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Message from the CEO

For Metalloinvest, 2016 was a year of challenges and opportunities. We made timely and correct decisions and, due to our strong business model.
Andrey Varichev
CEO
Management Company Metalloinvest

Dear shareholders, partners and team,

For Metalloinvest, 2016 was a year of challenges and opportunities. We made timely and correct decisions and, due to our strong business model, proved our resilience amid unfavourable market conditions.

A well-planned strategy focusing on increasing the Company’s share of high value-added products and the timely delivery of key capex projects allowed us to significantly boost output in all core product segments, despite severe external pressures. Production of iron ore concentrate, pellets, HBI / DRI, steel, and pig iron increased by 3%, 6%, 5%, 4%, and 20%, respectively.

Along with a record-high increase in production and shipments, the Company continued to implement its operational improvement programme and reduced the cash cost of its production by 2.8% to USD 2,211 million.

In 2016, Metalloinvest launched its Industry 4.0 business transformation programme to improve the efficiency of its entire management system. As part of this programme, the Company embarked on the design of an SAP S / 4HANA-based targeted solution. This new technological platform will enable Metalloinvest to increase the overall efficiency of its interrelated management processes.

To foster even better partnerships with customers, we are making efforts to improve our CRM systems and develop uniform service standards. Continuous demand analysis and efficient interaction with key partners in 2016 made us well-positioned to sign supply contracts for nearly 600,000 tonnes of hot briquetted iron with MMK, TMK and ChelPipe, some of our long-standing customers. These are our first long-term domestic premium product supply contracts.

Metalloinvest is responding flexibly to market changes by developing new steel grades, continuously improving its product quality, and upgrading its technological equipment. Last year, these efforts helped us move into a new market segment: we signed long-term contracts to supply billets for railway wheels to OMK and rail billets to Aktobe Rail and Section Works.

In 2017, the management team will focus on expanding the Company’s range of steel products and improving their operational performance, while also widening the sales geography of high value-added products, especially HBI and SBQ steel.

We also remain committed to sustainable development. Partnerships with the local authorities of the Belgorod, Kursk, and Orenburg regions enable us to improve the quality of life in Gubkin, Stary Oskol, Zheleznogorsk and Novotroitsk where our employees and their families reside.

As a socially responsible business, we pay special attention to environmental issues. All of our capex projects are energy efficient and aim to conserve resources and reduce the Company’s environmental footprint. Our industrial facilities maintain significantly lower environmental impact figures than the maximum level permissible.

Metalloinvest has all the necessary resources to continue its successful development: the right strategy, a balanced business model, an efficient management system, and highly-skilled employees.

On behalf of the management team, I would like to thank our shareholders, directors, partners, and employees for our fruitful collaboration in the challenging year of 2016!


Andrey Varichev
CEO
Management Company Metalloinvest