1. Severstal: Overview and Forecast Alexander Andrianov, Finance Director London February 2003 Overview and Forecast London February 2003

2. 2 Table of contents Market Position Operations Financials Stock Market Environmental Protection Conclusions

3. 3 Overview and Forecast Market position

4. 4 Geographical position

5. 5 Overview Investing in the company's workforce and consequently increasing productivity. Developing motivation system Holding the leader position in the Russian steel industry and supplying domestic and foreign customers with high quality steel products The optimisation of the company's steel production assets by modernising production facilities to increase the quality and expand the mix of its steel products Investing in raw material suppliers, transportation facilities, steel consuming businesses and other projects, which add value to Severstal's core business by reducing costs and improving the reliability of raw material supplies as well as the delivery of finished products

6. 6 Strategy Purchases Production SalesHuman Capital Uninterruptible supplying of Severstal To secure its raw materials supply safety, Severstal uses the strategy of vertical integration Severstals strong position influences the domestic raw material market Reducing of total purchasing costs Installation of automated systems for management customs Reducing costs and increasing quality Change over to 100% continuous casting steel Increasing the share of higher value-added products Targeting key consumers Investing in quality Developing projects of producing higher value-added products (Severgal) The domestic market is the top priority for Severstal Development of relationship with principal clients Development of sales network in export markets and direct sales in the domestic market Acquisitions and JV allow to increase shipments to automotive and pipe industries Developing training program for all categories of employees Developing a system of employee incentives Developing through its own training center Total Quality Management program, Production consulting program, the Preparation of managers for spin-off businesses and an internal course for top managers (TOP- 100), international MBA

7. 7 Macroeconomic Environment World market Russia Weighted average world steel price index (Apr-94=100) Since 1999 the greatest output growth rate had the automotive industry ( 9% - 2000, 12% - 2001, 0% - 2002), fuel and energy complex ( 4, 4.5 and 7%) and heavy-machinery ( 20, 7 and 2%). The latest tendencies are the increasing of zinc-coated steel consumption in the automotive industry and high quality strips in FEC. Rolled products average spot prices were 304 US$ in 20021 per ton. For last 10 years, the world steel output has increased by more than 100 m. tons. The total capacity now is 1bln. tons That exceeds the world steel consumption. As a result of previous tendency - large amount of mergers and integrations and ineffective capacities cut-back In 2002 average spot price was 266 US$ per ton. Prices on almost all products are going up. Severstal expects further prices increase.

8. 8 Macroeconomic Environment (continued) Anti-dumping Proceedings Government View 1. Russian steel export protection 2. Domestic market protection Import taxes are increased: USA - 30%, Mexico - 35%, Malaysia - 50%, Iran - 25%. Argentina, Brazil, Columbia, Peru, Venezuela,Chile are likely to follow them. Temporary import taxes are introduced against zinc-coated products from Kazakhstan and Ukraine. Key industries of strategic importance to Severstal include: automotive industry, pipe manufacturing, heavy machinery, ball bearing production, shipbuilding, white goods manufacturing In 2000, Severstal began the production of high quality thin cold rolled steel sheet for refrigerators produced by Electrolux Development of new products for special need of main clients (e.g., alumni-silicon galvanized sheet) Relationships with key customers are based on quarterly and half-year contracts Severstal expects sales to domestic market will rise up to approximately 52% of total sales in 2003 Severstal expects expansion of marketing outlets in automotive industry and pipe manufacturing due to its acquisitions and JV Severstals average price on export sales in 2002 was 13% higher, and - on domestic sales - 3% higher than prices of its major competitors Almost 77 % of Severstals domestic sales are made directly to end users, while export sales are conducted through Severstals export trading subsidiaries

9. 9 Market position Severstal continues to be among the worlds 20 largest steel producers. According to the annual research by the Metal Bulletin magazine, Severstal occupies 19 place with 9.6 million tons of total steel output in 2002. Among Russian ferrous metal producers, Severstal is the largest company in terms of revenues and the second largest in terms of volume of steel and rolled products output.

10. 10 Market position (continued) Sales 1999 - 2002 by market, thousand tons The increase in margins on domestic sales has, in part, caused Severstal to direct more of its sales to domestic customers. Another reason of export sales reducing is antidumping proceedings.

11. 11 Domestic sales Severstal sells to customers in a number of different industries. The main customer base in the domestic market are the automotive industry and pipe manufacturing companies. Severstal increasingly focuses on customers with demand for higher value-added products. 32% of sales to pipe industry comprised high-quality alloyed strip. The automotive industry mostly consumes cold-rolled sheets (65%) and thin hot-rolled sheets (18%).

12. 12 Export sales Severstal exports its products to 94 countries world-wide, which makes it the largest exporting company among Russian steel producers. Severstal's export sales include a higher share of value added products such cold-rolled, pickled and galvanised steel. Europe, in particular the Western Europe, is a strategic market for Severstal's exports. The company has strong relationships with its European customer base and is confident that its joint venture with Arcelor will further increase the companys position in this market.

13. 13 Key customers Key customers in the domestic automotive sector are Gorkovsky Automotive Works (GAZ), Voljsky Automotive Works (AvtoVAZ), Ijmash- Auto and UAZ Principal domestic customers in pipe manufacturing are the Vyksunsky and Chelyabinsky pipe plants The major consumer in metal processors is Cherepovets Steel Rolling Mill (ChSPZ), which is a part of the metallurgical branch of Severstal Group Severstal's major clients: Viksa metallurgical works, Cherepovets Steel Rolling Plant, AutoVAZ and GAZ, accounted for approximately 24% of the total volume of Severstals domestic sales in 2002. Viksa metallurgical works - pipe producing company, accounts for more than 7% of Severstal's total sales revenues. LARGEST DOMESTIC MARKET CUSTOMERS BY SALES VOLUME

14. 14 Challenges and Competitive Advantages OUTPUT, thousand tons 8 5218 060 8 315 7 151 7 351 7 966 9 595 8 384 9 011 0 2 000 4 000 6 000 8 000 10 000 12 000 200020012002E SeverstalNLМКММК SALES REVENUE, mn $ 1 789 20731922 1 151 1 276 1 526 1 559 1 818 1 555 0 500 1 000 1 500 2 000 2 500 200020012002E SeverstalNLMKMMK PRICES, $/tn 239 202 214 174 161 192 186 190173 0 50 100 150 200 250 300 200020012002 SeverstalNLМКММК

15. 15 Competitive Environment Russian Steel Industry Magnitogorsky Metallurgical Kombinat (MMK) Severstal Novolipetsky Metallurgical Kombinat (NLMK) West-Siberian Nijny Tagil Metallurgical Kombinat (NTMK) Kuznetsky Mechel Nosta Oskolsky Tons 2000 2001 2002 Domestic Sales 47% 47% 52% Export Sales 53% 53% 48% GMK EurasHolding Production output in 2001 The division of the Russian Market (2002)

16. 16 Overview and Forecast Operations

17. 17 Flow diagram 100 80 100 125 150 / / / Hot Strip Rolling Shop 2 Formed Section Shop Section Rolling Shop Cogging Mill Converter Shop Electric Steel Melting Shop Coke-Oven Plant Blast Furnace Plant Sintering Plant This shops will be closed Open Hearth Shop Hot Strip Rolling Shop 1 Hot Strip Rolling Shop 3 Cold Strip Rolling Shop

18. 18 Production facilities Severstal has a crude steel production capacity of 10.9 million tonnes per annum. With a total production output of 9.65 million tonnes in 2002, Severstals crude steel capacity utilisation rate was 88.5 %, or 3 p.p. higher than in 2001. Between 1995 and 2000, the companys average capacity utilisation rate was 80.9%, compared with 76% on average for the Russian steel industry.

19. 19 Production efficiency Low grade and waste production, % Fuel consumption Electricity consumption kW*h/ton Metal yield, % Planned idle time, % Hot rolling mill Severstal (mill 2000)85.4114.99516.7 Arcelor78.98197.716.19 Cold rolling mills Severstal (cold rolling)76.88712.8 Nippon Steel (Nagoya)55.8 5.49 kg/ton 92 0.67 3.69 0.58 0.54 0.75 4.62 3.79 3.54 0 1 2 3 4 5 199920002001 2002E Waste Low-grade

20. 20 Exports by product 4.1 m t 4.8 m t5.1 m t Severstal Cold rolled flat products 23% Other rolled steel products 57% Semi-finished 16% Coated rolled steel products 4% Value-added products 27% ММК Other rolled steel products 60% Cold rolled flat products 16% Coated rolled steel products 1% Semi-finished 23% Total export sales NLMK Other rolled steel products 31% Semi-finished 53% Cold rolled flat products 14% Coated rolled steel products 1% Electric steel 1% Severstal has the biggest share of high value-added products on export markets. It differs Severstal from other Russian metallurgical manufactures Value-added products 17% Value-added products 16%

21. 21 Domestic market by product 4.4 m t4.2 m t2.1 m tTotal sales Value added products 30% Value added products 27% Value added products 52% Severstal ММКNLMK Other rolled steel products 70% Semi-finished 3% Coated rolled steel products 7% Cold rolled flat products 20%

22. 22 Total sales by product 8.5 m t9.0 m t7.2 m tTotal sales Value added products 29% Value added products 25% Value added products 27% SeverstalММКNLMK

23. 23 Production development Rolling facilities Casting facilities Steel-making facilities Coking plant and blast furnaces Energy saving US$ 296 million US$ 120 million US$ 75 million US$ 250 million US$ 11.6 million Reconstruction of blast furnaces 1,2,4,5 Reconstruction of coke-oven batteries 3,4,7 Environmental protection Open hearth furnaces shutdown Iron desulphurisation unit Environmental protection Reconstruction of continuous casting machine in BOF plant Construction of continuous casting machine for long products in EAF plant 100% continuous casting in BOF and EAF plants Reconstruction of mills: automation, quality improvement of rolling and cutting Reconstruction of mill 5000 to produce high quality strips for large diameter pipes Increase in pickling capacity to 1.8 million tonnes per year Conversion to 100% hydrochloric pickling Increase own power generating facilities to 245.3 million kW*hours Installation of new drives with lower electricity consumption in shops

24. 24 Overview and Forecast Financials

25. 25 Financial result for 2002 In 2002 the revenues went up by 7.5% y-o-y mainly due to higher prices both on the domestic and export markets. Increase in prices contributed up to 93% of the total revenue growth. Costs grew 3.6% all through the year due to increase in prices and structure of suppliers of raw materials, tariffs on electricity and gas. Severstal took steps to hold its costs through internal saving programs and purchase optimization. Severstal took a conservative approach for forecasting, and the actual results turned to be generally better than expected. $000 20012002E Sales1,7891,924 Cost of sales1,4631,515 Gross profit326409 Profit from operations92277 Capex79119 Net cash from operating activities80109

26. 26 Changes in sales for 2002 - 14 540 other 35 88688 182 due to change in prices 16 9426 538 due to change in volumes 133267 due to change in product mix 1 923 556 815 785 1 106 760 676 120 1 113 017 1 789 137 Total change + 134 419 500 000 1 000 000 1 500 000 2 000 000 0 - domestic market - export $000 +23 801 +124 748 + 410 -14 540 2001 actual 2002E

27. 27 Cost of sales structure 2002 2001

28. 28 Capital expenditure Over the period from 2003 to 2005 total investment requirements are US$ 674 m. These investments will be financed by own resources at 55%, and 45% externally. Major items: Reconstruction and commission of blast furnace #4 Repair of blast furnaces currently operating Modernisation of all continuous casting machines at converter shop Reconstruction of Mill 5000: installation of automated systems; reconstruction of heating facilities; installation of sheet straightening machines Conversion to 100% hydrochloric pickling at cold rolling shop Construction of additional set of bell-type annealing furnaces at cold rolling shop Capex in 2000-2006, $ mn Total investment requirements US$ 752 m Own resources 55.6% Debt financing 44.4% Total investment requirements US$ 674 m Own resources 55% Debt financing 45%45%

29. 29 Financial policy Debt is cheaper. Equity needs better compliance with equity market regulations. Severstal moves towards this through IAS accounting and consolidation Severstal works exclusively with banks that provide complex services for clients, and that consider Severstal as VIP client, providing it with favourable fees Severstal places its free cash only in reliable banks (like foreign bank branches) Severstal diversifies its deposits by maturity in respect of currency and type of value stock

30. 30 Financial Management Sources of external financing Severstal uses debt financing only. As at 30 September 2002 Severstals debt profile comprised US$ 155 mil., 66% of which is dollar denominated Planned debt financing through syndicated loan and domestic bonds emission at aggregate amount of US$ 200 mil. maturing within 3 years Severstal shifted to long term debt because they have more beneficial credit terms Banks practice is to secure its loans by pledging of assets and export revenues Working capital management Severstal performs working capital management through its budgeting system, which consists of: Inventory stock control – keeping necessary volume of stock according to production requirements and repair and maintenance requirements Allowable level of receivables – a monthly control of debtors level for individual customer Available level of payables – seeking for most beneficial contract terms with suppliers Monthly payment planning – any payment can be made in accordance with authorized budget

31. 31 Social Responsibility Severstal employs about 37,700 people of total 350,000 living in Cherepovets. Social assets comprise certain cultural, resort and sports facilities (ice hockey stadium, basin, sports grounds), as well as certain food processing and catering facilities. Severstal regards its employees as one of its key success factors and intends to provide them with a set of social services. The total amount spent in 2002 for social services provided to its employees is $ 9.6 million. In 2001 it was $11.8 million. Severstal also maintains a voluntary pension fund for its former employees. Payments to the pension fund were $ 4.5 million in 2002 and $ 4.8 million in 2001. In 2002, Severstal comprised 45.7% in Cherepovets budget tax income and 50.2% in Vologodskaya oblasts budget tax income. In 2001, it was 50.5% and 56.3% respectively.

32. 32 Key resume points Strong liquidity position Good relationship with banks to meet necessary funding requirements at beneficial cost Significant own profits and cash flows No events of default on liabilities Costs planning and control in place Internationally recognizable financial reporting and forecasting

33. 33 Overview and Forecast Stock Market

34. 34 Ownership Structure As of 01.01.2003

35. 35 Share Performance Severstal outperformed the Russian stock index in the H1 2002. The higher steel prices supported the buying rage of the market players. In the H2 2002 Severstal followed the general decline in the market, but it is 20% higher YTD. The restructuring of the company was also a strong incentive to increase the share of Severstal in portfolios as the dividend payout (shares of Severstal-Auto and Severstal –Resource) gave the cheap entry into the new sectors of the market. We expect Severstal would outperform the market in the mid- term period. Severstal Performance, $ Severstal vs. RTS Index, (03/01/02 = 1.0)

36. 36 Overview and Forecast Environmental Protection

37. 37 Principles of environmental protection policy Severstals environment management system is certified in September 2001 with ISO – 14001 To continuously reduce the harmful impact of production activities on environment to technically achievable and economically acceptable level; To optimize production processes for continuous reduction of specific consumption of natural resources and energy per ton of output and to utilize accumulated and generating waste; To continuously improve the environmental management system as a part of stable competitive advantage; To hold the fair and constructive dialog with all interested parties

38. 38 Pollution Emission Pollution emission into atmosphere Pollution emissions in waters Stocking of production waste 000 tons ActualLimit

39. 39 Environmental protection expenditures - current costs reduced due to changes in calculation methodology according to new Statutory rules * $ mn

40. 40 The major environmental activities 1999 cleaning complex for Fuchs ladle furnace; construction of equipment for production waste utilization; construction of water recycling unit in hot rolling shop #1; construction of cleaning complex at drainage output construction of water recycling unit in BOF shop 2000 construction of cleaning complex at drainage output construction of oiled calx utilization unit in hot rolling shop #2; construction of equipment for production waste utilization; reconstruction of cyclone cell system in agglomerate shop; completion of construction of water recycling unit in BOF shop 2001 reconstruction of cyclone cell system in agglomerate shop; construction of supporting dams and inclined drainage unit in the ash-and-slag storage; reconstruction of biochemical entrapment equipment to clean and recycle the cooling in the coke shops 2002 reconstruction of the primary furnace in the stove of the blast furnace #5 construction of the oil waste recovery unit construction of the gas cleaning unit in the pig iron desulphurization shop

41. 41 Overview and Forecast Conclusions

42. 42 Challenges and advantages Cycle in the steel industry Higher competition level Complexity of consolidation Quotas, anti-dumping Excessive capacities in the steel industry Competition by mini-mills Increasing share of Ukrainian manufactures in the Russian market Geographic Location Transportation facilities (alternative) Security of Raw Materials and Energy Supply Tight Production Costs Control Personnels qualification Low labour costs Product Range Customer Base Technology Financial Position Production capacities Corporate Governance Stable Ownership Structure Main challengesCompetitive advantages

43. 43 Final Summary Severstal objectives are: modernization of production facilities, value-added products development (SeverGal) and increasing productivity The capital investment program includes a number of projects aiming at manufacturing of value-added products, maintenance volumes of production and improvement of products quality. The management structure provides the suitable level of controllability of the Groups companies Severstals strategy provides long-term attractive return on employed capital, stable cash flow and increasing profit The management system is being introduced within the Groups companies, increasing their transparency and operational efficiency. The company is going through its transformation intro a leading integrated steel manufacturer. Although, the domestic market of high quality steel products is increasingly competitive, Severstal believes its cost control strategy and upgrading production facilities policy will lead to a significant efficiency advantage over a number of competitors and ultimately preserves Severstals leading position. As part of its development, Severstal applies for a long-term corporate credit rating to enhance the companys liquidity