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13 November 2014

Severstal has the Fastest-Growing Distribution Network

The Distribution Network of Severstal Russian Steel was named the fastest-growing sales network in Russia. The performance of Severstal's Distribution Network in the first 9 months of 2014 reflects the success of this business: with 11% sales growth by volume, the network achieved 71% EBITDA growth year-on-year.

At the largest steelmaker forum in Russia and CIS, Week of Metals in Moscow and the 17th Russian Metal and Steel Market — 2014 International Conference, ZAO TD Severstal-Invest, a member of Severstal Russian Steel Distribution Network, received the Fastest Growing Sales Network Award of the Russia's Best Sales Network in 2014 contest.

“We made significant changes to the structure of TD Severstal-Invest after the creation of Severstal's Distribution Network. Our company became a part of the network operating in 15 countries of CIS and EU,” said the Head of Severstal Russian Steel Distribution Network Andrei Alekseev. “We established a network of large regional centers and sales offices to improve our customer service in Russia, and now we have presence in 30 cities across the country. It must be convenient to work with us for our customers, and the structure of our branch network supports quick turnaround times on product shipments and service delivery. This award and the performance of our company are great indications that we chose the right way of developing our business,” he added.

Successful business development in our target markets shows in the results of Severstal Russian Steel Distribution Network: in the first 9 months of 2014, its EBITDA increased to US$33 million, up 71% year-on-year. Revenue of the Distribution Network increased by 6.7% year-on-year to US$654 million, while sales by volume improved 11% year-on-year to 947 thousand tonnes.

The Russian business of the Distribution Network, TD Severstal-Invest, increased its EBITDA by a factor of 2.6—from US$7 million in the first 9 months of 2013 to US$18 million in the first nine months of 2014, while its revenue grew 7% to US$346 million in the same period. Sales by volume were 514 thousand tonnes representing an 11% increase from the first 9 months of 2013. Sales of rolled products to Central and North-Western Russia reached 326 thousand tonnes by volume, representing a 7% increase year-on-year, while sales to the Central Black Earth Region and Volga Region increased by 22% to 176 thousand tonnes.

Distribution Network businesses operating in the European Union, including Severstallat and Severstallat Silesia, increased their EBITDA to US$11 million in the reporting period, which is 15% more than in the first 9 months of 2013. Revenue from EU sales increased by 20% to US$247 million reflecting 27% increase in sales by volume, which reached 345 thousand tonnes. This sales hike reflects 53% increase in deliveries to Finland and Sweden, 35% increase in sales by volume to Eastern Europe, and nearly 70% increase in deliveries to Germany in the first 9 months of this year compared to the same period a year ago.

Individual businesses of our Distribution Network work on improving their business efficiency and growing their sales through better service. “We continuously improve our business processes focusing on customer needs,” says the Head of Distribution Network Andrei Alekseev. We expand our product range by launching new products in our steel service centers; we keep improving our warehouses to ensure that popular products are always in stock; and we are working on making our logistics more efficient. This effort helps us expand into new market segments and serve customers whose businesses require high service levels. We also manage our costs and look for opportunities to reduce them by implementing best-in-class solutions in all aspects of our operations. In the first 9 months of this year, we reduced our SG&A expenses per tonne of products by 23%,” he adds.