July 2011
SCM SET UP HARVEAST
w w w. s c m . c o m . u a
NEWS
SCM Sets Up Agricultural Holding In partnership with Smart Holding, SCM has set up a new agricultural holding – the HarvEast group. HarvEast will manage the agricultural assets of Ilyich Steel Plant: farmland of over 200,000 hectares in Donetsk and other regions; cattle stock and pig breeding farms; other core assets (compound feed production, seed crop rearing). “We believe in the potential of Ukrainian agriculture and see this area as a strategic business for SCM. We are ready to invest in its long-term development
and work consistently to create a strong, effective and competitive agricultural company,” said Oleg Popov, the CEO of SCM. “The decision to invest in agribusiness is in line with SCM’s diversification strategy.” “I’m confident that the merger of assets will help to boost effectiveness and capitalisation of the agribusiness and unleash the potential of Ukraine’s agriculture,” said the CEO of Smart Holding Alexey Pertin. Consolidation of the group will be finalized in 2012 when
it will take over the agricultural assets of Metinvest. Dmitriy Skornyakov, HarvEast CFO, will be acting CEO of the holding company for the start-up phase. “We will present the holding’s development strategy and budget plan next year,” Mr Skornyakov said. “But, we are interested in the areas where we have undeniable competitive advantages today,” he went on to say. “For example, we are set to develop crop rearing and dairy farming, as the current configuration of
4 Dmitriy Skornyakov, Acting CEO of HarvEast Holding Ilyich Plant’s agricultural assets is an excellent platform for this.”
DTEK has presented its long-term development concept for the next 20 years, with Energy, Society, People, Efficiency, Ukraine “plus” and Client Service being the six core elements. Special focus in the strategy is placed on the vision of a modern energy company and its role in social development. By 2030 DTEK plans to invest around $20 billion in the construction of new power units, development of coal production and modernisation of the existing thermal power plants. The
company also announced its intention to enter the oil and gas business to cover the needs of its generating facilities for gas fuel. “The main idea that lies at the core of our long-term development concept is readiness to compete with the largest European power companies. For us this means: the highest salaries for our employees, the highest safety standards, the best living conditions in the towns and cities where our enterprises are located and the best business reputation. These goals are very
ambitious, they require great human efforts, production and investment resources and support from the public and the state. We are already on our way to enter the club of the best representatives of the Western power industry,” said Maxim Timchenko, the CEO of DTEK. He went on to explain that DTEK would actively develop its retail brand for the sale of electricity and supporting services to consumers. Although Ukraine will remain the main market for DTEK, Central and Eastern
Europe and the CIS will become priority regions for the company’s further growth. DTEK will actively participate in modernisation of the Ukrainian economy and promotion of best practices in industrial and environmental safety. The Company believes that its people are the key to development, and will continue active investment in its personnel. Efficient production, investment activity and management will be the foundations for successful growth of DTEK.
FUIB Posts Record Profits Page 2
Metinvest’s Modernisation Programme Page 3
SCM Sustainability Report Page3
Shakhtar 75th Anniversary Page 4
Page 1
DTEK TO INVEST $20BN
DTEK to Invest $20 Billion by 2030
FUIB RECORD PROFITS
PORTINVEST
DTEK Building A Greener Future DTEK’s commitment to forging a ‘greener’ future has been underlined with news that 14 of its enterprises now meet international environmental management standard ISO 14001:2004. The company’s subsidiaries are the first in the Ukrainian coal and power industries to have brought their environmental management systems (EMS) in line with international best practice. Yuriy Ryzhenkov, DTEK’s Chief Operating Officer, said, “Having joined the European Energy Community this year, Ukraine has committed itself to improve its environmental performance by 2018. Replacement of obsolete equipment with advanced and environmentally friendly installations naturally requires significant financial investment. Even so, the most essential thing is not only to allocate funds but to change the approach of Ukrainian society to environmental issues and to do it, first of all, among companies’ managers and employees. Implementation of these environmental standards is an important step which enables us to come closer to the standards followed by European industry.” He said the environmental management system (EMS) now in place encourages a responsible attitude of both managers and personnel to environmental protection and compliance with established environmental requirements. The EMS is an integral part of the corporate governance system and will also have a positive impact on the company’s competitiveness.
Page 2
NEWS July 2011 SCM Launches New Industrial Holding - Portinvest The SCM Group has launched a new industrial holding in the transport sector – Portinvest. “The SCM Group’s portfolio has owned transportation assets for some time. Thus, we have accumulated the skills and expertise and built a team to implement the optimal development strategy,” noted SCM Director of New Business Development Nikolay Nesterenko. “Moreover, as a transportation services consumer we know the market well from the experience of Metinvest and DTEK.
4Transhipping complex of Avlita Stevedoring Company
We decided to establish a separate business on the basis of SCM’s existing assets to provide the full range of transportation services – from railway car spotting to cargo loading onto ships. Creating Portinvest is the first step to develop this business.” Portinvest has already taken over management of Avlita Stevedoring Company and Marine Industrial Complex, both based at Sevastopol. Portinvest will also be responsible for development and implementation of new investment projects in the port business. Nikolay Nesterenko added, “The primary goal of Portinvest is to concentrate all the expertise we have in the port business to manage our existing port assets and carry out new investment projects.” Aleksandr Smirnov, CEO of Portinvest, said, “Ukraine’s high transit potential prompted the need to establish an advanced transport infrastructure. Our task is to study all existing opportunities to realise this potential and build a strong business in line with the best global practice.”
First Ukrainian International Bank Posts Record Profits First Ukrainian International Bank (FUIB) has announced record-breaking profits in the past 12 months. In 2010, FUIB says it increased its assets to over $2 billion, up 11.8% on the previous year, and made a record profit of $54 million. Last year FUIB ranked sixth in the ´profit league table´ for banks and was among high performance financial institutions with a 2.6% ROA and a 13.4% ROE in Ukraine. In doing so, it has successfully bucked an international trend which continues to see the global financial sector struggle to emerge from the ravages of the 2008-09 economic downturn. Konstantin Vaisman, FUIB´s Board Chairman, said, “In 2010, we laid the foundation for future growth and achieved significant results.” He said that during 2011, FUIB´s focus will be on meeting its clients´ needs. New products such as cash management,
e-banking and development of trade finance will “drive the bank´s relations with mega companies,” he added. “In the short-term, FUIB will also concentrate on the faster growth of retail banking where middle-class and wealthy clients will be the key,” Mr Vaisman noted. During 2010 FUIB saw another landmark event – a decision on a merger of FUIB with Dongorbank. In addition, FUIB advised SCM on the acquisition of Renaissance Capital Bank.
KEY FACTS ON FUIB 2010
4Ranked 6 th by profit and 2 nd by information transparency among Ukrainian banks 4One of the top 1 000 banks in the world by tier 1 capital according to The Banker magazine Assets Aggregate liabilities Return on assets Return on capital
$2,222.2m $1,787.4m 2.6% 13.4%
Metinvest is carrying out a comprehensive improvement programme of its production units that will see the reconstruction and modernisation of its industrial plants. In May, Metinvest decommissioned its last open-hearth furnace at Azovstal Steel Plant. The company’s aggressive investment policy and full transition to converter steel production will open up new sales markets with improved quality products without affecting production volumes. During March and April mixer unit 3 at Ilyich Steel Plant was refurbished, ensuring timely preparation of hot metal and feeding for conversion into steel with a corresponding increased productivity. This major overhaul was completed ahead of schedule – within twenty-six days. In late June, the company started to
overhaul the 160-tonne converter at Yenakiyevo Steel Plant (YeMZ). The improvements will reduce maintenance costs by at least 50% and improve the reliability of the converter. “High quality renovation is one of the crucial steps in the process of operational efficiency improvements, said Alexander Podkorytov, the General Director of YeMZ. “In carrying out such major activities like the converter overhaul, nothing is left to chance. We have systematically thought through all aspects to make a modern and highly productive unit which enhances safety and working conditions for our employees,” he added. UAH 100m is being invested in the project and the overhaul will be completed this July.
July 2011
Metinvest also intends to increase the efficiency of YeMZ by improving its administration and management. The planned steps are expected to result in increased margins at the plant delivered through improved integration with Makeyevka Steel Rolling Plant which is also owned by the Metinvest Group. The optimisation of YeMZ’s rolling capacity and the streamlining of production and management processes at both sites will reduce overheads and production costs. “We have all the prerequisites to successfully implement this integration and significantly increase the efficiency of our production facilities,” noted Alexander Pogozhev, Metinvest’s Director of Steel and Rolled Products Division.
METINVEST MODERNISATION
NEWS Metinvest Modernisation Programme
Laying the Foundations for the Future SCM Sustainability Report 2009-2010 strategic areas of corporate responsibility, including HR management, health and safety, environment, climate change and energy efficiency as well as investment in local communities. Jock Mendoza-Wilson, Director of International and Investor Relations at SCM, said, “The report covers the economic downturn and the most challenging period for SCM in our history. It shows how we have struck a fine balance by taking the tough decisions which are necessary to maintain good liquidity. But we have also remained true to our corporate responsibility principles and maintained the trust of our employees and partners, while continuing to invest for the long term.”
SCM Group investment in 2009, UAH: 41.527bn environmental protection 4health and safety 490.4m 430.7m development of our employees 4local communities 50.5m
The online version of the Report is available at: http://sustainability09-10.scm.com.ua/en
SCM Fights Climate Change SCM is increasingly showing its commitment to what many regard as the most pressing issue facing business and society today – tackling climate change. The international business summit “Climate Change: Energy in Focus” took place in Kyiv on 23 March 2011. It was organised by the Ministry of Environment and Natural Resources, the United Nations office in Ukraine and the Global Compact Network, with SCM as the primary partner.
The summit gathered Ukrainian government officials, representatives of business, expert community and media from across Europe to discuss current strategies and best practices. Jock Mendoza-Wilson, Director of International and Investor Relations at SCM, was one of the keynote speakers at the summit. He said, “Energy efficiency and climate change are very important issues for business. Nobody doubts today that our
national and international competitiveness depends on how efficiently we use energy. Since 2008, efficient energy use has been one of the most important issues for every single asset within the SCM Group, from steel plants and our energy business, to our media and real estate businesses. However, energy efficiency and climate change are issues not only for business. They are highly important for the Ukrainian economy and for global sustainability.”
Page 3
FIGHTING CLIMATE CHANGE
The SCM Group invested some $190m in environmental protection and energy efficiency measures at its various enterprises and paid a total of $1.082m in salaries and pensions during the course of 2009. This information about the SCM Group’s corporate responsibility projects and achievements was revealed in the SCM Sustainability Report 2009-2010 which was presented in Kyiv on 13 April 2011 during an international corporate social responsibility conference partnered by SCM for the fifth consecutive year. The report, produced to international standards and independently assured by Ernst & Young, outlines the approach the SCM Group applies to implementing
NEWS FC SHAKHTAR CELEBRATES
FC Shakhtar 75th Anniversary
4FC Shakhtar: Celebrating the Past. Shaping the Future.
SCM Partners with The Economist for Ukraine Summit
$100M CREDIT FACILITY
July 2011
SCM partnered with The Economist to organise Ukraine Summit held in Kyiv on 29 March 2011 with the focus on the economic situation in the country and its outlook. The Summit ran under the title “Can real reform be delivered?” and gathered Ukrainian and international politicians, businesses and financial institutions. The summit discussed the challenges that Ukraine is facing and the opportunities Ukraine can seize. In particular, the participants talked about conditions of doing business in Ukraine, the image of the country from the global perspective and its effect on the intention of international businesses to invest in Ukraine, as well as competitiveness of Ukraine’s economy.
Natalia Yemchenko, SCM’s Director of Public Relations and Communications, took part in the panel discussion “The people problem: tackling skills, education and human capital.” “The summit is a platform for a public discussion of the challenges and opportunities Ukraine is facing today and will encounter in the foreseeable future. I believe that a public discussion of the most pressing issues is one of the institutes Ukraine actually needs for sustainable growth. Certainly, the next step – transforming the discussion and its results into a plan of concrete actions – is not always easy and in fact is not always taken. However, the second step will never happen without the first one,” she said.
Metinvest Secures $100m Credit Facility The Metinvest Group has secured a $100m pre-export credit facility, it has been announced. The agreement has been arranged by UniCredit and will be used for financing working capital and investment projects contemplated by the company´s longterm strategy. Metinvest is the largest fully vertically integrated mining and steel business in Ukraine. For further information, or to subscribe, please contact: Jock Mendoza-Wilson, Director of International and Investor Relations System Capital Management, 117 Postysheva st., Donetsk 83001, Ukraine ir@scm.com.ua – www.scm.com.ua
Founded in 1936, in May 2011 FC Shakhtar celebrated its 75th anniversary with a spectacular ceremony watched by more than 53,000 guests at Donbass Arena. President Chief Executive Officer Head Coach
Rinat Akhmetov Sergey Palkin Mircea Lucescu
4 Winner of the UEFA Cup 2009 4 6 Time Champion of Ukraine 2002, 2005, 2006, 2008, 2010, 2011 4 7 Time Winner of the Ukrainian Cup 1995, 1997, 2001, 2002, 2004, 2008, 2011 4 4 Time Winner of the USSR Cup 1961, 1962, 1980, 1983 4 Winner of the USSR Super Cup 1984 4 Winner of the Ukrainian Super Cup 2005, 2008, 2010
FC Shakhtar is Ukraine’s most successful football club of the past decade, the first Ukrainian team to win the UEFA Cup, and it is recognised as the best promoted team in 2001-2010 in the world by the International Federation of Football History and Statistics (IFFHS).
www.shakhtar.com FC Shakhtar’s home stadium – Donbass Arena – is the first five-star stadium in Eastern Europe designed and built to UEFA elite standards. It was opened in August 2009 to an accolade of superlatives. Its grand opening was recognised as the event of the year by Stadium Business Awards. Donbass Arena is a multi-function stadium housing restaurants, bars, a fitness centre, a Fan Café, Ukraine’s largest sports museum and an FC Shakhtar fan shop. It is one of the four Ukrainian stadias which will host the UEFA EURO 2012 European Championships.
www.donbass-arena.com