Metalloinvest
Annual Report 2019

Trasnsformtaion and development

The Company attaches particular importance to promoting a responsible approach to environmental protection and occupational health and safety.

Metalloinvest’s Development Strategy is geared towards consolidating its position as the world’s leading producer of merchant hot briquetted iron and a leading regional producer of high-quality iron-ore products, and raising its output of high value-added products while at the same time enhancing quality, boosting efficiency, and increasing the focus on the customer.

In accordance with the Debt Management Strategy approved by the Board of Directors in 2017, the Company places an emphasis on reducing borrowing costs and improving its debt repayment schedule. The Company continues to proactively manage its loan portfolio and is seeking ways to optimise the terms of existing loans.

The Company plans to maintain its target EBITDA margin above 30% at all points in the industry cycle, through boosting operational efficiency, reducing costs, and increasing sales margins.

The implementation of a large-scale investment programme, together with an increase in operational and management efficiency, has contributed to the Company’s progress towards becoming a long-term leader.

In the spring of 2019 the Board of Directors decided to update the development strategy, taking into account the opportunities and challenges presented by a new strategic cycle.

The company will seek opportunities for profitable growth, focusing on the most profitable products, customers, and markets; consolidate its long-term relationships with key clients; benefit from cost advantages; and make smart investments in strategic projects.

We are confident that retaining a longterm leading position is possible only when the principles of sustainable development are embedded and respected within the entire business, namely caring for our people and the environment.

For a number of years Metalloinvest has been rolling out its transformation programme, which is geared towards boosting efficiency, enhancing sustainability, and maintaining competitive advantages. The Company is endeavouring to become a leader in digital transformation across the metals and mining industry in Russia, and adopts a unified approach to implementing innovations and new production and management solutions to achieve its main objective: a comprehensive and companywide business transformation.

Sustainable development is a key priority:
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ensuring production safety

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safeguarding employee health and safety

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environmental protection

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An innovative approach involves:
  • The digitalisation of production processes.
  • Increasing the efficiency and safety of business processes through research and embracing best available technologies.
  • Increasing planning accuracy through the continuous monitoring of activities, automating analytical procedures, and improved forecasting.
  • Implementing an energy efficiency strategy that opens up opportunities for a production scale-up, while at the same time reducing resource costs and minimising human impacts on the environment.
  • Developing Industry 4.0 capabilities, skills, and knowledge, thereby enabling employees to participate in transformation processes.
  • Continuous stakeholder engagement and cooperation in the areas of digitalisation and technological upgrades.
  • In 2016 Metalloinvest launched a large-scale business transformation programme, Industry 4.0, whose key goals are:
  • improved business efficiency
  • reduced operational costs
  • better planning and improved monitoring of the implementation of plans
  • transparent accounting and timely decision-making
  • lower costs via an integrated SAP S/4HANA-based financial and business management system
  • The Company will reap the following key benefits following the implementation of the programme:
  • Better planning and improved monitoring of the implementation of plans, by providing timely and reliable information that is necessary for management decision-making.
  • A single information space with standardised data and processes.
  • An SAP infrastructure with communication channels, a data centre, and user workstations that provide access to the resources of the integrated financial and business management system.

In Q2 2019 the Company completed the second stage of a major digital transformation, launching an integrated financial and business management system at the metallurgical segment enterprises OEMK and Ural Steel. Over 100 of the Company’s management and production systems were replaced by a single ERP system, based on the latest SAP S/4HANA solutions. The ERP system is currently implemented at four Metalloinvest production enterprises, and is also being adopted by the Company’s trading and logistics operators.

It is estimated that total investment in developing the integrated financial and business management system stands at more than RUB6 billion. The introduction of a single digital platform facilitates a comprehensive business transformation in 18 functional areas; 45,000 Company employees were transferred to optimised structures. The implementation of 24 related transformation projects is ongoing.

The launch of the Budgeting, Analytical Reporting, and IFRS Consolidation modules and a back-up data centre is scheduled for 2020.

Over100

the Company’s systems were replaced by a single ERP system

3,000

organisational changes introduced

Digital transformation results at 2019 year-end:

  • On the second stage of implementation, the integrated management system also covered the trader and logistics operator of Metalloinvest
  • As a part of the transformation of functional strategies, we implemented the following:
  • the system for configuring materials and technologies for metallurgical production;
  • the system for optimizing balanced plans for the production, sales, transportation and procurement of materials;
  • mobile maintenance solutions and dashboards of operational analytics of maintenance and repair functions;
  • a new strategy for interaction with suppliers, an optimized supplier base, operational analytics in procurement for all levels of participants of the process, implementation of the project of digitalizing interaction with suppliers is in progress;
  • digitalization of HR in terms of employee self-service, end-toend automated goal management system, end-to-end analytics of HR processes, a pilot on electronic HR document management;
  • integrated budgeting system;
  • tax monitoring system.
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