Finance Plan for the year 2002 compiled with deficit. Bound to cut down welfare expenditure.
The Board of Directors reviewed vitally important issues for the NKNK personnel, relating to approval of the Company's Finance Plan for the year 2002 and discussion of the economical activity results achieved in the year 2001.
The Report on the issues was delivered by R. Akhmetov, Dy General Director for economics. He, in particular, mentioned that the pecuniary reduction in the year 2001 commodity output compared to the year 2000 "was explained by the deteriorated market and decrease in price for the Company's products". At the same time, there is an annual physical growth of the Company's products output. That is done to somehow compensate for the sheer fall in prices for our products".
The chief economist named in figures the major components of considerable setback in profit: during the year 2001, price rise for feedstock and materials was 27%, rise of tariff rates for heat, electrical energy and fuel was in whole 27% as well. The Rail rate was increased twice within the past year, which necessitated paying extra RUR 20m monthly to the Rail. The increase of the Rail services was as high as 45%. Of the total profit diminution, 52% (or upwards of RUR 1,390m) occurred due to the decline in prices for the NKNK products. If the said figures are added with another upwards of RUR 1,200m of "liability" (total) which was entailed by price rise for feedstock, materials, utilities and the rail, then we face gloomy statistics: if in July, NKNK profited RUR 220m, in November 2001 - merely 19m.
The expected balance sheet profit per the operation results of the year is RUR 2,500m (in the year 2000 - RUR 5,179m). However, commented R. Akhmetov, "despite the deteriorated external factors, the finance showing of the activities testifies to a stable financial situation with NKNK: the Company is able to completely settle its commitments, it is not dependable on loan capital and maintains financial stability. Moreover, the investment cover ratio is 0.86, whereas the standard one is 0.75, which means that the company is very active in upgrading its production facilities.
The average wage for the past year amounted to RUR 5,378 with payments from the consumption fund included. The wage-push compared to the year 2000 constituted 134%. The current year is planning to increase wages by 15% beginning March 01, and it will reach the average level of RUR 6,010.
Revealing the parameters of the year 2002 finance plan, the chief economist commented that it was compiled with the deficit of RUR 119m. It is suggested to issue another loan on debentures in the amount of RUR 1.5 billion with 2-3 years of maturity at 16-18% interest per annum. Execution of the loan on debentures will be meant for those items of expenses, the payments per which cannot be suspended today: collateral account service; repayment of the prior loan on debentures amounting to RUR 300m. Or, that very amount will be executed for soft loans.
Social benefits and bonuses are fixed at the rate of 60% compared to the level of the year 2001, funds intended for farms are reduced three times (RUR 15m). House-building and construction of social facilities are allotted RUR 80m (2.5 times less than last year).
In view of the figures above, R. Akhmetov said: "To our opinion, the social benefits, the funds for social infrastructure facilities have been considerably cut down. Upgrading and reconstruction of major production facilities have been put on the budget only with regard to the general principal lines of development." At the same time, R. Akhmetov as well as General Director V. Busygin made it clear in their speeches at the session that "with the situation being improved at the market of chemical products during the forthcoming year, we will do the adjustments - will attract indispensable loan supplies and aim our major efforts at reducing the internal production costs to gain maximum profit". For that, NKNK has a dependable production and personnel potential.
After one year, the Board of Directors has decided to come back again to the idea of a complex project on upgrading the Company's rubber production facilities in order to augment production of SKI-3, butyl, ethylene propylene rubber and to implement production of new synthetic types of rubber which are in great demand in the tire industry and which are not domestically produced for the time being.
A decision was taken to hold a general annual meeting of shareholders on 23 April 2002.
Press Service NKNK Inc