Kazanorgsintez in 2019: output growth, reduction in revenue and new markets

Focusing on domestic market

Kazanorgsintez has released its financial indicators for 2019. The annual general meeting of shareholders was held in absentia for the first time on June 29 because of the coronavirus pandemic. As Tatarstan Healthcare Minister Marat Sadykov expressed the official point of view, the situation can now be called “moderately optimistic”. But the minister stressed that it is too early to relax.

One month before the annual general meeting of shareholders, all draft documents had been published for review on the website of Kazanorgsintez. Besides, the shareholders could study the materials of the AGM in private in the corporate governance department of the company, and send completed bulletins by mail.

Certainly, the results of the budget-forming enterprise for 2019 were affected by the tense situation in the polymer market, where there was a significant reduction in prices. According to Market Report independent analytical agency, from January to September 2019, the drop in the average market price among HDPE brands was 19%, and the cost of LDPE decreased by 20%.

Nevertheless, with such an unfavourable market situation, Kazanorgsintez received a profit of 11,6 billion rubles, which indicates a well-built sales markets for the company's products. In 2019, the company's revenue amounted to 72,4 billion rubles. Polymers and copolymers of ethylene (74%) and polycarbonates (12%) still generate the most revenue. The company's capitalisation increased to 187,1 billion rubles compared to 2018.

According to the company's annual report, the sales structure of Kazanorgsintez remained unchanged: the domestic market in 2019 brought the company 60,5 billion rubles, and exports — 11,9 billion rubles. The consumers of Kazanorgsintez PJSC in the past year were companies from 31 countries. It has also entered new markets in Guatemala, India, South Korea, and Peru. For export deliveries, the company chose countries with a higher level of contract prices.

Output growth

In 2019, the company continued the system modernisation of production. This allowed it to increase the output of polymers and copolymers. The success of Kazanorgsintez was highlighted at the meeting of Tatneftekhiminvest-holding.

Last year, the company produced 1,8 million tonnes of organic synthesis products. The production capacity was used by 97,3%. The main reason for underutilisation is still the shortage of basic raw materials.

In total, Kazanorgsintez produced more than 1 million tonnes of commercial products in 2019. This is by 40,800 tonnes more than in 2018. The index of actual volume for the reporting period was 102,7% compared to the level of 2018. Ethylene polymers and polycarbonates accounted for the main share — 86,8% in value terms — in manufactured products.

The company's production costs increased by 1,3 billion rubles to 56,1 billion rubles. The major expenses were spent on raw materials, energy from the outside, and employee salaries.

241,6 million rubles were allocated for environmental protection measures

Kazanorgsintez accompanies its intensive production growth with environmental measures aimed at preserving the environment and reducing emissions to the atmosphere, soil and water. The company's responsibility in this area is set out in the environmental management programme.

In 2019, the company implemented 36 measures to protect atmospheric air, water bodies, soil and land resources. The total cost of environmental protection measures was 241,6 million rubles. In 2018, 231,9 million rubles were allocated for this purpose.

In particular, Kazanorgsintez is an active participant in the project Conservation and Prevention of Pollution of the Volga River on the Territory of the Republic of Tatarstan. For 2018-2025, the company has developed an action plan to improve the environmental condition of the river. The company intends to reduce the flow of polluted wastewater into the river, as well as reduce water intake.

In 2019, the company used 2,1 million cubic metres less water from the Kuybyshev Reservoir than in the previous year. The water consumption of Kazanorgsintez was 24,2 million cubic metres. In 2018, the company used 26,3 million cubic metres of Volga water for production.

It was possible to increase the use of recycled water due to the introduction of advanced water treatment technologies and the reconstruction of cooling towers. The water consumption in recycling water supply systems was 664,2 million cubic metres. The percentage of water turnover is 98%, in 2018 it reached 97,8%.

During the reporting period, Kazanorgsintez discharged less waste water (11,5 million cubic metres) into the Volga River than is allowed under the standard (14,2 million cubic metres/year). At the same time, the waste water was subjected to mechanical and biological treatment, and the content of pollutants in it met the requirements of the maximum permissible concentration for reservoirs of fishery purpose.

Harmful emissions below the permissible limit

The success of Kazanorgsintez in reducing harmful emissions was noted at the 3d Russian competition Climate and Responsibility 2019. Kazanorgsintez took the third place in the category The Best Organisation of Russia in Reducing Greenhouse Gas Emissions among organizations that emit less than 150,000 tonnes of CO2 equivalent a year.

Last year, the company also met the standards for the emission of harmful substances into the atmosphere. The emissions amounted to 10,944 tonnes, for the same period in 2018 — 10,692 tonnes.

The planned modernisation of Kazanorgsintez production also allows reducing harmful emissions into the atmosphere. Last year, the company organised public hearings before the start of the reactor reconstruction. It is expected that the modernisation project will bring economic and environmental benefits to the company.

Economic effect of the energy programme

Energy resources remain one of the main items of expenditure in the industrial sector. In 2019, tariffs for electric energy increased by 10,1% compared to the previous year, and for thermal energy — by 6,7%.

In 2019, electricity consumption increased by 1,9% compared to the previous year and amounted to 1,718 million kWh. The increase in electricity consumption is due to an increase in production output, as well as the introduction of new energy-consuming capacities at the HDPE Production and Processing Plant.

At the same time, the electric capacity index decreased by 0,85% compared to 2018 and amounted to 29,22 kWh/million rubles. The total heat consumption, including its own production, decreased by 3,8% to 3,356 thousand Gcal. The purchase of heat from the outside decreased by 12% and amounted to 1,841 thousand Gcal.

Own production of steam and heating water increased by 117,000 Gcal or 8,4% compared to the previous year . The heat capacity index decreased by 14,38% compared to 2018 and amounted to 31,31 Gcal/million rubles. The energy intensity of commercial products decreased by 8,75% and amounted to 8,97 t.o.e./million rubles.

To minimise energy costs, Kazanorgsintez reduces energy consumption per unit of production and uses secondary and renewable resources. Such measures are contained in the Long-Term Energy Saving and Energy Efficiency Programme for 2011-2015 and for the future until 2020. The programme also provides for the introduction of advanced technologies and equipment to develop the potential of energy saving.

In 2019, thanks to the implementation of programme measures, the company received an economic effect of 349 million rubles. Over nine years of the Long-Term Energy Saving and Energy Efficiency Programme for 2011-2015 and up to 2020, Kazanorgsintez has saved more than 1,8 billion rubles.

Participation in the social life of Tatarstan

Kazanorgsintez strictly adheres to the policy of social responsibility to its employees, their family members and residents of Tatarstan. The company increases wages every year. In the summer of last year, the payrolls of workers, which is 6,000 people out of 8,300 of the total staff of the enterprise, increased by 30%. The salaries of specialists increased by 10%. The least affected by the indexation was senior positions — where income growth was from 3% to 7%.

During 2019, the employees of Kazanorgsintez were paid and provided with benefits provided by the collective agreement for 2017-2019. The company has updated social facilities: Solnechny children's recreation centre, dormitories and Orgsintez swimming pool have been updated.

Last year, Kazanorgsintez took an active part in the preparation and holding of the 45th World championship in professional skills according to WorldSkills standards. The company's contribution was marked with a letter of thanks at the ceremony of summing up the results of the annual public competition Manager of the Year 2019.

Plans to increase production and reduce the shortage of raw materials

This year, Kazanorgsintez is going to continue to modernise its production within the framework of the Strategic Development Programme for 2020-2025. Ethylene plant workshops will be updated for propane raw material processing. Thus, the company compensates for the shortage of ethane raw materials.

The Bisphenol A Plant will be reconstructed to produce isopropylbenzene with the introduction of cumene production technology using a zeolite catalyst. At the polycarbonates plant, it is planned to increase production capacity due to the potential of existing production.

One of the main events will be the construction of CCGT-250 power generating unit. This will allow Kazanorgsintez PJSC to create its own power generation facilities and reduce energy costs.