Liquidity and capital resources

Cash flows

The following table illustrates cash flow 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 %
Net cash provided by operating activities 787 386 401 104%
Net cash used in investing activities (377) (271) (106) 39%
Net cash used in financing activities (335) (186) (149) 80%
Increase/(decrease) in cash and cash equivalents 75 (71) 146 206%
Effect of exchange rate changes (2) (15) 13 (87)%
Cash and cash equivalents at the beginning of year 158 244 (86) (35)%
Cash and cash equivalents at year end 231 158 73 46%

Operating activities

Compared to 2010, a cash inflow provided by operating activities doubled in 2011.

Net cash provided by operating activities before changes in working capital increased from $942 million in 2010 to $1,050 million in 2011. The increase was mainly attributable to improved operating performance. Cash flows in the amount of $156 million were used to finance working capital as compared to $527 million in 2010. Working capital increased in 2010 at a faster pace in response to growing production and sales activities following the period of the economic downturn.

Investing activities

In 2011, net cash used in investing activities equalled to $377 million or 39% above 2010. In 2011, significant payments for certain capital projects were made, particularly the construction of the electric arc furnace at Tagmet and the modernisation of our seamless pipe production line with a new FQM mill at STZ.

Financing activities

In 2011, net cash used in financing activities amounted to $335 million as compared to $186 million in 2010.

The net cash obtained to finance our capital requirements amounted to $4 million as compared to $103 million in the previous year. We spent $288 million on interest payments, or 16% less as compared to 2010 as a result of lower interest rates negotiated with our creditors. Significant amounts of cash related to proceeds and repayments of borrowings reflect refinancing of existing loans with lower interest rates.

In 2011, we paid a full year dividend for 2010 and an interim dividend in respect of the first six months of 2011 in the total amount of $47 million to OAO TMK shareholders as approved by the annual shareholders’ meeting in June 2011 and the extraordinary shareholders’ meeting in November 2011, respectively. We also paid $2 million to non-controlling shareholders of our subsidiaries as compared to $1 million in 2010.

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