Annual report 2015

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Annual report 2015

Four success factors

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Corporate
governance

Metalloinvest is committed to the continuous implementation of best international corporate governance practices

Metalloinvest is committed to the continuous implementation of best international corporate governance practices

Board of Directors

The Board of Directors is responsible for the strategic management of the Company. The Board of Directors’ key objectives are efficient corporate governance, setting and implementation of the Company’s strategic goals, determination of risk management principles and approaches, risk assessments, and creation of favourable conditions for long-term sustainable development.

The neutrality and independence of the Board of Directors are the key principles the Company draws on to improve the efficiency of its governance framework. Independent and non-executive directors are included on the Board of Directors to ensure control over the Company’s senior management. In defining the directors’ independence, the Company abides by the Corporate Governance Code recommended by the Central Bank of Russia.

The Board of Directors is balanced in terms of:

  • the number of independent and non-executive directors,
  • gender and age.
Russia Board of Directors Index 2015

By gender

Number of Board meetings, %

Share of independent directors on the Board, %

Average director age, years

In 2015, the Board of Directors held 48 meetings related to the delivery of investment projects, transaction and budget approvals, operational efficiency, production and implementation of the Company’s development strategy.

Four out of nine directors are independent

The Board of Directors has three committees:

  • Audit Committee
  • Finance, Budgeting and Strategy Committee
  • Remuneration Committee

Ivan Streshinsky

Chairman of the Board of Directors.
Member of the Board of Directors since February 2013.

Education
1992 - Graduated from the Moscow Institute of Physics and Technology with an honours degree in Aeromechanics and Flight Engineering.

Professional experience
2012–present CEO of USM Advisors.
CEO and member of the Board of Directors of Garsdale Services Investment Limited.

Currently serves as:
Member of the Board of Directors of MegaFon,
Member of the Board of Directors of Management Company Metalloinvest LLC,
Member of the Board of Directors of Kommersant,
Member of the Board of Directors of UTH Russia Limited,
Member of the Board of Directors of USM Holdings Limited,
Member of the Board of Directors of Mail.ru Group Limited,
Member of the Board of Directors of CITY..

2008–2012 CEO of Telecominvest.
2006–2008 As a member of the Board of Directors of Gazmetall and then Metalloinvest, he oversaw the consolidation of Metalloinvest Holding’s assets.
2006–2007 CEO of Gazmetall.
1994–2006 Held various senior management positions at Coalco Group.
1993–1994 Member of the Board of Directors of Perm Motors.

Valery Kazikaev

Independent non-executive director.
Member of the Finance, Budgeting and Strategy Committee.
Member of the Board of Directors since October 2013.


Education
1976 Graduated from the Moscow Mining Institute with a PhD in Economics.

Professional experience
2015 – present CEO of BMC LLC.
2014 – present Chairman of the Board of Directors of BMC LLC.
2013 – present Member of the Board of Directors of Management Company Metalloinvest.
2010–2013 First Deputy CEO for Strategic Development at Sheremetyevo International Airport.
2001–2010 CEO of TZK-Sheremetyevo.

Dmitry Tarasov

Executive Director.
Member of the Finance, Budgeting and Strategy Committee.
Member of the Board of Directors since April 2014.


Education
1985 Graduated from the Moscow Institute of Steel and Alloys (MISiS) with a degree in Metallurgical Engineering.
1990 Received a PhD in Engineering Science from MISiS specialising in Ore Processing and Development of Rare and Precious Metals.

Professional experience
2005–present Executive Director at Metalloinvest.
2007–2016 CEO of Ukrainian Ore Metallurgical Company.
2005–2007 Chairman of the Board of Directors of Mikhailovsky GOK.
2002–2007 Member of the Expert Committee for Metals and Mining of the Russian State Duma; member of the Co-ordination Committee for the Metal and Mining Sector under the Presidential Administration of Russia; Deputy Chairman of the Committee for Metallurgy under the Russian Chamber of Commerce and Industry; member of the Management Board of the Russian Union of Metal Product Exporters.
2002–2005 Deputy Director for Strategy and Future Development at Gazmetall.
2001–2002 Deputy CEO of the Agency for Foreign Investments under the Presidential Administration of Russia.
1999–2001 Advisor to the Head (Deputy Head) of the Russian State Fund for Precious Metals and Stones (Gokhran).
1992–1999 Vice President for Investments and Capital Construction at MISiS.
1985–1992 Held various positions with gold-mining enterprises under the USS R Council of Ministers’ Main Directorate of the Diamond and Gold Mining Industry (Glavalmazzoloto).

Andrey Varichev

Executive Director.
CEO of Management Company Metalloinvest.
Member of the Finance, Budgeting and Strategy Committee.
Member of the Board of Directors since April 2007.


Education
1991 Graduated from the Tsiolkovsky Moscow Institute of Aviation Technology (MATI) with a degree in Aircraft Mechanical Engineering.

Professional experience
2013 – present CEO of Management Company Metalloinvest.
2009 – 2014 CEO of Holding Company Metalloinvest.
2009 – 2009 CEO of Management Company Metalloinvest.
2008 – 2009 First Deputy CEO of Management Company Metalloinvest.
2006–2008 Commercial Director at Management Company Metalloinvest.
2005–2006 CEO of Mikhailovsky GOK.
2003–2004 First Deputy Sales Director at Ural Steel;
from 2004 - Deputy CCO at Ural Steel.
2001–2002 Deputy and Export Sales Director at TD NOSTAOKhMK.
1991–2001 Held senior management positions with a number of Russian steelmaking companies, including InterUral and NTMK.

Nikolai Krylov

Independent non-executive director.
Member of the Board of Directors since April 2015.


Education
Doctor of Law, J. D. degree from Yale Law School.

Professional experience
2012–present Sector Head at the Institute of State and Law of the Russian Academy of Sciences.
1994–1999 Various positions at international law firms in New York, including Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Cadwalader, Wickersham & Taft LLP.

Irina Lupicheva

Non-executive director.
Member of the Audit Committee.
Member of the Board of Directors since February 2013.


Education
Graduated from the Moscow State Institute of International Relations with a degree in International Economics and holds a postgraduate degree from Moscow Finance Academy.

Professional experience
2012 – present Managing Director, Head of Risk and Control at AF Holding (USM Advisors since 2012).
2004–2012 Held senior management positions in companies later consolidated into USM Holdings overseeing finance, internal audit and securities operations. Participated directly in the creation of USM Holdings.
1992–2004 Held senior management positions at MBG and MB Group Impex.

Sergey Soldatenkov

Independent non-executive director.
Chairman of the Remuneration Committee, member of the Audit Committee.
Member of the Board of Directors since April 2014.


Education
1986 Graduated from the Leningrad Institute of Aviation Instruments with a degree in Radio Engineering.
2007 Received an MBA from Moscow Technical University of Communications and Informatics.

Professional experience
2012–present Chairman of the Board of Directors of MegaFon.
2003–2012 CEO of MegaFon.
2002–2003 Vice President at United Company GROS.
2000–2002 Deputy CCO, Acting CEO, and CEO of Petersburg Telephone Networks (later restructured into North-West Telecom).
1999–2000 Deputy CEO of Telecominvest.
1994–1999 CEO of Delta Telecom.
1993–1994 CEO of ARS, a Russo-British JV..
1992–1993 Executive Director at Impex Group.

Galina Aglyamova

Independent non-executive director.
Chairman of the Audit Committee, member of the Remuneration Committee.
Member of the Board of Directors since October 2013.


Education
1985 - Graduated from the Moscow Institute of Steel and Alloys (MISiS) with a PhD in Economics.

Professional experience
2006–2012 Vice President for Finance at NLMK.
2005–2006 Deputy CEO for Economics and Finance at NLMK.
2000–2005 Director for Economics and Finance at NLMK.
1997–2000 Deputy Director for Economics at NLMK.
Launched her career in 1985 by joining NLMK as a planning economist.

Natalia Chumachenko

Non-executive director.
Chairman of the Finance, Budgeting and Strategy
Committee, member of the Remuneration Committee.
Member of the Board of Directors since October 2013.


Education
1994 Graduated from the Voronezh State Academy of Architecture and Civil Engineering.
2001 Graduated from Voronezh State University with a degree in Management.
A qualified Master Trainer at Door International Training and Coaching Centre.

Professional experience
July 2013 – present First Deputy CEO of USM Advisors.
2012–2013 Vice President for Asset Management at Summa Group.
2011–2012 Executive Vice President for Mass Market Business Development in Russia at VimpelCom.
1999–2011 Held various management positions at VimpelCom.

Committees of the Board of Directors

The Committees are responsible for the preliminary review of the most important issues within the remit of the Board of Directors and provide recommendations on the relevant decisions.

Report of the Finance, Budgeting and Strategy Committee

The updated Strategy 2023 factors in the latest market scenarios. Focus on output of high value-added products enables the Company to increase sales margins. Despite challenging conditions in global markets, the Company continues to keep its leverage ratio at an acceptable level. We closed a number of important deals in the capital markets, which, along with positive cash flow, ensured Metalloinvest’s financial stability.

Natalia Chumachenko
Chairman of the Finance, Budgeting and Strategy Committee

Members of the Committee:

Natalia Chumachenko (Chairman of the Committee), Andrey Varichev, Valery Kazikaev and Dmitry Tarasov.

Committee functions:

  • draft proposals on the Company’s priority areas;
  • assess and draft proposals on investment projects and M&A transactions;
  • draft proposals on selected transactions, such as sale and purchase of shares in other companies (including derivatives);
  • draft proposals on the conclusion of SPA and supply agreements for steel, iron ore and other products, if the value of the transaction or several related transactions exceeds RUB 1.5 billion (excluding intra-group transactions);
  • draft proposals on the conclusion of credit and loan agreements and security agreements thereto, bank deposit contracts, agreements to issue promissory notes and other fund-raising instruments, if the value of the transaction or several related transactions exceeds RUB 1 billion (excluding intra-group transactions);
  • draft proposals on the Company’s dividend policy.

Committee activity in 2015

In 2015, the Committee held 14 in-person and 36 inabsentia meetings.

In line with its key functions, the Committee provided methodological guidance and drafted recommendations on the development of and updates to:

  • the Company’s development strategy focus areas;
  • the Company’s annual budget and capex programme for 2015 and 2016;
  • key performance indicators, operational and financial targets;
  • key management tasks with a focus on business sustainability and operational efficiency, including:
    • reorganisation of Management Company Metalloinvest,
    • cost management,
    • re-organisation of subsidiaries,
    • margin management,
    • effective implementation of the investment programme,
    • introduction of a mid- and long-term planning framework,
    • creation of budget responsibility centres across departments.

In addition, the Committee monitored the Company’s operations (commercial, manufacturing and procurement functions), analysed costs and sales margins, and controlled the implementation of department budgets and the fuilfilment of the Company’s operational targets.

In 2015, the Committee also drafted recommendations and proposals for the Board of Directors concerning the conclusion of share sale and purchase agreements, SPA and supply agreements for steel and iron ore products, credit agreements and security agreements thereto, and bank deposit contracts.

Report of the Remuneration Committee

Many companies achieve higher labour productivity not only through more efficient production processes, but also through dedicated incentive programmes. The holistic nature of staff development projects boosts employee engagement, which has a positive impact on labour productivity. Social programmes, occupational safety initiatives, employee healthcare plans, and staff recruitment, motivation and adaptation programmes are all equally important to us.

Sergey Soldatenkov
Chairman of the Remuneration Committee

Members of the Committee:

Sergey Soldatenkov (Chairman of the Committee), Galina Aglyamova and Natalia Chumachenko.

Committee functions:

  • draft proposals to be approved by the Board of Directors concerning remuneration policies for directors, the CEO, and members of the Management Board.
  • draft proposals on staff development and incentives;
  • draft HR and social policies;
  • draft resource planning principles.

Committee activity in 2015

In 2015, the Remuneration Committee held seven inperson meetings.

In line with its key functions, the Committee provided methodological guidance and drafted recommendations on the development of:

  • KPIs for key managers at the Company and its controlled entities, and approaches to Metalloinvest’s 2015 employee remuneration system;
  • the corporate university concept, principles for the determination of training needs, multiple training formats, and principles for the assessment of training and development efficiency;
  • the corporate competency model;
  • programmes to boost employee engagement and performance.
Report of the Audit Committee

In 2015, the most significant risk for the Company was a potential drop in product prices. The Company successfully mitigated the impact of this risk on its financials through comprehensive sales structure management, involving both sales market expansion and product mix optimisation (including quality improvements). Thanks to the Company’s systemic approach to risk management, investment project implementation, credit and interest rate risks did not have a material impact on performance in 2015.

Galina Aglyamova
Chairman of the Audit Committee

Members of the Committee:

Galina Aglyamova (Chairman of the Committee), Irina Lupicheva and Sergey Soldatenkov.

Committee functions:

  • supervising the preparation of financial statements;
  • monitoring the performance of internal control and risk management systems;
  • monitoring internal audit performance;
  • making recommendations on external auditor selection and their remuneration;
  • ensuring the independence, neutrality and effective performance of external auditors.

Committee activity in 2015

In 2015, the Audit Committee held 9 meetings in person and 3 meetings in absentia. In line with its key functions, the Committee provided methodological guidance and drafted recommendations on:

  • approval of the 2014 IFRS statements and 2015 interim IFRS statements;
  • approval of the Company’s comprehensive risk management programme, including the level of risk appetite;
  • improvement of the credit risk management system;
  • re-organisation of the procurement price control system;
  • improvement of accuracy control for management reports on KPI achievement by the Company’s senior management;
  • assessment of the efficiency of measures taken by the Company’s senior management to eliminate gaps in the internal control framework identified by internal auditors;
  • external auditor selection and their remuneration.
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