History
The history of FESIL began with Lilleby
Metall in the city of Trondheim; here
production of FeSi was started as early as
1927. The owner, Ila og Lilleby Smelte-
verker AS, was registered as a joint stock
company December 5th, 1936. The com-
pany's name remained unchanged till
1995 when it was changed to FESIL
ASA. FESIL ASA has been listed on the
Oslo Stock Exchange since June 1995.
FESIL ASA has its head office in the city
of Oslo.
Sales and marketing
FESIL's wholly owned sales company
FESIL Sales AS handles all marketing
and sales of FeSi and SiMetal. The com-
pany is represented in every important
market by either subsidiaries or agents.
FESIL Sales AS is also the sales agent of
the FeSi produced at the Norwegian
plant Finnfjord Smelteverk AS. The
world's leading steel works; foundries
and chemical groups are to be found
among FESIL's customers.
Environment
The Norwegian authorities have imposed
the most restrictive environmental regu-
lations on the country's ferroalloy indus-
try. FESIL' plants do not release any-
thing to the sea other than cooling water
and sanitary effluents. The smoke is
cleansed of dust. The dust, microsilica,
has become a valuable additive to a
number of products, among them conc-
rete. FESIL's production is solely powe-
red by clean and renewable hydroelectric
power.
Ownership
FESIL ASA's 7,999,500 shares are listed
and traded on the Oslo Stock Exchange.
The biggest shareholders are the Ameri-
can company Globe Metallurgical Inc.
(39.25 %) and the British group Tennsil/
Tennant (39.99 %). The remaining shares
are spread out among 340 other share-
holders.
The FESIL
Group is a major producer of ferrosili-
con (FeSi) and silicon metal (SiMetal).
The Group has three melting plants, all
of them in Norway: Holla Metall, Lilleby
Metall and Rana Metall. Special pro-
ducts, including granulated and refi-
ned qualities, make up the bulk of the
production. FESIL also owns FESIL-
Brikettfabrikken that makes briquettes
from FeSi and silicon carbide (SiC). All
plants are certified as conforming to
ISO 9000. A further presentation of
each plant is given on page 49.
T H I S I S F E S I L
FESIL ANNUAL REPORT 1999 1
Turnover per market 1999
EU, 85 %
USA, 6 %
Far East, 6 %
Norway + others, 3 %
Strategy
FESIL's objective is to maintain and fur-
ther develop its international position as
a leading producer and marketer of sili-
con alloys and related by-products.
A primary objective is to give the
shareholders a return on invested capital
that over time at least equals the return
on investments carrying a comparable
risk. Since the markets for ferroalloys are
strongly cyclical, the return must be eva-
luated over a period of time.
In order to reduce exposure to cycli-
cal fluctuations, FESIL is endeavouring
to shift its production away from stan-
dard products to products that require
greater experience and technological
know-how. Efforts to ensure that the pro-
ducts are of a stable and high quality are
given high priority.
FESIL is continuously working to
reduce costs through, among other, chea-
per procurement, rationalisation, process
improvements and greater efficiency in
furnace operation. The lowest possible
costs is a precondition for long-term sur-
vival and profitability. Production of FeSi
and SiMetal is very energy intensive, and
long-term power contracts at competitive
prices and terms are consequently cru-
cial. The company is therefore constantly
focused on the question of power con-
tracts.
Stable and long-term relationships
with its customers form the basis of
FESIL's marketing strategy. The marke-
ting organisation is, as far as possible,
integrated with the rest of FESIL's orga-
nisation. This market orientation of the
Group is designed to ensure a rapid
response to market information.
FESIL ANNUAL REPORT 19992 T H I S I S F E S I L
SiMetal production 1999
Chemical, 86 %
High Purity, 11 %
Standard, 3 %
FeSi production 1999
Low AL/C, 38 %
High Purity, 18 %
Standard, 8 %
Granules, 36 %
M A I N F I N A N C I A L F I G U R E S
FESIL ANNUAL REPORT 1999 3
Earnings per share (after tax) (in NOK)
Group Profit & Loss Statement(in NOK mill.)
1999 1998 1997 1996 1995Operating income 1 711 2 037 2 107 2 133 2 231Operating expenses 1 616 1 929 2 049 1 927 1 957Ordinary depreciation 49 48 70 69 68Operating result 46 60 (11) 137 206
Share of results in other companies 11 9 11 10 9Net financial items (28) (24) (27) (39) (65)Profit before taxes 29 46 (27) 109 150
Taxes (9) (16) 9 (9) 14Profit/loss for the year 20 30 (18) 100 165
Group Balance Sheet(in NOK mill.)
1999 1998 1997 1996 1995Fixed Assets 414 427 346 440 465Current Assets 701 757 736 786 832Total Assets 1 115 1 184 1 082 1 226 1 297
Equity 466 446 415 433 369Long-term Debt 265 284 276 349 384Short-term Debt 384 454 391 444 544Total equity and liabilities 1 115 1 184 1 082 1 226 1 297
Key figures balance sheet(in NOK mill.)
1999 1998 1997 1996 1995Equity ratio 42% 38% 38% 35% 28%Interest bearing debt 371 406 387 483 522Investments 41 126 47 80 16
-505
10152025
19991998199719961995
Share price vs. Oslo Børs stock index
0306090
120150
TOTEX
FESIL
21.Jun. 951.Jan. 96
1.Jan. 971.Jan. 98
1.Jan. 99
31.Dec. 99
1999 – a year with challenges
1999 turned out to be a year that posed
great challenges to FESIL, especially in
the area of silicon metal (SiMetal).
Considerable over-capacity world wide
due to increased production capacity and
reduced demand, caused the prices to fall
to very low levels. To reduce stocks, and
as a contribution to stabilise the markets,
FESIL decided to temporarily reduce
production through closing down three
out of five SiMetal furnaces. One regret-
table consequence of this was that
employees had to be laid off. At the
most, as many as 120 out of a total of
about 440 employees were therefore
temporarily laid off. The prices for ferro
silicon were also lower in 1999 than in
the previous year, however this reduction
was not as big as for SiMetal. The FESIL
Group’s operating result in 1999 was
NOK 46 million (1998: NOK 60 million)
and the result after taxes was NOK 20
million (1998: NOK 30 million).
Considering the problems mentioned
above, it would not be unreasonable to
expect even poorer results for 1999. The
main reasons this did not happen were
higher efficiency and specialisation, areas
that have very much been in FESIL’s
focus throughout 1999.
Efficiency, full capacity, power
and environment
FESIL is operating in very cyclical and
international markets. For several years
the strategy has been through increasing
specialisation to move away from the
most cyclical products. For the first time,
in 1999 almost the entire production was
specialised products. At the same time,
the flexibility is being maintained in order
that standard grades may still be produ-
ced. It is FESIL’s opinion that long-term
profitability can only be achieved through
the combination of specialisation and effi-
cient operations. To increase efficiency is
an ongoing process that never ends. This
will be one of FESIL’s principal focuses
also in 2000, through strict cost control
and improvements in every part of the
process. Even though FESIL’s power situ-
ation is satisfactory the next five years, the
power market is changing fast. During
2000 FESIL will continue working to
secure long-term power prices at accept-
able and competitive terms. On entering
year 2000 the market for SiMetal shows
clear signs of improvement. It is one of
FESIL’s targets to have all five SiMetal
furnaces back in production before the
end of the year. For that to happen, the
market improvement we now see must be
considered stable. Both FESIL and the
other ferro alloy industry in Norway are
subject to the world’s most restrictive
environmental requirements. The compa-
ny’s engagement in environmental mat-
ters is considerable. During 2000 FESIL
will continue to work for future environ-
mental requirements to be made interna-
tional in order that our competitiveness
will not be further reduced and the
advantage given of our much more pollu-
ting competitors in Eastern Europe, Asia
and South America.
FESIL ANNUAL REPORT 19994
H I G H L I G H T S 1 9 9 9
T A S K S A N D O B J E C T I V E S F O R 2 0 0 0
The year 1999
For FESIL, 1999 turned out to be a year
that posed big challenges. In the begin-
ning it was the considerable effects of the
financial crisis in parts of Asia, and there
were few signs of an economic recovery
within the European Union (EU). The
most important demand indicators for
FESIL’s main products, ferrosilicon (FeSi)
and silicon metal (SiMetal), were therefore
still pointing downwards. For this reason,
FESIL intensified in 1999 its efficiency
programs even further, between other in
close co-operation with one of its main
shareholders, Globe Metallurgical Inc.
Ferrosilicon is used mainly as a small,
but important additive in the steel and
foundry industry. Since the need for FeSi
is closely tied to steel production, the
world consumption and production of
steel are important indicators for the
development of the FeSi industry. Since
March 1998 the world’s total steel pro-
duction has decreased. The total producti-
on was in 1998 2.3 % lower than in 1997.
This decrease continued into 1999 but
bottomed out during 1st quarter. From
then on the production increased through
the rest of 1999. Total steel production for
1999 ended 1.4 % above the 1998 level.
In Asia the production was 3.5 % higher
in 1999, while it was 2.5 % lower in EU.
The FeSi prices, which had been falling
throughout 1998, stabilised during the 1st
half of 1999. In the 2nd half they started
to increase. The basic economic outlook
signaled increased steel production, and
therefore higher FeSi consumption and
consequently increased prices. But then
something unexpected happened. In the
3rd quarter the US authorities lifted all
FESIL ANNUAL REPORT 1999 5
Board of Directors'Report
anti-dumping duties on FeSi imported into
USA. There was an immediate major
drop in the US prices, and the uncertainty
spread to Europe, thus undermining the
European price increase. So even if the
consumption of FeSi increased during
1999, we did not get a similar increase in
prices. Efficient and stable operations at
the plants are, in addition to market
development, very important for FESIL’s
financial results. Since FESIL’s operati-
ons were satisfactory in 1999, the ear-
nings from FESIL's FeSi activities turned
out as expected.
Silicon metal (SiMetal) is used by
the chemical, aluminium and electronics
industry. FESIL has concentrated on sup-
plying the chemical industry. The use of
SiMetal by the chemical sector had incre-
ased steadily for many years, but in 1998,
as a consequence of the slowdown that
began in Asia, this trend was broken.
The demand for SiMetal in fact fell
while, at the same time, world product-
ion capacity had been increased. A sur-
plus of SiMetal developed, resulting in a
considerable fall in prices. The price ero-
sion continued throughout most of 1999.
Because FESIL did not want to sell at the
very low spot prices, but concentrating
on supplying its long-term contracts, an
increase in stocks was unavoidable.
FESIL therefore decided to cut back
temporarily its production of SiMetal to
contribute to stabilising a falling market.
One SiMetal furnace at FESIL’s Lilleby
Metall plant was closed down on March
16th. Another two SiMetal furnaces were
closed down at the Holla Metall plant on
April 27th. These furnaces have a total
production capacity of 25,000 metric tons
per year. As long as they were kept out
of production, FESIL operated on 50 %
of its production capacity for SiMetal.
Unfortunately, one consequence of such
market driven shut downs is that employ-
ees are laid off temporarily. For a while
as many as 120 out of FESIL’s total of
440 employees were laid off. The prices
stabilised towards the end of the 3rd
quarter. At that time FESIL’s stocks were
considerably reduced. This allowed Fesil
to put one of the closed down furnaces
back into production, only to supply
against existing contracts. The furnace,
with an annual capacity of 8,500 metric
tons, resumed full production in week
no. 49. During the 4th quarter the market
improved, confirming that the bottom
appears to have passed for now.
Unavoidably, FESIL’s return on its
SiMetal activities in 2000 was not as
good as expected.
FESIL ANNUAL REPORT 19996 B O A R D O F D I R E C T O R S ' R E P O R T
Profit/loss after tax (in NOK mill.)
-50
0
50
100
150
200
19991998199719961995
Result and dividend
The pre-tax result of the FESIL group in
1999 was a profit of NOK 29 million.
The corresponding figure for 1998 was a
profit of NOK 45 million. The group's
operating income fell 16 % in 1999 to
NOK 1,711 million (1998: NOK 2,037
million). The operating profit came to
NOK 46 million in 1999 (1998: NOK 60
million).
The reduction in operating income
from 1998 to 1999, was due to reduced
sales of FeSi, lower prices on both FeSi
and SiMetal, as well as reduced trading
activity. The reason for the lower FeSi
sales in 1999 was the conversion of fur-
nace 4 at Holla Metall from FeSi to
SiMetal in 1998.
The reduced operating result in 1999
compared to 1998 was, in addition to
lower prices, due to temporary shut
downs of three SiMetal furnaces during
major parts of 1999, as well as a planned
stop at Lilleby Metall for 30 days in the
3rd quarter of 1999.
Net financial items amounted to net
costs of NOK 17 million in 1999 (1998:
net costs of NOK 15 million). Net interest
costs were NOK 30 million (1998: NOK
22 million). The higher interest was due
to a combination of higher interest rates
in 1999 compared to 1998, as well as a
higher level of interest bearing debt.
Financing the conversion of furnace 4 at
Holla Metall in 1998 caused the increase
in interest bearing debt from 1998 to
1999.
The cash flow from operations was
NOK 61 million in 1999 (1998: NOK
102 million). The Group's taxes amoun-
ted to NOK 9 million in 1999 (1998:
NOK 16 million), of which NOK 3 milli-
on (1998: NOK 11 million) were taxes
payable.
The result for the year after tax was a
profit of NOK 20 million (1998: Profit of
NOK 30 million). Earnings per share
were NOK 2.45 (1998: NOK 3.69).
Since the prices for FESIL's products
are now at a relatively low level, and in
order to maintain a strong financial posi-
tion, the Board will propose to the
Annual General Meeting that no divi-
dend will be paid for 1999 (dividend in
1998: NOK 0). The Annual General
Meeting will take place on May 11th,
2000.
The results for 1999 are presented
given the assumption of a «going con-
cern».
FESIL ANNUAL REPORT 1999 7
Interest bearing debt vs. equity (in NOK mill.)
300350400450500550600
19991998199719961995
Debt
Equity
B O A R D O F D I R E C T O R S ' R E P O R T
Capital developments, financing
and investments
FESIL's financial position has been signi-
ficantly strengthened over the past five
years. Whilst the Group's equity capital
at the end of 1994 amounted to NOK 60
million, it had by the end of 1999 reach-
ed NOK 466 million. The book value of
FESIL's assets has over the same period
decreased by NOK 82 million, to 1,115
million as of 31.12.99. This means that
the equity to assets ratio, during this peri-
od, has increased from 5 % to 42 %.
The Group's net interest-bearing
debt amounted to NOK 371 million at
the end of 1999 compared to NOK 406
million at the end of 1998. 16 % of the
net interest bearing debt was as of Dec-
ember 31st, 1999 denominated in Euros
(EUR), the rest in Norwegian kroner
(NOK). 62 % of the net interest-bearing
debt was tied to floating interest rates or
a rate fixed for less than 12 months. At
the end of 1999 not utilised drawing
rights amounted to NOK 258 million.
The Group's investments in fixed
assets in 1999 totalled NOK 41 million.
Shareholder structure
During 1997 and 1998 the American
metal producer Globe Metallurgical Inc.
(Globe) bought 39.25 % of the FESIL
shares. Globe is the world's largest pro-
ducer of special alloys for the foundry
industry and the world's second largest
producer of SiMetal. In 1999, the Swiss
metals trading company Gurta AG
bought a large number of FESIL shares.
The shares purchased by Gurta are
maintained in a company called Tennsil
Ltd. Together with Tennant Nordic Ltd.
and Tennant Midgley Group, Tennsil
Ltd. owns 39.98 % of the shares in
FESIL. It is the intention that the shares
owned by the Tennant companies and by
Tennsil are joined. As of 31.12.99 foreign
interests hold 79.8 % of the company's
shares.
During 1999 the price of FESIL sha-
res fluctuated between NOK 27-51. As of
31.12.99 the share price was NOK 36.00,
compared with NOK 30.00 at the end of
1998.
As of 31.12.99 FESIL had 345 share-
holders. The number of shares issued
was 7,999,500, all with voting rights.
The company's share capital is NOK
79,995,000. At the end of 1999, FESIL’s
market value was NOK 288 million.
Environment
Norwegian authorities have imposed the
strictest licence requirements in the world
upon the ferroalloy industry in Norway.
FESIL has complied with these require-
ments.
At Holla Metall, SFT (the Norwegian
authority for pollutionary matters) made
a thorough investigation in 1999. Six
deviations were registered as well as six
FESIL ANNUAL REPORT 19998 B O A R D O F D I R E C T O R S ' R E P O R T
FESIL's financial position has been significantly strength-
ened over the past five years. Whilst the Group's equity
capital at the end of 1994 amounted to NOK 60 million, it
had by the end of 1999 reached NOK 466 million.
remarks. Holla has investigated the situa-
tion with respect to the sea condition
close to the plant, associated with the dis-
charge limits for quartz mud from the
washing process. Holla has also been
working with Hemne Næringsforum on a
project in order to utilise the waste heat.
No conclusions have yet been drawn in
respect of further work on the project.
Lilleby Metall sold 63,7 Gwh of re-
cycled energy in the form of heated water
to the city of Trondheim. This amount of
energy equals the amount of energy nee-
ded to heat 7,500 apartments in Trond-
heim. The reduction from 88 Gwh in
1998 is because furnace no. 10 at Lilleby
did not operate since March 16th, 1999.
At full operation in 1999, Lilleby would
have been able to deliver 99 Gwh in
1999. Lilleby has been able to reduce the
discharge of SO2 by converting to car-
bon materials with 1,0 % sulphur versus
1,5 % in 1998 and up to 2,8 % in 1997.
Rana Metall takes part in a joint local
project called «Air monitoring in Rana».
The report from this project is not yet finis-
hed. The project is concerned with measu-
ring the level of dust debris, floating dust,
sulphur dioxide, as well as registration of
weather data. Additionally, the content of
iron, sink, chrome and lead are measured
in the dust debris. Rana Metall recovered
43 Gwh from smoke gases in 1999. A new
shed for preparation of ladles as well as a
new mechanic workshop was built.
In the summer of 1999 it became appar-
ent that some ferroalloy plants were
found to have higher discharge of mercu-
ry than the authorities were aware of.
This was not the case for plants produ-
cing ferrosilicon and silicon metal, but
even so these plants were required to
report discharge of six different heavy
metals. This requirement came towards
the end of the year, thus the results are
not ready until March 1st, 2000. The
plants that produce either ferrosilicon or
silicon metal do not expect these
measurements to reveal any environmen-
tal problems. Similar measurements in
the past have not revealed anything of
the kind for our type of industry.
In 1998 the parliament decided that
emissions of sulphur dioxide, from the
use of coal, coke and petrol coke should
as of 01.01.1999 be taxed. The tax is
NOK 3.00 per kilo SO2. Normally this
would mean a cost to FESIL at NOK
7–8 millions, but because sulphur in coal
and coke in inventory at hand, and also
because of the somewhat reduced pro-
duction, the cost to FESIL in 1999 was
NOK 4.4 millions. In December 1999 an
international agreement was signed
where Norway is obliged to reduce its
level of SO2 and NOx emissions by year
2010. If this reduction is to be made cost
effective in a national economic perspec-
tive, it will require the building of bag
houses at a few plants.
Det Norske Veritas (DNV) has repor-
ted measurements from 1997–1999 of
SO2 and NOx, as well as from floating
dust and dust debris, in the areas around
both Holla and Lilleby. All the monthly
and daily average values were well below
the authorities’ required minimum level
FESIL ANNUAL REPORT 1999 9B O A R D O F D I R E C T O R S ' R E P O R T
Lilleby Metall sold 63,7 Gwh of recycled energy in the
form of heated water to the city of Trondheim. This
amount of energy equals the amount of energy needed
to heat 7,500 apartments in Trondheim.
of discharge allowed, with the exception
for one average daily value of floating
dust at Holla and two average daily valu-
es at Lilleby. They were both above the
required minimum.
The measurements of SO2 from
DNV shows that building bag houses for
SO2 at FESIL’s plants will have a minor
effect on the environment. However,
building such bag houses might come
about in order to minimise the costs asso-
ciated with reaching the 2010 goals.
Today’s SO2 tax does not solve any envi-
ronmental problems, and FESIL is wor-
king through PIL (The Confederation of
Process Industry) in order for the authori-
ties to replace it with a system where the
industry uses what it takes in order to
comply with the 2010 targets.
The government’s quota commission
on CO2 presented their work at the end
of 1999. A very important issue is that
the commission does not recommend
that a broad quota system with quota
obligations be imposed until 2008. Any
consequences of such a system appear
therefore to be some years in the future.
FESIL has, for several years, been wor-
king to reduce the emissions from fossil
CO2 by replacing it with biological CO2,
since the emissions of CO2 arising from
the use of wood (biological CO2) is not
taken into the climate balance. An
important event in 1999 was that FESIL
through a 50 % owned company bought
10 charcoal ovens from a closed down
plant in Holland. One of the ovens will
be placed at Lilleby for FESIL and SIN-
TEF to jointly develop the technology
further. The next step is to place the
other nine ovens near by the Baltic for
production of charcoal. For FESIL it is
strategically important to gain knowledge
about the use of modern technology in
the production of charcoal. This could be
part of the solution for limiting the emis-
sions of fossil CO2. The problems in
connection with CO2 are further descri-
bed in an article elsewhere in this
Annual Report.
Year 2000
The entering into the year 2000 did not
reveal any surprises to FESIL. This fact
seems to confirm that all the precautions
taken in advance were successful.
FESIL ANNUAL REPORT 199910 B O A R D O F D I R E C T O R S ' R E P O R T
FESIL has, for several years, been working to reduce
the emissions from fossil CO2 by replacing it with biolo-
gical CO2.
Personnel and the working
environment
At the end of 1999 FESIL had 423
employees (1998: 442). Of these, 22 were
employed at FESIL’s companies outside
Norway. Due to marketing adjustments
FESIL had during 1999 reduced produc-
tion and instituted temporary redundan-
cies at two of its plants. At the end of the
year part of the working staff was laid off.
Absenteeism due to illness has
shown a positive trend, from 8.2 % in the
1st quarter to 6.9 % at the end of the year
(1998: 7.7 %). After several years with
increasing absenteeism, we have in 1999
been able to reverse the trend.
The number of injuries with absence
beyond the day of injury was 18 in 1999
against 42 in 1998. This gave an H-value
of 26 in 1999 against 52 the preceding
year. (H-value is the number of injuries
resulting in time off work beyond the day
of injury / number of working hours x
1 000 000). Half the registered injuries
with absence were related to fire damage.
One eye injury has been registered, and
compared to preceding years this is a
marked improvement. The reason is that
compulsory use of protective goggles
was introduced at all plants. No serious
injuries have been registered during the
course of the year.
The injury development through the
year showed a positive trend. Of the 18
injuries causing absence during 1999,
only six were registered in the 2nd half of
the year. At all the FESIL plants, there is
always a strong focus on safety, health
and environment. In addition, the com-
pany’s system auditor has carried out
internal audits. An important element in
risk prevention is the reporting of dange-
rous conditions and signs of such and the
handling of them. This is helping to pre-
vent dangerous conditions and signs of
such to lead to injuries with absenteeism.
The action programme set up at the
HES (health, environment and safety)
-conference in the autumn of 1998 focu-
sed especially on tidiness and cleaning,
alternative work for employees with
reduced working ability and also on
taking care of oneself and others. 1999
was declared a HES-year, and it is grati-
fying to see that this work throughout the
year has given positive results. A follow
-up conference on HES has been schedu-
led to take place during the autumn of
2000.
At the ordinary general meeting
06.05.99, Mr. Knut Øversjøen resigned
as a board member. Mr. Giovanni Luigi
Ghezzi was elected as new board mem-
ber. The Board wishes to thank the mem-
ber who left for his effort on behalf of the
company.
Details of the shares in the company
held by elected officers and the manage-
ment are given on page 37.
FESIL ANNUAL REPORT 1999 11B O A R D O F D I R E C T O R S ' R E P O R T
At all the FESIL plants, there is always a strong focus
on safety, health and environment. The number of inju-
ries with absence beyond the day of injury decreased
from 42 in 1998 to 18 in 1999.
Prospects
On entering a new millennium, the basic
picture for FESIL’s products is promis-
ing. The world’s total steel production is
on a high level and increasing. The need
for ferrosilicon (FeSi) is large and also on
the increase. However, due to the fact
that the US anti dumping duties were lif-
ted and also because EU is reconsidering
its anti dumping duties, it is more uncer-
tain how the FeSi prices will develop. It is
hard to predict the consequences of reduc-
ed EU duties, in part because available
statistics indicate that the system of anti-
dumping duties is being evaded to a
large extent. Also with respect to silicon
metal (SiMetal), the market is now firming
up. There is reason to expect increased
prices in 2000, even though idle produc-
tion capacity will gradually be put back
into production as the market picks up.
On entering year 2000, FESIL still has
two furnaces closed down. These furna-
ces have a total production capacity of
17,000 metric tons per year. The Board
considers it likely that one or both of
these will be restarted during the year.
It is the opinion of the Board that
FESIL is both financially and operation-
ally well prepared for the new millen-
nium. In the longer run there are reasons
for optimism. The need for improved
infrastructure in many countries and the
generally increasing welfare will increase
the demand for FESIL’s products.
As a whole, FESIL's power supply is
satisfactory in 2000 and will, to a large
degree, remain satisfactory up to year
2005. However, the Board is not satisfied
with the decisions taken by the
Norwegian Parliament in 1999 regarding
the future power regime for the
Norwegian power intensive industry. As
a consequence it is likely that this indus-
try will buy much more of the power it
needs in the future on the open electrici-
ty market as this is being liberalised. Still,
the Board considers it important that the
Norwegian energy policy provides that
the country's most important natural re-
source, hydroelectric power, is processed
further in Norway.
Norwegian ferrosilicon and silicon
metal industry is among the cleanest in
the world, and the engagement in envi-
ronmental matters is large. The permits
that the industry operates under, given
and implemented by the Norwegian
authorities, are the strictest in the world.
The Board is therefore both worried and
surprised when learning that some politi-
cians unilaterally want to impose further
Norwegian environment taxes. One con-
sequence will be that the competitiveness
of the Norwegian industry is further
reduced, to the advantage of its much
more polluting competitors in Eastern
Europe, Asia and South America. It will
be expensive for a small country such as
Norway is, always to strive for being
«best in class». It is the opinion of the
Board that the environmental policy
must be dealt with internationally, and
that actions should be coordinated across
borders so that they are implemented
where they have the most effects.
FESIL ANNUAL REPORT 199912 B O A R D O F D I R E C T O R S ' R E P O R T
It is the opinion of the Board that the environmental
policy must be dealt with internationally, and that acti-
ons should be coordinated across borders so that they
are implemented where they have the most effects.
Allocation of result
FESIL ASA's result for the year 1999 was
NOK 4,431,000, while free equity as of
31.12.99 is 146,082,000. The Board pro-
poses the result to be allocated as follows:
• To other equity: NOK 4,431,000
The Board of Directors of FESIL ASA
Oslo, February 16th, 2000
Jonathan O. Lee Giovanni L. Ghezzi Rune Larsen
Chairman
Hans Tormod Hansen John F. Lalley Åge Sakariassen
Arden C. Sims Johannes Lien Arne Byrkjeflot
Observer
Odd Samstad
President and CEO
FESIL ANNUAL REPORT 1999 13B O A R D O F D I R E C T O R S ' R E P O R T
From left: President and CEO, Odd Samstad, Johannes Lien, Rune Larsen, Jonathan O. Lee, Arden C. Sims, Arne Byrkjeflot, Hans Tormod Hansen,John F. Lalley, Åge Sakariassen. Giovanni L. Ghezzi was not present whenthe picture was taken.
PARENT COMPANY (AMOUNTS IN NOK 000S) GROUP
1997
843 048
20 221
863 269
555 027
24 559
141 021
30 927
172 949
924 483
-61 214
14 994
7 410
17 749
4 655
-56 559
16 135
-40 424
1998
627 024
12 241
639 265
418 138
-16 248
122 300
22 738
72 595
619 523
19 742
3 694
7 425
19 003
-7 884
11 858
-2 475
9 383
1999
533 443
13 359
546 802
333 261
21 599
97 960
25 223
57 153
535 196
11 606
15 609
8 360
23 642
327
11 933
-7 502
4 431
Operating income
Revenue
Other operating income
Total operating income
Operating expenses
Raw materials
Change in stocks
Salaries and other personnel expenses
Ordinary depreciation
Other operating expenses
Total operating expenses
Operating result
Financial items
Share of results in other companies
Financial income
Financial expenses
Total financial items
Profit before tax
Taxes
Result for the year
Earnings per share (NOK)
Note
5
6
7,8
10
9
4
4
4
19
1997
2 086 573
20 469
2 107 042
1 424 161
29 713
207 648
69 519
387 271
2 118 312
-11 270
10 871
8 613
35 567
-16 083
-27 353
9 055
-18 298
-2,29
1998
2 024 094
12 654
2 036 748
1 475 170
-22 933
186 584
47 525
290 116
1 976 462
60 286
8 938
12 550
36 274
-14 786
45 500
-15 979
29 521
3,69
1999
1 700 048
11 201
1 711 249
1 151 862
32 305
169 050
48 678
263 216
1 665 111
46 138
10 639
12 830
40 825
-17 356
28 782
-9 204
19 578
2,45
FESIL ANNUAL REPORT 199914
P R O F I T A N D L O S S A C C O U N T 1 9 9 9
PARENT COMPANY (AMOUNTS IN NOK 000S) GROUP
1997
18 068
18 068
59 758
79 139
6 277
145 174
94 157
120
3 122
15 506
112 905
276 147
102 716
17 238
227 960
18 228
263 426
6 588
372 730
648 877
1998
15 592
15 592
59 743
137 471
9 287
206 501
83 239
120
3 462
1 105
22 056
109 982
332 075
126 751
6 326
211 391
11 432
229 149
7 010
362 910
694 985
1999
8 091
8 091
64 895
135 461
7 417
207 773
91 295
120
366
22 826
114 607
330 471
92 646
2 870
242 804
5 365
251 039
42 574
386 259
716 730
ASSETS
Fixed assets
Intangible fixed assets
Deferred tax assets
Goodwill
Total intangible fixed assets
Tangible fixed assets
Land, buildings and other property
Machinery and plant
Fixtures and fittings, tools, office machines etc.
Total tangible fixed assets
Financial fixed assets
Investments in subsidiaries
Investments in associates
Investments in other companies
Pension funds
Other long-term receivables
Total financial fixed assets
Total fixed assets
Current assets
Stocks
Debtors
Accounts receivable
Group receivables
Other short-term receivables
Total debtors
Bank deposits, cash in hand etc.
Total current assets
Total assets
Note
11
19
10
12
12
13
8
14,18
6
18
16
1997
10 327
2 261
12 588
60 468
178 872
19 254
258 594
55 945
3 123
15 546
74 614
345 796
385 443
292 025
49 793
341 818
8 555
735 816
1 081 612
1998
5 525
5 525
60 453
251 682
20 455
332 590
61 194
3 463
2 436
22 070
89 163
427 278
419 279
290 062
38 286
328 348
9 296
756 923
1 184 201
1999
0
66 553
238 822
17 204
322 579
67 669
367
22 983
91 019
413 598
399 749
240 427
50 157
290 584
11 190
701 523
1 115 121
B A L A N C E S H E E T 1 9 9 9 , A S S E T S
FESIL ANNUAL REPORT 1999 15
FESIL ANNUAL REPORT 199916
PARENT COMPANY (AMOUNTS IN NOK 000S) GROUP
1997
79 995
119 057
199 052
140 360
140 360
339 412
508
508
164 060
44 111
59 419
13 667
27 700
144 897
648 877
1998
79 995
119 057
199 052
149 741
149 741
348 793
0
189 841
60 905
63 802
14 339
17 305
156 351
694 985
1999
79 995
119 057
199 052
154 172
154 172
353 224
2 630
2 630
176 235
97 369
44 190
14 817
28 265
184 641
716 730
EQUITY AND LIABILITIES
Equity
Paid-up capital
Share capital
Share premium reserve
Total paid-up capital
Retained earnings
Other equity
Total retained earnings
Total equity
Liabilities
Provisions
Pension obligations
Deferred tax liabilities
Total provisions
Total liabilities to financial institutions
Short-term liabilities
Drawn on overdraft facility
Trade creditors
Taxes payable
Public duties payable
Other short-term liabilities
Total short-term liabilities
Total equity and liabilities
Note
21
20
20
8
19
15
18
4,18
1997
79 995
119 057
199 052
216 320
216 320
415 372
951
951
274 748
5 097
205 680
446
21 187
158 131
390 541
1 081 612
1998
79 995
119 057
199 052
247 283
247 283
446 335
0
283 596
2 290
263 289
1 883
23 665
163 143
454 270
1 184 201
1999
79 995
119 057
199 052
266 861
266 861
465 913
2 464
253
2 717
262 019
195 762
637
28 694
159 379
384 472
1 115 121
The Board of Directors of FESIL ASA
Oslo, February 16th, 2000
Jonathan O. Lee Giovanni L. Ghezzi Rune Larsen
Chairman
Hans Tormod Hansen John F. Lalley Åge Sakariassen
Arden C. Sims Johannes Lien Arne Byrkjeflot
Observer
Odd Samstad
President and CEO
B A L A N C E S H E E T 1 9 9 9 , E Q U I T Y A N D L I A B I L I T I E S
C A S H F L O W S T A T E M E N T
FESIL ANNUAL REPORT 1999 17
PARENT COMPANY (AMOUNTS IN NOK 000S) GROUP
1997
-56 559
60 143
30 927
40 960
-6 473
1 398
10 509
-223
-3 153
-14 994
62 535
101 000
-108 974
-7 093
42 406
-65 150
-37 811
23 701
-46
-35 830
-12 000
-24 175
549
6 039
6 588
1998
11 858
192
22 738
-24 035
10 912
4 383
-2 926
-121
-1 613
-3 694
17 694
85
-83 556
-6 550
13 606
16 568
-59 847
16 794
25 781
42 575
422
6 588
7 010
1999
11 933
-1 378
25 223
34 105
3 456
-9 612
7 503
-1
3 736
-11 750
63 215
-26 495
-770
8 168
-31 412
-50 509
36 464
-13 606
22 858
35 564
7 010
42 574
Cash flow from operations
Ordinary result before tax
Taxes paid in period
Loss (gain) on sale of fixed assets
Ordinary depreciation
Changes in stocks
Changes in accounts receivable
Changes in due to trade creditors
Changes in other accruals
Effect of changes in foreign exchange rates
Changes in pension liabilities
Change in result of associated companies
(equity method)
Net cash flow from operations
Cash flow from investments
Income from sale of fixed assets
Payment for fixed assets purchased
Received on long-term loans made
Received on other investments
Payments on short-term loans to Group
Net cash flow from investments
Cash flow from financing
Net change overdraft facility
Received on taking up new short-term debt
Received on taking up new long-term debt
Repayment of short-term debt
Repayment of long-term debt
Payment of dividend
Net cash flow from financing
Net cash flow for the period
Cash and cash equivalents
at beginning of period
Cash and cash equivalents at end of period
Note
Note
10
6
8
16
1997
-27 353
-3 147
60 143
69 519
74 041
-13 603
-12 586
-3 445
1 385
-887
-10 871
133 196
26 113
-46 427
-6 349
1 500
-25 163
-50 541
7 296
-52 827
-12 000
-108 072
-39
8 594
8 555
1998
45 499
-11 177
146
47 525
-33 836
1 962
57 609
8 619
-1 063
-3 387
-8 938
102 959
552
-118 494
-6 523
3 028
-121 437
-2 807
13 178
8 848
19 219
741
8 555
9 296
1999
28 782
-3 776
-1 378
48 678
19 530
49 636
-67 527
-6 853
-1
4 900
-10 639
61 352
6
-38 673
-914
8 608
-30 973
-2 290
-4 618
-21 577
-28 485
1 894
9 296
11 190
Accounting principles
General
The annual financial statements have
been prepared in compliance with The
Norwegian Accounting Act of 1998 and
Norwegian Generally Accepted
Accounting Principles (NGAAP). All
amounts are in NOK 000s, unless other-
wise stated. The accounting principles
used have been changed to comply with
the Accounting Act 1998. The changes
are described below. The effects of imple-
menting the new principles are shown in
note 1.
Consolidation principles
Subsidiaries
The Group accounts include the parent
company and all companies in which the
parent company directly or indirectly
exercises dominant influence. These com-
panies (subsidiaries) are listed in note 12.
All subsidiaries are fully consolidated.
There are no minority interests in any of
the subsidiaries included in the Group
accounts.
In the Group accounts, inter-company
receivables and payables, and transactions
between group companies are eliminated.
Shares in subsidiaries are eliminated in
accordance with the purchase method of
consolidation. This means that the cost of
the shares to the parent company is set off
against the equity of the subsidiary at the
time of acquisition. Assets and liabilities
are analysed and included at current
value. Any remaining added value is
included in the balance sheet as goodwill,
which is amortised over its useful econo-
mic life. In calculating the deferred
tax/deferred tax asset relating to revaluati-
ons, the nominal tax rate is used.
Subsidiaries acquired during the year
are included in the group financial state-
ments from the date of acquisition to the
year-end. Companies which are sold
during the period are included up to the
date of disposal.
Conversion of foreign subsidiaries' accounts
The profit and loss accounts of foreign
subsidiaries are converted to Norwegian
kroner at the average exchange rate for
the year, while the balance sheet figures
are converted at the exchange rate on the
balance sheet date. Any conversion differ-
ences are recorded directly against equity.
Associated companies
Companies in which the group owns bet-
ween 20 % and 50 % and exercised signi-
ficant influence, are considered associa-
ted companies and are included in the
group's accounts using the equity method
of accounting. In the parent company,
the investment is recorded at cost.
The group share of the profit in asso-
ciated companies is based on profits after
tax, reduced by any amortisation of
goodwill resulting from the cost of the
shares being higher than the acquired
share of the company's equity. In the pro-
fit and loss account the share of the profit
of associated companies is classified as
financial income.
Other shares/parts
Other shares and minor investments where
FESIL have no significant influence are
recorded at historic cost. If the real value
is lower than historic cost, and this dimi-
nution in value is not considered to be
temporary, the item is written down. Any
dividends distributed by the companies
are included in financial income.
FESIL ANNUAL REPORT 199918
A C C O U N T I N G P R I N C I P L E S
Valuation and classification
principles
Current assets and short-term liabilities
include items which fall due within one
year of the end of the financial year, as
well as other items relating to the opera-
ting cycle. Other items are classified as
fixed assets / long-term liabilities.
Fixed assets are recorded at cost or
valuation and are depreciated over the
estimated useful economic life of the asset.
Land is not depreciated. Long-term liabili-
ties are valued at the nominal amount at
the time of the initial establishment. First
year's instalments on long-term loans are
classified as long-term liabilities.
Current assets are valued at the lower
of cost and net realisable value (the lower
of cost and market value). Short-term lia-
bilities are valued at the nominal amount
at the time of the initial establishment.
Intangible assets
All costs in connection with research and
development projects are expensed when
the costs are incurred. A deferred tax
asset is recognised in order to comply
with the Norwegian Accounting Act 1998.
The implementation effect is taken to
reserves.
Fixed assets
Fixed assets are valued at cost or valuat-
ion and are depreciated on a straight-line
basis over the estimated useful economic
life of the asset. Depreciation is normally
straight-line over the expected lifetime.
Normal maintenance and repair costs are
recorded as an expense when the cost is
incurred. Costs relating to periodical
maintenance that occur every 2–5 year
are accrued over the relevant period.
Costs relating to major replacements and
renewals that substantially increase the
useful economic life of the asset are capi-
talised. Fixed assets that are replaced are
expensed when the costs are incurred.
Leasing agreements
Leasing agreements where the risks and
rewards associated with owning the asset
are transferred to the lessee are conside-
red finance leases, and the asset is inclu-
ded in the lessee's balance sheet. Any
other leasing agreements are considered
operational, and no asset is recognised in
the accounts of the lessee.
Stocks
Stocks are valued at the lower of acquisit-
ion cost and estimated market value after
deducting sales costs. The acquisition cost
of goods for resale is the purchase price.
The acquisition cost of work in progress
and finished goods is their production cost.
Accounts receivables
Trade debtors and other accounts receiv-
able are recorded at their nominal value
reduced by a provision for bad debts.
The provision is made based on an indi-
vidual assessment of each balance.
Additionally, an unspecified provision is
made to cover expected losses.
Foreign exchange
Monetary assets and liabilities in foreign
currencies are converted to NOK at the
exchange rate on the balance sheet date.
Assets and revenue flows in foreign cur-
rencies are hedged in part through borrow-
ing in foreign currencies and in part
through various off-balance sheet financi-
al instruments. FESIL ASA mainly
employs forward contracts in its hedging
activities. Hedged balance sheet items are
recorded at the contracted rates. Gains
and losses on such contracts are included
in net income when the transactions are
settled. The company does not utilise
these derivative financial instruments for
speculative purposes. Starting from 1999,
currency gains or losses on operating
cash flow are included in operating in-
come. Profit and loss account for 1998
and 1997 are reclassified accordingly.
Currency conversion differences and
hedging of currency related to fixed
assets and long-term liabilities are both
recorded under financial items.
FESIL ANNUAL REPORT 1999 19A C C O U N T I N G P R I N C I P L E S
Pensions and pension obligations
Most of the group companies have pensi-
on plans that provide the employees with
a right to defined future pension benefits
(a defined benefit pension plan), where the
benefits are based on the number of pensi-
on earning years of service and the salary
at the time of reaching pensionable age.
The pension benefits are in part financed
by FESIL's pension fund (secured
schemes) and partly over the company's
profit and loss account (unsecured sche-
mes). Pensions are recorded in accordance
with the draft Norwegian Accounting
Standard for Pension Costs. The pension
cost for the year is included in «Salaries
and other personnel expenses». This com-
prises benefits earned in the period, inte-
rest cost on projected pension obligations,
estimated return on pension plan assets,
the effect of changes in the estimates and
terms and conditions of the pension plans,
and the effect of differences between the
actual and expected return on pension
plan assets. The net projected obligation is
the difference between the present value
of the projected benefit obligations and
the market value of the pension plan
assets. Changes in the projected benefit
obligations as a consequence of changes in
estimates as well as deviations between
actual and expected return on pension
plan assets, are recorded in the accounts
when the deviation exceeds 10 % of gross
pension obligations or pension plan assets
for the individual scheme, whichever is
the higher. See note 8.
Taxes
The tax charge in the profit and loss
account includes both the current tax
payable and the change in deferred tax.
The change in deferred tax reflects future
taxes payable as a result of the activities
in the year. Deferred tax is the tax liabili-
ty related to the accumulated profits and
losses, which fall due in future periods.
Deferred tax is estimated based on the
net of positive and negative temporary
differences between taxation and accoun-
ting values, as well as losses carried for-
ward. Consideration is given to deferred
tax in connection with acquisitions and in
profits according to the equity method of
accounting. This is in accordance with
the rules in the revised «Draft Norwegian
Accounting Standard for the Treatment of
Tax». The tax is divided in tax on ordina-
ry result and tax on extraordinary result
according to the basis for taxation. The
net deferred tax asset or liability is shown
in the balance sheet. See note 19.
Operating income and expenses
Operating income is recorded when ear-
ned. Sales of goods are recorded at the
time of delivery. Operating expenses are
matched with the corresponding opera-
ting income. The cost of freight and insu-
rance is included in other operating costs.
Power costs
Power costs are charged in the period in
which the power is used. Long-term con-
tracts are recorded at the agreed fixed
price, while spot purchases of power are
recorded at the spot rate. Part of the need
for spot power is hedged using forward
contracts, which are expensed on expiry.
Extraordinary income and expenses
Extraordinary income and expenses are
defined as items that are significant in size,
of an unusual character compared with
ordinary operations, and which cannot be
expected to occur regularly. Gains and
losses on sale of fixed assets and amounts
written down on these are recorded as
ordinary income/expenses if the transacti-
on does not satisfy all the above criteria.
Contingent liabilities
Contingent liabilities which are probable,
are provided for in the accounts.
Contingent liabilities which are possible,
but not probable, are not provided for,
but information is given in a note to the
accounts. Contingent income is not inclu-
ded in the accounts.
FESIL ANNUAL REPORT 199920 A C C O U N T I N G P R I N C I P L E S
As from January 1st, 1999 FESIL has
introduced new accounting principles
according to new Norwegian accounting
legislation. The effect of new accounting
principles on equity per 1.1.1999 and profit
and loss account for 1999 is shown below:
Comparable figures
Comparable figures are revised according
to new principles. In the 1999 accounts
currency gains or losses on operating
cash flow are included in operating
income. The 1998 and 1997 figures are
reclassified accordingly.
Outstanding currency hedging contracts (forward/options) as of 31.12.99 (in millions in the actual currency):
All contracts have been made in order to hedge the cash flow in the year 2000.
1. Effect of change in accounting principles
The company uses different types of
financial instruments in order to manage
financial risk.
Interest rate risk
Interest rate risk occurs in the short and
medium term perspective when part of
the company's debt has a floating interest
rate. The maximum share of floating inte-
rest is continously reviewed. The loan
portfolio as of 31.12.99 comprises a combi-
nation of fixed and floating interest rates.
The company's interest rate sensitivity is at
a desired level by the use of fixed interest
rate at some long-term loans, as well as by
use of interest rate swaps and FRA's
(Future Rate Agreement). A 1 % change in
the market interest rate will mean a
change in the company's interest cost at
+/- NOK 2.2–2.4 mill.
Currency risk
The development in currency rates impli-
es a direct as well as an indirect financial
risk to the company. Hedging of both cur-
rency cash flows and assets in currency is
done partly by using forward contracts
and options and partly by actual «on
balance sheet» positions.
2. Financial market risk
N O T E S T O T H E A C C O U N T S
FESIL ANNUAL REPORT 1999 21
PARENT COMPANY GROUP
EQ 1.1.99
15 592
P & L 99
-7 502 Deferred tax assets, not previously recognised
P & L 99
-5 778
EQ 1.1.99
5 525
Currency Sold
USD
EUR
GBP
SEK
8
65
7
8
(All amounts in NOK 000s unless otherwise specified)
FESIL ANNUAL REPORT 199922 N O T E S T O T H E A C C O U N T S
3. Agreements with partners
FESIL has made the following agreements with its partners:
GLOBE Metallurgical Inc. Technological services and management consulting agreement
Tennant Ltd. (G. Ghezzi partner) Distribution agreement, covering Great Britain
Sineco (G. Ghezzi partner) Logistic and storing agreement, covering Italy
All agreements listed above are made on strict business terms (arm's length basis).
4. Combination of items
PARENT COMPANY GROUP
1997
14 994
14 994
5 491
25
1 894
7 410
17 146
603
17 749
1 547
15 136
11 017
27 700
1998
3 694
3 694
7 293
132
7 425
18 016
430
557
19 003
1 575
11 442
4 288
17 305
1999
3 859
11 750
15 609
5 902
1 795
663
8 360
23 395
247
23 642
969
9 756
17 540
28 265
Share of results in other companies
Share of result in associated companies (see note 12)
Group contribution
Share of result in Rana Metall KS
TOTAL
Financial income
Interest income
Foreign exchange gain
Other financial income
TOTAL
Financial expenses
Interest expenses
Foreign exchange losses
Other financial expenses
TOTAL
Other short-term liabilities
Accrued interest expenses
Allocations etc.
Currency loan
Other short-term liabilities
TOTAL
1997
10 871
10 871
8 286
327
8 613
33 715
1 852
35 567
2 880
24 391
107 457
23 403
158 131
1998
8 938
8 938
11 973
577
12 550
34 024
430
1 820
36 274
3 174
25 777
120 635
13 557
163 143
1999
10 639
10 639
9 754
1 946
1 130
12 830
39 599
1 226
40 825
3 000
18 730
115 960
21 689
159 379
FESIL ANNUAL REPORT 1999 23N O T E S T O T H E A C C O U N T S
All of the parent company's income comes from their own products. All sales from the
plants are distributed through the Group's sales company FESIL Sales AS.
5. Segment information
6. Stocks
GROUP (AMOUNTS IN NOK MILL.)
Operating Operating Operating Operating Operating Operating
Operating income and result income result income result income result
by business area 1999 1998 1997
Own products 1 019,7 34,1 1 156,1 44,5 1 467,9 43,3
Trading products 691,5 12,0 880,6 15,8 639,1 9,2
TOTAL 1 711,2 46,1 2 036,7 60,3 2 107,0 52,5
Operating income by geographic area Norway EU USA Far East Other TOTAL
Own products 1999 51,5 854,8 14,7 96,8 1,9 1 019,7
Trading products 5,9 584,0 91,1 10,5 0,1 691,5
TOTAL 57,4 1 438,8 105,8 107,3 2,0 1 711,2
Own products 1998 58,1 914,4 87,0 94,0 2,6 1 156,1
Trading products 16,9 764,1 65,3 31,6 2,7 880,6
TOTAL 75,0 1 678,5 152,3 125,6 5,4 2 036,7
Own products 1997 64,8 1 153,1 134,5 102,6 12,9 1 467,9
Trading products 7,8 531,2 65,1 34,3 0,7 639,1
TOTAL 72,6 1 684,3 199,6 136,9 13,6 2 107,0
Loss and other costs regarding the sale of Hafslund Metall totalling NOK 63.9 million
are not included in the operating result for 1997.
See note 17 concerning securities in stock.
PARENT COMPANY GROUP
1997
45 685
57 031
102 716
1998
55 737
69 947
1 067
126 751
1999
43 231
49 415
92 646
Raw materials and process materials
Self-produced finished goods
Goods purchased for resale
TOTAL
1997
86 204
216 397
82 842
385 443
1998
93 818
201 729
123 732
419 279
1999
66 131
195 754
137 864
399 749
FESIL ANNUAL REPORT 199924 N O T E S T O T H E A C C O U N T S
7. Payroll expenses
PARENT COMPANY GROUP
1997
119 052
17 111
-2 241
7 099
141 021
278
1998
99 041
13 478
2 944
6 837
122 300
301
1999
76 109
10 136
4 727
6 988
97 960
277
Salaries
National insurance contribution
Pension costs
Other payments
TOTAL
Average no. of employees
1997
162 283
20 778
891
23 696
207 648
425
1998
155 166
18 606
3 361
9 451
186 584
449
1999
134 782
15 542
7 511
11 215
169 050
433
Remuneration to executives in 1999 (NOK)
Salaries/fees
Pension costs
Other remuneration
Board members
770 000
President CEO
1 194 509
39 571
107 403
The president/CEO is entitled to one
year's salary if dismissed by the company.
There are no obligations attached to sub-
scription rights, options and similar rights
which give employees or representatives
right to subscribe to, buy or sell shares or
primary capital certificates.
Auditor
Total remuneration to the company's
auditor for 1999 is expensed at NOK
407,000 for auditing and NOK 234,000
for other services.
FESIL ANNUAL REPORT 1999 25N O T E S T O T H E A C C O U N T S
8. Pension costs and pension obligations
PARENT COMPANY GROUP
1997
2 095
3 287
-4 168
2 214
3 428
-5 669
-2 241
51 993
-57 381
194
-5 194
5 702
5 702
508
1998
2 906
4 407
-4 042
701
3 972
-1 028
2 944
64 650
-62 709
-9 524
-7 583
18 727
-11 616
-633
6 478
-1 105
1999
2 409
4 520
-3 604
1 402
4 727
4 727
65 195
-54 058
-16 220
-5 083
15 533
-10 923
3 103
7 713
2 630
The year's pension expenses
Present value of the year's pensionable earnings
Interest charge on accrued pension liabilities
Expected return on pension funds
Net amortisation etc.
Net pension expenses
Funds secured schemes not previously taken into account
Booked pension expenses
Pension liabilities 31.12.99
Estimated accrued pension liabilities, funded schemes
Estimated value of pension fund, funded schemes
Not recorded variance on basis of calculation
Net pension liability funded schemes
Capitalised value unsecured schemes incl. employment tax
Deferred liability due to change of schemes
Deferred liability forecast gain/(loss)
Net pension liabilities unsecured schemes incl. employment tax
Net pension liabilities secured/unsecured schemes
1997
3 062
4 338
-5 748
2 304
3 956
-3 065
891
68 896
-75 822
-9
-6 935
7 886
7 886
951
1998
4 120
5 887
-5 563
1 925
6 369
-3 008
3 361
89 205
-86 055
-15 305
-12 155
25 563
-15 194
-650
9 719
-2 436
1999
3 692
6 205
-5 507
3 121
7 511
7 511
91 647
-83 262
-18 445
-10 060
23 315
-14 275
3 484
12 524
2 464
Information on members Funded schemes Unsecured schemes
Parent company: No. of working members 282 282
No. of pensioners 133 16
Group: No. of working members 393 411
No. of pensioners 156 19
Actuarial assumptions:
Yield on pension funds 7,0 %
Discount rate 6,0 % 6,0 %
Annual wage growth 3,5 % 3,5 %
Expected growth in National Insurance basis amount 3,0 % 3,0 %
Annual pension growth 2,5 % 2,5 %
Expected retirement at age 62 under Early Retirement Scheme (AFP) 25,0 %
FESIL ANNUAL REPORT 199926 N O T E S T O T H E A C C O U N T S
9. Other operating expenses
PARENT COMPANY GROUP
1997
13 585
22 736
63 866
72 762
172 949
1998
4 879
23 889
43 827
72 595
1999
3 163
15 945
38 045
57 153
Freight and insurance
Maintenance
Commission on sales
Loss and other costs re. sale of Hafslund Metall
Other operating expenses
TOTAL
1997
138 989
39 651
19 413
63 866
125 352
387 271
1998
152 597
42 506
18 814
76 199
290 116
1999
141 139
33 387
17 416
71 274
263 216
10. Fixed assets / leasing
PARENT COMPANY Plant under Land/ Machines/ Fixtures&
construction buildings ind.plants fittings Total
Acquisition costs 01.01. 5 599 1 475 520 763 17 585 545 422
Additions 1999 783 24 258 1 453 26 494
Transferred from plants under construction -1 215 1 215 0
Acquisition costs 31.12.99 5 167 1 475 546 236 19 038 571 916
Revaluation before 01.01.99 58 330 19 871 78 201
Depreciation, write-downs 01.01 62 408 761 8 298 417 121
Accumulated depreciation 31.12.99 77 430 646 11 621 442 344
Net book value 31.12.99 5 167 59 728 135 461 7 417 207 773
This year’s depreciation 15 21 885 3 323 25 223
Estimated useful life 10 years 5–33 years 3–12 years
onwards
Depreciation plan Straight line Straight line Straight line
This year’s leasing cost of non-capitalised items 751 751
Capitalised leasing agreements incl. in acquisition cost 2 357 2 357
FESIL ANNUAL REPORT 1999 27N O T E S T O T H E A C C O U N T S
GROUP Plant under Land/ Machines/ Fixtures&
construction buildings ind.plants fittings Total
Acquisition costs 01.01. 5 599 2 185 877 042 66 126 950 952
Additions 1999 1 731 32 524 6 846 41 101
Transferred from plants under construction -1 215 1 215 0
Disposals 1999 -1 272 -1 272
Acquisition costs 31.12.99 6 115 2 185 910 781 71 700 990 781
Revaluation before 01.01.99 58 330 19 871 78 201
Depreciation, write-downs 01.01 62 652 352 45 311 697 725
Accumulated depreciation 31.12.99 77 691 830 54 496 746 403
Net book value 31.12.99 6 115 60 438 238 822 17 204 322 579
This year’s depreciation 15 39 478 9 185 48 678
Estimated useful life 10 years 5–33 years 3–12 years
onwards
Depreciation plan Straight line Straight line Straight line
This year’s leasing cost of non-capitalised items 1 061 1 061
Capitalised leasing agreements incl. in acquisition cost 4 391 4 391
The part of «Land and buildings» concer-ning land is not depreciated.
Revaluation of industrial plant is depreci-ated and amounted to KNOK 1,391 in1999, and the book value of the aggrega-
te revaluations at December 31, 1999were KNOK 63,881.
Leased computer equipment is capitali-sed and depreciated over 3 years.Machinery and transport equipment at
the plants are also capitalised. Leasingagreements are normally over 3 years.
All costs in connection with research and
development projects are expensed when
the costs are incurred. FESIL organizes
their R&D activities through Ferro Alloys
Industries Research Association (FFF),
which has established research activities
amounting to NOK 8 mill. annually at
SINTEF, Trondheim. This activity is sup-
ported by The Norwegian Research
Board, and includes basic research as
well as further education of specialists
with doctorates. FESIL's expenses in
connection with these activities are
approximately NOK 2 mill. per year.
Development of products and pro-
cesses is done internally through co-
operation between the head technical
department and personnel at the different
plants, and with the use of expertise from
SINTEF when considered appropriate.
Within the FESIL Group, both real R&D
projects and projects that include parts of
R&D are carried out. The expenses of
these activities are approximately NOK 6
mill. annually, and cover the costs of per-
sonnel, material and external services.
The total future income from the on-
going research and development activities
is expected to equal or exceed total cost.
11. Research and development
FESIL ANNUAL REPORT 199928 N O T E S T O T H E A C C O U N T S
12. Subsidiaries and associated companies
Time of Business Ownership Voting
acquisition office share share
Subsidiaries of FESIL ASA
ILAB Ltda. 1986 Brasil 100 % 100 %
Rana Metall AS (general partner) 1989 Mo i Rana 100 % 100 %
FESIL Komplementar AS (general partner) 1974 Oslo 100 % 100 %
FESIL Sales AS 1987 Oslo 90 % 90 % *)
Rana Metall KS 1989 Mo i Rana 90 % 90 % *)
Subsidiaries of FESIL Sales AS:
FESIL-Brikettfabrikken AS 1969 Porsgrunn 82 % 82 % *)
FESIL Legierungshandel GmbH 1973 Duisburg 100 % 100 %
FESIL International AS 1978 Tokyo 100 % 100 %
FESIL Metales S.L. 1992 Madrid 100 % 100 %
FESIL AB 1996 Stockholm 100 % 100 %
Gemalco Rohstoffhandel GmbH 1990 Duisburg 100 % 100 %
*) The Group owns 100 % of FESIL-Brikettfabrikken AS, FESIL Sales AS and Rana Metall KS.
Associated companies
Nor-Kvarts AS 1982 Oslo 33 % 33 %
Norsk Jern Eiendom AS 1989 Mo i Rana 20 % 20 %
FESIL Metalli S.r.l. 1991 La Spezia 50 % 50 %
Gemalco SAH 1985 Lusanne 50 % 50 %
Associated companies Nor-Kvarts Norsk Jern FESIL Gemalco
AS Eiendom AS Metalli S.r.l. SAH Total
Acquisition cost 120 610 244 900 1 874
Book equity when acquired 120 610 244 900 1 874
Balance at 1.1.99 3 293 53 357 1 300 3 244 61 194
Part of this year’s profit and loss account 328 6 298 9 189 6 824
Depreciation goodwill 2 876 2 876
Transfer to/from the company (dividend/group contribution) -3 028 -677 -3 705
Other changes during this year 870 379 -98 -671 480
Balance at 31.12.99 4 491 59 882 534 2 762 67 669
The subsidiaries and associated companies are recorded in the Group accounts using the acquisition method of accounting.
The wholly-owned subsidiary Rana
Metall KS, Mo, owns 20 % of the shares
in Norsk Jern Eiendom AS, Mo. The
shares were acquired free of considerat-
ion in connection with establishment of
the smelting plant in Mo. 0,18 % was pur-
chased by Rana Metall KS in 1998 for
KNOK 231, and 0,28 % for KNOK 379
in 1999. The acquisition was subject to a
number of terms with regard to transfer/
sale of the shares. These lapsed at the
end of 1993. Norsk Jern Eiendom AS has
since then been treated as an associated
company. The equity method has been
used in the Group accounts.
The book equity at the time of the acqui-
sition was MNOK 165. Our share of this
was MNOK 33. The negative goodwill is
being written back over 10 years, 1999 is
the last year.
FESIL ANNUAL REPORT 1999 29N O T E S T O T H E A C C O U N T S
13. Shares and parts in other companies
The loans which fall due more than 5
years after the end of the financial year are
serial loans. Average interest rate is 6,7 %.
Debt covenants
There are debt covenants tied to the
group's interest bearing long-term debt.
As per Dec 31, 1999 all covenants were
fulfilled with satisfactory margin.
PARENT COMPANY GROUP
Ownership share Book value
366
366
Eletrosilex S.A.
Other companies
TOTAL
Book value
1
366
367
Ownership share
10 %
14. Debts which fall due more than one year after the end of the financial year
PARENT COMPANY GROUP
1997
168
173
15 165
15 506
1998
168
5 000
179
16 709
22 056
1999
5 000
133
17 693
22 826
Loans to group companies
Other long-term receivables
Loan to employees
Other loans
TOTAL
1997
270
15 276
15 546
1998
5 000
350
16 720
22 070
1999
5 000
321
17 662
22 983
16. Granted overdraft facilities and other drawing rights and restricted bank deposits
Cash and cash equivalents consist of cash and bank deposits.
15. Liabilities which fall due more than five years after the end of the financial year
PARENT COMPANY GROUP
1997
164 060
82 027
82 033
1998
189 841
75 200
114 641
1999
176 235
103 850
72 385
1997
274 748
119 986
154 762
1998
283 596
165 394
118 202
1999
262 019
112 850
149 169
Total long-term liabilities
Of this, loans which fall due more than 5 years after the
end of the financial year
Other long-term liabilities
PARENT COMPANY GROUP
1997
6 501
75 889
40 000
1998
6 953
59 095
933
1999
4 040
22 631
36 741
Restricted bank deposits
Undrawn overdraft facilities
Undrawn other drawing rights
1997
8 426
226 559
57 543
1998
9 226
237 313
5 298
1999
4 272
211 769
45 781
FESIL ANNUAL REPORT 199930 N O T E S T O T H E A C C O U N T S
17. Mortgages and securities
PARENT COMPANY GROUP
1997
209 718
1 000
245 198
102 716
145 174
494 088
1998
252 321
1 000
217 718
126 751
206 501
551 970
1999
274 573
1 000
273 865
92 646
207 773
575 284
Secured debts
Book value of debt secured by mortgages
Book value of mortgaged assets:
Shares
Receivables
Stocks
Operating assets
TOTAL
1997
389 932
192 297
375 658
255 065
823 020
1998
409 691
182 181
413 151
324 961
920 293
1999
380 979
139 917
391 713
316 480
848 110
The Group's subsidiary FESIL Sales AS
and subsidiaries have given guarantees
for a total of KNOK 12,156. These are
guarantees for VAT and discounted bills
of exchange.
The parent company has given guaran-
tees for KNOK 2,847. This includes
guarantee for a loan to Norchar AS of
USD 300,000.
Guarantees
18. Intercompany accounts
The balance due to/from group companies and associates listed below are included in the respective balance sheet accounts.
PARENT COMPANY
Trade debtors Other debtors Trade creditors
1999 1998 1997 1999 1998 1997 1999 1998 1997
Group companies 242 804 211 391 227 960 168 168 12 636 2 629 4 476
Associated companies 7 140 5 061 3 360
TOTAL 242 804 211 391 227 960 7 140 5 229 3 528 12 636 2 629 4 476
GROUP
Trade debtors Other debtors Trade creditors
1999 1998 1997 1999 1998 1997 1999 1998 1997
Associated companies 1 644 1 978 2 008 8 721 7 647 5 890 1 426 1 600 785
FESIL ANNUAL REPORT 1999 31N O T E S T O T H E A C C O U N T S
19. Taxes
PARENT COMPANY GROUP
1997
16 135
16 135
-12 258
9 471
-2 530
-585
-509
13 100
-71 219
-64 530
-18 068
1998
2 475
2 475
-12 258
14 314
6 452
-90
1 105
10 480
-75 691
-55 688
-15 592
1999
7 502
7 502
-12 258
11 318
23 280
-121
-2 630
8 384
-56 868
-28 895
-8 091
This year’s tax expenses:
Tax payable in Norway
Tax payable abroad
Change in deferred tax
Total tax expenses
Summary of temporary differences:
Receivables
Stocks
Operating fixed assets
Provisions according to NGAAP
Pensions
Gain/loss account and other accounts
Associated companies
Loss carried forward
Total temporary differences
Deferred tax / Deferred tax asset
1997
1 308
-10 363
-9 055
-13 692
13 384
-25 654
-2 686
-953
13 227
61 581
-82 089
-36 882
-10 327
1998
11 177
4 802
15 979
-13 964
18 695
-12 974
-3 635
2 437
10 481
60 050
-80 823
-19 733
-5 525
1999
86
3 339
5 779
9 204
-13 340
23 018
-8 509
-8 854
-2 463
8 385
62 006
-59 340
903
253
*) Permanent differences include not deductible expenses, i.e. entertainment expenses, and already taxed parts of the result from subsidiaries
and associated companies as well as the effect of higher tax rate in subsidiaries and associated companies abroad.
Explanation of why the tax differs from 28 % of profit/loss before tax:
Specification of loss carried forward
PARENT COMPANY GROUP
1997
-15 837
132
-430
-16 135
1998
3 320
143
-988
2 475
1999
3 341
122
4 039
7 502
28 % tax of profit/loss before tax
Permanent differences *)
28 % of change in temp. diff. regarding parts in general partnerships
Calculated tax expense
1997
-7 659
-1 396
-9 055
1998
12 740
3 239
15 979
1999
8 059
1 145
9 204
PARENT COMPANY GROUP
6 407
50 461
56 868
Last year for utilization:
Year 2003
Year 2007
Year 2008
Year 2009
6 407
50 461
312
2 160
59 340
FESIL ANNUAL REPORT 199932 N O T E S T O T H E A C C O U N T S
20. Equity
PARENT COMPANY Share Legal Share pre- Retained Other
capital reserve mium fund earnings equity Total
Revised equity per 31.12.98 according to Norwegian
Accounting Act 1998 and this year’s changes.
Equity per 31.12.98 79 995 139 110 114 096 333 201
Transfer from legal reserve to other equity -20 053 -114 096 134 149 0
Transfer from legal reserve to share premium fund -119 057 119 057 0
Deferred tax asset not previously recorded 15 592 15 592
Equity per 31.12.98 (according to new Act 1998) 79 995 0 119 057 0 149 741 348 793
This year’s profit 4 431 4 431
Equity per 31.12.99 79 995 0 119 057 0 154 172 353 224
GROUP
Revised equity per 31.12.98 according to Norwegian
Accounting Act 1998 and this year’s changes.
Equity per 31.12.98 440 762
Conversion differences 48
Deferred tax asset not previously recorded 5 525
Equity per 31.12.98 (according to new Norwegian Accounting Act 1998) 446 335
This year’s profit 19 578
Equity per 31.12.99 465 913
RISK-amount per share (NOK)
per 01.01.00* 0.00
per 01.01.99 0.00
per 01.01.98 0.00
per 01.01.97 -1.50
per 01.01.96 -1.00
*) RISK-amount per 01.01.00 is estimated. The taxation authorities
will determine the final RISK-amount based on FESIL’s tax return
for 1999.
The number of issued shares in the com-
pany at December 31st, 1999 was
7.999.500 at nominal value NOK 10. At
the end of 1999 the share price listed at
the Oslo Stock Exchange was NOK 36
compared to NOK 30 the previous year.
There are no arrangements which
dilute the earnings per share.
21. Share capital and shareholder information
FESIL ANNUAL REPORT 1999 33N O T E S T O T H E A C C O U N T S
Shareholder structure No. of Ownership Voting
The company's largest shareholders as of 31.12.99 shares share share
Globe Metallurgical Inc. 3 140 097 39.25 % 39.25 %
Tennsil Ltd. 1 825 154 22.81 % 22.81 %
Tennant Nordic Ltd. 1 289 345 16.12 % 16.12 %
KLP Forsikring 350 000 4.37 % 4.37 %
Storebrand livsforsikring, aksjefond 211 600 2.64 % 2.64 %
Tine pensjonskasse 190 000 2.37 % 2.37 %
Fokus Bank ASA 150 000 1.87 % 1.87 %
Den Norske Bank ASA, Marketmaking 131 000 1.63 % 1.63 %
Tennant Midgley Group 85 300 1.06 % 1.06 %
Total largest shareholders 7 372 496 92.12 % 92.12 %
Other shareholders 627 004 7.88 % 7.88 %
Total issued shares 7 999 500 100.00 % 100.00 %
The following shares are held by Board members, Board appointment/ No. of
president/CEO and senior management: position shares
Board members:
Jonathan Lee via Globe Metallurgical3 140 097
Arden C.Sims via Globe Metallurgical
Giovanni Luigi Ghezzi via Tennsil Ltd./Tennant 3 199 799
Arne Byrkjeflot via narrative 100
Åge Sakariassen 100
President/CEO and senior management:
Odd Samstad President/CEO 100
Stein Anderssen Senior Vice President, FeSi/CFO 100
Henrik Brekken Senior Vice President SiMet 67
Svein Johnsen Senior Vice President Personnel/Health and Safety 100
Ragnar Vaksdal Director Marketing and Sales SiMet 400
Petter Synnestvedt Director Business Development 670
In connection with an explosion in 1988
on board a vessel carrying briquettes, the
shipowner's insurance company has
made a claim against FESIL-Brikett-
fabrikken AS (FESIL). The claim for
compensation is approx. NOK 16 mill.
incl. interest expense. FESIL is of the
opinion that the shipowning company is
liable and that the claim is unfounded.
The expected outcome is not likely to
have a material effect on FESIL's
accounts. FESIL will always be involved
in minor civil disputes. Any probable
expenses are provided for.
22. Contingency issues
}
Auditor’s report for 1999 We have audited the annual financial statements of Fesil ASA as of December 31, 1999, sho-
wing a profit of NOK 4,431,000 for the parent company and a profit NOK 19,578 000 for
the group. We have also audited the information in the Board of Directors' report concer-
ning the financial statements, the going concern assumption, and the proposal for the alloca-
tion of the profit. The financial statements comprise the balance sheet, the statements of
income and cash flows, the accompanying notes and the group accounts. These financial sta-
tements are the responsibility of the Company’s Board of Directors and Managing Director.
Our responsibility is to express an opinion on these financial statements and on the other
information according to the requirements of the Norwegian Act on Auditing and Auditors.
We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors
and Norwegian good auditing practice. Good auditing practice requires that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence suppor-
ting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. To the extent required by law and
good auditing practice an audit also comprises a review of the management of the
Company's financial affairs and its accounting and internal control systems. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion,
• the financial statements are prepared in accordance with the law and regulations and
present the financial position of the Company and the Group as of December 31, 1999,
and the results of its operations and its cash flows for the year then ended, in accordance
with Norwegian good accounting practice
• the company's management has fulfilled its duty to produce a proper and clearly set out
registration and documentation of accounting information in accordance with
Norwegian law and good accounting practice
• the information in the Board of Directors' report concerning the financial statements, the
going concern assumption, and the proposal for the allocation of the profit are consistent
with the financial statements and comply with the law and regulations.
Oslo, February 16th, 2000
PricewaterhouseCoopers DA
Erling Elsrud
State Authorised Public Accountant (Norway)
Note: This translation from Norwegian has been prepared for information purposes only.
FESIL ANNUAL REPORT 199934
A U D I T O R ’ S R E P O R T
FESIL ANNUAL REPORT 1999 35
Financial information
Shareholder structure
Production
Market
Logistics
FESIL ANNUAL REPORT 199936
F I N A N C I A L I N F O R M A T I O N
Interest bearing debt vs. equity (in NOK mill.)
300350400450500550600
19991998199719961995
Debt
Equity
Operational investments and depreciation (in NOK mill.)
020406080
100120140
19991998199719961995
Depreciation
Investments
Financial key figures1999 1998 1997 1996 1995 Comment
Operating margin % 2.7 3.0 -0.5 6.4 9.2 Operating result / operating incomeProfit margin % 1.2 1.5 -0.9 4.7 7.4 Profit for the year / operating incomeReturn on assets % 5.0 6.1 0.0 11.7 17.2 Income bef. finance and taxes / avg. tot. assetsReturn on equity % 1.7 2.6 -1.6 7.9 13.2 Profit for the year / avg. equityEquity to assets % 42 % 38 % 38 % 35 % 28 % Equity / total assetsNet interest bearing debt / equity 0.80 0.91 0.93 1.11 1.42Equity / fixed assets 1.13 1.04 1.20 0.98 0.79Current ratio 1.83 1.67 1.88 1.77 1.53 Current assets / short term liabilities
Sensitivities
A 5 per cent change in price on main
products and other key factors will imply
an approximate effect on the operating
result in the range:
Figures in NOK mill. 5 % changeSales FeSi (own production) 23Sales SiMet (own production) 26Purchase of power spot (in 1999) 0Purchase raw materials FeSi (own prod.) 10Purchase raw materials SiMet (own prod.) 13Exchange rate Euro / NOK 38
Note: A price change such as described
above, will not necessarily give an imme-
diate effect, since the pricing is often tied
up to long-term contracts.
S H A R E H O L D E R S T R U C T U R E
FESIL ANNUAL REPORT 1999 37
Turnover on share capital
19991998199719961995
Number of times the share
capital has been traded
Share-related key figures 1999 1998 1997 1996 1995 CommentEarnings per share 2.5 3.7 -2.3 12.5 24.2 1995: Calculated using avg. no. of shares.Cashflow per share 7.7 12.9 16.7 21.2 16.2 1995: Calculated using avg. no. of shares.Equity per share 58.3 55.7 51.9 54.2 53.9 1995: Calculated using avg. no. of shares.Stock value 31.12. NOK mill. 288.0 240.0 656.0 660.0 476.0P/E-ratio 31.12. 14.4 8.1 N.A. 6.6 2.9Stock value in % of book equity 61.8 53.8 158.1 152.3 129.2RISK-amount per share (per 01.01. the foll.yr.) 0.0 0.0 0.0 -1.5 -1.0 Per 01.01.00: Assumed figure
Shareholder structure No. of Ownership VotingThe company's largest shareholders as of 31.12.99 shares share shareGlobe Metallurgical Inc. 3,140,097 39.25 % 39.25 %Tennsil Ltd. 1,825,154 22.81 % 22.81 %Tennant Nordic Ltd. 1,289,345 16.12 % 16.12 %KLP Forsikring 350,000 4.37 % 4.37 %Storebrand livsforsikring aksjefond 211,600 2.64 % 2.64 %Tine pensjonskasse 190,000 2.37 % 2.37 %Fokus Bank ASA 150,000 1.87 % 1.87 %Den Norske Bank ASA, Marketmaking 131,000 1.63 % 1.63 %Tennant Midgley Group 85,300 1.06 % 1.06 %Total largest shareholders 7,372,496 92.12 % 92.12 %Other shareholders 627,004 7.88 % 7.88 %Total issued shares 7,999,500 100.00 % 100.00 %
The following shares are held by Board Members, Board appointment/ No. ofpresident/CEO and senior management: position sharesBoard members:Jonathan Lee via Globe Metallurgical
3,140,097Arden C.Sims via Globe MetallurgicalGiovanni Luigi Ghezzi via Tennsil Ltd./Tennant 3,199,799Arne Byrkjeflot via narrative 100Åge Sakariassen 100
FESIL ASA's management:Odd Samstad President/CEO 100Stein Anderssen Senior Vice President, FeSi/CFO 100Henrik Brekken Senior Vice President SiMet 67Svein Johnsen Senior Vice President Personnel/Health and Safety 100Ragnar Vaksdal Director Marketing and Sales SiMet 400Petter Synnestvedt Director Business Development 670
2.0
1.5
1.0
0.5
0.0
}
0306090
120150
Share price vs. Oslo Børs stock index
TOTEX
FESIL
21.Jun. 951.Jan. 96
1.Jan. 971.Jan. 98
1.Jan. 99
31.Dec. 99
FESIL is
among the world’s largest producers
of silicon alloys, - and technologically
in the forefront. To an outsider the
production process may seem simple,
but at FESIL’s quality levels the know
-how and equipment required is on par
with any other «high-tech» operation.
Basically, Norwegian hydroelectric power
is used to refine the raw materials - quartz,
iron and coal/coke/charcoal - into metall-
urgical products with precise and constant
chemical and physical properties. The end
product is the result of generations of
development and search for quality.
Today, all plants in the FESIL sys-
tem have obtained accredited ISO 9000
certification. This also applies to FESIL’s
global sales and logistics systems.
It has been a natural choice for
FESIL to make the most out of its tech-
nological expertise by switching ever
more of its production over to specialised
products and qualities. At FESIL’s own
plants, production of standard grade
material will be limited to a minimum.
The FESIL plants were among the
first in the world to collect the previously
polluting microsilica from the furnace
gases and turn it into a commercial
product.
Lilleby Metall was the first plant of its
kind to develop a heat recovery system
that provides industries and institutions
in the neighbourhood with hot water.
Reducing energy consumption to a
minimum and protecting the environ-
ment against undesirable emissions are
now, more than ever, central goals for
the FESIL organisation.
FESIL ANNUAL REPORT 199938
P R O D U C T I O N
FESIL ANNUAL REPORT 1999 39P R O D U C T I O N
Transformers
Microsilica
Tapping
Casting
Crushing/Screening
Bul
k
Pap
er b
ags
Dru
ms
Pal
let
boxe
s
Big
.bag
s
Con
tain
er
Packaging
Granulation
Bulk stock
Gas cleaning
Furnace
Clean smoke
Hydroelectric power
Coal Iron Quartz
1,000 kg FeSi 75 %
1,000 kg SiMetal
Electricity: FeSi: 8,500kWh / SiMetal: 12,000kWh
Quartz: FeSi: 1,900 kgSiMetal: 2,700 kg Iron: FeSi: 300 kg
Coal/coke: FeSi: 1,300 kg / SiMetal: 2,800 kg
FESIL is a major supplier to the inter-
national markets for ferrosilicon and
silicon metal. There are three princi-
pal market regions: EU, USA and
Japan. FESIL participates in all
three regions, but its main effort is in
the EU-market.
More than 70 % of
its FeSi output ends
up here, and 90 % of
its SiMetal. FESIL has
major shares of the mar-
kets in the EU area.
FESIL has six sales outlets in the EU and
one in Japan. Most of the sales, including
the group’s trading, are made through
these companies. Other markets are
covered through agents, or on a direct
basis.
An important element in FESIL’s
sales policy is to reduce the customer’s
risk in and around the product as much
as possible. Considerable efforts have
therefore been invested in developing a
reliable scheduled transport and storage
system. This includes 10 storage facilities
throughout Europe and 5 in USA. "Just-
in-time" deliveries are an integrated part
of the «FESIL» brand.
We expect the same kind of accuracy
from our suppliers of container transport
to other destinations.
FESIL ANNUAL REPORT 199940
M A R K E T / L O G I S T I C S
FESIL ANNUAL REPORT 1999 41
Organisation structure
Management
Products
C L I M A T E A N D C O 2C H A L L E N G E S
F O R F E S I L
Focus on:
Background
According to many people, the planned
reduction in emission of greenhouse gases
is the most important environmental chal-
lenge in the world. The Kyoto protocol
aims at reducing the total manmade emis-
sion of greenhouse gases from industriali-
sed countries in the period 2008–2012 to
5 % below 1990 levels. Much of this
reduction will be achieved by substituting
gas for coal for generating electricity. This
will reduce the CO2 emission with 50 %
per produced kWh.
Norway’s commitment according to
the Kyoto protocol is a 1 % reduction
from the 1990 level in the period
2008–2012. This is not as low an ambiti-
on as it might seem at first sight. In 1999,
the emissions were already 10 % higher
than in 1990, and if nothing is done, in
2010 the emissions are expected to be 25
% above the 1990 level. Increased pro-
duction and use of oil/gas will be an
important contribution to this.
Svalbard, where hydroelectric power
is not an option, is the only place in
Norway where coal is used for producti-
on of electricity. The extended usage of
hydroelectric power in Norway is a
major benefit for the environment. The
paradox is that this is a contributing fac-
tor to why Norway finds it more difficult
than many other nations to reduce the
emission of greenhouse gases. The conse-
quence is, of course, that Norway has
little potential to substitute more favour-
able energy sources for coal. This is one
of the reasons why CO2 reduction costs
about NOK 125 per ton in Norway, some
3 times the cost in most other industriali-
sed countries.
For the Norwegian process industry
it is therefore important that the imple-
mentation of the Kyoto protocol allows
for international trade in emission quotas
through the following two mechanisms :
• Joint Implementation ( JI), which
includes different forms of trade and
project based co-operation between
industrial nations.
• Clean Development Mechanism
(CDM), which regulates trade and
project based co-operation between
industrial nations and developing
countries.
The quota panel
On December 17th, 1999, a government
appointed panel issued a proposition
about a nation wide quota system based
on the Kyoto protocol. The panel points
out that some business sectors will be hit
hard should they not be given any free
quotas. This applies to exports oriented
sectors with large CO2 emissions where
it will take long time before the competi-
tors will get comparable costs on their
CO2 emissions.
FESIL ANNUAL REPORT 199942 C L I M A T E A N D C O 2 C H A L L E N G E S F O R F E S I L
The extended usage of hydroelectric power in Norway
is a major benefit for the environment. The paradox is
that this is a contributing factor to why Norway finds it
more difficult than many other nations to reduce the
emission of greenhouse gases.
The panel proposes with 6 against 5
votes that no one shall get free quotas,
and that all quotas are to be auctioned.
The Norwegian quotas are based on his-
torical emissions from 1990. A system
based purely on auctions will in principle
mean that the authorities confiscates the
historical emission from 1990, and then
auctions them out to the highest bidder.
Both NHO (The Confederation of
Norwegian Business and Industry) and
PIL (The Confederation of Process
Industry) find this completely unaccept-
able for companies that have competitors
with no costs for their emissions.
The future quota price is assumed to
be approximately NOK 125 per ton CO2.
A comparison of the likely consequences
of such a CO2-price for private car usage
and production of ferrosilicon is as follows:
An additional NOK 125 per ton CO2-
tax on petrol would add NOK 0.40/litre +
VAT. This would give a price increase of
about 5 %. Considering that the petrol
price contributes with about 25 % of the
total cost for private car usage, this would
make it just over 1 % more expensive to
drive a private car. This will hardly reduce
the car usage, especially when taking into
account that future car engines probably
will be some tens of per cents more ener-
gy efficient.
About 3.6 tons CO2 is emitted when
producing 1 ton ferrosilicon. A CO2-tax of
NOK 125 per ton will increase the pro-
duction costs with about NOK 450 per
ton alloy, which is equivalent to about
10 % of the market price for ferrosilicon.
The market will not accept this price
increase since it will take considerable
time before all western producers must
pay similar taxes. The logical consequence
is that the production is taken over by
countries without CO2 taxes. This will not
only move the 3.6 tons of CO2 to another
country, but it is highly likely that the
alloys then will be produced with electrici-
ty from less favourable energy sources. If
electricity generated from coal is used,
then the total emission will be 15 tons
CO2 per ton alloy. The net effect is about
4 times higher CO2 emission.
Establishing an international CO2-
regime will lead to considerable uncer-
tainty for major parts of exposed
Norwegian process industry. It seems
reasonable to assume that this industry
needs at least some free CO2 quotas to
survive. The panel minority voted for
this option, which seems to have a fairly
broad political support.
Both FESIL and the rest of the expo-
sed process industry carefully follow the
further work with the quota issue. The
first milestone is April 1st, 2000, which
marks the deadline for comments to the
panel’s proposal. The panel is of the opi-
nion that the quota system, including also
mechanisms for registration and control,
should be in place during 2005. It also
points out that it is not necessary to
implement the system before 2008.
NHO and PIL expect Norway to
end up with a reasonable system, inclu-
ding some free quotas, and that
Norwegian authorities do not place sub-
stantial obstructions to international trade
FESIL ANNUAL REPORT 1999 43C L I M A T E A N D C O 2 C H A L L E N G E S F O R F E S I L
About 3.6 tons CO2 is emitted when producing 1 ton ferro-
silicon. A CO2-tax of NOK 125 per ton will increase the pro-
duction costs with about NOK 450 per ton alloy, which is
equivalent to about 10 % of the market price for ferrosilicon.
in quotas. This is of fundamental impor-
tance for the exposed process industry in
the critical phase when the Kyoto proto-
col is implemented.
What can be done about the CO2
emissions?
The Norwegian ferroalloy industry has
for more than 11 years worked together
on basic research issues involving the
education of a number of PhD students.
This work has been organised by the
Norwegian Ferroalloy Research
Organisation (Ferrolegeringsindustriens
Forskningsforening – FFF). Current
members are Elkem ASA, Eramet Norge
AS, FESIL ASA, Finnfjord Smelteverk
AS and Tinfos AS.
Knowledge related to environmental
issues has been given even higher priority
within FFF. This has given Norway a lea-
ding international position in respect of
production of ferroalloys with a mini-
mum of negative impact on the environ-
ment. Several EU regulations for the
European ferroalloy industry are based
on FFF projects.
Some metals may be produced using
hydrogen as a reducing agent. This is,
however, not possible for reduction of
quarts (SiO2) where the molecular bonds
are so strong that the oxygen can only be
removed by adding carbon and then hea-
ting the mixture to about 2000 ºC apply-
ing electric energy.
This leaves us with two options to
reduce CO2 emissions. One way is to
reduce the carbon consumption per ton
produced metal. The potential for this is,
however, small since the processes are
now run close to the theoretical mini-
mum carbon consumption. The alternati-
ve is to replace fossil carbon materials
(coal and coke) with wood chips and
charcoal, which is referred to as bio-car-
bon, and which is not attributed any net
greenhouse effect by the UN climate
panel provided that the trees are repla-
ced by replanting. The rationale for this
is that the effect on the climate is consi-
dered to be the same when the trees rot
in the wood as when they are used in
metallurgical processes.
FESIL – what next ?
FESIL emits about 500,000 tons of fossil
CO2 a year. This amounts to a little less
than 1 % of Norway’s total emission of
greenhouse gases. The extra cost would
be about NOK 60 million if FESIL must
buy quotas in a closed domestic CO2-
market at a price of
NOK 125 per ton CO2. The political
mood indicates that the ferroalloy produ-
cers will receive some free quotas and
that they will to some extent be allowed
to participate in international trade in
quotas. It is therefore impossible at this
moment to say anything specific about
the CO2-costs for FESIL from 2008 and
onwards.
Meanwhile, FESIL is working hard
to increase the usage of bio-carbon
(wood chips and charcoal). Although
FESIL ANNUAL REPORT 199944 C L I M A T E A N D C O 2 C H A L L E N G E S F O R F E S I L
The logical consequence is that the production is
taken over by countries without CO2-taxes. This will not
only move the 3.6 tons of CO2 to another country, but it
is highly likely that the alloys then will be produced
with electricity from less favourable energy sources.
much more expensive, these materials
provide process technical advantages,
especially for production of silicon metal.
They can also be used for production of
ferrosilicon.
Wood is the dominating cost when
producing charcoal. A necessary conditi-
on for production of charcoal in Norway
is that wood becomes available at a much
lower price than what the sawmills or
wood-processing industry can afford to
pay. Norway has considerable amounts of
such wood. However, the costs of collec-
ting the wood and transporting it over
long distances, makes it expensive to feed
a normal charcoal production unit with
30–40 000 tons of wood a year. Hence,
large-scale production of charcoal in
Norway looks unrealistic.
FESIL is working to extend its
knowledge of modern technology for
producing charcoal. A number of used
furnaces for such production has been
purchased through Norchar AS of which
FESIL owns 50 %. One of the furnaces
will be erected in Trondheim where the
technology will be developed further in
co-operation with specialists and resear-
chers at SINTEF. The object is to build a
plant in one of the Baltic countries where
large quantities of wood (firewood) are
available at an acceptable price. FESIL
hopes that enough local cheap waste-
wood and wood from demolition can
provide for a small long-term production
also from the furnace in Trondheim.
FESIL continuously works to optimi-
se the furnace processes. An important
goal is to reduce the power consumption
per ton produced alloy. In reality this
means increasing the silicon yield. A one
per cent increase in the yield reduces the
CO2 emission by approximately 0.5 %. It
is positive that this fulfils both FESIL’s
economic and environmental goals.
The future regime for reduction of
CO2-emissions looks like developing into
a major challenge both for FESIL and
other exposed process industries. Some
few per cent of reduction is expected
from the continuous improvements of the
process control, while the largest potential
is to replace coal and coke with wood
chips and charcoal. Economic considerati-
ons make a full conversion to these mate-
rials impossible, but FESIL will be well
prepared to meet new regulations and
costs related to CO2-emissions from 2008
through a rational technology for produc-
tion of charcoal and optimised production
processes. This will make it possible for
FESIL to take maximum advantage of
the positive sides of increasing the
amount of wood chips and charcoal used
in the production of ferroalloys.
FESIL ANNUAL REPORT 1999 45C L I M A T E A N D C O 2 C H A L L E N G E S F O R F E S I L
Meanwhile, FESIL is working hard to increase the usage of bio-carbon
(wood chips and charcoal). Although much more expensive, these
materials provide process technical advantages, especially for producti-
on of silicon metal. They can also be used for production of ferrosilicon.
In such a situation it is natural to ask the
«classical» question: «Is there light in the
tunnel??»
And the answer must be: «Yes there
is .… and it is not the train!!!»
First of all, FESIL has gained financi-
al strength during 1999. Even if our
accounts show that we do not make
enough money «in the bad times», we
have, even in the most difficult year of
the 90’s strengthened our balance sheet
for the fifth year running. This fact shall
of course not serve as a pillow to go to
sleep on, but can be seen as an «acid
test» that proves that the FESIL vessel is
now able to sail in rough seas.
Second, the principal market indica-
tors points upwards.
Demand for FeSi is increasing as a
result of the strong growth in steel pro-
duction. However, an unclear situation
concerning duties in the USA has slowed
the positive price development. But all
indicators tell us that the increase in
demand is so strong that the FeSi prices
will climb in the months to come.
For SiMetal the picture is clearly positive,
with increasing demand in both the che-
mical and aluminium sectors. At the
moment there is not longer a question
whether we shall start up the silicon
metal furnaces. The only uncertainty
now is the timing of the start-up, a questi-
on that demand and price development
will give the answer to.
Consequently the market conditions
look brighter as we enter year 2000.
Then what about our internal conditi-
ons? It is a clear fact that the long-term
price trend for our products is pointing
downwards. In order to remain competiti-
ve it is necessary to continuously improve
productivity. This work has been given
high priority in FESIL, and the fact that
we can come out of a «crisis year» such as
1999 financially stronger than we entered
it, shows that these efforts have born fruit.
There is, however, still much to be done,
and FESIL will continue in the same way
with unchanged tenacity.
The availability and price of electric
power are both decisive factors for the
FESIL ANNUAL REPORT 199946
The last year of the millennium was a
difficult year for FESIL. After the price
decreases seen in 1998 for both fer-
rosilicon (FeSi) and silicon metal
(SiMetal), this negative trend continued
till the end of 1999. At one point the pri-
ces for FeSi and SiMetal were lower than
in the «crisis year» 1992, a year when
FESIL and several competitors literally
were at the threshold of bankruptcy. Due
to low demand for SiMetal we have had
to reduce production. Furnaces have
been stopped and many of our collea-
gues were made redundant for a long
period of time. A very dark situation for
all of us.
P R E S I D E N T A N D C E O
production of silicon-based alloys. The
electricity contracts proposed and adopted
by the authorities do not solve FESIL’s
long-term need to be competitive. The
efforts to secure a long-term energy basis
will therefore be a topic of priority in the
coming months. The possibility for getting
a good result looks better than for a long
time, both in the Nordic and the Euro-
pean continental electricity markets.
The greatest challenge ahead for
FESIL and other process industry is the
environment. It is true that the process
industry in Norway are world leaders in
ecological production, but more and
more often it is argued in public debates
that this is not enough. There is therefore
a great danger of unilateral Norwegian
«pioneer regulations» that may bring
about a situation where we shall have to
bear costs that our competitors in other
countries are not faced with. In the worst
case this will bring about a dismantling of
process industries in Norway, resulting in
a worsening of the global environment.
My wish for the new millennium is
that Norway will direct its self-adopted
international pioneer role towards inter-
national agreements that will give the
same environmental requirements for all
process industry notwithstanding their
location on the globe. Then FESIL and
the Norwegian process industry will alre-
ady have an active competitive advanta-
ge enabling us also in the future to play
an important role in the onshore creation
of wealth in Norway.
Odd Samstad
President and CEO
FESIL ASA
FESIL ANNUAL REPORT 1999 47P R E S I D E N T A N D C E O
FESIL ANNUAL REPORT 199948
O R G A N I S A T I O N
FESIL ASAEnsjøveien 16P.O.Box 6532 EtterstadN-0606 OsloPh.:+47 22 08 90 90Fax:+47 22 08 90 99
Lilleby MetallP.O.Box 5410 LadeN-7442 TrondheimPh.:+47 73 84 25 00Fax:+47 73 84 15 98
Holla MetallP.O.Box 130N-7201 KyrksæterøraPh.:+47 72 45 06 00Fax:+47 72 45 06 01
Rana MetallP.O.Box 500N-8601 Mo i RanaPh.:+47 75 13 55 00Fax:+47 75 13 55 55
Fesil-Brikettfabrikken ASRolighetsveien 7 DN-3933 PorsgrunnPh.:+47 35 57 49 70Fax:+47 35 57 49 80
SwedenFESIL ABVanadisvägen 4SE-113 46 StockholmSwedenPh.:+46 8 32 79 55Fax:+46 8 32 19 85
Great BritainTennant MetallurgicalGroup Ltd.The MountWreakes Lane, DronfieldGB-Sheffield S18 6PNStorbritanniaTlf.:+44 124 6290 464Fax:+44 124 6290 465
France, Belgium,Luxembourg
FESIL Métaux S.A.88, Avenue Charles de GaulleF-92200 Neuilly sur SeineFrancePh.:+33 1 46 414 4800Fax:+33 1 46 424 4796
JapanFESIL International A/SIshikawa Bldg. Rm 703Nihombashi-Kayabacho 2-14-5Chuo-ku,J-Tokyo 103JapanPh.:+81 3 5640 2781Fax:+81 3 5640 1568
Fesil Sales ASEnsjøveien 16P.O.Box 6532 EtterstadN-0606 OsloPh.:+47 22 08 90 90Fax:+47 22 08 90 99
Germany, Netherlands,Austria and Switzerland
FESIL LegierungshandelGmbHWilhelmshöhe 4Postfach 10 04 65D-47004 DuisburgGermanyPh.:+49 203 300 070Fax:+49 203 300 0726
ItalyFESIL Metalli Srl.Via Trieste 5I-19020 Ceparano di FolloLa SpeziaItalyPh.:+39 0187 939 802Fax:+39 0187 939 942
SpainFESIL Metales S.L.Estébanez Calderón 3-6AE-28020 MadridSpainPh.:+34 91 571 5399Fax:+34 91 571 5740
SalesPlants
T H E P L A N T S
FESIL ANNUAL REPORT 1999 49
Rana Metall
This is FESIL’s newest plant,
established in 1989. Rana
Metall produces ferrosilicon
(FeSi) on two furnaces, with a
total production capacity of
approx. 75,000 metric tons per
year. The plant is equipped
with facilities for granulation
and for refining. These facilities
have the capacity of handling
the entire production at the
plant, reducing the production
of standard grades to a mini-
mum. The plant is certified as
conforming to ISO 9001 and
during year 2000 it will also be
certified according to the envi-
ronmental standard ISO 14001.
Holla Metall
Established in 1964. Holla
Metall produces silicon metal
(SiMetal) on four furnaces,
with a total production capaci-
ty of approx. 46,000 metric
tons per year. The plant is
equipped with facilities for gra-
nulation and for refining.
These facilities have the capa-
city of handling the entire pro-
duction at the plant, reducing
the production of standard gra-
des to a minimum. The plant
is certified as conforming to
ISO 9001 and during year
2000 it will also be certified
according to the environmen-
tal standard ISO 14001.
Lilleby Metall
Established in 1927. Lilleby
Metall produces ferrosilicon
(FeSi) on two furnaces and sili-
con metal (SiMetal) on one fur-
nace, with a total production
capacity of approx. 18,000
metric tons FeSi and 9,000
metric tons SiMetal per year.
The plant is equipped with faci-
lities for refining both FeSi and
SiMetal. Lilleby Metall produ-
ces some of the world’s purest
FeSi, having an important share
of the international market for
High Purity FeSi. The plant has
an energy recovering facility
supplying the city of Trondheim
with heated water equivalent to
30 % of the energy consumed at
the plant. The plant is certified
as conforming to ISO 9001 and
during year 2000 it will also be
certified according to the envi-
ronmental standard ISO 14001.
FESIL-Brikettfabrikken
Established in 1958. FESIL-
Brikettfabrikken produces ferro-
alloy briquettes for the foundry
industry using secondary mate-
rial from FeSi/SiMetal and sili-
con carbide (SiC). The briquet-
tes are made in a variety of
shapes, sizes and chemical com-
positions. The customers are
mainly foundries related to the
European automotive industry.
FESIL-Brikettfabrikken has a
production capacity of approx.
30,000 metric tons of briquettes
per year. The plant is certified
as conforming to ISO 9002 and
during year 2000 it will also be
certified according to the envi-
ronmental standard ISO 14001.
Rana Metall Holla Metall Lilleby Metall FESIL-Brikettfabrikken
Steel
During 1999 the world economic situati-
on was considerably improved, especially
in the Asian countries. Most experts
maintain that the Asian crises are now
over, at least for this time.
At the end of last year the world’s
steel industry had seen a dramatic increa-
se of demand for steel products. This
high demand has also led to a bettering
of steel prices, for which most steel pro-
ducers have been waiting a long time.
The world crude steel production
increased with 1.4 % in 1999 compared
with the1998 level.
The main reason is increased demand for
steel products, especially in Asia, as a
result of improved economic situation.
The Asian countries alone produced
nearly 40 % of the total world production
last year. There was an increase of 3.5 %
in the Asian steel production compared
with 1998. The increase of 0.7 % in Japan
resulted in a yearly steel production of
94.2 mill. metric tons, nearly 20 mill.
metric tons less than the production in
mainland China for the same period.
The increase in China was 8.0 %. Last
year China was also the world’s largest
steel producing country with a total of
123.3 mill. metric tons.
In EU there has been a strong growth
in the steel production at the end of 1999,
but the total production for the whole year
decreased by 2.9 %. The strong growth
seen during the last half of 1999 is also
expected to continue into 2000.
North America’s steel production
during 1999 resulted in a small increase
of 0.1 %, but there was a very strong
recovery at the end of the year.
FESIL ANNUAL REPORT 199950
It is said that: «Steel is the most used
and the most useful of all materials».
Steel is used in all countries and in
practically all parts of the world.
Probably no other material is used for
so many purposes. Measured in value,
the world consumption of steel is far
beyond that of competing materials,
such as plastics, aluminium, etc.
FESIL is among the world’s principal producers of
FeSi
The improvement world wide for stain-
less steels has been even more promising.
The total production of 17.3 mill. metric
tons represent an increase of 6.1 % from
the 1998 level. Here, as for carbon steel
production, the positive tendency came
at the end of the year. It is therefore
hoped and believed that the trend will
continue through the current year.
Special steels, among them stainless steel,
is one of the most important market seg-
ments for FESIL. For several of the spe-
cial grade steels, refined or granulated
ferrosilicon is required. Today, such gra-
des make up nearly all of FESIL’s output
of ferrosilicon. The granulated ferrosili-
con is especially popular among stainless
steel producers due to better recovery of
chromium as well as silicon during steel-
making. Another benefit of being in this
special steel segment is that the specific
consumption of ferrosilicon is several
times higher than for normal grade steels.
Ferrosilicon
Consumption of ferrosilicon is more or
less directly proportional to production
of steel, and the demand for ferrosilicon
in 1999 in FESIL’s main markets has
therefore been on a high level.
Due to high production activity espe-
cially in stainless steels, the demand for
low aluminium grade and granulated
ferrosilicon has been good.
The demand for ferrosilicon has
been good during the year, but prices
showed a downward trend during the lat-
ter half. The main reason for this drop is
the removal of anti-dumping duties for
Chinese, CIS and Brazilian imports into
USA that was in force from October
1999.
FESIL ANNUAL REPORT 1999 51F E S I
European spot price FeSi 75 % (DEM)
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
1,750
1,500
1,250
1,000
750
At the beginning of 1999 most analysts
believed in a relatively strong improve-
ment in ferrosilicon prices in USA, but
due to the lifting of duties there was a
sharp drop toward the end of the year.
This drop in prices on 75 % standard
FeSi on the import into USA had also an
impact on the price development in
Europe. In the 4th quarter 1999, conside-
rable amounts of Chinese and CIS ferro-
silicon had reportedly been imported
into USA.
Standard ferrosilicon is more sensitive to
fluctuations in price than special grades.
FESIL has therefore not experienced the
same price reductions as standard ferro-
silicon suppliers to USA. As mentioned
previously, the product range of FESIL’s
own plants consist of high purity, semi
high purity and granulated ferrosilicon.
Developments of spot prices for stan-
dard ferrosilicon in the USA and Europe
are shown in graphs.
The Asian market has been the fast-
est growing market for steel production
also during last year. Most of the stan-
dard ferrosilicon is still supplied from
China, but a large quantity is also coming
from the CIS countries. Pricing of stan-
dard ferrosilicon from these countries has
during 1999 been on a level that still
makes the Asian market of limited inte-
rest for western ferrosilicon producers.
FESIL’s strength in the Asian market is
high purity ferrosilicon and other special
grades used for production of grain ori-
ented silicon steel, tyre cord steel, etc.
In the EU, the Commission has for
more than a year been reviewing the
anti-dumping action against CIS, China,
Venezuela and Brazil. A decision is
expected in the first part of year 2000.
The uncertainty attached to this process,
has also contributed to keeping the prices
down in Europe.
FESIL ANNUAL REPORT 199952 F E S I
US import price FeSi 75 % (C/lb)
30
40
50
60
70
World crude steel production 1 000 tons (Accumulated last 12 months)
800,000780,000760,000740,000720,000700,000
Jan. 95Jan. 96
Jan. 97Jan. 98
Jan. 99Dec. 99
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
1999 has been a year characterised by
strong availability of silicon metal and
consequent very low spot prices. In
spite of this market situation FESIL
managed during the year to increase
sales with almost 20 %, mostly to the
chemical industry. Low spot prices was
also the main reason for FESIL’s decisi-
on to shut down three furnaces tempo-
rarily during the year.
Silicon metal
Since we began to produce silicon metal,
FESIL has focused on the chemical indus-
try as its principal customer. The basis for
FESIL’s long-term engagement in this
field is a belief in stronger growth and
more stable prices for this industry. As a
major supplier to the important chemical
industry, our constant focus on specialities
together with increased production capaci-
ty will make us an even more interesting
and important partner for this industry.
FESIL has always focused on custom-
ised production and has made an effort to
become a high quality supplier. This has
ensured that our customers get an optimal
product that fits their own specifications.
About 95 % of FESIL's production of sili-
con metal is now specialised. The produc-
tion of chemical quality silicon metal
accounts for approximately 85 %. The
remainder is refined material mainly sup-
plied to the aluminium industry.
A steady growth in the demand for
customised qualities and supplies requires
a close co-operation between producer
and customer. This makes the selection
of a supplier more dependent on quality
and flexibility and less on price. FESIL
will continue to work hard to satisfy our
customers' requirements, always trying to
be the partner they choose.
Market
No new capacity came on stream in
Europe in 1999, but because of the furnace
conversions carried out in 1998, the pro-
duction volume in Europe increased with
more than 10 %. The total Western world
production was estimated to be around
750,000 tons in 1999, of which the
European production counted for around
300,000 tons. Norwegian production was in
the same period about 140,000 tons.
Even though FESIL had temporary
3 furnaces stopped, our production volu-
me increased by almost 10 % in 1999.
In 1999 there was a growth in con-
sumption in the Asian market of about
7–8 %, compared with a decrease of
2–3 % in 1998. The Asian growth toget-
her with a general increase in consumpti-
on in all other markets gave an upturn in
total demand of about 4–5 %.
FESIL ANNUAL REPORT 1999 53
SiMetalfor the chemical, aluminium
and electronics industries
For year 2000 all analysis indicate at least
the same growth.
Most aluminium producers have
experienced a good year in 1999 with a
normal growth of 3–4 %. Indications for
year 2000 are also optimistic although
some people fear that the auto producti-
on may slow down somewhat.
Market expectation for the chemical
segment is that the growth will come
back to an average of some 5–6 % in
year 2000. Most of the growth in
demand will come in Europe and to
some extent in Japan.
At present, about 40 % of the total
silicon metal production goes to the che-
mical industry; we still believe, however,
that this percentage will increase to app-
roximately 50 % by 2005.
The main use of silicon metal in the
chemical industry is for production of sili-
cones. The ability of silicones to with-
stand degradation and chemical influence,
and their very stable thermal properties,
make them useful in an increasing num-
ber of products. Principal uses are silicone
oils, silicone rubber, lubricants, sealers,
cosmetics and textiles. Looking at the still
rapid population growth who will have a
general increase in living standards, the
demand for all these products will clearly
increase.
Analysis of the market indicate that
more than 50 % of the silicon metal pro-
duction will still be supplied to the alumi-
nium industry. Here, the metal is used as
an alloying element in many qualities
supplied to the automotive industry.
By adding different percentages of
silicon metal one improves the casting
properties and increases the hardness as
well as strength. Resistance to wear and
corrosion will also be improved. The
additions are normally between 0,5–2,0 %
for the primary aluminium alloys that are
mainly used for sheets, profiles, wires etc.
For the foundry alloys the silicon content
will be in the 10–20 % range. These
alloys are mainly used in the automotive
industry where we have seen a substanti-
al increase during the last years.
During 1999 we saw large quantities
low priced material being offered on the
market, resulting in a sharp reduction in
spot prices. FESIL decided not to sell at
these low prices, but to concentrate on
supplying its long-term contracts. As a
consequence, three out of FESIL’s five
SiMetal furnaces were shut down tempo-
rarily, reducing its production capacity
utilisation with approximately 50 %.
Based on our increased capacity in
silicon metal and the last development in
the industry we are prepared to increase
our supplies both to the chemical and to
the aluminium industry resulting in a lar-
ger market share.
Anti-dumping duties
The markets in both Europe and the
United States are still affected by the anti-
dumping duties. Since the duties on
Brazilian metal were lifted at the beginning
of 1998, we have experienced an increase
in the tonnage offered into the European
market. The duties on Chinese material
seem to continue through year 2000.
FESIL ANNUAL REPORT 199954 S I M E T A L
The main use of silicon metal in the chemical industry
is for production of silicones. The ability of silicones to
withstand degradation and chemical influence, and
their very stable thermal properties, make them useful
in an increasing number of products.
The future
As previously mentioned, the silicon
metal market is expected to revert to a
yearly growth of about 4–5 % for 2000.
With the already existing production capa-
city there will be no need for further con-
versions in year 2000. We believe that al-
though there will still be a surplus capacity
in the market, the supply /demand situati-
on will be much tighter. As has been seen
at the year-end, a tighter supply situation
can give higher spot prices and lead to a
general price increase in the market.
Low spot levels and a very good sup-
ply situation have also had an impact on
contract prices for 2000. This has given an
average price reduction to the chemical
industry that will always have a lag to the
spot price.
We believe that the «devaluation» of
the Real will still make the Brazilians
among our toughest competitors in the
future. Increased production capacity
among European producers will also
affect the supply situation.
As a specialist in silicon metal, FESIL
is one of the world's leading producers of
chemical grade silicon metal. We have
worked with determination to achieve this
position, convinced that know-how will be
the decisive competitive parameter.
Together with one of our principal
shareholders, Globe Metallurgical Inc.,
we are now the world's second largest
producer of silicon metal and a leading
supplier to the chemical industry. We are
looking forward to further develop this
position in the years to come, and we are
convinced that co-operation will be bene-
ficial to all parties.
Looking at the silicon market as a
whole, we are very pleased to say that we
have managed to increase our market
share in 1999, unfortunately with less pro-
fitability. On the other hand, with the pre-
sent demand/supply situation we feel very
much optimistic about the next year both
concerning volumes as well as prices.
FESIL ANNUAL REPORT 1999 55S I M E T A L
Silicon metal spot prices
Dec. 94–Jan. 99
USD/ton
European market
US freemarket
Dec. 94
Jun. 95Dec.
95Jun. 96
Dec. 96Jun. 97
Dec. 97 Jun. 98
Dec. 98
2,2002,0001,8001,6001,4001,2001,000
FESIL ASA / Globe Norge AS have a
production capacity of about 60,000
metric tons microsilica per year.
FeSi and SiMetal have been produ-
ced since the beginning of this century.
Until the 1970’ies the furnace gases were
not cleansed, and the discharge of micro-
silica polluted the environment.
The FESIL plant, Lilleby Metall in
Trondheim, was in 1976 among the first
in the world to install filters for cleansing
of the furnace gases.
All FESIL microsilica are tested accor-
ding to Norsk Standard NS 3045 – Silica
fume for concrete. Definitions and
requirements.
In the beginning, microsilica was
considered a waste product. But through
modern cleansing technology and proces-
sing, microsilica has gradually been deve-
loped as a valuable raw material for high
performance concrete, fibre cement she-
ets and refractory.
Fibre cement sheets are usually cor-
rugated sheets, 2.2 m long, 1.0 m wide
and 6 mm thick. They are mostly used
for roofs on warehouses and industrial
buildings. The sheets were previously
much used in Norway. They are still of
use in Europe and the rest of the world.
The sheets are made of cement, water,
cellulose fibre and microsilica. Earlier,
asbestos fibre was used as reinforcement
in the sheets. Since the 70’ies, asbestos
has been prohibited in Scandinavia. In
the 80-90’ies, use of asbestos was also
prohibited in the rest of Europe.
FESIL ANNUAL REPORT 199956
Microsilica is a by-product from the
production of ferrosilicon and silicon
metal. Microsilica is a grey powder,
which consists of very small spherical
particles of a size equivalent to those in
cigarette smoke. Microsilica is handled
like cement and is supplied in powder
form in bags, in big bags or in bulk as
loose powder. Microsilica is also suppli-
ed as slurry, a mixture of 50 % micro-
silica and 50 % water.
FESIL microsilicaFrom pollution to quality product
As the asbestos could not be used in the
sheets, the industry had to look for other
technical solutions. The solution was use
of silica, cement and cellulose fibre. The
cellulose fibres are shorter and smoother
than the asbestos fibres. The microsilica,
together with cement, gives a good adhe-
sion to the smooth cellulose fibres, and is
a good alternative to the asbestos.
There are presently in Europe some
20 factories that use microsilica in their
fibre cement sheets. In Norway and
Sweden, the prohibition against asbestos
was introduced before the technology
discovered the use of microsilica and cel-
lulose fibre. The factories were closed
down in the late 70’ies. In Denmark, they
managed to keep the fibre cement sheet
industry, and during the last years they
have used microsilica in their sheets.
In the Middle East and Far East
countries, the fibre cement sheet industry
is quite big, however, asbestos is still allo-
wed. It is likely, that in the near future,
asbestos will be prohibited in more and
more countries, and this may result in an
increased need for microsilica to the
industry.
FESIL has during the last 10 years
delivered Microsilica to the European
fibre cement sheet industry, and
Microsilica is to be found as an impor-
tant ingredient of millions of square
metres of roofs in Europe.
FESIL ANNUAL REPORT 1999 57M I C R O S I L I C A
FESIL has during the last 10 years deli-vered several thousand tons of Micro-silica to Dubai, one of The United ArabEmirates at the Arabian Gulf.50 years ago, Dubai was a small com-mercial town. Today it is a modern citywith free trade and tourism. Amongother, they have one of the world’s big-gest gold markets with about hundredjewellers in the same street.The photo shows the new quarter in AbuDhabi Road. All the buildings have beenbuilt during the last 10 years, and mostof them contain Microsilica in the concre-te. For the Emirate Towers alone (infront), about 4,000 metric tons Micro-silica were added to the concrete.
The cyclone dust is almost pure metal
with a high content of Si. The sculls are
contaminated by remains of slag and
have therefore a lower Si-content.
In spite of the relatively high Si-con-
tent the steel and foundry plants cannot
use these off-grade materials as they
come from the melting plants. The idea
behind the establishment of FESIL-Bri-
kettfabrikken was to take care of these Si-
quantities and convert them to a saleable
product. The problem was: How to
agglomerate cyclone dust and crushed
sculls?
The technique chosen for production
of briquettes is taken from the concrete
industry. A mixture of raw materials,
concrete and water is filled in a mould in
the briquetting machine and pressed
together under vibration and high com-
pression.
After the compression the trays of bri-
quettes are put into the hardening cham-
ber. About 24 hours later the briquettes
have a strength that make them resistant
to front loader transportation, packing etc.
FESIL ANNUAL REPORT 199958
When producing ferrosilicon (FeSi),
silicon metal (SiMetal) and silicon car-
bide (SiC), cyclone dust is generated,
as well as fines from the crushing and
screening equipment, and coarser fla-
kes of hardened metal from the ladles.
In the smelting technology this is
known respectively as «fines» and
«sculls» and is called «off-grades».
Previously these «off-grades» were
treated as waste and dumped.
Briquettesfines and sculls
The briquettes are produced in different
sizes, shapes and with different chemical
composition, and are delivered both pac-
ked on pallets and in bulk. The share of
packed briquettes has been considerably
reduced during the last three years.
Because of the pollution in the sculls
and the additive of concrete the briquettes
can only be used in a process working
with slag. Our briquettes are therefore
well suited for melting in a cupola furnace.
The FeSi and SiC-briquettes are
mainly exported to foundries associated
to European car industry. Both qualities
are used as additive in cupola furnaces
for the production of cast iron compo-
nents as engine blocks, brake disks etc.
In the briquetting market FESIL-Brikett-
fabrikken has a reputation for delivering
quality briquettes.
Basically, FESIL is selling briquettes
to Western Europe with Germany as the
dominant market. France, England and
Sweden are other markets for briquettes
from FESIL-Brikettfabrikken.
FESIL ANNUAL REPORT 1999 59B R I Q U E T T E S
FESIL ANNUAL REPORT 199960
M A N A G E M E N T
Management
• Odd Samstad, President and CEO
• Stein Anderssen, Senior Vice
President Ferrosilicon and CFO
• Henrik Brekken, Senior Vice President
Silicon Metal
• Tormod Haug, Senior Vice President
Procurement
• Svein Johnsen, Senior Vice President
Personnel, Health and Safety
• Lars Nygaard, Technical Director
• Sverre Sæther, Director Marketing
and Sales Ferrosilicon
• Ragnar Vaksdal, Director Marketing
and Sales Silicon Metal
• Petter Synnestvedt, Director Business
Development
FESIL ANNUAL REPORT 1999
This is FESIL 1
Main financial figures Group 3
Highlights 1999 4
Tasks and objectives for 2000 4
Board of Director’s report 5
Profit and Loss Account 14
Balance Sheet, assets 15
Balance Sheet, debt and equity 16
Cash Flow Statement 17
Accounting Principles 18
Notes to the Consolidated Accounts 21
Audit Report 34
Financial Information 36
Shareholder Information 37
Production 38
Market/Logistics 40
Climate and CO2 challenges
for FESIL 42
President and CEO 46
Organisation Structure 48
Production Plants 49
Ferrosilicon 50
Silicon metal 53
Microsilica 56
Briquettes 58
Management 60
The ordinary General Meeting will be held onMay 11th, 2000.
The board will not propose any dividend pay-ment for 1999.
Publication of results forJanuary-March: May 12th, 2000January-June: August 18th, 2000January-September: November 17th, 2000
C O N T E N T S
Design: TRB • Photo: FESIL • Print: Lade Offset
FESIL ANNUAL REPORT 1999
This is FESIL 1
Main financial figures Group 3
Highlights 1999 4
Tasks and objectives for 2000 4
Board of Director’s report 5
Profit and Loss Account 14
Balance Sheet, assets 15
Balance Sheet, debt and equity 16
Cash Flow Statement 17
Accounting Principles 18
Notes to the Consolidated Accounts 21
Audit Report 34
Financial Information 36
Shareholder Information 37
Production 38
Market/Logistics 40
Climate and CO2 challenges
for FESIL 42
President and CEO 46
Organisation Structure 48
Production Plants 49
Ferrosilicon 50
Silicon metal 53
Microsilica 56
Briquettes 58
Management 60
The ordinary General Meeting will be held onMay 11th, 2000.
The board will not propose any dividend pay-ment for 1999.
Publication of results forJanuary-March: May 12th, 2000January-June: August 18th, 2000January-September: November 17th, 2000
C O N T E N T S
Design: TRB • Photo: FESIL • Print: Lade Offset
AN
NU
AL
RE
PO
RT
19
99
Ensjøveien 16P.O.box 6532 EtterstadN-0606 Oslo, NorwayTel.: +47 22 08 90 90Fax: +47 22 08 90 99E-mail: [email protected]: www.fesil.com
Annual report 1999«Good times are comin’,but they’re sure comin’ slow"
Neil Young
AN
NU
AL
RE
PO
RT
19
99
Ensjøveien 16P.O.box 6532 EtterstadN-0606 Oslo, NorwayTel.: +47 22 08 90 90Fax: +47 22 08 90 99E-mail: [email protected]: www.fesil.com
Annual report 1999«Good times are comin’,but they’re sure comin’ slow"
Neil Young
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