Net Profit of Rusal in 2010

Net profit of RUSAL by  International Financial Reporting Standards (IFRS) in the I half of 2010 amounted to 1 billion 268 million dollars compared with a net loss of $ 868 million in I half of 2009., the press service of the company reported.
Revenues for the period increased by 41,6% - up to $ 5.321 billion rise in the company connects with an increase in aluminum prices.
Operating profit for Rusal in the I half of 2010 amounted to 1 billion 034 million dollars compared with a loss of $ 487 million dollars in the I half of 2009. Operating margin was 19%.
Adjusted data EBITDA in the I half of 2010 increased to 1 billion 325 million dollars compared with a negative adjusted EBITDA of $ 144 million, up I half of 2009. Adjusted EBITDA margin was 24.9%.
Investment in enterprise development and construction of new assets amounted to 457 million dollars, of which 208 million dollars were used to refinance the loan for the project BEMO, $ 52 million from funds raised during the IPO, were used to repay the loan on a BEMO According to the agreement on debt restructuring for Rusal.
The market value of company-owned stake in OAO GMK Norilsk Nickel, as at 30 June 2010 amounted to 7 billion 168 million dollars compared to 6 billion 707 million dollars at 31 December 2009. Thanks to positive dynamics of growth stocks in the I half of 2010 .

Export Of Russian Capital

Mechel OJSC intends to acquire additional facilities in Brazil. Metallurgists state that Russia tariffs and distances make business unprofitable. The era of Russian cheap energy products is over and will never return, for production of hydrocarbons is becoming more and more sophisticated. Furthermore, domestic oil and gas companies are not anxious to invest funds in the fuel industry, choosing to develop fields in other countries. It means that in the foreseeable future Russians will lose both jobs and ability to buy energy. 

Mechel, a mining and steel company, specializing in coal, steel and power production, began to purchase foreign facilities several years ago. At present, in addition to Russian factories, it owns coal strip mines in the USA, ore operations in Kazakhstan, metallurgical production facilities in Romania and Lithuania. Experts assume that Mechel has influence on the owners of the Estar Group that owns the British MIRsteel plant. 

Late in August, mass media informed that Igor Zyuzin, owner of Mechel, intends to acquire three blast furnaces from Cosipar or to set up a joint venture with this company. The Russian metallurgical company is tempted by sizeable reserves of iron ore in Brazil and by the location of the factory that is close to the ocean, simplifying the delivery of coal from the USA and shipment of pig iron to Great Britain for processing.

The arrangement, though logical in business terms, calls in questions from experts. They believe that the intended production chain is aimed at loading MIRsteel, which has actually been idle for more than two years. Thereby, experts want to know whether it is proper to provide jobs to foreign workers, when modernization of metallurgical operations results in mass redundancy of employees in Russia. 

Russian business people do not have any other option but transfer their facilities closer to ports or acquire ready-to operate facilities in other countries. It is obvious that factories that were built in hinterland regions within the vast Russian territory during the Soviet period will be able to survive on the market only at very low tariffs for energy and cargo transportation. This is exactly what nobody can promise. 

Having privatized Soviet black gold, Yeltsin-time business entrepreneurs embarked on milking the industry. Without having exploration and drilling technologies that could be applied to shelf conditions, without state-of-the-art refineries, oil and gas company owners spent their huge profits on payment of dividends, lining their own pockets, rather than on know-how. Development of Eastern Siberia (and the Yamal peninsula) is impossible without cutting-edge technology and extremely costly control systems. This will require technological reforms in the entire industry and in research financing.

At the same time, Russia has not even considered the problem of liquefied gas transportation from Yamal, which requires special ice-class tankers. Things came to the point that today Russian oil-field experts are not able to perform properly fracturing operations, opting to invite professionals from the Schlumberger Company to do the job.

Experts believe that the only alternative to this process is nationalization of major properties, price control, free secondary and higher education, and task-specific public investment in innovative industries. Can these tasks be accomplished in today's situation? Most unlikely. The two-year-long talks of the Kremlin about industry modernization have shown that the economic and political system of the country is geared to primitive guzzling up of resources. Therefore, it may happen that Russia soon will have to import fossil fuels; however, there is the question that has been factored out - where will it take money from to purchase them.

By Vladimir Terletsky

Due Diligence of Russian Contracting Party

Russian corporate lawyers are sometimes especially concerned about a due diligence investigation of the other party to the contract requesting heaps of documents from it: the Articles of Association, extract from the register of legal entities, etc.

In European countries such investigation is referred to as due diligence ("due circumspection"). It is generally performed for making a decision on acquisition of a new business. The similar investigation of the future contracting party is performed quite rarely. The reason for this is that contractual relationships in the West tend to be built on trust to the partner. It is assumed that the contracting party acts honestly, as it is known well that "reputation comes first".

Legislation in another country is different (sometimes quite substantially); it is important to know certain procedural aspects and to understand the practices. Due to this, we would recommend a foreign business person to entrust a law firm located in Russia with due diligence inspection of the Russian contracting party.

Then the customer will be able to receive explicit answers to important questions: 

- whether this company is legally incorporated; 

- whether it goes through bankruptcy or liquidation; 

- who its owners and managers are; 

- how long this legal entity has been on the market, etc. 

You can't but agree that such information can be essential for making a decision whether it is feasible to enter into a million-euro contract with the subject entrepreneur.

Contact Info For Foreign Investors' Complaints to Ministry of Economic Development in Russia

 Foreign investors in Russia have the opportunity to address complaints and requests for assistance in investment projects in the Department of Investment Policy and Development of Public-Private Partnership of the Ministry of Economic Development of the Russian Federation.

Contacts in the Ministry of Economic Development of Russia: 

Belyakov Sergey, Director of the Department: tel. +7 (495) 651-7964 

An Mikhail Andreevich, Deputy Director of the Department: tel. +7 (495) 651-7970 

Applications can be sent by e-mail:


 invest@economу.gov.ru,


 and by fax: +7 (495) 951-9263, +7 (495) 951-5332.
In addition,  treatment of foreign investors comes through the Advisory Council on Foreign Investments in Russia and other business associations (the American Chamber of Commerce, the Association of European Businesses, etc.).

Currently Ministry of Economic Development of Russia has received 26 quiries of investors, 11 problems were resolved, 15 are in the solution process. 

After materials of Ministry of Economic Development of Russia

Titanium Valley Of The Russian Metallurgical Industry

In three months the Sverdlovsk region will send an application to the federal authorities to create a free economic zone called the "Titanium Valley." The plans are for this project to work with the Verkhnyaya Salda Production Association (the VSMPO-Avisma corporation) to manufacture titanium and aluminum alloy products for the domestic and foreign machine-building industry. But, the company's managers fear that the corporation will not be able to achieve world-class productivity, since they must also finance community and sports facilities in the Sverdlovsk region. And the governor, Aleksandr Misharin is not yet ready to release VSMPO from its public social obligations.

 

The "Titanium Valley" project has been discussed for years. Several years ago, Eduard Rossel, the governor of the Sverdlovsk region at the time, proposed the idea to create a free economic zone in the city of Verkhnyaya Salda. The regional government even approached the federal Ministry of Economic Development with this proposal. But their request was turned down. As a result, business sees no tax relief on the horizon and is thus in no hurry to invest in an increase in the advanced processing of titanium products at VSMPO. Only Boeing has shown any interest, organizing a joint venture with Ural Boeing Manufacturing, which specializes in machining titanium forgings for the Dreamliner aircraft.

In 2010, at the Farnborough Airshow in Britain, Boeing signed an agreement with the Rostekhnologiya corporation (the VSMPO-Avisma's primary shareholder) to establish a research center for titanium technology and materials. This research center will be in Moscow, not Verkhnyaya Salda, but VSMPO's management hopes that it will help facilitate the advanced processing of titanium. In particular, the center will be responsible for training specialists to able to coordinate the production of chassis parts and other Boeing components. 

In preparation for this step, VSMPO approved an investment program until 2013. This year $105 million will be invested in equipment upgrades and next year the investment will grow to $200 million annually. The funds will primarily be spent on increasing the volume of production in the forging and stamping shop, which stopped fulfilling orders in 2008. 

Tatyana Kansafarova, the vice president of the regional Union of Industrialists and Entrepreneurs, believes that it is necessary to change the legislative framework of the Sverdlovsk region and Russia, and to more actively lobby for the interests of the foundry industry in order to attract investment. 

VSMPO's managers say that they aren't experiencing any problems with investment, but they are still counting on assistance from the government. According to Mikhail Voevodin, the general director of VSMPO-Avisma, it has been determined who is going to participate in the free economic zone, but before they invest, the candidates would like to know what incentives the government is going to offer them. "Investors want to be sure that the free economic zone will really be established. You can hardly count on someone coming and giving money unless there is a favorable tax structure," he emphasizes. 

Aleksandr Misharin, the governor of the Sverdlovsk region, claims that the federal government is prepared to free investors from income tax, VAT, and customs duties obligations. According to him, the fate of the project depends on how quickly and ably the officials and businessmen can finalize the proposal. This will take at least three months and, as the regional head hopes, by the end of 2010 a decision will have been made on the Titanium Valley. Aleksandr Misharin expects that businesses in Verkhnyaya Salda that receive these incentives will be able to produce globally-competitive products and create new jobs. 

VSMPO-Avisma Resumed Its Investment Program

The VSMPO-Avisma corporation has resumed its investment program, suspended two years ago because of the economic crisis. On August 25, 2010, their third 6,000-ton pressing machine from the Skoda company with two handling mechanisms from the Glama company were officially put into operation at the Verkhnyaya Salda Metallurgical Production Association. A total of $40 million was invested in the equipment.

According to Mikhail Voevodin, the general director of VSMPO-Avisma, the pressing machine was purchased in 2006, but the unfavorable condition of global markets forced them to consider not only whether they should freeze the investment program, but if it was even advisable to increase the capacity of the forging and stamping shop. In 2009, the shareholders decided to finish the pressing machine, which will produce 900-1,000 tons a month of titanium slab for making plates, sheets, and strips.

Ivan Dekun, the head of VSMPO's forging and stamping shop, told that in addition to the pressing machine "6000," new furnaces from the Locher company will be installed and also equipment for processing forgings. In 2011, VSMPO plans to begin fulfilling orders to produce relatively large, one-of-a-kind products for the aerospace and petrochemical industries. The corporation's management expects their production numbers to return to pre-economic crisis levels by next year. Their increased number of orders has forced VSMPO-Avisma to invest no less than $200 million per year in technical development.

Largest Agricultural Progect in Russia (Tambov Region)

Tambov authorities launched a large-scale new progect "Green Valley".


The progect  is intended to establish in the agricultural city of science Michurinsk within five years  agricultural science and technology complex totaling to 30 billion rubles investment, the head of the economic policies of the Tambov region Administration Luybov Fedorova. 

The project is initiated by the head of Tambov region Administration Oleg Betina and focused primarily on the concentration of high-tech industries with the use of bio-and nanotechnologies. 


Enterprises will accommodate 42 thousand square meters, where will the production of biological materials with desired properties and functional foods and health and prophylactic purposes will be located. The project will be the largest in the agricultural sector in Russia.
The regional authorities will create the most favorable conditions for business entities - the project participants.
"Green Valley"will  include dairy plant, production of ready-made lunches and snacks, meat processing plant, oil production, processing plant fruit, berry and vegetable crops, production of animal feed, told the head of the department.
Fedorova said that the project envisages creation of about one and a half thousand new jobs.

Profit of Russian Companies Increased by 63% in 1 Half of 2010

Aggregate profit of companies in Russia in I half of 2010 increased by 63%  to 2.72 trillion rubles., the Federal State Statistics Service of Russia (Rosstat) announced today. 


This indicator is calculated as revenue minus losses of organizations, without regard to financial results of small businesses, banks, insurance and budget organizations.

Leaders building profits were real estate companies. According to Rosstat aggregate profit of organizations conducting real estate transactions involved in renting and business activities in this area has increased by 2,6 times - up to 108.9 billion rubles. 

Second place in the pace of profit growth took manufacturing. Their profits had nearly doubled compared to the same period last year - up to 660.6 billion rubles. (95.8%).


Profits of enterprises in wholesale and retail trade increased by 69.4% (to 714.5 billion rubles.) Enterprises in the field of mining - by 56,5% (to 608.9 billion rubles.) Transport and communications - 35 , 1% (329.5 billion rubles).

Seek of Strategic Investor for Aircraft Production in Russian Ulyanovsk Region

The governor of Ulyanovsk region Sergey Morozov and chairman of the company «Evektor» Jaroslav Ruzicka have signed an Agreement of Intent on the establishment in Ulyanovsk production of turboprop aircraft EV-55 of the company "Evektor". Company «Evektor» is a leading design bureau of the Czech aircraft industry and the main European producer of light-metal aircraft.
According to the text of the Agreement «Evektor» with the assistance of the Government of the Ulyanovsk region intends to seek a strategic investor for creation of the territory of the Ulyanovsk region of turboprop aircraft EV-55 Outback production. Capacity of the aircraft, ranging from 9 to 14 passenger seats, a relatively low price ($ 1,900,000) and range up to 2000 km are very attractive from the standpoint of its use in regional local lines of the Russian Federation.
Signing of the document was preceded by a series of business meetings and negotiations. Czech delegation was informed about the creation of the territory of the region's aviation cluster, as well as on measures of state support provided to investors, the deploying production on the territory of the Ulyanovsk region. For a more detailed acquaintance with the region's potential in the aviation sector members of the Czech delegation visited the Aviastar-SP, the site of port special economic zones and infrastructure, airport "Ulyanovsk-East ", Ulyanovsk Higher Civil Aviation School.

Kaliningrad Region in Russia is Developing Industrial Zones

According to the press service of the Kaliningrad region government "development of industrial zones is particularly important for the development of depressed areas of the Kaliningrad region, as well as for the regional economy as a whole".
  The district planned deployment of seven industrial zones - Guriev, Technopark Gusev, industrial zones created by "BaltTehProm " in the regional center, industrial zone in Chernyakhovsk and others. Industrial zones encourage arrival of domestic and foreign investors to the Kaliningrad Region of Russia.

Some of the projects is of a high degree of readiness, the rest are at the design stage. For example, in 2011  industrial zones "Gurievskaya" and  Technopark "Gusev" and "Baltic Industrial Park" are ready to open in the outskirts of Kaliningrad. The rest will be opened by the end of 2012.
On materials by the Government of the Kaliningrad Region http://www.gov39.ru/