Investor Presentaiton
Management's Discussion and Analysis
Nine months ended September 30, 2011
Russia. In the first nine months of 2011, an increase in the average cost per
tonne, reflecting higher prices for raw materials, as well as changes in the
product mix resulted in a U.S.$170 million and U.S.$187 million growth of
the cost of sales of seamless and welded pipe, respectively.
Growth in the cost of sales attributable to higher sales volumes of seamless
and welded pipe amounted to U.S.$153 million and U.S.$97 million,
respectively.
The cost of other operations increased U.S.$32 million, while the effect of
translation from the functional to the presentation currency accounted for a
U.S.$143 million increase in the cost of sales of the division.
America. An average cost per tonne, mainly increased as a result of a
significant growth in coil and scrap prices, as well as changes in the product
mix markedly affected the division's cost of sales. The cost of sales of
seamless and welded pipe increased U.S.$56 million and U.S.$47 million,
respectively.
Higher sales volumes of seamless and welded pipe contributed U.S.$18
million and U.S.$33 million, respectively.
In the first nine months of 2011, the cost of sales from other operations
decreased U.S.$1 million as a result of reduced sales of services to external
customers.
Europe. The European division specialises in selling seamless pipe and
steel billets. In the first nine months of 2011, an increase in the average cost
per tonne caused by a significant growth of scrap prices at the end of 2010
resulted in a U.S.$34 million increase in the cost of sales. Growth in the cost
of sales attributable to an increase in sales volumes of seamless pipe
amounted to U.S.$11 million.
An increase in the cost of sales from other operations in the amount of
U.S.$25 million primarily reflected a substantial growth in the sales of steel
billets.
The effect of translation from the functional to the presentation currency
resulted in a U.S.$13 million growth in the cost of sales.
The table below shows our total cost of sales by group of products for the
periods presented below:
Seamless pipe
Welded pipe
Nine-month period ended
30 September
2011
2010
Change
Change
in millions of U.S. dollars
in millions of U.S. dollars
in %
2,126
1,614
512
32%
1,684
1,265
419
33%
COST OF SALES - PIPES
Other operations
3,810
2,879
931
32%
226
139
87
63%
TOTAL COST OF SALES
4,036
3,018
1,018
34%
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