Andrei Karunos

A

ccording to its president, the activity of the MAIR Industrial Group is characterized by a constant growth of production and financial indexes. Its business management systems are being improved. In 2004 the net profit amounted to $36 million. “In 2005 we are planning to make no less than $ 40 million”; says Viktor Makushin.
In 2004 investments by MAIR totaled $ 17.3 million. These funds were invested mainly in modernizing capital assets, procuring equipment and introducing new production technologies. In Viktor Makushin’s words, the company will further develop scrap recycling as well as some of its production facilities in the steel industry and paintwork business. As the Group’s president notes, its other assets will be put on sale, "if conditions are favorable".
In 2005 investment projects provide for making use of $ 30 million. Over half of this amount will be invested in developing scrap-recycling enterprises in countries of Eastern Europe, including Ukraine.
In 2004 the aggregate volume of ferrous scrap shipments to scrap-recycling enterprises of MAIR in Russia, Ukraine and Poland amounted to almost 2,973,000 or 35 % more than in the previous year. At the same time, the share of export shipments accounted for 70 %. In 2005 scrap shipments to the Group’s enterprises in Russia, Ukraine, Poland and Bulgaria are to come to about 4 million tons.
The president of MAIR puts the accent on the dynamic development of one of the Group’s enterprises Georgievsky Reinforcement Plant (the Stavropolsky Territory). In 2003 its volume of finished products accounted for $ 2.5 million and for $ 7.7 in 2004. Under the existing plans, the volume in the current year is expected to exceed $11 million.
On the whole, the volume of selling finished products by MAIR amounted to $ 793 million in 2004 (the increment is 58 %) and in 2005 the company plans to exceed the level of $ 1 billion.
As Viktor Makushin believes, 90 % of the company’s achievements are due to innovations and introduction of high technologies. MAIR has far-reaching plans as regards the sphere of developing IT-technologies. "We set a task for ourselves to considerably improve corporate management", says Makushin. He notes that the project of complex automation of the business management system has been already started. The project provides for creating a single corporate virtual private network (VPN), which will permit to transfer all databases to a single server and considerably reduce time needed for processing information of any kind. The full implementation of the project is planned to be completed in a year and a half. It costs about $ 7 million. Communication channels are provided by the company’s partners TransTeleCom and GoldenTelecom.
Under the project acquisition and transfer of data on stocking up ferrous scrap at the local level will be automatized in the real-time operation mode. Remote users will get access to operational information of the central database in the on-line environment. As the management at MAIR believes, the new information system will allow to efficiently manage the world’s largest network of enterprises for storing up and recycling ferrous scrap as well as to reduce to one or two hours the duration of management cycle of correcting the procurement policy. This system will be completely put in operation in the second half of 2005.
"I would like to draw your attention to the fact that all our enterprises have mathematical models of both the production and the market. It let us react more efficiently and faster than other producers to market changes and make proper decisions", stresses Viktor Makushin. In his words, "our main efforts are directed at improving the quality of management. So, we hope to continue our successful advances so as to become a transnational corporation and enter new markets besides those five countries, where we are already present".
In 2004 the MAIR Industrial Group placed the first bond loan for 500 million rubles (about $ 17.8 million). The term of the loan is Ç years, the offer will be in one year, the coupon rate equals 12.3 % per annum. A new bond loan for 1 billion rubles (about $ 35.6 million) is set for May. The Group intends to direct funds from placing to replenishing the company’s working capital (because of a seasonal increase in the business volume) as well as to optimizing the company’s credit portfolio. Before the year’s end a profit from 500 million rubles invested in the company’s turnover will also be directed to repaying credits and clearing overdrafts by companies integrated in the MAIR Industrial Group. By results of 2005 the Group’s total credit portfolio will remain the same.
When asked about his attitude toward putting quotas on export shipments of scrap from Russia, Viktor Makushin said that, in his opinion, it did not make sense to use quotas and duties in the existing market. He cited the following figures. The volume of the ferrous scrap market in Russia reached 30 million tons (28.8 million tons in 2004), however, the domestic consumption amounted to only 15 million tons. Having this in mind the MAIR head is convinced that "in the nearest eight to ten years duties on scrap are inexpedient for the economy".
Calling this regulating measure a hidden donation to steel companies, Viktor Makushin could not keep himself from sharp words: "Russian steelmakers already have a crazy profitability because raw materials and resources get to them much cheaper than to their foreign rivals". Besides, with an existing 15 % duty companies with transparent business, including MAIR, are paying to the budget twice as much as small scrap enterprises that prefer "black and gray" business-making schemes. That is why, Viktoc Makushin said, the duty should be either annulled or fixed.

The president of MAIR shared his expectations of results from the company’s advances to markets of East European countries. "We are planning to continue investing in Poland and this year we intend to invest there several million dollars so as to get the first 100,000 tons of scrap metal on this market. In 2006 we would like to have already from 300,000 to 500,000 tons, i.e. up to 10 % of Poland’s scrap metal market. We also obtained the license in Bulgaria and made our first investments in the amount of $ 2 million, although we believe that this business will be developing there at a lower rate. Ukraine is the most interesting to us: we intend to direct the main flow of investments there. No less than $ 10 million will go to capital assets only".
Being actively engaged in scrap operations, the company does not lose sight of its metallurgical sector either. Viktor Makushin reminded that all four metallurgical enterprises owned by the Group were acquired while being bankrupt. In 1998 to 2000 they were successfully brought to the level of the design capacity. The three of them, in Markushin’s words, even exceeded indexes of the Soviet times. In 2004 the 1st-category overhaul of the blast-furnace was done at the Verkhnesynyachikhinsky metallurgical plant. The metal production at the Sulinsky metallurgical plant is up and growing and there are plans to modernize the furnace-ladle installation there. The Saratovsky hardware plant is experiencing difficulties with procuring rod, which is its basic raw material, because of Russian producers’ monopoly and import duties on the Ukrainian rod. Since appeals to the Anti-Monopoly Committee have brought no results and there is no sense to wait for a market with Ukraine to be opened, the company decided to put this plant on sale.