Rustam Minnikhanov: ‘This isn’t our first crisis, we have always found solutions’
The Tatarstan president participated in a teleconference on results of annual general meetings of TAIF GC shareholders
The final teleconference on results of annual general meetings of shareholders in TAIF Group of Companies with the Tatarstan president took place. Rustam Minnikhanov was presented the financial performance of TAIF Group companies in 2019, the first half of 2020 and was told about prospects of further development with amendments due to the situation in the global and Russian economy influenced by the COVID-19 pandemic. Read the details in Realnoe Vremya’s report.
TAIF Group didn’t allow sudden fall in production volume in 2019
Due to the epidemiological situation that remains unfavourable, the final session was held via teleconference. Director General of TAIF JSC Ruslan Shigabutdinov was the moderator.
2019 turned out quite a tough period for the Russian economy accompanied by a slower pace on the global scale, growing trade barriers and increasing geopolitical tension. However, this time also became a kind of litmus test too that determined those who happened to be uncompetitive. In the uneasy economic conditions, having taken all necessary preventive measures, in 2019 TAIF Group didn’t allow a sudden fall in production volumes, continued the development, completely met all social and other commitments it had made, including tax and duty payments to the budget.
The performance of TAIF Group in 2019 is illustrative evidence of stability and reliability of the strategy pursued by the companies included in it as well as demonstration of the margin of strength and experience accumulated by the Group in its almost 30-year history. In 2019, despite negative trends in the Russian and world economy, TAIF Group continued strengthening its positions in both the Russian and international markets, actively expanded its ties with the world’s leading companies in oil and gas processing, petrochemistry and power engineering.
Kazanorgsintez PJSC: 2019 income is 11,6bn rubles
A reduction in prices (according to Market Report independent analytic agency from January to September 2019, the average market price for low-density polyethylene fell by 19%, the price for high-density polyethylene did by 20%) and a tense situation in the polymer market in general couldn’t help but influence the performance of Kazanorgsintez PJSC. But even with the unfavourable economic situation, the company’s revenue last year was 72,44bn rubles, while income was 11,6bn. This is lower than in 2018.
A fall in prices in the polyethylene and polycarbonate market, which, in turn, happened because of an imbalance between demand and supply, became the foundation for the reduction in revenue: new petrochemical capacities have been put into operation both in Russia and around the world, foreign manufacturers are dumping.
Moreover, KOS’s capitalisation grew to 187,1bn rubles compared to 2018.
“According to Kazanorgsintez’s performance in 2019, Kazanorgsintez produced over a million tonnes of commodities. The indicator of the use of production capacities totalled 97,3%. The total ethylene production volume exceeded 680,000 tonnes, polyethylene did 748,000 tonnes. It is the best result in ethylene and polyethylene production in the company’s history. Moreover, there were made over 526,000 tonnes of low-density polyethylene, which is higher than last year’s level by 13,000 tonnes. There were manufactured 210,000 tonnes of high-density polyethylene (plus 14,500 tonnes against the previous period),” Kazanorgsintez PJSC Director General Farid Minigulov reported.
The geography of supplies of Kazanorgsintez products covers 31 countries of the world. The first shipping to new markets of Guatemala, India, South Korea, Peru took place. Moreover, only 1/6 of the amount of products made are exported. The domestic market accounts for 60,5bn rubles in the revenue, and foreign supplies are equal to just 11,9bn rubles.
Consequently, projects of the company’s Development Strategy are consecutively and gradually implemented. The steps taken last year allowed significantly increasing polymer and copolymer production volumes.
“12,618bn rubles were spent to finance major construction as well as replacement and upgrade of equipment in 2019. Four pyrolysis furnaces with a capacity of 72 tonnes an hour were put into operation in the ethylene plant. Modernisation works in shops continued to increase ethylene production using propane as feedstock,” Farid Minigulov noted in his report.
Last year, Kazanorgsintez PJSC allocated 241,6 million rubles for environmental protection measures. Gradual modernisation of the company’s plants allows reducing the emission of harmful substances into the atmosphere, which is already significantly lower than those established by Russia and Tatarstan’s legislation in environmental activity.
“In the persistent complicated situation in the market in the first half of 2020, including as a result of the consequences of the COVID-19 virus, sales revenue keeps going down. So revenue reduced by 22,1%, by 8,9bn rubles in monetary terms compared to the same period last year and totalled 31,263bn rubles. Moreover, due to a fall in prices, about 10bn rubles weren’t received. Polyethylene prices decreased by 28% in June 2020 compared to June 2019, prices for polycarbonate did by more than 13%. The reduction in revenue resulted in EBITDA equal to 6,58bn rubles, which is 5bn less than the first six months of 2019,” the Kazanorgsintez PJSC Director General stressed.
Despite the current economic tendencies, the company saved the staff, keeps fully meeting its social commitments to the staff. The employers are provided with means of individual protection, and Kazanorgsintez went on operating even at the peak of the pandemic when a considerable part of plants around the world stalled. All scheduled plans are fulfilled: shops of the ethylene plant are upgraded, equipment that enables to process propane feedstock is added to the production chain. This will allow compensating for a deficit of raw ethane. An isopropylbenzene unit with the introduction of cumene production in zeolite catalyst is reconstructed in Bisphenol A plant. The polycarbonate plant plans to augment volumes with the use of the potential of current production.
Capitalisation of Nizhnekamskneftekhim PJSC in 2019 rose by 56,2%
As Director General of Nizhnekamskneftekhim PJSC Ayrat Safin said in his report, Nizhnekamskneftekhim PJSC ended 2019 with significant growth of production capacities. The production of ethylene (618,000 tonnes), benzene (274,800 tonnes), styrene (307,300 tonnes) demonstrated record-high results. Isoprene production from isobutane increased up to 217,000 tonnes. The effectiveness is so high — it is a result of investment projects implemented earlier to increase the capacities of isoprene-monomer and synthetic rubber plants as well as the continuing modernisation of operating plants. During last year, a new catalyst was launched in the oligomer and glycol plant, the benzene extraction unit in the ethylene plant reached its installed capacity, high molecular weight polyethylene glycol and methoxypolyethylene glycol plants were launched. The plant of butadiene rubbers was modernised to make a new type of synthetic rubbers. Moreover, the plastics plant mastered the production of three new types of polypropylene, low-density linear polyethylene production capacities rose too.
Despite a slower economic growth on a global scale, a reduction in production of cars and tyres, a fall in the price for synthetic rubbers and plastics, the capitalisation of Nizhnekamskneftekhim PJSC, which is a part of TAIF GC, surpassed 174 billion rubles by late 2019, having increased by 56,2%.
The company maintained its positions in the world’s top 10 synthetic rubber manufacturers. The total amount of products made in 2019 reached 679,000 tonnes. NKNK’s share of isoprene rubber production is 43,9% of the global market, the company with 17,5% of the world production occupies the third position in butyl rubber supplies. Butadiene rubber manufactured by Nizhnekamskneftekhim PJSC holds 5,3% of the world market. The majority of 717,000 tonnes of plastics produced by NKNK was sold in Russia. Last year, the company increased low-density linear polyethylene supplies to Russian enterprises by 13%, kept positions in the Russian market in propylene copolymers and ethylene, continues developing the segment of polystyrene for heat insulation in food packaging.
“In 2019, the company achieved the following economic results: revenue amounted to over 174 billion rubles, sales profit is almost 28 billion, net profit was 23,708bn rubles. 45 billion rubles were allocated to finance the projects on modernisation, reequipment, reconstruction, create new plants,” Nizhnekamskneftekhim PJSC Director General Ayrat Safin provided the numbers in his report.
The last year became breakthrough for Nizhnekamskneftekhim in environmental protection: the second stage of the large reconstruction of biological treatment facilities and construction of a new 15-km industrial sewage and stormwater tank ended. Over 3 billion rubles were allocated for these purposes. The unfavourable changes in the global market influenced the financial performance in the first quarter of 2020 at Nizhnekamskneftekhim PJSC as well. Revenue has fallen by a quarter in the last six months. But the company is going to neither stop nor even correct the investment programme that is implemented.
So in 2020 the construction of a new facility producing olefins, the construction of a methanol plant and construction of the 495 MW CCGT-TPP, which can run on syngas (in fact, residues of key production of the facility) remain key development projects of Nizhnekamskneftekhim in 2020. Also, it is planned to launch the production of butadiene-styrene rubber with a capacity of 60,000 tonnes a year. The assortment will consist of six types of butadiene-styrene rubber of the fifth and sixth generations. Room is created to develop the sixth generation of butadiene-styrene rubber. Moreover, the company develops the production of functionalised butadiene rubbers via anionic polymerisation.
TAIF Group’s EBITDA in 2019 reached 166bn rubles
“Thanks to big investments whose amount has been 788bn rubles, or over US $20bn, throughout the Group’s existence, the Group’s balanced income in 2019 was 877bn rubles, of which 754bn rubles were revenue,” Director General of TAIF JSC Ruslan Shigabutdinov provided the numbers in his report.
There was some reduction in income compared to the results in 2018, first of all, because prices for key petrochemicals fell in the second half of 2019. Moreover, EBITDA grew by 15% compared to 2018 and totalled 166bn rubles. The amount of taxes and duties paid to all budget levels is 55,6bn rubles, including 15,6bn rubles to the consolidated budget of the Republic of Tatarstan.
In 2019, TAIF Group companies hold 41% of all ethylene made in Russia, 41% (1,5 million tonnes) of the total amount of Russian plastics, 68% of all Russian synthetic rubbers. TAIF Group accounted for 44% of the total volume of commodities sold in oil refining, petrochemistry and energy in the Republic of Tatarstan in 2019. Total exports in the financial results are equal to 28%, while the geography of supplies of TAIF Group’s products covers 57 countries of the world.
TAIF Group gradually and consecutively continues implementing projects scheduled by TAIF Group’s Strategic Development Programme through 2030. It includes over 30 investment projects in oil and gas processing, chemistry, petrochemistry and power engineering — construction, reconstruction and modernisation of production capacities of the Group’s capacities. Last year, 53,5bn rubles were invested in these tasks, which is 15% of all investments in key funds across the Republic of Tatarstan.
As a socially-oriented business, TAIF Group allocated 50,3bn rubles in 2019 to finance socially important areas: development and support for the health care system, education and qualification upgrade, solution of the Group’s workers’ housing issues and construction programmes, support for culture and religion, veterans and disabled people, children’s development, organisation of socially important events, support for professional and amateur sport and so on. A lot of attention is paid to environmental issues. The total value of environmental protection measures taken last year was 8,9 bn rubles.
Beginning of 2020 turned out tough for all TAIF Group of Companies
“Compared to the first half last year, the Group’s revenue reduced almost by 30%, or 114bn rubles. Sales profit decreased by 60%. EBITDA shrank by 90% to a record low number — about 10bn rubles. This entailed a reduction in tax payments, including payments to the budget of the Republic of Tatarstan. The closure or transition of most Russian and international companies to a shorter working regime because of the fight against the spread of the coronavirus led to a sudden fall in prices for key products of oil refining and petrochemistry as well as a surplus in warehouses and reservoirs due to lower consumer demand. Despite such a complicated, even critical situation, we didn’t stop our plants, we saved the staff,” Director General of TAIF JSC Ruslan Shigabutdinov briefly outlined the performance of TAIF Group in the first half of 2020.
At the same time, the Group didn’t cut costs on investment projects envisaged by the Strategic Development Programme through 2030. The total investments in the construction of new and modernisation of operating plants from 2020 to 2030 must account for about 1,5 trillion rubles. Around 40bn have already been invested in the development of the Group’s companies since the beginning of the year alone. The construction of the EP-600 ethylene facility is one of the biggest investment projects implemented nowadays.
“The EP-600 is, in fact, a doubled capacity of Nizhnekamskneftekhim. A handful imagines the importance and dimension of this project, but this, in reality, one of the grandiose projects in the Russian Federation. Today the works are keeping to the schedule, without delay. The biggest equipment arrived: the heaviest and highest column. They all were successfully installed. The project was deeply, thoroughly elaborated. We prepared for it meticulously: chose both suppliers and developers. Linde company and we were destined to meet. It is the world’s serious leader in this sphere. From a perspective of finance, this project is funded without doubt. The contractors have begun working, they are mobilising. A construction camp with all infrastructure is erected. Moreover, its location is convenient, not far from the construction site. Up to 5,000 people will be working at the peak on the site,” Director General of TAIF JSC Ruslan Shigabutdinov told Realnoe Vremya and Novy Vek TV channel’s journalists in an interview.
The large modernisation will allow expanding production capacities of the Group’s enterprises in chemistry and petrochemistry 2,1 times in monetary terms compared to the level in 2020, while the amount of processing of the main hydrocarbon feedstock will reach 774,6bn rubles in monetary terms, and the share of purchased feedstock in the general pattern will be equal to just 31,5% thanks to a longer and more effective chain of further processing. However, the Group’s management fears that one of the biggest oil, gas and chemical holdings of Russia and the world won’t be able to take advantage of the changes considered by a bill on reverse excise on ethane and LHG and an investment increment to reverse excise on oil feedstock developed by Russia’s Ministry of Energy and Ministry of Finance.
“These changes in the Tax Code within the general development strategy of Russia’s economy are aimed to stimulate the industry and increase investments, particularly, in petrochemistry. We would like these initiatives applied to our enterprises too and we could take advantage of these additional opportunities to accelerate and perhaps increase the programme both in terms of finance and volume. We expect our numerous addresses at the level of both the government of Tatarstan and the president of the republic and the Russian Federation to be accepted. If we are heard, their adoption will allow us to accelerate the development. Today there is sense in seriously working together with those who have already shown a result. We expect these legislative initiatives to allow us to additionally realise the existing potential of the gas, oil and chemical enterprises of Tatarstan. Both the republic and Russia in general will benefit from it,” Director General of TAIF JSC Ruslan Shigabutdinov told Realnoe Vremya and Novy Vek TV channel’s journalists in an interview.
Rustam Minnikhanov: “We see Mr Shigabutdinov’s successes and the successes of the company under his management”
The president of Tatarstan carefully listened to the reports and noted that the companies of TAIF Group had always made a big contribution to the development of the economy of the Republic of Tatarstan and the Russian Federation. Rustam Minnikhanov highly evaluated the performance of TAIF Group of Companies and thanked the management of the companies and staff of the enterprises for effective fruitful work.
Rustam Minnikhanov also noted that the current tough economic situation negatively influenced the development of the whole economy of our republic but expressed confidence that the situation would improve in the foreseeable future.
“This isn’t our first crisis, we have always found solutions. The most important thing is to save the existing plants, staff, specialists and keep developing the investment projects of TAIF Group of Companies, which have a strategically important meaning not only for the economy of the Republic of Tatarstan but also for the Russian Federation,” the Tatarstan president stressed.
Rustam Minnikhanov also assured them that the management of the republic would put as much effort as it could and take advantage of all existing opportunities to protect the enterprises’ interests for the sake of their development.
Ruslan Shigabutdinov’s duties as director general of TAIF JSC were confirmed at first meeting of board of directors
Immediately after the teleconference on the annual general meetings of shareholders in TAIF Group of Companies ended, the first meeting of a new board of directors of TAIF JSC took place, in which Rustam Minnikhanov also participated.
The Tatarstan president noted the great performance of TAIF Group of Companies in 2019 and the difficulty of the global economic situation in early 2020 caused by the COVID-19 coronavirus pandemic. He emphasised that it would take all power and experience to save the development pace and success of TAIF Group’s Development Strategy Programmes through 2030.
“The post of chairman of the board of directors is crucial. It must be an authoritative, experience, quite strict person. This is why my proposal is to recommend Mr Albert Shigabutdinov as chairman of the board of directors. He is an energetic, skilled person. I am asking you to endorse this candidacy and vote,” the Tatarstan president voiced his offer.
Albert Shigabutdinov’s candidacy who chaired TAIF Group since its foundation until 2019 and nowadays works senior adviser to the director general of TAIF JSC in development was unanimously backed.
“Nobody will dare now to predict how the world, the economy will be developing given the pandemic, general political and economic situation in the world. But we discussed the decision made to develop the company through 2030 together with specialists, it is possible. Today the management of the republic, president of Tatarstan, president of Russia are doing their best to create conditions for the enterprises so that they can fulfil the plans that were adopted earlier. I am sure we will do it all. We just need enough energy, time and insistence. And of course, we have to work, work, work. And of course, we will meet all social commitments we made. People are all we have. If we can’t provide a decent quality of life, salaries, financial well-being of all people who work for us, it is impossible to achieve the results. It is the main goal of the Development Strategy,” Albert Shigabutdinov voiced the priorities of future work.
Vice Director General of TAIF JSC and First Vice Board Director Rustem Sulteyev who had been chairing the board of directors for 21 years was elected as vice chairman of the board directors of TAIF JSC. His huge experience is in demand at TAIF Group.
“It is very important to strategically see and decide, run the operational activity of the company. I am offering to confirm the duties of the director general. We see Mr Shigabutdinov’s successes and the successes of the company under his management,” Rustam Minnikhanov switched to the second important issue of the agenda. And this offer was also unanimously supported by the board of directors.
TAIF Group of Companies is one of the largest manufacturing and investment companies in Russia that owns considerable assets and production capacities has a flexible and high-level management. TAIF Group of Companies uniting 43 subsidiaries and subordinate companies operates in many areas, oil and gas processing and petrochemistry, power engineering, construction, investments and services are key of them.