9 Sep 2009 17:20

VSMPO-Avisma stretches investment targets until 2015, cutting sales

MOSCOW. Sept 9 (Interfax) - VSMPO-Avisma is stretching the timeframe for its investment program, which was originally due to be completed by 2012, until 2015, said the titanium producer's general director, Mikhail Voyevodin.

It also plans to sell 19,300 tonnes of titanium products this year - 9.2% below the peak level achieved in 2007, Voyevodin said in an interview with the corporation's corporate newspaper.

The investment program was approved in 2007 but it has been extended until 2015 due to the current conditions in order to ease pressure on the company, Voyevodin said.

He said all of the goals, resources and methods approved in 2007 remained in force, and that $635 million of the targeted $1 billion of investment had been absorbed. The rest will be used by 2015. "A revision of all projects will enable is to extend the timeframe for the program painlessly," Voyevodin said.

The program mainly involves the acquisition of equipment to complement existing capacity. The biggest projects are the Ural Boeing Manufacturing joint venture; and new skull melting furnaces and housing for these, which will produce ingots from titanium waste and which will be commissioned in 2011.

Voyevodin said VSMPO-Avisma's main strategic goal in today's conditions was to improve efficiency and cut costs.

Regarding sales, Voyevodin said: "We have to grasp the situation we're in and what lies ahead in 2010, 2011 and, possibly, 2012. Realistically, the next three years will be similar. There'll be no growth, but we're hoping our marketing services will prevent further decline in output. We're planning to sell 19,300 tonnes of titanium products this year, which would be 29.5% less [than in 2007]."

VSMPO-Avisma sold 25,620 tonne of titanium in 2008.

Voyevodin said production volumes always depended on the availability of human resources. "If the unfavorable production environment were only going to last six months or a year, then we could have endured without resorting to unpopular cuts. But we're looking at three, three-and-a-half years, and it we don't take effective action now the corporation's very survival might be at stake," Voyevodin said.

The corporation's loan book is "close to the limit in all respects, and increasing this would only get us mired in debt," he said.

"We can't expect sharp growth in revenue because orders are not increasing. All we can do is try and survive, and we do that by cutting costs. Salaries make up around 40% of our costs," Voyevodin said.

Management has been working on the best way to achieve this for months, and is considering a four-day week, job cuts, and sending staff on forced leave with two-thirds pay.

"I think the anti-crisis program will take shape in this context during the first third of September," he said.

VSMPO is the world's biggest titanium producer, exporting around 70% if its output. The state Russian Technologies (Rostekhnologii) corporation owns 66% of the company.