Page 6-7 - MMK annual report 2011

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/ 2011 /
Social Sphere
Sales Markets
About Us
Last year MMK’s Board of Directors introduced
important changes to the Company’s corporate
governance structure to bring it more in line with
international best practice. A shareholder meeting
on 20 May 2011 voted to elect Boris Dubrovsky as
the General Director of MMK, and to transfer the
authority of the sole executive body from MMK
Managing Company LLC to the General Director
of MMK. Mr. Dubrovsky has vast experience both
at MMK, where he occupied the post of executive
director until 2008, and at Uralvagonzavod, where
he was the first deputy general director from 2009
to 2011.
At a meeting of the State Committee for
Modernization held in Magnitogorsk in 2011,
Russia’s President praised MMK’s success in
modernization of the Company’s assets. We believe
this is a logical recognition of our hard work. We
have systematically carried out a comprehensive
modernization of MMK’s production base over
the course of the last 10 years. This investment
program was designed to meet demand from
Russian customers and to increase MMK’s
production of higher value added products. We
undertook a fundamental overhaul of the long
products facilities, built modern galvanizing and
colour coating lines, revamped the 2,000 mm
hot rolling mill, built a steel making complex in
Turkey, constructed the unique 5,000 mm plate
mill – and commissioned it in the middle of the
crisis. Between 2000 and 2011 we invested around
USD 8.3 billion through our long-term investment
program. Our investments peaked in 2008-2009, at
over USD 1.5 billion per year.
MMK’s large-scale investment projects, aimed
at the expansion of production capacities and
the introduction of new types of products, have
increased the Company’s debt levels. MMK
used debt to finance the majority of its capital
expenditure investment projects, but has recently
sought to optimize these projects in order to keep
debt at sustainable levels. We achieved this goal in
2011, with capital expenditure at the level of just
USD 1.2 billion, a decrease of 46 % from 2010.
MMK today has found new momentum and
meaning. Using our extensive experience, we are
tackling the production targets and social issues
that we face step by step. We are successfully
implementing upgrades and new technologies. Our
most recent major investment projects, the 5,000
mm and 2,000 mm rolling mills, have opened up
long-term prospects.
We have gained valuable experience from
working in difficult situations. In 2012 we will
focus on increasing energy efficiency and labour
productivity, on reducing costs, quality control
and mastering new types of higher value added
I am confident that history will repeat itself and
MMK will overcome current difficulties such as
the global economic and financial crisis, and will
continue to advance and grow We have everything
we need to achieve this: experience solving the
most complicated problems, up-to-date equipment
and technologies, self-sufficiency in electricity,
strong competitive positions, product flexibility
and, most important of all, highly skilled personnel.
On behalf of the Board of Directors I want to
express our gratitude to the whole MMK team
for their dedication, proficiency, preservation
of traditions and hard work. We are also truly
grateful to our partners for their cooperation with
us. We are interested in working with you. All our
efforts, all our modernization projects are first and
foremost aimed at meeting your needs.
Magnitogorsk Iron and Steel Works has a very
special year in 2012.
On the 1st of February MMK celebrated its 80th
anniversary. In our eight decades we have achieved
impressive results, having produced 563.5 million
tons of pig iron, 731.1 million tons of crude steel
and 576.1 million tons of finished steel products.
Very impressive figures!
Magnitka has never enjoyed easy times: its history
began with the unprecedented pace of construction
during the country’s industrialization, includes the
challenges of wartime and post-war reconstruction,
and more recently the consequences of the
collapse of the country in 1990s, including years
of political and economic crises. Working in a
market-based economy made the crisis years of
2008 and 2009 a serious test of MMK’s strength.
In 2007 MMK produced a record 12.2 million
tons of finished steel products. The subsequent
decline in demand for steel products in 2008-2009
prevented us from maintaining the growth rates
we had achieved. Today MMK is gradually restoring
production volumes. Despite a challenging
macroeconomic situation in 2011, MMK produced
11.724 million tons of crude steel and 10.646
million tons of finished steel products during the
year. Prices for commercial steel products grew
17 % y-o-y in 2011. Deliveries to the strategically
important domestic market grew in 2011, and
constituted 67 % of MMK’s total sales volume.
MMK Group’s revenue for 2011 stood at USD 9.306
billion, up 21 % in from 2010. Unfortunately we
did not achieve all of our goals: MMK Group’s 2011
EBITDA decreased compared to 2010 and equalled
USD 1.336 billion.
V. F. Rashnikov
Address of the Chairman of the Board of Directors
Dear shareholders, colleagues and partners!