Transcript LM presentation to SEB

Company Presentation
(by Andre Kolesin, Vice Chairman of the Council, Finance)
“CEO Meets Investor 2010”
NASDAQ OMX
Rīga, Latvia
10-December-2010
CONTENTS
INTRODUCTION – JSC “LIEPĀJAS METALURGS” (LM)
ORGANISATION STRUCTURE
EXISTING PRODUCTION PROCESS
MODERNIZATION PROGRAM
SOCIO-ECONOMIC SIGNIFICANCE OF LM IN THE REPUBLIC OF LATVIA
10-December-2010
2
INTRODUCTION – JSC “LIEPĀJAS METALURGS” (LM)
LM is a manufacturer of rolled steel products based in
Liepaja, Latvia. (http://lm.metalurgs.lv)
LM was founded in 1882 as a wire and nail factory.
About 2300 employees currently work at LM.
LM was privatized in 1995 and in 1996 the Company
was successfully shaped into a Joint-Stock enterprise.
LM is a Joint Stock Company, whose shares are quoted
and publicly traded on the Riga Stock Exchange
(NASDAQ-OMX). The Company’s records are openly
available on the Stock Exchange web site since the year
of 2000.
LM is the only steel mill in the Baltic region.
Company’s main product (99% of revenues) –
construction reinforcement bar (rebar).
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MAIN COMPANIES INCLUDED IN CONSOLIDATION GROUP OF LM:
Company
Liepājas osta LM (Liepaja’s Port
LM)
www.liepajaport.lv
LM shares
in %
95
Industry
Stevedoring services, cargo,
ship broker service, ship
agency
Turnover
2009
(€’000)
23’000
The Company handles over 30 % of the total cargo turnover at the ice-free Liepaja Port. The port has six berths
with a maximum draft of 9.5 metres and a maximum length of 225 metres.
Medical Center of JSC “Liepājas
Metalurgs”
http://msd.metalurgs.lv
100
Medical Services
Rūķis LM
100
Construction materials
production, waste and crushed
slag processing
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1’500
1’000
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ORGANISATION STRUCTURE:
JOINT STOCK COMPANY «LIEPAJAS METALURGS»
ORGANISATION CHART
Council of shareholders
Board of JSC «Liepajas metalurgs»
Chairman of the Council
Executive Director
Representative of the
Director
Chief
Economist
Marketing
Department
Ice Hall
Maintenance
Department
Security
Department
Medical
Department
Office
Service
Supplies
Dpt (Purch)
Maintenance
Department
Oversize Scrap
Supplies
Department
IT
Department
Legal
Department
Logistics
Department
Chief Power Engineer/
Manager of the Power
Shop
Personnel
Depart (HR)
Newspaper
“Metalurgs”
editorial board
Chief
Engineer
Financial
Department
Technology
Department
Planning &
Economy
Department
Internal
Audit Dept
Metrology
Laboratory
Environmental
Protection
Laboratory
Quality
Manager
Central
Laboratory
Steam
Power
Shop
Power
Shop
Quality
Department
Laboratory of
Automation and
Mechanization
Labor Protection
& Safety
Technology Dept.
Chief
Mechanic’s
Department
1
Electricity
Shop
Production
Department
Mechanical
Repairs
Shop
Repairs &
Construction
Shop
Foundry
OpenHearth
F. Shop
Rolling
Mill Shop
Metal
Goods
Shop
Scrap
Yard
2
Railway
Transport
Shop
Motor
Transport
Shop
1.Slag processing shop
2.Ships breaking shop
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Key Managers of
the Company:
Position
Name, surname
Education
Time worked in the
company
Chairman of the Council
(Supervisory Board)
Sergejs Zaharjins
Higher (engineer – mechanic)
37 years
Chairman of the Board
(Management Board)
Valerijs Terentjevs
Higher (engineer – mechanic)
40 years
Board Member
(Supplies)
Iļja Segals
Higher (engineer – mechanic)
14 years
Board Member and Managing
Director
Leons Ptičkins
Higher (economist)
18 years
Chief Engineer
(Technical Director)
Egils Kupšis
Higher (engineer – mechanic)
18 years
Chief Economist
Benita Imbovica
Higher (economist)
43 years
Vice Chairman of the Council
(Sales)
Alex Zaharin
Higher (BA Finance / BA IT,
USA)
7 years
Vice Chairman of the Council,
Finance
Andrew Kolesin
Higher (MBA, BA Economics,
BS Accounting – all USA)
5 years
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EXISTING PRODUCTION PROCESS
On December 9, 1965, a new steel melting shop with three open heath furnaces was
commissioned. In October 1968, the first million tons of rolled products was manufactured, and
in April 1970, the first continuous casting machine (vertical caster) was put into operation.
LM presently operates three Open-Hearth Furnaces (OHFs) feeding a billet caster which in turn
supplies two Rolling Mills (RMs). A new continuous billet caster was installed in 2006 by
Siemens VAI to replace the old Vertical Casters.
·
·
·
·
The LM operation presently consists of:
3 x 170 tonne Siemens-Martin Open-Hearth Furnaces;
2 x eight strand Vertical Billet Casters (one is in process being demolished);
1 x four-strand curved mould Continuous Billet Caster (installed in 2006).
1 x 350/250 Rebar & Wire-rod Rolling Mill;
1 x 350 Rebar Rolling Mills.
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scrap
520’000 t/y
iron 53’625 t/y
iron breakage 50’766 t/y
Scrap
Yard
630’000 t/y metal charge
• The existing three Open-Heart Furnace
(Martin Furnaces) meltshop’s annual
capacity is ~ 555’000 t of billet (semifinished product) which are taken to the
Rolling Mills for further production.
Melt Shop
3 Open-Heart
Furnaces
(Siemens
Martin
Furnaces)
•Two Rolling Mills produce combined
about 670’000 t per year of rebar
(finished product).
560’000 t/y liquid
steel
CCM
•As a result, LM buys ~ 140K t of billet
elsewhere (chiefly in Belarus) in order to
keep its Rolling Mills producing at their
full capacity.
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550’000 t/y cast billets
Rolling Mills
Mill
250 / 350
Mill
350
380’000 t/y
finished products
290’000 t/y
finished products
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LM’S MODERNIZATION
Existing versus Future:
PURCHASED SCRAP
520,000 tonnes
900,000 tonnes Electric Arc Furnace
Open Hearth Furnaces
Ladle Furnace
550,000 tonnes
865,000 tonnes
Billet Purchase
140,000 tonnes
Billet Sales
172,000 tonnes
Existing Rolling Mills
Existing Rolling Mills
670,000 tonnes
670,000 tonnes
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THE MODERNIZATION PROGRAM
THE START - August 26, 2004 opened up a new era for LM, when the factory’s full scale
modernization of the steelmaking process began. A contract to build a modern continuous steel
casting machine was signed in co-operation with Austrian-Italian partners.
Phase 1 of the modernization program (completed) - financed by the Company’s own resources:
Project
Continuous Casting Machine (CCM)
Pre-Engineering Project
Packing Line on the Rolling Mill 350
Total up to date Modernization investment funded by LM's own sources
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Investment
Amount
Supplier Completion Date
(mill.)
Siemens VAI
April, 2006
€ 25.50
Siemens VAI December, 2006 € 4.76
Siemens VAI December, 2007 € 4.41
€ 34.67
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THE MODERNIZATION PROGRAM
Phase 2 of the Modernization Program (chronology):
- The investment involves replacement of the steelmaking operation - replacement of the three
existing open-heart furnaces (OHF) with latest technology electric arc furnace (EAF) and ladle furnace
(LF).
- The Government of the Republic of Latvia (“Saeima”) at the State Budget approval session in
November 2008, voted in favor of the State Guarantee for the needs of financing of the LM’s
modernization program to be included in the State Budget for 2009.
- The EPC Turnkey Supply Contracts were signed by LM with STG Group S.p.A. (STG) (Italy) and in
June 2009 for the total value of € 81 million.
- The European Commission formally approved the State Guarantee of the Republic of Latvia for the
financing needs of LM’s modernization program on December 15, 2009.
- The Financing (loan) Agreement was signed by and between LM and UniCredit MedioCredito
Centrale S.p.A. (UniCredit) (Italy) on December 29, 2009 for the total value of € 85.6 million.
- The State Guarantee was signed by and between UniCredit and Ministry of Finance of the Republic of
Latvia on December 30, 2009 (on the last day possible) for the same amount as financing.
- The EPC Turnkey Supply Contract entered into full force and effect on June 17, 2010.
- The Financing entered into full force and effect on June 30, 2010.
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THE MODERNIZATION PROGRAM
Legal Structure:
COMMERCIAL RISK
COVER
Long-Term
Financing
Agreement
EPC Supply
Contract
(“turn-key”)
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Activity / Month
Effectiveness of the contract
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
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ENGINEERING
Plant layout
Basic design delivery
Mech-elect detail design delivery
Civil detail design delivery
CIVIL WORKS EXECUTION
Civil works start up
CIVIL WORKS of DDS and WTP
CIVIL WORKS of SCRAP CRANES AND BILLET CRANE
CIVIL WORKS of SS and SVC
End of external civil works
CIVIL WORKS of EAF and Ferroalloy
CIVIL WORKS of LF and AUXILIARIES
CIVIL WORKS of CCM
End of internal civil works
PRODUCTION AND DELIVERY
Delivery equipments 1 certificate
Delivery equipments 2 certificate
Delivery equipments 3 certificate
Delivery equipments 4 certificate
Delivery equipments 5 certificate
Delivery equipments 6 certificate
Delivery equipments 7 certificate
ERECTION AND COMMISSIONING
ERECTION DDS and WTP
ERECTION SCRAP CRANE AND BILLET CRANE
ERECTION SS and SVC
ERECTION EAF and Ferroalloy
ERECTION LF and AUXILIARIES
ERECTION of CCM
End of erection certificate (DDS and WTP)
End of erection certificate (SS and SVC)
End of erection certificate (the rest)
training & Supervision cetificate
Cold test
Performance test certificate
Final acceptance certificate
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SOCIO-ECONOMIC SIGNIFICANCE OF LM IN THE REPUBLIC OF LATVIA (1)
LM is the Top-10 largest enterprise in Latvia by net sales. Among the production enterprises
included on the TOP 500 list the Company is ranked as No. 1 (2009)
LM is one of the largest exporters in Latvia. The Company was recognized as the biggest Latvian
exporter in 2008 and was granted the LR Ministry of Economics „Award for Export and Innovation
2008” as well as the title „Export Champion 2008”
LM is producing over 5% of the total Latvia’s national export
LM employs 6.2% of economically active population of the City of Liepaja, and 7.1% of gainfully
employed residents of Liepaja
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SOCIO-ECONOMIC SIGNIFICANCE OF LM IN THE REPUBLIC OF LATVIA (2)
LM is the largest tax payer in the region Kurzeme, attributing close to 20% of the City of Liepaja’s
annual budget
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THANK
YOU!
10-December-2010