Selling, general and administrative expenses

Selling, general and administrative expenses were slightly down as a percentage of revenue to 11% in 2011 as compared to 12% in 2010. The following table sets out our operating SG&A expenses for the periods presented:

  Year ended December 31  
  2011 2010 Change Change
    in millions of U.S. dollars in millions of U.S. dollars %
Russia 530 470 60 13%
America 149 153 (4) (3)%
Europe 43 36 7 19%
TOTAL SG&A EXPENSES 722 660 62 9%

Russia. The increase was mainly attributable to the growth in sales staff costs in 2011 as compared to 2010. Growing salaries and related social security contributions resulted in a $29 million growth in selling, general and administrative expenses. The decrease in freight expenses under certain sales contracts, though partially offset by grown freight tariffs, resulted in a $2 million decline in selling expenses. The effect of translation from the functional to the presentation currency and changes in other expenses accounted for $17 million and $15 million of the total increase, respectively.

America. Selling, general and administrative expenses declined reflecting primarily a $16 million decrease in depreciation mainly due to the amortisation of the intangible asset “Customer relationships”; the asset is amortised using the diminishing balance method to reflect the pattern of consumption of the related economic benefits. Staff costs and other expenses increased $2 million and $10 million, respectively.

Europe. An increase in selling, general and administrative expenses in the European division reflects higher sales activities in the European division which caused a $2 million growth in freight expenses in 2011 as compared to 2010. The effect of translation from the functional to the presentation currency and changes in staff and other costs accounted for $2 million and $3 million, respectively.

The table below provides a breakdown of our total selling, general and administrative expenses for the periods presented:

  Year ended December 31  
  2011 2010 Change Change
  in millions of U.S. dollars in millions of U.S. dollars in %
Staff costs 229 190 39 21%
Freight 219 212 7 3%
Depreciation 80 95 (15) (16)%
Professional services 73 68 5 7%
Other expenses 121 95 26 27%
TOTAL SG&A EXPENSES 722 660 62 9%

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