REG - Evraz Plc - Half-year Report <Origin Href="QuoteRef">EVRE.L</Origin> - Part 3
19/08/2016 13:41
- Part 3: For the preceding part double click ID:nRSR4887Hb
Attributable to equity holders of the parent entity
Issued Treasury shares Additional paid-incapital Revaluation surplus Accumulated profits Translation difference Total Non-controlling interests Total Equity
capital
At 31 December 2014 $ 1,507 $ - $ 2,481 $ 155 $ 1,299 $ (3,644) $ 1,798 $ 218 $ 2,016
Net profit/(loss) - - - - 19 - 19 - 19
Other comprehensive income/(loss) - - - - (3) 135 132 3 135
Reclassification of revaluation surplus to accumulated profits in respect of the disposed subsidiaries - - - (28) 28 - - - -
Reclassification of revaluation surplus to accumulated profits in respect of the disposed items of property, plant and equipment - - - (3) 3 - - - -
Total comprehensive income/(loss) for the period - - - (31) 47 135 151 3 154
Derecognition of non-controlling interests in subsidiaries - - - - - - - (4) (4)
Non-controlling interests arising on sale of ownership interests in subsidiaries - - - - (3) - (3) 2 (1)
Purchase of treasury shares - (336) - - (3) - (339) - (339)
Transfer of treasury shares to participants of the Incentive Plans - 31 - - (31) - - - -
Share-based payments - - 12 - - - 12 - 12
At 30 June 2015 $ 1,507 $ (305) $ 2,493 $ 124 $ 1,309 $ (3,509) $ 1,619 $ 219 $ 1,838
The accompanying notes form an integral part of these unaudited interim condensed consolidated financial statements.
Selected Notes
to the Unaudited Interim Condensed Consolidated Financial Statements
Six-month period ended 30 June 2016
1. Corporate Information
These interim condensed consolidated financial statements were authorised for issue by the Board of Directors of EVRAZ plc
on 17 August 2016.
EVRAZ plc ("EVRAZ plc" or "the Company") was incorporated on 23 September 2011 as a public company under the laws of the
United Kingdom with the registered number 7784342. The Company's registered office is at 5th Floor, 6 St. Andrew Street,
London, EC4A 3AE, United Kingdom.
The Company, together with its subsidiaries (the "Group"), is involved in the production and distribution of steel and
related products and coal and iron ore mining. In addition, the Group produces vanadium products. The Group is one of the
largest steel producers globally.
Lanebrook Limited (Cyprus) is the ultimate controlling party of the Company.
2. Significant Accounting Policies
Basis of Preparation
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting
Standard ("IAS") 34 "Interim Financial Reporting", as adopted by the European Union. Accordingly, these interim condensed
consolidated financial statements do not include all the information and disclosures required for a complete set of
financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the
year ended 31 December 2015, which were prepared in accordance with International Financial Reporting Standards, as adopted
by the European Union.
The interim condensed consolidated financial statements do not constitute statutory accounts as defined by Section 435 of
the Companies Act 2006. The financial information for the full year is based on the statutory accounts for the financial
year ended 31 December 2015. Statutory accounts for the year ended 31 December 2015 have been filed with the Registrar of
Companies. The auditor's report under section 495 of the Companies Act 2006 in relation to those accounts was unqualified,
did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Operating results for the six-month period ended 30 June 2016 are not necessarily indicative of the results that may be
expected for the year ending 31 December 2016.
Going Concern
These interim condensed consolidated financial statements have been prepared on a going concern basis.
The Group's activities in all of its operating segments continue to be affected by the uncertainty and instability of the
current economic environment (Note 12). In response, the Group implemented a number of cost cutting initiatives, reduced
capital expenditures, continues to reduce the level of debt and proactively manages its debt covenants compliance.
Based on the currently available facts and circumstances the directors and management have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the foreseeable future.
2. Significant Accounting Policies (continued)
Restatement of Financial Statements
Reclassification of Expenses
In 2016, the Group reclassified property tax accrued and paid by the production subsidiaries from general and
administrative expenses to the "cost of revenue" caption. The Group also reclassified staff costs of certain categories of
personnel and the related expenses from cost of revenue to general and administrative expenses.
The reclassifications were made to better reflect the nature of these costs in the current business environment and in
order to make the financial statements more comparable with industry peers.
The effects of the restatement on the previously reported amounts are set out below.
Six-month period ended 30 June 2015
As previouslyreported Property tax Staff costs Restated
Statement of Operations
Cost of revenue $ (3,570) $ (15) $ 30 $ (3,555)
Gross profit 1,324 (15) 30 1,339
General and administrative expenses (252) 15 (30) (267)
Changes in Accounting Policies
In the preparation of the interim condensed consolidated financial statements, the Group followed the same accounting
policies and methods of computation as compared with those applied in the complete consolidated financial statements for
year ended 31 December 2015, except for the adoption of new standards and interpretations and revision of existing IAS as
of 1 January 2016.
New/Revised Standards and Interpretations Adopted in 2016:
§ Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions
IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit
plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative
benefit. This amendment is not relevant to the Group, since none of the entities within the Group has defined benefit plans
with contributions from employees.
2. Significant Accounting Policies (continued)
Changes in Accounting Policies (continued)
§ Amendments to IAS 1 - Disclosure Initiative
The amendments to IAS 1 Presentation of Financial Statements clarify existing IAS 1 requirements:
Ø The materiality requirements in IAS 1
Ø The requirements that apply when additional subtotals are presented in the statement of financial position and the
statements of profit or loss and OCI
Ø That specific line items in the statements of profit or loss and OCI and the statement of financial position may be
disaggregated
Ø That entities have flexibility as to the order in which they present the notes to financial statements
Ø That the share of OCI of associates and joint ventures accounted for using the equity method must be presented in
aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to
profit or loss.
§ Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations
The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation,
in which the activity of the joint operation constitutes a business, must apply the relevant IFRS 3 principles for business
combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured
on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a
scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint
control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments
apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests
in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with
early adoption permitted.
§ Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of Depreciation and Amortisation
The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are
generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed
through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment
and may only be used in very limited circumstances to amortise intangible assets.
§ Amendments to IAS 16 and IAS 41 - Bearer Plants
The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under
the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41.
Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost
(before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that
produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For
government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
will apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with
early adoption permitted. These amendments are not expected to have any impact to the Group as the Group does not have any
bearer plants.
§ Amendments to IAS 27 - Equity Method in Separate Financial Statements
The amendments allow entities to use the equity method to account for investments in subsidiaries, joint ventures and
associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity
method in its separate financial statements will have to apply that change retrospectively.
2. Significant Accounting Policies (continued)
Changes in Accounting Policies (continued)
§ Annual Improvements to IFRSs 2010-2012 Cycle
The amendments relate to IFRS 2 "Share-based Payment, IFRS 3 "Business Combinations", IFRS 8 "Operating Segments", IAS 16
"Property, Plant and Equipment" and "IAS 38 Intangible Assets", IAS 24 "Related Party Disclosures".
§ Annual Improvements to IFRSs 2012-2014 Cycle
The amendments relate to IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations", IFRS 7 "Financial
Instruments: Disclosures", IAS 19 "Employee Benefits", IAS 34 "Interim Financial Reporting".
The amendments described above had no significant impact on the financial position and performance of the Group or the
disclosures in the consolidated financial statements.
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet
effective.
3. Segment Information
As disclosed in the consolidated financial statements for the year ended 31 December 2015, in the second half of 2015,
management changed the definition of segment expense and EBITDA to make these indicators more comparable with Russian steel
peers. Segment expense and EBITDA were adjusted to not include social and social infrastructure maintenance expenses. As
such, the comparative segment information for the first half of 2015 has been restated accordingly.
The following tables present measures of segment profit or loss based on management accounts.
Six-month period ended 30 June 2016
US$ million Steel Steel, North America Coal Other operations Eliminations Total
Revenue
Sales to external customers $ 2,376 $ 835 $ 210 $ 30 $ - $ 3,451
Inter-segment sales 107 - 272 110 (489) -
Total revenue 2,483 835 482 140 (489) 3,451
Segment result - EBITDA $ 429 $ 25 $ 210 $ 7 $ (47) $ 624
Six-month period ended 30 June 2015
US$ million Steel Steel, North America Coal Other operations Eliminations Total
Revenue
Sales to external customers $ 3,386 $ 1,250 $ 195 $ 40 $ - $ 4,871
Inter-segment sales 179 - 292 173 (644) -
Total revenue 3,565 1,250 487 213 (644) 4,871
Segment result - EBITDA $ 631 $ 49 $ 178 $ 9 $ 13 $ 880
3. Segment Information (continued)
The following table shows a reconciliation of revenue and EBITDA used by management for decision making and revenue and
profit or loss before tax per the consolidated financial statements prepared under IFRS.
Six-month period ended 30 June 2016
US$ million Steel Steel, North America Coal Other operations Eliminations Total
Revenue $ 2,483 $ 835 $ 482 $ 140 $ (489) $ 3,451
Reclassifications and other adjustments (84) (3) 62 28 89 92
Revenue per IFRS financial statements $ 2,399 $ 832 $ 544 $ 168 $ (400) $ 3,543
EBITDA $ 429 $ 25 $ 210 $ 7 $ (47) $ 624
Unrealised profits adjustment (41) 1 - - (3) (43)
Reclassifications and other adjustments (6) 1 6 1 47 49
(47) 2 6 1 44 6
EBITDA based on IFRS financial statements $ 382 $ 27 $ 216 $ 8 $ (3) $ 630
Unallocated subsidiaries (53)
$ 577
Social and social infrastructure maintenance expenses (12) - - - - (12)
Depreciation, depletion and amortisation expense (103) (77) (73) (1) - (254)
Impairment of assets (4) - (3) - - (7)
Loss on disposal of property, plant and equipment and intangible assets (5) (3) (2) - - (10)
Foreign exchange gains/(losses), net (6) 39 78 - - 111
252 (14) 216 7 (3) 405
Unallocated income/(expenses), net (72)
Profit/(loss) from operations $ 333
Interest income/(expense), net (236)
Share of profits/(losses) of joint ventures and associates (22)
Gain/(loss) on financial assets and liabilities (10)
Other non-operating gains/(losses), net (17)
Profit/(loss) before tax $ 48
3. Segment Information (continued)
Six-month period ended 30 June 2015
US$ million Steel Steel, North America Coal Other operations Eliminations Total
Revenue $ 3,565 $ 1,250 $ 487 $ 213 $ (644) $ 4,871
Reclassifications and other adjustments (152) (1) 53 21 102 23
Revenue per IFRS financial statements $ 3,413 $ 1,249 $ 540 $ 234 $ (542) $ 4,894
EBITDA $ 631 $ 49 $ 178 $ 9 $ 13 $ 880
Exclusion of management services from segment result 47 - 4 - - 51
Unrealised profits adjustment 37 4 - - 32 73
Reclassifications and other adjustments 25 (16) (10) (1) - (2)
109 (12) (6) (1) 32 122
EBITDA based on IFRS financial statements $ 740 $ 37 $ 172 $ 8 $ 45 $ 1,002
Unallocated subsidiaries (70)
$ 932
Social and social infrastructure maintenance expenses (9) - (1) - - (10)
Depreciation, depletion and amortisation expense (134) (81) (88) (1) - (304)
Impairment of assets (12) - (8) - - (20)
Loss on disposal of property, plant and equipment and intangible assets (9) (6) (2) - - (17)
Foreign exchange gains/(losses), net (82) (35) 6 3 - (108)
494 (85) 79 10 45 473
Unallocated income/(expenses), net 6
Profit/(loss) from operations $ 479
Interest income/(expense), net (224)
Share of profits/(losses) of joint ventures and associates (28)
Gain/(loss) on financial assets and liabilities 48
Gain/(loss) on disposal groups classified as held for sale 20
Loss of control over a subsidiary (167)
Other non-operating gains/(losses), net (8)
Profit/(loss) before tax $ 120
In the six-month period ended 30 June 2016, the Group recognised income on net reversal of the allowance for net realisable
value of inventory in the amount of $9 million.
The material changes in property, plant and equipment during the six-month period ended 30 June 2016 other than those
disclosed above are presented below:
US$ million Steel Steel, North America Coal Other operations Total
Additions $ 68 $ 79 $ 41 $ - $ 188
4. Impairment of Non-current Assets
The Group recognised impairment losses as a result of the impairment testing at the level of cash-generating units. In
addition, the Group made a write-off of certain functionally obsolete items of property, plant and equipment.
For the purpose of the impairment testing as of 30 June 2016 the Group assessed the recoverable amount of each
cash-generating unit ("CGU") where indicators of impairment were identified.
4. Impairment of Non-current Assets (continued)
In the first half of 2016, based on the analysis of market changes and cash inflow dependence between the assets and new
business organisational structure, management redefined the composition of cash generating units of Steel North America for
the purposes of impairment testing. The assets of EVRAZ Inc. NA and EVRAZ Inc. NA Canada, which were previously allocated
to cash-generating units based on individual plant level, were merged into 5 new units based on principal markets served by
each cash-generating unit:
§ Large diameter pipes;
§ Oil Country Tubular Goods (casing and tubing);
§ Seamless pipes;
§ Flat rolled products (plates and coils);
§ Long products (rails, rod and bar products).
The recoverable amount has been determined based on a value-in-use calculation using cash flow projections based on the
actual operating results and business plans approved by management and appropriate discount rates reflecting the time value
of money and risks associated with respective cash-generating units. For the periods not covered by management business
plans, cash flow projections have been estimated by extrapolating the respective business plans' results using a zero real
growth rate. The key assumptions used by management in the value-in-use calculations with respect to the cash-generating
units to which the goodwill was allocated and where indicators of impairment existed are presented in the table below.
Period of forecast, years Pre-tax discount rate, % Commodity Average price of commodity per tonne in 2016 Average price of commodity per tonne in 2017 Recoverable amount of CGU, US$ million Carrying amount of CGU, US$ million
Steel North America 5 10.88-11.29 steel products $694 $769 3,273 2,516
Large diameter pipes 5 11.29 steel products $918 $888 1,300 919
Oil Country Tubular Goods 5 11.20 steel products $943 $978 431 390
Seamless pipes 5 11.23 steel products $910 $1 170 153 137
Flat rolled products 5 10.93 steel products $590 $660 563 517
Long products 5 10.88 steel products $570 $593 825 553
In addition, the Group determined that there were indicators of impairment in several other cash generating units and
tested them for impairment using the following assumptions.
Period of forecast, years Pre-tax discount rate, % Commodity Average price of commodity per tonne in 2016 Average price of commodity per tonne in 2017
EVRAZ Palini e Bertoli 9 15.44 steel plates E416 E432
EVRAZ Yuzhkoks (former Bagleykoks) 5 18.57 coke $129 $156
Raspadskaya 19 13.04 coal $41 $41
EVRAZ Stratcor Inc. 5 11.71 vanadium products $34,613 $36,742
Mezhegeyugol 26 12.48 coal $51 $70
EVRAZ Sukha Balka 18 21.64 ore $18 $20
4. Impairment of Non-current Assets (continued)
As a result of impairment testing, the Group recognised a $16 million impairment loss with regards to EVRAZ Stratcor Inc.
and made a partial reversal of impairment of EVRAZ Palini e Bertoli in the amount of $19 million.
Discount Rates
Discount rates reflect the current market assessment of the risks specific to each cash-generating unit. The discount rates
have been determined using the Capital Asset Pricing Model and analysis of industry peers. Reasonably possible changes in
discount rates could lead to an impairment at EVRAZ Sukha Balka, EVRAZ Stratcor Inc. and EVRAZ Inc. NA cash-generating
units. If the discount rates were 10% higher, this would lead to an impairment of $69 million.
Sales Prices
The price assumptions of the products sold by the Group were estimated using industry research using analysts' views
published by Credit Suisse, Deutsche Bank, JP Morgan, Morgan Stanley, RBC, UBS, VTB during the period from April to June
2016. The Group expects that the nominal prices will grow with a compound annual growth rate of (7.0)%-6.6% in 2016 - 2021
and 2.0%-2.5% in 2022 and thereafter. Reasonably possible changes in sales prices in the 2nd half of 2016 and 2017 could
lead to an impairment at EVRAZ Sukha Balka and EVRAZ Stratcor Inc. cash-generating units. If the prices assumed for the 2nd
half of 2016 and 2017 were 10% lower, this would lead to an impairment of $4 million.
Sales Volumes
Management assumed that the sales volumes of steel products would increase by 12.2% in 2017 and future dynamics will be
driven by gradual market recovery and changes in assets' capacities. Reasonably possible changes in sales volumes in the
2nd half of 2016 and 2017 could lead to an impairment at EVRAZ Stratcor Inc. If the sales volumes were 10% lower than those
assumed for the 2nd half of 2016 and 2017, this would lead to an impairment of $5 million.
Cost Control Measures
The recoverable amounts of cash-generating units are based on the business plans approved by management. A reasonably
possible deviation of cost from these plans could lead to an impairment at EVRAZ Sukha Balka and EVRAZ Stratcor Inc.
cash-generating units. If the actual costs were 10% higher than those assumed for the 2nd half of 2016 and 2017, this would
lead to an impairment of $17 million.
The unit's recoverable amount would become equal to its carrying amount if the assumptions used to measure the recoverable
amount changed as follows:
Discount rates Sales prices Sales volumes Cost control measures
EVRAZ Sukha Balka 3.9% (5.9)% - 3.7%
Steel North America
Oil Country Tubular Goods 6.1% - - -
Flat 5.7% - - -
Seamless 7.0% - - -
5. Income Taxes
Major components of income tax expense were as follows:
Six-month periodended 30 June
US$ million 2016 2015
Current income tax expense $ (66) $ (76)
Adjustment in respect of income tax of previous years (1) 2
Deferred income tax benefit/(expense) relating to origination and reversal of temporary differences 26 (27)
Income tax expense reported in the consolidated statement of operations $ (41) $ (101)
6. Property, Plant and Equipment
The movement in property, plant and equipment for the six-month period ended 30 June 2016 was as follows:
US$ million Land Buildings and constructions Machinery and equipment Transport and motor vehicles Mining assets Other assets Assets under construction Total
At 31 December 2015, cost, net of accumulated depreciation $ 97 $ 822 $ 1,798 $ 79 $ 1,192 $ 12 $ 302 $ 4,302
Additions - - 2 - - 186 188
Assets put into operation - 24 91 6 20 1 (142) -
Disposals (7) (1) (1) - (1) (1) (11)
Depreciation and depletion charge - (32) (154) (10) (40) (2) - (238)
Impairment losses recognised in statement of operations - (7) (13) (1) (5) - (4) (30)
Impairment losses reversed through statement of operations 2 4 14 - 2 - 1 23
Transfer to assets held for sale - - - - - - (9) (9)
Change in site restoration and decommissioning provision - 1 - - - - - 1
Translation difference 4 82 150 8 142 - 28 414
At 30 June 2016, cost, net of accumulated depreciation $ 103 $ 887 $ 1,887 $ 81 $ 1,311 $ 10 $ 361 $ 4,640
7. Investments in Joint Ventures and Associates
The movement in investments in joint ventures and associates during the six-month period ended 30 June 2016 was as
follows:
US$ million Timir Streamcore Other associates Total
At 31 December 2015 $ 40 $ 26 $ 8 $ 74
Share of profit/(loss) (24) 2 - (22)
Translation difference 5 4 - 9
At 30 June 2016 $ 21 $ 32 $ 8 $ 61
The Group assessed the recoverability of its investment in Timir at 30 June 2016. The recoverable amount of the asset was
based on a value-in-use calculation using cash flow projections based on the business plans approved by management and an
appropriate discount rate reflecting the time value of money and risks associated with the asset. The period of the
forecast was 25 years. The discount rates were 11.78%. As a result, in the 1st half of 2016, the Group partially impaired
its investment in Timir. The major drivers that led to impairment were the decrease in the expected long-term prices for
iron ore, the increase in the amount of the required capital expenditures to maintain the production at the budgeted
capacities and the postponement of the start of production for 2 years.
7. Investments in Joint Ventures and Associates (continued)
In the value-in-use calculation management assumed that the railway tariffs for the iron ore transportation in the Yakutia
region, which are established by the local railway companies, will be reduced to the general level of the tariffs in
Russia. These tariffs have not been agreed yet by the parties. If the assumption were not valid, this would lead to an
additional impairment of $58 million which would give a $21 million effect on the share of profits/(losses) of joint
ventures and associates recognised in the consolidated statement of operations.
8. Related Party Disclosures
For the Group related parties include associates and joint venture partners, key management personnel and other entities
that are under the control or significant influence of the key management personnel, the Group's ultimate parent or its
shareholders. In considering each possible related party relationship, attention is directed to the substance of the
relationship, not merely the legal form.
Amounts owed by/to related parties were as follows:
Amounts due from Amounts due to
related parties related parties
US$ million 30 June 31 December 2015 30 June 31 December 2015
2016 2016
Vtorresource-Pererabotka $ 1 $ 1 $ 19 $ 10
Yuzhny GOK 8 - 149 129
Other entities 7 5 3 4
16 6 171 143
Less: allowance for doubtful accounts - - - -
$ 16 $ 6 $ 171 $ 143
Transactions with related parties were as follows for the six-month periods ended 30 June:
Sales to Purchases fromrelated parties
related parties
US$ million 2016 2015 2016 2015
Genalta Recycling Inc. $ - $ - $ 4 $ 8
Interlock Security Services - - 9 13
Vtorresource-Pererabotka 3 5 99 167
Yuzhny GOK 11 15 31 35
Other entities - 1 7 7
$ 14 $ 21 $ 150 $ 230
Compensation to Key Management Personnel
In the six-month periods ended 30 June 2016 and 2015, key management personnel totalled 34 and 42 persons, respectively.
Total compensation to key management personnel was included in general and administrative expenses and consisted of the
following in the six-month periods ended 30 June:
US$ million 2016 2015
Salary $ 6 $ 8
Performance bonuses 5 6
Social security taxes 2 3
Share-based payments 5 5
$ 18 $ 22
9. Cash and Cash Equivalents
Cash and cash equivalents were denominated in the following currencies:
US$ million 30 June 2016 31 December 2015
US dollar $ 759 $ 1,196
Russian rouble 50 121
Others 59 58
$ 868 $ 1,375
The above cash and cash equivalents mainly consist of cash at banks.
10. Equity
Share Capital
Number of shares 30 June2016 31 December 2015
Issued and fully paid
Ordinary shares of $1 each 1,506,527,294 1,506,527,294
Treasury Shares
Number of shares 30 June2016 31 December 2015
Number of treasury shares 87,066,592 98,481,249
Earnings per Share
Earnings per share are calculated by dividing the net income attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period. Diluted earnings per share amounts are calculated by dividing the net
profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the
period plus the weighted average number of ordinary shares that would be issued on the conversion of all the potential
dilutive ordinary shares into ordinary shares.
The following reflects the profit and share data used in the basic and diluted earnings per share computations:
Six-month period
ended 30 June
2016 2015
Weighted average number of ordinary shares outstanding during the period 1,410,286,193 1,466,710,794
Effect of dilution: share options - 34,505,010
Weighted average number of ordinary shares adjusted for the effect of dilution 1,410,286,193 1,501,215,804
Profit/(loss) for the period attributable to equity holders of the parent entity, US$ million $ (4) $ 19
Basic earnings/(losses) per share $ (0.00) $ 0.01
Diluted earnings/(losses) per share $ (0.00) $ 0.01
In the six-month period ended 30 June 2016, share-based awards were antidilutive as the Group reported net losses
attributable to the equity holders of the parent entity.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
the date of completion of these interim condensed consolidated financial statements.
11. Loans and Borrowings
Short-term and long-term loans and borrowings were as follows:
US$ million 30 June2016 31 December2015
Bank loans $ 2,113 $ 2,236
US dollar-denominated
7.40% notes due 2017 177 286
7.75% bonds due 2017 26 186
9.5% notes due 2018 137 353
6.75% notes due 2018 537 796
7.5% senior secured notes due 2019 350 350
6.50% notes due 2020 1,000 1,000
8.25% notes due 2021 750 750
6.75% notes due 2022 500 -
Rouble-denominated
8.40% rouble bonds due 2016 - 165
12.95% rouble bonds due 2019 233 206
12.60% rouble bonds due 2021 233 -
Fair value adjustment to liabilities assumed in business combination 1 7
Unamortised debt issue costs (49) (54)
Interest payable 91 66
$ 6,099 $ 6,347
Some of the loan agreements and terms and conditions of notes provide for certain covenants in respect of EVRAZ plc and its
subsidiaries. The covenants impose restrictions in respect of certain transactions and financial ratios, including
restrictions in respect of indebtedness and profitability.
Pledged Assets
The Group pledged its rights under selected export contracts as collateral under the loan agreements. All proceeds from
sales of steel pursuant to these contracts can be used to satisfy the obligations under the loan agreements in the event of
a default.
At 30 June 2016, a 100% ownership interest in EVRAZ Inc NA and 51% in EVRAZ Inc NA Canada were pledged against a $350
million liability under 7.5% senior secured notes due 2019. The subsidiaries represent approximately 33.8% of the
consolidated assets at 30 June 2016 and generated almost 23.5% of the consolidated revenues in the six-month period ended
30 June 2016. In addition, property, plant and equipment and inventory of these subsidiaries amounting to $1,101 million
and $316 million, respectively, at 30 June 2016 were pledged as collateral under the notes.
At 30 June 2016, 100% of shares of EVRAZ Caspian Steel were pledged as collateral under a bank loan with a carrying value
of $98 million at 30 June 2016. The subsidiary represented 1% of the consolidated assets at 30 June 2016 and generated 0.8%
of the consolidated revenues in the six-month period ended 30 June 2016. In addition, property, plant and equipment of
EVRAZ Caspian Steel amounting to $53 million at 30 June 2016 were pledged as collateral under the same loan.
The Group's pledged assets at carrying value included the following:
US$ million 30 June 2016 31 December 2015
Property, plant and equipment $ 1,154 $ 1,107
Inventory 316 383
11. Loans and Borrowings (continued)
Issue of Notes and Bonds
In June 2016, the Group issued 6.75% notes due 2022 in the amount of $500 million. The proceeds from the issue of the notes
were used to finance the purchase of 7.40% notes due 2017, 9.50% notes due 2018, 6.75% notes due 2018 and 7.75% bonds due
2017 at the tender offer settled on 17 June 2016 and to refinance other current indebtedness of the Group.
In March 2016, the Group completed a placement of bonds in the total amount of 15,000 million Russian roubles ($233 million
at 30 June 2016), which bear interest of 12.60% per annum and mature on 23 March 2021. The currency risk exposure of these
bonds was not hedged.
Repurchase of Notes and Bonds
In the first half of 2016, the Group partially repurchased 7.40% notes due 2017 ($109 million), 9.50% notes due 2018 ($216
million), 6.75% notes due 2018 ($259 million) and 7.75% bonds due 2017 ($160 million). The premium over carrying value on
the repurchase in the amount of $5 million, $19 million, $6 million and $5 million, respectively, was charged to the
Gain/(loss) on financial assets and liabilities caption of the consolidated statement of operations.
In addition, the Group fully settled its 8.40% rouble bonds due 2016, there was no gain or loss on this transaction.
Unutilised Borrowing Facilities
As of 30 June 2016, the Group had unutilised bank loans in the amount of $1,132 million, including $198 million of
committed facilities.
12. Commitments and Contingencies
Operating Environment of the Group
The Group is one of the largest vertically integrated steel producers globally and the largest steel producer in Russia.
The Group's major subsidiaries are located in Russia, Ukraine, the USA and Canada. Russia and Ukraine are considered to be
developing markets with higher economic and political risks. Steel consumption is affected by the cyclical nature of demand
for steel products and the sensitivity of that demand to worldwide general economic conditions.
The global economic recession resulted in a significantly lower demand for steel products and decreased profitability. In
addition, the political crisis over Ukraine led to an additional uncertainty in the global economy. The unrest in the
Southeastern region of Ukraine and the economic sanctions imposed on Russia caused the depreciation of national currencies
and economic slowdown in Russia and Ukraine. In addition, a significant drop in crude oil prices negatively impacted the
Russian economy. The combination of the above resulted in increased inflation and uncertainty regarding economic growth. If
the Ukrainian crisis broadens and further sanctions are imposed on Russia, this could have an adverse impact on the Group's
business.
Management believes it is taking appropriate measures to support the sustainability of the Group's business in the current
circumstances.
The global economic climate continues to be unstable and this may negatively affect the Group's results and financial
position
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