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ЕВРАЗ. Годовой отчет за 2021 год - часть 13
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FINANCIAL STATEMENTS
Additional information
ANNUAL REPORT & ACCOUNTS 2021
23. EMPLOYEE BENEFITS (CONTINUED)
23. EMPLOYEE BENEFITS (CONTINUED)
Net benefit expense (recognised in the statement of operations within cost of sales and selling, general and administrative expenses and interest
Gains/(losses) recognised in other comprehensive income
expense)
Year ended 31 December 2021
Year ended 31 December 2021
US
US
Russian
& Canadian
Other
Russian
& Canadian
Other
US$ million
plans
plans
plans
Total
US$ million
plans
plans
plans
Total
Return on plan assets, excluding amounts included in net
$ –
$ 31
$ –
$ 31
Current service cost
$ (2)
$ (19)
$ –
$ (21)
interest expense
Net interest expense
(4)
(3)
–
(7)
Net actuarial gains/(losses) on post-employment benefit
1
54
–
55
Other
–
(3)
–
(3)
obligation
Effect of asset ceiling
–
(1)
–
(1)
Continuing operations
$ (6)
$ (25)
$ –
$ (31)
$ 1
$ 84
$ –
$ 85
Discontinued operations
(5)
$ –
–
(5)
Net benefit expense
$ (11)
$ (25)
$ –
$ (36)
Year ended 31 December 2020
US
In 2021, net benefit expense relating to the discontinued operations includes $(1) million of current service cost, $(2) million of net interest expense
Russian
& Canadian
Other
and $(2) million of net actuarial losses on other long-term employee benefits obligation.
US$ million
plans
plans
plans
Total
Return on plan assets, excluding amounts included in net
Year ended 31 December 2020
$ -
$63
$ -
$63
interest expense
US
Net actuarial gains/(losses) on post-employment benefit
Russian
& Canadian
Other
6
(74)
-
(68)
obligation
US$ million
plans
plans
plans
Total
Effect of asset ceiling
-
2
-
2
Current service cost
$ (2)
$ (18)
$ -
$ (20)
$ 6
$ (9)
$ -
$ (3)
Net interest expense
(4)
(4)
-
(8)
Past service cost
(2)
-
-
(2)
Other
-
(3)
-
(3)
Year ended 31 December 2019
Continuing operations
$ (8)
$ (25)
$ -
$ (33)
US
Russian
& Canadian
Other
Discontinued operations
(4)
-
-
(4)
US$ million
plans
plans
plans
Total
Net benefit expense
$ (12)
$ (25)
$ -
$ (37)
Return on plan assets, excluding amounts included in net
$ -
$ 84
$ -
$ 84
interest expense
In 2020, net benefit expense relating to the discontinued operations includes $(1) million of current service cost and $(3) million of net interest
Net actuarial gains/(losses) on post-employment benefit
(15)
(81)
(3)
(99)
expense.
obligation
$ (15)
$ 3
$ (3)
$ (15)
Year ended 31 December 2019
US
Russian
& Canadian
Other
Actual return on plan assets was as follows:
US$ million
plans
plans
plans
Total
US$ million
2021
2020
2019
Current service cost
$ (1)
$ (17)
$(1)
$ (19)
Actual return on plan assets
$ 46
$ 82
$ 105
Net interest expense
(4)
(5)
-
(9)
including:
Past service cost
(1)
-
-
(1)
US & Canadian plans
46
82
105
Other
-
(3)
-
(3)
Russian plans
–
-
-
Continuing operations
$ (6)
$ (25)
$ (1)
$ (32)
Discontinued operations
(9)
-
-
(9)
Net defined benefit liability
Net benefit expense
$ (15)
$ (25)
$ (1)
$ (41)
Year ended 31 December 2021
US
In 2019, net benefit expense relating to the discontinued operations includes $(1) million of current service cost, $(4) million of net interest expense
Russian
& Canadian
Other
and $(4) million of net actuarial losses on other long-term employee benefits obligation.
US$ million
plans
plans
plans
Total
Benefit obligation
$ 59
$ 802
$ 10
$ 871
Plan assets
–
(746)
(7)
(753)
Net defined benefit asset (Note 14)
–
25
–
25
Net defined benefit liability
$ 59
$ 81
$ 3
$ 143
240
241
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ANNUAL REPORT & ACCOUNTS 2021
23. EMPLOYEE BENEFITS (CONTINUED)
23. EMPLOYEE BENEFITS (CONTINUED)
Movements in benefit obligation
Net defined benefit liability (continued)
US
Russian
& Canadian
Other
Year ended 31 December 2020
US$ million
plans
plans
plans
Total
US
Russian
& Canadian
Other
At 31 December 2018
$ 91
$ 687
$ –
$ 778
US$ million
plans
plans
plans
Total
Interest cost on benefit obligation
8
26
-
34
Benefit obligation
$ 102
$858
$ 10
$ 970
Current service cost
2
17
1
20
Plan assets
-
(724)
(6)
(730)
Past service cost
1
-
-
1
Net defined benefit asset (Note 14)
-
-
-
-
Benefits paid
(10)
(36)
(1)
(47)
Actuarial (gains)/losses on benefit obligation related to
3
(2)
-
1
Net defined benefit liability
$ 102
$ 134
$ 4
$ 240
changes in demographic assumptions
Actuarial (gains)/losses on benefit obligation related to
15
83
3
101
changes in financial assumptions
Year ended 31 December 2019
Actuarial (gains)/losses on benefit obligation related to
1
-
-
1
US
experience adjustments
Reclassification to liabilities directly associated with disposal
Russian
& Canadian
Other
-
(8)
-
(8)
groups classified as held for sale
US$ million
plans
plans
plans
Total
Other
-
-
8
8
Benefit obligation
$ 123
$ 785
$ 11
$ 919
Translation difference
12
18
-
30
Plan assets
-
(653)
(7)
(660)
At 31 December 2019
$ 123
$ 785
$ 11
$ 919
Net defined benefit asset (Note 14)
-
12
-
12
Interest cost on benefit obligation
7
23
-
30
Net defined benefit liability
$ 123
$ 144
$ 4
$ 271
Current service cost
3
18
-
21
Past service cost
2
-
-
2
Benefits paid
(7)
(51)
(4)
(62)
Actuarial (gains)/losses on benefit obligation related to
Movements in net defined benefit liability/(asset)
1
(6)
-
(5)
changes in demographic assumptions
Actuarial (gains)/losses on benefit obligation related to
(1)
84
-
83
US
changes in financial assumptions
Russian
& Canadian
Other
Actuarial (gains)/losses on benefit obligation related to
(6)
(4)
-
(10)
US$ million
plans
plans
plans
Total
experience adjustments
Effect of asset ceiling
-
(2)
-
(2)
At 31 December 2018
$ 91
$ 132
$ –
$ 223
Other
-
1
2
3
Translation difference
(20)
10
1
(9)
Net benefit expense recognised in the statement of
15
25
1
41
At 31 December 2020
$ 102
$ 858
$ 10
$ 970
operations
Contributions by employer
(10)
(15)
-
(25)
Interest cost on benefit obligation
6
18
-
24
(Gains)/losses recognised in other comprehensive income
15
(3)
3
15
Reclassification to liabilities directly associated with disposal
Current service cost
3
19
-
22
-
(7)
-
(7)
groups classified as held for sale
Benefits paid
(8)
(44)
-
(52)
Translation difference
12
-
-
12
Actuarial (gains)/losses on benefit obligation related to
-
(7)
-
(7)
changes in demographic assumptions
At 31 December 2019
$ 123
$ 132
$ 4
$ 259
Actuarial (gains)/losses on benefit obligation related to
1
(48)
-
(47)
changes in financial assumptions
Net benefit expense recognised in the statement of
12
25
-
37
Actuarial (gains)/losses on benefit obligation related to
operations
-
1
-
1
experience adjustments
Contributions by employer
(7)
(33)
(1)
(41)
Effect of asset ceiling
-
1
-
1
(Gains)/losses recognised in other comprehensive income
(6)
9
-
3
Reclassification to liabilities directly associated with disposal
(44)
-
-
(44)
Translation difference
(20)
1
1
(18)
groups classified as held for distribution to owners
At 31 December 2020
$ 102
$ 134
$ 4
$ 240
Translation difference
(1)
4
-
3
At 31 December 2021
$ 59
$ 802
$ 10
$ 871
Net benefit expense recognised in the statement of
11
25
-
36
operations
Contributions by employer
(8)
(20)
-
(28)
(Gains)/losses recognised in other comprehensive income
(1)
(84)
-
(85)
The weighted average duration of the defined benefit obligation was as follows:
Reclassification to liabilities directly associated with disposal
(44)
-
-
(44)
groups classified as held for distribution to owners
Years
2021
2020
2019
Translation difference
(1)
1
(1)
(1)
Russian plans
10.7
11.0
10.9
At 31 December 2021
$ 59
$ 56
$ 3
$ 118
US & Canadian plans
14.4
15.0
14.3
Other plans
18.3
20.4
20.3
242
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ANNUAL REPORT & ACCOUNTS 2021
23. EMPLOYEE BENEFITS (CONTINUED)
23. EMPLOYEE BENEFITS (CONTINUED)
The principal assumptions used in determining pension obligations for the Group’s plans are shown below:
Changes in the fair value of plan assets
2021
2020
2019
US
US &
US &
US &
Russian
& Canadian
Other
Russian
Canadian Other
Russian
Canadian Other
Russian
Canadian
Other
US$ million
plans
plans
plans
Total
plans
plans
plans
plans
plans
plans
plans
plans
plans
At 31 December 2018
$ –
$ 555
$ –
$ 555
Discount rate
6.7%
2.4-3%
0.25%
6.2%
2-2.6%
0.2%
7%
3.3-3.4%
0.2%
Future benefits increases
4-7.5%
–
1%
4-7%
-
1%
5%
-
-
Interest income on plan assets
-
21
-
21
Future salary increase
4-7.5%
3%
1%
4-7%
3%
1%
5%
3%
1%
Return on plan assets (excluding amounts included in net
Average life expectation, male, years
71
87
89
71
86.5
88
70
86
88
-
84
-
84
interest expense)
Average life expectation, female, years
80
88.5
91
80
88.5
91
80
88.5
90
Contributions of employer
10
15
-
25
Healthcare costs increase rate
–
6.3%
–
-
6.5%
-
-
5-6.8%
-
Benefits paid
(10)
(36)
(1)
(47)
Reclassification to liabilities directly associated with disposal
-
(1)
-
(1)
groups classified as held for sale
The following table demonstrates the sensitivity analysis of reasonable changes in the significant assumptions used for the measurement of
Other
-
(3)
8
5
the defined benefit obligations, with all other variables held constant.
Translation difference
-
18
-
18
Impact on the defined benefit obligation
Impact on the defined benefit obligation
Impact on the defined benefit
At 31 December 2019
$ –
$ 653
$ 7
$ 660
at 31 December 2021,
at 31 December 2020,
obligation at 31 December 2019,
US$ million
US$ million
US$ million
Interest income on plan assets
-
19
-
19
Reasonable
US &
US &
US &
Return on plan assets (excluding amounts included in net
Other
-
63
-
63
change in
Russian
Canadian
Other
Russian
Canadian
Other
Russian
Canadian
interest expense)
plans
assumption
plans
plans
plans
plans
plans
plans
plans
plans
Contributions of employer
7
33
1
41
Discount rate
10%
$ (7)
$ (33)
$ –
$ (8)
$ (32)
$ (1)
$ (8)
$ (34)
$ (1)
Benefits paid
(7)
(51)
(4)
(62)
(10%)
7
35
–
9
33
1
9
36
1
Other
-
(2)
2
-
Translation difference
-
9
-
9
Future benefits increases
10%
4
–
–
7
-
-
6
-
-
At 31 December 2020
$ –
$ 724
$ 6
$ 730
(10%)
(4)
–
–
(6)
-
-
(9)
-
-
Future salary increase
10%
1
1
–
1
1
-
1
1
-
Interest income on plan assets
-
15
-
15
(10%)
(1)
(1)
–
(1)
(1)
-
(1)
(1)
-
Return on plan assets (excluding amounts included in net
-
31
-
31
interest expense)
Average life expectation,
Contributions of employer
1
14
–
1
14
-
1
12
-
8
20
-
28
male, years
1
Benefits paid
(8)
(44)
-
(52)
(1)
(1)
(13)
–
(1)
(14)
-
(1)
(12)
-
Other
-
(3)
-
(3)
Average life expectation,
Translation difference
-
3
1
4
1
8
–
1
9
-
1
7
-
female, years
1
At 31 December 2021
$ –
$ 746
$ 7
$753
(1)
(1)
(8)
–
(1)
(9)
-
(1)
(7)
-
Healthcare costs
–
1
–
-
1
-
-
-
-
increase rate
10%
The amount of contributions expected to be paid to the defined benefit plans during 2022 approximates $37 million.
(10%)
–
(1)
–
-
(1)
-
-
-
-
The major categories of plan assets as a percentage of total plan assets were as follows at 31 December:
2021
2020
2019
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
US & Canadian plans:
Equity funds and investment trusts
43%
–
45%
-
48%
34%
Governmental bonds
22%
–
17%
-
-
-
Corporate bonds and notes
21%
–
24%
-
14%
-
Cash
3%
–
3%
-
3%
-
Other
3%
8%
3%
8%
-
1%
92%
8%
92%
8%
65%
35%
244
245
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ANNUAL REPORT & ACCOUNTS 2021
24. PROVISIONS
25. LEASE AND OTHER LONG-TERM LIABILITIES
At 31 December the provisions were as follows:
Lease Liabilities
US$ million
2021
2020
2019
The Group has a number of lease contracts, under which it leases railroad cars, coating equipment, warehouses, offices and other machinery and
equipment (Note 9). The movement in lease liabilities is disclosed in the table below:
Non-current
Current
Non-current
Current
Non-current
Current
Site restoration and
2021
2020
2019
$ 182
$ 18
$ 272
$ 24
$ 321
$ 21
decommissioning costs
US$ million
Non-
Current
Non-
Current
Non-
Current
Other provisions
–
19
-
17
-
12
current
portion of
current
portion of
current
portion of
lease
lease
lease
lease
lease
lease
$ 182
$ 37
$ 272
$ 41
$ 321
$ 33
Total
liabilities
liabilities
Total
liabilities
liabilities
Total
liabilities
liabilities
1 January
$ 87
$ 57
$ 30
$ 117
$ 83
$ 34
$ 124
$ 90
$ 34
In the years ended 31 December 2021, 2020 and 2019, the movement in provisions was as follows:
Recognition of liabilities under new contracts
33
26
7
9
8
1
15
14
1
Sale of subsidiaries
–
–
–
-
-
-
(2)
-
(2)
US$ million
Site restoration and
Interest accrued
5
2
3
6
4
2
8
6
2
decommissioning costs
Other provisions
Total
Payment of principal
(30)
–
(30)
(31)
-
(31)
(35)
-
(35)
At 31 December 2018
$ 244
$ 13
$ 257
Payment of interest
(3)
–
(3)
(2)
-
(2)
(2)
-
(2)
Additional provisions
31
21
52
Termination of lease arrangements
–
–
–
(2)
(1)
(1)
-
-
-
Increase from passage of time
18
-
18
Reclassification into short-term portion
–
(21)
21
-
(31)
31
-
(33)
33
Effect of change in the discount rate
73
-
73
Reclassification to disposal groups held for
(21)
(15)
(6)
-
-
-
-
-
-
Effect of changes in estimated costs and timing
(20)
-
(20)
distribution to owners
Translation difference
-
-
-
(10)
(6)
(4)
9
6
3
Utilised in the year
(21)
(10)
(31)
Unused amounts reversed
-
(4)
(4)
31 December
$ 71
$ 49
$ 22
$ 87
$ 57
$ 30
$ 117
$ 83
$ 34
Reclassification to liabilities directly associated with disposal groups classified
(9)
(8)
(17)
as held for sale
Total expenses under lease contracts are summarised in the table below.
Translation difference
26
-
26
At 31 December 2019
$ 342
$ 12
$ 354
US$ million
2021
2020
2019
Additional provisions
5
18
23
Increase from passage of time
17
-
17
Interest accrued under lease liabilities
$ 4
$ 6
$ 8
Effect of changes in estimated costs and timing
1
-
1
Expense relating to variable lease payments not included in the
5
7
7
Utilised in the year
(10)
(4)
(14)
measurement of opening lease liabilities
Unused amounts reversed
(10)
(8)
(18)
Expense relating to leases, which were not recognised as lease
12
11
12
Translation difference
(49)
(1)
(50)
liabilities (leases of low-value assets and short-term leases)
At 31 December 2020
$ 296
$ 17
$ 313
Continuing operations
$ 21
$ 24
$ 27
Additional provisions
14
24
38
Discontinued operations
1
-
-
Increase from passage of time
17
-
17
Effect of changes in estimated costs and timing
5
-
5
$ 22
$ 24
$ 27
Utilised in the year
(11)
(14)
(25)
Unused amounts reversed
-
(3)
(3)
Reclassification to disposal groups held for distribution to owners
(119)
(6)
(125)
(Notes 2 and 13)
The maturity of contractual undiscounted and discounted cash flows under lease payments at 31 December was as follows:
Translation difference
(2)
1
(1)
2021
2020
2019
At 31 December 2021
$ 200
$ 19
$ 219
US$ million
Present value
Present value
Present value
Lease
of lease
Lease
of lease
Lease
of lease
payments
payments
payments
payments
payments
payments
Site Restoration Costs
Not later than 1 year from the reporting date
$ 22
$ 22
$ 31
$ 30
$ 35
$ 34
Later than 1 year and not later than 2 years
24
19
34
29
38
34
The major part of the provision for site restoration and decommissioning costs relates to the Russian subsidiaries. The Land Code, the Forest Code of
the Russian Federation, Federal Law on environmental protection, Resolution of the Government of the Russian Federation on restoration and
Later than 2 years and not later than 5 years
18
15
18
15
40
34
conservation of land define the legal basis and state policy in the field of environmental protection. Under this legislation, mining companies and steel
Later than 5 years and not later than 10 years
13
9
12
9
14
10
mills have obligations to restore mining sites and contaminated land. The majority of costs are expected to be paid after 2038.
Later than 10 years
11
6
6
4
8
5
Total lease payments
88
71
101
87
135
117
At 31 December the respective liabilities were measured based on estimates of restoration costs, which are expected to be incurred in the future
Less: amounts representing finance charges
(17)
–
(14)
-
(18)
-
discounted at the following annual rates:
31 December
$ 71
$ 71
$ 87
$ 87
$ 117
$ 117
2021
2020
2019
Russia
7%
7%
7%
USA
2%
2%
2%
246
247
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25. LEASE AND OTHER LONG-TERM LIABILITIES (CONTINUED)
25. LEASE AND OTHER LONG-TERM LIABILITIES (CONTINUED)
Other Long-Term Liabilities
Hedging Instruments
Other liabilities consisted of the following as of 31 December:
In July 2015, the Group issued bonds in the total amount of 15,000 million Russian roubles ($269 million at the issue date), which bore interest of
12.95% per annum and had a put date in June 2019. The Group used an intercompany loan to transfer the proceeds from the bonds within the Group.
US$ million
2021
2020
2019
To manage the currency exposure, the Group entered into a series of cross currency swap contracts with several banks under which it agreed to deliver
Financial liabilities
US-dollar denominated interest payments at rates ranging from 5.90% to 6.55% per annum plus the notional amount, totaling approximately
Derivatives not designated as hedging instruments
$ 66
$ 49
$ 6
$265 million, in exchange for rouble-denominated interest payments at the rate of 12.95% per annum plus notional, totaling 14,948 million roubles
Long-term trade and other payables
11
34
44
($268 million at the date of the bonds issue).
77
83
50
Bonds principal,
Hedged amount,
Less: current portion (Note 26)
(4)
(10)
(24)
Year
millions
millions
Swap amount,
Interest rates
73
73
26
of issue
of roubles
of roubles
US$ million
on the swap amount
Non-financial liabilities
12.95 per cent bonds due 2019
2015
15,000
13,310
239
5.90%
- 6.55%
Tax liabilities
-
16
4
Other non-financial liabilities
5
16
13
The Group accounted for these swap contracts as cash flow hedges. In 2017, one of these swap contracts with the notional amount of $26 million did
5
32
17
not meet the criteria for efficiency and ceased to be classified as hedging instruments. In 2019, the change in fair value of these derivatives amounted
Less: current portion (Note 26)
(1)
(3)
(3)
to $46 million. The realised gain/(loss) on the swap transactions amounting to $(23) million was related to the interest portion of the change in fair
4
29
14
value of the swap.
Under IFRS the lesser of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in present value
$ 77
$ 102
$ 40
of the expected future cash flows on the hedged item from inception of the hedge is recognised in other comprehensive income and the remaining loss
on the hedging instrument is recorded through the statement of operations. In 2019, the Group recognised a gain/(loss) in other comprehensive
income amounting to $27 million. Most of the swaps were assessed as effective. Those swaps, which ceased to be effective, were reclassified into
Derivatives Not Designated as Hedging Instruments
Derivatives Not Designated as Hedging Instruments. In 2019, $19 million were recorded in the Foreign exchange gains/(losses) caption in the
consolidated statement of operations. In June 2019, upon repayment of the 12.95% rouble bonds, the related swap contracts matured and the Group
In 2019-2021 derivatives not designated as hedging instruments comprised of those swap contracts, which either were not designated as cash flow or
recycled $33 million of the accumulated unrecognised gains on cash flow hedges from other comprehensive income to the statement of operations.
fair value hedges or ceased to be effective, and forward contracts.
The aggregate amounts under swap contracts translated at the year end exchange rates are summarised in the table below.
US$ million
2021
2020
2019
26. TRADE AND OTHER PAYABLES
Bonds and loans, principal
$ 337
$ 338
$ 323
Trade and other payables consisted of the following as of 31 December:
Hedged amount
337
338
323
Swap amount
381
381
317
US$ million
2021
2020
2019
Trade accounts payable
$ 1,228
$ 844
$ 982
To manage the currency exposure on the rouble-denominated bonds, the Group partially economically hedged these transactions. In 2020, the Group
Liabilities for purchases of property, plant and equipment, including VAT
135
200
132
concluded a currency and interest rate swap contract under which it agreed to deliver US dollar-denominated interest payments at a fixed rate of
Accrued payroll
145
157
162
3.335% rate per annum plus the US dollar notional amount, in exchange for variable rouble-denominated CBR key rate-based interest payments plus
Other payables
26
50
75
the rouble notional amount during a period of 3 years until 27 March, 2023. The exchange is exercised on approximately the same dates as
Other long-term obligations with current maturities (Note 25)
5
13
27
the payments under the bank loan.
$ 1,539
$ 1,264
$ 1,378
In 2019, the Group concluded a currency and interest rate swap contract under which it agreed to deliver US dollar-denominated interest payments at
a fixed rate of 3.75% per annum plus the US dollar notional amount, in exchange for fixed rouble-denominated interest payments plus the rouble
The maturity profile of the accounts payable is shown in Note 28.
notional amount during a period of 5 years until 25 July, 2024. The exchange is exercised on approximately the same dates as the payments under
At 31 December 2021, 2020 and 2019, trade accounts payable included $187 million, $131 million and $156 million, respectively, owed by
the bonds.
the Group for purchases of scrap from Vtorresource-Pererabotka, a related party (Note 17). These amounts were classified as trade payables to third
parties as Vtorresource-Pererabotka sold its receivables from the Group under factoring contracts to several banks with no recourse.
The swap contracts, which were effective at 31 December 2021, 2020 and 2019, are summarised in the table below.
Year
Borrowings principal,
Hedged amount,
Swap amount,
Interest rates
of issue
millions of roubles
millions of roubles
US$ million
on the swap amount
27. OTHER TAXES AND DUTIES PAYABLE
7.95 per cent bonds due 2024
2019
20,000
20,000
317
3.75%
EVRAZ ZSMK bank loan agreement due 2023
2020
5,000
5,000
64
3.335%
Other taxes and duties payable were mainly denominated in roubles and consisted of the following as of 31 December:
US$ million
2021
2020
2019
The discount rates used in the valuation were the non-deliverable forward rate curve and the interest rate swap curve for US dollar at the reporting
dates.
VAT
$ 72
$ 89
$ 67
Social insurance contributions (Note 23)
37
47
48
In 2021, 2020 and 2019, a change in fair value of these derivatives of $(16) million, ($64) million and $20 million, respectively, together with
Property tax
7
8
7
a realised gain/(loss) on the swap transactions, amounting to $12 million, $13 million and $8 million, respectively, was recognised within gain/(loss)
Land tax
5
6
6
on financial assets and liabilities in the consolidated statement of operations (Note 7).
Personal income tax
5
7
8
In 2019-2020, the Group had EUR/USD forward contracts, which were accounted for at fair value. In 2020 and 2019, the change in fair value of
Export and import duties
13
-
7
the derivatives of $6 million and $(4) million, respectively, together with a realised gain/(loss) on the currency forward transactions, amounting to
Other taxes, fines and penalties
6
12
10
$(24) million and $14 million, respectively, was recognised within gain/(loss) on financial assets and liabilities in the consolidated statement of
$ 145
$ 169
$ 153
operations (Note 7).
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28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Credit Risk
Liquidity Risk (continued)
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Financial instruments
The Group prepares a rolling 12-month financial plan which ensures that the Group has sufficient cash on demand to meet expected operational
that potentially expose the Group to concentrations of credit risk consist primarily of cash and trade accounts receivable.
expenses, financial obligations and investing activities as they arise. The Group exercises a daily monitoring of cash proceeds and payments. The Group
maintains credit lines and overdraft facilities that can be drawn down to meet short-term financing needs. If necessary, the Group refinances its short-
To manage credit risk related to cash, the Group maintains its available cash, mainly in US dollars and euros, in reputable international banks and
term debt by long-term borrowings. The Group also uses forecasts to monitor potential and actual financial covenants compliance status (Note 22).
major Russian banks. Management periodically reviews the creditworthiness of the banks in which it deposits cash.
Where compliance is at risk, the Group considers options including debt repayment, refinancing or covenant reset. The Group has developed standard
The Group’s trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. There are no
payment periods in respect of trade accounts payable and monitors the timeliness of payments to its suppliers and contractors.
significant concentrations of credit risk within the Group. The Group defines counterparties as having similar characteristics if they are related entities.
The following tables summarise the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments, including interest
In 2021, the major customers were Russian Railways (3.8% of total sales), Ternium Procurement SA (3.8%) and Shang Chen Steel Co (3.3%).
payments.
Part of the Group’s sales is made on terms of letter of credit. In addition, the Group requires prepayments from certain customers. The Group does not
31 December 2021
require collateral in respect of trade and other receivables, except when a customer applies for credit terms which are longer than normal. In this case,
the Group requires bank guarantees or other collateral. The Group has developed standard credit terms and constantly monitors the status of accounts
Less than
3 to 12
After
On demand
1 to 2 years
2 to 5 years
Total
receivable collection and the creditworthiness of the customers.
US$ million
3 months
months
5 years
Certain of the Group’s long-standing Russian customers for auxiliary products, such as heat and electricity, represent municipal enterprises and
Fixed-rate debt
Loans and borrowings
governmental organisations that experience financial difficulties. The significant part of allowance for expected credit losses consists of receivables
Principal
$ –
$ 5
$ 5
$ 760
$ 986
$ –
$ 1,756
from such customers. The Group has no practical ability to terminate the supply to these customers and negotiates with regional and municipal
Interest
–
31
68
78
40
–
217
authorities the terms of recovery of these receivables.
Lease liabilities
–
8
14
24
18
24
88
Other long-term financial liabilities
–
2
2
4
74
–
82
At 31 December the maximum exposure to credit risk is equal to the carrying amount of financial assets, which is disclosed below.
Total fixed-rate debt
–
46
89
866
1,118
24
2,143
US$ million
2021
2020
2019
Variable-rate debt
Restricted deposits at banks (Notes 14 and 19)
$ 16
$ 8
$ 10
Loans and borrowings
Financial instruments included in other non-current and current assets
Principal
–
–
59
67
1,630
–
1,756
2
2
17
(Note 14)
Interest
–
11
33
34
43
–
121
Trade and other receivables (Notes 14 and 16)
638
396
550
Total variable-rate debt
–
11
92
101
1,673
–
1,877
Loans receivable
-
-
33
Non-interest bearing debt
Receivables from related parties (Notes 14 and 17)
44
10
10
Loans and borrowings
Cash and cash equivalents (Note 19)
1,027
1,627
1,423
Principal
–
–
–
–
4
10
14
$ 1,727
$ 2,043
$ 2,043
Trade and other payables
181
1,075
133
–
–
–
1,389
Payables to related parties
2
47
–
–
–
–
49
Dividends payable
–
292
–
–
–
–
292
Total non-interest bearing debt
183
1,414
133
–
4
10
1,744
The ageing analysis of trade and other receivables, loans receivable and receivables from related parties at 31 December is presented in the table
below.
$ 183
$ 1,471
$ 314
$ 967
$ 2,795
$ 34
$ 5,764
US$ million
2021
2020
2019
Gross amount
Impairment
Gross amount
Impairment
Gross amount
Impairment
31 December 2020
Not past due
$ 612
$ (2)
$ 343
$ (1)
$ 446
$ (1)
Less than
3 to 12
After
On demand
1 to 2 years
2 to 5 years
Total
Past due
104
(32)
100
(36)
193
(45)
US$ million
3 months
months
5 years
less than 6 months
69
–
46
-
107
(1)
between 6 months and 1 year
3
(1)
5
(2)
31
-
Fixed-rate debt
over 1 year
32
(31)
49
(34)
55
(44)
Loans and borrowings
Principal
$ -
$ 943
$ 5
$ 510
$ 1,748
$ -
$ 3,206
$ 716
$ (34)
$ 443
$ (37)
$ 639
$ (46)
Interest
-
92
85
116
120
-
413
Lease liabilities
-
7
24
34
18
18
101
In the years ended 31 December 2021, 2020 and 2019, the movement in allowance for expected credit losses was as follows:
Other long-term financial liabilities
-
3
7
11
67
-
88
Total fixed-rate debt
-
1,045
121
671
1,953
18
3,808
US$ million
2021
2020
2019
Variable-rate debt
At 1 January
$ (37)
$ (46)
$ (42)
Loans and borrowings
Charge for the year
1
2
(3)
Principal
-
3
41
350
1,157
-
1,551
Utilised
1
2
2
Interest
-
12
47
53
54
-
166
Transfer to disposal groups held for distribution to owners
1
-
-
Total variable-rate debt
-
15
88
403
1,211
-
1,717
Translation difference
-
5
(3)
Non-interest bearing debt
At 31 December
$ (34)
$ (37)
$ (46)
Loans and borrowings
-
-
-
-
1
9
10
Trade and other payables
195
890
9
-
-
-
1,094
Payables to related parties
1
33
-
-
-
-
34
Liquidity Risk
Amounts payable under put options for shares in
-
65
-
-
-
-
65
subsidiaries
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to
Total non-interest bearing debt
196
988
9
-
1
9
1,203
ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
$ 196
$ 2,048
$ 218
$ 1,074
$ 3,165
$ 27
$ 6,728
The Group manages liquidity risk by maintaining adequate cash reserves and borrowing facilities, by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and liabilities.
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28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Liquidity Risk (continued)
Market Risk (continued)
31 December 2019
Interest Rate Risk (continued)
Less than
3 to 12
After
Cash Flow Sensitivity Analysis for Variable Rate Instruments
On demand
1 to 2 years
2 to 5 years
Total
US$ million
3 months
months
5 years
Based on the analysis of exposure during the years presented, reasonably possible changes in floating interest rates at the reporting date would affect
Fixed-rate debt
profit before tax (“PBT”) by the amounts shown below. There is no impact on the Group’s equity other than the equivalent change in accumulated
Loans and borrowings
profits. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
Principal
$ -
$ 5
$ 5
$ 1,002
$ 2,304
$ 10
$ 3,326
Interest
-
97
134
184
249
-
664
In estimating reasonably possible changes the Group assessed the volatility of interest rates during the reporting periods.
Lease liabilities
-
9
26
38
40
22
135
Other long-term financial liabilities
-
16
8
11
16
-
51
US$ million
2021
2020
2019
Amounts payable under put options for shares in
-
-
69
-
-
-
69
Basis points
Effect on PBT
Basis points
Effect on PBT
Basis points
Effect on PBT
subsidiaries
Total fixed-rate debt
-
127
242
1,235
2,609
32
4,245
US$ millions
US$ millions
US$ millions
Liabilities denominated in US dollars
Variable-rate debt
Decrease in LIBOR
(10)
2
(18)
2
(17)
2
Loans and borrowings
Increase in LIBOR
10
(2)
18
(2)
17
(2)
Principal
-
26
16
30
386
885
1,343
Liabilities denominated in euro
Interest
-
14
45
59
125
16
259
Decrease in EURIBOR
(6)
–
(32)
-
(6)
-
Total variable-rate debt
-
40
61
89
511
901
1,602
Increase in EURIBOR
6
–
32
-
6
-
Non-interest bearing debt
Liabilities denominated in roubles
Trade and other payables
228
883
78
-
-
-
1,189
Payables to related parties
1
13
-
-
-
-
14
Decrease in Bank of Russia key rate
(164)
1
(75)
-
(75)
-
Increase in Bank of Russia key rate
75
(1)
75
-
50
-
Total non-interest bearing debt
229
896
78
-
-
-
1,203
$ 229
$ 1,063
$ 381
$ 1,324
$ 3,120
$ 933
$ 7,050
Currency Risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in currencies other than the functional currencies of
Payables to related parties in the tables above do not include contract liabilities in the amount of $1 million, $4 million and $5 million as of
31 December 2021, 2020 and 2019, respectively.
the respective Group’s subsidiaries. The currencies in which these transactions are denominated are primarily US dollars, Canadian dollars and euro.
The Group does not have formal arrangements to mitigate currency risks of the Group’s operations. However, management believes that the Group is
partly secured from currency risks as foreign currency denominated sales are used to cover repayment of foreign currency denominated borrowings.
Market Risk
The Group’s exposure to currency risk determined as the net monetary position in the respective currencies was as follows at 31 December:
US$ million
2021
2020
2019
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures, while
USD/RUB
$ 2,729
$ 2,230
$ 2,750
optimising the return on risk.
EUR/RUB
8
(71)
467
EUR/USD
(14)
16
(77)
USD/CAD
(467)
(614)
(907)
Interest Rate Risk
EUR/CZK
(13)
(14)
(11)
The Group borrows on both a fixed and variable rate basis and has other interest-bearing liabilities, such as finance lease liabilities and other
USD/CZK
20
24
17
obligations.
USD/KZT
1
1
(164)
RUB/KZT
(141)
(168)
-
The Group incurs interest rate risk on liabilities with variable interest rates. The Group’s treasury function performs analysis of current interest rates.
In case of changes in market fixed or variable interest rates management may consider the refinancing of a particular debt on more favourable terms.
The Group does not have any financial assets with variable interest rates.
Fair Value Sensitivity Analysis for Fixed Rate Instruments
The Group does not account for any fixed rate financial assets or liabilities at fair value through profit or loss. Therefore, a change in interest rates at
the reporting date would not affect the Group’s profits.
The Group does not account for any fixed rate financial assets as assets available for sale. Therefore, a change in interest rates at the reporting date
would not affect the Group’s equity.
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28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
Market Risk (continued)
Fair Value of Financial Instruments (continued)
Currency Risk (continued)
At 31 December the Group held the following financial instruments measured at fair value:
Sensitivity Analysis
2021
2020
2019
The following table demonstrates the sensitivity to reasonably possible changes in the respective currencies, with all other variables held constant, of
US$ million
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
the Group’s profit before tax. In estimating reasonably possible changes the Group assessed the volatility of foreign exchange rates during the reporting
Assets measured at fair value
periods. There is no impact on the Group’s equity other than the equivalent change in accumulated profits.
Derivatives not designated as hedging
instruments (Notes 14 and 25)
–
2
–
-
2
-
-
17
-
2021
2020
2019
Change in
Effect on
Change in
Effect on
Change in
Effect on
Liabilities measured at fair value
exchange rate
PBT
exchange rate
PBT
exchange rate
PBT
Derivatives not designated as hedging
instruments (Note 25)
–
66
–
-
49
-
-
6
-
%
US$ millions
%
US$ millions
%
US$ millions
(9.51)
(286)
(16.88)
(478)
(7.78)
(230)
USD/RUB
During the reporting period, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair
9.51
238
16.88
304
7.78
200
(8.83)
(1)
(17.10)
12
(7.50)
(35)
value measurements.
EUR/RUB
8.83
1
17.10
(12)
7.50
35
(11.61)
–
(18.91)
-
(8.84)
-
CAD/RUB
The following table shows financial instruments for which carrying amounts differ from fair values at 31 December.
11.61
–
18.91
-
8.84
-
(5.29)
1
(7.79)
(1)
(5.02)
4
EUR/USD
US$ million
2021
2020
2019
5.29
(1)
7.79
1
5.02
(4)
(7.39)
35
(8.13)
50
(4.58)
42
USD/CAD
Carrying amount
Fair value
Carrying amount
Fair value
Carrying amount
Fair value
7.39
(35)
8.13
(50)
4.58
(42)
(3.93)
1
(7.56)
1
(2.23)
-
EUR/CZK
Long-term fixed-rate bank loans
$ 29
$ 36
$ 38
$ 47
$ 56
$ 57
3.93
(1)
7.56
(1)
2.23
-
(7.34)
(1)
(11.48)
(3)
(5.98)
(1)
Long-term variable-rate bank loans
1,747
1,707
1,542
1,531
1,309
1,330
USD/CZK
7.34
1
11.48
3
5.98
1
Long-term zero-rate loans
14
12
9
7
-
-
(3.84)
–
(10.02)
-
(4.20)
7
USD/KZT
3.84
–
10.02
-
4.20
(7)
USD-denominated
(9.56)
13
(14.86)
25
-
-
RUB/KZT
9.56
(13)
14.86
(25)
-
-
8.25% notes due 2021
–
–
762
767
776
825
6.75% notes due 2022
–
–
514
543
513
555
In addition to the effects of changes in the exchange rates disclosed above, the Group is exposed to currency risk on derivatives (Note 25). The impact
5.375% notes due 2023
758
790
761
818
759
819
of currency risk on the fair value of these derivatives is disclosed below.
5.25% notes due 2024
703
746
707
778
705
770
Rouble-denominated
12.60% rouble bonds due 2021
–
–
210
213
250
268
2021
2020
2019
7.95% rouble bonds due 2024
278
272
279
297
333
346
Change in
Effect on
Change in
Effect on
Change in
Effect on
exchange rate
PBT
exchange rate
PBT
exchange rate
PBT
$ 3,529
$ 3,563
$ 4,822
$ 5,001
$ 4,701
$ 4,970
%
US$ millions
%
US$ millions
%
US$ millions
(9.51)
35
(16.88)
74
(7.78)
30
USD/RUB
9.51
(29)
16.88
(52)
7.78
(25)
The fair value of the non-convertible bonds and notes was determined based on market quotations (Level 1). The fair value of long-term bank loans
was calculated based on the present value of future principal and interest cash flows, discounted at the Group’s market rates of interest at
the reporting dates (Level 3). The discount rates used for valuation of financial instruments were as follows:
Fair Value of Financial Instruments
Currency in which financial instruments are denominated
2021
2020
2019
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
USD
2 – 2.6%
1.6
- 2.6%
2.5
- 3.8%
•
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
EUR
-
2.2%
-
•
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;
RUB
7.2%
4.9
- 7.2%
-
and
•
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data
(unobservable inputs).
Capital Management
Capital includes equity attributable to the equity holders of the parent entity. Revaluation surplus which is included in capital is not subject to capital
management because of its nature.
The carrying amounts of financial instruments, such as cash, short-term and long-term investments, short-term accounts receivable and payable, short-
term loans receivable and payable and promissory notes, approximate their fair value.
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to
support its business and maximise the return to shareholders. The Board of Directors reviews the Group’s performance and establishes key
performance indicators. There were no changes in the objectives, policies and processes during 2021.
The Group manages its capital structure and makes adjustments to it by the issue of new shares, dividend payments to shareholders, and the
purchase of treasury shares. In addition, the Group monitors distributable profits on a regular basis and determines the amounts and timing of
dividend payments taking into account cashflow and other constraints.
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29. NON-CASH TRANSACTIONS
30. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Transactions that did not require the use of cash or cash equivalents, not disclosed in the notes above, were as follows in the years ended
Contractual Commitments
31 December:
At 31 December 2021, 2020 and 2019, the Group had the following contractual commitments for the purchase of production equipment and
US$ million
2021
2020
2019
construction works (including VAT):
Liabilities for purchases of property, plant and equipment, excluding VAT
$ 127
$ 194
$ 142
US$ million
2021
2020
2019
Continuing operations
$ 770
$ 432
$ 274
Discontinued operations
136
30
105
30. COMMITMENTS AND CONTINGENCIES
$ 906
$ 462
$ 379
Operating Environment of the Group
These commitments include $326 million (31 December 2020: $202 million) relating to the Palmer project - a construction of a new rail mill in Pueblo
The Group is one of the largest vertically integrated steel producers globally and the largest steel producer in Russia. The Group’s major subsidiaries
(Colorado, USA) with an expected completion date in the 2nd quarter of 2023.
are located in Russia, the USA and Canada. Russia is considered to be a developing market with higher economic and political risks.
In 2010, the Group concluded a contract with PraxAir Rus (Note 2, Accounting Judgements) for the construction of an air separation plant and for the
The unrest in the Southeastern region of Ukraine and the economic sanctions imposed by the USA and the European Union on Russia in 2014 and
supply of oxygen and other gases produced by PraxAir Rus at this plant to EVRAZ NTMK for a period of 20 years (extended to 25 years in 2015, when
later on caused economic slowdown in Russia and reduced access to international capital markets. Further sanctions imposed on Russia could have
the construction was completed). This supply contract does not fall within the scope of IFRS 16 “Leases”. At 31 December 2021, the Group has
an adverse impact on the Group’s business.
committed expenditure of $490 million over the life of the contract.
Steel consumption is affected by the cyclical nature of demand for steel products and the sensitivity of that demand to worldwide general economic
In 2018, the Group concluded a contract with Air Liquide Kuzbass (Note 2, Accounting Judgements) for the construction of an air separation plant and
conditions.
for the supply of oxygen and other gases produced by Air Liquide Kuzbass at this plant to EVRAZ ZSMK for a period of 20 years. The contractual price
comprises a fixed component and a variable component. The total amount of the fixed component approximates $473 million, which is payable within
The coronavirus (COVID-19) pandemic outbreak has significantly affected the world economy, including steel production, oil and gas, and construction
20 years starting upon commencement of production in 2021 in proportion to the amounts of the variable component. The variable component is
industry. However, the majority of the Group’s businesses were relatively unaffected with no significant issues for production, supply or shipments.
determined based on the actual purchase of gases and is estimated at $347 million during the life of the contract. Based on management’s
The recovery of the global steel market observed since the second half of 2020 accelerated in 2021 as the ongoing influx of monetary and fiscal
assessment this supply contract does not fall within the scope of IFRS 16 “Leases” as the Group has no access to the equipment and has no rights
stimulus helped the global economy to continue its recovery from the impact of COVID-19. In 2021, steel prices have continued to increase to multi-
either to operate the assets, or to design them in order to predetermine the way of their usage. Also it is expected that more than an insignificant
year highs together with related raw materials prices.
amount of the assets’ output will be sold to the parties unrelated to the Group. In 2021, the construction was completed and the supply of oxygen and
other gases started from September 2021. In addition, Air Liquide Kuzbass constructed the system of trunk and auxiliary pipelines, distribution
From 1 August 2021, after a sharp rise in prices for steel products, iron ore and coal, the Russian government imposed duties on ferrous metals
stations and other equipment for products delivery, which are leased by the Group from 1 July 2021 for a period of 20 years and accounted for under
consisting of a 15% base rate and also a metal-specific rate per tonne of steelmaking raw materials, semi-finished and rolled steel products, which are
IFRS 16. The discounted lease payments are estimated at $8 million.
exported outside the Eurasian Economic Union. The duties were in effect until the end of 2021. Starting from 1 January 2022 the excise tax on liquid
steel was introduced. The new excise tax is payable on every tonne of steel produced, including unsold volumes. Unless slab price falls below $300/mt,
In 2019, the Group concluded a contract with Xcel Energy Inc. for the supply of electricity to a Group’s steel mill (CF&I Steel LP) and a rail mill (Palmer
the tax rate is 2.7%. In addition, from 1 January 2022 mineral extraction tax rates for iron ore and coal became variable (instead of previous fixed
North America LLC), both located in Pueblo (Colorado, USA), for a period of 22 years. The Group is committed to purchase from 1 January 2022 at least
rates) and now are based on formulas linking to commodity prices and the rouble exchange rates. As a result, in 2022, if prices remain near the 2021
500,000 MWh annually on a take-or-pay basis at rates ranging from 3.90 to 4.90 cents/kWh. The rates can be adjusted for gas prices.
levels, the tax expense will significantly increase.
At 31 December 2021, the total amount of this commitment at the unadjusted rates approximates $440 million.
The increased market volatility may have an impact on the Group’s financial position, earnings and cash flows in 2022 and beyond. Management
closely monitors the development of the economic situation and undertakes all necessary measures to maintain the sustainability of the Group’s
Social Commitments
business in the current circumstances.
The Group is involved in a number of social programmes aimed to support education, healthcare and social infrastructure development in towns where
The global economic climate continues to be unstable and this may negatively affect the Group’s results and financial position in a manner not
the Group’s assets are located. The Group budgeted to spend approximately $35 million under these programmes in 2022.
currently determinable.
Environmental Protection
Taxation
In the course of its operations, the Group may be subject to environmental claims and legal proceedings. The quantification of environmental
Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Further, the interpretation
exposures requires an assessment of many factors, including changing laws and regulations, improvements in environmental technologies, the quality
of tax legislation by tax authorities as applied to the transactions and activity of the Group’s entities may not coincide with that of management.
of information available related to specific sites, the assessment stage of each site investigation, preliminary findings and the length of time involved in
As a result, tax authorities may challenge transactions and the Group’s entities may be assessed for additional taxes, penalties and interest. In Russia
remediation or settlement.
the periods remain open to review by the tax and customs authorities with respect to tax liabilities for three calendar years preceding the year of
review. Under certain circumstances reviews may cover longer periods.
The Group has a number of environmental claims and proceedings which are at a stage of investigation. Environmental provisions in relation to these
proceedings that were recognised at 31 December 2021 amounted to $23 million.
Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, the Group has accrued tax liabilities based on
its best estimate of the probable outflow of resources embodying economic benefits, which will be required to settle these liabilities. Possible liabilities
Preliminary estimates available of the incremental costs indicate that such costs could be up to $190 million. The Group has insurance agreements,
which were identified by management at the end of the reporting period as those that can be subject to different interpretations of the tax laws and
which will provide reimbursement of the costs to be actually incurred up to $228 million, of which $23 million relate to the accrued environmental
other regulations and are not accrued in these financial statements could be up to approximately $31 million.
provisions and have been recognised in receivables at 31 December 2021. Management believes that an economic outflow of the additional costs is
not probable and any pending environmental claims or proceedings will not have a material adverse effect on its financial position and results of
operations.
In addition, the Group has committed to various environmental protection programmes covering periods from 2022 to 2026, under which the Group
will perform works aimed at reductions in environmental pollution and contamination. As of 31 December 2021, the costs of implementing these
programmes are estimated at $198 million, including $17 million relating to the discontinued operations.
256
257
Meet EVRAZ
EVRAZ in figures
Strategic report
Corporate governance
FINANCIAL STATEMENTS
Additional information
ANNUAL REPORT & ACCOUNTS 2021
30. COMMITMENTS AND CONTINGENCIES (CONTINUED)
32. MATERIAL PARTLY-OWNED SUBSIDIARIES (CONTINUED)
Legal Proceedings
The Group has been and continues to be the subject of legal proceedings, none of which has had, individually or in aggregate, a significant effect on its
US$ million
2021
2020
2019
operations or financial position.
Accumulated balances of material non-controlling interests
The Group exercises judgement in measuring and recognising provisions and the exposure to contingent liabilities related to pending litigations or other
Raspadskaya
$ 83
$ 44
$ 162
outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgement
New CF&I (subsidiary of EVRAZ Inc NA)
107
105
105
is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the final
Others
(10)
(20)
(15)
settlement. Because of the inherent uncertainties in this evaluation process, actual losses may be different from the originally estimated provision.
180
129
252
These estimates are subject to change as new information becomes available, primarily with the support of internal specialists or with the support of
outside consultants. As of 31 December 2021, possible legal risks approximate $16 million. Probable risks were recorded within the relevant captions
Profit allocated to material non-controlling interests
of the consolidated statement of financial position, mostly in provisions (Note 24).
Raspadskaya
65
17
35
New CF&I (subsidiary of EVRAZ Inc NA)
2
-
2
Others
6
(7)
2
Issued Guarantees
$ 73
$ 10
$ 39
In 2021, the Group guaranteed 50% of liabilities of its joint venture Allegro (Note 17) under a bank loan facility of RUB 9 billion (approximately
$121 million). The guarantee expires in February 2033. In addition, the Group’s share in the joint venture (50%) was pledged as collateral for this loan.
The summarised financial information regarding these subsidiaries is provided below. This information is based on amounts before inter-company
In June 2018, EVRAZ plc and EVRAZ West-Siberian Metallurgical Plant issued a joint guarantee in the amount of up to 30 billion roubles ($478 million
eliminations. As described in Note 4, at the end of 2020 Raspadskaya acquired Yuzhkuzbassugol. Consequently, the consolidated statement of
at the exchange rate at the transaction date) to 9 companies owned by Sibuglemet to compensate any direct losses caused by the failure to perform
financial position of Raspadskaya at 31 December 2020 and 2021 and the statement of operations and cash flow information for 2021 include,
the agreed management services provided by one the Group’s subsidiaries to these entities. Sibuglemet is a producer of coking coal and operator of
coal refineries in the Kemerovo region of Russia. The management company committed to perform all management functions including, inter alia, all
among others, Yuzhkuzbassugol and its subsidiaries, and the consolidated statement of financial position of Raspadskaya at 31 December 2019, the
the decisions required to carry out the day-to-day operations of these coal companies, their investment and procurement activities. The maturity of the
statement of operations and cash flow information for 2020 and 2019 do not include the acquired entities. At 31 December 2020, the share of non-
guarantee was set for 31 December 2030. On 15 November 2020, the Group terminated the management services contract. The guarantee will
controlling shareholders took into account the potential buyback of 4.25% of Raspadskaya’s shares (Note 4).
continue to be effective 3 years after the date of termination.
Summarised statements of operations
Raspadskaya
31. AUDITOR’S REMUNERATION
US$ million
2021
2020
2019
Revenue
$ 2,098
$ 627
$ 996
The remuneration of the Group’s auditor in respect of the services provided to the Group was as follows.
Cost of revenue
(752)
(441)
(509)
Gross profit
1,346
186
487
US$ million
2021
2020
2019
Operating costs
(180)
(77)
(96)
Audit of the parent company of the Group
$ 1
$ 1
$ 1
Impairment of non-financial assets
(8)
-
(92)
Foreign exchange gains/(losses), net
23
94
(24)
Audit of the subsidiaries
2
2
2
Total audit fees
3
3
3
Profit from operations
1,181
203
275
Non-operating gains/(losses)
(27)
4
23
Other services
1
-
1
Profit before tax
1,154
207
298
Income tax benefit/(expense)
(230)
(43)
(64)
$ 4
$ 3
$ 4
Net profit
$ 924
$ 164
$ 234
Other comprehensive income/(loss)
(14)
(242)
150
Total comprehensive income/(loss)
910
(78)
384
attributable to non-controlling interests
63
(8)
56
32. MATERIAL PARTLY-OWNED SUBSIDIARIES
dividends declared to non-controlling interests
(35)
(5)
(3)
Financial information of subsidiaries that have material non-controlling interests is provided below.
New CF&I
Non-controlling interests at 31 December
US$ million
2021
2020
2019
Country of
Revenue
$ 739
$ 561
$ 757
Subsidiary
incorporation
2021
2020
2019
Cost of revenue
(653)
(496)
(654)
Raspadskaya
Russia
6.76%
4.85%
11.83%
Gross profit
86
65
103
New CF&I (subsidiary of EVRAZ Inc NA)
USA
10.00%
10.00%
10.00%
Operating costs
(94)
(82)
(93)
Impairment of assets
(9)
-
-
Profit/(loss) from operations
(17)
(17)
10
Non-operating gains/(losses)
18
22
20
Profit before tax
1
5
30
Income tax benefit/(expense)
–
(1)
(7)
Net profit
$1
$ 4
$ 23
Other comprehensive income/(loss)
20
(1)
(6)
Total comprehensive income/(loss)
21
3
17
attributable to non-controlling interests
2
-
2
dividends declared to non-controlling interests
–
-
-
258
259
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