure
that the composition of
its committees is fully in
line with the Company’s
business objectives.
Additional committees
have either been
formed or deemed
unnecessary (Strategy
Committee, Corporate
Governance Committee,
Ethics Committee,
Risk Management
Committee, Budget
Committee, Health,
Safety and Environment
Committee, and others).
Status
of compliance
with corporate
governance
principle
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
1. Partial compliance
Formed in accordance with
the Corporate Governance
Code as a matter of
priority, the Company’s
Audit Committee and HR,
Remuneration, and Social
Policy Committee are chaired
by independent directors.
Apart from the Audit
Committee and the HR,
Remuneration, and Social
Policy Committee, the Board
of Directors set up a Strategy
Committee, which assists
the Board of Directors in
matters related to long-term
efficiency improvements,
growing the Company’s asset
base, and increasing its
profitability and investment
appeal. The Committee
is chaired by a member
of the Board of Directors
who is not independent.
The Committee is made up of
five independent directors,
other members of the Board
of Directors, and experts with
the professional experience
required to address
the matters listed above.
The Company believes that
this Committee structure is
optimal, implies no additional
risks for NLMK, and changing
it is not practical in the near
future.
Nevertheless, the Company is
monitoring the situation and
will take measures to adjust
the structure if necessary.
2. Compliance ensured
2.8.6.
Committee chairs
regularly inform
the Board of Directors
and its Chairman
of their respective
Committees’ activities.
1. Within the reporting period
Committee chairs regularly
reported on their activities to
the Board of Directors.
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
266
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
2.9.
2.9.1.
2.9.2.
3.1.
3.1.1.
3.1.2.
The Board of Directors ensures that the performance of the Board, its committees and members is evaluated.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. Within the reporting period,
self-assessment or external
assessment of the Board’s
performance was carried
out, including a performance
evaluation of the Committee,
individual members of
the Board, and the Board of
Directors as a whole.
2. The results of self-assessment
or external assessment
of the Board of Directors
made within the reporting
period have been reviewed
at the Board of Directors’
meeting in praesentia.
1. An independent performance
evaluation of the Board of
Directors was carried out
by an independent auditor
(consultant) at least once
within the last three reporting
periods.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
The evaluation of
the Board of Directors
is designed to
determine the efficiency
of the Board’s,
its Committees’,
and members’
performance and
the correspondence
of their performance
to the development
needs of the Company,
as well as to step
up the Board’s
activities and identify
the areas for potential
improvement.
A performance
assessment of
the Board of Directors,
Board committees,
and Board members is
made on a regular basis
at least once a year.
For an independent
quality assessment
of the Board of
Directors’ performance,
an external company
(consultant) is involved
at least once every
three years.
The Corporate Secretary of the Company ensures efficient day-to-day interaction with shareholders, coordinates
the Company’s activities aimed at the protection of shareholders’ rights and interests, and supports the efficient
operation of the Board of Directors.
The Corporate
Secretary has sufficient
knowledge, experience,
and qualification to
perform his obligations,
as well as an impeccable
reputation and
credibility with
shareholders.
The Corporate
Secretary has sufficient
independence from
the Company’s
executive bodies and
has the required
authority and resources
to execute the tasks
assigned to him.
1. The Company has adopted
and disclosed an internal
document: Regulations on
the Corporate Secretary.
2. The biography of
the Corporate Secretary
published on the company's
website and the Annual
Report is as detailed as
the biographies of Board
members and the company’s
executive management.
1. The Board of Directors
approves the appointment,
dismissal from office, and
additional remuneration of
the Corporate Secretary.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
4.1.
4.1.1.
4.1.2.
4.1.3.
The level of remuneration paid by the Company is sufficient to attract, motivate, and retain persons with
the required expertise and qualification. Remuneration to the Board members, executive bodies, and other key
executives of the co mpany is paid according to the remuneration policy adopted in the Company.
The level of
remuneration paid
by the Company to
the Board members,
executive bodies, and
other key executives is
sufficient to motivate
them to perform
effectively, enabling
the Company to
attract and retain
competent and
qualified professionals.
At the same time
the company avoids
having a higher
than necessary
remuneration level
and an unreasonably
large gap between
the remuneration of
the persons mentioned
above and the company
employees.
The Company’s
remuneration policy
is developed by
the Remuneration
Committee and
approved by the Board
of Directors. With
the assistance of
the Remuneration
Committee, the Board
of Directors oversees
the incorporation and
implementation of
the remuneration policy
in the Company, and, if
required, revises and
amends it.
The Company’s
remuneration policy
contains transparent
mechanisms
for determining
the remuneration
level of the Board
members, members of
executive bodies, and
other key executives
of the Company, and
regulates all types of
payments, benefits, and
privileges granted to
the these persons.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Company has adopted
an internal document
(internal documents): a policy
(policies) on remuneration
of the Board members,
members of executive
bodies, and other key
executives, which expressly
establishes approaches to
the remuneration paid to
these persons.
1. Within the reporting period
the Remuneration Committee
reviewed the remuneration
policy (policies) and practices
and, if required, gave
relevant recommendations to
the Board of Directors.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Company’s remuneration
policy (policies) contains
(contain) transparent
mechanisms for determining
the remuneration level
of the Board members,
members of executive
bodies, and other key
executives of the Company,
and regulates (regulate) all
types of payments, benefits,
and privileges granted to
the these persons.
268
269
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
4.1.4.
4.2.
4.2.1.
4.2.2.
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Company’s remuneration
policy (policies) or other
internal documents establish
the rules of expense
reimbursement of the Board
members, members of
executive bodies, and
other key executives of
the Company.
The Company
establishes its policy
of reimbursement
of expenses
(compensation)
specifying the list
of reimbursable
expenses and the level
of service to which
Board members,
executive bodies, and
other key executives
of the Company
are entitled. This
policy can be a part
of the Company’s
remuneration policy.
The remuneration system for members of the Board of Directors aligns the financial interests of directors
with the long-term financial interests of shareholders.
1. Fixed annual remuneration
was the sole form of
monetary remuneration
to the Board members for
their work on the Board
of Directors during
the reporting period.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1.
If the Company’s internal
document (documents) –
policy (policies) on
remuneration – provides
for the ownership of
the Company’s shares by
the Board members, clear
and explicit rules aimed
at encouraging long-term
ownership of the Company’s
shares by the Board members
should be introduced and
disclosed.
The Company pays fixed
annual remuneration
to the Board members.
The Company does
not pay remuneration
for participation in
individual meetings of
the Board of Directors
or Board Committees.
The Company does
not use any forms of
short-term incentives
and additional material
incentives for members
of the Board of
Directors.
Long-term ownership of
the Company's shares
is most conducive to
aligning the financial
interests of the Board
members with the long-
term interests of
shareholders. At
the same time,
the Company does not
tie the rights to sell
shares to achieving
certain performance
indicators, and
members of the Board
of Directors do not
participate in option
programmes.
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
The Company does
not provide for
additional payments
or compensations
in the event of early
termination of
the Board members’
appointment in
connection with
the transfer of control
over the Company or
other circumstances.
1. The Company does not
provide for additional
payments or compensations
in the event of early
termination of the Board
members’ appointment in
connection with the transfer
of control over the Company
or other circumstances.
4.2.3.
4.3.
4.3.1.
The Company’s remuneration system for members of executive bodies and other key executives provides
for a correlation between the amount of remuneration and the Company’s performance and personal contribution
to achieving this performance.
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
The remuneration
of members of
executive bodies and
other key executives
of the Company
is determined in
such a way as to
ensure a reasonable
and justified
correspondence
between the fixed
part of remuneration
and the variable part
of remuneration,
depending on
the Company’s
performance and
the employee’s personal
(individual) contribution
to the final result.
1. Within the reporting period
annual performance
indicators approved by
the Board of Directors were
used to determine the amount
of variable remuneration of
members of executive bodies
and other key executives of
the Company
2. During the latest evaluation of
the Company’s remuneration
system for members of
executive bodies and other
key executives, the Board
of Directors (Remuneration
Committee) made sure that
an efficient ratio of the fixed
part and the variable part
of remuneration is applied in
the Company.
3. The Company provides for
a procedure which ensures
that the Company’s bonuses
illegally received by members
of executive bodies and
other key executives of
the Company are returned
to the Company.
1. Compliance ensured
2. Compliance ensured
3. Non-compliance
The Company uses a clear
mechanism for paying
bonuses to members of
executive bodies and other
senior executives:
1. Determining the quantitative
indicators that the bonus
will be paid for; 2. Control
departments independently
calculating the planned and
actual indicators required
for the bonus payout;
3. Independent audit of
the actual attainment
of the indicators before
calculating the bonus size;
4. The HR, Remuneration,
and Social Policy Committee
approving the actual
attainment and the size of
the payout.
The Company believes that this
system eliminates the need
for an additional bonus return
procedure.
Nevertheless, if preconditions
for returning bonus payments
emerge, the Company will
take the necessary measures:
recalculate the indicators and
bonus sums with subsequent
withholding/return according
to existing Russian Federation
legislation.
270
271
ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
In conditions when significantly
changing market prices
have a determining influence
on the share price, a long-
term incentive programme
using the Company's shares
has been recognized as
ineffective and is not used in
the Company. The Company
has adopted a long-term
incentive programme for
members of executive bodies
and other key executives of
the Company, which does
not provide for the use
of the Company’s shares
(financial instruments based
on the Company’s shares).
The current long-term
incentive programme is based
on defining and evaluating
long-term strategic KPIs.
The right to receive long-
term remuneration appears
no earlier than three years
after the KPIs are set if
there is confirmation of
their successful attainment
expressed in quantitative
terms. The KPIs for the long-
term programme correlate
directly with the Company’s
strategic success.
In the near future there are
no plans to implement a long-
term incentive programme
for members of executive
bodies and key executives of
the Company with the use
of the Company’s shares
(financial instruments based
on the Company’s shares).
Status
of compliance
with corporate
governance
principle
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
4.3.2.
The Company has
implemented a long-
term incentive
programme for
members of executive
bodies and other
key executives of
the Company using
the Company’s shares
(options or other
derivative financial
instruments based on
the Company’s shares).
1. The Company has
implemented a long-term
incentive programme for
members of executive bodies
and other key executives
of the Company using
the Company’s shares
(financial instruments based
on the Company’s shares).
2. In line with the long-term
incentive programme,
members of executive bodies
and other key executives of
the Company have the right to
sell shares and other financial
instruments not earlier than
three years from the moment
of their granting. Additionally,
the right to sell them depends
on the Company achieving
certain performance
indicators.
4.3.3.
The amount of
compensation (golden
parachute) paid by
the Company to
members of executive
bodies or other
key executives in
case of their early
termination initiated by
the Company and with
no fraudulent actions
on their part does not
exceed the two-fold
amount of the fixed
part of their annual
remuneration.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The amount of compensation
(golden parachute) paid by
the Company to members of
executive bodies or other key
executives in case of their
early termination initiated
by the Company and with no
fraudulent actions on their
part did not exceed the two-
fold amount of the fixed part
of their annual remuneration
in the reporting period.
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
5.1.
5.1.1.
5.1.2.
5.1.3.
5.1.4.
The Company has an efficiently functioning risk management and internal control system in place,
aimed at providing reasonable assurance that the Company will achieve its targets.
1. The Company’s internal
documents/respective policy
approved by the Board
of Directors explicitly
defines the functions of
the Company’s various
management bodies and
subdivisions in the risk
management and internal
control system.
1. The Company's executive
bodies ensured that risk
management and internal
control functions and
authority are well distributed
between the managers
(heads) of the subdivisions
reporting to them.
1. The Company has adopted
an anti-corruption policy.
2. There is a procedure in
place in the Company aimed
at informing the Board of
Directors or the Board’s
Audit Committee about
any violations of legislation,
the Company’s internal
procedures, and ethics code.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. During the reporting period,
the Board of Directors or
the Board’s Audit Committee
evaluated the efficiency
of the Company’s risk
management and internal
control system. The results of
this evaluation are included in
the Company’s Annual Report.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
The Board of Directors
defines the principles
and approaches to
the Company’s risk
management and
internal control system.
The Company's
executive bodies ensure
that an efficiently
functioning risk
management and
internal control
system is established
and maintained in
the Company.
The Company's risk
management and
internal control
system ensures
an objective, fair, and
clear understanding
of the Company’s
current state and
prospects, the integrity
and transparency
of the Company's
statements, and that
the risks assumed
by the Company
are reasonable and
acceptable.
The Company’s
Board of Directors
takes the necessary
measures to ensure
that the Company's
risk management and
internal control system
functions efficiently
and complies with
the principles and
approaches determined
by the Board of
Directors.
272
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
The Company arranges internal audits for a systematic independent evaluation of the reliability and efficiency
of the risk management and internal control system and corporate governance practice.
6.1.2.
5.2.
5.2.1.
5.2.2.
6.1.
6.1.1.
A separate structural
subdivision has been
set up in the Company
for internal audit
or an independent
external auditor
has been engaged.
There is a division
between the functional
and administrative
jurisdictions of
the Internal Audit
Department.
The Internal Audit
Department functionally
reports to the Board of
Directors.
The Internal Audit
Department evaluates
the efficiency of
the internal control,
risk management, and
corporate governance
systems. The Company
is guided by generally
accepted internal audit
standards.
1. The Company has set up
a separate structural
subdivision for internal audit,
which functionally reports
to the Audit Committee
and the Company’s Board
of Directors, or engaged
an independent auditor under
the same accountability
principle.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. During the reporting period,
the internal audit evaluated
the efficiency of the internal
control and risk management
system.
2. The Company is guided
by generally accepted
approaches to internal
control and risk management.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
The Company and its activity are transparent for its shareholders, investors, and other stakeholders.
The Company
has developed
and implemented
an information policy,
which ensures efficient
interaction between
the Company, its
shareholders, investors,
and other stakeholders
information-wise.
1. The Company’s Board of
Directors has approved
the Company’s Information
Policy developed with regard
to recommendations of
the Code.
2. The Board of Directors (or
one of its Committees) has
reviewed the issues related to
information policy observance
at least one time within
the reporting period.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
1. Compliance ensured
2. Compliance ensured
3. Compliance ensured
The Board of Directors
is chaired by a person
controlling the Company,
whose plans with regard to
the Company’s corporate
governance are reflected
in the documents approved
by the Company’s General
Meeting of Shareholders and
Board of Directors, available
to an unlimited number of
interested parties.
The Company
discloses information
on its corporate
governance system
and practices, including
detailed information
on observance of
the principles and
recommendations of
the Code.
1. The Company discloses
information on its corporate
governance system and on
the general principles of
corporate governance used
in the Company, including on
the Company’s website.
2. The Company discloses
information on
the composition of its
executive bodies and
the Board of Directors,
the independence of
the Board members and their
membership in the Board
Committees (in accordance
with the definition set out in
the Code).
3. If there is a person
controlling the Company,
the Company publishes
a memorandum of
the controlling person
regarding their plans with
regard to the Company's
corporate governance.
6.2.
6.2.1.
The Company discloses complete, valid, and reliable information on the Company in due time to enable the Company’s
shareholders and investors to make informed decisions.
The Company discloses
information guided
by the principles of
regularity, consistency,
efficiency, availability,
reliability, completeness,
and comparability
of the information
disclosed.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. The Information Policy
of the Company defines
approaches and criteria of
determining information
that can significantly affect
the Company's valuation and
the value of its securities;
it also defines procedures
ensuring timely disclosure of
such information.
2. If the Company's securities
circulate on foreign regulated
markets the disclosure
of material information in
the Russian Federation and
in these markets is done
simultaneously and similarly
during the reporting year.
3. If foreign shareholders
own a significant quantity
of the Company’s shares,
the information was disclosed
not only in Russian but also
in one of the most common
foreign languages during
the reporting year.
274
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. During the reporting year,
the Company disclosed
its annual and semi-
annual IFRS financial
statements. The Annual
Report of the Company
for the reporting year
includes annual IFRS financial
statements and an auditor's
opinion.
2. The Company discloses
information on the its
equity structure in full in
its Annual Report and on
the Company’s website in line
with Recommendation 290 of
the Code.
1. The Company’s Annual
Report contains information
on the key aspects of
the Company’s operations
and its financial performance.
2. The Company’s Annual
Report contains information
on environmental and social
aspects of the Company’s
activities.
6.2.2.
The Company avoids
a box-ticking approach
while disclosing
information; it discloses
material information on
its activities even if law
does not require such
disclosure.
The Annual Report
as one of the most
important tools of
interaction with
shareholders and other
stakeholders contains
information, which
enables the evaluation
of the Company’s
performance over
a year.
6.2.3.
6.3
6.3.1
6.3.2
The Company provides information and documents requested by shareholders in line with the principle
of equal and easy access.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
Information and
documents requested
by shareholders are
disclosed in line with
the principle of equal
and easy access.
When providing
information to
shareholders
the Company ensures
a reasonable balance
between the interests
of certain shareholders
and the interests of
the Company itself,
which seeks to keep
important commercial
information, which may
significantly affect
its competitiveness,
confidential.
1. The Company’s Information
Policy determines an easy
procedure of giving access to
information for shareholders
including the information
on legal entities controlled
by the Company on
shareholder’s request.
1.
In the reporting year,
the Company did not refuse
to satisfy the shareholders’
requests to provide
information or justified such
refusals.
2. In cases defined by
the Information Policy of
the Company, shareholders
are warned about
the confidential nature
of the information and
undertake to keep it
confidential.
7.1
7.1.1
Actions that significantly affect or can significantly affect the structure of the share capital and the financial status
of the Company and, accordingly, the shareholders' standing (i.e. material corporate events) are carried out on fair
terms ensuring observance of the rights and interests of shareholders and other interested parties.
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
The material
corporate events
include restructuring
of the Company;
acquisition of 30
and over percent
of the Company‘s
voting shares
(takeover); material
transactions effected
by the Company;
increase or reduction
of the Company’s
authorized capital;
listing and delisting of
the Company’s shares;
other actions which
may cause a significant
change of shareholders’
rights or violation
of their interests.
The Company’s
Charter lists (specifies
the criteria of)
transactions and
other actions that are
recognized as material
corporate events and
fall in the remit of
the Company’s Board of
Directors.
1. The Company’s Charter
lists transactions and other
actions that are recognized
as material corporate events
and the criteria to determine
them. Decision-making
regarding material corporate
events falls in the remit of
the Company’s Board of
Directors. In cases when
the decision on performing
such corporate actions
statutorily falls in the remit
of the General Meeting of
Shareholders, the Board of
Directors provides respective
recommendations to
shareholders.
2. The Company’s Charter lists
the following actions, among
others, as material corporate
events: restructuring of
the Company; acquisition
of 30 and over percent of
the Company’s voting shares
(takeover); increase or
reduction of the Company’s
authorized capital; listing and
delisting of the Company’s
shares.
The Company’s Charter does
not list transactions and other
actions that are recognized
as material corporate events
and the criteria to determine
them. Decision-making in
relation to actions, recognized
by the Corporate Governance
Code as material corporate
events, fall in the remit of
the Company’s Board of
Directors or the General
Meeting of Shareholders in
line with the legislation and
the Company’s Charter.
In cases when such corporate
events are statutorily
assigned to the competence
of the General Meeting of
Shareholders, the Board of
Directors provides respective
recommendations to
shareholders.
In cases when such corporate
events are statutorily
assigned to the competence
of the Board of Directors,
they are first reviewed
by the relevant Board
Committees that provide
respective recommendations
to the Board of Directors.
In view of the above,
the Company excludes
the possibility of any risks.
The Company does not plan to
review and approve the list of
material corporate events in
the near future, but intends
to continue to act within
the framework of current
legislation.
276
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
Status
of compliance
with corporate
governance
principle
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
1. The Company has a procedure
in place ensuring that
the independent directors
declare their opinion on
material corporate events
before they are approved.
1. The Company’s Charter,
taking into account
the specifics of the Company’s
activities, establishes
the minimal criteria
for the attribution of
the Company’s transactions
to material corporate events,
which are lower than those
statutorily required.
2. During the reporting period
all material corporate events
underwent an approval
procedure prior to their
implementation.
7.1.2
7.1.3
The Board of Directors
plays a key role in
decision-making
or in preparing
recommendations
regarding material
corporate events;
the Board of Directors
relies on the opinion
of the Company’s
independent directors.
In case of material
corporate events that
affect the rights and
legitimate interests of
shareholders, equal
conditions are provided
to all the Company’s
shareholders;
if the procedures set
out in the legislation
and designed to protect
the shareholders’
rights are not sufficient,
additional measures
are taken to protect
the rights and
legitimate interests
of the Company’s
shareholders. In this
case, the Company
is guided not only
by compliance with
formal statutory
requirements but
also by the corporate
governance principles
outlined in the Code.
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
In cases when such corporate
events are statutorily
assigned to the competence
of the Board of Directors,
these matters are first
reviewed by the relevant Board
Committees that provide
respective recommendations
to the Board of Directors.
The current system meets
the needs of the Company,
and its change in the next few
years does not seem practical.
The Company believes
that additional risks for
the Company are excluded.
At the same time, the Company
is monitoring the system
for protecting the rights
and legitimate interests of
shareholders and in case
of any risk factors emerging,
it will take required measures
to adjust the system.
2. Compliance ensured
7.2
7.2.1
The Company ensures such a procedure for material corporate events that enables shareholders to receive
full information thereof in due time and to influence such events; it guarantees observance and proper level of
protection of their rights when such events take place.
Information on
material corporate
events is disclosed
with an explanation of
the grounds, conditions,
and consequences of
such events.
1. During the reporting period,
the Company disclosed
information on its material
corporate events in a timely
and detailed manner including
the grounds and timing of
such events.
◼ Compliance
ensured
◻ Partial
compliance
◻ Non-
compliance
1. Partial compliance
The Company’s Charter
does not establish minimal
criteria for the attribution of
the Company’s transactions
to material corporate events
that are lower than those
statutorily required.
The Company is guided
by statutory criteria
for the attribution of
the Company’s transactions
to material corporate events.
The majority of material
corporate events recognized
by the Corporate Governance
Code fall within the remit
of the Company’s Board of
Directors or the General
Meeting of Shareholders.
Decision-making with regard
to transactions, which
the Corporate Governance
Code recognizes as material
corporate events, fall within
the remit of the Company’s
Board of Directors. In cases
when such corporate events
are statutorily assigned
to the competence of
the General Meeting
of Shareholders, the Board
of Directors provides
respective recommendations
to shareholders.
278
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
7.2.2
The rules and
procedures related
to the Company's
performance of
material corporate
events are specified in
the Company’s internal
documents.
1. The Company’s internal
documents provide for
a procedure for engaging
an independent appraiser to
estimate the value of property
to be disposed of or acquired
as a material transaction
or as an interested party
transaction.
2. The Company’s internal
documents provide for
a procedure for engaging
an independent appraiser
to estimate the value of
acquisition and buyback of its
shares.
3. The Company’s internal
documents provide for
an expanded list of grounds
on which Board members and
other parties are recognized
as an interested party in
the Company’s transactions
under the Russian legislation.
Status
of compliance
with corporate
governance
principle
◻ Compliance
ensured
◼ Partial
compliance
◻ Non-
compliance
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
1. Partial compliance
The Company’s internal
documents do not provide
for a procedure for engaging
an independent appraiser to
estimate the value of property
to be disposed of or acquired
as a material transaction
or as an interested party
transaction. The Company
engages an independent
appraiser in cases set out in
the legislation of the Russian
Federation, and the Company
believes that this fully
eliminates any risk.
The Company does not plan
to review the procedure for
engaging an independent
appraiser in the near future
and intends to continue to
operate within the framework
of the current legislation.
The Company is monitoring
the system, and in case of any
risk factors emerging, it will
take the required measures to
adjust the system.
2. Compliance ensured
No.
Principles of corporate
governance
Criteria of corporate
governance principles
observance evaluation
Status
of compliance
with corporate
governance
principle
Clarification of deviation
from criteria of corporate
governance principles
observance evaluation
3. Partial compliance
The Company’s internal
documents do not provide for
an expanded list of grounds
on which Board members and
other parties as required
by law are recognized as
an interested party in
the Company’s transactions.
Before the conclusion of
any transaction in which
there can be interest,
the Company evaluates all
possible circumstances that
could lead to the existence of
such interest, including those
not provided for by law. This
approach has proved to be
effective in practice, risks
are completely excluded and
the Company does not deem
it appropriate to provide
an expanded list of grounds
on which Board members
and other parties are
recognized as an interested
party in the Company’s
internal documents. Thus,
the Company does not plan
to make changes to internal
documents in the near future
and will continue to adhere to
the established approach.
The Company is monitoring
the system, and in case of any
risk factors emerging,it will
take the required measures
to adjust the system.
280
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ANNUALREPORT 2020 Statement by member
of the Board of Directors
About the Company
Corporate governance
Our team
Environmental protection
Appendix
REPORT ON THE PAYMENT OF DECLARED
(ACCRUED) DIVIDENDS
Year
Period
Dividend per share, RUB
Declaration date
Amount, RUB
2020
2020
2020
2019
2019
2019
2019
2018
2018
2018
2018
2017
2017
2017
2017
2016
2016
2016
2016
2015
2015
2015
2015
2014
9M
6M
3M
year
9M
6M
3M
year
9M
6M
3M
year
9M
6M
3M
year
9M
6M
3M
year
9M
6M
3M
year
6.43
4.75
3.21
17.36 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 3.12 per share)
3.22
3.68
7.34
22.81 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 5.80 per share)
6.04
5.24
5.73
14.04 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 3.36 per share)
5.13
3.20
2.35
9.22 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 3.38 per share)
3.63
1.08
1.13
6.95 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 2.43 per share)
1.95
0.93
1.64
2.44 (taking into account paid
interim dividends, the outstanding
dividend amount to be paid is
RUB 1.56 per share)
18.12.2020
25.09.2020
30.06.2020
29.05.2020
20.12.2019
27.09.2019
07.06.2019
19.04.2019
21.12.2018
28.09.2018
08.06.2018
08.06.2018
22.12.2017
29.09.2017
02.06.2017
02.06.2017
23.12.2016
30.09.2016
03.06.2016
03.06.2016
21.12.2015
30.09.2015
05.06.2015
05.06.2015
38,536,451,153.2
28,467,829.390
19,238,259,440.40
104,042,424,886.40 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 18,698,868,988.80)
19,298,191,712.80
22,055,076, 243.20
43,990,287,941.60
136,705,513,344.40 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 34,760,717.992)
36,199,092,529.60
31,404,510,737.60
34,341,192,085.20
84,144,910,449.60 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 20,137,243,526.40)
30,745,255,741.20
19,178,327,168
14,084,084,014
55,257,555,152.80 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 20,257,108,071.20)
21,755,414,881.20
6,472,685,419.20
6,772,346,781.20
41,652,929,318 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 14,563,542,193.20)
11,686,793,118
5,573,701,333.20
9,828,892,673.60
14,623,474,465.60 (taking into
account paid interim dividends,
the outstanding dividend amount
to be paid is RUB 9,349,434,494.40)
2014
6M
0.88
30.09.2014
5,274,039,971.20
1 The ratio “Dividends to net profit, %” is calculated as Dividends per share in rubles multiplied by the number of shares (5,993,227,240) divided
by the dollar rate on the day of the announcement divided by the net profit attributable to NLMK shareholders under IFRS multiplied by 100%.
2 The obligation to pay dividends on shares was fulfilled by PJSC “NLMK” in the terms established by the legislation of the Russian Federation.
The reason for paying dividends is not in full amount due to incorrect payment details of shareholders.
Dividends/free
cash flow, %1
Date of payment
Paid out2 as of 31.12.2020
RUB
% from declared
134
101
83
104
124
133
99
104
84
166
93
113
99
101
120
84
75
65
37
65
44
50
52
26
18
from 30.12.2020 до 10.02.2021 (inclusive)
from 13.10.2020 до 17.11.2020 (inclusive)
from 14.07.2020 до 17.08.2020 (inclusive)
from 10.06.2020 до 15.07.2020 (inclusive)
38,526,138,114.73
28,427,060,235.83
19,212,238,851.08
103,925,539,981.95
from 10.01.2020 to 13.02.2020 (inclusive)
from 11.10.2019 to 15.11.2019 (inclusive).
from 20.06.2019 to 24.07.2019 (inclusive)
19,277,572,251.46
22,031,690,658.57
43,941,942,070.47
from 07.05.2019 to 13.06.2019 (inclusive)
136,559,008,896.53
from 10.01.2019 to 13.02.2019 (inclusive)
from 13.10.2018 to 19.11.2018 (inclusive).
from 21.06.2018 to 25.07.2018 (inclusive)
from 21.06.2018 to 25.07.2018 (inclusive)
from 10.01.2018 to 13.02.2018 (inclusive)
from 13.10.2017 to 17.11.2017 (inclusive)
from 15.06.2017 to 19.07.2017 (inclusive)
from 15.06.2017 to 19.07.2017 (inclusive)
from 10.01.2017 to 13.02.2017 (inclusive)
from 13.10.2016 to 17.11.2016 (inclusive)
from 15.06.2016 to 19.07.2016 (inclusive)
36,160,188,287.60
31,370,838,449.86
34,304,657,291.50
84,054,201,298.19
30,712,814,779.85
19,157,682,665.66
14,067,867,006.85
55,198,112,496.67
21,731,775,726.20
6,465,547,166.15
6,764,857,327.70
from 15.06.2016 to 19.07.2016 (inclusive)
41,605,954,038.53
from 09.01.2016 to 12.02.2016 (inclusive)
from 13.10.2015 to 17.11.2015 (inclusive)
from 17.06.2015 to 21.07.2015 (inclusive)
from 17.06.2015 to 21.07.2015 (inclusive)
11,673,475,109.09
5,567,460,843.39
9,817,408,088.53
14,606,462,870.22
99.973
99.86
99.86
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.88
99.89
99.89
99.89
99.89
99.89
99.89
99.89
99.88
99.88
from 12.10.2014 to 18.11.2014 (inclusive)
5,267,898,137.36
99.88
3 As at December 31, 2020 dividends payment deadline has not expired. The data is related to the expiry date of the dividend payout period the 9 months
of 2020 – deadline expiring – February 10, 2021.
282
283
ANNUALREPORT 2020 NOVOLIPETSK STEEL
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL
REPORTING STANDARDS
AS AT AND FOR THE YEAR ENDED
31 DECEMBER 2020
(WITH INDEPENDENT AUDITOR’S REPORT THEREON)
Novolipetsk Steel
Consolidated financial statements as at and for the year ended 31 December 2020
CONTENTS
Independent auditor’s report
Consolidated statement of financial position
Consolidated statement of profit or loss
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
3
9
10
11
12
13
14
2
Independent Auditor’s Report
To the Shareholders and the Board of Directors of Novolipetsk Steel:
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated
financial position of Novolipetsk Steel and its subsidiaries (together – the “Group”) as at 31 December
2020, and the Group’s consolidated financial performance and consolidated cash flows for the year then
ended in accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Group’s consolidated financial statements comprise:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2020;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group in accordance with the International Code of Ethics for Professional
Accountants (including International Independence Standards) issued by the International Ethics
Standards Board for Accountants (IESBA Code) and the ethical requirements of the Auditor’s
Professional Ethics Code and Auditor’s Independence Rules that are relevant to our audit of the
consolidated financial statements in the Russian Federation. We have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code.
AO PricewaterhouseCoopers Audit
White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047
T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru
Our audit approach
Overview
Materiality
• Overall Group materiality: 92 million US Dollars (USD),
which represents 1% of the Group’s consolidated revenue
Group
scoping
• We conducted audit work at 5 reporting units in four countries
• Our audit scope addressed 78% of the Group’s revenues and 74%
of the Group’s consolidated total assets
Key audit
matters
• Key Audit Matter – Assessment of the recoverability of the carrying
value of goodwill, intangible assets, property, plant and equipment
and investment in joint venture NBH.
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where
management made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all
of our audits we also addressed the risk of management override of internal controls, including among
other matters consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if,
individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
in the table below. These, together with qualitative considerations, helped us to determine the scope
of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of
misstatements, if any, both individually and in aggregate on the consolidated financial statements as a
whole.
Overall Group materiality
USD 92 million (2019: USD 106 million)
How we determined it
1% of the Group’s consolidated revenue
Rationale for the materiality
benchmark applied
We chose revenue as the benchmark because, in our view,
it is the benchmark which objectively best represents the
performance of the Group over a period of time while
financial results are volatile. We determined overall
materiality as 1%, which in our experience is within the
range of acceptable quantitative materiality thresholds
applied for public companies in the relevant industry.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Assessment of the recoverability of the
carrying value of goodwill, intangible assets,
property, plant and equipment, and investment
in joint venture NBH
Refer to Notes 8, 9 and 4 to the consolidated
financial statements
The Group management performed an analysis of
existence of indicators of impairment of the
Group’s property, plant and equipment (PP&E),
intangible assets, goodwill and carrying value of
investment in joint venture NBH (a joint venture
between the Group and Societe Wallonne de
Gestion et de Participations S. A.(SOGEPA), as
well as indicators of potential reversal of an
impairment loss recognised in prior periods. This
analysis revealed:
We obtained, understood and evaluated
management’s impairment models. We involved
our valuation experts to assist in the evaluation of
the methodology, mathematical accuracy and
assumptions used in the models.
Specific work performed over the impairment test
included:
•
comparing the key assumptions used within
the impairment models to the historic
performance of the respective CGUs,
approved estimates, and other supporting
calculations;
•
sales volumes and prices decline on the market
of certain finished products and raw materials
because of the spread of COVID -19;
•
• high volatility on the market of certain finished
products and raw materials.
The analysis triggered testing a number of the
Group’s cash-generating units (CGUs) for
impairment. No indicators that an impairment loss
recognised in prior periods may no longer exist or
may have decreased have been identified.
The recoverable amount of PP&E, intangible
assets and goodwill for each CGU subject to
testing as well as recoverable amount of
investment in NBH were calculated by
management as at 31 December 2020 or as at
30 June 2020.
sample benchmarking the key assumptions
used within the impairment models, including
price forecasts for core raw materials and
finished products, inflation and discount rates,
against external expert valuations,
macroeconomic and industry forecasts, which
corroborated their validity;
• performing a sensitivity analysis over the
key assumptions in order to assess their
potential impact on impairment results and
ranges of possible outcomes of the
recoverable amounts;
• assessing compliance with the requirements
of IFRS of the related disclosures in the
consolidated financial statements and
verification of disclosure.
How our audit addressed the key audit matter
The scope of the audit procedures for
verification of impairment models for each
CGU was based on its significance, safety
margin, sensitivity to assumptions and on
individual risks.
Key audit matter
Management assessed the recoverable amount
of CGU PJSC NLMK as fair value less cost to sell
and as value in use for each other CGU using
discounted cash flow models.
As a result of this testing performed, additional
impairment loss of USD 120 million was
recognized in respect to investment in NBH. In
respect to other CGUs management concluded
that no impairment was required as at
31 December 2020.
We focused on this area because of the
significant judgmental factors involved in the
calculation of recoverable amount of each CGU,
and the significant carrying value of the assets in
scope of the test.
How we tailored our Group audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion
on the consolidated financial statements as a whole, taking into account structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
The Group’s major production facilities are located in the Russian Federation, the USA and Western
Europe and the trading company is based in Switzerland. Based on our continuing assessment, we
included in our group audit scope the 5 components located in these regions.
The audits of the components were conducted by PwC network firms in accordance with International
Standard on Auditing (ISA) 600 “Special considerations – audits of group financial statements
(including the work of component auditors)”. The Group engagement team’s instructions to component
auditors included results of our risk assessment, materiality levels and the approach to the audit of
centralised processes and systems. The Group engagement team is in regular contact with the
component auditors. Our selection is based on the relative significance of the entities within the Group
or specific risks identified.
By performing the procedures above at the components in combination with additional procedures
performed at the Group level, we have obtained sufficient and appropriate audit evidence regarding
the consolidated financial statements as a whole that provides a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises the Group Annual
Report for 2020 and the Issuer’s Report for the first quarter of 2021 (but does not include the
consolidated financial statements and our auditor’s report thereon), which are expected to be made
available to us after the date of this auditor’s report
Our opinion on the consolidated financial statements does not cover the other information and we will
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
When we read the Group Annual Report for 2020 and the Issuer’s Report for the first quarter of 2021,
if we conclude that there is a material misstatement therein, we are required to communicate the
matter to those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The certified auditor responsible for the audit resulting in this independent auditor’s report is
A. B. Fomin.
10 February 2021
Moscow, Russian Federation
Signed on the original: A. B. Fomin
A. B. Fomin, certified auditor (licence No. № 01-000059), AO PricewaterhouseCoopers Audit
Audited entity: Novolipetsk Steel
Independent auditor: AO PricewaterhouseCoopers Audit
Record made in the Unified State Register of Legal Entities on
28 January 1993 under State Registration Number 1024800823123
Registered by the Government Agency Moscow Registration Chamber on
28 February 1992 under Nо. 008.890
Taxpayer Identification Number 4823006703
2, Metallurgov sq., Lipetsk, 398040, Russian Federation
Record made in the Unified State Register of Legal Entities on
22 August 2002 under State Registration Number 1027700148431
Taxpayer Identification Number 7705051102
Member of Self-regulatory organization of auditors Association
“Sodruzhestvo”
Principal Registration Number of the Record in the Register of Auditors and
Audit Organizations –12006020338
Novolipetsk Steel
Consolidated statement of financial position
(millions of US dollars)
Note
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
Assets
Current assets
Cash and cash equivalents
Short-term financial investments
Trade and other accounts receivable
Inventories
Other current assets
Non-current assets
Long-term financial investments
Investments in joint ventures
Property, plant and equipment
Goodwill
Other intangible assets
Deferred income tax assets
Other non-current assets
Total assets
Liabilities and equity
Current liabilities
Trade and other accounts payable
Dividends payable
Short-term borrowings
Current income tax liability
Other short-term liabilities
Non-current liabilities
Long-term borrowings
Deferred income tax liability
Other long-term liabilities
Total liabilities
3
5
6
7
5
4
8
9
9
17
10
11
11
17
Equity attributable to Novolipetsk Steel shareholders
Common stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
12(a)
Non-controlling interests
Total equity
Total liabilities and equity
842
191
1,148
1,373
16
3,570
7
131
5,659
212
159
119
5
6,292
9,862
1,065
109
1,054
51
3
2,282
2,432
359
48
2,839
5,121
221
8
(7,140)
11,641
4,730
11
4,741
9,862
713
287
1,047
1,634
14
3,695
5
223
6,039
248
162
101
11
6,789
10,484
1,124
318
468
32
-
1,942
2,188
405
2
2,595
4,537
221
9
(6,140)
11,840
5,930
17
5,947
10,484
1,179
19
1,326
1,816
10
4,350
85
159
4,798
224
165
152
11
5,594
9,944
1,122
525
398
28
-
2,073
1,677
346
14
2,037
4,110
221
10
(6,782)
12,370
5,819
15
5,834
9,944
The consolidated financial statements as set out on pages 9 to 66 were approved by the Group’s management and
authorised for issue on 10 February 2021.
The accompanying notes constitute an integral part of these consolidated financial statements.
9
Novolipetsk Steel
Consolidated statement of profit or loss
(millions of US dollars, unless otherwise stated)
Revenue
Cost of sales
Gross profit
Note
14
General and administrative expenses
Selling expenses
Net impairment losses on financial assets
Other operating income/(expenses), net
Taxes other than income tax
16
Operating profit before share of results of joint ventures
and impairment of investments in joint ventures,
impairment of non-current assets and loss on disposals of
property, plant and equipment
Loss on disposals of property, plant and equipment
Impairment of non-current assets
Share of results of joint ventures and impairment of
investments in joint ventures
Losses on investments, net
Finance income
Finance costs
Foreign currency exchange (loss)/gain, net
Hedging result
Expenses on operations with financial instruments
Other expenses, net
Profit before income tax
8, 9
4
18
18
19, 22
22
Income tax expense
17
Profit for the year
Profit is attributable to:
Novolipetsk Steel shareholders
Non-controlling interests
Earnings per share:
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
9,245
(5,920)
3,325
(346)
(845)
(8)
9
(64)
10,554
(7,303)
3,251
(352)
(843)
(1)
13
(66)
12,046
(7,680)
4,366
(375)
(886)
(1)
(4)
(88)
2,071
2,002
3,012
(8)
(5)
(236)
-
18
(90)
(40)
(24)
(39)
(67)
1,580
(343)
1,237
1,236
1
(4)
(30)
(88)
-
18
(68)
(6)
-
-
(30)
1,794
(453)
1,341
1,339
2
(7)
(4)
(243)
(2)
21
(70)
33
-
-
(11)
2,729
(486)
2,243
2,238
5
Earnings per share attributable to
Novolipetsk Steel shareholders (US dollars)
Weighted-average number of shares outstanding:
basic and diluted (in thousands)
13
0.2062
0.2234
0.3734
12(a)
5,993,227
5,993,227
5,993,227
The accompanying notes constitute an integral part of these consolidated financial statements.
10
Novolipetsk Steel
Consolidated statement of comprehensive income
(millions of US dollars)
Profit for the year
1,237
1,341
2,243
Note
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Other comprehensive (loss)/income:
Items that may be reclassified subsequently to profit or loss:
Hedge reserve of cash flows
Income tax related to hedge reserve of cash flows
Cumulative translation adjustment
22
22
2(b)
Total comprehensive income/(loss) for the year
attributable to:
Novolipetsk Steel shareholders
Non-controlling interests
(205)
41
(839)
234
236
(2)
-
-
644
1,985
1,981
4
-
-
(1,154)
1,089
1,087
2
The accompanying notes constitute an integral part of these consolidated financial statements.
11
Novolipetsk Steel
Consolidated statement of changes in equity
(millions of US dollars)
Attributable to Novolipetsk Steel shareholders
Note
Common stock
Additional
paid-in capital
Accumulated
other
comprehensive
loss
Retained
earnings
Non-controlling
interest
Total equity
Balance at 1 January 2018
221
10
(5,631)
12,029
Profit for the year
Cumulative translation
adjustment
2(b)
Total comprehensive income
Acquisition of non-controlling
interest
Dividends to shareholders
12(b)
-
-
-
-
-
-
-
-
-
-
-
2,238
(1,151)
-
(1,151)
2,238
-
-
(1)
(1,896)
Balance at 31 December 2018
221
10
(6,782)
12,370
Profit for the year
Cumulative translation
adjustment
2(b)
Total comprehensive income
Disposal of assets to an entity
under common control
Acquisition of non-controlling
interest
Dividends to shareholders
12(b)
-
-
-
-
-
-
Balance at 31 December 2019
221
Profit for the year
Hedge reserve of cash flows
net of related income tax
Cumulative translation
adjustment
22
2(b)
Total comprehensive income
Disposal of assets to an entity
under common control
Dividends to shareholders
12(b)
-
-
-
-
-
-
Balance at 31 December 2020
221
-
-
-
(1)
-
-
9
-
-
-
-
(1)
-
8
-
642
642
-
-
-
1,339
-
1,339
-
-
(1,869)
(6,140)
11,840
-
1,236
(164)
(836)
-
-
(1,000)
1,236
-
-
-
(1,435)
(7,140)
11,641
17
5
(3)
2
(3)
(1)
15
2
2
4
-
(2)
-
17
1
-
(3)
(2)
-
(4)
11
6,646
2,243
(1,154)
1,089
(4)
(1,897)
5,834
1,341
644
1,985
(1)
(2)
(1,869)
5,947
1,237
(164)
(839)
234
(1)
(1,439)
4,741
The accompanying notes constitute an integral part of these consolidated financial statements.
12
Novolipetsk Steel
Consolidated statement of cash flows
(millions of US dollars)
Cash flows from operating activities
Profit for the year
Note
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
1,237
1,341
2,243
Adjustments to reconcile profit for the year to net cash
provided by operating activities:
Depreciation and amortisation
Loss on disposals of property, plant and equipment
Losses on investments
Finance income
Finance costs
Share of results of joint ventures and impairment of
investments in joint ventures
Income tax expense
Impairment of non-current assets
Foreign currency exchange loss/(gain), net
Hedging result
Expenses on operations with financial instruments
Change in impairment allowance for inventories and
credit loss allowance of accounts receivable
Changes in operating assets and liabilities
(Increase)/decrease in trade and other accounts
receivable
Decrease/(increase) in inventories
(Increase)/decrease in other operating assets
Increase /(decrease) in trade and other accounts payable
18
18
4
17
8, 9
19,22
22
Сash provided by operations
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases and construction of property, plant and
equipment and intangible assets
Proceeds from sale of property, plant and equipment
Purchases of investments and loans given
Proceeds from repayment of loans given
Placement of bank deposits
Withdrawal of bank deposits
Interest received
Contribution to share capital of joint venture
Acquisition of subsidiary, net of cash and cash
equivalents acquired
Acquisition of non-controlling interest
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payments on leases
Interest paid
Payments from settlement of derivative financial
instruments
Dividends paid to Novolipetsk Steel shareholders
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Supplemental disclosures of cash flow information:
Non-cash investing activities:
Conversion of debt to equity
4
3
3
4
574
8
-
(18)
90
236
343
5
40
24
39
4
(177)
117
(2)
46
2,566
(285)
2,281
(1,124)
15
(51)
142
(836)
847
10
(131)
(4)
-
(1,132)
2,002
(1,284)
(20)
(64)
(16)
(1,637)
(1)
(1,020)
129
-
713
842
562
4
-
(18)
68
88
453
30
6
-
-
5
314
284
(1)
(132)
3,004
(381)
2,623
(1,080)
1
(164)
115
(933)
777
29
(155)
-
(1)
(1,411)
1,015
(500)
(14)
(49)
-
(2,120)
-
(1,668)
(456)
(10)
1,179
713
577
7
2
(21)
70
243
486
4
(33)
-
-
1
(258)
(187)
7
177
3,318
(577)
2,741
(680)
3
(91)
-
(305)
1,349
22
-
(4)
(4)
290
470
(643)
-
(56)
-
(1,888)
(2)
(2,119)
912
(34)
301
1,179
-
-
210
The accompanying notes constitute an integral part of these consolidated financial statements.
13
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
1
Background
Novolipetsk Steel (the “Parent Company” or “NLMK”) and its subsidiaries (together – the “Group”) is one of the
world’s leading steelmakers with facilities that allow it to operate an integrated steel production cycle. The Parent
Company is a public joint stock company in accordance with the Civil Code of the Russian Federation. The Parent
Company was originally established as a State owned enterprise in 1934 and was privatised in the form of an open
joint stock company on 28 January 1993. On 29 December 2015, the legal form of the Parent Company was changed
to public joint stock company due to changes in legislation of the Russian Federation.
The Group is a vertically integrated steel company and the largest steel producer in Russia. The Group also operates
in the mining segment (Note 21).
The Group’s main operations are in the Russian Federation, the European Union and the USA and are subject to
the legislative requirements of the respective state and regional authorities. The Parent Company’s registered
office is located at 2, Metallurgov sq., 398040, Lipetsk, Russian Federation.
As at 31 December 2020, the Parent Company’s major shareholder with 79.25% (81.40% as at 31 December 2019
and 84.03% as at 31 December 2018) ownership interest is Fletcher Group Holdings Limited, which is beneficially
owned by Mr. Vladimir Lisin.
The major companies of the Group by reportable segment (see Note 21) are:
Russian flat products
LLC VIZ-Steel
JSC Altai-Koks
NLMK Trading S.A.
(formerly – Novex Trading (Swiss) S.A.)
NLMK DanSteel and Plates
Distribution Network
NLMK DanSteel A/S
NLMK USA
NLMK Indiana LLC
NLMK Pennsylvania LLC
Russian long products
JSC NLMK-Ural
LLC NLMK-Metalware
LLC NLMK-Kaluga
LLC Vtorchermet NLMK
Mining
JSC Stoilensky GOK
Activity
Country of
incorporation
Share at
31 December
2020
Share at
31 December
2019
Share at
31 December
2018
Production of steel
Production of blast
furnace coke
Trading
Russia
Russia
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Switzerland
100.00%
100.00%
100.00%
Production of steel
Denmark
100.00%
100.00%
100.00%
Production of steel
Production of steel
USA
USA
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Production of steel
and long products
Production of
metalware
Production of long
products
Processing of metal
scrap
Mining, processing and
pelletising of iron-ore
Russia
Russia
Russia
92.59%
92.59%
92.59%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Russia
100.00%
100.00%
100.00%
Russia
100.00%
100.00%
100.00%
14
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
1
Background (continued)
Among joint ventures the major is:
Activity
Country of
incorporation
Share at
31 December
2020
Share at
31 December
2019
Share at
31 December
2018
NLMK Belgium Holdings S.A. Holding company*
Belgium
49.00%
49.00%
49.00%
*NLMK Belgium Holdings S.A. is owned jointly by the Group and Societe Wallonne de Gestion et de Participations S. A. (SOGEPA),
a Belgian state company (Note 4). It comprises strip and plate manufacturers located in Belgium, France and Italy.
2
Basis of preparation of the consolidated financial statements
(a)
Basis of preparation
These consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”) under the historical cost convention except as described in the principal accounting policies
applied in the preparation of these consolidated financial statements, as set out in Note 25. These policies have
been consistently applied to all the periods presented in these consolidated financial statements except for new
standards adopted as set out in Note 27. Figures for three reporting periods are presented for users’ convenience.
(b)
Functional and reporting currency
The functional currency of all of the Group’s Russian entities is considered to be the Russian ruble. The functional
currency of the majority of the foreign subsidiaries is their local currency. The Group uses US dollars as the
presentation currency of these consolidated financial statements. All amounts in the consolidated financial
statements are rounded to the nearest million unless otherwise stated.
The results of operations and financial position of each Group entity are translated into the presentation currency
as follows:
▪
▪
▪
▪
assets and liabilities in the statement of financial position are translated at the closing rate at the end of
the respective reporting period;
income and expenses are translated at average exchange rates for each month (unless this average rate is
not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of the transactions);
components of equity are translated at the historical rate;
all resulting exchange differences are recognised in other comprehensive income.
Items of consolidated statement of cash flows are translated at average exchange rates for each month (unless this
average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case proceeds and disposals are translated at the dates of the transactions).
When control over a foreign operation is lost, the previously recognised exchange differences on translation to a
different presentation currency are reclassified from accumulated other comprehensive income/loss to profit or
loss for the year as part of the gain or loss on disposal. On partial disposal of a subsidiary without loss of control,
the related portion of accumulated currency translation differences is reclassified to non-controlling interest within
equity.
15
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
2
Basis of preparation of the consolidated financial statements (continued)
The Central Bank of the Russian Federation’s Russian ruble to the main foreign currencies closing rates of exchange
as of the reporting dates and the period weighted average exchange rates for corresponding reporting periods are
indicated below.
Russian ruble to US dollar
For the year ended 31 December
As at 31 December
Russian ruble to Euro
For the year ended 31 December
As at 31 December
3
Cash and cash equivalents
Cash
Deposits
Other cash equivalents
4
Investments in joint ventures
NLMK Belgium Holdings S.A. (“NBH”)
TBEA & NLMK (Shenyang) Metal Product Co., Ltd.
2020
2019
2018
72.1464
73.8757
82.4488
90.6824
64.7362
61.9057
72.5021
69.3406
62.7078
69.4706
73.9546
79.4605
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
441
384
17
842
388
296
29
713
526
627
26
1,179
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
121
10
131
213
10
223
149
10
159
The table below summarises the movements in the carrying amount of the Group’s investments in joint ventures.
2020
2019
2018
As at 1 January
Share of net loss
Contribution into share capital
Impairment of investments
Disposal of 2% stake in NBH
Share of change in unrealised profit in inventory
Share of change in other comprehensive income
Translation adjustment
As at 31 December
223
(81)
131
(120)
-
(35)
(1)
14
131
159
(101)
155
(31)
-
44
(1)
(2)
223
205
(120)
210
(87)
(7)
(36)
(2)
(4)
159
16
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
4
Investments in joint ventures (continued)
Summarised consolidated financial information for NBH before impairment losses is as follows:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Equity
Revenue
Net loss
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
693
673
1,366
(635)
(539)
767
551
1,318
(654)
(507)
969
562
1,531
(684)
(673)
(1,174)
(1,161)
(1,357)
192
157
174
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
1,374
(167)
1,562
(207)
1,837
(242)
NBH cash and cash equivalents as at 31 December 2020, 2019 and 2018 amounted to $32, $25 and $1, respectively.
NBH financial liabilities excluding trade and other accounts payable as at 31 December 2020, 2019 and 2018
amounted to $510, $649 and $690, respectively, and are included in current and non-current liabilities.
Reconciliation of net assets of NBH, calculated in accordance with its consolidated financial statements, to the
carrying amount of the investment is below.
2020
2019
2018
Net assets as at 1 January
Net loss for the year
Contribution into share capital
Acquisition of treasury shares
Other comprehensive income
Translation adjustment
Net assets as at 31 December
PP&E valuation difference
Adjusted net assets as at 31 December
As at 31 December:
Share in net assets
Excess of fair value of investment in NBH as at
the deconsolidation date
Accumulated share of the other investor in contributions into
share capital
Accumulated impairment of investments
Share of unrealised profit in inventory
Cumulative translation adjustment
Investments in NBH
23
(161)
185
-
(1)
3
49
143
192
94
100
416
(469)
(61)
41
121
33
(202)
195
-
(2)
(1)
23
134
157
77
100
376
(349)
(26)
35
213
19
(197)
210
(5)
1
5
33
141
174
85
100
316
(318)
(70)
36
149
The other investor in NBH is SOGEPA, a Belgian state-owned company, controlling the stake of 49.0% as of
31 December 2020, 2019 and 2018.
17
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
4
Investments in joint ventures (continued)
In October 2019, the Group and SOGEPA have agreed to jointly support NBH bank financing via shareholder
guarantees on a parity basis and to invest in the charter capital of NBH for the execution of the Group’s Strategy
2022 investment projects EUR 35 million, EUR 50 million and EUR 15 million in 2019, 2020 and 2021, respectively,
each.
In December 2018, the Group converted existing loans to NBH into share capital in the amount of $210.
Information about the Group’s operations with NBH and investment impairment testing is disclosed in Notes 23
and 8, respectively.
5
Financial investments
Short-term financial investments
Bank deposits (Note 22(c))
Loans to related parties (Note 23(c))
Other short-term financial investments
Long-term financial investments
Loans to related parties (Note 23(c))
Bank deposits (Note 22(c))
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
149
41
1
191
6
1
7
198
157
128
2
287
5
-
5
292
5
14
-
19
85
-
85
104
The carrying amounts of financial investments approximate their fair values.
6
Trade and other accounts receivable
Financial assets
Trade accounts receivable
Credit loss allowance of trade accounts receivable
Other accounts receivable
Credit loss allowance of other accounts receivable
Non-financial assets
Advances given to suppliers
Allowance for impairment of advances given to suppliers
VAT and other taxes receivable
Accounts receivable from employees
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
834
(14)
147
(22)
945
79
(9)
132
1
203
818
(18)
33
(23)
810
70
(3)
168
2
237
1,099
(21)
30
(17)
1,091
76
(3)
161
1
235
1,148
1,047
1,326
The carrying amounts of trade and other accounts receivable approximate their fair values.
18
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
6
Trade and other accounts receivable (continued)
As at 31 December 2020, 2019 and 2018, accounts receivable with a carrying value of $119, $133 and $173,
respectively, served as collateral for certain borrowings (Note 11).
Movements in the credit loss allowance of financial receivables are as follows:
As at 1 January
Credit loss allowance recognised
Accounts receivable written-off
Credit loss allowance reversed
Translation adjustment
As at 31 December
7
Inventories
Raw materials
Work in process
Finished goods
Impairment allowance
2020
2019
2018
(41)
(5)
3
3
4
(36)
(38)
(7)
2
5
(3)
(41)
(43)
(8)
-
7
6
(38)
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
771
298
350
1,419
(46)
1,373
927
383
384
1,694
(60)
1,634
859
504
501
1,864
(48)
1,816
Product type “Slabs” is represented by semi-finished products of own production or purchased from third parties,
which the Group plans to process further or sell to third parties without processing. Depending on the origin and
usage plans, this type of product is distributed between “Raw materials”, “Work in process” and “Finished goods”
categories as follows:
Raw materials
Work in process
Finished goods
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
82
108
42
219
141
42
97
249
65
As at 31 December 2020, 2019 and 2018 inventories with a carrying value of $287, $460 and $472, respectively,
served as collateral for certain borrowings (Note 11).
Cost of raw materials and acquired semi-finished goods
in cost of production for the years ended
31 December 2020, 2019 and 2018 amounted to $3,939, $4,835 and $5,521, respectively. Cost of fuel and energy
resources in cost of production for the years ended 31 December 2020, 2019 and 2018 amounted to $540, $607
and $632, respectively.
In November 2020 the Group has signed settlement agreement with the United States Government and will receive
refund of paid steel tariffs and accrued interests, enacted by Department of Commerce under Section 232 of the
USA Trade Expansion Act. Cost of sales for the year ended 31 December 2020 was reduced by $97.
19
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
8
Property, plant and equipment
Land
Buildings
Land and buildings
improvements
Machinery and
equipment
Vehicles
Construction in
progress
Cost at 1 January 2018
Accumulated depreciation and impairment
Net book value at 1 January 2018
Additions
Disposals
Impairment
Transfers
Reclassification to intangible assets
(Note 9)
Depreciation charge
Translation adjustment
Cost at 31 December 2018
Accumulated depreciation and impairment
Net book value at 31 December 2018
Adjustment on adoption of IFRS 16
Net book value at 1 January 2019
Additions
Disposals
Impairment
Transfers
Depreciation charge
Translation adjustment
Cost at 31 December 2019
Accumulated depreciation and impairment
Net book value at 31 December 2019
128
-
128
-
-
-
5
-
-
(23)
110
-
110
22
132
-
(3)
-
1
-
13
143
-
143
2,057
(783)
1,274
-
(1)
-
55
-
(47)
(207)
1,774
(700)
1,074
42
1,116
6
-
-
53
(56)
128
2,081
(834)
1,247
2,328
(1,442)
886
-
(1)
-
37
-
(76)
(147)
1,956
(1,257)
699
2
701
-
(2)
-
88
(73)
85
2,263
(1,464)
799
6,533
(4,218)
2,315
-
(3)
-
201
-
(424)
(321)
5,701
(3,933)
1,768
13
1,781
3
(4)
(4)
657
(391)
179
6,880
(4,659)
2,221
279
(188)
91
-
-
-
43
-
(16)
(17)
266
(165)
101
-
101
-
(1)
-
75
(25)
16
370
(204)
166
855
-
855
731
(4)
(4)
(341)
(24)
-
(167)
1,050
(4)
1,046
-
1,046
1,158
-
(4)
(874)
-
137
1,472
(9)
1,463
Total
12,180
(6,631)
5,549
731
(9)
(4)
-
(24)
(563)
(882)
10,857
(6,059)
4,798
79
4,877
1,167
(10)
(8)
-
(545)
558
13,209
(7,170)
6,039
20
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
8
Property, plant and equipment (continued)
Including:
Right-of-use assets
Cost at 31 December 2019
Accumulated depreciation
Net book value at 31 December 2019
Additions
Disposals
Impairment
Transfers
Depreciation charge
Translation adjustment
Total property, plant and equipment
Cost at 31 December 2020
Accumulated depreciation and impairment
Net book value at 31 December 2020
Including:
Right-of-use assets
Cost at 31 December 2020
Accumulated depreciation
Net book value at 31 December 2020
Land
Buildings
Land and buildings
improvements
Machinery and
equipment
Vehicles
Construction in
progress
Total
19
-
19
5
-
-
-
-
(20)
128
-
128
19
-
19
53
(8)
45
1
(1)
-
62
(57)
(189)
1,826
(763)
1,063
47
(13)
34
1
-
1
-
-
-
302
(84)
(138)
2,168
(1,289)
879
1
-
1
16
(3)
13
1
(14)
-
642
(388)
(302)
6,487
(4,327)
2,160
18
(7)
11
1
-
1
-
(1)
-
48
(28)
(29)
351
(195)
156
1
-
1
-
-
-
1,087
(3)
(5)
(1,054)
-
(215)
1,285
(12)
1,273
-
-
-
90
(11)
79
1,094
(19)
(5)
-
(557)
(893)
12,245
(6,586)
5,659
86
(20)
66
The amount of borrowing costs capitalised is $32, $59 and $36 for the years ended 31 December 2020, 2019 and 2018, respectively. The capitalisation rate was 3.2%, 5.5% and 6.5% in
2020, 2019 and 2018, respectively.
21
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
8
Property, plant and equipment (continued)
The Group management made an analysis of impairment indicators of the Group’s assets as well as indicators of
potential reversal of an impairment loss recognized in prior periods as at 30 September 2020. Against the
background of the spread of coronavirus infection (COVID-19) heightened volatility accompanied by the sales
volumes and prices decline on the market of certain finished products and raw materials triggered impairment
assessment of some of the Group’s cash generating units, which required the reassessment of the recoverable
amounts using the income approach based primarily on Level 3 inputs as at 31 December 2020. Goodwill was also
tested for impairment as of the same date. No indicators that an impairment loss recognized in prior periods may
no longer exists or may have decreased have been identified. Testing for impairment in the comparative periods
was also caused by similar factors and was conducted as of 31 December 2019 and 2018.
For the purpose of the impairment test, the Group management used a forecast of cash flows for five years and
normalised cash flows for a post-forecast period.
The table below summarises CGUs and types of assets, subject to determination of the recoverable amount as of
31 December 2020 (for JSC NLMK-Ural and LLC NLMK-Metalware as of 30 June 2020), major assumptions and their
sensitivity used in the impairment models. Sales price is estimated using an average annual growth rate, over the
5-year forecast period (31 December 2019: 5-year; 31 December 2018: 5-year) based on current industry trends
and including long-term inflation forecasts for each territory. Sales volume is estimated using an average annual
growth rate over the same forecast period based on past performance and management’s expectations of market
development. Discount rate reflects specific risks relating to the relevant segments and the countries in which they
operate. Sensitivity in the table below was determined as a percentage of changes of corresponding factors in
forecast and post-forecast periods when recoverable values of assets (value in use) become equal to their carrying
values (in respect of NLMK Belgium Holdings S.A. - carrying value prior to current year impairment loss). As of 30
June 2020 impairment testing showed that recoverable amount of investment (value in use) in NLMK Belgium
Holdings S.A. before impairment recognised was below its carrying amount by $120.
Recoverable amount for CGU NLMK has been determined as fair value less costs to sell. As a result of testing
performed recoverable amount is higher than carrying amount and possible changes in assumptions do not lead to
impairment recognition.
CGU
Asset type
NLMK Belgium Holdings S.A. Investment
NLMK Pennsylvania LLC
NLMK Indiana LLC
NLMK Indiana LLC
JSC Altai-Koks
LLC VIZ-Steel
LLC VIZ-Steel
JSC NLMK-Ural
LLC NLMK-Metalware
NLMK DanSteel A/S
Property, plant
and equipment
Property, plant
and equipment
Goodwill
Goodwill
Property, plant
and equipment
Goodwill
Property, plant
and equipment
Property, plant
and equipment
Property, plant
and equipment
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sales
Price
Sensitivity,
% of change
Sales
volume
Discount
rate
7.7%
9.8%
Flat products
and plate
Flat products
9.7%
Plate
9.7%
14.1%
13.9%
13.9%
13.6%
13.4%
Plate
Coke, chemical
products
Flat products
Flat products
Long-products
and semi-
finished goods
Metalware
8.1%
Plate
650
768
641
641
179
-0.4%
-2.7%
0.5 p.p.
-1.4%
-5.6%
0.8 p.p.
-0.7%
-6.4%
1.5 p.p.
-0.4%
-57.0%
-3.3%
-47.9%
0.7 p.p.
70.1 p.p.
1,455
-40.0%
-9.2%
14.8 p.p.
1,455
453
-38.5%
-0.2%
-8.8%
-1.0%
13.4 p.p.
0.3 p.p.
615
687
-6.5%
-32.9%
39.6 p.p.
-2.5%
-7.4%
3.7 p.p.
* Weighted average prices based on the forecast product mix, averaged for the period from 2021 to 2025.
22
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
8
Property, plant and equipment (continued)
The table below summarises CGUs and types of assets, subject to determination of the recoverable amount as of
31 December 2019, major assumptions and their sensitivity used in the impairment models. Sales price is estimated
using an average annual growth rate, over the 5-year forecast period (31 December 2018: 5-year) based on current
industry trends and including long-term inflation forecasts for each territory. Sales volume is estimated using an
average annual growth rate over the same forecast period based on past performance and management’s
expectations of market development. Discount rate reflects specific risks relating to the relevant segments and the
countries in which they operate. Sensitivity in the table below was determined as a percentage of changes of
corresponding factors in forecast and post-forecast periods when recoverable values of assets (value in use) become
equal to their carrying values (in respect of NLMK Belgium Holdings S.A. - carrying value prior to current year
impairment loss). As of 31 December 2019 impairment testing showed that recoverable amount of investment
(value in use) in NLMK Belgium Holdings S.A. before impairment recognised was below its carrying amount by $31.
CGU
Asset type
NLMK Belgium Holdings S.A. Investment
NLMK Pennsylvania LLC
NLMK Indiana LLC
NLMK Indiana LLC
JSC Altai-Koks
JSC Altai-Koks
LLC VIZ-Steel
LLC VIZ-Steel
LLC NLMK-Kaluga
NLMK DanSteel A/S
Property, plant
and equipment
Property, plant
and equipment
Goodwill
Property, plant
and equipment
Goodwill
Property, plant
and equipment
Goodwill
Property, plant
and equipment
Property, plant
and equipment
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sales
Price
Sensitivity,
% of change
Sales
volume
Discount
rate
7.5%
9.8%
Flat products
and plate
Flat products
9.7%
Plate
9.7%
12.9%
12.9%
13.8%
13.8%
13.6%
8.1%
Plate
Coke, chemical
products
Coke, chemical
products
Flat products
Flat products
Long-products
and semi-
finished goods
Plate
622
0.3%
2.3%
-0.3 p.p.
737
582
582
147
-4.0%
-31.4% 6.4 p.p.
-0.5%
-6.1%
1.3 p.p.
-0.4%
-47.2%
0.9 p.p.
-4.4%
-34.0% 36.6 p.p.
147
-38.6%
-27.8% 32.6 p.p.
1,286
-4.2%
-22.3% 5.8 p.p.
1,286
421
-3.5%
-0.6%
-18.7% 4.4 p.p.
0.5 p.p.
-3.0%
649
-0.1%
-0.3%
0.1 p.p.
* Weighted average prices based on the forecast product mix, averaged for the period from 2020 to 2024.
23
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
8
Property, plant and equipment (continued)
The table below summarises CGUs and types of assets, subject to determination of the recoverable amount as of
31 December 2018, major assumptions and their sensitivity used in the impairment models. Prices for steel
products in this estimate were determined based on forecasts of investment banks’ analysts. Sensitivity in the table
below was determined as a percent of changes of corresponding factors in forecast and post-forecast periods when
recoverable values of assets (value in use) become equal to their carrying values (in respect of NLMK Belgium
Holdings S.A. - carrying value prior to current year impairment loss). As of 31 December 2018 impairment testing
showed that recoverable amount of investment (value in use) in NLMK Belgium Holdings S.A. before impairment
recognised was below its carrying amount by $87.
CGU
Asset type
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sales
Price
Sensitivity,
% of change
Sales
volume
Discount
rate
NLMK Belgium Holdings S.A. Investment
7.6%
JSC Altai-Koks
JSC Altai-Koks
NLMK DanSteel A/S
Property, plant
and equipment
Goodwill
Property, plant
and equipment
13.0%
13.0%
7.8%
Flat products
and plate
Coke, chemical
products
Coke, chemical
products
Plate
642
187
187
674
0.7%
6.9%
-0.8 p.p.
-15.4%
-10.6%
13.5 p.p.
-2.4%
-1.6%
1.5 p.p.
-0.7%
-3.6%
0.8 p.p.
* Weighted average prices based on the forecast product mix, averaged for the period from 2019 to 2023.
24
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
9
Intangible assets
Goodwill
Mineral rights
Industrial
intellectual
property
Beneficial lease
interest
Cost at 1 January 2018
Accumulated amortisation and
impairment
Net book value at
1 January 2018
Additions
Reclassification from property,
plant and equipment (Note 8)
Amortisation charge
Translation adjustment
Cost at 31 December 2018
Accumulated amortisation and
impairment
Net book value at
31 December 2018
Adjustment on adoption of
IFRS 16
Net book value at
1 January 2019
Additions
Impairment
Amortisation charge
Translation adjustment
Cost at 31 December 2019
Accumulated amortisation and
impairment
Net book value at
31 December 2019
Additions
Disposals
Amortisation charge
Translation adjustment
Cost at 31 December 2020
Accumulated amortisation
Net book value at
31 December 2020
Including:
Right-of-use assets
Cost at 31 December 2020
Accumulated amortisation
Net book value at
31 December 2020
279
(14)
265
-
-
-
(41)
238
(14)
224
-
224
-
-
-
24
262
(14)
248
-
-
-
(36)
226
(14)
212
-
-
-
351
(234)
117
1
24
(4)
(21)
296
(179)
117
-
117
1
(22)
(3)
14
311
(204)
107
1
-
(3)
(16)
263
(174)
89
-
-
-
53
(14)
39
18
-
(10)
(7)
57
(17)
40
-
40
24
-
(14)
5
86
(31)
55
44
(3)
(14)
(12)
100
(30)
70
17
(2)
15
9
(1)
8
-
-
-
-
9
(1)
8
(8)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
692
(263)
429
19
24
(14)
(69)
600
(211)
389
(8)
381
25
(22)
(17)
43
659
(249)
410
45
(3)
(17)
(64)
589
(218)
371
17
(2)
15
25
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
9
Intangible assets (continued)
Mineral rights include a license for iron ore and non-metallic minerals mining of Stoilensky iron-ore deposit in
Belgorod Region expiring in 2040, with the carrying value of $59, $73 and $68 as at 31 December 2020, 2019 and
2018, respectively.
In October 2019, the Group decided to stop coal exploration works in the Usinsky mine field area No. 3 and returned
an exploration and extraction license expiring in 2031 to the government. As a result, impairment charge of $22
was recognized which equals the full amount of the exploration asset carrying value.
Goodwill arising on acquisitions was allocated to the appropriate business segments in which the respective
acquisitions took place.
Allocation of net book value of goodwill to each segment is as follows:
Russian flat products
NLMK USA
Russian long products
Mining
Goodwill impairment testing
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
137
21
3
51
212
163
21
3
61
248
146
21
3
54
224
The Group tested goodwill for impairment as at 31 December 2020, 2019 and 2018. For the purpose of annual
impairment testing of goodwill related to CGU JSC Stoilensky GOK as at 31 December 2020, management decided
to use the previous detailed calculation of this СGU recoverable amount as there were no significant changes in the
underlying business. The recoverable amount has been determined as value in use of the respective asset. For the
purpose of this impairment testing (excluding CGU JSC Stoilensky GOK), the Group used the same assumptions and
estimates as for other assets, as disclosed in Note 8. Impairment testing showed no impairment of goodwill as at
31 December 2020, 2019 and 2018.
10
Trade and other accounts payable
Financial liabilities
Trade accounts payable
Accounts payable for purchases of property, plant and
equipment
Other accounts payable
Non-financial liabilities
Accounts payable and accrued liabilities to employees
Advances received
Taxes payable other than income tax
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
429
159
27
615
144
175
131
450
558
184
29
771
149
103
101
353
584
121
26
731
177
120
94
391
1,065
1,124
1,122
The carrying amounts of trade and other accounts payable approximate their fair values.
In 2020 and 2019 the Group recognised revenue equal to the amount of contracts liability included into advances
received as at the beginning of the year.
26
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
11
Borrowings
Rates*
Currency
Maturity*
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
Bonds
From 4.00% to 4.70%
Loans
From EURIBOR+0.85% to
EURIBOR+1.30%
From LIBOR +1.20% to LIBOR
+1.50%
0.94%
0.95%
Leases
USD
2023-2026
1,709
1,709
1,354
2021-2024
1,065
EUR
USD
EUR
EUR
2021
2022
2022
2021-2089
258
123
245
86
3,486
(1,054)
2,432
784
85
-
-
78
2,656
(468)
2,188
562
159
-
-
-
2,075
(398)
1,677
Less: short-term loans and current maturities of long-term
loans, bonds and leases
Long-term borrowings
* Rates and maturity as of 31 December 2020
The carrying amounts and fair value of long-term bonds are as follows:
As at
31 December 2020
Fair
value
Carrying
amount
As at
31 December 2019
Fair
value
Carrying
amount
As at
31 December 2018
Fair
value
Carrying
amount
Bonds
1,709
1,864
1,709
1,823
1,209
1,159
The fair value of short-term borrowings equals their carrying amount. The fair values of long-term borrowings
approximate their carrying amount. The fair values of bonds are based on market price and are within level 1 of the
fair value hierarchy.
The Group has complied with the financial and non-financial covenants of its borrowing facilities during the years
ended 31 December 2020, 2019 and 2018.
Bonds and bonds’ coupons as at 31 December 2020 were designated as hedging instrument with carrying amount
and fair value of $1,287 and $1,386, respectively (Note 22).
The long-term borrowings mature as follows:
1-2 years
2-5 years
Over 5 years
Collateral
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
579
1,327
526
2,432
410
1,245
533
2,188
133
1,044
500
1,677
As at 31 December 2020, 2019 and 2018, the loan facilities were secured by inventories and accounts receivable
with the total carrying value of $406, $593 and $645, respectively (Notes 6, 7).
27
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
11
Borrowings (continued)
Net debt reconciliation
Short-term
borrowings
Long-term
borrowings
Cash and cash
equivalents
Balance at 1 January 2018
Cash flows
Interest accrued
Foreign exchange difference
Translation adjustment
(380)
(1,901)
55
(77)
(19)
23
199
-
(246)
271
Balance at 31 December 2018
(398)
(1,677)
Cash flows
Interest accrued
Foreign exchange difference
Recognition on adoption of IFRS 16
Leasing recognised
Translation adjustment
Balance at 31 December 2019
Cash flows
Interest accrued
Foreign exchange difference
Leasing recognised
Other financial expenses
Translation adjustment
17
(81)
23
(8)
-
(21)
(468)
(424)
(100)
(42)
(12)
-
(8)
(436)
-
184
(71)
(15)
(173)
(2,188)
(178)
-
(342)
(17)
(7)
300
Balance at 31 December 2020
(1,054)
(2,432)
301
840
-
72
(34)
1,179
(456)
-
(94)
-
-
84
713
129
-
59
-
-
(59)
842
Short-term
bank
deposits
1,057
(1,055)
12
62
(71)
5
143
13
(17)
-
-
13
157
(14)
7
5
-
-
(6)
149
Net debt
(923)
39
(65)
(131)
189
(891)
(732)
(68)
96
(79)
(15)
(97)
(1,786)
(487)
(93)
(320)
(29)
(7)
227
(2,495)
12
(a)
Shareholders’ equity
Shares
As at 31 December 2020, 2019 and 2018, the Parent Company’s share capital consisted of 5,993,227,240 issued
common shares, with a par value of 1 Russian ruble each. For each common share held, the stockholder has the
right to one vote at the stockholders’ meetings.
(b)
Dividends
Dividends are paid on common shares at the recommendation of the Board of Directors and approval at a General
Shareholders Meeting, subject to certain limitations as determined by the Russian legislation. Profits available for
distribution to the shareholders in respect of any reporting period are determined by reference to the statutory
financial statements of the Parent Company. As at 31 December 2020, 2019 and 2018, the retained earnings of the
Parent Company, available for distribution in accordance with the legislative requirements of the Russian
Federation, amounted to $3,322, $4,671 and $4,689, converted into US dollars using the exchange rates at
31 December 2020, 2019 and 2018, respectively.
According to the Group’s dividend policy, the Group pays dividends on a quarterly basis as follows:
▪
▪
If Net Debt/EBITDA is below 1.0х, the payout amount shall be equivalent to or above 100% of free cash
flow, based on the Company's IFRS Consolidated Financial Statements for the reporting period;
If Net Debt/EBITDA is above 1.0х, the payout amount shall be equivalent to or above 50% of free cash flow,
based on the Company's IFRS Consolidated Financial Statements for the reporting period.
28
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
12
Shareholders’ equity (continued)
Dividends, declared by the Parent Company and translated to US dollars at the historical rate as of the
announcement date, are as in the table below.
Declaration
period
2020
Total
2019
Total
Per share*
amount Per share*
amount Per share*
2018
Total
amount
326
556
477
537
5.80
7.34
3.68
3.22
543
674
343
309
3.36
5.73
5.24
6.04
1,869
1,896
For the 4th quarter of previous year April
For the 1st quarter of current year
June
For the 2nd quarter of current year September
For the 3rd quarter of current year December
3.12
3.21
4.75
6.43
263
275
369
528
1,435
* Dividends per share are shown in Russian rubles.
(c)
Capital management
The Group’s objectives when managing capital are to safeguard financial stability and a target return for the
shareholders, as well as the reduction of cost of capital and optimisation of its structure. To achieve these
objectives, the Group may revise its investment program, borrow new or repay existing loans, offer equity or debt
instruments on capital markets.
When managing capital, the Group uses the following indicators:
▪
▪
▪
the return on invested capital ratio, which is defined as operating profit before share of results of joint
ventures and impairment of investments in joint ventures, impairment of non-current assets and loss on
disposals of property, plant and equipment less income tax divided by capital employed for the last twelve
months, should exceed cost of capital;
the net debt to EBITDA ratio, which is defined as total debt less cash and cash equivalents and short-term
bank deposits divided by operating profit before share of results of joint ventures and impairment of
investments in joint ventures, impairment of non-current assets and loss on disposals of property, plant
and equipment less depreciation and amortization for the last twelve months;
free cash flow, which is defined as net cash provided by operating activities less net interest paid less capital
expenditures, should be positive.
There were no changes in the Group’s approach to capital management during the reporting period.
13
Earnings per share
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Profit for the year attributable to the NLMK shareholders
(millions of US dollars)
Weighted average number of shares
1,236
5,993,227,240
1,339
5,993,227,240
2,238
5,993,227,240
Basic and diluted earnings per share (US dollars)
0.2062
0.2234
0.3734
Basic and diluted net earnings per share is calculated by dividing profit for the year attributable to the NLMK
shareholders by the weighted average number of common shares outstanding during the reporting period. NLMK
does not have potentially dilutive financial instruments during the years ended 31 December 2020, 2019 and 2018.
29
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
14
(a)
Revenue
Revenue by type
Revenue from sale of goods
Flat products
Pig iron, slabs and billets
Long products and metalware
Coke and other chemical products
Iron ore and sintering ore
Scrap
Other products
Total revenue from sale of goods
Revenue from transportation services
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
4,819
2,684
990
197
69
54
136
8,949
296
9,245
5,804
2,628
1,231
295
48
75
178
6,416
3,477
1,268
307
-
86
194
10,259
11,748
295
298
10,554
12,046
(b)
Revenue by geographical area
The allocation of total revenue by geographical area is based on the location of end customers who purchased the
Group’s products. The Group’s total revenue from external customers by geographical area is as follows:
Russia
European Union
North America
Middle East, including Turkey
Asia and Oceania
CIS
Central and South America
Other regions
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
3,820
1,562
1,426
1,033
780
249
210
165
4,337
1,917
1,948
1,169
244
405
285
249
4,051
2,268
2,556
1,375
489
405
557
345
9,245
10,554
12,046
The Group does not have customers with a share of more than 10% of the total revenue in 2020 and 2019, except
NBH group companies in 2018 (Note 23).
30
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
15
Labour costs
The Group’s labour costs, including social security costs, which are included in the corresponding lines of the
consolidated statement of profit or loss, were as indicated below.
Cost of sales
General and administrative expenses
Selling expenses
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
696
182
31
909
750
191
29
970
720
230
29
979
Remuneration of the key management personnel that comprises payments to members of the Management Board
and the Board of Directors of the Parent Company, is recorded within general and administrative expenses and
includes annual compensation and performance bonus contingent on the Group’s results for the reporting year.
Total remuneration of the key management personnel, including social security costs amounted to $14, $17 and
$38 in 2020, 2019 and 2018, respectively. As at 31 December 2020, 2019 and 2018 accrued liabilities to key
management personnel related to the long-term incentive plan amounted to nil, nil and $25, respectively.
16
Taxes other than income tax
Allocation of taxes other than income tax to the functional items of consolidated statement of profit or loss is
indicated below.
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
59
4
1
64
57
3
6
66
76
4
8
88
Cost of sales
General and administrative expenses
Other operating expenses
17
Income tax
Income tax charge comprises the following:
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Current income tax expense
Deferred income tax benefit/(expense)
Income tax related to hedge reserve of cash flows
Total income tax expense
(308)
6
(41)
(343)
(379)
(74)
-
(453)
(574)
88
-
(486)
The corporate income tax rate applicable to the Group entities located in Russia, is predominantly 20%. The
corporate income tax rate applicable to income of foreign subsidiaries ranges from 11% to 30%.
31
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
17
Income tax (continued)
Profit before income tax is reconciled to the income tax expense as follows:
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Profit before income tax
Income tax at rate 20%
Change in income tax:
- tax effect of non-deductible income/(expenses)
- non-taxable translation adjustments
- effect of different tax rates
- unrecognized deferred tax asset on investments in joint
ventures
- unrecognised tax loss carry forward for the year
- utilisation of previously unrecognised tax loss carry forward
- effect of tax on intercompany dividends
- impairment of previously recognised deferred tax assets
- recognition of previously unrecognised tax loss carry
forward
1,580
(316)
3
4
22
(59)
(10)
13
-
-
-
1,794
(359)
(15)
(1)
9
(26)
(27)
1
(1)
(34)
-
2,729
(546)
-
7
27
(71)
(8)
56
(6)
(15)
70
Total income tax expense
(343)
(453)
(486)
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities, are
presented below:
As at
31 December 2020
(Charged)/credited
to profit or loss
Translation
adjustment
As at
1 January 2020
Deferred tax assets
Trade and other accounts payable
Trade and other accounts receivable
Inventories
Tax losses carried forward
Borrowings
Other long-term liabilities
Deferred tax liabilities
Property, plant and equipment
Other intangible assets
Total deferred tax liability, net
26
13
18
39
13
10
119
(348)
(11)
(359)
(240)
8
4
5
(6)
3
10
24
(14)
(4)
(18)
6
(3)
(2)
-
-
-
-
(5)
62
1
63
58
21
11
13
45
10
-
100
(396)
(8)
(404)
(304)
32
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
17
Income tax (continued)
Deferred tax assets
Trade and other accounts payable
Trade and other accounts receivable
Inventories
Tax losses carried forward
Borrowings
Deferred tax liabilities
Property, plant and equipment
Other intangible assets
Total deferred tax liability, net
Deferred tax assets
Trade and other accounts payable
Trade and other accounts receivable
Inventories
Tax losses carried forward
Deferred tax liabilities
Property, plant and equipment
Other intangible assets
Total deferred tax liability, net
As at
31 December 2019
(Charged)/credited
to profit or loss
Translation
adjustment
As at
1 January 2019
21
11
13
45
10
100
(396)
(8)
(404)
(304)
(9)
1
(10)
(42)
10
(50)
(27)
3
(24)
(74)
2
1
-
-
-
3
(38)
(1)
(39)
(36)
28
9
23
87
-
147
(331)
(10)
(341)
(194)
As at
31 December 2018
(Charged)/credited
to profit or loss
Translation
adjustment
As at
1 January 2018
28
9
23
87
147
(331)
(10)
(341)
(194)
11
(2)
6
56
71
20
(3)
17
88
(4)
(3)
(6)
1
(12)
59
4
63
51
21
14
23
30
88
(410)
(11)
(421)
(333)
The amount of tax loss carry-forwards that can be utilised each year is limited under the Group’s different tax
jurisdictions. The Group regularly evaluates assumptions underlying its assessment of the realisability of its deferred
tax assets and makes adjustments to the extent necessary. In assessing the probability that future taxable profit
against which the Group can utilise the potential benefit of the tax loss carry forwards will be available, management
considers the current situation and the future economic benefits outlined in specific business plans for each
subsidiary. Deferred tax assets are recorded only to the extent that it is probable that the temporary difference will
reverse in the future and there is sufficient future taxable profit available against which the deductions can be
utilised.
33
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
17
Income tax (continued)
The table below summarises unused cumulative tax losses for which no deferred tax assets has been recognised,
with a breakdown by the expiry dates.
From 10 to 20 years
No expiration
Total
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
180
1,468
1,648
256
1,407
1,663
-
1,393
1,393
The unused tax losses were incurred mostly by Group subsidiaries located in Europe and USA.
The Group has not recorded a deferred tax liability in respect of temporary differences of $1,441, $1,417 and $1,728
for the years ended 31 December 2020, 2019 and 2018, respectively, associated with investments in subsidiaries
and joint ventures as the Group is able to control the timing of the reversal of those temporary differences and does
not intend to reverse them in the foreseeable future.
In accordance with the statutory legislation, the Group’s entities in Russia (major entities, including NLMK) and USA
were integrated in two separate consolidated groups of taxpayers for the purpose of assessment and payment of
corporate income tax in line with the combined financial result of business operations. The Group’s entities that are
not part of the consolidated groups of taxpayers assess their income taxes individually.
As at 31 December 2020, 2019 and 2018, the Group analysed its tax positions for uncertainties affecting recognition
and measurement thereof. Following the analysis, the Group believes that all deductible tax positions which form
the basis for income tax returns of the Group companies, are recognised and measured in accordance with the
applicable tax legislation.
18
Finance income and costs
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
Interest income on bank accounts and bank deposits
Other finance income
Total finance income
Interest expense on borrowings
Capitalised interest
Other finance costs
Total finance costs
7
11
18
(100)
32
(22)
(90)
13
5
18
(81)
33
(20)
(68)
12
9
21
(77)
21
(14)
(70)
34
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
19
Foreign exchange differences
Foreign exchange gain/(loss) on cash and cash equivalents
Foreign exchange gain/(loss) on financial investments
Foreign exchange (loss)/gain on debt financing
Foreign exchange loss on other assets and liabilities
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
59
74
(171)
(2)
(40)
(94)
(139)
242
(15)
(6)
72
245
(250)
(34)
33
Starting from February 3, 2020 the Group adopted hedge accounting of cash flows in accordance with
IFRS 9 “Financial instruments” (Note 22).
20
Operating leases
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
Within 1 year
From 1 to 5 years
After 5 years
Total commitments for minimum lease payments
In 2018 total rental expenses relating to operating leases were $17.
-
-
-
-
-
-
-
-
15
50
228
293
From 1 January 2019, the Group has recognised right-of-use assets for these leases, except for short-term and low-
value leases.
21
Segment information
The Group management examines the Group’s performance both from a product and geographic perspective and
has identified six reportable segments of its business: Mining, Russian flat products, Russian long products, NLMK
USA, NLMK DanSteel and Plates Distribution Network, and Investments in NBH. Each of these segments represents
a combination of subsidiaries (except for Investments in NBH – see Note 4), offers its own products, has a separate
management team and is managed separately with relevant results reviewed on a monthly basis by the Group’s
Management Board which is the Chief Operating Decision Maker as defined by IFRS 8 Segment Reporting.
The Group management determines pricing for intersegmental sales, as if the sales were to third parties.
The revenue from external parties is measured in the same way as in the consolidated statement of profit or loss.
The Group management evaluates performance of each segment based on segment revenues, gross profit,
operating profit before share of results of joint ventures and impairment of investments in joint ventures,
impairment of non-current assets and loss on disposals of property, plant and equipment, profit for the year and
amount of total assets and total liabilities.
Elimination of intersegmental operations and balances represents elimination of intercompany dividends paid to
Russian flat products segment by other segments and presented within “Profit for the year” line together with other
intercompany elimination adjustments, including elimination of NBH’s liabilities to the Group companies (Note 23).
NBH deconsolidation adjustments include elimination of NBH’s sales, recognition of the Group’s sales to NBH and
elimination of unrealised profits (Notes 4, 23), elimination of NBH’s assets and liabilities and recognition of the
investment in joint venture (Note 4), recognition of impairment and share of NBH’s loss, and other consolidation
adjustments.
35
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
21
Segment information (continued)
Information on the segments’ profit or loss for the year ended 31 December 2020 and their assets and liabilities as of this date is as follows:
Revenue from external customers
Intersegment revenue
Cost of sales
Gross profit
Operating profit/(loss)*
Net finance income/(costs)
Income tax (expense)/benefit
Profit/(loss) for the year
Segment assets
Segment liabilities
Depreciation and amortization
Capital expenditures
Mining
92
1,307
(355)
1,044
957
1
(188)
760
1,738
(264)
(107)
(202)
Russian flat
products
5,600
1,188
(4,775)
2,013
1,076
(73)
(152)
1,260
6,957
(4,942)
(354)
(806)
Russian long
products
1,171
368
(1,343)
196
49
-
(7)
28
940
(398)
(44)
(38)
NLMK DanSteel
and Plates
Distribution
Network
399
1
(359)
41
(16)
(3)
(1)
(23)
428
(315)
(12)
(44)
NLMK
USA
1,086
-
(1,007)
79
19
3
3
24
749
(150)
(57)
(49)
Investments in
NBH
Elimination of
intersegmental
operations and
balances
1,325
49
(1,361)
13
(154)
(13)
-
(167)
1,366
(1,174)
(61)
(274)
-
(2,864)
2,850
(14)
21
-
2
(541)
(1,153)
1,291
-
-
NBH deconsoli-
dation adjust-
ments
(428)
(49)
430
(47)
119
13
-
(104)
(1,163)
831
61
274
Total
9,245
-
(5,920)
3,325
2,071
(72)
(343)
1,237
9,862
(5,121)
(574)
(1,139)
* Operating profit/(loss) before share of results of joint ventures and impairment of investments in joint ventures, impairment of non-current assets and loss on disposals of property, plant and equipment.
36
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
21
Segment information (continued)
Information on the segments’ profit or loss for the year ended 31 December 2019 and their assets and liabilities as of this date is as follows:
Revenue from external customers
Intersegment revenue
Cost of sales
Gross profit/(loss)
Operating profit/(loss)*
Net finance income/(costs)
Income tax (expense)/benefit
Profit/(loss) for the year
Segment assets
Segment liabilities
Depreciation and amortization
Capital expenditures
Mining
77
1,238
(381)
934
864
15
(161)
661
2,120
(607)
(113)
(218)
Russian flat
products
5,897
1,430
(5,239)
2,088
1,160
(55)
(239)
1,941
7,483
(4,567)
(330)
(854)
Russian long
products
1,428
329
(1,554)
203
39
-
(8)
15
1,160
(437)
(50)
(50)
NLMK DanSteel
and Plates
Distribution
Network
490
1
(435)
56
(3)
(2)
(1)
(6)
371
(258)
(11)
(33)
NLMK
USA
1,715
-
(1,728)
(13)
(95)
(8)
(31)
(128)
840
(314)
(58)
(37)
Investments in
NBH
Elimination of
intersegmental
operations and
balances
1,502
60
(1,568)
(6)
(197)
(12)
4
(207)
1,318
(1,161)
(63)
(118)
-
(2,998)
2,938
(60)
(7)
-
(13)
(1,097)
(1,752)
2,028
-
-
NBH deconsoli-
dation adjust-
ments
(555)
(60)
664
49
241
12
(4)
162
(1,056)
779
63
118
Total
10,554
-
(7,303)
3,251
2,002
(50)
(453)
1,341
10,484
(4,537)
(562)
(1,192)
* Operating profit/(loss) before share of results of joint ventures and impairment of investments in joint ventures, impairment of non-current assets and loss on disposals of property, plant and equipment.
37
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
21
Segment information (continued)
Information on the segments’ profit or loss for the year ended 31 December 2018 and their assets and liabilities as of this date is as follows:
Revenue from external customers
Intersegment revenue
Cost of sales
Gross profit
Operating profit/(loss)*
Net finance income/(costs)
Income tax (expense)/benefit
Profit/(loss) for the year
Segment assets
Segment liabilities
Depreciation and amortization
Capital expenditures
Mining
22
1,189
(381)
830
771
19
(179)
706
2,081
(412)
(117)
(137)
Russian flat
products
6,327
2,416
(5,672)
3,071
2,005
(49)
(355)
1,875
6,822
(4,262)
(334)
(520)
Russian long
products
1,720
432
(1,779)
373
161
(6)
(25)
155
1,150
(450)
(60)
(36)
NLMK DanSteel
and Plates
Distribution
Network
513
1
(475)
39
(26)
(4)
(4)
(34)
373
(251)
(9)
(37)
NLMK
USA
2,134
-
(1,863)
271
196
(9)
69
255
1,019
(350)
(57)
(20)
Investments in
NBH
Elimination of
intersegmental
operations and
balances
1,772
65
(1,812)
25
(162)
(12)
19
(242)
1,531
(1,357)
(75)
(116)
-
(4,038)
3,856
(182)
(59)
-
8
(435)
(1,748)
2,126
-
-
NBH deconsoli-
dation adjust-
ments
(442)
(65)
446
(61)
126
12
(19)
(37)
(1,284)
846
75
116
Total
12,046
-
(7,680)
4,366
3,012
(49)
(486)
2,243
9,944
(4,110)
(577)
(750)
* Operating profit/(loss) before share of results of joint ventures and impairment of investments in joint ventures, impairment of non-current assets and loss on disposals of property, plant and equipment.
38
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
21
Segment information (continued)
Geographically, all significant assets, production and administrative facilities of the Group are located in Russia, USA
and Europe. The following is a summary of non-current assets other than financial instruments, investments in joint
ventures and deferred tax assets by location:
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
5,503
287
220
25
6,035
5,975
298
169
18
6,460
4,731
310
145
12
5,198
Russian Federation
USA
Denmark
Other
22
(a)
Risks and uncertainties
Operating environment of the Group
The Russian Federation displays certain characteristics of an emerging market. The legal, tax and regulatory
frameworks continue to develop and are subject to varying interpretations (Note 24(f)).
The Russian economy continues to be negatively impacted by ongoing political tension in the region and
international sanctions against certain Russian companies and individuals. This environment may have a significant
impact on the Group’s operations and financial position and the future effects of the current economic situation
are difficult to predict therefore management’s current expectations and estimates could differ from actual results.
Management is taking necessary measures to ensure sustainability of the Group’s operations.
The major financial risks inherent to the Group’s operations are those related to market risk, credit risk and liquidity
risk. The objectives of the financial risk management function are to establish risk limits, and then ensure that
exposure to risks stays within these limits.
(b)
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and
commodity price risk.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of
changes in market interest rates.
The risk of changes in market interest rates relates primarily to the Group’s long-term borrowings with variable
interest rates. To manage this risk, the Group continuously monitors interest rate movements. The Group reduces
its exposure to this risk by having a balanced portfolio of fixed and variable rate borrowings.
39
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
The interest rate risk profile of the Group is follows:
Fixed rate instruments
Financial assets
- cash and cash equivalents (Note 3)
- financial investments (Note 5)
- trade and other accounts receivable less credit loss
allowance (Note 6)
Financial liabilities
- trade and other accounts payable (Note 10)
- dividends payable
- borrowings (Note 11)
Variable rate instruments
Financial liabilities
- borrowings (Note 11)
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
842
198
945
1,985
(615)
(109)
(2,163)
(2,887)
713
292
810
1,815
(771)
(318)
(1,787)
(2,876)
1,179
104
1,091
2,374
(731)
(525)
(1,354)
(2,610)
(1,323)
(1,323)
(869)
(869)
(721)
(721)
A change of 100 basis points in interest rates for variable rate instruments would not have significantly affected
profit for the year and equity.
Foreign currency risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates.
The export-oriented companies of the Group are exposed to foreign currency risks. To minimise foreign currency
risks, the export program is designed taking into account potential (forecast) major foreign currencies’ exchange
fluctuations. The Group diversifies its revenues in different currencies. In its export contracts, the Group controls
the balance of currency positions: payments in foreign currency are settled with export revenues in the same
currency.
Management of foreign currency risk related to changes in cash flows of future receipts in foreign currency
The Group is exposed to foreign currency risk related to the revenue expected to be received nominated in foreign
currencies, mainly in US dollars. To hedge the foreign currency risk exposure on revenue expected to be received
in foreign currency the Group attracts borrowings in the same foreign currency.
On February 3, 2020 the Group designated the portion of US dollars nominated borrowings as hedging instrument
of the expected highly probable US dollars nominated revenue in accordance with IFRS 9 “Financial instruments”.
On February 3, 2020 a portion of future monthly revenues expected to be received in US dollars over the period
from February 2020 through May 2026 was designated as a hedged item. The Group's bonds and bonds’
coupons nominated in US dollars were designated as hedging instrument (Note 11).
The nominal amounts of the hedged item and the hedging instrument are equal. To the extent that a change in the
foreign currency rate impacts on the value of the hedging instrument, the effects are recognized in other
comprehensive income or loss and further reclassified to profit or loss in the same period in which the
hedged revenue is recognised.
40
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
The management strategy of foreign currency risk related to volatility of future cash inflows in foreign currency is
to hedge revenue expected to be received in the amount of the net monetary position in US dollars. The amount of
hedged revenue aligns the amount of payments on bonds and bonds’ coupons. The Group expects that the hedging
relationships are effective since the future cash outflows on bonds and bonds’ coupons payments match the future
cash inflows on the hedged portion of revenue. Ineffectiveness may occur as hedged items and hedge instruments
have different maturity dates.
Information on the amounts of currency differences on hedging instrument recognized in other comprehensive loss
is as follows:
Hedge reserve of cash flows
Hedging result
Income tax related to hedge reserve of cash flows
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
(229)
24
41
(164)
-
-
-
-
-
-
-
-
A schedule of the expected reclassification of the accumulated effects from the remeasurement of hedging
instrument recognized in other comprehensive loss to profit or loss as of December 31, 2020 is as follows:
Reclassifications
Income tax
2020
(29)
6
2021
2022
2023
2024
2025
2026
Total
(29)
6
(30)
6
(55)
11
(41)
8
(23)
(23)
(24)
(44)
(33)
(20)
4
(16)
(5)
1
(209)
42
(4)
(167)
The net foreign currency position presented below is calculated in respect of major currencies by items of
consolidated statement of financial position as the difference between financial assets and financial liabilities
denominated in a currency other than the functional currency of each entity at 31 December 2020.
US dollar
Euro
Hong Kong
dollar
Swiss franc
Cash and cash equivalents
Trade and other accounts receivable
Financial investments
Trade and other accounts payable
Borrowings
Cash flow hedge
409
7
-
(49)
(1,709)
1,287
139
401
139
(345)
(1,433)
-
Net foreign currency position
(55)
(1,099)
112
-
50
-
-
-
162
-
-
-
-
-
-
-
41
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
The net foreign currency position presented below is calculated in respect of major currencies by items of
consolidated statement of financial position as the difference between financial assets and financial liabilities
denominated in a currency other than the functional currency of each entity at 31 December 2019.
Cash and cash equivalents
Trade and other accounts receivable
Financial investments
Trade and other accounts payable
Borrowings
Net foreign currency position
US dollar
Euro
Hong Kong
dollar
Swiss franc
115
4
-
(82)
(1,709)
(1,672)
304
349
133
(324)
(784)
(322)
1
-
154
-
-
155
1
-
-
-
-
1
The net foreign currency position presented below is calculated in respect of major currencies by items of
consolidated statement of financial position as the difference between financial assets and financial liabilities
denominated in a currency other than the functional currency of each entity at 31 December 2018.
Cash and cash equivalents
Trade and other accounts receivable
Financial investments
Trade and other accounts payable
Borrowings
Net foreign currency position
Sensitivity analysis
US dollar
Euro
Hong Kong
dollar
Swiss franc
84
1
-
(56)
(1,355)
(1,326)
480
536
99
(186)
(562)
367
309
1
-
-
-
310
24
-
-
-
-
24
Sensitivity is calculated by multiplying a net foreign currency position of a corresponding currency by percentage of
currency rates changes.
A 25 percent strengthening of the following currencies against the functional currency as at 31 December 2020,
2019 and 2018 would have increased/(decreased) equity by the amounts shown below, however effect on profit
for the year would be different, and would amount to $230 loss, $376 loss and $29 loss, respectively, due to foreign
exchange effects from intercompany operations (Note 19) and applying of hedge accounting.
US dollar
Euro
Hong Kong dollar
Swiss franc
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
(336)
(275)
41
-
(418)
(81)
39
-
(332)
92
78
6
A 25 percent weakening of these currencies against the functional currency as at 31 December 2020, 2019 and 2018
would have had an equal but opposite effect to the amounts shown above, provided all other variables remain
constant. Income tax was not recalculated on the possible reasonable change in exchange rates for the purpose of
this sensitivity analysis.
42
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
Commodity price risk
Commodity price risk is the risk arising from possible changes in price of raw materials and metal products, and
their impact on the Group’s future performance and the Group’s operational results.
The Group minimises its risks related to metal prices by having a wide range of geographical zones for sales, which
allows the Group to respond quickly to negative changes in the situation on its existing markets on the basis of an
analysis of the existing and prospective sales markets.
One of the commodity price risk management instruments is vertical integration. A high degree of vertical
integration allows cost control and effective management of the entire process of production: from mining of raw
materials and generation of electric and heat energy to production, processing and distribution of metal products.
To mitigate the corresponding risks the Group also uses formula pricing tied to price indices for steel products when
contracting raw and auxiliary materials.
(c)
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer
contract, leading to a financial loss for the Group. The Group is exposed to credit risk from its operating activities
(primarily for outstanding receivables from customers) and from its financing activities, including deposits with
banks and financial institutions, and other financial instruments.
Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and
control relating to customer credit risk management.
The Group controls the levels of credit risk it undertakes by assessing the degree of risk for each counterparty or
groups of parties. In order to minimise credit risk, management developed and maintains the Group’s credit risk
grading to categorise exposures according to their degree of risk of default. A default on a financial asset is when
the counterparty fails to make contractual payments within 30 days of when they fall due. The Group’s credit risk
grading framework comprises six categories:
• AAA – investments grade which correspond to international agencies ratings from AAA till BB+;
• A – low risk non-investments grade which correspond to international agencies ratings BB and BB-;
• B – moderate risk non-investments grade which correspond to international agencies ratings B+ and B;
•
• D – critical risk non-investments grade which correspond to international agencies ratings from CCC till D;
• NR – not rated category used for related parties or secured debts.
C – high risk non-investments grade which correspond to international agencies rating B-;
The credit rating information is based on a range of data that is determined to be predictive of the risk of default
and applying experienced credit judgement. The nature of the exposure and type of borrower are taken into account
in the analysis. Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of
default.
The credit risk grades are designed and calibrated to reflect the risk of default as credit risk deteriorates. As the
credit risk increases the difference in risk of default between grades changes. Each exposure is allocated to a credit
risk grade at initial recognition, based on the available information about the counterparty. All exposures are
monitored and the credit risk grade is updated to reflect current information. The monitoring procedures followed
are both general and tailored to the type of exposure. The following data are typically used to monitor the Group’s
exposures:
•
•
•
•
Payment report, including payment ratios and ageing analysis;
Extent of utilisation of granted limit;
Changes in business, financial and economic conditions;
Credit rating information supplied by external rating agencies.
43
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
The Group monitors all financial assets, loans issued and financial guarantee contracts that are subject to the
impairment requirements to assess whether there has been a significant increase in credit risk since initial
recognition. If there has been a significant increase in credit risk the Group will measure the loss allowance based
on lifetime rather than 12-month estimated credit loss.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the
Group compares the risk of a default occurring on the financial instrument at the reporting date based on the
remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining
maturity at the current reporting date when the financial instrument was first recognised. In making this
assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable,
including historical experience and forward-looking information that is available without undue cost or effort, based
on the Group’s historical experience and expert credit assessment.
The Group analyses all data collected using statistical models and estimates the remaining lifetime probability of
default exposures and how these are expected to change over time. The factors taken into account in this process
include macro-economic data such as GDP growth, unemployment and interest rates. Multiple economic scenarios
form the basis of determining the probability of default at initial recognition and at subsequent reporting dates.
Different economic scenarios will lead to a different probability of default. It is the weighting of these different
scenarios that forms the basis of a weighted average probability of default that is used to determine whether credit
risk has significantly increased.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset
has increased significantly since initial recognition when contractual payments are more than 30 days past due
unless the Group has reasonable and supportable information that demonstrates otherwise.
The Group has monitoring procedures in place to make sure that the criteria used to identify significant increases
in credit are effective, meaning that significant increase in credit risk is identified before the exposure is defaulted
or when the asset becomes 30 days past due. The Group performs periodic back-testing of its ratings to consider
whether the drivers of credit risk that led to default were accurately reflected in the rating in a timely manner.
The Group uses forward-looking information that is available without undue cost or effort in its assessment of
significant increase of credit risk as well as in its measurement of expected credit loss. The Group employs experts
who use external and internal information to generate a ‘base case’ scenario of future forecast of relevant economic
variables along with a representative range of other possible forecast scenarios. The base case scenario is the most
likely outcome. The external information used includes economic data and forecasts published by governmental
bodies and monetary authorities. The Group applies probabilities to the forecast scenarios identified and calculate
probability-weighted expected credit loss by running each scenario through the relevant expected credit loss model
and multiplying it by the appropriate scenario weighting. The Group has not made changes in the estimation
techniques or significant assumptions made during the reporting period.
The Group holds collateral to mitigate credit risk associated with trade accounts receivable by reducing expected
credit loss in case of default. The main types of collateral are bank coverage and credit insurance. There was no
change in the Group’s collateral policy during the year.
Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets
have been developed based on analysing historical data over the past 3 years.
The measurement of expected credit loss is based on probability weighted average credit loss. As a result, the
measurement of the loss allowance should be the same regardless of whether it is measured on an individual basis
or a collective basis. In relation to the assessment of whether there has been a significant increase in credit risk it
can be necessary to perform the assessment on a collective basis.
44
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
The Group’s maximum exposure to credit risk by class of assets reflected in the carrying amounts of financial assets
on the consolidated statement of financial position is as follows:
Cash and cash equivalents (Note 3)
Trade and other accounts receivable (Note 6)
Financial investments (Note 5)
Total on-balance sheet exposure
Financial guarantees issued (Note 23(d))
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
842
945
198
1,985
283
2,268
713
810
292
1,815
331
2,146
1,179
1,091
104
2,374
309
2,683
Credit risk related to investment in the charter capital of NBH is disclosed in Note 4.
Analysis of trade accounts receivable, net of credit loss allowance, by credit quality, based on internal credit ratings
is as follows:
AAA
A
B
C
D
NR, including:
- NBH group companies
- Credit insurance (AA international agencies’ credit ratings)
- Bank coverage (A- and above international agencies’ credit
ratings)
- Not covered
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
23
80
89
51
12
297
169
72
27
820
28
53
49
39
1
249
254
55
72
800
19
25
41
18
2
411
284
202
76
1,078
Analysis by credit quality, based on international agencies’ credit rating, of bank balances and bank deposits is as
follows:
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
Bank balances and term deposits
AAA-BBB
BB-B
Unrated and cash on hand
Short-term and long-term bank deposits
AAA-BBB
BB-B
835
5
2
842
148
2
150
706
5
2
713
157
-
157
1,173
4
2
1,179
5
-
5
45
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
Risks and uncertainties (continued)
As at 31 December 2020, ageing of trade and other receivables is as follows:
Not past due
Past due, including:
- up to 1 month
- from 1 to 3 months
- from 3 to 12 months
- over 12 months
Total
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
919
34
3
4
21
981
(14)
-
-
(2)
(20)
(36)
905
34
3
2
1
945
As at 31 December 2019, ageing of trade and other receivables is as follows:
Not past due
Past due, including:
- up to 1 month
- from 1 to 3 months
- from 3 to 12 months
- over 12 months
Total
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
773
42
6
5
25
851
(15)
-
-
(1)
(25)
(41)
758
42
6
4
-
810
As at 31 December 2018, ageing of trade and other receivables is as follows:
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
Not past due
Past due, including:
- up to 1 month
- from 1 to 3 months
- from 3 to 12 months
- over 12 months
Total
995
93
6
8
27
1,129
(10)
-
-
(2)
(26)
(38)
985
93
6
6
1
1,091
46
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
(d)
Risks and uncertainties (continued)
Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities. The Group is exposed to daily calls on its available cash resources.
The Group monitors its risk to a shortage of funds using a regular cash flow forecast. The Group’s objective is to
maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans,
debentures, finance leases. To provide for sufficient cash balances required for settlement of its obligations in time
the Group uses detailed budgeting and cash flow forecasting instruments.
The table below analyses the Group’s short-term and long-term borrowings and leases by their remaining
corresponding contractual maturity. The amounts disclosed in the maturity table are the undiscounted cash
outflows.
Less than 1 year
From 1 to 2 years
From 2 to 5 years
Over 5 years
Total borrowings
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
1,134
662
1,464
672
3,932
545
491
1,432
708
3,176
296
193
1,342
520
2,351
Liquidity risk related to investment in the charter capital of NBH and financial guarantees issued, is disclosed in
Notes 4 and 23(d), respectively.
As at 31 December 2020, 2019 and 2018, the Group does not have significant trade and other accounts payable
with maturity over one year and its carrying amount approximates its fair value.
(e)
Insurance
To minimize risks the Group concludes insurance policies which cover property damages and business interruptions,
construction and erection all risks, freightage, auto insurance and commercial (trade) credits. In respect of
legislation requirements, the Group purchases compulsory motor third party liability insurance, insurance of civil
liability of organizations operating hazardous facilities. The Group also buys civil liability insurance of the members
of self-regulatory organizations, directors and officers liability insurance, voluntary health insurance and accident
insurance for employees of the Group.
23
Related party transactions
Parties are considered to be related if one party has the ability to control the other party, is under common control,
or can exercise significant influence or joint control over the other party in making financial or operational decisions
as defined by IAS 24, Related Party Disclosures. In considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal form. The Group carries out operations with
related parties on an arm’s length basis.
47
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
23
(a)
Related party transactions (continued)
Sales to and purchases from related parties
Sales
NBH group companies
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
Other related parties
Purchases
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
NBH group companies
Other related parties
For the year ended
31 December 2020
For the year ended
31 December 2019
For the year ended
31 December 2018
897
2
4
376
49
26
947
2
6
384
60
18
1,330
2
1
410
65
5
NBH group companies together are the major customer of the Group. Sales to NBH group are performed by
the Russian flat products segment and represent 9.7%, 9.0% and 11.0% of the total sales of the Group for
the years ended 31 December 2020, 2019 and 2018, respectively.
(b)
Accounts receivable from and accounts payable to related parties
Accounts receivable and advances given
NBH group companies
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
Accounts payable
NBH group companies
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
(c)
Financial transactions
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
298
32
22
11
249
26
28
5
412
32
31
6
As at 31 December 2020, 2019 and 2018 loans issued to NBH group companies amounted to $47, $133 and $99 and
maturing 31 December 2021, 31 December 2020 and 31 December 2020, respectively (Note 5). When issuing loans
to the foreign companies of the Group and joint ventures, interest rate is determined using information on similar
external deals subject to the company’s internal credit rating.
(d)
Financial guarantees issued
As at 31 December 2020, 2019 and 2018, guarantees issued by the Group for borrowings received by NBH group
companies amounted to $283, $331 and $309, respectively, which is the maximum potential amount of future
payments, payable on demand of the guarantee. No amount has been accrued in these consolidated financial
statements for the Group’s obligation under these guarantees as the Group assesses the probability of cash
outflows related to these guarantees, as low.
48
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
23
Related party transactions (continued)
The maturity of the guaranteed obligations is as follows:
Less than 1 year
From 1 to 2 years
Over 2 years
As at
31 December 2020
As at
31 December 2019
As at
31 December 2018
107
127
49
283
130
-
201
331
57
-
252
309
(e)
Investments transactions
In September 2018, the Group completed the sale of 2% stake in share capital of NBH to Tubes de Haren et Nimy S.A.,
a subsidiary of NBH, for a cash consideration of $5, realising a loss of $2 upon the decrease of carrying value of the
investment of $7. As a result of this transaction, direct ownership of the Group in the share capital of NBH decreased
to 49.0%.
24
(a)
Commitments and contingencies
Anti-dumping investigations
The Group’s export trading activities are subject from time to time to compliance reviews by the regulatory
authorities in the importers’ jurisdictions. The Group’s export sales prices were considered by local governments
within several anti-dumping investigation frameworks. The Group takes steps to address negative effects of the
current and potential anti-dumping investigations and participates in the settlement efforts coordinated through
the Russian authorities. No provision arising from any possible agreements and decisions as a result of anti-dumping
investigations has been made in the consolidated financial statements.
(b)
Litigation
The Group, in the ordinary course of business, is the subject of, or party to, various pending or threatened legal
actions. The Group management believes that any liability resulting from these legal actions will not significantly
affect its financial position or results of operations, and no amount has been accrued in the consolidated financial
statements.
(c)
Environmental matters
The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of
government authorities is continually being reconsidered. The Group periodically evaluates its obligations under
environmental regulations. As obligations are determined, they are recognised in financial statements immediately.
Potential liabilities, which might arise as a result of future changes in existing regulations, civil litigation or legislation,
cannot be reasonably estimated. In the current enforcement climate under existing environmental legislation,
significant liabilities for management believes that the Group has met the Government’s federal and regional
requirements concerning environmental matters, therefore, there are no environmental damage and remediation.
49
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
24
(d)
Commitments and contingencies (continued)
Capital commitments
Management estimates the outstanding agreements in connection with equipment supply and construction works
amounted to $881, $1,157 and $714 as at 31 December 2020, 2019 and 2018, respectively.
(e)
Social commitments
The Group makes contributions to mandatory and voluntary social programs. The Group’s social contributions, as
well as local social programs, benefit the community at large and are not normally restricted to the Group’s
employees. The Group has transferred certain social operations and assets to local authorities, however, the Group
management expects that the Group will continue to fund certain social programs for the foreseeable future. These
costs are recorded in the period they are incurred.
(f)
Tax contingencies
Management believes that the tax policy of the Group complies with the legislation of the Russian Federation on
taxes and related fees.
At the same time, the legislation on taxes and related fees in the Russian Federation is characterised by dynamic
development, as well as the possibility of wide discretion by the tax administration on many issues of taxation,
which can lead to different interpretations of individual legal norms by taxpayers and regulatory authorities.
Therefore, the risk of expenses cannot be excluded if the tax policy applied by the Group is contested in any part.
As a general rule, risk may arise in respect of three calendar years preceding the year in which the decision to
conduct the review is made. The amount and probability of risk cannot be estimated with a sufficient degree of
reliability, however, they may turn out to be significant from the point of view of the financial situation and/or
economic activity of the Group as a whole.
(g)
Major terms of loan agreements
Certain of the loan agreements contain covenants that impose restrictions on the purposes for which the loans may
be utilised, covenants with respect to disposal of assets, incurrence of additional liabilities, issuance of loans or
guarantees, obligations in respect of any future reorganisations procedures or bankruptcy of the borrowers, and
also require that the borrowers maintain pledged assets to their current value and conditions. In addition, these
agreements contain covenants with respect to compliance with certain financial ratios, clauses in relation to
performance of the borrowers, including cross-default provisions, as well as to legal claims in excess of certain
amount, where reasonable expectations of a negative outcome exist, and covenants triggered by any failure of the
borrower to fulfill contractual obligations. The Group companies were in compliance with all debt covenants as at
31 December 2020, 2019 and 2018.
(h)
Assessment of the coronavirus impact on the Group
In 2020, the COVID-19 pandemic had significant impact on business activity, that initially led to weakening of demand
for steel in traditional sales markets and a temporary drop in steel product prices which however started to recover
gradually in second half 2020. In order to keep capacity utilization rates high the Group made changes to regional
sales structure and diversified product mix. Production and supply chains of the Group were not significantly
impacted by the COVID-19 pandemic.
At the date of issuing these consolidated financial statements the situation with the spread of coronavirus infection
(COVID-19) is still evolving. The Group benefits from a strong financial position, with low leverage and significant
liquidity. As at 31 December 2020 the Group has liquid resources of $991 comprising cash and cash equivalents as
well as a committed and unutilised credit facilities amounting to $1,715 which significantly exceeds repayment of
borrowings in 2021 disclosed in Note 22 (d).
The Group management made an analysis of impairment indicators of the Group’s assets considering impact of
macroeconomic situation and impairment testing for some of the Group cash generating units (Note 8). No
significant increase of expected credit losses or cases of significant debtor defaults have been identified.
Management closely monitors the development of the situation and takes necessary measures to mitigate negative
effects.
50
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out
below. The Group from one reporting period to another has consistently applied these accounting policies.
(a)
Basis of consolidation
Subsidiaries
Subsidiaries are those entities that the Group controls because the Group has (a) power over the investees (that is,
it can direct relevant activities of the investees that significantly affect their returns); (b) exposure, or rights, to
variable returns from its involvement with the investees; and (c) the ability to use its power over the investees to
affect the amount of investor returns.
Subsidiaries are consolidated when the Group obtains control over an investee and terminates when the Group
ceases to have control over the investee.
Non-controlling interest is that part of the net results and of the equity of a subsidiary attributable to interests,
which are not owned, directly or indirectly, by the Group. Non-controlling interest forms a separate component of
the Parent Company’s equity.
The acquisition method of accounting is used to account for the acquisition of subsidiaries other than those acquired
from parties under common control. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured at their fair values at the acquisition date, irrespective of the extent of any
non-controlling interest.
The Group measures non-controlling interest that represents present ownership interest and entitles the holder to
a proportionate share of net assets in the event of liquidation on a transaction-by-transaction basis, either at: (a)
fair value, or (b) the non-controlling interest’s proportionate share of net assets of the acquiree.
Goodwill is measured by deducting the net assets of an acquiree from the aggregate of: the consideration
transferred for the acquiree, the amount of non-controlling interest in the acquiree, and the fair value of an interest
in the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is
recognised in profit or loss, after management reassesses whether it identified all the assets acquired and all
liabilities and contingent liabilities assumed, and reviews the appropriateness of their measurement.
Consideration transferred for an acquiree is measured at the fair value of the assets given up, equity instruments
issued and liabilities incurred or assumed, including the fair value of assets or liabilities from contingent
consideration arrangements, but excludes acquisition-related costs such as fees for advisory, legal, valuation and
similar professional services. Transaction costs related to an acquisition and incurred for issuing equity instruments
are deducted from equity; transaction costs incurred for issuing debt as part of a business combination are deducted
from the carrying amount of the debt and all other transaction costs associated with the acquisition are expensed.
51
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
All intercompany transactions, balances and unrealised gains on transactions between the Group companies are
eliminated. Unrealised losses are also eliminated, unless the cost cannot be recovered. The Parent Company and all
of its subsidiaries use uniform accounting policies consistent with the Group’s policies.
Joint ventures
Joint ventures are entities over which the Group has joint control over financial or operating policies. Joint control
is the contractually agreed sharing of control, which exists only when decisions about the relevant activities require
the unanimous consent of the parties sharing control.
Investments in joint ventures are initially recognised at cost (fair value of the consideration transferred). The Group
uses the equity method of accounting to subsequent measurement for an investment in joint ventures.
Dividends received from joint ventures reduce the carrying value of the investment in joint ventures. The Group’s
share of profits or losses of joint ventures after acquisition is recorded in the consolidated statement of profit or
loss for the year as share of financial result of joint ventures. The Group’s share in the change of other
comprehensive income after the acquisition is recorded within other comprehensive income as a separate line item.
All other changes in the Group’s share of the carrying amount of net assets of the joint ventures are recognised in
profit or loss within the share of financial results of the joint ventures, or consolidated statement of changes in
equity depending on the substance of the change.
However, when the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture,
including any other unsecured receivables, the Group does not recognise further losses, unless this is required by
law or it has incurred obligations or made payments on behalf of the joint venture.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the
Group’s interest in these entities. Unrealised losses arising from transactions between the Group and its joint
ventures are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
In the consolidated statement of financial position, the Group’s share in the joint venture is presented at the
carrying amount inclusive of goodwill at the acquisition date and the Group’s share of post-acquisition profits and
losses net of impairment loss.
In the consolidated statement of profit or loss the amount of impairment of investments in joint ventures is included
in the line “Share of results of joint ventures and impairment of investments in joint ventures”.
Disposals of subsidiaries and joint ventures
When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured
to its fair value as at the date of ceasing control or significant influence, with the change in the carrying amount
recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting
for the retained interest as a joint venture, or financial asset. In addition, any amounts previously recognised in
other comprehensive income, in respect of that entity, are accounted for as if the Group had directly disposed of
the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are recycled to profit or loss.
At the date when the Group’s control ceases, it de-recognises the assets and liabilities of the former subsidiary from
the consolidated statement of financial position and recognises profit or loss connected with the loss of control
attributable to the former controlling stake.
If the ownership interest in a joint venture is reduced but joint control is retained, only a proportionate share of the
amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
(b)
Cash and cash equivalents
Cash and cash equivalents include cash balances in hand, cash on current accounts with banks, bank deposits and
other short-term highly liquid investments with original maturities of three months or less.
52
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
(c)
Significant accounting policies (continued)
Value added tax (VAT)
Output value added tax arising upon the sale of goods (performance of work, provision of services) is payable to
the tax authorities on the earlier of: (a) collection of receivables from customers; or (b) delivery of goods (work,
services) or property rights to customers. VAT is excluded from revenue.
Input VAT on goods and services purchased (received) is generally recoverable against output VAT upon receipt of
the VAT invoice. VAT related to sales / purchases and services provision / receipt payments to the budget which has
not been settled with at the balance sheet date (deferred VAT) is recognised in the consolidated statement of
financial position on a gross basis and disclosed separately within current assets and current liabilities.
Where provision has been made for impairment of receivables, an impairment loss is recorded for the gross amount
of the debt, including VAT.
(d)
Inventories
Inventories are recorded at the lower of cost and net realisable value (the estimated selling price in the ordinary
course of business, less the estimated cost of completion and selling expenses).
Inventories include raw materials designated for use in the production process, finished goods, work in progress
and goods for resale.
Release to production or any other write-down of inventories is carried at the weighted average cost.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and
related production overheads (based on normal operating capacity).
Other costs are included in the cost of inventories only to the extent they were incurred to provide for the current
location and condition of inventories.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period
in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value
and all losses of inventories, including obsolete inventories written down, shall be recognised as an expense in the
period in which the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising
from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised
as an expense in the period in which the reversal occurs.
(e)
Property, plant and equipment (PP&E)
Measurement at recognition
Property, plant and equipment are initially stated at cost (historical cost model). The PP&E cost includes:
▪
▪
▪
its purchase price, including import duties and non-refundable purchase taxes, after deducting trade
discounts and rebates;
costs directly attributable to bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by the relevant entity’s management;
the initial estimate of the cost of subsequent dismantling and removal of a fixed asset, and restoring the
site on which it was located, the obligation for which the relevant entity incurs either when the item is
acquired or as a consequence of having used the item during a specific period for purposes other than to
produce inventories during that period.
The value of property, plant and equipment built using an entity’s own resources includes the cost of materials and
labour, and the relevant portion of production overhead costs directly attributable to the construction of the PP&E.
Borrowing costs directly attributable to the acquisition, construction or production of an asset which takes a
substantial period of time to prepare for use or sale are included in the cost of this asset.
53
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
Recognition of costs in the carrying amount of a property, plant and equipment item ceases when the item is in the
location and condition necessary for it to be capable of operating in the manner intended by management of the
relevant entity.
Subsequent measurement
Property, plant and equipment items are carried at cost less accumulated depreciation and recognised impairment
losses.
Subsequent expenditures
The costs of minor repairs and maintenance are expensed when incurred. The costs of regular replacement of large
components of property, plant and equipment items are recognised in the carrying amount of the relevant asset
when incurred subject to recognition criteria. The carrying amount of the parts being replaced is de-recognised.
When a large-scale technical inspection is conducted, related costs are recognised in the carrying amount of a fixed
asset as replacement of previous technical inspection subject to recognition criteria. Any costs related to the
previous technical inspection that remain in the carrying value shall be de-recognised.
Other subsequent expenditures are capitalised only when they increase the future economic benefits embodied in
these assets.
All other expenses are treated as costs in the consolidated statement of profit or loss in the reporting period as
incurred.
Property, plant and equipment line of the consolidated statement of financial position also includes capital
construction and machinery, and equipment to be installed.
If PP&E items include major units with different useful lives, then each individual unit of the related asset is
accounted for separately.
Borrowing costs
Borrowing costs are capitalised from the date of capitalisation and up to the date when the assets are substantially
ready for utilisation or sale.
The commencement date for capitalisation is when the Group (a) incurs expenditures for the qualifying asset; (b)
incurs borrowing costs; and (c) undertakes activities that are necessary to prepare the asset for its intended use or
sale.
When funds borrowed for common purposes are used to purchase an asset, capitalised borrowing costs are
determined through multiplying the capitalisation rate by expenses related to the asset.
Interest payments capitalised under IAS 23 are classified in consolidated statement of cash flows in a manner that
is consistent with the classification of the underlying asset on which the interest is capitalised.
All other borrowing costs are attributed to expenses in the reporting period when incurred and recorded in the
consolidated statement of profit or loss in the “Finance costs” line.
Mineral rights
Exploration and evaluation assets are carried at original cost and classified consistently within tangible or intangible
assets depending on their nature. Mineral rights acquired as a result of a business combination are measured at fair
value at the acquisition date. Other mineral rights and licenses are recorded at cost. Mineral rights are amortised
using the straight-line basis over the license term given approximately even production output during the license
period.
54
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
Right-of-use assets
The Group leases various land, buildings, equipment and transport. Contracts may contain both lease and non-lease
components. The Group allocates the consideration in the contract to the lease and non-lease components based
on their relative stand-alone prices.
Assets arising from a lease are initially measured on a present value basis and accounted within Property, plant and
equipment.
Right-of-use assets are measured at cost comprising the following:
•
•
•
•
the amount of the initial measurement of lease liability,
any lease payments made at or before the commencement date less any lease incentives received,
any initial direct costs, and
costs to restore the asset to the conditions required by lease agreements.
Depreciation
Depreciation is charged on a straight-line basis over the estimated remaining useful lives of the individual assets
through an even write-down of historical cost to their net book value. Right-of-use assets are depreciated over the
shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to
exercise a purchase option, the right-of-use asset is depreciated over the underlying assets’ useful lives.
Depreciation commences from the time an asset is available for use, i.e. when the location and condition provide
for its operation in line with the Group management’s intentions.
Depreciation is not charged on assets to be disposed of and on land. In some cases, the land itself may have a limited
useful life, in which case it is depreciated in a manner that reflects the consumption of benefits to be derived from
it.
The range of estimated useful lives of different asset categories is as follows:
Buildings and land and buildings improvements
Machinery and equipment
Vehicles
10 – 70 years
2 – 30 years
5 – 25 years
The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the
asset less the estimated costs of disposal if the asset was already of the age and in the condition expected at the
end of its useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period.
If the cost of land includes the costs of site dismantlement, removal of PP&E items and restoration expenses, that
portion of the land asset is depreciated over the period of consumption of benefits obtained by incurring those
costs.
Impairment of PP&E is outlined in section (h) “Impairment of non-current assets”.
55
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
(f) Leases
Applicable for the reporting periods starting 1 January 2019
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable,
variable lease payment that are based on an index or a rate, initially measured using the index or rate as
at the commencement date,
• amounts expected to be payable by the Group under residual value guarantees,
•
the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Extension and termination options are included in a number of property and equipment leases across the Group.
These terms are used to maximise operational flexibility in terms of managing the assets used in the Group’s
operations. The majority of extension and termination options held are exercisable only by the Group and not by
the respective lessor. Extension options (or period after termination options) are only included in the lease term if
the lease is reasonably certain to be extended (or not terminated). Lease payments to be made under reasonably
certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases of the Group, the Group’s incremental borrowing rate is used,
being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with similar terms, collateral and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as a starting point,
adjusted to reflect changes in financing conditions since third party financing was received,
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk, and
• makes adjustments specific to the lease, e.g. term, country, currency and collateral.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are
not included in the lease liability until they take effect. When adjustments to lease payments based on an index or
rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance costs. The finance costs are charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period.
Applicable for the reporting periods earlier 1 January 2019
Leasing transactions are classified according to the relevant lease agreements, which specify the risks and rewards
associated with the leased property and distributed between the lessor and lessee. Lease agreements are classified
as financial leases or operating leases.
In a financial lease, the Group receives the major portion of economic benefits and risks associated with the
ownership of the asset. At the commencement of the lease term, the leased asset is recognised in the consolidated
statement of financial position at the lower of fair value or discounted value of future minimum lease payments.
The corresponding rental obligations are included in borrowings. Interest expenses within lease payments are
charged to profit or loss over the lease term using the effective interest method.
Accounting policies for depreciation of leased assets are consistent with the accounting policies applicable to owned
depreciable assets.
56
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
A lease is classified as an operating lease if it does not imply transferring the major portion of risks and rewards
associated with the ownership of the asset. Payments made under operating leases are recorded as an expense on
a straight-line basis over the lease term.
(g)
Goodwill and intangible assets
Goodwill is the difference between:
•
•
the comprehensive fair value of the consideration transferred on the acquisition date and non-controlling
interest, and, where the entity is acquired in instalments, the acquisition date fair value of the non-
controlling interest previously held by the buyer in the acquired entity; and
the share of net fair value of identifiable assets acquired and liabilities assumed.
The excess of the share of net fair value of identifiable assets bought and obligations assumed by the Group over
the consideration transferred and the fair value of non-controlling interest at the acquisition date previously owned
by the buyer in the acquired entity, represents income from a profitable acquisition. Income is recognised in the
consolidated statement of profit or loss at the acquisition date.
Goodwill on joint ventures is included in the carrying amount of investments in these entities.
When interest in the previously acquired entity increases (within non-controlling interest) goodwill is not
recognised. The difference between the acquired share of net assets and consideration transferred is recognised in
equity.
Goodwill is measured at historical cost and subsequently stated less accumulated impairment losses.
Impairment of goodwill
The goodwill is not amortised but tested for impairment at least annually and whenever there are indications that
goodwill may be impaired. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-
generating units (“CGUs”) that are expected to benefit from the synergies of the combination. The evaluation of
impairment for cash-generating units, among which goodwill was distributed, is performed once a year or more
often, when there are indicators of impairment of such CGUs.
If the recoverable amount of a cash-generating unit is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the CGU and then to any other assets of the CGU
pro-rata to the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed
in subsequent periods.
Disposal of goodwill
If goodwill is a part of the cash-generating unit, and a part of the unit is disposed of, the goodwill pertaining to that
part of disposed operations is included in the carrying amount of that operation when profit or loss on its disposal
is determined. In such circumstances, the goodwill disposed of is generally measured on the basis of the relative
values of the operation disposed of and the portion of the cash-generating unit which is retained.
Intangible assets
Intangible assets are initially recognised at cost.
The cost of a separately acquired intangible asset comprises:
•
•
its purchase price, including non-refundable purchase taxes, after deducting trade discounts and rebates;
directly attributable cost of preparing the asset for its intended use.
If an intangible asset is acquired as a result of a business combination, the cost of the intangible asset equals its fair
value at the acquisition date.
57
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
If payment for an intangible asset is deferred beyond normal credit terms, its cost is the cash price equivalent. The
difference between this amount and the total payments is recognised as interest expense over the entire period of
credit unless it is capitalised in accordance with IAS 23, “Borrowing Costs”.
If an intangible asset is an integral part of a fixed asset to which it belongs, then it is recorded as part of that asset.
After the initial recognition of intangibles, they are carried at cost less sum of accumulated amortisation and
accumulated impairment loss. If impaired, the carrying amount of intangible assets is written down to the higher of
value in use and fair value less costs to sell.
Amortisation
Intangible assets with a definite useful life are amortised using the straight-line method over the shorter of: the
useful life or legal rights thereto.
The range of estimated useful lives of different asset categories is as follows:
• Mineral rights
•
Industrial intellectual property
(h)
Impairment of non-current assets
20-36 years
1-10 years
At each reporting date, the Group determines if there are any objective indications of potential impairment of an
individual asset or group of assets.
Intangible assets with indefinite useful lives are tested for impairment at least once a year and if their carrying
amount impairment indicators are identified.
Recoverable value measurement
If any such impairment indicators exist, then the asset’s recoverable amount is estimated. In the event of
impairment, the value of the asset is written down to its recoverable value, which represents the higher of: the fair
value less costs to sell or the value in use.
Fair value less costs to sell is the amount obtainable from the sale of an asset or payable on the transfer of a liability
at the evaluation date, in an arm’s length transaction between knowledgeable, willing parties, less any direct costs
related to the sale or transfer.
Value in use is the present value of estimated future cash flows from expected continuous use of an asset and its
disposal at the end of its useful life.
In assessing value-in-use, the anticipated future cash proceeds are discounted to their current value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely
independent cash inflows (cash-generating units), which in most cases are determined as individual subsidiaries of
the Group. Estimated cash flows are adjusted in line with the risk of specific conditions at sites and discounted at
the rate based on the weighted average cost of capital. With regard to assets that do not generate cash regardless
of cash flows generated by other assets, the recoverable amounts are based on the cash-generating unit to which
such assets relate.
58
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
Impairment loss
The asset’s carrying amount is written down to its estimated recoverable value, and loss is included in the
consolidated statement of profit or loss for the period. Impairment loss is reversed if there are indications that the
assets’ impairment losses (other than goodwill) recognised in previous periods no longer exist or have been
reduced, and if any consequent increase in the recoverable value can be objectively linked to the event that took
place after the impairment loss recognition. Impairment loss is reversed only to the extent that the carrying amount
of an asset does not exceed its carrying amount that would be established (less amortisation) if the asset
impairment loss had not been recognised. An impairment loss is reversed for the relevant asset immediately
through consolidated statement of profit or loss.
(i)
Provisions for liabilities and charges
Provisions for liabilities and charges are accrued when the Group:
•
•
•
has present obligations (legal or constructive) as a result of past events;
it is probable that an outflow of resources embodying economic benefits will be required to settle such an
obligation;
a reliable estimate of the amount of the obligation can be made.
The amount recognised as a provision shall be the best estimate of the expenses required to settle the present
obligation at the end of the reporting period. Where the impact of the time factor on the value of money is
significant, the provision should equal the present value of the expected cost of settling the liability using the
discount rate before taxes. Any increase in the carrying amount of the provision is recorded in the consolidated
statement of profit or loss as finance costs.
The nature and estimated value of contingent liabilities and assets (including court proceedings, environmental
costs, etc.) are disclosed in notes to the consolidated financial statements where the probability of economic
benefits outflow is insignificant.
The creation and release of provision for impaired receivables have been included in impairment losses on financial
assets in the consolidated statement of profit or loss. Amounts charged to the allowance account are generally
written off, when there is no legal right to recover cash.
(j)
Income taxes
Income tax expense comprises current and deferred tax. The current and deferred taxes are recognised in profit or
loss for the period, except for the portion thereof that arises from a business combination or transactions or events
that are recognised directly within equity.
Current tax
Current tax liabilities are measured in the amount expected to be paid to (recovered from) the tax authorities,
applying the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting
period.
Deferred tax
Deferred tax assets and liabilities are recognised for the differences between the carrying amount of an asset or
liability in the consolidated statement of financial position and their tax base.
59
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
•
•
Deferred tax is not recognised if temporary differences:
arise at the goodwill initial recognition;
arise at the initial recognition (except for business combination) of assets and liabilities that do not impact
taxable or accounting profits;
are associated with investments in subsidiaries where the Group controls the timing of the reversal of
these temporary differences, and it is probable that the temporary differences will not be utilised in the
foreseeable future.
•
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Estimation of deferred tax assets and liabilities reflects tax implications that would arise depending on the method
to be used at the end of the reporting period to recover or settle carrying value of these assets or liabilities.
Deferred tax assets are recognised in respect of the carry forward of unused tax losses and unused tax credits to
the extent that it is probable that future taxable profit will be available against which the unused tax losses and
unused tax credits may be utilised.
The carrying amount of deferred tax assets is subject to revision at the end of each reporting period and is decreased
to the extent of reduced probability of receiving sufficient taxable income to benefit from utilising the deferred tax
assets partially or in full.
Deferred tax assets and liabilities are offset if there is a legal right for the offset of current tax assets and liabilities,
and when they relate to income taxes levied by the same tax authority or on the same taxpayer; and the Group
intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
Uncertain tax positions
The Group’s uncertain tax positions are reassessed by management at the end of each reporting period. Liabilities
are recorded for income tax positions that are determined by management as more likely than not to result in
additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based
on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting
period, and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than
on income are recognised based on management’s best estimate of the expenditure required to settle the
obligations at the end of the reporting period.
(k)
Dividends payable
Dividends are recorded as a liability and deducted from equity in the period in which they are declared and
approved. Any dividends declared after the reporting date and before the consolidated financial statements have
been authorised for issue are disclosed in the subsequent events note.
60
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
(l)
Significant accounting policies (continued)
Revenue recognition
Revenue from sales of goods and provision of services
Revenue is recognised at a transaction price that represents an amount that reflects the consideration to which the
Group expects to be entitled in exchange for transferring those goods or services. Revenue from sale of goods and
services is recognised when a performance obligation is satisfied, i.e. when control over the goods or services
underlying the particular performance obligation is transferred to the customer. If the Group agrees to transport
goods to a specified location (typically under contracts based on certain Incoterms types), revenue is split into two
performance obligations – sale of goods and rendering of transportation services. Revenue from sale of goods is
recognised at a point of time, when control over the goods is transferred to the customer, normally when the goods
are shipped and the risks, rewards and legal title are passed. Revenue from rendering of transportation services is
recognised over time as the transportation service is provided to the customer. This is determined based on the
actual days of transportation relative to the average expected days of transportation. The transaction price is
allocated to the rendering of transportation services on an average transportation price per ton basis. Costs related
to the rendering of transportation services are included in selling expenses.
Revenue is recorded net of discounts, provisions, value added tax and export duties, and refunds, and after excluding
intra-group sales turnover.
No element of financing is deemed present as the sales are made with an average credit term of 60 days, which is
consistent with market practice.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
Dividend income
Dividend income on investments is recognised when the Group becomes entitled to receive the payment.
(m)
Segment information
The Group provides separate disclosures on each operating segment that meets the criteria outlined in paragraph
11 of IFRS 8, “Operating Segments”.
The Group’s organisation comprises six reportable segments:
•
•
•
the Mining segment, which comprises mining, processing and sales of iron ore, fluxing limestone and
metallurgical dolomite, and supplies raw materials to the steel segment and third parties;
the Russian flat products segment, comprising production and sales of steel products and coke, primarily
pig iron, steel slabs, hot rolled steel, cold rolled steel, galvanised cold rolled sheet and cold rolled sheet
with polymeric coatings and also electro-technical steel;
the Russian long products segment, comprising a number of steel-production facilities combined in a single
production system beginning from scrap iron collection and recycling to steel-making, production of long
products, reinforcing rebar and metalware;
• NLMK USA, comprising production and sales of steel products in the United States;
• NLMK DanSteel and Plates Distribution Network, comprising production and sales of plates in Europe and
•
other regions of the world;
Investments in NBH, comprising production of hot rolled, cold rolled coils and galvanised and pre-pained
steel, and also production of a wide range of plates as well as a number of steel service centers located in
the European Union.
The accounting policies of each segment consist with the principles outlined in significant accounting policies.
61
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
(n)
Financial instruments
Financial assets
The Group’s financial assets include cash and cash equivalents, trade and other accounts receivable and short-term
financial instruments which are measured at amortised cost.
Debt instruments have the following categories based on the business model for managing the financial assets and
whether the contractual cash flows represent solely payments of principal and interest:
▪
▪
▪
debt instruments the payments on which represent solely payments of principal and interest and that are
intended to collect payments are classified as those to be measured subsequently at amortised cost;
debt instruments the payments on which represent solely payments of principal and interest and that are
held in a portfolio where an entity both holds to collect assets’ cash flows and sells assets are classified as
those to be measured subsequently at fair value through other comprehensive income; and
other financial assets are measured subsequently at fair value through profit or loss.
The Group does not have equity financial instruments.
To assess the expected credit loss on financial assets measured subsequently at amortised cost the Group uses
the expected credit
is based on
the change in credit quality of financial assets since initial recognition. The Group assesses expected credit losses
using lifetime expected credit losses for cash and cash equivalents, trade and other accounts receivable and short-
term financial investments since their terms are less than 12 months.
‘three stage’ approach which
in accordance with a
losses model
Initial recognition of financial assets
Financial investments measured subsequently at fair value are initially recorded at fair value. All other financial
assets are initially recorded at fair value plus transaction costs.
All purchases and sales of financial assets that require delivery within the time frame established by regulation or
market convention (“regular way” purchases and sales) are recorded at the trade date, which is the date when the
Group commits to buy or sell a financial asset.
Write-off
Financial assets are written-off, in whole or in part, when the Group exhausted all practical recovery efforts and has
concluded that there is no reasonable expectation of recovery. The write-off represents a de-recognition event.
Indicators that there is no reasonable expectation of recovery include expiration of statute of limitation.
De-recognition
The Group de-recognises financial assets when (a) the assets are redeemed or the rights to cash flows from the
assets otherwise expire or (b) the Group has transferred the rights to the cash flows from the financial assets or
entered into a qualifying pass-through arrangement while (i) also transferring substantially all risks and rewards of
ownership of the assets, or (ii) neither transferring nor retaining substantially all risks and rewards of ownership but
not retaining control in respect of these assets.
Control of an asset is retained if the counterparty does not have the practical ability to sell the asset in its entirety
to an unrelated third party without needing to impose additional restrictions on the sale. If the Group neither
transfers nor retains substantially all risks and rewards of ownership of the asset, but retains control over such
transferred asset, the Group continues recognition of its share in this asset and the related obligation in the amount
of the anticipated consideration.
62
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
Modification
The Group sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Group
assesses whether the modification of contractual cash flows is substantial considering, among other, the following
factors: any new contractual terms that substantially affect the risk profile of the asset, significant change in interest
rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit
risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.
If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Group
derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is
considered to be the date of initial recognition for subsequent impairment calculation purposes, including
determining whether a significant increase in credit risk has occurred. Any difference between the carrying amount
of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or
loss, unless the substance of the difference is attributed to a capital transaction with owners.
In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make
the originally agreed payments, the Group compares the original and revised expected cash flows to assets whether
the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks
and rewards do not change, the modified asset is not substantially different from the original asset and the
modification does not result in derecognition. The Group recalculates the gross carrying amount by discounting the
modified contractual cash flows by the original effective interest rate (or credit-adjusted effective interest rate for
purchased or originated credit impaired financial assets), and recognises a modification gain or loss in profit or loss.
Financial liabilities
The Group’s financial liabilities include trade and other payables, bank overdrafts, borrowings and financial
guarantee agreements.
Financial liabilities are respectively classified as:
▪
▪
financial liabilities at fair value through profit or loss;
borrowings and loans.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trade and financial liabilities
designated initially at fair value through profit or loss. Financial liabilities are classified as held for trade if acquired
for the purpose of selling in the short term. Income and expense on liabilities held for trade are recognised in the
consolidated statement of profit or loss, except for the change of the fair value attributable to the change of own
credit risk, which is recognized in other comprehensive income.
Borrowings
After initial recognition, interest-bearing borrowings are carried at amortised cost using the effective interest
method. Gains and losses on such financial liabilities are recognised in consolidated statements of profit or loss
upon their de-recognition and also as amortisation accrued using the effective interest method.
Initial recognition of financial liabilities
All financial liabilities are initially recorded at fair value less transaction costs incurred (except for financial liabilities
at fair value through the consolidated statements of profit or loss).
De-recognition
A financial liability is de-recognised from the consolidated statement of financial position if it was settled, cancelled
or expired.
63
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
Significant accounting policies (continued)
If the existing financial liability is replaced by another liability to the same creditor, on terms that significantly differ
from the previous terms, or the terms of the existing liability significantly differ from the previous terms, such
replacement or change is recorded as de-recognition of the initial liability and recognition of a new liability, and the
difference in their carrying amount is recognised in the consolidated statement of profit or loss.
Financial guarantee agreements
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability
is initially measured at fair value and subsequently at the higher of:
•
•
the amount determined
IFRS 9 Financial Instruments; or
the amount initially recognized, where applicable, less the cumulative amount of income recognised in
accordance with the principles of IFRS 15 Revenue from Contracts with Customers.
in accordance with
loss model under
the expected
credit
The fair value of financial guarantees is determined based on the present value of the difference in cash flows
between the contractual payments required under the debt instrument and the payments that would be required
without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations
by the third party. Where guarantees in relation to loans or other payables of associates are provided for no
compensation, the fair values are accounted for as contributions and recognised as part of the cost of the
investment.
Cash flow hedge accounting
At inception of the hedge relationship, the Group documents its objective and strategy, identifies the hedging
instrument and the hedged item, the nature of the hedged risk and method for evaluation whether the hedge
relationship meets the hedge effectiveness requirements.
The hedge relationship meets all of the hedge effectiveness requirements when:
•
•
•
an economic relationship exists between the hedged item and the hedging instrument;
the effect of credit risk does not dominate the value changes;
the hedge ratio reflects the ratio between the quantity of the hedged item and the quantity of the hedging
instrument.
The Group applies cash flow hedge accounting, the hedge objective is to protect the cash flows from exchange rate
exposure by hedging the expected highly probable US dollars nominated revenue with the portion of US dollars
nominated borrowings.
The effective portion of changes in the fair value of the hedging instrument (i.e. that portion which is compensated
by the change in the hedge reserve of cash flows) is recognised in other comprehensive income and accumulated
in hedge reserve of cash flows in equity.
The gain or loss relating to the ineffective portion is recognised immediately in the consolidated statement of profit
or loss in separate line “Hedging result”.
The amounts accumulated in equity are reclassified to profit or loss in the periods when payments on bonds and
bonds’ coupons occur.
The Group should revoke the hedge accounting prospectively when the hedge relationship (or part of the hedge
relationship) no longer meets the criteria for hedge accounting. This requirement is also applied when the hedging
instrument is expired or is sold, terminated, or exercised.
64
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
26
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as well as disclosures to this consolidated financial
statements. Management also makes certain judgements in the process of applying the Group’s accounting policies.
Estimates and judgements are continually evaluated based on historical experience and other factors, including
forecasts and expectations of future events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates, and management’s estimates can be revised in the future, either positively
or negatively, based on the facts surrounding each estimate.
Judgments that have the most significant effect on the amounts recognised in the consolidated financial
statements, and estimates that can cause a significant adjustment to the carrying amounts of assets and liabilities
within the next financial year are reported below.
(a)
Tax legislation and potential tax gains and losses
The Group’s potential tax gains and losses are reassessed by management at every reporting date. Liabilities which
are recorded for income tax positions are determined by management based on the interpretation of current tax
laws. Liabilities for penalties, fines and taxes other than on income are recognised based on management’s best
estimate of the expenditure required to settle tax liabilities at the reporting date (Note 24).
The recognised deferred tax assets represent income taxes recoverable through future deductions from taxable
profits and are recorded in the statement of financial position (Note 17). Deferred income tax assets are recorded
to the extent that realisation of the related tax benefit is probable. This includes temporary difference expected to
reverse in the future and the availability of sufficient future taxable profit against which the deductions can be
utilised. The future taxable profits and the amount of tax benefits that are probable in the future are based on the
medium term business plan prepared by management and extrapolated results thereafter. The business plan is
based on management expectations that are believed to be reasonable under the circumstances.
(b)
Estimation of useful lives of property, plant and equipment
The estimation of the useful life of an item of property, plant and equipment is a matter of management judgement
based upon experience with similar assets. In determining the useful life of an asset, management considers the
expected usage based on production volumes, inventories, technical obsolescence rates, physical wear and tear
and the physical environment in which the asset is operated. Changes in any of these conditions or estimates may
affect future useful lives (Note 8).
(c)
Impairment analysis of property, plant and equipment, goodwill and investments in joint ventures
The estimation of forecasted cash flows for the purposes of impairment testing involves the application of a number
of significant judgements and estimates to certain variables including volumes of production and extraction, prices on
finished goods, operating costs, capital investment, and macroeconomic factors such as inflation and discount rates.
In addition, judgement is applied in determining the cash-generating units assessed for impairment (Notes 8, 9).
65
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
27
New or revised standards and interpretations
The following amended standards became effective from 1 January 2020, but did not have a material impact on the
Group:
• Amendments to the Conceptual Framework for Financial Reporting (issued on 29 March 2018 and effective
for annual periods beginning on or after 1 January 2020);
• Amendments to IFRS 3 Definition of a business (issued on 22 October 2018 and effective for acquisitions
from the beginning of annual reporting period that starts on or after 1 January 2020);
• Amendments to IAS 1 and IAS 8 Definition of materiality (issued on 31 October 2018 and effective for
annual periods beginning on or after 1 January 2020);
• Amendments to IFRS 9, IAS 39 and IFRS 7 Interest rate benchmark reform (issued on 26 September 2019
and effective for annual periods beginning on or after 1 January 2020).
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning
on or after 1 January 2021 or later, and which the Group has not early adopted and are not expected to have any
material impact on the Group financial statements when adopted:
•
•
•
•
•
•
COVID-19-Related Rent Concessions Amendment to IFRS 16 issued on 28 May 2020 and effective for
annual periods beginning on or after 1 June 2020;
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture – Amendments to IFRS
10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date
to be determined by the IASB);
IFRS 17 "Insurance Contracts" (issued on 18 May 2017 and effective for annual periods beginning on or
after 1 January 2023);
Classification of liabilities as current or non-current – Amendments to IAS 1 (issued on 23 January 2020 and
effective for annual periods beginning on or after 1 January 2022);
Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1
(issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023);
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual
Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs
2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for
annual periods beginning on or after 1 January 2022);
• Amendments to IFRS 17 and an amendment to IFRS 4 (issued on 25 June 2020 and effective for annual
•
periods beginning on or after 1 January 2023);
Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
(issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021).
28
Subsequent events
In January 2021 the Group received refund of paid steel tariffs, enacted by Department of Commerce under Section
232 of the USA Trade Expansion Act., and accrued interests in the amount of $105 (included in other accounts
receivable as at 31 December 2020).
66
Independent Auditor’s Report
To the Shareholders and the Board of Directors of Novolipetsk Steel:
Our opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Novolipetsk Steel (the “Company”) as at
31 December 2020, and the Company’s financial performance and cash flows for the year then ended in accordance with the reporting rules established in the
Russian Federation.
What we have audited
The Company’s financial statements comprise:
the balance sheet as at 31 December 2020;
the statement of financial results for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the balance sheet and statement of financial results, which include significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
AO PricewaterhouseCoopers Audit
White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047
T: +7 (495) 967 6000, F:+7 (495) 967 6001, www.pwc.ru
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
Independence
We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence
Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and the ethical requirements of the Auditor’s Professional
Ethics Code and Auditor’s Independence Rules that are relevant to our audit of the financial statements in the Russian Federation. We have fulfilled our other
ethical responsibilities in accordance with these requirements and the IESBA Code.
Our audit approach
Overview
Materiality
Overall Company materiality: Russian Roubles (“RUB”) 4,370,000 thousand, which represents 1% of the
Company’s revenue.
Key audit matter
Impairment of the investment in subsidiary LLC NLMK Overseas Holdings
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we
considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into
account the structure of the Company, the accounting processes and controls, and the industry in which the Company operates.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements
are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Company materiality for the financial
statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, if any, both individually and in aggregate on the financial
statements as a whole.
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
2
Overall Company materiality
RUB 4,370,000 thousand
How we determined it
1% of the Company’s revenue
Rationale for the materiality benchmark applied
We chose revenue as the benchmark because, in our view, it is the benchmark which objectively
best represents the performance of the Company over a period of time while financial results are
volatile. We determined overall materiality as 1%, which in our experience is within the range of
acceptable quantitative materiality thresholds applied for public companies in the relevant industry.
We also consider misstatements or possible misstatements in the context of qualitative factors.
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
3
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Impairment of the long-term financial investments in LLC NLMK Overseas
Holdings
Annually at the reporting date management performs analysis of existence of
impairment indicators of the Company’s long-term investments, including
investments in the subsidiaries where the market value is not determined.
If impairment indicators are in place, management assesses investments’
recoverable amount and compares that with the carrying value.
If the impairment test identifies a steady decline in the value of investments,
impairment loss is recognized. Impairment loss is calculated as the difference
between the recoverable amount and the carrying value of investment.
The recoverable amount of the investment in the subsidiary LLC NLMK
Overseas Holdings that has investments in its own subsidiaries, is defined as
the value of its net assets adjusted for the recoverable value of investments.
The latter is in turn defined based on discounted cash flow models of the major
production companies and using net assets value for other investments.
Respective models and calculations were prepared as at 31 December 2020.
As a result of testing performed, significant excess of the carrying amount of
investments in LLC NLMK Overseas Holdings over its recoverable amount was
identified and additional impairment provision of RUB 12,870,000 thousand was
recognized.
We focused on this area because of the significant judgment involved in the
evaluation of recoverable amount, and the significant carrying value of the
assets in scope of the test and the amount of the impairment loss.
We obtained, understood and evaluated management’s analysis of
existence of impairment indicators of the Company’s financial
investments and we did not identify any additional factors that should
have been considered in the analysis.
We audited the recoverable amount of the investments in LLC NLMK
Overseas Holdings subsidiaries which were calculated by management
based on subsidiaries’ net assets.
We involved our valuation experts to assist in the evaluation of the
methodology, mathematical accuracy and assumptions used in the
models.
During our work on verification of the recoverable amount of the
investments in the subsidiary LLC NLMK Overseas Holdings that
included audit of the recoverable value of its investments determined
based on discounted cash flow models, we performed the following main
procedures:
comparison of the key assumptions used within the impairment
models to the historic performance of the LLC NLMK Overseas
Holdings investments, approved estimates, and other supporting
calculations;
sample benchmarking of the key assumptions used within the
impairment models, including price forecasts for core raw materials
and finished products, inflation and discount rates, against external
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
4
Key audit matter
How our audit addressed the key audit matter
expert valuations, macroeconomic and industry forecasts, which
corroborated their validity;
performing sensitivity analysis of the key assumptions in order to
assess their potential impact on impairment results and ranges of
possible outcomes of the recoverable amounts.
The scope of the audit procedures for verification of impairment
models for each investment of LLC NLMK Overseas Holdings was
based on its significance, safety margin, sensitivity to assumptions
and individual risks.
Other information
Management is responsible for the other information. The other information comprises the Annual Report for 2020 and the Issuer’s Report for the first quarter of
2021 (but does not include the financial statements and our auditor’s report thereon), which are expected to be made available to us after the date of this auditor’s
report.
Our opinion on the financial statements does not cover other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read other information identified above when it becomes available and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
When we read the Annual Report for 2020 and the Issuer’s Report for the first quarter of 2021, if we conclude that there is a material misstatement therein, we
are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the reporting rules established in the
Russian Federation, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
5
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
6
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken
to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The certified auditor responsible for the audit resulting in this independent auditor’s report is A. B. Fomin.
10 February 2021
Moscow, Russian Federation
A. B. Fomin, certified auditor (licence No. № 01-000059), AO PricewaterhouseCoopers Audit
Audited entity: Novolipetsk Steel
Independent auditor: AO PricewaterhouseCoopers Audit
Record made in the Unified State Register of Legal Entities on
28 January 1993 under State Registration Number 1024800823123
Taxpayer Identification Number 4823006703
Registered by the Government Agency Moscow Registration Chamber on 28 February 1992 under Nо. 008.890
Record made in the Unified State Register of Legal Entities on 22 August 2002 under State Registration
Number 1027700148431
Taxpayer Identification Number 7705051102
2, Metallurgov sq., Lipetsk, 398040, Russian Federation
Member of Self-regulatory organization of auditors Association «Sodruzhestvo»
Principal Registration Number of the Record in the Register of Auditors and Audit Organizations – 12006020338
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
7
TRANSLATION NOTE: This version of our report is a translation from the original, which was prepared in Russian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation
of information, views or opinions, the original language version of our report takes precedence over this translation.
8
NOVOLIPETSK STEEL
NLMK, 2 Metallurgov sq., 398040 Lipetsk
Tel.: +7 (4742) 44 42 22 | fax: +7 (4742) 44 11 11
е-mail: info@nlmk.com | www.nlmk.com
ACCOUNTING (FINANCIAL) STATEMENTS
NOVOLIPETSK STEEL
FOR 2020
Accounting
(Financial)
statement
for 2020
CONTENTS
BALANCE SHEET .................................................................................................................................................................................................................................... 4
PROFIT AND LOSS STATEMENT ............................................................................................................................................................................................................. 6
STATEMENT OF CHANGES IN EQUITY ................................................................................................................................................................................................... 8
CASH FLOW STATEMENT .................................................................................................................................................................................................................... 10
NOTES TO BALANCE SHEET AND PROFIT AND LOSS STATEMENT ...................................................................................................................................................... 12
1. GENERAL INFORMATION ................................................................................................................................................................................................................ 13
2. SIGNIFICANT ASPECTS OF ACCOUNTING POLICY AND BASIS OF ACCOUNTING (FINANCIAL) STATEMENTS PREPARATION .......................................................... 15
2. 1 INTANGIBLE ASSETS ..................................................................................................................................................................................................................... 15
2. 2 R&D RESULTS ............................................................................................................................................................................................................................... 16
2. 3 FIXED ASSETS AND CONSTRUCTION IN PROGRESS ...................................................................................................................................................................... 16
2. 4 FINANCIAL INVESTMENTS ............................................................................................................................................................................................................ 17
2. 5 INVENTORIES ............................................................................................................................................................................................................................... 17
2. 6 SHORT-TERM AND LONG-TERM ASSETS AND LIABILITIES ........................................................................................................................................................... 18
2. 7 ADVANCE PAYMENTS MADE AGAINST NON-CURRENT ASSETS .................................................................................................................................................. 18
2. 8 CASH AND CASH EQUIVALENTS ................................................................................................................................................................................................... 18
2. 9 CREDITS AND LOANS .................................................................................................................................................................................................................... 19
2. 10 ESTIMATED LIABILITIES .............................................................................................................................................................................................................. 19
2. 11 INCOME AND EXPENSES ............................................................................................................................................................................................................ 19
2. 12 TAXES ......................................................................................................................................................................................................................................... 19
2. 13 ASSETS, LIABILITIES AND OPERATIONS IN FOREIGN CURRENCY ................................................................................................................................................ 20
2. 14 INFORMATION BY SEGMENTS ................................................................................................................................................................................................... 20
2. 15 CHANGES IN ACCOUNTING POLICY ........................................................................................................................................................................................... 20
2. 16 COMPARATIVE DATA ................................................................................................................................................................................................................. 21
3. DISCLOSURE OF SIGNIFICANT INDICATORS .................................................................................................................................................................................... 22
3. 1 INTANGIBLE ASSETS ..................................................................................................................................................................................................................... 22
3. 2 FIXED ASSETS AND CONSTRUCTION IN PROGRESS ...................................................................................................................................................................... 23
3. 3 FINANCIAL INVESTMENTS ............................................................................................................................................................................................................ 25
3. 4 INVENTORIES ............................................................................................................................................................................................................................... 27
3. 5 ACCOUNTS RECEIVABLE AND PAYABLE ....................................................................................................................................................................................... 28
3. 5. 1 Accounts Receivable ................................................................................................................................................................................................................ 28
3. 5. 2 Accounts payable ..................................................................................................................................................................................................................... 30
3. 6 CASH AND CASH EQUIVALENTS ................................................................................................................................................................................................... 31
3. 7 CAPITAL AND DIVIDENDS ............................................................................................................................................................................................................. 33
3. 8 CREDITS AND LOANS .................................................................................................................................................................................................................... 35
3. 9 ESTIMATED LIABILITIES ................................................................................................................................................................................................................ 36
3. 10 INCOME AND EXPENSES ............................................................................................................................................................................................................ 36
3. 10. 1 Income and expenses from ordinary activities ...................................................................................................................................................................... 36
3. 10. 2 Other income and expenses .................................................................................................................................................................................................. 37
3. 11 CURRENT INCOME TAX FORMATION ......................................................................................................................................................................................... 38
3. 12 INFORMATION BY SEGMENTS ................................................................................................................................................................................................... 38
Notes
2
3. 13 SECURITY OF LIABILITIES ............................................................................................................................................................................................................ 39
3. 14 INFORMATION ON RELATED PARTIES ........................................................................................................................................................................................ 40
3. 14. 1 The list of related parties ....................................................................................................................................................................................................... 40
3. 14. 2 Operations with related parties ............................................................................................................................................................................................. 42
3. 15 CONTINGENT LIABILITIES .......................................................................................................................................................................................................... 49
3. 16 EVENTS AFTER THE REPORTING DATE ....................................................................................................................................................................................... 49
Accounting
(Financial)
statement
for 2020
Notes
3
Accounting
(Financial)
statement
for 2020
Notes
Balance
Sheet
NLMK
Entity
Taxpayer Identification Number
Type of business
Type of business entity / form of ownership Public Joint Stock Company /
Production of cold-rolled steel flats
2, Metallurgov sq., 398040 Lipetsk
Joint private and foreign property
Unit of measurement – RUB k
Address
The accounting statements are subject to obligatory auditing
Auditor PWC Audit
The auditor’s taxpayer identification number
The auditor’s main state registration number
Description
1
ASSETS
I. Non-current assets
Intangible assets
Results of research and developments
Fixed assets
Financial investments
Deferred tax assets
Other non-current assets
Total for Section I
II. Current assets
Inventories
Input VAT
Accounts receivable
Financial investments (excluding cash equivalents)
Cash and cash equivalents
Other current assets
Total for Section II
BALANCE (sum of lines 1100 + 1200)
BALANCE SHEET
as of 31 December 2020
Form acc. to OKUD
Date (day, month, year)
OKPO
TIN
OKVED2
CODES
0710001
31/12/2020
05757665
4823006703
24.10.4
OKOPF/ OKFS
OKEI
12247 / 34
384
TIN
OGRN
7705051102
1027700148431
V
YES
NO
Code
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
2
3
4
5
Disclosure in
Notes
6
1110
1120
1150
1170
1180
1190
1100
1210
1220
1230
1240
1250
1260
1200
1600
1,401,412
2,765
192,736,224
169,674,801
2,482,779
8,316,059
374,614,040
57,259,269
1,049,657
78,512,363
10,605,000
47,458,916
43
194,885,248
569,499,288
1,707,636
2,510
165,776,831
158,223,497
1,222,741
7,563,601
334,496,816
55,675,785
1,176,619
109,715,882
9,481,811
26,636,800
43
202,686,940
537,183,756
1,666,241
5,760
139,314,267
177,809,199
1,770,135
7,043,877
327,609,479
61,111,447
553,567
126,333,555
2,497,606
60,339,735
67
250,835,977
578,445,456
2.1, 3.1
2.2
2.3, 3.2
2.4, 2.6, 3.3
2.12, 3.11
2.7, 3.5.1
2.5, 3.4
2.6, 3.5.1
2.4, 2.6, 3.3
2.8, 3.6
4
Description
Code
As of 31.12.2020
As of 31.12.2019 As of 31.12.2018
Accounting
(Financial)
statement
for 2020
1
LIABILITIES
III. Capital and reserves
Charter capital
Revaluation of non-current assets
Additional capital (without revaluation)
Reserve capital
Retained earnings (uncovered loss)
Total for Section III
IV. Long-term liabilities
Borrowings
Deferred tax liabilities
Other liabilities
Total for Section IV
V. Short-term liabilities
Borrowings
Accounts payable
Estimated liabilities
Total for Section V
BALANCE (sum of lines 1300 + 1400 + 1500)
2
3
4
5
1310
1340
1350
1360
1370
1300
1410
1420
1450
1400
1510
1520
1540
1500
1700
5,993,227
3,259,484
771,777
299,661
245,414,209
255,738,358
152,793,410
12,056,430
--
164,849,840
43,916,850
100,325,861
4,668,379
148,911,090
569,499,288
5,993,227
3,275,807
771,777
299,661
289,131,900
299,472,372
105,703,843
10,847,050
385,320
116,936,213
30,406,203
86,497,982
3,870,986
120,775,171
537,183,756
5,993,227
3,290,822
771,777
299,661
325,751,607
336,107,094
84,066,622
10,985,025
15,510
95,067,157
21,823,828
118,357,751
7,089,626
147,271,205
578,445,456
Form 0710001 p. 2
Disclosure in
Notes
6
3.7
2.6, 2.9, 3.8
2.12, 3.11
2.6, 3.5.2
2.6, 2.9, 3.8
2.6, 3.5.2
2.10, 3.9
NLMK Manager
by virtue of Power of Attorney No.505-20/8 dd. 09.01.2020
Е. Morozova
10 February 2021
Balance
Notes
Sheet
5
Accounting
(Financial)
statement
for 2020
NLMK
Entity
Taxpayer’s identification number:
Type of activity
Type of business entity / form of ownership
Public joint-stock company / Joint private and foreign property
Unit of measurement – RUB k
Production of cold-rolled steel flats
Description
1
Revenue
incl. sales of iron and steel products
Cost of sales
incl. iron and steel products sold
Gross profit (loss)
Selling expenses
Administrative expenses
Sales profit (loss)
Income from shareholding in other organizations
Interest receivable
Interest payable
Other income
Other expenses
Profit (loss) before tax
Income tax
incl. current income tax
deferred income tax
Other
Profit tax redistribution among a consolidated group of taxpayers
Net profit (loss)
PROFIT AND LOSS STATEMENT
for 2020
Form under OKUD
Date (day, month, year)
under OKPO
INN
under OKVED2
CODES
0710002
31/12/2020
05757665
4823006703
24.10.4
under OKOPF/ OKFS
under OKEI
12247 / 34
384
Code
For 2020
For 2019
2
2110
2110.1
2120
2120.1
2100
2210
2220
2200
2310
2320
2330
2340
2350
2300
2410
2411
2412
2460
2465
2400
3
437,079,106
434,795,572
(325,865,606)
(323,384,896)
111,213,500
(33,317,051)
(18,460,815)
59,435,634
48,980,386
348,436
(6,131,228)
20,397,324
(55,923,841)
67,106,711
(6,310,959)
(6,361,617)
50,658
(3,167)
332,529
61,125,114
4
421,816,321
419,595,963
(316,087,072)
(313,940,919)
105,729,249
(30,065,720)
(15,020,523)
60,643,006
72,099,211
571,485
(4,651,585)
28,474,056
(61,338,214)
95,797,959
(12,930,691)
(12,521,271)
(409,420)
(1,501)
554,305
83,420,072
Disclosure in
Notes
5
2.11, 3.10.1
2.11, 3.10.1
3.3
2.4, 3.3
2.9, 3.8
2.11, 3.10.2
2.12, 3.11
2.12, 3.11
3.7
Profit and
Loss Statement
Notes
Form 0710002 p. 2
6
Description
1
Consolidated financial performance for the period
FOR REFERENCE
Base profit (loss) per share (RUB)
Code
2
2500
2900
For 2020
3
For 2019
4
Disclosure in Notes
5
61,125,114
83,420,072
10.20
13.92
3.7
Accounting
(Financial)
statement
for 2020
NLMK Manager
by virtue of Power of Attorney No.505-20/8 dd. 09.01.2020
Е. Morozova
10 February 2021
Profit and
Notes
Loss Statement
7
STATEMENT OF CHANGES IN EQUITY
for 2020
NLMK
Entity
Taxpayer’s identification number:
Type of activity
Type of business entity / form of ownership
Public joint-stock company / Joint private and foreign property
Unit of measurement – RUB k
1. Capital flow
Production of cold-rolled steel flats
Code
Charter capital
Description
1
Capital as of 31 December 2018
Capital increase – total:
For 2019
including:
net profit
income directly pertaining to the capital
increase
Capital reduction – total:
including:
dividends
Additional capital change
Capital as of 31 December 2019
Capital increase – total:
For 2020
including:
net profit
income directly pertaining to the capital
increase
Capital reduction – total:
including:
dividends
Additional capital change
Capital as of 31 December 2020
Additional
capital
4
3
5,993,227
4,062,599
--
Х
Х
--
--
Х
--
--
Reserve
capital
5
299,661
--
Х
Х
--
Х
Х
5,993,227
Х
(15,015)
4,047,584
Х
--
299,661
--
Х
Х
--
--
Х
--
--
--
Х
Х
--
Х
Х
5,993,227
Х
(16,323)
4,031,261
Х
--
299,661
2
3100
3210
3211
3213
3220
3227
3230
3200
3310
3311
3313
3320
3327
3330
3300
Accounting
(Financial)
statement
for 2020
Notes
Statement of changes in
equity
Form under OKUD
Date (day, month, year)
under OKPO
INN
under OKVED2
CODES
0710004
31/12/2020
05757665
4823006703
24.10.4
under OKOPF/ OKFS
under OKEI
12247 / 34
384
Retained earnings
(uncovered loss)
6
Total
7
325,751,607
336,107,094
83,469,552
83,469,552
83,420,072
83,420,072
49,480
(120,104,274)
49,480
(120,104,274)
(120,104,274)
15,015
289,131,900
(120,104,274)
Х
299,472,372
61,207,393
61,207,393
61,125,114
61,125,114
82,279
(104,941,407)
82,279
(104,941,407)
(104,941,407)
16,323
245,414,209
(104,941,407)
Х
255,738,358
8
3. Net assets
Description
Net assets
1
Accounting
(Financial)
statement
for 2020
Form 0710004 p.2
Code
2
3600
As of 31.12.2020
3
As of 31.12.2019
4
As of 31.12.2018
5
255,738,358
299,472,372
336,107,094
NLMK Manager
by virtue of Power of Attorney No.505-20/8 dd. 09.01.2020
Е. Morozova
10 February 2021
Statement of changes in
equity
Notes
9
CASH FLOW STATEMENT
for 2020
NLMK
Entity
Taxpayer’s identification number:
Type of activity
Type of business entity / form of ownership
Public joint-stock company / Joint private and foreign property
Unit of measurement – RUB k
Production of cold-rolled steel flats
Description
1
Cash flow from current operations
Inflow – total
including:
from sales of goods, products, works and services
from rent, license payments, royalties, commissions and other similar payments
other inflow
Payments - total
including:
to suppliers (contractors) for feedstock, materials, works and services
related to employee salaries and wages
interest on liabilities
corporate income tax
other payments
Balance of cash flows from current operations
Cash flows from investment operations
Form under OKUD
Date (day, month, year)
under OKPO
INN
under OKVED2
CODES
0710005
31/12/2020
05757665
4823006703
24.10.4
under OKOPF/ OKFS
under OKEI
12247 / 34
384
Code
2
For 2020
3
For 2019
4
4110
458,410,301
408,881,905
4111
4112
4119
4120
4121
4122
4123
4124
4129
4100
456,750,478
233,448
1,426,375
(381,756,350)
(328,063,076)
(32,260,560)
(6,134,854)
(5,072,579)
(10,225,281)
76,653,951
407,183,814
250,581
1,447,510
(367,992,527)
(308,494,446)
(33,443,101)
(4,783,662)
(11,104,188)
(10,167,130)
40,889,378
Inflow – total
including:
from sale of non-current assets (except financial investments)
from sale of interest (shares) in other companies
from repayment of loans granted, from sale of debt securities (rights of demand of funds from other persons)
from dividends, interest on debt financial investments and similar incoming funds from participation in other
organizations
other inflow
4210
81,359,005
85,551,206
4211
4212
4213
4214
4219
800,091
40,836
8,382,160
58,538
23,911
28,837,253
72,135,918
--
56,631,504
--
10
Accounting
(Financial)
statement
for 2020
Cash flow statement
Notes
Accounting
(Financial)
statement
for 2020
Description
1
Payments – total
including:
those related to acquisition, set-up, upgrade, reconstruction and preparation for usage of non-current assets
those related to acquisition of stock (shares) in other companies
those related to acquisition of debt securities (rights of demand of monetary funds from other persons),
granting of loans to other entities
interest on debt liabilities included into the cost of an investment asset
other payments
Balance of cash flows from investment operations
Cash flows from financial operations
Inflow – total
including:
receiving loans and credits
Payments – total
including:
payment of dividends and other payments related to profit distribution in favour of owners (participants)
related to repayment (buy- back) of bills of exchange and other debt securities, repayment of loans and credits
other payments
Balance of cash flows from financial operations
Balance of cash flows for the reporting period
Balance of cash and cash equivalents as of the beginning of the reporting period
Balance of cash and cash equivalents as of the end of the reporting period
Foreign currency to RUB exchange rate fluctuation effect
Code
2
4220
For 2020
3
(63,844,996)
For 2019
4
(60,105,441)
4221
4222
4223
4224
4229
4200
4310
4311
4320
4322
4323
4329
4300
4400
4450
4500
4490
(39,743,605)
(14,871,000)
(36,796,408)
--
(8,356,133)
--
(874,258)
17,514,009
(12,631,076)
--
(10,677,957)
25,445,765
85,325,214
57,156,316
85,325,214
(160,579,072)
57,156,316
(152,005,832)
(111,456,848)
(43,496,426)
(5,625,798)
(75,253,858)
18,914,102
26,636,609
47,458,761
1,908,050
(130,848,683)
(15,104,232)
(6,052,917)
(94,849,516)
(28,514,373)
60,339,683
26,636,609
(5,188,701)
NLMK Manager
by virtue of Power of Attorney No.505-20/8 dd. 09.01.2020
10 February 2021
Е. Morozova
Cash flow statement
Notes
11
Accounting
(Financial)
statement
for 2020
NOTES
TO BALANCE SHEET
AND PROFIT AND LOSS STATEMENT
Notes
12
Accounting
(Financial)
statement
for 2020
1. GENERAL INFORMATION
Novolipetsk Steel (hereinafter referred to as “the Company”) is an integrated steel-making company specializing in production of a wide variety of flats.
Abbreviated Company name: PJSC NLMK.
Registered office of the Company: 2, Metallurgov sq., Lipetsk, Russia.
Postal address of the Company: 2, Metallurgov sq., Lipetsk, 398040, Russia.
The main activities of the Company are:
production and sale of iron and steel products;
production and sale of mechanical engineering products (equipment, accessories, tools and spare parts);
production of construction materials, structures, and products;
generation, transmission and distribution of electrical and heat power;
industrial construction, rendering construction and public utilities services;
foreign and domestic trade;
and others.
The Company is licensed for all types of activities subject to licensing.
The Company has a representative office in Moscow as well as a branch office in Yekaterinburg.
As of 31.12.2020 the Company’s headcount was 27,207 employees, as of 31.12.2019 – 27,401 employees.
Board of Directors as of 31 December 2020:
Chairman of the Board of Directors
Vladimir Lisin
Members:
Oleg V. Bagrin
Thomas Veraszto
Nikolai Gagarin
Sergey Kravchenko
Joachim Limberg
Marjan Oudeman
Stanislav Shekshnya
Benedict Sciortino
Management Board as of 31 December 2020:
Grigory Fedorishin
Tatyana Averchenkova
Mikhail Arkhipov
Ilya Guschin
Barend de Vos
Sergey Likharev
President (Chairman of the Management Board)
Vice-President, Operational Efficiency
Vice President, HR & Management System
Vice President, Sales
Vice-President, International Operations
Vice President, Logistics
Notes
13
Accounting
(Financial)
statement
for 2020
Shamil Kurmashov
Evgeny Ovcharov
Sergei Chebotarev
Vice President, CFO
Vice-President, Risk Management
Vice President, Energy and Environment
President (Management Board Chairman) is a sole executive body of the Company.
Information on risk management, internal control and internal audit is presented on the Company's website1.
Information on the Register Holder and the Auditor:
Register Holder of the Company is JSC Agency “RNR”; license No. 042-13984-000001, dd. 29.11.2002 with an unlimited validity. The Register of the issuer’s registered
securities owners has been held by the registrar since 4 March 2004.
The company’s auditor is PWC Audit
Financial and tax accounting
Financial and tax accounting of the Company's business to the extent established by the current legislation is conducted by the Corporate Solutions Centre in line with
Service Contract No. 75757 dd. 31.12.2019. The authorized signatory of the accounting (financial) statements is E. Morozova, Director of the Accounting Division of
Corporate Solutions Centre LLC, on the basis of a power of attorney.
The Company’s operational environment
The Russian economy demonstrates some characteristics typical of emerging markets. The country’s economy is mostly susceptible to oil and gas prices. Continuous
political tension in the region as well as the extended international sanctions against some Russian companies and nationals are having a negative impact on the
Russian economy. Moreover, the existing tax, currency and customs legislation is subject to various interpretations and thus creates additional difficulties for Russian
companies. Such economic environment cannot but influence the Company’s business.
In 2020, the COVID-19 pandemic caused serious headwinds for overall business activity, that initially led to weakening of demand for steel in traditional sales markets
and a temporary drop in steel product prices which however started to recover gradually in second half 2020. In order to keep capacity utilization rates of the Company
high the NLMK Group made changes to regional sales structure and diversified product mix. Production and supply chains of the Company were not significantly
impacted by the COVID-19 pandemic.
At the date of issuing these accounting (financial) statements, the situation with the spread of coronavirus infection (COVID-19) is still evolving. The Company benefits
from a strong financial position, with low leverage and significant liquidity. The Company management made an analysis of impairment indicators of the Company's
financial investments, as a result, impairment indicators were identified in relation to certain financial investments, and the corresponding financial investments of
the Company were tested for possible impairment (clause 3.3. Explanations).
Current economic environment cannot but influence the activities of the Company.
The management takes the necessary measures to ensure a stable financial position of the Company and to provide support to its customers and employees. However
future consequences of the economic situation are difficult to foresee and their influence on the Company’s business might differ from today’s expectations of the
Management.
Main financial risks intrinsic to the Company’s operations include market risks, credit risks, currency risks and underliquidity risks. Financial risk management is aimed
at determination of risk limits and subsequent observance of the established limits. Risk management is to ensure proper functioning of the Company’s internal policy
and procedures for the purpose of minimizing these risks. The Company discloses its procedures for management of these risks at its official website1.
1Posted on the website of NLMK (http://www.nlmk.com)
Notes
14
Accounting
(Financial)
statement
for 2020
The Russian Law on transfer pricing provides for a possibility of additional charging of tax liabilities to monitored transactions (transactions with related parties and
certain transactions between independent parties), if the transaction price does not correspond to the market one.
In order to meet requirements of the applicable legislation on transfer pricing the Company’s Management introduced internal control procedures. In the reporting
year the Company submitted the “Notice of controlled transactions for 2019” to the Tax authority (in 2019 - for 2018).
The Company is preparing transfer pricing documentation which will confirm the compliance of prices used with the market level for tax purposes. Nevertheless, there
is a possibility that due to further practice in application of transfer pricing rules these prices can be contested and consequences of such outcome cannot be securely
evaluated.
According to the Law on Controlled Foreign Companies (hereinafter - CFC) taxation on profit was introduced in the Russian Federation for foreign companies and
foreign ventures without establishing an entity (including funds) being controlled by tax residents of the Russian Federation (controlling persons). Starting from 2015
CFCs’ income is taxed at 20% in line with the legislation requirements.
The Company has established a consolidated taxpayer group (hereinafter - CTG) for the purpose of calculation and payment of corporate income tax, taking into
account the total financial result of a business, in which it acts as the responsible party. 19 NLMK Group companies are included into the CTG.
The Company concluded an agreement with various banks on accession to Cash pooling service for a Master account where NLMK acts as a Parent Company for the
purpose of NLMK Group companies’ liquidity management by cash consolidation. Cash consolidation is performed through conducting operations under loan
agreements between the Company and NLMK Group companies.
2. SIGNIFICANT ASPECTS OF ACCOUNTING POLICY AND BASIS OF ACCOUNTING (FINANCIAL) STATEMENTS PREPARATION
The accounting (financial) statements have been prepared in accordance with the rules of accounting and reporting effective in the Russian Federation, in particular,
with the Federal Law “Accounting” and Regulation on accounting and reporting in the Russian Federation approved by the RF Ministry of Finance.
The unit of measurement for accounting indicators is RUB thousand without decimal digits. In the accounting (financial) statements, negative figures or figures
deductible from relevant indicators in order to calculate intermediate or total values, are given in round brackets.
The companies whose names were brought in line with the Civil code requirements (renaming to Public Company, Joint-Stock Company or Production Cooperative) as
of the reporting date, are presented with their names changed.
The Company’s consolidated financial statements have been compiled in line with the International Financial Reporting Statements (IFRS).
2. 1 INTANGIBLE ASSETS
Intangible assets are reflected in balance sheets upon actual costs of acquisition, manufacture and additional expenses in order to bring assets to a state in which they
could be used as intended, less depreciation charged.
Depreciation of intangible assets is calculated by a straight-line method with an exclusion of cases when application of another method to determine depreciation can
be justified by a reliable calculation of expected receipt of future economic benefits from using the intangible asset, including financial result from potential sale of
that asset.
When useful life of an intangible asset is checked in order to revise it, more accurate definition of the useful life is performed in case of significant change in the period
(for 12 months and longer of the previously defined one) within which the Company plans to use that asset. Should it be impossible to define useful life for intangible
assets accounted before 1 January 2008, standard depreciation charges are established on the basis of a 20-year term. For similar intangible assets accounted from 1
January 2008, depreciation is not charged.
There are no regular revaluations of intangible assets or checks for their impairment.
Notes
15
Expenses for purchasing non-exclusive rights for using the result of intellectual activity or the means of individualization (computer software etc.) are charged to
relevant accounts on a monthly basis by equal portions and in the amount determined by the Company’s agreements or calculations, during the period they refer to.
2. 2 R&D RESULTS
Scientific research, development- and- design and process works the results of which are used for production or management purposes are shown on account 04
“Intangible assets” separately and are reflected in the balance sheet under item “R&D results”. They are written off on a straight-line basis as operational expenses
within three years starting from the first day of the month following the month of their actual use commencement.
2. 3 FIXED ASSETS AND CONSTRUCTION IN PROGRESS
Structure of fixed assets
Fixed assets acquired from 1 January 2011 with the initial cost of RUB 40 thou. per item and below, are accounted within inventories.
Special tools, devices and equipment the lifetime of which is longer than 12 months and the cost of which is over RUB 40 thou. per item are accounted under the
procedure established for fixed asset accounting.
Evaluation basis
The original value of fixed assets acquired by the Company for payment, is formed by the actual costs of acquisition, construction and manufacture less taxes
refundable. The initial cost of fixed assets received under agreements which provide for the fulfilment of liabilities (payments) by non-monetary means shall be
recognized as the price of valuables handed over or to be handed over, based on the price upon which the Company usually defines the value of similar valuables in
comparable circumstances.
Costs related to completion, additional supply of equipment, modernization and upgrading increase the initial cost of fixed assets.
Over the period from 1992 to 1997, the Company conducted annual re-evaluations of fixed assets in accordance with the Russian Government regulations. Currently,
no annual re-evaluation of fixed assets is conducted.
Fixed assets purchased before 01.01.1997 are shown in the balance sheet at replacement cost, and those purchased after 01.01.1997 – at initial cost, minus
accumulated depreciation amounts respectively.
Depreciation
Depreciation of fixed asset items is charged on a straight-line basis from the initial (replacement) value of items and using depreciation norms calculated for established
useful lives of such items.
Groups of fixed assets
Buildings
Structures
Machinery and equipment including household
equipment and other items
Vehicles
Cultivated resources of plant origin
Useful life (years) of items taken onto the books
before 01.01.2003
since 01.01.2003
5-256
8-106
5-100
13-34
40
5-45
2-47
1-42
3-25
30
16
Accounting
(Financial)
statement
for 2020
Notes
For fixed asset items commissioned before 01.01.2003, useful life is set on the basis of depreciation norms approved by USSR Ministers Council’s Resolution No. 1072
"On uniform norms of depreciation for complete recovery of national economy of the USSR" dd. 22.10.1990, and for those acquired starting from 01.01.2003 -
according to the norms calculated based on the useful lives set by the Company.
Depreciation is not charged for objects under preservation for longer than three months as well as within renewal period longer than 12 months.
Accounting
(Financial)
statement
for 2020
Retirement, writing-off and disposal
Retired or disposed fixed asset items are written off from the balance sheet along with the accrued depreciation amount. The revaluation surplus amount of a retired
fixed asset item shall be transferred from additional capital to retained profit of the Company, remaining within the equity.
Any profits and expenses induced by fixed asset retirement shall be reflected in the Profit and Loss Statement for the reporting period when they were incurred as
other income and expenses.
Construction in progress
The Construction in Progress reflects the scope of construction works which the Company accepted from its contractors.
Settlements between the Company (Builder) and contractors are performed on a monthly basis according to the agreements on construction, after step-by-step
(intermediate) acceptance of the construction and installation works done. Information on value of works done contained in Forms KC-2 and KC-3 is a basis for reflection
of expenses related to construction of fixed assets. The value of works is reflected in the contract prices, also in the estimated costs according to which the settlements
of NLMK with the contractors are effected with the progressive total since the beginning of the works, the beginning of the year also including the reporting period.
2. 4 FINANCIAL INVESTMENTS
A unit of financial investment accounting is: for shares – a share; for bonds – a bond; for nominal capital contributions – interest; for certificates of deposit, notes –
series and number of a security; for loans, deposits, assignment and special partnership contracts – a contract.
Financial investments are accounted on the basis of actual acquisition costs. Debt securities for which current market value is not determined are accounted before
the retirement at original cost. Financial investments, for which the current market value is determined under the established procedure, are reflected as of the quarter
end at their current market value.
Debt securities and granted loans are not estimated in terms of discounted value. Financial investments in securities (shares, bonds), for which the current market
value is not defined, are depreciated at time of retirement upon the average acquisition cost for that type of securities.
Interests on loans granted and other similar agreements are accrued as of the month end.
In order to show the impairment of the Company’s financial investments a provision for their impairment is set up calculated according to the method summarizing
information on cost reduction factors and signs of depreciation. If there are signs of impairment of financial investments for which market value is not defined, as of
the end of reporting year the Company generates a provision amounting to the excess of book value of such investments over their estimated value determined based
on the information available to the Company.
Short- term deposits placed for a period not exceeding 3 months, are classified as cash equivalents and reported as part of other cash assets.
2. 5 INVENTORIES
Evaluation of inventories acquired at a charge, as of the end of the reporting period is done at actual costs. In the reporting period accounting is carried out at book
prices, determined when first assigning a nomenclature number. When materials arrive, their cost is determined based on the price specified in the delivery order on
the basis of a contract or other data. Subsequently actual first cost of materials based on the data for the period preceding the previous period is used as accounting
price of the acquired materials. Entry of materials purchased is accounted using control accounts 15 “Procurement and acquisition of tangible assets” and 16 “Deviation
of tangible assets cost”. In the end of a reporting period, any deviations of the actual cost of materials from their cost of acquisition are written off pro rata the value
of materials consumed in the reporting period at book prices to accounting accounts in accordance with the purposes of materials usage and to account 10 “Materials"
for the adjustment of its balance by the amount of deviations related to the unused materials balance.
Inventories received without settlement documents of suppliers are recorded as non-invoiced deliveries at book prices.
17
Notes
Accounting
(Financial)
statement
for 2020
When tangible assets are released into production or otherwise retire they are valued within the reporting period at book prices with subsequent writing off of
deviations of actual cost from the book prices to the relevant accounts at the end of the reporting period. When materials are written off, their evaluative calculation
includes their quantity and cost as per the nomenclature number as of the beginning of the month, and also all incomings during the month.
Finished products are valued as of the end of the reporting period at actual costs for each product type, which is formed by the cost of finished product balances as of
the beginning of the reporting period and the first cost of the reporting period.
Within the reporting period, finished products accounting is carried out on the basis of book prices without application of account 40 “Product (works, services)
output”. Actual first cost of the finished products upon the data of the reporting period before the last one is used as a book price.
Difference between actual first cost and book price of the finished goods is charged to a separate subaccount of account 43 “Finished goods” broken down to product
types.
Finished goods are written off at book prices when dispatched. At the same time deviations related to finished goods sold are written off to sales accounts pro rata
their quantity. Deviations related to the balance of finished goods are written off from deviations subaccount to finished goods subaccounts at the end of the reporting
period, when actual calculation is formed, by product type for the purpose of determination of actual first cost.
Work-in-progress as of the reporting period end is valued on the basis of the actual first cost generated based on work-in-progress value as of the period beginning
and production costs of the reporting period. The order-by-order calculation of work-in-progress is evaluated on the basis of actual costs.
In the balance sheet inventories, including work-in-progress, are accounted less the assessed reserves charged quarterly. The method of reserves estimation takes into
account the value of identified non-used long-term stored stocks and probable price of their sale.
2. 6 SHORT-TERM AND LONG-TERM ASSETS AND LIABILITIES
Accounts payable and receivable, including indebtedness under credits and loans, are accounted as short- term assets and liabilities, if their maturity does not exceed
12 months from the balance sheet date in accordance with contractual conditions, or if not fixed. Financial investments are classified as short- term or long- term
depending on estimated time of their use (circulation, ownership or repayment).
As of the end of a reporting period, long-term assets and liabilities are shown in the balance sheet as short-term ones when their remaining maturity (repayment
period) does not exceed 12 months from the balance sheet date.
2. 7 ADVANCE PAYMENTS MADE AGAINST NON-CURRENT ASSETS
For a more reliable accounting of information on the property status of the Company, the amounts of advances, given for capital construction, purchasing fixed asset
items and other non-current assets, are reflected in Section I of the Balance sheet in line 1190 “Other non-current assets”.
2. 8 CASH AND CASH EQUIVALENTS
Short-term deposits placed for a period not exceeding 90 days, are classified as cash equivalents and reported in the accounting (financial) statements as part of other
cash assets. Interest received on cash equivalents is accounted in cash flow statement as part of current operations.
Cash flow amount in foreign currency is converted into roubles at the official rate of this foreign currency to rouble established by the Central Bank of the Russian
Federation as of the date of the payment effecting or receipt.
In the presentation of cash flows in the cash flow statement, the following items are presented in summarized form as cash inflow (payments) in accordance with cash
flow type:
placement and refund of deposits for 3 months and up;
indirect taxes as part of cash inflow from buyers and customers, payments to suppliers and contractors and payments to / refunds from the RF budget system;
inflow from contractors as refund of payments made earlier;
currency exchange transactions;
execution and receipt of payments as refunds under earlier transactions;
Notes
18
Accounting
(Financial)
statement
for 2020
receipt and granting of loans in the framework of cash pooling.
Cash flows from current, investment and financial transactions are included in the same reporting segment identified by the type of activity.
The cash flow necessary to maintain the current Company’s business volume is included in current operations. The cash flow associated with the Company’s business
expansion is included in investment operations.
Proceeds and payments on the investment activities include cash flows related to interest-free loans granted to related parties on the grounds of the economic benefits
the Company receives from them as dividends or in any other indirect way.
2. 9 CREDITS AND LOANS
Interest payable to a lender (creditor) is recognized in the cost of an investment asset or as part of other expenses evenly over the contract validity period.
Additional borrowing costs for the received credits and loans are accounted in the balance sheet and statements in the reporting period which they belong to.
The discount on placed bonds is reflected in other expenses proportionally over the term of the loan agreement.
2. 10 ESTIMATED LIABILITIES
The Company accepts estimated liabilities for forthcoming expenses on vacation pays and on payment of bonuses to employees. In the Balance Sheet such liabilities
are reported within short-term liabilities. The procedure for such estimated liabilities accrual and their further accounting is governed by the methodologies approved
by the Company.
The necessity of recognizing other estimated liabilities is subject to consideration by the Company on the basis of the financial and economic activity.
2. 11 INCOME AND EXPENSES
Income and expenses of the Company are classified as operational and other income and expenses.
Sales proceeds are defined as of transfer date of title for products, goods, results of works, services rendered (for charge) on the basis of settlement documents
presented to buyers (customers).
Production costs of products (works, services) sold domestically or exported are defined by straight-line calculation on the basis of types of products and their actual
costs.
Expenses related to the sales of products (services, works) and general expenses are recognized in full in costs of products (services, works) sold in the reporting period
as operational expenses.
Expenses for licenses, certificates are included into the cost of goods manufactured (works, services) on a monthly basis by equal amounts during their validity.
Actual expenses related to routine and major repairs are recognized as current period expenses upon repairs completion.
Income generated from granting of assets, rights, arising out of patents for inventions, industrial models and other kinds of intellectual property for temporary use
and possession subject to payment, from holding shares in nominal capitals of other organizations, interests received from granting organization’s monetary funds for
use, and other income from securities not related to the organization’s core activity is attributed to other income.
The Company generates provisions for inventory impairment, shortage and losses from tangible assets impairment, for financial investment depreciation, provisions
for bad debts. Accrual of evaluation reserves is effected on the account of other expenses.
2. 12 TAXES
Income tax
Accounting and taxable profit are defined according to current legislative requirements of the Russian Federation using different methods of assessment.
The current profit tax is calculated based on the income tax return.
Every month, the Company calculates deferred tax assets, deferred tax liabilities, deferred income tax, expenses (income) on income tax, contingent expenses (income)
on income tax, permanent tax expenses (income).
Notes
19
Accounting
(Financial)
statement
for 2020
Deferred tax assets and liabilities are shown in the balance sheet as non-current assets and long-term liabilities, respectively.
CTG’s consolidated taxation base shall be defined as arithmetic sum of the profits of all CTG participants decreased by the arithmetic sum of all CTG participants’
expenses taking into account the provisions of the Tax Code of the Russian Federation.
Settlements with participants in respect of CTG’s income tax are included in other receivables (line 1230 "Accounts Receivable") and other payables (line 1520
"Accounts Payable").
The Company states individually calculated income tax in line 2411 "Current income tax" of the Profit and Loss statement.
The due share of savings on CTG’s operating results is shown in the Profit and Loss statement in line 2465 "Redistribution of income tax of the consolidated group of
taxpayers". Cash flows of CTG members are reflected within the cash flows from current operations of the Cash Flow Statement.
Land tax
The Company pays land tax since it has property right to industrial area land. The Company pays rent for the rest of the land used.
2. 13 ASSETS, LIABILITIES AND OPERATIONS IN FOREIGN CURRENCY
For accounting items in foreign currencies, the official exchange rate of a foreign currency to the Russian ruble as of the date of operation is used.
In order to prepare accounting (financial) statements, funds on bank accounts (bank deposits), cash and payment documents, securities (except for the shares),
accounts receivable including for borrowing liabilities (except for granted and received advance payments and down-payments, prepayments) expressed in foreign
currency are recalculated into rubles at the exchange rate valid for the reporting date.
Exchange rate differences are shown in the balance sheet as part of other income and expenses separately from other kinds of income and expenses including financial
results from operations with foreign currency during the period they occurred in.
Exchange rates of foreign currencies to Russian ruble set by the RF Central Bank:
Foreign currency
USD 1
EUR 1
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
73.8757
90.6824
61.9057
69.3406
(RUB)
69.4706
79.4605
2. 14 INFORMATION BY SEGMENTS
The Company owns assets only in the territory of the Russian Federation and is a sole integrated facility for the production and sale of ferrous products.
The Company identifies reporting segments based on the activity type. Key indicators: proceeds from sale of products, financial result (profit or loss). The information
on assets and liabilities within a reporting segment is not disclosed, because for the Company as a whole the segment share in the production and sales is exceeding.
Besides the key indicators, proceeds from sales by product types, the share of proceeds from export sales are disclosed additionally.
Reporting segment information is stated using the same valuation techniques as used for the presentation of similar figures in the Company’s financial statements
taken as a whole.
Besides, the Company discloses segment information in its consolidated financial statements in line with the International Financial Reporting Standards (IFRS), where
the Company is included in the Russia Strip Segment without further subdivision by product types.
2. 15 CHANGES IN ACCOUNTING POLICY
The Company applied changes in RAS 18/02 “Corporate income tax accounting” in the preparation of the accounting (financial) statements for 2020. The changes
resulted in an adjustment of the amount of accrued and settled deferred tax assets (DTA) and deferred tax liabilities (DTL) for 2019 (lines 2450 and 2430) in the Profit
Notes
20
Accounting
(Financial)
statement
for 2020
and Loss Statement. Starting from 2020, changes in the deferred tax assets and liabilities have been shown in a summarized form in line 2412 “Deferred income tax”.
Appropriate adjustments have been made in the comparative data, included in the accounting (financial) statements for 2020.
No significant changes have been made to the accounting policy.
2. 16 COMPARATIVE DATA
In these accounting (financial) statements the comparative data have been derived by carrying over the respective reporting parameters for the previous reporting
period, excluding reclassification of other cash flow proceeds and payments from current operations. The changes made do not significantly affect the Company's
reporting, however, they improve its understanding.
Description
Cash flow from current operations
payments to suppliers (contractors) for feedstock, materials, works and
services
other payments
Line code
before adjustment
adjustment
(RUB k)
after adjustment
4121
4129
(307,353,266)
(11,308,310)
(1,141,180)
1,141,180
(308,494,446)
(10,167,129)
Notes
21
3. DISCLOSURE OF SIGNIFICANT INDICATORS
3. 1 INTANGIBLE ASSETS
Availability of intangible assets
Accounting
(Financial)
statement
for 2020
Description
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
l
e
u
a
v
l
a
n
i
g
i
r
O
n
o
i
t
a
i
c
e
r
p
e
D
l
n
o
i
t
a
u
a
v
e
c
n
a
a
B
l
l
e
u
a
v
l
a
n
i
g
i
r
O
n
o
i
t
a
i
c
e
r
p
e
D
l
n
o
i
t
a
u
a
v
e
c
n
a
a
B
l
l
e
u
a
v
l
a
n
i
g
i
r
O
n
o
i
t
a
i
c
e
r
p
e
D
l
n
o
i
t
a
u
a
v
e
c
n
a
a
B
l
Groups of intangible assets – total
1,484,837
(122,511)
1,362,326
1,790,481 (118,767)
1,671,714 1,748,155
(122,539)
1,625,616
including:
research and development
software and data bases
trademarks and service marks
original works of entertainment books
or art
other intellectual property items
Costs for purchase of intangible assets
Total
For reference:
intangible assets, created by the
organization itself
intangible assets with fully repaid value
36,939
(16,467)
20,472
36,739
(15,180)
21,559
35,584
(12,766)
22,818
1,445,529
275
(103,692)
(258)
1,341,837
17
1,751,019 (100,903)
(590)
629
1,650,116 1,709,844
629
39
(107,111)
(565)
1,602,733
64
2,069
(2,069)
--
2,069
(2,069)
--
2,073
(2,072)
1
25
Х
Х
(25)
Х
Х
--
39,086
1,401,412
25
Х
Х
(25)
Х
Х
--
35,922
1,707,636
25
Х
Х
(25)
Х
Х
--
40,625
1,666,241
31,574
99,925
(13,358)
(99,925)
18,216
--
31,373
100,030
(12,399)
(100,030)
18,974
--
30,219
105,659
(10,313)
(105,659)
19,906
--
There are no intangible assets with undetermined useful life.
Notes
22
3. 2 FIXED ASSETS AND CONSTRUCTION IN PROGRESS
Availability of fixed assets and capital investments in progress
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
Accounting
(Financial)
statement
for 2020
Description
Fixed assets
Buildings
Structures
Machinery and equipment including
household equipment and other
items
Vehicles
Cultivated resources of plant origin
Land lots and land improvement
expenses
Total
For reference:
the cost of real estate objects,
received for use and undergoing
state registration.
cost of leased out main assets
Capital investments in progress
Facilities construction1
Acquisition of objects
Equipment to be installed
Materials and spare parts for
construction and installation works
Total
l
e
u
a
v
l
a
n
i
g
i
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n
o
i
t
a
i
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B
l
38,348,838
50,437,539
(13,151,761)
(19,998,962)
25,197,077
30,438,577
35,773,855
35,227,726
(11,882,138)
(17,784,886)
23,891,717
17,442,840
33,764,420
33,432,076
(10,895,534)
(16,559,848)
22,868,886
16,872,228
209,651,315 (125,674,284)
(3,085,900)
(592)
6,745,323
1,370
83,977,031
3,659,423
778
186,947,935
5,318,957
1,370
(114,806,928)
(2,768,108)
(553)
72,141,007 156,284,039
4,600,444
1,370
2,550,849
817
(104,631,896)
(2,599,971)
(513)
51,652,143
2,000,473
857
1,345,426
306,529,812
1,345,426
(161,911,500) 144,618,312 264,615,269
1,345,426
--
1,343,370
(147,242,613) 117,372,656 229,425,719
1,345,426
--
--
(134,687,762)
1,343,370
94,737,957
8,727,773
2,971,177
х
(1,327,340)
х
1,643,837
6,122,476
1,513,213
х
(938,194)
х
575,019
4,655,283
1,523,186
Х
(880,753)
Х
642,433
Х
х
х
х
х
х
х
х
х
х
36,969,565
972,912
5,471,515
4,703,920
48,117,912
Х
х
х
х
х
х
х
х
х
х
37,429,523
850,685
6,809,043
3,314,924
48,404,175
Х
Х
Х
Х
Х
Х
Х
Х
Х
Х
32,910,122
304,607
8,259,617
3,101,964
44,576,310
1The largest constructions in progress as of 31.12.2020 are construction of a set of stoves, revamping of BF-4 and BF-6 complex.
Notes
23
Fixed assets flow (initial value)
Description
For 2020
For 2019
Acquired1
Retired
Acquired
Retired
(RUB k)
Accounting
(Financial)
statement
for 2020
(38,455)
(182,389)
2,613,438
15,392,203
Buildings
Structures
Machinery and equipment including household equipment
and other items
Vehicles
Land lots and land improvements expenses
Total
For reference:
The increase of the objects’ value due to additional
construction, installation of additional equipment,
reconstruction
the decrease of the objects’ value as a result of partial
liquidation
1 Major assets commissioned within the reporting year are the assets acquired within the frames of NLMK Investment Programme, please see the details at www.nlmk.com.
(2,274,488)
(66,926)
--
(2,562,258)
24,977,868
1,493,291
--
44,476,800
31,992,646
825,786
2,056
36,784,947
2,036,819
1,927,640
12,789,716
3,320,403
(25,901)
--
--
Depreciation of the retired fixed assets amounted to RUB 1,810,003 thou. over 2020 and RUB 1,512,831 thou. over 2019.
(27,384)
(131,990)
(1,328,750)
(107,273)
--
(1,595,397)
(55,680)
(RUB k)
Non-depreciable fixed assets
Description
Land plots
Facilities under preservation
Housing facilities
Total
As of 31.12.2020
Original value
As of 31.12.2019
As of 31.12.2018
1,345,426
693,299
17,541
2,056,266
1,345,426
694,231
17,541
2,057,198
1,343,369
704,708
17,541
2,065,618
As of 31.12.2020 the Company rents fixed assets (including land lots) for the amount of RUB 4,249,662,000, as of 31.12.2019 – RUB 4,267,248,000, as of 31.12.2018
– RUB 4,792,233,000 (off-balance sheet price under lease agreements). The Company rents land lots with the total area of 2,369 thousand square meters. The land
lots rented are located in Lipetsk and Lipetsk Region.
Notes
24
3. 3 FINANCIAL INVESTMENTS
Availability of financial investments
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
Accounting
(Financial)
statement
for 2020
Description
l
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l
a
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o
f
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o
i
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p
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a
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i
t
a
u
a
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l
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u
a
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f
n
o
i
s
i
v
o
r
P
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a
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c
n
a
n
i
f
t
n
e
m
t
s
e
v
n
i
t
n
e
m
r
i
a
p
m
i
e
c
n
a
a
B
l
n
o
i
t
a
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a
v
l
Long-term financial
investments - total
Investments in charter capitals
of other entities
of which:
NLMK Overseas Holdings
NLMK Kaluga
Stoilensky
Altai Koks
VIZ Steel
Uralvtorchermet
NLMK Metalware
Zhernovsky-1 Mining &
Concentration Complex
Usinsky-3 Mining &
Concentration Complex
Loans granted
Other financial investments
Short-term financial
investments - total
Loans granted
of which:
NLMK Kaluga
Deposits
Total
233,837,396
(64,162,595)
169,674,801
209,619,174
(51,395,677)
158,223,497
189,469,630
(11,660,431)
177,809,199
233,339,221
(63,712,684)
169,626,537
209,128,494
(50,945,128)
158,183,366
189,017,696
(11,225,918)
177,791,778
116,234,843
39,185,090
21,196,293
18,477,302
14,754,878
12,901,320
4,196,960
(43,770,000)
(7,218,000)
--
--
--
(12,459,329)
--
72,464,843
31,967,090
21,196,293
18,477,302
14,754,878
441,991
4,196,960
90,362,843
39,185,090
21,196,293
18,477,302
14,754,878
12,901,320
4,196,960
(30,900,000)
(7,218,000)
--
--
--
(11,225,918)
--
59,462,843
31,967,090
21,196,293
18,477,302
14,754,878
1,675,402
4,196,960
70,362,843
39,185,090
21,196293
18,477,302
14,754,878
12,901,320
4,196,960
--
--
--
--
--
(11,225,918)
--
70,362,843
39,185,090
21,196293
18,477,302
14,754,878
1,675,402
4,196,960
2,772,287
(265,355)
2,506,932
2,772,287
--
2,772,287
2,772,287
--
2,772,287
-
48,264
449,911
-
(449,911)
-
48,264
--
1,624,717
40,131
450,549
(1,601,210)
--
(450,549)
23,507
40,131
--
1,624,717
15,971
435,963
--
--
(434,513)
1,624,717
15,971
1,450
10,606,000
62,580
(1,000)
(1,000)
10,605,000
61,580
9,482,811
12,926
(1,000)
(1,000)
9,481,811
11,926
2,498,606
2,497,950
(1,000)
(1,000)
2,497,606
2,496,950
-
10,543,420
244,443,396
-
-
(64,163,595)
10,543,420
180,279,801
--
9,469,885
219,101,985
--
--
(51,396,677)
--
9,469,885
167,705,308
2,489,342
656
191,968,236
--
--
(11,661,431)
2,489,342
656
180,306,805
As of 31.12.2020, 31.12.2019 and 31.12.2018 there were no financial investments for which the current market value was to be determined.
Notes
25
Financial investments flow
In April 2020, Usinsky-3 Mining & Concentration Complex Usinsky-3 was liquidated, the cost of the retired financial asset is RUB 1,624,717,000. Due to the retirement
of financial asset Usinsky-3 Mining & Concentration Complex Usinsky-3, the earlier accrued provision in the amount of RUB 1,601,210,000 was recovered.
In July, Novolipetsk Printing House was liquidated, the cost of the retired financial asset is RUB 36,556,000. Due to the retirement of financial asset Novolipetsk Printing
House, the earlier accrued provision in the amount of RUB 36,556,000 was recovered.
In order to increase net assets of LLC NLMK Overseas Holdings the Company in 2020 made a contribution into its assets in cash in the amount of RUB 14,871,000,000
by offsetting the Company’s cash claims under the interest-free loans granted in the amount of RUB 11,001,000,000 (in 2019: a contribution into the assets by offsetting
the Company’s cash claims under the interest-free loans granted in the amount of RUB 20,000,000,000) recognizing it as financial investments in accordance with
clause 7 of RAS 1/2008 “Accounting Policy of an Organization”.
Accounting
(Financial)
statement
for 2020
The Company granted loans to its related parties.
Impairment of financial investments
Based on the results of an impairment test for investments in NLMK Overseas Holdings LLC, a reserve provision in the amount RUR, 12,870,000 thousand was accrued
in the reporting year.
In Uralvtorchermet in the amount of RUR 1,233,411,000, in Zhernovsky-1 Mining & Concentration Complex Zhernovsky-1 in the amount of RUR 265,355,000.
Notes
26
Income from financial investments
Description
Income from short-term deposits (from 3 months up to 1 year)
Dividends from subsidiaries
Interests on loans granted
Total
Accounting
(Financial)
statement
for 2020
Income, RUB k
For 2020
For 2019
101,191
48,980,386
3,988
49,085,565
227,510
72,099,211
13,229
72,339,950
3. 4 INVENTORIES
Structure of inventories
Type of stock
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
s
t
s
o
c
n
o
i
t
c
u
d
o
r
P
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o
f
s
n
o
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P
y
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o
t
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v
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i
t
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e
m
r
i
a
p
m
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c
n
a
a
B
l
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o
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a
u
a
v
l
s
t
s
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n
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i
t
c
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d
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r
P
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o
f
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i
s
i
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r
P
y
r
o
t
n
e
v
n
i
t
n
e
m
r
i
a
p
m
i
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
s
t
s
o
c
n
o
i
t
c
u
d
o
r
P
r
o
f
s
n
o
i
s
i
v
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r
P
y
r
o
t
n
e
v
n
i
t
n
e
m
r
i
a
p
m
i
(RUB k)
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
Raw and other materials, other
similar valuables
WIP costs
Finished products and goods for
reselling
Goods shipped
Deferred expenses
Total
28,456,170
13,430,094
(1,908,513)
(346,073)
26,547,657
13,084,021
30,949,980
11,181,845
(1,909,124)
(358,371)
29,040,856
10,823,474
31,278,579
11,277,562
(1,981,883)
(277,791)
29,296,696
10,999,771
8,553,718
8,841,876
231,997
59,513,855
--
--
--
(2,254,586)
8,553,718
8,841,876
231,997
57,259,269
8,208,828
7,439,395
163,232
57,943,280
--
--
--
(2,267,495)
8,208,828
7,439,395
163,232
55,675,785
8,367,664
12,269,445
177,871
63,371,121
--
--
--
(2,259,674)
8,367,664
12,269,445
177,871
61,111,447
Inventories to be sold to buyers instead of further processing are accounted in finished products.
Notes
27
3. 5 ACCOUNTS RECEIVABLE AND PAYABLE
3. 5. 1 Accounts Receivable
Structure of accounts receivable
Accounting
(Financial)
statement
for 2020
Type of debt
Long-term accounts
receivable - total
including:
settlements with buyers and
customers
advance payments made1 -
total
including:
under current operations
for non-current assets3
other
Short- term accounts
receivable - total
including:
settlements with buyers and
customers
advance payments made -
total
including:
under current operations
for non-current assets3
other
Total
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
r
e
p
s
a
d
e
t
n
u
o
c
c
A
t
c
a
r
t
n
o
C
e
h
t
s
m
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e
t
t
b
e
d
d
a
B
n
o
i
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i
v
o
r
p
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c
n
a
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B
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n
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i
t
a
u
a
v
l
r
e
p
s
a
d
e
t
n
u
o
c
c
A
t
c
a
r
t
n
o
C
e
h
t
s
m
r
e
t
t
b
e
d
d
a
B
n
o
i
s
i
v
o
r
p
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
r
e
p
s
a
d
e
t
n
u
o
c
c
A
t
c
a
r
t
n
o
C
e
h
t
s
m
r
e
t
t
b
e
d
d
a
B
n
o
i
s
i
v
o
r
p
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
(RUB k)
12,101,872
--
12,101,872
60,988,431
--
60,988,431
5,598,831
--
198,000
103,481
94,519
11,903,872
--
--
--
--
--
--
--
198,000
1,400,653
103,481
94,519
11,903,872
77,664
1,322,989
59,587,778
--
--
--
--
--
--
--
1,400,653
716,043
77,664
1,322,989
59,587,778
79,796
636,247
4,882,788
--
--
--
--
--
--
5,598,831
--
716,043
79,796
636,247
4,882,788
83,802,923
(9,076,373)
74,726,550
64,729,561
(8,438,509)
56,291,052
136,396,105
(8,617,504)
127,778,601
13,952,510
(193,290)
13,759,220
13,189,398
(169,846)
13,019,552
8,662,779
(396,393)
8,266,386
12,202,196
(594,771)
11,607,425
8,754,720
(142,353)
8,612,367
9,941,378
(177,281)
9,764,097
3,979,338
(593,453)
3,385,885
2,512,790
(141,035)
8,222,858
(1,318)
8,221,540
6,241,930
(1,318)
2,371,755
6,240,612
3,532,430
(175,963)
6,408,948
(1,318)
3,356,467
6,407,630
57,648,217
95,904,795
(8,288,312)2
(9,076,373)
49,359,905
86,828,422
42,785,443
125,717,992
(8,126,310)2
(8,438,509)
34,659,133
117,279,483
117,791,948
141,994,936
(8,043,830)2
(8,617,504)
109,748,118
133,377,432
1 Here and hereafter the advance payments made are shown VAT included.
2 There were no significant changes in the structure and composition of the provisions. Including the provision for Stalkonstruktsiya Concern in the amount of RUB 2,046,892,000, to N. Maksimov in the
amount of RUB 5,583,697,000.
3 Advance payments, given for the purposes of capital construction, purchase of fixed assets and other non-current assets, reflected in line 1190 “Other non-current assets” of the balance sheet.
Notes
28
Accounting
(Financial)
statement
for 2020
Other debtors
Type of debt
Other long-term receivables– total
including:
settlements with personnel on other operations
interest-free loans granted
interest-free loan to NLMK Overseas Holdings LLC
interest on long-term financial investments
Other short-term receivables- total
including:
interest-free loans granted
of which
interest-free loan to NLMK Overseas Holdings LLC
received non-interest bearing notes
settlements on interest accrued
calculations of assignment of claims
including:
debt related to claim assignment transactions
NLMK Overseas Holdings LLC
settlements with budget and off-budget funds in terms of taxes and duties
budget settlements on VAT
settlements with customs
claim settlements
settlements with CTG participants
settlements related to reimbursable services
lease settlements
settlements with personnel on salaries and other operations
settlements with reporting persons
settlements related to dividends
interest-free loans granted (cash pooling)
other
Total
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
11,903,872
59,587,778
4,882,788
(RUB k)
217,012
3,113,758
--
8,573,1022
49,359,905
257,209
48,003,296
45,736,6593
11,327,2732
34,659,133
296,044
2,400,492
--
2,186,252
109,748,118
476,186
1,923,308
66,961,937
32,483,3813
1,300,862
1,976,378
--
--
25,525
5,883,978
333,429
201,728
1,468,309
36,772
83,288
11,944
18,165
--
4,554,889
505,071
61,263,777
--
1,822,526
167,459
--
--
43,310
5,762,672
321,288
133,519
238,902
31,913
15,942
6,723
60,324
22,155,942
1,776,782
198,523
94,246,911
64,636,685
1,766,000
10,266,0861
9,594,590
9,594,590
39,545
6,872,621
483,163
153,754
1,092,704
33,178
36,746
2,390
20,578
5,550,034
6,615,627
259,165
114,630,906
1 Including the interest on NLMK Ural’s loan as of 31.12.2018 in the amount of RUB 10,181,855,000 maturing in 2019.
2 Including the interest on NLMK Ural’s long-term loan as of 31.12.2019 in the amount of RUB 8,483,517,000 maturing on 31.12.2022 (as of 31.12.2019 in the amount of RUB 10,181,855,000 maturing in 2022,
1,145,380 maturing in 2021).
3 Interest-free loan as of 31.12.2020 maturing on 31.12.2021, (as of 31.12.2019 maturing on 31.12.2021).
Notes
29
Overdue accounts receivable
Type of debt
Total
including:
settlements with buyers and
customers
advance payments made - total
including:
under current operations
other
3. 5. 2 Accounts payable
Structure of accounts payable
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
Accounted for
by the Contract
terms
Book
value
Accounted for
by the Contract
terms
Book
value
Accounted for
by the Contract
terms
(RUB k)
Book
value
3,307,793
1,863,327
2,481,211
1,674,609
2,407,029
1,421,432
915,518
1,543,518
1,543,518
848,757
722,228
950,065
950,065
191,034
1,277,607
574,710
1,107,761
433,675
574,710
628,894
433,675
133,173
1,256,149
566,669
566,669
584,211
859,756
390,706
390,706
170,970
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
Type of debt
Long-term accounts payable - total
including:
settlements with suppliers and contractors
Short-term accounts payable - total
including:
advances received1
suppliers and contractors
settlements related to payables to employees
settlements related to taxes and duties
settlements related to debt to state off-budget funds
debt to shareholders in terms of dividends
other
Total
--
385,320
--
100,325,861
48,468,030
37,913,965
1,027,276
3,676,872
665,696
7,862,227
711,795
100,325,861
385,320
86,497,982
31,556,300
31,356,508
962,781
1,777,048
655,058
19,666,723
523,564
86,883,302
1 Hereinafter advance payments received from buyers and customers are indicated net of VAT to be paid to the budget.
15,510
15,510
118,357,751
45,586,665
32,537,043
834,152
1,986,221
615,138
36,475,355
323,177
118,373,261
30
Accounting
(Financial)
statement
for 2020
Notes
Accounting
(Financial)
statement
for 2020
Overdue accounts payable
Description
Total
including:
settlements with suppliers and contractors
advance payments received
other
3. 6 CASH AND CASH EQUIVALENTS
Description
Settlement accounts
Currency accounts
Deposits (up to 3 months)
Other cash equivalents
of which: financial documents
Total
Other income and payments from current operations
Description
Other income from current operations
Income from litigation, claims
Interest on cash equivalents
Remuneration under the program of Depositary Receipts
Purchase - sale of currency
Other income
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
7,190,579
7,108,975
39,250
42,354
6,226,536
5,454,612
716,298
55,626
7,419,724
4,328,335
3,060,404
30,985
(RUB k)
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
1,325,552
21,293,916
23,871,338
968,110
155
47,458,916
478,934
14,948,889
11,203,786
5,191
191
26,636,800
2,869,096
17,510,928
39,954,627
5,084
52
60,339,735
(RUB k)
For 2020
For 2019
1,426,375
547,892
213,950
198,769
301,700
164,064
1,447,510
607,295
363,027
169,143
--
308,045
Notes
31
Accounting
(Financial)
statement
for 2020
Description
Other payments under the current operations
Tax payments
Including VAT
Other settlements with personnel
Settlements with various creditors
Settlements related to claims
Charity expenses
Settlements with the pension fund
Purchase - sale of currency
Other remittance
For 2020
(10,225,281)
(6,498,130)
(4,911,932)
(888,324)
(120,054)
(649,068)
(565,935)
--
(1,422,866)
(80,904)
End
For 2019
(10,167,129)
(7,626,361)
(6,091,005)
(901,270)
(337,171)
(691,442)
(273,359)
(85,833)
(197,162)
(54,531)
Within the cash flows of current operations under line 4124 “Corporate income tax”, CTG participants’ cash transfers to the Company as well as CGT income tax
payments to the budget have been shown in summarized form.
Other inpayments from investment activitie
Description
Other payments on investment activities
Placement of deposits for a period of over 3 months and up to one year
Refund of deposits from over 3 months to one year
Other payments on investment activities
For 2020
For 2019
(RUB k)
(874,258)
,(61,119,611)
60,388,183
(142,831)
(10,677,957)
(57,156,471)
46,590,471
(111,957)
As part of other payments under financial transactions, there is reflection of cash flow for the transfer of tax withheld when paying dividends in the amount of RUB
5,107,316 thou. (in 2019 - RUB 5,832,550 thou.).
Notes
32
Cash flows with Subsidiaries and Affiliates (including VAT)
Accounting
(Financial)
statement
for 2020
Description
Cash flow from current operations
Subsidiarys
Other companies1
of which:
NLMK Trading SA
Cash flow from investment operations
Subsidiaries3
Cash flow from financial operations
Subsidiarys
Other companies1
Total
Inflow
Payments
For 2020
For 2019
For 2020
For 2019
(RUB k)
248,547,963
16,301,199
232,246,764
232,241,959
72,005,750
72,005,750
30,819,672
2,487,494
28,332,179
351,373,386
206,560,874
15,781,524
190,779,350
190,774,184
72,835,139
72,835,139
22,382,637
22,382,637
--
301,778,650
(175,906,552)
(174,909,862)
(996,960)
(996,960)
(19,192,070)
(19,192,070)2
(17,246,710)
(509,999)
(16,736,711)
(212,345,332)
(159,016,858)
(158,622,747)
(394,111)
(294,795)
(4,124,018)
(4,124,018)
(1,760,622)
--
(1,760,622)
(164,901,498)
1 Cash flows of NLMK Trading SA, Novexco (Cyprus) Limited, NLMK DanSteel A/S.
2 Including a contribution to the property of LLC NLMK Overseas Holdings LLC in order to increase net assets in the amount of RUB 14,871,000,000 reflected under line 4222 “related to acquisition of stock
(shares) in other companies” of the Cash Flow Statement.
3 Receipt and granting of loans in the framework of cash pooling were reflected in summarized form.
3. 7 CAPITAL AND DIVIDENDS
Description
Authorized capital
Reserve capital
Paid in capital– total
including:
revaluation of fixed assets
other sources
Retained profit (loss)
Total
Notes
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
5,993,227
299,661
4,031,261
3,259,484
771,777
245,414,209
255,738,358
5,993,227
299,661
4,047,584
3,275,807
771,777
289,131,900
299,472,372
5,993,227
299,661
4,062,599
3,290,822
771,777
325,751,607
336,107,094
33
Company`s shares
As of 31.12.2020 the authorized capital is paid up in full and consists of 5,993,227,240 common shares at par value 1 ruble each.
Shareholders holding more than 5% of the nominal capital
Accounting
(Financial)
statement
for 2020
Description
FLETCHER GROUP HOLDINGS LIMITED
As of 31.12.2020
Share, %
As of 31.12.2019
As of 31.12.2018
79.25
81
84
Other free-floating shares (including: global depositary shares traded on London Stock Exchange (Deutsche Bank Trust Company Americas is NLMK’s depositary
bank) and shares traded on Moscow Stock Exchange.
Earnings per share
Description
Net profit for the reporting period, RUB k
Weighted average number of outstanding common shares, pcs.
Basic profit (loss) per share, RUB
For 2020
For 2019
61,125,114
5,993,227,240
10.20
83,420,072
5,993,227,240
13.92
Diluted profit per share was not calculated due to absence of factors, having the diluting effect on the basic profit per share indicator.
Dividends
The Annual General Shareholders’ Meeting held on 29.05.2020 approved payment of dividends in the amount of RUB 17.36 per common stock upon 2019 performance
results that made in total RUB 104,042,556,000 with account of interim dividends of RUB 85,343,556,000 accrued in 2019.
In 2020 the following interim dividends were declared: 3.21 ruble per common stock for Q1 which made RUB 19,238,259,000; 4.75 ruble per common stock for H1
which made RUB 28,47,829 thou.; 6.43 ruble per common stock for 9 months which made RUB 38,536,450 thou.
As of 31.12.2020 the dividends for 2019, Q1 and H1 of 2020, accrued to the main company running business, are paid in full.
Detailed information on the dividend structure and dividend policy is published on the Company's web-site (http://www.nlmk.com)
Notes
34
Accounting
(Financial)
statement
for 2020
3. 8 CREDITS AND LOANS
Structure of credits and loans
Type of liabilities
Long-term liabilities– total
including:
loans
credits
Short-term liabilities– total
including:
loans
of which:
NLMK Trading SA
Loans under cash-pooling agreement
of which:
Stoilensky
Altai Koks
NLMK Trade House
NLMK Kaluga
Novolipetsk Steel Service Center
SMT NLMK
credits
Total
Bank credits
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
152,793,410
105,703,843
84,066,622
(RUB k)
125,588,690
27,204,720
43,916,850
11,899,989
11,236,646
32,014,750
24,739,612
3,189,836
1,422,305
647,373
600,000
428,906
2,111
196,710,260
105,703,843
--
30,406,203
84,066,622
--
21,823,828
814,132
12,763,225
--
29,497,258
22,081,120
1,453,136
99,552
2,745,339
382,712
312,476
94,813
136,110,046
--
7,099,572
2,426,330
--
107,872
--
289,879
266,334
1,961,031
105,890,450
As of 31.12.2020, 31.12.2019 and 31.12.2018 the Company signed agreements with ALFA-BANK, Sberbank and VTB Bank on the opening of the credit facilities with
the limit not exceeding RUB 85,000,000,000, for working capital financing and for other corporate purposes. Unused credit limit for all the credit facility agreements
makes RUB 57,795,280,000.
Bank credits
Lender description
Deutsche Bank AG1
ALFA-BANK
Other credit institutions
Total bank credits, incl. interest accrued
including:
with maturity up to 1 year, incl. current portion of long-term credits
1 This loan was obtained from a syndicate of banks, the agent bank is specified as the creditor here.
Notes
Maturity
As of 31.12.2020
2019
2022
2020
--
27,206,831
--
27,206,831
As of
31.12.2019
--
--
94,813
94,813
(RUB k)
As of
31.12.2018
1,960,905
--
126
1,961,031
2,111
94,813
1,961,031
35
Accounting
(Financial)
statement
for 2020
Loans
Lender name
Steel Funding DAC (Eurobonds)2
Subsidiaries and other related parties
of which: interest-free loans
Loans under cash-pooling
of which: interest-free loans
Total loans, incl. interest accrued
including:
with maturity up to 1 year, incl. current portion of long-term loans
1 Including the interest accrued.
2 As of 31.12.2020 three issues of Eurobonds due in 2023-2026. The rest of the debt is a short-term debt.
As of 31.12.2020
126,252,0322
11,236,647
--
32,014,7501
30,806,250
169,503,429
As of 31.12.2019
105,795,5522
722,423
150,000
29,497,2581
25,246,398
136,015,233
(RUB k)
As of 31.12.2018
94,104,6842
2,725,163
150,000
7,099,5721
5,922,538
103,929,419
43,914,739
30,311,390
19,862,797
Detailed information on the structure and terms and conditions of the debt portfolio is published on the Company's web-site (http://www.lipetsk.nlmk.com)
3. 9 ESTIMATED LIABILITIES
Name of the estimated liability
Estimated liabilities - total
including:
on upcoming expenses for vacations
on upcoming expenses for bonuses
on unsettled court proceedings and claims
3. 10 INCOME AND EXPENSES
3. 10. 1 Income and expenses from ordinary activities
Income from ordinary activities
Description
Revenue from sales of products (services) outside the RF
Revenue from sales in the RF
Total
Notes
As of 31.12.2020
As of 31.12.2019
(RUB k)
As of 31.12.2018
4,668,379
3,870,986
7,089,626
1,917,835
2,420,994
329,550
1,667,478
1,904,749
298,759
1,536,035
5,239,128
314,463
For 2020
For 2019
228,197,950
208,881,156
437,079,106
(RUB k)
217,814,677
204,001,644
421,816,321
36
Expenses for production
Description
Material expenses - total
including: raw and other materials
fuel, energy
work and services rendered by third parties1
Labour costs
Social allocations
Depreciation
Other costs
Total by components
Balance change (increase [-], decrease [+]): construction in progress, semi-finished
products, finished products
Total expenses on ordinary activities
For reference: Expenses for capital and routine repair
1Including expenses related to the sale of products in the amount of RUB 30,089,305 thou. (over 2019– RUB 27,879,910 thou.).
For 2020
For 2019
319,928,307
223,499,492
57,088,776
39,340,039
25,449,708
7,656,094
16,297,423
12,665,125
381,996,657
-4,353,185
377,643,472
15,525,815
(RUB k)
303,071,463
208,202,825
56,913,336
37,955,302
22,717,625
7,583,720
13,983,065
9,386,301
356,742,174
4,431,141
361,173,315
16,435,159
3. 10. 2 Other income and expenses
Other income and expense
Description
Sale of foreign currency
including:
swap transactions
Exchange rate difference
The right of claim assignment
Valuation reserves
Transactions with securities
Sales of inventories
Profit and loss of previous years
Expenses on credits
Retirement of fixed assets, capital investments
Writing-off of inventories, tare, inventories from repairs
Other expenses over the Group of Companies
Charity expenses
Other
Total
For 2020
For 2019
Income
Expenses
Income
Expenses
5,262,236
6,382,322
3,200,162
3,381,428
(RUB k)
--
--
9,169,673
64,863
--
2,003,160
333,584
--
1,035,623
1,071,072
--
--
1,457,114
20,397,324
1,421,786
18,143,952
9,136,061
15,062,671
60,063
1,664,739
1,128,201
584,249
1,072,572
304,526
77,490
855,348
1,451,647
55,923,841
--
6,327,099
13,660,496
286,739
23,911
2,000,124
114,344
--
406,811
1,658,454
--
--
795,916
28,474,056
--
--
13,653,928
39,858,270
19,308
1,708,838
325,113
328,719
142,613
487,323
203,129
276,412
953,133
61,338,214
37
Accounting
(Financial)
statement
for 2020
Notes
Accounting
(Financial)
statement
for 2020
3. 11 CURRENT INCOME TAX FORMATION
Calculation of profit tax according to the requirements of RAS 18/02
Description
Book profit (loss) before tax
Contingent expenses (income) for income tax (according to accounting data)
Deferred income tax
Permanent tax expenses (income)
Current profit tax1
Taxable profit (according to the tax accounting data)
Permanent difference leading to the taxable profit increase according to the tax accounting data
Permanent difference leading to taxable profit decrease according to the tax accounting data
Taxable temporary differences
Deductible temporary differences
For 2020
67,106,712
13,421,343
50,658
(7,110,384)
6,361,617
31,808,083
15,136,579
(50,688,500)
(6,046,898)
6,300,190
(RUB k)
For 2019
95,797,959
19,159,592
(409,420)
(6,228,901)
12,521,271
62,606,356
--
(43,775,638)
(154,780)
8,042,342
1Income tax rate - 20%
Calculation of the taxation base with reference to the profit tax does not include profits in the form of dividends from participation in authorized capitals.
Taxable temporary differences are associated with differences in recognition in accounting and taxation of initial appraisal of property to be depreciated, accumulated
depreciation, depreciation premium, appraisal of construction-in-progress, WIP, semi-finished products and materials produced in-house, finished products.
The Deductible temporary differences are die to differences in recognition in accounting and taxation of deferred expenses, losses from servicing facilities and
companies, losses from sale of depreciated property, estimated liability. In 2020, deferred tax assets for provisions for inventory impairment and for doubtful debts
were recognized.
Expenses not used for taxation purposes are mainly related to the accrual of impairment of financial investments.
3. 12 INFORMATION BY SEGMENTS
The Company discloses information on a single segment based on the type of activity.
Indicator
Sales revenue, RUB k
Share of sales revenue in total proceeds, %
Total production cost, RUB k
Sales profit (loss), RUB k
Share of profit in total profit, %
Segment
Not distributed
Company as a whole
2020
435,284,110
99.59
376,699,922
58,584,188
98.57
2019
418,999,111
99.33
359,088,130
59,910,981
98.79
2020
1,794,996
0.41
943,550
851,446
1.43
2019
2,817,210
0.67
2,085,185
732,025
1.21
2020
437,079,106
100.00
377,643,472
59,435,634
100.00
2019
421,816,321
100.00
361,173,315
60,643,006
100.00
Notes
38
Accounting
(Financial)
statement
for 2020
Type of product
Pig iron
Slabs
Hot-rolled coils
Cold-rolled coils
Coated steel
Electrical Steel
Other by-products and energy resources
Total
Sales revenue
for 2020
for 2019
33,557,966
156,221,709
98,685,882
57,217,698
62,921,168
20,050,793
6,628,894
435,284,110
9,705,606
169,814,242
90,688,176
59,740,497
61,137,598
20,283,245
7,629,747
418,999,111
(RUB k)
Change
23,852,360
(13,592,533)
7,997,706
(2,522,799)
1,783,570
(232,452)
(1,000,853)
16,284,999
In the reporting year the proceeds from sales to foreign customers accounted for 52.43 % (51.98 % in 2019) of the total sales revenue in the segment.
In 2020 the share of the largest customer NLMK Trading SA (at least 10% of sales) amounted to 49.93 % (in 2019 – 48.40 %) of the Company’s sales revenue in total
(see Explanation 3.14.2)
3. 13 SECURITY OF LIABILITIES
Description
Received - total
including:
Bank guarantees for advance payment return and payment guarantees
Granted sureties
including:
Contribution liability of Steel Invest&Finance (Luxembourg) S.A.1
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
3,743,552
5,037,995
4,379,463
(RUB k)
3,743,552
124,946,058
5,037,995
76,720,020
4,379,463
72,259,568
--
1The Company is liable to provide a contribution of EUR 15,000,000 in 2021 (EUR 65,000,000 in 2020-2021) under the contract between the Company, Steel Invest & Finance (Luxembourg) S. A. and the Belgian
investment fund SOGEPA for effecting additional contributions to the authorized capital of NLMK Belgium Holdings.
1,360,236
4,507,139
As of 31.12.2020, 31.12.2019, 31.12.2018 the Company has liabilities under the surety agreements (RUB 123,230,163,000, RUB 76,289,420,000, and
RUB 71,491,738,000 accordingly) issued against related parties loans. The liabilities in accordance with the terms and conditions of the agreements will remain valid
until 2030 and will cease to exist pro rata the repayment of the loans by the related parties.
Notes
39
3. 14 INFORMATION ON RELATED PARTIES
3. 14. 1 The list of related parties1
Accounting
(Financial)
statement
for 2020
The list of related parties includes the affiliates of the Company1 in accordance with the RF legislation as well as related parties acting on other grounds.
The main business entity owning 79.25 % of the Company’s stock is FLETCHER GROUP HOLDINGS LIMITED.
The Beneficiary of the above companies in accordance with definition of this notion by the Russian legislation is Mr. Vladimir Lisin.
There are no predominant (participating) business entities.
In addition to those listed in this disclosure, the related ones are the members of the Board of Directors and the Management Board, disclosed in the General
Information.
List of NLMK’s subsidiaries and affiliates as of 31.12.2020:
Description
VIZ-Steel
NLMK Communications
Vtorchermet NLMK
Stagdok
Dolomit
Uralvtorchermet
NLMK-Metalware
NLMK Kaluga
Mining & Concentration Complex Zhernovsky-1
Altai Koks
NLMK Information Technologies
Stake in
authorized capital
as of 31.12.2020,
%
100
100
100
100
100
100
100
100
100
100
100
Description
NLMK Overseas Holdings
NLMK Trade House
Construction and Erection Trust NLMK
Stoilensky
NLMK Long Products
Novolipetsk Steel Service Center
Hotel Complex “Metallurg”
NLMK Engineering
NLMK Ural
Neptune
All the companies specified are registered in the Russian Federation.
Operations with the affiliate Neptune are insignificant and are not disclosed in the reporting and comparative period.
Stake in authorized
capital as of
31.12.2020, %
100
100
100
100
100
100
100
100
92.59
25.00
Notes
1 The complete list of the Company’s affiliates is subject to mandatory disclosure by the Issuer of issue-grade securities and is published on NLMK’s web-site (http://www.nlmk.com).
40
Accounting
(Financial)
statement
for 2020
Other related parties
Other related parties include entities belonging to the same group as the Company does, as well as organizations and their subsidiaries, which are significantly
influenced by the members of the Company’s Board of Directors and/or the Company’s management by way of voting interest ownership / participation in
management.
Other related parties with whom the Company had operations in the reporting year and/or in regards of which there are balances under settlements of operations
not completed on the reporting date
Freight One
Universalny Expeditor
Tuapse Sea Trade Port
Taganrog Sea Trade Port
Saint-Petersburg Sea Port
UNIVERSAL FORWARDING COMPANY (UFC) LIMITED
Novexco (Cyprus) Limited1
NLMK Trading SA1
NLMK DanSteel A/S1
NLMK Pennsylvania LLC1
Steel Funding DAC
VIZ-Broker
NLMK - Ural Service
Railcar Repair Company "Gryazi"
InServicePlus
Gazobeton 481
NLMK Verona SpA
NLMK Belgium Holdings S.A.
NLMK Indiana LLC
NLMK India Service Centre Pvt Ltd
Social Security Charity Fund “Miloserdiye”
Verkh-Isetsky Steel Plant
Blinovskoye
Lisya Nora
Ural Health-Center Nizhnie Sergi
Association of ferrous metallurgy enterprises “Russian Steel”
Advocate Bureau "Reznik, Gagarin & Partners", Moscow
Steel Invest & Finance (Luxembourg) S.A.
1Other affiliates controlled by Novolipetsk Steel through NLMK Overseas Holdings
PO TatVtorchermet
JSC “Vtorchermet”
JSC ChuvashVtormet
Vtorchermet NLMK Center
Vtorchermet NLMK North
Vtorchermet NLMK Siberia
Vtorchermet NLMK Western Siberia
Vtorchermet NLMK Ural
Vtorchermet NLMK Black Belt Region
Vtorchermet NLMK South
Vtorchermet NLMK East
Vtorchermet NLMK Perm
Vtorchermet NLMK West
Vtorchermet NLMK Republic
Vtorchermet NLMK Povolzhie
Vtorchermet NLMK Bashkortostan
Vtorchermet NLMK Volga
NLMK Plate Sales S.A.
NLMK La Louvière S.A.
NLMK Sales Europe S.A.
NLMK Clabecq S.A.
Novolipetsk Medical Centre Association
SC Lipetsk Metallurg
Pride Media
NLMK International B.V.1
Corporate Solutions Centre
NLMK India Coating Pvt Ltd
NLMK Strasbourg
Notes
41
Accounting
(Financial)
statement
for 2020
3. 14. 2 Operations with related parties
Operations related to individual companies are disclosed for the period of their actual inclusion into the list of related parties including VAT.
The Company makes transactions with the related parties in line with market principles.
Sales to related parties
Description
Subsidiary companies
of which:
LLC VIZ-Steel
Novolipetsk Steel Service
Center
NLMK Trade House
Other related parties
of which:
NLMK Trading SA
Total
For 2020
For 2019
Total
16,538,692
Products,
commodities
15,003,084
Inventories
Services
Rent
Total
838,395
676,690
20,523
15,146,468
Products,
commodities
13,971,688
Inventories
Services
Rent
586,710
559,204
28,866
(RUB k)
7,934,728
7,864,972
18,030
51,726
--
7,884,953
7,850,314
1,755
32,884
--
3,227,731
3,226,324
219,776,110
3,194,871
3,214,967
219,044,922
16,740
1,995
7,380
10,395
8,500
679,029
5,725
862
44,779
4,328,502
498,279
205,305,563
4,254,079
494,777
205,001,093
36,341
489
8,743
25,347
2,261
256,908
12,735
752
38,819
218,336,576
218,261,562
--
236,314,802
234,048,006
845,775
75,014
1,355,71
9
--
204,177,163
204,148,188
--
28,975
--
65,302
220,452,031
218,972,781
595,453
816,112
67,685
Purchases from other related parties
Description
Subsidiary companies
of which:
Altai Koks
Stoilensky
Vtorchermet NLMK
Other related parties
of which:
Freight One
Total
For 2020
For 2019
Total
183,130,653
Inventories
177,169,518
Services
5,950,131
Rent
11,004
Total
Inventories
162,341,960 156,688,940
Services
5,642,799
Rent
10,221
(RUB k)
36,841,163
111,021,571
26,875,164
26,236,772
36,840,972
111,021,401
26,875,164
813,509
--
--
--
25,094,358
191
170
--
328,905
39,274,837 39,274,646
94,044,024 94,043,824
21,270,732 21,270,732
23,439,610
--
--
--
726,898 22,371,316
191
200
--
341,396
20,545,571
209,367,425
--
177,983,027
20,216,866
31,044,489
328,705
339,909
19,469,632
290,051 18,838,183
185,781,570 157,415,838 28,014,115
341,396
351,617
Notes
42
Accounts receivable
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
Description
Accounting
(Financial)
statement
for 2020
Subsidiaries
of which:
NLMK-Ural
NLMK Overseas Holdings LLC
Stoilensky GOK GOK
Other related parties
of which:
Freight One
Total
Accounts payable
Description
Subsidiaries
of which:
Stoilensky GOK
Altai-Koks
Other related parties
of which:
NLMK Trading SA1
Total
1Advance payments received
t
b
e
D
t
b
e
d
d
a
B
n
o
i
s
i
v
o
r
p
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
t
b
e
D
t
b
e
d
d
a
B
n
o
i
s
i
v
o
r
p
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
t
b
e
D
t
b
e
d
d
a
B
n
o
i
s
i
v
o
r
p
e
c
n
a
a
B
l
n
o
i
t
a
u
a
v
l
12,616,669
(64,107) 12,552,562
35,451,349
(42,309) 35,409,040 29,535,768
(175,060)
29,360,708
10,517,204
--
128,560
2,710,235
(13,073) 10,504,131
--
112,145
2,433,199
--
(16,414)
(277,036)
11,376,449
--
20,098,892
1,647,721
--
(23,215) 11,353,234 12,385,445
9,594,626
5,189,590
1,927,250
--
(4,819) 20,094,073
1,561,404
(86,317)
(30,434)
--
(106,263)
(76,523)
12,355,011
9,594,626
5,083,327
1,850,727
1,652,039
15,326,904
--
1,652,039
(341,143) 14,985,761
1,423,895
37,099,070
(84,029)
1,821,481
1,339,866
(128,626) 36,970,444 31,463,018
(64,999)
(251,583)
1,756,482
31,211,435
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
15,487,965
11,014,524
11,280,261
(RUB k)
11,706,721
2,854,232
40,687,128
40,268,472
56,175,093
6,858,162
3,362,928
27,389,844
27,145,681
38,404,368
6,500,365
3,994,568
40,745,593
40,634,698
52,025,854
Notes
43
Accounting
(Financial)
statement
for 2020
Dividends received from subsidiaries
Description
Stoilensky GOK
Altai-Koks
VIZ-Steel
NLMK - Kaluga
Novolipetsk Steel Service Center
NLMK Engineering
Dolomit
NLMK-Metalware
Stagdok
Uralvtorchermet
Construction and Erection Trust NLMK
NLMK Trade House
NLMK Information Technologies
Total
For 2020
For 2019
60,033,260
4,477,590
2,250,000
2,000,000
208,000
400,368
145,279
200,000
15,166
1,250,000
100,000
--
--
71,079,663
Total amount of accrued dividends from subsidiaries is shown in cl. 3.3 of the Explanation.
Loans granted to related parties
In the reporting year the Company granted short-term and long-term loans, repayment of which is envisioned not later than by 2026:
(RUB k)
50,018,987
--
2,700,000
2,000,000
403,000
75,113
165,202
--
--
--
85,000
37,000
9,000
55,493,302
(RUB k)
Description
As of 31.12.2020
For 2019
Subsidiaries
including:
interest-free loans to NLMK Overseas Holdings LLC
Other related parties1
including:
Blinovskoye
Total
Granted
13,411,495
13,411,495
16,173
--
13,427,668
Repaid
Granted
Repaid
26,664,772
26,664,772
8,040
3,840
26,672,812
28,356,370
47,256,396
28,356,370
30,000
--
28,386,370
47,256,396
9,840
7,840
47,266,236
1 Including long-term loans in the amount of RUB 16,173 thou. (in 2019- RUB 30,000 thou.), repaid – RUB 8,040 thou. (RUB 5,840 thou. in 2019).
Notes
44
Outstanding short-term and long term loans:
Accounting
(Financial)
statement
for 2020
Borrower’s name
Subsidiaries1
including:
NLMK-Ural
NLMK Overseas Holdings
Vtorchermet NLMK
Other related parties2
Total
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
36,073,325
1,666,638
32,483,381
1,923,306
48,264
36,121,589
49,925,603
2,265,638
45,736,659
1,923,306
40,131
49,965,734
69,362,429
2,802,438
64,636,685
1,923,306
19,971
69,382,400
1 Including the interest-free loans to the subsidiaries as of 31.12.2020, 31.12.2019 and 31.12.2018 in the amount of RUB 36,073,325 thousand, RUB 49,925,603 thousand and RUB 69,362,428 thousand.
2Interest-bearing loans
The Company granted loans to the related parties under cash pooling agreement:
Borrower’s name
Subsidiaries1
including:
NLMK-Ural
Vtorchermet NLMK
NLMK - Kaluga
Stoilensky GOK
NLMK-Metalware
Other related parties2
Total 3
For 2020
For 2019
Granted
Repaid
Granted
Repaid
89,110,465
86,906,239
76,290,757
84,141,204
(RUB k)
39,795,231
36,363,513
237,428
--
6,166,619
1,215,615
90,326,080
38,580,507
36,314,456
237,428
--
5,889,692
1,192,080
88,098,319
37,554,920
22,629,103
3,914,373
--
3,952,428
911,889
77,202,646
40,228,785
21,869,227
6,403,715
2,781,383
3,952,428
914,513
85,055,717
1 Including interest-free-free loans for 2020 in the amount of RUB 88,807,626 thou. (in 2019 - RUB 72,332,695 thou.), repaid – RUB 86,653,054 thou. (RUB 77,704,717 thou. in 2019).
2 Interest-free loans.
3 Repayment and provision of loans are shown in detail.
Notes
45
Outstanding loans granted under cash pooling agreement:
Accounting
(Financial)
statement
for 2020
Borrower’s name
Subsidiaries
including:
interest-free loans
Other related parties
including:
interest-free loans
Total
Returns on loans:
Borrower’s name
Subsidiaries
Other related parties
Total
Loans granted by related parties
The Company received loans from subsidiaries and other related parties.
Lender name
Subsidiaries
including:
Uralvtorchermet
Construction and Erection Trust NLMK 1
Other related parties
including:
NLMK Trading SA1
Total 1
1 Interest-free loans
1 Including the interest accrued. No interest-free loans were granted or repaid in 2020 and 2019.
Notes
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
4,557,503
4,496,931
57,958
57,958
4,615,461
1,754,276
1,743,358
34,424
34,424
1,788,700
for 2020
For 2019
1,540
2,214
3,754
9,067,923
6,578,581
37,048
37,048
9,104,971
(RUB k)
10,718
2,163
12,881
(RUB k)
For 2020
For 2019
Received
Repaid
Received
Repaid
--
615,386
--
--
28,332,179
28,332,179
28,332,179
465,386
150,000
16,854,155
16,745,885
17,469,541
--
--
--
--
--
--
--
1,859,735
1,859,735
1,859,735
46
Lender name
Subsidiaries
including:
Stoilensky GOK
NLMK - Kaluga
Altai-Koks
NLMK Trade House
VIZ-Steel
NLMK-Metalware
Other related parties
Total 1
Interest payable:
Lender name
Subsidiaries
Other related parties
Total
For 2020
For 2019
1,233
11,920
13,153
(RUB k)
20,520
18,252
38,772
In addition, the Company received loans from subsidiaries and other related parties under cash-pooling agreement. Outstanding loans received under the cash pooling
agreement are disclosed in paragraph 3.8 of the Notes.
For 2020
For 2019
Received
221,946,070
Repaid
219,606,612
Received
198,607,578
Repaid
176,405,739
(RUB k)
102,254,294
21,723,345
7,503,549
4,420,993
14,093,576
4,780,492
363,463
176,769,202
Including interest-free loans for 2020 in the amount of RUB 186 ,263 ,186 thou. (in 2019 - RUB 171,543,389 thou.), repaid – RUB 180,667,623 thou. (in 2019 – RUB 152,219,528 thousand), repayment and
provision of loans are shown in detail.
121,909,084
24,386,383
8,956,685
4,412,674
12,476,178
4,525,860
392,319
198,999,897
116,321,866
35,528,033
24,455,233
14,294,179
11,840,426
3,797,428
557,844
220,164,456
118,980,358
33,331,167
26,191,933
15,616,931
11,290,129
3,794,365
658,084
222,604,154
Interest payable for loans received from subsidiaries under cash pooling agreement:
Lender name
Subsidiaries
Total
For 2020
For 2019
134,460
134,460
(RUB k)
166,992
166,992
47
Accounting
(Financial)
statement
for 2020
Notes
Security of liabilities
The Company stood surety for subsidiaries and other related parties:
Security granted by the Company
NLMK - Kaluga
VIZ-Steel
Stoilensky GOK
NLMK DanSteel A/S
NLMK Trading SA
VIZ-Broker
NLMK Pennsylvania LLC
NLMK-Metalware
Dolomit
NLMK Belgium Holdings S.A.
NLMK Plate Sales S.A.
NLMK Verona SpA
NLMK Strasbourg
NLMK La Louveiere SA
NLMK-Ural
Steel Invest & Finance (Luxembourg) S.A. (Explanation 3.13)
Total
Liabilities under the above securities are valid till 2030.
Operations with key management personnel
As of 31.12.2020
As of 31.12.2019
As of 31.12.2018
(RUB k)
--
358,571
4,611,729
6,895,793
85,750,040
46,011
3,193,697
--
--
6,356,020
4,940,955
6,569,461
1,245,759
3,612,273
5,513
1,360,236
124,946,058
279,189
430,600
5,872,494
5,637,077
36,783,570
--
7,247,402
--
--
3,471,162
4,884,130
7,575,435
--
--
31,822
4,507,139
76,720,020
667,144
812,997
9,137,703
7,364,511
19,891,501
50,013
12,826,077
11,248
37,461
3,973,599
7,948,875
9,538,438
--
--
--
--
72,259,567
Members of the Board of Directors and the Management Board are the top management of the Company.
Conditions and procedure for payment of remuneration and reimbursement of expenses related to the execution of the Board of Directors member’s functions, is
provided for by NLMK’s Regulations on the Board of Directors members' Remuneration (“Regulations”) approved by the General Shareholders Meeting.
Terms and procedure of remuneration payment to the members of the Management Board are determined by the contract concluded with the members on the
proposal of the Committee for Human Resources, Remuneration and Social Policy. Data for 2019 is adjusted with consideration of the actual payments in 2020.
Description
Bonuses and salaries (without estimated liabilities for upcoming expenses
for vacations)
Remunerations
Other payments3
Total
For 2020
For 2019
530,7361
167,8462
1,770
700,352
1 Bonuses to the members of the Management Board in 2020 include liabilities on their payment based on a preliminary calculation upon the reporting year performance.
2 Remuneration to the members of the Board of Directors in 2020 are determined on the basis of a preliminary calculation according to the Regulation.
(RUB k)
534,219
170,693
9,185
714,097
48
Accounting
(Financial)
statement
for 2020
Notes
3. 15 CONTINGENT LIABILITIES
Accounting
(Financial)
statement
for 2020
In the ordinary course of business the Company participates in several legal proceedings acting as a claimant or a defendant. The Company’s management believes
that its liabilities, which may arise from these proceedings, cannot have a material adverse effect on financial status and performances.
Since the Company fulfils the requirements of regulatory authorities within the framework of environment protection and takes actions aimed at improvement of
environmental situation in the region, at present there are no liabilities related to damage to the environment and its elimination.
The Russian tax law admits various interpretations and is subject to frequent changes. The Company’s Management does not rule out some possible disputes with
supervisory agencies on any transactions that took place in the reporting and previous periods, which could result in changes of performance results. Tax audits may
cover three calendar years of business immediately preceding the year of audit. Earlier periods may be subject to auditing under certain circumstances. In the Company
management’s opinion, as of 31.12.2020 the respective legal regulations have been interpreted correctly by it, and the Company’s position in terms of tax laws is going
to be stable.
3. 16 EVENTS AFTER THE REPORTING DATE
There have been no material events after December 31, 2020 till the signing date of these statements subject to disclosure herein.
Manager, NLMK
by virtue of Power of Attorney No.505-20/8 dd. 09.01.2020
Е. Morozova
10 February 2021
Notes
49