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Severstal

April 14, 2002

Severstal Executive Board approved Severstalmash spin off

This was reported about at the press-conference by Alexei Evgeniev, head of the Machine Building Center, which was newly created in place of Severstal repair shops.
   The idea to spin off was born during last years of repair shops' operation. Since December 1, 2001 the Department of non-core businesses incorporated the Machine Building Center. Having in mind its future spin off the management structure including production, finance, sales, purchasing and personnel units was put in place. From January 1, it became possible to imitate the spin off situation.
   The results of Severstalmash's operations in a simulation situation were reported of at the presentation. Severstalmash was able to meet the business plan goals set for 2001. It reached indicators which exceeded the 2000 year level by 20%. Export sales grew 6.8 times. The product portfolio included more products of high added value. For the first time non standard equipment was produced for Norilsk Nikel and other large target clients of Machine Building Center. Presently, Severstalmash independently plans output and expenses, by means of a virtual account arranged at the beginning of this year. Results of working with a virtual account were such that in spite of the cyclical character of production, and its decline in winter months, the Machine Building Center was able to generate profits. According to Evgeniev, "Machine Building Center's successful operations in a simulation situation allow us to say that it's ready to operate independently." As a result, Executive Board set the final date for the repair shops' spin off for July 1, 2002.
   In experts' opinion the newly formed company has some obvious competitive advantages, which will allow it to become the industry leader in the Northwestern region. They include ability and skill to create complex engineering designs, low expenses, high quality of end products and unique service know-now.
   Supposedly, Severstalmash will develop in three directions - engineering, servicing and production of new high technology equipment. Severstalmash will employ 10,000 people.
   The newly created structure will be a 100% daughter company of Severstal. Upon spin off it will receive all moveables and immoveables of the repair shops, ufinished products from its balance sheet, specific machine building materials and financial means for preparing the company for an independent operation.
   According to Evgeniev, "Firstly, the new company aims to increase the volume of sales to Severstal and other companies of the Severstal group. Secondly, it aims to increase its share of high value added products sold to other clients." Evgeniev believes that it is possible that in several years the Machine Building Center will become a division of the Severstal group.

 

 

 

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