| 26. | Segment information |
The Group’s operations are presented in three business segments as follows:
| • | Steel segment, comprising production and sales of semi-finished steel products, carbon and specialty long products, carbon and stainless flat products, value-added downstream metal products, including forgings, stampings, hardware, rails, balks and ferrosilicon; |
| • | Mining segment, comprising production and sales of coal (coking and steam) and middlings, coke and chemical products, and iron ore, which supplies raw materials to the Steel and Power segments and also sells substantial amounts of raw materials to third parties; |
| • | Power segment, comprising generation and sales of electricity and heat power, which supplies electricity and heat power to the Steel and Mining segments and also sells a portion of electricity and heat power to third parties. |
These segments are combinations of subsidiaries and have separate management teams and offer different products and services.
The above three segments meet criteria for reportable segments. No operating segments have been aggregated to form the above reportable operating segments. Subsidiaries are consolidated by the segment to which they belong based on their products and by which they are managed. The Group’s management evaluates performance of the segments based on segment revenues, gross margin and operating income (loss). Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties. The accounting policies used by the Group in reporting segments internally are the same as those used for preparation of consolidated financial statement and in the respective quantitative and qualitative notes of the consolidated financial statements therefore no reconciliation between segment information and consolidated assets, liabilities and operating results is performed.
|
As of December 31, 2017 and for the year then ended |
Mining | Steel | Power | Adjustments and eliminations |
Consolidated | |||||||||||||||
|
Revenues from external customers |
100,129 | 172,760 | 26,224 | 0 | 299,113 | |||||||||||||||
|
Inter-segment revenues |
42,286 | 7,622 | 16,338 | (66,246 | ) | 0 | ||||||||||||||
|
Gross profit |
93,464 | 34,013 | 12,724 | (1,444 | ) | 138,757 | ||||||||||||||
|
Gross margin, % |
65.6 | 18.9 | 29.9 | 0 | 46.4 | |||||||||||||||
|
Depreciation and depletion |
(7,979 | ) | (5,800 | ) | (448 | ) | 0 | (14,227 | ) | |||||||||||
|
Loss on write-off of non-current assets |
(135 | ) | (145 | ) | (41 | ) | 0 | (321 | ) | |||||||||||
|
Impairment of goodwill and non-current assets |
(3,800 | ) | (2,281 | ) | 0 | 0 | (6,081 | ) | ||||||||||||
|
Operating profit |
48,190 | 9,154 | 1,267 | (1,444 | ) | 57,167 | ||||||||||||||
|
Share of profit (loss) of associates, net |
18 | 0 | 0 | 0 | 18 | |||||||||||||||
|
Finance income |
475 | 150 | 8 | 0 | 633 | |||||||||||||||
|
Intersegment finance income |
1,335 | 567 | 49 | (1,951 | ) | 0 | ||||||||||||||
|
Finance cost |
(34,324 | ) | (12,793 | ) | (493 | ) | 0 | (47,610 | ) | |||||||||||
|
Intersegment finance cost |
(222 | ) | (1,342 | ) | (387 | ) | 1,951 | 0 | ||||||||||||
|
Income tax expense |
(2,023 | ) | (800 | ) | (327 | ) | 0 | (3,150 | ) | |||||||||||
|
Profit (loss) for the year |
18,596 | (4,712 | ) | 130 | (1,444 | ) | 12,570 | |||||||||||||
|
Segment assets |
208,585 | 100,128 | 10,414 | 0 | 319,127 | |||||||||||||||
|
Segment liabilities |
368,283 | 185,074 | 9,903 | 0 | 563,260 | |||||||||||||||
|
Investments in associates |
283 | 0 | 0 | 0 | 283 | |||||||||||||||
|
Goodwill |
14,367 | 556 | 3,408 | 0 | 18,331 | |||||||||||||||
|
Capital expenditures |
(5,852 | ) | (1,329 | ) | (321 | ) | 0 | (7,502 | ) | |||||||||||
|
As of December 31, 2016 and for the year then ended |
Mining | Steel | Power | Adjustments and eliminations |
Consolidated | |||||||||||||||
|
Revenues from external customers |
89,647 | 161,639 | 24,723 | — | 276,009 | |||||||||||||||
|
Inter-segment revenues |
31,907 | 7,254 | 15,903 | (55,064 | ) | — | ||||||||||||||
|
Gross profit |
76,515 | 42,148 | 11,578 | (554 | ) | 129,687 | ||||||||||||||
|
Gross margin, % |
62.9 | 25.0 | 28.5 | — | 47.0 | |||||||||||||||
|
Depreciation and depletion |
(7,912 | ) | (5,435 | ) | (367 | ) | — | (13,714 | ) | |||||||||||
|
Loss on write-off of non-current assets |
(863 | ) | (1,089 | ) | (1 | ) | — | (1,953 | ) | |||||||||||
|
Impairment of goodwill and non-current assets |
(1,336 | ) | (3,866 | ) | — | — | (5,202 | ) | ||||||||||||
|
Operating profit |
31,012 | 11,531 | 701 | (554 | ) | 42,690 | ||||||||||||||
|
Share of profit (loss) of associates, net |
(17 | ) | — | — | — | (17 | ) | |||||||||||||
|
Finance income |
1,082 | 93 | 1 | — | 1,176 | |||||||||||||||
|
Intersegment finance income |
1,401 | 2,141 | 53 | (3,595 | ) | — | ||||||||||||||
|
Finance cost |
(37,615 | ) | (16,015 | ) | (610 | ) | — | (54,240 | ) | |||||||||||
|
Intersegment finance cost |
(1,731 | ) | (1,396 | ) | (468 | ) | 3,595 | — | ||||||||||||
|
Loss after tax for the year from discontinued operations, net |
— | (406 | ) | (20 | ) | — | (426 | ) | ||||||||||||
|
Income tax (expense) benefit |
(5,019 | ) | 265 | (139 | ) | — | (4,893 | ) | ||||||||||||
|
Profit (loss) for the year |
2,309 | 7,455 | (378 | ) | (554 | ) | 8,832 | |||||||||||||
|
Segment assets |
210,028 | 104,550 | 10,887 | — | 325,465 | |||||||||||||||
|
Segment liabilities |
375,938 | 191,058 | 11,057 | — | 578,053 | |||||||||||||||
|
Investments in associates |
265 | — | — | — | 265 | |||||||||||||||
|
Goodwill |
14,367 | 580 | 3,408 | — | 18,355 | |||||||||||||||
|
Capital expenditures |
(3,958 | ) | (1,206 | ) | (360 | ) | — | (5,524 | ) | |||||||||||
|
As of December 31, 2015 and for the year then ended |
Mining | Steel | Power | Adjustments and eliminations |
Consolidated | |||||||||||||||
|
Revenues from external customers |
80,632 | 146,032 | 26,477 | — | 253,141 | |||||||||||||||
|
Inter-segment revenues |
28,091 | 6,972 | 14,990 | (50,053 | ) | — | ||||||||||||||
|
Gross profit |
57,442 | 33,395 | 11,288 | (318 | ) | 101,807 | ||||||||||||||
|
Gross margin, % |
52.8 | 21.8 | 27.2 | — | 40.2 | |||||||||||||||
|
Depreciation and depletion |
(9,106 | ) | (4,651 | ) | (328 | ) | — | (14,085 | ) | |||||||||||
|
Loss on write-off of non-current assets |
(199 | ) | (492 | ) | — | — | (691 | ) | ||||||||||||
|
Impairment of goodwill and non-current assets |
— | (16 | ) | (1,444 | ) | — | (1,460 | ) | ||||||||||||
|
Operating profit |
16,004 | 8,527 | 39 | (318 | ) | 24,252 | ||||||||||||||
|
Finance income |
142 | 38 | 3 | — | 183 | |||||||||||||||
|
Intersegment finance income |
887 | 307 | 53 | (1,247 | ) | — | ||||||||||||||
|
Finance cost |
(33,656 | ) | (24,767 | ) | (2,029 | ) | — | (60,452 | ) | |||||||||||
|
Intersegment finance cost |
(225 | ) | (878 | ) | (144 | ) | 1,247 | — | ||||||||||||
|
Profit (loss) after tax for the year from discontinued operations, net |
764 | 87 | (29 | ) | — | 822 | ||||||||||||||
|
Income tax (expense) benefit |
(5,630 | ) | (2,795 | ) | 103 | — | (8,322 | ) | ||||||||||||
|
Loss for the year |
(71,563 | ) | (40,626 | ) | (2,121 | ) | (318 | ) | (114,628 | ) | ||||||||||
|
Segment assets |
217,393 | 113,985 | 10,694 | — | 342,072 | |||||||||||||||
|
Segment liabilities |
375,153 | 216,771 | 12,002 | — | 603,926 | |||||||||||||||
|
Investments in associates |
284 | — | — | — | 284 | |||||||||||||||
|
Goodwill |
14,367 | 3,603 | 3,408 | — | 21,378 | |||||||||||||||
|
Capital expenditures |
(4,971 | ) | (520 | ) | (486 | ) | — | (5,977 | ) | |||||||||||
The following table presents the Group’s revenues segregated between domestic and export sales. Domestic represents sales by a subsidiary in the country in which it is located. This category is further divided between subsidiaries located in Russia and other countries. Export represents cross-border sales by a subsidiary regardless of its location.
| 2017 | 2016 | 2015 | ||||||||||
|
Domestic |
||||||||||||
|
Russia |
176,906 | 164,361 | 146,701 | |||||||||
|
Other |
23,445 | 22,252 | 20,817 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
200,351 | 186,613 | 167,518 | |||||||||
|
Export |
98,762 | 89,396 | 85,623 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total revenue |
299,113 | 276,009 | 253,141 | |||||||||
|
|
|
|
|
|
|
|||||||
Allocation of total revenue by country is based on the location of the customer. The Group’s total revenues from external customers by geographic area were as follows:
| 2017 | 2016 | 2015 | ||||||||||
|
Russia |
177,005 | 164,412 | 146,754 | |||||||||
|
Asia |
63,182 | 54,114 | 40,119 | |||||||||
|
Europe |
36,605 | 34,126 | 39,019 | |||||||||
|
CIS |
19,346 | 18,630 | 20,231 | |||||||||
|
Middle East |
2,212 | 1,536 | 4,222 | |||||||||
|
USA |
286 | 707 | 581 | |||||||||
|
Other regions |
477 | 2,484 | 2,215 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
299,113 | 276,009 | 253,141 | |||||||||
|
|
|
|
|
|
|
|||||||
The majority of the Group’s non-current assets are located in Russia. The carrying amounts of property, plant and equipment pertaining to the Group’s major operations were as follows:
| December 31, 2017 |
December 31, 2016 |
|||||||
|
Russia |
228,825 | 238,175 | ||||||
|
Germany |
1,407 | 1,415 | ||||||
|
Austria |
589 | 581 | ||||||
|
Czech Republic |
216 | 206 | ||||||
|
Romania |
41 | 40 | ||||||
|
Other |
37 | 35 | ||||||
|
|
|
|
|
|||||
|
Total |
231,115 | 240,452 | ||||||
|
|
|
|
|
|||||
Because of the significant number of customers, there are no individual external customers that generate sales greater than 10% of the Group’s consolidated total revenue.
The following table presents the breakdown of the Group’s revenues from external customers by major products:
| 2017 | 2016 | 2015 | ||||||||||
|
Mining segment |
||||||||||||
|
Coal and middlings |
84,341 | 75,258 | 64,186 | |||||||||
|
Coke and chemical products |
13,747 | 11,330 | 11,756 | |||||||||
|
Iron ore concentrate |
220 | 126 | 1,844 | |||||||||
|
Other |
1,821 | 2,933 | 2,846 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
100,129 | 89,647 | 80,632 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Steel segment |
||||||||||||
|
Long steel products |
96,768 | 89,575 | 73,853 | |||||||||
|
Hardware |
27,578 | 24,580 | 23,443 | |||||||||
|
Flat steel products |
22,505 | 18,230 | 17,490 | |||||||||
|
Forgings and stampings |
12,247 | 11,652 | 12,166 | |||||||||
|
Semi-finished steel products |
492 | 3,434 | 5,027 | |||||||||
|
Ferrosilicon |
2,807 | 3,368 | 3,528 | |||||||||
|
Steel pipes |
2,733 | 3,286 | 3,308 | |||||||||
|
Other |
7,630 | 7,514 | 7,217 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
172,760 | 161,639 | 146,032 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Power segment |
||||||||||||
|
Electricity |
24,297 | 22,527 | 24,524 | |||||||||
|
Other |
1,927 | 2,196 | 1,953 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total |
26,224 | 24,723 | 26,477 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total revenue |
299,113 | 276,009 | 253,141 | |||||||||
|
|
|
|
|
|
|
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