OAO Holding Company METALLOINVEST. Condensed consolidated interim financial information. 30 June 2015

Transcription

1 Condensed consolidated interim financial information 2015

2 Contents Report on Review of Interim Financial Information Consolidated Interim Statement of Financial Position... 1 Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income... 2 Consolidated Interim Statement of Cash Flows... 3 Consolidated Interim Statement of Changes in Equity General information Basis of preparation Accounting policies Segment information Property, plant and equipment and intangible assets Available-for-sale financial assets Short-term and long-term borrowings Employee benefit obligations Balances and transactions with related parties Other operating (expenses)/income net Financial risk management and fair value of financial instruments Events after the reporting period... 16

3

4

5 Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income Six months ended Three months ended Note Sales 2,437,650 3,532,929 1,199,765 1,727,931 Cost of sales (1,235,075) (1,876,274) (652,226) (924,214) Gross profit 1,202,575 1,656, , ,717 Distribution expenses (362,029) (531,531) (182,901) (263,226) General and administrative expenses (139,181) (227,135) (72,734) (112,779) Dividend income on available-for-sale financial assets 59,621 50,703 59,621 50,703 Other operating (expenses)/income net 10 (50,253) (12,653) (14,785) (34,378) Operating profit 710, , , ,037 Finance income 54,845 45,388 27,681 22,715 Finance costs (141,589) (211,374) (69,567) (100,740) Foreign exchange gain/(loss) from borrowings and loans advanced net 21,732 (81,137) 127, ,767 Share of net loss of associates (2,345) (1,221) (1,529) (625) Profit before income tax 643, , , ,154 Income tax charge (126,706) (138,675) (81,336) (96,445) Profit for the period 516, , , ,709 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Available-for-sale financial assets: Fair value gain/(loss) arising during the period 6 119, ,375 (71,562) 171,171 Gain transferred to profit or loss on disposal - (66,866) - (66,866) Currency translation differences 37,237 (33,997) 63, ,180 Share of currency translation differences of associates (2,790) (3,798) 500 (431) Total items that may be reclassified subsequently to profit or loss 153, ,714 (7,580) 293,054 Items that will not be reclassified to profit or loss: Remeasurements of employee benefit obligations 8 (23,237) 20,349 (13,025) (8,738) Total items that will not be reclassified to profit or loss (23,237) 20,349 (13,025) (8,738) Total other comprehensive income/(loss) for the period 130, ,063 (20,605) 284,316 Total comprehensive income for the period 647, , , ,025 Profit is attributable to: Owners of the Company 518, , , ,177 Non-controlling interests (1,370) 1,986 (1,434) (468) 516, , , ,709 Total comprehensive income is attributable to: Owners of the Company 648, , , ,493 Non-controlling interests (1,370) 1,986 (1,434) (468) 647, , , ,025 Basic and diluted earnings per ordinary share for profit attributable to the owners of the Company (in USD per share) The accompanying notes on pages 5 to 16 are an integral part of this condensed consolidated interim financial information. 2

6 Consolidated Interim Statement of Cash Flows Six months ended Cash flows from operating activities: Profit before income tax 643, ,695 Reconciliation between profit before income tax and net cash from operating activities: Depreciation and impairment loss 113, ,785 Amortisation of intangible assets and mineral rights 19,609 31,567 Finance cost (net) 86, ,986 Foreign exchange loss 6,358 95,668 Share of net loss of associates 2,345 1,221 Dividend income on available-for-sale financial assets (59,621) (50,703) Gain on disposal of available-for-sale financial assets - (66,866) Other (3,771) 10,144 Changes in: Inventories 19,195 19,787 Trade and other receivables (17,375) 11,399 Trade and other payables 1,084 72,528 Employee benefit obligations (2,985) (5,583) Interest paid (137,032) (223,866) Income tax paid (38,691) (137,037) Other finance charges - (19,386) Net cash from operating activities 632, ,339 Cash flows from investing activities: Purchases of property, plant and equipment; intangible assets (198,488) (286,720) Exploration and evaluation expenditure - (1,035) Proceeds from disposal of available-for-sale financial assets - 250,690 Dividends received on available-for-sale financial assets 105,499 - Loans advanced (581,884) (365,721) Repayments of loans advanced 567, ,199 Interest received 26,339 13,804 Other Net cash used in investing activities (80,276) (284,489) Cash flows from financing activities: Repayment of borrowings (509,858) (2,749,785) Proceeds from borrowings 61 2,749,364 Dividends paid by the Group s subsidiaries to non-controlling interests (1,483) - Net cash used in financing activities (511,280) (421) Effect of exchange rate changes on cash and cash equivalents (58,284) (15,241) Net (decrease)/increase in cash and cash equivalents (17,086) 470,188 Cash and cash equivalents at the beginning of the period 549, ,539 Cash and cash equivalents at the end of the period 532, ,727 The accompanying notes on pages 5 to 16 are an integral part of this condensed consolidated interim financial information. 3

7 Consolidated Interim Statement of Changes in Equity Attributable to owners of the Company Noncontrolling Share capital Other reserves Retained earnings Total interests Total equity Balance at 1 January ,640 (1,226,452) 2,666,636 1,627,824 17,055 1,644,879 Profit/(loss) for the period , ,040 (1,370) 516,670 Other comprehensive income/(loss) Currency translation differences - 37,237-37,237-37,237 Share of currency translation differences of associates - (2,790) - (2,790) - (2,790) Fair value gain on available-for-sale financial assets - 119, , ,318 Remeasurements of employee benefit obligations - - (23,237) (23,237) - (23,237) Total comprehensive income/(loss) for the period ended , , ,568 (1,370) 647,198 Balance at ,640 (1,072,687) 3,161,439 2,276,392 15,685 2,292,077 Balance at 1 January ,640 (305,918) 3,008,313 2,890,035 68,524 2,958,559 Profit for the period , ,034 1, ,020 Other comprehensive income/(loss) Currency translation differences - (33,997) - (33,997) - (33,997) Share of currency translation differences of associates - (3,798) - (3,798) - (3,798) Fair value gain on available-for-sale financial assets - 271, , ,375 Gain on available-for-sale financial assets transferred to profit or loss - (66,866) - (66,866) - (66,866) Remeasurements of employee benefit obligations ,349 20,349-20,349 Total comprehensive income for the period ended , , ,097 1, ,083 Acquisition of additional interest in subsidiaries ,860 17,860 (40,668) (22,808) Dividends declared by the Group s subsidiaries to non-controlling interests (4,776) (4,776) Dividends declared by the Company - - (511,478) (511,478) - (511,478) Balance at ,640 (139,204) 3,082,078 3,130,514 25,066 3,155,580 The accompanying notes on pages 5 to 16 are an integral part of this condensed consolidated interim financial information. 4

8 1 General information OAO Holding Company METALLOINVEST (the Company ) and its subsidiaries (the Group ) principal activity is the production and sale of iron ore products and ferrous metals. These products are sold both in the Russian Federation and abroad. The Company is incorporated and domiciled in Russia. The address of its registered office is Rublyovskoye shosse, 28, Moscow, Russia. The Group s manufacturing facilities are primarily based in Kursk, Belgorod and Orenburg regions. The principal activities of the Group are not subject to seasonal fluctuations. At 2015 and 31 December 2014, USM Metalloinvest LLC owned a 51% stake in the Company and USM Investments Limited owned a 25% stake in the Company (both companies are 100%-owned direct or indirect subsidiaries of USM Holdings Limited), OAO Lebedinskiy Mining and Processing Works owned a 15% stake in the Company and OAO Oskol Electrometallurgical Plant owned a 3% stake in the Company (both companies are 100%-owned direct subsidiaries of the Company) while the remaining 6% stake in the Company was owned by the Company as treasury shares. At 2015 and 31 December 2014, the major beneficial owner of the Company was Alisher B. Usmanov, who owned 48% stake in USM Holdings Limited through his fully owned company ABU Holdings International Limited. 2 Basis of preparation This condensed consolidated interim financial information has been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with IFRSs. Estimates. The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2014, with the exception of changes in estimates that are required in determining the provision for income taxes, calculation of employee benefit obligations and fair value of available-for-sale financial assets. Operating environment. The recent political and economic turmoil witnessed in the region, in particular the developments in Ukraine, have had and may continue to have a negative impact on the Russian economy, including weakening of the Russian Rouble, higher interest rates, reduced liquidity and making it harder to raise international funding. These events, including international sanctions against Russian companies and individuals and the related uncertainty and volatility of the financial markets, may have a significant impact on the Group s operations and financial position, the effect of which is difficult to predict. The future economic and regulatory situation may differ from management s expectations. Management believes it is taking all necessary measures to support the sustainability and development of the Group s business in the current business and economic environment. Foreign currency translation. The Company s functional currency is the national currency of Russia, Russian rouble ( RUB ); the Group s presentation currency is US Dollar ( USD ). At 2015 the principal exchange rate used for translating foreign currency balances was USD 1 = RUB (31 December 2014: USD 1 = RUB ). The principal average exchange rate used for translating income and expenses was USD 1 = RUB (six months ended 2014: USD 1 = RUB ). Significant depreciation of RUB against USD resulted in significant change in the Group s income and expenses comparing to the previous period. 5

9 3 Accounting policies The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December Income taxes in interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss. Adoption of new or revised standards and interpretations. The following new standards, amendments to standards and interpretations became effective for the Group from 1 January 2015: Amendments to IAS 19 Defined benefit plans: Employee contributions (issued in November 2013 and effective for annual periods beginning 1 July 2014). Annual Improvements to IFRSs 2012 (issued in December 2013 and effective for annual periods beginning on or after 1 July 2014). Annual Improvements to IFRSs 2013 (issued in December 2013 and effective for annual periods beginning on or after 1 July 2014). These standards, amendments to standards and interpretations did not have a material impact on this condensed consolidated interim financial information. A number of new standards, amendments to standards and interpretations are not yet effective as at 2015, and have not been early adopted: IFRS 9 Financial Instruments: Classification and Measurement (issued in July 2014 and effective for annual periods beginning on or after 1 January 2018). The Group is currently assessing the impact of the standard on its consolidated financial information. IFRS 14, Regulatory deferral accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016). Accounting for Acquisitions of Interests in Joint Operations Amendments to IFRS 11 (issued on 6 May 2014 and effective for the periods beginning on or after 1 January 2016). Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 16 and IAS 38 (issued on 12 May 2014 and effective for the periods beginning on or after 1 January 2016). IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2017). Agriculture: Bearer plants Amendments to IAS 16 and IAS 41 (issued on 2014 and effective for annual periods beginning 1 January 2016). Equity Method in Separate Financial Statements Amendments to IAS 27 (issued on 12 August 2014 and effective for annual periods beginning 1 January 2016). Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after 1 January 2016). Annual Improvements to IFRSs 2014 (issued on 25 September 2014 and effective for annual periods beginning on or after 1 January 2016). Disclosure Initiative Amendments to IAS 1 (issued in December 2014 and effective for annual periods on or after 1 January 2016). Investment Entities: Applying the Consolidation Exception Amendment to IFRS 10, IFRS 12 and IAS 28 (issued in December 2014 and effective for annual periods on or after 1 January 2016). Unless otherwise described above, the new standards, amendments to standards and interpretations are not expected to significantly affect the Group s consolidated interim financial information. 6

10 4 Segment information Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM) and for which discrete financial information is available. The functions of the CODM are performed by the senior management board of the Group. Management has determined the operating segments based on the types of products produced and services provided and from which each reportable segment derives its revenues. The development and approval of strategies, market and risk analysis, setting of goals are undertaken in line with the segments determined. The Group is organised on the basis of the following reportable operating segments: Mining production and sale of iron ore products and co-products (includes LGOK and MGOK); Steel production and sale of ferrous metal products (includes OEMK, Ural Steel and OOO Ural Scrap Company); Trading overseas trading of the Group s products (includes Metalloinvest Trading AG, Europe Steel Ltd and Metalloinvest Logistics DWC LLC). Other activities have been included in the All other segments column. These activities include central management, certain services and investment activities, activities of Hamriyah Steel FZC and the Group s activities in exploration and evaluation of copper deposit. The CODM reviews management accounting information which is based on the financial information prepared in accordance with Russian accounting standards (RAS) or IFRS and adjusted to meet internal reporting requirements. Such financial information differs in certain aspects from the information presented in accordance with IFRS. Sales between segments are carried out at arm s length. Revenue from external parties reported to the CODM of the Group is measured in a manner consistent with that in profit or loss. The CODM evaluates the performance of each segment and the overall performance of the Group based on Management EBITDA and Adjusted EBITDA. Management EBITDA is determined based on management accounting information, while Adjusted EBITDA is determined based on IFRS accounts. EBITDA is calculated as operating profit before tax adjusted for depreciation and amortisation, foreign exchange gain or loss, interest income and expense and certain other non-cash and extraordinary items. Since EBITDA is not a standard IFRS measure, the Group s definition may differ from that of other companies. Segment financial information reviewed by the CODM includes working capital as a measure of reportable segments assets. Working capital consists of inventories and certain receivables and payables. Working capital is determined based on management accounting information. Since working capital is not a standard IFRS measure, the Group s definition may differ from that of other companies. 7

11 4 Segment information (continued) Segment information is as follows: Mining Steel Trading All other segments Eliminations Total External revenue 498, ,756 1,401,127 28,320-2,437,650 Inter-segment revenue 621, ,364-5,888 (1,300,570) - Total revenue 1,119,765 1,183,120 1,401,127 34,208 (1,300,570) 2,437,650 Adjusted EBITDA 481, ,466 63,417 67, ,950 Management EBITDA 492, ,960 13,673 37, ,316 Depreciation and amortisation 51,174 40, ,564-96,538 Interest income 16,153 6, ,784-53,702 Inter-segment interest income 11,016 10, ,823 (89,202) - Interest expense 48,194 8,655 2,637 68, ,754 Inter-segment interest expense 58,809 11,572-18,821 (89,202) - Income tax charge 75,963 44,432 1,679 6, ,640 Segment information for the three months ended 2015 is as follows: Mining Steel Trading All other segments Eliminations Total External revenue 263, , ,630 15,757-1,199,765 Inter-segment revenue 307, ,354-3,120 (618,871) - Total revenue 570, , ,630 18,877 (618,871) 1,199,765 Adjusted EBITDA 220,061 81,682 39,802 71, ,525 Management EBITDA 225,471 75,730 16,065 48, ,788 Depreciation and amortisation 27,729 21, ,424-52,190 Interest income 7,477 4, ,213-27,245 Inter-segment interest income 5,506 6, ,449 (44,803) - Interest expense 25,956 4,360 1,078 31,094-62,488 Inter-segment interest expense 28,591 5,806-10,406 (44,803) - Income tax charge 47,461 22,528 1,610 5,837-77,436 Total reportable segment assets: , , ,652 24, , December , ,554 83,008 80, ,018 8

12 4 Segment information (continued) Segment information for the six months ended 2014 is as follows: Mining Steel Trading All other segments Eliminations Total External revenue 796, ,066 1,975,619 47,945-3,532,929 Inter-segment revenue 1,008, ,066-7,365 (1,860,251) - Total revenue 1,805,119 1,557,132 1,975,619 55,310 (1,860,251) 3,532,929 Adjusted EBITDA 915, ,883 31,604 15,740-1,093,056 Management EBITDA 923, ,766 23,787 4,655-1,087,074 Depreciation and amortisation 63,686 61, , ,808 Interest income 37,158 1, ,736-43,778 Inter-segment interest income 20,819 1, ,967 (132,870) - Interest expense 82,971 9,597 4,188 96, ,191 Inter-segment interest expense 90,444 30,672-11,754 (132,870) - Income tax charge 125,062 8, , ,826 Segment information for the three months ended 2014 is as follows: Mining Steel Trading All other segments Eliminations Total External revenue 386, , ,996 25,974-1,727,931 Inter-segment revenue 477, ,805-4,507 (889,964) - Total revenue 864, , ,996 30,481 (889,964) 1,727,931 Adjusted EBITDA 407,015 66,619 29,201 38, ,608 Management EBITDA 409,952 68,989 7,537 26, ,215 Depreciation and amortisation 33,727 30, ,216-68,065 Interest income 18,029 1, ,716-21,861 Inter-segment interest income 9, ,243 (69,702) - Interest expense 38,765 3,788 2,030 48,401-92,984 Inter-segment interest expense 49,596 9,812-10,294 (69,702) - Income tax charge 69,965 23, ,821-98,408 9

13 4 Segment information (continued) A reconciliation of Management EBITDA to profit for the period is provided as follows: Six months ended Three months ended Management EBITDA for reportable segments 760,715 1,082, , ,478 Other segments Management EBITDA 37,601 4,655 48,522 26,737 Total 798,316 1,087, , ,215 Adjustments to Management EBITDA arising from differences in management accounting and requirements of IFRS: Capitalisation of elements of cost of non-current assets recognized as expenses in profit or loss in accordance with RAS 18,669 18,724 12,349 14,709 Recognition of expenses in profit or loss recognised as non-current assets in accordance with RAS (4,017) (7,919) (2,101) (3,274) Additional loss on disposal of property, plant and equipment (475) (3,211) (118) (2,363) Unrealised profits adjustment 30,065 8,799 28,002 19,915 Effect arising from differences in management accounting and requirements of IFRS at the foreign trader 19,322 11,959 (2,951) (3,294) Reverse of/(additional) provision for impairment of receivables 891 (9,107) 1,064 (7,194) Employee benefit obligations adjustment 2,985 5,583 1,965 2,696 Reclassification of other charges from operating expenses to finance costs (Recognition)/reverse of vacation reserve in profit or loss (3,741) (5,209) (1,309) 3,463 Other adjustments 9,935 (14,474) 10,836 2, ,950 1,093, , ,608 Other reconciling items: Depreciation, amortisation and impairment loss (133,127) (209,352) (68,841) (102,413) Finance income 54,845 45,388 27,681 22,715 Finance costs (141,589) (211,374) (69,567) (100,740) Foreign exchange (loss)/gain (6,358) (95,668) 119, ,743 Gain on disposal of available-for-sale financial assets - 66,866-66,866 Share of net loss of associates (2,345) (1,221) (1,529) (625) Income tax charge (126,706) (138,675) (81,336) (96,445) Profit for the period 516, , , ,709 An analysis of the Group s sales to external customers by their geographical location is presented as follows: Six months ended Three months ended Russia 969,991 1,415, , ,422 Rest of CIS 67, ,936 35,179 41,657 Total CIS 1,037,164 1,518, , ,079 China 71, ,952 24,526 51,414 Rest of Asia 75, ,917 34,904 85,492 Total Asia 146, ,869 59, ,906 Middle East 430, , , ,804 Europe 596, , , ,094 Other countries 227, ,274 86, ,048 Total Sales 2,437,650 3,532,929 1,199,765 1,727,931 10

14 5 Property, plant and equipment and intangible assets Six months ended 2015 Property, plant and equipment Intangible assets (excluding goodwill) Mineral rights Opening net book amount at 1 January ,010, , ,923 Additions 220,550 1,913 - Disposals (1,779) - - Depreciation and amortisation (111,018) (1,779) (17,842) Currency translation differences 29,428 4,678 9,992 Closing net book amount at ,148, , ,073 Six months ended 2014 Property, plant and equipment Intangible assets (excluding goodwill) Mineral rights Opening net book amount at 1 January ,137, ,726 1,439,289 Additions 310,718 34,877 - Disposals (5,724) - - Depreciation and amortisation (169,151) (2,300) (29,276) Impairment loss* (7,367) - - Currency translation differences (75,458) (13,976) (39,752) Closing net book amount at ,190, ,327 1,370,261 * During the six months ended 2014 the Group recognised an impairment loss of USD 7,367 thousand as a result of a restructuring programme of its subsidiary OAO Ural Steel, a steel production plant included in Steel segment. The programme was commenced in January 2014 with the purpose to improve the effectiveness and profitability of the subsidiary s production operations. The programme involves terminating certain cost-inefficient production workshops and optimising the related staffing levels. At 2015, the Group had contractual commitments for the purchase of property, plant and equipment for USD 297,136 thousand (31 December 2014: USD 355,788 thousand). At 2015, certain bank borrowings were secured by items of property, plant and equipment with carrying amount of USD 794 thousand (31 December 2014: USD 811 thousand). 6 Available-for-sale financial assets Six months ended At 1 January 760,937 1,422,534 Fair value gain 119, ,375 Disposals - (250,690) Currency translation differences 13,473 (29,396) At 893,728 1,413,823 Available-for-sale financial assets include the following: December 2014 Listed securities: MMC Norilsk Nickel ADR 846, ,763 Unlisted securities: OOO South Ural Mining & Processing Works 46,949 47,174 Total 893, ,937 At 2015 and 31 December 2014, the Group held approximately 3.2% interest in OJSC MMC Norilsk Nickel and 19.9% share in OOO South Ural Mining & Processing Works. Fair values of the available-for-sale financial assets were determined applying valuation techniques disclosed in Note

15 7 Short-term and long-term borrowings December 2014 Long-term borrowings 1,922,314 2,222,906 Guaranteed notes 1,691,395 1,690,407 Unsecured corporate bonds 180, ,281 Total long-term borrowings 3,794,150 4,090,594 Short-term borrowings 369,510 67,274 Short-term part of unsecured corporate bonds - 444,269 Bank overdraft 43, ,018 Total short-term borrowings 413, ,561 Total 4,207,185 4,734,155 Movements in borrowings are analysed as follows: Six months ended Opening amount at 1 January 4,734,155 5,965,056 Borrowings received 61 2,692,038 Repayments of borrowings (90,722) (2,734,809) Repayments of unsecured corporate bonds (411,913) - Foreign exchange and currency translation differences, net (24,396) (74,332) Closing amount at 4,207,185 5,847,953 At 2015, interest accrued on borrowings, guaranteed notes and unsecured corporate bonds of USD 39,036 thousand (31 December 2014: USD 50,611 thousand) is presented in current accounts payable. 8 Employee benefit obligations The Group companies operate both funded and unfunded post-employment benefits plans. The principal assumptions used for actuarial valuations were the same as those applied for the year ended 31 December 2014, with the exception of the discount rate. The decrease in the discount rate from 13.0% to 10.9% resulted in recognition of an actuarial loss of USD 23,237 thousand in other comprehensive income (for the six months ended 2014 the increase in the discount rate from 7.9% to 8.6% resulted in recognition of an actuarial gain of USD 20,349 thousand in other comprehensive income). Amounts recognised in the consolidated interim statement of profit or loss and other comprehensive income were as follows: Six months ended Current service costs 3,080 6,161 Curtailment - (3,548) Net interest expense 8,490 11,575 Net periodic benefit costs 11,570 14,188 Amounts recognised in the consolidated interim statement of financial position were as follows: December 2014 Present value of defined benefit obligations 167, ,687 Fair value of plan assets (1,292) (1,217) Net liability in the statement of financial position 165, ,470 12

16 9 Balances and transactions with related parties Parties are considered to be related if one party has the ability to control the other party, is under common control, or can exercise significant influence or joint control over the other party in making financial or operational decisions as defined by IAS 24, Related Party Disclosures. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Other related parties at 2015 and 31 December 2014 include entities significantly influenced by the owners of the Company. The owners of the Company are disclosed in Note 1. The nature of the related party relationships for those related parties with whom the Group entered into significant transactions or had significant balances outstanding at 2015 and 31 December 2014 is detailed below: (i) Balances and transactions with other related parties Period-end balances: December 2014 Trade accounts receivable 6,836 7,677 Advances to suppliers of property, plant and equipment - 1,122 Other receivables 20,526 20,733 Trade accounts payable 12,529 10,509 Six months ended The transactions carried out during the period: Sales of goods and services 5,151 14,878 Sales of property, plant and equipment - 1,018 Purchases of raw materials and components 4,844 11,488 Purchases of property, plant and equipment 376 1,862 Purchase of services 15,902 18,375 Finance income 1,135 1,599 Six months ended Loans advanced to other related parties: At 1 January 233, ,770 Loans advanced during the period 128,162 93,520 Repayments of loans advanced (110,054) (38,500) Interest income accrued 7,711 18,663 Interest income received (6,269) (718) Foreign exchange and currency translation differences, net 10,977 (7,004) At 264, ,731 Loans advanced to other related parties bear interest rates ranging as follows: Currency December 2014 USD 1.4% 1,9% 1.9% RUB 8.4% 9.3% 8.4% 9.3% (ii) Balances and transactions with the owners of the Company Six months ended Loans advanced to the owners of the Company: At 1 January 1,062, ,084 Loans advanced during the period 453, ,201 Repayments of loans advanced (457,924) (65,699) Interest income accrued 32,439 18,681 Interest income received (6,406) (6,461) Foreign exchange and currency translation differences, net (6,179) (7,293) At 1,078, ,513 13

17 9 Balances and transactions with related parties (continued) Loans advanced to the owners of the Company bear interest rates ranging as follows: Currency December 2014 USD 2.9% 1.9% 2.9% EUR - 1.8% RUB 8.5% 11% 8.5% 11% (iii) Contractual commitments to other related parties At 2015, the Group had no contractual commitments to other related parties (31 December 2014: USD 3,539 thousand) for the purchase of property, plant and equipment. (iv) Key management personnel compensation Key management personnel comprise of senior management board and Board of Directors. Compensation of key management personnel consists of monthly remuneration, annual performance bonus contingent on operating results and contributions to the Russian state pension fund. Total key management personnel compensation included in general and administrative expenses for the six months ended 2015 amounted to USD 9,235 thousand (the six months ended 2014: USD 15,770 thousand). 10 Other operating (expenses)/income net Six months ended Six months ended Foreign exchange loss on operating activities, net (28,090) (14,531) Charity expenses (13,777) (36,375) Social costs (3,714) (5,732) Gain on disposal of available-for-sale financial assets - 66,866 Other (4,672) (22,881) Total (50,253) (12,653) 11 Financial risk management and fair value of financial instruments The Group s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The condensed consolidated interim financial information does not include all financial risk management information and disclosures required in the annual financial statements; it should be read in conjunction with the group s annual financial statements as at 31 December There have been no changes in the risk management department or in any risk management policies since the year end. Fair value measurements are analysed by level in the fair value hierarchy as follows: (i) level one are measurements at quoted prices (unadjusted) in active markets for identical assets or liabilities, (ii) level two measurements are valuations techniques with all material inputs observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices), and (iii) level three measurements are valuations not based on observable market data (that is, unobservable inputs). Management applies judgement in categorising financial instruments using the fair value hierarchy. If a fair value measurement uses observable inputs that require significant adjustment, that measurement is a Level 3 measurement. The significance of a valuation input is assessed against the fair value measurement in its entirety. 14

18 11 Financial risk management and fair value of financial instruments (continued) Financial instruments carried at fair value Available-for-sale financial assets are carried in the statement of financial position at their fair value. The levels in the fair value hierarchy into which the fair value measurements are categorised are as follows: December 2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 FINANCIAL Assets Available-for-sale financial assets - Equity securities 846,779-46, ,763-47,174 Total financial assets carried at fair value 846,779-46, ,763-47,174 At 2015 and 31 December 2014, included in Level 1 was the Group s investment in MMC Norilsk Nickel ADRs. The fair value of the Group s investment in the ADRs is based on the London Stock Exchange quotation. There were no transfers into or out of Level 3 during the period. At 2015 and 31 December 2014, included in Level 3 was the Group s investment in OOO South Ural Mining & Processing Works, a limited liability company which is not publicly traded. The fair value of the investment is estimated by reference to future cash flows discounted at the post-tax RUBnominated rate of 15.1% (31 December 2014: 15.3%) based on the market interest rate and the risk premium specific to the unlisted securities. During the six months ended 2015 the Group recognised a fair value loss of USD 224 thousand ( 2014: USD 11,491 thousand) in other comprehensive income. At 2015, if the post-tax RUB-nominated rate was 1.0% (31 December 2014: 1.0%) lower/higher with all other variables held constant, the estimated fair value of the investment would have been USD 8,756 thousand higher and USD 7,382 thousand lower, respectively (31 December 2014: USD 9,699 thousand higher and USD 8,103 thousand lower, respectively). Fair value of financial assets and liabilities carried at amortised cost The fair values of the following financial assets and liabilities approximate their carrying amounts: Trade and other receivables; Cash and cash equivalents; Trade and other payables; Bank overdrafts. At 2015, the fair values of borrowings have been less than their carrying amounts by USD 93,028 thousand (31 December 2014: USD 41,932 thousand). The market value of the guaranteed notes issued in April 2013 based on the Irish Stock Exchange quotation as at 2015 was USD 921,304 thousand (31 December 2014: USD 778,213 thousand). The market value of the guaranteed notes issued in July 2011 based on the London Stock Exchange quotation as at 2015 was USD 709,516 thousand (31 December 2014: USD 663,427 thousand). 15

19 11 Financial risk management and fair value of financial instruments (continued) The market value of the unsecured corporate bonds based on the Moscow Stock Exchange quotation as at 2015 was USD 168,752 thousand (31 December 2014: USD 604,647 thousand). At 2015, the fair value of liability to the regional administration exceeded its carrying amount by USD 18,625 thousand. At 31 December 2014, the fair value of liability to the regional administration approximated its carrying amount. At 2015, the fair values of loans advanced have been less than their carrying amounts by USD 43,660 thousand (31 December 2014: USD 62,212 thousand). 12 Events after the reporting period In July 2015, the Group signed a pre-export finance facility agreement for USD 750 million maturing over the period USD 515 million were used to partially refinance the existing pre-export finance facility obtained in March In July 2015, the Company cancelled 6% of its treasury shares (Note 1). 16