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Meeting with Alexei Mordashov

January 19, 2015, Novo-Ogaryovo, Moscow Region

Severstal Management CEO Alexei Mordashov reported to the President on PAO Severstal's performance in 2014, the companies' potential for development on the domestic market and the implementation of social programmes.

President of Russia Vladimir Putin: Mr Mordashov, my colleagues and I were just saying that you have over 50,000 workers at Severstal, while overall, the group employs more than 90,000 people. This is an enormous workforce, and indeed, the companies have a long history. Of course, a great deal depends on the organisation of production, but the labour traditions also have great significance. In this respect, I would like to talk about your achievements last year and the group’s future plans.

I know you are also carrying out major social projects in various areas.

CEO of JSC Severstal Management ALEXEI MORDASHOV: Mr President, to start, thank you for finding the time in your busy schedule to see me. Thank you very much.

Indeed, first and foremost, the results in our company are achieved by people who put a great deal of effort and time into the success of Severstal. Overall, we feel we are developing well and are looking forward to the future with optimism. Last year was a good year for all our companies, especially for Severstal itself – the primary and largest company in our group, employing the biggest number of workers at over 50,000.

Last year, we increased our production volume slightly: steel production went up by about 2 percent. Overall, we achieved good indicators, you could say, the world’s leading indicators in terms of such important factors as production profitability and net debt volume. At the same time, we did a great deal of work abroad, but came to the conclusion that our future lies primarily in Russia, in the Russian market, and our production here is most efficient. We sold the North American division and are focusing almost entirely on our Russian assets. This has led to a fairly high profit level.

We have taken on many social programmes. To continue the topic on which you chaired a State Council meeting in Cherepovets recently, we are persevering in our efforts to help children and fight homelessness. We have a large Road to Home programme, which we are developing in the regions where we have a presence. Just before the New Year, we held a meeting with the Governor to look at the outcomes of this programme. We were happy to see that the percentage of homeless children in Cherepovets is half of the national average. In other words, I think the programme is providing significant results.

We are continuing these efforts. For example, just recently, we signed a new collective agreement for three years where we stipulated payments to women who are on leave to care for children aged 18 months to three years, wherein they receive benefits of 4,000 rubles per month, etc.

We are continuing to invest in production. Last year, we launched a long product mill in Balakovo, Saratov Region, which produces one million tonnes of rolled steel per year, worth about $800 million. It has now reached its designed capacity.

Overall, we are continuing to invest. Last year, we invested 32 billion rubles [about $500 million]. This year, we expect to invest 30 billion rubles. We are reconstructing mills in Cherepovets: a hot rolling mill and a cold rolling mill. In other words, overall, we are looking to the future with confidence.

We believe our future lies primarily in the Russian market, which in our view has good potential. Right now, there is a lot of talk about the difficult times and so on. But I think that what is happening now, in spite of some serious difficulties, also represents good potential for growth. In other words, what is happening is a serious correction to the macroeconomic indicators, but on the other hand, these events are making national production more competitive.

Of course, we will probably have to go through a difficult period of several months while everything stabilises and new conditions take hold, but when they do, I am certain we will have new growth opportunities. Therefore, these opportunities are at the heart of all our efforts at Severstal and in our companies as Power Machines, which will also focus primarily on the domestic Russian market. They have a portfolio of orders for three years to come. At the same time, we are developing new types of products, actively working on designing products for our key clients, such as RusHydro, manufacturing turbines, generators for Rosatom, and trying to develop a low speed turboset for nuclear power plants, etc.

The SVEZA company, which is Russia’s leader in plywood production with six plywood mills, is also investing and developing. We are considering a project to build a pulp mill in the Russian Federation.

Thus, we see serious potential in our nation and are working actively.

Vladimir Putin: What is the average salary at Severstal?

Alexei Mordashov: It’s 54,000 rubles at Severstal, but it’s lower at SVEZA, which is based in the regions, so the average there is 34,000. At Power Machines, it is about 60,000, since they are mainly working in large cities.

Vladimir Putin: How do you assess the current state of the global markets?

Alexei Mordashov: The state varies, of course, but for the most part, in our industries, there is a certain excess capacity everywhere, which was built in recent years in anticipation of growth in Asian markets, first and foremost, China, which means a certain increase in competition. But overall, for us, it means we need to be competitive. And what is happening in Russia today largely helps us overcome all the existing difficulties.

Vladimir Putin: It is certainly quite timely that you are investing in modernisation.

Alexei Mordashov: It is very important to expand production, to develop human resources first and foremost, to prevent unreasonable investments, maintain a reasonable level of debt (thankfully, all our companies have a fairly low level of debt) and have high profitability. Nearly all our companies are among the leaders in profitability within their sectors, globally and in Russia.

Vladimir Putin: Good. Thank you.


January 19, 2015, Novo-Ogaryovo, Moscow Region