Strategy & Change Management



Strategy & Change Management

Severstal Strategy

The main strategy of Severstal is to become the global leader through EBITDA and maintaining a learning position in its return on investments and margins. The EBITDA target of Severstal is minimum 20% over the cycle. The net debt/normalized EBITDA ratio should not be more than 1.5. On high-growth emerging markets, the focus of Severstal is on the vertical integration steel company. The main financial objectives of Severstal are cost competitiveness, vertical integration and presence in consolidated and growing markets. One of the focuses of Severstal is on the diversification in new prospective markets of metallic iron. Severstal acquired Iron Mineral Beneficiation Services (Proprietary) Limited (IMBS) in 2010. Severstal is also working on the Mineral Development Agreement for Putu Iron Ore Project in 2010. The project is expected to end by 2017. They key priority of Severstal is to make the asset portfolio strong and increase profits. Modernization and expansion of production volumes has to be completed in the steel demand recession time period (severstal.com).

Internationalization strategy

Their key financial objective is to become one of the leaders by EBITDA in the global steel industry, while retaining one of the leading positions by margins and returns on investment. Their vertical integration is the key to these returns, with high self-sufficiency in iron ore and coking coal. They will continue to focus our investment activities on areas where we see the greatest potential for growth, and therefore they will be investing in steel-related mining as well as expanding their Russian steel operations. In their restructured North American assets they aim to invest in creating a wider product offer to higher growth market segments such as automotive. Our wholly-owned indirect subsidiary Nordgold, which runs their gold operations, has grown rapidly into an established producer focused on emerging markets and is a growing contributor to their financial results (severstal.com).

They continually review their asset portfolio and strategic development priorities to ensure they generate the highest returns for shareholders from the allocation of capital to development opportunities open to them as an international steel and mining company. They will also target new frontiers to further expand their presence in areas with high growth potential such as India.

Acquisition Strategy

Severstal International made some structural changes, including divesting the European operations and streamlining the North American business. Severstal was the first Russian-based company to acquire US steel by buying the Oregon Steel Mills and Claymont Steel Holdings. It is also on its way to purchase IPSCO's North American assets. Severstal has also acquired the world's leading metal and mining company, Esmark. Severstal has also acquired the businesses of Esmark which were Wheeling-Pittsburgh Steel Corporation, Esmark Steel Services Group and joint venture of Mountain State Carbon (severstal.com).

M & A strategy

Severstal is concentrating on the operations of high-value added steel production and steel-related mining in healthy markets. They aim to increase their shareholder value by reconstructing asset initiatives. Severstal has completed the course of underperforming US facilities which include the Wheeling, Sparrows Point ...