Steel surface after precision measurement
of chemical composition by spectral method
Scale 1 : 50,000
ANNUAL REPORT
2021
nlmk.com
GROUP
GROUP
“
”
WE FOSTER
AND CREATE
OPPORTUNITIES FOR LEADERSHIP
INNOVATIVE-THINKING
AMONG EMPLOYEES
NLMK Group’s 2021 Annual 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 2021 to 31 December 2021.
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 2021. GRI 102-51
GRI 102-52
Information about the Group’s financial and business activities
is disclosed in accordance with its 2021 IFRS consolidated
financial statements.
Data relating to NLMK’s operating activities and sustainability
information are presented within the scope shown in the Scope
of reporting table in the Appendix, unless otherwise indicated
in the text of the Report.
Starting from 2018 the 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
Since 2020, the company publishes its Climate Change section
in line with TCFD (Taskforce on Climate-related Financial
Disclosure) recommendations. New indicators are also provided
in accordance with the SASB (Sustainability Accounting Standards
Board) and WEF’s Stakeholder Capitalism Metrics.
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, and CDP 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.
As a global steel company, NLMK Group attaches great
importance to the global agenda of sustainable development
and ESG transformation. This year, the company has
prepared its Annual Report in accordance with its vision
of innovative development: in each book, which are grouped
by ESG aspects, there are cases of innovative solutions
aimed at solving such tasks as reducing the negative
impact on the environment, digitalizing everyday operations
in production and increasing the gender diversity
of the company's top management.
Our approach to preparing reports
Scope of reporting and standards GRI 102-45
Concept
4
42
CEO Statement
2
Business review
6
Our innovations
22
Our strategy
26
Sustainability management
32
Our results
36
ENVIRONMENTAL
PROTECTION
Climate change
44
Energy efficiency
64
Environmental protection
72
CORPORATE
GOVERNANCE
Corporate governance
170
Compliance and corporate ethics
206
Operational control and risk management
212
Information for shareholders and investors
222
SOCIAL
PARTNERSHIP
Stakeholder dialogue
106
Supply chain management
112
Human Rights
118
Our employees
122
Occupational health and safety
144
Developing local communities
158
104
168
ABOUT THE REPORT
STRATEGIC REVIEW
duties on steel products, volatility
in raw material markets, and the need
for unscheduled maintenance
to debottleneck the Lipetsk site given
significant production growth. Strong
teamwork helped us meet these
challenges successfully.
We also had to be extra resilient
in the context of the ongoing COVID-19
pandemic that caused supply chain
disruptions, including with respect
to investment projects. NLMK Group
successfully overcame new outbreaks
of disease and continued implementing
programmes to aid its employees
and the regions where it operates.
Another emerging outside influence
to consider was the higher profile
of the climate agenda: Europe
and the US as well as the areas where
we operate have set ambitious goals
to reduce greenhouse gas emissions.
NLMK Group takes a responsible
attitude to climate change issues
and is making honest efforts to bring
emissions down by consistently
reducing the carbon footprint of NLMK
products. Between 2010 and 2021,
the greenhouse gas emissions from
the company's principal site in Lipetsk
decreased by 9%.
We are not stopping there: at the end
of the year, the company's Board
of Directors approved a 2030 Climate
Programme that aims at reducing
specific emissions per tonne of steel
by 10% with respect to the 2023
level. We have also developed
a roadmap for the company to become
carbon neutral by 2050 and entered
into a number of partnerships
to implement innovative decarbonization
solutions.
CEO
Statement GRI 102-14
Looking back, what’s
your take on 2021
for NLMK Group?
By 2021, we were implementing Strategy
2022 projects as planned despite
the challenges of the previous two years,
including the coronavirus pandemic.
This enabled us to achieve synergies
in a growing steel market. Thanks to high
operating efficiency, the company
delivered $7.3 billion of EBITDA improving
its EBITDA margin to 45%, which
is higher than the industry average.
Our business model has proven effective
and very flexible yet again. Vertical
integration encompassing efficient iron
ore production helped us confidently
cope with the high price volatility in 2021.
By leveraging our diversified geography
of supply, we could quickly respond
to changes in the market and to high
demand in areas with the highest price
levels, such as the USA and the EU.
Through consistent implementation
of strategic projects, we grew NLMK’s
production by 9% in 2021. We also
continued shaping the next phase
of Strategy 2030, which should ensure
the company's long-term sustainable
growth.
What challenges did you
face in 2021?
Despite the high price environment, 2021
was not an easy year. Challenges we
faced included the introduction of export
How do you plan to support
company growth in the
medium term?
We are currently focused on executing
Strategy 2022, and continue shaping
the outline of projects for the new
strategic phase at the same time.
This will be a growth strategy that
responds to the industry’s primary
challenges: decarbonization and tougher
environmental requirements, the need
to adjust the product portfolio to new
customer requirements, maintaining
the competitive advantage of low-
cost steel production, and ensuring
successful development in the face
of deglobalization and protectionism.
One of the key projects will focus
on the construction of a new mining
and smelting facility that will produce
hot-briquetted iron (HBI) at the Stoilensky
mining and beneficiation site using
a carbon-free technology which cuts
CO2 emissions in half compared
to the conventional BF/BOF process.
This manufacturing facility will be able
to achieve complete carbon neutrality
after the low-carbon hydrogen reduction
technology is scaled to industrial-level
production. The project will also consider
the most stringent environmental
requirements by leveraging the best
available technologies to minimize its
environmental impact.
What efforts
is NLMK Group making
to meet the ESG agenda?
Sustainable development issues
are incorporated into the overall
development strategy and are
an integral part of our business.
This enables the company, a UN
Global Compact participant,
to contribute to achieving sustainable
development goals.
The company's primary focus in this
area is to minimize its environmental
impact and to improve production
safety; although NLMK Group finds
other aspects of the ESG agenda
important, too. We disclose our
relevant performance metrics
in the appropriate sections of our
Annual Report.
Our efforts are evidenced
by the improvement of the company’s
standing in leading global agencies’
sustainability ratings. According
to the FTSE4Good Index,
NLMK Group outperforms 97%
of companies in the steelmaking
sector in terms of sustainable
practices. In 2021, NLMK Group
was awarded a high rating of B–
by Carbon Disclosure Project (CDP),
a leading international organization
that rates corporations based
on their environmental sustainability.
The company was also rated
among the Top 3 for environmental
transparency by the World Wildlife
Fund. The World Steel Association
(worldsteel) recognized NLMK Group
as a Sustainability Champion.
Q&A
with the CEO
Grigory Fedorishin
NLMK Group CEO
3
2
Strategic review
CEO Statement
Annual Report 2021
STRATEGIC REVIEW
Steel surface after precision measurement
of chemical composition by spectral method
Scale 1 : 50,000
CEO STATEMENT
2
BUSINESS REVIEW
6
Key performance indicators 2021
6
About the company
8
What we make
9
Our products
10
NLMK Group business model
12
Our assets
14
Where we make and market steel
20
OUR INNOVATIONS
22
Research and development
23
Digitization and IT solutions
24
Cybersecurity
25
OUR STRATEGY
26
Market review
26
Strategic priorities
28
SUSTAINABILITY MANAGEMENT
32
Sustainable development policy
32
Integrated Management System
33
Contribution to the achievement of the Sustainable
Development Goals adopted by the UN General Assembly
34
OUR RESULTS
36
Report of the Board of Directors on priority areas of activity
36
Financial overview
36
Sustainability ratings
38
Five-year highlights
39
Contacts
39
OPERATING INDICATORS
FINANCIAL PERFORMANCE GRI 102-7
PRODUCTION
SALES
Business review
Key performance indicators 2021
20.0 m t
(+8% year-on-year)
Iron ore
Flat steel
Long steel
0.7 m t
(–16% year-on-year)
10.2 m t
(–1% year-on-year)
8.5 m t
(+4% year-on-year)
2.7 m t
(+16% year-on-year)
2.7 m t
(+16% year-on-year)
1 Dividends accrued. For 2021, the 9M 2021 dividends are presented. The payment of Q4 2021 dividends will be considered by the Board of Directors
in June 2022 as part of recommendations for the Annual Meeting of Shareholders.
2017
10.1
2018
2019
2020
2021
12
10.6
9.2
16.2
2017
2.7
2018
2019
2020
2021
3.6
2.6
2.6
7.3
2017
1.3
2018
2019
2020
2021
2.0
1.5
1.1
3.3
2017
1.5
2018
2019
2020
2021
2.2
1.3
1.2
5.0
2017
26
2018
2019
2020
2021
30
24
29
45
2017
1.4
2018
2019
2020
2021
2.1
1.6
1.7
2.8
2017
0.24
2018
2019
2020
2021
0.37
0.22
0.21
0.84
2017
0.35
2018
2019
2020
2021
0.25
0.7
0.94
0.40
2017
113
2018
2019
2020
2021
104
104
158
116
Revenue, $ bn
EBITDA, $ bn
Free cash flow, $ bn
Net profit, $ bn
EBITDA margin, %
Dividends1, $ bn
Earnings per share, $
Net debt/EBITDA, x
Dividends1/FCF, %
7
6
Strategic review
Business review
Annual Report 2021
NLMK Group is the largest steelmaker
in Russia and one of the top 20 global
steel producers. The Group employs
a vertically integrated business model
from mining and primary steelmaking
to finished downstream manufacturing
to service and distribution,
and has 20 production facilities
in Russia, Europe, the US and India.
NLMK Group’s steelmaking capacity
stands at 18.7 million tonnes per
year. GRI 102-4
The company’s products are used
in a wide range of industries, including
construction, production of cars, white
and yellow goods, windmill turbines,
cargo ships and many other.
About the company
GRI 102-1
What we make
GRI 102-2
Around 40% of NLMK steel is sold
in Russia, and the rest is shipped
to customers located in more
than 70 countries. The company
is a major player in the international
steel market. For instance, it has
over 10% of the European plate market
and the global transformer steel market,
and around 20% of the global steel slabs
market.
Thanks to the self-sufficiency in key
raw materials and energy coupled
with world-class technologies used
throughout the production cycle,
NLMK has managed to become one
of the most efficient steelmakers globally.
The Group has one of the strongest
margins and balance sheets among
steelmaking companies. In 2021,
the company’s EBITDA margin
was higher the industry’s average.
Thanks to its prudent capital allocation,
NLMK has secured investment-grade
credit ratings from all major rating
agencies.
NLMK Group employs 50,600 people,
and in 2021, it received a golden award
in the Forbes Best Employers in Russia
rating, prepared together with KPMG.
The company adheres to the strict
principles of sustainable development.
It is committed to protecting
the employees’ health and well-
being, nurturing talent, treating
the environment responsibly, observing
high ethical business standards,
developing, supporting and respecting
the interests of local communities,
as well as maintaining transparency
and high quality of disclosure. NLMK’s
achievements in sustainability have
been recognized by the leading
international ESG rating agencies.
For example, as of 19 December 2021
NLMK is ranked among the Top 10
out of 140 steelmaking companies
according to Sustainalytics.
NLMK Group is a public company
listed on the Moscow Stock Exchange
and since 2005 on the London Stock
Exchange.
NLMK IS:
No. 1 steelmaker by volumes in Russia
Efficient vertical integration
Cost-efficient steelmaker
High profitability
Stable financial position
High sustainability standards
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 84% of total output, while long
steel used in construction makes up 16%
of production.
NLMK sales in 2021
NLMK sales to third parties
(with NBH)
Sales, m t
Share in total sales, %
Pig iron
0.6
4
Slabs
3.0
18
Billet
0.3
2
Plate
1.1
7
Hot-rolled flat steel
4.6
28
Cold-rolled flat steel
1.7
10
Galvanized steel
1.4
8
Pre-painted steel
0.5
3
GO steel
0.3
2
NGO steel
0.2
1
Long steel
2.6
16
Metalware
0.3
2
Total
16.6
100
High value-added products
9
8
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Business review
Annual Report 2021
OUR PRODUCTS GRI 102-7
SEMIS
COATED
STEEL
PLATE
ELECTRICAL
STEEL
HOT-ROLLED
STEEL
LONG
PRODUCTS
COLD-ROLLED
STEEL
METALWARE
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
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
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
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
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
Rebar in rods and coils,
wire rod, and sections
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
A wide range of low-
carbon metalware.
This includes wire
and secondary products,
with various coatings
and surface finishes, nails,
and fasteners
Steelmaking, pipe industry
Automotive industry, yellow
and white goods, construc-
tion, and facing materials.
• NLMK Lipetsk
• NLMK Kaluga
• NLMK Lipetsk
• NLMK Strasbourg
• Sharon Coating
Lifting and transport
equipment, offshore
wind turbines, drilling
platforms, shipbuilding,
pipelines, boilers,
and tanks for aggressive
environments (pressure,
temperature, load, etc.)
Electrical machines,
transformers,
power engineering,
and instrument making
• NLMK DanSteel
• NLMK Clabecq
• NLMK Verona
• NLMK Lipetsk
• VIZ-Steel
Pipe industry, steel
structures, shipbuilding,
machine building,
high-pressure vessels,
yellow machinery,
commercial, and residential
and infrastructure
construction
Construction
• NLMK Lipetsk
• NLMK La Louvière
• NLMK Indiana
• NLMK Pennsylvania
• NLMK Ural
• NLMK Kaluga
Automotive industry,
machine building,
pipe industry, yellow
machinery and white
goods, and commercial,
residential and infrastructure
construction
Construction
and machine building
• NLMK Lipetsk
• NLMK La Louvière
• NLMK Pennsylvania
• NLMK Metalware
SHARE OF TOTAL
SALES
DESCRIPTION
CONSUMERS
SITES
MARKET SHARE1
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 large-scale repairs at the end of 2020.
2 6% moisture.
3 Rebar market.
24%
7%
28%
10%
11%
3%
15%
2%
19%
(slabs)
10%
GO steel
Pre-painted
steel
NGO steel
Galvanized steel
100%
19%
99%
21%
11%
17%
32%
22%3
22%
EU market
Global market
Russian market
11
10
Strategic review
Business review
Annual Report 2021
Product
84% Flat steel
16% Long steel
NLMK GROUP
BUSINESS MODEL
RESOURCES
PROFIT
PROCESSES
VALUE
NLMK's unique business model allows it to minimize
expenditure on production and logistics costs while at the same
time swiftly and flexibly adapting to the changing requirements
of our end users and the situation in local sales markets.
A key factor is our ability to make the most of our strategic
advantages based on the geographical location of our asset.
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.
>5 bn t
iron ore reserves
Captive electricity generation
through utilization of blast
furnace and coke oven
off-gases
64%
of needs
Stable scrap supplies
to the Group's Russian steel-
making assets
64%
of needs
Captive coke production
100%
of needs
Stoilensky covers:
97%
of pellet needs
100%
of iron-ore concentrate
needs
MIDSTREAM
EBITDA, $ m
Mining
Steelmaking
Finished
product
Low cash
cost
Close proximity
to consumers
DISTRIBUTED
ECONOMIC VALUE
NON-DISTRIBUTED
ECONOMIC VALUE
$2,355 m
Employees
$1,010 m
Employee wages and other
payments and benefits paid
to employees
Shareholders and investors
$3,523 m
dividends paid
$43 m
commissions paid
$55 m
interests paid
to creditors
Local communities
$13 m
Community investments
$7,516 m
Operating expenses
DOWNSTREAM
14.8 m t
finished products
capacity
~80%
of captive crude
steel is processed
at the Group's rolling
facilities
Process
Region
Region
17.4 m t of steel per year
UPSTREAM
68% Russia
16% USA
16% EU
77% BOF
23% EAF
95% Russia
4% USA
1% EU
NLMK
Russia Flat
Mining
NLMK USA
NLMK
Russia Long
NBH
NLMK DanSteel
and plate sales
network
3,981
2,120
1,005
530
35
25
13
12
Strategic review
Business review
Annual Report 2021
OUR ASSETS
MINING
NLMK RUSSIA FLAT
PRODUCTION SITES
• Stoilensky
• Dolomit
• Stagdok
PRODUCTION SITES
• NLMK Lipetsk
• VIZ-Steel
• Altai-Koks
Iron ore concentrate
Crude steel1
Iron ore concentrate
Revenue
Revenue
Iron ore raw materials
Fluxes
Iron ore concentrate
Commodity pig iron
Coke2
Pellets
Slabs
Pig iron
Sinter ore
Hot-rolled steel
Steel
Limestone
Cold-rolled steel
Commodity semis
Dolomite
Galvanized steel
Pre-painted steel
GO steel
NGO steel
Finished rolled products
Sinter ore
Flat steel
Limestone
EBITDA
EBITDA
Pellets
Dolomite
Investments
Investments
OPERATIONS
• Covers the Group's demand
for raw materials
OPERATIONS
• Produces steel, including semis
for international companies, flat
products and coke
PRODUCTS
• Iron ore concentrate, pellets,
sinter ore, limestone,
and dolomite
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: NLMK Lipetsk
• External: steelmakers, road
construction, and agriculture
CONSUMERS
• Internal: international rolling
divisions
• External: construction, pipe
production, automotive industry,
machine building, white goods,
yellow machinery, power industry
and other sectors
HEADCOUNT
HEADCOUNT
6,700
30,800
2020/2021
2020/2021
PRODUCTION CAPACITY1, m t
PRODUCTION CAPACITY, m t
OUTPUT, m t
OUTPUT, m t
INTRAGROUP SALES, m t
INTRAGROUP SALES, m t
SALES TO EXTERNAL CUSTOMERS, m t
SALES TO EXTERNAL CUSTOMERS, m t
FINANCIALS, $ m
FINANCIALS, m
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 large-scale repairs in the end of 2020.
2 6% moisture.
19.3
1.2
7.6
14.2
6.5
0.4
-53%
-38%
+3%
0.3
0.5
2,150
+79%
+99%
-10%
2,120
182
11,569
+70%
2.8x
+11%
3,981
894
20.0
+8%
-4%
6.2
10.5
+6%
+14%
+11%
-20%
-6%
7.6
3.1
0.9
1.2
0.6
-59%
-3%
-3%
-10%
-1%
-10%
+2%
-10%
3.0
1.4
2.7
0.8
0.4
0.3
0.2
Supplies to NLMK Europe
2.4
-10%
5.8
-4%
+2%
+9%
+4%
-1%
13.0
7.4
13.4
6.1
15
14
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Annual Report 2021
OUR ASSETS
NLMK RUSSIA LONG
NLMK USA
PRODUCTION SITES
• NLMK Vtorchermet scrap
collecting facilities
• NLMK Ural
• NLMK Kaluga
• NLMK Metalware
PRODUCTION SITES
• NLMK Pennsylvania
• NLMK Indiana
• Sharon Coating
Steel
Revenue
Billets
Long steel
Metalware
Scrap processing
Steel
Long products
Metalware
Long products
EBITDA
Investments
OPERATIONS
• Processes scrap for the Group's
steelmaking facilities in Russia
• Produces long products
and metalware
OPERATIONS
• Produces flat steel
PRODUCTS
• Scrap, billets, rebar, wire rod,
sections, and metalware
PRODUCTS
• Hot-rolled steel, cold-rolled
steel, and galvanized steel
CONSUMERS
• Construction and machine
building
CONSUMERS
• Construction, pipe production,
automotive industry, machine
building, white goods and yellow
machinery production
HEADCOUNT
HEADCOUNT
7,700
1,100
2020/2021
PRODUCTION CAPACITY, m t
OUTPUT, m t
SALES, m t
FINANCIALS, $ m
2,848
530
38
+85%
5.7x
0%
0.3
2.4
0.3
+6%
+18%
+7%
2.6
3.1
2.4
0.3
+15%
+12%
+17%
+9%
3.4
2.8
Steel
Revenue
Steel
Flat steel
Hot-rolled steel
Galvanized steel
Cold-rolled steel
Flat products
EBITDA
Investments
2020/2021
PRODUCTION CAPACITY, m t
OUTPUT, m t
SALES, m t
FINANCIALS, $ m
0.8
2.5
1.2
0.5
0.3
+36%
+22%
+11%
3,230
1,005
69
3x
13.2x
+49%
0.7
2.1
+19%
+31%
17
16
Strategic review
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Annual Report 2021
OUR ASSETS
NLMK DANSTEEL
NBH
PRODUCTION SITES
• NLMK DanSteel
PRODUCTION SITES
• NLMK La Louvière
• NLMK Strasbourg
• NLMK Clabecq
• NLMK Verona
Steel
Steel
Flat steel
Hot-rolled steel
Plate
Coated steel
Cold-rolled steel
Flat steel
OPERATIONS
• Produces plates from semis
coming from the Lipetsk site
OPERATIONS
• Produces flat steel from slabs
coming from the Lipetsk site
and from internally produced semis
PRODUCTS
• Niche steel semis, and plates,
including Q&T
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
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
HEADCOUNT
500
1,700
2020/2021
PRODUCTION CAPACITY, m t
OUTPUT, m t
SALES, m t
SALES GEOGRAPHY
0.2
2.3
0.2
1.5
+25%
-30%
0.8
0.6
0.2
0.02
-35%
+13%
-23%
-39%
97%
of sales
in the EU countries
Plate
Plate
Plate
95%
of sales
in the EU countries
2020/2021
PRODUCTION CAPACITY, m t
OUTPUT, m t
SALES, m t
SALES GEOGRAPHY
0.6
0.6
+14%
0.6
+12%
19
18
Strategic review
Business review
Annual Report 2021
WHERE WE MAKE
AND MARKET STEEL
GRI 102-6
7.3
Russia
3.2
EU
2.3
North America
2.0
Middle East (incl. Turkey)
1.8
Other
16.6 m t
16.5
0.7
0.2
Russia
USA
Europe
Russia Flat
Russia Long
Europe
USA
14.2
6.5
2.9
2.5
3.4 0.2 0.8
18.6
12.0
2.8
Steel
Flat steel
Long steel
44
Russia
19
EU
14
USA
23
Other
Production capacity, m t
Sales1 in 2021, m t
Sale breakdown, home/export markets, %
Steel output in 2021, m t
1 With NBH.
Altai-Koks
NLMK Ural
NLMK Indiana
NLMK Kaluga
NLMK Lipetsk
Stoilensky
Upstream assets
Slab supplies from Lipetsk to NLMK USA
and NLMK Europe
BF and BOF operations
Intragroup raw material flows in Russia
Rolling assets
Sales of steel to third parties on home
and export markets
EAF
Intragroup international supplies
NLMK Verona
NLMK Vtorchermet
8.9 m t
Export market
7.3 m t
Home market
Sales
16.2 m t
0.1 m t
Export market
2.1 m t
Home market
Sales
2.2 m t
2.0 m t
Home market
Sales
2.0 m t
Sharon Coating
NLMK Pennsylvania
NLMK India
NLMK DanSteel
NLMK Clabecq
NLMK La Louvière
NLMK Strasbourg
VIZ-Steel
21
20
Strategic review
Business review
Annual Report 2021
Our
innovations
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 across
all of the company’s main business
processes: steel production, customer
service, sustainable development,
repairs, energy, logistics, procurement
and HR.
One of the formats that NLMK is actively
using to seek out new ideas is building
up partnerships with leading venture
funds, accelerators and technology
parks, and development institutions
both in Russia and abroad, such
as Internet Initiatives Development
Fund or the Centre for Scientific
and Technological Cooperation
of the Franco-Russian Chamber
of Commerce and Industry. Such
partnerships are systemic in nature,
shaping the innovation ecosystem that
unites NLMK Group with its partners.
More than 10 strategic partnership
and cooperation agreements
were signed in 2021.
In 2021, NLMK acted as an industrial
partner of the Moscow Accelerator.
The company also signed an agreement
on strategic partnership with Sber,
As a modern, high-tech company, NLMK Group
sees an indivisible link between its development
and innovation programmes. For NLMK,
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.
which envisages its participation
in the 500Global accelerator programme.
NLMK also joined the SberUnity project,
a platform to facilitate the cooperation
of major companies, start-ups
and investors. This service enables
NLMK Group to find collaborative
opportunities with technology
companies that offer innovative
solutions.
Additionally, NLMK concluded
a strategic partnership agreement
with the independent Artificial
Intelligence Laboratories Association.
The Company plans to expand its
cooperation in production process
digitalization with Internet of Things
and AI technologies.
One of NLMK’s fundamental principles
for new technology development
is to create a one-stop-shop for open
innovation. In this forum, the company
can identify the most relevant tasks
to then look for solutions. These may
involve external participants from
the innovation ecosystem. The NLMKLab
portal is used as an open channel
to create a funnel of innovation projects
(lab.nlmk.com). In 2021, the portal
received over 300 applications,
of which approximately 30 are currently
in development or being implemented.
An example of innovative technology
implementation is the Production
Robotization Project. In 2021,
the company began to introduce
industrial robotics at key production
sites to boost the efficiency of their main
and auxiliary processes and reduce
occupational health and safety risks.
In Q2 2021, an audit was conducted
at NLMK Lipetsk, jointly with major
international robotization companies,
to assess in which operations industrial
robots could potentially be effective.
The audit generated over 100
hypotheses, 30% of which were focused
on reducing risks to employee health.
In late 2021, the company founded
a robotics expertise centre and began
to pilot the first hypotheses.
NLMK sees innovation projects as a way
to develop and fulfil its team’s potential.
Any employee may participate in these
projects. To encourage initiative,
the company provides opportunities
for experimentation by simplifying
the approval processes and mechanisms
for innovation project implementation.
The open innovation format also
facilitates employees’ professional
growth: partnerships with leading
universities and venture funds open
up new sources of ideas and access
to one-of-a-kind projects.
NLMK Group is currently elaborating its
Strategy 2030, where the development
of new products and technologies
is a centerpiece. In the upcoming
strategic cycle the company will target
the following goals:
•
Increase in the portfolio of new product
development for long-term customer
requirements
•
Develop new processes
•
Develop new products
and technologies for a longer horizon
The company pays great attention
to the development of partnerships
through the format of open innovation,
actively interacts with clients - leaders
of innovations on the joint development
of products, builds a global network
to provide access to advanced scientific
and technical knowledge of the industry,
and uses external innovation tools
through trend analysis and proactive
search for ideas.
NLMK Group builds a portfolio
of products and technologies depending
on the needs of the client, the market
and business, tracking trends
and key changes, as well as analyzing
the challenges facing technologies
in order to determine in which areas
Research and development
it is necessary to find breakthrough
solutions to ensure and maintain
competitiveness in the future.
The life cycle of a project to create a new
product is based on computer modeling,
prototyping, the use of advanced
tools and techniques for examining
samples before full-scale experiments
on industrial equipment. This reduces
the cost of project implementation,
speeds up the development
and implementation of solutions,
and reduces the risks of innovation.
The corporate research and development
centre (R&D-centre) has specialized
competencies and resources
for creating digital and physical models
of new products. Over the past two
years, the company has patented
a number of process developments
for the production of innovative steel
grades, including:
•
Weatherproof steel. The key property
of this steel is that it has an oxide layer,
which makes it difficult for oxygen
to penetrate the metal and inhibits
corrosion processes
•
Nitrogen steel, which has increased
strength in extreme cold
•
Steel for hot pressing, which
becomes stronger after hot stamping
with hardening up to 1.7 GPa
The metal is used for the manufacture
of equipment for agricultural machinery
and reduces the abrasion of parts
•
Extra low-carbon high-strength
steel HC220Y with high formability
and increased strength. It is designed
for the manufacture of complex-shaped
car body parts
In addition, the company has developed
a number of innovative coatings:
an antibacterial coating based
on a combination of copper and silver
ions, which can be used in the decoration
of medical premises, as well as a thin
organic coating, a special water-based
composition that forms a polymer film
on the metal surface. When using such
a coating, corrosion resistance increases
two to four times compared to steel
products with standard coatings.
$20 m
invested in R&D
$70 m
invested in digitalization
23
22
Strategic review
Our Innovations
Annual Report 2021
The advancement of information
technology and digital solutions
is instrumental for attaining NLMK Group’s
strategic goals. Dozens of cross-functional
teams are engaged in over 200 IT projects
focused on developing digital solutions
for production sites and corporate
functions.
To promote rapid development of new
IT solutions and streamline the support
and evolution of the existing infrastructure,
the сompany created technology
platforms that rely on microservice
architecture to ensure business agility
and sustainability.
Centres of Expertise
and Technology
Centres of Expertise were established
to provide expert support
to the company’s teams and promote
the development of corporate platforms.
They accumulate knowledge about all
production, logistics and corporate IT
systems of NLMK Group, provide project
teams with required resources and focus
on the development of advanced
technology, such as machine vision
and machine learning, IIoT1 and LTE
networks, to introduce a wide range
of services that can meet the increased
requirements to safety and reliability.
New international Centres of Excellence
were established in 2021 to promote
the evolution of IT systems on a global
scale across all NLMK sites. They
enable in-house development of IT
projects and digital solutions and foster
the evolution of the partner company
ecosystem in various areas of technology.
The company introduced a Single Digital
Development Platform (SDP), a digital
environment based on a set of standard
components designed to fast-track
software development. SDP helps
streamline the development process,
promote greater interchangeability
of employees, ensure continuity
of deliverables and significantly reduce
time-to-market. In addition, it serves
as the company’s global data warehouse
(Big Data) making the data available
for digital product development.
Digitization and IT solutions
In 2021, the company continued its
work on the Data Science and Machine
Learning Platform designed for digital
product development and life cycle
management. The platform uses artificial
intelligence to design and train new
models. Integration with the DSML
platform ensures process transparency
and stability, sustainable operation
of solutions, as well as preservation
and availability of deliverables for further
improvement, which makes it an essential
part of the partner ecosystem.
Smart Manufacturing
In 2021, NLMK Group launched
the Smart Manufacturing Programme
that aims to increase the digital maturity
of the production processes along two
dimensions:
•
Promoting the autonomy
of the production chain to minimize
direct human involvement in managing
the technology and material
flows. Humans will gradually
take up new roles focused solely
on monitoring, analysis, diagnostics
and system development, which will
improve equipment performance
and reliability, as well as product
quality and operational efficiency.
Minimization of direct human
interactions with equipment
and products will further improve
labour safety
•
Boosting the adaptability
of the production chain to changes
in the order portfolio, parameters
of incoming materials, equipment
status and market conditions. Tools
designed to enhance adaptability
ensure real-time in-stream
measurement of key parameters
of materials and technology, dynamic
analysis of recipes and equipment
operation modes based
on the maximum number of influence
factors at the level of individual units
and the entire production chain
In 2021, the company developed
a portfolio and launched dozens of Smart
Manufacturing projects at the main
production stages of the Lipetsk site.
1 IIoT – Industrial Internet of Things.
The actual economic effects of the digital
solutions portfolio deployed in 2021
totalled over RUB 2 billion.
Key IT projects
In 2021, NLMK Lipetsk launched
the first solutions developed as part
of the Production Management Systems
Deployment Programme at all production
stages. The programme is based
on a digital technology platform that
enables unified access to the production
data for all projects. The projects
are focused on efficient online technology
management, operational planning
and production dispatching, automation
of reporting at the level of production
units and end-to-end management
of production efficiency and product
quality at the level of individual sites
and the entire NLMK Group. According
to the programme timeline, its main part
will be completed in 2022.
NLMK Lipetsk, VIZ-Steel
and NLMK Kaluga deployed a unique
software package that can forecast
production dates to reduce the customer
lead time and improve capacity utilization.
The Sales Services Development
Programme includes projects focused
on ensuring prompt interactions
with customers, shortening the feedback
loop and boosting loyalty. In 2021,
the Company launched an online tender
service for rare and substandard products
as part of the programme. In the very first
months of its operation, this service helped
significantly expand the active customer
base and increase sales velocity.
A series of projects aimed at evolving
the IT components of business processes
is underway. SAP ERP and SAP 4HANA,
a digital sales platform and a production
planning system will be introduced as part
of this programme.
In 2021, NLMK mobile app and NLMK
Slab Shop platform were launched.
The NLMK application is meant
to supplement the nlmk.shop online
store as well as speed up the purchase
process and make it more convenient
for customers. The NLMK Slab Shop
is an online platform for placing small
volume orders. Orders with matching
parameters are fitted into the production
schedule as a single lot.
Several new tools to enhance safety
have been adopted in production.
These tools help reduce human
involvement in hazardous operations,
improve the safety of railway and road
transportation, identify risks related
to hazardous works and, most
importantly, promote zero tolerance
to violations of industrial safety rules.
This promotes stability and sustainable
development of NLMK Group.
In 2021, the company enhanced its focus
on environmental issues. The Ecology
Information System was introduced
to collect data on the environmental
footprint of all NLMK Group sites (air,
water, soil), prepare company-wide reports
based on all available environmental
indicators, analyse measures to improve
the environment and evaluate investment
efficiency. Digital Video Analytics Service
for Atmospheric Emissions exploits
machine vision and machine learning
to analyse the sources of emissions online
and enables immediate incident response.
Project development
At the end of 2020, one of the most
significant production projects, calendar
planning and scheduling (CP&S)
was put into commercial operation.
In 2021, the Lipetsk site completely
switched to production planning based
on the planning and scheduling systems,
abandoning the previous process when
compiling shift-daily tasks, casting
and rolling planning.
The systems gives access to the entire
database of orders, similar
to a construction set, and provides
flexibility and transparency when making
decisions on available production
capacities, managing work in progress,
agreeing on deadlines for accepting
customer orders, and also guarantees
the required level of delivery discipline.
Further improvements are planned
for 2022, including the achievement
of the OTIF (On Time In Full) target.
SAP Hybris (SAP Commerce) is SAP's
technical solution used by NLMK
as a digital platform for two types
of projects: the nlmk.shop online store
and the B2B client account (direct
sales and wholesale). Also in 2021, we
improved the user interface of personal
accounts and carried out integration
with customer IT systems. A website
for the sale of slabs was launched.
The interface of the nlmk.shop
portal was significantly simplified,
EDI was introduced, and analytics
was adjusted. The plans for 2022
include expanding the functionality,
integrating with business applications
and making the application more user-
friendly.
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 team
has taken effective measures, based
on the principle of the top management’s
involvement in ensuring integrated
and centralised information security
management and risk-based approach
implemented by the Risk Assessment
and Management team.
The company conducts regular internal
audits of compliance with trade
secret and personal data processing
requirements. The maturity level
of information security processes
Cybersecurity
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 carries 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.
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.
25
24
Strategic review
Our Innovations
Annual Report 2021
96
63
57
52
33
53
2016
2017
2018
2019
2020
2021
1,761
1,155
840
728
696
559
494
477
643
534
473
487
USA
The EU
Russia
China
2020
2021
Average 2016–2019
223
160
167
80
124
108
Coking coal,
FOB Australia
Iron ore, 62% Fe,
CFR China
2020
2021
Average
2016–2020
Price trends
2021 was marked by record high
growth and volatility of raw material
markets. Iron ore price moved higher
by 48% year-on-year to $160/t.
While in H1 2021, the price growth
was supported by high steel production
volumes in China and limited supply from
major exporters (Brazil and Australia),
in H2 2021 price went down due to steel
output restrictions in China.
Export price for Australian coking coal
rose by 80% year-on-year to $223/t.
This was underpinned by several
factors: global steel output growth,
coking coal deficit in China amid strict
safety control measures for coal assets,
and rising energy prices. With China
maintaining the ban for Australian coal
imports, the rebalance of coking coal
market occurred: China increased
import volumes from the US, Russia
and Mongolia, while Australia raised
exports to India, Japan and the EU.
In Q4 2021, the deficit in coking coal
market started to improve which
was followed by price stabilization.
Flat steel prices in the US surged
by 2.6x year-on-year reaching local
maximum in September 2021 then
the quotes stabilized. Steel prices
in the EU improved by 2.1x year-on-
year, but since July 2021 prices shifted
to downward phase. Dollar-denominated
prices for uncoated flat steel in Russia
were up by 81% year-on-year.
Our strategy
Market review
2021 became the year of recovery
for steel markets. Acceleration
of economic activity following
the softening of pandemic restrictions
and strong government support
contributed to steel consumption
growth. In H1 2021, the deficit persisted
amid pent up demand and capacity
restarts lagging behind, this resulted
in price surges. In H2 2021, markets
shifted to stabilization. Recovered
steel production and exhausted pent
up demand effect led to inventory
replenishment to pre-pandemic level.
Global steel output increased
by 4% year-on-year to 1.9 billion tonnes
in 2021. Steel producers in all regions
grew steel output supported by firm
demand and improved profitability,
steel capacity utilization rate reached
82% (+4 p.p. year-on-year) on average.
Steel production in China decreased
by 2% year-on-year amid state
measures to control air pollutant
emissions. Apparent steel demand
in China went down by 4% year-on-year
to 1 billion tonnes driven by deceleration
of activity in infrastructure and residential
construction as well as stricter
government regulation. At the same
time steel net exports increased by 57%
to 53 million tonnes.
US market
Steel production in the US moved higher
by 18% year-on-year to 86 million tonnes.
Average capacity utilization rate reached
82% exceeding pre-pandemic level.
In 2021, demand for steel products
increased by 24% year-on-year
to 107 million tonnes following
social assistance programmes that
boosted consumption of durable
goods and government stimulus
for infrastructure construction projects.
The volume of steel imports
improved by 47% year-on-year
to 29 million tonnes, exports –
by 22% year-on-year to 8 million tonnes.
EU market
The output of steel increased
by 13% year-on-year to 157 million
tonnes. The demand improved in all
steel consuming segments due
to realization of pent up demand
and government support programmes.
At the beginning of the year, capacity
utilization rates recovered to pre-crisis
level and reached 72% on average
in 2021.
Apparent steel demand in the EU
increased by 14% year-on-year
to 167 million tonnes. Import volumes
of flat and long steel grew by 31%
to 29 million tonnes, exports –
by 32% year-on-year to 19 million tonnes.
Russian market
Steel output in Russia increased
by 6% year-on-year and reached
76 million tonnes.
Apparent steel demand was estimated
at 46 million tonnes (+4% year-on-year)
in 2021. The growth of consumption
was driven by state support of residential
and infrastructure construction through
preferential mortgage and national
projects implementation. Production
growth in machinery (+10% year-on-
year) and mining (+5% year-on-year)
was another positive driver.
Finished steel exports were up
9% year-on-year, reaching
31 million tonnes in 2021 supported
by firm demand in the key export
markets. The volume of steel
imports declined by 8% year-on-year
to 5 million tonnes.
Global steel output, bn t
1.63
1.73
1.81
1.87
1.88
1.95
2016
2017
2018
2019
2020
2021
Steel output by region, %
South
America
Middle East
Russia
Other
countries
Northern
America
The EU
Asia
(w/o China)
China
2
2
4
4
6
8
19
55
Source: Worldsteel
Net steel exports from China, m t
Hot-rolled coil prices, EXW, $/t
Global raw material prices, $/t
Sources: Bloomberg, Worldsteel, Eurofer, Metall Expert. Data are preliminary
Source: Bloomberg
Source: Bloomberg
27
26
Strategic review
Our strategy
Annual Report 2021
Strategic priorities
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 billion
to EBITDA.
0.57
Operational
efficiency
0.68
Investments
0.45
World class sales
portfolio
0.3
Growth in low-cost
steel production
0.5
Leadership in efficiency
$1.25 bn
$1.25 bn
By strategic goals
By tools
Key elements of Strategy 2022
Strategy in action
The total effect from Strategy 2022
projects implementation reached
$340 million in 2021. This result takes
into account Group’s structural growth
and positive market conditions.
1. Leadership in efficiency
2. Growth in low-cost steel
production
3. World-class sales
portfolio
4. Leadership in
sustainability and safety
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
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:
$0.5 billion
Target structural EBITDA gain:
$0.3 billion
Target structural EBITDA gain:
$0.45 billion
Capex over the strategic
period: $0.05 billion
Capex over the strategic
period: $1.0 billion
Capex over the strategic
period: $1.1 billion
Operational
efficiency
Investment
Effects
2021
179
161
340
96
Russia Flat products
41
Russia Long products
34
Mining
8
International companies
$179 m
EBITDA gains in 2021, $ m
EBITDA gains by segment
in 2021, $ m
Operational efficiency
Development in the area of operational
efficiency implies continuous process
at all production stages. The effect from
implementation of operational efficiency
projects reached $179 million in 2021
exceeding the target level of $100 million
per year. EBITDA growth was driven
by improved productivity and cost
reduction at Russia Flat and Russia Long
segments.
In 2021, controlled effect from slab cash
cost reduction amounted to $36 per
tonne compared to 2018 level, which
enabled NLMK Group to maintain leading
position relative to other global steel
producers.
Thanks to NLMK Production System
the number of initiatives submitted
by staff increased by more than 3.5 times
compared to 2018.
Investments
NLMK Group continues to implement
the project of low-cost production
growth. Additional effect on EBITDA
reached $161 million in 2021.
•
By the end of 2020 the main stages
of the programme to increase
steel output by 1 million tonnes
to 14.2 million tonnes at the Lipetsk site
were completed. In 2021, the effects
of the projects made a significant
contribution to achieving target EBITDA
growth
– Overhaul of blast furnace
operations. The capacity of BF-6
increased to 3.4 million tonnes
(+8%). The furnace was equipped
with an advanced automated
control system with built-in artificial
intelligence components.
Installation of new air treatment
systems at BF-4 and BF-6 enables
the capture of 99.9% of dust
particles
– Overhaul of steelmaking equipment.
Continuous Casting Machine
No. 9 (CCM-9) was upgraded
in BOF Shop No. 2. The unit’s
capacity increased by 80%
to 1.8 million tonnes. The project
enables the production of slabs
up to 400 mm thickness and up
to 2,800 mm width to be used
for plate production
– Overhaul of CCM-9 along
with BOF-2 and BOF-3 expanded
the capacity of BOF Shop No. 2
to 10 million tonnes (+15%). Off-
gases of these units will be used
at a new captive power plant
for energy generation
•
Commissioning of a new coal
stamping plant at Altai-Koks
with a capacity of 1.1 million tonnes
of coke per year. The introduction
of stamping technology improves coke
quality, reduces the cost of production
and improves the environmental
footprint of production
•
The launch of the new 300MW off-gas
power plant is scheduled for 2023.
The plant will enable increasing
the share of captive energy generation
from 65% to 95% in the site’s energy
consumption balance, and reducing
its carbon oxide (CO) emissions
by 3,000 tonnes per year and its
greenhouse gas (CO2) emissions
by 650,000 tonnes per year
The expansion of steel capacities
enables an increase in the output
of high value-added products. As a part
of Strategy 2022, NLMK Group
is actively implementing projects
focused on strengthening its presence
in the premium steel segment.
The main project gains are expected
in 2022–2023:
•
The launch of a new hot-dip
galvanizing line No. 5 (HDGL-5)
at the Lipetsk site is planned
for 2022. The unit’s capacity
is 450,000 tonnes of high-quality
coated steel, which is used
in the construction, automotive,
and white goods segments
•
The new GO steel plant construction
in India is expected to be completed
in 2022. The new site’s capacity
is 64,000 tonnes of GO steel, which
will provide an opportunity to increase
NLMK Group’s share in Indian
electrical steel market. The second
stage of the project provides
for the upgrade of existing GO steel
capacities at VIZ-Steel in Russia
29
28
Strategic review
Our strategy
Annual Report 2021
•
HSM upgrade at NLMK La Louvière
is implemented in two phases.
The first one was completed in 2021,
the end of the second phase
is scheduled for H2 2022. The project
will increase the rolling capacity
of the mill from 1.7 to 2.0 million
tonnes, as well as expand sales
portfolio with high-strength steel
products.
•
Launch of production of rolled steel
with zinc-alum-magnesium (ZAM)
coating at NLMK Strasbourg. The new
coating makes rolled products three
times more resistant to corrosion,
as compared to zinc, and also
protects steel from cracking during
mechanical treatment due to its high
ductility.
•
Commissioning of an accelerated
cooling system and a new reheating
furnace at NLMK DanSteel.
The projects will increase production
capacity from 570,000 tonnes
to 740,000 tonnes of rolled products
and enable the production of plates
with improved strength properties.
The projects were completed
at the end of 2021.
Leadership
in sustainability and safety
Leadership in sustainability and safety
remains a priority for NLMK Group,
focusing on:
•
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 LTIFR 0.5 for our own employees
and contractors
•
High level of social protection
and employee engagement
For more details on the forth block
of Strategy 2022, see the Environmental
Protection and Operational Health
and Safety sections.
(Environmental Programme 2030).
The programme is aimed at improving
air quality, including reducing dust
emissions, creating completely closed
water-loop systems and maximizing
the return of secondary raw
materials in the production (see
the Environmental Protection section
for more details).
Strategy 2030
In 2021, NLMK Group continued
elaborating its next strategic development
cycle, Strategy 2030.
Over the planning horizon to 2030
NLMK Group’s is faced with a challenge
to maintain competitive cash cost
in the face of stricter environmental
requirements, as well as to improve
the quality of the product portfolio
based on long-term consumer
and technology trends. One of the central
projects of the future strategy will
be the construction of a new metals
and mining facility at the Stoilensky Mining
and Beneficiation plant.
The project, titled Green Horizon, is based
on the most advanced and environmentally
friendly technologies, and encompasses
the development of several production
stages and mastering a new product
for the company, hot-briquetted iron (HBI).
The project covers the expansion
of the existing open-pit mine to increase
iron ore output from 43 million
tonnes to 67 million tonnes per year,
the construction of new beneficiation
capacities for a total of 10 million
tonnes of concentrate, a pelletizing
plant with a capacity of 9 million tonnes
of pellets, and an HBI shop with a capacity
of 2.5 million tonnes of HBI.
The new facility will be built with the strictest
environmental norms in mind. It will
employ the best available technologies
ensuring that the environmental impact
of production is minimized: gas purification
systems, a closed loop water system, reuse
of waste, conveyor transport in the open-pit
mine, etc.
The HBI technology cuts CO2 emissions
in half compared to the conventional
BF-BOF process. Going forward, it
is possible to transfer the technology
to “green” hydrogen and low-carbon
energy (for example, nuclear). Thus,
zero greenhouse gas emissions can
be achieved on the long-term horizon
(for more information, see the Climate
Change section).
Much attention in the Strategy 2030
will be given to the environment: all
new projects are based on the best
available solutions in the field of resource
saving and environmental protection
1 LTIFR – Lost Time Injury Frequency Rate.
HOT BRIQUETTED IRON (HBI)
Hot briquetted iron (HBI) is a product with an iron content of more than 90%,
obtained by briquetting direct reduced iron (DRI), which makes it convenient
for transportation, processing and storage. DRI, also called sponge iron,
is produced by direct reduction of iron ore (in the form of lumps, pellets or fines)
to iron using a reducing gas derived from natural gas.
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Strategic review
Our strategy
Annual Report 2021
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.
NLMK Group’s values GRI 102-16
Value
Description
Continuous improvement
of processes
Continuous improvement of processes and technologies to ensure the sustainable
production of steel products that help improve the quality of life
Client-oriented approach
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
In 2019, NLMK’s Board of Directors
approved the company's Sustainable
Development Policy. The 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 Director (see
the Sustainability Agenda Management
at the Board of Directors Level section for
more details).
Sustainable development policy
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.
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.
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
Integrated Management System
•
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
web-site.
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32
Strategic review
Sustainability management
Annual Report 2021
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, supporting local communities, and ensuring
safe and decent working conditions.
Field of activity
NLMK Group's contribution
UN Goal
Key facts and figures
Environmental protection
• Water resources
• Emission
into the atmosphere
• Rational use
of natural resources
• Biodiversity
• Implementing a series of measures
aimed at improving energy efficiency
and the efficiency of resource use
and reducing the environmental
footprint of operations
• Introducing water recycling systems
• Implementing water treatment
technologies
• Reducing water withdrawal
• Recycling ferrous scrap
• Monitoring the state of biodiversity
and developing programmes
to prevent and reduce negative
impacts
97%
share of reused water
99%
share of reused recyclables
$339 m
invested in operating and investment
projects with environmental effect in 2021
over $2 bn
invested in environmental activities
since 2000
Ensuring the health and well-being of employees and communities
• Occupational health
and industrial safety
• Our employees
• Development
of local
communities
• 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
• Rolling out COVID-19 vaccination
campaign for employees
• Upgrading equipment and improving
technology in order to minimize their
negative impact on human health
and the environment
$860 m
invested in fight against COVID-19
$46.4 m
invested in the development of safe
production
RUB 0.9 bn
invested in external social programmes
Field of activity
NLMK Group's contribution
UN Goal
Key facts and figures
Fighting climate change
• Climate change
• Energy efficiency
• Implementing a set of measures
to reduce specific greenhouse gas
emissions
• Sales of products that enable lower
emissions on the consumer side
• International cooperation in the field
of combating climate change
• Improving energy efficiency
• Transitioning to captive energy
generation
• Consuming energy from secondary
sources
–15%
reduction in specific emissions per tonne
of Fe in 2010 – 2021
77.2%
share of captive electricity generation
on secondary fuel gases
A long-term programme to achieve
carbon neutrality has been developed
Development of employees and regions of presence
• Our employees
• Human rights
• Development
of local
communities
• Interaction
with suppliers
and contractors
• Implementing training
and development programmes
to enhance employees’ professional
skills
• Implementing external social
programmes aimed to support
education in the regions where
the company operates
• Interacting with educational institutions
in order to improve the quality
of educational programmes
• Creating jobs in the regions where
NLMK Group operates
• Creating equal opportunities for high-
performance work, professional
growth and tapping on the creative
potential of each employee
of the Group
• Updating Supplier Code of 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
RUB 3,654 m
invested in personnel training
and development
2.9 m
man-hours of training
>900
jobs
created in 2021
Partnership and ethical business conduct
• Interaction
with suppliers
and contractors
• Compliance
and corporate
ethics
• Countering corruption and fraud
and preventing conflicts of interest
• Updating the Code of Corporate
Ethics and Anti-Corruption Policy
• Creating and continuously improving
efficient corporate governance
practices
• Creating and developing a system
of government relations
• Openly interacting with stakeholders
and informing stakeholders about
the company’s positive and negative
impacts
• Supporting sustainability
initiatives implemented by Russian
and international industry
organizations
• Promoting sustainable development
practices when interacting
with stakeholders
• Strengthening partnerships with other
companies in the industry
NLMK's compliance hotline
was awarded the maximum
score based on the results
of the Transparency International – R
assessment
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Strategic review
Sustainability management
Annual Report 2021
Our results
Report of the Board of Directors
on priority areas of activity
Group’s steel production increased
by 10% year-on-year to 17.4 million
tonnes in 2021 as a result of BF and BOF
overhaul completion at the Lipetsk site
and production growth at Russia Long
Products and NLMK USA.
Steel production growth and increase
in key markets consumption contributed
to the achievement of 16.8 million tonnes
(–4% year-on-year) of sales. At the same
time intragroup slab sales moved higher
by 1 million tonnes as slab supplies
to NLMK USA grew amid strong steel
demand in the region. Sales of semi-
products to third parties decreased
by 20% year-on-year as slab supplies
to NLMK USA and NLMK DanSteel
grew. Slab shipments to NBH stood
at 1.7 million tonnes (–19% year-on-
year) due to the upgrade of the NLMK
La Louvière hot strip mill in H1 2021.
Sales of finished products grew
by 6% year-on-year to 11.2 million tonnes.
Sales in NLMK’s ‘home’ markets
increased by 6% year-on-year
to 11.4 million tonnes as steel
consumption in Russia and the US grew.
Steel exports were down by 22% year-on-
year to 5.2 million tonnes due to the high
baseline of 2020, when supplies
were redirected to export markets.
Segment results
Steel output at Russia Flat products grew
by 9% year-on-year to 13.4 million tonnes
following the overhaul at NLMK Lipetsk
steelmaking operations in Q1–Q3 2020
and at NLMK Lipetsk BF operations
in H2 2020. Sales in the Segment totalled
13.2 million tonnes (–1% year-on-year)
due to longer average slab lead time
following the recovery of slab shipments
to NLMK USA, slab stock growth
due to structural production increase
and finished steel stock normalization from
the low base of the end of 2020 formed
amid high demand in the Russian market.
Sales of finished rolled products
decreased by 3% year-on-year
to 5.9 million tonnes due to planned
repairs of the equipment in H1 2021.
Sales of semi-finished products to third
parties went down by 22% year-on-
year to 3.6 million tonnes due mainly
to an increase in intragroup slab
shipments in 2021. Sales of semi-finished
products to the Group sites and to NBH
grew by 36% year-on-year to 3.7 million
tonnes following the recovery of slab
shipments to the USA.
Sales of Russia Long products
grew by 15% year-on-year
to 3.1 million tonnes driven by growth
of demand in the construction sector
and recognition of export shipments
made at the end of 2020. The Russian
market accounted for 73% (+7 p.p. year-
on-year). The volume of steel product
sales in Russia increased by 27% year-
on-year to 2.2 million tonnes. Export
sales went down by 7% year-on-year
to 0.8 million tonnes.
NLMK USA sales grew by +27% year-
on-year to 2.0 million tonnes following
the recovery of steel demand in the USA.
The volume of NLMK DanSteel
sales increased by 12% year-on-
year to 0.6 million tonnes following
the recovery of demand for steel
in the EU.
Iron ore raw material output increased
by 8% year-on-year to 20.0 million
tonnes amid the expansion
of the concentrate production capacity.
Iron ore raw material sales increased
by 7% year-on-year to 19.8 million
tonnes following output growth.
Financial overview
Financial results
Revenue
Revenue increased by 75% year-on-year
to $16.2 billion due to higher sales prices
on all key markets, which was partially
offset by the decrease in sales
to external markets as slab supplies
were redistributed to NLMK USA.
The Russian market share of 41%
remained flat year-on-year. Driven
by record demand growth on developed
markets in 2021, the share of the USA
in revenue stood at 21% (+6 p.p. year-on-
year), and the share of the EU was 18%
(+1 p.p. year-on-year), as the share
on Asian markets decreased
EBITDA1
EBITDA grew by a factor of 2.7 year-on-
year to $7.3 billion due to the widening
price spreads and improved sales
mix, as well as the implementation
of Strategy 2022 projects.
Commercial expenses increased
by 5% year-on-year to $884 million due
to an increase in tariffs for steel product
transportation. General and administrative
expenses increased by 28% year-on-year
to $443 million amid the creation of long-
term incentive programme reserves
and annual salary indexation at NLMK’s
Russian companies.
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.
Debt management
Total debt of NLMK Group decreased
to $3.4 billion.
Net debt increased by 17% year-on-
year to $2.9 billion due to increased
investment and dividend payment.
Net debt/EBITDA went down to 0.40х.
Revenue from semi-finished product sales
grew by 42% year-on-year to $3.8 billion
amid an increase in average prices,
which was partially offset by increased
intra-group slab supplies. The share
of semi-finished products in total revenue
decreased by 5 p.p. year-on-year to 24%.
Revenue from finished product sales
increased by 94% year-on-year
to $11.3 billion. The share of finished
products in the revenue totalled 70%
(+7 p.p. year-on-year).
Net profit
Net profit in 12M 2021 increased
by a factor of 4.1 year-on-year
to $5.0 billion.
Free cash flow
Free cash flow increased by a factor
of 2.9 year-on-year to $3.3 billion, driven
mainly by EBITDA growth.
Cash outflow for working capital
replenishment totalled $1.4 million due to:
•
–$819 million: an increase in accounts
receivable amid growing steel product
prices
•
–$1,285 million: higher prices of raw
material and finished product stocks
•
+$677 million: higher accounts payable
due to increased coal prices.
Investment
The Group’s investment in 12M 2021
totalled $1.2 billion (+8% year-on-year)
in line with the forecast.
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Strategic review
Our results
Annual Report 2021
Indicator
Stakeholder group
2017
2018
2019
2020
2021
Generated direct economic value
10,104
12,069
10,573
9,279
16,209
Revenue
Wide range of stakeholders
10,065
12,046
10,554
9,245
16,196
Revenue from financial investments
29
21
18
18
9
Income from sale of assets
10
2
1
16
4
Distributed economic value
(9,773)
(11,565)
(10,559)
(8,625)
(13,854)
Operating expenses
Wide range of stakeholders
(6,994)
(7,967)
(6,966)
(5,628)
(7,516)
Employee wages and other
payments and benefits paid
to employees
Employees
(960)
(979)
(970)
(909)
(1,010)
Payments to providers of capital:
Shareholders and investors
(1,354)
(1,946)
(2,169)
(1,702)
(3,621)
• dividends paid
(1,285)
(1,890)
(2,120)
(1,638)
(3,523)
• interests paid to creditors
(69)
(56)
(49)
(64)
(55)
• commissions paid
–
–
(43)
Community investments
Local communities
(11)
(11)
(9)
(14)
(13)
Non-distributed economic value
331
504
14
654
2,355
Financial performance,1 $ m
2017
2018
2019
2020
2021
Revenue
10,065
12,046
10,554
9,245
16,196
Net profit2
1,450
2,238
1,339
1,236
5,036
EBITDA
2,655
3,589
2,564
2,645
7,263
EBITDA margin, %
26%
30%
24%
29%
45%
Operating cash flow
1,899
2,741
2,623
2,281
4,516
Investment
592
680
1,080
1,124
1,217
Net debt
923
891
1,786
2,495
2,924
Free cash flow
1,266
2,027
1,523
1,103
3,250
Operating performance, ‘000 t
2017
2018
2019
2020
2021
Steel output
16,850
17,285
15,531
15,667
17,191
Steel output (with NBH)
17,076
17,493
15,696
15,833
17,400
Steel product sales
16,469
17,591
17,069
17,520
16,846
Finished steel sales
10,759
10,762
11,056
10,535
11,214
Sales to home markets
10,650
10,573
11,376
10,744
11,429
Sustainability performance
2017
2018
2019
2020
2021
NLMK Group headcount, '000 people
53.2
53.4
52.8
51.9
50.6
Labour productivity, t of steel/pers., NLMK
Lipetsk
321
328
322
325
344
Specific air emissions, kg/t of steel
19.5
18.9
20.2 (18.9)3
19.8 (18.6)3
18.1
Specific CO2 emissions, t/t of steel + commercial
pig iron (Scope 1)
1.73
1.70
1.75
1.72
1.67
S&P Global
45/100 – score in 20211
The score remained above industry average (29).
SUSTAINALITICS
28.2/100 – score in 20212
The score improved to 28.2. NLMK is in the top-6 among
140 metals & mining companies analysed by the agency.
FTSE4Good
4.3/5 – score in 20211
NLMK’s assessment is higher than the industry average.
The company’s shares continue to be part of the FTSE4Good
index following the December 2021 revision.
MSCI
BBB – score in 2019–2021
(where CCC – the lowest score, ААА – the highest)
NLMK’s rating is at the industry average level.
CDP
B–/A – score in 2021
(where D– is the lowest score and A is the highest)
The company filled out the CDP Climate Change
questionnaire for the first time and received a B- rating, which
is above the industry average.
Transition Pathway Initiative
3/4 – score in 20211
The rating grew by 2 points in a year.
Generating
economic value
By implementing its activities in various
areas of sustainable development,
NLMK Group generates additional value
1 The higher the score, the better the company manages sustainability issues.
2 The lower the score, the better the company manages sustainability issues.
for its stakeholders. In 2021, the volume
of distributed economic value amounted
to $13,854 million.
Five-year highlights
1 Excluding NBH, unless otherwise specified.
2 Net profit attributable to NLMK shareholders.
3 Specific emissions without temporary factors associated with steel output reduction.
Sustainability ratings
NLMK Group's high positions in the ratings of leading international ESG agencies reflect
the efforts of NLMK Group management in the field of sustainable development.
Contacts
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
40–3, Bolshaya Ordynka St.,
Moscow, 119017 GRI 102-3
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
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Strategic review
Our results
Annual Report 2021
3D PRINTING
PARTS
OF SPARE
NLMK Lipetsk has launched a new 3D printing
centre that will be used to manufacture spare
parts for operating equipment. The project will
enable annual savings of close to RUB 200 million
on the procurement and supply of spare parts
for the Lipetsk site and other NLMK Group
companies.
Traditional casting process
Casting using 3D printed spare parts
7–15 days
5–7 days
7–50 days
1–2 days
2–4 days
1 day
7–15 days
1 day
7–15 days
3–5 days
The centre's 3D printers will manufacture
moulds for casting parts using
material jetting technology by applying
powder and gluing it with a binder.
Previously, such moulds would be made
with wooden patterns.
Digital simulation will make it possible
to manufacture shapes of any geometric
complexity and check them for defects
before casting, as well as reduce the lead
time to several hours.
Successful 3D printing tests, in particular,
with molds for casting blast-furnace
tuyeres, preceded the decision to set
up a 3D printing centre. It will start off
by producing about 150 different types
of spare parts.
m of annual
savings
RUB 200
on procurement
and operational supply
of spare parts
types of parts
150
will be produced at the first stage
hours2–4
shorter
lead time
Up to
Any geometric
complexity
NLMK
22–100
days
Drawing
CAD
drawing
Drawing
Preparation
Preparation
Production
of wooden
moulds
Production
of 3D moulds
Moulding
Moulding
Casting
Casting
Finishing
Finishing
11–16
days
Annual Report 2021
Strategic review
41
40
41
40
ENVIRONMENTAL
PROTECTION
Zinc-aluminum-magnesium coating with micro-additive
Scale 1 : 10,000
CLIMATE CHANGE
44
Our approach to managing climate issues
45
Pathway to carbon neutrality
46
Performance and targets
48
Climate-related cooperation
55
NLMK Group products advance low-carbon economy
56
Plans for 2022 and the medium term
57
Assessment of climate risks and their impact on strategy
58
Risk management
61
Scenario analysis overview
61
ENERGY EFFICIENCY
64
Our approach to managing energy efficiency
65
Certification
65
Membership and participation in organizations
65
Energy resource consumption in 2021
66
Captive electricity generation
68
Implementing energy efficiency projects
70
Optimization initiatives undertaken by NLMK Group in 2021
70
Motor fuel consumption
71
Plans for 2021 and the medium term
71
ENVIRONMENTAL PROTECTION
72
The results of two-decade efforts to reduce
environmental impact
73
Environmental management priorities
75
Monitoring, control, and compliance
79
Training
81
Certification
82
Plans for 2022–2023
82
Water resources
83
Waste handling and sound use
of natural resources
89
Atmospheric air protection
94
Ecosystem development
98
1 Fe – taking into account the iron contained in the produced steel and commercial pig iron.
Climate
change
Key 2021 figures
1.84 t
CO2-equivalent per tonne of Fe1
(Scope 1 + Scope 2) (–1% yoy)
1.89 t
of CO2-equivalent per tonne of steel
(Scope 1 + Scope 2) (–1% yoy)
–0.4 m t
of CO2 through projects implemented in 2021
(Scope 1 + Scope 2)
–1.55 m t
of СО2 through purchasing low-carbon power
Key highlights
• Climate change
• Air emissions
Key events in 2021
• NLMK Group developed a Climate Programme providing for a reduction
in specific emissions to 1.69 t CO2/t Fe by 2030 (–10% vs. 2023)
and a scenario for achieving carbon neutrality by 2050.
• The company filled out the CDP Climate Change questionnaire for the first
time and received a B- rating, which is above the industry average.
• NLMK implemented a number of investment projects aimed at reducing
the carbon intensity of its operations (achieving higher iron content in raw
materials, reducing coke consumption, and improving energy efficiency).
The full effect of the above projects will manifest itself in 2022.
• Deloitte verified CO2 emission benchmarks for NLMK Lipetsk blast furnaces
calculated according to the EU Emissions Trading System methodology,
and confirmed that NLMK is among the 10–15% companies with the best
performance in the EU.
• An in-depth assessment of the most significant climate risks
and opportunities for the company was carried out.
• Memorandums were signed with Gazpromneft and NOVATEK, including
memorandums on the development of CO2 capture, utilization and storage
projects.
• An agreement was signed with Rosenergoatom on cooperation in the field
of low-carbon electricity supply. In 2021, Rosenergoatom provided nuclear
energy to Group companies.
• NLMK Group took part in the 26th UN Climate Change Conference (COP26)
in Glasgow.
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
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.
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,
supporting measures, 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 (emission volumes avoided
due to NLMK’s products are comparable
to emission volumes from the Group’s
steel production) and attain their
decarbonization goals.
On average steel produced
by NLMK Group consists of 35%
of recycled resources such as ferrous
scrap and other materials that are climate
neutral and can significantly reduce
the company's carbon footprint. Specific
CO2 emissions from scrap steelmaking
are approximately four times lower than
from primary raw materials.
This year NLMK Group published
its second report in line
with the recommendations of the Task
Force on Climate-related Financial
Disclosures (TCFD)1.
Climate strategy priorities
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.
In the reporting period, a working group
on climate change issues was created
under the Board of Directors, which
included six of its independent members.
Meetings of the working group are held
several times a year. In 2021, three
meetings took place. The agenda
of the meetings includes such issues
as the decarbonization strategy, climate
projects, climate risks, methodology
and benchmarking, and progress towards
achieving the goals set. GRI 102-31
NLMK Group’s management devotes
particular attention to climate aspects
when considering the company’s
strategy, risk management, annual
budget, and business plans,
as well as when setting the company’s
business goals and monitoring
the implementation and efficiency
of major investments.
Our climate impact reduction targets
are determined by the Strategic Planning
Committee of the Board of Directors (see
Committees of the Board of Directors
section for more details). This issue
is considered by the committee
annually. Goals related to climate impact
minimization are assigned by the CEO
(Chairman of the Management Board)
to the functional managers of the Group,
as well as the heads of production
divisions at NLMK Group companies.
The company evaluates progress towards
achieving the goals annually. GRI 102-19
GRI 102-20
The Board of Directors working group
on climate change and the Management
Board monitor the progress
in achieving the goals and addressing
the Committee’s instructions,
and consider proposals for new tasks
and projects. Such tasks and projects
are further developed and presented
to the Committee for approval.
Targets to reduce greenhouse
gas emissions are cascaded
to the company’s executives that have
an impact on these indicators, including
the heads of the Group's key operations.
1 The Task Force on Climate-related Financial Disclosures (TCFD) was established 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.
Environmental protection
Climate change
45
44
Annual Report 2021
PATHWAY TO CARBON
NEUTRALITY
In 2021, NLMK Group approved
the Climate Programme to reduce
specific emissions to 1.69 t CO2/t Fe or
1.72 t CO2/t of steel by 2030. The key
project of the Programme is the new
metals and mining facility at Stoilensky,
Green Horizon. The project provides
a foundation for major company
transformation and paves the way
for transition to an electric arc method
of steel production based on DRI/
HBI (coke-free iron ore with a high
iron content) as feedstock. Even
with the current energy consumption
structure, the above route allows
for a twofold reduction of CO2 emissions
compared to the BF–BOF route. Going
forward, when sufficient volumes
of “green” hydrogen and technologies
of industrial recovery with this gas
become available, the decarbonization
potential of the process would
be over 90% (vs. the current levels).
Moreover, the next stage
of the company’s strategic development
includes a number of other projects
aimed at reducing the current chain’s
carbon footprint (consuming less carbon
feedstock and fuels).
NLMK Group’s business model has
a number of advantages that support
a successful transition to a new, less
carbon-intensive production chain.
The first one is the availability of a world-
class resource base, which enables
the Group to produce pellets with a high
iron content (an essential prerequisite
for DRI/HBI production, including
within the framework of the Green
Horizon project). The second one
is NLMK Group’s access to natural gas
and low-carbon nuclear electric energy.
Finally, since the Group has no coal
assets, it is motivated to reduce coal
and coke consumption.
On top of Strategy 2030, NLMK Group
has set long-term goals to reduce
specific emissions by 2050 to at least
1.2 t of CO2/t of steel (40% reduction
vs. the current level) with a full transition
to an HBI+EAF chain using the Group's
existing iron ore, as well as natural gas
and electricity from the grid at its current
level of carbon intensity.
When the industrialized hydrogen-based
iron reduction technologies (where
hydrogen is used instead of natural gas)
and a sufficient amount of low-carbon
electricity become available, the HBI+EAF
process chain will reduce the Group’s
carbon intensity to 0.2 t of CO2/t of steel
(90% reduction vs. the current base).
The remaining emissions can be reduced
through CO2 capture projects or offset
by absorption projects. Thus, when
the necessary external conditions
are met, NLMK Group aims to achieve
carbon neutrality.
NLMK Group’s long-term decarbonization
strategy implies a complete replacement
of the BF–BOF steel production chain
by 2050. The step-by step process
transition will depend on the blast furnace
capital repairs schedule and other
technological constraints. Decisions
to close blast furnaces will be made
so as to prevent over-investment
in capacity maintenance and steel
production decline.
Most countries in the world, including Russia and other countries where NLMK Group operates, have committed to reducing
CO2 emissions to zero, generally by 2050-2070. Some countries, including NLMK's key markets (EU and USA) have adopted
ambitious medium-term targets leading up to 2030. Energy transition is one of the key prerequisites for achieving carbon
neutrality in industries such as steelmaking. Given the existing and potential technologies, the CO2 reduction potential
for BF-BOF steelmaking is limited to 10–15% (excluding CCUS1) of the current levels.
Medium-term targets of specific
CO2 emission reduction
Long-term CO2 reduction goals
1
Carbon Capture, Utilization and Storage technology. Though CO2 capturing technologies are available, none of them is commercially viable for large volumes of greenhouse gases.
Such projects require significant CAPEX and OPEX.
NLMK GROUP AND ROSENERGOATOM AGREE
ON STRATEGIC PARTNERSHIP IN ENERGY
In 2021, NLMK Group and Rosenergoatom (part of the Electric Power Division
of Rosatom State Corporation), a leading Russian generation company, signed
a partnership agreement on low carbon power energy supplies.
The agreement covers the possibility of supplying low-carbon energy from
Rosenergoatom power stations to Stoilensky’s new metals and mining facility.
Increasing the share of low-carbon energy sources is one of NLMK Group’s
priority initiatives aimed at reducing the carbon intensity of production
and greenhouse gas emissions. Nuclear energy is one of the main
decarbonization tools, currently accounting for a third of global low-carbon
electricity production.
In 2021 NPPs supplied over 3 billion kWh to NLMK Group sites allowing to cut
1.55 million tonnes of CO2 Scope 2 emissions.
NLMK GROUP JOINS FORCES TO REDUCE CLIMATE
FOOTPRINT
NLMK Group and one of Russia’s largest oil companies have signed
a memorandum of cooperation to attain climate impact reduction goals.
The companies plan to jointly develop projects aimed at reducing greenhouse
gas emissions, including the development of technologies for the production,
transportation, storage, and use of hydrogen in steelmaking. As part
of the agreement, the companies will also jointly research and test carbon
capture, utilization, and storage technologies.
Reducing of specific
emissions to
1.69
t СО2 /t Fe
1.72
t CO2/ t of steel
by 2030
or
Environmental protection
Climate change
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46
Annual Report 2021
Performance and targets
1 Scope 2 emissions according to the market-based method was calculated using residual mix coefficients for electric energy purchased from the grid
and 0 coefficient for electric energy purchased under free bilateral contracts with Rosenergoatom. However it should be noted that only EU countries
regularly define residual mix data. For other countries of NLMK presence regional coefficient was used as residual mix (in line with Scope 2 GHG
Protocol Guidance).
2 A non-profit charitable organization that operates a global disclosure system for investors, companies, cities, states and regions to manage their
environmental impact, including climate impact. CDP ratings through disclosure drive companies towards sustainable transformation and are one
of the global rating systems.
3 See https://www.atsenergo.ru/results/co2 for more details.
INDEPENDENT AUDITOR VERIFIES NLMK’S GHG REPORT
International audit firm Deloitte has verified 2020 CO2 emissions data
associated with NLMK’s key transformation products (coke, sinter, pig iron,
lime, and calcined dolomite) in line with the methodology used in the EU to set
CO2 emissions quotes for Europe. Verification of the indicators provides NLMK
with a reliable benchmarking with the EU emissions trading system.
NLMK’s CO2 emissions per tonne of pig iron totaled 1.39 t of CO2/t. By way
of comparison, 10% of steelmaking companies with the lowest emissions
in the EU emit 1.36 t of CO2/t. NLMK’s performance is significantly better than
the European steelmakers’ average emissions of 1.49 t of СО2/t.
This was the first time that NLMK’s greenhouse gas emission volume
was verified in line with the EU ETS methodology. In future, NLMK plans
to confirm the data annually.
Global climate change challenges
society to reduce greenhouse gas
emissions. To that end, NLMK Group
introduces new technologies, increases
production efficiency, and monitors
and controls its emissions.
NLMK Group is constantly enhancing
the level and quality of greenhouse gas
emission disclosures.
In 2021, the Group began to use
the market-based method for quantifying
Scope 2 emissions in its internal
calculations in addition to the location-
based method. The location-based
method takes into account the average
specific greenhouse gas emissions per
power system arising from electricity
generation. The market-based method
takes into account the emissions
from electricity generation that
the company received from a specific
source, such as a specific power plant
or a group of power plants. In such
cases the emission factors take
into account the concluded energy
purchasing contracts1.
The company also works with suppliers
to obtain information about the carbon
footprint associated with the purchased
products. In 2021, the company took
part in the CDP Climate Change2 survey
for the first time, immediately receiving
a high B- rating, which is higher than
the industry average (level C).
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 IPCC 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 No. 300
of the Russian Ministry of Natural
Resources and the Environment
dd. 30 June 2015; 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.
In addition to the fact that Scope 2
emissions are now determined based
on two methods, the approach
to selecting average CO2 emission
factors for electricity purchased from
the grid for the Group's Russian sites
was changed. In 2021, the website
of the wholesale electricity market Trade
System Administrator was chosen
as the source of information3. The Trade
System Administrator has been
publishing data on the average CO2
emission factor for the First Synchronous
Zone of the United Energy System
of Russia for two years. All the Russian
sites of the Group operate in the First
Synchronous Zone. To enable proper
comparison of 2021 emissions
against previous years, emission data
for 2016–2020 were recalculated
applying the average 2020 annual
coefficient taken from the Trade System
Administrator website.
In 2022, the reductions generated
from this low-carbon energy will
be used to offset CO2 emissions from
some of the company's steel products.
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.
NLMK Group 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. The charcoal
supplied to the company is FSC certified1.
Direct and indirect energy emissions, ‘000 t of CO2-equivalent GRI 305-1 GRI 305-2
Indicator
2017
2018
2019
2020
2021
Direct GHG emissions (Scope 1)
30,740
31,232
28,601
30,036
30,436
СО2
30,665
31,158
28,531
29,964
30,365
Including from stationary sources
30,459
30,956
28,311
29,753
30,151
CH4
47
46
42
44
44
N2O
28
28
28
28
28
Indirect energy emissions (Scope 2)2, location-based
2,839
2,832
2,546
2,458
2,698
Indirect energy emissions (Scope 2)3, market-based
2,869
2,871
2,586
2,502
1,711
Total (Scope 1 + Scope 2), location-based method
33,579
34,064
31,147
32,494
33,134
including СО2 for stationary sources (location-based)
33,295
33,785
30,854
32,210
32,847
Total (Scope 1 + Scope 2) market-based
33,609
34,103
31,187
32,537
32,147
including СО2 for stationary sources (market-based)
33,325
33,824
30,893
32,253
31,860
СО2 emission from biomass combustion (for reference)
16
17
25
25
26
1 Forest Stewardship Council.
2 Emissions from fuel combustion in the production of electricity received from the external grid for the needs of the Group's sites. The calculation
was made using the location-based method: by the average weighted rates of greenhouse gas emissions produced at a certain territory (country,
region, state).
3 Emissions related to supplies of external electricity (in case of Rosenergoatom, based on free contracts of electricity sales and purchase).
GHG emissions trends (Scope 1 + Scope 2, location-based),
m t of CO2-equivalent
2017
2.8
2.8
2.5
2.5
2.7
33.6
34.1
31.1
32.5
33.1
30.7
31.2
28.6
30.0
30.4
2018
2019
2020
2021
Direct GHG emissions (Scope 1)
Indirect GHG emissions (Scope 2)
By type of activity, blast furnace operations (50%) and energy production (15%) are the largest contributors to direct greenhouse gas
emissions (Scope 1).
Environmental protection
Climate change
49
48
Annual Report 2021
1 In line with the corporate approach to setting targets on CO2 emission indicators.
2 Specific emissions excluding the transient impacts due to decreased production.
3 Specific emission per tonne of steel is still included into the report.
Direct GHG emissions by type of activity (Scope 1) in 20211, %
NLMK Group total direct and indirect energy emissions of GHG (Scope 1 + Scope 2, location-based) in 2021
by country, '000 t of CO2-equivalent
The company continues to assess 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 Group companies2. Estimated
coverage is at least 95%. For the purchased
electricity, Scope 3 included emissions
related to fuel production, processing,
and delivery, as well as losses in networks
during electricity transmission.
Upstream GHG emissions
(Scope 3), m t of CO2 equivalent
GRI 305-3
The largest part of other indirect GHG
emissions is linked to coal — 34%
of the total volume. The category
is mostly made up by methane emissions
in coal mining. Emissions under “Ferrous
metals” include sourcing of metals
for production of steel from third parties.
Other indirect GHG emissions (Scope 3) upstream along the value
chain by major category, %
Specific CO2 emissions, stationary sources1, t of CO2 eq./t
GRI 305-4
Indicator
2017
2018
2019
2020
2021
Specific direct emissions (Scope 1):
per tonne of Fe
1.75
1.72
1.77
1.74
1.69
per tonne of steel
1.78
1.77
1.80
1.88
1.73
Specific indirect energy emissions (Scope 2, location-based):
per tonne of Fe
0.16
0.16
0.16
0.14
0.15
per tonne of steel
0.17
0.16
0.16
0.16
0.15
Specific indirect energy emissions (Scope 2, market-based):
per tonne of Fe
0.16
0.16
0.16
0.15
0.10
per tonne of steel
0.17
0.16
0.16
0.16
0.10
Specific total emissions (Scope 1 + Scope 2, location-based):
per tonne of Fe
1.91
1.87
1.92 (1.87)2
1.89 (1.86)2
1.84
per tonne of steel
1.95
1.93
1.97 (1.93)2
2.03 (1.91)2
1.89
Specific total emissions (Scope 1 + Scope 2, market-based):
per tonne of Fe
1.91
1.88
1.93 (1.88)2
1.89 (1.86)2
1.78
per tonne of steel
1.95
1.93
1.97 (1.93)2
2.04 (1.91)2
1.83
49.7
Blast furnace operations
14.6
Energy resource production
10.9
Production of iron ore raw materials
7.3
BOF operations
5.1
Lime production
5.0
Coke production
4.9
Rolled steel production and finishing
1.1
EAF steelmaking
0.7
Mobile sources
0.3
Ferroalloy production
0.2
Other stationary sources
30.436
m t of
CO2-eq.
Russia
USA
Belgium
Italy
Denmark
France
India
Total
31,957
724
194
139
95
25
1
33,135
1 The CO2 emissions from process gas combustion (blast furnace and coke oven gases) outside the gas sources but within the Group's facilities,
are considered equal to emissions from the combustion of an energy-equivalent amount of natural gas adjusted for combustion efficiency.
The corresponding CO2 deduction is made for process gas sources. The “Energy resources production” category includes emissions generated
by production of heat, electricity, and technical gases.
2 Emissions associated with the semi-finished products manufactured within the Group are not included in this category, as they are already taken
into account in Scopes 1 and 2. Upstream emissions do not include emissions associated with the delivery of products to customers.
2018
2019
2020
2021
7.9
8.8
7.6
8.4
34.1
Hard coal
16.4
Ferrous metals
13.8
Electricity
7.5
Natural gas
6.2
Railway transportation
5.0
Ferroalloys
4.6
Sea transportation
3.8
Non-ferrous metals
3.1
Petroleum coke
2.1
Fluxes and minerals
1.4
Pellets and HBI
0.8
Coal coke
0.7
Liquid fuel
0.3
Truck transportation
0.2
Ore and concentrate
0.1
Carbon-containing materials
8.4
m t of
СО2-eq.
In addition to the commonly applied
industry indicator – specific emissions per
tonne of steel – calculations were carried
out per tonne of end-product iron
output (Fe), which is generally taken
as the sum total of iron contained
in the output of steel, commercial pig
iron3 and commercial HBI. A significant
share of the Group’s total output
is delivered in the form of commercial
pig iron. The newly introduced metric
enables better visibility into specific
emission trends and will take into account
the improvements planned for the coming
decade and further ahead.
Specific CO2 emissions (Scope 1 + Scope 2, location-based) from
stationary sources, t/t of Fe
2016
2.00
1.98
1.94
1.99
1.95
Previous factor values for Scope 2
New factor values for Scope 2
2017
2018
2019
2020
2021
1.90
1.94
1.91
1.87
1.92
1.89
1.872
1.862
1.942
1.922
1.84
specific emissions went down by 4% from
2020 to 2021, and down by 5% from
the 2018 baseline.
Last year’s Annual Report specified
CO2 emissions per tonne of steel
and per tonne of commercial pig iron.
It was decided in 2021 to replace
this approach in favour of a more
comprehensive indicator. Specific
emissions of past periods have been
recalculated also per tonne of end-
product iron output. Specific СО2
emissions from stationary sources
(Scope 1 + Scope 2, location-
based) calculated per tonne of steel
and commodity pig iron with the previous
emissions factors for Scope 2
(the approach used last year), totalled
1.88 t of СО2/t of steel and commercial
pig iron in 2021 vs. 1.92 (1.902) in 2020,
which delivers a reduction of 2% (1%).
GRI 305-4
The increase in specific СО2 emissions per
tonne of steel in 2019 and 2020 vs. past
periods was caused by a temporary decline
in production output at Lipetsk during
the implementation of the programme
to upgrade blast furnace and steelmaking
operations. The emission value in 2020
was additionally impacted by lower output
in Europe and the US amid COVID-19.
With normalized output volumes,
NLMK Group’s specific emissions have
been decreasing over 2016–2020.
In the market-based calculation, Scope 2
Environmental protection
Climate change
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Annual Report 2021
1 The emission factors for grid power remain unchanged to correct for exogenous factors in assessment of progress towards the targets.
NLMK GROUP REDUCES CLIMATE FOOTPRINT THROUGH USE OF HYDROGEN-CONTAINING
SECONDARY RESOURCES
NLMK Group utilizes secondary resources – steelmaking by-product gases – to reduce its fossil fuel consumption, thus cutting
its annual greenhouse gas emissions by 3.5 million tonnes of СО2.
NLMK uses blast furnace and coke off-gases to generate energy to support production, and as a direct energy carrier
for he main process equipment. At NLMK Lipetsk, NLMK Group’s flagship site, such electric energy covers 65% of the site’s
needs (the goal is to ensure 100% coverage by 2023). Among other factors, the energy value of off-gases is determined by their
pure hydrogen content, from 7% in blast furnace gas to 60% in coke gas.
Annual consumption of blast-furnace and coke-oven gas across NLMK Group is 23 billion m3 per year. This volume of recyclable
gas contains 3 billion m3 of hydrogen, which can be leveraged to further reduce reliance on carbon fossil fuels.
Consistent efforts are undertaken
to reduce the company’s environmental
footprint. From 2010 to 2021, emissions
of СО2 per tonne of end-product iron
output went down by 15% across
the Group, and by 9% at the main
production site in Lipetsk. This reduction
has mostly been driven by improvements
in operational efficiency of production
(specific consumption of coal at Lipetsk
was reduced by 185 kg/t of pig iron during
the period), as well as by the growing use
of electric-arc furnaces in steelmaking.
The 2023 target for specific СО2 emission
per tonne of steel (Scope 1 + Scope 2)
is 1.91 t/t, down from 2.00 t/t in 2019
(a 5% decrease), the target per tonne
of Fe is 1.87 t/t vs. 1.94 t/t in 2019 (a 4%
decrease), the target per tonne of steel
and marketable pig iron is 1.84 t/t vs.
1.92 t/t last year. The targets are informed
by location-based calculations of Scope 2
emissions1.
NLMK Group continues to develop
and implement projects aimed
at GHG emission reduction. These
rely on well-known continued
actions to improve energy efficiency
and reduce fuel consumption,
as well as on some innovative solutions.
The latter include recycling of carbon
resources and biofuels in blast
furnace operations and innovative
CCUS technologies.
A series of projects to reduce
СО2 emissions was implemented
in 2019–2020. The impact of each
project was assessed based
on the technical effects within the project
timeframe: reductions in consumption
of natural gas, coke and coke breeze,
electrical power, oxygen, lime,
dolomite, etc.
Reduction of СО2 emissions by projects contributing to NLMK Group strategic target through 2023
GRI 305-5
Project (completed)
Go-live date
Reduction of СО2
emissions (Scope 1 +
Scope 2), ‘000 t
Reduction of СО2
emissions (Scope 1 +
Scope 2), kg / t of steel
Construction of co-gen boiler houses
at NLMK Ural in the towns of Nizhnie Sergi
and Beryozovsky
November 2019
31
1.8
Construction of a water-heating boiler house
at NLMK Ural in the town of Revda
November 2019
8
0.4
Turbine-driven blower at Blast Furnace No. 7
November 2019
76
4.3
Implementation of a dynamic stacking
model at the homogenization ore pile
and of an APCS for dosing of fluxes
at the charge preparation sections
December 2019
14
0.8
Stopping of BOF blowing at a certain carbon
setpoint (applied to some products)
August 2020
3
0.2
A new recovery power plant
is to be launched in 2023
at NLMK Lipetsk fuelled with by-product
gases from steelmaking and blast
furnace operations. It will reduce
СО2 emissions by 650,000 t per
year (35 kg per tonne of steel).
Phased implementation of advanced
beneficiation processes at Stoilensky
from 2020 to 2023 will increase the Fe
content in the charge and reduce
BF fuel consumption at Lipetsk,
thereby cutting СО2 emissions
by an additional 790,000 t per year
(42,000 t per tonne of steel). Moreover,
NLMK Group is pursuing a portfolio
of research projects to start using
hydrogen in production, i.e., recovery
and utilization of СО2, and other means
of decarbonization.
The newly elaborated Climate Programme
targets a specific emission reduction
by 10% by 2030 vs. the 2023 base –
down to 1.69 t СО2/t of Fe or to 1.72 t
СО2/t of steel. To pursue the target the
Group considers the following projects:
•
Construction of an HBI module
with a capacity of 2.5 million tonnes
at Stoilensky
NLMK Group target for reduction of specific СО2 emissions from
stationary sources (Scope 1 + Scope 2) within the current strategic
cycle through to 2023, w/o change of external emission factor,
t of СО2 / t of Fe
1 Includes operational efficiency improvements related to the project.
2 Specific emission without the impact of temporary factors associated with reduced production output.
1.94
0.01
-0.03
-0.04
-0.01
1.87
20192
Steel
output
increase
Increase
in captive
energy
generation
Increased
iron content
in concentrate
Other
projects
2023
target
•
Construction of an EAF based
on the HBI module
•
Implementation of effective projects
to decarbonize the existing
production chain, run CCUS pilots,
and further enhance operational
efficiency due to reduction of carbon
fuel consumption and increased
use of low-carbon power,
as well as other actions.
Project (completed)
Go-live date
Reduction of СО2
emissions (Scope 1 +
Scope 2), ‘000 t
Reduction of СО2
emissions (Scope 1 +
Scope 2), kg / t of steel
Replacement of manganese limestone
with manganese ore
May 2021
82
4.7
Construction of an additional beneficiation
section at Stoilensky1
July 2020
125
7.2
A set of measures to reduce lime
consumption
2020
51
3.0
Other projects
2019–2020
19
1.1
Total
409
23.5
Environmental protection
Climate change
53
52
Annual Report 2021
The company engages actively in cooperation with Russian and international partners
to pursue reduction of environmental and climate impacts.
NLMK GROUP PARTICIPATES OF COP26
NLMK Group took part in the 26th Conference of the Parties to the UN Framework Convention on Climate Change (COP26).
As part of the Russian delegation, Nikita Vorobyev, NLMK Group Director of Environmental and Climate Affairs, presented
the company’s key efforts in decarbonization.
NLMK GROUP CONTRIBUTES TO GLOBAL DECARBONIZATION INITIATIVES
In 2020, NLMK Group joined the dialogue under the Mission Possible Partnership — a World Economic Forum coalition
that seeks to accelerate decarbonization of the global industries that account for 30% of GHG emissions. In particular,
NLMK Group participates in discussions of an initiative to reduce the climate impacts of ferrous metallurgy.
The dialogue parties address the matters of mitigation targets, the required legislation, market conditions, and decarbonization
technologies for the steel industry.
NLMK GROUP PARTICIPATES IN THE GLOBAL WORLDSTEEL PROGRAMME
TO REDUCE CLIMATE IMPACTS
Since 2020, together with Worldsteel experts, in line with Step Up decarbonization initiative NLMK Group has been
developing actions to enhance equipment productivity, reduce resource consumption, improve feedstock quality, and better
the reliability of production processes. These actions aim to implement best international practices in reduction of GHG
emissions.
NLMK GROUP PARTICIPATES IN THE NET ZERO STEEL PATHWAY METHODOLOGY PROJECT
Launched in 2020, the project aims to develop a practical approach for ferrous metallurgy to set decarbonization targets,
based on the climate science evidence and goals of the Paris Agreement. The project takes account of the actual situation
in the ferrous industry and its ties to other sectors.
The Technical Working Group consisted of around 20 organizations that are related to ferrous metallurgy, including
NLMK Group, as well as World Steel Association and ResponsibleSteel.
The need for a specialized methodology emerged since the Science Based Target initiative’s Sectorial Decarbonization
Approach (SBTi’s SDA) does not properly account for or discards such factors as the different steelmaking routes
(opportunities to decarbonize integrated and electric steelmaking operations are significantly different), replacement of virgin
feedstocks in other industries with ferrous metallurgy by-products (which reduces the carbon footprint significantly), emission
reduction due to offsetting projects, etc.
In July 2021, the final project report was published with important recommendations, but a detailed implementation guidance
for target setting is yet to be developed.
Climate-related cooperation
NLMK Group carbon intensity
in 2030 per t of Fe, kg/t
Specific direct emissions of CO2 per
tonne of steel at NLMK Lipetsk in 2021,
calculated in line with the guidance1
for European Union Emissions Trading
System (EU ETS), was 1.70 t СО2 / t
of steel. The gap with the EU ETS
benchmark2 — as stricter requirements
were imposed in 2021 for the period
of 2021–2025 — currently stands
at 16%. Within the current strategic
cycle, NLMK Group aspires to reduce
the gap down to 13%.
NLMK Lipetsk СО2 emissions
according to EU ETS (Scope 1),
t of СО2 / t of steel
2023
HBI
Stoilensky
EAF
Stoilensky
BF
process
2030
target
-10%
1.87
-0.08 -0.03
-0.08
1.69
NLMK Lipetsk
2021
NLMK Lipetsk
2023
EU ETS
benchmark3
1.70
1.66
1.47
1 COMMISSION DELEGATED REGULATION (EU) 2019/331 dd. 19 December 2018 determining transitional Union-wide rules for harmonized free
allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council.
2 EU ETS does not regulate BOF steel, but there are established benchmarks for coke, sinter, pig iron, lime and dolomite. The data given for 1 tonne
of steel are calculated at the specified consumption coefficients.
3 Assuming the same consumption factors for coke and ore materials in 2021.
Environmental protection
Climate change
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Annual Report 2021
REDUCTION OF CO2 EMISSIONS
ON THE CONSUMER SIDE DUE
TO NLMK GROUP PRODUCTS
0.3
0.3
TOTAL
0.2
0.8
0.4
DanSteel plate (used in wind
power installations)
Annual consumer-side reduction
–29.0 m t
Lifecycle emissions reduction
–650 m t
Total sales, 2018–2023
2.1 m t
Premium NGO steels
Wear-resistant and high-strength
steel (Q&T and Q&P)
Premium electrical steels (GO)
Niche rolled products
Sales, 2023 target
–0.03
–0.2
–0.5
–5
–6
–1
–7.7
–20.5
–410
–228
Plans for 2022 and the medium term
In 2022, NLMK Group plans to continue
elaborating projects that help reduce
СО2 emissions from existing processes,
creating opportunities for supplying
“green” steel to the market, developing
in collaboration with partners
the avenues to implement carbon
capture, utilization, and storage
projects (CCUS), and conducting
operational activities to reduce
СО2 emissions. The Group intends
to engage with suppliers and clients
to share information on carbon footprint
reduction and setting decarbonization
targets, to develop a system for carbon
footprint assessment for different
types of products, to participate
in the CDP programme, and to evaluate
the prospects of obtaining a Responsible
Steel certification.
NLMK Group products advance low-carbon economy
Forests are the largest carbon sink
globally — they absorb more CO2
than they release into the atmosphere.
Some industries drive the reduction
of GHG emissions, too. For example,
solar and wind power generation
are replacing fossil fuels.
Calculation of CO2 emissions averted
due to consumption of certain goods
is now a common practice, also applied
in steelmaking and other industries.
NLMK Group produces steel plates that
are used in construction of wind power
installations, as well as premium electrical
steels that enable consumers to reduce
specific magnetic losses in transformers
and electrical motors. NLMK also
produces high-strength and wear-
resistant steels. This delivers metal
structures of lower weight, which, in turn,
leads to lower fuel and steel consumption
and, ultimately, drives the transition
to the low-carbon economy.
The list of products that help reduce СО2
emissions by consumers was revised
in 2021, and the corresponding reduction
impacts were refined. NLMK Group
estimates show that, if the planned
volume of such products is successfully
sold in 2023, the volume of averted
consumer-side CO2 emissions will total
about 29 million tonnes per year (on par
with the Group’s total annual emissions),
and about 650 million tonnes throughout
the entire product lifecycle (20–50 years).
The energy outputs (heat and electrical
energy) supplied by Altai-Koks Coke
and Chemical Plant are also driving lower
СО2 emissions from fossil fuels (coal)
in the town of Zarinsk. Our analysis puts
the reduction at 0.7 million tonnes of СО2
per year.
Environmental protection
Climate change
57
56
Annual Report 2021
TCFD category
Reasons (drivers) of the risk/
opportunity
Potential financial
consequences
Description
Risks
Low-carbon economy transition risks
Political
and legal risks
• Payment for carbon
emissions
• Other payments
• Product quotas
• Subsidies
• Product and manufacturing
standards
• Phase-out of products or
raw materials
• Potential court trials
• Requirements to reports
of investors, staff, suppliers,
and buyers
• Increase in operating
expenses
• Write-off and devaluation
of assets,
as well as premature
decommissioning of existing
assets due to policy changes
• Increased costs and/or lower
demand for products due
to fines and court decisions
• Lower demand for products
Various climate scenarios imply
different uses of regulatory
mechanisms, such as СВАM,
apparent and hidden
taxes on CO2 emissions,
and restrictions on greenhouse
gas quota trading. The potential
increase in the number of court
cases due to the development
of requirements to CO2 emission
reduction might affect NLMK’s
activities
Process risks
• Commercialization of low-
carbon products
• Commercialization
of low-carbon production
technologies
• Circular economy
• Costs of research
and development (R&D)
in new and alternative
technologies
• Capital investment
in technology development
Development of green steel
production technologies may
lead to the devaluation of capital
investment in upgrades
of the BF-BOF production route
Market risks
• Commercial market trends
• Energy carrier prices
• Changes in consumer
demand
• Changes in demand
at existing markets
• Lower demand for products
• Higher operational costs,
lower product profitability
• Abrupt and unexpected
changes in electricity costs
• Changes in profit structure
The global shift away from
coal, and the increase in costs
of natural gas and oil may lead
to an increase in operational
costs, while initiatives
to increase the efficiency
of resource utilization
and transition to alternative
materials or less carbon-
intensive products might
decrease steel demand
in various industries
Reputation risks
• Expectations of investors,
personnel, suppliers,
and buyers
• Lower capital availability or
increase in the cost of capital
• Lower profits due
to decreased demand
or as a result of negative
impact on management
and availability of labour
resources (for example,
difficulties with hiring
and employee retention)
Reputation is an important
factor of business success,
both in terms of talent attraction
and retention and in terms
of compliance with broader
requirements to information
disclosure and responsible
business practices from
investors, suppliers, and clients
Physical risks
Extreme risks
• Extreme weather events
• Lower profits as a result
of production capacity
decrease (e.g., difficulties
with logistics, disruptions
in supply chains)
• Increase in operational costs
• Increase in capital
expenditures (e.g., to recover
assets)
• Increased insurance
premiums and potentially
lower availability of asset
insurance in “high-risk”
zones
It is believed that the frequency
and scale of extreme weather
events, such as floods,
hurricanes, forest fires,
droughts, and heat waves will
increase in scenarios that imply
temperature growth
Chronic risks
• Temperature changes
• Water availability
• Sea level rise
One of the most evident
consequences of climate
change is the increase
in average temperatures.
Additionally, if certain climate
scenarios materialize, the risks
of changes in the nature
of precipitation and lower
water availability will
emerge. Likewise, increased
atmospheric temperatures
might lead to global sea level
rise and flooding of coastal
territories
Assessment of climate risks and their impact on strategy
GRI 201-2
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 their impact.
Strategy 2030 was developed
with existing and potential climate risks
and opportunities in mind.
The steelmaking industry is highly
sensitive to physical climate risks,
as well as low-carbon economy
transition risks.
The geographical location
of the company’s production sites
determines the various levels
of vulnerability to physical risks. Even
through the industry overall is sensitive
to the consequences of climate change,
the location of Group companies
make them relatively less vulnerable
to the materialization of physical risks.
In addition, NLMK’s control over supply
routes of raw materials and finished
products further reduces the risks
of disruptions in supply chains.
In the reporting period NLMK Group
partnered up with Carbon Trust
(United Kingdom), an independent
sustainability consultant, to analyse
risks and opportunities related
to climate change. The project included
an assessment of the potential
impact of risks and opportunities
on the company’s activities.
136 individual risks and opportunities
were identified, and a more detailed
assessment was conducted for 82
of them (66 risks and 16 opportunities).
This was followed by an in-depth
assessments of the six risks recognized
as priority areas for NLMK Group.
In addition, an in-depth assessment
of physical risks was initiated
for the Green Horizon project.
Risks and opportunities were grouped
by root causes and then classified
by TCFD categories. The table
below indicates the main risks
and opportunities identified
by the analysis, their drivers aligned
with TCFD categories that are relevant
for NLMK, and an assessment
of potential financial consequences.
Environmental protection
Climate change
59
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Annual Report 2021
Risk management
Climate risk management is an integral
part of NLMK Group’s overarching
risk management system (see
the Operational Control and Risk
Management section for more details).
Climate risks are identified and assessed
by qualitative and quantitative
methods, including a scenario analysis
and modelling of risk materiality,
probability, and velocity. Aggregate
information about the climate risk
profile and related changes is disclosed
in the NLMK Group Risk Radar.
For every external driver, the time
horizon of potential materialization
was assessed. Three time horizons
were identified: short-term (up to 2025),
mid-term (2025–2030) and long-term
(after 2030). It is expected that transition
risks will be relevant at all time horizons,
and most risks will materialize in the long
term, since process transitions
in steelmaking will become more
prominent by the late 2020s. In addition,
chronic and acute physical risks will
materialize in the long term. The same
can be said for the most significant
opportunities materializing in the future,
since by that time a more significant
increase in low-carbon steel production
will occur.
The criterion of risk probability or
possibility is related to the considered
scenarios (see their description below).
The more similarity in the assessments
of risk parameters for various scenarios,
the higher the probability of risk
materialization. Probability varies from
low to very high.
According to the company, preliminary
assessments indicate that the Group
is highly resistant to climate change.
The Climate Programme significantly
decreases the company’s climate-
related transition risks in the mid-
and long-term perspective.
Scenario analysis overview
In order to conduct a scenario
analysis of climate-related risks
and opportunities, data were collected
from various sources, including
the International Energy Agency
(IEA), the International Institute
for Applied Systems Analysis (IIASA),
Shared Socioeconomic Pathways
(SSP), the Global Economic Forum,
the World Resources Institute (WRI),
and the Climate Impact Atlas of the Royal
Netherlands Meteorological Institute
(jointly with the CMIP5 project). These
sources consider various climate
scenarios which, for the purpose
of in-depth analysis, were divided
into two groups: Business-as-usual
and the Paris Agreement scenario
(limiting global warming to well below
2°С). For physical risks, the worst-case
scenario was also analysed.
TCFD category
Reasons (drivers) of the risk/
opportunity
Potential financial
consequences
Description
Opportunities
Energy sources
• Subsidies/support measures
for low carbon energy
production
• Energy carrier prices
• Decrease in the Group’s
greenhouse gas emissions
and, consequently, less
sensitivity to changes
in payment for CO2
emissions
• Additional profits in case
of captive low-carbon
electricity generation
The possibility of using various
energy sources depends
on whether the cost of wind
and sun energy will decrease
and if support for projects
of captive low-carbon electricity
generation will be available
Products
and services
• Changes in demand
at existing markets
• Increased profits
due to more demand
for “greener” products
The transition to a low-carbon
economy may lead to changes
in demand at markets
of renewable energy, transport,
electricity, and construction
Markets
• Carbon markets
• Emergence of new markets
of goods and services
• Commercialization
of manufacturing
technologies for low-carbon
products
• Subsidies and other support
measures
• Increased profits due
to entering new markets
of goods and services
• Due to demand for “green”
products (increase in sales
of current products that
decrease carbon footprint
on the customers’ side
and development of new
products)
Opportunities related
to the production of “green”
steel, such as loan financing
of “green” projects,
monetization of gains from
measures to reduce СО2
emissions or utilization
Sustainability
• Payment for carbon
emissions
• Water availability
• Temperature changes
• The Group companies’
more convenient location
and lower carbon intensity
of products vs. competitors
will ensure more profitability.
In case different climate
scenarios materialize,
the Company may benefit
because of higher availability
of water vs. its competitors.
CBAM can potentially lead
to an increase in product
profitability due to lower carbon
footprint vs. competitors
Environmental protection
Climate change
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Annual Report 2021
SCENARIO ANALYSIS
PARIS AGREEMENT SCENARIO
BUSINESS-AS-USUAL SCENARIO
WORST-CASE SCENARIO
DESCRIPTION
DESCRIPTION
DESCRIPTION
The scenario implies quick decarbonization in line with the Paris Agreement, which
implies limiting global warming to well below 2 °С vs. the pre-industrial age, with a pro-
bability of 66%. It is believed that this scenario will ensure the transition to a low-carbon
economy with zero emissions in the second half of the 20th century. Like with most
low-carbon economy transition scenarios, this option requires significant emission cuts
by 2100 in order to limit global warming to 2 °C.
An interim scenario, which implies more probability of temperatures exceeding 2 °C,
leading to significant consequences for global climate systems. In this scenario,
the current climate and energy policies get reconsidered, including obligations assumed
as part of national plans to reduce emissions and adapt to climate change (Nationally
Determined Contributions, NDCs). This scenario implies significant decarbonization
in the second half of the 20th century.
In this scenario, the existing climate and energy policy will not succeed. This option
will lead to a significant increase in global greenhouse gas emissions. Physical risks
are expected to grow significantly in this scenario.
25,000
(–50% vs. 2015)
Global GHG emissions
in 2050, m t of CO2
equivalent
56,000
(+13% vs. 2015)
Global GHG emissions
in 2050, m t of CO2
equivalent
103,000
(+109% vs. 2015)
Global GHG emissions
in 2050, m t of CO2
equivalent
Representative
Concentration
Pathway
Representative
Concentration
Pathway
Representative
Concentration
Pathway
IPCC climate scenario
IPCC climate scenario
IPCC climate scenario
Social and economic development scenario
Social and economic development scenario
Social and economic development scenario
Shared
Socioeconomic
Pathway
Shared
Socioeconomic
Pathway
Shared
Socioeconomic
Pathway
Average
global temperature
increase by 20501
Average
global temperature
increase by 20501
Average
global temperature
increase by 20501
Average
global temperature
increase by 21001
Average
global temperature
increase by 21001
Average
global temperature
increase by 21001
RCP 2.6
RCP 4.5
RCP 8.5
SSP 1:
Sustainability
SSP 2:
Middle of the road
SSP 5:
Fossil-fuelled
development
1.6 ± 0.3 °C
2.0 ± 0.3 °C
2.6 ± 0.4 °C
1.6 ± 0.4 °C
2.4 ± 0.5 °C
4.3 ± 0.7 °C
For the first two scenarios, an in-depth
analysis was made for the following
transition risks on the 2022–2030 horizon:
•
Introduction of a carbon tariff
on product exports into the EU
•
Introduction of a carbon tariff
on product exports into the USA
•
Introduction of a tax on greenhouse
gas emissions in Russia
•
Global decrease in steel demand
•
Increased EAF competitiveness vs.
the BF-BOF route
•
Stricter “green” legislation in the EU
As a result of the analysis, the following
materiality matrix of climate risks
and opportunities was formed.
Risk prioritization by parent root cause
Opportunity prioritization by root causes with materiality evaluation
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Likelihood Score
Velocity Score
Expected exposure
after 2030
Expected exposure
only under stress scenarios
Very high certainty
of outcome
under all scenarios
Expected exposure
before 2025
Energy prices
Circular economy
Product and production standards
Carbon pricing
Subsidies
Changes in demand from current markets
Commodity market dynamics
Extreme weather events
Water availability
Low-carbon production tecnology
commercialization
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Likelihood Score
Velocity Score
Expected exposure
after 2030
Expected exposure
only under stress scenarios
Very high certainty
of outcome
under all scenarios
Expected exposure
before 2025
1 Temperature anomalies vs. the pre-industrial
period of the 1850–1900s.
Environmental protection
Climate change
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Annual Report 2021
Energy
efficiency
Key 2021 figures
403.6
PJ (+1.8% yoy)
NLMK Group’s total energy consumption
in 2021
-0.144
Gcal/t (–2.6% yoy)
reduction in specific energy intensity of steel
production at NLMK Lipetsk
Major themes
• Energy
Key events in 2021
• The Lipetsk site's captive generating facilities, which are fueled by secondary
fuel gases, reached an all-time high in electricity generation (508.5 MW
per day).
• The overhaul of BF-4 was completed with the construction of a new gas
cleaning facility, which will increase the reliability of blast-furnace gas supply.
• Reconstruction of BF-4 air heaters started. The goal is to improve fuel
efficiency in hot iron production and reduce carbon monoxide emissions
from air heaters by 98%. The upgrade will be carried out gradually
in 2022–2024 without the blast furnace shut downs.
• A set of measures to increase the production of liquid oxygen
were implemented. In October 2021, the Lipetsk site achieved a record
high production of liquid oxygen at 4,900 tonnes per month, of which
3,650 tonnes is liquid medical oxygen for healthcare facilities in nearby
regions.
• The construction of production buildings’ metal structures and the installation
of the main process equipment of the new recovery power plant began.
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
Awards
A team of employees of NLMK's energy services came second
at the CASE-IN International Engineering Championship (League of Young
Professionals, REN Cup), which was held as part of the #TogetherBrighter Youth
Day of the Russian Energy Week.
NLMK employees, as part of the Best Steel team, won the national final
of the Metal Cup. Sustainable Development case championship on technology
strategy.
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 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.
NLMK Group's goals are to be the leader
in using the best global practices
to improve production energy efficiency
and to achieve the lowest technically
and economically feasible level
of specific energy intensity and steel
cash cost. The main principles of the IMS
Policy are to reduce the resource
intensity of production through:
•
Reducing specific consumption
of natural raw materials, water,
and fuel and energy resources
•
Improving operational efficiency
•
Introducing recycling and close-loop
systems and applying best available
technologies (BATs)
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
and energy. 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.
The purchased equipment
and services are evaluated in terms
of compliance with corporate energy
efficiency requirements.
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.
The company annually updates its
portfolio of projects aimed at achieving
the target indicators of energy
resource use.
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.
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:
•
NLMK Lipetsk
•
VIZ-Steel
•
Altai-Koks
•
Dolomit
•
NLMK Kaluga
•
NLMK Metalware
•
NLMK Ural
•
Stagdok
•
Stoilensky
The NLMK DanSteel site has also been
certified to ISO 50001. ISO 50001
certified companies account for 95%
of the Group's energy consumption.
In 2021, all management systems
operating at the facility level
were consolidated into the integrated
management system (IMS). In 2022,
it is planned to complete the project
at the company level.
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.
The company is also a member
of the NP Market Council
association, which ensures
the operation of the enterprise
in the wholesale electricity market,
and since November 2010 – a member
of the Union of Independent Energy Audit
and Energy Expert Organizations non-
commercial partnership.
Environmental protection
Energy efficiency
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Annual Report 2021
Energy resource consumption in 2021
In 2021, total energy consumption
within the company stood at 403.6 PJ,
which is 7.3 PJ higher year-on-year.
The increase is due to the completion
of the BF-4 overhaul, the ramp-up
of BOF-3 in BOF Shop No. 2,
and the increase in steel output.
NLMK Group uses a variety of non-
renewable energy resources in its
production activities: 27.2% of all
energy consumed comes from
natural gas, and 58.6% comes from
coal and coke products; it also uses
renewable energy sources like electric
energy from renewable sources, wood
chips and charcoal for the production
of ferroalloys.
In 2021, the share of electricity from
renewable sources totalled 5.1% of all
purchased electric energy, flat year-on-
year1. The share of renewable energy
in all NLMK Group energy consumption
was 0.4%.
Renewable electric energy consumption across NLMK Group GRI 302-1
Indicator
2017
2018
2019
2020
2021
Share of renewable electric energy in purchased electric energy, %
4.81
4.86
5.10
5.14
5.14
Total share of renewable energy in total energy consumed, %
0.37
0.37
0.37
0.41
0.43
Total renewable energy consumed, PJ
1.50
1.51
1.43
1.62
1.72
The share of renewable energy is shown in the total volume of electricity consumption without transit flows. NLMK Group sites made
no direct purchases from renewable energy suppliers.
In 2021, the volume of electricity supplied from NPPs under direct contracts between NLMK Group and Rosenergoatom amounted
to close to 3 billion kWh (10.8 PJ).
Note: conversion coefficient from MWh to GJ = 3.6. Reverse coefficient: 1/3.6 = 0.278 (GOST R 51750-2001).
1 The share of generation from renewables is shown as assumed for Russia as of the end of 2021 according to the annual report on the functioning
of the UES of Russia in 2021, for Europe – according to The European Power Sector in 2020 report, p. 8, and for the US – according to the Monthly
Energy Review US report by the Energy Information Administration, p.129.
Share of renewable electric energy in total purchased electricity by region, without transit flows, %
Region
Share of renewable
energy
Source
Companies
Russia, Central Unified
Energy System zone (Central
and Northwestern Federal Districts)
1.5
Hydro
NLMK Lipetsk
Stoilensky
Stagdok
Dolomit
NLMK Kaluga
Russia, Ural Unified Energy System
zone (Ural and Volga Federal
Districts)
2.0
Hydro, wind, solar
NLMK Ural
NLMK Metalware
VIZ-Steel
USA
19.5
Hydro, wind, solar, biofuel
NLMK Indiana
NLMK Pennsylvania
Sharon Coating
Belgium
25.0
Wind, solar, biofuel
NLMK La Louvière
NLMK Clabecq
France
21.4
Hydro, wind, solar, biofuel
NLMK Strasbourg
Italy
40.8
Hydro, wind, solar, biofuel
NLMK Verona
Denmark
87.1
Wind, solar, biofuel
NLMK DanSteel
Total energy consumption by NLMK Group1, PJ GRI 302-1
1 The methodology for calculating the company’s energy consumption: purchased energy minus sold energy (sales, shipment, transfer) at every
production site; total across all sites. The calculation of the company's energy consumption in 2017–2019 has been brought to a unified
methodological basis in terms of the use of coke breeze, the purchase, generation and distribution of electrical and thermal energy between
companies. Since 2021, oxygen and nitrogen have been included in the company's energy balance in connection with the conclusion of outsourcing
agreements for a part of the volume consumed. Methodology for calculating non-renewable types of energy: total energy consumption minus
renewable energy.
2 Starting from 2020, the consumption of coke products and motor fuels has been supplemented with the consumption of NLMK Ural and mining
companies. Consumption of non-renewable fuels is shown minus the volume of shipment/sale of fuel in the form of products.
Non-renewables consumption
Total energy consumption
408.2
2017
2018
2019
2020
2021
412.1
381.3
394.8
401.9
409.7
413.6
382.7
396.4
403.6
Breakdown of non-renewable fuel consumption by NLMK Group
in 20212, % GRI 302-1
0.9
58.6
Coal and coke products
27.2
Natural gas
13.2
Pulverized coal
0.9
Motor fuel
0.1
Fuel oil
0.1
334.2 PJ
401.9 PJ
Non-renewable energy consumption
NLMK Group consumption of non-renewable fuels2, PJ GRI 302-1
Fuel type
2017
2018
2019
2020
2021
Coal and coke products
217.22
208.64
185.24
197.64
195.7
Natural gas
91.65
87.75
91.26
85.86
91.01
Pulverized coal
28.40
43.30
36.15
43.36
44.13
Motor fuel (petrol, diesel, liquefied gas)
2.76
2.79
2.91
2.90
3.10
Fuel oil
0.04
0.04
0.21
0.29
0.25
Total
340.07
342.53
315.77
330.05
334.19
Environmental protection
Energy efficiency
67
66
Annual Report 2021
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 Lipetsk and NLMK Kaluga), nitrogen, 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.
Consumption, generation, and sale of electrical and thermal energy
by NLMK Group, PJ, GRI 302-1
Indicator
2017
2018
2019
2020
2021
Electrical energy and thermal energy obtained for consumption
Electrical energy obtained
87.32
87.30
78.47
77.72
83.45
Thermal energy obtained as steam
0.51
0.50
0.48
0.48
0.51
Thermal energy obtained as hot water
1.52
1.59
1.33
1.03
1.09
Total
89.35
89.39
80.29
79.24
85.05
Captive electrical and thermal energy generation
Electrical energy generation
46.34
49.36
50.01
49.93
51.34
Thermal energy as steam
23.78
21.90
21.75
22.26
22.00
Thermal energy as hot water
7.93
9.78
7.41
7.68
7.95
Total
78.04
81.03
79.17
79.87
81.29
Electricity and thermal energy sold to external consumers
Electricity sold and transmitted
11.78
10.70
8.99
8.63
9.26
Heat energy sold and transmitted as steam
0.36
0.35
0.37
0.40
0.44
Heat energy sold and transmitted as hot water
2.56
2.76
2.35
1.92
1.96
Total
14.7
13.81
11.71
10.94
11.7
Specific energy intensity1 at NLMK Lipetsk, Gcal/t GRI 302-3
Indicator
2017
2018
2019
2020
2021
Specific energy intensity
5.491
5.469
5.641
5.546
5.402
Captive electricity generation
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.
Captive electricity generation at NLMK Group sites
Captive electricity generation at NLMK Group sites
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
Co-generation plant: fuel – coke oven gas
Mini gas-piston co-generation plant: fuel – natural gas
NLMK Lipetsk: 522 MW
Altai-Koks – 200 MW
NLMK Ural – 11 MW
CONSTRUCTION WORKS ARE ONGOING AT A NEW RECOVERY CO-GENERATION PLANT
(RCGP-2) UTILIZING 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 utilizing recyclable gases (BOF and BF) from steel production. The installed capacity of the new recovery co-generation plant will
be 300 MW. The total investment in the project is estimated at RUB 35 billion.
In 2023, the launch of this new power plant running on by-product gases of blast furnace and steelmaking operations will cut CO2
emissions by 650,000 t (36 kg per tonne of steel) annually.
Note: 1 Gcal = 4.186 GJ
In 2021, NLMK Lipetsk generating capacities reached an all-time high level of average daily electricity generation: (CGP – 346.7 MW,
RCGP – 161.8 MW, total – 508.5 MW).
Share of captive electricity
in total electricity
consumption at NLMK
Lipetsk1, %
Captive electricity generated at NLMK Lipetsk2
53.0
58.0
65.0
63.7
63.4
2017
2018
2019
2020
2021
2017
403.1
417.0
478.3
480.2
489.2
81.0
84.0
82.0
72.2
77.2
2018
2019
2020
2021
Captive electricity generation, MW
Share of captive electricity from secondary fuel gases, %
1 The share of captive electricity generation in 2021 is lower than in 2020 due to an increase in total electricity consumption (ramp-up of BOF-3
in BOF Shop No. 2 at the Lipetsk site).
2 The share of captive electricity generation utilizing secondary fuel gases increased in 2021 due to an increase in the volume of blast-furnace gas
utilization after the completion of the overhauls of BF-6 and BF-7 in 2019 and BF-4 in 2020.
Note: conversion coefficient from MWh to GJ = 10.0945, calculated on the basis of conversion coefficient from MWh to a tonne of conventional fuel =
0.3445 (Rosstat), conversion coefficient from a tonne of conventional fuel to Gcal = 7, conversion coefficient from Gcal to GJ = 4.186.
Environmental protection
Energy efficiency
69
68
Annual Report 2021
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,
pumping, and cooling equipment
•
Optimizing process charts
for the production of energy resources
•
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; pumping equipment
upgrades are also underway.
Optimization initiatives undertaken by NLMK Group
in 2021
In 2021, energy-efficient optimization
projects at the generating capacities
of the CGP and RCGP at the Lipetsk
site and CGP at Altai-Koks were aimed
at changing the operating modes
and control algorithms for boilers
and turbines, using new combustion
air preheating technology, increasing
the area of economizers, and using
systems for improved heat
transfer and cleaning at turbine
generator capacitors.
Reduction of energy consumption through energy-saving initiatives (programmes) at the Lipetsk site, TJ
GRI 302-4
NLMK IMPLEMENTED THE FIRST WIRELESS AUTOMATED ENERGY ACCOUNTING SYSTEM
NLMK's sinter shop launched an automated energy accounting system based on wireless data transmission technology.
Every 30 minutes, 214 readers send information about the consumption of electricity and water to the plant’s unified
management system. Data analysis prevents emergencies and optimizes energy costs.
This technology is based on LoRaWAN (Long Range Wide Area Network) wireless data transmission, an alternative
to the classical method of transmitting information over wires with lower implementation and maintenance costs. The solution
enables wide coverage (up to 1.5 km) with high noise immunity, while lowering power consumption (up to 10 years without
changing the battery).
Rostelecom and NLMK IT employees ensured the integration of the companies' systems running on different platforms,
established an integration service for the simultaneous exchange of meter readings, debugged and tested the solution.
Motor fuel consumption
NLMK Group has determined
technically feasible levels of specific
fuel consumption for all categories
of transport (motor fuel is covered
by the company's energy
management system). The Logistics
Development Strategy until 2022
sets fuel consumption targets, which
the company strives to achieve.
In 2021, activities to reduce motor fuel
consumption were aimed at:
•
Equipping diesel locomotives
with an electronic fuel injection
system. This measures makes fuel
consumption 10–16% more efficient,
depending on the type of locomotive.
In 2022 it is planned to expand
this system to NLMK's entire fleet
of locomotives, which will reduce diesel
fuel consumption by 2,445,000 litres
•
Revising and selecting optimal routes
for motor transport, cutting empty
runs and downtime (thus saving close
to 500,000 litres of diesel fuel)
•
Switching to alternative fuel (diesel
fuel consumption reduced by almost
30,000 litres)
Efforts to reduce diesel fuel consumption
will continue in 2022. In preparation
for the new strategic cycle, the company
will focus on the use of vehicles using
alternative energy sources, which will
reduce or eliminate harmful emissions
into the environment.
Total electricity saved, TJ
Total fuel saved, TH
Energy consumption reduction, TJ
68
2017
2018
2019
2020
2021
31.7
329.4
372.3
379.5
1,200.9
664
1,374.3
735.8
1,392
753
1,851
1,939.4
1,115.4
1,520.9
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 energy resources
•
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
digital 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
The company is working on a portfolio
of technological development projects
in the energy sector. The focus areas
in 2022 will be the development
of renewable energy generation
projects (including at sites in Europe),
the assessment of opportunities
for the application of industrial
energy storage technologies
and the analysis of alternative hydrogen
production technologies.
STOILENSKY TO START USING HYBRID MINING DUMP TRUCKS BY 2025
By 2025, Stoilensky will be the first in Russia to start using trolley trucks – giant mining dump trucks with a hybrid engine.
In the normal driving mode, the internal combustion engine will generate electricity for the operation of the motor-wheels,
and while driving along the main road in the mine, over which the trolley line will be stretched, the dump truck will receive
energy from the high-voltage line.
The average speed of the dump truck will increase by 40%. Today, loaded dump trucks in the mine are moving uphill
at a speed of 16–18 km/h, trolley trucks under the same conditions will run at 25 km/h. This means that diesel fuel will
be saved, and as a result, emissions of nitrogen oxides will decrease.
Environmental protection
Energy efficiency
71
70
Annual Report 2021
Awards
Worldsteel has recognized NLMK Group as Sustainability Champion.
NLMK Group ranked second in the Environmental Transparency Rating
of Mining and Metals Companies according to the World Wildlife Fund (WWF)
Russia and National Rating Agency.
NLMK Group received the ComNews Awards 2021 for the best digital ESG
solution.
NLMK Group was awarded the gold medal of the 27th international industrial
exhibition Metal-Expo 2021 for its upgrade of NLMK's steelmaking production,
which allowed to increase the productivity of one of the BOF shops by 15%
while reducing the environmental impact (reducing dust and CO emissions
by 2,000 tonnes).
NLMK won the Leaders of Russian Business competition, held by the Russian
Union of Industrialists and Entrepreneurs, in the Environmental Responsibility
category.
NLMK won the III national competition Reliable Partner – Environment
with The best project in the field of environmental digitalization.
Environmental
protection
Key 2021 figures
Pollutants discharge into water bodies reduced
by 33%
compared to 2018 baseline
97%
of water in production is recycled and reused
100%
of secondary iron waste recycled
Over $2 bn
allocated to investment projects
with an environmental impact since 2000
$339 m
allocated to operational and investment projects
with an environmental impact in 2021
Major themes
• Atmospheric emissions
• Water
• Waste
• Biodiversity
• Supplier environmental assessment
• Environmental compliance
Key events in 2021
• Two large-scale overhauls of NLMK's dedusting systems completed.
The project will reduce dust emissions by more than 300 tonnes per year
• The HSM effluent tank was upgraded at NLMK Lipetsk eliminating 400 m2
dam and land contamination with petroleum products
• A large-scale environmental upgrade of the beneficiation plant air purification
system started at Stoilensky
• NLMK Kaluga eliminated industrial runoff in 2021 with a closed-loop water
system
• A number of projects on secondary raw materials recycling
were implemented
• At Stoilensky, the first stage of irrigation system construction started
at the tailings dam, thus eliminating dusting
• At Stoilensky, the elaboration of environmental solutions for the Green
Horizon project started. The project aims to expand existing and set up new
production facilities. The solutions include among other initiatives to reduce
nitrogen oxides and sulfur dioxide emissions and create a closed water-loop
system
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
The company consistently reduces its
environmental impact by efficiently using
natural resources, introducing innovative
technologies to improve environmental
performance, and annually investing
heavily in environmental projects.
Since 2000, the company has invested
more than $2 billion in environmental
projects, or about 30% of all investments
in maintaining production facilities.
Thanks to large-scale environmental
investments, since 2000, all the main
process stages that have a major
impact on the environment have been
upgraded: coke oven batteries, blast
furnaces, BOFs, over 200 dedusting
systems have been upgraded or built
The results of two-decade efforts to reduce
environmental impact
Environmental investments, $ million
2000
2000–2006
2000–2012
2000–2018
2000–2021
5
171
793
1,243
2,039
(half of all the systems in operation
today) in the sintering, blast furnace,
BOF and refractory shops. The company
also switched to anhydrous slag
cooling technology and stopped
flaring of exhaust gases – now they
are used for efficient power generation.
With the completion of the project
for the construction of a second recovery
co-generation plant in 2023, the Lipetsk
site will achieve 100% utilization of off-
gases from the core steelmaking units.
Environmental protection
73
72
Environmental protection
Annual Report 2021
Specific emissions into the atmosphere
per tonne of steel have decreased
by 2.4 times since 2000. Despite
the expansion of the Group and more
than a two-fold increase in steel output,
the Group's gross emissions decreased
by 12%.
In terms of water impacts, a project
to build a closed-loop water
supply system at the Lipetsk site
was implemented, which enabled
complete elimination of industrial
and storm effluents into the river
and return this water for reuse
in the production cycle. As a result,
water withdrawal from the Voronezh
River reduced by 5 times. Thanks
to the construction of closed-loop
water supply systems at all the Group
facilities, since 2000, specific water
consumption per tonne of steel has
decreased by 4.5 times, and specific
wastewater discharge – by almost 3
times, while steel output has doubled.
In its activities, the company strives
to adhere to circular production
and re-use not only off gases
and water, but also solid secondary
resources. Since 2015, the Group
is implementing its Raw Materials
Recycling Programme, which
includes several dozen projects aimed
at increasing the internal processing
of recyclable materials and their re-use
in production.
In 2019, the processing of a 25 ha
slag dump that existed since 1934
was completed, on which 6 million
tonnes of materials were accumulated
during the Soviet period. All these
materials were used either as raw
materials for the production of iron
and steel, or as process raw materials
for construction in the Lipetsk Region.
As much as 350,000 tonnes of iron
were extracted, which not only reduced
the consumption of fossil fuels, but also
reduced greenhouse gas emissions
by 100,000 tonnes.
Emission into the atmosphere in 2000–2021
Water withdrawal for industrial needs
43.5
38.1
21.7
18.9
18.1
8.2
9.1
14.9
17.5
17.4
357
347
324
331
314
Specific emission, kg/t steel
Steel output, m t
Gross emission of NLMK Group, ‘000 t
2000
2006
2012
2018
2021
114
98
65
59
57
13.9
10.8
4.4
3.4
3.3
8.2
9.1
14.9
17.5
17.4
Water withdrawal for NLMK Group production needs, m m3
Specific water consumption for production needs,m3/t of steel
NLMK Group steel output, m t
2000
2006
2012
2018
2021
NLMK achieved 100% utilization
of secondary iron-containing raw
materials. To this end, in 2019, a unique
facility was launched – the Briquetting
Plant for the processing of generated
and previously accumulated dust
and sludge (dust and other fine solid
particles mixed with water). Recycled
briquettes are re-used in blast furnaces
as material for the production of iron
and steel. This innovative facility,
in which RUB 4.5 billion was invested,
allows saving up to 500,000 tonnes
of fossil iron ore annually. In addition, all
the dust collected in the de-dusting units
was returned into production.
In general, over the last 20 years
the recycling rate of the main production
site in Lipetsk reached all-time highs.
100%
Recycling of secondary
iron-containing raw materials
99%
Recycling of secondary raw materials
Environmental management priorities
Our approach
to managing
environmental protection
A responsible attitude towards
the environment and the efficient
use of natural resources – are key
principles of Sustainable Development
Policy of NLMK Group. 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 – both on the part
of the Board of Directors and the CEO
(Chairman of the Management Board)
of the company.
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.
The fundamental document
in the field of environmental protection
is the Integrated Management System
(IMS) Policy of NLMK Group. The policy
reflects the company's responsible
and rational approach to environmental
protection management.
Organizational structure
GRI 102-19 GRI 102-20
NLMK recognizes the importance
of effective environmental management.
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. GRI 102-31 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 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 Group 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,
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.
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 last five years
increased by 77% totalling $339 million
in 2021.
In 2021, the funding of the Group's
environmental investment projects
remained flat year-on-year. Due to these
capital investments, the Lipetsk site
completed large-scale reconstructions
of the de-dusting system in the BF-3
casthouse and de-dusting system
for capturing fugitive emissions at one
of the two mixers in BOF Shop No. 1
Environmental protection
75
74
Environmental protection
Annual Report 2021
with the total dust emissions reduction
of more than 300 tonnes. The company
has started installation of the main
process equipment for the new recovery
co-generation power plant, utilizing BOF
gas. Total investment in environmental
projects since 2000 has exceeded
$2 billion. NLMK Group's specific air
emissions reached its all-time low
at 18.1 kg/t of steel.
Targets and key
performance indicators
NLMK recognizes the importance
of efficient environmental management.
As part of its current Environmental
Programme the following targets has
been established:
•
Minimizing the impact that
the Group’s Russian and international
companies have on the environment,
and complying with all applicable
2017
90
95
124
101
124
192
242
479
327
339
102
147
355
226
215
2018
2019
2020
2021
Investment projects
Operating environmental costs
1 In 2021, the approach to assessing environmental investments changed: spending on revamping, upgrading and constructing new environmental
facilities that were not previously taken into account have been added. Data for 2017–2020 were adjusted to ensure comparability.
2 Without the impact of temporary factors associated with lower production.
3 Total, production and household wastewater.
4 Excluding overburden and tailings, taking into account accumulated sludge.
NLMK Group’s strategic environmental goals until 2023
Target
KPI
Units
2018
(base year)
2020
2021
2023 target
Compliance
of environmental
indicators
of NLMK Group
with best practices
Specific emissions
kg/ t of steel
18.9
18.62 (19.8)
18.1
18.0
Waste recycling share
%
89
95
95
92
Reducing specific air
emissions
CO (NLMK Lipetsk)
kg/ t of steel
16.3
16.02 (16.8)
15.7
14.8
NОx (NLMK Lipetsk)
kg/ t of steel
1.2
1.22 (1.3)
1.2
1.1
SOx (NLMK Lipetsk)
kg/ t of steel
1.7
1.72 (1.7)
1.5
1.6
Dust
kg/ t of steel
1.4
1.22 (1.4)
1.2
1.2
1st Class substances
(Russian companies)
g/ t of steel
0.08
0,072(0.08)
0.07
0.07
Reducing the impact
on water resources
Specific water
discharge
(NLMK Lipetsk)3
m3/t of steel
0.8
0.72 (0.7)
0.6
0.6
Pollutants discharge
into water bodies
‘000 t
17.6
13.92 (12.5)
11.8
13.2
Increasing utilization
of overburden, tailings
and iron-containing
wastes
Share of utilized
secondary iron
materials4
%
93
99
100
101
Main impacts of the Environmental Programme 2027
Emission reduction, ‘000 t/year
Substance
Volume
Reduction vs. 2023,
NLMK Group, %
Reduction vs. 2023,
NLMK Lipetsk, %
All substances
51.3
16%
20%
Dust
3.4
16%
17%
NOx
1.7
6%
11%
SOx
1.8
5%
8%
Industrial and domestic wastewater reduction, ‘000 t/year of pollutants in the run-off (Russian companies)
All substances
12.8
99.7%
100.0%
environmental standards
and environmental risk management
commitments
•
Increasing recycling rates
•
Reducing specific air emissions
•
Reducing the impact on water
resources
ENVIRONMENTAL PROGRAMME 2027 APPROVED
In 2021, the Strategic Planning Committee of the Board of Directors adopted NLMK Group’s Environmental Programme until
2027. The key long-term goal for reducing environmental impact is to reduce total air emissions by 16% compared to 2023,
while dust emissions to be reduced by 16% and sulfur dioxide emissions – by 6%. The programme also targets cessation
of industrial run-off at the Group's Russian facilities and household run-off at the Lipetsk site. The company is planning
to invest close to $200 million in these efforts.
GREEN HORIZON
The new project for the development of Stoilensky until 2030 is titled
Green Horizon. The name is telling: the process solutions, which are being
considered, will enable the growth of industrial development with little or no
increase in environmental footprint, including through the upgrade of existing
production facilities and the use of the best global environmental practices
in new operations.
The most ambitious environmental initiatives of the Green Horizon project
include:
•
Using conveyor belts to deliver ore from the open pit to the beneficiation
plant, thus eliminating railway transport and minimizing dusting
•
Switching from traditional diesel dump trucks to electric trolley trucks, thus
reducing emissions of nitrogen oxides
•
Raising the bar for environmental standards applied to transport
•
Using best available technologies in the field of de-dusting to drastically
reduce concentration levels
•
Construction of purification systems to cut nitrogen and sulfur oxides content
in gas for pelletization and direct reduction of iron
•
Creating closed water-loop system to cease industrial effluents
Supplier environmental
assessment
Starting from 2007, all suppliers
of NLMK Group have been subjected
to audits, which cover compliance
with environmental standards.
Since 2015 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. 10% of suppliers have so
far confirmed that they have a certified
environmental management system
in place that complies with the ISO 14001
international standard.
The qualification, assessment,
and audit procedures are set out
in NLMK Group’s regulatory documents.
The procedures stipulate that
counterparties that are recognized
as not meeting the established criteria
based on the qualification results
are not allowed to supply raw materials,
materials and equipment and perform
services for NLMK Group enterprises.
The procedures provide that
counterparties that are recognized
as not meeting the established criteria
based on the qualification results
are not allowed to supply raw materials,
materials and equipment and perform
services for NLMK Group enterprises.
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.
100% new suppliers and contractors
were screened for environmental critera
in 2018–2021 GRI 308-1 . There were no
suppliers or contractors who were not
allowed to work with NLMK Group due
to non-compliance with environmental
requirements.
NLMK Group spending on environmental protection1, $ m GRI 103-2
Environmental protection
77
76
Environmental protection
Annual Report 2021
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 on Environmental
and Climate Affairs heads the international
carbon regulation area.
NLMK Europe is a member
of the European Steel Association
(EUROFER), which discusses
environmental developments in Europe
and is particularly active in the EU
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.
In 2021, NLMK Group audited 57
suppliers of raw materials, supplies
and equipment, of which 23
were screened for environmental
compliance. Based on the results
of the audit, 11 suppliers developed
measures to eliminate environmental
risks GRI 308-2 . An audit
of 19 contracting organizations
was also carried out, 15 of which
developed measures to eliminate
environmental risks.
After the audits, corrective action plans
are developed together with suppliers
and contractors to eliminate environmental
risks. In 2021, 11 supplier audits
revealed 19 instances of non-compliance
and four recommendations were issued;
as for contractors – 15 audits revealed
23 instances of non-compliance and five
recommendations were issued. If
a counterparty is unable to confirm that
the identified gaps were eliminated, it
is submitted to the conciliation committee
which will decide if further cooperation
is possible.
Evaluation of contractors is carried
out on the basis of internal corporate
documents through a specially developed
qualification survey. The Standard
Environmental Protection Requirements
for Contractors is publicly available
on the company's official website.
On an ongoing basis, for all employees
of contractors, a four-hour training
in environmental protection requirements
is provided before obtaining work
permit to production facilities
and the company premises.
Suppliers of feedstock, materials, and equipment to NLMK Group
screened using environmental criteria during audits GRI 308-2
2017
21
16
24
21
19
36
39
34
13
23
2018
2019
2020
2021
Suppliers
Contractors
Suppliers with corrective action plans following audits (% of total
audits conducted) GRI 308-2
Indicator
2017
2018
2019
2020
2021
Share of suppliers
with corrective action plans, %
69
80
41
38
48
Share of contractors
with corrective action plans, %
90
63
50
43
79
Payments for negative environmental impact, $ m
Indicator
2017
2018
2019
2020
2021
NLMK Group1
2.6
2.3
1.7
1.8
1.5
Russian assets
1.9
1.3
1.0
0.9
1.0
Membership
and participation
in organizations
NLMK works with Russian
and international associations
to establish an effective dialogue
on sustainable use of natural
resources. In particular, NLMK Group
is a member of worldsteel’s expert
groups on the environment, sustainable
development and climate. As part
of its collaboration with worldsteel,
NLMK Group collects and submits
data on sustainability indicators
on an annual basis and participates
in steel products life cycle assessment.
In early 2022, NLMK Group signed
an updated Sustainability Charter.
In 2021, NLMK Group was recognized
as a Sustainability Champion. The title,
which is the main industry award
in this area, is awarded annually
to steel companies that have proven
their commitment to the principles
of sustainable development.
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,
as well as the working group responsible
for developing steel decarbonization
strategy in Russia.
NLMK is a member of the Committee
on Ecology and Nature Management
of the Russian Union of Industrialists
carbon regulation activities. NLMK Group
is committed to the sustainable
steelmaking principles promoted
by the EUROFER.
In 2021, NLMK Group ranked second
in the Environmental Responsibility
Openness Rating of Mining and Metals
Companies, a project of the World Wildlife
Fund (WWF) Russia and the National
Rating Agency, improving its result
by four notches compared to 2020.
NLMK Group and the Austrian
Metallurgical Competence Centre
K1-MET continued their partnership
to develop a recycling technology
for steelmaking waste. In cooperation
with the shareholders of K1-MET –
Voestalpine Stahl, Primetals Technologies
Austria, Montan-University of Leoben
and the University of Linz – NLMK
implements projects for the efficient
use and processing of secondary raw
materials from steelmaking.
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 companies. These
procedures have been agreed with state
supervisory bodies and are regulated
by legal documents. GRI 303-2
The Group's enterprises operate
the Internal Environmental Improvements
System (IEIS). IEIS provides internal
control over compliance with established
standards and rules. Also, within
the framework of the IEIS, compliance
with design and legislative environmental
requirements is monitored during audits
by the Environment function. IEIS helps
to prevent violations of environmental
requirements and reduces
the likelihood of instructions from
regulatory authorities.
Supervisory bodies conduct regular
annual checks, both scheduled
and ad-hoc, of the Group’s companies
to ensure they comply with Russian
legislation as well as stakeholder
expectations. In 2021, territorial
environmental control bodies conducted
45 inspections. At the same time, no
significant fines or non-financial sanctions
have been brought against NLMK Group
companies, and no lawsuits have been
initiated to compensate for damage
to the environment or third parties. There
have been no environmental accidents
in 2021. GRI 307-1
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 2021, 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 1%
(vs. 26% in 2017).
1 For the Group’s international companies, costs of procuring permits are taken as payments for negative environmental impact.
Environmental protection
79
78
Environmental protection
Annual Report 2021
safety of the plant. As part of this system,
shop employees themselves regularly find
and eliminate environmental inconsistencies
or their root causes.
In 2021, NLMK Group continued
implementing its project to equip air
emissions and wastewater 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.
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 2021, innovative air quality monitoring
systems were purchased for the Lipetsk
site and Stoilensky. The systems will
be installed at the borders of the sites’
sanitary protection zone. Using these
systems, it will be possible to monitor
the state of atmospheric air, timely
detect atypical emissions of nitrogen
dioxide, carbon monoxide, sulfur oxide,
hydrogen sulphide, and dust particles
for subsequent analysis of the causes
of their occurrence and development
of measures aimed at their reduction
or elimination. In 2022, a similar
project is planned to be implemented
at Altai-Koks.
NLMK USES DIGITAL TOOLS TO MONITOR AND ANALYSE VISIBLE EMISSIONS
In 2021, a system for analyzing visible emissions using machine vision algorithms and deep learning methods was developed
and implemented at the Lipetsk site. The purpose of the system is to identify any non-typical atmospheric emissions recorded
by CCTV cameras, determine their location, estimated volume and send notifications to the plant's specialists for detailed
analysis and establishing the root causes of emissions. The service collects and stores data on all emissions, which helps acquire
in-depth analytics. In 2021, this solution received three awards: at ComNews Awards 2021 it was recognized as the best digital
ESG solution, at the III Russian competition Reliable Partner – Environment it topped the best project in the field of digitalization
of ecology category, and at STAR 4.0 digital industrial innovations (part of Innoprom 2021) it won in the Sustainable Development
category.
ENVIRONMENTAL AUDIT OF MINING ASSETS
As part of the development of an environmental liability insurance programme
and the development of a procedure for identifying environmental risks
and risks of man-made incidents with an impact on the environment,
environmental audits were conducted at the company's mining assets
in 2021.
The audits did not identify risks with a high probability of materialization,
and also confirmed the high level of maturity of environmental risk
management.
NLMK HELD THE ANNUAL NLMK YOUNG LEADER 2021
COMPETITION DEDICATED TO GREEN PRODUCTION
In 2021, the theme of the Young Leader annual corporate competition
was Green Production. All projects participating in the competition reduced
environmental impact, and some had an economic effect. A ferroalloy
furnace operator won the competition with a project to reduce CO2 emissions
in ferrosilicon production.
GREEN CITY: ENVIRONMENTAL SEMINARS AT ALL
LIPETSK SCHOOLS
The project tells the residents of Lipetsk about the current environmental
situation in the city and the company's initiatives to reduce the impact
on the environment. The seminars cover several important topics: health
of the Lipetsk residents, areas impacted by the industry, programmes
for improving the environment at the plant and in the city, green tools.
Open communication between NLMK and the city are key to an effective
partnership in the field of environmental safety.
NLMK STARTED USING
A MOBILE DUST
SUPPRESSION SYSTEM
In 2021, an innovative solution
for dust suppression of fugitive
sources was implemented
at the Lipetsk site. The mobile
dust suppression system
will be used year-round
in areas where bulk materials
are stored during loading
and unloading operations
characterized by heavy
dusting, as well as during work
on the dismantling of buildings
and structures.
The volume of investments
amounted to close
to RUB 17 million
The company also engages its employees
in the environmental control process.
In 2021, NLMK Group's Lipetsk site
launched a rapid response system
for environmental incidents. By calling
the hotline or leaving a 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 IEIS,
designed to ensure the environmental
In addition to innovative
monitoring systems, it is planned
to purchase portable gas analysis
equipment for mobile and rapid
measurements of harmful substances
in the atmospheric air at the Lipetsk site.
This will make it possible to timely control
the quality of atmospheric air in places
not equipped with stationary equipment.
Since May 2021, the company has
been publishing environmental
monitoring data on the main controlled
substances (carbon monoxide, hydrogen
sulphide, sulfur dioxide and nitrogen
dioxide) in the air of Lipetsk. The map
shows the indicators of average
monthly values in MPC shares both
from the posts of Roshydromet
and from 12 additional control points
on the border of the sanitary protection
zone of the plant and in the city.
An interactive environmental monitoring
map is available to the public
on the NLMK website.
In 2021, Stagdok organized an online
monitoring post for the noise and seismic
effects of blasting. At a distance
of 500 m from the boundaries
of the mine, a noise monitoring
station and a recorder of external
vibration effects were installed, which
provide information in real time.
According to the results of the control,
the permissible impact standards
are observed, there are no excesses.
A new monitoring station was installed
at the initiative of the company
for additional control, information
on measurements is regularly published
on the company's website.
In 2021, the roll-out of the Environment
IT system began at the Group’s Russian
assets, which will automate environmental
reporting, systematize and store actual
data on the environmental performance
of enterprises.
In 2021, the Environment mobile app
project was initiated, which will help
to get rid of paper logs and maintain
an electronic archive.
NLMK devotes special attention
to fostering a culture of environmental
awareness among its employees
and local communities in the regions
where it operates. A series of educational
courses were developed for the benefit
of all the Group’s staff. In particular,
in 2021, Management of Production
Training
and Consumption Waste and Waste
Atlas e-courses were developed, aimed
at improving the culture of separate
waste collection. At least 10%
or 5,000 employees take environmental
training sessions and development
courses every year.
NLMK Group has been running
the Green Office programme for several
years already. It aims to enhance
the commitment of the Group’s
employees to eco-friendly culture.
In 2021, the Group companies
installed additional 270 containers
for the separate collection of waste:
paper, cardboard, glass, plastic; there
are also collection points for used office
equipment. For the second year in a row,
NLMK won the Green and Healthy Office
competition in the Best Separate Waste
Collection System category.
Environmental protection
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80
Environmental protection
Annual Report 2021
NLMK’s continuous efforts to systematize
its environmental management
operations in accordance with modern
international standards are reflected
in its Environmental Management
System, which helps to identify
and monitor environmental issues
and risks. The EMS functions within
the framework of the company's
integrated management system, which
allows for a comprehensive approach
to environmental issues for the Group
as a whole, taking into account risk-
based approach.
The ISO 14001:2015 standard has
been implemented at 14 of the Group’s
production facilities, where 89%
of the Group employees work and which
account for 96% of the Group's
steel output.
Every year, internal audits are carried
out at the company's facilities to confirm
the compliance of the current EMS
Certification
In the next reporting periods, NLMK plans
to implement environmental intitatives,
including through the overhaul of major
production facilities using the best
available technologies.
NLMK CONFIRMED COMPLIANCE WITH INTERNATIONAL
ENVIRONMENTAL STANDARDS
NLMK Group extended the validity of its ISO 14001 certificate. The document
confirms that the Environmental Management System employed
by the Group companies complies with this international standard. The audit
was conducted by the British Standards Institute (BSI).
WATER-RELATED RISKS IN NLMK'S FOCUS
In 2021, the company completed an analysis of the risks and opportunities
associated with climate change and the activities of NLMK Group, including risks
associated with water availability in the regions where it operates. The results
of the assessment show that in the short and medium term, this risk has a low
probability of impact on the Group's operations.
Water scarcity risk
Water stress is projected to increase across Zarinsk, Farrell, PA, Clabecq,
Lipetsk and Stary Oskol. In areas currently under low water stress, e.g.
Zarinsk this is unlikely to have a significant impact on operations, however
at sites already located in areas of high or extremely high water stress, e.g.
Stary Oskol and Clabecq, this could have an impact on operating costs
as competition for water increases prices rise. The impact of cost increases
for water consumption is most significant in Pennsylvania where the cost of water
is highest. In total, water availability risks were found to account for less than 1%
of the overall estimated value at stake. In 2021, there was no conflict of interest
with stakeholders associated with the risk of water shortages. GRI 303-1
Flood risk
Flood risk in Lipetsk is an event driven risk that has not been consistently
recorded for a long enough duration of time. The latest flood event
was reported in the region in June 2016, however no disruption to operations
at the Lipetsk site was observed due to mitigation measures in place at the site
(industrial storm drains and shop floor water pumps).
Drought risk
The risk of drought has been assessed within the Lipetsk Region and research
found that Lipetsk has been impacted by drought previously, however
the drought had no significant impact on the operations of NLMK’s
Lipetsk site. The assessment of NLMK’s Lipetsk operations during historic
droughts supports the conclusion that vulnerability at the site to droughts,
of the magnitude experienced previously, risk is low.
For more details on the risks associated with climate change, see the Climate
Change section.
with the requirements of international
standards. In 2021, 86 internal audits
were carried out.
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 implementing its environmental
programmes, NLMK focuses
on the introduction of the best available
technologies. As part of a four-
party agreement between NLMK,
the Ministry of Natural Resources,
Rosprirodnadzor and the administration
of the Lipetsk Region, the company
has already implemented six out of nine
projects planned until 2024. They
aim to implement the Ecology federal
project. These projects reduce emissions
by 9,200 tonnes, which is 49% higher
than the planned effect.
Plans for 2022–2023
Key projects planned for 2022–2023
Site
Project
Environmental impact
NLMK Lipetsk
Repair of air heaters for blast furnaces No. 3&5 Revamping of air
heaters of blast furnace No. 4
Reducing CO emissions by 7,500
tonnes per year
NLMK Lipetsk
Revamping of the de-dusting system of mixer No. 1 in BOF
Shop No. 1
Reducing dust emissions by 100,000
tonnes per year
Stoilensky
Technical re-equipment of the de-dusting system of the medium
and fine crushing section of the beneficiation plant
Reducing dust emissions by 791 tonnes
per year
NLMK Lipetsk
Setting up accumulation area for waste generated in wagons
cleaning
Elimination of the soil contamination risk
on an area of 1,000 m2
NLMK Lipetsk
Elimination of the risk of dusting when liming oily scale
Elimination of the soil contamination risk
on an area of 120 m2
Altai-Koks
Revamping of the dust collection system of the dust-free coke
dispensing unit on coke oven batteries No. 3 and No. 4
Reducing dust emissions by 254 tonnes
per year
Stoilensky
Reconstruction of the storm sewer
Exclusion of the risk of soil pollution
on an area of 1,100 m2
NLMK Indiana
Arrangement of a waste storage warehouse
Elimination of the soil contamination risk
on an area of 500 m2
Water resources
GRI 303
Water stewardship
priorities
NLMK Group is committed to reducing
the volume of water that it consumes,
and devotes considerable efforts
to lowering its water withdrawal volumes
in favour of reusing water. Indicators
for reducing the impact on water resources
are set in the company's Strategic Goals.
The most important impact mitigation
tool for the company is the consistent
building of closed water-loop systems
at the Group companies, which make
it possible to withdraw fresh water only
to compensate for the inevitable losses
from water evaporation.
The company regularly monitors
and assesses the risks of water
availability in all its home regions, using
data from regular reports on the state
and utilization of water resources published
by the Ministry of Natural Resources
and Ecology of Russia and authorized
state control bodies of other countries,
as well as: https://www.wri.org/;
http://www.sage-ill-nappe-rhin.alsace/;
https://watersgeo.epa.gov/
watershedreport/.
In 2021, NLMK Lipetsk continued
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. NLMK experts
evaluate and optimize technical
solutions for the upgrade of Lipetsk's
wastewater treatment facilities based
on the company's experience in upgrading
its own storm water treatment facilities,
which made it possible to reduce
concentrations of all substances.
Water withdrawal
and consumption
GRI 303-1 GRI 303-3
NLMK companies withdraw a small
proportion of their water from
external sources (less than 3%
of the Group’s total industrial water
supply). 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 fresh water
from surface water bodies, underground
sources, and rainwater. NLMK Group
companies do not use wastewater from
third-parties. All water withdrawn by the
company is fresh water.
The Group 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
fresh 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
Environmental protection
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82
Environmental protection
Annual Report 2021
Fresh water withdrawal, m m3
Fresh water use for production needs, m m3
Water consumption (total water withdrawal minus water discharge),
m m3
Specific water consumption, m3/t of steel
Specific fresh water use for production needs, m3/t of steel
2017
2018
2019
2020
2021
143
139
139
132
136
60
59
60
57
57
86
83
86
81
3.5
3.4
3.8
3.6
3.3
5.0
4.8
5.5
5.1
4.7
81
NEW LONG-TERM TARGET 2027 – ZERO RUNOFF
Water protection has always been and remains the focus of the company's attention. Over the past 40 years, fresh water
withdrawal at the main production site in Lipetsk has been reduced by a factor of nine, since 2000 – by a factor of five. Back
in 2009, the technical water supply system was upgraded at the Lipetsk site in order to create a closed water-loop system.
The discharge of industrial and storm sewage into the Voronezh River was ceased. As a result, the fresh water withdrawal
reduced many-fold, as runoff that used to be discharged is now returned to production cycle instead of fresh water withdrawal.
In December 2021, the Strategic Planning Committee of the Board of Directors approved the Environmental Programme
through to 2027, which sets the goal of complete cessation of wastewater discharges into water bodies at the Russian
companies of the Group.
Fresh withdrawal (intake) and consumption by NLMK Group1 GRI 303-3 GRI 303-5
NLMK Group’s water use
in total volume of water
withdrawal (intake), 2021,
m m3
65.2
Fresh water use
71.7
Unused water
1 The approach to the presentation of data on fresh water withdrawal (intake) has been adjusted vs. the previous year. Water withdrawal is shown taking
into account third-party, transit and lost water.
In 2021, there were no incidents related
to interruptions in access to water (work
stoppages / plant closures, etc.) that had
any impact on the Group’s financial state
or production activities.
Unused water is drainage water from
the mines that is discharged without being
used in the production process, as well
as direct-flow water used for non-contact
cooling of production units, lost water
and third-party water. This water is not
consumed in the production process and
is not polluted. Unused water accounted
for 52% of water withdrawal in 2021.
In 2021, a five-year low of fresh water
consumption for industrial needs
was reached, thanks to operational
measures to control water consumption,
eliminate leaks, and return wastewater
for reuse. A total of 75% of fresh water
withdrawal falls on the Russian companies
of NLMK Group.
Fresh water withdrawal from
the Voronezh River,
Lipetsk site
Water withdrawal from
the Voronezh River, m m3
Steel production, m t
1980
9.1
9.8
8.2
9.3
13.4
189.3
138.9
96.5
21.8
21.3
1990
2000
2010
2021
Fresh water withdrawal (intake) by NLMK Group, by source and region, and use of withdrawn water, m m3
GRI 303-3 GRI 303-5
Indicator
2017
2018
2019
2020
2021
Total water used, including
70.0
68.9
70.6
65.1
65.2
• for production needs
59.6
58.6
59.8
57.3
57.1
• for household needs
10.4
10.3
10.8
7.8
8.1
Share of used water, % of water withdrawal (intake)
49%
49%
51%
49%
48%
Unused water
74.9
72.3
70.3
67.9
71.7
Fresh water withdrawal by NLMK Group1, including
143.1
139.4
139.4
131.6
135.5
• Russian companies
107.8
104.8
103.7
98.9
101.6
• international companies
35.3
34.7
35.8
32.7
33.9
Process water
121.4
120.5
120.9
113.8
116.3
• Surface water, including
64.0
63.3
64.6
61.5
62.6
–
Russian companies
31.9
31.5
31.8
31.3
31.4
–
international companies
32.1
31.8
32.8
30.1
31.2
• Groundwater, including
57.3
57.1
56.1
52.2
53.5
–
Russian companies
54.7
54.8
53.8
50.2
51.5
–
international companies
2.6
2.3
2.4
2.0
2.0
Indicator
2017
2018
2019
2020
2021
• Rainwater collected and stored by the Group
0.1
0.1
0.1
0.1
0.1
–
Russian companies
0.1
0.1
0.1
0.1
0.1
–
international companies
0
0
0
0
0
Potable water
21.7
19.0
18.6
17.8
19.2
• Surface water
0
0
0
0
0
• Groundwater, including
18.1
17.9
17.6
17.0
18.3
–
Russian companies
17.8
17.6
17.3
16.7
18.0
–
international companies
0.3
0.3
0.3
0.3
0.3
• Municipal water, including
3.6
1.0
1.0
0.8
0.8
–
Russian companies
3.4
0.9
0.7
0.6
0.6
–
international companies
0.2
0.2
0.2
0.2
0.2
Urban wastewater converted for treatment
1.8
1.7
1.5
1.4
1.4
Water consumption
85.6
83.3
85.7
81.3
81.0
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 21.3 million
m3/year (from the level of 189 million
m3/year in 1980 when production output
was merely 9 million tonnes).
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, which also mitigates
the Group’s water-related risks.
Closed water-loop systems 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.
2017
2018
2019
2020
2021
97.0
97.1
97.1
97.2
97.4
Share of recycled water in NLMK Group's total industrial water
supply, %
Environmental protection
85
84
Environmental protection
Annual Report 2021
by the discharge permits. These permits
establish wastewater quality standards
on the basis of the profile of water bodies
and the so-called fisheries standards
(standards for water bodies intended
for fish breeding), which in Russia
are significantly stricter that foreign similar
requirements for industrial wastewater
and drinking water quality. The number
of controlled indicators for the Group's
main production sites is approaching
20. According to a number of them,
enterprises should produce cleaner
water than the one they withdraw.
NLMK Group companies do laboratory
checks of all monitored indicators
for compliance with established
standards and requirements. Compliance
with water discharge regulations
is subject to regular monitoring
by supervisory bodies. GRI 303-2
Measurements are carried out
by accredited laboratories. The water level
in NLMK's settling ponds and the tailing
pond of Stoilensky is also monitored
to eliminate the possibility of spills
and unauthorized water discharges.
There have been no cases of water level
approaching critical levels in 2021.
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 conditions as it
was withdrawn, without disrupting
the natural state of the environment.
Each Group company makes use
of water purification and treatment
technologies that ensure the quality
1 Source: State Report on the Condition and Use of Water Resources in the Russian Federation,
http://www.mnr.gov.ru/docs/gosudarstvennye_doklady/.
Sediment
ponds
WATER
CONSUMPTION
CYCLE AT
NLMK LIPETSK
75
closed-loop water
systems in operation
at NLMK Lipetsk
Voronezh
River
No sulphate-containing runoff
• Switching from sulphuric
to hydrochloric acid
in pickling process
• Switching from wet
to dry gas purification process
Modernization of local sewage
for joint treatment
of household
and highly mineralized
wastewater
No runoff of coke
and chemical
operations
NLMK
operations
No runoffs
into the river
of effluents as well as water used
for industrial and household purposes
meets the standards set by applicable
regulations. No untreated discharges
are made into water bodies. GRI 303-4
All discharged effluents have mineral
content of less than 1 g/l. The total
mineralization of effluents is defined
as the ratio of the mass of pollutants
to the volume of effluents. The trend
of the total mineral content in effluents
shows an improvement in the quality
of wastewater. From 2018 to 2021, total
mineral content decreased by 28%.
2016
16.2
15.7
17.6
15.3
12.5
NLMK Group
Lipetsk site
2017
2018
2019
2020
2021
11.8
13.5
12.7
11.2
10.0
8.2
13.2
8.0
6.4
Target, Group
Target, Lipetsk
Pollutants discharge into water bodies with effluents, '000 t
GRI 303-4
2017
3,173
3,265
3,312
3,186
3,455
2018
2019
2020
2021
Volume of water recycled at NLMK Group companies, m m3
2015
2016
2017
2018
2019
2020
1,183
885
650
610
428
391
345
2021
Potable and household water consumption at Stoilensky, '000 m3
The regions where the Group operates
offer a high availability of water
resources. The Group has no operations
in water-stressed areas1. According
to the UN methodology, a region or
country is considered water-deficient if
its annual water supply is below 1,700 m3
per capita.
Only one location, namely the Belgorod
Region where Stoilensky is situated,
is exposed to potential local water
shortage. 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 through 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 2021, a project was also approved
to redirect pumped clean drainage
water from the Stoilensky open-pit
mine directly into a water body without
using it in the closed loop: this way up
to 8 million m3 per year uncontaminated
water, a valuable resource, will
be returned to the natural environment.
Water discharge
Monitoring of effluent discharge into water
bodies at all sites is an important
environmental aspect of NLMK Group
operations. Summary data for NLMK
Group on the volume of water discharge
and pollutants content are formed on
the basis of official statistical reports
(2-TP Water Management) for Russian
companies and reporting data of the
Group’s international companies.
The bulk of pollutants are suspended
solids, dry residues and biological oxygen
demand. At all wastewater outlets,
regular monitoring of water quality
is organized according to the quality
and quantity indicators established
Environmental protection
87
86
Environmental protection
Annual Report 2021
Total volume of water discharge by type, quality, and receiving water body, NLMK Group, m m3
GRI 303-4
Indicator
2017
2018
2019
2020
2021
Wastewater after use1
23.5
26.3
24.1
20.7
20.8
Including household effluents at
• the Lipetsk site
9.2
8.6
7.3
6.7
6.0
• Stoilensky
4.0
7.6
6.5
4.9
6.4
• Other Russian companies
2.0
1.8
1.5
1.4
1.4
• International companies
8.3
8.3
8.8
7.7
7.1
Specific water discharge1 after use, m3 / t of steel
1.4
1.5
1.5
1.3
1.2
Total water discharge2, NLMK Group
47.4
49.0
47.7
43.4
46.0
• to surface water (rivers, lakes, reservoirs and canals)
45.2
46.9
45.7
41.6
44.1
• Including to seawater
0.2
0.3
0.3
0.3
0.3
Converted to third parties for treatment
2.1
2.1
2.0
1.8
1.8
Specific total water discharge2, m3 / t steel
2.8
2.8
3.0
2.7
2.6
Water discharge as % of total water supply
1
1
1
1
1
Share of unused water (drainage water, rainwater, non-contact
cooling, third-party effluents)) in the total volume of water discharge, %
52
48
51
52
55
Pollutants discharged into water bodies, ‘000 t
15.7
17.6
15.3
12.5
11.8
Effluent mineralization, g/l
0.33
0.36
0.32
0.29
0.26
Recycling of secondary iron-
containing raw materials2, %
GRI 301-2 GRI 306-4
1 Industrial and household effluents.
2 Including unused water (direct flow cooling water, third-party effluents, rainwater and drainage water). Water discharge volume does not include water
collected and converted to third-party organizations / municipalities and the loss of withdrawn water during transportation. In 2021, the volume of such
unused water totalled 10 m m3).
also projects for the recycling of carbon
waste (plastic, wood waste, paper)
and other technogenic raw materials
An example of the utilization
of secondary resources in production
and an increase in the sales
of by-products is the project
for the processing of concrete
and reinforced concrete breakage,
which started in 2021. The project will
enable recovery of up to 5,000 tonnes
of iron per year and up to 100,000
tonnes of secondary crushed
stone – to be sold to third parties
as by-product. GRI 306-4
In 2021, work was organized to process
waste from the cleaning of railway
cars. The project enabled recovery
of over 600 tonnes of ferrous scrap,
as well as significantly reduced
the costs of waste disposal at third-
party landfills. GRI 306-4
Waste handling and sound use
of natural resources GRI 306-1
Circularity measures
and priorities
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
through to 2023 is to increase waste
utilization and recycling at NLMK Group
to 92%1. Utilization includes reuse,
recycling, and waste disposal. Potential
negative impact on the environment
is minimized through compliance
with the requirements for safe waste
management and the implementation
of appropriate measures. GRI 306-2
Even today, the vast majority
of secondary resources are processed
within the Group's facilities. To achieve
the targets, the company has adopted
a large-scale Recycling Programme.
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 87% to 95%. By optimizing
the process of secondary raw materials
processing, it is planned to halve
the volume of waste disposal from
237,000 tonnes to 107,000 tonnes.
In 2021, a project was launched
to develop and implement a strategy
and system for managing recycled
raw materials, taking into account
the circular economy principles. This
will allow NLMK Group to achieve one
of the strategic Sustainable Development
Goals “Ensure sustainable consumption
and production patterns” (SDG 12),
by increasing captive waste processing
to a level of at least 98%. The main
effects for the Group are achieved
through the extraction of additional iron,
the use of secondary energy resources,
as well as the sales of products
generated from sorting and separate
collection of waste. The Recycling
Programme includes not only projects
to utilize iron waste in production, but
NLMK PARTNERS UP WITH AUSTRIAN METALLURGICAL
COMPETENCE CENTRE K1-MET TO DEVELOP
STEELMAKING RESIDUE RECYCLING TECHNOLOGY
K1-MET is a leading European Competence Centre from Austria
for the development of advanced metallurgical and environmental processes.
In cooperation with the shareholders of K1-MET NLMK is going to implement
projects aimed at ensuring the efficient use and processing of recyclables
in steelmaking operations. Launched in 2021, NLMK‘s first joint project
with Voestalpine and K1-MET aims to develop a technology for processing
zinc-containing waste. The new technology will make it possible to separate
zinc from iron-containing materials, enabling NLMK to return thousands
of tonnes of iron to the production cycle. An important environmental
impact of using this technology is the replacement of primary raw materials
with secondary resources, which reduces the volume of accumulated waste
and helps to reduce greenhouse gas emissions.
2017
91.4
93.3
98.8
99.5
99.6
2018
2019
2020
2021
MOLDING SAND REGENERATION
In 2021, NLMK installed a state-of-the-art facility for the regeneration of spent
molding sands. The new technology for preparing molding sands for casting
makes it possible to return 40% to 70% (from 11 to 20,000 tonnes) of used
molding sand into production, thus utilizing waste sand and reducing spending.
The total investment in the project exceeded RUB 140 million.
Total volume of water
discharge by NLMK Group,
including unused water,
by Russian and international
companies, 2021, m m3
GRI 303-4
29.3
International companies
16.7
Russian companies
The company's Environmental
Programme sets the goal of reducing
the discharge of pollutants
with wastewater into water bodies
by 25% compared to 2018. In 2021,
compared to 2018, the pollutants
discharge was reduced by 33% due
to the upgrade of local treatment
facilities at the Lipetsk site, completed
in 2020, and a set of measures
to reduce effluents.
In 2009 NLMK Lipetsk ceased industrial
run-off into the Voronezh River. In 2021,
a set of measures was implemented
to reduce the discharge of household
wastewater into the Voronezh River.
At the end of 2021, compared
to 2020, the volume of effluent
discharge reduced by 0.7 million
m3 (–8%) and the flow of pollutants
into the water body was reduced
by 1,800 tonnes (–22%).
Since 2016, the volume of water
discharge at the Lipetsk site has
decreased by 3.5 million m3 (–32%),
the amount of pollutants discharge
into the river has been reduced
by 6,300 tonnes (–46%). Over the same
period, water discharge at NLMK Ural
more than halved, the amount
of pollutants discharged into water
bodies reduced by more than 6 times
due to the closure of several outlets.
At NLMK Kaluga, industrial effluent
discharge was completely stopped,
there is no pollutants discharge
into water bodies.
The goal of the Strategy 2022 to reduce
pollutants discharge into water bodies
was achieved in the reporting year.
The new Environmental Programme
has set a new goal of zero discharge
of pollutants with effluents at the Group's
Russian companies by 2027.
1 Not including mining waste – overburden and beneficiation tailings – which is not considered waste in many geographies.
2 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.
Environmental protection
89
88
Environmental protection
Annual Report 2021
1 The total volume of generated overburden is indicated. For Stagdok and Dolomit, overburden is not waste and is utilized for backfilling post-mining
areas, as the mine is developed sidewards, 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.
Overburden and beneficiation tailings generated and utilized by NLMK Group, m t GRI 306-3
GRI 306-4 GRI 306-5
Indicator
2017
2018
2019
2020
2021
Stoilensky overburden and beneficiation tailings
53.9
46.6
53.7
61.4
64.6
Share of utilized Stoilensky overburden and beneficiation tailings, %
9
10
10
8
8
Overburden generation1
48.5
39.8
51.3
60.5
60.7
Share of utilized overburden, %
25
26
29
29
28
Generated beneficiation tailings
18.2
19.5
20.5
21.4
23.9
Utilized beneficiation tailings, %
25
25
26
24
23
In 2021, a pilot project was successfully
launched at the Lipetsk site together
with the Russian company Eco-Gradient
to clean oily scale using the coalescence
method. This technology
is an environmentally friendly method
of cleaning mill and BOF scale from oil
products. The new technology will make
it possible to feed recyclables back
into sinter operations without burning oil
and to recover high-quality oil product
for further sale.
By creating a competitive
environment between final processors
and consumers of secondary raw
materials, as well as by optimizing
logistics processes, the cost of third-
party disposal in 2021 was reduced
by 10% compared to 2020.
In NLMK Group, waste includes
substances or items that are not
processed in-house, which are formed
during production, performance of works,
provision of services or in consumption,
which are processed/disposed of by third-
parties or are buried/landfilled. GRI 306-2
0.09% (0.06 m t)
97.9%
Class V ( 65.6 m t
incl. 96.5% – Stoilensky
overburden and tailings
(64.6 m t))
2%
Class IV (1.3 m t)
0.086%
Class III
0.001%
Class II
0.000%
Class I
66.98 m t
slu
dg
e a
nd
d
ust
bri
qu
ett
es
ca
pti
ve
el
ec
tri
c e
ne
rg
y
Bla
st
fur
na
ce
ga
s
Blast
furnace
Briquetting
plant
Recovery
co-generation plant
Containment
ponds
CLOSED-LOOP
CYCLE AT
NLMK LIPETSK
20
bn m3 pa
off-gases utilized
2.0
bn m3 pa
water reused in the closed-loop
water supply system
Closed-loop
water supply system
1.8
m t pa
recyclables reused
Waste generated by NLMK Group's Russian assets by hazard class, m t
Total waste generated and utilized by NLMK Group, m t GRI 306-3 GRI 306-4 GRI 306-5
Indicator
2017
2018
2019
2020
2021
Waste generation1
1.5
1.5
1.5
1.4
1.6
• hazardous2
0.1
0.1
0.1
0.1
0.1
• non-hazardous
1.4
1.5
1.4
1.3
1.5
Secondary raw materials recovered in-house
1.9
1.8
1.9
2.0
1.3
Total waste and recovered recyclables
3.4
3.4
3.4
3.4
2.8
• hazardous2
0.1
0.1
0.1
0.1
0.1
• non-hazardous
3.3
3.2
3.2
3.2
2.7
Secondary raw materials recovered by third parties
1.0
1.2
1.2
1.2
1.4
• hazardous2
0.1
0.1
0.1
0.1
0.1
• non-hazardous
1.0
1.1
1.2
1.2
1.3
Waste disposal at third-party landfills
0.2
0.1
0.1
0.1
0.1
• hazardous2
0.0
0.0
0.0
0.0
0.0
• non-hazardous
0.2
0.1
0.1
0.1
0.1
Incinerated waste
0
0
0
0
0
Secondary raw materials accumulated at year-end
5.7
5.9
6.1
6.1
1.6
Recycling of secondary iron-containing raw materials, %
91.4
93.3
98.8
99.5
99.6
Recycling, total3, %
96.9
97.6
98.0
98.8
98.9
1 Excluding secondary raw materials recovered in-house, Stoilensky's overburden, and tailings.
2 Hazardous waste includes I-III hazard class waste.
3 Recycling includes waste disposal and by-product recovery without processing of accumulated recyclables.
In 2021, waste generation increased
by 0.2 million tonnes due to a 10%
increase in steel output. In 2021,
4.5 million tonnes were excluded from
the previously accumulated secondary
raw materials. At the same time,
the recycling of iron-containing raw
materials approached 100%, thanks
to the processing of iron-containing sludge
at the briquetting factory built in 2019.
The share of processed sludge increased
from 47% in 2018 to 100% in 2021.
Further, it is planned to process
the entire volume of generated sludge
at the plant and gradually process
the previously accumulated sludge.
The total share of recycling, excluding
processing of previously accumulated
raw materials, amounted to 98.9%,
and taking into account the accumulated
waste – 129.5%.
Environmental protection
91
90
Environmental protection
Annual Report 2021
DUST CONTROL IN THE STOILENSKY MINE
In the Stoilensky mine, a watering machine with a tank volume of 110 m3
was put into operation, which makes it possible to irrigate the faces and roads
in the mine twice as fast compared to 35 m3 tank trucks. An experimental
project to create such equipment was implemented by experts from
Stoilensky and the Grodno Mechanical Plant.
Beneficiation
plant
Pelletizing
plant
Thickening
units
Tailings
dam
Construction
CLOSED-LOOP
CYCLE AT
STOILENSKY
Open-pit mine
open extraction of rich
ore and quartzite
31,000
t pa
captured dust utilized
in pellet production
6.5
m t pa
rock overburden
utilized
5.5
m t pa
tailings utilized
for dam construction
0.5
bn m3 pa
water reused
in the closed-loop
water supply
system
Bag and electric
filters
NLMK VTORCHERMET, A LEADER IN SCRAP FERROUS
METAL PROCESSING
One NLMK Group asset, NLMK Vtorchermet, 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. Processing scrap metal helps
both rid the environment of scrap and significantly reduce consumption of natural
resources and energy.
NLMK Vtorchermet annually processes 5 million tonnes of scrap metal.
NLMK Group continuously implements
measures to minimize the generation
of hazardous waste. Part of the generated
hazardous waste is disposed
of by the Group at its own sites, part
is transferred for disposal or neutralization
to specialized organizations that have
the appropriate licenses.
In 2021, sorting and separate collection
of plastic tableware was organized
at the Lipetsk site. The use of plastic
tableware is one of the preventive
sanitary measures amid the pandemic.
Thus, the transfer of all types of plastic
to a specialized company for recycling
in 2021 increased by 14% compared
to 2020.
Production lifecycle
NLMK Group companies produce 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.
NLMK Group products are part of circular
economy: 100% of the products can
be recycled and recovered, 35%
of the Group's steel is produced from
ferrous scrap. GRI 306-4
Tailings dams
and hydraulic
engineering structures
The organizational structure
of NLMK Group includes dedicated
services and units responsible
for the safety of hydraulic structures.
On an ongoing basis, measures
are taken to monitor and control
ENERGY EFFICIENCY WHILE REDUCING HAZARDOUS
WASTE
In 2021, a large-scale project to modernize the lighting systems
at the Russian sites of the Group was launched. One of the objectives
of the project is the complete elimination of mercury-containing light sources,
with the replacement of lamps with modern LEDs. Implementation of the project
in the near future will make it possible to cease generation of Class I hazardous
mercury-containing waste. Another task is to increase the efficiency of lighting
systems in the production units of NLMK Group's Russian companies to ensure
standard illumination of workplaces while reducing power consumption. In total,
more than 90,000 light units will be replaced.
99.9%
of the waste, generated by NLMK Group's
Russian companies in 2021,
is non-hazardous.
the state of the environment throughout
the entire life cycle of deposits
and tailings. All deposits developed
by the company are at the stage
of industrial development or exploration.
Currently, iron ore reserves have been
explored for over 130 years ahead,
and the mine closure is not planned.
In 2021 a comprehensive survey
of Stoilensky tailings dams and hydraulic
engineering structures was conducted
together with specialized government
agencies, general designed and experts.
The survey assessed the safety level
of the Stoilensky tailings dams and
hydraulic engineering structures
as ‘normal’ (the best possible option).
The Group duly informs local
communities about the existence
of the tailings dam and holds
regular public hearings regarding
the development of the facility. All
development projects of the company
are coordinated with stakeholders.
Stoilensky’s tailings dam is the only
NLMK’s tailings dam, built in 1984.
Throughout its operation, no
environmental incidents related
to the tailings dam systems
and structures have been recorded.
The dam has a local warning system,
which is checked monthly by employees
of Stoilensky and experts from
Rostekhnadzor. A plan for the liquidation
of accidents of tailings dams
and hydraulic structures has been
developed, which is updated annually.
Staff training is carried out at least
once a month. In September 2021,
scheduled training sessions were held
with the involvement of employees
of the Russian EMERCOM. According
to the conclusion of the specialized
state committee, monitoring of seismic
activity for the area of the tailings
is not required.
The Stoilensky tailings facility uses
an efficient and environmentally friendly
method of processing waste rock
after beneficiation, which involves
the extraction of liquid and further
forced transportation of tailings
in a condensed state. This saves
natural resources: 80% of the process
water used during transportation
is returned into production. In addition,
the dusting is significantly reduced,
since thickened tailings are not subject
to weathering.
No excess water intake with beneficiation
tailings in the tailings dam eliminates
the risks of its overflow and reduces
pressure on the dams. Taking
into account tailings thickening
and measures to ensure the safety
of hydraulic structures, the risk of dams
breach at Stoilensky is under control
and has a conditionally acceptable level.
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. The cost of the tailings storage
maintenance programme amounted
to RUB 416 million in 2021.
Environmental protection
93
92
Environmental protection
Annual Report 2021
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Coke over
battery
Recovery
plant
Co-generation
plant
Slurry
collectors
CLOSED-LOOP
CYCLE AT
ALTAI-KOKS
0.3
bn m3 pa
water reused in the closed-loop
water supply system
Closed-loop water
supply system
11,000
t pa
recyclables reused
1.5
bn m3 pa
Natural gas savings
A total of 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, 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.
74
Carbon oxide (IV)
8
Nitrogen oxides (III)
10
Sulfur oxide (III)
7
Dust (III)
<1
Other (III–IV)
0.2
I–II
I – extremely hazardous
II – highly hazardous
III – moderately hazardous
IV – low hazard
314.2 k t
NLMK Group's emissions by hazard class, %
Atmospheric air protection
Air protection priorities
NLMK Group devotes considerable
efforts to reducing its air emissions
and has set a target of reducing specific
air emissions from 18.9 kg/t in 2018
to 18.0 kg/t of steel by 2023, or by 5%.
In 2021, the company began to develop
priority projects under a long-term
programme for the modernization
of de-dusting systems. The new
Environmental Programme 2027 also
provides for operational measures
for the repair and maintenance
of de-dusting systems to improve
cleaning efficiency.
Since 2000 NLMK Group’s specific
emissions more than halved, from
43.3 to 18.1 kg/tonne of steel. Overall,
with almost a two-fold increase in production
the amount of cumulative impact
on the environment was reduced by 58%.
Emission of controlled
substances
In 2021, gross emissions decreased
by 17,300 tonnes (by 5%) compared
to 2018 (base year of the Strategy
2022), with comparable steel output.
Specific emissions per tonne of steel
were also reduced. Specific emissions
display a planned decline towards
the target of 18.0 kg/t of steel in 2023
with production output kept flat.
BEACHES WITHOUT DUST
A project was implemented at Stoilensky, which made it possible to radically
reduce the formation of dust on the dry beaches of the tailings. The new
dust suppression system includes an adaptive water irrigation infrastructure
and an innovative processing technology with a special component that
suppresses the formation of dust even in windy conditions. Investments
in the project amounted to RUB 150 million.
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) reduced
almost ten-fold from 2000
to 2021.
STABLE AIR QUALITY
NLMK summed up the results of the annual environmental monitoring
of the state of atmospheric air at the border of the sanitary protection zone
of the site. Analysis of the data confirmed the low impact of production
on the adjacent territories – 99.7% of all measurements showed that
the content of substances in the air is below the maximum permissible
concentrations, that is, it is safe for the population.
Environmental protection
95
94
Environmental protection
Annual Report 2021
Emission reduction projects completed under the Environmental Programme in 2019–2021
Site
Event
Ecological effect
Lipetsk
site
Revamping of de-dusting systems,
replacement of air heaters and technical
re-equipment of blast-furnace slag granulation
plants during the BF-6 overhaul
Reducing H2S, SO2, dust and CO emissions, elimination
of visible emissions
Achieving a purification rate of 99.9%, recovering 100%
of the captured dust
Total effect is 5,663 tonnes per year
Revamping of de-dusting systems during
the BF-4 overhaul
Reducing dust emissions, eliminating visible emissions
Achieving a purification rate of 99.9%, recovering 100%
of the captured dust
Total effect is 234 tonnes per year
Revamping of the off-gas ducts of BOFs
No. 2 and No. 3, construction of a system
for cleaning fugitive emissions in BOF Shop
No. 2
Reducing dust and CO emissions, eliminating visible
emissions
Achieving a purification rate of 99.9%, recovering 100%
of the captured dust
Total effect is 3,096 tonnes per year
Revamping of the aspiration-technological unit
(ATU-24) in the refractory shop
Reducing dust emissions at the site by more than 90%
Increasing productivity of the aspiration system by 20% – up
to 240,000 m3/hour
Total effect is 64 tonnes per year
Revamping of capture departments
with integration of coke oven gas flows of coke
oven batteries
Reducing phenol emissions by 66% and H2S by 31%
at the site
Construction of a new waterless cooling
section for the entire slag generated in BF Shop
No. 1
Switching to waterless slag cooling, reducing H2S emissions
The overall effect is a 3.5-fold reduction in hydrogen sulphide
emissions at the site
Revamping of the BF-3 casthouse
de-dusting unit
Reducing dust emissions by 60% at the source
Effect – 200 tonnes per year
Revamping of the aspiration system
for capturing fugitive emissions of mixer No. 2,
BOF Shop No. 1
Reducing dust emissions by 80% at the source
Effect – 100 tonnes per year
Stoilensky
Technical re-equipment of the technological
aspiration unit ATU-1 of the crushing
and screening section at the beneficiation plant
The possibility of additional capture of 700 tonnes of dust has
been implemented. The risk of exceeding the maximum allowable
emissions at the source has been eliminated, the concentration
of dust at workplaces has been reduced four times
The degree of purification of emissions increased from 35 to 96%
Emission reduction projects
PURIFIED GAS FERTILIZER
In 2021, NLMK began supplying a new type of nitrogen fertilizer, granular ammonium sulfate, which is a by-product of coke
oven gas treatment.
NLMK is the only producer of ammonium sulfate in the Central Black Earth region. It is produced at the new coke oven gas
capture and purification complex, which was put into operation in 2019. The best available technologies enable returning
100% of ammonium sulfate dust into the process, as well as significantly reducing the emissions of hydrogen sulphide –
by 31%, phenol – by 71%, ammonia – by 79%, naphthalene – by 23%.
1 Without the impact of temporary factors associated with a decrease in production.
2 Russian companies.
3 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.
Volume of significant air emissions by NLMK Group by substance type GRI 305-7
Indicator
2017
2018
2019
2020
2021
Total, NLMK Group, ‘000 t
333.8
331.5
317.0
313.3
314.2
• per unit of production, kg/t
20.5
19.8
18.91 (20.2)
18.61 (19.8)
18.1
NOx emissions, '000 t
27.1
27.2
26.2
26.1
26.3
• per unit of production, kg/t
1.6
1.6
1.7
1.7
1.5
SO2 emissions, '000 t
31.8
31.7
29.5
31.0
30.6
• per unit of production, kg/t
1.9
1.8
1.9
2.0
1.8
Dust emissions, '000 t
25.7
24.4
22.5
23.0
20.7
• per unit of production, kg/t
1.5
1.4
1.4
1.4
1.2
СО emissions, '000 t
245.9
244.8
235.3
230.1
233.6
• per unit of production, kg/t
14.4
14.0
15.0
14.5
13.4
Volatile organic compounds, '000 t
2.6
2.7
2.8
2.6
2.6
Hazard class I substances2, t
1.2
1.3
1.2
1.2
1.1
• per unit of production2, g/t
0.07
0.08
0.08
0.08
0.07
Hazard class II substances2, t
552
547
514
480
490
• per unit of production2, g/t
0.03
0.03
0.03
0.03
0.03
NLMK Lipetsk
• CO, per unit of production, kg/t
16.5
16.3
17.7
16.01 (16.8)
15.7
• NOx, per unit of production, kg/t
1.2
1.2
1.3
1.21 (1.3)
1.2
• SOx, per unit of production. kg/t
1.6
1.7
1.7
1.71 (1.7)
1.5
Note: Specific indicators for NLMK Group are calculated based on NLMK Group steel output volumes, taking into account NBH, for NLMK Lipetsk –
based on its output volumes for the reporting period.
2017
334
332
317
313
314
17.1
17.5
15.7
15.8
17.4
19.5
18.9
20.2
19.8
18.93
18.63
18.1
2018
2019
2020
2021
Total air emissions, ‘000 t
Specific air emissions, kg/t
Steel output, m t
Specific air emissions by NLMK Group
NLMK Group is developing non-
standard and innovative solutions
to meet environmental challenges.
For example, in 2021, pilot
tests of a blast-furnace slag dry
crystallization unit using an innovative
waterless cooling technology
were carried out at the Lipetsk site.
The technology allows not only
to reduce the release of hydrogen
sulphide in comparison with water
cooling of the slag, but also to obtain
new products. In 2022, NLMK plans
to continue testing this technology
on BOF slag.
Environmental protection
97
96
Environmental protection
Annual Report 2021
The company acknowledges
the importance of deforestation
issues. NLMK Group has
a deforestation policy in place: if
a tree is cut down, two new ones
must be planted in its stead.
measures in line with legislation.
The measures that the Group
undertakes to recover disturbed
territories are sufficient according
to Russian legislation.
NLMK Group conducts operations
on industrial lands and residential areas
in line with applicable law. Group assets
do not operate in environmentally
protected land or on land with a high
biodiversity value. The company’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 water
withdrawal inlets are equipped with fish
protection devices. The sites’ location
does not prevent the movement
of migratory birds and animals.
NLMK Group has organized
a comprehensive assessment of possible
involvement in biodiversity conservation
projects. Such programme actions
have been developed at NLMK Group’s
Russian companies.
Ecosystem development
In 2021, NLMK Group assessed
its impact1 on biodiversity in line
with the stages stipulated in the Natural
Capital Protocol2 and its auxiliary
document, Integrating Biodiversity
into Natural Capital Assessments. This
enabled the company to make decisions
more effectively and to manage
risks. The assessment showed
that the company’s operations
have no direct significant impact
on biodiversity. GRI 304-2
The company’s measures are structured
in line with the universally accepted
AR3T approach (Avoid, Reduce, Restore
& Regenerate, Transform) to setting
science-based biodiversity conservation
targets. This approach is described
in the Science Based Targets
for Nature3 guidance. The structure
of the AR3T approach covers measures
for preventing potential impact,
reducing current impact, regenerating
and recovering ecosystems,
and transforming the ecosystems that
companies operate in.
In line with A3T, managing the human
impact of Group companies
on biodiversity is mainly linked
to measures aimed at restricting
and reducing their footprint. The main
biodiversity efforts are aimed at reducing
any existing impact and taking offset
1 The assessment was made for the Group’s Russian companies.
2 Natural Capital Protocol is a system that supports decision-making and allows organizations to determine, measure, and assess their direct
and indirect impact, as well as their level of dependency on natural capital.
3 https://sciencebasedtargetsnetwork.org/wp-content/uploads/2020/11/Science-Based-Targets-for-Nature-Initial-Guidance-for-Business.pdf.
The Group regularly implements
measures that aim to rehabilitate
land affected 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 Group’s mining
companies. The programmes are being
implemented as planned. In 2021,
rehabilitation was carried out on 49
hectares of disturbed land.
Area occupied by Group companies and reclaimed land, ha
GRI 304-3
Indicator
2019
2020
2021
Area1
11,973
11,971
11,959
Land rehabilitated
15
10
46
Cut down | Planted
Long-term programmes
for biodiversity
recovery
NLMK Group aims to manage biodiversity
matters based on best industry practices
and recommendations of reputable
international organizations, such as,
among others, IUCN (International Union
for Conservation of Nature and Natural
Resources); TNFD (Taskforce on Nature-
related Financial Disclosures); WWF
(World Wild Fund for Nature); SBTN
(Science-based targets for nature).
The approach to target setting is based
on preliminary assessment of the current
state and baseline biodiversity
indicators at the company’s territory
to prepare measurable and relevant
metrics for biodiversity management
and progress assessment. In 2021,
the company began to develop its
strategy and programme for biodiversity
conservation using a hierarchy
of mitigation measures, reaching first
a No Net Loss, and then a Net Positive
Impact on biodiversity for all Group
companies using the Prevent – Reduce –
Recover – Compensate principle.
NLMK Group's Environmental
Programme 2023 already features overall
targets and metrics with a direct or
indirect impact on biodiversity:
•
NLMK Group’s CO2 emission
reduction programme (reducing
specific emissions, t/t of steel)
•
Reducing air impact with individual
substances (CO, NOx, SOx, dust,
Class I and II substances, kg/t
of steel)
•
Reducing impact on water
resources (specific water discharge,
m3/t of steel)
•
Reducing pollutant discharge
into water bodies (‘000 t)
•
Increasing usage of overburden,
tailings, and iron-containing wastes
(share of overburden and tailings
utilization, recycling of secondary
iron-containing raw materials, %)
Company
Action
Environmental effect
Costs, RUB ‘000
Stoilensky
Research work and environmental
monitoring of the impact
of Stoilensky’s industrial operations
on biodiversity
Cataloguing the biological diversity of flora
and fauna
Making a list of rare and protected species
in order to preserve populations
850
NLMK Lipetsk
Replenishing bird populations
Natural bioindicator of good environmental
conditions
Preserving Red Book bird species
13,180
Altai-Koks
Releasing 11,218 juvenile carp
into the Ob river.
Replenishing aquatic biological resources
280
Repairing the fish protection devices
at the bank water intake
Minimizing harm to aquatic biological
resources
140
NLMK Lipetsk
Dolomit
VIZ-Steel
Technical and biological recultivation
Recovering 49 ha of land disturbed
by mining operations
2,015
NLMK Lipetsk
Stoilensky
Stagdok
Altai-Koks
Dolomit
Reforestation
Planting 27,000 trees and shrubs
Caring for 18,500 ha of planted forests
three times a year
Landscaping 26,000 m2 of territory
54,080
Total
70,545
NLMK CONTINUES
UPGRADES
OF ENVIRONMENTAL
PROTECTION
EQUIPMENT
NLMK is completing
a large-scale reconstruction
of the exhaust systems
in the Blast Furnace No. 3
casthouse and in the mixing unit
in BOF Shop No. 1. The project
will reduce dust emissions
by 350 t.
AIR PURIFICATION SYSTEMS REPLACED AT STOILENSKY
In 2021, Stoilensky launched a major project to modernize the aspiration
system in the medium and fine crushing building of the beneficiation
plant. The commissioning works are scheduled to compete in Q1 2022.
The implementation of the project will significantly reduce the concentration
of dust in the air of the working area and halve the gross emission of dust
into the atmosphere. Total investment in the project exceeds RUB 600 million.
The replacement of the aspiration system at the crushing and sorting site
of the concentrating plant is also continuing. The phased replacement of the air
purification system will improve the condition of workplaces, reduce dust emissions
by six times and allow the introduction of the best available technologies. Total
investment in the project exceeds RUB 200 million.
1 The data has been adjusted in comparison with the Annual Report 2020.
Environmental protection
99
98
Environmental protection
Annual Report 2021
Cooperation with stakeholders
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 environmental park occupies more
than 5 hectares of land situated between the BOF shops of the Lipetsk
site. The lake is filled with process water from the Lipetsk site that has
undergone treatment following its use in production. The park is inhabited
by 550 birds of 52 species, including five species from the Russian Red
Book and the Lipetsk Region Red Book. Every year, up to 200 waterfowl
from the urban surroundings flock here for the winter. All birds are fed here
according to the diet of the Moscow Zoo, there are enough provisions
for both local and guest birds. The lake is also inhabited by fish, 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 2021, populations in the park have been replenished. Birds of 22 species
have moved to Swan Lake from the Penza and Lipetsk zoos, Vorob’i
(Sparrows) and Malinki (Raspberries) bird parks from the Rostov and Kaluga
regions, respectively.
BREEDING CENTRE
FOR RARE CRANE
SPECIES IN THE OKA
NATURE RESERVE
NLMK cooperates annually
with a breeding centre
for rare crane species
as part of the Eurasian
Regional Association of Zoos
and Aquariums’ programme
for the conservation of cranes
in 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 and genetic features
of individual populations that will
help both breeding in captivity
and reintroduction into nature.
Cranes from the Russian Red
Book live in the Swan Lake
Environmental Park.
STOILENSKY CONTINUES RESEARCH AND MONITORING OF BIODIVERSITY JOINTLY
WITH BELOGORYE NATURE RESERVE
In relative proximity to the production site of Stoilensky lies Yamskaya Steppe, one of the sections of the Belogorye Nature
Reserve. This reserve is one of the smallest and oldest protected natural territories in Russia. It was founded in 1999 based
on the Les Na Vorskle reserve, which existed since 1924. The objective was to preserve and study the typical and unique
ecosystems of the Cretaceous South in the Central Russian Upland. Yamskaya Steppe covers a surface area of 566 ha,
and the width of its preservation zone is 1 km. It is located 12 km to the South-West of Gubkino. The section of meadow
steppe is located near the watershed of the small Chufichka and Dubenka rivers, which belong to the Oskol River basin.
Since 2020, NLMK has been carrying out biodiversity activities and monitoring based on contracts with the reserve. In 2021,
the two parties continued joint research work and environmental monitoring of the impact of Stoilensky’s industrial operations
on biodiversity:
• Developing methodological frameworks for environmental monitoring of the impact on the reserve’s condition
• Continuing the inventory of biological diversity, including in the nature reserve
• Assessing the condition of rare and endangered species of plants and animals in the nature reserve and adjacent
territories
• Validating the monitoring methods and air quality evaluation in the Yamskaya Steppe nature reserve
• Characterizing the condition of surface water quality in the Chufichka River basin
NLMK GROUP
COMPANIES OFFSET
FISH STOCKS
Every year NLMK works
to release juvenile fish into water
bodies in order to replenish
fish stocks. The incubation
and release of the fish is carried
out by specialized organizations
as part of contractual relations.
In 2020, the Altai-Koks
environmental team began
a six-year programme to release
juvenile fish into one of the water
bodies of the Verkhneobsky
basin. As part of this programme,
the company plans to release
more than 100,000 juvenile
carp into the rivers. In 2021,
over 11,000 juvenile carp have
been released into the Ob River,
bringing the total number since
the beginning of the programme
to 38,000.
NLMK LIPETSK RENEWS ITS PLANTED GREENERY
The greenery at the site was renewed as part of a territory landscaping
programme.
With a view to maintain an environmentally efficient green barrier, almost 2,500
trees and about 12,000 shrubs were planted on the industrial site and along
the internal roads, and about 25,000 square meters of lawns and flowerbeds
were arranged and renovated. The territory of the site was decorated
with new seedlings of poplar, fir tree, maple, and linden, as well as spirea
and cotoneaster bushes.
The works are carried out as part of a 5-year programme created
with the Voronezh State University of Forestry and Technologies
for the inventory and replenishment of the plant’s greenery. In 2019–2021,
the condition of trees and shrubs was examined on a surface area of 41.7
hectares. The inventory results provide reliable information about the condition
of the plants, any trees in emergency condition, the state of the soils,
and the most suitable types of trees and shrubs to plant.
In 2019–2021, 167,000 trees were planted at NLMK Group’s production sites.
NLMK’s biodiversity preservation
programme for 2022 includes such
measures as planting tree seedlings
on a surface area of 6.7 hectares,
caring for the planted forests at Group
Plans for 2022 and the medium term
sites, releasing over 10,000 juvenile fish
at Stoilensky and Altai-Koks to replenish
aquatic biological resources, and continuing
biodiversity research and monitoring jointly
with natural reserves.
Environmental protection
101
100
Environmental protection
Annual Report 2021
Previously, timber was used as lining when
transporting metal by sea. Every year,
close to 13,000 m3 of timber, or almost
three railway trains, would be used for this
purpose. In the new scheme, timber
is replaced with reusable fasteners made
from special polymer materials.
Now, 20 times less timber is required
for shipping a batch of metal. At the same
time, there is no need to recycle used
timber, whereas demand for recycling
household plastic waste into polymer
material is incentivized.
Fifty thousand 1.5-litre plastic bottles
are needed to produce new polymer
fasteners for transporting a 5,000-tonne
batch of slabs. The new fasteners are easy
to use, accelerating the process of loading
steel semis onto a ship.
1.5-litre plastic
bottles
50,000
reused as feedstock
million saved
annually
>RUB100
with the new transportation scheme
20
is required for shipping
a batch of metal
times
less timber
Frederiksværk (Denmark)
Kaliningrad (Russia)
Reusable fasteners
from special polymer materials
POLYMER
AGAINST
DEFORESTATION
NLMK Group has introduced the use of polymer
materials instead of timber for the transportation
of steel semis, for the first time in the history
of international commercial shipping. The new
transportation scheme saves more than
RUB 100 million annually. The new transportation
scheme is now being used on the Kaliningrad –
Frederiksværk (Denmark) route. The scheme will
be scaled up within the NLMK Group supply chain.
103
102
Annual Report 2021
Environmental protection
STAKEHOLDER DIALOGUE
106
Our approach to stakeholder engagement
106
SUPPLY CHAIN MANAGEMENT
112
Our approach to supply chain management
113
Supply chain responsibility
114
Selection and qualification of suppliers and contractors
115
Evaluation and audit of suppliers and contractors
115
2021 performance
116
HUMAN RIGHTS
118
Managing human rights issues
118
Integrating fundamental human rights principles
into NLMK Group’s activities
119
Human rights reporting channels
120
OUR EMPLOYEES
122
HR strategy priorities
123
Our employees
124
Assessment and remuneration
127
Training and development
129
Social Policy
137
Plans for 2022 and medium term
143
OCCUPATIONAL HEALTH AND SAFETY
144
Our approach to managing occupational health and safety
144
Effectiveness of OHS efforts
147
OHS investments
147
Management system and certification
147
OHS risk assessment
148
Fire safety
148
Staff training and engagement
149
Industrial safety
150
Emergency preparedness and incident reporting
151
Traffic safety for road and rail transport
151
Personal protective equipment
152
OHS Hotline
152
Partnerships with contractors
152
Assessing the maturity of the OHS system
153
2021 performance
154
Plans for 2022 and the medium term
156
DEVELOPING LOCAL COMMUNITIES
158
Priority areas of support for local communities
158
2021 performance
161
Plans for 2022 and the medium term
165
SOCIAL
PARTNERSHIP
A single colony
of triple eutectic —
the main structural
component
of a high-strength
zinc-aluminum-
magnesium coating
Scale 1 : 10,000
Stakeholder
dialogue
Our approach to stakeholder
engagement
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 сompany’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
•
Сompany clients
•
National, and regional government
authorities
•
Investment and banking 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 сompany’s stakeholder map
is based on the needs and interests
of stakeholders and NLMK Group,
as well as expert assessments
from the сompany’s management,
and is regularly reviewed and updated
as necessary. In 2021, the stakeholder
map did not undergo any significant
changes. GRI 102-42
NLMK stakeholder map in 2021
NLMK uses various means to engage with stakeholders, thereby enabling the company to rapidly identify risks and opportunities
when working together with its stakeholders. In 2021, the company continued to maintain an active dialogue with all of its
stakeholders. GRI 413-1
38,900
employees
participated in NLMK Pulse survey
Business partners
Internal stakeholders
Other external stakeholders
Stakeholder target development area
Government
authorities
Shareholders
Clients
Suppliers
and contractors
Local
communities
Trade unions
Employees
Investment
community
Stakeholders
Maintaining a level of satisfaction
Active involvement
Maintaining awareness
The company’s influence on the stakeholder groups
Stakeholder group’s influence on the company
Low
High
Results of stakeholder engagement GRI 102-44 GRI 102-21
Government authorities
Importance for NLMK
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 operational activities. Given the intense competition
and market volatility, it is essential to have a stable regulatory environment that provides opportunities for long-term planning
and sustainable 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 сompany operates
• Reducing the environmental footprint
• Access to markets of finished products and materials
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
• Representing company interests in procedures of limiting market access
Stakeholder dialogue
107
106
Social partnership
Annual Report 2021
Consumers
Importance for NLMK
The consumers of NLMK products include leading manufacturers from various regions 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, loyalty, and trust and help grow sales of NLMK products.
NLMK strives to create a client-centred system that allows us to track and predict fluctuations in consumer demand
and to satisfy and anticipate our clients’ changing needs and expectations.
NLMK is continuously monitoring customer experience through Customer Journey Mapping. This method helps study
the points of contact between the client and the company on various customer journeys (such as the development of new
products, delivery, etc.). At each point, customer experience is analysed and corrective measures are elaborated, if
necessary.
In the current strategic cycle, NLMK Group 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)
In order to increase customer satisfaction, NLMK Group established a claim consideration procedure that fully complies
with international standards for quality management systems (ISO 9001:2015 and IATF 16949:2016). 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 the Group’s
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).
NLMK 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.
Stakeholder interests
• Compliance with contractual obligations
• High-quality products
• Development of a product line policy
• Competitive pricing
• Timely and reliable deliveries
Forms of engagement
• 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
Employees
Importance for NLMK
NLMK 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.
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 сompany seeks to increase employee engagement by improving feedback channels, conducting team-building activities,
and offering social support. The company regularly organizes live events with the CEO, where employees can ask him their
questions.
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 improvement
• Strengthens the Group’s employer brand
• Delivers information in a timely manner and provides an effective feedback mechanism
• Ensures convenient access to corporate services
• Develops horizontal links between colleagues
Stakeholder interests
• Decent salaries and the use of an incentive system
• Opportunities for professional development and career growth
• Comfortable, safe workspaces
• Compliance with employment laws and other regulations
• Compliance with the requirements of the International Labour Organization
• Respect for human rights
Forms of engagement
• Offering continuing education, training, and staff development programmes.
For more details on employee training, see the Training and Development section.
• Organizing regular safety training session, improving workplace conditions.
For more details 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 the management at various levels
• Monitoring and sustaining employee engagement.
See the Social Policy section for more details.
In 2021, our corporate NLMK Pulse Survey had a coverage of 38,900 employees, or around 83% of the headcount
at the Group’s Russian sites.
• 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 measures taken within the company.
Shareholders and the investment and banking community
Importance for NLMK
Shareholders own our business and influence the course of NLMK’s development. The company is committed
to safeguarding their interests.
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, and also actively engages with banks, which
are a source of capital for the company.
The key goals of our engagement with investors, shareholders and banks 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.
Shareholders and the investment and banking community
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, stability and sustainable practices of the company
Forms of engagement
• Disclosing information in various public sources: the company publishes 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, in 2020 and 2021
investor visits to sites were suspended 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 380 meetings with investors in various formats
• Regular exchange of information and responses to requests
For more details on shareholder and investor engagement, see the Information for Shareholders and Investors section
Stakeholder dialogue
109
108
Social partnership
Annual Report 2021
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. At industry level,
NLMK Group representatives regularly participate in working groups and commissions of the Association of Russian
Steelmakers, a representative authority, in order to enhance the Industry Tariff Agreement and negotiate with the Russian
Mining and Metals Trade Union. At the organizational level, social and labour relations are regulated by collective bargaining
agreements, which are concluded with the primary trade unions of the companies. These documents guarantee compliance
with the requirements of the International Labour Organization, including support for freedom of association, the right
to liberty and security of person, the prohibition of slavery and child labour, the prohibition of trafficking in persons,
the prohibition of discrimination based on sex, social status, or race, ensuring safe working conditions, occupational
health and safety, respect for the right to a minimum wage, and a system of benefits and remuneration. NLMK’s effective
engagement with trade unions helps to strengthen its brand as a socially responsible employer.
Stakeholder interests
• Compliance with employment legislation and protection of employee interests
• Compliance with the sectoral tariff agreement
• Compliance with the terms of collective bargaining agreements
• Compliance with the requirements of the International Labour Organization
Forms of engagement
• Conducting collective bargaining: in 2021, we continued a series of collective negotiations with the trade union
organizations of NLMK Group companies. Steps were taken to harmonize the basic benefits provided under such
collective bargaining agreements
• Concluding collective bargaining and other agreements and signing joint resolutions: in 2021, the terms of collective
agreements were renegotiated for NLMK Construction and Assembly Trust and NLMK Engineering. In 2020–2021,
collective bargaining agreement terms were renegotiated for 11 NLMK Group sites
• Working jointly on various commissions and committees
• Holding employee conferences
Suppliers and contractors
Importance for NLMK
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 the right high quality goods and services are purchased at the right time,
and that procurement is as competitive and transparent as possible. In addition, NLMK Group pays particular attention
to the compliance of its suppliers and contractors with sustainable development principles.
Most of the Group’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 main principles of such collaboration are outlined in the Supplier and Contractor
Code of Conduct, which sets out our requirements for suppliers and contractors and underscores our aspiration
to support the highest standards in compliance and corporate ethics. The Code also promotes compliance in ensuring
a fair and equitable approach to procurement, anti-corruption, managing conflicts of interest, respect for human rights,
environmental protection, and occupational health and safety.
Stakeholder interests
• 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
• Compliance with sustainable development principles
Forms of engagement
• Conducting pre-qualification of suppliers
• Developing competitive procurement procedures for goods and services
• Developing electronic data interchange (EDI) with 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, as well as a hotline for suppliers and contractors
• Conducting business meetings with suppliers and participating in conferences and industry associations
• Organizing supplier days (workshops) for various procurement categories with production site visits
• Organizing online conferences for suppliers to present NLMK Group’s procurement 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, supplier status,
production capacity, and compliance with sustainable development requirements, such as occupational health and safety,
industrial safety, and environmental requirements
For more details on the results of supplier and contractor engagement, see the Supply Chain Management section.
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,
as well as the company’s overall reputation. Such activities are an integral part of NLMK Group’s corporate social
responsibility.
NLMK Group companies are some of the largest employers and taxpayers in the regions where they operate. The company’s
social assets (medical clinics, health resorts, and corporate sports facilities) are available to local communities, making
a significant contribution to the social infrastructure of the regions.
The company has an interest in improving the living standards of local communities 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 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
• Company involvement in addressing the problems of local communities
• Jobs for local people, including the employment of people with disabilities
• 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 topic-specific conferences and events
• Processing stakeholder requests
For more details on the results of local community engagement, see the Developing Local Communities section.
Stakeholder dialogue
111
110
Social partnership
Annual Report 2021
1 Information on procurement practices is presented for the Group’s Russian companies.
Supply chain
management1
Major themes
Supplier environmental assessment
Key events in 2021
• Expanded use of electronic document management with suppliers
• Part of investment procurement process automated via SAP Ariba Sourcing
• NLMK started operating an automated warehouse complex
• Claim management automation project introduced
• the process of evaluating and informing suppliers about its results is automated
• NLMK Group acknowledged as “The Company of the Year in Procurement” by the results of the main occupational
competition of Russian procurement experts
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
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 the procurement
team and designed in a way 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:
– Contractors Qualification
Regulations
– Contractor Assessment Regulations
– Regulations on Contractors
Selection in Cooperation
with the Tender Commission, etc.
– Regulation on Category Strategies
Development
– Regulation on Cross-functional
Groups
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.
Key 2021 figures
RUB 230.9 bn
spending on goods and materials procured
in Russia
Supplier management process within NLMK Group
Supplier Relationship Management (SRM)1
Ensuring continuous
improvement
of suppliers’ work
to meet NLMK’s
requirements
Preliminary audits
and audits
of existing
suppliers
Supplier
performance
assessment
Systematic monitoring of potential risks associated with the work of suppliers, taking measures
to minimize threats and losses
Distribution
of suppliers
by group relative
to their importance
to the business
Risk management
Quality control
and identification
of risks associated
with supply
of products
1 Supplier Relationship Management
Supplier efficiency
management
Supplier
assessment
Supplier
segmentation
Supplier
qualification
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.
77suppliers
of goods and services were audited
Supply chain management
113
112
Social partnership
Annual Report 2021
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. The company does not purchase
any conflict minerals (conflict mineral
resources such as tin, tungsten, tantalum
and gold), linked with human rights abuses
in the Democratic Republic of Congo
and the neighbouring countries.
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 2021,
a project was launched to automate claim
management for instances when suppliers
fail to respect delivery timelines.
In 2021, the company changed its supplier
evaluation procedure and methodology.
Suppliers are evaluated and informed
automatically based on the results
of the quarter and calendar year
performance. All counterparties are rated.
The company also identifies critical
suppliers, using the following criteria:
high-volume suppliers, impact of supplied
goods and materials on production
continuity and regularity (critical component
suppliers), impact on final product quality,
non-substitutable suppliers, and location
of the suppliers.
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 transaction support centre
(Corporate Solutions Centre) ensures
the efficiency of procurement processes.
Having a single service centre for processing
transactions reduces costs, improves
levels of internal customer satisfaction,
and speeds 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. NLMK’s achievements in automating
procurement activities were recognized
within the broader professional community.
In 2021, NLMK Group was named
Company of the Year in Procurement
at the main professional competition
for Russian procurement experts.
EFFICIENCY
ASSESSMENT
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 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.
The company prioritizes partners striving
to promote reasonable consumption
of resources and ensuring compliance
with legal and social standards within
the supply chains. For instance, when
purchasing office goods and furniture,
NLMK selects companies that
demonstrate a highly responsible approach
to compliance with environmental safety
standards.
As part of efforts to increase responsibility
across the supply chain, NLMK
focuses on:
•
Cooperating with suppliers
and contractors with a strong
commitment to sustainable
development principles,
and with a developed sustainable
development strategy
•
Supporting small and medium-
sized businesses, and cooperation
with suppliers and contractors
owned by women or representatives
of vulnerable groups of the population
•
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
NLMK takes reasonable steps to eliminate
the risks of human trafficking and slavery
in the supply chain.
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 expects a great
deal from 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.
Evaluation and audit of 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 performance
Indicator
2019
2020
2021
Number of suppliers on which partnership restrictions were imposed
18
15
7
Number of suppliers with which NLMK Group decided to temporarily suspend
relations
6
7
6
Number of suppliers with which NLMK Group decided to terminate relations
11
13
18
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, product quality,
and company sustainability, 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.
Supply chain management
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Social partnership
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Supplier and contractor audits
Subject of audit
2016
2017
2018
2019
2020
2021
Goods and materials
22
35
39
34
13
57
Services
1
21
17
24
20
20
For more details on supplier and contractor environmental assessments, see the Supplier Environmental Assessment section
of the Environmental Protection chapter.
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
•
Adherence to human rights, 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.
2021 performance
Procurement from suppliers of goods and materials by supplier
country, % of total GRI 102-9
The company continued to actively
improve its procurement processes
and centralize the procurement of basic
materials, raw materials, and services.
Most notably, the сompany launched
a process aimed at simplifying
the electronic form used for self-
registration by counterparties.
The efficiency of interaction with suppliers
was improved through the digital assistant
functionality. Thus, 60% of purchase
orders were generated automatically,
and robotization of tender procedures
was launched (over 800 tenders have
already been held by a robot).
Due to the COVID-19 pandemic,
suppliers of basic raw materials
and equipment were diversified.
The procurement team and internal
customers’ efforts helped to avoid
the negative impact of the pandemic
on production performance. Supply
continuity risks were mitigated through
2,0271
87
Russia
1231
8
Europe
51
2
Kazakhstan
501
2
Others
141
1
Ukraine
RUB
230.9 bn
Note: data on procurement of goods and materials from third parties are presented
for the Group’s Russian companies. The amount does not include transportation and handling
expenses and customs duties.
Procurement volume in 2021 by key categories, RUB m (VAT excluded) GRI 102–9 GRI 301-1
Goods and materials category
Procurement volume
Coal and coal concentrates
99,738
Raw materials (without the main raw material categories)
40,254
Provision of repairs and maintenance
36,876
Refractory products
14,930
Process equipment
9,182
Iron ore (concentrate, pellets, and ore)
8,239
Provision of technology
7,263
Coatings
5,635
Coke and chemical raw materials, fluxes
2,068
Petroleum, oil, lubricants
2,337
Rolls
1,808
Information technologies
1,620
Work wear
675
Other
274
Total
230,898
There were no significant changes in the Group’s supply chain structure during 2021. GRI 102-10
In the reporting year, procurement from local suppliers for the Russian companies accounted for 87%, or RUB 201 billion. GRI 204-1
1 Number of suppliers.
PLANS FOR 2022 AND THE MEDIUM TERM
The Group intends to continue with its work to further automate and improve procurement processes. More specifically, the Group’s
plans include:
•
Developing sustainable development practices
•
Formalizing assessment of counterparties for exposure to environmental risks
•
Identifying and assessing critical non-tier 1 suppliers
•
Developing marketplaces (catalogues) for basic contractors
•
Extending robotization of standard procurement procedures
•
Upgrading warehouse logistics
establishing intermediate warehouses
at supplier sites; using formula pricing
to mitigate the risk of non-deliveries
due to rising raw material prices,
and expanding supervision of key
deliveries under contracts.
Supply chain management
117
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Annual Report 2021
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
•
The UN Guiding Principles
on Business and Human Rights
•
The UN Global Compact
•
Transforming our World: 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.
The following internal documents ensure
a unified approach to respecting human
rights in the Group’s activities at all
sites: NLMK Group’s Human Rights
Policy, NLMK Group Corporate Ethics
Code, NLMK Group Anti-Corruption
Policy, and collective bargaining
agreements.
NLMK’s human rights principles and their integration
into Group’s activities
NLMK’s human rights principles
Prohibition
of forced labour
Prohibition
of child labour
Prohibition
of discrimination
Respect
for the right
to a minimum wage
Provision of safe
working conditions
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 2021
In 2021, the company successfully integrated human rights provisions into the standard terms of business with contractors.
NLMK’s vendors and counterparties confirm that at the time of contract execution they respect and recognise human rights
envisaged by the Russian law and international legal instruments.
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 forced and compulsory labour.
Principle 5. Businesses should uphold the effective abolition of child labour.
UN Global Sustainable Development Goals
Key 2021 figures
0
violations of human
rights
were recorded during the reporting year
Managing human rights issues
NLMK also devotes special attention
to ensuring the right to freedom
of association and collective
bargaining, as well as to the issues
concerning child labour and forced or
compulsory labour, human trafficking,
and ensuring equal pay for equal
work. 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
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.
Integrating fundamental human rights principles
into NLMK Group’s activities
Fundamental principles
Areas of activity
Provision of safe working conditions
In organizing production, the company prioritizes the health and safety of its
employees above all. The company’s management monitors and reduces risks
associated with hazardous working conditions, increasing safety levels at the sites
of every NLMK company 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.
See the Occupational Health and Safety and Environmental Protection sections for
more details.
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.
See the Our Employees section for more details.
Human rights
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In 2021, NLMK recorded no cases
of discrimination related to human rights
violations GRI 406-1 GRI 102-17 ,
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. The company's employees
regularly undergo trainings on human
rights issues, including those organized
for the participants of the UN Global
Compact that the Group joined in 2019.
In addition, human rights issues
are included in the educational electronic
corporate course developed in 2021
on the Corporate Ethics Code and Anti-
Corruption Policy. GRI 412-2
GRI 412-1 The salient human rights
risks associated with the operations
of NLMK Group companies relate
to non-discrimination based on gender,
age, disabilities and other criteria,
the right to safe working conditions,
freedom of association and collective
bargaining, as well as the right
of local communities to a clean
environment. These risks have the most
significant impact on the employees
and contractors of the Group’s
sites, as well as on the citizens living
in the immediate vicinity of the sites.
In 2021, a mandatory human rights
clause was included in the standard
agreements with the Group’s contractors
in order to mitigate the risks of human
rights violations among the company’s
vendors. GRI 412-3 More detailed
information on avoiding the risks
of discrimination is available in the Diversity
and Inclusion section; on the health
risks, in the OHS Risks section,
and on environmental risks in the Climate
Change section. Information on exercising
the right to freedom of association
is available in the Trade Unions section.
In 2021, the company has successfully
integrated human rights provisions
into the standard terms of business
with the contractors. Thus, NLMK’s
vendors and counterparties confirm
that at the time of contract execution
they adhere to and respect human
rights envisaged by the Russian law
and international legal instruments including:
•
Support for freedom of association
•
The right to liberty and security
of person
•
Respect for the prohibitions
of the child and forced labour, human
trafficking, as well as the prohibition
for discrimination
•
Ensuring the occupational health
and safety of workers, as well as safe
working conditions
•
Respect the right to a minimum wage
In 2021, considerable attention was paid
to the issues of non-discrimination
and ensuring equal opportunities for all,
including persons with disabilities.
The company shared its experience
in the area taking part in the federal
and regional conferences, including
the round table of the Federation Council
Committee on Social Policy devoted
to Cooperation of Higher Education
Institution, Non-Profit Organizations
and Business on the Employment
of People with Disabilities
on 5 October, 2021.
NLMK participates in the 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.
NLMK’s activities aimed at protecting
human rights across all regions
where it operates are coordinated
by the HR Function and cover
100% of the company’s facilities.
Whenever 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 corporate
interests and to manage risks.
NLMK’s senior management team
is always engaged in making important
decisions. NLMK Vice President for HR
and Management System is responsible
for supervising the execution
of the Human Rights Policy. GRI 102-20
The company communicates its Human
Rights Policy to its stakeholders,
including its employees, subcontractors,
and business partners. In 2020,
the Human Rights Policy was translated
into the languages of all regions where
the company operates.
GRI 412-2
NLMK encourages all stakeholders
to report actions that violate human
rights. Employees, customers, suppliers,
contractors and other stakeholders can
use any feedback channel (including
in languages other than Russian) listed
on the NLMK website.
Human rights reporting channels
All messages and complaints received
by the сompany 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.
Complaints of human rights violations
can be directed to both the Hotline
and the Independent Compliance
Hotline (negotiated by an independent
operator and compliance unit of the Legal
Department). See the Compliance
and Corporate Ethics section for more
details.
Independent compliance
hotline
Anonymous
text messages
Telephone hotline
Anonymous email
NLMK intranet portal
Feedback forms on the NLMK
website
Fundamental principles
Areas of activity
Prohibition of discrimination
NLMK Group does not tolerate discrimination based on gender, religion, and other
grounds in its staff management activities, including hiring, and adheres to the same
principles when determining wages.
See the Our Employees section for more details.
Support for freedom of association
and collective bargaining
NLMK Group fulfils all of the requirements set forth in collective bargaining
agreements, and regularly engages with trade unions. The company also ensures that
conditions are in place to facilitate the creation of associations by making corporate
communications tools available and by supporting employee volunteering initiatives.
GRI 407-1
See the Our Employees and Stakeholder Dialogue sections for more details.
Prohibition of forced labour and child
labour
NLMK Group only signs employment contracts with individuals that meet the minimum
age requirements stipulated by the legislation. The company does not make use
of child labour. The company forbids the use of forced labour, penal and military
labour, slavery, and human trafficking. All employment at the company is exclusively
voluntary in nature. GRI 408-1 GRI 409-1
Respect for the rights of indigenous
peoples
NLMK Group estimates that there are no indigenous peoples present in the regions
where the Group companies operate GRI 411-1
PLANS FOR 2022 AND THE MEDIUM TERM
Given the international nature of NLMK’s operations and stakeholders’ interest for protecting human rights, the сompany will enhance
its approach to human rights issues.
In future reporting periods, we plan to engage the сompany's stakeholders in the human rights agenda by holding joint events
and inviting experts to work out joint actions on this issue. Another task will be to develop methodological approaches to assessing
how well 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.
Human rights
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Annual Report 2021
Our
employees
Key 2021 figures
RUB 3,654 m
total investment in staff training
and development
2.9 m
man-hours of training
7.2%
voluntary staff turnover at NLMK Group
34%
Women account of the management
and administrative staff
25%
Women account of the total number
of 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 2021
• Developing online trainings, introducing new professional training formats
• Working on an international project to create competency maps
and assessment tools for key steelmaking professions
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
Prizes and awards
In 2021, NLMK Group received a gold award in the Forbes’ Best Employer
in Russia ranking, organized together with the KPMG audit company.
NLMK Group received the highest grade (Platinum) in the Environment
and Corporate Governance categories, the combined result was Gold.
NLMK Group came first in the Crystal Pyramid HR Awards 2021. The company
topped the Corporate University of the Year nomination, and NLMK Group’s
Vice President, HR and Management System Mikhail Arkhipov was named HR
Manager of the Year.
NLMK Group’s Digital Diary project received a silver medal in the People
are the most valuable capital nomination at the annual SAP Value Award.
NLMK won the InterComm 2021 main award in the field of corporate
communications. The company’s Pictures of the war years documentary
topped the Event category, which focused on projects in the field of organizing
corporate events.
HR strategy priorities
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.
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. Much attention is paid
to the digitalization of production and non-
production processes, aimed at increasing
efficiency and reducing labour costs.
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.
NLMK’s corporate culture is built
on the principle of openness
and transparency. To this end, NLMK has
built up mechanisms that allow 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, one of the main sources
of information about news and important
events of the Group, where employees
can get answers to their questions
in an interactive format.
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. In addition, the company
provides training to employees on risk
management, cybersecurity, etc.
The Group seeks to apply a unified
approach to managing its staff, including
at its foreign companies.
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
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Annual Report 2021
1 Average headcount.
2 Headcount as of 31 December 2021.
Our employees
In 2021, NLMK Group’s average
headcount was 50,600 people, of whom
47,200 (93.2%) were employed
at the company’s Russian assets,
2,100 (4.2%) at its European divisions,
0,200 (0.4%) at international auxiliary
companies, and 1,100 (2.2%)
in the USA. GRI 102-7 GRI 102-8
Approximately 96% of NLMK Group
employees work under permanent
contracts, and around 4% under fixed-
term contracts. When working under
a fixed-term contract, any employee
has the right to review their salary,
participate in incentive programmes,
and is also provided with additional
benefits in accordance with the collective
bargaining agreement.
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 34% of all
employees, including 50% of white-
collars, 24% of white-collar managers
and 4% of shop-floor (revenue-
generative) managers (the total share
female managers is 16%).
Women account for 16% in junior
management positions. Among middle
managers there are 18% of women,
among top management (positions two
levels below the CEO) – 14%.
During the reporting year, 1,632 men
and 554 women were promoted.
A total of 22% are women among IT
and engineering professionals.
The average work experience of men
and women at NLMK companies
is at a comparable level: the average
work experience for men is 12 years,
for women – 13 years.
NLMK employees represent various age
groups, which attests to the lack of age
discrimination in NLMK Group’s HR
policy. In 2021, 23% of all employees
were aged over 50, 62% were aged
between 30 and 50, and 15%
were under 30. Of those in management
NLMK Group staff1 breakdown
by region in 2021, %
GRI 102-8
NLMK Group staff1 breakdown by segment in 2021, thousands
of people GRI 102-8
93.2
Russia
4.2
EU
2.2
USA
0.4
India, Turkey, Switzerland
50,600
50.6
30.4
8.0
6.7
2.3
2.1
NLMK Russia
Flat Products
NLMK Russia
Long Products
Mining division
Service
and auxilliary
companies
NLMK
Europe
NLMK
USA
1.1
NLMK Group staff1 breakdown
by contract type in 2021, %
GRI 102-8
96
Permament contract
4
Fixed-term contract
50,600
NLMK Group2 staff breakdown by gender and category in 2021, %
GRI 102-8 GRI 405-1
Blue-collar
managers
4
24
50
22
25
96
76
50
78
75
White-collar
managers
White collars
Blue collars
Total NLMK Group
Men
Women
positions (white-collar and blue-collar
managers), 75% were aged between 30
and 50, and 20% were aged over 50.
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 2021, NLMK Group’s Board
of Directors and Management Board
were made up of both men and women.
NLMK Group1 staff breakdown by gender and category in 2021, %
GRI 102-8 GRI 405-1
Gender composition
of NLMK Group governance
bodies as of 31.12.2021,
people GRI 405-1
Under 30
30–50 years
Over 50
Blue-collar
managers
22
19
21
23
23
3
5
16
17
15
75
76
63
60
62
White-collar
managers
White collars
Blue collars
Total NLMK Group
2
Board
of Directors
Management
Board
Men
Women
1
7
7
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 2021, labour productivity across
NLMK Group stood at 344 tonnes of steel
per person, growing year-on-year as major
investment projects were implemented
to upgrade the sites’ main equipment.
The changes in the previous years
are due to preliminary hires and training
in anticipation of higher output in 2021.
Labour productivity, t of steel/person
1 Headcount as of 31 December 2021.
2 Labour productivity without reduction of output at the Lipetsk site associated with large-scale BF and BOF overhauls.
NLMK Lipetsk
NLMK Group
437
463
482
502
503
448
497
461
2014
2015
2016
2017
2018
2019
20192
2020
20202
2021
499
505
268
283
308
321
328
297
322
305
325
344
Our employees
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Social partnership
Annual Report 2021
1 In 2021, involuntary turnover stood at 0.5%, with overall turnover at 7.8%.
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.
1 The average salary is calculated based on the NLMK Group methodology, which is based on the guidance of Article 139 of the Russian Labour
Code, Decree of the Russian Government No. 922 dd. 24 December 2007, Methodological Provisions on Statistics (Issue 1,2,3,4,5) of the Federal
State Statistics Service, and includes remuneration for time worked, vacation pay, compensation payments and bonuses. The average monthly salary
is calculated as the payroll for the period divided by the average number of employees for the period divided by the number of months in the period.
Employee voluntary turnover1
at NLMK Group
GRI 401-1
Strategic planning
for labour resources
As a high-tech company, NLMK strives
to manage its personnel as efficiently
as possible. The Group uses
a number people analytics systems
for strategic and tactical planning
of human resources. On the basis
of statistical data from past periods,
development and efficiency
improvement initiatives, the company,
together with representatives
of regional administrations
and enterprises of the Lipetsk Region,
forms a pool of competencies
and professions required in the future,
as well as recruitment to educational
institutions in the required specialties,
ensuring that the need for qualified
personnel is covered in five-seven
years ahead. People analytics
represent several easy-to-use
dashboards, which enable correct
assessment of the current situation,
the interconnectedness of events
and results based on big data,
and also contribute to making objective
decisions and outlooks.
NLMK Group new hires
by region in 2021, people
GRI 401-1
NLMK Group new hires by age
group in 2021, people
GRI 401-1
The company created more than 900 jobs
in 2021, 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 (in 2021,
they made up 95% of those hired).
In line with the equal opportunities
for all principle, NLMK implements
targeted employment projects for people
with disabilities. In 2021, the share of people
with disabilities hired by the company
was 0.4% (20 people) of the total new hires.
In total, the company employs 438 people
with disabilities (0.9% of the total number
of employees). Due to the specific nature
of the steel industry, which involves 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.
Turnover
In 2021, voluntary staff turnover increased
year-on-year to 7.3%.
The increase in turnover in 2021 year-
on-year is due to the delayed effect
of a decrease in turnover in 2020:
because of the COVID-19 pandemic
and the downturn in the economy,
the mobility of people decreased in 2020,
but the economic recovery in 2021 led
to a revival of activity in the labour market.
Employee voluntary turnover
2017
6.8%
7.0%
6.9%
6.0%
7.3%
2018
2019
2020
2021
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, disability 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 legislation 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.
High standing of the Group in the 2021
HH.ru, Forbes, and Changellenge
employer ratings attests to the company
being a preferred employer in the regions
where it operates.
The Changellenge rating focuses
on the assessment of employers
by students of the TOP-30 universities
in Russia. According to the results
of the rating, NLMK Group
was included in the TOP-50 companies
in the Engineering category.
The company focuses on the digitalization
of recruitment: it introduced a tool
for selecting STEM specialists (podbor.
io), a corporate blog and a job page
on the Habr resource, and video interviews
powered by the Sever.AI platform. NLMK
Group’s career page is also available
at NLMK.team.
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 2021, 4,717 people (9% of the average
headcount) joined the NLMK team,
23% of them were women (2%
of the average headcount). A total of 96%
were hired by the Group’s Russian
companies. GRI 401-1
4,343
Russia
220
USA
149
EU
5
India, Turkey, Switzerland
4,717
1,733
Under 30
2,558
30–50 years
426
Over 50
4,717
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.
The company is committed to annually
increasing the level of employee
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. An annual assessment
of the achievement of target KPIs
(Management by Objectives)
by employees is carried out in conjunction
with an assessment of the corporate
behaviour (Management by Behavioral
Indicators), which reflects the company's
approach to management as a whole.
When preparing local regulations
on remuneration, the opinion of trade
union organizations is taken into account.
Fixed remuneration management
in the Group is based on employee
performance evaluation. 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 fairness
of remuneration across the Group’s
companies, while unlocking the potential
and stimulating the professional activity
of each employee. In 2021 this system
covered 95% of NLMK Group’s Russian
company employees. In several divisions,
the process of forming individual
development plans for employees
was launched, with the help of which
the employee will be able to strengthen
those competencies that turned out
to be underdeveloped. In 2022, this
approach will be extended to all white
collars of the Group.
The average salary1 of NLMK Group
employees at Russian companies in 2021
was RUB 76,000, a 7% increase year-on-
year. The increase was significantly ahead
of the inflation rate due to additional
measures to support employees. At our
international companies, remuneration
is determined based on collective
bargaining agreements and local labour
legislation, and is also indexed annually.
Average monthly salary at NLMK Group’s Russian companies, RUB '000/person
43.7
47.4
52.0
56.6
60.8
64.5
70.9
76.0
+8%
+10%
+9%
+7%
+6%
+10%
+7%
2014
2015
2016
2017
2018
2019
2020
2021
The сompany does not tolerate any form
of discrimination on grounds of gender
or other factors when implementing
or further developing its remuneration
system. The company adheres
to the equal pay for equal work principle
and complies with legislative labour
requirements.
The methodology for calculating this
indicator implies taking into account
the actual payroll for the initial grades
in each of the categories. The difference
in the salaries of men and women
in working and STEM professions
is due to higher pay for those employed
in difficult and hazardous working
conditions, in which the share of women
is traditionally lower.
In 2021, 47,438 employees
of NLMK Group, or 93.7% of all staff,
underwent an official performance
assessment. GRI 404-3
The company also continues to develop
an end-to-end management system
that aims to achieve the Group’s goals
(Management by Objectives, or MBO).
Nearly 11,000 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 paid monthly
based on the performance indicators
of their unit or position.
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1 White collars are managers, specialists, and office employees.
Proportion of NLMK Group employees who received a regular
performance and career development review, by category
and gender as of 31.12.2021, persons
GRI 404-3
Training and development
Average monthly salary
of entry-level employees
by gender and category
at Russian NLMK Group
companies in 2021, RUB ‘000
GRI 405-2
76,604
Women
Men
Management
STEM employees
Blue collars
78,851
48,607
43,161
61,609
50,208
Of total white
collars1
By category
By gender
92%
93%
92%
94%
Of total blue
collars
Of total men
Of total women
Features
of the МВО system
•
At the CEO-1 level, curators
are appointed who are responsible
for building a cascade of strategic
goals through the MBO system at all
levels of management
•
Objectives are discussed and agreed
between the manager and their
employees. Constructive two-way
feedback is given throughout the year
and at the end of the year
•
Employee development plan
is developed that allows them
to improve their managerial
and professional skills year by year
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 quantitative KPI
can reach 150%, for a qualitative
KPI – 120%.
By 2023, NLMK Group plans to extend
the MBO system to cover 100%
of employees at all levels, including
blue collars.
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 pay growth.
In 2021, a special focus was placed
on identifying employees with below-
the-market-level pay in order to increase
their pay levels more quickly.
NLMK has a personnel relocation
policy. 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.
Total number of training hours
NLMK Group investment in employee training and development
in 2021 GRI 404-2
86%
Corporate University campus
6.9%
Training activities, including at international companies
4.5%
Spending on the Corporate University training processes
0.5%
Remuneration of the Corporate University trainers
1.6%
Spending on e-course development
RUB
3,654 m
51%
Training activities, including at international companies
33%
Spending on the Corporate University training processes
4%
Remuneration of the Corporate University trainers
12%
Spending on e-course development
RUB 491 m
Employee proficiency and qualifications
are an important factor in ensuring
sustainable development at NLMK.
An effective system of training
and development is based on job
profiling, regular knowledge tests
and the use of modern training formats
(microcourses, distance learning).
NLMK invests significant resources
in the training and development of its
employees. The share of specialists
trained in the reporting year was 96%.
In 2021, total spending on training
and development of employees
amounted to RUB 3,654 million,
with RUB 3,163 million invested
in the construction of the Corporate
University campus in Lipetsk,
RUB 252.4 million – in training events,
RUB 220.7 million – in educational
processes of the Corporate University
and the development of e-courses,
and RUB 17.7 million – coaching costs.
Thus, the average amount spent per
FTE on training and development
is RUB 67,200 and RUB 9,000 excluding
investments in the construction
of the Corporate University campus.
In 2021, the NLMK employees received
a total of 2,910,566 man-hours of training
(including OHS training), with 154,695
of them delivered to NLMK Group’s
Russian companies via the Corporate
University. Divided by NLMK Group’s
average headcount, this means
57.5 hours of training per FTE (61.0 hours
divided by the average headcount
of the Russian companies). GRI 404-1
NLMK Lipetsk employees also provide
trainings on the company's professional
competencies to students of basic
educational institutions. These trainings
not only educate potential employees
for NLMK Group but also help mentors
32%
OHS training
68%
Other training
24%
OHS training
76%
Other training
Men
Women
2,375,817
534,749
develop themselves. Altogether,
in the reporting year, 1,047,862 man-
hours of training were given to students.
The overall time of OHS training
in 2021 was 891,215 man-hours
(536,640 man-hours of external
training, 331,407 man-hours
of in-house training, and 23,169 man-
hours at the Corporate University).
The training process is aimed
at developing industry employees
and solving priority problems in a rapidly
changing business environment. It consists
of several stages, which include not only
educational programmes for the company
employees, but also development
of potential future employees –
schoolchildren and students of colleges
and universities. GRI 404-1
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Career guidance
for schoolchildren
As part of cooperation with schools
and continuing education centres,
the company implements a wide range
of outreach and educational activities
through corporate career guidance
projects, including steelmaking shifts,
the School of Professional Skills, NLMK
Class, training schoolchildren in working
professions, Children Corporation,
and Combinatorium: Build your Career!
board game.
In 2021, one of the key projects aimed
at actively attracting young people
was the Children Corporation project,
which introduces schoolchildren
and parents to the world of professions.
As part of the second wave
of the Corporation Children project,
career guidance was provided
to the children of the company
employees and orphans in the region.
194 children (98 orphans, 96 children
of employees) took part in career
guidance activities and social events
for 10 months. Following the programme,
90% of the children chose NLMK Group
companies for their internship.
COMBINATORIUM: BUILD YOUR CAREER!
NLMK developed Combinatorium: Build Your Career! board game to introduce
various career paths to schoolchildren and students. Players get acquainted
with the company's career guidance programmes, NLMK partners in the field
of personnel training, professions, benefits, competitions and other
opportunities that promote career development at the Group's companies.
The NLMK Navigator mobile app for schoolchildren, students, parents
and teachers offers information on career guidance programmes and how
to sign up for them.
Work with students
Training of personnel
on the basis of specialized
educational organizations
With a view to increase the share of highly
qualified specialists in the labour market,
NLMK cooperates with more than 20
specialized educational institutions
in the regions where it operates: technical
schools, colleges, and universities.
Future employees receive in-depth
training in competencies that are relevant
to NLMK, do internships at the Group's
companies, perform real work tasks
and participate in NLMK projects.
In 2021, a pilot project was launched
on targeted learning for students
of secondary vocational education.
Basic educational institutions (BEI)
are focused on training personnel
commissioned by NLMK. They
are involved in joint projects, offer
integrated training programmes,
and attract experts from production. BEI
students receive a corporate scholarship.
They do internships at NLMK Group
enterprises, including on the basis
of targeted training agreements.
NLMK Group also helps with training
supplies for colleges and technical
schools, and employees of production
departments give classes on theory
and practice.
Efficient cooperation with schools,
continuous education centres,
and institutions of secondary vocational
and higher education not only attracts
young professionals to NLMK, but
also forms the company's image
as a preferred employer in the regions
where it operates.
The Academy of Steel Opportunities
programme was launched in 2021.
The programme offers internships
to undergraduate STEM students
of Russian universities.
ReSolve CORPORATE CASE CHAMPIONSHIP
For young people who want to develop and become part of NLMK Group,
the company organizes NLMK ReSolve, a corporate case championship,
for students of universities and vocational schools aged 16 to 25 years. At all
stages of the championship, teams are advised 24/7 by NLMK Group mentors.
In 2021, 375 students took part in the case championship. During the event,
student teams were consulted by 45 NLMK Group mentors.
Following the championship, 10 best teams participated in the nationals
of the Metal Cup championship, two of them reached the international grand
final and joined the Russian national teams.
The Academy of Steel Opportunities is a programme aimed
at developing undergraduates and graduates of various specialties, which
allows them to immerse in the corporate culture.
More than 2,000 applications were submitted to participate in the first wave
of the Academy of Steel Opportunities, of which 75 interns were selected.
In May 2022, the third stage will be completed, following which the best interns
will be offered employment at NLMK Group.
Corporate competitions, recognition programmes
Career guidance
for schoolchildren
Trainings for students
of colleges and universities
Job market
Hiring
Mentoring
Corporate programmes for HiPo and talent pool development
Continuing professional development, talent and best professional discovery programmes
Onboarding
Training and development process at NLMK
The project took third place in the Best
Programme for Schoolchildren
nomination of the Russian Graduate
Awards 2021 competition.
Staff onboarding
In 2021, onboarding programmes for new
hires were updated.
An online onboarding training course
was developed for all NLMK Group
enterprises. It introduces newly hired
employees to the company, production
technology, products and customers,
as well as the NLMK Production System,
Safety Culture and development
opportunities. In 2021, over 4,000 new
NLMK Group employees took the course.
Development
of managerial
competencies following
on annual assessment.
Competence Development
Digital Guide
In 2021, a pilot project was implemented
to develop managerial competencies
following an annual assessment.
Within its framework, Competence
Development Digital Guide
was introduced, encompassing
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Social partnership
Annual Report 2021
managerial, end-to-end professional
and corporate competencies. Using
the development activities from
the Guide and based on personal
assessment results, each employee
can easily form individual development
plans (IDPs). It helps to focus
on the development of those
competencies that employees fall
behind on through, first of all, solving
urgent problems in the workplace.
The Guide includes all internal
educational resources: e-courses,
books from corporate libraries,
as well as educational solutions
of the Corporate University. As part
of the pilot in 2021, 1,700 employees
completed their IDPs. Four months later,
a selective competency assessment
was conducted, which showed that
close to 90% of the assessed employees
improved their result.
NLMK Corporate
University
GRI 404-2
NLMK Corporate University
was established in 2016 in order
to centralize and implement a unified
system of management education
in NLMK 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 members,
and to develop the company’s ecosystem
encompassing representatives of client,
partner, and contractor companies.
Objectives:
•
Development of NLMK managers at all
levels, enhancing the management
system by instilling unified work
standards, uncovering managers’
leadership potential, and developing
managerial competencies
•
Identifying and rolling out best
practices through leaders’
participation in learning solution
development
•
Supporting organizational change
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 of the NLMK
Corporate University includes
over 6,900 company leaders, including
the talent pool.
The recommended percentage
of managerial training per employee
is approximately 5% of their working
hours annually. The target for training
cycles completed in 2021 was 17,823,
which was exceeded within the reporting
period and reached 101%.
On average, members of the Corporate
University target audience receive
17.2 hours of training.
The Group’s international companies
and companies across the NLMK
ecosystem also use Corporate University
leaning solutions.
The Leaders Train Leaders
approach
Senior and middle managers
and key experts at the Group assist
in the development of the Corporate
University learning solutions and deliver
training as internal trainers for at least
four days every year. Company vice
presidents act as trainers 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 through
training by repeated internalization
of educational content
All internal trainers complete a special
certification programme and receive
further advice from the Corporate
University in order to ensure that
all learning solutions are taught
to the highest professional standards.
In 2021, over 400 NLMK leaders became
internal trainers.
The Leaders Train Leaders approach
is evolving through scaling up a single
methodology within both the company
and its ecosystem of partner companies.
Learning solutions
All Corporate University learning solutions
are a synthesis of the knowledge
and best practices of NLMK Group’s
experts and cutting-edge international
developments.
Today, the Corporate University portfolio
includes over 160 learning solutions
of various formats broken down into four
streams:
•
Strategy and Value Creation
•
Leadership and Teamwork
•
Operational Efficiency and Safety
•
Project Management
In 2021, the сompany introduced learning
solutions in English for the staff working
at the international sites in Europe
and the USA, covering more than 200
international employees.
Leadership Development
Programmes
Leadership development programmes
is a new stream added to the Corporate
University’s portfolio of learning solutions
in 2020. In 2021, the Corporate University
delivered two leadership development
programmes.
In September 2021, another stream
of Level Up programme was launched
to develop the mid-level talent pool.
At this level of management, the learning
content is focused on nurturing future
heads of workshops and departments
who make important decisions
that directly affect the essence
and results of a business unit. The core
competencies developed under the six-
month programme are systems thinking,
collaboration, performance management
and continuous improvement.
In 2021, a project-based approach
was used for the first time
in the programme: the participants
were requested to choose a goal
for the upcoming year, formulate a related
problem and come up with a solution
that can impact the achievement
of the company’s strategic targets.
To reach this goal, they need to complete
a project, where they have to agree
on the task and the intention for how
to solve it with their immediate supervisor
and continue working on this task during
the Systems Thinking course.
In 2021, the company continued
cascading the Foremen School
Programme, reaching a target audience
of over 2,500 people. Three more
streams were launched, and currently,
more than 1,500 NLMK Group
employees are studying at the Foremen
School. The programme is aimed
at developing managerial competencies
of NLMK foremen and candidates
to foreman positions from the talent pool.
Foremen are expected to improve their
efficiency in solving operational problems
and developing human resources, gain
process management skills in their areas
of responsibility and learn how to facilitate
interactions within their departments
and between other functional units.
In 2021, the Kirkpatrick-Phillips Evaluation
Model was introduced to assess
the efficiency of the NLMK Corporate
University.
Development activities, hours
Learning solutions
Online courses offered
by the Corporate University
Sessions and conferences
2017
9,460
2018
2019
2020
2021
71,828
145,828
169,542
155,380
2017
2
2018
2019
2020
2021
3
28
45
45
2017
12
2018
2019
2020
2021
27
38
143
149
2018
2019
2020
2021
25
28
35
27
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Annual Report 2021
NLMK CORPORATE UNIVERSITY WON A NUMBER
OF PRESTIGIOUS AWARDS
In 2021, NLMK Group’s Corporate University won the Grand Prix of the Crystal
Pyramid 2021 HR Award in the Best Corporate University category.
The Smart Pyramid 2021 Award was also presented to the NLMK Group
Corporate University. The company took second place in the Best Corporate
Training Programme category with its Foremen School programme. The jury
noted the efficient staff development practice exploiting hybrid training formats
and highly praised the series of videos telling the stories of foremen as a good
innovation that contributes to the adaptation of the content to the target
audience specifics.
INTERNATIONAL RECOGNITION
NLMK Group’s Corporate University has entered the CLIP (Corporate Learning
Improvement Process) international accreditation programme of the European
Foundation for Management Development (EFMD), a leading independent
corporate training organization that audits and evaluates all aspects of training
and development for compliance with international quality standards. The next
steps will be the preparation of a self-assessment report followed by the visit
of the audit committee and the receipt of the quality status recognition from
the European Foundation for Management Development in 2022.
In 2021, the NLMK Group Corporate
University launched a new website at
https://university.nlmk.com/.
Assessment
and development
of professional
competencies
In 2021, the company continued
to modernize the internal corporate
system for assessing and developing
the professional competencies
of employees. The main emphasis
was placed on updating the assessment
of knowledge that affects the efficiency
of the performance of production tasks
in order to identify areas for further
development.
In the reporting year, the following
was introduced into the process:
•
Assessment of knowledge
on corporate ethics and anti-
corruption, actions of employees
in case of a conflict of interest
•
Development of a Competence
Development Guide, through which
business experts can offer generalized
and highly specialized development
activities
•
Development of programmes
for functional and industrial academies
based on the results of the evaluation.
Vocational training
GRI 404-2
Vocational training and onboarding
programmes for NLMK employees 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.
The development of production
academies, internal educational solutions
on professional competencies, continues.
Their aim is to give key professional
knowledge required for a specific
position and are intended for specialists
and managers of a specific production
area. The main resource of production
academies are internal experts –
specialists with the greatest experience
and knowledge. They take an active
part in the development of training
programmes, ensuring professional
expertise continuity.
One of the important professional
competencies of managers
and specialists is knowledge
of English. In 2021, the development
of the corporate English language training
programme continued.
Independent
qualification assessment
Independent qualification assessment
in NLMK Group started at the end
of 2020 with the opening of two
qualification assessment centres
at NLMK and NLMK Long. The main
purpose of an independent assessment
of qualifications is to confirm
the compliance of the professional
competencies of employees (knowledge,
abilities, and skills) with the requirements
of the professional standard. Based
on the results of the assessment,
the employee receives an industry
certificate of qualification, valid throughout
the country.
The unique model of industry-specific
professional assessment of workers
formed the basis of the independent
assessment system for steelmaking
qualifications. In 2021, the independent
assessment of workers expanded from
3 to 15 qualifications. Since the opening
of these centres, over 400 workers have
already confirmed their qualifications
at the industry level.
In 2021, qualification assessment centres
and NLMK Group’s technical experts
actively participated in the development
of federal professional standards
and industry assessment tools.
In the same year, NLMK Group
topped the Industrial Personnel
Qualifications Assessment nomination
in the Best Application of the National
Qualification Tools competition
organized by the National Agency
for the Development of Qualifications.
Talent Pool
NLMK Group creates opportunities
for employee development and promotes
their career growth. To support
and promote promising employees,
the company has had a talent pool
programme for several years. This
is the first step on the path to career
growth. When filling in a managerial
position, talent pool members
are considered first. Talent pool members
are trained according to the plan,
developed specifically for each
management level.
In 2021, 78% of the talent pool members
were appointed to new positions.
At the moment, the talent pool covers
88% of senior and middle management
positions, the target for 2022 is to achieve
90% coverage.
The League+ high-potential employee
identification and development programme,
launched in 2021, is another window
of opportunity for the Group’s employees.
It is aimed at finding and developing people
with leadership potential for faster career
advancement, regardless of their position
or function. A modular development
programme with an emphasis on project
activities and leadership potential
fulfillment was developed for the League+
participants.
Career planning
The Career Routes project is a new
HR process at NLMK Group. It helps
employees to navigate career verticals
and horizontals, choose a suitable goal
for themselves and develop in the chosen
NLMK Corporate University
campus
The 492 capacity, modern conference
hall has seats designed with an elevation
to ensure comfort and the optimum
experience for every participant who wants
to see what is happening on the stage.
This is a transformative space: the stalls
can be folded away in 10–15 minutes
to free up the space. Multi-level sector
seats resembling an amphitheatre can
also be organized on the stage. Thanks
to the unique Glassroom technology,
a video wall showing live screens of online
participants can be used to enhance
engagement with the speaker. This
way, online lecture and project work
participants can get the feel of “being
in the classroom”. This technology
allows to maintain visual contact
and non-verbal interactions between
the speaker and the audience and also
between the participants. Glassroom can
be used beyond the learning process
for presentations, press conferences
and other online events, which is especially
important during the pandemic.
The ground floor of the atrium features
an exhibition space. The second and third
floors host rooms that can be used
for various events, including training
sessions, whilst the fourth floor has
a space for design-thinking meetings.
The campus will become a point
of attraction for residents and visitors
of the city, as well as for the employees
and partners of NLMK Group.
Investments in the project amounted
to RUB 4.3 billion.
International collaboration
Since 2019, the Corporate University has
been a member of several international
associations: the European Foundation
for Management Development (EFMD),
the Executive Corporate Learning Forum
(ECLF), and the Education and Training
Committee (ETCO) of Steeluniversity &
Worldsteel.
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Social partnership
Annual Report 2021
direction. The project offers employees all
possible career options through a clear
roadmap.
Mentoring
The development of the mentoring
system is one of the key areas
of NLMK Group's HR strategy. More
than 8,000 employees in the company
have the status of a mentor, and their
pool is growing with more than
1,000 people joining annually.
In 2021, NLMK Group's mentoring
system underwent a major
transformation. The updated system
is designed to preserve the stable
traditions of vocational training,
onboarding and project activities. New
approaches to selection, training,
development and recognition of mentors
were introduced.
Employee support
GRI 404-2
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 have 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.
Career coaching
In 2021, a pilot project was implemented
to introduce career coaching
in a group format. Career workshops
were organized for participants in two
streams of the League+ programme
for high-potential employees.
In the future, it is planned to train internal
career coaches to work individually
with employees on their careers.
Incentive and recognition
programmes
In 2021, NLMK Group’s five sites
hosted the Master of the Year corporate
competition, in which over 240 people
participated. The competition is aimed
at forming a progressive team of middle
managers, increasing motivation
for the development of managerial
and professional competencies.
In November 2021, NLMK Group
launched the NLMK Sferrum recognition
programme. By participating
in the recognition programmes,
employees receive ferrums,
a corporate currency that can be saved
and exchanged at the Group’s online
store for useful goods at any time.
Corporate currency can be earned
by participating in four programmes:
Academy of Steel Opportunities, Safety
Academy, the Innovation Lab's Innovation
Award programme, and the Bestseller
sales service programme.
360/180 degree feedback
Since 2018, the company has been
using the 360/180 personnel assessment
system. It is a 360 degree feedback
survey based on SAP SF. Respondents’
answers are anonymous and aggregated.
The results of the assessment are fully
confidential.
NLMK Group's corporate and managerial
competencies model is mainly used
as criteria for the 360 degree appraisal.
Any manager or employee, in agreement
with their immediate supervisor,
can request a feedback and include
respondents at their discretion.
The results of the assessment are used
to determine development goals
and cannot be the basis for making HR
decisions (dismissal, bonus reduction,
etc.).
In 2021, more than 170 employees
requested 360 degree feedback.
Corporate social programmes are a key
tool for supporting high employee
engagement, which also creates additional
labour market advantages. Social policy
issues fall within the remit of the Human
Resources function. This makes social
projects more effective and targeted,
focusing on the real needs of employees,
and enables efficient feedback analysis.
The company's internal social policy
is focused on supporting the objectives
of NLMK Group's HR Strategy
and sustainable development goals.
The Report presents consolidated data
on the social support of NLMK Group
employees. In order to standardize
processes and organize work on
budgeting social expenses, NLMK
Group companies are guided by the
Regulations for Budgeting Social
Expenses, which came into effect in
2020. The Regulations establish the
procedure and rules for the formation
of expenses for social programmes
aimed at supporting employees of the
company, their family members, NLMK
Group retirees, etc. Expenses are
recorded on an accrual basis.
In 2021, NLMK Group continued
to implement its Social Strategy until
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 engagement
•
Reducing waste (time, health, personal
efficiency)
Social Policy GRI 401-2
NLMK Group’s social spending in 2016–2021, RUB bn
Investment in social programmes for employees, international assets
Investment in local communities, international assets1
Investment in social programmes for employees, Russian assets
Investment in local communities, Russian assets1
2016
2017
2018
2019
2020
2021
0.56
1.03
2.26
4.79
2.15
2.29
2.44
2.87
2.61
0.85
0.39
0.29
0.01
2.6
0.9
3.1
1 For more information about investment in the development of local communities, see the Development of Local Communities section.
Area
Activities
Physical health
• Mandatory medical check-ups
• Check-up programmes (voluntary health insurance (VHI)
• Preventive immunization programmes (VHI)
• Outpatient and inpatient care (VHI)
• Health-resort treatment (for certain groups)
• Healthy Choice lifestyle programme
• Organization of physical activity (sports games and competitions, gyms, Nordic
Walking project)
Mental health
• Additional days off work in case of significant events (birth of a child, death of a close
relative, etc.)
• Flexible work schedules, remote work opportunities
• Employee Assistance Programme: advice on legal, psychological, financial, and tax
issues
•
Higher competitiveness
and attractiveness of jobs
and the employer
The Social Strategy sets out KPIs,
the structure of social programmes,
and key aspects of such key programmes,
including: Medical Services, Catering,
My Family, Sports, and Communities.
NLMK Group’s total social investments
in 2021, including NLMK Group’s
international assets, stood
at RUB 6.6 billion, of which RUB 5.7 billion
was allocated to social support
programmes for NLMK Group employees.
Wellbeing and social
support
In 2021, NLMK Group updated its
understanding of social support:
the Employee Wellbeing Programme
was adopted, based on modern practices
and methods for a comprehensive
assessment of employee wellbeing.
The company aims to create a corporate
ecosystem that promotes employee
wellbeing and helps them unlock
their potential for their own benefit
and the benefit of the company.
NLMK Group's Wellbeing Programme
covers the following six areas: physical
health, mental health, mindfulness
and development, financial wellbeing,
corporate citizenship, and diversity
and inclusion. The company strives
to implement programmes and activities
to support employees in order to achieve
balance and harmony in various aspects
of their lives.
Our employees
137
136
Social partnership
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The company purchased vouchers
for the children of employees aged
11 to 15 to a summer seaside camp,
organized transfers for them and paid
for their insurance.
Healthy eating
The company develops and promotes
a culture of healthy eating
at NLMK Group companies as part
of the corporate nutrition programme
“NLMK Eats!” launched in 2020–2021.
As part of a strategic partnership
with federal catering operators,
the company:
•
Improved the quality of food
and service in corporate canteens
and buffets
•
Introduced online orders and delivery
of hot meals (lunch boxes) to remote
production sites and offices. In 2021,
close to 17,000 lunch boxes
were ordered and delivered
•
Introduced partial subsidy for meals
for employees
•
Installed vending machines
with special food for employees
working in harmful and hazardous
working conditions
Accident and critical
illness insurance
GRI 403-6 GRI 403-10
In 2021, the terms of the accident
and critical illness insurance programme
were amended based on the results
of the first year of its implementation.
This type of insurance implies payments
to employees in case of accidents,
including those that occurred outside
the production and office, for example,
at home or on vacation, as well as when
diagnosing critical illnesses (including
cancer). In addition, the programme
provides for additional payments
for the initial diagnosis of occupational
diseases and long-term disability.
Area
Activities
Mindfulness and development (part
of the Education and Development
budget)
• Career routes
• Development of professional and managerial competencies
• Development programmes for high-potential employees
• Recognition programmes
Financial wellbeing GRI 201-3
• Decent salary
• Non-state pension schemes
• Material aid
• Children's health and recreation
• Food co-financing (NLMK Eats!)
• Accident and critical illness insurance payments
• PrimeZone corporate discount programme
• Corporate transfer to workplace
Corporate citizenship
• Cultural events and competitions
• Sports events
• Corporate volunteering
• Corporate charity
• Shared activity clubs
Diversity and inclusion
• Communication campaign for employees on the main aspects of D&I, their values
for people, organization, and society
• School of parent-child relations
• Programmes to foster culture within the company
• Updating the Code of Ethics
1 Including RUB 2.6 billion spending on social support for employees of the Russian assets.
In 2021, NLMK Group continued
to develop its comprehensive Employee
Health Programme GRI 403-6 ,
focusing on physical and mental
health of employees. In 2021, two new
elements were added: a comprehensive
employee support programme
and a pilot project to assess employee’s
stress level.
COMPREHENSIVE EMPLOYEE SUPPORT PROGRAMME
In 2021, a comprehensive employee support programme was launched
at the company's Lipetsk and Moscow assets. Now the company's
employees can get free advice from a lawyer, a healthy lifestyle expert,
a psychologist, and a financial advisor at any time. In the first three months,
close to 1% of employees used this opportunity, and the number is constantly
growing. A selective survey of employees who used the service showed
that 100% of employees perceived it as an expression of thoughtfulness,
on a scale of 1 to 5 84% of users rated the professionalism of experts
and the quality of advice at four and five points, respectively, and 89%
would recommend the service to their colleagues. Legal advice is the most
popular among employees (70% of requests), 60% of users are men, 40%
are women.
In 2022, the programme will be expanded to all Russian companies
of NLMK Group.
Social support costs for NLMK Group employees (including
international companies) for 2021 by area, %
46.7
Medicine and wellness
18.4
Material assistance and payments to employees
not involved in production
10.8
Co-financing for private pension programmes
9.8
Meals
9.7
Transport to workplace
2.5
Sport and cultural activities
1.2
Accident and critical illness insurance
0.8
Children’s health and recreation
RUB 5.7
bn1
Children's health
and recreation
In 2021, NLMK Group launched
a comprehensive health programme
for the children of all Russian employees.
Taking into account the current restrictions
on the capacity of children's health facilities
in 2021, more than 700 children benefitted
from the programme. Parents could choose
one of three options:
•
Regional summer camps
•
Mother and Child health programme
•
Summer camps in the southern regions
of Russia
Healthy Choice project
GRI 403-6 GRI 403-10
The implementation of the Healthy Choice
programme continues. The project fosters
healthy lifestyle culture among employees,
aiming to increase the commitment
of staff to the basics of a healthy lifestyle,
to identify and involve the leaders of this
movement (health managers) in promoting
and supporting best healthy practices
among employees. As of the end of 2021,
more than 1,000 employees participated
in the programme.
Diversity, equality
and inclusion
NLMK Group, as an international
socially responsible company, promotes
the culture of diversity, equality
and inclusion. NLMK employs people
of different ages, gender, education,
marital status, young mothers and fathers,
parents raising children with disabilities,
representatives of many nationalities
and cultures.
Gender balance
NLMK Group strives to maintain gender
balance, taking into account the specifics
of the steel industry, provides
the necessary support to working
parents and their children, and takes care
of the health of future generations.
The company pays special attention
to women's health, support for pregnant
women and young parents.
In 2021, 375 employees of the company
used the right to take early paid parental
leave before the birth of a child. All
employees, regardless of gender, can
receive financial assistance at birth
and take parental leave. In 2021, 2%
of male employees took parental leave.
In total, the company employs more than
4,000 parents raising children under
the age of three. GRI 401-3
The company is developing measures
to ensure equal career opportunities
for women, encouraging their
participation in leadership programmes
and competitions. The corporate media
highlight successful examples of women's
career growth and work-life balance.
Employees on parental leave,
pers. GRI 401-3
2%
Men
98%
Women
1,108
Our employees
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Social partnership
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Inclusion
The company strives to create equal
employment and career opportunities
for people with disabilities.
The company employs 445 parents
of children with disabilities and provides
them with financial assistance
and additional days off.
NLMK Group employees
with disabilities by category,%
NLMK Group employees
with disabilities by age, %
Employees raising children
with disabilities, %
11
Managers
28
Specialists
2
White collars
59
Blue collars
438
4
Under 30
31
30–45 years old
32
45–55 years old
32
55 and older
438
23
Women
77
Men
445
NLMK Group employees
with disabilities by level
of education, %
NLMK Group employees
with disabilities by gender, %
39
Higher education
20
Secondary
vocational education
23
Basic vocational education
19
General secondary
education
438
69
Men
31
Women
438
EMPLOYMENT OF PEOPLE WITH DISABILITIES:
THE FEDERATION COUNCIL ROUND TABLE
The experience of NLMK Group in employment of people with disabilities
was discussed at the round table of the Federation Council on social policy
on October 5, 2021. The discussion was attended by representatives
of federal ministries and departments, higher educational institutions, non-
profit organizations; the position of business and employers was voiced
by NLMK. The participants of the event came to the conclusion that there
is a need for more active cooperation on the employment of persons
with disabilities between the state, specialized non-profit organizations and,
of course, business. The recommendations of the round table participants
formed the basis of the final resolution and relevant draft laws.
The company is looking to raise the level
of staff awareness of the principles
of interaction with employees
with disabilities, and plans to hold
thematic webinars and educational
sessions on the topic of inclusion
in 2022. In 2021, a Working Group
on Diversity and Inclusion was created
under the leadership of the Vice
President for Human Resources
and Management System.
The company actively promotes
the principles of diversity
and inclusion among employees
under the #NotDifferent heading
on the corporate portal. In 2021,
the company's employees took part
in the UN GC Target Gender Equality
accelerator. The Group also took
WEP’s gender gap survey, which uses
the UNGC methodology. The results
of the assessment confirm that
the company is aware of the importance
of gender equality issues and is taking
positive steps to improve it.
NLMK Pulse corporate
survey
In 2021, the NLMK Pulse corporate
survey covered more than
38,000 employees, or 80% of the average
headcount at the Group’s Russian sites.
Participation in the survey gives each
employee an opportunity to directly
impact changes in the company.
Following the 2021 survey:
•
More than 400 meetings
were organized to improve
the efficiency of communication
between managers of different levels
and employees
•
Over 1,000 jobs became safer
and more environmentally friendly
thanks to measures to minimize
the impact of harmful operational
factors
•
RUB 125 million was invested
in improving working conditions: repair
canteens, dining rooms, and gyms
•
Close to RUB 300 million was invested
in the renovation of sanitary facilities.
The NLMK Pulse survey will cover both
Russian and foreign companies in 2022.
In 2021, a detailed survey
was conducted on staff satisfaction
with social programmes (the survey
takes place every three years).
In 2021, the survey included
questions on diversity, equality
and inclusion for the first time. More
than 5,000 employees of NLMK
Group's Russian assets took part
in the survey, or close to 12% of the total
headcount. The results of the survey will
be summarized and analysed in Q1 2022
and taken into account when updating
the social policy.
Trade union
organizations
and collective bargaining
agreements
The company fully complies
with the requirements specified
in collective bargaining agreements,
and also interacts with representatives
of trade union organizations.
Collective bargaining agreements
are concluded both at Russian
and foreign companies of the Group.
They apply to all employees, regardless
of their membership in a trade union.
The company announces the possibility
of joining a trade union organization
in its corporate media, including its
corporate portal.
Representatives of NLMK Group
regularly participate in the activities
of working groups and commissions
in the Association of Metallurgists
of Russia, an all-Russian industry
association of employers, to improve
the Industry Tariff Agreement
and negotiate with the Mining
and Metallurgical Trade Union
of Russia. In 2021, with the participation
of representatives of the company,
an agreement was signed amending
the Industry Tariff Agreement
for the metals and mining industry
of Russia for 2020–2022.
Number of employees covered by collective agreements, % GRI 102-41
Region of NLMK Group
2017
2018
2019
2020
2021
Russia
100
100
100
100
100
Europe1
89
88
88
87
97
USA1
n/a
72
71
72
72
1 In % of the actual headcount. In accordance with national legislation, some categories of employees do not have the right to conclude a collective
bargaining agreement, the coverage of other categories is 100%.
Volunteering
The Group companies focus on three
main areas in its corporate volunteering
activities:
•
Environment: campaigns
for cleaning and landscaping of local
and environmentally sensitive areas,
eco-quests for children and youth,
environmental hikes, etc.
•
Healthy lifestyle: activities to promote
a healthy lifestyle and engage
residents of the ‘home’ regions
in grassroots sports, equipping sports
grounds, etc.
•
Assistance to socially vulnerable
groups of people: children, pensioners
and people with disabilities, urgent
assistance on express requests
of the community without employer
involvement, etc.
As of the end of 2021, close
to 1,500 NLMK employees were part
of the volunteer movement.
Volunteers were able to put their ideas
into practice as part of #NAVolne,
the second corporate competition
of volunteer projects dedicated to healthy
lifestyle, having received grants of up
to RUB 100,000.
Our employees
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Social partnership
Annual Report 2021
VOLUNTEERS OF NLMK GROUP AND RESIDENTS OF
THE CITIES WHERE THE GROUP OPERATES WERE TRAINED
IN SOCIAL ENTREPRENEURSHIP IN MOSCOW
The authors of the Steel Tree projects, residents of the cities where
NLMK operates, and the company's volunteers participated in the event,
which consisted of theory and practice with a business game, a meeting
of employees from different cities, a project fair and much more.
NORDIC WALKING
In 2021, the company's employees participated in the national project Nordic
Walking – A New Way of Life. It is implemented with support from the Russian
Ministry of Sports as part of the federal project Sport is the Norm of Life (part
of the Demography national project). More than 150 employees of the Group,
united in 15 teams in five regions of Russia, took part in the competition.
NLMK Group teams won prizes in each of the company's home regions.
Nordic walking clubs were set up at all sites of the company. As part
of the healthy lifestyle promotion, Nordic walking master classes are included
in corporate educational programmes.
NLMK AND VIZ-STEEL
IMPROVE SPORTS
FACILITIES
Renovated gym opened
in the motor transport
department of the Lipetsk site.
It was renovated in accordance
with the unified standard
of NLMK’s sports facilities.
Renovation plans include
several more gyms on the site.
After a large-scale renovation,
a sports hall of the cold rolling
shop was opened at VIZ-
Steel. In order to encourage
workers to do more physical
training and sports, VIZ-Steel
also co-finances subscriptions
to fitness centres, sports
sections, swimming pools, etc.
NLMK KALUGA
VOLUNTEERS TOGETHER
WITH THE STATE
TRAFFIC SAFETY
INSPECTORATE HELD
A CHILDREN'S EVENT
DEDICATED TO TRAFFIC
RULES IN THE OBNINSK
CITY PARK
Stories of Auntie Traffic Light,
an educational programme,
aims to prevent child road
traffic injuries. The children
got acquainted with the traffic
police service: the inspectors
told the kids about their work
and showed what the patrol car
is equipped with.
VIZ STEEL AND VIZ VOLUNTEERS CLEANED UP THE BEACH
OF VERKH-ISETSKY POND IN YEKATERINBURG
Paper wrappers, household plastic, bottle glass and cigarette butts
are unpleasant but constant companions of the modern city. Volunteers from
VIZ-Steel and VIZ took part in Clean Coast, a national cleaning campaign,
and cleaned up the beach of Verkh-Isetsky Pond.
HEALTH OF SPECIAL
CHILDREN
Thanks to Stoilensky volunteers
Lastochka kindergarten
(No. 52), where a resource
group for children with autism
spectrum disorders and other
mental disorders operates, now
has a sensory room. Sensory
stress relief area is necessary
for the rehabilitation of autistic
children. The Magic Country
project by Ekaterina Karateeva,
a specialist in the HR department
at Stoilensky, was implemented
as part of the #NaVolne
volunteer project
competition with the support
of the Miloserdiye Charitable
Foundation, a social partner
of NLMK.
Corporate sports
NLMK traditionally provides its
employees with all the conditions
for necessary physical activity.
The company has equipped gyms
and playgrounds on its sites, corporate
sports facilities, rents external
gyms for team sports, co-finances
subscriptions to swimming pools
and gyms. NLMK also regularly holds
corporate competitions and sports days,
employees regularly participate in various
sports competitions.
Plans for 2022
and medium term
In 2022, the company will continue
to implement projects aimed
at increasing labour productivity,
taking into account the optimization
and improvement of process efficiency,
automation and digitalization. Much
attention is to be paid to ensuring
competencies for NLMK Group's
strategically important investment
projects.
The active use of people analytics
for strategic and tactical staff
planning will enable informed
decisions and provide NLMK Group
with the necessary competencies
in the long and medium term.
In the field of training and development,
in 2022 the company will continue
to improve its educational programmes
for key working professions. NLMK staff
training and development programmes
represent a full cycle of continuous
professional and personal development –
from social projects aimed at professional
self-determination to niche educational
solutions for specific production tasks.
In 2022, the work on improving
the company’s onboarding process
will continue, focusing on pain
points identified in onboarding
satisfaction survey.
2022 should be a key year for the Career
Routes project, which will cover almost
16,000 people.
The social policy in 2022 will focus
on the development of the children's
recreation programme, which will
include educational activities about
NLMK Group, corporate pension
programme transformation, expansion
of the Healthy Choice project
and the corporate volunteer movement.
The third competition of volunteer
projects in the field of environment will
also take place.
Our employees
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Social partnership
Annual Report 2021
Occupational
health and safety
Key 2021 figures
$46.4 m
invested in the development of safe production
40
large-scale OHS projects
curated by the сompany’s Top 100 executives
5 top risk programmes
introduced to prevent injuries
40
multifunctional units
purchased for automated medical examinations
Occupational safety is a top priority for NLMK Group.
Striving for a zero injury rate at all its operations,
the company is continuously improving its OHS
management system.
Major themes
Occupational health and safety
Key events in 2021
Results of injury prevention programmes:
• 19% decrease in LTIFR among employees and contractors
• 19% less falls with a level difference
• 13% less same-level falls
• 40% less injuries from moving equipment parts
• 60% less eye injuries
Switched to using improved PPE.
All sites have OHS committees in place chaired by the heads of sites.
Integration of cardinal safety rules completed. Regulations on disciplinary
measures for OHS violations entered into force.
Group-wide contest CEO Awards organized for the first time as part of the non-
financial incentive programme.
Global Sustainable Development Goals
Our approach to managing occupational health
and safety
GRI 403-1
The company’s approach to OHS
management based on:
•
Strict compliance with Russian
and international OHS regulations
•
Introduction of best practices
•
A risk-based approach and control
of key risk factors
•
Developing and fostering 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.
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
All injuries, accidents, incidents,
and occupational illnesses can
and must be prevented
OHS is an integral part of our
business and at the heart
of our decisions to develop
and improve business
processes
Safe operations
are the responsibility of every
employee
NLMK Group’s
OHS principles
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 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.
All NLMK employees and contractors
are involved in measures to improve
workplace safety. The CEO (Chairman
of the Management Board) plays
a key role in regulating the company’s
approaches to production safety.
He determines the Group’s OHS
development strategy and approves its
foundational document, the Integrated
Management System Policy.
GRI 102-20
NLMK Group approved its Integrated Management System Policy (IMS Policy) in 2020. This Group-wide document lays
out the сompany’s position in the areas of quality (ISO 9001), environmental protection (ISO 14001), energy efficiency
(ISO 50001), and OHS (ISO 45001). The Policy was approved as part of Integrated Management System development
and is in line with the requirements of international standards. It takes into account the world’s best sustainability practices.
The сompany’s OHS goals:
• To follow 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 ensure efficient production with zero accidents, incidents, and near misses through global excellence in OHS
and continuous development and promotion of a safety culture among NLMK Group’s employees and contractors
Integrated Management System objectives and management liabilities are published at NLMK Group’s website.
Occupational health and safety
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Social partnership
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The company strives to ensure safe
production by introducing best OHS
practices and by continuously developing
and promoting a production culture
among NLMK Group employees
and contractors. Group management
assumes responsibility for providing
safe and favourable working
conditions and preserving the life
and health of NLMK Group employees
and contractors. When planning
production activities, management
takes into consideration the analysis
of environmental protection risks. OHS
issues are discussed with employee
representatives and trade unions.
The staff of structural units can submit
proposals related to ensuring safety, safe
work methods, and actions to improve
working conditions.
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 steps to improve
it. In addition, the Management Board
reviews the achievement of OHS KPIs.
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.
The development and maintenance
of the OHS management system
is the responsibility of the project
development office within the OHS
department. 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 in the Group. Requirements
for compliance with the 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 on Ensuring Ability to Provide Emergency First Aid and Medical Evacuation
• Regulations Governing the Safe Operation of Lifting Equipment
• Contractor Management Regulations
• Regulations Governing Working 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 Group 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
In order to develop a plan of corrective
measures, the company carries out
an annual bridge analysis of OHS
incidents to identify problem areas
with the highest injury rates and analyse
the causes of incidents in the following
categories:
•
Work-related injuries across
NLMK Group, functional areas,
and production sites
•
Fires and fire safety incidents
•
Industrial safety incidents
•
Road traffic incidents
•
On-site clinic visits
OHS investments
In order to achieve the objectives that
have been set in a high-quality manner
within the framework of the OHS
Strategy, the сompany invests in this
sphere annually. In 2021, OHS expenses
amounted to approximately $46.4 million.
All NLMK Group companies submit their
planned measures and projects for OHS
risk management to the Investment
Committee for review, which
decides on allocating funds for their
implementation. Priority is given
to projects that reduce risks of employee
injuries and critical equipment
malfunction.
Breakdown of occupational health and safety investments in 2021, %
In 2021 over $13 million was invested
into projects to improve production safety
in the following areas:
•
Industrial safety
•
Risk management
•
Fire safety (protecting employees
and property)
•
Improving working conditions
for employees
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
2021, the number of employees covered
by the OHS management system
was approximately 50,000, or almost
100% of the headcount. In 2021,
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
they were certified for compliance
with OHSAS 18001:2007. 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; NLMK Ural,
NLMK Verona, and NLMK Strasbourg
in 2020; and Stoilensky, Dolomit,
Stagdok (Mining Division enterprises),
and NLMK DanSteel in 2021. More
than 30,000 employees were covered
by the OHS management system,
which was certified by BSI (British
Standards Institution). In 2022, the plan
is to obtain ISO 45001:2018 certification
for the OHS management system
at NLMK Kaluga.
28.5
Personal protective equipment
27.9
Risk management
21.2
Improving working conditions for employees
6.9
Industrial safety
6.6
Other
6.1
Fire safety
1.5
Healthy meals
1.3
OHS trainings
$46.4 m
Occupational health and safety
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Social partnership
Annual Report 2021
OHS risk assessment
GRI 403-2 GRI 403-7
NLMK Group applies a risk-based
approach to OHS management.
The company assesses risks at all
production operations. As a result
of the assessment, absolute majority
of identified high risks was eliminated.
In other cases temporary measures have
been developed that reduce the amount
of risk until corrective action is taken.
INDUSTRIAL MEDICINE
GRI 403-9
The Industrial Medicine Development Strategy includes several major project sets with an emphasis on building up a system
of emergency response when providing aid to the injured and ill. In 2021, the company adopted the Regulations on ensuring
ability to provide emergency first aid and medical evacuation, as well as the medical emergency response plans at three more
sites.
In 2021, the level of on-site clinic equipment increased on average by 48%. The newest equipment was purchased for first
aid, condition monitoring, and immobilization. Over 70 health workers in corporate on-site clinics were trained in providing
first aid to the injured and in expanded resuscitation at the pre-hospital stage. The health workers took courses certified
by the American Heart Association and the European Resuscitation and received international certificates. Training sessions
(medical drills) are organized regularly to test emergency medical evacuation plans with various scenarios and injury profiles.
GRI 403-3
As part of the emergency cardiopulmonary resuscitation programme, over 200 high-tech automated external defibrillators
(AED) were installed at all Group companies, and over 50 mobile training centres were created and equipped with adult
CPR manikins. Over 1,700 company employees took the Cardiopulmonary Resuscitation with AED course. Amid COVID-19
restrictions, two corporate e-courses were developed and are being implemented successfully: Cardiopulmonary
Resuscitation with AED and First Aid: Injuries and Critical Conditions.
In 2021, the company established a pool of first-aiders: almost 600 production employees underwent in-person first aid
training. In addition, a group of in-house trainers (corporate first aid instructors) was created.
In order to boost the efficiency of pre-shift and pre-trip medical check-ups, over 40 universal electronic check-up systems
were purchased. The system covers up to 70% of such check-ups.
GRI 403-10 In terms of managing hazardous factors and occupational diseases, the number of visits to NLMK Lipetsk
on-site health clinics with complaints of eye microdamage halved in 2021.
Altai-Koks continues to implement a pilot project for preventing occupational deafness with Hearing Laboratory, a leading
manufacturer of personal protective equipment. Individual treatment and prevention programmes were developed
for employees with a high risk of deafness. An audit of workplaces with an analysis of noise exceedance was carried out
at NLMK Lipetsk.
Fire safety
In 2021, particular attention was paid
to personnel’s readiness for fires
and interaction with emergency rescue
services. Jointly with fire and emergency
rescue services, two major tactical
fire drills were held (Altai-Koks,
NLMK Lipetsk). In addition, tactical drills
were organized at Stoilensky to check
the interaction of first responders, medics,
and production personnel during accident
response.
As part of the programme for fire safety
during hot works, actions for fire safety
control were taken. In 2021, 28 innovative
mobile foam extinction systems
were installed to protect rolling equipment
as part of the rolling mill fire safety
programme.
Specialists from the MARSH insurance
broker audited 12 departments
at NLMK Lipetsk, as well as Altai-Koks
and VIZ-Steel, as part of a project
for external fire safety risk assessment.
As a result of these actions,
over 1,500 recommendations
were proposed based on global best
practices.
Staff training and engagement
GRI 403-4 GRI 403-5
SAFETY CULTURE DEVELOPMENT: LEADERSHIP IN OHS
Throughout the year, the programme for leadership development in OHS
was being actively implemented, curated by the NLMK Group CEO.
Since April 2021, OHS Committees operate at all Russian companies
of the Group. Meetings are held every month and chaired by the Managing/
General Director.
VIZ-Steel piloted the SafeStart learning solution to foster a responsible attitude
to safety not just at work, but also at home. In 2022, the SafeStart programme
is to be adapted and rolled out to all Group companies.
ELECTRONIC WORK PERMITS
In 2021, the three main operations of NLMK Lipetsk completed the integration
of electronic work permits (EWP). Currently, EWP account for over 95%
of the issued work permits. Transition to the EWP system began for the other
shops and operations at NLMK Lipetsk, and other production facilities
in Russia. The introduction of EWP reduces the time for issuing work permits,
helps create a single electronic database for analyzing the quality of issued
permits, and also increases control over pre-work activities.
In 2021, the company established
a system for automatically assigning safety
culture courses in line with corporate
requirements. Over 85% of employees
were trained in OHS tools. Additionally,
an approach to employee adaptation after
long absences was developed and will
be introduced in 2022.
In-house trainers play a key role in building
a culture of safe behaviour in the Group:
in 2021, over 150 line managers
and OHS employees underwent
training and became in-house trainers
on OHS tools.
In 2021, emphasis was made on practical
application of tools, expanding
competencies based on assessment
and individual development plans,
and developing business partnerships
for production. Over 82% of employees
in the OHS function took the From
Inspector to Partner course. Employee
engagement in managing unsafe events
through the Hazard Reporting IT service
was 43% (+91% vs. 2020).
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Industrial safety
In 2021, the company began to implement
the industrial safety management system
development strategy, which includes
the introduction of proactive and reactive
programmes based on incident
investigations.
For all industrial safety incidents
investigations are carried out, systemic
causes are identified, and measures
are developed to prevent such incidents
from recurring.
In order to prevent industrial safety
incidents, a project was piloted to assess
industrial safety risks at the NLMK Lipetsk
coke and chemical operations, actions
were taken to ensure safe equipment
condition, and the Regulations on Works
in Confined Spaces are being introduced.
The programme of ensuring safety
of buildings and structures (B&S)
included developing a concept of a B&S
condition management system
at hazardous production facilities, including
the Regulations on B&S Condition
Management at NLMK Group companies.
B&S standards were updated at all Group
sites, a long-term programme of B&S
examination was drafted, and alternative
ways are being explored to assess
the technical condition of B&S based
on consultations with the industry’s top
institutions and EMERCOM.
To develop the competencies
of personnel that participates in B&S
management, a unique 400-hour training
programme was elaborated. It provides
basic knowledge in B&S, processes
of construction operations, legal
requirements for B&S, reliability-centred
maintenance, etc. 85% of employees
responsible for the technical condition
and repairs of the company's B&S
were trained under this programme.
As part of the Crane Safety project, KPMG
held an audit of loading and unloading
operations. 21 initiatives were developed
to prevent incidents involving lifting gear.
The incident investigation programme
included the development of the classifier
for industrial safety incident levels
and the review of the Regulations
on Investigation of Industrial Safety
Incidents.
Traffic safety for road and rail transport
The сompany is developing a culture
of safe driving. As part of the project
to increase traffic safety for road
and rail transport, 928 drivers of road
and process transport and 21
in-house trainers took the Defensive
Driving course. The training provider
is certified by the British Royal Society
for the Prevention of Accidents (RoSPA).
An additional traffic safety agreement
was developed for contractors.
A dedicated course was launched
for locomotive drivers: Traffic Safety
and Increasing the Quality and Efficiency
of Rail Transport Operation.
LOTO SAFETY SYSTEM
The purpose of the LOTO project is to decrease one of the key risks for NLMK Group: injuries from a source of hazardous
energy during maintenance or repairs, and in case of contact with rotating or moving parts of equipment, machines,
and mechanisms.
All Russian sites underwent an assessment audit. Priority is given to projects in the shops where the risk of personnel
exposure during repairs is the highest. All NLMK Group sites are to be covered by the LOTO system until 2025.
In 2020 NLMK’s OHS Director officially joined the Safety and Health Committee of the World Steel Association. He participates
in the committee’s meetings regularly.
Emergency preparedness and incident reporting
NLMK prioritizes efforts to prevent
and respond to emergencies. Each
company has regulations in place
on preventing and managing
the consequences of both man-made
and natural disasters. The schedule
of planned emergency training sessions
for 2021 included sessions on fires, gas
leaks, acid/alkali spills, molten zinc leaks or
spillages, as well as power outages.
In order to ensure timely notification
on incidents at the sites, a reporting
matrix was created and key participants
of the process were identified. Information
sheets indicating the contacts of persons
responsible from the OHS service
were installed at NLMK sites.
In line with the Regulations on Notification,
Registration and Investigation of Incidents
in OHS, Industrial Safety and Environment,
information about critical-level events
or incidents that imply reputational risks
must be immediately communicated
to the NLMK Group CEO. Incident alerts
are sent out for prompt notification
of employees and contractors.
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.
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Partnerships with contractors
In 2021, NLMK Group companies
engaged over 800 contractors
and subcontractors, as well as outsourced
service suppliers with an average
headcount over 17,500.
Ensuring safe working conditions
for counterparties is an integral part
of NLMK’s corporate social responsibility
and one of the company’s strategic
goals. Group leadership pays particular
attention to creating an efficient OHS
management system for working
with contractors and the strategic
development of the company’s partners.
With this goal in mind, the Regulations
Assessing the maturity of the OHS system
The company 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 Group companies
comply with corporate regulations.
Based on these reports, a quantitative
assessment is made of the companies’
compliance with current regulations.
In case of any inconsistencies, remedial
measures are developed and changes
are made to the approach to OHS
management. To improve the quality
of assessment, the Group is working
to establish an internal institution of OHS
auditors.
Personal protective equipment
In 2021, the сompany continued to implement its strategy for providing employees with PPE. The transition to more comfortable
protective shoes with increased protection characteristics and protective goggles with a reinforced layer that prevents scratches
and fogging is complete.
OHS Hotline
The hotline launched in December
2019 continued its operation in 2021.
Employees have had a positive response
to the new OHS communication tool.
The toll-free number 8 (800) 600–04–74
and email address HSE@nlmk.com
received over 200 employee requests.
Employees asked questions about OHS
standards and requirements, labour
conditions, working during the COVID-19
pandemic, PPE provision, and 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.
on Contractor Management were adopted
in early 2021. The document introduced
the risk-oriented approach to every stage
of a contract’s life cycle for investment
projects, capital repairs, and outsourcing.
A course was developed to reinforce
competencies of contractor management,
and over 200 specialists and managers
took it.
In order to assess how contractor
management tools take root, at the end
of 2021 the OHS department held
an audit of the OHS management system
for working with contractors. Seven
NLMK Group companies confirmed that
the system is effective and the methods
and practices applied are in line
with the target model.
OHS qualifications are organized
for preliminary selection and confirmation
of contractors’ readiness to abide by legal
and group-wide requirements. Qualification
is required for any counterparties that
intend to provide services on the territory
of an NLMK company, regardless
of the cost of the contracted services.
A new version of the Regulations
on Qualification approved in December
2021 further optimized this process.
In order to consolidate requirements
on abiding by the Cardinal Safety Rules,
subcontractor management, limiting
the number of subcontractor levels,
and making changes to the system
of fines and bonuses, a new Agreement
was approved in the sphere of OHS,
industrial and fire safety of operations,
environmental protection, pass control,
and internal security procedures in Q4.
It is signed with all contractors that enter
into labour relations with NLMK Group.
In order to develop the competencies
of managers, specialists, and contractor
employees, seven training programmes
were developed and a pool of 22 in-house
trainers and 30 trainers among Group
contractors was formed.
In order to assess management systems,
OHS held a comprehensive audit of 18
contractor organizations. After these
actions, plans of corrective measures
were compiled to eliminate any deviations
and develop OHS processes. For three
contractors, long-term development plans
for OHS management systems and safety
culture were formed.
In 2021, as part of the Ecosystem project,
NLMK Group’s OHS tools were integrated
in two contractor organizations.
It was noted that these practices
were taking root and applied in operations
to a higher extent (90%).
In October 2021, an OHS Forum
was organized to increase engagement
of contractors into OHS matters.
It was attended by over 40 general
directors of contractor organizations.
As a result, participants formulated
the expectations, obligations, and plans
for 2022 aimed at the strategic
development of contractor relations.
The company’s efforts of integrating tools
and practices aimed at the development
of an occupational injury prevention
system led to a reduction in LTIFR among
contractors by 47% in 2021 vs. 2020.
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NLMK Group’s LTIFR without
‘light’ injuries in 2017–2021
GRI 403-9
LTIFR for NLMK Group
employees and contractors
in 2017-2021 GRI 403-9
NLMK Group’s LTIFR
without ‘light’ injuries
2017
0.99
0.66
0.75
0.77
0.64
2018
2019
2020
2021
NLMK Group
(employees and contractors)
Industry average (WSA data)
2017
1.12
0.77
0.86
1.25
1.01
0.97
0,84
0.83
0.85
2018
2019
2020
2021
Employees
Contractors
2017
0.97
0.69
0.76
1.43
1.26
2.05
1.06
1.22
0.85
0.47
2018
2019
2020
2021
LTIFR is calculated on a monthly basis
for each subsidiary taking into account
data for both NLMK employees
and contractors. During the reporting
period, LTIFR stood at 1.01. Changes
in this indicator are due to the introduction
of an anti-concealment programme
towards registering incidents of all levels.
In 2020, this policy allowed the company
to identify the main production risks
and develop corrective actions to prevent
them in the future.
Programmes to decrease injury rates
enabled a reduction in the number
of incidents in the following categories:
falls/trips by 13%, falls from height
by 19%, exposure to moving parts
of equipment by 40%. However, falls
and trips are still the hazardous factor that
leads to the most injuries.
In 2021, there was an increase
in materialized risks related to manual
operations and exposure to extreme
temperatures. Due to that, a programme
was launched for the prevention of injuries
when using manual tools at NLMK Group.
For early 2022, the development
of a programme for reducing extreme
temperature risks is planned.
The Group 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 2021, total
TRIFR increased vs. last year to 3.23
due to optimization of registering non-
disabling injuries among employees
and contractors. Such cases
were almost never registered before,
because employees did not understand
the principle of their identification.
1 TRIFR includes fatalities, lost-time injuries, and injuries requiring treatment. It is calculated on the basis of the method adopted by the Group
for determining recordable injuries (RIs).
TRIFR (RI)1 for NLMK Group
employees and contractors
in 2017–2021 GRI 403-9
Injury severity in 2017–2021
Employees
Contractors
Employees + contractors
2017
3.22
2018
2019
2020
2021
2.55
2.42
3.68
3.75
3.5
2.47
2.43
3.18
3.23
5.23
2.12
2.37
2.01
2.07
Light injuries
Severe and group injuries, fatalities
2017
2018
2019
2020
2021
23
12
25
20
17
98
77
80
147
127
The number of light injuries decreased
by 18%,
and the number of severe, fatal, and group
injuries went down
by 15%
year-on-year
2021 performance
In 2021, the company continued
to implement its anti-concealment
programme for incident registration
at all levels that was introduced in late
2019. NLMK Group strives to determine
the systemic causes, develop corrective
measures, and prevent incidents from
happening again.
The company also 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
Upgrades of the NLMK safety system,
including improvements in response
methods to emergencies and production
incidents, enable the company
to minimize the consequences
of incidents.
In 2021, employees and contractors
at NLMK Group sites suffered 144 lost
time injuries. The decrease in injuries
among employees by 8% and among
contractors by 38%, with the overall
number going down by 17%, confirms
the effectiveness of the company’s
tools of safety culture development.
Applying risk assessment and behavioural
safety tools enables the development
of a safety culture, employee upskilling,
and a gradual decrease in injury
rates. The number of cases involving
contractors is decreasing due to a set
of measures to address top risks
at investment projects.
Indicator
2017
2018
2019
2020
2021
Total number of occupational incidents
121
89
105
167
144
Employees
90
65
72
133
123
Contractors
31
24
33
34
21
Number of occupational fatalities
11
3
6
3
6
Employees
5
3
2
1
5
Contractors
6
0
4
2
1
Number of lost time injuries
110
86
99
164
138
Employees
85
62
70
132
118
Contractors
25
24
29
32
20
Total man-hours worked for employees
92,677,015
93,637,091
95,179,559
93,300,837
97,493,913
Total man-hours worked for contractors
15,108,161
22,612,132
26,995,931
39,798,091
44,452,504
The сompany deeply regrets the six
fatalities that occurred to employees
a contractor at its sites in Lipetsk,
Zarinsk, and Pennsylvania. The incidents
were investigated, root causes
were identified, and the relevant risks
were re-evaluated. In order to avoid
a recurrence of such cases in the future,
the сompany is focusing on the top.
The system for recording work-related
injuries at NLMK Group is based on industry-
wide methods adopted by the World Steel
Association (WSA). The Group regularly
provides WSA with relevant statistics
in order to access comparative information
for the industry.
The main injury rate indicator used
in the Group is Lost Time Injury Frequency
Rate (LTIFR). After the concealment
prevention programme was launched in late
2019, the company’s LTIFR increased, but
in 2021 it went down by 19%, confirming
the efficiency of the company’s OHS efforts.
Number of work-related
incidents resulting in injury
to NLMK Group employees
and contractors in 2017–2021
(without fatalities) GRI 403-9
Employees
Contractors
2017
85
62
70
132
118
25
24
29
32
20
2018
2019
2020
2021
NLMK Group’s LTIFR vs.
the industry average
in 2017–2021
GRI 403-9
Note: The increase in the number of man-hours in 2021 is due to the addition of time that NLMK employees spend on the way from the checkpoint
to the immediate place of work and back, as well as on the transportation of NLMK Group employees to the territory of the Group's companies
by corporate transport.
GRI 403-9
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Social partnership
Annual Report 2021
not just at work, but also at home.
Scale the solution up to all Russian
companies of NLMK Group
•
Digitalize briefings based on Linkis,
introduce pre-shift testing
and an adaptation course after long
absences
•
Develop in-house trainers, implement
a programme for developing a captive
function with a focus on managerial
competency development based
on assessment results, boost
competencies of narrowly focused
specialists, develop the mentoring
system
•
Integrate HAZID/HAZOP tools
in project activities
Programme of PPE
distribution
to employees
•
Launch a breath protection
programme
•
Launch a welder protection
programme
•
Develop the PPE Outsourcing project
(including contact-free distribution)
•
Review the protective properties
of clothing
•
Launch a remote course on PPE
Fire safety
•
Develop a programme and implement
measures based on the results
of external fire risk assessment
•
Implement a programme to reduce
the number of fires and ignitions due
to electrical reasons
OHS tools
and injury
reduction
programmes
•
Injury reduction programme for manual
tool use
•
Project for dividing pedestrian paths
and transport routes in shops
•
Continue implementing programmes
to manage top injury risks and roll them
out to other Group sites
•
Cascade best practices developed
at NLMK’s investment facilities
to repairs and process operations
Training
•
Update matrices of obligatory
permits considering new legislative
requirements, automate the processes
of assignment and tracking due
dates for training through IT systems
(SAP SF)
•
Form a unified approach to practical
training in top risks at all Group
sites (work at height and in confined
spaces): requirements to training
grounds, practical trainers, etc
•
Assess the efficiency and implement
measures to increase the quality
of current OHS tools, focus on top
risks, analyse results as part
of projects
•
Introduce the dynamic risk
assessment tool in NLMK’s Russian
perimeter (briefing before start
of works, assessment by the 5
Steps methodology, suspending
unsafe works). Train at least 80%
of production employees
•
Adapt the SafeStart learning solution
to foster a responsible attitude
to personal safety and safety of others
PLANS FOR 2022
AND THE MEDIUM TERM
Industrial safety
•
Elaborate a strategy of developing
the fire safety management system
for 2022–2023, with the purpose
of reducing the number of fire safety
incidents
•
Increase the efficiency
of the production control system
at NLMK Group companies to ensure
safety at hazardous production
facilities
•
Audit the industrial safety management
system
•
Digitalize elements of the industrial
safety management system in IT
systems
•
Introduce new practices of assessing
the technical condition of equipment
and examining B&S at hazardous
production facilities
•
Continue implementing the Crane
Safety, Buildings and Structures,
and Gas Safety programmes
Contractor
management system
In 2022, operations will focus
on efficiency of contractor management
processes, targeted OHS development
of key contractor partners,
and preparation for major construction
projects in the next investment cycle.
One important step in the development
of the management system will
be business process digitalization.
The prototype of the Contractor
Management module has already been
developed, which will be piloted at Group
companies in 2022.
Industrial
healthcare
•
Implement the Emergency Response
set of actions. The company will
continue providing industrial onsite
clinics with modern diagnostic
and resuscitation medical equipment,
testing plans of emergency medical
response via training sessions
in the workplace with participation
of emergency response teams,
promoting the programme
of defibrillator accessibility, introducing
interactive maps and dynamic
monitoring of automated external
defibrillators
•
Develop mass three-level training
for first aid employees (baseline,
advanced, in-depth), re-launch training
in simulation centres to develop
practical first aid skills, develop
the in-house trainer system (corporate
first aid instructors)
•
Create a unified network of electronic
medical check-ups, introduce new
digital products within the system
(transferring content, in-shop
general practitioner, Face ID, etc.),
integrate the system with EWP, work
with cardiovascular disease risk
groups
Traffic safety for road
and rail transport
•
Continue introducing international
practices for the development
of personnel driving automotive,
industrial (in-shop), and mining
transport and special equipment:
Defensive Driving and Manoeuvring
of Special Equipment.
The programmes were developed
considering the bridge analysis
of transport incidents, properties
of the equipment used, and types
of process operations
•
Develop the in-house trainer
system for defensive driving based
on the methods of international driver
schools: RoSPA (UK, Royal Society
for the Prevention of Accidents), Royal
Society for Prevention of Accidents,
Institute of Advanced Motorists (UK),
Smith System, National Safety Council
(USA), СЕРА, and best practices
in Russia
•
Introduce new technologies and digital
solutions in railway transport, update
and fine-tune security and control
systems (video analytics, impact
sensors, driver identification, video
infrastructure monitoring, signalling,
centralization and blocking devices,
track sections, systems of audio
and video control for inspectors
and locomotive driver instructors, etc.)
•
Develop systems of training and testing
locomotive drivers and railway
workers in line with best Russian
and international practices
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•
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
•
Steel Tree grant competition:
support for social initiatives
of residents of the regions where
the company operates
•
There for you: support
for the volunteer movement
The Miloserdiye Fund has received
a number of awards: in particular
it received a certificate of honour
of the Lipetsk Chamber of Commerce
and Industry; it is also a two-time
recipient of the Golden Badge
for Services to the City of Lipetsk.
The fund received the highest awards
at the national competition of voluntary
public annual reports “Reference Point”.
The Steel Tree grant programme, which
Developing
local communities
Key figures for 2021
RUB 6.6 bn
NLMK’s total social investment
0.9 bn
investment in external social programmes
74 projects
projects supported through the Steel Tree grant
competition
Important issues
Indirect economic impacts
Local communities
Key events in 2021
NLMK Group won the All-Russian competition “Leaders of Russian Business”,
hosted by the Russian Union of Industrialists and Entrepreneurs, for projects to
combat the COVID-19 pandemic
Global Sustainable Development Goals
As a major company engaged in mining,
production of steel and steel products,
NLMK has a significant impact
on the environment and the lives of local
communities. The territories where
the Group's mining and production
facilities operate include cities and regions
in Russia, Denmark, Belgium, Italy,
France and the USA. GRI 203-2
The departments responsible
for corporate citizenship aim
to ensure that the common interests
of NLMK Group, its employees,
local communities, state authorities
and local governments on issues
related to the sustainable development
of the company and the regions
of presence are met, guided by wellbeing
of employees and the local population.
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
Priority areas of support for local
communities
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 corporate citizenship
and philanthropy 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)
Charitable 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 ten key areas.
•
Care: 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
(includes the Angel Children and Time
for Kindness programmes)
•
Science and culture: supporting gifted
children (winners of science Olympiads
and music and art competitions),
creative groups, libraries, museums,
and art galleries
STEEL TREE HELPED
OPEN A COMPUTER
CLASS IN STARY OSKOL
FOR TEACHING BLIND
AND VISUALLY
IMPAIRED PEOPLE
The Tiflo NET classroom
opened at the Rehabilitation
Centre for the Visually
Impaired of the Stary Oskol
Society of the Blind. The Steel
Tree grant of RUB 300,000
was used to purchase
monitors, processors, hard
drives and other components,
as well as the JAWS (Job
Access with Speech) software
and sets of stickers for labeling
the keyboard in Braille.
MARATHON OF GOOD DEEDS
In September 2021, the Good Deeds Marathon was held
at some of the company's sites, timed with the International Day of Charity.
In Lipetsk, the sports and environmental marathon was held with the support
of the Miloserdiye Charitable Fund. The family holiday included eco-
competitions for the collection of plastic and waste paper, an eco-game
for children, a children's break-dance championship, and master classes from
fitness instructors.
NEW FORMAT OF ENVIRONMENTAL CLEAN-UP
Close to 200 people in six districts of Lipetsk walked the distance, picking litter
along the way. Ecosteel plogging is a race coupled with litter picking activities.
In 90 minutes, the teams picked more than a tonne of litter, with plastic
accounting for a third of it. Ecoprom, partner of the project, disposed of it.
The Miloserdiye Charitable Fund and the Clean Country Association helped
organize the campaign.
is being implemented with the support
of the Fund, won the Best Social Projects
in Russia national contest.
In 2021, the Miloserdiye Charitable Fund
was ranked 7th among the top private
and corporate charitable funds in Russia.
The rating was compiled by the RAEX
agency together with the Association
of Rating Compilers (ARC). Year-
on-year, the Fund's rating improved
by 11 notches. In 2021, the Fund's
structure was improved: the Ural
branch was opened in Yekaterinburg,
and the Stary Oskol branch is scheduled
to open in early 2022.
NLMK is committed to enhancing
the tools it uses to collaborate and engage
with communities and its employees
in order to develop a culture of everyday
charity.
Developing local communities
159
158
Social partnership
Annual Report 2021
NLMK also operates various volunteering
and charity programmes and conducts
research on the needs of local
communities in areas where it operates.
Tools used to engage and determine the needs of local communities GRI 413-1
Measure
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 including through
the communication channel of the Miloserdiye Fund
Direct engagement
via internal communication
channels
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 on the internal communication channels used, see the Stakeholder Dialogue
section
Working with local authorities
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 more details on the internal communication channels used, see the Stakeholder Dialogue
section
Public hearings
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 2021, three NLMK
projects were heard publicly and approved by Lipetsk residents
Strategic documents
on corporate citizenship
and philanthropy
In 2021, the development of the Corporate
Citizenship and Philanthropy Strategy
continued. These high-level documents
will become an integral part of the Group's
strategic documents. 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.
Local community impact
assessment
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.
Requests from the population
and proposals on charitable
programmes of the Miloserdiye Fund
are analyzed through regular monitoring
of various communication channels.
Every month, the company receives
up to 20 such requests and promptly
responds to them.
2021 performance
GRI 203-1
Each year, NLMK allocates significant
resources to corporate citizenship
programmes in a variety of areas.
In 2021, NLMK Group allocated
RUB 0.9 billion to external social
programmes. 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 144.5 million
was allocated to support healthcare
in 2021, which amounted to 16%
of the company’s total investment
in corporate citizenship programmes.
The Fund regularly provided expensive
medicines and high-tech medical
equipment, including ventilators,
oxygen concentrators, X-ray machines,
nebulizers, inhalers and means
of transporting patients to medical
institutions in five regions of Russia.
THE MILOSERDIYE CHARITABLE FUND HELPED
TO RENOVATE FIRST AID/OBSTETRIC STATIONS
IN REMOTE AREAS OF THE LIPETSK REGION
The Fund helped to install more than 50 new plastic windows in seven first-
aid stations of the Volovsky district. Similar work is planned to be carried out
in the Terbunsky district. After the first plastic windows were installed in first
aid/obstetric stations in the villages of Knyazhnaya and Samarino, the medical
staff appreciated the comfort of the renovated premises and sincerely
thanked the Miloserdiye Fund for their care and support.
STEEL TREE GRANT COMPETITION
The Steel Tree grant competition has been held since 2017. Every year
the number of applications and awarded grants is rising. In 2021, grants
were awarded to projects in the following categories: ecology and urban
improvements, family values, science and culture, sports and health,
supporting 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 2021 set a new record at close to 300. A total of 74 grants were awarded
to projects, of which NLMK contributed RUB 27 million. In 2021, 29 projects
were completed in the Lipetsk Region, with investment totaling close
to RUB 8 million.
It determines such needs through surveys
and public hearings as well as various
internal corporate communication
channels.
Geography of the Steel Tree
grant competition, number
of projects
29
Lipetsk
20
Stary Oskol
14
Sverdlovsk Region
7
Zarinsk
4
Kaluga Region
74
40
Grassroots and children's sports
17
Funding education
16
Health
10
Support for veterans and retired employees
8
Support for socially vulnerable groups
5
Funding social infrastructure development
in the home regions
4
Culture and arts
RUB
0.9 bn
Investments in corporate citizenship programmes in 2021, %
GRI 203-1
NLMK GROUP WON THE LEADERS OF RUSSIAN BUSINESS
NATIONAL COMPETITION HELD BY THE RUSSIAN UNION
OF INDUSTRIALISTS AND ENTREPRENEURS
WITH PROJECTS TO COMBAT THE COVID-19 PANDEMIC
The company topped the Best Practice for Ensuring the Safety of Employees
and Contractors amid the COVID-19 pandemic category.
Developing local communities
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160
Social partnership
Annual Report 2021
Support for socially
vulnerable groups
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
for single elderly persons. Around
2,500 food parcels was delivered
to vulnerable groups.
A total of RUB 72.5 million was allocated
to support socially vulnerable groups
in regions where NLMK Group operates
in 2021, which amounted to 8%
of the company’s total investment
in corporate citizenship 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 basic
educational institutions.
Due to the spread of COVID-19 in 2021,
the scale of support for this group
was significantly increased. A campaign
to support lonely elderly people was held
in the Lipetsk Region. They were given
food parcels. More than 8 tonnes
of products were sent to settlements
in 10 districts of the region.
A total of RUB 96.3 million was allocated
to support veterans and retired
employees in 2021, which amounted
to 10% of the company’s total investment
in corporate citizenship 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
THE MILOSERDIYE CHARITABLE FUND ALLOCATED
OVER RUB 1.2 MILLION TO IMPROVE THE FACILITIES
OF RAINBOW NURSERY SCHOOL IN THE VILLAGE
OF KHLEVNOYE, LIPETSK REGION
In the framework of its Childhood programme, the Fund helped procure new
kitchen and refrigeration equipment, devices for indoor air disinfection, vacuum
cleaners and garden trimmers, dishes and furniture, sports equipment and toys,
educational games and creative kits for the all-round development of pupils.
MILOSERDIYE CHARITABLE FUND HELPS TRAIN
FUTURE SHOOTING SPORTS STARS
Thanks to the support of the Miloserdiye Charitable Fund, more than 320 young
residents of Lipetsk have the opportunity to study free of charge at the Olympic
Reserve School No. 13. A total of 14 coaches hold regular training sessions.
The future stars of Russian sports have at their disposal a bullet range
and a modern shooting range of the Lipetsk Metallurg sports club.
Today, 16 students of the Lipetsk sports school are members of the Russian
national team in trap and bullet shooting. The school was twice awarded
with grants from the Shooting Union of Russia and four times by the Olympians
Support Fund for the best results at the end of the year. Lipetsk athletes have
won more than 1,000 medals at international and national competitions, set
three world records and 26 Russian records.
VIZ-STEEL SUPPORTED
A LABORATORY
AT THE URAL
POLYTECHNIC COLLEGE
VIZ-Steel helped launch
a metal testing laboratory
at the Ural Polytechnic College.
The laboratory will train students
in metal forming. The training
programme was created jointly
with VIZ-Steel specialists, taking
into account the needs of modern
steelmaking production.
VIZ-Steel actively cooperates
with other regional educational
institutions that train future
steelmakers. The enterprise
provides an opportunity
for students of various technical
colleges and universities to have
an internship.
HELPING VETERANS
Within the framework of the Steel
Tree grant competition
the Miloserdiye Charitable Fund
supported the From Heart
to Heart project in Lipetsk.
With the allocated funds,
students of the Faculty
of Economics of the Lipetsk
State Technical University bought
detergents and souvenirs,
learned the addresses of single
elderly veterans, and placed
colorful information banners
about the campaign at bus
stops. Volunteers helped more
than 50 single elderly persons
with their everyday chores.
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
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 graduates of this school.
In 2021, the company allocated
RUB 371.4 million to support grassroots
and children's sports in the regions
where it operates, or 40% of total
investment in the company's corporate
citizenship programmes.
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.
Developing local communities
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162
Social partnership
Annual Report 2021
In 2022, the company plans to finalize
and adopt its corporate citizenship
and philanthropy strategic documents.
Plans for 2022 and the medium term
It also plans to continue developing
the Steel Tree grant competition,
expand the number of its participants,
URBAN ART
In 2021, thanks to the support of the Miloserdiye Fund, new art objects
appeared in the settlements of the Lipetsk Region. The walls of residential
buildings and technical buildings in Lipetsk, Usman, Zadonsk, Volovo,
Dobrinka and Dolgorukov were decorated with graffiti by a professional artist.
The opening of more than 10 art objects was a continuation of the fund’s
educational project to preserve the memory of the people whose names
the streets bear. Previously, similar artworks of prominent figures from various
eras adorned the squares of Lipetsk.
MUSIC TALENT FESTIVAL
A family music festival was held in Stary Oskol with the support of the Steel
Tree grant competition.
More than 300 children study at the Stary Oskol Children's Music School
No. 3. In 2021, a project was launched to organize the Young Shoots
of the Musical Tree music festival, which won a Steel Tree grant. The heroes
of the festival are students of music and art schools and their parents.
STARY OSKOL HALLMARK
Stary Oskol presented the First Ore mini public garden, dedicated
to the extraction of the first ore in the Stoilensky mine, at Belgorod in Bloom,
an international landscape design festival. Stoilensky funded the park
renovation in 2021 to commemorate its 60th anniversary.
Stoilensky allocated RUB 2.5 million to the renovatopn. The project became
the hallmark of Stary Oskol and won in the Come visit us nomination.
MILOSERDIYE GREEN CAMPAIGNS IMPROVED YARDS
AND PARKS
Miloserdiye Charitable Fund helped to improve urban public spaces.
In the spring of 2021, green campaigns organized by Miloserdiye took place
on five Lipetsk streets. More than 1,100 maples and lindens were planted
in yards. When selecting areas for greening, priority was given to new
buildings, where there are still few green spaces. Residents themselves
proposed the areas for landscaping and took an active part in planting
seedlings together with the fund's volunteers, activists, and schoolchildren.
update the design of the programme
taking into account feedback from
stakeholders, as well as digitalize
competition procedures.
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 2021, a total of RUB 156.9 million
was allocated to support science
and education in regions where
the company operates; this amount
represented 17% of the company’s
total investment in corporate citizenship
programmes.
Developing social
infrastructure of regions
where NLMK Group
operates GRI 203-1
The main priorities of NLMK Group’s
corporate citizenship programmes
include determining and facilitating
solutions to issues that currently
affect the regions where the company
operates as well as social infrastructure
development.
In 2021, a total of RUB 49.6 million
was allocated to develop the social
infrastructure of the regions where
NLMK Group operates, or 5%
of the company’s total investment
in corporate citizenship programmes.
Support for culture
and arts
As part of efforts to support culture
and 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 41.6 million was
allocated to support culture and the arts
in 2021, which amounted to 4%
of the company’s total investment
in corporate citizenship programmes.
Developing local communities
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Social partnership
Annual Report 2021
The mobile app is integrated with
the corporate intranet and gives
employees access to all necessary
services, such as NLMK Group's news
feed, vacation management, bank of
ideas, personal protective equipment
requests, instant registration of safety
rules violations, and others.
The application funtionality
is continuously finetuned: new services
are being added based on employee
requests.
The application is customer-centric
and enables prompt and convenient
access to the company's automated
services.
The app offers such innovative solutions
as mobile access card and video
registration of safety violations.
Vacation
management
News feed
Bank of ideas
Personal
protective
equipment
Prompt registration
of safety violations
employees
30,000
use the app
Golden Prize
of the International
Step Two Award
Intranet and Digital
Workplace Awards 2021
DIGITAL
SOLUTIONS
FOR EMPLOYEES
NLMK Group has launched a unique mobile app
that increases the efficiency of internal corporate
communications and makes corporate services
more user-friendly. The app was launched in March
2020. Currently, close to 30,000 employees (or 60%
of the NLMK Group headcount) use the app.
Social partnership
167
166
Annual Report 2021
CORPORATE
GOVERNANCE
Plate-dendritic structure
of zinc-aluminum-magnesium coating
Scale 1 : 10,000
CORPORATE GOVERNANCE
170
Corporate governance system
170
General Meeting of Shareholders
173
Board of Directors
174
Members of NLMK Board of Directors
as of 31 December 2021
176
Biographies of members of the Board of Directors
179
Committees of the Board of Directors
191
Corporate Secretary
198
Management Board
198
Report on remuneration paid to governing bodies
203
COMPLIANCE AND CORPORATE ETHICS
206
OPERATIONAL CONTROL AND RISK MANAGEMENT
212
Internal Audit
219
Independent auditor
221
INFORMATION FOR SHAREHOLDERS AND INVESTORS
222
Contacts for shareholders
225
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 by the Bank of Russia.
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:
All documents regulating corporate governance practices and principles are available on NLMK Group’s official website.
NLMK’s Corporate Governance Structure GRI 102-18
CORPORATE GOVERNANCE STRUCTURE
According to internal company documents, NLMK’s corporate governance structure includes:
•
The General Meeting of Shareholders, which is the company’s supreme governing body that makes decisions on key
business issues
•
The Board of Directors, which handles the overall management 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 key matters concerning the company’s
activities
•
Executive bodies: the CEO (Chairman of the Management Board) and the Management Board, which manage day-to-day
activities of the company and ensure its efficient operation, while implementing the objectives set by the Board of Directors
•
The 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
•
Internal audit, which oversees the company’s financial economic activities
22%
women
in the Board of Directors
Sustainable development and long-term growth of return on equity investment
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 infor-
mation on the activities of the company and its governing and controlling bodies
Equal treatment of all shareholders, including non-Russians and minority shareholders
Commitment to ensure reliable and effective registration of title to shares and guarantee the opportunity to alienate
them freely and without encumbrances
Compliance with existing laws, principles of the Corporate Governance Code recommended by the Bank of Russia,
and international corporate governance standards
Observing the rights of third parties, including creditors and NLMK employees, as required by the law, the Charter,
and other regulatory documents
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
Open and transparent communications, including by disclosing full and up-to-date information about the сompany
to give shareholders and investors an opportunity to make informed decisions, as well as by providing documents
(information) related to the сompany upon shareholders’ request
Complying with business ethics in conducting operations
Independent auditor
General Meeting of Shareholders
Strategic Planning Committee
Human Resources,
Remuneration, and Social Policy
Committee
Audit Committee
Digital Development Committee
Internal audit
Board of Directors
CEO (Chairman
of the Management Board)
Corporate Secretary
171
170
Corporate governance
Corporate governance
Annual Report 2021
1
Annual meeting (absentee
ballot using e-voting
technology)
3
Extraordinary meeting
(absentee ballot using
e-voting technology)
Improving Corporate
Governance practices
in 2021
In 2021, 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:
•
The company engaged an independent
consulting firm, Spencer Stuart,
to carry out an independent
assessment of the Board of Directors'
performance. The consultants issued
recommendations to further increase
the Board’s efficiency (see the Results
of the Board of Directors Performance
Assessment section for more details)
•
Jane Zavalishina was elected
to the Board of Directors. She
is a highly qualified expert in information
technologies and innovation.
The new structure of the Board
of Directors is more diverse, balanced,
and characterized by stronger digital
competencies. Jane Zavalishina
was appointed Chair of the newly
created Digital Development
Committee
•
The company adopted new
and revised existing company
documents, which are approved
by the General Meeting of Shareholders
and the Board of Directors:
– NLMK’s control over the transactions
and M&A activities of the Group
companies was increased
and the competencies of NLMK’s
governance bodies related
to changes in the structure
of NLMK’s direct and indirect
participation in other companies
were expanded. These changes
were reflected in the NLMK
Charter and the Regulations
on the Management Board
– The Charter and the Regulations
on the Board of Directors now
offer more clarity on the role
of the Board of Directors
in succession planning, performance
assessment of the Board
of Directors and the CEO (Chairman
of the Management Board),
and approving the CEO’s KPIs
and the company’s HR strategy.
In addition, since the number
of committees has increased,
recommendations were specified
on Board members’ participation
in committees
– The Human Resources,
Remuneration, and Social
Policy Committee approved
the revised version of the Induction
course for newly elected Board
members, developed the Board
of Directors Succession Policy
and recommended it to the Board
of Directors for approval.
The Policy is based on regulators’
recommendations and best
practices, which aim to support
the balance of key competencies,
experience, and diverse Board
composition
– The company approved
the Regulations on Digital
Development Committee;
new versions of the Corporate
Governance Code, the Regulations
on Remuneration of Members
of NLMK’s Board of Directors,
and Anti-Corruption Policy, which
takes into account the latest
regulatory requirements and anti-
corruption compliance practices
of NLMK Group
As at the end of 2021, NLMK complies
with all principles of the Corporate
Governance Code: 79 principles (91%)
are fully observed and 7 principles
are partially observed. The сompany
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 2021, the company
successfully employed an electronic
voting service, which allows shareholders
to vote regardless of where their shares
are registered.
NLMK shareholders have ranked among
top-3 most active users of the e-voting
service (NSD). For the convenience of its
shareholders, the company launched
an additional service on the website
of NLMK’s registrar. The shareholders
were able to use it at the Extraordinary
General Meeting on 26 November 2021.
In accordance with Federal Law
No. 17-FZ dd. 24 February 2021
and a resolution of the Board of Directors,
the company’s Annual General Meeting
of Shareholders on 2021 performance
was held by absentee ballot.
In 2021, the number of NLMK
shareholders tripled, exceeding 373,000
by year-end.
The share of Corporate
Governance Code
recommendations fully
observed by the company
PLANS FOR 2022 AND THE MEDIUM TERM
In 2022, NLMK will continue to analyse the best corporate governance practices and evaluate them in terms of their
applicability to the company's activities. Particular attention will still be paid to the implementation of sustainability practices.
As always, the company will analyse rankings, ratings 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. The Group will continue to analyse best practices, new approaches and tools for ensuring alternative ways
of corporate meeting participation.
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 opportunity to participate in the company’s
profits distribution by receiving dividends on identical terms.
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 General Meeting
of Shareholders procedure for preparing,
convening, holding, and vote counting
is set forth in the Regulations on NLMK’s
General Meeting of Shareholders
published on the company’s official
website.
The сompany’s internal documents
stipulating the General Meeting procedure
contain provisions relating to:
•
The option for the company's
shareholders to participate
in the meetings 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
Shareholders have two options
for online voting: through the e-voting
service of the National Settlement
Depository and the online voting service
on the website of NLMK’s registrar,
the Regional Independent Registrar
Agency. These services are available
to all company shareholders, regardless
of whether they are the depository’s
clients or if their share rights are recorded
in the register.
The notice about the General Meeting
of Shareholders and the information
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 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 Corporate Governance Code
recommended by the 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 NLMK’s
website.
NLMK's General Meetings
of Shareholders held in 2021
NLMK’s Annual General Meeting
of Shareholders on 2020 performance
was held on 29 April 2020 by absentee
ballot. It was attended by shareholders
and shareholder representatives holding
a total of 88.52% 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”. In addition, shareholders
approved the payment of 2020 dividends
in the amount of RUB 21.64 per share.
Activities in 2021
Four General Meetings of Shareholders
were held in 2021.
2017
85%
85% 85%
87%
91%
2018
2019
2020
2021
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Share of votes held by the General
Meeting participants, %
11.06.2021
88.56
27.08.2021 26.11.2021
88.49
86.83
NLMK's Extraordinary General
Meetings of Shareholders held
in 2021
At NLMK’s Extraordinary General Meeting
of Shareholders held on 11 June,
shareholders passed a resolution to pay
(declare) Q1 2021 dividends on ordinary
shares in the amount of RUB 7.71 per
ordinary share.
At NLMK’s Extraordinary General Meeting
of Shareholders held on 27 August,
shareholders passed a resolution to pay
(declare) H1 2021 dividends on ordinary
shares in the amount of RUB 13.62 per
common share, including out of retained
earnings.
At NLMK’s Extraordinary General Meeting
of Shareholders held on 26 November,
shareholders passed a resolution to pay
(declare) 9M 2021 dividends on ordinary
shares in the amount of RUB 13.33 per
common share, including out of retained
earnings.
At the meetings, shareholders also
approved new versions of corporate
documents (the NLMK Charter,
the Regulations on the Board
of Directors and the Regulations
on Remuneration of Members of NLMK’s
Board of Directors), passed resolutions
on the company's membership in the Wind
Industry Association, the Association
for the Development of Electric,
Unmanned and Connected Transport
and Infrastructure, and the European
Foundation for Management Development
Association.
Detailed information on the voting results
and resolutions passed by the General
Meetings of Shareholders in 2021
is available on the company’s website.
Board of Directors
NLMK’s 2021 Extraordinary General
Meetings of Shareholders were held
by absentee ballot.
NLMK Board of Directors
procedures
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.
Board members are engaged
in various business aspects, both
within the operation of the Board
and its committees and outside
of it. Directors ensure productive
interaction and experience exchange
with the management including
at informal meetings. With the view
to integrate long-term trends
and challenges in the company’s
development strategy, working groups
have been formed at the Board
of Directors level.
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 the management, and make
objective independent judgements
and decisions that serve the interests
of NLMK and its shareholders.
The Regulations on the Board
of Directors establish the procedure
of preparing for and holding Board
meetings, as well as the procedure
for the nomination and selection
of potential Board embers. GRI 102-24
Members of the 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’s 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 performance 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
competence 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.
Chairman of the Board
of Directors
GRI 102-23
The Chairman of the Board of Directors
ensures the efficient functioning
of the Board, arranges for the preparation
of its 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 its activities
and ensuring that its committees function
efficiently.
The Chairman is elected by Board
members among themselves
by a majority vote of the total number
of 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.
In 2021, in line with best corporate
governance practices, the Board
of Directors elected its Deputy Chairman.
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 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 Board
of Directors and the Corporate
Governance Code recommended
by the Bank of Russia.
Composition of the Board
of Directors
GRI 102-22 GRI 405-1
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 professional
reputation in the business community,
as well as extensive work experience
in key executive positions in leading
international companies of various sectors.
In addition, many Board members have
occupied CEO positions at various
companies, which enabled them to obtain
competencies in all aspects of business
operation, including knowledge and skills
in steelmaking, mining, finance,
investment, risk management, ESG.
Most Board members have substantial
work experience in the boards of directors
and supervisory boards of other
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 two
women and citizens of various states,
ensuring sociocultural and gender
diversity.
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 2021, the Board
of Directors elected at the Annual General
Meeting of Shareholders on 29 April 2021
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.
For instance, in 2021, Jane Zavalishina
was elected into the Board.
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Annual Report 2021
Members of NLMK
Board of Directors
as of 31 December 2021
VLADIMIR LISIN
Chairman of the Board of Directors
OLEG BAGRIN
MARJAN OUDEMAN
NIKOLAI GAGARIN
JANE ZAVALISHINA
4 years of tenure
1 year of tenure
Independent director
The Audit Committee
The Human Resources,
Remuneration, and Social Policy
Committee
The Strategic Planning
Committee
The Digital Development
Committee
6 years of tenure
7 years of tenure
Deputy Chairman of the Board of Directors
Board member
Board member
Board member
SERGEY KRAVCHENKO
2 years of tenure
Board member
THOMAS VERASZTO
STANISLAV SHEKSHNIA
25 years of tenure
Non-executive director
17 years of tenure
Non-executive director
20 years of tenure
Non-executive director
Board member
Board member
JOACHIM LIMBERG
Board member
3 years of tenure
Directors’ expertise in the steel
sector
Directors’ length of tenure
Composition of the Board
of Directors by director status
>20 years
>10 years
Independent
10–20 years
4–10 years
Non-executive
<10 years
<4 years
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Composition of NLMK Board of Directors in 2021
Composition of NLMK Board of Directors from
24.04.2020 until 29.04.2021
Composition of NLMK Board of Directors elected
on 29.04.2021
Board member
Position
Board member
Position
Vladimir Lisin
Chairman of the Board
of Directors
Vladimir Lisin
Chairman of the Board
of Directors
Oleg Bagrin
Board member
Oleg Bagrin
Deputy Chairman
of the Board of Directors
Thomas Veraszto
Board member,
Independent director
Thomas Veraszto
Board member,
Independent director
Joachim Limberg
Board member,
Independent director
Joachim Limberg
Board member,
Independent director
Nikolai Gagarin
Board member
Nikolai Gagarin
Board member
Sergey Kravchenko
Board member,
Independent director
Sergey Kravchenko
Board member,
Independent director
Stanislav Shekshnia
Board member,
Independent director
Stanislav Shekshnia
Board member,
Independent director
Marjan Oudeman
Board member,
Independent director
Marjan Oudeman
Board member,
Independent director
Benedict Sciortino
Board member,
Independent director
Jane Zavalishina
Board member,
Independent director
Key competencies of the NLMK Board of Directors GRI 102-27
Competency
Number of Board members1
Board
of Directors
(9)1
Strategic Planning
Committee (6)
Audit
Committee
(5)
Human Resources,
Remuneration,
and Social Policy
Committee (4)
Digital
Development
Committee (3)
Knowledge
of industry
6
6
2
3
2
Corporate
governance
8
5
5
3
2
Strategy
7
6
3
3
3
Finance
and investment
9
6
5
4
3
HR
management
8
6
4
4
3
Risk
management
8
5
5
3
2
Customers
and sales
5
4
2
2
2
Digitalization
and IT
5
3
3
3
2
On 28 July 2021, Stanislav
Shekshnia, who was previously not
an NLMK shareholder, acquired 578
of the company’s global depositary
shares (equivalent to 5,780 ordinary
shares) making up 0.000096% 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 committee.
Board structure by gender
Men
78%
22%
Women
Age of Board members
40–50 years
51–60 years
61 and over
Biographies of members of the Board of Directors
OLEG BAGRIN
Year of birth: 1974
Deputy Chairman of the Board of Directors since 2021, 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 and Digital Development Committee
Experience
Oleg Bagrin has extensive experience in the governance bodies of major companies and funds, including
executive positions in financial asset management and the banking sphere.
2005–2019 – Director, Chairman of the Board of Directors, Libra Capital Investment Company.
2007–2019 – member of the collegiate executive body and member of the Board of Directors, NLMK Pennsylvania
LLC, Sharon Coating LLC, NLMK Indiana LLC.
2011–2018 – member of the Board of Managing Directors and the Board of Directors, NLMK International B.V.
2012–2015 – member of the Board of Directors, Freight One.
2012–2018 – CEO (Chairman of the Management Board), NLMK Group.
Positions in other companies
2015–2016, 2018–present – member of the Board of Directors, Freight One.
2018–present – Director and member of the Board of Directors, FLETCHER GROUP HOLDINGS LIMITED.
Education
State Academy of Management (Moscow), economist and analyst (1996).
State University of Management (Moscow), postgraduate degree in economics (2001).
Cambridge University, MBA (2005).
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
Experience
Vladimir 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.
Education
Vladimir 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.
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NIKOLAI GAGARIN
Year of birth: 1950
Member of the Board of Directors since 2001, member of the Audit Committee
Experience
In 2003, as a Managing Partner, Nikolai 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 is a multi-skilled specialist in various
spheres of law and litigation. He has extensive experience in corporate law, foreign investment, taxation, finance,
real estate, contract law, arbitration proceedings, civil litigation, natural resources law, environmental protection law,
and industrial safety.
In the course of his career, he led and participated in multiple large projects, including the creation
and development of financing structures for international holding companies and the successful organization
of IPOs on the London Stock Exchange. He has many years of experience serving on governance bodies
of major companies and actively participating in substantial projects, including mineral resource management
and environmental projects. Nikolai Gagarin developed a methodology for economic analysis and fair value
assessment, which was recognized by Russian arbitration courts as applicable in bankruptcy proceedings. He
initiated several legislative reforms.
2007–2018 – Director, member of the Board of Directors, FLETCHER GROUP HOLDINGS LIMITED.
2002–2013 – member and Chairman of the Board of Directors, Chernomorneftegaz.
2004–2012 – member and Chairman of the Board of Directors, Tuapse Commercial Sea Port.
2009–2017 – member of the Board of Directors, Severneftegaz.
Education
Lomonosov Moscow State University, degree in law (1982).
THOMAS VERASZTO
Independent director
Year of birth: 1962
Member of the Board of Directors since 2016, member of the Strategic Planning Committee,
the Human Resources, Remuneration, and Social Policy Committee, and the Digital
Development Committee
Experience
Thomas 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.
Thomas 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. In 2016, he served as an Advisor in ERG
Sales.
2017–2019 – member of the Board of Directors in Segezha Group.
Positions in other companies
2017–present – member of the Board of Directors, Steppe Agroholding.
2020–present – Chairman, Familia Privatstiftung.
2021–present – member of the Supervisory Board, Bank Saint Petersburg.
2021–present – member of the Board of Directors, UNITED MEDICAL GROUP CY PLC.
2021–present – member of the Board of Trustees, Andrei Sakharov Science Endowment Fund.
Education
University of Graz, Ph.D. in law (1984), master’s degree in philosophy (1985).
Bologna Centre of the School of Advanced International Studies, Johns Hopkins University, diploma (1988).
SERGEY KRAVCHENKO
Independent director
Year of birth: 1960
Member of the Board of Directors since 2020, member of the Strategic Planning Committee,
the Human Resources, Remuneration, and Social Policy Committee
Experience
Sergey 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. He is leading the development of a major
programme related to the production and procurement of parts and semi-products from Russian titanium, which
resulted in the creation of joint ventures with VSMPO-AVISMA: two plants and a joint technical research centre
in the Ural Region. In 1994–2002 he served for a year as the director of the International Cooperation and Business
Development Programme in the Boeing Commercial Airplanes department in Seattle, WA, and as vice president
for engineering and supplier management of Boeing Commercial Airplanes.
Before joining Boeing in 1992, Sergey 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 USA,
Sweden, and South Korea. He has published more than 70 research papers and holds more than 20 patents
in various areas of engineering.
He 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 2009 he was awarded
the Businessman of the Year prize by the American Chamber of Commerce.
2007–2015 – member of the Board of Directors, American Chamber of Commerce in Russia.
2011–2015 – member of the Supervisory Board, Accenture.
Sergey Kravchenko has extensive experience managing major projects in R&D, HR, finance and investment, ESG
and other key areas.
Positions in other companies
2002–present – CEO, Boeing (Russia, Ukraine, CIS), Innovation Acceleration Leader, Boeing Global Services, Vice
President, Boeing International, The Boeing Company.
2004–present – Council member, Youth Achievement interregional social organization.
2016–present – independent director, Chair of the Appointment and Remuneration Committee, Deputy Chair
of the Strategic Development Committee, independent director in charge of ESG Strategy, TMK.
Education
Moscow Polytechnic University, mechanical engineer (1982).
USSR Academy of Sciences, candidate of engineering sciences (1985).
Russian Academy of Sciences, doctor of engineering sciences (1991); professor (1992).
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MARJAN OUDEMAN
Independent director
Year of birth: 1958
Member of the Board of Directors since 2018, Chair of the Audit Committee and member
of the Strategic Planning Committee
Experience
Marjan Oudeman was the President of the Executive Board of Utrecht University (the Netherlands) from 2013
until June 2017.
From 2010 to 2013, Mrs Oudeman was a member of the Executive Committee of AkzoNobel, responsible for HR
and Organizational Development.
Marjan Oudeman has extensive experience as a line manager in the steel industry and considerable financial
and international business experience.
Previously Mrs Oudeman was a member of the Executive Committee of steelmaking company Corus Group,
Executive Director Corus Strip Products Division from 2007 to 2010. She also held positions of the CEO Corus
Nederland BV, Managing Director Corus Strip Products IJmuiden from 2004 to 2007, and Managing Director Corus
Packaging Plus from 2000 to 2004.
Before joining Corus, Marjan Oudeman worked for Hoogovens Group NV, holding various positions, including
in management bodies, legal, treasury, corporate finance and controlling.
2005–2013 - Member of the Supervisory Board of NS Groep N.V.
2009–2013 - Member of the Supervisory Board of Stichting Comité Concertgebouw.
2010–2015 - Member of the Supervisory Board of ABN AMRO N.V.
2012–2018 - Member of the Board of Directors of Equinor ASA.
2017–2021 - Member of the Supervisory Board of Aalberts NV.
2008–2020 - Governor of Stichting Nationaal Fonds 4 en 5 Mei.
2012–2020 - Vice-Chairman of the Supervisory Board of Stichting Het Rijksmuseum.
2013–2018 - Member of the Supervisory Board of Het Concertgebouw N.V.
2014–2016 - Member of the Supervisory Board of Koninklijke Ten Cate B.V.
2013–2021 - Chairman of the Supervisory Board of Ronald McDonald Kinderfonds.
2018–2021 - Governor of Stichting Berenschot Beheer.
Along with membership in management bodies, Marjan Oudeman held positions of member and chairman of such
bodies as risk and capital committee, audit committee, ESG committee in a number of companies.
Positions in other companies
2014–now – Member of the Supervisory Board of Directors, SHV Holdings NV.
2015–now – Member of the Board of Directors, Solvay S.A.
2016–now – Chairman of the Supervisory Board, Advanced Research Center Chemical Building Blocks Consortium.
2018–now – Member of the Board, Directors of UPM-Kymmene Corporation.
2019–now – Member of the Board, Stichting Hoge Veluwe Fonds.
2021–now – Member of the Supervisory Board of Koninklijke Luchtvaart Maatschappij N.V. (KLM Royal Dutch Airlines).
Education
Rijksuniversiteit Groningen, Master at Law (1982).
University of Rochester and University of Rotterdam, MBA (1990).
STANISLAV SHEKSHNIA
Independent director
Year of birth: 1964
Member of the Board of Directors since 2015, Chairman of the Human Resources, Remuneration,
and Social Policy Committee and member of the Audit Committee
Experience
In 1991–2002, Stanislav Shekshnia was 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 served as Chairman of the Board at SUEK and Vimpelcom-R and as a Board member of a number of Russian
and Ukrainian companies.
Stanislav Shekshnia was an independent director at DTEK BV, Ilim Timber Industry, Naftna Industrija Srbije (NIS),
and Ener1.
In 2002, he co-founded Zest Leadership International Consultancy.
2007–2019 – Senior Partner, LEADERSHIP VECTOR (Talent Equity Consulting practice). He focused on leadership,
leadership development, corporate governance, and business in emerging economies.
2010–2018 – member of the Board of Directors, head of the HR and Remuneration Committee, NIS a.d. Novi Sad.
2010–2012 – member of the Board of Directors, Ener1.
2011–2013 – member of the Strategy Committee of the Board of Directors, RUSNANO.
2015–2016 – member of the HR and Remuneration Committee of the Board of Directors, Stroytransgaz.
2015–2019 – member of the Board of Directors, Russian Fishery Company.
Experience on various committees, including the Audit and ESG Committee.
Stanislav Shekshnia also provides personal coaching to business owners and corporate executives.
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 11 books, numerous articles, executive commentaries, interviews,
and case studies on entrepreneurship, leadership, people management, intercultural management, and business
and management in Russia.
Positions in other companies
2006–present – Affiliate Professor of Entrepreneurship at INSEAD Business School.
2018–present – Chairman of the Board of Directors, Samolet Group.
2019–present – Senior Consultant, Ward Howell.
Education
Lomonosov Moscow State University, political economics (1988), Ph.D. in economics (1993).
Northeastern University in Boston School of Business, MBA (1992).
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JANE ZAVALISHINA
Independent director
Year of birth: 1977
Member of the Board of Directors since 2021, member of the Audit Committee and Chair
of the Digital Development Committee
Experience
Throughout her career, Jane Zavalishina focused on applying innovative technologies to create new business
models and transform traditional ones. In 2000, she joined Yandex as a product director, then became head
of Yandex.Money, an e-payment system company, and of Yandex Data Factory, a department specializing in using
machine learning technologies to boost business efficiency. In 2018, she co-founded the Mechanica AI startup
in the Netherlands. The startup develops AI-based solutions for the industrial sector.
She is an active participant of numerous events in Europe, Asia, and the Middle East, where she speaks about data
management, AI strategy and app development.
In 2016, Silicon Republic included Jane Zavalishina into the global Top 40 Women in Tech list in the Inspiring Leader
category. In 2019, she was included in the Global Shakers’ 30 STEM Women to Watch list. In 2016, 2017, and 2019, she
was named one on the Inspiring Fifty – the 50 most inspiring women in the tech sector in the Netherlands.
2009–2017 – co-founder, Council member, Russian Electronic Money and Remittance Association (REMA).
2012–2017 – Chair of the Board of Directors, Yandex Money.
2014–2018 – CEO, Yandex Data Factory.
2018 – Vice President for Strategy, OnlinePay B.V.
2018–2021 – President and Director, MECHANICA AI B.V.
Positions in other companies
2016–present – member of Global Future Councils, World Economic Forum.
2017–present – professor at EXPONENTIAL EXPANSION B.V. (Singularity University Benelux, the Netherlands).
2018–present – member of the Consultation Council, Stichting SIDN fonds.
2019–present – member of the Consultation Council, MIH Fintech Holdings B.V., member of the Board of Directors,
independent director, Finnovate LLP.
2020–present – member of the Investment Committee, BTS Digital Ventures Ltd., member of the Board of Directors,
independent director, FINOM Payments B.V.
2021–present – Chair of the Board of Directors, independent director, FINOM Payments B.V.
2021–present – member of the Board of Directors, SFI.
Education
Lomonosov Moscow State University, degree in psychology (1994–1998).
JOACHIM LIMBERG
Independent director
Year of birth: 1954
Member of the Board of Directors since 2019, member of the Strategic Planning Committee
and the Audit Committee
Experience
Mr Limberg has more than 40 years of experience in the metals sector. He 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, Joachim Limberg joined thyssenkrupp Group, where he held several management positions till 2018.
2009–2018 – Chairman of the Management Board of the Materials Services Business Area, CEO, Chairman
of the Executive Board of thyssenkrupp Materials Services GmbH.
2014–2020 – Member, Deputy Chairman of the Board of Bundesvereinigung Logistik (BVL) e.V.
1989–2015 – Vice-chairman, member of the Board of Directors of POLARPUTKI OY.
He has extensive experience in the fields of strategy, finance and investments, ESG and other key areas.
Positions in other companies
2019–now – Senior Industry Expert, Triton Beratungsgesellschaft GmbH,
2020–now – Member of the Board of: HYDAC Fluidtechnik GmbH, HYDAC Filtertechnik GmbH, HYDAC Technology
GmbH, BENTELER International AG.
2021–now - Deputy Chairman of the Supervisory Board, Muller - Die lila Logistik SE.
Education
Open University of Hagen, DIPLOM-ÖKONOM (Dipl.-Ök.) (1985); professional exporter.
Board of Directors’ activity in 2021
In 2021, NLMK’s Board of Directors held nine meetings, seven of which were held by absentee ballot. A total of 31 items
were considered at the meetings.
Main issues examined by the Group’s Board of Directors in 2021
Questions
Resolutions
Stakeholders
Strategy
and priority areas
Approval of NLMK Group Consolidated Budget for 2022
• Investors
and shareholders
• Consumers
• Suppliers
• Government
authorities
• Employees
• Local communities
Appointments
and remuneration
Considering proposed additions to the agenda of the NLMK Annual General Meeting
of Shareholders on the company’s 2020 results and proposals on nominating candidates
to NLMK’s governing bodies (to the Board of Directors and the position of CEO (Chairman
of the Management Board))
Recommendations to the NLMK Annual General Meeting of Shareholders on the company’s
2020 results regarding adoption of the resolution on remuneration to members of the NLMK
Board of Directors
Election of the Chairman and Deputy Chairman of the NLMK Board of Directors
Formation of NLMK Board of Directors committees (including the formation of the new
Digital Development Committee and approval of its Regulations)
Recognition of the independent status of nominees to NLMK’s Board of Directors
Performance assessment of the NLMK Board of Directors
Reports on the performance of the NLMK Board of Directors Committees and Corporate
Secretary
• Investors
and shareholders
• Government
authorities
• Employees
185
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Corporate governance
Corporate governance
Annual Report 2021
Questions
Resolutions
Stakeholders
Corporate
governance
Convocation of the NLMK General Meetings of Shareholders
Providing recommendations to the NLMK Annual General Meeting of Shareholders
regarding profit distribution (dividend payment)
NLMK’s participation in associations (recommendations to the General Meeting
of Shareholders regarding NLMK’s membership in associations:
• Russian Association of Wind Power Industry
• Association for the Development of Electric, Autonomous, and Connected Transport
and Infrastructure
• European Foundation for Management Development)
Approving NLMK’s 2020 report on interested-party transactions
Approving NLMK’s 2020 Draft Annual Report
Recommendations to the company’s Annual General Meeting of Shareholders
regarding approval of NLMK’s auditor
Approving the remuneration of NLMK’s auditor
Approving the meeting schedule for NLMK’s Board of Directors
Approving NLMK’s corporate documents (Regulations on the Digital Development
Committee, as well as new versions of the Anti-Corruption Policy and the Corporate
Governance Code)
Including matters of approving new versions of the Charter and corporate documents
into the agenda of NLMK’s General Meetings of Shareholders (Regulations
on the Board of Directors, Regulations on the Management Board, Regulations
on Remuneration for Members of the NLMK Board of Directors)
Approving NLMK’s Management Board composition
Approving NLMK Management Board members occupying additional positions
in governance bodies of other organizations
Approving an interested-party transaction
• Investors
and shareholders
• Government
authorities
• Employees
Financial
reporting
Approving the company’s annual accounting (financial) statements for 2020,
as well as NLMK’s IFRS 2020 annual consolidated financial statements
• Investors
and shareholders
• Consumers
• Suppliers
• Government
authorities
• Employees
• Local communities
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 Board
meetings1
Audit
Committee
Human
Resources,
Remuneration,
and Social
Policy
Committee
Strategic
Planning
Committee
Digital
Development
Committee
Oleg Bagrin
9 (9)
8 (8)
5 (5)
2 (2)
Thomas
Veraszto
+
9 (9)
8 (8)
5 (5)
2 (2)
Nikolai Gagarin
9 (9)
5 (5)
Vladimir Lisin2
9 (9)
32 (3)
5 (5)
Benedict
Sciortino
+
4 (4)
3 (3)
5 (5)
Stanislav
Shekshnia
+
9 (9)
5 (5)
8 (8)
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 Vladimir Lisin was a member of the Human Resources, Remuneration, and Social Policy Committee until 29 April 2021.
Board
member in the
reporting year
Independent
director
Participation
in Board
meetings1
Audit
Committee
Human
Resources,
Remuneration,
and Social
Policy
Committee
Strategic
Planning
Committee
Digital
Development
Committee
Jane
Zavalishina1
+
5 (5)
2 (2)
5 (5)
2 (2)
Marjan
Oudeman
+
9 (9)
5 (5)
5 (5)
Joachim
Limberg
+
9 (9)
5 (5)
5 (5)
Sergey
Kravchenko
+
9 (9)
8 (8)
5 (5)
1 Jane Zavalishina was elected to the Board of Directors at NLMK’s Annual General Meeting of Shareholders. She was elected to the Audit Committee
and the Digital Development Committee at the 29 April 2021 Board meeting.
Sustainability agenda
management at the Board
of Directors level
GRI 102-26 GRI 102-29
Sustainability management is integrated
into NLMK Group’s corporate
governance system and is carried
out at all NLMK companies, including
international ones. Sustainability issues
consistently feature on the agenda
of NLMK Group’s leadership. 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.
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).
The following working groups have been
formed at the Board of Directors level:
•
Climate Change Management
(J. Limberg, M. Oudeman,
J. Zavalishina, B. Sciortino,
S. Shekshnia, S. Chebotarev (Vice-
president, Enegy and Environment),
led by T. Veraszto)
•
Development of the R&D Area
(M. Oudeman, J. Zavalishina,
G. Fedorishin (CEO (Chairman
of the Management Board), I. Spitsberg
(Vice-president, Technology
Development), led by S. Kravchenko)
Sustainability management at the Board of Directors level
Board Committee
Key aspect of sustainability
Strategic Planning Committee
Sustainability risk assessment
Environment:
• Air emissions
• Discharges and waste
• Use of resources
• Biodiversity
• Climate change
Human Resources, Remuneration, and Social Policy
Committee
Integration of ESG 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
187
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Corporate governance
Corporate governance
Annual Report 2021
Board of Directors
succession planning
GRI 102-24
Considering the significance
of succession and performance
assessment the Human Resources,
Remuneration, and Social Policy
Committee developed the Succession
Policy and recommended that the Board
of Directors approve it. This document
reflects the recommendations of the Bank
of Russia, as well as the principles
of the Corporate Governance Code,
the research results of leading
international consultants, and the best
experience of global companies
with advanced corporate governance
practices.
Thus, the Succession Policy
of the company’s Board of Directors
includes such aspects as:
•
Principles of the Board of Directors
formation, ensuring diverse, competent
and efficient composition
•
Succession goals
•
Components (stages)
of the Succession Policy
•
Approaches and tools for performance
assessment
The Succession Policy is expected
to be approved by the Board of Directors
in 2022.
The efficient application of approaches
and processes aimed at ensuring
the Board of Directors succession
planning determines the development
of the Board’s structure. In 2021,
the composition of the company’s Board
of Directors was updated, enhancing
the Board’s expertise in several areas
and making it more balanced and diverse.
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
assessment market capitalization.
The Board of Directors’ performance
assessment is an effective tool
for improving the corporate governance
system, each component of which
is related to the work of the governing
body.
Organizational structure for managing sustainability issues at NLMK GRI 102-20
WORKING GROUPS
Climate Change
Management
Internal Audit
Board of Directors
Strategic Planning Committee
Human Resources,
Remuneration, and Social Policy
Committee
Audit Committee
Investment Committee
Risk Management Committee
Functional units and teams at the Group’s Russian and international companies
CEO (Chairman
of the Management Board)
Management Board
Development
of the R&D Area
Board Committee
Key aspect of sustainability
Audit Committee
Performance monitoring and sustainability reporting
GRI 102-32
Board of Directors; Human Resources, Remuneration,
and Social Policy Committee, Audit Committee
Corporate governance:
• Corporate governance
• Business ethics
• Anti-corruption
The main purposes of the assessment
are 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.
In line with the Corporate Governance
Code recommended by the Bank
of Russia 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, but also
assesses the work of its committees,
as well as Board and committee
Chairs. The assessment includes
an analysis of the Board’s composition
and qualifications, its agenda,
meeting efficiency, and interaction
with the management and the Corporate
Secretary.
KEY GOALS
SYSTEMATIC
PERFORMANCE
ASSESSMENT
OF THE BOARD ENSURES:
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
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 asessment 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
ASSESSMENT
TOOLS
ASSESSED
COMPONENTS
SCOPE
OF ASSESSMENT
Online survey of members
of the Board of Directors,
as approved by NLMK’s Human
Resources, Remuneration,
and Social Policies Committee
Discussion at the Board meeting
held in person
Professional and personal
qualities of Board members
Independence, coherence,
and degree of personal
participation of Board members
Board of Directors procedures
Board meeting agendas
Interaction of the Board
of Directors with the company
management
Other factors affecting
the performance of the Board
of Directors
Board of Directors
Committees of the Board
of Directors
Chairs of the Board of Directors
and committees
Corporate Secretary
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Corporate governance
Corporate governance
Annual Report 2021
Results of the Board
of Directors performance
assessment
Guided by current trends
and recommendations of normative
documents, at the end of 2020
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, internal documents,
practices of the Board and its committees,
and a benchmark against the advanced
corporate governance practices
of international companies.
As a result of the assessment,
the consultant highlighted several
indicators that are at a higher level
than in global peer companies. These
indicators include the active participation
of Board members in the governing body’s
operation, their engagement in making all
key decisions, and meeting attendance.
The consultant pointed out the diverse
nature of the Board of Directors,
the multifaceted experience of its
members, and the efficiency of interaction
with the management. Other strong suits
included the high share of independent
directors, efficient execution of their
functions, and the reliable process
of selecting independent directors, who
successfully integrate into the Board.
The consultant emphasized the active
participation of the Chairman of the Board
of Directors in interaction within the Board
and with the management, as well as open
opinion exchange as part of transparent
and efficient corporate procedures.
The assessment noted the high quality
of the Corporate Secretary’s work
and the work of committees that
perform their functions to the full extent
and are an effective forum for discussing
key matters.
The consultant also recommended several
areas for improvement, such as the further
development of certain competencies
and the integration of advanced practices
into the work of the Board and its
committees.
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
•
Digital Development Committee
In 2021, the Group established a Digital
Development Committee under
the Board of Directors.
The structure of committees is built
based on the most important areas
of the Board’s activities. Their
composition is formed to ensure
the most efficient use of the committee
members’ expertise and professional
experience.
The committees of the Board
of Directors report to the Board
and serve as its advisory bodies.
The resolutions of the committees
are advisory in nature.
The results of the performance
assessment and recommendations
on further improving corporate
governance practices and the work
of the Board, its committees,
and individual members were reviewed
at the in-person Board meeting in March
2021. In line with the recommendations,
several measures were taken,
including the creation of working
groups as well as a set of measures
for succession planning. The company
plans to further implement
the consultant’s recommendations
and the Board members’ suggestions
consolidated during the assessment
in 2022.
Additionally, as part of enhancing
the Board’s succession planning
and assessment, the Human Resources,
Remuneration, and Social Policy
Committee improved its approaches
to the internal assessment of the Board
of Directors.
Induction course
programme for newly
elected members
of NLMK's Board
of Directors and the
onboarding process
In line with best corporate governance
practices, the Human Resources,
Remuneration, and Social Policy
Committee developed and approved
an induction course for newly elected
members of NLMK’s Board of Directors
to ensure the efficient functioning
of the Board and support succession
planning.
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,
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 Group’s core
facilities, processes, and products. Other
Board members and representatives
of the company management are actively
engaged in integrating newly elected
Board members into the work
of the company’s governing bodies
and its operations.
In 2021, the Human Resources,
Remuneration, and Social Policy
Committee approved a new version
of the induction course programme.
It integrated, among other things,
the practice of assigning a mentor from
the current Board members to every
newcomer to accelerate and streamline
the integration of new members.
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 a number of measures
to prevent conflicts of interests. As part
of these requirements, members
of the Board of Directors shall:
•
Notify the Board and put
the company’s interests above their
own under all circumstances in case
there is a potential conflict of interest
(including an interest in the Group
making a transaction)
•
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 2021 (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
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 three
out of four 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 and climate impact,
including greenhouse gas emissions,
and reviews and approves
the appropriate investment programme.
Strategic Planning
Committee composition
as of 31 December 2021
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 did not
change in 2021.
191
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Corporate governance
Corporate governance
Annual Report 2021
Committee’s activities
in 2021
In 2021, the Committee held five
meetings. The Committee reviewed
and passed resolutions on the following
issues:
•
Implementation of the current
(Strategy 2022) and planning
of the next (Strategy 2030) stage
of the company’s strategic
development
•
Long-term Environmental and Climate
Programmes of the company, including
NLMK Group’s CO2 emissions
reduction targets for 2030 and 2050
•
Status of NLMK Group’s investment
programme and 2022 investment
budget
•
Strategic Planning Committee schedule
for 2022
Plans for 2022
In 2022, the Strategic Planning
Committee plans to actively work
on development areas and key projects
for the new strategic cycle beyond
2023. The Committee will also control
the implementation of its instructions
and the progress of NLMK Group’s
investment programme.
Audit Committee
The Audit Committee’s main purpose
is to draft and submit recommendations
to the Board of Directors in order
to ensure its effective involvement
in the supervision of the company’s
financial and business activities,
including matters related to:
•
Conducting an annual independent
external audit of NLMK’s accounting
(financial) statements, the quality
of the auditor’s services, and their
compliance with the requirements
of auditor independence
•
The independent assessor’s evaluation
of property in cases stipulated
by Russian legislation and in other
cases
•
The company’s
sustainable development
disclosure. GRI 102-32 Since
2019, one of the Audit Committee’s
responsibilities is monitoring results
and considering reports related
to sustainable development,
including matters of environment
and occupational health
and safety GRI 102-29
The Committee analyses and evaluates
the company’s information disclosure
system on sustainable development
issues and monitors its completeness,
accuracy, and reliability.
Audit Committee
composition
as of 31 December 2021
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 2021.
Committee members
from 24 April 2020 to 29 April 2021
Committee members
as of 29 April 2021
Committee member
Position
Committee member
Position
Marjan Oudeman
Chair of the Committee
Marjan Oudeman
Chair of the Committee
Joachim Limberg
Committee member
Joachim Limberg
Committee member
Nikolai Gagarin
Committee member
Nikolai Gagarin
Committee member
Stanislav Shekshnia
Committee member
Stanislav Shekshnia
Committee member
Benedict Sciortino
Committee member
Jane Zavalishina
Committee member
NLMK Audit Director Elena Sidorova was appointed Secretary of the Committee.
Audit Committee’s
activities in 2021
In 2021, the 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
•
External and internal audits, including
of 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
Committee members
from 24 April 2020 to 29 April 2021
Committee members
as of 29 April 2021
Board member
Position
Board member
Position
Oleg Bagrin
Chair of the Committee
Oleg Bagrin
Chair of the Committee
Thomas Veraszto
Committee member
Thomas Veraszto
Committee member
Helmut Wieser
Committee member
Helmut Wieser
Committee member
Joachim Limberg
Committee member
Joachim Limberg
Committee member
Vladimir Lisin
Committee member
Vladimir Lisin
Committee member
Marjan Oudeman
Committee member
Marjan Oudeman
Committee member
Karen Sarkisov
Committee member
Karen Sarkisov
Committee member
Grigory Fedorishin
Committee member
Grigory Fedorishin
Committee member
Benedict Sciortino
Committee member
Benedict Sciortino
Committee member
Sergey Kravchenko
Committee member
Sergey Kravchenko
Committee member
Sergey Filatov
Committee member
Sergey Filatov
Committee member
193
192
Corporate governance
Corporate governance
Annual Report 2021
Risk management
and internal control
The Audit Committee exercises
control over the reliability and efficient
functioning of the risk management
and 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 auditor, and the Group’s other
bodies responsible for fulfilling the risk
management, oversight, and compliance
functions. The Audit Committee
holds regular meeting with the teams
of the independent auditor, the Audit
Director, and other Company
management.
Human Resources, Remuneration, and Social Policy Committee composition in 2021
Committee members
from 24 April 2020 to 29 April 2021
Committee members
as of 29 April 2021
Committee member
Position
Committee member
Position
Stanislav Shekshnia
Chair of the Committee
Stanislav Shekshnia
Chair of the Committee
Vladimir Lisin
Committee member
Thomas Veraszto
Committee member
Thomas Veraszto
Committee member
Oleg Bagrin
Committee member
Oleg Bagrin
Committee member
Sergey Kravchenko
Committee member
Sergey Kravchenko
Committee member
Internal Audit
The Audit Committee is responsible
for monitoring the operation
and evaluating the efficiency
of the internal audit function.
The Committee ensures this
by discussing significant matters
with the Audit Director, approving
the annual internal audit plan,
and reviewing reports on conducted
audits, which contain the main
conclusions and recommendations,
as well as the report on the activities
of the Audit Department. The Audit
Committee, which assessed
the effectiveness of the internal
audit, was satisfied with the quality
of the services provided by it.
Reports on monitoring the execution
of the Internal Auditor’s
recommendations are submitted
to the Committee 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 they deem to be important,
and meets with the external auditors
as required.
The Audit Department undergoes
regular quality self-assessment,
and independent external 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
has satisfied itself that such services
do not impair auditor’s independence
and do not relate to financial statements
preparation. In 2021, the share of non-
audit services was at an acceptable level
of no more than 39% 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 such review,
the Committee evaluated the work
of the external auditor positively.
Global challenges and developments driven by amongst other climate change, technology developments,
digitization and corona, impact our lives, customer requirements, expectations of stakeholders and therefore
the business environment for the company.
In today’s dynamic and challenging world, business success and continuity is served by a responsive
organization and effective risk management. The Audit Committee seeks to serve the interest of the company
and its stakeholders by challenging and supporting management in running an effective and efficient risk
management system, in ensuring an integer control environment and in ensuring compliance.
The Audit Committee is evaluating its own activities on an annual basis to ensure the effectiveness of its role
within the company in this changing world and where the scope not only lies on financials but also on non-
financials.”
Marjan Oudeman,
Chair of the Audit Committee
“
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 governing bodies
and other key employees
•
Remuneration of the company’s
governing bodies and other key
employees
•
Social policy of the company
Human Resources,
Remuneration, and Social
Policy Committee
composition
as of 31 December 2021
The Audit 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 2021.
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Annual Report 2021
Committee’s activities
in 2021
The Human Resources, Remuneration
and Social Policy Committee held
eight meetings in 2021, including
three in the form of absentee voting.
The Committee reviewed and passed
resolutions on the following issues:
•
Progress against target KPIs
by the NLMK Group CEO (Chairman
of the Management Board)
and approval of 2021 target project
KPIs
•
Eligibility of nominees proposed
for independent directors
to be voted on at the NLMK Annual
General Meeting of Shareholders
on the company’s 2020 results
•
Professional background of nominees
to the NLMK Board of Directors
to be voted on at the Annual
General Meeting of Shareholders
on the company’s 2019 results
•
Review of proposals to the NLMK
Board of Directors on the amount
of remuneration to be paid to Board
members
•
Labour productivity improvement
•
Status of the succession pool
for the position of CEO (Chairman
of the Management Board)
•
Approving the Regulations
on the NLMK Corporate University
Academic Council
•
Succession planning for the Board
of Directors
•
Developing competencies
for implementation of the next
stage of the company’s strategic
development
Approving the programme
of the induction course for newly
elected members of the NLMK Board
of Directors.
In 2021, the Committee
continued to analyse and evaluate
the implementation of the company’s
HR Strategy and the performance of key
executives. The Committee considered
the implementation status of the labour
productivity improvement programme
and matters of professional competence
development. The Committee
continued its systematic succession
planning efforts for the position of CEO
(Chairman of the Management Board).
Several documents were approved
and recommendations were provided
to the Board of Directors, including those
related to its succession.
In 2021, 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.
As always, active efforts were ongoing to implement Committee instructions, oversee their execution,
and systematically work on related matters.
Particular attention was paid to succession planning for the CEO and the Board of Directors. The Committee
regularly included such matters in Committee meeting agendas, actively discussed them, developed several
internal documents, and updated certain approaches and processes.
One important outcome is the independent assessment of the Board conducted by the Spencer Stuart
consulting firm, which has an impeccable reputation and international expertise in corporate governance.
The consultant helped us highlight the strong suits in the operation of the Board of Directors and identify areas
where its practices can be developed and improved. These conclusions will enable an increase in the Board’s
efficiency and the overall quality of corporate governance. Several actions to implement the consultant’s
recommendations have already been undertaken.
The Committee members’ strong engagement in the consideration of agenda items, their profound expertise
and wide-ranging experience in all areas of the Committee’s activities, and the efficient collaboration
with the management ensured the deep elaboration of all matters under consideration, facilitating the adoption
of high-quality resolutions and instructions, continuous control over their execution, and the integration of best
practices into the company’s operation.”
Stanislav Shekshnia,
Chair of the Human Resources, Remuneration,
and Social Policy Committee
“
Digital Development Committee
In 2021, the Digital Development
Committee was created under
the company’s Board of Directors.
Its operation will facilitate the efficient
implementation of the company’s
strategy and boost its competitiveness
amid the active integration of digital
technologies.
The main purpose of the Digital
Development Committee
is the preliminary consideration
and presentation of recommendations
to the NLMK Board of Directors
on the following matters:
•
IT systems development and process
digitalization strategy
•
Control over the organization of IT
and information security management
processes, including the protection
of personal data
•
Control over the processes
of monitoring and proper response
to changes in the development
of information technologies, including
the consideration of potential
opportunities to apply them at NLMK
Digital Development
Committee composition
as of 31 December 2021
The Committee is chaired
by an independent director; 2 out
of 4 Committee members are also
independent directors. The Committee
includes an independent director
with experience and knowledge
in innovative technologies and digital
solutions for business.
Digital Transformation
Committee Members in 2021.
Committee members
as of 29 April 2021
Committee
member
Position
Jane
Zavalishina
Chair
of the Committee
Thomas
Veraszto
Committee
member
Oleg
Bagrin
Committee
member
Grigory
Fedorishin
Committee
member
Digital Development Committee’s activities in 2021
In 2021, the Digital Development Committee held two in-person meetings.
Jane Zavalishina,
Chair of the Digital Development
Committee
Over the past decade, digitalization has become a key trend and significantly altered many industries
and business sectors. The active application of new digital technologies and approaches in the company
is already opening new opportunities for end-to-end planning and boosting operational efficiency, substantially
changing the format of the company’s interaction with clients, and providing tools to increase safety
and reduce the environmental impact.
Already in this strategic cycle, over 10% of NLMK’s operational efficiency growth was achieved using digital
tools: from relatively simple ones, such as online data visualization for process management, to complex sets
of mathematical models that optimize entire production stages. The acceleration of these changes reflects
the key features of digital solutions: compared to traditional technologies, they are more easily replicable
and their development is faster.
The creation of the Digital Development Committee in 2021 reflects the strategic significance that
the company attaches to these changes: both new opportunities to create long-term competitive advantages
and new risks that need to be managed. That is why the Committee’s key priorities for 2022 include
the determination of IT and digitalization development vectors in the new strategy cycle beyond 2023,
as well as an analysis and update of technical policies and processes that ensure the reliable and safe
application of digital technologies.”
“
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Corporate Secretary
NLMK’s Corporate Secretary ensures
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 recommended by the Bank
of Russia. 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 registering 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.
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 resolutions 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 website.
GRI 102-26
VALERY LOSKUTOV
Year of birth: 1969
Valery Loskutov graduated from the Lipetsk Polytechnic Institute and the Academy of National
Economy under the Government of the Russian Federation with an MBA.
Experience
For more than twenty years, he has been a member of the governing bodies of a number of Russian companies. Valery Loskutov
has been with NLMK since 1998 and has served as NLMK’s Corporate Secretary since 2005. He was Secretary of the Human
Resources Remuneration, and Social Policy Committee from 2017 to 2021.
Valery 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 XIII Director of the Year national award in the Corporate Governance Director/Corporate Secretary category.
Valery 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, where he maintains
a leading position as one of the top 50 corporate governance directors.
Composition of the Management Board
Members of the Management Board as of 31.12.2021
Members of the Management Board until 22.07.2021
Member
of the Management
Board
Position
Member
of the Management
Board
Position
Grigory Fedorishin
CEO (Chairman of the Management
Board), member of the Strategic
Planning Committee, member
of the Digital Development Committee
Grigory Fedorishin
CEO (Chairman of the Management
Board), member of the Strategic
Planning Committee, member
of the Digital Development Committee
Mikhail Arkhipov
Member of the Management
Board, Vice President for HR
and Management System
Mikhail Arkhipov
Member of the Management
Board, Vice President for HR
and Management System
Tatyana Averchenkova
Member of the Management Board,
Managing Director of NLMK Lipetsk
Tatyana Averchenkova
Member of the Management
Board, Managing Director
of NLMK Lipetsk
Ilya Guschin
Member of the Management Board,
Vice President for Sales
Ilya Guschin
Member of the Management Board,
Vice President for Sales
Ben de Vos
Member of the Management Board,
Vice President for International
Operations
Ben de Vos
Member of the Management Board,
Vice President for International
Operations
Shamil Kurmashov
Member of the Management Board,
Vice President for Finance
Shamil Kurmashov
Member of the Management Board,
Vice President for Finance
Sergey Likharev
Member of the Management Board,
Vice President for Logistics
Sergey Likharev
Member of the Management Board,
Vice President for Logistics
Sergey Chebotarev
Member of the Management
Board, Vice President for Energy
and Environment
Evgeny Ovcharov1
Member of the Management Board,
Vice President for Risk Management
Sergey Chebotarev
Member of the Management
Board, Vice President for Energy
and Environment
Composition of the Management Board
NLMK Group’s Management Board consisted of eight members as of 31 December 2021. The current composition was approved
by the Board of Directors at a meeting held on 22 July 2021.
GRIGORY FEDORISHIN
Year of birth: 1979. Member of the Strategic Planning Committee and the Digital Development
Committee. CEO (Chairman of the Management Board) since March 2018.
Experience
Grigory 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, an 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.
Education
Grigory Fedorishin graduated from the State Finance Academy in Moscow. He holds an MBA from INSEAD business
school in France and Singapore. He is member of the Certified Financial Analysts (CFA) association.
1 Member of the Management Board until 22 July 2021.
Biographies of members of the Management Board
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TATYANA AVERCHENKOVA
Year of birth: 1979. Managing Director, NLMK Lipetsk. Member of the Management Board
since 2017.
Experience
Tatyana Averchenkova has been with NLMK since 2001. She served as Director for Controlling and held various senior
management positions in the Strategy Department. From 2016 to 2021, she held the position of Vice President
for Operational Efficiency. In 2021 she was appointed Managing Director of NLMK Lipetsk.
Education
Tatyana Averchenkova graduated from Lipetsk State Technical University with a major in economics and management.
SERGEY LIKHAREV
Year of birth: 1964. Vice President, Logistics. Member of the Management Board since 2014.
Experience
Sergey 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.
Education
Sergey Likharev holds a Ph.D. in physics and mathematics and an MBA from Cornell University, USA. From 1990
to 1993, he worked as a researcher at Lomonosov Moscow State University.
ILYA GUSCHIN
Year of birth: 1976. Vice President, Sales. Member of the Management Board since 2014.
Experience
Ilya 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.
Education
Ilya Guschin graduated from the Faculty of Economics at Lomonosov Moscow State University. He holds a Ph.D.
in economics.
MIKHAIL ARKHIPOV
Year of birth: 1982. Vice President, HR and Management System. Member of the Management
Board since 2018.
Secretary of the Human Resources, Remuneration and Social Policy Committee since 2021.
Experience
He 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.
Education
Mikhail Arkhipov graduated with honours from the Faculty of Sociology at Lomonosov Moscow State University.
BEN DE VOS
Year of birth: 1967. Vice President, International Operations. Member of the Management Board
since 2016.
Experience
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.
Ben 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.
Education
Ben 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.
SERGEY CHEBOTAREV
Year of birth: 1980. Vice President, Energy and Environment. Member of the Management Board
since 2018.
Experience
Sergey 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.
Education
Sergey Chebotarev graduated from Lipetsk State Technical University with a major in applied mathematics. He holds
a Ph.D. in engineering sciences.
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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)
are stipulated by existing Russian
legislation 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 Company’s
CEO (Chairman of the Management Board)
since 12 March 2018.
Activities of the
Management Board in 2021
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 2021, the Management Board held
46 meetings, including 18 by absentee
ballot. The following issues were considered
at these meetings:
•
Achievement of the Group’s targets
and status of the development
programme on occupational health
and safety
•
Execution of NLMK Group’s budget
•
Implementation of the strategy regarding
operational efficiency, investment
programme, and sales portfolio
management
•
HR and Social Strategy implementation
•
Development programmes for functional
areas
•
Individual development areas
and projects for the next strategic cycle
(Strategy 2030)
•
The Group’s participation
in and withdrawal from other companies
•
Recommendations to the governance
bodies of subsidiaries
Participation in Management Board meetings in 2021
Member of the Management Board
Number of meetings, in which member
of the Management Board participated
Grigory Fedorishin
46 (46)
Tatyana Averchenkova
46 (46)
Ilya Guschin1
43 (46)
Barend de Vos
46 (46)
Sergey Likharev
46 (46)
Evgeny Ovcharov2
10 (46)
Mikhail Arkhipov
46 (46)
Sergey Chebotarev
46 (46)
Shamil Kurmashov
46 (46)
1 Left the company in December 2021.
2 Member of the Management Board until 22 July 2021.
SHAMIL KURMASHOV
Year of birth: 1978. Vice President, Finance. Member of the Management Board since 2019.
Experience
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.
Education
Shamil 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).
NLMK Management Board members had
no conflict of interest in 2021.
Grigory Fedorishin owns 17,839
of the company’s global depositary
shares (equivalent to 178,390 ordinary
shares) making up 0.00298% of NLMK’s
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.
Approach
to remuneration
and reimbursement paid
to members of the Board
of Directors
GRI 102-35 GRI 102-36
The company's remuneration policy
with regards 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. The Regulations
on Remuneration of Members
of the Board of Directors, which
were 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, benefits, and privileges
offered to them.
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. It consists of the 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
meetings over the reporting period.
Members of the Board of Directors
are also paid remuneration for chairing
the Board, as well as for being
a member or Chair of one or more Board
committees.
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 for members of the NLMK Board of Directors
Remuneration category
Remuneration amount
Basic remuneration
$160,000
Additional remuneration to the Chair of the Board of Directors,
taking into account their functions related to organizing the work
of the Board of Directors
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 for working
on each committee
Additional remuneration to the Chair of any committee of the Board
of Directors (who participated in over half of its meetings)
Up to 40% of the basic remuneration for working
on each committee
charter capital. Other members
of the Management Board are not NLMK
shareholders.
The company has no particular share
ownership requirements for the CEO
(Chairman of the Management Board)
and other Management Board members.
Other Management Board members
are not NLMK shareholders.
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Remuneration is paid based
on a resolution of NLMK’s General
Meeting of Shareholders. Regulations
on the Remuneration for 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
The maximum amount of a Board
member’s expenses reimbursed
by the company during the reporting
period is determined by a resolution
of the General Meeting of Shareholders
and shall not exceed the amount
of the basic remuneration package.
Compensation shall only be paid if
the member of the Board of Directors
participated in more than half of its
meetings.
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 2020, which was held on 29 April
2021, resolved to pay remuneration
to members of NLMK Board of Directors
in the amount of $1,952,000.
Remuneration paid to members of the Board of Directors1, ‘000 RUB
Indicator
2018
2019
2020
2021
Total payments
152,482
179,066
169,522
167,478
Remuneration
145,564
170,693
167,846
164,551
• Including: basic remuneration
92,259
108,186
106,381
106,932
• Bonuses
53,305
62,507
61,465
57,619
• Salary
–
–
–
–
• Commission
–
–
–
–
Benefits
–
–
–
–
Reimbursed expenses
6,918
8,373
1,676
2,927
Other types of remuneration
–
–
–
–
1 Data for 2018–2019 are represented in actual amounts. Remuneration to members of the Board of Directors for 2021 is determined based
on preliminary calculations in accordance with the Regulations on Remuneration for Members of NLMK’s Board of Directors.
2 Data for 2018 are represented in actual amounts. Remuneration to members of the Board of Directors for 2019–2021 is determined based
on preliminary calculations in accordance with the Regulations on Remuneration for Members of NLMK’s Board of Directors. The amounts may differ
from previously published numbers due to the reporting of accrued payments based on yearly performance, including reimbursement.
Individual amount of remuneration paid to Board members2, ‘000 RUB
Board member
2018
2019
2020
2021
Vladimir Lisin
20,705
24,041
23,640
–
Stanislav Shekshnia
17,427
21,655
19,503
19,613
Oleg Bagrin
19,293
21,948
19,503
19,613
Nikolai Gagarin
12,982
15,026
14,775
14,859
Karen Sarkisov
15,633
18,031
17,730
–
Thomas Veraszto
16,309
19,248
17,730
17,830
Helmut Wieser
16,423
400
–
–
Marjan Oudeman
15,881
20,848
19,503
19,573
Benedict Sciortino
17,446
18,935
17,730
17,830
Franz Struzl
383
–
–
–
Joachim Limberg
–
18,934
17,730
17,830
Sergey Kravchenko
–
–
–
17,830
Jane Zavalishina
–
–
–
19,573
Approach
to remuneration
and reimbursement
paid to members
of the Management Board
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,
environment and energy efficiency,
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. For example,
the weight of the LTIFR indicator is 10%
of the annual CEO’s compensation.
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 the 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
investment and operational efficiency
projects. The KPIs of all top managers
include injury reduction and occupational
safety targets. Also, when calculating
the management’s performance,
satisfaction and engagement indicators
of employees in relevant departments
are taken into account.
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 cycle.
The programme covers more than
70 NLMK executives, including the CEO
and members of the Management Board.
Long-term incentive programme
payments are made to Management
Board members depending
on the achievement of the company’s
strategic goal on the five-year horizon.
50% of the bonus depends on achieving
the structural effect of the company's
strategy and 50% – on achieving
the company's EBITDA target over a five-
year horizon.
The actual values of indicators for NLMK's
executive compensation programmes
are confirmed by the company's
consolidated IFRS financial statements
and are agreed at the Board of Directors
level or by CEO.
.
Remuneration paid to Management Board members1, ‘000 RUB.
Indicator
2018
2019
2020
2021
Total payments
1,554,239
535,032
526,703
2,063,188
• Including: salary
205,195
238,764
235,295
293,709
• Bonuses
312,510
295,455
291,408
285,479
• LTI programme bonuses
1,029,686
–
–
1,484,000
• Commission
–
–
–
• Benefits
–
–
–
• Reimbursed expenses
1,481
813
69
309
• Other types of remuneration
5,367
–
12
336,097
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 сompany’s strategic objectives under the long-term incentive programme.
205
204
Corporate governance
Corporate governance
Annual Report 2021
NLMK Group Code
of Corporate Ethics
The сompany believes that
by communicating honestly and openly
with business partners and the public,
adhering to best practices in corporate
governance and norms of business
ethics, and maintaining its corporate
culture, NLMK Group reinforces its
business reputation and position
on the global steel market. With this
in view, NLMK Group not only observes
the applicable legislative provisions, but
also establishes and adheres to additional
ethical principles and rules of business
practice.
The Code of Corporate Ethics approved
by the Board of Directors in 2018
is available on the сompany’s official
website.
The Code enshrines the following key
values of NLMK Group.
Human rights
Compliance with legislation
Transparency and honesty
Efficiency
Mutual respect
and professionalism
Safety and corporate
citizenship
NLMK Group’s basic ethical values GRI 102-16
NLMK Group acknowledges the inviolability of human rights, prohibits human rights
violations, and builds up its decision-making system in line with the NLMK Group
Human Rights Policy
NLMK Group and its employees meet the requirements of Russian and other
applicable legislation, industrial and corporate regulations, standards,
and procedures
NLMK Group honours its obligations before counterparties and employees,
maintains its reputation as a reliable business partner, and ensures
the transparency of its transactions and operations
NLMK Group strives for continuous improvement of the efficiency of its business,
e.g. by improving the corporate governance system, streamlining production
processes, and introducing innovative technologies
The wellbeing of NLMK Group’s employees is one of the company’s basic values,
with their competence, trust, friendliness, cooperation, and team spirit enabling
the Group to reach its objectives and ensure its sustainable development
NLMK Group ensures that all its production processes comply with occupational
health and safety requirements, adheres to corporate social responsibility principles
with regard to its employees and the population of the regions where the company
operates, and takes environmental protection measures
All company employees read the Сode
when joining the сompany and take
regular training on its provisions.
In 2021, NLMK Group developed
an online course on the Code
and the Anti-Corruption Policy, which
was taken by over 10,000 company
employees. Over 2,800 company
employees underwent in-person
training dedicated to the Code’s
requirements. Knowing and complying
with the requirements of the Code
is an obligation for all company
employees, which is included into all job
descriptions as a standard requirement.
Additionally, in 2021, questions
assessing knowledge of the Code
were included in the evaluation
of employees’ professional competencies,
which is conducted once every three
years. GRI 205-2
The company expects adherence to basic
values and principles of good business
conduct not only from its employees,
but also from its business partners.
The company’s business partners
familiarize themselves with the provisions
of the Code during qualification, selection,
and contract conclusion. In addition,
the Group requires its business partners
to sign the anti-corruption provisions
adopted in the company. GRI 102-16
In 2021, the company held a forum
for basic contractors, where 30
representatives of 17 basic contractors
underwent in-person training dedicated
to the company’s anti-corruption
requirements. At the strategic supplier
conference organized by the Procurement
function, 200 supplier representatives
underwent training in two languages,
English and Russian.
Compliance system
In 2021, the company was actively
developing its compliance system, which
aims to ensure that NLMK's operations
comply with applicable legislation
and internal documents.
In 2021, the compliance system covered
the following areas:
•
Anti-corruption compliance
•
Antitrust compliance
Whistleblowing by reason
Compliance hotline statistics
•
Personal data protection
•
Insider compliance
•
Intellectual property risk management
Established in 2020, the Compliance
Unit implements an anti-corruption
and antitrust compliance programmes
and coordinates the introduction
and operation of the compliance system
as a whole.
Compliance related to personal
data protection, insider trading,
and intellectual property
risk management is curated
by the corresponding functions.
Each of them implements its own
system of measures for managing
the corresponding compliance risks.
Regardless of the area, NLMK Group’s
compliance system places particular
importance on measures for developing
a corporate culture of strong business
ethics, both within the company
and in relations with other stakeholders.
As part of these efforts in 2021, an array
of previous whistleblower channels
merged into NLMK Group’s compliance
hotline.
NLMK Group’s
independent compliance
hotline. Key changes
in 2021 GRI 102-17
1. Wider scope: NLMK’s compliance
hotline accepts reports of not only
corruption or fraud whistleblowers,
but also potential violations
of the antitrust and insider trading
legislation, other legal or corporate
requirements, and the company’s
business ethics norms.
2. Independence and confidentiality: all
reports are accepted and processed
by the Compliance Unit, which
ensures whistleblower confidentiality
and protection from harassment
in the workplace. In 2021,
as an additional effort to ensure
independence and confidentiality,
Ernst & Young was engaged
as the independent operator
of the compliance hotline.
3. Wider coverage. The number
of whistleblower channels increased
and they are now accessible
by third parties. A short guide
on the compliance hotline is available
on the company’s website.
4. Each whistleblowing report
is carefully looked into in line
with the Regulations
on Official Inspections
and Investigations. All inspections
on whistleblowing are carried
out in the company’s unified
online system for investigations.
Information about investigation
results is communicated
to the whistleblower.
In October 2021, as a result
of the Transparency International R
research titled Hotlines for reporting
corruption in the commercial sector:
100 Russian companies with the largest
revenue, NLMK Group’s compliance
hotline was awarded the maximum score.
21
Request for clarification
16
Other violations of internal procedures
16
Tender procedures
14
Other labour management issues
13
Payroll
9
Business ethics
8
Access control and security
5
Sales procedures
4
Conflict of interest
106
Compliance
and corporate ethics
207
206
Corporate governance
Compliance and corporate ethics
Annual Report 2021
Not confirmed
Confirmed
7
6
6
4
1
6
8
11
6
2
1
3
2
5
3
7
Tender
procedures
Access
control
and security
Sales
procedures
Conflict
of interest
Business
ethics
Payroll
Other
labour
management
issues
Other
violations
of internal
procedures
Confirmed and not confirmed cases
Number of reports per 100 employees
0.02
Share of anonymous reports
39%
Share of reports on labour rights/business ethics
33%
Share of confirmed cases
34%
New reports under investigation as on 12.01.2022
7
Whistleblowing report
procedure
Each relevant report to the compliance
hotline is registered in the compliance
IT system within one working day,
and the whistleblower is notified.
Having analyzed the case, no later than
three business days the compliance
department sends it to the relevant
departments for verification.
The investigation lasts for up to 30 days,
however it can be extended if there
is a justified reason. The Compliance Unit
logs the investigation results in the IT
system and monitors the implementation
of corrective measures, where
applicable. The investigation results
are communicated to the whistleblower. If
the results are not ready within the 30-day
period, an interim status report is sent
to the whistleblower.
The company strictly adheres to non-
retaliation principles: anyone who
has reported a violation in good
faith is protected from any form
of pressure, harassment, discrimination.
The Compliance Unit is also responsible
for maintaining the confidentiality
of whistleblowers’ identity.
Anti-corruption practice
(compliance)
In its day-to-day operations, NLMK
Group is guided by high ethical
standards and the principles
of business transparency and zero
tolerance to any form or manifestation
of corruption, as well as the stipulations
of international and regional documents,
such as the United Nations Convention
against Corruption. The company
engages in targeted work to prevent
and counteract corruption and fraud.
The company’s management constantly
devotes attention to detecting
and responding to wrongdoings
in a timely manner. GRI 102-16
NLMK Group’s anti-corruption
compliance programme is aimed
at the prevention and timely
detection of corruption by integrating
and developing:
•
The internal control system
•
The corporate culture of zero tolerance
for corruption
•
The effective use of whistleblowing
mechanisms for reporting instances
of corruption
In 2021, the NLMK Board of Directors
approved the new version of the Anti-
Corruption Policy. It includes a ban
on political spending and any other
participation of the company in political
activities.
The new Policy was presented
to employees through the company’s
communication channels, including
publications on the corporate portal
with quotes of top management,
as well as videos on NLMK TV.
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 The distribution
of responsibilities and powers between
the company’s units in the anti-corruption
system is stipulated in the Appendix
to the Anti-Corruption Policy.
The Audit Committee of the Board
of Directors, the CEO (Chairman
of the Management Board)
and the Risk Management Committee
of the Management Board (RMC) all
play a key role in establishing an anti-
corruption system that functions
efficiently.
In 2021, the Audit Committee considered
and took note of the results of the anti-
corruption compliance audit conducted
by the Audit Department. In addition,
the Audit Committee regularly considers
the results of due diligence of specific
processes, including the assessment
of corruption and fraud risks.
The RMC reviews issues related
to the identification and assessment
of corruption risks, as well as the approval
and control of the effectiveness
of corruption risk management measures.
In 2021, the RMC approved the overall
development strategy of the NLMK Group
compliance system, including anti-
corruption compliance.
The CEO (Chairman of the Management
Board) assigns the person responsible
for anti-corruption efforts in the company
and is in charge of the overall control
over anti-corruption measures.
The Compliance Unit established
in the Legal Department is in charge
of implementing anti-corruption
programmes. GRI 102-16
The Compliance Unit is in charge
of implementing the company’s compliance
system development strategy, including
anti-corruption compliance. At the same
time, the Compliance Unit collaborates
with related structural units responsible
for security, HR management, risk
management, and internal audit.
Internal control
and procedures
for managing conflicts
of interest
Corruption and fraud risks at the level
of specific processes are managed
as part of the overall internal control
system in the company, which
includes checks at the hiring stage,
third party due diligence, including
in procurement, effectuating payments,
in processes related to event organization
and hospitality expenses, and other
processes.
Third-party anti-corruption due diligence
is part of the contractor and supplier
qualification procedure. All partners
of the company that have undergone
qualification confirm that they have
read and will abide by the Code
and the Anti-Corruption Policy. In 2021,
qualification procedures included
screening of 2,473 potential company
counterparties, and in 22% of cases
the counterparty was declined because
of detected risks. In 2021, the contract
approval process was supplemented
with compliance control to ensure
that company contracts contain anti-
corruption clause.
Managing conflicts
of interest
In 2021, NLMK Group approved a new
version of its Regulations on Preventing,
Disclosing, and Managing Conflicts
of Interest. In line with this version, during
their probation period new company
employees sign a statement indicating
if they have a conflict of interest or not.
In addition, 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.
All other employees are required to file
a conflict of interest statement if a conflict
of interest emerges (self-declaration).
Since June 2021, all three types of conflict
of interest declaration (when hiring, annual,
and self-declaration) are digitalized in SAP
SF. As part of these conflict of interest
declaration procedures, employees
also confirm that they have read
the NLMK Group Code of Corporate Ethics,
Anti-Corruption Policy, and Regulations
on preventing, disclosing, and managing
conflicts of interests (hereinafter
the certification procedure of internal
document compliance). GRI 205-2
In 2021, 1,623 employees underwent
the conflict of interest declaration procedure
and the certification procedure of internal
document compliance.
NLMK Group has become
a highly efficient leader
in the Russian steel
industry. Our commitment
to the highest standards
of governance as well as zero
tolerance for any form
of corruption and fraud,
is a part of this leadership
and a fundamental principle
for our company and myself
personally. We firmly believe
that NLMK Group employees
and our counterparties
in Russia and abroad
must unconditionally
support the ‘zero tolerance
for corruption’ principle. Our
non-tolerance for corruption
is one of the values that
unite the NLMK team
and our partners, and drive
the company’s sustainable
development.”
Grigory Fedorishin
CEO (Chairman of the
Management Board)
“
209
208
Corporate governance
Compliance and corporate ethics
Annual Report 2021
As a result, 28 cases of actual conflict
of interest and 39 cases of potential conflict
of interest were detected.
As at the year-end, 24 out of 28 cases
of actual conflict of interest were settled;
for the rest, settlement is in progress.
All cases of potential conflict of interest
are being monitored.
Reports of corruption
and fraud
The Group encourages employees
to use the whistleblower channels
of the compliance hotline and other
company feedback channels for good-
faith reports of corruption and fraud. One
of the principles of the company’s Anti-
Corruption Policy is the non-retaliation
clause: no employee will be punished
for refusing to participate in corruption
and/or for reporting corruption in good
faith. Anyone who reports a violation
in good faith will be protected against
any form of pressure, harassment,
and discrimination.
In 2021, the compliance hotline received
46 reports related to the risk of theft
and internal fraud. Investigations
have been made into all violation
reports. In 14 cases the information
was confirmed fully or partially,
in eight cases the investigation
was still in progress as at the year-
end. For all detected violations,
settlement measures have been taken,
including contracts with two individual
contractors were terminated, five
employees were brought to disciplinary
responsibility, penalties were imposed
on one contractor, and one incident
was transferred to law enforcement
agencies. GRI 205-3
Integrating
an anti-corruption culture
The company dedicates particular
attention to integrating a culture
of zero tolerance for corruption
via a programme for training
and informing employees about
NLMK Group’s behaviour standards,
including management example (“tone
at the top”). In 2021, the company
management made six communications
about anti-corruption and countering
fraud, including the addresses
of the CEO, the Vice President for HR
and Management System, the Vice
President for Operational Efficiency,
and the Legal Director. Information about
the company’s behaviour standards
is communicated to employees
via the following channels:
•
The welcome email that every new
employee receives
•
Publications in blogs and the feed
on the internal portal
•
Publications in the NLMK Company
magazine
•
Presentations by compliance
representatives as part of strategy
sessions for the company functional
areas.
In 2021, over 30 publications
on compliance and anti-corruption
were made through corporate
communication channels.
In addition to informing, the company also
has a programme for training employees
in anti-corruption requirements. In 2021,
over 2,800 employees underwent
in-person training in anti-corruption
requirements. The online course
was taken by over 10,000 employees.
Additionally, in 2021, the online course
on conflict of interest was updated
and taken by 88 employees.
In addition to integrating a culture
of compliance in the Group, NLMK
is also taking steps to inform and train
its partners in the anti-corruption
requirements that the company
abides by.
Efficiency assessment
and audit
The Compliance Unit regularly assesses
the efficiency of the anti-corruption
compliance programme and provides
information to the person responsible
for anti-corruption efforts. Reports
on the overall operation of the compliance
system are presented to the company
CEO annually.
The anti-corruption and fraud system
efficiency is assessed during internal
audits. In 2021, the Audit Department
audited anti-corruption compliance.
Its results were reviewed by the RMC
and the company’s Audit Committee
of the Board of Directors. As a result
of the audit, risks of corruption
and fraud emerging in certain processes
were reassessed, and the RMC drafted
and approved a new list of areas
with a risk of corruption and fraud.
In 2021, the company’s anti-corruption
compliance system was also audited
by external experts as part of the Group’s
participation in the RUIE Anti-Corruption
Rating. As a result of the audit,
NLMK Group was rated A2 – Companies
with a high level of anti-corruption efforts.
In addition, in 2021, the NLMK Group
anti-corruption compliance programme
received the Russian Compliance Award
in the Best Anti-Corruption Compliance
Programme nomination.
During the year, no corruption-related
legal proceedings were initiated against
NLMK Group or its employees.
GRI 206-1
Antitrust compliance
GRI 206-1
In 2021, keeping in mind the stricter
regulatory environment and law
enforcement practice, the company
paid particular attention to developing
the system for internal compliance
with antitrust legislation, focusing mainly
on developing the compliance corporate
culture.
Key changes in 2021:
•
New versions of the Antitrust
Compliance Policy and the Regulations
on antitrust risk management
were approved
•
In-person training programme
on antitrust requirements
was introduced and taken
by over 200 structural unit employees;
an online course on antitrust
compliance was developed and taken
by over 600 structural unit employees
•
Four videos on antitrust compliance
were broadcast on NLMK TV
•
Potential violations of antitrust
requirements were included
into the scope of the independent
compliance hotline, the hotline
coverage was extended to third parties,
including partners
As a result of the 2021 internal audit
of antitrust compliance, and considering
the explanation of the Federal
Antimonopoly Service of Russia
On the system of internal antitrust
compliance, approved by the FAS
of Russia plenary No. 20 dd. 2 July 2021:
•
The company introduced changes
into its map of antitrust risks
•
A road map has been developed
to reduce the risks antitrust legislation
violations
Plans for 2022
and the medium term
In 2022, the company plans to continue
developing its compliance system,
including compliance programmes
for specific areas. The planned actions
include:
•
Updating the company’s Corporate
Ethics Code, further training
and informing all employees about
the Group’s ethical standards
•
Introducing new training
and communication programmes
in corporate ethics and specific
compliance areas
•
Preparing for certifying the compliance
system according to the new
ISO 37301:2021 standard.
211
210
Corporate governance
Compliance and corporate ethics
Annual Report 2021
As a major international steel producer, NLMK is exposed to a variety of risks that
could have a negative impact on the Group’s business and our stakeholders if they
materialize. In order to safeguard its shareholder value and sustainable development,
the company employs the latest operational control and risk management practices
and methods. 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’
and four levels of management. Control procedures are used in the Group’s Russian
and international subsidiaries and are an integral component of the key corporate
decision-making activities and processes.
Internal Control and Risk
Management System
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 reviews reports
on the status of the company’s risks,
plays a key role in the risk management
process. The Internal Control and Risk
Management Department functions
as a separate structural unit within
NLMK. Its goals and objectives include
analysing risks associated with key
business processes, ensuring that risk
management processes are effective,
implementing monitoring procedures,
and developing a corporate culture of risk
awareness.
Division of internal control and risk management functions among corporate governance system
participants
Participant
Key functions
Level 1
Board of Directors
• Specifies the principles for and approaches to the organization of the internal
control system
Audit Committee
• Monitors the reliability and effectiveness of the Internal Control and Risk
Management System
• Monitors procedures to ensure the Group’s compliance with legislative
and trade exchange requirements, and with corporate ethical standards, rules,
and procedures
• Analyses and assesses the implementation of NLMK’s conflict of interest
management policy
• Oversees compliance with policies and operational controls over environmental
and social risks, as well as occupational health and safety risks GRI 102-30
Participant
Key functions
Level 2
Management Board
• Determines the risk management strategy and approves critical risk management
measures
• Ensures the effective functioning of the Internal Control and Risk Management
System
Risk Management Committee
(Management Board)
• Approves the principles, strategy, and regulatory instruments for risk
management processes and the internal control system
• Regularly reviews the company’s Risk Map (a list of salient risks, indicating
their weight and trends for a certain period) and ensures the overall monitoring
of the implementation of risk management measures
• Approves and performs the general monitoring of risk management measures
• Regularly reviews the results of an analysis and assessment of the internal
control system; approves and ensures the general monitoring of actions
to enhance the system
• Approves and monitors adherence to corporate ethics and business culture
norms within the Group
• Ensures the overall organization of activities to enforce the Code of Corporate
Ethics and Anti-Corruption Policy
• Regularly reviews reports on compliance with business ethics and anti-
corruption principles
• Coordinates the work of subdivisions participating in the risk management
process and internal control system
Investment Committee
• Overall control over risk magnitude, as well as selection of risk management
measures for investment projects, their implementation and inclusion
into the budget
Level 3
• Internal Control and Risk
Management Department
• OHS (see the OHS section for more
details)
• Environment and Climate (see
the Environment and Climate
Change sections for more details)
• Legal Support
• Compliance (see the Compliance
section for more details)
• Corporate Security
• Financial Controlling
• Information Security
(see the Cybersecurity section
for more details)
• Assesses and regularly monitors the level of risks taken and assesses
the efficiency of management activities
• Coordinates and provides methodological support for the risk management
process
• Drafts regulatory and methodological documents concerning risk management
and internal control
• Records and processes incidents associated with deviations in the internal
control system; plans and monitors corrective measures
• Systematically looks into the risk coverage by the internal control system
in cooperation with line managers; plans and monitors the implementation
of corrective measures
• Builds a system for effective internal communication about risks
• Increases the сompany’s resilience to business interruptions
• Ensures effective response and business recovery after interruptions
• Ensures compliance of NLMK operations with relevant legislation and internal
documents
• Promotes and assesses the effectiveness of measures to counteract corruption
and fraud implemented in accordance with the Group’s anti-corruption policy
• Creates a risk-awareness culture
Level 4
Risk owners (business units)
• Identify risks
• Implement risk management measures
• Monitor key risk indicators (KRIs)
Audit Department (Internal Audit
Service)
• Assesses the reliability and effectiveness of internal control and risk management
and evaluates the corporate governance system with a view to providing
independent and objective guarantees and consultations to the Board
and the CEO
• Provides advice and recommendations, promotes knowledge sharing
Operational control
and risk management
213
212
Corporate governance
Operational control and risk management
Annual Report 2021
Our approach to risk
management
Risk management is a continuous
process that aims to reduce risk
to an acceptable level and prevent
events that could have a negative
impact on NLMK achieving its business
goals. The Group is committed
to effectively and proactively managing
risks and opportunities on a day-to-day
basis and to the ongoing development
of a risk-awareness culture.
NLMK’s risk management system
was developed to take into account
the challenges posed by the external
environment and in accordance
with the principles set forth
in international risk management
standards, including ISO 31000:2018
and COSO ERM:2017. NLMK’s key
internal document focused on risk
management is the Internal Control
and Risk Management Policy approved
by the Board of Directors. Internal
documents have also been drafted
to manage individual risk categories that
are important to the Group.
The Risk Management Committee
of the Management Board
is an important link in the risk
management process. During its
meetings, it conducts a detailed review
of changes in the company’s risk
profile, issues related to the functioning
of the risk management system,
and methodological approaches to risk
management. The Management Board
and Board of Directors review the map
of significant risks to which NLMK
is exposed on an annual basis and take
into account information on current
and emerging risks in decision-making.
GRI 102-11
NLMK’s functional units work
on identifying and responding
to risks that are relevant to their
operations with methodological
support from the Internal Control
and Risk Management Department.
The Department monitors
the effectiveness of the measures used
to manage risks as part of an analysis
of management reporting from risk-
owning functional units. This includes
operational data at the business process
level on current and planned KRI
values, the status of risk management
measures, and risks that have
materialized.
NLMK is committed to the continuous
development of its corporate risk
management culture, which aims
to identify and respond to risks
in a timely and effective manner.
With this aim in mind, the management
regularly emphasizes the importance
of risk management in internal corporate
communications. Systematic training
in managing individual risk categories
and integrating risk management
into the Group’s daily activities also help
to develop a risk-awareness corporate
culture.
Assessing the probability and impact
of risks is one of the most crucial
factors in making informed management
decisions. To this end, NLMK utilizes
modern risk analysis practices and tools.
By applying specially developed methods
for assessing individual risk categories,
anticipated losses and the probability
of risk materialization can be determined
with a very high degree of precision,
and effective risk management measures
can be developed.
The majority of significant risks to which
NLMK is exposed are assessed
on a quantitative basis, which leads
to better-informed management
decisions. The Group assesses salient
risks using scenario analysis models
and stress testing.
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 was created in 2020,
which will develop innovative methods
and tools for quantifying risk and making
decisions in conditions of uncertainty.
This will contribute to the continuous
improvement of risk management
methods.
The company regularly monitors
the effectiveness of its risk management
system and implements measures
to improve it. Internal audit plays a key
role in the assessment of the risk
management system. In 2021,
the internal audit assessed the Group’s
risk management system. According
to the audit report, the NLMK Internal
Control and Risk Management System
has reached maturity, is generally
aligned with best practices and facilitates
more effective decision-making.
The internal audit developed additional
recommendations to further improve
the system’s operation.
Risk Map
The company has developed a Risk Map
to rationalize its approach to identifying,
analysing, and monitoring risks
and drawn up a list of salient (critical)
risks. This list covers both financial
and non-financial risks which according
to the Group’s estimations, are highly
likely to materialize or may have a big
impact on the company’s operations.
Analysing critical risks and monitoring
the implementation of risk control
measures remain a top priority
for the NLMK Group management
team. The Risk Map is regularly updated
to reflect the strategy, operational
changes, and external context.
In 2021, the major changes in the Risk
Map were related to external factors:
supply continuity risks increased,
while environmental and climate
risks were triggered by the climate
agenda. The company developed
a list of measures to ensure business
continuity, analysed the climate risk
profile, and formulated its Climate
Programme. The Group continues to pay
special attention to occupational safety,
employee wellbeing, and information
security.
Occupational and industrial safety risks
Risks of industrial and fire safety, risks of emergency situations, occupational risks
Why is this risk important?
NLMK Group is a manufacturing company. The company's 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 structures, floods, and other natural
disasters.
Potential risk factors
Current risk management measures
• Design errors
• Operational mistakes/unsafe
operations
• Poor quality of servicing
• Untimely servicing
• Hidden defects
• In-depth survey of buildings and structures and development of relevant repair
programmes
• Industrial safety expert review process
• Fire safety programme based on the results of an external fire risk assessment
• A new format of fire work permit, including risk assessment and control at all
stages of work
• Internal cross-audits on fire safety
• Regular audits of the state of production facilities (observations, inspections,
surveys)
• Updated cardinal safety rules for employees and contractors
• New injury prevention programmes, including LOTO (the procedure for using
energy sources for the safety of workers during maintenance, repair or cleaning
of equipment), safety at height, eye protection, etc.
• Pre-work hazard analysis and dynamic risk assessment
• A response system for emergency medical care, medical evacuation, first aid,
and resuscitation, including employee training
• Electronic work permits for hazardous operations
• Mobile app for risk registration
Health & safety risks
Risks of occupational diseases, epidemiological risks
Why is this risk important?
Due to the specifics of the company processes, the operations at the Group's sites are associated with the impact of harmful
factors.
The ongoing COVID-19 pandemic brought about additional risks for the health of employees, both related to the disease itself
and to its consequences for the body
Potential risk factors
Current risk management measures
• Harmful working conditions
• Poor quality of mandatory
medical check-ups, emergency
medical aid, first-aid training
• Seasonal epidemiological risks
• Epidemiological risks related
to COVID-19
• 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
• Upgrading corporate medical institutions (purchase of medical equipment, training
of medical personnel)
• Various forms of rehabilitation treatment for workers who have suffered from
COVID-19 and viral pneumonia, at corporate medical facilities
• A set of measures to contain 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, organizing catering for them
• Training sessions for workers to teach them the latest first-aid algorithms
• Using high-quality personal protective equipment
Salient risks GRI 102-15
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Environmental risks
Risks associated with events caused by NLMK Group’s operations which may have negative effects on the environment.
Risks associated with the impact of the environmental situation on the activities of the Group's enterprises1.
Why is this risk important?
The materialization of environmental risks may result in serious negative consequences in terms of the Group’s financial
performance, reputation, and operational efficiency, and business continuity.
A responsible attitude towards the environment and the efficient use of natural resources are the key principles of NLMK's
Sustainable Development Policy. The company 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 (see the Environmental Protection section for more details).
Potential risk factors
Current risk management measures
• Lack of environmental
compliance of current processes
• Changes in environmental laws
• Availability of natural resources
for continuous operation
• Making sure that engineering and design are duly aligned with environmental
requirements and reduce environmental impact
• Developing, implementing and annually updating the Environmental
Programme, which encompasses projects to reduce emissions, waste,
negative impacts on water, land and biodiversity
• Monitoring and maintaining the operability of environmental protection
equipment through regular periodic maintenance, scheduled repairs
and overhauls
• Collaborating with government authorities by taking part in associations
and offering comments on draft documents on environmental protection
• Monitoring the availability of natural resources, regular assessment of the state
of reserves and soil conditions in the locations of the Group's production
facilities
Climate risks
Risks associated with the physical effects of climate change and the transition to a low-carbon economy
Why is this risk important?
Climate change is one of the most serious problems of the modern world, affecting society, economy and safety. Climate
risks can be conditionally divided into:
• Physical risks associated with natural phenomena arising from climate change, the likelihood of which increases
with global warming
• Transition risks associated with the transition to a low-carbon economy. The greenhouse gas emissions are the main
driver of climate change. According to various estimates, steel industry accounts for 7% to 9% of global greenhouse gas
emissions
NLMK Group takes climate change issues very seriously and consistently reduces the carbon footprint of its products
(see the Climate Change section for more details)
Potential risk factors
Current risk management measures
Physical risks:
• Extreme risks (extreme weather
events)
• Chronic risks (long-term climate
change)
Transition risks:
• Policy risks
• Market risks
• Reputation risks
• Technology risks
• Making sure that engineering and design are duly aligned with climate change
specifics
• Developing the Climate Programme and implementing investment and operational
projects to reduce CO2 emissions
• Collaborating with government authorities by taking part in associations
and working groups and offering comments on draft documents on transitioning
to low-carbon economy
1 In this risk group, in particular, the risks of water availability and its quality are separately assessed (see the Water-Related Risks section
for more details)
Water-related risks
Risks associated with water availability and quality
Why is this risk important?
Water is an important resource used in production processes. Although NLMK Group's enterprises are not located in water-
deficient regions, the company strives to reduce water consumption and makes every effort to reduce the volume of water
intake and increase water reuse rate. The company regularly monitors and assesses the risks of water supply in all regions,
where it operates (see the Environmental Protection section for more details).
Potential risk factors
Current risk management measures
• Water scarcity
• Floods
• Droughts
• Water pollution
• Regular monitoring of the quality of water bodies (upstream and downstream
of the company facilities) and groundwater (via monitoring wells)
• Closed water-loop systems, which not only minimize the consumption of fresh
water, but also include “buffer” tanks for regular water supply to production units
• Wastewater reuse measures
• Availability of emergency response plans, plans for localization and elimination
of water-related accidents
IT and information security risks
Disruption of business continuity due to unavailability of IT systems, data transmission network following technical
and software failures, non-fulfilment 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.
Potential risk factors
Current risk management measures
• Targeted external attacks
and viruses
• Human error
• Deliberate actions of employees
• Physical loss of infrastructure
and equipment (due to accidents
or natural disasters)
• Integrated information security system development programme
• Improvement of information security processes
• External audits for compliance with the legal requirements in the field of personal
data protection and external testing of information security system stability
• Information security incident response plans (DRP, BCP)
Currency and price risks
Risks associated with financial losses as a result of adverse changes in prices for finished products and raw materials,
as well as exchange rates
Why is this risk important?
The key factor determining the size of the Group's revenue is global steel prices. Since most of the Group’s revenue
is denominated in foreign currencies and most of expenses are denominated in Russian rubles, NLMK faces currency risks.
The correlation between steel prices and the ruble exchange rate creates a “natural hedging” effect, where one risk is partially
offset with the other.
Potential risk factors
Current risk management measures
• Lower prices on finished
products
• Increase in raw material prices
• Volatile supply timeframes
• Currency exchange rate
variations affecting financial
results
• “Natural hedging” of price risk by currency risk, maintaining an optimal open
currency position
• Using formula-based pricing, concluding long-term contracts
• Hedging using derivative financial instruments (if necessary)
• Hedge accounting according to IFRS standards
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Annual Report 2021
The company also considers
the following risks:
•
Reputational risks and risks related
to stakeholder engagement (see
the Dialogue with Stakeholders
section for more details)
•
Risks related to skills depreciation
•
Equipment failure risks
•
Inventory risks
•
Supply continuity risks
•
Liquidity risks
•
Tax risks
•
Credit risks
•
Interest risks
•
Compliance risks
(see the Compliance section
for more details)
2021 performance
1
In 2021 the company continued
to improve its Internal Control and Risk
Management System and develop its
approaches to risk management and risk
culture. The following key projects focus
on the ESG agenda and emerging risks:
•
Assessing Climate Risks
and Opportunities. The project
included an analysis of climate
pathways and a financial assessment
of the potential impact of climate
risks and opportunities (joint project
with Carbon Trust – see the Climate
Change section for more details)
•
Conducting an environmental audit
of the Group’s mining enterprises
•
Developing an expanded programme
of liability insurance, including insurance
for environmental risks
•
Developing Environmental Programme
(see the Environmental Protection
section for more details) and Climate
Programme (see the Climate Change
section for more details)
Risk strategy and plans
for 2022 and the medium
term
NLMK has introduced the practice
of regularly updating its Internal Control
and Risk Management strategy. In 2021,
three key areas for further development
of the Internal Control and Risk
Management System were approved
for the next two years.
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 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, ensuring stability in crisis
situations, and fulfilling its obligations
to stakeholders.
In 2022, the Group plans to expand
the project to include international
assets, carry on with employee training
in continuity management.
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 the following
processes: improving existing control
procedures by analysing 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.
Corporate culture of risk
awareness
The сompany is working on building
a risk awareness culture that meets
the principles of engagement,
responsibility, and risk prevention.
As part of this commitment, NLMK plans
to develop of additional training 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.
Internal Audit
Internal audit is a source of independent
and reasonable guarantees to the Board
of Directors and management. Its objective
is to improve 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 is built
in line with legal requirements
and the recommendations of professional
standards, the Bank of Russia’s Corporate
Governance Code, and best international
practices.
Internal audit is a centralized function
performed by the Audit Department. It
fully encompasses the core activities
of NLMK Group companies, including
international ones. The unified
management of the internal audit
allows for the use of uniform standard
approaches to planning, auditing,
and reporting, and also ensures
an effective exchange of information within
the function and with key stakeholders.
The internal audit performs the following
functions:
•
Evaluation of the internal control system
•
Evaluation of the risk management
system
•
Evaluation of corporate governance
In addition, internal audit performs
consulting activities by providing
independent opinions to internal
customers on certain matters concerning
financial and business operations.
NLMK’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 internal audit and their enforcement
Principles
Tools and mechanisms for enforcing the principles
Independence and objectivity
The Audit Director functionally reports to NLMK's Board of Directors
The Audit Director is appointed (dismissed) by resolution of NLMK's Board of Directors
The 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
Systematic and consistent
approach
The internal audit is guided by a risk-based Audit Plan
Resources are distributed between targeted (limited scope) and comprehensive audits
of processes when the Audit Plan is devised
The internal audit prepares recommendations taking into account the costs/value ratio. Priority
is given to systemic measures
Regular monitoring of the execution of post-audit recommendations
1 1 Events after the reporting date: In February 2022, situation in Ukraine escalated, which negatively impacted commodity and financial markets, and
increased volatility, particularly with regard to foreign exchange rates. Since then, the circumstances have been deteriorating and the situation remains
highly unstable. There is increased volatility in the financial and commodity markets. There is an expectation of further sanctions and limitations on
business activity of companies operating in the region, as well as consequences on the economy in general, but the full nature and possible effects of
these are unknown.
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Principles
Tools and mechanisms for enforcing the principles
Efficient use of resources
Lead auditors are appointed from among the most qualified auditors
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
Professionalism
and a professional approach
to work
Internal auditors have special knowledge, skills, and expertise needed to carry out practical
professional activity in the company; they continuously develop and improve the said
knowledge, skills, and other expertise through assessment, training, and sharing experience;
they also continuously develop their expertise in IT systems as they are the key source
of information during audits
Continuous audit quality
improvement
Annual internal and periodic external (once every five years) assessments of the internal audit
to determine whether the internal audit activities 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 the function’s
performance.
Following the 2017 independent quality assessment, Deloitte provided NLMK with a positive
opinion stating that the internal audit’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 is the Regulations on the Audit Department. The Regulations
have been approved by the Board of Directors and are available on the company's official website.
The head of internal audit submits reports to the Audit Committee on the audit results of the effectiveness of the internal control and risk
management system.
2021 PERFORMANCE
In 2021, the internal audit continued to implement the Internal Audit Development Strategy through to 2022, approved
by the Audit Committee.
The following planned activities were carried out:
• Maturity assessment of the top risk management system, assessment of anti-trust risk management and management
of the risk of free trade restrictions/geopolitical risks
• Assessment of anti-corruption compliance, including the execution of the Anti-corruption Policy, the Regulations
on Preventing, Disclosing and Managing Conflicts of Interests, the operation of the hotline
• Efficiency assessment of the internal control system for end-to-end processes at NLMK Group: system of qualification,
tenders, and contract approval, the Repairs process in the company’s Russian assets
• Local audits of process control efficiency
Plans for 2022 and the medium term
Assessing the reliability of risk management and internal control for NLMK Group’s key business processes according to the Internal
Audit Plan, including the testing of end-to-end processes in the company’s international assets.
Efficiency assessment of certain corporate governance elements.
1,538.5
Audit and reviews
1,002.4
Non-audit services
Independent auditor
The сompany 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 2021, NLMK’s Annual General
Meeting of Shareholders approved
PricewaterhouseCoopers Audit (PwC)
as the сompany’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.
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 2021, the share of non-audit services
in the total volume of services provided
by PwC was at an acceptable level
and did not exceed 39% 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 2021 interim and annual
IFRS consolidated financial statements
as well as for the audit of the 2021
RAS statements in the amount
of RUB 59.1 million (VAT excluded).
Remuneration paid
to the independent auditor
for 2021,
$ ‘000 (VAT excluded)
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.
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1 NLMK LI for GDS traded on the LSE; NLMK RX for shares traded on the MICEX platform of the Moscow Exchange.
2 NLMK LI for GDS traded on the LSE; NLMK.MM for shares traded on the MICEX platform of the Moscow Exchange.
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 5.98% of the share capital
as of 31 December 2021. The company’s
depositary bank is Deutsche Bank Trust
Company Americas.
London Stock Exchange (London) Ticker Code
NLMK
Moscow Stock Exchange (Moscow) Ticker Code
NLMK
Bloomberg Ticker Code
NLMK LI1
Reuters Ticker Code
NLMKq.L2
NLMK share index on MOEX
MOEX Russia Index
0.9
1.0
1.1
1.2
1.3
1.4
1.5
Jan 21
Feb 21
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
Share price on MOEX (left axis), RUB
GDS price on LSE (right axis), $
150
200
250
300
Jan 21
Feb 21
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
25
30
35
40
NLMK Global Depositary Share price on the London Stock Exchange, $
Indicator
2020
2021
Variance, %
Start of year
23.0
27.7
20
End of year
27.7
29.5
6
Maximum
29.3
37.8
29
Minimum
12.3
26.9
118
Average
21.1
31.6
50
Ordinary NLMK share price on the Moscow Stock Exchange, RUB
Indicator
2020
2021
Variance, %
Start of year
143.7
209.1
45
End of year
209.1
217.6
4
Maximum
223.8
279.6
25
Minimum
101.1
197.8
96
Average
152.5
233.2
53
NLMK share prices on the Moscow Stock Exchange and London Stock Exchange in 2021
NLMK share index and Moscow Stock Exchange index in 2021
Share price
Information
for shareholders
and investors
Number of shareholders
In 2021, the number of shareholders tripled, reaching 373,000 people. The number of online voting participants increased
to 1,500 people by the end of the year (+2.2х year-on-year).
Number of NLMK shareholders and online voting participants
Indicator
As of 23.11.2020
As of 01.11.2021
Variance, %
Total shareholders
114,181
373,150
+3.3х
Online voting participants
677
1,482
+2.2х
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Corporate governance
Information for shareholders and investors
Annual Report 2021
Market capitalization
In 2021, the company’s average market
capitalization on the London Stock
Exchange was $19 billion (+50% year-
on-year). At the end of 2021, NLMK
share price stood at $2.95 per share
(or $29.52 per GDS), which is consistent
with a capitalization of $17.7 billion
(+6% year-on-year). GRI 102-7
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 No. 372-FZ dd. 23 October 2020),
and 15% for non-residents (clause 3.2,
Article 224 of the Russian Tax Code).
Dividends
Dividend Policy
According to the current2 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 сompany’s
IFRS consolidated financial statements
for the reporting period
•
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 сompany’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 million 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 сompany shareholders
in line with the Board of Directors’
recommendations.
Dividends on GDS
Any dividends paid on shares certified
by GDS will be declared and paid
to the Depositary in Russian 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
www.nlmk.com.
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 shares, including GDS.
2 As of 31 December 2021.
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
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 shareholder
register.
Equity structure
Equity structure as at 31 December 2021, % GRI 102-5
79.3
Fletcher Group
Holdings Limited1
20.7
Other free-floating shares2
Stock share owned by governing bodies
members is
less than 0.01%.
Contacts for shareholders
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
1 Columbus Circle, New York,
NY 10019, USA
London Office
Winchester House
1 Great Winchester St., London,
EC2N 2DQ, United Kingdom
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
1 The company’s beneficiary is Vladimir Lisin, according to the definition of ‘beneficiary’ in Russian legislation.
2 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.
225
224
Corporate governance
Information for shareholders and investors
Annual Report 2021
Managing Director
of the Lipetsk site
Chair of the Digital
Development Committee
Vice President for Technology
Development
24%
White-collar managers
12.5%
Management Board
4%
Blue-collar
management
34%
Management
and administrative staff
22%
Board of Directors
Share of women
25%
Аmong NLMK Group employees
In 2021, Tatiana Averchenkova
was appointed to the position
of Managing Director of NLMK Lipetsk.
Earlier Tatiana held the position of Vice
President for Operational Efficiency
of NLMK Group. Tatiana has been
working at NLMK Group since 2001.
She was Director of Controlling and held
leadership positions in the Strategy
Department.
Since 2016, Tatiana was Vice President
for Operational Efficiency. Under her
leadership NLMK Production System
was created, which has become one
of the main tools for implementing
NLMK Group's strategy. Tatiana
is a member of the Management Board
of NLMK Group.
Jane Zavalishina was elected
to NLMK Group Board of Directors
as Independent Director at the Annual
General Meeting of Shareholders.
At the first Board meeting after AGM
a new Board Committee on Digital
Development was created, the first
among Russian steel companies.
Jane Zavalishina was appointed Chair
of the newly created committee.
The committee will contribute
to the effective implementation
of the company's strategy and increase
its competitiveness against
the background of the trend towards
active introduction of digital technologies
in the industry.
Jane is the President and co-
founder of Mechanical AI B.V.,
as well as a teaching professor
at Singularity University Benelux.
During her career, Jane was focused
on the application of innovative
technologies to create new
and transform traditional businesses.
In 2021, the position of Vice President
for Technology Development was created
in NLMK Group. Irina Spitsberg
was appointed to this position. Irina
is engaged in the development
and implementation of a long-term
strategy for the development of new
products and new production
technologies.
She heads the company's international
team of engineers and scientists
in Russia and Europe. Irina's tasks
include consolidation of existing research
and development portfolios, identification
of longterm promising areas of technology
development and their management.
G
WOMEN'S
VIEW
ON MANAGEMENT
Annual Report 2021
Corporate governance
227
226
AND REPORTING
APPENDICES
Microstructure of IF-steel
for ultra-deep drawing
Scale 1 : 10,000
Appendix
Annual Report 2021
Appendix
231
230
About the report
Scope of reporting about NLMK
operations and sustainability activities.
GRI 102-7
Russia
NLMK Russia Flat Products
NLMK Lipetsk
Steel and flat products
VIZ-Steel
GO electrical steel
Altai-Koks
Coke
NLMK Trading SA
Trader (located in Switzerland)
NLMK Russia Long Products
NLMK Ural
Steel and long products
NLMK Kaluga
Steel and long products
NLMK Metalware
Metalware
NLMK Vtorchermet
Scrap processing
Other
–
Mining Division (Russia)
Stoilensky
Extraction and processing of iron ore
Stagdok
Extraction and processing of flux limestones
Dolomit
Extraction of flux dolomite
USA
NLMK USA
NLMK Pennsylvania LLC & Sharon Coating LLC
Flat products
NLMK Indiana LLC
Steel and flat products
EU
NLMK DanSteel and plate distribution network
NLMK DanSteel A/S
Plate
NBH Segment
NLMK Clabecq S.A.
Plate
NLMK Verona SpA
Plate
NLMK La Louviere S.A.
Strip
NLMK Strasbourg S.A.
Strip
Other
–
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
Design and survey operations
SMT NLMK
Construction
NLMK IT
IT and computing services
NLMK Communications
Telecom services
VIZ
Steel baths
VIZ-Broker
Customs brokerage services
Gazobeton-48
Gas-concrete blocks
NLMK INDIA Service Center Pvt Ltd
Cutting and sales of GO steel
Other
–
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
The process of defining
material topics
GRI 102-46
on the requirements set out in the GRI
Standards.
For the preparation of the 2021 Report,
the heads of NLMK’s functional areas
updated the list of material topics based
on 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.
The process of defining material topics
Analysis of the results of a survey completed
by internal stakeholders
Analysis of public information about the Company
and the mining and steel industry
Benchmarking of material topics that are disclosed
by international and Russian companies in the mining
and stee lindustry
Analysis of the requirements of ESG analysts who
determine ratings for sustainability practices
Analysis of external sources
Analysys of stakeholder views
Amended list
of material topics
Preliminary list of material topics
Appendix
Annual Report 2021
Appendix
233
232
Influence on stakeholder assessment and decision
Low
Medium
High
Significance of environmental, economic,
and social impacts
Low
Medium
High
16
21
20
15
18
17
19
8
9
19
10
11
12
13
14
1
4
5
6
7
2
3
High significance – high
influence on stakeholders
1. Climate change issues,
including:
•
achievement of targets to reduce
greenhouse gas emissions,
measures, accounting and reporting
system for greenhouse gas emissions
•
a description of the risks
and opportunities associated
with climate change that could
potentially impact the company’s
operations, revenue or expenses
2. Air emissions, including:
•
emissions of pollutants
into the atmosphere
•
minimization of negative impact
3. Impact on water resources,
including:
•
approach to water use
•
water consumption and wastewater
statistics
4. Waste, including:
•
waste generation
•
recycling
5. Health and safety
in the workplace, including:
•
process of hazard identification,
risk assessment and accident
investigation
•
informing and training employees
on occupational health and safety
issues in the workplace
•
promotion of a healthy lifestyle
for employees, including providing
access to medical services
and services
•
types and level of industrial
injuries, as well as measures aimed
at improving the level of safety
at work
6. Employment, including:
•
total number of employees,
percentage of newly hired employees,
employee turnover, percentage
of employees hired from the local
population, gender composition
of employees
•
compensation and benefits
for employees
7. Indirect economic impacts,
including:
•
description of infrastructure
investment
8. Risk management, including:
•
assessment of environmental
and social risks and opportunities
of new projects
•
implementation of management
tools based on identified risks
aimed at preventing, minimizing
and eliminating consequences
for the health and safety
of employees and local communities,
as well as for the environment
9. Economic performance,
including:
•
net sales
•
income from financial investments
and asset sales
•
operating costs
•
salaries and other payments
to employees
•
payments to suppliers
•
investing in communities
High significance – average
influence on stakeholders
10. Emergency preparedness,
including:
•
emergency preparedness
mechanisms
•
measures taken to effectively
respond to emergencies and ensure
the protection of workers and local
communities
11. Training and education,
including:
•
number of training hours per
employee
•
professional development
programmes
12. Ethical business conduct,
including:
•
compliance with applicable law
•
responsibility for sustainable
development indicators at the level
of the Board of Directors
13. Anti-corruption, including:
•
implementation of practices
and policies to prevent corruption
•
informing about the policy
and methods of combating corruption
•
corruption risk assessment
•
anti-corruption training
•
description of confirmed cases
of corruption and actions taken
14. Supply chain including:
•
share of spending on local suppliers
in the regions of operation
•
supply chain transparency
•
sustainability in the supply chain
Medium significance – high
impact on stakeholders
15. Local communities, including:
•
information about the company’s
interaction with local communities
•
economic, social, cultural
and environmental impact
of the company on local communities
and their rights
•
investment in local communities
High significance – low
influence on stakeholders
16. Energy management,
including:
•
energy consumption within
the company
•
the amount of energy required per
unit of output
•
reduction in energy consumption
resulting from initiatives to reduce
energy consumption and improve
energy efficiency
17. Human rights policy:
•
human rights assessment or human
rights impact assessment
•
training of employees in the field
of human rights
•
non-discrimination, information
on the number of cases
of discrimination, as well as measures
taken
•
diversity and equal opportunity:
composition of governing bodies
and key staff categories by gender,
age and other indicators of diversity
•
the ratio of the base salary of men
and women by category of workers
•
freedom of association and the right
to enter into collective bargaining
18. Innovative development,
including:
•
Innovation
•
Research and development
•
Digitalization
Medium significance –
medium influence
on stakeholders
19. Responsible tailings
management, including:
•
formation, placement and presence
of tailings at the end of the year
•
tailings management approach
Medium significance – low
influence on stakeholders
20. Countering COVID-19,
including:
•
measures taken to counter COVID-19
•
impact of COVID-19 on business
processes
21. Biodiversity, including:
•
significant impacts on biodiversity
associated with the company’s
activities
•
reclamation of disturbed lands
Materiality matrix GRI 102-47
Appendix
Annual Report 2021
Appendix
235
234
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
External assurance
(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,
The calculation, collection,
and consolidation of the operational,
social, and environmental indicators
presented in the Report were carried
out in accordance with the reporting
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 2021
was used (USD 1 = RUB 72.15) or
the rate on 31 December 2021 (USD 1 =
RUB 71.88).
Methodology for preparing
and revising data
Annual Report 2021
approval procedure
Operating performance indicators,
as well as data in the field of sustainable
development, are presented
in international system units (International
System of Units).
The sources of information
in the field of sustainable
development within the framework
of personnel management, labor
protection and industrial safety,
as well as environmental protection
are the forms of state mandatory
statistical reporting, annually submitted
to the relevant departments.
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 2021 information disclosure
covers both the Group’s Russian
and international companies, unless
the text states otherwise.
In 2021, the company significantly
expanded the scope of disclosures
on greenhouse gas emissions in line
with TCFD recommendations. In the next
reporting periods, the company plans
to continue the practice of disclosing this
information. A significant step in 2021
was enhanced disclosure of information
on aspects related to climate change.
No.
Stage
Document
1
Preliminary approval by the Board of Directors
Minutes of the meeting of the Board of Directors No. 290
dd. 24.05.2022
2
Approval by the General Meeting of Shareholders
Minutes No. 66 dd.
30.06.2022
TCFD-index
TCFD recommendations
Annual report 2021
Page
1. Governance
Disclose the organization’s governance around climate-related risks and opportunities
Describe the board’s oversight of climate-
related risks and opportunities
Information is represented
in the Sustainability agenda management
at the Board of Directors level section and
Climate change: Climate strategy priorities
45, 59
Describe management’s role in assessing
and managing climate-related risks
and opportunities.
Information is represented the Climate
change: Climate strategy priorities
58–61
2. Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy,
and financial planning where such information is material
Describe the climate-related risks
and opportunities the organization has
identified over the short, medium, and long
term
Information is represented in the Climate
change: Assessment of climate risks and
their impact on strategy, Climate change:
Risk management and Climate change:
Pathway to carbon neutrality sections
46–47, 58–60
Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy, and financial planning
Information is represented in the Climate
change: Assessment of climate risks and
their impact on strategy, Climate change:
Risk management and Climate change:
Pathway to carbon neutrality sections
56–61
Describe the resilience of the organization’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario
Information is represented in the Climate
change: Scenario analysis overview
section
61–63
3. Risk management
Disclose how the organization identifies, assesses, and manages climate-related risks
Describe the organization’s processes
for identifying and assessing
climate-related risks
Information is represented in the Climate
change: Assessment of climate risks and
their impact on strategy, Climate change:
Risk management and Climate change:
Scenario analysis overview sections
58–61
Describe the organization’s processes
for managing climate-related risks
Information is represented in the Climate
change: Assessment of climate risks and
their impact on strategy, Climate change:
Risk management and Climate change:
Scenario analysis overview sections
58–61
Describe how processes for identifying,
assessing, and managing
climate-related risks are integrated
into the organization’s overall risk
management
Information is represented in the Climate
change: Assessment of climate risks and
their impact on strategy, Climate change:
Risk management and Climate change:
Scenario analysis overview sections
58–61
4. Metrics and targets
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 organization
to assess climate-related risks
and opportunities in line with its strategy
and risk management process
Information is represented in the Climate
change: Performance and targets section
48–54
Disclose Scope 1, Scope 2, and,
if appropriate, Scope 3 GHG emissions,
and the related risks
Information is represented in the Climate
change: Performance and targets section
49–51
Describe the targets used by the organization
to manage climate-related risks
and opportunities and performance against
targets
Information is represented in the Climate
change: Performance and targets section
53–54
can be found in the Appendix.
The independent auditor was AO
PricewaterhouseCoopers Audit.
GRI 102-56
Appendix
Annual Report 2021
Appendix
237
236
WEF’s Stakeholder
Capitalism Metrics
Principles of Governance
Theme
Core Metrics and Disclosures
Response and/or Reference
Related
Standards
Quality
of Governing
Composition of the highest governance
body and its committees by: competencies
relating to economic, environmental
and social topics; executive or non-
executive; independence; tenure
on the governance body; number of each
individual’s other significant positions
and commitments, and the nature
of the commitments; gender
Board of Directors, p. 176
Biographies of members of the Board
of Directors, p. 179
Committee Composition, p. 191
GRI 102-22
GRI 405-1a
Stakeholder
Engagement
A list of the topics that are material to key
stakeholders and the company, how
the topics were identified
The process of identifying essential topics,
p. 231
Dialogue with stakeholders, p. 106
GRI 102-21
GRI 102-43
GRI 102-47
Ethical
Behavior
Anti-corruption
1. Total percentage of governance body
members, employees and business
partners who have received training
on the organization’s anti-corruption
policies and procedures, broken down
by region.
2а) Total number and nature of incidents
of corruption confirmed during the current
year, but related to previous years; and
2b) Total number and nature of incidents
of corruption confirmed during the current
year, related to this year.
3. Discussion of initiatives and stakeholder
engagement to improve the broader
operating environment and culture, in order
to combat corruption.
Anti-corruption practice (anti-corruption
compliance), p. 208
1. In 2021, more than 2,800 employees
received full-time training in anti-
corruption requirements. Electronic
training was conducted for more than
10,000 employees.
2. In 2021, the compliance hotline received
46 applications related to the risk
of theft and internal fraud. Checks
have been carried out on all claims
of violation. In 14 cases, the information
was confirmed in full or in part, 8
applications were not completed
at the reporting date.
3. Introduction of anti-corruption culture,
p.210
GRI 205-2
GRI 205-3
Ethical
Behavior
Compliance
Description of internal and external
mechanisms for:
• Requests for advice on ethical behavior;
• Reports of concerns about unethical or
illegal behavior
Independent Compliance hotline
of NLMK Group, p. 207
GRI 102-17
Risk
and Opportunity
Oversight
Integrating risk and opportunity
into business process
Company risk factor and opportunity
disclosures that clearly identify the principal
material risks and opportunities facing
the company specifically (as opposed
to generic sector risks), the company
appetite in respect of these risks. These
opportunities and risks should integrate
material economic, environmental
and social issues, including climate
change.
Activity control and risk management,
p. 212
Assessment of climate risks and their
impact on strategy, p. 58
GRI 102-15
Planet
Theme
Core Metrics and Disclosures
Response and/or Reference
Related
Standards
Climate
Change
Greenhouse gas (GHG) emissions
For all relevant greenhouse gases report
in metric tonnes of carbon dioxide
equivalent (tCO2e) GHG Protocol Scope 1
and Scope 2 emissions.
Estimate and report material upstream
and downstream (GHG Protocol Scope 3)
emissions where appropriate.
Climate change: Performance and targets,
p. 48
GRI 305:1-3
TCFD
GHG Protocol
Climate
Change
TCFD implementation
Fully implement the recommendations
of the Task Force on Climate-related
Financial Disclosures (TCFD). If necessary,
disclose a timeline of at most three years
for full implementation. Disclose whether
you have set, or have committed to set,
GHG emissions targets that are in line
with the goals of the Paris Agreement –
to limit global warming to well below 2°C
above pre-industrial levels and pursue
efforts to limit warming to 1.5°C –
and to achieve net-zero emissions before
2050.
Climate change, p. 59
The company adopted
the recommendations of the Task Force
on Climate-related Financial Disclosures
(TCFD) in its climate change-related
reporting.
The company also carried out a scenario
analysis in alignment with TCFD’s guidance
that was detailed in its CDP Climate
Change Questionnaire.
GRI Index provides mapping of GRI
disclosures to TCFD’s recommendations.
The company cites the TCFD index
in the Appendices to the Annual Report,
p. 235
TCFD
Freshwater
Availability
Water consumption and withdrawal
in water stressed areas
Not applicable. The regions of the Group’s
presence are characterized by high
availability of water resources, the Group
does not operate in water-deficient areas.
SASB
CG-HP-140a.1
WRI Aqueduct
water risk
atlas tool
People
Theme
Core Metrics and Disclosures
Response and/or Reference
Related
Standards
Dignity
and Equality
Diversity and inclusion
Percentage of employees per employee
category, by age group, gender and other
indicators of diversity , etc.
Personnel structure, p. 140
GRI 405-1b
Dignity
and Equality
Pay equality
The ratio of the basic salary by employee
category and gender
Evaluation and remuneration, p. 127
GRI 405-2
Dignity
and Equality
Risk for incidents of child, forced or
compulsory labour
Human rights, p. 120
GRI 202-1
Health
and Wellbeing
Health and safety
The number and rate of fatalities as a result
of work-related injury; high-consequence
work-related injuries (excluding fatalities);
recordable work-related injuries; main types
of work-related injury; and the number
of hours worked.
An explanation of how the organization
facilitates workers’ access to non-
occupational medical and healthcare
services, and the scope of access provided
for employees and workers.
Occupational safety and industrial safety,
p. 154
GRI:2018
403-9a&b,
GRI:2018
403-6a
Skills
for the Future
Training provided
Average training and development
expenditure per full time employee (total
cost of training provided to employees
divided by the number of employees).
Training and development, p. 129
57.5 hours of training per person in terms
of the average number of students.
GRI 404-1
Appendix
Annual Report 2021
Appendix
239
238
Prosperity
Theme
Core Metrics and Disclosures
Response and/or Reference
Related
Standards
Employment
and Wealth
Generation
Absolute number and rate
of employment
1. Total number and rate of new employee
hires during the reporting period,
by age group, gender, other indicators
of diversity and region.
2. Total number and rate of employee
turnover during the reporting period,
by age group, gender, other indicators
of diversity and region.
1. Personnel structure: Recruitment, p. 126
2. Personnel structure: Turnover, p. 126
GRI 401-1a&b
Employment
and Wealth
Generation
Contribution to the economy
1. Direct economic value generated
and distributed (EVG&D) , ideally split
out by:
–
Revenues
–
Operating costs
–
Employee wages and benefits
–
Payments to providers of capital
–
Payments to government
–
Community investment
2. Financial assistance received from
the government: total monetary
value of financial assistance
received by the organization from
any government during the reporting
period.
1. Financial Review: Creating economic
value, p. 38
2. NLMK Group does not receive financial
assistance from the state
GRI 201-1
GRI 201-4
Employment
and Wealth
Generation
Contribution to financial well-being
1. The company’s investment strategy
description.
2. Dividend payments
1. Strategic priorities: Strategy 2022, p. 28
2. Information for Shareholders: Dividends,
p. 296–297, Dividend payments, p. 296
Innovation
for Better
Products
and Services
Total R&D expenses
Total costs related to research
and development
Our innovations, p. 22
Community
and Social
Vitality
Total tax paid
Financial statements, p. 298
GRI 201-1
SASB index
Indicator
Reference / Comment
Page
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
48–54
Energy management
EM-MM-130a.1 Total energy consumed,
percentage grid electricity, percentage
renewable
Total energy consumed – 403.6 PJ;
Percentage grid electricity – 18% (consumption of purchased
electricity – sold to external customers / total energy consumption
of the Group);
Percentage renewable – 0.43%
64–69
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
Total fresh water withdrawn – 19.2 m m3
Total fresh water consumed – 11.1 m m3. The difference is due to the
fact that fresh water is withdrawn not only for own needs, but also for
transfer to third-party consumers.
The regions of the Group’s presence are characterized by high
availability of water resources. The Group does not operate in water-
scarce areas
83–88
Biodirversity impacts
EM-MM-160a.1 Description
of environmental management
policies and practices for active sites
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
98–99
EM-MM-160a.2 Percentage of mine sites
where:
1) Acid rock drainage is predicted
to occur
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)
239
2) Acid rock drainage is actively mitigated
Not applicable. Acid effluents are not formed
239
3) Acid rock drainage is under treatment
or remediation
Not applicable. Wastewater treatment is carried out by sedimentation
of suspensions in the tailing dump and biological treatment in natural
conditions
239
EM-MM-160a.3 Percentage of proved
and probable reserves in or near sites
with protected conservation status or
endangered species habitat
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
239
Greenhouse gas emissions
EM-MM-110a.1 Gross global Scope 1
emissions, percentage covered under
emissions-limiting regulations
Gross global Scope 1 emissions – 30 m t CO2-equiv.
Only 1.1% is regulated by legal requirements at factories in the EU
49–54, 239
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) – 233,600 t, (2) nitrogen oxides (excluding
N2O) – 26,300 t, (3) sulfur oxides – 30,600 t, (4) solid particles
20,700 t, (5) mercury (Hg) – 0 t, (6) lead (Pb) – 1 t, (7) volatile organic
compounds (VOC) – 2,600 t
239
Appendix
Annual Report 2021
Appendix
241
240
Indicator
Reference / Comment
Page
Waste & hazardous materials management
EM-MM-150a.1 Total weight of tailings
waste, percentage recycled
Total weight of tailings – 23.9 m t
The share of used tailings is 23% of the total volume
240
EM-MM-150a.2 Total weight of mineral
processing waste, percentage recycled
The total weight of overburden is 60.7 m t (including non-waste).
The share of used overburden is 28% of the total volume
240
EM-MM-150a.3 Number of tailings
impoundments, broken down by MSHA
hazard potential
NLMK Group operates one tailing dam. Detailed information
is available at https://nlmk.com/upload/iblock/4dc/TSF-management.pdf
240
Labor relations
EM-MM-310a.1 Percentage of active
workforce covered under collective
bargaining agreements, broken down
by local and foreign employees
Without local and foreign employees stucture
240
Security, human rights, rights of indigenous peoples
EM-MM-210a.2 Percentage of proved
and probable reserves in or near
indigenous land
0; According to the company estimates, there is no presence
of indigenous peoples in the regions where NLMK Group operates
240
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
240
Community relations
EM-MM-210b.1 Discussion of process
to manage risks and opportunities
associated with community rights
and interests
118–121
EM-MM-210b.2 Number and duration
of non-technical delays
There were no non-technical delays at Russian assets
240
Activity metrics
EM-MM-000.A Production of (1) metal
ores and (2) finished metal products
Saleable iron ore production: 19.5 m t
Finished steel production: 16.6 m t1
240
EM-MM-000.B Total number
of employees
NLMK Group’s average 2021 headcount was 50,600 people
124
Business ethics & transparency
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.
208
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
240
1 Including NBH.
GRI Index
GRI 102-55
Indicator
Reference / Comment
Page
Independent verification
GRI 102: General disclosures
1. Organizational profile
GRI 102-1 Name of the organization
8
GRI 102-2 Activities, brands, products,
and services
9
GRI 102-3 Location of headquarters
39
GRI 102-4 Location of operations
8
GRI 102-5 Ownership and legal form
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.
225, 230
GRI 102-6 Markets served
20
GRI 102-7 Scale of the organization
7, 10, 124,
224, 230
GRI 102-8 Information on employees and other
workers
124–125
Average headcount breakdown by
segment, region and contract type, %
and thousands of people;
Headcount breakdown by age, gender
and categories, %.
GRI 102-9 Supply chain
116–117
Procurement from suppliers of goods
and materials by supplier country and
by categories, number of suppliers and
million Russian rubles (“RUB”)
GRI 102-10 Significant changes
to the organization and its supply chain
In the reporting period, there
were no significant changes
in the structure and activities
of the company.
117
GRI 102-11 Precautionary Principle or approach
214
GRI 102-12 External initiatives
259
GRI 102-13 Membership of associations
259
2. Strategy
GRI 102-14 Statement from senior
decision-maker
2
GRI 102-15 Key impacts, risks, and opportunities
215
3. Ethics and integrity
GRI 102-16 Values, principles, standards,
and norms of behaviour
32, 106,
206–207
GRI 102-17 Mechanisms for advice and concerns
about ethics
121, 207
4. Corporate management
GRI 102-18 Governance structure
171
GRI 102-19 Delegating authority
45, 75
GRI 102-20 Executive-level responsibility
for economic, environmental, and social topics
45, 75,
120, 145,
188
GRI 102-21 Consulting stakeholders
on economic, environmental, and social topics
107
GRI 102-22 Composition of the highest
governance body and its committees
175, 191
GRI 102-23 Chair of the highest governance
body
175
Appendix
Annual Report 2021
Appendix
243
242
Indicator
Reference / Comment
Page
Independent verification
GRI 201-4 Financial assistance received from
government
NLMK Group did not receive
significant amounts of
government subsidies for
the 12 months ending 31
December 2021. In the register
of NLMK shareholders there
was no government as
of 31 December 2021.
GRI 203 Indirect economic impacts
GRI 103 Management approach
137
GRI 203-1 Infrastructure investments
and services supported
161, 164
Investments in corporate citizenship
programmes, billion RUB and %
GRI 203-2 Significant indirect economic impacts
158
GRI 204 Procurement practices
GRI 103 Management approach
117
Procurement from local suppliers for
the Russian companies, % and billion
RUB
GRI 204-1 Proportion of spending on local
suppliers
GRI 205 Anti-corruption
GRI 103 Management approach
208
GRI 205-1 Operations assessed for risks related
to corruption
208
GRI 205-2 Communication and training about
anti-corruption policies and procedures
207, 209
GRI 205-3 Confirmed incidents of corruption
and actions taken
210
GRI 206 Anti-competitive behavior
GRI 103 Management approach
210
GRI 206-1 Legal actions for anti-competitive
behavior, anti-trust, and monopoly practices
210
GRI 300 Environmental
GRI 103 Management approach
75–76
Spending on environmental protection
(incl. investments projects and current
expenditures), million US dollars
GRI 301 Materials
GRI 301-1 Materials used by weight or volume
117
GRI 301-2 Recycled input materials used
89
GRI 302 Energy
GRI 103 Management approach
65
GRI 302-1 Energy consumption within
the organization
66–68
Energy consumption by the Group, PJ
Consumption of non-renewable fuels by
the Group, including fuel types used, PJ
Consumption, generation and sale of
electricity and thermal energy by the
Group, PJ
GRI 302-3 Energy intensity
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
68
Energy intensity, Gcal/tonne (“t”)
GRI 302-4 Reduction of energy consumption
70
GRI 303 Water and effluents
GRI 103: Management approach
83
GRI 303-1 Interactions with water as a shared
resource
83
Indicator
Reference / Comment
Page
Independent verification
GRI 102-24 Nominating and selecting the highest
governance body
174, 188
GRI 102-25 Conflicts of interest
191
GRI 102-26 Role of highest governance body
in setting purpose, values, and strategy
174, 187,
198
GRI 102-27 Collective knowledge of highest
governance body
178
GRI 102-28 Evaluating the highest governance
body’s performance
188
GRI 102-29 Identifying and managing economic,
environmental, and social impacts
187, 192
GRI 102-30 Effectiveness of risk management
processes
212
GRI 102-31 Review of economic, environmental,
and social topics
45, 75
GRI 102-32 Highest governance body’s role
in sustainability reporting
188, 192
GRI 102-35 Remuneration policies
203, 205
GRI 102-36 Process for determining
remuneration
203, 205
GRI 102-37 Stakeholders’ involvement
in remuneration
203
5. Dialogue with stakeholders
GRI 102-40 List of stakeholder groups
106
GRI 102-41 Collective bargaining agreements
141
Number of employees covered by
collective bargaining agreements, %
GRI 102-42 Identifying and selecting
stakeholders
106
GRI 102-43 Approach to stakeholder
engagement
106
GRI 102-44 Key topics and concerns raised
107
6. Reporting practice
GRI 102-45 Entities included in the consolidated
financial statements
0
GRI 102-46 Defining report content and topic
boundaries
231
GRI 102-47 List of major themes
232
GRI 102-48 Restatements of information
234
GRI 102-49 Changes in reporting
234
GRI 102-50 Reporting period
0
GRI 102-51 Date of most recent report
0
GRI 102-52 Reporting cycle
0
GRI 102-53 Contact point for questions
regarding the report
39
GRI 102-54 Claims of reporting in accordance
with the GRI Standards
0
GRI 102-55 GRI content index
241
GRI 102-56 External assurance
234
Topic-specific disclosures
GRI 200 Economic
GRI 201 Economic Performance
GRI 103 Management approach
8, 28–31
GRI 201-1 Direct economic value generated
and distributed
38
GRI 201-2 Financial implications and other risks
and opportunities due to climate change
58
GRI 201-3 Defined benefit plan obligations and
other retirement plans
138
Appendix
Annual Report 2021
Appendix
245
244
Indicator
Reference / Comment
Page
Independent verification
GRI 305-5 Reduction of GHG emissions
52–53
Reduction of CO2 emissions,
thousands of t
GRI 305-6 Emissions of ozone-depleting
substances (ODS)
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.
GRI 305-7 Nitrogen oxides (NOX), sulfur oxides
(SOX), and other significant air emissions
96
Volume of significant air emissions
by the Group by substance type,
thousands of t
GRI 306 Waste (2020)
GRI 103: Management approach
89
GRI 306-1 Waste generation and significant
waste-related impacts
89
GRI 306-2 Management of waste-related impacts
89–90
GRI 306-3 Waste generated
90–91
Waste generation by the Group,
hazardous and non-hazardous, million t;
Overburden of JSC Stoilensky GOK
and beneficiation tailings, million t
GRI 306-4 Waste diverted from disposal
89–92
Secondary raw materials recovered
by third parties, hazardous and non-
hazardous, million t;
Secondary raw materials recovered in-
house, million t;
Share of utilized overburden of
JSC Stoilensky GOK and beneficiation
tailings of the Group, %
GRI 306-5 Waste directed to disposal
90–91
Waste disposal at third-party landfills,
hazardous and non-hazardous, million t;
Overburden and beneficiation tailings
generated and utilized by the Group,
million t
GRI 307 Environmental compliance
GRI 103: Management approach
79
GRI 307-1 Non-compliance with environmental
laws and regulations
79
GRI 308 Supplier environmental assessment
GRI 103: Management approach
77
GRI 308-1 New suppliers that were screened
using environmental criteria
77
GRI 308-2 Negative environmental impacts
in the supply chain and actions taken
78
Suppliers and contractors of the Group
screened using environmental criteria
during audits conducted by the Group;
Suppliers and contractors of
the Group subject to measures to
improve environmental compliance
following audits conducted by
the Group, %
Indicator
Reference / Comment
Page
Independent verification
GRI 303-2 Management of water discharge-
related impacts
86
Management of water discharge-related
impacts
GRI 303-3 Water withdrawal
83–84
Freshwater withdrawal, by sources and
by regions, million m3
Urban wastewater converted for
treatment, million m3
GRI 303-4 Water discharge
87–88
Volume of water discharge by receiving
water body and by region, million m3;
Volume of water collected and
converted to third-party and volume
of loss of withdrawn water during
transportation, million m3;
Pollutants discharged into water
bodies, thousands of t
GRI 303-5 Water consumption
83–84
Water consumption, million m3
GRI 304 Biodiversity
GRI 103: Management approach
98
GRI 304-1 Operational sites owned, leased,
managed in, or adjacent to, protected areas
and areas of high biodiversity value outside
protected areas
98
GRI 304-2 Significant impacts of activities,
products, and services on biodiversity
98
GRI 304-3 Habitats protected or restored
99
Land rehabilitated, ha
GRI 304-4 IUCN Red List species and national
conservation list species with habitats in areas
affected by operations
98
GRI 305 Emissions
GRI 103: Management approach
45
GRI 305-1 Direct (Scope 1) GHG emissions
49
Direct GHG emissions (Scope 1),
thousands of t of CO2-equivalent
GRI 305-2 Energy indirect (Scope 2) GHG
emission
49
Indirect energy GHG emissions
(Scope 2), market-based method and
location-based method, thousands of t of
CO2-equivalent
GRI 305-3 Other indirect (Scope 3) GHG
emissions
50
Upstream GHG emissions (Scope 3),
million of t of CO2-equivalent
GRI 305-4 GHG emissions intensity
51
Specific direct emissions from
stationary sources (Scope 1), t of
CO2-equivalent per t of Fe and steel;
Specific indirect energy emissions from
stationary sources (Scope 2, location-
based), t of CO2-equivalent per t of Fe
and steel;
Specific indirect energy emissions from
stationary sources (Scope 2, market-
based), t of CO2-equivalent per t of Fe
and steel;
Specific total emissions from stationary
sources (Scope 1 + Scope 2, location-
based), t of CO2-equivalent per t of Fe
and steel;
Specific total emissions from stationary
sources (Scope 1 + Scope 2, market-
based), t of CO2-equivalent per t of Fe
and steel;
Specific total emissions from stationary
sources (Scope 1 + Scope 2, location-
based), t of CO2-equivalent per t of
steel and commodity pig iron
Appendix
Annual Report 2021
Appendix
247
246
Indicator
Reference / Comment
Page
Independent verification
GRI 406 Non-discrimination
GRI 103: Management approach
118–121
GRI 406-1 Incidents of discrimination
and corrective actions taken
121
GRI 407 Freedom of association and collective bargaining
GRI 103: Management approach
118–121
GRI 407-1 Operations and suppliers in which
the right to freedom of association and collective
bargaining may be at risk
121
GRI 408 Child labor
GRI 103: Management approach
118–121
GRI 408-1 Operations and suppliers at significant
risk for incidents of child labour
121
GRI 409 Forced or compulsory labor
GRI 103: Management approach
118–121
GRI 409-1 Operations and suppliers at significant
risk for incidents of forced or compulsory labour
121
GRI 411 Rights of indigenous peoples
GRI 411-1 Incidents of violations involving rights
of indigenous peoples
Company conciders there
is no presence of indigenous
peoples in the regions where
NLMK Group operates.
120
GRI 412 Human rights assessment
GRI 412-1 Operations that have been subject
to human rights reviews or impact assessments
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.
121
GRI 412-2 Employee training on human rights
policies or procedures
121
GRI 412-3 Significant investment agreements and
contracts that include human rights clauses or
that underwent human rights screening
121
GRI 413 Local communities
GRI 103: Management approach
160
GRI 413-1 Operations with local community
engagement, impact assessments,
and development programmes
160
GRI 413-2 Operations with significant actual
and potential negative impacts on local
communities
No such operations
Company specific dislosures
1) Average monthly salary at NLMK Group’s
Russian companies (company methodology,
thousands RUB / employee)
127
2) Significant emissions for the Group and
for NLMK Lipetsk by type of substances, per unit of
production (company methodology, kg/t and g/t)
96
3) NLMK Group's social spending in 2016–2021
(company, billion RUB)
137
Indicator
Reference / Comment
Page
Independent verification
GRI 400 Social
GRI 401 Employment
GRI 103: Management approach
126
GRI 401-1 New employee hires and employee
turnover
126
Number and rate of new hires by
region, by gender and by age;
Rate of employee turnover, %
GRI 401-3 Parental leave
139
GRI 403 Occupational health and safety
GRI 103: Management approach
144
GRI 403-1 Occupational health and safety
management system
144
GRI 403-2 Hazard identification, risk assessment,
and incident investigation
148
GRI 403-3 Occupational health services
148
GRI 403-4 Worker participation, consultation,
and communication on occupational health
and safety
149
GRI 403-5 Worker training on occupational
health and safety
149
GRI 403-6 Promotion of worker health
139
GRI 403-7 Prevention and mitigation
of occupational health and safety impacts directly
linked by business relationships
148
GRI 403-8 Workers covered by an occupational
health and safety management system
147
GRI 403-9 Work-related injuries
154–155
LTIFR for the Group employees and
contractors;
TRIFR for the Group employees and
contractors;
Number of occupational accidents,
employees and contractors;
Number of occupational fatalities,
employees and contractors;
Number of lost time injuries, employees
and contractors;
Total man-hours worked for employees
and contractors
GRI 403-10 Work-related ill health
148
GRI 404 Training and education
GRI 103: Management approach
129
GRI 404-1 Average hours of training per year per
employee
129
Average hours of training per year
per employee in the Group’s Russian
companies
GRI 404-2 Programmes for upgrading employee
skills and transition assistance programmes
129, 132,
135, 136
GRI 404-3 Percentage of employees receiving
regular performance and career development
reviews
127–128
Proportion of the Group employees
who received a regular performance
and career development review, by
category and gender, %
GRI 405 Diversity and equal opportunity
GRI 103: Management approach
139
GRI 405-1 Diversity of governance bodies
and employees
124–125,
175
GRI 405-2 Ratio of basic salary and remuneration
of women to men
128
Appendix
Annual Report 2021
Appendix
249
248
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
GRI indicator consolidation
boundaries
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)
NLMK
USA
DanSteel
and plate
distribution
network
NBH Segment
Service
and Supporting
Business
NLMK Clabecq S.A.,
NLMK Verona SpA, NLMK La
Louvière S.A.,
NLMK Strasbourg S.A.
Other
companies
Information on employees and other workers (GRI 102-8)
V
V
V
V
V
V
V
V
Supply chain (GRI 102-9)
V1
V2
V3
–
–
–
–
–
Collective bargaining agreements (GRI 102-41)
V
V
V
V
V
V
V4
V
The management approach and its components (Only spending on environmental protection
(incl. investments projects and current expenditures), million US dollars) (GRI 103-2)
V1
V5
V
V
V
V
–
V6
Financial implications and other risks and opportunities due to climate change (GRI 201-2)
V
V
V
V
V
V
V
V
Infrastructure investments and services supported (GRI 203-1)
V
V
V
–
V7
V8
–
–
Significant indirect economic impacts (GRI 203-2)
V
V
V
V
V
V
V
V
Procurement (GRI 204-1)
V1
V2
V3
–
–
–
–
–
Anti-corruption (GRI 205-1, 205-2, 205-3)
V
V
V
V
V
V
V
V
Anti-competitive behaviour (GRI 206-1)
V
V
V
V
V
V
V
V
Energy (GRI 302-1)
V1
V9
V
V
V
V
–
–
Energy (GRI 302-3)
V10
–
–
–
–
–
–
–
Water (GRI 303-1, 303-2, 303-3, 303-4, 303-5)
V1
V5
V
V
V
V
–
V6
Biodiversity (GRI 304-1, 304-2, 304-3, 304-4)
V1
V5
V
V
V
V
–
V6
Emissions (GRI 305-1, 305-2, 305-3, 305-4, 305-5)
V1
V9
V
V
V
V
V11
V12
Emissions (GRI 305-7)
V1
V5
V
V
V
V
–
V6
1 Excluding NLMK Trading SA.
2 Excluding NLMK Long and NLMK Vtorchermet.
3 Excluding Stagdok and Dolomit.
4 Excluding NLMK Jemappes Steel Center.
5 Only NLMK Ural, NLMK Metalware, NLMK Kaluga, NLMK Vtorchermet.
6 Only VIZ.
7 Only NLMK DanSteel.
8 Only NLMK Verona SpA.
9 Excluding NLMK Long.
10 Only NLMK Lipetsk.
11 Only NLMK Manage Steel Center.
12 Only NLMK Ural Service, VIZ, and NLMK India Service Center Pvt Ltd.
13 Only NLMK Distribution France, NLMK Deutschland, NLMK Manage Steel Center.
14 Only NLMK Trade House, NLMK Communication, NLMK IT, NLMK Engineering, VIZ, and NLMK India Service Center Pvt Ltd.
Appendix
Annual Report 2021
Appendix
251
250
Indicator
Russia Flat
Products
(Russia)
Russia Long
Products
(Russia)
Mining Division
(Russia)
NLMK
USA
DanSteel
and plate
distribution
network
NBH Segment
Service
and Supporting
Business
NLMK Clabecq S.A.,
NLMK Verona SpA, NLMK La
Louvière S.A.,
NLMK Strasbourg S.A.
Other
companies
Waste (GRI 306-1, 306-2, 306-3, 306-4, 306-5)
V1
V5
V
V
V
V
–
V6
Environmental compliance (GRI 307-1)
V
V
V
V
V
V
V
V
Supplier environmental assessment (GRI 308-1, 308-2)
V
V
V
–
–
–
–
–
Employment (GRI 401-1)
V
V
V
V
V
V
V
V
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)
V1
V
V
V
V
V
V13
V14
Training and education (GRI 404-1, 404-2, 404-3)
V
V
V
V
V
V
V
V
Diversity and equal opportunity (GRI 405-1)
V
V
V
V
V
V
V
V
Non-discrimination (GRI 406-1)
V
V
V
V
V
V
V
V
Freedom of association and collective bargaining (GRI 407-1)
V
V
V
V
V
V
V
V
Child labour (GRI 408-1)
V
V
V
V
V
V
V
V
Forced or compulsory labour (GRI 409-1)
V
V
V
V
V
V
V
V
Rights of indigenous peoples (GRI 411-1)
V
V
V
V
V
V
V
V
Human rights assessment (GRI 412-1, 412-2)
V
V
V
V
V
V
V
V
Local communities (GRI 413-1)
V
V
V
V
V
V
V
V
Average monthly salary at the Group’s Russian companies
V
V
V
–
–
–
–
V
Significant air emissions by the Group by substance type, per unit of production
V1
V5
V
V
V
V
–
V6
NLMK Group's social spending in 2016–2021 (Russian companies)
V
V
V
–
–
–
–
V
1 Excluding NLMK Trading SA.
2 Excluding NLMK Long and NLMK Vtorchermet.
3 Excluding Stagdok and Dolomit.
4 Excluding NLMK Jemappes Steel Center.
5 Only NLMK Ural, NLMK Metalware, NLMK Kaluga, NLMK Vtorchermet.
6 Only VIZ.
7 Only NLMK DanSteel.
8 Only NLMK Verona SpA.
9 Excluding NLMK Long.
10 Only NLMK Lipetsk.
11 Only NLMK Manage Steel Center.
12 Only NLMK Ural Service, VIZ, and NLMK India Service Center Pvt Ltd.
13 Only NLMK Distribution France, NLMK Deutschland, NLMK Manage Steel Center.
14 Only NLMK Trade House, NLMK Communication, NLMK IT, NLMK Engineering, VIZ, and NLMK India Service Center Pvt Ltd.
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
Independent Limited Assurance Report
To the Management of Novolipetsk Steel:
Introduction
We have been engaged by the Management of Novolipetsk Steel (hereinafter – the “Company”) to
provide limited assurance on the selected information listed below and included in the Annual Report
for the year ended 31 December 2021 of the Company (hereinafter – the “Annual Report”). The Annual
Report represents information related to the Company, its subsidiaries and a joint venture and its
subsidiaries (hereinafter together – the “Group”), unless otherwise stated in the Annual Report.
Selected information
We assessed the quantitative and qualitative information specified in Appendix 1 to this report, that is
disclosed in the Annual Report (hereinafter – the “Selected Information”).
The scope of our limited assurance procedures was limited to the Selected Information as at
31 December 2021 and for the year then ended 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 Sustainability Reporting Standards 102, 103, 203, 204, 302, 303, 304, 305, 306, 308,
401, 403 and 404 (hereinafter together – the “GRI Standards”) published by the Global Reporting
Initiative (GRI), and in the Group’s methodology as set forth in the criteria defined in notes to the
Group’s specific disclosures in the Our employees and Environmental protection sections of the Annual
Report, (hereinafter – the “NLMK Methodology”, and together with the GRI Standards – the “Reporting
Criteria”). We believe that the Reporting Criteria are appropriate given the purpose of our limited
assurance engagement.
Responsibilities of the Group’s management
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 (including the NLMK Methodology) for
preparing and reporting the Selected Information in accordance with the Reporting Criteria;
•
preparing, measuring and reporting of the Selected Information in accordance with the Reporting
Criteria; and
•
the 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 will 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 except
where the respective terms are expressly agreed in writing and our prior consent in writing is obtained.
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 or 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. The procedures performed in
a limited assurance engagement vary in nature and timing from, and are less in extent than for, a
reasonable assurance engagement. Consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that would have been obtained had a
reasonable assurance engagement been performed.
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 the Group’s personnel responsible for the preparation of the Annual
Report and collection of underlying data;
•
performed analysis of the relevant internal methodology and guidelines (including the NLMK
Methodology), gaining an understanding of the design of the key systems, processes and
controls for preparing and reporting the Selected Information; and
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.
•
performed limited substantive testing on a selective basis of the Selected Information to check
that data had been appropriately measured, recorded, collated and reported.
Reporting and measurement methodologies
Under the GRI Standards there is a range of different, but acceptable, measurement and reporting
techniques. The techniques, together with the NLMK Methodology, 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 used by management in preparing the
Annual Report, described therein, and for which the Group is solely responsible for.
Conclusion
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 as at 31 December 2021 and for
the year then ended has not been prepared, in all material respects, in accordance with the Reporting
Criteria.
28 March 2022
Moscow, Russian Federation
A. B. Fomin is authorised to sign on behalf of the general director of AO PricewaterhouseCoopers
Audit (Principal Registration Number of the Record in the Register of Auditors and Audit Organizations
(PRNR) – 12006020338), certified auditor (PRNR – 21906104343)
Appendix 1 to the Independent Limited Assurance Report dated
28 March 2022
The Selected Information subject to limited assurance procedures and prepared in accordance with the
GRI Disclosures and the NLMK Methodology, as applicable, is set out below:
GRI disclosure* / the Group’s
specific disclosure*
Selected Information as at 31 December 2021 and for the
year then ended
102-8 Information on employees
and other workers
•
Average headcount breakdown by segment, region and
contract type, % and thousands of people;
•
Headcount breakdown by age, gender and categories, %.
102-9 Supply chain
•
Procurement from suppliers of goods and materials by
supplier country and by categories, number of suppliers and
million Russian rubles (“RUB”).
102-41 Collective bargaining
agreements
•
Number of employees covered by collective bargaining
agreements, %.
103-2 The management
approach and its components
•
Spending on environmental protection (incl. investments
projects and current expenditures), million US dollars.
203-1 Infrastructure investments
and services supported
•
Investments in corporate citizenship programmes, billion
RUB and %.
204-1 Proportion of spending on
local suppliers
•
Procurement from local suppliers for the Russian
companies, % and billion RUB.
302-1 Energy consumption within
the organization
•
Energy consumption by the Group, PJ;
•
Consumption from non-renewable fuels by the Group,
including fuel types used, PJ;
•
Consumption, generation, and sale of electricity and thermal
energy by the Group, PJ.
302-3 Energy intensity
•
Energy intensity, Gcal/tonne (“t”).
303-2 Management of water
discharge-related impacts
•
Management of water discharge-related impacts.
303-3 Water withdrawal
•
Freshwater withdrawal, by sources and by regions, million
m3;
•
Urban wastewater converted for treatment, million m3.
303-4 Water discharge
•
Volume of water discharge by receiving water body and by
region, million m3;
•
Volume of water collected and converted to third-party and
volume of loss of withdrawn water during transportation,
million m3;
•
Pollutants discharged into water bodies, thousands of t.
303-5 Water consumption
•
Water consumption, million m3.
304-3 Habitats protected or
restored
•
Land rehabilitated, ha.
GRI disclosure* / the Group’s
specific disclosure*
Selected Information as at 31 December 2021 and for the
year then ended
305-1 Direct (Scope 1) GHG
emissions
•
Direct GHG emissions (Scope 1), thousands of t of CO2-
equivalent.
305-2 Energy indirect (Scope 2)
GHG emissions
•
Indirect energy GHG emissions (Scope 2), market-based
method and location-based method, thousands of t of CO2-
equivalent.
305-3 Other indirect (Scope 3)
GHG emissions
•
Upstream GHG emissions (Scope 3), million of t of CO2-
equivalent.
305-4 GHG emissions intensity
•
Specific direct emissions from stationary sources (Scope 1),
t of CO2-equivalent per t of Fe and steel;
•
Specific indirect energy emissions from stationary sources
(Scope 2, location-based), t of CO2-equivalent per t of Fe
and steel;
•
Specific indirect energy emissions from stationary sources
(Scope 2, market-based), t of CO2-equivalent per t of Fe
and steel;
•
Specific total emissions from stationary sources (Scope 1 +
Scope 2, location-based), t of CO2-equivalent per t of Fe
and steel;
•
Specific total emissions from stationary sources (Scope 1 +
Scope 2, market-based), t of CO2-equivalent per t of Fe and
steel;
•
Specific total emissions from stationary sources (Scope 1 +
Scope 2, location-based), t of CO2-equivalent per t of steel
and commodity pig iron.
305-5 Reduction of GHG
emissions
•
Reduction of CO2 emissions, thousands of t.
305-7 Nitrogen oxides (NOx),
sulphur oxides (SOx), and other
significant air emissions
•
Volume of significant air emissions by the Group by
substance type, thousands of t.
306-3 Waste generated
•
Waste generation by the Group, hazardous and non-
hazardous, million t;
•
Secondary raw materials recovered in-house, million t;
•
Overburden of JSC Stoilensky GOK and beneficiation
tailings, million t.
306-4 Waste diverted from
disposal
•
Secondary raw materials recovered by third parties,
hazardous and non-hazardous, million t;
•
Secondary raw materials recovered in-house, million t;
•
Share of utilized overburden of JSC Stoilensky GOK and
beneficiation tailings of the Group, %.
306-5 Waste directed to disposal •
Waste disposal at third-party landfills, hazardous and non-
hazardous, million t;
•
Overburden and beneficiation tailings generated and utilized
by the Group, million t.
308-2 Negative environmental
impacts in the supply chain and
actions taken
•
Suppliers and contractors of the Group screened using
environmental criteria during audits conducted by the
Group;
GRI disclosure* / the Group’s
specific disclosure*
Selected Information as at 31 December 2021 and for the
year then ended
•
Suppliers and contractors of the Group subject to measures
to improve environmental compliance following audits
conducted by the Group, %.
401-1 New employees hires and
employee turnover
•
Number and rate of new hires by region, by gender and by
age;
•
Rate of employee turnover, %.
403-9 Work-related injuries
•
LTIFR for the Group employees and contractors;
•
TRIFR for the Group employees and contractors;
•
Number of occupational accidents, employees and
contractors;
•
Number of occupational fatalities, employees and
contractors;
•
Number of lost time injuries, employees and contractors;
•
Total man-hours worked for employees and contractors.
404-1 Average hours of training
per year per employee
•
Average hours of training per year per employee in the
Group’s Russian companies.
404-3 Percentage of employees
receiving regular performance
and career development reviews
•
Proportion of the Group employees who received a regular
performance and career development review, by category
and gender, %.
The Group’s specific disclosure
•
Average monthly salary at the Group’s Russian companies,
thousands RUB / employee;
•
Significant air emissions by the Group and by the Company
by substance type, per unit of production, kg/t and g/t;
•
Social support costs for employees of the Group’s Russian
companies, billion RUB.
* Reporting boundaries in terms of the Company and the number of its subsidiaries and a joint venture
and its subsidiaries included for each information disclosure are set up in Appendix “GRI indicator
consolidation boundaries” to the Annual Report, unless stated otherwise in the Annual Report.
Appendix
Annual Report 2021
Appendix
259
258
NLMK’s internal audit service conclusion
on the risk management and internal control
in the company in 2021
Opinion prepared in line with the requirements of Federal Law 208-FZ dd. 26 December 1995 “On Joint-Stock Companies”.
In its activities, the Audit Department is guided by the Bank of Russia Governance Code, the Regulations on the Audit Department,
International Professional Standards of Internal Audit, internal audit guidelines and practices, documents of international
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.
The Audit Department bases its opinion about the reliability and efficiency of the company’s risk management and internal control
system on the result of audits, previous checks, and activities implemented by the management. It assesses the effectiveness
of risk management measures, including response to materialized risks, and whether there are any significant and/or systematic
flaws in the internal control system.
In 2021, the Audit Department conducted checks in line with the risk-oriented approach for the following processes: counterparty
qualifications, tenders and contact approval, repairs, compliance of anti-corruption and antitrust requirements, managing the risk
of free trade restrictions/geopolitical risk, managing the company’s top risks.
As a result of the reliability and efficiency evaluation of the risk management and internal control system, the Audit Department
has sufficient grounds to express the opinion that overall the company’s risk management and internal control is effective in all
significant aspects and in line with the scale of the company’s activities. The assessment did not detect any factors that could
prevent the company from achieving its goals and potentially have a significant adverse impact on the interests of the company’s
shareholders or non-compliance with current legislation.
Elena Sidorova
Director of the Audit Department
Lipetsk, 18 February 2022
Participation in industry associations
and external initiatives
NLMK Group leaders head a number
of industry associations and relevant
commissions and committees, 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 (RUIE)
and member of the Supervisory Board
of the Russian Steel Association.
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.
NLMK Group’s participation in industry associations and external initiatives
GRI 102-12 GRI 102-13
Association/Initiative
NLMK Group’s status
World Steel Association, an international association of iron
and steel product manufacturers
Member
2018 signatory to worldsteel’s Sustainability Charter1.
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
The Russian Union of Industrialists and Entrepreneurs (RUIE)
Member of 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
Russian Steel Association
Member of the Supervisory Board and the Management
Committee
Member in all commissions of the Association, including
the Commission for protection of labour, industrial
and environmental safety
European Steel Association (EUROFER)
Member of the Association and the Management Bureau
Participation in working groups
Council of Electricity Consumers of the Russian Federation
Member of the Council
Council of Non-Resource Exporters - Expert Council
of the Committee on Transport and Construction of the State
Duma of the Russian Federation
Member of the Council
Participation in the Council as an expert
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)
Party to the Partnership
Anti-Corruption Charter of Russian Business
Party to the Charter
Steel Construction Development Association
Member in the Association
1 In early 2022, NLMK Group re-affirmed its commitment to sustainable development by re-signing worldsteel’s Sustainability Charter.
Appendix
Annual Report 2021
Appendix
261
260
NLMK management, having considered the information available regarding the activities of the company, confirms its responsibility for:
Preparation and fair presentation of NLMK Group's IFRS consolidated financial statements as of 31 December 2021
and for the year ended on that date, published in this Annual Report (and disclosed on 3 February 2022 on the Group's official
website in the Investors section), which includes the company's balance sheets, profit and loss statements, cash flow statements,
equity statements and the statements on total shareholder income, and notes to the consolidated financial statements.
Fair presentation of NLMK’s financial status, operational results and cash flow results, as well as those of its subsidiaries
and affiliates in the consolidated financial statements, disclosed in this Annual Report (as well as on the company's official website
in the Investors section).
Completeness and correctness of the information disclosed in the NLMK Group Annual Report for 2021, specifically the information
on the operational results of NLMK Group, the results of its strategic development, risks and events which may have impact
on the operations of the Group in the near future.
The company management confirms that the operational and financial data, disclosed in the financial statements and this Annual
Report, fully reflect the results of NLMK Group’s operations in 2021 and main changes against previous periods as well as give
a comprehensive representation on the development of NLMK and its subsidiaries and affiliates.
Grigory Fedorishin
CEO (Chairman of the Management Board)
Responsibility statement
No.
Regulation
Reference
to the clause
Status of compliance
Comments
1
Information about Joint-stock
company position in the industry
70.3
Compliance ensured
Information is represented
in part About Company,
section Company Profile
2
Information about strategy in joint-
stock company development
70.3
Compliance ensured
Information is represented
in part About Company,
section Strategy 2022
3
Report of the Board on results
of joint-stock company strategy
development
70.3
Compliance ensured
Information is represented
in the About the company
section, Strategy in action
part
4
Information about consumption
of energy resources
70.3
Compliance ensured
Information is represented
in Appendix
5
Information about development
perspectives
70.3
Compliance ensured
Information is represented
in part About Company,
section Strategy 2030
6
Report on dividends declared
70.3
Compliance ensured
Information is represented
the Information
for shareholders section
and Appendices
7
Information about key risk factors
70.3
Compliance ensured
Information is represented
in the Operational control
and risk management section
8
List of transactions which
are recognized as major transactions
in line with the Federal Law On Joint-
stock Companies
70.3
Compliance ensured
Information is represented
the Appendix
9
List of transactions recognized
as interested-party transactions
in line with the Federal Law On Joint-
stock Companies
70.3
Compliance ensured
Information is represented
the Appendix
10
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
70.3
Compliance ensured
Information is represented
in the Board of Directors
section
Report on compliance with the Directive
on information disclosure by security
issuers
Appendix
Annual Report 2021
Appendix
263
262
No.
Regulation
Reference
to the clause
Status of compliance
Comments
19
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;
70.4
Compliance ensured
Information is represented
the Appendix
20
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.
70.4
Compliance ensured
Information is represented
the Appendix
21
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
70.5
Not applicable
-
No.
Regulation
Reference
to the clause
Status of compliance
Comments
11
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
70.3
Compliance ensured
Information is represented
in the Corporate governance
section
12
Joint-stock company policy
in the field of remuneration and (or)
compensation of expenses
70.3
Compliance ensured
Information is represented
in the Report on remuneration
paid to governing bodies
section
13
Report on compliance
with the Corporate
Governance Code principles
and recommendations
70.3
Compliance ensured
Information is represented
the Appendix
14
Information on the approval
of the annual report by the general
meeting of shareholders or the board
of directors of a joint-stock company
70.3
Compliance ensured
Information is represented
the Appendix
15
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;
70.4
Compliance ensured
Information is represented
the Appendix
16
Corporate Governance Code: A brief
description of the most significant
aspects of the corporate governance
model and practice in a joint-stock
company;
70.4
Compliance ensured
Information is represented
the Appendix
17
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;
70.4
Compliance ensured
Information is represented
the Appendix
18
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;
70.4
Compliance ensured
Information is represented
ithe Appendix
No.
Company name
Address
Activity
NLMK share
in charter
capital, %
1
2
3
4
5
Subsidiary companies
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
100
2
Dolomit Joint-Stock Company
Dankov, Lipetsk Region,
Russia
Mining and processing
of dolomite
100
3
Stoilensky Mining and Beneficiation
Plant Joint-Stock Company
Stary Oskol, Belgorod Region,
Russia
Mining and processing of iron
ore and other minerals
100
4
Studenovskaya Joint-Stock Mining
Company
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
100
5
NLMK Engineering Joint-Stock
Company
Lipetsk, Russia
Design and survey operations
100
6
NLMK Ural Joint-Stock Company
Revda, Sverdlovsk Region,
Russia
Production of long steel stock,
hot-rolled and forged flat steel
92.59
NLMK companies and affiliates as of 31.12.2021
Appendix
Annual Report 2021
Appendix
265
264
No.
Company name
Address
Activity
NLMK share
in charter
capital, %
7
VIZ-Steel Limited Liability Company
Yekaterinburg, Sverdlovsk
Region, Russia
Production and marketing
of electrical steel
100
8
Vtorchermet NLMK Limited Liability
Company
Yekaterinburg, Sverdlovsk
Region, Russia
Collection, processing,
and sales of ferrous and non-
ferrous scrap
100
9
Zhernovsky-1 Mining
and Processing Complex Limited
Liability Company
Novokuznetsk, Kemerovo
Region, Russia
Entire range of works related
to coal mining and processing
100
10
NLMK Information Technologies
Limited Liability Company
Lipetsk, Russia
IT, computing, and telecom
services
100
11
NLMK Kaluga Limited Liability
Company
Vorsino, Borovsk District,
Kaluga Region, Russia
Production of steel, re-rolling
stock (billets), hot-rolled
and forged flats, unpainted
and pre-painted cold-rolled
flat steel
100
12
NLMK Metalware Limited Liability
Company
Beryozovsky, Sverdlovsk
Region, Russia
Production of wire, wire
products, fasteners,
and springs
100
13
NLMK Communications Limited
Liability Company
Lipetsk, Russia
Telecom services
100
14
NLMK Long Limited
Liability Company
Yekaterinburg, Sverdlovsk
Region, Russia
Managing company, trading
and procurement activities
100
15
NLMK Overseas Holdings Limited
Liability Company
Lipetsk, Russia
Developing the growth
strategy for NLMK Group
companies, supporting
relations between the Group’s
Russian and international
businesses
100
16
Novolipetskaya Metallobaza
Limited Liability Company
Lipetsk, Russia
Manufacturing of plastic
and steel products
100
17
NLMK Construction and Assembly
Trust Limited Liability Company
Lipetsk, Russia
Contracting of industrial,
housing, utilities, cultural
services, and road
construction works.
Construction of health facilities
and household natural gas
supply lines
100
18
NLMK Trading House, Limited
Liability Company
Moscow, Russia
Sale of NLMK Group products
100
19
Neptune Limited Liability Company
Lipetsk, Russia
Sports and recreation
services
100
NLMK Lipetsk’s energy resource consumption
(fuels and coals) in 2020–2021
Name
UoM
2021
2020
Change, %
Electric energy
m kWh
3,779
2,555
48
RUB m with VAT
4,488
3,713
21
Natural gas
m m3
2,125
2,044
4
RUB m with VAT
12,212
11,377
7
Thermal energy
Gcal
29,580
24,237
22
RUB m with VAT
56
41
37
Diesel fuel
‘000 litres
23,308
22,311
4
RUB m with VAT
1,011
899
12
Petrol
t
289
253
14
RUB m with VAT
18
14
30
Fuel oil
t
1,510
3,101
-51
RUB m with VAT
8
16
-52
Coals
‘000 t
4,831
4,848
-0.4
RUB m with VAT
49,583
36,071
37
List of transactions performed by NLMK
in 2021 recognized as major transactions in line
with the Federal Law “On Joint-Stock Companies”
and of other transactions falling under the ex-
tended procedure for approving major transac-
tions in line with the Company’s Charter.
In 2021, 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”.
Appendix
Annual Report 2021
Appendix
267
266
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 one 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 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 function
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 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 2021, neither the General Meeting
of Shareholders nor the Board
of Directors passed resolutions regarding
interested-party transactions.
No.
Substantive terms of the transaction
Management body that
approved the transaction
Interested party(ies)
The contract for the supply of wagons
concluded between Novolipetsk Steel
(buyer) and Freight One (supplier).
The transaction amount is RUB 4,809.24
m, including VAT. The transaction
term is from the moment of signing
until the parties fulfill their contractual
obligations and conduct mutual
settlements.
The Board of Directors
(Minutes No. 283
dd. 29 September 2021)
Vladimir Lisin, Chairman of the Board
of Directors of Novolipetsk Steel,
is at the same time a member of the Board
of Directors of Freight One, a controlling
person of Novolipetsk Steel and Freight One.
Oleg Bagrin, Deputy Chairman of the Board
of Directors of Novolipetsk Steel, is also
a member of the Board of Directors
of Freight One.
List of transactions performed by NLMK in 2021
recognized as interested-party transactions
in line with the Federal Law “On Joint-Stock
Companies”.
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 on __.__.2022 (MoM No __).
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 2021.
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-06–28/102 dd. 27 December 2021).
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.
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1.1
The company must ensure equal and fair treatment of all shareholders for the realization of their right to participate
in the management of the company.
1.1.1
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.
1. 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.
Compliance ensured
Partial compliance
Non-compliance
1.1.2
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.
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 (if the company’s Charter provides for such
information).
Compliance ensured
Partial compliance
Non-compliance
Due to the current epidemiological situation, in 2021 meetings of the company
shareholders were held in the format of absentee voting (via electronic voting
technology). At the same time, when holding in-person meetings of shareholders,
the notification about such meetings include, among other things, the documents
needed to access the venue of the General Meeting.
1.1.3
In preparation for the General
Meeting of Shareholders and its
convocation, shareholders
were able to receive information
on the meeting and materials
therefore, 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.
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.
Compliance ensured
Partial compliance
Non-compliance
1.1.4
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. 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.
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.
Compliance ensured
Partial compliance
Non-compliance
1.1.5
Every shareholder had
an opportunity for unhindered
exercise of their voting right
in the simplest and the most
convenient manner.
1. The charter of the company provides for the possibility of filling in the electronic
ballot on the website , the address of which is indicated in the communication
on the holding of the general meeting of shareholders.
Compliance ensured
Partial compliance
Non-compliance
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 holding general meetings of shareholders in the reporting period in the
form of a meeting (joint presence of shareholders), sufficient time was provided
for reports on issues on the agenda and time for discussion of these issues,
shareholders were given the opportunity to express their opinions and ask
questions on the agenda that interested them.
2. The company invited candidates to the management and control bodies of the
company and took all necessary measures to ensure their participation in the
general meeting of shareholders, at which their candidacies were put to the vote.
Candidates for the management and control bodies of the company who attended
the general meeting of shareholders were available to answer questions from
shareholders.
3. The sole executive body, the person responsible for keeping accounting records,
the Chairman or other members of the Audit Committee of the Board of Directors
were available to answer questions from shareholders at general meetings
of shareholders held in the reporting period.
4. In the reporting period, the company used telecommunication means to provide
shareholders with remote access to participate in general meetings, or the Board
of Directors made a reasonable decision that there was no need (possibility) to use
such means in the reporting period.
Compliance ensured
Partial compliance
Non-compliance
Due to the current epidemiological situation, in 2021, meetings of the company
shareholders in 2021 were held in the form of absentee voting (via electronic voting
technology). At the same time, when holding in-person meetings of shareholders:
• sufficient time is provided for reports on agenda items and discussion of issues;
• shareholders are given the opportunity to express their opinion and ask their
questions on the agenda;
• candidates for management and control bodies are invited;
• CEO (Chairman of the Management Board), members of the Audit Committee
(including its Chair), as well as candidates for management and control bodies
are available to answer shareholders’ questions.
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1.2
The shareholders are provided an equal and fair opportunity to participate in the company’s profit
by receiving dividends.
1.2.1
The company developed
and implemented a transparent
and clear mechanism
of dividend determination
and payment.
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.
3. The justification for the proposed distribution of net profit, including for the payment
of dividends and the company’s own needs, and an assessment of its
compliance with the Dividend Policy adopted in the company, with explanations
and an economic justification for the need to allocate a certain part of net
profit for the company’s own needs in the reporting period, were included
in the materials to the General Meeting of Shareholders, the agenda of which
covers the issue of distribution of profits (including the payment (declaration)
of dividends).
Compliance ensured
Partial compliance
Non-compliance
1.2.2
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.
1. The Regulation on the company’s Dividend Policy, in addition to the restrictions
established by law, defines financial / economic circumstances under which
the company should not make a decision on the payment of dividends.
Compliance ensured
Partial compliance
Non-compliance
1.2.3
The company does not
allow for deterioration of its
shareholders’ dividend rights.
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
1.2.4
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.
1. During the reporting period, other ways for persons controlling the company
to receive profit (income) at the expense of the company other than dividends
(for example, through transfer pricing, unreasonable provision of services
by the controlling person to the company at inflated prices, through internal loans
replacing dividends to the controlling person and (or) his or her controlled persons)
were not used.
Compliance ensured
Partial compliance
Non-compliance
1.3
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.
1.3.1
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.
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
1.3.2
The company does not take
any actions which result
in or may result in artificial
redistribution of corporate
governance.
1. There are no quasi-treasury shares or they have not participated in voting within
the reporting period.
Compliance ensured
Partial compliance
Non-compliance
1.4
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.
1.4.1
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.
1. 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
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2.1
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.
2.1.1
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.
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. In the reporting period, the Nominations (Appointments, Personnel) Committee
considered the issue of the compliance of the professional qualifications, skills
and experience of members of the executive bodies with the current and expected
needs of the company, dictated by the approved strategy of the company.
3. 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.
Compliance ensured
Partial compliance
Non-compliance
2.1.2
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.
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.
Compliance ensured
Partial compliance
Non-compliance
2.1.3
The Board of Directors defines
the principles and approaches
of the company’s risk
management and internal
control system
1. The principles and approaches to the organization of the risk management and
internal control system in the company are defined by the Board of Directors and
are enshrined in the company’s internal documents defining the policy in the field of
risk management and internal control.
2. In the reporting period, the Board of Directors approved (revised) the acceptable
level of risks (risk appetite) of the company, or the Audit Committee and (or)
the Risk Committee (if any) considered the advisability of submitting the issue
of revising the risk appetite of the company for consideration by the Board
of Directors.
Compliance ensured
Partial compliance
Non-compliance
2.1.4
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. 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 Board of Directors considered issues related
to the specified policy (policies).
Compliance ensured
Partial compliance
Non-compliance
2.1.5
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.
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.
Compliance ensured
Partial compliance
Non-compliance
2.1.6
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.
1. The internal documents of the company define the persons responsible
for the implementation of the Information Policy.
Compliance ensured
Partial compliance
Non-compliance
2.1.7
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.
1. During the reporting period, the Board of Directors considered the results of self-
assessment and (or) external assessment of corporate governance practices
in the company.
Compliance ensured
Partial compliance
Non-compliance
2.2
The Board of Directors is accountable to the company’s shareholders.
2.2.1
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 (self-
evaluation) of the Board of Directors’ activities performed during the reporting
period.
Compliance ensured
Partial compliance
Non-compliance
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2.2.2
The Chairman of the Board
of Directors is available
for communication
with the company's
shareholders.
1. The company has a transparent procedure that provides shareholders
with the opportunity to send complaints to the Сhairman of the Board of Directors
(and, if applicable, to the Senior Independent Director) and receive feedback
on them.
Compliance ensured
Partial compliance
Non-compliance
2.3
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.
2.3.1
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.
1. In the reporting period, 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.
Compliance ensured
Partial compliance
Non-compliance
2.3.2
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. 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.
Compliance ensured
Partial compliance
Non-compliance
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. During the reporting period, the Board of Directors analyzed its own needs
in the field of professional qualifications, experience and skills and identified
the competencies required for the Board of Directors in the short and long term.
Compliance ensured
Partial compliance
Non-compliance
2.3.4
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.
1. In the reporting period, the Board of Directors considered the issue of compliance
of the number of the Board members with the needs of the company
and the interests of shareholders.
Compliance ensured
Partial compliance
Non-compliance
2.4
The Board of Directors has a sufficient number of independent directors.
2.4.1
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.
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
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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.
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.
Compliance ensured
Partial compliance
Non-compliance
2.4.3
At least one third of the elected
members of the Board
are independent directors.
1. At least one third of the elected members of the Board are independent directors.
Compliance ensured
Partial compliance
Non-compliance
2.4.4
Independent directors play
a key role in preventing
internal company conflicts
and in the company’s execution
of material corporate actions.
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
Compliance ensured
Partial compliance
Non-compliance
2.5
The Chairman of the Board of Directors promotes the most efficient implementation of the functions assigned to the Board
of Directors.
2.5.1
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.
Compliance ensured
Partial compliance
Non-compliance
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
2.5.2
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.
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
2.5.3
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 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
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2.6
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.
2.6.1
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.
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.
Compliance ensured
Partial compliance
Non-compliance
2.6.2
The rights and obligations
of the Board members
are clearly worded and stated
in the company’s internal
documents.
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
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 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.
Compliance ensured
Partial compliance
Non-compliance
2.6.4
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.
1. 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.
Compliance ensured
Partial compliance
Non-compliance
2.7
Meetings of the Board of Directors, preparation for them, and attendance by the Board members ensure the efficient
performance of the Board of Directors.
2.7.1
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.
1. The Board of Directors had at least six meetings during the reporting year.
Compliance ensured
Partial compliance
Non-compliance
2.7.2
The company’s internal
documents set the procedure
for preparing and holding
Board meetings, enabling
Board members to be properly
prepared.
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.
2. In the reporting period, members of the Board of Directors who were absent from
the venue of the meeting of the Board of Directors were given the opportunity
to participate in the discussion of agenda items and voting remotely - via tele-
and video conferencing.
Compliance ensured
Partial compliance
Non-compliance
2.7.3
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.
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.
Compliance ensured
Partial compliance
Non-compliance
2.7.4
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 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, not less than ¾ of the votes, or by a simple majority of votes
of all the elected Board members.
Compliance ensured
Partial compliance
Non-compliance
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.
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2.8
The Board of Directors sets up committees for preliminary consideration of the most important issues of the company’s activity.
2.8.1
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.
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.
Compliance ensured
Partial compliance
Non-compliance
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
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 internal documents of the company define the tasks of the Remuneration
Committee, including, but not limited to, the tasks contained in recommendation
180 of the Code, as well as the conditions (events) upon the occurrence of which
the Remuneration Committee considers the issue of reviewing the company’s
Remuneration Policy of members of the Board of Directors, executive bodies
and other key executives.
Compliance ensured
Partial compliance
Non-compliance
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.
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
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2.8.3
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.
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.
3. In order to form a Board of Directors that best meets the goals and objectives
of the company, the Nomination Committee in the reporting period, independently
or jointly with other committees of the Board of Directors, or the company’s
authorized department for interaction with shareholders, organized interaction
with shareholders, not limited to the circle of largest shareholders, in the context
of the selection of candidates to the company’s Board of Directors.
Compliance ensured
Partial compliance
Non-compliance
2.8.4
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).
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.
Compliance ensured
Partial compliance
Non-compliance
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. Audit Committee, Remuneration Committee, Nomination Committee
(or the corresponding committee with combined functions) in the reporting period
were headed by independent directors.
2. The company’s internal documents (policies) provide for provisions according
to which persons who are not members of the Audit Committee, the
Nomination Committee (or the relevant committee with integrated functionality)
and the Remuneration Committee may attend committee meetings only
at the invitation of the Chairman of the relevant committee.
Compliance ensured
Partial compliance
Non-compliance
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
2.9
The Board of Directors ensures that the performance of the Board, its committees and members is evaluated.
2.9.1
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.
1. The internal documents of the company define the procedures for assessing (self-
evaluating) the quality of the work of the Board of Directors.
2. 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.
3. 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’ in-
person meeting.
Compliance ensured
Partial compliance
Non-compliance
2.9.2
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.
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
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3.1
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.
3.1.1
The Corporate Secretary
has sufficient knowledge,
experience, and qualification
to perform his obligations,
as well as an impeccable
reputation and credibility
with shareholders.
1. Biographical information about the Corporate Secretary (including information
about age, education, qualifications, experience), as well as information about
positions in the management bodies of other legal entities held by the Corporate
Secretary for at least five recent years is provided on the company’s official website
and in the Annual Report.
Compliance ensured
Partial compliance
Non-compliance
3.1.2
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 Board of Directors approves the candidate for the position of Corporate
Secretary and terminates their powers, considers the issue of paying them
additional remuneration.
3. The internal documents of the company enshrine the right of the Corporate
Secretary to request, receive documents of the company and information from
management bodies, structural divisions and officials of the company.
Compliance ensured
Partial compliance
Non-compliance
4.1
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 company is paid according to the remuneration policy adopted in the company.
4.1.1
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.
1. The remuneration of members of the Board of Directors, executive bodies
and other key executives of the company is determined taking into account
the results of a benchmarking analysis with peer companies.
Compliance ensured
Partial compliance
Non-compliance
4.1.2
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.
1. During the reporting period, the Remuneration Committee reviewed
the Remuneration policy (policies) and (or) the practice of its (their) implementation,
assessed their effectiveness and transparency, and, if necessary, submitted
appropriate recommendations to the Board of Directors to revise the said policy
(policies).
Compliance ensured
Partial compliance
Non-compliance
4.1.3
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.
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.
Compliance ensured
Partial compliance
Non-compliance
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4.1.4
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.
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.
Compliance ensured
Partial compliance
Non-compliance
4.2
The remuneration system for members of the Board of Directors aligns the financial interests of directors with the long-term
financial interests of shareholders.
4.2.1
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.
1. In the reporting period, the company paid remuneration to members of the Board
of Directors in accordance with the company’s Remuneration policy.
2. In the reporting period, the company did not use with regard to members
of the Board of Directors any form of short-term incentives or additional financial
incentives, the payment of which depends on the company performance
(indicators). No remuneration was paid for participation in particular meetings
of the Board or committees of the Board of Directors.
Compliance ensured
Partial compliance
Non-compliance
4.2.2
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.
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.
Compliance ensured
Partial compliance
Non-compliance
4.2.3
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.
Compliance ensured
Partial compliance
Non-compliance
4.3
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.
4.3.1
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 execute e 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. When determining the amount of remuneration paid to members of the executive
bodies and other key executives of the company, the risks borne by the company
are taken into account in order to avoid creating incentives for making excessively
risky management decisions.
Compliance ensured
Partial compliance
Non-compliance
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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. 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.
Compliance ensured
Partial compliance
Non-compliance
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 introduce a programme of long-term motivation
of members of executive bodies and key executives using company shares (financial
instruments based on company shares). If a long-term incentive programme is
implemented with the use of the company’s shares (financial instruments based on
the company’s shares), it will be provided that the right to sell such shares and other
financial instruments comes no earlier than three years from the date of their sale and is
due to the achievement of certain indicators of the company’s activity.
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.
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.
Compliance ensured
Partial compliance
Non-compliance
5.1
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.
5.1.1
The Board of Directors defines
the principles and approaches
to the company’s risk
management and internal
control system.
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.
Compliance ensured
Partial compliance
Non-compliance
5.1.2
The company's executive
bodies ensure that an efficiently
functioning risk management
and internal control system
is established and maintained
in the company.
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.
Compliance ensured
Partial compliance
Non-compliance
5.1.3
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.
1. The company has adopted an anti-corruption policy.
2. The company has organized a safe, confidential and accessible way (hotline)
to inform the Board of Directors or the Audit Committee of the Board of Directors
about violations of legislation, internal procedures, or the company’s code
of ethics.
Compliance ensured
Partial compliance
Non-compliance
5.1.4
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.
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.
2. In the reporting period, the Board of Directors reviewed the results of reliability
and efficiency assessment of the company’s risk management and internal control
system, and information on the results of the review was included in the company’s
Annual Report.
Compliance ensured
Partial compliance
Non-compliance
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5.2
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.
5.2.1
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.
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
5.2.2
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. During the reporting period, the internal audit evaluated the efficiency of the internal
control and risk management system.
2. In the reporting period, as part of the internal audit, an assessment was made
of the corporate governance practice (certain practices), including communication
procedures (including communication on internal control and risk management)
at all levels of the company’s management, as well as interaction with stakeholders.
Compliance ensured
Partial compliance
Non-compliance
6.1
The company and its activity are transparent for its shareholders, investors, and other stakeholders.
6.1.1
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. During the reporting period, the Board of Directors (or one of its committees)
considered the effectiveness of communication between the company, its
shareholders, investors and other interested parties and the advisability (necessity)
of revising the Information policy of the company.
Compliance ensured
Partial compliance
Non-compliance
6.1.2
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.
Compliance ensured
Partial compliance
Non-compliance
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.
6.2
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.
6.2.1
The company discloses
information guided
by the principles
of regularity, consistency,
efficiency, availability,
reliability, completeness,
and comparability
of the information disclosed.
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.
Compliance ensured
Partial compliance
Non-compliance
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.
1. The Information policy of the company defines approaches to the disclosure
of information about other events (actions) that have a significant impact
on the value or quotations of its securities, the disclosure of information about
which is not provided for by law.
2. The company discloses information on its equity structure in full in its Annual
Report and on the company’s website in line with Recommendation 290
of the Code.
3. The company discloses information on controlled entities that are of significant
importance to it, including key areas of their activities, on the mechanisms
that ensure the accountability of controlled entities, the powers of the Board
of Directors of the company in relation to determining the strategy and evaluating
the performance of controlled entities.
4. The company discloses a non-financial report - a report on sustainable
development, an environmental report, a report on corporate social responsibility
or another report containing non-financial information, including on factors related
to the environment (among them environmental and climate change), society (social
factors) and corporate governance, except for the report of the equity securities
issuer and the Annual Report of the joint-stock company.
Compliance ensured
Partial compliance
Non-compliance
Appendix
Annual Report 2021
Appendix
293
292
No.
Principles of corporate
governance
Criteria of corporate governance principles observance evaluation
Status of compliance with corpo-
rate governance principle
Clarification of deviation from criteria of corporate governance principles ob-
servance evaluation
6.2.3
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.
1. The company’s Annual Report contains information on the results of the Audit
committee’s assessment of the effectiveness of the external and internal audit
process.
2. The company’s Annual Report contains information on environmental and social
aspects of the company’s activities.
Compliance ensured
Partial compliance
Non-compliance
6.3
The company provides information and documents requested by shareholders in line with the principle of equal and easy
access.
6.3.1
Information and documents
requested by shareholders
are disclosed in line
with the principle of equal
and easy access.
1. The Information Policy (internal documents defining the information policy)
of the company defines an easy procedure for providing access to information
and documents of the company at the request of shareholders.
2. The information policy (internal documents defining the information policy)
contains provisions stipulating that if a shareholder receives a request to provide
information about organizations controlled by the company, the company makes
the necessary efforts to obtain such information from the relevant organizations
controlled by the company.
Compliance ensured
Partial compliance
Non-compliance
1. Compliance ensured.
2. Partial compliance.
The company, in accordance with the Information Policy, discloses, among other things,
information about significant controlled legal entities, including information about key
areas of activity and performance indicators, as well as information about significant
events affecting the financial and economic activities of these companies.
During 2022, the company plans to assess the feasibility of updating the current
version of the Information Policy. At the same time, this recommendation of the Code
is observed in practice: at the request of a shareholder, the company provides
all the necessary information, and in case of its absence, the necessary efforts
are made to obtain the missing information from the relevant organizations controlled
by the company.
6.3.2
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. 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.
Compliance ensured
Partial compliance
Non-compliance
7.1
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.
7.1.1
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.
Compliance ensured
Partial compliance
Non-compliance
7.1.2
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.
1. The company has a procedure in place ensuring that the independent directors
declare their opinion on material corporate events before they are approved.
Compliance ensured
Partial compliance
Non-compliance
Appendix
Annual Report 2021
Appendix
295
294
No.
Principles of corporate
governance
Criteria of corporate governance principles observance evaluation
Status of compliance with corpo-
rate governance principle
Clarification of deviation from criteria of corporate governance principles ob-
servance evaluation
7.1.3
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.
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.
Compliance ensured
Partial compliance
Non-compliance
7.2
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.
7.2.1
Information on material
corporate events is disclosed
with an explanation
of the grounds, conditions,
and consequences of such
events.
1. If the company committed significant corporate actions during the reporting
period, the company promptly and in detail disclosed information about such
actions, including the reasons, conditions for the actions and the consequences
of such actions for shareholders.
Compliance ensured
Partial compliance
Non-compliance
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. In the absence of a formal interest of a member of the Board of Directors, the sole
executive body, a member of the collegial executive body of the company or
a person who is the controlling person of the company, or a person entitled
to give the company mandatory instructions, in the transactions of the company,
but in the presence of a conflict of interest or other actual interest, the internal
documents of the company provide that such persons do not take part in voting
on the approval of such a transaction.
Compliance ensured
Partial compliance
Non-compliance
1. Partial compliance.
The company’s internal documents do not provide for a procedure for engaging
an independent appraiser to determine the value of property alienated or acquired
under a major or interested-party transaction. The company engages an independent
appraiser in cases provided for in the legislation of the Russian Federation, which,
in the company’s opinion, completely eliminates associated risks.
The company does not plan to revise the procedure for engaging an independent
appraiser in the near future and intends to continue acting within the framework
of the current legislation. At the same time, the company monitors this system and,
in case of prerequisites for the emergence of risks, will take necessary measures
to correct the system.
2. Compliance ensured.
3. Compliance ensured.
Appendix
Annual Report 2021
Appendix
297
296
Year
Period
Dividend per share, RUB
Declaration date
Amount, RUB
Dividends/free
cash flow, %1
Date of payment
Paid out2 as of 31.12.2021
RUB
% from declared
2021
9M
13.33
26.11.2021
79,889,719,109.20
96
from 08.12.2021 to 19.01.2022
(inclusive)
79,869,125,636.593
99.97
2021
6M
13.62
27.08.2021
81,627,755,008.80
128
from 08.09.2021 to 12.10.2021
(inclusive)
81,526,123,885.30
99.88
2021
3M
7.71
11.06.2021
46,207,782,020.40
133
from 24.06.2021 to 28.07.2021
(inclusive)
46,151,949,151.92
99.88
2020
year
21.64 (taking into account
paid interim dividends,
the outstanding dividend
amount to be paid is RUB 7.25
per share)
29.04.2021
129,693,437,473.60 (taking into account paid
interim dividends, the outstanding dividend
amount to be paid is RUB 43,450,897,490.00)
159
from 12.05.2021 to 16.06.2021
(inclusive)
129,537,206,162.01
99.88
2020
9M
6.43
18.12.2020
38,536,451,153.20
207
from 30.12.2020 to 10.02.2021
(inclusive)
38,490,037,326.05
99.88
2020
6M
4.75
25.09.2020
28,467,829,390
121
from 13.10.2020 to 17.11.2020
(inclusive)
28,433,396,553.64
99.88
2020
3M
3.21
30.06.2020
19,238,259,440.40
83
from 14.07.2020 to 17.08.2020
(inclusive)
19,215,508,661.40
99.88
2019
year
17.36 (taking into account
paid interim dividends,
the outstanding dividend
amount to be paid is RUB 3.12
per share)
29.05.2020
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)
104
from 10.06.2020 to 15.07.2020
(inclusive)
103,930,812,372.99
99.89
2019
9M
3.22
20.12.2019
19,298,191,712.80
124
from 10.01.2020 to 13.02.2020
(inclusive)
19,278,336,612.39
99.90
2019
6M
3.68
27.09.2019
22,055,076,243.20
133
from 11.10.2019 to 15.11.2019
(inclusive).
22,032,160,596.42
99.90
2019
3M
7.34
07.06.2019
43,990,287,941.60
99
from 20.06.2019 to 24.07.2019
(inclusive)
43,942,798,941.29
99.89
2018
year
22.81 (taking into account
paid interim dividends,
the outstanding dividend
amount to be paid
is RUB 5.80 per share)
19.04.2019
136,705,513,344.40 (taking into account paid
interim dividends, the outstanding dividend
amount to be paid is RUB 34,760,717.992)
104
from 07.05.2019 to 13.06.2019
(inclusive)
136,561,427,815.00
99.89
2018
9M
6.04
21.12.2018
36,199,092,529.60
84
from 10.01.2019 to 13.02.2019
(inclusive)
36,161,117,065.45
99.90
2018
6M
5.24
28.09.2018
31,404,510,737.60
166
from 13.10.2018 to 19.11.2018
(inclusive).
31,371,264,920.92
99.89
2018
3M
5.73
08.06.2018
34,341,192,085.20
93
from 21.06.2018 to 25.07.2018
(inclusive)
34,305,019,118.04
99.89
Report on the payment of declared (accrued)
dividends
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.
3 As at 31 December 2020 dividends payment deadline did not expire. The data is related to the expiry date of the dividend payout period the 9 months
of 2020 – deadline expiring – 10 February 2021.
FINANCIAL STATEMENTS
Part 1 – CONSOLIDATED IFRS
FINANCIAL STATEMENTS for 2021
Part 2 – 2021 NLMK's RAS
FINANCIAL STATEMENTS for 2021
GRI 102-56
NOVOLIPETSK STEEL
CONSOLIDATED FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL
REPORTING STANDARDS
AS AT AND FOR THE YEAR ENDED
31 DECEMBER 2021
(WITH INDEPENDENT AUDITOR’S REPORT THEREON)
Novolipetsk Steel
Consolidated financial statements as at and for the year ended 31 December 2021
2
CONTENTS
Independent auditor’s report
3
Consolidated statement of financial position
9
Consolidated statement of profit or loss
10
Consolidated statement of comprehensive income
11
Consolidated statement of changes in equity
12
Consolidated statement of cash flows
13
Notes to the consolidated financial statements
14
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
Independent Auditor’s Report
To the Shareholders and Board of Directors of Novolipetsk Steel:
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 2021, 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 2021;
•
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.
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 property, plant
and equipment, intangible assets and
goodwill
Refer to Notes 8 and 9 to the
consolidated financial statements
The Group management performed an
analysis of existence of impairment
indications of the Group’s property,
plant and equipment (PP&E), intangible
assets, goodwill, as well as indicators of
potential reversal of the impairment loss
recognised in prior periods. This
analysis revealed 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. CGU where
management identified indicators that
an impairment loss recognised in prior
periods may no longer exist or may
have decreased was tested for
impairment reversal.
The recoverable amount of PP&E,
intangible assets and goodwill for each
CGU subject to testing were calculated
by management as at 31 December
2021.
As a result of this testing performed, no
additional impairment has been
recognized as at 31 December 2021
and no impairment loss recognised in
prior periods was reversed.
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.
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;
•
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.
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.
Other matter – Materiality and Group audit scope
Overview
Materiality
•
Overall Group materiality: 127 million US Dollars (USD),
which represents 1% of the Group’s consolidated average
revenue for 2020-2021
Group scoping
•
We conducted audit work at 5 reporting units in four countries.
•
Our audit scope addressed 76% of the Group’s revenues and
73% of the Group’s consolidated total assets
Materiality
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.
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 127 million (2020: USD 92 million)
How we determined it
1% of the Group’s consolidated average revenue for 2020-2021
Rationale for the materiality
benchmark applied
We chose the Group’s consolidated average revenue for 2020-
2021 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.
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 the 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 2021 and the Issuer’s Report for the 12 months 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 2021 and the Issuer’s Report for the 12 months 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 judgment 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.
2 February 2022
Moscow, Russian Federation
Signed on the original - A. B. Fomin
A. B. Fomin is authorised to sign on behalf of the general director of AO PricewaterhouseCoopers
Audit (Principal Registration Number of the Record in the Register of Auditors and Audit Organizations
(PRNR) – 12006020338), certified auditor (PRNR – 21906104343)
Novolipetsk Steel
Consolidated statement of financial position
(millions of US dollars)
The accompanying notes constitute an integral part of these consolidated financial statements.
9
Note
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Assets
Current assets
Cash and cash equivalents
3
541
842
713
Short-term financial investments
5
259
191
287
Trade and other accounts receivable
6
1,916
1,148
1,047
Inventories
7
2,649
1,373
1,634
Other current assets
14
16
14
5,379
3,570
3,695
Non-current assets
Long-term financial investments
5
1
7
5
Investments in joint ventures
4
64
131
223
Property, plant and equipment
8
6,184
5,659
6,039
Goodwill
9
211
212
248
Other intangible assets
9
136
159
162
Deferred income tax assets
17
178
119
101
Other non-current assets
8
5
11
6,782
6,292
6,789
Total assets
12,161
9,862
10,484
Liabilities and equity
Current liabilities
Trade and other accounts payable
10
1,708
1,065
1,124
Dividends payable
10
109
318
Short-term borrowings
11
1,504
1,054
468
Current income tax liability
88
51
32
Other short-term liabilities
2
3
-
3,312
2,282
1,942
Non-current liabilities
Long-term borrowings
11
1,962
2,432
2,188
Deferred income tax liability
17
413
359
405
Other long-term liabilities
32
48
2
2,407
2,839
2,595
Total liabilities
5,719
5,121
4,537
Equity attributable to Novolipetsk Steel shareholders
Common stock
12(a)
221
221
221
Additional paid-in capital
8
8
9
Accumulated other comprehensive loss
(7,098)
(7,140)
(6,140)
Retained earnings
13,283
11,641
11,840
6,414
4,730
5,930
Non-controlling interests
28
11
17
Total equity
6,442
4,741
5,947
Total liabilities and equity
12,161
9,862
10,484
The consolidated financial statements as set out on pages 9 to 67 were approved by the Group’s management and
authorised for issue on 2 February 2022.
Novolipetsk Steel
Consolidated statement of profit or loss
(millions of US dollars, unless otherwise stated)
The accompanying notes constitute an integral part of these consolidated financial statements.
10
Note
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Revenue
14
16,196
9,245
10,554
Cost of sales
(7,794)
(5,920)
(7,303)
Gross profit
8,402
3,325
3,251
General and administrative expenses
(443)
(346)
(352)
Selling expenses
(884)
(845)
(843)
Net impairment losses on financial assets
-
(8)
(1)
Other operating (expenses)/income, net
(16)
9
13
Taxes, other than income tax, and contributions
16
(391)
(64)
(66)
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
6,668
2,071
2,002
Loss on disposals of property, plant and equipment
(13)
(8)
(4)
Impairment of non-current assets
8, 9
(39)
(5)
(30)
Share of results of joint ventures and impairment of
investments in joint ventures
4
(82)
(236)
(88)
Finance income
18
9
18
18
Finance costs
18
(115)
(90)
(68)
Foreign currency exchange loss, net
19, 21
(53)
(40)
(6)
Hedging result
21
(5)
(24)
-
Income/(expenses) on operations with financial instruments
7
(39)
-
Other expenses, net
(43)
(67)
(30)
Profit before income tax
6,334
1,580
1,794
Income tax expense
17
(1,280)
(343)
(453)
Profit for the year
5,054
1,237
1,341
Profit is attributable to:
Novolipetsk Steel shareholders
5,036
1,236
1,339
Non-controlling interests
18
1
2
Earnings per share:
Earnings per share attributable to
Novolipetsk Steel shareholders (US dollars)
13
0.8403
0.2062
0.2234
Weighted-average number of shares outstanding:
basic and diluted (in thousands)
12(a)
5,993,227
5,993,227
5,993,227
Novolipetsk Steel
Consolidated statement of comprehensive income
(millions of US dollars)
The accompanying notes constitute an integral part of these consolidated financial statements.
11
Note
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Profit for the year
5,054
1,237
1,341
Other comprehensive income/(loss):
Items that may be reclassified subsequently to profit or loss:
Hedge reserve of cash flows
21
83
(205)
-
Income tax related to hedge reserve of cash flows
21
(15)
41
-
Cumulative translation adjustment
2(b)
(26)
(839)
644
Total comprehensive income/(loss) for the year
5,096
234
1,985
attributable to:
Novolipetsk Steel shareholders
5,078
236
1,981
Non-controlling interests
18
(2)
4
Novolipetsk Steel
Consolidated statement of changes in equity
(millions of US dollars)
The accompanying notes constitute an integral part of these consolidated financial statements.
12
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 2019
221
10
(6,782)
12,370
15
5,834
Profit for the year
-
-
-
1,339
2
1,341
Cumulative translation
adjustment
2(b)
-
-
642
-
2
644
Total comprehensive income
-
-
642
1,339
4
1,985
Disposal of assets to an entity
under common control
-
(1)
-
-
-
(1)
Acquisition of non-controlling
interest
-
-
-
-
(2)
(2)
Dividends to shareholders
12(b)
-
-
-
(1,869)
-
(1,869)
Balance at 31 December 2019
221
9
(6,140)
11,840
17
5,947
Profit for the year
-
-
-
1,236
1
1,237
Hedge reserve of cash flows
net of related income tax
21
-
-
(164)
-
-
(164)
Cumulative translation
adjustment
2(b)
-
-
(836)
-
(3)
(839)
Total comprehensive
(loss)/income
-
-
(1,000)
1,236
(2)
234
Disposal of assets to an entity
under common control
-
(1)
-
-
-
(1)
Dividends to shareholders
12(b)
-
-
-
(1,435)
(4)
(1,439)
Balance at 31 December 2020
221
8
(7,140)
11,641
11
4,741
Profit for the year
-
-
-
5,036
18
5,054
Hedge reserve of cash flows
net of related income tax
21
-
-
68
-
-
68
Cumulative translation
adjustment
2(b)
-
-
(26)
-
-
(26)
Total comprehensive income
-
-
42
5,036
18
5,096
Dividends to shareholders
12(b)
-
-
-
(3,394)
(1)
(3,395)
Balance at 31 December 2021
221
8
(7,098)
13,283
28
6,442
Novolipetsk Steel
Consolidated statement of cash flows
(millions of US dollars)
The accompanying notes constitute an integral part of these consolidated financial statements.
13
Note
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Cash flows from operating activities
Profit for the year
5,054
1,237
1,341
Adjustments to reconcile profit for the year to net cash
provided by operating activities:
Depreciation and amortisation
595
574
562
Loss on disposals of property, plant and equipment
13
8
4
Finance income
18
(9)
(18)
(18)
Finance costs
18
115
90
68
Share of results of joint ventures and impairment of
investments in joint ventures
4
82
236
88
Income tax expense
17
1,280
343
453
Impairment of non-current assets
8, 9
39
5
30
Foreign currency exchange loss, net
19,21
53
40
6
Hedging result
21
5
24
-
(Income)/expenses on operations with financial
instruments
(7)
39
-
Gain on disposal of subsidiary
(3)
-
-
Change in impairment allowance for inventories and
credit loss allowance of accounts receivable
(4)
4
5
Changes in operating assets and liabilities
(Increase)/decrease in trade and other accounts
receivable
(819)
(177)
314
(Increase)/decrease in inventories
(1,285)
117
284
Increase in other operating assets
(2)
(2)
(1)
Increase /(decrease) in trade and other accounts payable
677
46
(132)
Сash provided by operations
5,784
2,566
3,004
Income tax paid
(1,268)
(285)
(381)
Net cash provided by operating activities
4,516
2,281
2,623
Cash flows from investing activities
Purchases and construction of property, plant and
equipment and intangible assets
(1,217)
(1,124)
(1,080)
Proceeds from sale of property, plant and equipment
4
15
1
Purchases of investments and loans given
(370)
(51)
(164)
Proceeds from repayment of loans given
147
142
115
Placement of bank deposits
(298)
(836)
(933)
Withdrawal of bank deposits
446
847
777
Interest received
6
10
29
Contribution to share capital of joint venture
4
(18)
(131)
(155)
Acquisition of subsidiary, net of cash and cash
equivalents acquired
-
(4)
-
Acquisition of non-controlling interest
-
-
(1)
Proceeds from disposal of subsidiary, net of cash
disposed
6
-
-
Net cash used in investing activities
(1,294)
(1,132)
(1,411)
Cash flows from financing activities
Proceeds from borrowings
2,462
2,002
1,015
Repayment of borrowings
(2,337)
(1,284)
(500)
Payments on leases
(22)
(20)
(14)
Interest paid
(55)
(64)
(49)
Payments from settlement of derivative financial
instruments
-
(16)
-
Commissions paid
(43)
-
-
Dividends paid to Novolipetsk Steel shareholders
(3,523)
(1,637)
(2,120)
Dividends paid to non-controlling interests
-
(1)
-
Net cash used in financing activities
(3,518)
(1,020)
(1,668)
Net (decrease)/ increase in cash and cash equivalents
(296)
129
(456)
Effect of exchange rate changes on cash and cash equivalents
(5)
-
(10)
Cash and cash equivalents at the beginning of the year
3
842
713
1,179
Cash and cash equivalents at the end of the year
3
541
842
713
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
14
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 20).
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 2021, the Parent Company’s major shareholder with 79.25% (79.25% as at 31 December 2020
and 81.40% as at 31 December 2019) 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 20) are:
Activity
Country of
incorporation
Share at
31 December
2021
Share at
31 December
2020
Share at
31 December
2019
Russian flat products
LLC VIZ-Steel
Production of steel
Russia
100.00%
100.00%
100.00%
JSC Altai-Koks
Production of blast
furnace coke
Russia
100.00%
100.00%
100.00%
NLMK Trading S.A.
Trading
Switzerland
100.00%
100.00%
100.00%
NLMK DanSteel and Plates
Distribution Network
NLMK DanSteel A/S
Production of steel
Denmark
100.00%
100.00%
100.00%
NLMK USA
NLMK Indiana LLC
Production of steel
USA
100.00%
100.00%
100.00%
NLMK Pennsylvania LLC
Production of steel
USA
100.00%
100.00%
100.00%
Russian long products
JSC NLMK-Ural
Production of steel
and long products
Russia
92.59%
92.59%
92.59%
LLC NLMK-Metalware
Production of
metalware
Russia
100.00%
100.00%
100.00%
LLC NLMK-Kaluga
Production of long
products
Russia
100.00%
100.00%
100.00%
LLC Vtorchermet NLMK
Processing of metal
Russia
100.00%
100.00%
100.00%
Mining
JSC Stoilensky GOK
Mining, processing and
pelletising of iron-ore
Russia
100.00%
100.00%
100.00%
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
15
1
Background (continued)
Among joint ventures the major is:
Activity
Country of
incorporation
Share at
31 December
2021
Share at
31 December
2020
Share at
31 December
2019
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 24. 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 26. 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
16
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.
2021
2020
2019
Russian ruble to US dollar
For the year ended 31 December
73.6541
72.1464
64.7362
As at 31 December
74.2926
73.8757
61.9057
Russian ruble to Euro
For the year ended 31 December
87.1877
82.4488
72.5021
As at 31 December
84.0695
90.6824
69.3406
3
Cash and cash equivalents
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Cash
404
441
388
Deposits
109
384
296
Other cash equivalents
28
17
29
541
842
713
4
Investments in joint ventures
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
NLMK Belgium Holdings S.A. (“NBH”)
54
121
213
TBEA & NLMK (Shenyang) Metal Product Co., Ltd.
10
10
10
64
131
223
The table below summarises the movements in the carrying amount of the Group’s investments in joint ventures.
2021
2020
2019
As at 1 January
131
223
159
Share of net loss
(21)
(81)
(101)
Contribution into share capital
18
131
155
Impairment of investments
-
(120)
(31)
Share of change in unrealised profit in inventory
(61)
(35)
44
Share of change in other comprehensive loss
1
(1)
(1)
Translation adjustment
(4)
14
(2)
As at 31 December
64
131
223
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
17
4
Investments in joint ventures (continued)
Summarised consolidated financial information for NBH before impairment losses is as follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Current assets
1,067
693
767
Non-current assets
731
673
551
Total assets
1,798
1,366
1,318
Current liabilities
(1,037)
(635)
(654)
Non-current liabilities
(587)
(539)
(507)
Total liabilities
(1,624)
(1,174)
(1,161)
Equity
174
192
157
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Revenue
1,782
1,374
1,562
Net loss
(42)
(167)
(207)
NBH cash and cash equivalents as at 31 December 2021, 2020 and 2019 amounted to $2, $32 and $25, respectively.
NBH financial liabilities excluding trade and other accounts payable as at 31 December 2021, 2020 and 2019
amounted to $834, $510 and $649, 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.
2021
2020
2019
Net assets as at 1 January
49
23
33
Net loss for the year
(41)
(161)
(202)
Contribution into share capital
36
185
195
Other comprehensive income/(loss)
3
(1)
(2)
Translation adjustment
(4)
3
(1)
Net assets as at 31 December
43
49
23
PP&E valuation difference
131
143
134
Adjusted net assets as at 31 December
174
192
157
As at 31 December:
Share in net assets
85
94
77
Excess of fair value of investment in NBH as at
the deconsolidation date
100
100
100
Accumulated share of the other investor in contributions into
share capital
416
416
376
Accumulated impairment of investments
(469)
(469)
(349)
Share of unrealised profit in inventory
(122)
(61)
(26)
Cumulative translation adjustment
44
41
35
Investments in NBH
54
121
213
The other investor in NBH is SOGEPA, a Belgian state-owned company, controlling the stake of 49.0% as of
31 December 2021, 2020 and 2019.
Information about the Group’s operations with NBH and investment impairment testing is disclosed in Notes 22
and 8, respectively.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
18
5
Financial investments
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Short-term financial investments
Bank deposits (Note 21(c))
1
149
157
Loans to related parties (Note 22(c))
258
41
128
Other short-term financial investments
-
1
2
259
191
287
Long-term financial investments
Loans to related parties (Note 22(c))
1
6
5
Bank deposits (Note 21(c))
-
1
-
1
7
5
260
198
292
The carrying amounts of financial investments approximate their fair values.
The estimated fair value of fixed interest rate instruments is based on estimated future cash flows expected to be
received discounted at current interest rates for similar instruments with similar to NBH credit risk and remaining
maturity.
The fair values of loans were included in level 3 of the fair value hierarchy.
6
Trade and other accounts receivable
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Financial assets
Trade accounts receivable
1,473
834
818
Credit loss allowance of trade accounts receivable
(13)
(14)
(18)
Other accounts receivable
41
147
33
Credit loss allowance of other accounts receivable
(19)
(22)
(23)
1,482
945
810
Non-financial assets
Advances given to suppliers
112
79
70
Allowance for impairment of advances given to suppliers
(11)
(9)
(3)
VAT and other taxes receivable
192
132
168
Prepaid export custom duties
139
-
-
Accounts receivable from employees
2
1
2
434
203
237
1,916
1,148
1,047
The carrying amounts of trade and other accounts receivable approximate their fair values.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
19
6
Trade and other accounts receivable (continued)
As at 31 December 2021, 2020 and 2019, accounts receivable with a carrying value of $112, $119 and $133,
respectively, served as collateral for certain borrowings and committed unutilised credit facilities (Note 11).
Movements in the credit loss allowance of financial receivables are as follows:
2021
2020
2019
As at 1 January
(36)
(41)
(38)
Credit loss allowance recognised
(4)
(5)
(7)
Accounts receivable written-off
3
3
2
Credit loss allowance reversed
4
3
5
Translation adjustment
1
4
(3)
As at 31 December
(32)
(36)
(41)
7
Inventories
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Raw materials
1,320
771
927
Work in process
791
298
383
Finished goods
579
350
384
2,690
1,419
1,694
Impairment allowance
(41)
(46)
(60)
2,649
1,373
1,634
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:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Raw materials
152
82
219
Work in process
479
108
141
Finished goods
99
42
42
As at 31 December 2021, 2020 and 2019 inventories with a carrying value of $251, $287 and $460, respectively,
served as collateral for certain borrowings and committed unutilised credit facilities (Note 11).
Cost of raw materials and acquired semi-finished goods in cost of production for the years ended
31 December 2021, 2020 and 2019 amounted to $6,042, $3,939 and $4,835, respectively. Cost of fuel and energy
resources in cost of production for the years ended 31 December 2021, 2020 and 2019 amounted to $628, $540
and $607, respectively.
In November 2020 the Group has signed settlement agreement with the United States Government and received
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
20
8
Property, plant and equipment
Land
Buildings
Land and buildings
improvements
Machinery and
equipment
Vehicles
Construction in
progress
Total
Cost at 31 December 2018
110
1,774
1,956
5,701
266
1,050
10,857
Accumulated depreciation and impairment
-
(700)
(1,257)
(3,933)
(165)
(4)
(6,059)
Net book value at 31 December 2018
110
1,074
699
1,768
101
1,046
4,798
Adjustment on adoption of IFRS 16
22
42
2
13
-
-
79
Net book value at 1 January 2019
132
1,116
701
1,781
101
1,046
4,877
Additions
-
6
-
3
-
1,158
1,167
Disposals
(3)
-
(2)
(4)
(1)
-
(10)
Impairment
-
-
-
(4)
-
(4)
(8)
Transfers
1
53
88
657
75
(874)
-
Depreciation charge
-
(56)
(73)
(391)
(25)
-
(545)
Translation adjustment
13
128
85
179
16
137
558
Cost at 31 December 2019
143
2,081
2,263
6,880
370
1,472
13,209
Accumulated depreciation and impairment
-
(834)
(1,464)
(4,659)
(204)
(9)
(7,170)
Net book value at 31 December 2019
143
1,247
799
2,221
166
1,463
6,039
Including:
Right-of-use assets
Cost at 31 December 2019
19
53
1
16
1
-
90
Accumulated depreciation
-
(8)
-
(3)
-
-
(11)
Net book value at 31 December 2019
19
45
1
13
1
-
79
Additions
5
1
-
1
-
1,087
1,094
Disposals
-
(1)
-
(14)
(1)
(3)
(19)
Impairment
-
-
-
-
-
(5)
(5)
Transfers
-
62
302
642
48
(1,054)
-
Depreciation charge
-
(57)
(84)
(388)
(28)
-
(557)
Translation adjustment
(20)
(189)
(138)
(302)
(29)
(215)
(893)
Cost at 31 December 2020
128
1,826
2,168
6,487
351
1,285
12,245
Accumulated depreciation and impairment
-
(763)
(1,289)
(4,327)
(195)
(12)
(6,586)
Net book value at 31 December 2020
128
1,063
879
2,160
156
1,273
5,659
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
21
8
Property, plant and equipment (continued)
Land
Buildings
Land and buildings
improvements
Machinery and
equipment
Vehicles
Construction in
progress
Total
Including:
Right-of-use assets
Cost at 31 December 2020
19
47
1
18
1
-
86
Accumulated depreciation
-
(13)
-
(7)
-
-
(20)
Net book value at 31 December 2020
19
34
1
11
1
-
66
Additions
-
2
-
3
-
1,175
1,180
Disposals
(1)
(5)
(1)
(8)
(1)
(4)
(20)
Impairment
-
-
-
-
-
(9)
(9)
Transfers
8
200
378
279
112
(977)
-
Depreciation charge
-
(58)
(101)
(380)
(32)
-
(571)
Translation adjustment
(1)
(9)
(8)
(26)
(2)
(9)
(55)
Total property, plant and equipment
Cost at 31 December 2021
134
2,005
2,501
6,613
453
1,468
13,174
Accumulated depreciation and impairment
-
(812)
(1,354)
(4,585)
(220)
(19)
(6,990)
Net book value at 31 December 2021
134
1,193
1,147
2,028
233
1,449
6,184
Including:
Right-of-use assets
Cost at 31 December 2021
19
48
1
20
1
-
89
Accumulated depreciation
-
(20)
(1)
(11)
-
-
(32)
Net book value at 31 December 2021
19
28
-
9
1
-
57
The amount of borrowing costs capitalised is $28, $32 and $59 for the years ended 31 December 2021, 2020 and 2019, respectively. The capitalisation rate was 2.7%, 3.2% and 5.5% in
2021, 2020 and 2019, respectively.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
22
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 2021. High volatility on the
market of certain finished products and raw materials triggered impairment assessment (or reversal thereof) of
some of the Group’s cash generating units (further – “CGUs”), which required the reassessment of the recoverable
amounts using the income approach based primarily on Level 3 inputs as at 31 December 2021. Goodwill was also
tested for impairment as of the same date. Testing for impairment in the comparative periods was also caused by
similar factors and was conducted as of 31 December 2020 and 2019.
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 2021, 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 2020: 5-year; 31 December
2019: 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 2021 impairment testing showed neither impairment, nor reversal of
previously recognised impairment loss.
CGU
Asset type
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sensitivity,
% of change
Sales
Price
Sales
volume
Discount
rate
NLMK Belgium Holdings S.A. Investment
7.9%
Flat products
and plate
684
-0.3%
-1.6%
0.4 p.p.
LLC VIZ-Steel
Property, plant
and equipment
14.7%
Flat products
1,725
-15.0%
-27.0% 15.8 p.p.
LLC VIZ-Steel
Goodwill
14.7%
Flat products
1,725
-11.8%
-21.4%
9.2 p.p.
NLMK DanSteel A/S
Property, plant
and equipment
8.3%
Plate
705
-1.7%
-7.3%
2.5 p.p.
* Weighted average prices based on the forecast product mix, averaged for the period from 2022 to 2026.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
23
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 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
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sensitivity,
% of change
Sales
Price
Sales
volume
Discount
rate
NLMK Belgium Holdings S.A. Investment
7.7%
Flat products
and plate
650
-0.4%
-2.7%
0.5 p.p.
NLMK Pennsylvania LLC
Property, plant
and equipment
9.8%
Flat products
768
-1.4%
-5.6%
0.8 p.p.
NLMK Indiana LLC
Property, plant
and equipment
9.7%
Plate
641
-0.7%
-6.4%
1.5 p.p.
NLMK Indiana LLC
Goodwill
9.7%
Plate
641
-0.4%
-3.3%
0.7 p.p.
JSC Altai-Koks
Goodwill
14.1%
Coke, chemical
products
179
-57.0%
-47.9% 70.1 p.p.
LLC VIZ-Steel
Property, plant
and equipment
13.9%
Flat products
1,455
-40.0%
-9.2% 14.8 p.p.
LLC VIZ-Steel
Goodwill
13.9%
Flat products
1,455
-38.5%
-8.8% 13.4 p.p.
JSC NLMK-Ural
Property, plant
and equipment
13.6%
Long-products
and semi-
finished goods
453
-0.2%
-1.0%
0.3 p.p.
LLC NLMK-Metalware
Property, plant
and equipment
13.4%
Metalware
615
-6.5%
-32.9% 39.6 p.p.
NLMK DanSteel A/S
Property, plant
and equipment
8.1%
Plate
687
-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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
24
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
Discount
rate, %
Product types
Average sale
price*, $ per
tonne (FCA)
Sensitivity,
% of change
Sales
Price
Sales
volume
Discount
rate
NLMK Belgium Holdings S.A. Investment
7.5%
Flat products
and plate
622
0.3%
2.3%
-0.3 p.p.
NLMK Pennsylvania LLC
Property, plant
and equipment
9.8%
Flat products
737
-4.0%
-31.4%
6.4 p.p.
NLMK Indiana LLC
Property, plant
and equipment
9.7%
Plate
582
-0.5%
-6.1%
1.3 p.p.
NLMK Indiana LLC
Goodwill
9.7%
Plate
582
-0.4%
-4.4%
0.9 p.p.
JSC Altai-Koks
Property, plant
and equipment
12.9%
Coke, chemical
products
147
-47.2%
-34.0% 36.6 p.p.
JSC Altai-Koks
Goodwill
12.9%
Coke, chemical
products
147
-38.6%
-27.8% 32.6 p.p.
LLC VIZ-Steel
Property, plant
and equipment
13.8%
Flat products
1,286
-4.2%
-22.3%
5.8 p.p.
LLC VIZ-Steel
Goodwill
13.8%
Flat products
1,286
-3.5%
-18.7%
4.4 p.p.
LLC NLMK-Kaluga
Property, plant
and equipment
13.6%
Long-products
and semi-
finished goods
421
-0.6%
-3.0%
0.5 p.p.
NLMK DanSteel A/S
Property, plant
and equipment
8.1%
Plate
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
25
9
Intangible assets
Goodwill
Mineral rights
Industrial
intellectual
property
Beneficial lease
interest
Total
Cost at 31 December 2018
238
296
57
9
600
Accumulated amortisation and
impairment
(14)
(179)
(17)
(1)
(211)
Net book value at
31 December 2018
224
117
40
8
389
Adjustment on adoption of
IFRS 16
-
-
-
(8)
(8)
Net book value at
1 January 2019
224
117
40
-
381
Additions
-
1
24
-
25
Impairment
-
(22)
-
-
(22)
Amortisation charge
-
(3)
(14)
-
(17)
Translation adjustment
24
14
5
-
43
Cost at 31 December 2019
262
311
86
-
659
Accumulated amortisation
(14)
(204)
(31)
-
(249)
Net book value at
31 December 2019
248
107
55
-
410
Additions
-
1
44
-
45
Disposals
-
-
(3)
-
(3)
Amortisation charge
-
(3)
(14)
-
(17)
Translation adjustment
(36)
(16)
(12)
-
(64)
Cost at 31 December 2020
226
263
100
-
589
Accumulated amortisation
(14)
(174)
(30)
-
(218)
Net book value at
31 December 2020
212
89
70
-
371
Including:
Right-of-use assets
Cost at 31 December 2020
-
-
17
-
17
Accumulated amortisation
-
-
(2)
-
(2)
Net book value at
31 December 2020
-
-
15
-
15
Additions
-
1
31
-
32
Impairment
-
(30)
-
-
(30)
Amortisation charge
-
(3)
(21)
-
(24)
Translation adjustment
(1)
(1)
-
-
(2)
Cost at 31 December 2021
225
262
126
-
613
Accumulated amortisation and
impairment
(14)
(206)
(46)
-
(266)
Net book value at
31 December 2021
211
56
80
-
347
Including:
Right-of-use assets
Cost at 31 December 2021
-
-
18
-
18
Accumulated amortisation
-
-
(6)
-
(6)
Net book value at
31 December 2021
-
-
12
-
12
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
26
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 $56, $59 and $73 as at 31 December 2021, 2020 and
2019, 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.
Due to the high uncertainty regarding the development of coal licenses at the Zhernovsky coal deposit, an
impairment charge of $30 was recognized for the exploration asset.
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:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Russian flat products
137
137
163
NLMK USA
21
21
21
Russian long products
2
3
3
Mining
51
51
61
211
212
248
Goodwill impairment testing
The Group tested goodwill for impairment as at 31 December 2021, 2020 and 2019. For the purpose of annual
impairment testing of goodwill related to CGU JSC Stoilensky GOK and JSC Altai-Koks as at 31 December 2021,
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 and JSC Altai-Koks),
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 2021, 2020 and 2019.
10
Trade and other accounts payable
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Financial liabilities
Trade accounts payable
756
429
558
Accounts payable for purchases of property, plant and
equipment
137
159
184
Other accounts payable
43
27
29
936
615
771
Non-financial liabilities
Accounts payable and accrued liabilities to employees
221
144
149
Advances received
311
175
103
Taxes payable other than income tax
240
131
101
772
450
353
1,708
1,065
1,124
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
27
10
Trade and other accounts payable (continued)
The carrying amounts of trade and other accounts payable approximate their fair values.
In 2021 and 2020 the Group recognised revenue equal to the amount of contracts liability included into advances
received as at the beginning of the year.
11
Borrowings
Rates*
Currency
Maturity*
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Bonds
1.45%
EUR
2026
571
-
-
From 4.00% to 4.70%
USD
2023-2026
1,236
1,709
1,709
Loans
From EURIBOR+0.45% to
EURIBOR+1.30%
EUR
2022-2024
1,248
1,065
784
0.94%-0.95%
EUR
2022
339
368
-
LIBOR +1.25%
USD
2025
-
258
85
Leases
2022-2089
72
86
78
3,466
3,486
2,656
Less: short-term loans and current maturities of long-term
loans, bonds and leases
(1,504)
(1,054)
(468)
Long-term borrowings
1,962
2,432
2,188
* Rates and maturity as of 31 December 2021
The carrying amounts and fair value of long-term bonds are as follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Bonds
1,807
1,873
1,709
1,864
1,709
1,823
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.
In June 2021 the Group has placed bonds in the amount of EUR 500 million. The funds received from the placement
of the bonds were partially used for repayment of previously issued bonds nominated in US dollars with maturity
in 2023 and 2024.
The Group has complied with the financial and non-financial covenants of its borrowing facilities during the years
ended 31 December 2021, 2020 and 2019.
Bonds, loans and bonds’ coupons as at 31 December 2021 were designated as hedging instrument with carrying
amount and fair value of $1,907 and $1,942, respectively (Note 21). Carrying amount and fair value of hedging
instrument as at 31 December 2020 were $1,287 and $1,386, respectively.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
28
11
Borrowings (continued)
The long-term borrowings mature as follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
1-2 years
447
579
410
2-5 years
1,492
1,327
1,245
Over 5 years
23
526
533
1,962
2,432
2,188
Collateral for borrowings and committed unutilised credit facilities
As at 31 December 2021, 2020 and 2019, the loan facilities were secured by inventories and accounts receivable
with the total carrying value of $363, $406 and $593, respectively (Notes 6, 7).
Net debt reconciliation
Short-term
borrowings
Long-term
borrowings
Cash and cash
equivalents
Short-term
bank
deposits
Net debt
Balance at 1 January 2019
(398)
(1,677)
1,179
5
(891)
Cash flows
17
(436)
(456)
143
(732)
Interest accrued
(81)
-
-
13
(68)
Foreign exchange difference
23
184
(94)
(17)
96
Recognition on adoption of IFRS 16
(8)
(71)
-
-
(79)
Leasing recognised
-
(15)
-
-
(15)
Translation adjustment
(21)
(173)
84
13
(97)
Balance at 31 December 2019
(468)
(2,188)
713
157
(1,786)
Cash flows
(424)
(178)
129
(14)
(487)
Interest accrued
(100)
-
-
7
(93)
Foreign exchange difference
(42)
(342)
59
5
(320)
Leasing recognised
(12)
(17)
-
-
(29)
Other financial expenses
-
(7)
-
-
(7)
Translation adjustment
(8)
300
(59)
(6)
227
Balance at 31 December 2020
(1,054)
(2,432)
842
149
(2,495)
Cash flows
(422)
444
(296)
(153)
(427)
Interest accrued
(82)
-
-
6
(76)
Foreign exchange difference
66
58
(27)
(6)
91
Leasing recognised
(4)
(6)
-
-
(10)
Commissions accrued and other financial
expenses
-
(44)
-
-
(44)
Translation adjustment
(8)
18
22
5
37
Balance at 31 December 2021
(1,504)
(1,962)
541
1
(2,924)
12
Shareholders’ equity
(a)
Shares
As at 31 December 2021, 2020 and 2019, 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
29
12
Shareholders’ equity (continued)
(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 2021, 2020 and 2019, the retained earnings of the
Parent Company, available for distribution in accordance with the legislative requirements of the Russian
Federation, amounted to $3,669, $3,322 and $4,671, converted into US dollars using the exchange rates at
31 December 2021, 2020 and 2019, 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.
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.
2021
2020
2019
Declaration
period
Per share*
Total
amount Per share*
Total
amount Per share*
Total
amount
For the 4th quarter of previous year April
7.25
580
3.12
263
5.80
543
For the 1st quarter of current year
June
7.71
640
3.21
275
7.34
674
For the 2nd quarter of current year September
13.62
1,103
4.75
369
3.68
343
For the 3rd quarter of current year
December
13.33
1,071
6.43
528
3.22
309
3,394
1,435
1,869
* 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
30
13
Earnings per share
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Profit for the year attributable to the NLMK shareholders
(millions of US dollars)
5,036
1,236
1,339
Weighted average number of shares
5,993,227,240
5,993,227,240
5,993,227,240
Basic and diluted earnings per share (US dollars)
0.8403
0.2062
0.2234
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 2021, 2020 and 2019.
14
Revenue
(a)
Revenue by type
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Revenue from sale of goods
Flat products
9,390
4,819
5,804
Pig iron, slabs and billets
3,814
2,684
2,628
Long products and metalware
1,922
990
1,231
Coke and other chemical products
279
197
295
Scrap
116
54
75
Iron ore and sintering ore
81
69
48
Other products
196
136
178
Total revenue from sale of goods
15,798
8,949
10,259
Revenue from transportation services
398
296
295
16,196
9,245
10,554
(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:
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Russia
6,646
3,820
4,337
North America
3,451
1,426
1,948
European Union
2,837
1,562
1,917
Middle East, including Turkey
1,614
1,033
1,169
Central and South America
705
210
285
CIS
397
249
405
Asia and Oceania
392
780
244
Other regions
154
165
249
16,196
9,245
10,554
The Group does not have customers with a share of more than 10% of the total revenue in 2021, 2020 and 2019.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
31
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.
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Cost of sales
711
696
750
General and administrative expenses
261
182
191
Selling expenses
38
31
29
1,010
909
970
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 $44, $14 and
$17 in 2021, 2020 and 2019, respectively. As at 31 December 2021, 2020 and 2019 accrued liabilities to key
management personnel related to the long-term incentive plan amounted to $24, nil and nil respectively.
16
Taxes, other than income tax, and contributions
Allocation of taxes, other than income tax, and contributions to the functional items of consolidated statement of
profit or loss is indicated below.
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Cost of sales
83
59
57
General and administrative expenses
7
4
3
Selling expenses (export custom duties)
301
-
-
Other operating expenses
-
1
6
391
64
66
17
Income tax
Income tax charge comprises the following:
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Current income tax expense
(1,303)
(308)
(379)
Deferred income tax benefit/(expense)
8
6
(74)
Income tax related to hedge reserve of cash flows
15
(41)
-
Total income tax expense
(1,280)
(343)
(453)
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%.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
32
17
Income tax (continued)
Profit before income tax is reconciled to the income tax expense as follows:
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Profit before income tax
6,334
1,580
1,794
Income tax at rate 20%
(1,267)
(316)
(359)
Change in income tax:
- tax effect of non-deductible (expenses)/income
(11)
3
(15)
- non-taxable translation adjustments
(4)
4
(1)
- effect of different tax rates
(24)
22
9
- unrecognized deferred tax asset on investments in joint
ventures
(21)
(59)
(26)
- unrecognised tax loss carry forward for the year
(4)
(10)
(27)
- utilisation of previously unrecognised tax loss carry forward
68
13
1
- effect of tax on intercompany dividends
-
-
(1)
- impairment of previously recognised deferred tax assets
(17)
-
(34)
Total income tax expense
(1,280)
(343)
(453)
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 2021
Credited/(charged)
to profit or loss
Translation
adjustment
As at
1 January 2021
Deferred tax assets
Trade and other accounts payable
47
20
1
26
Trade and other accounts receivable
-
(13)
-
13
Inventories
112
95
(1)
18
Tax losses carried forward
9
(30)
-
39
Borrowings
11
(2)
-
13
Other long-term liabilities
8
(2)
-
10
187
68
-
119
Deferred tax liabilities
Property, plant and equipment
(397)
(48)
(1)
(348)
Other intangible assets
(10)
4
(3)
(11)
Trade and other accounts receivable
(15)
(16)
1
-
(422)
(60)
(3)
(359)
Total deferred tax liability, net
(235)
8
(3)
(240)
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
33
17
Income tax (continued)
As at
31 December 2020
Credited/(charged)
to profit or loss
Translation
adjustment
As at
1 January 2020
Deferred tax assets
Trade and other accounts payable
26
8
(3)
21
Trade and other accounts receivable
13
4
(2)
11
Inventories
18
5
-
13
Tax losses carried forward
39
(6)
-
45
Borrowings
13
3
-
10
Other long-term liabilities
10
10
-
-
119
24
(5)
100
Deferred tax liabilities
Property, plant and equipment
(348)
(14)
62
(396)
Other intangible assets
(11)
(4)
1
(8)
(359)
(18)
63
(404)
Total deferred tax liability, net
(240)
6
58
(304)
As at
31 December 2019
(Charged)/credited
to profit or loss
Translation
adjustment
As at
1 January 2019
Deferred tax assets
Trade and other accounts payable
21
(9)
2
28
Trade and other accounts receivable
11
1
1
9
Inventories
13
(10)
-
23
Tax losses carried forward
45
(42)
-
87
Borrowings
10
10
-
-
100
(50)
3
147
Deferred tax liabilities
Property, plant and equipment
(396)
(27)
(38)
(331)
Other intangible assets
(8)
3
(1)
(10)
(404)
(24)
(39)
(341)
Total deferred tax liability, net
(304)
(74)
(36)
(194)
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
34
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.
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
From 10 to 20 years
214
180
256
No expiration
318
1,468
1,407
Total
532
1,648
1,663
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 $3,607, $1,441 and $1,417
for the years ended 31 December 2021, 2020 and 2019, 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 2021, 2020 and 2019, 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 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Interest income on bank accounts and bank deposits
6
7
13
Other finance income
3
11
5
Total finance income
9
18
18
Interest expense on borrowings
(82)
(100)
(81)
Capitalised interest
27
32
33
Other finance costs
(60)
(22)
(20)
Total finance costs
(115)
(90)
(68)
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
35
19
Foreign exchange differences
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Foreign exchange (loss)/gain on cash and cash equivalents
(27)
59
(94)
Foreign exchange (loss)/gain on financial investments
(54)
74
(139)
Foreign exchange gain/(loss) on debt financing
85
(171)
242
Foreign exchange loss on other assets and liabilities
(57)
(2)
(15)
(53)
(40)
(6)
Starting from February 3, 2020 the Group adopted hedge accounting of cash flows in accordance with
IFRS 9 “Financial instruments” (Note 21).
20
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 22).
NBH deconsolidation adjustments include elimination of NBH’s sales, recognition of the Group’s sales to NBH and
elimination of unrealised profits (Notes 4, 22), 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
36
20
Segment information (continued)
Information on the segments’ profit or loss for the year ended 31 December 2021 and their assets and liabilities as of this date is as follows:
Mining
Russian flat
products
Russian long
products
NLMK
USA
NLMK DanSteel
and Plates
Distribution
Network
Investments in
NBH
Elimination of
intersegmental
operations and
balances
NBH deconsoli-
dation adjust-
ments
Total
Revenue from external customers
108
8,648
2,207
3,230
639
1,736
-
(372)
16,196
Intersegment revenue
2,402
2,921
641
-
1
46
(5,965)
(46)
-
Cost of sales
(420)
(6,494)
(2,172)
(2,170)
(554)
(1,633)
5,442
207
(7,794)
Gross profit
2,090
5,075
676
1,060
86
149
(523)
(211)
8,402
Operating profit/(loss)*
1,991
3,605
487
970
13
(27)
(336)
(35)
6,668
Net finance income/(costs)
5
(103)
(2)
(3)
(3)
(12)
-
12
(106)
Income tax expense
(393)
(707)
(77)
(199)
-
(1)
96
1
(1,280)
Profit/(loss) for the year
1,566
3,326
397
767
9
(42)
(866)
(103)
5,054
Segment assets
2,888
8,517
1,128
1,610
535
1,798
(2,705)
(1,610)
12,161
Segment liabilities
(401)
(6,564)
(298)
(243)
(369)
(1,624)
2,868
912
(5,719)
Depreciation and amortization
(129)
(376)
(43)
(35)
(12)
(62)
-
62
(595)
Capital expenditures
(182)
(894)
(38)
(69)
(29)
(167)
-
167
(1,212)
* 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
37
20
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:
Mining
Russian flat
products
Russian long
products
NLMK
USA
NLMK DanSteel
and Plates
Distribution
Network
Investments in
NBH
Elimination of
intersegmental
operations and
balances
NBH deconsoli-
dation adjust-
ments
Total
Revenue from external customers
92
5,600
1,171
1,086
399
1,325
-
(428)
9,245
Intersegment revenue
1,307
1,188
368
-
1
49
(2,864)
(49)
-
Cost of sales
(355)
(4,775)
(1,343)
(1,007)
(359)
(1,361)
2,850
430
(5,920)
Gross profit
1,044
2,013
196
79
41
13
(14)
(47)
3,325
Operating profit/(loss)*
957
1,076
49
19
(16)
(154)
21
119
2,071
Net finance income/(costs)
1
(73)
-
3
(3)
(13)
-
13
(72)
Income tax (expense)/benefit
(188)
(152)
(7)
3
(1)
-
2
-
(343)
Profit/(loss) for the year
760
1,260
28
24
(23)
(167)
(541)
(104)
1,237
Segment assets
1,738
6,957
940
749
428
1,366
(1,153)
(1,163)
9,862
Segment liabilities
(264)
(4,942)
(398)
(150)
(315)
(1,174)
1,291
831
(5,121)
Depreciation and amortization
(107)
(354)
(44)
(57)
(12)
(61)
-
61
(574)
Capital expenditures
(202)
(806)
(38)
(49)
(44)
(274)
-
274
(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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
38
20
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:
Mining
Russian flat
products
Russian long
products
NLMK
USA
NLMK DanSteel
and Plates
Distribution
Network
Investments in
NBH
Elimination of
intersegmental
operations and
balances
NBH deconsoli-
dation adjust-
ments
Total
Revenue from external customers
77
5,897
1,428
1,715
490
1,502
-
(555)
10,554
Intersegment revenue
1,238
1,430
329
-
1
60
(2,998)
(60)
-
Cost of sales
(381)
(5,239)
(1,554)
(1,728)
(435)
(1,568)
2,938
664
(7,303)
Gross profit/(loss)
934
2,088
203
(13)
56
(6)
(60)
49
3,251
Operating profit/(loss)*
864
1,160
39
(95)
(3)
(197)
(7)
241
2,002
Net finance income/(costs)
15
(55)
-
(8)
(2)
(12)
-
12
(50)
Income tax (expense)/benefit
(161)
(239)
(8)
(31)
(1)
4
(13)
(4)
(453)
Profit/(loss) for the year
661
1,941
15
(128)
(6)
(207)
(1,097)
162
1,341
Segment assets
2,120
7,483
1,160
840
371
1,318
(1,752)
(1,056)
10,484
Segment liabilities
(607)
(4,567)
(437)
(314)
(258)
(1,161)
2,028
779
(4,537)
Depreciation and amortization
(113)
(330)
(50)
(58)
(11)
(63)
-
63
(562)
Capital expenditures
(218)
(854)
(50)
(37)
(33)
(118)
-
118
(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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
39
20
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 2021
As at
31 December 2020
As at
31 December 2019
Russian Federation
5,936
5,503
5,975
USA
320
287
298
Denmark
219
220
169
Other
64
25
18
6,539
6,035
6,460
21
Risks and uncertainties
(a)
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 23(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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
40
21
Risks and uncertainties (continued)
The interest rate risk profile of the Group is follows:
As at
31 December 2021
As at
31 December 2019
As at
31 December 2019
Fixed rate instruments
Financial assets
- cash and cash equivalents (Note 3)
541
842
713
- financial investments (Note 5)
260
198
292
- trade and other accounts receivable less credit loss
allowance (Note 6)
1,482
945
810
2,283
1,985
1,815
Financial liabilities
- trade and other accounts payable (Note 10)
(936)
(615)
(771)
- dividends payable
(10)
(109)
(318)
- borrowings (Note 11)
(2,218)
(2,163)
(1,787)
(3,164)
(2,887)
(2,876)
Variable rate instruments
Financial liabilities
- borrowings (Note 11)
(1,248)
(1,323)
(869)
(1,248)
(1,323)
(869)
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 and Euro. 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”.
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).
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
41
21
Risks and uncertainties (continued)
In June 2021 the Group performed advanced repayment of the portion of US dollars nominated bonds and
discontinued the revaluation of hedging instrument regarding repaid liabilities. Accumulated effects from the
remeasurement of hedging instruments in the amount of $66 was recorded in the hedge reserve of cash flows in
other comprehensive loss. The effect will be reclassified to profit as the hedged revenue is recognised.
On January 1, 2021 the Group designated the portion of Euro nominated long-term borrowings as hedging
instruments of the expected highly probable Euro nominated revenue in accordance with IFRS 9 “Financial
instruments”. A portion of future monthly revenues expected to be received in Euro over the period from February
2022 through July 2022 was designated as a hedged item, the Group's long-term loans nominated in Euro were
designated as hedging instrument.
On June 2, 2021 the Group designated the portion of Euro nominated borrowings as hedging instrument of the
expected highly probable Euro nominated revenue in accordance with IFRS 9 “Financial instruments”. A portion of
future monthly revenues expected to be received in Euro over the period from July 2022 through December 2026
was designated as a hedged item. The Group's bonds and bonds’ coupons nominated in Euro were designated as
hedging instrument (Note 11).
The nominal amounts of the hedged items and the hedging instruments are equal. To the extent that a change in
the foreign currency rate impacts on the value of the hedging instruments, 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.
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 and Euro. The
amount of hedged revenue aligns the amount of payments on bonds, bonds’ coupons and loans. The Group expects
that the hedging relationships are effective since the future cash outflows on bonds and bonds’ coupons in US
dollars and loans in Euro match the future cash inflows on the hedged portion of revenue in US dollars and Euro.
Information on the amounts of income/(expenses) on hedging instrument recognized in other comprehensive loss
is as follows:
Hedge
reserve of
cash flows
Income tax related to
hedge reserve
of cash flows
Hedge reserve
of cash flows net of
related income tax
As at 1 January 2020
-
-
-
Change of hedge reserve of cash flows –
recognition of (loss)/income from the
remeasurement of hedging instruments
(229)
46
(183)
Change of hedge reserve of cash flows –
hedging result
24
(5)
19
As at 31 December 2020
(205)
41
(164)
Change of hedge reserve of cash flows –
recognition of income/(loss) from the
remeasurement of hedging instruments
72
(13)
59
Change of hedge reserve of cash flows –
hedging result
11
(2)
9
As at 31 December 2021
(122)
26
(96)
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
42
21
Risks and uncertainties (continued)
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 31 December 2021 is as follows:
2022
2023
2024
2025
2026
Total
Reclassifications
37
(93)
(64)
(25)
23
(122)
Income tax
(6)
20
13
5
(6)
26
31
(73)
(51)
(20)
17
(96)
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 2021.
US dollar
Euro
Cash and cash equivalents
30
91
Trade and other accounts receivable
3
608
Financial investments
-
258
Trade and other accounts payable
(103)
(292)
Borrowings
(1,235)
(2,158)
Cash flow hedge
814
1,093
Net foreign currency position
(491)
(400)
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
Cash and cash equivalents
409
139
112
Trade and other accounts receivable
7
401
-
Financial investments
-
139
50
Trade and other accounts payable
(49)
(345)
-
Borrowings
(1,709)
(1,433)
-
Cash flow hedge
1,287
-
-
Net foreign currency position
(55)
(1,099)
162
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
43
21
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.
US dollar
Euro
Hong Kong
dollar
Swiss franc
Cash and cash equivalents
115
304
1
1
Trade and other accounts receivable
4
349
-
-
Financial investments
-
133
154
-
Trade and other accounts payable
(82)
(324)
-
-
Borrowings
(1,709)
(784)
-
-
Net foreign currency position
(1,672)
(322)
155
1
Sensitivity analysis
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 2021,
2020 and 2019 would have increased/(decreased) equity by the amounts shown below, however effect on profit
for the year would be different, and would amount to $70 loss, $230 loss and $376 loss, respectively, due to foreign
exchange effects from intercompany operations (Note 19) and applying of hedge accounting.
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
US dollar
(326)
(336)
(418)
Euro
(373)
(275)
(81)
Hong Kong dollar
-
41
39
A 25 percent weakening of these currencies against the functional currency as at 31 December 2021, 2020 and 2019
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
44
21
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;
•
C – high risk non-investments grade which correspond to international agencies rating 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.
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
45
21
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
46
21
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:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Cash and cash equivalents (Note 3)
541
842
713
Trade and other accounts receivable (Note 6)
1,482
945
810
Financial investments (Note 5)
260
198
292
Total on-balance sheet exposure
2,283
1,985
1,815
Financial guarantees issued (Note 22(d))
314
283
331
2,597
2,268
2,146
All loans to NBH are considered to have low credit risk, and the loss allowance recognised during the period was
therefore limited to 12 months’ expected losses
Analysis of trade accounts receivable, net of credit loss allowance, by credit quality, based on internal credit ratings
is as follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
AAA
203
23
28
A
184
80
53
B
284
89
49
C
54
51
39
D
7
12
1
NR, including:
- NBH group companies
454
297
249
- Credit insurance (AA international agencies’ credit ratings)
164
169
254
- Bank coverage (A- and above international agencies’ credit
ratings)
84
72
55
- Not covered
26
27
72
1,460
820
800
Analysis by credit quality, based on international agencies’ credit rating, of bank balances and bank deposits is as
follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Bank balances and term deposits
AAA-BBB
536
835
706
BB-B
2
5
5
Unrated and cash on hand
3
2
2
541
842
713
Short-term and long-term bank deposits
AAA-BBB
1
148
157
BB-B
-
2
-
1
150
157
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
47
21
Risks and uncertainties (continued)
As at 31 December 2021, ageing of trade and other receivables is as follows:
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
Not past due
1,434
(13)
1,421
Past due, including:
- up to 1 month
44
-
44
- from 1 to 3 months
10
(1)
9
- from 3 to 12 months
9
(2)
7
- over 12 months
17
(16)
1
Total
1,514
(32)
1,482
As at 31 December 2020, ageing of trade and other receivables is as follows:
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
Not past due
919
(14)
905
Past due, including:
- up to 1 month
34
-
34
- from 1 to 3 months
3
-
3
- from 3 to 12 months
4
(2)
2
- over 12 months
21
(20)
1
Total
981
(36)
945
As at 31 December 2019, ageing of trade and other receivables is as follows:
Trade and other receivables
Gross amount
Credit loss
allowance
Net of allowance
Not past due
773
(15)
758
Past due, including:
- up to 1 month
42
-
42
- from 1 to 3 months
6
-
6
- from 3 to 12 months
5
(1)
4
- over 12 months
25
(25)
-
Total
851
(41)
810
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
48
21
Risks and uncertainties (continued)
(d)
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.
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Less than 1 year
1,563
1,134
545
From 1 to 2 years
504
662
491
From 2 to 5 years
1,591
1,464
1,432
Over 5 years
151
672
708
Total borrowings
3,809
3,932
3,176
Liquidity risk related to financial guarantees issued is disclosed in Note 22(d).
As at 31 December 2021, 2020 and 2019, 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.
22
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
49
22
Related party transactions (continued)
(a)
Sales to and purchases from related parties
For the year ended
31 December 2021
For the year ended
31 December 2020
For the year ended
31 December 2019
Sales
NBH group companies
1,364
897
947
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
2
2
2
Other related parties
4
4
6
Purchases
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
456
376
384
NBH group companies
46
49
60
Other related parties
39
26
18
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 8.4%, 9.7% and 9.0% of the total sales of the Group for
the years ended 31 December 2021, 2020 and 2019, respectively.
(b)
Accounts receivable from and accounts payable to related parties
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Accounts receivable and advances given
NBH group companies
454
298
249
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
35
32
26
Accounts payable
NBH group companies
22
22
28
Companies of Freight One Group and other transport
companies under the common control of beneficial owner
10
11
5
(c)
Financial transactions
As at 31 December 2021, 2020 and 2019 loans issued to NBH group companies amounted to $259, $47 and $133
and maturing 31 December 2022, 31 December 2021 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 2021, 2020 and 2019, guarantees issued by the Group for borrowings received by NBH group
companies amounted to $314, $283 and $331, 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
50
22
Related party transactions (continued)
The maturity of the guaranteed obligations is as follows:
As at
31 December 2021
As at
31 December 2020
As at
31 December 2019
Less than 1 year
241
107
130
From 1 to 2 years
-
127
-
Over 2 years
73
49
201
314
283
331
23
Commitments and contingencies
(a)
Anti-dumping and antimonopoly 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.
In 2021, the Federal Antimonopoly Service of the Russian Federation initiated cases against NLMK PJSC and other
Russian metallurgical companies on violation of antimonopoly legislation in terms of pricing on the Russian market
of hot-rolled flat products. The Group doesn’t agree with the initiation of the case and defends its position within
the legal investigation. No provision arising from any possible decisions as a result of this investigation 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,
management believes that the Group has met the Government’s federal and regional requirements concerning
environmental matters, therefore, there are no significant liabilities for environmental damage and remediation.
(d)
Capital commitments
Management estimates the outstanding agreements in connection with equipment supply and construction works
amounted to $780, $881 and $1,157 as at 31 December 2021, 2020 and 2019, 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
51
23
Commitments and contingencies (continued)
(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.
From 1 January 2022 an excise tax on liquid steel will be introduced and the mineral extraction tax (MET) will be
increased. In general, excise tax on liquid steel will be calculated in relation to the mass of semi-finished products
obtained from liquid steel as 2.7% of the average export market price of steel slabs per month. Along with that, if
the steel is smelted in open-hearth, induction and (or) electric steelmaking furnaces and if the share of ferrous scrap
in the total mass of raw materials used for the production of liquid steel is at least 80%, the excise tax will be
calculated as 30% of the difference between average export market price of steel billet per month and average
market price of scarp on the Russian market per month minus 12.5 thousand rubles and 50% of the cost of
purchased ferroalloys and alloying elements. MET for iron ore will be calculated on the weight of iron ore mined as
4.8% of the index SGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures / Options multiplied by the ratio of the
actual iron content in the ore to the reference value (62%).
(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 2021, 2020 and 2019.
(h)
Assessment of the coronavirus impact on the Group
At the date of issuing these consolidated financial statements the situation with the spread of coronavirus infection
(COVID-19) is still evolving. In 2021 the Russian economy started to recover from the pandemic as a result of an
increase in business activity and due to government support measures. This was also supported by the global
economic recovery and high prices on global commodity markets. The Group benefits from a strong financial
position, with low leverage and significant liquidity.
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
52
24
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
53
24
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 joint control, any retained interest in the entity is re-measured to its fair value as
at the date of ceasing control or joint control, 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
54
24
Significant accounting policies (continued)
(c)
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 advances 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
55
24
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
56
24
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
10 – 70 years
Machinery and equipment
2 – 30 years
Vehicles
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”.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
57
24
Significant accounting policies (continued)
(f) Leases
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
58
24
Significant accounting policies (continued)
(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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
59
24
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
20-36 years
•
Industrial intellectual property
1-10 years
(h)
Impairment of non-current assets
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
60
24
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
61
24
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
62
24
Significant accounting policies (continued)
(l)
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, 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
63
24
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 losses model in accordance with a ‘three stage’ approach which 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.
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
64
24
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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
65
24
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
in
accordance
with
the
expected
credit
loss
model
under
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.
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 and Euro nominated revenue with the portion of
US dollars and Euro 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.
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
66
25
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 23).
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).
(d)
Export duties recognition and disclosure
Starting from 1 August 2021 Resolution of the Russian Federation Government became effective and introduced
export customs duties on ferrous metallurgy products for the period from 1 August till 31 December 2021. The Group
has applied its judgement and does not consider export custom duties as part of selling price of goods. The Group
considers duties as an additional tax imposed on the Group and accordingly presents them as part of operating
expenses in the line «Taxes, other than income tax, and contributions» (Note 16).
Novolipetsk Steel
Notes to the consolidated financial statements
(millions of US dollars)
67
26
New or revised standards and interpretations
The following amended standards became effective from 1 January 2021, but did not have a material impact on the
Group:
•
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;
•
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).
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning
on or after 1 January 2022 or later, and which the Group has not early adopted:
•
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);
•
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);
•
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 IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting policies (issued on
12 February 2021 and effective for annual periods beginning on or after 1 January 2023);
•
Amendments to IAS 8: Definition of Accounting Estimates (issued on 12 February 2021 and effective for
annual periods beginning on or after 1 January 2023);
•
Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for
annual periods beginning on or after 1 April 2021. An amendment issued on 31 March 2021 extended the
date of the practical expedient from 30 June 2021 to 30 June 2022 );
•
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12
(issued on 7 May 2021 and effective for annual periods beginning on or after 1 January 2023).
The Group is currently assessing the impact of the amendments on its consolidated financial statements. Unless
otherwise described above, the new standards and interpretations are not expected to have any material impact
on the Group financial statements when adopted.
27
Subsequent events
On 2 February 2022, the Board of Directors of the Parent Company recommended dividends for the fourth quarter
of 2021 of 12.18 Russian rubles per share in the total amount of $946 at the exchange rate as at 2 February 2022.
Акционерное общество «ПрайсвотерхаусКуперс Аудит» (АО «ПвК Аудит»)
Бизнес-центр «Белая площадь», ул. Бутырский Вал, 10, Москва, Российская Федерация, 125047
T: +7 (495) 967 6000, Ф:+7 (495) 967 6001, www.pwc.ru
Аудиторское заключение независимого аудитора
Акционерам и Совету директоров публичного акционерного общества «Новолипецкий металлургический комбинат»:
Мнение
По нашему мнению, прилагаемая бухгалтерская (финансовая) отчетность отражает достоверно во всех существенных отношениях финансовое
положение публичного акционерного общества «Новолипецкий металлургический комбинат» (далее – «Общество») по состоянию на 31 декабря
2021 года, а также финансовые результаты и движение денежных средств Общества за год, закончившийся на указанную дату, в соответствии с
правилами составления бухгалтерской (финансовой) отчетности, установленными в Российской Федерации.
Предмет аудита
Мы провели аудит бухгалтерской (финансовой) отчетности Общества, которая включает:
•
бухгалтерский баланс по состоянию на 31 декабря 2021 года;
•
отчет о финансовых результатах за год, закончившийся на указанную дату;
•
отчет об изменениях капитала за год, закончившийся на указанную дату;
•
отчет о движении денежных средств за год, закончившийся на указанную дату;
•
пояснения к бухгалтерскому балансу и отчету о финансовых результатах, включая основные положения учетной политики.
2
Основание для выражения мнения
Мы провели аудит в соответствии с Международными стандартами аудита (МСА). Наши обязанности согласно указанным стандартам далее описаны в
разделе «Ответственность аудитора за аудит бухгалтерской (финансовой) отчетности» нашего заключения.
Мы полагаем, что полученные нами аудиторские доказательства являются достаточными и надлежащими, чтобы служить основанием для выражения
нашего мнения.
Независимость
Мы независимы по отношению к Обществу в соответствии с Международным кодексом этики профессиональных бухгалтеров (включающим
Международные стандарты независимости), выпущенным Советом по международным стандартам этики для бухгалтеров (Кодекс СМСЭБ) и этическими
требованиями Кодекса профессиональной этики аудиторов и Правил независимости аудиторов и аудиторских организаций, применимыми к нашему
аудиту бухгалтерской (финансовой) отчетности в Российской Федерации. Нами выполнены прочие этические обязанности в соответствии с этими
требованиями и Кодексом СМСЭБ.
Ключевые вопросы аудита
Ключевые вопросы аудита – это вопросы, которые, согласно нашему профессиональному суждению, являлись наиболее значимыми для нашего аудита
бухгалтерской (финансовой) отчетности за текущий период. Эти вопросы были рассмотрены в контексте нашего аудита бухгалтерской (финансовой)
отчетности в целом и при формировании нашего мнения об этой отчетности, и мы не выражаем отдельного мнения по этим вопросам.
Ключевой вопрос аудита
Какие аудиторские процедуры были выполнены в отношении
ключевого вопроса аудита
Восстановление обесценения долгосрочных финансовых вложений
в ООО «НЛМК Оверсиз Холдингс»
Ежегодно по состоянию на отчетную дату руководство Общества
проводит проверку на предмет наличия признаков обесценения
финансовых вложений, в том числе инвестиций в дочерние общества, по
которым не определяется рыночная стоимость.
При наличии признаков обесценения руководство определяет расчетную
стоимость финансовых вложений и сравнивает ее с их учетной
(балансовой) стоимостью.
В случае, если проверка на обесценение выявляет устойчивое снижение
стоимости финансовых вложений, создается резерв под обесценение на
величину разницы между учетной (балансовой) и расчетной стоимостью
финансовых вложений.
Мы получили, изучили и оценили документацию по проверке на
обесценение финансовых вложений, подготовленную руководством, и
не выявили каких- либо дополнительных факторов, которые должны
были быть, но не были приняты во внимание при проведении данной
проверки.
Мы проверили расчетную стоимость инвестиций в дочерние общества
ООО «НЛМК Оверсиз Холдингс», по которым данная стоимость была
определена руководством на основании их чистых активов.
В рамках проверки расчетной стоимости инвестиций в ООО «НЛМК
Оверсиз Холдингc», включавшей проверку расчетной стоимости его
объектов инвестиций, определенной на основании моделей
3
И напротив, при выявлении индикаторов восстановления и устойчивого
роста стоимости финансовых вложений, проводится восстановление
резерва по финансовым вложениям на величину разницы между учетной
(балансовой) и расчетной стоимостью финансовых вложений.
Расчетная стоимость инвестиции в дочернее общество ООО «НЛМК
Оверсиз Холдингc», имеющего в активах вложения в собственные
дочерние общества, определяется как величина его чистых активов,
скорректированная с учетом расчетной стоимости конечных объектов
инвестиций. Последняя, в свою очередь, определяется на основании
моделей дисконтированных денежных потоков для основных
производственных предприятий и на основании чистых активов для
прочих компаний. Данные модели и расчеты подготовлены по состоянию
на 31 декабря 2021 года. В результате проведенного руководством
тестирования было выявлено существенное превышение расчетной
стоимости финансового вложения в ООО «НЛМК Оверсиз Холдингс» над
его учетной (балансовой) стоимостью, в результате чего было проведено
восстановление резерва под обесценение в размере 36 770 млн. руб.
Мы обратили особое внимание на данный вопрос в силу наличия
высокой степени суждения в оценке обесценения финансовых вложений,
а также значительной балансовой стоимости рассматриваемых активов и
начисленных/восстановленных резервов.
дисконтированных денежных потоков, мы провели следующие
основные процедуры:
•
проверку моделей дисконтированных денежных потоков,
подготовленных руководством, с привлечением экспертов
аудитора в области оценки для оказания нам содействия в
оценке методологии, математической точности и допущений,
использованных в моделях;
•
сравнение ключевых допущений, использованных в моделях
обесценения, с результатами деятельности объектов
инвестиций ООО «НЛМК Оверсиз Холдингc», утвержденными
бюджетными показателями и прочими подтверждающими
расчетами;
•
сравнительный анализ ключевых допущений, использованных
в моделях обесценения, включая цены на основное сырье и
цены реализации продукции, уровень инфляции, ставки
дисконтирования, с внешними экспертными оценками,
макроэкономическими и отраслевыми прогнозами, который
подтвердил их обоснованность;
•
анализ чувствительности в отношении ключевых допущений с
целью оценки их потенциального влияния на результаты
обесценения и диапазона возможных значений возмещаемых
стоимостей;
Объем аудиторских процедур по проверке моделей обесценения в
отношении каждого объекта инвестиций ООО «НЛМК Оверсиз
Холдингc» выполнен в зависимости от его значимости, запаса
прочности, индивидуальных рисков и чувствительности к ключевым
допущениям.
4
Прочие сведения – существенность и объем аудита
Существенность
При планировании аудита мы определили существенность и провели оценку рисков существенного искажения бухгалтерской (финансовой) отчетности.
В частности, мы проанализировали, в каких областях руководство выносило субъективные суждения, например, в отношении значимых оценочных
значений, что включало применение допущений и рассмотрение будущих событий, с которыми в силу их характера связана неопределенность. Как и во
всех наших аудитах, мы также рассмотрели риск обхода системы внутреннего контроля руководством, включая, помимо прочего, оценку наличия
признаков необъективности руководства, которая создает риск существенного искажения вследствие недобросовестных действий.
На определение объема нашего аудита оказало влияние применение нами существенности. Аудит предназначен для получения разумной уверенности в
том, что бухгалтерская (финансовая) отчетность не содержит существенных искажений. Искажения могут возникать в результате недобросовестных
действий или ошибок. Они считаются существенными, если можно обоснованно предположить, что в отдельности или в совокупности они могут повлиять
на экономические решения пользователей, принимаемые на основе этой бухгалтерской (финансовой) отчетности.
Основываясь на своем профессиональном суждении, мы установили определенные количественные пороговые значения для существенности, в том
числе для существенности на уровне бухгалтерской (финансовой) отчетности Общества в целом, как указано в таблице ниже. С помощью этих значений и
с учетом качественных факторов, мы определили объем нашего аудита, а также характер, сроки проведения и объем наших аудиторских процедур и
оценили влияние искажений (взятых по отдельности и в совокупности), при наличии таковых, на бухгалтерскую (финансовую) отчетность в целом.
Существенность на уровне бухгалтерской
(финансовой) отчетности Общества в целом
6 150 000 тыс. руб.
Как мы ее определили
1% от средней выручки Общества за 2020 - 2021 годы
Обоснование примененного базового
показателя для определения уровня
существенности
Мы приняли решение использовать в качестве базового показателя для определения уровня
существенности среднюю выручку Общества за 2020-2021 годы, потому что мы считаем, что
именно этот базовый показатель наиболее объективно отражает результаты деятельности
Общества в течение периода времени, когда финансовые результаты волатильны. Мы
установили существенность на уровне 1%, что на основании нашего опыта попадает в
диапазон приемлемых количественных пороговых значений существенности для публичных
компаний в данной отрасли. Также мы принимаем во внимание искажения и/или
потенциальные искажения, которые, по нашему мнению, являются существенными в силу
качественных факторов.
5
Определение объема аудита
Объем аудита определен нами таким образом, чтобы мы могли выполнить работы в достаточном объеме для выражения нашего мнения о бухгалтерской
(финансовой) отчетности в целом с учетом структуры Общества, используемых Обществом учетных процессов и средств контроля, а также с учетом
специфики отрасли, в которой Общество осуществляет свою деятельность.
Прочая информация
Руководство несет ответственность за прочую информацию. Прочая информация содержит Годовой отчет Общества за 2021 год и Отчет эмитента
эмиссионных ценных бумаг за 12 месяцев 2021 года (но не включает бухгалтерскую (финансовую) отчетность и наше аудиторское заключение о данной
отчетности), которые, как ожидается, будут нам предоставлены после даты настоящего аудиторского заключения.
Наше мнение о бухгалтерской (финансовой) отчетности не распространяется на прочую информацию, и мы не будем предоставлять вывода,
выражающего уверенность в какой-либо форме в отношении данной информации.
В связи с проведением нами аудита бухгалтерской (финансовой) отчетности наша обязанность заключается в ознакомлении с указанной выше прочей
информацией, когда она будет нам предоставлена, рассмотрении вопроса о том, имеются ли существенные несоответствия между прочей информацией
и бухгалтерской (финансовой) отчетностью или нашими знаниями, полученными в ходе аудита, и не содержит ли прочая информация иных возможных
существенных искажений.
Если при ознакомлении с Годовым отчетом Общества за 2021 год и Отчетом эмитента эмиссионных ценных бумаг за 12 месяцев 2021 года мы придем к
выводу о том, что в них содержится существенное искажение, мы должны довести это до сведения лиц, отвечающих за корпоративное управление.
Ответственность руководства и лиц, отвечающих за корпоративное управление, за бухгалтерскую (финансовую) отчетность
Руководство несет ответственность за подготовку и достоверное представление указанной бухгалтерской (финансовой) отчетности в соответствии с
правилами составления бухгалтерской (финансовой) отчетности, установленными в Российской Федерации, и за систему внутреннего контроля, которую
руководство считает необходимой для подготовки бухгалтерской (финансовой) отчетности, не содержащей существенных искажений вследствие
недобросовестных действий или ошибок.
При подготовке бухгалтерской (финансовой) отчетности руководство несет ответственность за оценку способности Общества продолжать непрерывно
свою деятельность, за раскрытие в соответствующих случаях сведений, относящихся к непрерывности деятельности, и за составление отчетности на
основе допущения о непрерывности деятельности, за исключением случаев, когда руководство намеревается ликвидировать Общество, прекратить его
деятельность или когда у него отсутствует какая-либо иная реальная альтернатива, кроме ликвидации или прекращения деятельности.
Лица, отвечающие за корпоративное управление, несут ответственность за надзор за подготовкой бухгалтерской (финансовой) отчетности Общества.
6
Ответственность аудитора за аудит бухгалтерской (финансовой) отчетности
Наша цель состоит в получении разумной уверенности в том, что бухгалтерская (финансовая) отчетность не содержит существенных искажений
вследствие недобросовестных действий или ошибок, и в выпуске аудиторского заключения, содержащего наше мнение. Разумная уверенность
представляет собой высокую степень уверенности, но не является гарантией того, что аудит, проведенный в соответствии с МСА, всегда выявляет
существенные искажения при их наличии. Искажения могут быть результатом недобросовестных действий или ошибок и считаются существенными, если
можно обоснованно предположить, что в отдельности или в совокупности они могут повлиять на экономические решения пользователей, принимаемые на
основе этой бухгалтерской (финансовой) отчетности.
В рамках аудита, проводимого в соответствии с МСА, мы применяем профессиональное суждение и сохраняем профессиональный скептицизм на
протяжении всего аудита. Кроме того, мы выполняем следующее:
•
выявляем и оцениваем риски существенного искажения бухгалтерской (финансовой) отчетности вследствие недобросовестных действий или ошибок;
разрабатываем и проводим аудиторские процедуры в ответ на эти риски; получаем аудиторские доказательства, являющиеся достаточными и
надлежащими, чтобы служить основанием для выражения нашего мнения. Риск необнаружения существенного искажения в результате
недобросовестных действий выше, чем риск необнаружения существенного искажения в результате ошибки, так как недобросовестные действия могут
включать сговор, подлог, умышленный пропуск, искаженное представление информации или действия в обход системы внутреннего контроля;
•
получаем понимание системы внутреннего контроля, имеющей значение для аудита, с целью разработки аудиторских процедур, соответствующих
обстоятельствам, но не с целью выражения мнения об эффективности системы внутреннего контроля Общества;
•
оцениваем надлежащий характер применяемой учетной политики и обоснованность оценочных значений, рассчитанных руководством, и
соответствующего раскрытия информации;
•
делаем вывод о правомерности применения руководством допущения о непрерывности деятельности, а на основании полученных аудиторских
доказательств – вывод о том, имеется ли существенная неопределенность в связи с событиями или условиями, в результате которых могут
возникнуть значительные сомнения в способности Общества продолжать непрерывно свою деятельность. Если мы приходим к выводу о наличии
существенной неопределенности, мы должны привлечь внимание в нашем аудиторском заключении к соответствующему раскрытию информации в
бухгалтерской (финансовой) отчетности или, если такое раскрытие информации является ненадлежащим, модифицировать наше мнение. Наши
выводы основаны на аудиторских доказательствах, полученных до даты нашего аудиторского заключения. Однако будущие события или условия
могут привести к тому, что Общество утратит способность продолжать непрерывно свою деятельность;
•
проводим оценку представления бухгалтерской (финансовой) отчетности в целом, ее структуры и содержания, включая раскрытие информации, а
также того, представляет ли бухгалтерская (финансовая) отчетность лежащие в ее основе операции и события так, чтобы было обеспечено их
достоверное представление.
Мы осуществляем информационное взаимодействие с лицами, отвечающими за корпоративное управление, доводя до их сведения помимо прочего,
информацию о запланированном объеме и сроках аудита, а также о существенных замечаниях по результатам аудита, в том числе о значительных
недостатках системы внутреннего контроля, которые мы выявляем в процессе аудита.
7
Мы также предоставляем лицам, отвечающим за корпоративное управление, заявление о том, что мы соблюдали все соответствующие этические
требования в отношении независимости и информировали этих лиц обо всех взаимоотношениях и прочих вопросах, которые можно обоснованно считать
оказывающими влияние на независимость аудитора, а в необходимых случаях – о действиях, предпринятых для устранения угроз, или принятых мерах
предосторожности.
Из тех вопросов, которые мы довели до сведения лиц, отвечающих за корпоративное управление, мы определяем вопросы, которые были наиболее
значимыми для аудита бухгалтерской (финансовой) отчетности за текущий период и, следовательно, являются ключевыми вопросами аудита. Мы
описываем эти вопросы в нашем аудиторском заключении, кроме случаев, когда публичное раскрытие информации об этих вопросах запрещено законом
или нормативным актом, или когда в крайне редких случаях мы приходим к выводу о том, что информация о каком-либо вопросе не должна быть
сообщена в нашем заключении, так как можно обоснованно предположить, что отрицательные последствия сообщения такой информации превысят
общественно значимую пользу от ее сообщения.
Руководитель задания, по результатам которого выпущено настоящее аудиторское заключение независимого аудитора (руководитель аудита), – Алексей
Борисович Фомин.
2 февраля 2022 года
Москва, Российская Федерация
А.Б.Фомин, лицо, уполномоченное генеральным директором на подписание от имени Акционерного общества «ПрайсвотерхаусКуперс Аудит» (основной
регистрационный номер записи в реестре аудиторов и аудиторских организаций (ОРНЗ) – 12006020338), руководитель аудита (ОРНЗ – 21906104343)
NOVOLIPETSK STEEL
NLMK 2, Metallurgov Sq., Lipetsk, 398040 Russia
phone: +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 2021
2
Accounting
(Financial)
reports
for 2021
Notes
CONTENTS
Balance Sheet .................................................................................................................................................................................................................................................................. 4
Profit and loss statement .................................................................................................................................................................................................................................................. 6
CAPITAL STATEMENT .................................................................................................................................................................................................................................................... 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
15
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 ................................................................................................................................................................................................................................................................... 20
2. 13 ASSETS, LIABILITIES AND OPERATIONS IN FOREIGN CURRENCY .............................................................................................................................................................. 20
2. 14 INFORMATION BY SEGMENTS .......................................................................................................................................................................................................................... 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 ........................................................................................................................................................................................................................................................ 28
3. 5 ACCOUNTS RECEIVABLE AND PAYABLE ........................................................................................................................................................................................................... 29
3. 6 CASHAND CASH EQUIVALENTS .......................................................................................................................................................................................................................... 32
3. 7 EQUITY AND DIVIDENDS ...................................................................................................................................................................................................................................... 34
3. 8 CREDITS AND LOANS ........................................................................................................................................................................................................................................... 35
3. 9 ESTIMATED LIABILITIES ....................................................................................................................................................................................................................................... 37
3. 10 INCOME AND EXPENSES ................................................................................................................................................................................................................................... 37
3. 10. 1 Income and expenses related to ordinary activities
37
3. 10. 2 Other income and expenses
38
3. 11 CURRENT INCOME TAX FORMATION
38
3. 12 INFORMATION BY SEGMENTS .......................................................................................................................................................................................................................... 39
3. 13 SECURITY OF LIABILITIES .................................................................................................................................................................................................................................. 40
3. 14 INFORMATION ON RELATED PARTIES
40
3
Accounting
(Financial)
reports
for 2021
Notes
3. 14. 1 The list of related parties ................................................................................................................................................................................................................................... 41
3. 14. 2 Operations with Related Parties
43
3. 15 CONTINGENT LIABILITIES
`
46
3. 16 EVENTS AFTER THE REPORTING DATE .......................................................................................................................................................................................................... 47
4
Accounting
(Financial)
reports
for 2021
Notes
Indicator
Code
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Disclosure in
Notes
1
2
3
4
5
6
ASSETS
I. Non-current assets
Intangible assets
1110
1,145,079
1,401,412
1,707,636
2.1, 3.1
R&D results
1120
18,132
2,765
2,510
2.2
Fixed assets
1150
216,597,030
192,736,224
165,776,831
2.3, 3.2
Financial investments
1170
206,517,266
169,674,801
158,223,497
2.4, 2.6, 3.3
Deferred tax assets
1180
3,662,978
2,482,779
1,222,741
2.12, 3.11
Other non-current assets
1190
13,363,562
8,316,059
7,563,601
2.7, 3.5.1
Total for Section I
1100
441,304,047
374,614,040
334,496,816
II. Current Assets
Inventories
1210
109,973,750
57,259,269
55,675,785
2.5, 3.4
Input VAT
1220
1,338,833
1,049,657
1,176,619
Accounts receivable
1230
126,274,388
78,512,363
109,715,882
2.5, 3.5.1
Financial investments (excluding cash equivalents)
1240
177,878
10,605,000
9,481,811
2.4, 2.6, 3.3
Cash and cash equivalents
1250
25,389,114
47,458,916
26,636,800
2.8, 3.6
Other current assets
1260
--
43
43
Total for Section II
1200
263,153,963
194,885,248
202,686,940
BALANCE (sum of lines 1100 + 1200)
1600
704,458,010
569,499,288
537,183,756
Balance Sheet
As of 31 December 2021.
CODES
Form under OKUD
0710001
Date (day, month, year)
31.12.2021
Entity
NLMK
OKPO
05757665
Taxpayer’s identification number
TIN
4823006703
Type of activity
Production of cold-rolled steel flats
under OKVED2
24.10.4
Type of business entity / form of ownership Public Joint Stock Companies /
under OKOPF/ OKFS
12247 / 34
Joint private and foreign property
Unit of measurement – RUB thou.
OKEI
384
Address
398040, Lipetsk, 2, Metallurgov sq.
The accounting statements are subject to obligatory auditing
V
YES
NO
Auditor PWC Audit
The auditor’s taxpayer identification number
TIN
7705051102
The auditor’s main state registration number
OGRN
1027700148431
Balance
Sheet
5
Accounting
(Financial)
reports
for 2021
Notes
Form 0710001 p. 2
Indicator
Code
As of 31.12.2021
As of
31.12.2020
As of 31.12.2019
Disclosure in
Notes
1
2
3
4
5
6
LIABILITIES
III. Capital and reserves
Charter capital
1310
5,993,227
5,993,227
5,993,227
3.7
Revaluation of non-current assets
1340
3,234,383
3,259,484
3,275,807
Additional capital (w/o revaluation)
1350
771,777
771,777
771,777
Reserve capital
1360
299,661
299,661
299,661
Retained profit (uncovered loss)
1370
272,577,474
245,414,209
289,131,900
Total for Section III
1300
282,876,522
255,738,358
299,472,372
IV. Long-term liabilities
Debt
1410
140,058,784
152,793,410
105,703,843
2.6, 2.9, 3.8
Deferred tax liabilities
1420
15,783,089
12,056,430
10,847,050
2.12, 3.11
Other liabilities
1450
--
--
385320
2.5, 3.5.2
Total for Section IV
1400
155,841,873
164,849,840
116,936,213
V. Short- term liabilities
Debt
1510
95,354,511
43,916,850
30,406,203
2.6, 2.9, 3.8
Payables
1520
160,793,167
100,325,861
86,497,982
2.5, 3.5.2
Estimated liabilities
1540
9,591,937
4,668,379
3,870,986
2.10, 3.9
Total for Section V
1500
265,739,615
148,911,090
120,775,171
BALANCE (sum of lines 1300 + 1400 + 1500)
1700
704,458,010
569,499,288
537,183,756
NLMK official
E. Morozova
by virtue of Power of Attorney No.505-20/109 dd. 01.02.2021
2 February 2022
Balance
Sheet
6
Accounting
(Financial)
reports
for 2021
Notes
Profit and loss statement
for 2021.
CODES
Form under OKUD
0710002
Date (day, month, year)
31.12.2021
Entity
NLMK
OKPO
05757665
Taxpayer’s identification number
TIN
4823006703
Type of activity
Production of cold-rolled steel flats
under OKVED2
24.10.4
Type of ownership / ownership
Public joint-stock companies / Joint private and foreign property
under OKOPF/ OKFS
12247 / 34
Unit of measurement – RUB thou.
OKEI
384
Indicator
Code
for 2021
for 2020
Disclosure in
Notes
1
2
3
4
5
Revenue
2110
792,927,899
437,079,106
2.11, 3.10.1
incl. sales of iron and steel products
2110.1
787,970,309
434,795,572
Cost of sales
2120
(495,622,579)
(325,865,606)
2.11, 3.10.1
incl. iron and steel products sold
2120.1
(489,839,657)
(323,384,896)
Gross income (loss)
2100
297,305,320
111,213,500
Commercial costs
2210
(59,446,777)
(33,317,051)
Administrative costs
2220
(24,617,984)
(18,460,815)
Sales profit (loss)
2,200
213,240,559
59,435,634
Income from shareholding in other organizations
2310
79,014,241
48,980,386
3.3.
Interest receivable
2320
354,203
348,436
2.4, 3.3
Interest payable
2330
(5,392,327)
(6,131,228)
2.9, 3.8
Other income
2340
60,044,403
20,397,324
2.11, 3.10.2
Other costs
2350
(27,800,449)
(55,923,841)
Profit (loss) before taxes
2,300
319,460,630
67,106,711
Income tax
2410
(41,721,742)
(6,310,959)
2.12, 3.11
incl. current income tax
2411
(39,175,282)
(6,361,617)
deferred income tax
2412
(2,546,460)
50,658
Other
2460
(22,173)
(3,167)
Redistribution of income tax of the consolidated group of taxpayers
2465
474,866
332,529
2.12, 3.11
Net profit (loss)
2400
278,191,581
61,125,114
3.7
Profit and
Loss Statement
7
Accounting
(Financial)
reports
for 2021
Notes
Form 0710002 p. 2
Indicator
Code
for 2021
for 2020
Disclosure in Notes
1
2
3
4
5
Consolidated financial performance for the period
2500
278,191,581
61,125,114
FOR REFERENCE
Base profit (loss) per share (RUB)
2900
46,4
10,2
3.7
NLMK official
E. Morozova
by virtue of Power of Attorney No.505-20/109 dd. 01.02.2021
2 February 2022
Profit and
Loss Statement
8
Accounting
(Financial)
reports
for 2021
Notes
CAPITAL STATEMENT
for 2021.
CODES
Form under OKUD
0710004
Date (day, month, year)
31.12.2021
Entity
NLMK
OKPO
05757665
Taxpayer’s identification number
TIN
4823006703
Type of activity
Production of cold-rolled steel flats
under OKVED2
24.10.4
Type of ownership / ownership
Public joint-stock companies / Joint private and foreign property
under OKOPF/ OKFS
12247 / 34
Unit of measurement – RUB thou.
OKEI
384
1. Capital flow
Indicator
Code
Charter capital
Additional
capital
Reserve
capital
Retained profit (uncovered
loss)
Total
1
2
3
4
5
6
7
Capital as of 31 December 2019
3100
5,993,227
4,047,584
299,661
289,131,900
299,472,372
for 2020
Capital increase – total:
3210
--
--
--
61,207,393
61,207,393
including:
net profit
3211
Х
Х
Х
61,125,114
61,125,114
income directly pertaining to the capital
increase
3213
Х
--
Х
82,279
82,279
Capital reduction – total:
3220
--
--
--
(104,941,407)
(104,941,407)
including:
dividends
3227
Х
Х
Х
(104,941,407)
(104,941,407)
Additional capital change
3230
Х
(16,323)
--
16,323
Х
Capital as of 31 December 2020
3200
5,993,227
4,031,261
299,661
245,414,209
255,738,358
for 2021
Capital increase – total:
3310
--
--
--
278,314,318
278,314,318
including:
net profit
3311
Х
Х
Х
278,191,581
278,191,581
income directly pertaining to the capital
increase
3313
Х
--
Х
122,737
122,737
Capital reduction – total:
3320
--
--
--
(251,176,154)
(251,176,154)
including:
dividends
3327
Х
Х
Х
(251,176,154)
(251,176,154)
Additional capital change
3330
Х
(25,101)
--
25,101
Х
Capital as of 31 December 2021
3300
5,993,227
4,006,160
299,661
272,577,474
282,876,522
Statement of changes in
equity
9
Accounting
(Financial)
reports
for 2021
Notes
Form 0710004 c.2
3. Net assets
Indicator
Code
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
1
2
3
4
5
Net assets
3600
282,876,522
255,738,358
299,472,372
NLMK official
E. Morozova
by virtue of Power of Attorney No.505-20/109 dd. 01.02.2021
2 February 2022
Statement of changes in
equity
10
Accounting
(Financial)
reports
for 2021
Notes
CASH FLOW STATEMENT
CODES
for 2021.
Form under OKUD
0710005
Date (day, month, year)
31.12.2021
Entity
NLMK
OKPO
05757665
Taxpayer’s identification number
TIN
4823006703
Type of activity
Production of cold-rolled steel flats
under OKVED2
24.10.4
Type of ownership / ownership
Public joint-stock companies / Joint private and foreign property
under OKOPF/ OKFS
12247 / 34
Unit of measurement – RUB thou.
OKEI
384
Indicator
Code
for 2021
for 2020
1
2
3
4
Cash flow from current operations
Inflow – total
4110
836,032,369
458,410,301
including:
from sales of goods, products, works and services
4111
833,967,533
456,750,478
from rent, license payments, royalties, commissions and other similar payments
4112
371,286
233,448
other inflow
4119
1,693,550
1,426,375
Payments - total
4120
(658,780,135)
(380,650,067)
including those to suppliers (contractors) for raw and other materials, works, services
4121
(531,388,862)
(326,956,793)
related to employee salaries and wages
4122
(34,857,573)
(32,260,560)
interest on liabilities
4123
(5,222,751)
(6,134,854)
corporate income tax
4124
(39,694,792)
(5,072,579)
other payments
4129
(47,616,157)
(10,225,281)
Balance of cash flows from current operations
4100
(177,252,234)
77,760,234
Cash flows from investment operations
Inflow – total
4210
111,736,662
81,359,005
including:
from sale of non-current assets (except financial investments)
4211
26,903
800,091
from sale of interest (shares) in other companies
4212
645
40,836
from repayment of loans granted, from sale of debt securities (rights of demand of funds from other persons)
4213
21,178,526
8,382,160
from dividends, interest on debt financial investments and similar incoming funds from share participation in
other organizations
4214
80,417,755
72,135,918
other inflow
4219
10,112,833
--
Cash flow statement
11
Accounting
(Financial)
reports
for 2021
Notes
Indicator
Code
for 2021
for 2020
1
2
3
4
Payments – total
4220
(91,699,230)
(64,951,279)
including those related to acquisition, set-up, upgrade, reconstruction and preparation for usage of non-current
assets
4221
(47,903,836)
(40,849,888)
related to acquisition of stock (shares) in other companies
4222
(2,334,008)
(14,871,000)
those related to acquisition of debt securities (rights of demand of monitory funds from other persons),
granting of loans to other entities
4223
(41,445,278)
(8,356,133)
other payments
4229
(16,108)
(874,258)
Balance of cash flows from investment operations
4200
20,037,432
16,407,726
Cash flows from financial operations
Inflow – total
4310
169,415,257
90,753,572
including:
receiving loans and credits
4311
169,415,257
90,753,572
Payments – total
4320
(386,875,658)
(166,007,430)
including:
payment of dividends and other payments related to profit distribution in favour of owners (participants)
4322
(227,938,724)
(111,456,848)
related to repayment (buy-back) of bills of exchange and other debt securities, repayment of loans and credits
4323
(125,772,476)
(48,924,784)
other payments
4329
(33,164,458)
(5,625,798)
Balance of cash flows from financial operations
4300
(217,460,401)
(75,253,858)
Balance of cash flows for the reporting period
4400
(20,170,735)
18,914,102
Balance of cash and cash equivalents as of the beginning of the reporting period
4450
47,458,761
26,636,609
Balance of cash and cash equivalents as of the end of the reporting period
4500
25,388,809
47,458,761
Foreign currency to RUB exchange rate fluctuation effect
4490
(1,899,217)
1,908,050
NLMK official
E. Morozova
by virtue of Power of Attorney No.505-20/109 dd. 01.02.2021
2 February 2022
Cash flow statement
12
Accounting
(Financial)
reports
for 2021
Notes
NOTES
TO BALANCE SHEET
AND PROFIT AND LOSS STATEMENT
13
Accounting
(Financial)
reports
for 2021
Notes
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: NLMK.
Domicile of the Company: 2, Metallurgov sq., 398040, Lipetsk. 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);
industrial construction, rendering construction and public utilities services;
production of construction materials, structures, and products;
foreign and domestic trade;
generation, transmission and distribution of electrical and heat power;
and others.
The Company is licensed for all types of activities subject to licensing. The Company has representative office in Moscow.
As of 31.12.2021 the Company’s headcount was 25,771 people, as of 31.12.2020 – 27,207 people.
Board of Directors as of December 31, 2021:
Chairman of the Board of Directors
Vladimir Lisin
Members:
Oleg Bagrin
Thomas Veraszto
Nikolai Gagarin
Evgenia Zavalishina
Sergey Kravchenko
Joachim Limberg
Marjan Oudeman
Stanislav Shekshnya
Management Board as of December 31, 2021:
Grigory Fedorishin
President (Chairman of the Management Board)
Tatiana Averchenkova
Managing Director
Mikhail Arkhipov
Vice President, HR & Management System
Ilya Guschin
Vice-president, Sales
Barend de Vos
Vice-President, International Operations
Sergey Likharev
Vice-President for Logistics
Shamil Kurmashov
Vice President, CFO
Sergey Chebotarev
Vice President, Energy and Utilities
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Accounting
(Financial)
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for 2021
Notes
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 March 4, 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.
Russian economy showed a positive trend of recovering from pandemic in 2021. Recovery of global economy and high prices at world markets including prices for
steel and steel products also contribute to this situation. However, higher prices in some Russian and world markets also lead to the growth of inflation in Russia.
The COVID-19 pandemic did not significantly affect the production and supply chains 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.
As of the date of issue of accounting (financial) statements, the situation with the spread of coronavirus infection (COVID-19) is steel dynamic. The Company's
advantages are a stable financial position, low debt burden and a liquidity cushion.
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 website. 1
Management believes that the tax policy of the Company 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 Company 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
Company.
1Posted on the website of NLMK (http://www.nlmk.com)
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Accounting
(Financial)
reports
for 2021
Notes
From 1 January 2022 an excise tax on liquid steel will be introduced and the mineral extraction tax (MET) will be increased. In general, excise tax on liquid steel will
be calculated in relation to the mass of semi-finished products obtained from liquid steel as 2.7% of the average export market price of steel slabs per month. Along
with that, if the steel is smelted in open-hearth, induction and (or) electric steelmaking furnaces and if the share of ferrous scrap in the total mass of raw materials
used for the production of liquid steel is at least 80%, the excise tax will be calculated as 30% of the difference between average export market price of steel billet
per month and average market price of scarp on the Russian market per month minus 12.5 thousand rubles and 50% of the cost of purchased ferroalloys and
alloying elements. MET for iron ore will be calculated on the weight of iron ore mined as 4.8% of the index SGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures /
Options multiplied by the ratio of the actual iron content in the ore to the reference value (62%).
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. 17 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.
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). CFCs’ income is
taxed at 20% in line with the legislation requirements.
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 January 1, 2008, standard depreciation charges are established on the basis of a 20-year term. For similar intangible assets
accounted from January 1, 2008, depreciation is not charged.
There are no regular revaluations of intangible assets or checks for their impairment.
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.
16
Accounting
(Financial)
reports
for 2021
Notes
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
Assets, except for land plots, with the original value of 40 thousand rubles 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
Useful life (years) of items taken onto the books
before 01.01.2003
since 01.01.2003
Buildings
5-256
5-45
Structures
8-106
2-47
Machinery and equipment including household
equipment and other items
5-100
1-42
Vehicles
13-34
3-25
Cultivated resources of plant origin
40
30
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 since 01.01.2003 -
according to the norms calculated based on the useful lives set by the Company.
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Accounting
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Notes
Depreciation is not charged for objects under preservation for longer than three months as well as within renewal period longer than 12 months.
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
Units of financial investment accounting: for shares – a share; for bonds – a bond; for contributions in authorized capital – interest; for certificates of deposit, notes –
series and number of a security; for loans, deposits, assignment and simple partnership contracts – a contract. Financial investments are accounted on the basis of
actual acquisition costs. Debt securities for which current market value is n/a 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 (shares, bonds), for which current market value is not determined, are evaluated at the moment of retirement at the average original cost of
each retiring unit of financial investment accounting split by batches. The identification of batches of retiring securities is provided by the entity or subdivision
concluding an agreement, which is the basis for recording the retirement of securities in accounting.
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.
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.
In relation to inventories intended for administrative purposes, FAS 5/2019 Inventories is not applied.
18
Accounting
(Financial)
reports
for 2021
Notes
Inventories received without settlement documents of suppliers are recorded as non-invoiced deliveries at book prices.
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.
General costs are fully recognized as general expenses in the course of the reporting period.
Expenses related to the sales of products (works, services) are fully recognized as general expenses in the course of the reporting period.
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 inventories and probable net price of 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;
19
Accounting
(Financial)
reports
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Notes
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;
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 as expenses related to normal operation in full in the reporting
period
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.
20
Accounting
(Financial)
reports
for 2021
Notes
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 profit tax return.
Every month, the Company calculates deferred tax assets, deferred tax liabilities, deferred profit tax, expenses (income) on profit tax, contingent expenses (income)
on profit tax, running tax expenses (income).
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 profit 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 "Profit tax redistribution within a consolidated taxpayer
group" 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 rouble 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 roubles 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 rouble set by the RF Central Bank:
(RUB)
Foreign currency
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
USD 1
74.2926
73.8757
61.9057
EUR 1
84.0695
90.6824
69,3406
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.
21
Accounting
(Financial)
reports
for 2021
Notes
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
FAS 5/2019 Inventories has been applied since accounting (financial) statements of 2021, the effect of accounting policy changes due to the start of FAS 5/2019
applixation are shown in prospective.
Starting of 1 January 2021 financial investments (shares, bonds), for which current market value is not determined, are evaluated at the moment of retirement at the
average original cost of each retiring unit of financial investment accounting split by batches. Earlier they were evaluated at the original cost if financial investments
acquired first (FIFO method) Changes in the accounting policy did not have a significant effect on the data of previous periods.
2. 16 COMPARATIVE DATA
Comparative data of these statements are derived by carrying over the respective reporting parameters for the previous reporting period.
22
Accounting
(Financial)
reports
for 2021
Notes
3. DISCLOSURE OF SIGNIFICANT INDICATORS
3. 1 INTANGIBLE ASSETS
Availability of intangible assets
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Original value
Depreciation
Balance valuation
Original value
Depreciation
Balance valuation
Original value
Depreciation
Balance valuation
Groups of intangible assets – total
1,231,635
(127,408)
1,104,227
1,484,837 (122,511)
1,362,326 1,790,481
(118,767)
1,671,714
incl.:
research and development
40,802
(18,754)
22,048
36,939
(16,467)
20,472
36,739
(15,180)
21,559
Software and data bases
1,188,464
(106,295)
1,082,169
1,445,529 (103,692)
1,341,837 1,751,019
(100,903)
1,650,116
trademarks and service marks
275
(265)
10
275
(258)
17
629
(590)
39
Original works of entertainment books or
art
2,069
(2,069)
--
2069
(2,069)
--
2,069
(2,069)
--
other intellectual property items
25
(25)
--
25
(25)
--
25
(25)
--
Costs for purchase of intangible assets
Х
Х
40,852
Х
Х
39,086
Х
Х
35,922
Total
Х
Х
1,145,079
Х
Х
1,401,412
Х
Х
1,707,636
For reference:
intangible assets, created by the
organization itself
151,271
(131,003)
20,268
31,574
(13,358)
18,216
31,373
(12,399)
18,974
intangible assets with fully repaid value
183,091
(183,091)
--
99,925
(99,925)
--
100,030
(100,030)
--
There are no intangible assets with undetermined useful life.
23
Accounting
(Financial)
reports
for 2021
Notes
3. 2 FIXED ASSETS AND CONSTRUCTION IN PROGRESS
Availability of fixed assets and capital investments in progress
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Original value
Depreciation
Balance valuation
Original value
Depreciation
Balance valuation
Original value
Depreciation
Balance valuation
Fixed assets
Buildings
47,325,405
(14,452,735)
32,872,670
38,348,838
(13,151,761)
25,197,077
35,773,855
(11,882,138)
23,891,717
Structures
67,556,455
(22,884,386)
44,672,069
50,437,540
(19,998,963)
30,438,577
35,227,726
(17,784,886)
17,442,840
Machinery and equipment including
household equipment and other
items
220,073,953 (138,529,025)
81,544,928
209,651,315
(125,674,284)
83,977,031
186,947,935
(114,806,928)
72,141,007
Vehicles
11,523,575
(3,462,802)
8,060,773
6,745,323
(3,085,900)
3,659,423
5,318,957
(2,768,108)
2,550,849
Cultivated resources of plant origin
1,370
(631)
739
1,370
(592)
778
1,370
(553)
817
Land plots and land improvement
expenses
1,361,684
--
1,361,684
1,345,426
--
1,345,426
1,345,426
--
1,345,426
Total
347,842,442 (179,329,579)
168,512,863
306,529,812
(161,911,500)
144,618,312
264,615,269
(147,242,613)
117,372,656
For reference:
The cost of real estate objects,
received for use and undergoing
state registration.
11,866,637
Х
Х
8,727,773
x
x
6,122,476
x
x
cost of leased out main assets
3,420,690
(1,462,842)
1,957,848
2,971,177
(1,327,340)
1,643,837
1,513,213
(938,194)
575,019
Capital investments in progress
Construction of objects
Х
x
36,687,096
Х
x
36,969,565
Х
x
37,429,523
Acquisition of objects
x
x
632,640
x
x
972,912
x
x
850,685
Equipment to be installed
x
x
6,641,193
x
x
5,471,515
x
x
6,809,043
Materials and spare parts for
construction and installation works
x
x
4,123,238
x
x
4,703,920
x
x
3,314,924
Total
x
x
48,084,167
x
x
48,117,912
x
x
48,404,175
24
Accounting
(Financial)
reports
for 2021
Notes
Fixed assets flow (initial value)
(RUB thou.)
Description
for 2021
for 2020
Acquired
Retired
Acquired
Retired
Buildings
9,025,921
(49,354)
2,613,438
(38,455)
Structures
17,150,470
(31,555)
15,392,203
(182,389)
Machinery and equipment including household equipment
and other items
11,596,100
(1,173,462)
24,977,868
(2,274,488)
Vehicles
4,851,955
(73,703)
1,493,291
(66,926)
Land plots and land improvement expenses
16,258
--
--
--
Total
42,640,704
(1,328,074)
44,476,800
(2,562,258)
For reference:
The increase of the facilities’ value due to additional
construction, installation of additional equipment,
reconstruction
27,285,737
--
12,789,716
the decrease of the objects’ value as a result of partial
liquidation
--
(200,094)
--
(25,901)
Depreciation of the fixed assets retired in 2021 amounted to RUB 1,209,114 thou. in 2021 and RUB 1,810,003 thou. over 2020.
Non-depreciable fixed assets
(RUB thou.)
Description
Original value
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Land plots
1,361,684
1,345,426
1,345,426
Facilities under preservation
611,539
693,299
694,231
Housing facilities
17,541
17,541
17,541
Total
1,990,764
2,056,266
2,057,198
As of 31.12.2021 the Company rents fixed assets (including land plots) for the amount of RUB 4,222,373 thou. as of 31.12.2020 – RUB 4,249,662 thou. as of
31.12.2019 – RUB 4,267,248 thou. (off-balance sheet price under lease agreements). The Company rents land lots with the total area of 2,220 thousand square
meters. The land lots rented are located in Lipetsk and Lipetsk Region.
25
Accounting
(Financial)
reports
for 2021
Notes
3. 3 FINANCIAL INVESTMENTS
Availability of financial investments
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Original value
Provision for
financial
investment
impairment
Balance
valuation
Original value
Provision for
financial
investment
impairment
Balance
valuation
Original value
Provision for
financial
investment
impairment
Balance
valuation
Long-term financial
investments - total
223,713,843
(17,196,577)
206,517,266
233,837,323
(64,162,522)
169,674,801
209,619,174
(51,395,677)
158,223,497
investments in charter capitals
of other entities
223,163,075
(16,746,741)
206,416,334
233,339,221
(63,712,684)
169,626,537
209,128,494
(50,945,128)
158,183,366
of which:
NLMK Overseas Holdings
118,548,843
(7,000,000)
111,548,843
116,234,843
(43,770,000)
72,464,843
90,362,843
(30,900,000)
59,462,843
NLMK Kaluga
39,185,090
(7,218,000)
31,967,090
39,185,090
(7,218,000)
31,967,090
39,185,090
(7,218,000)
31,967,090
Stoilensky
21,196,293
--
21,196,293
21,196,293
--
21,196,293
21,196,293
--
21,196,293
Altai Koks
18,477,302
--
18,477,302
18,477,302
--
18,477,302
18,477,302
--
18,477,302
VIZ Steel
14,754,878
--
14,754,878
14,754,878
--
14,754,878
14,754,878
--
14,754,878
Uralvtorchermet
--
--
--
12,901,320
(12,459,329)
441,991
12,901,320
(11,225,918)
1,675,402
Vtorchermet NLMK
1,682,834
--
1,682,834
1,240,843
--
1,240,843
1,240,843
--
1,240,843
NLMK-Metalware
4,196,960
--
4,196,960
4,196,960
--
4,196,960
4,196,960
--
4,196,960
Mining & Concentration
Complex Zhernovsky-1
2,772,287
(2,528,741)
243,546
2,772,287
(265,355)
2,506,932
2,772,287
--
2,772,287
Loans granted
75,624
--
75,624
48,264
48,264
40,131
--
40,131
Other financial investments
475,144
(449,836)
25,308
449,838
(449,838)
--
450,549
(450,549)
--
Short-term financial
investments - total
178,544
(666)
177,878
10,606,000
(1,000)
10,605,000
9,482,811
(1,000)
9,481,811
Loans granted
159,660
(666)
158,994
62,580
(1,000)
61,580
12,926
(1,000)
11,926
Deposits
18,884
--
18,884
10,543,420
10,543,420
9,469,885
--
9,469,885
Total
223,892,387
(17,197,243)
206,695,144
244,443,323
(64,163,522)
180,279,801
219,101,985
(51,396,677)
167,705,308
As of 31.12.2021, 31.12.2020 and 31.12.2019 there were no financial investments for which the current market value was to be determined.
26
Accounting
(Financial)
reports
for 2021
Notes
Financial investments flow
In December 2021, Metallurg Hotel Complex was liquidated, the cost of the retired financial asset is RUB 50,810 thou. Due to the retirement of financial asset
Metallurg Hotel Complex, the earlier accrued provision in the amount of RUB 36,725 thou. was recovered.
In November 2021 a reorganization of Vtorchermet NLMK in the form of merging with Uralvtorchermet took place, the cost of financial investment of Vtorchermet
NLMK made RUB 1,682,834 thousand. Based on the provisions of paragraph 7 of RAS 1/2008 "Accounting policy of an organization”, the previously accrued
impairment provision for this financial investment into Uralvtorchermet in the amount of RUB 12,459,329 thousand was summarized with initial cost of investment
into Uralvtorchermet to form the cost of joining the Uralvtorchermet LLC investment to Vtorchermet NLMK LLC in the amount of RUB 441 991 thousand. No
indicators for recovery of provision for impairment were defined at the moment of joining.
In order to increase net assets of NLMK Overseas Holdings in 2021 the Company made a contribution into its assets in cash in the amount of RUB 2,314,000 thousand
(in 2020, a contribution into its assets in cash in the amount of of RUB 14,871,000 thousand by offsetting the Company's cash claims under the interest-free loans
granted in the amount of RUB 11,001,000 thousand ) and reflected as financial investments, guided by the provisions of paragraph 7 of RAS 1/2008 "Accounting
policy of an organization".
The Company granted loans to its related parties.
Impairment of financial investments
Due to improvements in the economic environment, management of the Company identified indicators of a potential reversal of the previously recognised
impairment provision for the Company's financial investments, as a result the financial investment into NLMK Overseas Holding LLC was tested for possible reversal
of the previously recognised impairment.
The recoverable amount of an investment in the capital of the subsidiary NLMK Overseas Holdings LLC, which also has in its assets investments in its own subsidiaries
and jointly controlled companies, is determined as the amount of net assets of NLMK Overseas Holdings LLC according to its reporting data, adjusted for the
difference between the total book value of the investments of NLMK Overseas Holdings LLC and the corresponding estimated value of the final investment facilities,
the most significant of which are NLMK Indiana LLC, NLMK Pennsylvania LLC, NLMK DanSteel A/S and NLMK Belgium Holdings S.A. The estimated value of the
ultimate investments, in its turn, is determined on the basis of models for assessing the recoverable investment amount into major manufacturing enterprises and
on the basis of net assets to estimate the recoverable amount of investments into other companies. Based on the results of an impairment test for investments in
NLMK Overseas Holdings LLC, a reserve in the amount of RUB 36,770,000 thousand was reversed in 2021 (a reserve of RUB 12,870,00 thousand accrues in 2020).
The recoverable cost of investment in the capital of the subsidiary company Mining & Concentration Complex Zhernovsky-1 LLC is determined by a model for
assessing the recoverable amount of an investment. Based on the results of an impairment test for investments in Mining & Concentration Complex Zhernovsky-1
LLC, a reserve in the amount RUB 2,263,386 thousand was accrued in 2021 (in 2020 - RUB 265,355 thousand).
Information on the main approaches to determining the key prerequisites and assumptions used to determine the recoverable amount of investments as of 31
December 2021, as well as the sensitivity of the recoverable amount to changes in assumptions, is presented in 2021 Consolidated Financial Statements of NLMK
prepared in accordance with the International Financial Reporting Standards. The assumptions used to define the amount of investments to be reimbursed, not
disclosed in the consolidated financial statements are given in the table below.
27
Accounting
(Financial)
reports
for 2021
Notes
* Average weighted prices with regard to the product mix of products sold, averaged over the period of 2022-2026.
** Sensitivity of the recoverable cost of final investee to changes in relevant factors during the forecast and post-forecast periods.
Income from financial investments
Name
Income, RUB k
for 2021
for 2020
Income from short-term deposits (from 3 months up to 1 year)
36,863
101,191
Dividends from subsidiaries
79,014,241
48,980,386
Interests on loans granted
11,954
3,988
Total
79,063,058
49,085,565
Cash generating unit
Discount rate,
%
Product types
Average price of
product sale*, USD
per ton (FCA)
Sensitivity**, %
Price change
Change of sale
volumes
Change of the
discount rate
(1 %)
1 %
(1 %)
1 %
(1 p.p.)
1 p.p.
NLMK Pennsylvania LLC
10.8 %
Flat products
848
-15.1 % 15.2 %
-1.8 %
1.8 %
10.2 %
-7.5 %
NLMK Indiana LLC
18.1 %
Flat products
705
-11.5 % 11.5 %
-1.5 %
1.5 %
2.4 %
-1.8 %
28
Accounting
(Financial)
reports
for 2021
Notes
3. 4
INVENTORIES
Structure of inventories
(RUB thou.)
Type of stock
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Production cost
Provisions for
inventory
impairment
Balance
valuation
Production cost
Provisions for
inventory
impairment
Balance
valuation
Production cost
Provisions for
inventory
impairment
Balance
valuation
Feedstock, materials and other
similar valuables
48,072,972
(1,364,037)
46,708,935
28,456,170
(1,908,513)
26,547,657
30,949,980
(1,909,124)
29,040,856
WIP costs
19,947,475
(218,484)
19,728,991
13,430,094
(346,073)
13,084,021
11,181,845
(358,371)
10,823,474
Finished products and goods for
reselling
16,312,396
--
16,312,396
8,553,718
--
8,553,718
8,208,828
--
8,208,828
Goods shipped
26,990,563
--
26,990,563
8,841,876
--
8,841,876
7,439,395
--
7,439,395
Deferred expenses
232,865
--
232,865
231,997
--
231,997
163,232
--
163,232
Total
111,556,271
(1,582,521) 109,973,750
59,513,855
(2,254,586)
57,259,269
57,943,280
(2,267,495)
55,675,785
Inventories to be sold to buyers instead of further processing are accounted in finished products.
Inventory flow
(RUB thou.)
Description
for 2021
for 2020
Acquired
Retired
Intergroup
inventory
turnover
Acquired
Retired
Intergroup
inventory
turnover
Feedstock, materials and other
similar valuables
479,538,831
(4,859,039)
(454,518,514)
272,995,612
(9,498,334)
(265,990,477)
WIP costs
70,555,651
(2,127)
(63,908,554)
63,607,903
(102,810)
(61,244,546)
Finished products and goods for
reselling
602,604
(217,613,152)
224,769,226
946,112
(145,118,523)
144,517,301
Goods shipped
4,366,778
(279,875,932)
293,657,841
810
(181,316,051)
182,717,722
Deferred expenses
612,601
(611,734)
1
618,863
(550,098)
0
Total
555,676,465
(502,961,984)
0
338,169,300
(336,585,816)
0
29
Accounting
(Financial)
reports
for 2021
Notes
3. 5 ACCOUNTS RECEIVABLE AND PAYABLE
3. 5. 1 ACCOUNTS RECEIVABLE
Structure of accounts receivable
(RUB thou.)
Type of debt
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Accounted for
by the Contract
terms
Bad debt
provision
Balance
valuation
Accounted for
by the Contract
terms
Bad debt
provision
Balance
valuation
Accounted for
by the Contract
terms
Bad debt
provision
Balance
valuation
Long-term accounts
receivable - total
52,573,715
--
52,573,715
12,101,872
--
12,101,872
60,988,431
--
60,988,431
including:
settlements with buyers and
customers
--
--
--
--
--
--
--
--
--
advance payments made1 -
total
1,912,647
--
1,912,647
198,000
--
198,000
1,400,653
--
1,400,653
including:
under current operations
105,956
--
105,956
103,481
--
103,481
77,664
--
77,664
for non-current assets3
1,806,691
--
1,806,691
94,519
--
94,519
1,322,989
--
1,322,989
other
50,661,068
--
50,661,068
11,903,872
--
11,903,872
59,587,778
--
59,587,778
Short- term accounts
receivable - total
96,092,405
(9,028,170)
87,064,235
83,802,923
(9,076,373)
74,726,550
64,729,561
(8,438,509)
56,291,052
including:
settlements with buyers and
customers
27,467,000
(101,890)
27,365,110
13,952,510
(193,290)
13,759,220
13,189,398
(169,846)
13,019,552
advance payments made -
total
16,785,812
(707,987)
16,077,825
12,202,196
(594,771)
11,607,425
8,754,720
(142,353)
8,612,367
including:
under current operations
5,227,623
(706,669)
4,520,954
3,979,338
(593,453)
3,385,885
2,512,790
(141,035)
2,371,755
for non-current assets3
11,558,189
(1,318)
11,556,871
8,222,858
(1,318)
8,221,540
6,241,930
(1,318)
6,240,612
other
51,839,593
(8,218,293)2
43,621,300
57,648,217
(8,288,312)2
49,359,905
42,785,443
(8,126,310) 2
34,659,133
Total
148,666,120
(9,028,170)
139,637,950
95,904,795
(9,076,373)
86,828,422
125,717,992
(8,438,509)
117,279,483
1 Here and hereafter the advance payments made are shown VAT included.
2 Including the reserve in full amount for bad debt of Stalkonstruktsiya Concern CJSC of RUB 2,046,892 thousand, to Mr. N. Maximov in the amount of RUB 5,583,697 thousand, which is not included into the
overdue debt. There were no significant changes YoY in the structure and composition of the provisions (reserves).
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.
30
Accounting
(Financial)
reports
for 2021
Notes
Other debtors
(RUB thou.)
Type of debt
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Other long-term receivables– total
50,661,068
11,903,872
59,587,778
including:
settlements with personnel on other operations
178,428
217,012
257,209
interest-free loans granted
50,392,943
3,113,758
48,003,296
of which
NLMK Overseas Holdings
48,469,637,2
--
45,736,659,2
interest on long-term financial investments
89,697
8,573,102,1
11,327,273,1
Other short-term receivables- total
43,621,300
49,359,905
34,659,133
including:
interest-free loans granted
89,032
32,959,567
1,923,308
of which
interest-free Loan to NLMK Overseas Holdings
--
32,483,381,2
--
received non-interest bearing notes
2,000,000
1,300,862
1,822,526
settlements on interest accrued
697,679
1,976,378
167,459
settlements with budget and off-budget funds in terms of taxes and duties
51,585
25,525
43,310
budget settlements on VAT
8,923,851
5,883,978
5,762,672
settlements with customs
10,418,370
333,429
321,288
claim settlements
112,905
201,728
133,519
settlements with CTG participants
1,903,344
1,468,309
238,902
settlements related to reimbursable services
51,966
36,772
31,913
lease settlements
75,796
83,288
15,942
settlements with personnel on salaries and other operations
4,736
11,944
6,723
settlements with reporting persons
59,751
18,165
60,324
settlements related to dividends
8,420,061
--
22,155,942
interest-free loans granted (cash pooling)
10,302,404
4,554,889
1,776,782
other
509,820
505,071
198,523
Total
94,282,368
61,263,777
94,246,911
1 Interest on the long-term loan of NLMK Ural.
2 Interest-free loan as of 31.12.2021 maturing on 31.12.2023 as of 31.12.2020 maturing on 31.12.2021, as of 31.12.2019 maturing on 31.12.2021.
31
Accounting
(Financial)
reports
for 2021
Notes
Overdue accounts receivable
(RUB thou.)
Type of debt
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Accounted for
by the Contract terms
Book
value
Accounted for
by the Contract terms
Book
value
Accounted for
by the Contract terms
Book
value
Total
3,696,658
2,300,395
3,307,793
1,863,327
2,481,211
1,674,609
including:
settlements with buyers and
customers
978,652
876,762
915,518
722,228
1,277,607
1,107,761
advance payments made - total
1,896,028
1,189,359
1,543,518
950,065
574,710
433,675
incl.:
under current operations
1,896,028
1,189,359
1,543,518
950,065
574,710
433,675
other
821,978
234,274
848,757
191,034
628,894
133,173
3. 5. 2 Accounts payable
Structure of accounts payable
(RUB thou.)
Type of debt
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Long-term accounts payable - total
--
--
385,320
incl.:
settlements with suppliers and contractors
--
--
385,320
Short-term accounts payable - total
160,793,167
100,325,861
86,497,982
including:
advances received1
97,620,654
48,468,030
31,556,300
suppliers and contractors
56,795,434
37,913,965
31,356,508
settlements related to taxes and duties
3,116,564
3,676,872
1,777,048
settlements related to payables to employees
1,124,326
1,027,276
962,781
settlements related to debt to state off-budget funds
753,901
665,696
655,058
debt to shareholders in terms of dividends
520,862
7,862,227
19,666,723
other
861,426
711,795
523,564
Total
160,793,167
100,325,861
86,883,302
1 Hereinafter advance payments received from buyers and customers are indicated net of VAT to be paid to the budget.
32
Accounting
(Financial)
reports
for 2021
Notes
Overdue accounts payable
(RUB thou.)
Indicator
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Total
5,717,029
7,190,579
6,226,536
including:
settlements with suppliers and contractors
5,620,134
7,108,975
5,454,612
advance payments received
79,894
39,250
716,298
other
17,001
42,354
55,626
3. 6 CASH AND CASH EQUIVALENTS
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Settlement accounts
12,153,053
1,325,552
478,934
Currency accounts
6,045,530
22,246,831
14,948,889
Deposits (up to 3 months)
7,185,170
23,871,338
11,203,786
Other cash equivalents
5,361
15,195
5,191
of which: financial documents
305
155
191
Total
25,389,114
47,458,916
26,636,800
Other income and payments from current operations
(RUB thou.)
Description
for 2021
for 2020
Other income from current operations
1,693,550
1,426,375
Income from litigation, claims
667,287
547,892
Interest on cash equivalents
291,066
213,950
Remuneration under the program of Depositary Receipts
293,063
198,769
Purchase - sale of currency
187,801
301,700
Other income
254,333
164,064
33
Accounting
(Financial)
reports
for 2021
Notes
End
Description
for 2021
for 2020
Other payments under the current operations
(47,616,157)
(10,225,281)
Tax payments
(44,908,498)
(6,498,130)
including:
VAT, import duties
(9,912,123)
(4,911,932)
advance payments to the customs related to the exports
(33,014,000)
--
Other settlements with personnel
(955,581)
(888,324)
Settlements with various creditors
(190,723)
(120,054)
Settlements related to claims
(849,437)
(649,068)
Charity expenses
(695,989)
(565,935)
Purchase - sale of currency
--
(1,080)
Payments related to financial instruments
--
(1,421,786)
Other remittance
(15,929)
(80,904)
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 inflows and payments on investment activities
(RUB thou.)
Description
for 2021
for 2020
Other inflows from investment activity
10,112,833
--
Placement of deposits for a period of over 3 months and up to one year
29,861,210
--
Refund of deposits from over 3 months to one year
(19,748,377)
--
Other payments on investment activities
(16,108)
(874,258)
Placement of deposits for a period of over 3 months and up to one year
--
(61,119,611)
Refund of deposits from over 3 months to one year
--
60,388,183
Other payments on investment activities
(16,108)
(142,830)
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
29,984,781 thousand. (in 2020 - RUB 5,107,316 thousand).
34
Accounting
(Financial)
reports
for 2021
Notes
Cash flows with subsidiaries and other related parties (including VAT) 3
(RUB thou.)
Description
Earnings
Payments
for 2021
for 2020
for 2021
for 2020
Cash flow from current operations
487,828,579
248,547,963
(359,200,038)
(175,906,552)
Subsidiaries
32,288,565
16,301,199
(358,981,342)
(174,909,862)
Other companies1
455,540,014
232,246,764
(218,696)
(996,690)
of which: NLMK Trading SA
455,525,877
232,241,959
(218,696)
(996,690)
Cash flows from investment operations
101,491,574
72,005,750
(47,038,253)
(19,192,070)
Subsidiaries2
101,491,574
72,005,750
(47,038,253)2
(19,192,070) 2
Cash flows from financial operations
45,129,088
30,819,673
(54,456,618)
(17,246,710)
Subsidiaries
36,161,330
2,487,494
(40,913,335)
(509,999)
Other companies1
8,967,758
28,332,179
(13,543,283)
(16,736,711)
of which: NLMK Trading SA
2,353,058
28,332,179
(13,543,283)
(16,736,711)
Total
634,449,241
351,373,386
(460,694,909)
(212,345,332)
1 Cash flows of NLMK Trading SA, NLMK Pennsylvania LLC, NLMK DanSteel A/S.
2 Including contribution to the property of LLC NLMK Overseas Holdings in order to increase net assets amounted to RUB 2,314,000 thou. (in 2020 - RUB 14,871,000 thou.), reflected in line “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 contracts have been shown in aggregated form.
3. 7 EQUITY AND DIVIDENDS
Company`s shares
As of 31.12.2021 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 charter capital
Item
Share, %
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
FLETCHER GROUP HOLDINGS LIMITED
79
79
81
Other shares are free-floating (including: global depositary shares traded on the London Stock Exchange (Deutsche Bank Trust Company Americas is NLMK’s
depositary bank) and shares traded on Moscow Exchange).
Earnings per share
Description
for 2021
for 2020
Net profit for the reporting period, RUB thou.
278,191,581
61,125,114
Weighted average number of outstanding common shares, pcs.
5,993,227,240
5,993,227,240
Basic profit (loss) per share, RUB
46.4
10.2
Diluted profit per share was not calculated due to absence of factors, having the diluting effect on the basic profit per share indicator.
35
Accounting
(Financial)
reports
for 2021
Notes
Dividends
The General Shareholders’ Meeting held on 29.04.2021 approved payment of dividends in the amount of RUB 21.64 per common stock upon 2020 performance
results that made in total RUB 129,693,437 thou. with account of interim dividends of RUB 86,242,539 thou. accrued in 2020.
In 2021 the following interim dividends were declared: RUB 7.71 per common stock for Q1 which made RUB 46,207,782 thou.; RUB 13.62 per common stock for H1
which made RUB 81,627,755 thou.; RUB 13.33 per common stock for 9 months which made RUB 79,889,719 thou.
As of 31.12.2021 the dividends for 2020, Q1, H1 2021 and 9M 2021 accrued to the main company running business, are paid in full.
Detailed information on the structure of dividends and the dividend policy are published on the Company's web-site (http://www.nlmk.com)
3. 8 CREDITS AND LOANS
Structure of credits and loans
(RUB thou.)
Type of liabilities
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Long-term liabilities– total
140,058,784
152,793,410
105,703,843
including: loans
140,058,784
125,588,690
105,703,843
credits
--
27,204,720
--
Short-term liabilities– total
95,354,511
43,916,850
30,406,203
including: loans
15,315,014
11,899,989
814,132
of which:
Steel Funding DAC
812,812
--
--
NLMK Trading SA
--
11,236,646
--
Stoilensky
14,492,399
--
--
Loans under cash-pooling agreement
12,767,545
32,014,750
29,497,258
of which:
Altai Koks
9,298,993
3,189,836
1,453,136
NLMK Trade House
1,706,084
1,422,305
99,552
NLMK Kaluga
1,084,670
647,373
2,745,339
Novolipetsk Steel Service Center
177,409
600,000
382,712
Stoilensky
--
24,739,612
22,081,120
Construction and Assembly Trust NLMK
--
428,906
312,476
credits
67,271,952
2,111
94,813
Total
235,413,295
196,710,260
136,110,046
For working capital financing and for other corporate purposes, the Company signed: as of 31.12.2021, 31.12.2020 and 31.12.2019 - agreements with ALFA-BANK,
Sberbank of Russia and VTB Bank on the opening of credit facilities with the limit not exceeding RUB 85,000,000 thou. in total, as of 31.12.2021 - an agreement on
opening a credit facility with UNICREDIT S.P.A. as a facility agent, ING BANK N.V. as a mandated lead arranger and a syndicate of banks with a limit not exceeding
RUB 50,441,700 thou., as of 31.12.2020 - RUB 54,409,440 thou.
36
Accounting
(Financial)
reports
for 2021
Notes
Unused credit limit for all the credit facility agreements as at the reporting date makes RUB 68,186,100 thou., as of 31.12.2020 - RUB 112,204,720 thou.
Bank credits
(RUB thou.)
Lender description
Maturity
As of 31.12.2021
As of
31.12.2020
As of
31.12.2019
ALFA-BANK
2022
25,223,774
27,206,831
--
UNICREDIT S.P.A.
2022
42,048,178
--
--
Other credit institutions
2020
--
--
94,813
Total bank credits, incl. interest accrued
67,271,952
27,206,831
94,813
incl.:
with maturity up to 1 year, incl. current portion of long-term credits
67,271,952
2,111
94,813
Loans
(RUB thou.)
Lender name
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Steel Funding DAC (Eurobonds)2
134,185,2622
126,252,0322
105,795,552,2
Subsidiaries and other related parties
21,188,536
11,236,647
722,423
of which: interest-free loans
14,492,399
--
150,000
Loans under cash-pooling
12,767,545,1
32,014,7501
29,497,258,1
of which: interest-free loans
11,370,431
30,806,250
25,246,398
Total loans, incl. interest accrued
168,141,343
169,503,429
136,015,233
including:
with maturity up to 1 year, incl. current portion of long-term loans
28,082,559
43,914,739
30,311,390
1 Including the interest accrued.
2 As of 31.12.2021 three issues of Eurobonds due in 2023-2026. The rest of the debt is a short-term debt.
In June 2021 the Company placed a bond loan for the amount of Euro 500 m. Funds received during the loan placement were partially used to buy back previously
issued dollar bond loans with maturity dates in 2023 and 2024.
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)
37
Accounting
(Financial)
reports
for 2021
Notes
3. 9 ESTIMATED LIABILITIES
(RUB thou.)
Name of the estimated liability
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Estimated liabilities - total
9,591,937
4,668,379
3,870,986
including:
on upcoming expenses for vacations
1,935,953
1,917,835
1,667,478
on upcoming expenses for bonuses
6,410,9001
2,420,994
1,904,749
on unsettled court proceedings and claims
1,245,084
329,550
298,759
1 The amounts include the created estimated liabilities - RUB 3,455,000 thou. under the long-term motivation programme for achieving the Company's strategic targets in 2019-2021, payments under which
are expected in 2022.
3. 10 INCOME AND EXPENSES
3. 10. 1 Income and expenses related to ordinary activities
Income from ordinary activities
(RUB thou.)
Description
for 2021
for 2020
Revenue from sales of products (services) outside the RF
428,869,464
228,197,950
Revenue from sales in the RF
364,058,435
208,881,156
Total
792,927,899
437,079,106
Expenses for production
(RUB thou.)
Description
for 2021
for 2020
Material expenses - total
519,110,188
319,928,307
Including: raw and other materials
355,109,527
223,499,492
fuel, energy
117,629,068
57,088,776
work and services rendered by third parties1
46,371,593
39,340,039
Labour costs
30,330,424
25,449,708
Social allocations
8,002,923
7,656,094
Depreciation
18,303,253
16,297,423
Other costs
37,541,165,2
12,665,125
Total by components
613,287,953
381,996,657
Balance change (increase [-], decrease [+]): construction in progress, semi-finished
products, finished products
-33,600,613
-4,353,185
Total expenses on ordinary activities
579,687,340
377,643,472
For reference: Expenses for capital and routine repair
19,450,094
15,525,815
1Including expenses related to the sale of products in the amount of RUB 32,656,640 thou. (over 2020– RUB 30,089,305 thou.).
2 Including export duties in the amount of RUB 22,782,888 thou.
38
Accounting
(Financial)
reports
for 2021
Notes
3. 10. 2 Other income and expenses
Other income and expenses
(RUB thou.)
Description
for 2021
for 2020
Income
Expenses
Income
Expenses
The right of claim assignment
10,662,097
10,661,592
9,169,673
9,136,061
Sale of foreign currency
3,554,527
3,371,663
5,262,236
4,960,536
Expenses on credits
--
3,217,753
--
584,249
Exchange rate difference
3,176,263
--
--
18,143,952
Sales of inventories
2,052,985
1,548,130
2,003,160
1,664,739
Profit and loss of previous years
1,253,270
1,836,501
333,584
1,128,201
Charity expenses
--
801,415
--
855,348
Writing-off of inventories, tare, inventories from repairs
729,802
743,393
1,071,072
304,526
Retirement of fixed assets, capital investments
625,554
215,654
1,035,623
1,072,572
Valuation reserves
36,874,113
2,438,681
64,863
15,062,671
Transactions with securities
--
50,866
--
60,063
Other expenses over the Group of Companies
--
8,556
--
77,490
Costs related to derivative financial instruments
--
--
--
1,421,786
Others
1,115,792
2,906,245
1,457,113
1,451,647
Total
60,044,403
27,800,449
20,397,324
55,923,841
3. 11 CURRENT INCOME TAX FORMATION
Calculation of profit tax according to the requirements of RAS 18/02
(RUB thou.)
Description
for 2021
for 2020
Profit (loss) before tax
319,460,630
67,106,712
Contingent expenses (income) for income tax (according to accounting data)
63,892,126
13,421,343
Deferred profit tax
(2,546,460)
50,658
Permanent tax expenses (income)
(22,170,384)
(7,110,384)
Current profit tax1
39,175,282
6,361,617
Taxable income (according to the tax accounting data)
195,876,409
31,808,083
Permanent difference leading to the taxable income increase according to the tax accounting data
4,979,051
15,136,579
Permanent difference leading to taxable income decrease according to the tax accounting data
(115,830,972)
(50,688,500)
Taxable temporary differences
(18,633,295)
(6,046,898)
Deductible temporary differences
5,900,995
6,300,190
1Income tax rate - 20%
39
Accounting
(Financial)
reports
for 2021
Notes
Calculation of the taxation base with reference to the income 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.
Deductible temporary differences are associated with 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 2021, 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
Segment
Not distributed
Company as a whole
2021
2020
2021
2020
2021
2020
Sales revenue, RUB thou.
788,850,189
435,284,110
4,077,710
1,794,996
792,927,899
437,079,106
Share of proceeds from sales in total proceeds, %
99.49
99.59
0.51
0.41
100
100
Total production cost, RUB thou.
576,795,655
376,699,922
2,891,685
943,550
579,687,340
377,643,472
Sales profit (loss), RUR thou
212,054,534
58,584,188
1,186,025
851,446
213,240,559
59,435,634
Share of profit in total profit, %
99.44
98.57
0.56
1.43
100
100
(RUB thou.)
Product type
Sales revenue
Change
for 2021
for 2020
Pig iron
24,113,916
33,557,966
-9,444,050
Slabs
334,361,760
156,221,709
178,140,051
Hot-rolled products
183,070,870
98,685,882
84,384,988
Cold-rolled products
99,366,093
57,217,698
42,148,395
Coated rolled steel
105,361,906
62,921,168
42,440,738
Electrical steel
30,514,223
20,050,793
10,463,430
Other by-products and energy resources
12,061,421
6,628,894
5,432,527
Total
788,850,189
435,284,110
353,566,079
In the reporting year the proceeds from sales to foreign customers accounted for 54.37 % (52.43 % in 2020) of the total proceeds from sales in the segment.
In 2021 the share of the largest customer NLMK Trading SA (at least 10% of sales) amounted to 52% (in 2020 – 50%) of the Company’s total sales revenue (see
Explanation 3.14.2)
40
Accounting
(Financial)
reports
for 2021
Notes
3. 13 SECURITY OF LIABILITIES
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Received: bank guarantees for advance payment return and payment guarantees
11,160,519
3,743,552
5,037,995
Granted sureties - total
76,416,898
124,946,058
76,720,020
Subsidiary companies
2,446,083
4,975,813
6,614,105
Other related parties
73,970,815
119,970,245
70,105,915
including:
NLMK Trading SA
41,198,119
85,750,040
36,783,570
As of 31.12.2021, 31.12.2020, 31.12.2019 the Company has liabilities under the surety agreements (RUB 74,171,354 thou., RUB 123,230,163 thou. and RUB
71,782,281 thou. 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.
41
Accounting
(Financial)
reports
for 2021
Notes
3. 14 INFORMATION ON RELATED PARTIES
3. 14. 1 The list of related parties1
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 % 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 as of 31.12.2021:
Name
Stake in authorized
capital as of
31.12.2021, %
Name
Stake in authorized
capital as of
31.12.2021, %
VIZ Steel
100
NLMK Overseas Holdings
100
NLMK Communications
100
NLMK Trade House
100
LLC Vtorchermet NLMK
100
Construction and Assembly Trust NLMK
100
Stagdok
100
Stoilensky
100
Dolomite
100
NLMK Long Products
100
NLMK Information Technologies
100
Novolipetsk Steel Service Center
100
NLMK Metalware
100
Altai Koks
100
Neptune
100
NLMK Engineering
100
NLMK Kaluga
100
NLMK Ural
92.59
Mining & Concentration Complex Zhernovsky-1
100
Uralvtorchermet (before 9.11.2021)
100
All the companies specified are registered in the Russian Federation.
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.
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).
42
Accounting
(Financial)
reports
for 2021
Notes
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
First Freight Company
PO TatVtorchermet
Universalny Expeditor
Vtorchermet
Tuapse Sea Trade Port
ChuvashVtormet
Taganrog Sea Trade Port
Vtorchermet NLMK Center
Saint-Petersburg Sea Port
Vtorchermet NLMK North
UNIVERSAL FORWARDING COMPANY (UFC) LTD
Vtorchermet NLMK Siberia
NLMK Trading SA1
Vtorchermet NLMK Western Siberia
NLMK DanSteel A/S1
Vtorchermet NLMK Ural
NLMK Pennsylvania LLC1
Vtorchermet NLMK Black Belt Region
Steel Funding DAC
Vtorchermet NLMK South
VIZ-Broker
Vtorchermet NLMK East
NLMK - Ural Service
Vtorchermet NLMK Perm
Railcar Repair Company "Gryazi"
Vtorchermet NLMK West
InServicePlus
Vtorchermet NLMK Republic
Gazobeton 48 1 (before 30.12.2021)
Vtorchermet NLMK Povolzhie
NLMK Verona SpA
Vtorchermet NLMK Bashkortostan
NLMK Belgium Holdings S.A.
Vtorchermet NLMK Volga
NLMK Indiana LLC 1
NLMK Plate Sales S.A.
NLMK India Service Center Pvt Ltd1
NLMK La Louvière S.A.
Social Security Charity Fund “Miloserdiye”
NLMK Sales Europe S.A.
Verkh-Isetsky Steel Plant
NLMK Clabecq S.A.
Blinovskoye
Novolipetsk Medical Centre Association
Lisya Nora
SC Lipetsk Metallurg
Ural Health-Center Nizhnie Sergi
Pride Media
Association of ferrous metallurgy enterprises “Russian Steel”
NLMK International B.V.1
Advocate Bureau "Reznik, Gagarin & Partners", Moscow
LLC “CSC”
Steel Invest & Finance (Luxembourg) S.A.1
NLMK India Coating Private Limited1
LLC Rumelco
NLMK Strasbourg
Metallurg Hotel (before 23.12.2021)
1Other affiliates controlled by Novolipetsk Steel through NLMK Overseas Holdings
43
Accounting
(Financial)
reports
for 2021
Notes
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
(RUB thou.)
Description
for 2021
for 2020
Total
Products,
commodities
Inventory,
FA
Services
Lease
Total
Products,
commodities
Inventory,
FA
Services
Lease
Subsidiaries
32,885,725
31,773,487
382,566
714,024
15,648
16,538,692
15,003,084
838,395
676,690
20,523
Other affiliated parties
414,568,209
414,102,235
16,329
368,584
81,061
219,776,110
219,044,922
7,380
679,029
44,779
of which:
NLMK Trading SA
412,801,665
412,754,487
--
47,178
--
218,336,576
218,261,562
--
75,014
--
Total
447,453,934
445,875,722
398,895
1,082,608
96,709
236,314,802
234,048,006
845,775
1,355,719
65,302
Purchases from other related parties
(RUB thou.)
Description
for 2021
for 2020
Total
Inventory, FA
Services
Lease
Total
Inventory,
FA
Services
Lease
Subsidiaries
370,667,049
365,411,670
5,241,450
13,929
183,130,653
177,169,518
5,950,131
11,004
Other affiliated parties
30,939,418
808,353
29,835,011
296,054
26,236,772
813,509 25,094,358
328,905
Total
401,606,467
366,220,023
35,076,461
309,983
209,367,425
177,983,027 31,044,489
339,909
Accounts receivable
The table shows receivables from the related parties, except for those under the interest-free loans granted.
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Debt
Bad debt
provision
Balance
valuation
Debt
Bad debt
provision
Balance
valuation
Debt
Bad debt
provision
Balance
valuation
Subsidiaries
13,650,420
(185,001)
13,465,419
13,515,282
(64,664)
13,450,618
35,451,349
(42,309)
35,409,040
Other affiliated parties
3,367,303
(462,434)
2,904,869
2,710,235
(277,036)
2,433,199
1,647,721
(86,317)
1,561,404
Total
17,017,723
(647,435)
16,370,288
16,225,517
(341,700)
15,883,817
37,099,070
(128,626)
36,970,444
44
Accounting
(Financial)
reports
for 2021
Notes
Payables
(RUB thou.)
Description
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Subsidiaries
23,696,211
15,487,962
11,014,521
Other affiliated parties
83,241,177
40,686,332
27,385 256
of which:
NLMK Trading SA1
82,813,823
40,268,472
27,145,681
Debt of the companies which ceased to be related parties as of the reporting date
--
799
4,591
Total
106,937,388
56,175,093
38,404,368
1Advance payments received
Dividends received from subsidiaries
(RUB thou.)
Description
for 2021
for 2020
Dividends from subsidiaries - total
70,594,176
71,079,663
of which:
Stoilensky
31,500,000
60,033,260
Altai Koks
32,300,409
4,477,590
NLMK - Kaluga
6,000,000
2,000,000
Total amount of accrued dividends from subsidiaries is shown in cl. 3.3 of the Explanation.
Loans granted to related parties
Outstanding loans granted to the related parties, details of loan granting and repayment:
(RUB thou.)
Borrower’s name
As of 31.12.2021
As of 31.12.2020
As of 31.12.2019
Subsidiaries
60,903,365
40,630,828
51,679,879
including:
interest-free loans
60,784,379
40,570,256
51,668,961
Other affiliated parties
36,624
106,222
74,555
incl.:
interest-free loans
--
57,959
34,424
Total
60,939,989
40,737,050
51,754,434
45
Accounting
(Financial)
reports
for 2021
Notes
In the reporting year the Company granted short-term and long-term loans, repayment of which is envisioned not later than by 2026.
(RUB thou.)
Borrower’s name
for 2021
for 2020
Granted
Repaid
Granted
Repaid
Subsidiaries
298,982,859
278,710,322
102,521,960
113,571,011
including:
interest-free loans
287,648,263
267,434,140
102,219,121
113,317,826
Loans to other related parties
608,909
678,507
1,231,788
1,200,120
including:
interest-free loans
608,909
666,868
1,215,615
1,192,080
Total
299,591,768
279,388,829
103,753,748
114,771,131
Loans granted by related parties
The Company received loans from subsidiaries and other related parties.
Outstanding loans are disclosed in cl.3.8. of the Notes.
(RUB thou.)
Lender name
for 2021
for 2020
Received
Repaid
Received
Repaid
Subsidiaries
423,088,755
427,686,803
221,946,070
220,221,998
including:
interest-free loans
370,054,949
374,855,933
185,605,102
180,259,780
Other affiliated parties
9,819,735
14,620,735
28,990,263
17,411,999
including:
interest-free loans
851,976
1,067,568
658,084
557,844
NLMK Trading SA
2,353,058
13,553,167
28,332,179
16,745,885
Total
432,908,490
442,307,538
250,936,333
237,633,997
Information on sureties for subsidiaries and other related parties is provided in cl.3.13 of the Notes.
46
Accounting
(Financial)
reports
for 2021
Notes
Operations with key management personnel
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 for 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. Information on major management personnel’s salary and other remuneration
types is given excluding insurance premium. Data for 2020 is adjusted with consideration of the actual payments in 2021.
(RUB thou.)
Description
for 2021
for 2020
Bonuses and salaries (without estimated liabilities for upcoming expenses for vacations)
579,188,1
526,649
Remunerations
185,427,2
146,281
Other payments3
1,823,3343
1,770
Total
2,587,949
674,700
1 Bonuses to the members of the Management Board in 2021 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 are determined on the basis of a preliminary calculation according to the Regulation.
3 Other payments include estimated liability for long-term motivation programme for achieving the Company's strategic targets in 2019-2021, payments under which are expected in 2022.
3. 15 CONTINGENT LIABILITIES
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 31.12.2021 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.
In 2021, the Russian Federal Antimonopoly Service brought an action against NLMK for violation of the antimonopoly legislation related to setting and maintaining a
monopoly price in the hot-rolled product market. The Company disagrees with the initiation of the proceedings and it defends its stand in the course of the legal
investigations. No provisions on possible agreements and resolutions resulting from antimonopoly investigations were accrued in the accounting (financial)
statements.
47
Accounting
(Financial)
reports
for 2021
Notes
3. 16 EVENTS AFTER THE REPORTING DATE
On 2 February 2022, the Company’s Board of Directors recommended that dividends should be paid for the fourth quarter of 2021 in the amount of 12.18
Russian rubles per share totalling RUB 72,997,508 thou.
Head of NLMK
E. Morozova
by virtue of Power of Attorney No.505-20/109 dd. 01.02.2021
2 February 2022