Portrait of the Group

Severstal is a leading international steel producer by profitability and combines the growth potential of Russia’s emerging market with the margin sustainability of an international steel producer. Its focus on high value-added products in attractive niche markets and successful track record of acquiring and integrating high-quality assets in America, Italy, France and the UK has enabled Severstal to realise greater earnings than those of other Russian steel producers.

Severstal has four business divisions: Russian Steel and Metalware, Severstal North America, Lucchini and Severstal Mining.

The company’s primary mill is situated in Cherepovets in the North-West of Russia - 475km east of St.Petersburg and 620km north of Moscow. This geographical location provides Severstal with the opportunity to use waterways in the summer to reduce transport costs. Severstal’s integrated manufacturing facilities, which include sintering machines, coke batteries, blast furnaces, steel melting and rolling units, hot treatment and coating lines, produce a wide range of long and flat steel products, including hot and cold-rolled flat steel (including coated steel), hot-rolled sections, roll-formed shapes, pipes and has an annual crude steel capacity of 11.6 million tonnes.

In January 2004, Severstal, through its subsidiary Severstal North America Inc (‘SNA’), completed the purchase of the assets and business of Rouge Industries for US$285 million in cash. SNA did not assume any of Rouge Industries’ pension liabilities, and agreed to provide a new retirement benefit plan for its employees (formerly the employees of Rouge Industries).

SNA, started operations on February 1, 2004 and at present is the fourth largest integrated steel-maker in the USA, with 2,4 million tonnes of steel making and 3,6 million tonnes of rolling capacity. The SNA purchase allowed Severstal to gain access to the US market and obtain new customers. The US market for automotive steel is the largest in the world. The SNA plant produces high quality sheet for car and truck producers and the Cherepovets steel mill is the biggest producer of steel for the Russian automotive industry.

Severstal has 70,8% of Lucchini, the second largest Italian steel group. With its 20 production mills spread in five European countries, Lucchini added 4 millions tones capacity p.a to Severstal’s production. Lucchini is specialized in high quality long and special carbon steel products.

According to operational results, in 2005, these plants together produced 16.7 million tonnes of crude steel, compared with 12,8 million tonnes in 2004. 10.8 million tonnes were produced in Cherepovets, 2.7 million tonnes by SNA and 3.2 million tones at Lucchini’s plants.

Including Lucchini on a pro-forma basis, Severstal’s total sales of US$ 11.57 billion in 2005 and EBITDA of US$3.1 billion, which in terms of EBITDA, ranked Severstal first among Russian steel producers and sixth among the world’s steel producers in 2005 according to publicly available companies’ reports. Including the Lucchini steel operations the controlling stake in which was acquired by Severstal in October 2006 and which previously was under common control with Severstal. Severstal generated total pro forma sales of US$ 5.90 billion and EBITDA of US$ 1.3 billion for the six months to 30 June 2006.