EVRAZ : Annual report 2020

For a Better Future

Annual report & accounts 2020

Annual report & accounts 2020

MEET EVRAZ

For our	For our	For our
PARTNERS	PEOPLE	COMMUNITY

14	69,619	US$ 31
million tonnes	employees	million
steel products sales	as of 31 December 2020	Social and social infrastructure
		maintenance expenses

LEADER

• In construction and railway product markets in Russia.
• The largest coking coal producer in Russia.
• In production of rails and large diameter pipes in North America.

Report boundaries

This annual report ("the Report") presents the results for EVRAZ plc and its subsidiaries for 2020 divided into segments: Steel; Steel, North America; and Coal. It details the Group's operational and financial results and corporate social responsibility activities in 2020.

The Report has been prepared in accordance with the disclosure requirements of the United Kingdom and the Financial Conduct Authority:

the Companies Act 2006, the Listing Rules, the Disclosure Guidance and Transparency Rules, and the Competition and Market Authority. The Report has also been prepared taking into account the International Integrated Reporting Framework,

and sustainability reporting best practices.

CONTENTS

→ Meet EVRAZ

→ EVRAZ in figures

→ Strategic report	4
Chairman's introduction	5
Chief executive officer's letter	7
EVRAZ' business model	10
Operational model	12
Sustainable development	14
EVRAZ business system	16
Market review	20
Strategic priorities	24
Key performance indicators	28
Impact of COVID-19	30
Financial review	32
Business review	44
Corporate Social Responsibility	56
Customer-centric R&D	84
Digital transformation	88
Principal risks and uncertainties	90
Viability statement	96
Statement in accordance with S172 of the Companies Act	97
Non-financial reporting	98

→ Corporate governance	100
Board of Directors	101
Management	104
Corporate governance report	106
Stakeholder Engagement	116
Audit Committee report	118
Nominations Committee report	124
Health, Safety and Environment Committee	126
Remuneration report	128
Directors report	140
Directors responsibility statement	145

Global footprint

Canada ↘	London Office •	• Moscow Office	↙ ↙ Russia
↙ Czech	↙ Kazakhstan
	Switzerland ↗	→ Steel segment
	Republic			→ Steel, North America segment
USA ↘					→ Coal segment

→ Financial statements	146
Independent Auditors report to members of EVRAZ plc	147
Consolidated financial statements	158
Separate financial statements	236

→ Additional information	250
Stock performance indicators and shareholder information	251
Definitions of selected alternative performance measures	253
Data on mineral reserves	256
Short summary of relevant anti-corruption policies	257
Terms and abbreviations	258
Contact details	262

Annual report & accounts 2020

2 | 3

Meet EVRAZ

EVRAZ in figures

Strategic report

Corporate governance

Financial statements

Additional information

EVRAZ IN FIGURES

FINANCIAL HIGHLIGHTS

Consolidated revenues by segment, US$ million

Consolidated EBITDA by segment, US$ million

8,879	8,143	6,969	2,337	2,021	1,490	2,583	2,500	1,779	472	483	410	(1,435)	(1,242)	(894)	12,836	11,905	9,754	2,672	1,795	1,930	1,218	843	400	14	38	(28)	17	18	15	(145)	(93)	(105)	3,777	2,601	2,212
Steel			Coal		Steel, NA		Other	Eliminations	Total	Steel			Coal		Steel, NA		Other	Eliminations	Total
									operations																operations	and unallocated
																														subsidiaries
	2018	2019		2020													2018	2019		2020

Read more on page 32 →

Read more on page 32 →

Net debt	CAPEX2	Net profit
US$	US$	US$

3,356	657	858
million	million	million
↓ 3% year-on-year	↓ 14% year-on-year	↑ 2.4x year-on-year
	2. Including payments on deferred terms recognised
	in financing activities.

OPERATING HIGHLIGHTS

Crude steel output, kt					Steel products output1, kt					Iron ore products output, kt			Raw coking coal production, kt	Coking coal concentrate production, kt		Gross vanadium slag production,3 mtV
2020				13,630			2020			12,768	2020					14,205	2020			20,653	13,598	1,930	15,528	2020						19,533
																														2020
2019						13,814			2019					13,230	2019				13,765	2019						26,140			13,975	1,947	2019					18,380
																														2019						15,923
2018			13,019			2018			12,376	2018				13,515	2018				24,188	2018			14,130	2,057		16,188	2018			17,052
			1.	Net of re-rolled volumes.																				Production by Coal segment						3. In tonnes of pure vanadium.
																															Production by Steel segment

CSR HIGHLIGHTS

LTIFR (excluding fatalities), per million hours Key air emissions, ktEVRAZ GHG emissions, MtCO2eFresh water consumption, million m3

2020							1.58	2020						121.30	2020										43.57	2020							206.20
2019								2.04	2019									127.69	2019									43.35	2019							205.32
2018					1.91	2018								128.24	2018							38.79	2018									226.49
Read more on page 58 →					Read more on page 60 →						Read more on page 64 →					Read more on page 62 →

Diversity, % (number of people)

2	104	18,951
22%	26%	27%
78%	74%	73%
7	298	50,266
Board	Senior	Employees
	Management
Men	Women

Read more on page 69 →

Employees by region

Russia and CIS 95%

North America 4%

Europe 1%

Read more on page 69 →

SHAREHOLDER STRUCTURE

Geographic dispersion of institutional shareholders, % of voting rights		Ultimate beneficial owners, % of voting rights4

United Kingdom	Russia
9.50%
2.22%	28.68	19.35	9.66	5.75	33.80

	Europe (excl. UK, Russia)
North America	6.35%			Roman Abramovich4	Alexander Abramov4	Alexander Frolov4	Gennady Kozovoy5	Free-float
10.87%	Asia&Pacific	Other	4. The number of shares per dealing notification dated 20 June 2019.
	1.72%
	1.15%	5.	The number of shares is as per TR-1 Form: Notification of major interest in shares dated 6 February 2013. For Mr Kozovoy, includes shares held directly.

STRATEGIC	Annual report & accounts 2020	4 | 5	Meet EVRAZ	EVRAZ in figures	Strategic report	Corporate governance	Financial statements	Additional information

REPORT CHAIRMAN'S

INTRODUCTION

Sustainable
of the COVID-19 pandemic
foundation	Despite the unpredictable challenges
diligently implemented new workplace
	in 2020, EVRAZ's response was
for a Better Future	robust. The Group's employees
on the health and wellbeing
	safety measures while also focusing
	of the broader communities in which they
	and their families live and work. Thanks
	to the dedication and commitment of its
	people, EVRAZ maintained operational
	continuity and made further progress
	on its environmental agenda despite
	the unique challenges of 2020.	Alexander Abramov
		Non-Executive Chairman

Health and safety	the work of the EVRAZ crisis management	climate risks, applying best environmental
	centre and senior executives to mitigate	practices and working to meet stakeholder
The EVRAZ Board of Directors remains	the operational, commercial and financial	expectations.
committed to its long-term goal	impact on the Group. Thanks to the safety
of achieving zero injuries and fatalities	measures that EVRAZ enacted to protect its	For more about the Group's environmental
in the workplace. While the Group's	people and ensure operational continuity,	performance, see sections Environmental
health and safety efforts led to significant	the COVID-19 pandemic has had a relatively	management and GHG emissions on pages 60-65→
improvements in this area, there were still	limited impact on the Group's business.
five tragic employee fatalities in 2020,		Throughout the year, the Board strove
which is five too many. As part of its	The Board also understands that	to better understand the potential longer-
efforts to improve the safety culture,	the unprecedented measures undertaken	term climate-related risks and opportunities
EVRAZ focused on a new approach	to prevent the spread of COVID-19	facing EVRAZ. The first step was
to engage employees in the process	and the mental impact this may have	to conduct a qualitative analysis of three
of identifying and mitigating risks. This	on many people in these trying times	climate scenarios envisaging global
and other initiatives helped to bring	requires careful attention to the possible	average temperature increases of ~1.5°C,
the lost-time injury frequency rate -	health repercussions of the pandemic.	~2.0°C and ~4.5°C by the year 2100. This
a key health and safety metric - down		analysis drew on insight into the global
to 1.58, which is a sign of considerable	For more about the support given to employees	physical climate impacts under various
progress in the Group's overriding priority	during this time, see section Impact of COVID-19	climate scenarios developed by the UN's
of safeguarding its people. In addition,	on pages 30-31→	Intergovernmental Panel on Climate
EVRAZ spared no effort in its COVID-	Environment	Change, as well as Shared Socioeconomic
19 response to provide safe working	Pathways, which provide outlooks
conditions for employees while also		for socioeconomic factors corresponding
supporting local hospitals and communities.	In 2020, the Board of Directors approved	to the different climate scenarios. The Group
	the Group's new Environmental Strategy,	used this research to prepare its first
From the outbreak of the pandemic,	which serves as a roadmap for improving	Climate Change Report, which serves
the Board of Directors closely monitored	environmental performance by assessing

Annual report & accounts 2020

6	| 7	Meet EVRAZ	EVRAZ in figures		Strategic report		Corporate governance	Financial statements	Additional information

CEO LETTER

as a foundation to continue improving climate risk management at EVRAZ.

The Climate Change Report was prepared following the recommendations of the Task Force on Climate-related Financial Disclosures and outlines the principles underpinning the approach that

EVRAZ takes to climate change while providing greater insight for stakeholders on the Group's mitigation actions.

The initial findings are summarised in this report and the Group intends to update the Climate Change Report periodically.

Discover more in the Climate Change Report:

https://www.evraz.com/en/sustainability/ data-center/climate-change-reports/

Governance

The EVRAZ Board of Directors

and management team are focused

on ensuring that all aspects of the business are conducted in the best interests

independent non-executive directors have been recruited in recent years to enhance the depth and breadth of the Board's experience. In 2020, the Nominations Committee began searching for suitable candidates to replace those independent non-executive directors who will have served terms of nine years and will be required

to stand down at the Annual General Meetings in 2021 and 2022.

Having both served nine years

as non-executive directors, and in line with the UK Corporate Governance Code's recommendations on director independence, neither Sir Michael Peat nor Karl Gruber will seek re-election at the forthcoming Annual General Meeting.

In 2020, the Board engaged in an externally facilitated annual evaluation of its conduct, after having undertaken internally evaluated reviews in 2018 and 2019.

The Nominations Committee initiated and took part in the review, during which

EVRAZ uses an annual, organisation- wide employee survey as a guide

for aligning the Group's culture with its purpose and values, as described

on pages 72-73 of the Strategic Report. The Board receives a summary of this survey for review and closely follows

the implementation of management efforts undertaken as a result of the survey.

Dividends

In 2020, the Board approved two interim dividend payments: US$0.40 per ordinary share, totalling US$581 million, on 27 March 2020; and US$0.20 per share, totalling US$291 million, on 2 October 2020. Prior to each distribution, the Board ensured that the level of distributable reserves within the balance sheet was sufficient

to enable the dividend to be paid, in line with the established EVRAZ dividend policy. The Board also considered the impact

of COVID-19 on the Group's going concern and cash flow position.

Dear shareholder,

2020 was an unprecedented year, which changed the world and the way we do business. Intense global uncertainty caused by the outbreak of COVID-19 had a profound effect on economies

and pressured global markets. The restrictive measures imposed by the governments

of various countries to fight against

the COVID-19 pandemic had a significant impact on the level of consumption of steel products around the world, especially

in the first half of the year. However, thanks to the upswing seen on the global markets in the second half of the year, the Group delivered solid operating and financial results while, most importantly, doing everything it could to protect its people during a pandemic.

Alexander Frolov

Chief Executive Offcer

of the Group, its shareholders and other stakeholders, with particular attention being paid to generating long-term shareholder value.

The Board held its meetings via video conferencing to minimise the disruptions to its business amid the pandemic.

The Board received regular updates from management about the impact of COVID-19, as well as the mitigation measures implemented to safeguard people and operations.

While most directors have been serving on the Board since EVRAZ plc's incorporation in October 2011, new

all Board directors received questionnaires for response and comment. The review found the Board's performance in all key areas to be satisfactory.

Our people

EVRAZ recognises that its operations can only improve alongside the skills

and qualifications of an engaged workforce. To this end, the Group continued to improve existing professional development programmes and launched several new initiatives in 2020.

See pages 68-73 for more details →

In recognition of the solid performance that EVRAZ delivered in 2020, the Group has announced an interim dividend.

On 24 February 2021, the Board of Directors voted to disburse a total of US$437.1 million, or US$0.30 per share, with a record date of 12 March 2021 and payment date

of 7 April 2021.

Alexander Abramov

Non-Executive Chairman

Sustainability

Management's primary focus was on ensuring safe working conditions and preventing the spread of COVID-

19. EVRAZ went beyond protecting its employees and worked to safeguard local communities.

For more about the Group's COVID-19 response, as well as the effects of the pandemic on EVRAZ, see Impact of COVID-19 on pages 30-31. →

The overriding priority of EVRAZ

is the health and safety of its people. Unfortunately, five people lost their lives at the Group's enterprises during the reporting period. The lost time injury frequency rate (LTIFR) reached 1.58, the lowest level for EVRAZ historically and below the target of 1.61 that management set for 2020.

In 2020, the primary focus in the area of health and safety was the roll-out

of a project to enhance risk management across all divisions. After thoroughly reviewing and further developing existing

processes, the Group began training employees to use a new set of tools for identifying and managing risks.

As a result of the COVID-19 pandemic, all training courses have been conducted online since the second quarter of 2020.

Other key aspects of the project include the Risk Hunting initiative and a review of standard operating procedures.

In 2020, EVRAZ worked hard to create a new environmental strategy with environmental impact mitigation goals to be achieved

by 2030. At the Group's steelmaking assets, the goals include reducing greenhouse gas emissions (Scope 1 and 2) per tonne of steel produced by 20%, reducing atmospheric emissions from steel production by 33%, closing the water supply cycle, as well

as recycling 95% of general and metallurgical waste. At the mining assets, they include recycling 50% of mining waste and utilising 75% of the methane released in the process of degassing.

During the reporting period, EVRAZ continued to implement measures aimed

at improving its environmental impact. Among the most important projects of 2020 were construction of a dust and gas cleaning unit for blast furnace no. 6 at EVRAZ NTMK, modernisation of gas cleaning units of the basic oxygen furnace shop at EVRAZ NTMK, modernisation of electrostatic precipitators of Heat and Power Station

at EVRAZ ZSMK and the direction of coke oven gas to the coking chemicals collecting shop no. 3 at EVRAZ NTMK. In 2020,

the Group's specific greenhouse gas intensity ratio remained below 2.0 tonnes of carbon dioxide equivalent (tCO2e) per

tonne of crude steel.

For more about the Group's new environmental strategy, see pages 14-15, 60. →

In 2020, EVRAZ management team actively focused on developing the Group's climate change approach at the request of the Board of Directors and its Health, Safety and Environmental Committee.

In March-June, EVRAZ held several sessions with senior management, which included a detailed discussion on climate change. By the end of June, the Group