Production Performance Social Responsibility About the Annual Report
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OMK Annual Report 2017 PRODUCTION PERFORMANCE SOCIAL RESPONSIBILITY ABOUT THE ANNUAL REPORT THE OMK ANNUAL REPORT FOR 2017 INCLUDES INFORMATION ABOUT OMK’S PERFORMANCE IN THE REPORTING PERIOD FROM 1 JANUARY 2017 TO 31 DECEMBER 2017. The financial information in the annual report has been consolidated in accordance with Russian Accounting Standards (RAS) and certified by the company’s external auditor. Operational information is provided according to an internal company order. Information about OMK’s sustainable development activities is presented in accordance with the GRI G4 sustainability reporting guidelines. OMK Annual Report 2017 2 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION CONTENTS 1 OVERVIEW 4 CORPORATE GOVERNANCE 6 SUSTAINABLE DEVELOPMENT 1.1 About the company.................................5 4.1 Approach to corporate governance . 37 6.1 Message from the Head of the 1.2 Major pipeline projects............................. 10 4.2 Management structure ............................39 Human Resources Department ....................60 1.3 Geographical reach .................................11 4.3 Board of Directors ..................................41 6.2 Sustainable development practices .................61 1.4 Annual results ......................................12 4.4 Management Board ...............................42 6.3 HR management...................................64 1.5 Message from the Chairman 4.5 Management Board activity in 2017 . 43 6.4 Social projects.....................................89 of the Board of Directors ............................13 6.5 Charity ............................................97 5 KEY INDICATORS 1.6 Main events in 2017.................................15 6.6 Production safety..................................99 5.1 Message from the Chair 6.6.1 Occupational safety...............................100 2 ОМК’S ANNIVERSARY of the Management Board . .45 6.6.2 Environmental safety .............................109 5.2 Operating indicators ...............................47 6.7 Supply chain management . 118 3 STRATEGY • Large Diameter Pipes Division ......................50 6.8 Responsible procurement..........................119 3.1 Mission............................................23 • Oil and Gas Pipes Division ...........................51 3.2 Vision .............................................24 • Trubodetal Plant ...................................53 7 APPENDICES ....................................120 3.3 Areas for development.............................25 • Blagoveshchensk Valves Plant .....................54 8 CONTACT INFORMATION . 132 3.4 Strategy implementation — new products . .26 • Almetyevsk Pipe Plant .............................55 3.5 Successful projects and case studies in 2017 .......29 • Railway Wheels Division ...........................56 3.5.1 New projects with partners . 30 • Chusovoy Steel Works .............................57 3.6 Investment and R&D ................................31 5.3 Message from the Head 3.7 Market overview...................................33 of the Economy and Finance Department . 58 OMK Annual Report 2017 3 MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.0 Overview OMK Annual Report 2017 4 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.1 ABOUT THE COMPANY OMK is an integrated high-tech producer of steel, rolled sheet, pipes, pipeline valves and fittings, railway wheels, and automotive springs. Our products enable safe and efficient transportation of freight and passengers. Moscow The Group consists of five large industrial plants: Vyksa Blagoveshchensk Trubodetal Plant Almetyevsk Chusovoy Steel Works Valves Plant (Chelyabinsk, Chelyabinsk Pipe Plant Steel Works (Vyksa, Nizhny Novgorod (Blagoveshchensk, Republic region) (Almetyevsk, Republic (Chusovoy, Perm Territory) region) of Baskortostan) of Tatarstan) Watch the video Watch the video OMK Annual Report 2017 5 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.1 ABOUT THE COMPANY OMK’S BUSINESS CONSISTS OF SEVEN DIVISIONS Large Diameter Oil and Gas APP Division, Pipes Division, Pipes Division, Almetyevsk Vyksa Vyksa • Almetyevsk Pipe Plant — • Casting and rolling mill — producing oil and gas pipes, water and gas pipes • Thick-Plate Mill 5000 producing hot rolled sheet and shaped pipes (Mill 5000) — producing hot-rolled thick sheet • VSW Electric Pipe Welding Shop No. 2 — • VSW Electric Pipe Welding Shop No. 4 — producing water and gas pipes producing large diameter pipes and small sections • Pipe Anti-Corrosion • VSW Electric Pipe Welding Shop No. 3 — Coating Shop producing oil and gas pipes and large sections • VSW Electric Pipe Welding Shop No. 5 — producing casing pipes • Casing Pipe Finishing Centre (opening in 2018) OMK Annual Report 2017 6 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.1 ABOUT THE COMPANY OMK’S BUSINESS CONSISTS OF SEVEN DIVISIONS Trubodetal Division, BVP Division, Chelyabinsk Blagoveshchensk • Trubodetal Plant — • Blagoveshchensk Valves Plant — producing pipe fittings producing pipeline valves OMK Annual Report 2017 7 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.1 ABOUT THE COMPANY OMK’S BUSINESS CONSISTS OF SEVEN DIVISIONS Railway CSW Division, Wheels Division, Chusovoy Vyksa • Chusovoy Steel Works — producing automotive springs • VSW Wheel Plant — producing railway wheels OMK Annual Report 2017 8 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 1.1 ABOUT THE COMPANY RUSSIAN MARKET POSITION AND SHARE SIGNIFICANT 1 POSITION 2 POSITION MARKET SHARE Pipeline % Shaped % Pipeline % fittings1 16 pipes2 9 valves2, 3 9 Large diameter Water and gas Oil and gas 2 % 2 % 2 % pipes 31 pipes 12 pipes 16 Railway % Total tubular % wheels2 53 products2 16 Automotive Casing % 2 % springs2 57 pipes 23 1 Market share in monetary terms, based on revenue for all types of this product (estimated) 2 Market share in quantitative terms, based on production volume of this type of product (estimated) 3 In operating segments OMK Annual Report 2017 9 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION MAJOR 1.2 PIPELINE PROJECTS OMK pipes are used in the construction of major oil and gas pipelines (total volumes supplied since 2007). Bovanenkovo-Ukhta Southern Corridor North European (thousands of tonnes) (thousands of tonnes) Gas Pipeline (thousands of tonnes) 620 495 2017 East Siberia — Ukhta — Torzhok 350 (thousands of tonnes) Pacific Ocean Sakhalin — Khabarovsk — (thousands of tonnes) Vladivostok 480 (thousands of tonnes) 570 Nord Stream Power of Siberia (thousands of tonnes) 340 (thousands of tonnes) 2017 1 Zapolyarnoye — Purpe 470 and Kuyumba — Taishet (thousands of tonnes) 530 TurkStream Nord Stream 2 (thousands of tonnes) (thousands of tonnes) 2017 100 2017 390 Filanovsky 500 Central Asia — China (thousands of tonnes) (thousands of tonnes) 1 55 Deliveries were also made in 2017. OMK Annual Report 2017 370 10 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION GEOGRAPHICAL 1.3 REACH While the majority of OMK products are sold in Russia, the company is active on the international market. Products were supplied to more than 20 countries in 2017. Azerbaijan Netherlands Armenia Poland Belarus Slovakia Bulgaria USA United Kingdom Uzbekistan Hungary Ukraine Germany Turkey Italy Finland Kazakhstan France Kyrgyzstan Czech Republic Latvia Estonia Lithuania Japan Moldova OMK Annual Report 2017 11 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION ANNUAL 1.4 RESULTS PRODUCTION Tubular products Large diameter pipes Rolled products (rolls and sheets) Railway wheels (thousands of tonnes) (thousands of tonnes) (thousands of tonnes) (thousands of tonnes) % % % % 2,230 +12 1,020 +16 1,259 +1 681 +99 Wide sheet Pipe fittings Pipeline valves Automotive springs (thousands of tonnes) (thousands of tonnes) (thousands of tonnes) (thousands of tonnes) % % % % 664 –9 9.8 –28 4.9 –2 46 –4 SOCIAL RESPONSIBILITY Lost time injury Social Percentage of engaged employees Awards to OMK employees frequency rate (LTIFR): and charity projects RUB million % percentage % 67 +13 points 1,568 +114% 1.73 –22 203 1 In comparison with 2016 OMK Annual Report 2017 12 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION MESSAGE FROM THE CHAIRMAN 1.5 OF THE BOARD OF DIRECTORS Dear colleagues and partners, was awarded the bronze medal. Trubodetal, Blagoveshchensk Valves Plant and Chusovoy OMK has closely followed its chosen Steel Works are also introducing strategy and achieved its objectives improvements at a rapid pace and holding in the reporting year. We have held our their own among the leaders. leading positions in key product segments, improved our operational efficiency In 2017, our company was also named and reduced our debt load. All of these best Russian manufacturer of oil and gas achievements are the result of coordinated tubular products. This is the fifth time work by the entire team. in the last six years that OMK has received I would like to thank each and every this prestigious award, which is based employee for their contribution to our on a survey of energy industry common cause. representatives. The award emphasizes