Potentials for development of Nizhnekamskneftekhim: Russian petrochemical giant draws conclusions of 2014
Despite economic and political challenges, the largest petrochemical complex of Tatarstan and Russia preserved its profitability and made a record profit
Today Nizhnekamskneftekhim (NKNKH) has officially put into operation the forth equipment of Welding, which separates and dries halobutyl rubber. This event was traditionally dedicated to the annual meeting of the shareholders of the company. At the meeting, they drew conclusions of 2014, which, undoubtedly, was successful for the company in spite of a decline in synthetic rubber production, the key driver of the revenue.
One more time Nizhnekamskneftekhim demonstrated its solid positions as a leading company of the petrochemical sector of Russia. The launch of the new machine designed for separation of halobutyl rubbers despite economic instability in the country and anti-Russian sanctions proved once again the fact that the company is not going to take a wait-and-see position hoping for better times.
Rustam Minnikhanov, Acting President of Tatarstan, participated in the ceremony of the official launch of the machine. At the meeting, Rustam Minnikhanov said that, 'We are speaking about import substitution. Oriented to the export, this enterprise proves to have a high competitiveness of its products that strengthen positions of the company on the world market.' Then the President along with the top managers of TAIF and NKNKH pushed the symbolic button that gave a rise to a new line of rubber production.
Production of goods in Butyl Rubber Plant, in fact, is universal on the ground that the flexible technological scheme allows to make the transition to the production of a certain type of butyl elastomer in a short space of time, depending on consumers' request. And well-known worldwide tyre manufacturers are among clients of the company.
Above the most optimistic expectations
After the opening ceremony, the building site was replaced by the central office of Nizhnekamskneftekhim, where the annual meeting of shareholders took place. The summary of the activity of the enterprise of 2014 was the main issue of the agenda.
Azat Bikmurzin, the director general of NKNKH, analysed the operational and financial activity and noted that last year preservation of key positions on foreign and domestic markets was the main target of the company. The result was achieved: volume index increased by almost 3%, the enterprise managed to ramp up volumes of the output up to 2,3 million tonnes and product realization, so the revenue reached 133bn rubles, which was the principal result of 2014 and a new financial record of Nizhnekamskneftekhim for its 47-year history.
Having launched new factories within the scope of the programme, NKNKH continued its strategic development: the fourth line of polystyrene production and so-called catalyst manufacture, a common project of industrial workers and the Kazan Federal University scientists, were launched as a part of import substitution. This production will enable to provide the independence of NKNKH from catalyst suppliers; the catalyst is necessary for Isoprene Monomer and Synthetic Rubber Plants. The factory will get over 2,000 tonnes of catalyst annually.
Not only these facts show the continuous development of the company. Adoption of new types of rubber and plastics brands consolidated positions of the company further on the world and domestic markets.
As a result, the enterprise met its obligations with respect to the shareholders on the realization of the strategic development programme. The head of the company emphasized that in future Nizhnekamskneftekhim is going to follow its chosen course.
Fall factor
For the world market, the year of 2014 was marked by the next cost reduction for synthetic rubbers whose price depends on the natural rubber market. From the beginning of 2011 until now, the price for natural elastomer decreased fourfold.
These rubbers traditionally accounted for the main volume of the exported commodities produced by Nizhnekamskneftekhim forming a big part of the revenue. However, last year the enterprise had to reduce the volume of the exported and national deliveries of isoprene rubber by 7,6% compared to 2013 due to the fall of elastomer price.
Butyl felt better: sales volume of butyl rubber and halobutyl rubber increased by 12% in real terms, and 98% of the products were exported. A drop in price messed up a bit the rosy picture by reducing expected growth in value terms equal to less than 2%.
Anyway, the demand on this type of elastomers in the world tyre industry increases by 4% every year. World-famous tyre companies, which were shipped almost 80% of butyl polymers, are the main clients of Butyl and Halobutyl Rubbers Plants. Consequently, in 2014 NKNKH augmented its share of butyl rubbers on the world market up to 16%.
Another popular rubber in the tyre industry is butadiene rubber with neodene catalyst (NdBR) whose production was set up 10 years ago. Last year almost all its annual volume was sent to our foreign consumers. But a fall in its price affected this type of polymer as well, so that the sale of NdBR decreased by 13%.
Last year the status of NKNKH, which produces high-quality products, allowed it to sign long-term agreements with four world tyre concerns on the delivery of synthetic rubbers. So the share of shipped products made 80% of the total rubber volume.
Plastic breakthrough
In 2003 Nizhnekamskneftekhim phased in its first Polystyrol Plant fulfiling the strategic task on widening the range of products and transition from monomers to polymers. By the end of 2013, these plants numbered four. What is more, ABS, Polyethylene and Polypropylene Plants appeared in NKNKH.
In conclusion, the total volume of styrene, ethylene and propylene polymers reached over 715,000 tonnes last year. The growth made 10,7% compared to 2013.
The high quality of the products of NKNKH became an important factor not only for the Russian refiners of plastic raw materials (here sales increased by 20%) but also for foreign manufacturers due to that the share of export grew twofold. The polystyrol of Nizhnekamsk accounts for 3% on the world market.
To give it its due, the fourth line of styrene plastic production, which was launched in 2014, brought additional 50,000 tonnes to the annual volume.
Polyolefin Plant of NKNKH works better in comparison with 2013. Due to the modernized technology and a number of technical innovations, production volume of both polyethylene and polypropylene ramped up.
The work held on widening the range of brands of propylene plastics may be called very effective. NKNKH decided to switch from homo- to copolymers of propylene, statistical copolymers of propylene and ethylene, including pipe brands, new brands of block copolymers within the scope of work on import substitution.
As for polyethylene, NKNKH has quite positive indicators here too: in Russia having increased by one-third, in comparison with 2013, sales made 94%.
All in all the accent on the increase of plastics volume and import substitution played a decisive role in the growth of gross profit to 23,08 billion rubles. The company still have a potential for growth: in experts view, the expansion of the sphere of plastics application will facilitate the growth of their consumption in Russia to the western level, for instance, they can be used in construction or Municipal engineering.
Financial summary
As for the financial results, 2014 brought NKNKH a reduction of its accounts receivable and accounts payable from 775 million to 1,8 billion rubles respectively.
The net worth of the petrochemical giant of the republic increased almost by 12,5% and surpassed 68bn rubles.
The company transferred nearly 9bn rubles to all budget levels, including 700m to the Treasury of Nizhnekamsk as regards tax payments.
Drawing financial and economic conclusions of the year, the director general of Nizhnekamskneftekhim said that the revenue from products realization grew almost by 11% up to 133bn rubles, whereas commodity output at comparable prices made 102,7% compared to the level of 2013. Product sales for export to 54 countries form almost a half of the revenue.
Net profit of 9,3bn rubles, which in comparison with the previous year increased 1,5 times, is the main indicator of successful work of the enterprise in 2014. Indubitably, the revenue is lower than it was in 2011 or 2012, but the company managed to augment its commodity volumes, increased shipment for export in value terms by 4% and volume of domestic trade.
Not only production keeps Neftekhim alive
Azat Bikmurzin continued his speech saying that Nizhnekamskneftekhim realized many social projects along with fulfilment of production targets. In 2014, seventy big events were held within the scope of the active programme on Environmental Protection. As a result of the implementation of nature conservation methods, gross emission of harmful substances into the atmosphere decreased by 10% compared to 2014.
As one of the largest consumers of energy resources among industrial enterprises of Russia, Nizhnekamskneftekhim continued implementing energy conservation measures. It saved 80,000 Gcal of heat energy and 15 million kWh at a cost of 104 million rubles.
Provision of workers with dwelling (256 allotted flats) and citizens with new working places traditionally is a priority. For example, 420 graduated students of educational institutions of Nizhnekamsk joined the collective.
Overall, costs of NKNKH spent on social and non-production expenses, and tax payments surpassed 14bn rubles.
A point of pride
Giving his speech at the meeting, Rustam Minnikhanov didn't fail to note one more time that gas and petrochemical complex is the key driver of the economy of the Republic of Tatarstan, and NKNKH is the leading enterprise not only of the complex but also of the whole country.
The company achieved good results in 2014, but they still need to augment the pace of development, for instance, last year it increased only by 3%. Moreover, the company has a great potential. It is the clear evidence that all realized projects and products are in demand on domestic and foreign markets.
As Rustam Minnikhanov pointed out, today the situation is not easy, but NKNKH goes on the realization of its principal strategic project – an ethylene complex that produces 1 million tonnes annually. Import substitution remains one of the main tasks, though NKNKH succeeded in this field when last year it launched catalyst production. It proves that the enterprise is thinking about the perspective of its development.
The head of the republic highly estimated petrochemists' labour: these figures are more important under conditions of the uneasy economic and political situation and added that all these results are enormous labour of the collective and administration. He also stated with confidence that the collective of NKNKH will cope with all targets this year too.
Rustam Minnikhanov ended his speech saying that, 'This company is effective and prospective. We will be proud of Nizhnekamskneftekhim further on'.
Billions invested in the development strategy
The experts from PricewaterhouseCoopers audit firm confirmed the authenticity of the financial report of 2014. According to a representative of the firm, who stated from the rostrum, the financial report 'authentically reflects the financial position of Nizhnekamskneftekhim OJSC as from 31 December 2014, results of its operational and financial activity and flow of funds for 2014 according to the rules of working out a financial report established in the Russian Federation'.
Having heard all reports, the shareholders started to vote: it was decided by a majority to channel practically one-third of net profit or, more precisely, 2,78bn rubles in real terms, to dividend payment, which is 1,52 rubles per each common or preferred stock. All payments will be executed on 9 May.
Furthermore, the shareholders made a decision to invest almost 6,5 billion rubles of the profit in fulfilment of the strategic programme during this year. In addition, 33 million rubles will go to awarding the members of the board of directors.
Then members of the board of directors of 'Nizhnekamskneftekhim' OJSC were elected; the former board was preserved. Vladimir Busygin will head the board as its chairman again. What is more, at the first meeting of the re-elected board of directors the authorities of the director general of Nizhnekamskneftekhim Azat Bikmurzin were approved by a collective decision.
After the meeting, Albert Shigabutdinov, the head of TAIF, Vladimir Busygin, the chairman of the board of directors of NKNKH, and Azat Bikmurzin, the director general of the company, answered the questions of the journalists.