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)
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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 the high quality of and demand for our Last year we conducted the next scheduled products, as well as our outstanding service. stage in the audit of the production I would like to thank our partners and system at the plants. The development customers for rating our work so highly. of the production system is one of our Your feedback is the best motivation primary objectives and the most important we could have! factor in the company’s long-term sustainability. An assessment by Toyota During the reporting year, we reached Engineering Corporation experts confirmed a new stage in the development that we have achieved our objectives. of the goal-setting system. Our system makes The Vyksa Steel Works production it possible to break down our strategic goals system won the silver medal and was and communicate them to every employee, acknowledged as the best in the global helping to develop a corporate culture metals industry. Almetyevsk Pipe Plant and promote engagement.
OMK Annual Report 2017 13 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MESSAGE FROM THE CHAIRMAN 1.5 OF THE BOARD OF DIRECTORS
Last year, our employee engagement Our investment programme doubled a project road map. The joint initiatives will indicator reached 67% — the best result in size this reporting year compared be aimed at creating innovative solutions % in the Russian metals industry. with the preceding period, largely due for energy production: new grades of steel, 67 to the implementation of an oil and gas import-substitution pipeline valves and The most important area of OMK’s pipe production project at Vyksa. The first pipeline assemblies, materials for wind power level of engagement development strategy is the introduction part — the finishing centre — is due to be plants, etc. of OMK employees of new types of products. In 2017, commissioned in 2018. The project will be we expanded our range of shaped pipes fully completed by 2022 and will enable We did a lot during the reporting year, for modern construction, began supplying OMK to produce a number of new types but we have ambitious goals, and we must universal steel solutions, produced innovative of pipes, including pump and compressor work hard to achieve them. Competition railway wheels that won several industry pipes, and several types of casing pipes. in the markets is increasing, and market awards, and created a separate brand capacity is shrinking. On the other hand, of automotive springs for foreign models. Strategic agreements with our partners production capacities are increasing and new 2018 I must mention the Trubodetal Plant. were an important outcome of last year. manufacturers are emerging. We are facing It was one of the first plants in Russia The agreement with Metalloinvest is numerous new challenges and risks. But I am commissioning of the to commission modular equipment for for ten years — this is the longest confident that our team of professionals can VSW finishing centre the oil and gas industry in OMK history — procurement contract in OMK history — handle anything! and covers the supply of cast blanks to VSW and covers the supply of cast blanks for the production of railway wheels. We will to VSW for the production of railway wheels. continue working across the board to expand This guarantees that we can reliably fulfil Anatoly Sedykh our product range in 2018 and beyond. orders, no matter how complicated. This will guarantee that our business is We are also planning close cooperation diversified and strengthened in a difficult with the state-owned corporation economy. Rosatom, with which we have signed
OMK Annual Report 2017 14 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MAIN EVENTS 1.6 IN 2017
BUSINESS
VSW’s production system OMK and Metalloinvest signed OMK supplied a shipment was declared the best in the global a long-term contract for the supply of wheels with new properties metals industry of steel blanks for railway wheel for innovative metro cars production and unique high-speed wheels Details to Estonia Details
Details Details APP was awarded a bronze medal by Toyota Engineering Corporation OMK and Rosatom signed for the development of its an agreement on joint VSW supplied shaped pipes production system implementation of projects for the construction of stadiums and introduction of import- for the 2018 World Cup Details substitution equipment Details and technologies
Details
OMK Annual Report 2017 15 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MAIN EVENTS 1.6 IN 2017
SOCIAL RESPONSIBILITY
OMK adopted a corporate social The third OMK Partnership social responsibility policy and charity projects competition was held. The 78 best projects Details received RUB 9.3 million
Details OMK held the Start Your Business social entrepreneurship competition for the second time OMK and OMK Uchastie Fund in Chusovoy, and for the first time held the seventh Art Ovrag festival in Blagoveshchensk. The 26 best in Nizhny Novgorod Region ideas received RUB 6 million and got involved in its second in financial support for social #GivingTuesday business projects Details Watch the video
Details
OMK Annual Report 2017 16 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MAIN EVENTS 1.6 IN 2017
AWARDS
ОМК was named best Russian CSW won the Automotive ОМК was awarded the Leaders ОМК won the award for support manufacturer of oil and gas Component of the Year award in Corporate Philanthropy prize and expansion of social tubular products for the fifth time for the second year in a row entrepreneurship at Leaders Details in the last six years in the Russian Automotive Springs in Russian Business:
Details Market Leader category Dynamics and Responsibility,
Details ОМК won an Impulse for Good a competition held by the award from the Our Future Fund Russian Union of Industrialists VSW railway wheels won in the Best Corporate Programme and Entrepreneurs competitions run by Russian OMK plants won the Most Socially for Development of Social Details Railways and the Railway Effective Mining and Metals Plant Entrepreneurship category Equipment Manufacturers’ Union competition Details Details Details Details The Art Ovrag Festival won the National Event Tourism Prize at the Russian Event Awards 2017
VSW won the regional Investment Details Project of the Year competition
Details
OMK Annual Report 2017 17 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION 2.0 ОМК's Anniversary
In 2017, United Metallurgical Company celebrated 25 years in business, and Vyksa Steel Works, OMK’s largest asset, celebrated 260 years. Over the past quarter-century, OMK has become not just a Russian metals industry leader, but also a driver in the radical modernization of domestic pipe and tube manufacturing. The company is expanding infrastructure and carrying out wide-ranging social, charitable and environmental projects to make living and working in areas where OMK operates interesting and comfortable. To celebrate its anniversary, which was held under the tagline Intelligent Metallurgy, the company implemented several landmark projects in education, outreach and culture.
OMK Annual Report 2017 18 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
2.0 ОМК’S ANNIVERSARY MAIN EVENTS
UNVEILING OF THE LARGEST MURAL IN THE WORLD ON MILL-5000 AT VYKSA STEEL WORKS
10,800 m2 covered
Russian and European record
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OMK Annual Report 2017 19 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
2.0 ОМК’S ANNIVERSARY MAIN EVENTS
RUSSIA-WIDE BOOK FESTIVAL BOOK CITY: ARCHITECTURE OF THE INTELLECT 5 10,000 cities visitors
Watch photogallery
OMK Annual Report 2017 20 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
2.0 ОМК’S ANNIVERSARY MAIN EVENTS
THE IRON CHRONICLE OF RUSSIA, GUEST PERFORMANCES FROM PUBLICATION OF THE A FILM COVERING THE MAIN THE MOSCOW PROVINCIAL IRON LOGIC OF RUSSIA, EVENTS IN THE HISTORY THEATRE AND APPEARANCES A BOOK ABOUT RUSSIAN OF THE COUNTRY, THE INDUSTRY BY INTERNATIONAL BALLET STARS METALLURGY AND THE HISTORY AND THE COMPANY IN VYKSA OF ОМК PLANTS
Watch the film 6 > 1,000 performances illustrations
OMK Annual Report 2017 21 MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
3.0 Strategy
OMK Annual Report 2017 22 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
3.1 MISSION
To manufacture high-quality metal products for the energy, transport, construction and other industries with an optimal price-performance ratio to best meet the needs of our customers
OMK Annual Report 2017 23 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
3.2 VISION
ОМК produces high-quality, high-demand metal products that meet consumers’ most stringent requirements
OMK is an integrated supplier of products and solutions for Russian energy companies
ОМК is a first-class team of professionals
OMK Annual Report 2017 24 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
AREAS 3.3 FOR DEVELOPMENT
In 2017, OMK continued to implement its chosen Improving operational efficiency Expanding the product line strategy of long-term expansion, improving efficiency and strengthening the company’s position in the industry Fostering a corporate culture Reaching new markets and on the markets. Perfecting the business model Carrying out projects Our objective is to become the key supplier of integrated in partnership with other solutions for the oil and gas industry and the most efficient Managing critical risks companies metals company in Russia. Digitalizing production processes Engaging in responsible business The model we have chosen is based on the development and management practices of our own state-of-the-art products, including import- substitution products, which meet customers’ most stringent requirements, both current and potential.
OMK Annual Report 2017 25 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
STRATEGY IMPLEMENTATION — 3.4 NEW PRODUCTS DEVELOPMENT OF NEW PRODUCTS
Pipes
• Large diameter pipes for pipeline sections • Casing pipes with premium threads in areas with active tectonic faults and additional properties
• Pipes with polyurethane foam coating. • New large profile sizes up to 300х300 mm, A facility has been set up at VSW compliant with Russian and international to apply polyurethane foam insulation standards, and pipes of structural grade to 219–1020-mm-diameter pipes steel
• Pipes with cladding • High strength (category K60) pipes for pipeline construction • Smooth casing pipes 244.48 mm and 339.72 mm in diameter (strength group J55) per API 5CT requirements with plans to expand pipe sizes to 426 mm, and also high-strength casing pipes
OMK Annual Report 2017 26 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
STRATEGY IMPLEMENTATION — 3.4 NEW PRODUCTS DEVELOPMENT OF NEW PRODUCTS
Fittings and valves
• Stamped T-bends for the Portovaya • Import-substitution ball valves for the gas compressor station, the most powerful industry and new sizes of 6th-generation in the world. The 219.1-mm-diameter item high-capacity spring-loaded safety relief with wall thickness of 28 mm is designed valves for pressure of 28.45 MPa. • Modular equipment for the oil, gas • Fittings and fasteners for nuclear power and energy industries, including plants and cogeneration plants the production, storage and processing of hydrocarbons and gas condensate
OMK Annual Report 2017 27 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
STRATEGY IMPLEMENTATION — 3.4 NEW PRODUCTS DEVELOPMENT OF NEW PRODUCTS
Railway wheels, springs and steel
• 957-mm-diameter railway wheels made • Rolled sheet meeting additional of grade 2 steel of low-stress structure impact viscosity requirements with reduced weight and an increased for machine building, construction safety margin and the petrochemical and energy industries • Steel sheet for construction produced by VSW from grade ST3 and S390 steel up • More than 50 new types of automotive to 150 mm thick and up to 3100 mm wide springs, including for foreign models
OMK Annual Report 2017 28 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SUCCESSFUL PROJECTS 3.5 AND CASE STUDIES IN 2017
• OMK plants made significant progress Over a period of four years beginning in the development of production systems, in February 2017, all pipe and wheel rolling especially VSW (which was awarded plants will be equipped with advanced a silver medal by Toyota Engineering information tools for real-time production Corporation auditors for the best management production system in the global metals industry) and APP (bronze medal) • By creating an integrated production safety management system, • An advanced goal-setting system is being including occupational, industrial, introduced in the company with the aim transport, environmental and fire of achieving continuous improvement safety management, and ensuring and the best possible results the safety of production processes and the occupational health of staff, • VSW is introducing the Manufacturing it has been possible to reduce work-related Execution System, an automated injuries in the company by 50% over operational management system. the past three years It gathers data on production, optimizes planning, improves process synchronization, etc.
OMK Annual Report 2017 29 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
NEW PROJECTS 3.5.1 WITH PARTNERS
• OMK and Rosatom signed a long-term road map for joint projects to develop new grades of steel, and import-substitution pipeline valves, and to create and use materials for the production of wind energy plants and other areas
• OMK and Metalloinvest signed a long-term contract up to 2027 for the supply of steel blanks for the manufacture of solid-rolled railway wheels. This guarantees reliable fulfilment of all orders and production of VSW wheel products that meet the latest standards and customers’ most stringent requirements
OMK Annual Report 2017 30 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
INVESTMENT 3.6 AND R&D
The following key investment The following projects produced projects were launched in 2017: outcomes during the reporting period: • Increased output at the Casting and Rolling Mill • Modernizing the blank section to change over to production of continuous cast billets • Construction of a shop for production (stage 1) of couplings at VSW • Upgrading the local heat treatment unit • Installation of a quench tank at VSW pipe at VSW pipe shop 3 shop 3 • Setting up a facility for application • Expansion of the VSW machining section of polyurethane foam coatings at VSW
• Establishment of a preservative coating • Upgrading the furnace to increase the output section at VSW pipe shop 5 of the coupling blanks manufacturing section at VSW • Construction of a mill for production of short-sheet springs at CSW • Increasing the output of the pipe air hardening furnace
• An inductive heating unit in the RV1600 mill’s straight-line section was introduced at Trubodetal Plant, enabling OMK products to meet Gazprom requirements
OMK Annual Report 2017 31 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
INVESTMENT 3.6 AND R&D 12.5 Investment (RUB billion)
2017 12.5 2016 6.0 2015 5.3 2014 11.5 2013 16.1
160.0 R&D expenditure, (RUB million)
2017 160.0 2016 131.0 2015 131.3 2014 128.8 2013 85.4
OMK Annual Report 2017 32 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MARKET 3.7 OVERVIEW
OMK World steel production Largest steel producers in 2017 by country products or the oil and gas, millions of tonnes millions of tonnes transport fand other key industries China 831.7 +5.7% are in demand worldwide. % Our company supplies pipes, 1,691.2 +5.3 Japan 104.7 -0.1% railway wheels and automotive India 101.4 +6.2% springs to more than 20 countries USA 81.6 +4.0% around the world. Nevertheless, Russia 71.3 +1.3% the key markets for OMK are Russia South Korea 71.1 +3.7% and the CIS. Germany 43.6 +3.5%
GLOBAL STEEL MARKET
According to a report by the World Steel Association (Worldsteel), total global steel production in 2017 was 1,691.2 million tonnes, 5.3% higher than the year before. Growth was observed in all regions except the CIS, where production remained at roughly the 2016 level.
As in the previous year, Russia ranked fifth in terms of production volume, with an increase to 71.3 million tonnes.
OMK Annual Report 2017 33 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MARKET 3.7 OVERVIEW
Domestic market This trend is expected to continue in the near future. On the other hand, pipes are being used more widely Pipes, fittings and pipeline valves in modern, large-scale construction, from stadiums to shopping centres. This is fuelling a rise in demand Pipes are OMK’s key business, accounting for more for special pipes for the construction industry. than 80% of company revenues, so the situation on the domestic tubular product market is crucial. Railway wheels According to an estimate from the Pipe Industry Development Fund, pipe consumption in Russia After a long three-year decline, the railway wheels increased by 3% in 2017 compared with 2016. market, which is cyclical in nature, began to pick up The key drivers were OCTG, due to the continuing in 2017. This growth was due to the improvement development of a number of fields, and industrial in the economy, particularly in rail transport, and construction pipes, due to large-scale and the deferred demand that had built up over infrastructure projects. the past three years. Furthermore, production of specialized cars increased by a factor of 1.5. However, consumption of large diameter pipes Based on rail car production data for 2017, car continues to fall. Russian market capacity decreased manufacturers’ reports and consumption statistics, by 19% in 2017. Total consumption peaked two years OMK estimates that the maximum demand for ago at over 2.8 million tonnes; in the reporting year wheels on the Eurasian Economic Union market it was no more than 1.75 million tonnes. will remain at the 2017 level for the next two years. The situation is further complicated by the fact that over the past two years, according to the Pipe Springs Industry Development Fund, an additional 1 million tonnes of excess capacity for large diameter pipe According to the analytics agency Autostat, manufacture has appeared in Russia. the market for new trucks in Russia grew by 28% in 2017, leading to growth in the springs market as The reduction in the number of large oil and gas well. However, competition in the springs segment pipeline projects has had a correspondingly adverse continues to increase. impact on the demand for pipeline fittings and valves.
OMK Annual Report 2017 34 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MARKET 3.7 OVERVIEW
Foreign markets Egypt and Israel were the key drivers of the growth in hydrocarbon extraction due to the opening of gas Outside the CIS, there is fierce competition fields in the Mediterranean. Next year could see between a large number of underutilized a rise in hydrocarbon extraction and consumption pipe manufacturing plants, and this situation of steel products connected with oil and gas projects has been aggravated in 2017–2018 due in East Africa. to the commissioning of new pipe plants manufacturing straight and helical seam large In the Middle East, oil and gas companies plan diameter pipes in Saudi Arabia, the UAE, Turkey to start work on the construction of large pipelines and Nigeria. such as the Iraq–Jordan and TAPI pipelines.
Europe America
Steel pipe production in the EU increased Offshore drilling got underway once more in the by 8% in 2017 due to the relatively active US and Canada in early 2017 as the oil and gas expansion of pipeline projects, as well as growth companies increased investment after two years in the automotive and construction sectors. of cutbacks. According to forecasts for 2018, production will decrease as the supply of pipes for the main The number of working drilling rigs in the US rose pipeline projects in the region comes to an end. by 40% in 2017. Oil extraction in the country stood at 9.2 million barrels/day in 2017, with forecasts suggesting it could reach 10 million barrels/day Africa and the Middle East in 2018, the highest level since 1970.
China continues to increase its influence The USA supplied its first shipment of liquefied in the African oil and gas sector, competing natural gas to Central Europe in June 2017, with American and European companies. and considers that this will contribute to ensuring Investment by international oil and gas companies the reliability of energy supplies to the region. in developing the energy sector in African countries Several memoranda on resuming pipeline increased in 2017. Current energy price levels, construction projects that had been put on hold. however, were insufficient for complex projects to be implemented. However, in several countries in the region — Mexico, Argentina and Venezuela — drilling decreased.
OMK Annual Report 2017 35 MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
4.0 Corporate Governance
OMK Annual Report 2017 36 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPROACH TO CORPORATE 4.1 GOVERNANCE
Although OMK is not a public company, its corporate • The level of remuneration paid by the company governance system is built on the basic principles is sufficient to enable it to attract, motivate of the Corporate Governance Code, including: and retain employees who have the required skills and qualifications • Equal and fair treatment of all shareholders as they exercise their right to participate • The system of remuneration for members in the governance of the company of the executive bodies and other key executives of the company provides for their remuneration • Shareholders are given equal and fair to be dependent on the company's performance opportunities to share in profits by receiving and their personal contributions to achieving it dividends • The company organizes an internal audit • The corporate governance system and practice to ensure a systematic, independent evaluation ensures equal conditions for all shareholders of the reliability and effectiveness of its risk owning shares of the same category, including management and internal control system and its minority shareholders and foreign shareholders, corporate governance practices and equal treatment of them by all OMK Group companies • OMK’s operations are sufficiently transparent for shareholders, investors and other stakeholders • Shareholders have been provided with reliable and effective means for accounting for rights • The company discloses complete, up-to-date to shares, as well as the opportunity to dispose and reliable information about itselfto allow • Any actions that materially affect or may • The company provides a procedure of the shares belonging to them freely and without its shareholders, investors and contractors materially affect the company’s share capital for material corporate actions which allows encumbrance to make informed decisions structure and its financial position and, shareholders to receive timely and complete accordingly, the position of its shareholders information on such actions, provides them • The company’s corporate secretary is responsible • OMK Group companies provide information (‘material corporate actions’) are taken under fair with the opportunity to influence decision making for conducting all ongoing communications and documents at the request of shareholders terms and conditions that ensure that the rights about such actions, and ensures compliance with shareholders, and coordinating actions to in accordance with the principle of equal and interests of shareholders as well as other and an adequate level of protection of shareholder protect the rights and interests of shareholders and unhindered access stakeholders are observed rights in the performance of such actions
OMK Annual Report 2017 37 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPROACH TO CORPORATE 4.1 GOVERNANCE
OMK is focused on best global practices the fundamental principle of corporate behaviour — and corporate governance standards. OMK uses avoiding conflict between employees’ personal its non-public status not to ensure secrecy about interests and the interests of the company — its operations, but rather to respond more promptly and regulates the use of insider information. to the challenges and demands that the company The basic objectives of this document are to ensure might face. that all company employees adhere to high standards of corporate ethics, take action in the event OMK implements a set of functional strategies, of conflicts of interest, and conduct business which are reflected in the constituting documents in a responsible manner. of the corporate governance system. The provisions of the Declaration are not one-sided: An important feature of the system of internal they protect the interests of employees as well as documentation is its consistency and flexibility. shareholders. The Declaration of Corporate Ethics Any external and internal challenges are quickly is one of the documents underpinning the efficiency reflected in the provisions of local regulations. and investment attractiveness of the company. It promotes trust between participants in corporate OMK adheres to a sustainable development policy relations that are based on honesty, integrity, aimed at accomplishing its mission, supporting and reliability. its strategy, and streamlining and standardizing sustainable development operations across all Compliance with ethical principles and standards companies controlled by OMK. The document helps to avoid unjustified risks, to support long-term describes the basic priorities in sustainable economic growth, to strengthen the company’s development, requirements for reporting position in the markets, to promote an increase and analysis of operations, as well as the allocation in capitalization and profit, and so forth. of responsibilities for implementing the policy. The Declaration of Corporate Ethics is an open In July 2007, OMK adopted a Declaration document which is available on the OMK website of Corporate Ethics, which regulates the corporate and its internal portal. governance system. The current version was approved in 2016. The document affirms
OMK Annual Report 2017 38 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MANAGEMENT 4.2 STRUCTURE
In 2017, a Board of Directors was formed bodies, the Chair of the Management Board at United Metallurgical Company, comprising and the President. The directors of the divisions Anatoly Sedykh, Vladimir Markin, Natalya and their functions are now subordinate Eremina, Svetlana Obolenskaya and Anastasia to the Chair of the Management Board, Natalya Poletaeva. Eremina.
Anatoly Sedykh, who was previously This change is a logical continuation Chairman of the Management Board, became of the improvements to the company’s decision- the Chairman of the OMK Board of Directors. making system. It enables OMK to react quickly In this position, Mr. Sedykh has concentrated to changes in the economic situation, implement on the strategic development of the company, the investment strategy as effectively as possible while management gained more authority. and develop more rapidly. It is also in line This was reflected in the new version with modern management trends. The Russian of the OMK Charter approved in July 2017. company VSW is the sole shareholder of the core OMK companies (Trubodetal, Almetyevsk Pipe Work on updating the Charter began in late 2017, Plant (APP), Blagoveshchensk Valves Plant (BVP), and the new version was adopted in January Chusovoy Steel Works (CSW), and OMK). 2018. The managing organization, OMK, and managing The OMK management structure presently has directors of plants managed the routine one sole-member executive body (the Chair operations of the core companies in the group of the Management Board) and one collegial (VSW, Trubodetal, APP, CSW, and BVP) executive body (the Management Board). in 2017, having been given the functions Until this change (i.e. from July to December of the sole-member executive body of these 2017), OMK had two sole-member executive companies. OMK provides corporate governance for the OMK Group.
OMK Annual Report 2017 39 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MANAGEMENT 4.2 STRUCTURE
Sole Shareholder of OMK — VSW OMK Board Collegial External auditor Executive Body — The functions of Directors (selected by of the sole-member executive body OMK Management the sole shareholder) have been transferred (Chairman to the managing Anatoly Sedykh) Board organization, OMK
Internal Audit Sole-member Service Revision executive body — Committee (documents regulating the activity Chair of the Management of the Internal Audit Service (selected by the sole Board are approved, and the director shareholder) is appointed, by the OMK (Natalya Eremina) Board of Directors)
OMK Annual Report 2017 40 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
BOARD 4.3 OF DIRECTORS*
Anatoly Sedykh Natalya Eremina Vladimir Markin Anastasia Poletaeva Svetlana Obolenskaya
Chairman of the Board of Directors Chair of the Management Board, Deputy Chairman Attorney at the Moscow City Bar, Corporate Secretary Member of the Board of Directors of the Board of Directors Member of the Board of Directors
*For biographies, see Appendix B. OMK Annual Report 2017 41 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MANAGEMENT 4.4 BOARD*
Natalya Eremina Eduard Stepantsov Dmitry Chernyshev Yulia Shkhiyants Petr Trushin Svetlana Nikolashina
Chair of the Management Board, Head of the Commercial Head of the Asset Development Head of the Economy Efficiency Management Head of the Human Resources Member of the Board of Directors Department and Investment Department and Finance Department Director Department
*For biographies, see Appendix B. OMK Annual Report 2017 42 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MANAGEMENT BOARD 4.5 ACTIVITY IN 2017
There are six department heads* The Management Board also considered a number of issues pertaining to non-financial on the United Metallurgical risks for the company, including the transfer Company Management Board. of fixed assets to the administration of the city of Vyksa, approval of bank transactions, OMK’s Management Board held 97 meetings a review of the results of an employee in 2017 (12 in the office and 85 by conference engagement study, etc. call), during which 198 issues were considered. Throughout the year, the members The key focus areas of the Management of the Board worked according to approved Board’s work in 2017 were: individual objectives. These focused primarily on improving the efficiency of management • improving efficiency at the plants teams, transforming the role of the supervisory function in the business and relaying changes • budgeting and achieving objectives to employees, effective presentation, mentoring, and so on. • launching priority investment projects
• conducting social programmes in areas where the company operates
• optimizing the structure and number of the company’s workforce
* The new Board was formed in early 2018. OMK Annual Report 2017 43 MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
5.0 Key indicators
OMK Annual Report 2017 44 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MESSAGE FROM THE CHAIR 5.1 OF THE MANAGEMENT BOARD
Dear colleagues and partners, The Oil and Gas Pipes Division increased production for the fifth year in a row According to expert evaluations, with respect to both pipes and steel industrial production in Russia as a whole sheet in the Casting and Rolling Mill. increased in 2017 by 1% in comparison Furthermore, production of hot-rolled steel with the previous year. We also sensed reached its highest level, 1.26 million tonnes, a pickup in certain segments where due to the efficient operation of the Casting the company is represented, but as and Rolling Mill. The division surpassed before the situation remains unstable the million-tonne mark for pipe production due to adverse external factors. for the first time this year, up 14% on 2016.
Despite the difficult situation in the economy The casing and shaped pipe segments as a whole, OMK’s key divisions increased were especially successful. Casing pipe product production and shipping production grew by 33%. Shaped pipe volumes thanks to the coordinated work production rose due to the increase of the production and sales services. in shipments for the construction industry. We coped with the situation and met all I’d like to make special mention of VSW’s customer requirements. supply of pipes for the modern stadiums that have been built for the World Cup 2018. The Large Diameter Pipes Division, This is our company’s contribution which accounts for up to 40% of company to the success of the first-ever world football revenues, increased production volume championship hosted by Russia. and once again surpassed the million- tonne mark. The main supplies were for the construction of Nord Stream 2, TurkStream, Power of Siberia and the North European Gas Pipeline.
OMK Annual Report 2017 45 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MESSAGE FROM THE CHAIR 5.1 OF THE MANAGEMENT BOARD
The Railway Wheels Division also increased Employees’ health and safety is an absolute the OMK Partnership grant competition, its output significantly in 2017. Demand from priority for United Metallurgical Company. the Start Your Business programme key partners, especially Russian Railways, We approved a new industrial safety to expand social entrepreneurship, finally ended the cycle of falling demand. policy in 2017 which meets Russian laws the seventh Art Ovrag festival of urban The division also undertook several and international standards. Integrating culture, and the Book City book festival. successful projects. In particular, VSW the production safety management system supplied unique high-speed wheels enabled us once again to reduce the critical Our mission is still to produce high-quality to customers in Estonia and the first shipment lost time injury frequency rate (LTIFR) products for various industries. To increase of wheels with improved properties to 1.73. Our results in this area are highly our competitiveness, we must responding for the innovative Moskva metro trains. rated by experts. OMK received an award quickly to challenges and difficulties from the Russian Union of Industrialists as they arise, work more efficiently in each Production declined in the other four and Entrepreneurs in 2017 for its efforts area, introduce real-time improvements divisions. At Trubodetal Plant, for example, in the field of occupational health and safety. and not rest on our laurels. production decreased by nearly a third, to its lowest level in the past five years. We have continued to expand our service I would like to thank the employees The cause lay in the changes in schedules regions and will maintain this approach. and management of OMK for all their work for major pipeline projects. Nevertheless, It is very important for us to create in 2017 and wish them success in 2018! the plant is expanding. Trubodetal has begun an environment in which company production of modular equipment, assemblies employees and their families can live and units for nuclear and hydroelectric and work happily. We spent several Natalya Eremina power plants. A negative trend of 2–4% hundreds of millions of roubles on social, was observed at Blagoveshchensk Valves charitable, cultural and educational events Plant, Almetyevsk Pipe Plant and Chusovoy and programmes. These included some very Steel Works. high-profile and significant projects —
OMK Annual Report 2017 46 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
Large diameter Railway pipes wheels (thousands of tonnes) (thousand units) 2017 % 2017 % 1,020 +16 681 +99 2016 875 2016 342
Casing Water and gas pipes pipes (thousands of tonnes) (thousands of tonnes) 2017 % 2017 % 373 +33 175 +8 2016 280 2016 162
OMK Annual Report 2017 47 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
Shaped Pipeline pipes fittings (thousands of tonnes) (thousand units) 2017 % 2017 % 260 +12 9.8 –28 2016 232 2016 13.7
Pipeline Wide valves sheet (thousands of tonnes) (thousands of tonnes) 2017 % 2017 % 4.9 –2 664 –9 2016 5.0 2016 730
OMK Annual Report 2017 48 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
Rolled products Small and medium (rolls and sheets) diameter pipes (thousands of tonnes) (thousands of tonnes) 2017 % 2017 % 1,259 +1 1,210 +9 2016 1,242 2016 1,107
Automotive Oil and gas springs pipes (thousands of tonnes) (thousands of tonnes) 2017 % 2017 % 46 –4 402 –7 2016 48 2016 433
OMK Annual Report 2017 49 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
LARGE DIAMETER PIPES DIVISION
PRODUCTS 1,020 • Wide sheet steel for production of large diameter pipes, machine building, shipbuilding Production of large diameter pipes, (thousand tonnes) and construction. Width: 900–4850 mm. 2017 1,020 Thickness: 10–150 mm. Maximum capacity: up to 1.3 million tonnes per year 2016 875 2015 1,380 • Straight-seam and single-seam ERW pipes for oil and gas export pipelines with inner 2014 1,058 and outer anti-friction or anti-corrosion 2013 800 coatings. Strength class: up to Х80. Diameter: 508–1420 mm. Maximum capacity: up to 2 million tonnes per year 664 United Metallurgical Company increased production of its key product — large Production of wide sheet for large diameter pipes diameter pipes — in 2017. OMK manufactured at Thick-Plate Mill 5000, (thousand tonnes) and supplied large orders for strategic 2017 664 customers, including supplies for large gas 2016 730 export pipeline construction and operating and repair needs for oil and gas companies. 2015 937 2014 623 2013 544
OMK Annual Report 2017 50 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
PRODUCTS OIL AND GAS PIPES DIVISION • Hot-rolled flat sheet steel in rolls and sheets for small and medium diameter pipes, also used in machine building, shipbuilding and construction. Width: 30–1750 mm. Thickness: 1–12.7 mm. Maximum capacity: 1,102 up to 1.3 million tonnes per year Production of tubular products by the division • Pipes for gas, oil and refined product pipelines, (thousands of tonnes) water and gas pipes, casing and shaped pipes, 2017 1,102 and general-purpose pipes for heating systems, 2016 963 construction and agriculture.
2015 971 For a detailed list, see Appendix B. 2014 873 2013 797 Production of pipes by the division rose by 14% in comparison with 2016 and exceeded 1 million tonnes for the first time in history. Casing pipe production immediately increased by a third due 1,259 to the startup of a number of major hydrocarbon Production of Casting and Rolling Mill products (roll and sheet) extraction and oilfield development projects (thousands of tonnes) in Russia, as well as growth in demand for these 2017 1,259 products in the US. 2016 1,213 2015 1,181 2014 1,029 2013 920
OMK Annual Report 2017 51 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
OIL AND GAS PIPES DIVISION
PRODUCTS and general-purpose pipes segments with small diameters up to 108 mm Despite having to develop new types for construction, repairs of housing of products, during 2017 the division and public utilities and fabrication of steel maintained a high level of production structures. of oil and gas pipes and general-purpose pipes with diameters ranging up to Shaped pipe production rose by 12% because 530 mm. Approximately 420,000 tonnes of high demand for capital construction of such pipes were shipped to consumers of industrial and public facilities under federal in total during the year. The division remained and regional programmes and due to major focused, however, on ensuring reliably infrastructure projects. In particular, VSW high quality in production of line pipes supplied shaped pipes for the construction with high corrosion and cold resistance, of sports stadiums in Nizhny Novgorod, resistance to hydrogen sulphide, oil and gas Saransk and Volgograd for the forthcoming pipes with internal coatings, pipes 2018 World Cup. The total increase with polyurethane foam insulation, in production of small and medium diameter and casing pipes meeting the requirements pipes was 9%. The Casting and Rolling Mill, of GOST R 53366 and API Spec 5CT. in turn, increased production to 1.259 million tonnes, a record for the mill, due to There was an 8% increase compared the increase in demand for rolled stock with 2016 in the water and gas pipes in the VSW pipe shops.
OMK Annual Report 2017 52 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
For the third year in a row, production volumes TRUBODETAL PLANT fell due to changes in the schedules for large pipeline projects, including the Power of Siberia gas pipeline. Nevertheless, Trubodetal fulfilled a number of significant orders in 2017, including some to new markets. 10 The plant supplied gas traps for the construction of a liquefied natural gas plant Pipeline fittings production (thousand tonnes) (the Yamal LNG project, the main shareholder of which is NOVATEK), a stamped T-bend 2017 10 for the Portovaya compressor station, the most 2016 14 powerful in the world, hot heating steam lines for Surgut Regional Power Plant 2, assemblies 2015 16 for the Syninsk compressor station and taps 2014 19 made of stainless steel for the construction of new reactors in the Novovoronezh 2013 13 and Belarusian nuclear power plants.
Trubodetal tapped into a new market segment: PRODUCTS producing modular equipment for the oil and gas industry. The plant built and supplied Pipeline nodes, cold and hot bent branches, and stamped a bactericide-hydrogen sulphide inhibitor and welded pipeline parts: bends, T-bends, reducers and dispensing unit for the Danilovsk oil and gas ends. Used in the construction of long-distance pipelines, condensate field operated by Irkutsk Oil oil and gas field infrastructure pipelines, distribution Company. and pumping stations, oil refineries and gas processing facilities, nuclear power plants and cogeneration plants. Diameter: 57–1420 mm. Maximum capacity: up to 30,000 tonnes per year
OMK Annual Report 2017 53 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
BLAGOVESHCHENSK VALVES PLANT
Production fell at the Blagoveshchensk Valves Plant in 2017 due to increased pressure 4.9 on the Russian market from suppliers of Chinese products. Pipeline valve production (thousands of tonnes)
2017 4.9 In the reporting year, the plant supplied products for major projects to renovate 2016 5.0 and construct oil refining facilities at Gazprom, 2015 6.7 Rosneft, Surgutneftegas, Lukoil, TAIF, Sibur, Gazprom Neft, Tatneft, etc. 2014 6.4 2013 7.0 BVP developed new types of wedge gate valves, check valves and spring-loaded safety relief valves (including high-capacity 6th-generation PRODUCTS valves) and also began production of valves made from heat-resistant grades of steel. • Cast wedge gate valves, spring-loaded safety relief valves, rotary check valves, changeover valves, safety relief valve assemblies, wellhead and shutoff valves, etc. Applications: oil and gas extraction, oil and gas processing, petrochemicals, power generation. Diameter: 25–800 mm. Maximum capacity: up to 13,900 tonnes per year
OMK Annual Report 2017 54 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
ALMETYEVSK • Square hollow sections. Used in machinery PIPE PLANT and tractor production, construction, furniture manufacturing, and other industries. Cross section: 15х15–180х180. Wall thickness: 1.5–6 mm
Almetyevsk Pipe Plant’s position in the Volga 208 region and the Republic of Tatarstan, the key oil region in Central Russia, is stable and assured. APP production of tubular products (thousands of tonnes)
2017 208 Despite the difficult situation in the industry, Almetyevsk Pipe Plant performed well 2016 216 in the reporting year, precisely filling consumer 2015 237 orders on time and almost maintaining 2016 production volumes. 2014 247 2013 226 The plant’s key achievement was its increase in production efficiency. Following an audit PRODUCTS by Toyota Engineering Corporation, APP was judged to have attained the bronze medal level • Water and gas pipes and tubes, oil and gas pipes and tubes — of production system readiness. The plant straight-seam electrically welded, including became the second metals plant in the world with two- and three-layer outer polyethylene coating. after Vyksa Steel Works to receive such a high Applications: oil and gas industry, water supply and heating, evaluation. construction, and agriculture. Diameter: 21.3–219 mm. Wall thickness: 1.5–8 mm. Length: 6–12 m.
OMK Annual Report 2017 55 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
RAILWAY WHEELS DIVISION
After shrinking for several years, the railway wheels market experienced significant growth 681 in 2017, proving that it tends to be cyclical. Against this backdrop, Vyksa Steel Works Railway wheel production (thousand tonnes) increased production volumes. The main 2017 681 supplies were to Russian Railways, a strategic partner of the plant. 2016 342 2015 320 VSW also supplied the first shipment of advanced wheels with improved properties 2014 450 for the new-generation Moskva-series metro 2013 661 cars. The new 865-mm-diameter wheels with a low-stress disc design are made of grade L steel. They have high strength and good wear PRODUCTS resistance and are equipped with devices that reduce the level of noise generated by a moving One-piece rolled railway wheels and wheel centres for freight train. and passenger trains, including Lastochka high-speed trains. Diameter: 760–1098 mm, 140 sizes In 2017 an innovative VSW product, low-stress are mastered from the date of the shop foundation. railway wheels made of grade T steel for cars Maximum capacity: 850,000 units per year with an axle load of 23.5 tonne-force, won prestigious competitions run by Russian • One-piece rolled railway wheels for fast and high-speed Railways and the Railway Equipment trains. Maximum capacity: 10,000 units per year Manufacturers’ Union.
OMK Annual Report 2017 56 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OPERATIONAL 5.2 RESULTS
CHUSOVOY Although CSW production volumes were STEEL WORKS slightly lower due to increased competition, the plant has developed more than 50 new types of springs. The plant modernized its equipment last year and engaged in engineering, marketing and pre-sales work in order to enter the market with its own 46 Springer brand of springs for foreign-made vehicles. Spring production (thousand tonnes)
2017 46 In 2017, CSW began supplying spring products to the Volvo Group truck plant in Kaluga. As part 2016 48 of the localization programme, agreements were 2015 43 reached with world leaders in the car industry to supply test lots of Chusovoy springs to Ford 2014 55 and Hyundai Motors assembly lines. 2013 59 An investment project was launched at CSW to construct a new rolling mill to manufacture PRODUCTS blanks for springs. The project is aimed at expanding import substitution and will More than 800 sizes of springs in the very latest designs, deliver a 50% increase in the plant’s capacity including parabolic springs, as well as arms for air for production of short-leaf springs for foreign suspensions. Supplier to key Russian (KamAZ, Ural, NefAZ, models and the newest models of Russian UAZ, etc.) and foreign truck manufacturers. vehicles. The mill is scheduled to begin Capacity: 110,000 tonnes/year operating in 2019.
OMK Annual Report 2017 57 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MESSAGE FROM THE HEAD OF THE ECONOMY 5.3 AND FINANCE DEPARTMENT
Dear colleagues, We also reduced our overdue receivables, introduced new technologies, and developed The Russian economy continued to recover electronic document management. in 2017, but progress has been slow. On the positive side, inflation was at a record We expect that 2018 will be difficult due to low (only 2.5%), the rouble grew stronger, various factors related to both the Russian there was some growth (albeit slight) in GDP economy and the macroeconomic situation. and industrial production, and the Russian We will keep the company’s financial situation Central Bank cut its key rate. in equilibrium, ensure sufficient cash flow for investment projects, control our debt load Despite numerous challenges and fierce and optimize internal processes. competition, United Metallurgical Company has operated quite confidently throughout the year. Effective and wise control of spending, precise planning of resources Yulia Shkhiyants and adherence to its chosen strategy have enabled the company to hold its position on the markets. The key divisions from the point of view of cash flow generation, the Large Diameter Pipes Division, the Oil and Gas Pipes Division and the Railway Wheels Division, managed to increase revenue against a background of increasing production and sales volumes.
OMK Annual Report 2017 58 MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.0 Sustainable development
OMK Annual Report 2017 59 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
MESSAGE FROM THE HEAD 6.1 OF THE HUMAN RESOURCES DEPARTMENT
The company continued to develop as a socially The functional HR Management and Social responsible business in 2017. Our cooperation Development strategy for 2018–2020 was with internal and external stakeholders and our approved in November. It defines the key tasks administrative decision-making are now as continuing to identify staff reserves to supply based on the corporate values that have been a workforce for our new projects, introducing formulated and introduced into the corporate values into company management, establishing constitution. a corporate university, and providing a convenient HR service to employees Members of the Management Board defined and subdivisions. the priorities for sustainable development in the OMK Corporate Social Responsibility We continued to support local communities Policy. The policy was an important step in in the cities where our production facilities are creating a management system that has enabled located. In 2017, we spent over RUB 200 million us to set corporate social responsibility on social and charitable activities, projects objectives for 2018 and to ensure that they and programmes aimed at implementing are met. In our production safety policy, creative and educational initiatives, supporting we systematized the company’s approaches children, young people and the elderly, in this area and confirmed that people’s health and developing sport. Social projects previously and safety are our top priority. Thus we achieved launched with the company’s involvement the objective we had set for the reporting year: demonstrated their sustainability by obtaining to formalize the company’s approaches in the funding for further development from sources corporate documents and, relying on this not associated with OMK. Our future plans experience, to proceed to developing social are to begin setting medium-term (3–5-year) practices on a new level. corporate social responsibility objectives, and to work on more detailed charts of social The primary task of our HR work over the past and environmental risks. In addition to improving year has been to improve efficiency in company our own company, we plan to promote the wider subdivisions. The company offered to transfer application of sustainable development redundant employees to our new projects, practices in our business environment. making it possible to keep the team together and diversify the business with almost no increase in staff numbers. Svetlana Nikolashina
OMK Annual Report 2017 60 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SUSTAINABLE DEVELOPMENT 6.2 PRACTICE
In 2017, the OMK Management Board The corporate social responsibility priorities safety, and environmental protection. In time, adopted the new OMK Corporate Social were defined according to the requirements this should lead to sustainable systemic Responsibility Policy. The document defines of a number of stakeholders — staff, changes throughout the entire supply chain. the company’s strategy, public relations government agencies, major consumers The policy is openly available on the OMK priorities, and the system for managing of the company’s products (international website. the main aspects of corporate social gas pipeline projects, oil companies and car responsibility. The document’s strength manufacturers), and creditor banks. A corporate social responsibility management is its modern integrated format, making The company has voluntarily committed system has been created on the basis it possible to compare values and objectives to complying with the international social of the provisions of the new Corporate Social and methods for achieving them. responsibility standards GOST ISO 26000 Responsibility Policy. This is a system The provisions of the policy define and SA8000. The provisions of the policy for decision-making, goal-setting and risk the relationship between the company’s apply to all company employees. control in the area of corporate social strategic objectives through its corporate responsibility, and a mechanism social responsibility priorities and the According to the policy, contracts signed for considering the needs of stakeholders corporate social responsibilities of specific with contractors and suppliers include and how to integrate them within subdivisions, in line with current best practice. appendices containing guiding principles the company’s strategy. Thus, The company has consciously rejected the on working conditions, health and safety, the requirements of Section 9 (Management outdated format of a declaration of principles, use of child and forced labour, System) of the international social indicating its proactive position on managing and requirements to comply with legislation responsibility standard SA8000 voluntarily aspects of sustainable development. on occupational safety, industrial and fire adopted by the company were met.
OMK Annual Report 2017 61 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SUSTAINABLE DEVELOPMENT 6.2 PRACTICE
The Corporate Social Responsibility Committee, operating under the Chair Stakeholders of the Management Board, occupies a central place in the system for managing aspects of corporate social responsibility. Management Board Dialogues It coordinates the efforts of all company departments and management bodies Committee chaired by member Public accountability on aspects in implementing the provisions of the OMK of the Management Board of corporate social responsibility Corporate Social Responsibility Policy. Recommendations
The Corporate Social Responsibility Committee is headed by Chair of the Corporate Social Responsibility Committee Management Board Natalya Eremina.
Corporate social responsibility goals Natalya Eremina: ”OMK takes a responsible Request for audit of corporate Operational reporting social responsibility system approach to human rights, occupational Corporate social responsibility risks safety, local community development, procurement and other aspects, and we Auditor’s opinion Objectives on introducing innovation have already developed applicable practices. The new policy underpins an effective system that makes it possible External auditor Subdivisions responsible for achieving corporate social responsibility goals to consolidate information on all these aspects and to develop future plans that IAS take all stakeholders’ wishes into account.” Audit of corporate social responsibility KPIs Monitoring
Planning groups Database
OMK Annual Report 2017 62 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SUSTAINABLE DEVELOPMENT 6.2 PRACTICE
ANNUAL CORPORATE SOCIAL RESPONSIBILITY MANAGEMENT CYCLE:
Meeting of Corporate Social Responsibility Committee: The committee includes heads become part of the integrated management of subdivisions that are responsible for • Goal setting for next period system. Thus, aspects of corporate social • Updating of risks chart achieving key performance indicators (KPIs) • Assignment to modify corporate social responsibility policy responsibility are an integral part of the core in the area of corporate social responsibility: • Assignment to audit individual KPIs operations of company subdivisions, in line the HR department, production safety with global best practice. office, quality control office, corporate Dialogue 5 • Data gathering from with stakeholders subdivisions responsible; OMK corporate social responsibility policy communications office, efficiency preparation of annual management office, government liaison Basic report • Audit of individual KPIs office and corporate social responsibility 4 measures 6 In addition to monitoring the implementation office. The committee is headed by the Chair of policy, the committee provides clear of the Management Board. The committee’s Meeting of Corporate and timely reporting of information Social Responsibility makeup enables it to effectively monitor Committee: on performance in the sphere of sustainable achievement of the relevant goals by OMK Contact External development to a broad range subdivisions and to respond rapidly to crises. with Ethics requests • Approval of of stakeholders. The committee secretary Commission and audits annual report • Endorsement of maintains a database containing information Two interrelated documents developed 3 Rapid 1 updated corporate on the achievement of goals, risks, response social responsibility by the committee — the registers Meeting of policy and administrative and accounting indicators, of corporate social responsibility goals Corporate Social • Approval of plan and this is used to prepare the public annual Responsibility and risks — form the core of the corporate Report on requests Reports for dialogue with report and to respond to requests from Committee stakeholders (special): received and risks on critical risks social responsibility management system. identified from risk managers partners. If necessary, the committee may After approval by the committee, these • Response to Publication order an audit of individual corporate social documents will be included in the general new requests 7 of annual report responsibility KPIs from OMK’s internal corporate strategic planning system and and risks Supplier auditing service or an external auditor. qualification procedure
3
Subdivisions work to achieve corporate social responsibility goals and input information into database
OMK Annual Report 2017 63 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT STAFF DEVELOPMENT STRATEGY
In 2017, staff were managed on the basis In November 2017, the Management Board of the functional strategy for 2015–2017. approved the functional HR and Social The company efficiently managed working Development Management strategy hours and payroll, staffing requirements, for 2018–2020. social facilities and staff retention. The following priorities were set in the new GAINS FROM INCREASE The key task in 2017 was to identify reserves strategic cycle: IN LABOUR PRODUCTIVITY within the staffing structure and take measures IN 2017 to improve efficiency in the subdivisions. • Providing staff for the construction Redundant personnel were redeployed to jobs of new production facilities at Vyksa associated with the construction of Electric Pipe Welding Shop No. 1 at Vyksa Steel Works. • Implementing a social investment plan at Vyksa 142.2 due to the expansion of the production base Since this demand could be covered by existing RUB million staff, the company did not conduct either mass • Making maximum use of internal reserves layoffs or mass recruitment of staff during in staffing and workforce efficiency the reporting year. As a result of measures taken to redistribute resources and introduce additional • Creating a consistent management culture training programmes, the planned annual gain at all of the group’s plants, based on an effective % from the increase in labour productivity — system for communicating corporate values 23,035 -0.9 RUB 94 million — was exceeded by 51%, reaching RUB 142.2 million. • Developing employees professionally through Number of staff, (persons) an effective corporate training system and cross-functional interaction 2017 23,035 -0.9% 2016 23,240 2015 24,346
OMK Annual Report 2017 64 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT RECRUITMENT
OMK plants work with several top-ranking higher education institutions, which gives them an advantage when it comes to recruiting the most promising young specialists. Some forms of cooperation have been in place for more than ten years.
ОMK PARTNER INSTITUTIONS
1 National University of Science and Technology 16. Almetyevsk State Petroleum Institute MISIS, Vyksa Branch of National University 17. Kazan Aviation Institute of Science and Technology MISIS 18. Kazan State Energy University 2. Alexeyev State Technical University, 19. Kazan (Volga) Federal University Nizhny Novgorod 20. TISBI University of Management, Kazan 3. Murom Institute of Stoletovs State University, Vladimir 4. Lobachevsky State University, Nizhny Novgorod 5. Kozeradsky Metallurgical College, Vyksa 6. Bauman State Technical University, Moscow 7. Navashino Polytechnical School 8. Samara State Transport University 9. Boris Yeltsin Ural Federal University 26 10. Lysva Branch of Perm National Research Value of cooperation with educational Polytechnic University (RUB million) 11. Perm State University institutions* 12. Chusovoy Industrial School 13. Lysva Polytechnical College 2017 26 14. Ufa State Aviation Technical University 2016 23 15. Ufa State Petroleum Technical University 2015 25
* Expenditure includes targeted training programmes for OMK employees and support for higher education institutions, including scholarships for outstanding undergraduate and graduate students and young lecturers. OMK Annual Report 2017 65 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT MAIN CAREER ADVICE PROGRAMMES
Number of participants Programme duration Event Target group (years) 2016 2017
Participation in the nationwide ‘No Turnstile Week’ Tenth grade students (15–16 years) since 2017 42 Award to student at Vyksa Branch of National University of Science and Technology MISIS with the highest mark in the Unified State Examination students since 2016 1 1 Young Innovators and Inventors Festival primary and secondary school students 3 450 650 Trajectory Careers Academy Tenth grade students (15–16 years) 4 90 90 Talks by plant specialists in schools and higher education institutions upper secondary school pupils, students 4 50 250 Companies fair at Employment Centre upper secondary school pupils, students 4 over 1,000 over 1,000 Work experience (job training) Tenth grade students (15–16 years) 6 12 13 Industry and Proflandia games Ninth grade students (14–15 years) 7 100 100 Work placements students from Chusovoy Industrial School 10 30 40
Tours of spring production facility school and higher education students 10 85 105
Batashev Brothers Scholarship competition 9–11th grade students (14–17 years) 13 15 15 Tours of production facility upper secondary school pupils, students over 15 years 1,350 1,425
OMK Annual Report 2017 66 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT MAIN CAREER ADVICE PROGRAMMES 2,710 150 Number of young specialists Young specialists hired after graduating in company from higher education (persons) (persons)
2017 2,710 2017 150 2016 2,908 2016 125 2015 2,994 2015 122
The 6.8% decrease in the ‘Young Specialists’ category in 2017 was due to the decrease in the number of job openings for young specialists.
OMK Annual Report 2017 67 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT SUCCESSFACTORS COMPLETE RECRUITMENT SYSTEM
SuccessFactors, a complete recruitment Ratio of in-house and external staff system, was introduced at OMK in October recruitment in categories B, C and D Creation and approval Requirements for candidates 2017. of recruitment requests and working conditions within within a single system a single template • The system enables a centralized approach % 1 2 to recruitment using a single statistical 90.7 database of vacancies and processes. In-house Detailed history Advantages Real-time status of comments of using of candidates’ • It makes it much simpler to organize 2017 90.7% on candidates 6 3 the system applications employee rotation, both at the employee’s and reports primary plant and within the company 2016 90.2% as a whole. 80.6% 2015 5 4 • Managers can create requests for staff Endorsement of hiring Evaluation and comparative in any category and from any region. % conditions (job offer) for candidates analysis of proposed 9.3 in a single system candidates • The system facilitates career progression External by in-house candidates by creating specific talent pool groups. 2017 9.3% 2016 9.8% 2015 19.4%
In line with the strategic objective of making maximum use of employees’ potential in order to develop the talent pool, 17 line managers were promoted to senior management positions in 2017. Recruitment from external sources has fallen by 10 percentage points in the space of two years thanks to the emergence of big career opportunities for company employees and candidates from local communities.
OMK Annual Report 2017 68 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT WORKFORCE STABILITY
Thanks to the efforts made by management the turnover is steady at 3–5%. This is due to provide steady employment, competitive to the absence of equivalent employers in pay and an expanded social programme, the area and the insulation of the job market, it has been possible to keep average which motivates qualified workers to stay employee turnover at key company plants at a plant. At the other sites, where a large to 4.1%. At the plants that are the main number of job openings are available, the employers in their cities (VSW and CSW), rate of turnover is 10–15%.
2016 2017 Plant Net turnover (%) Stability Net turnover (%) Stability VSW 4.0 96.0 2.7 97.3 Trubodetal 4.8 95.2 3.0 97.0 BVP 18.1 81.9 5.8 94.2 CSW 4.8 95.2 4.8 95.2 APP 8.5 91.5 7.1 92.9 OMK managing company 11.7 88.3 8.9 91.1 Group 6.0 94.0 4.1 95.9
OMK Annual Report 2017 69 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT ENGAGEMENT
The annual study of employee engagement of dialogue with employees as stakeholders. Ethics Commission by means of amendments of the new values was measured as part of the using international methodology* was conducted Over 400 corrective measures are taken to the OMK Corporate Constitution. This is the engagement study and varied between 64% for the fifth time in 2017, covering 74% of full- annually according to the results of the study. regulatory document that contains the code and 82%. The new values were approved by time employees. The results were analysed The company believes that the fundamental of corporate ethics. In particular, the special the Management Board together with the new in a focus group format with individual staff factors promoting an increase in engagement are role of managers in complying with ethical version of the Corporate Constitution. categories and round tables in the subdivisions the deliberate development of people skills by standards was emphasized (Section 4.11), as (shops). Plans to improve engagement in 2018 managers at various levels, and compliance with was the responsibility of employees to provide OMK corporate values were developed during working sessions with the company’s rules of conduct, which is ensured constructive feedback on performance, including subdivision managers. by the OMK Ethics Committee and he ethics negative feedback (Section 4.12). The dispute committees at the plants. resolution procedure was defined (Section 4.13). Increasing engagement year-on-year helps the company to remain focused on conditions Following a review of the requests received, the The company established a set of corporate for staff. The engagement study is itself a form rules were updated by a decision of the OMK values in 2017. The level of communication
Employee engagement, %
2015 2016 2017 ОМК 50% 54% 67% VSW 53% 56% 73% Trubodetal 50% 51% 67% АPP 93% 86% 92% CSW 26% 34% 42% BVP 24% 30% 48%
ОМК managing 66% 70% 76% company
* AON Hewitt international methodology. OMK Annual Report 2017 70 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT EMPLOYEE QUALIFICATIONS
The employee qualification level • certification according to international is calculated according to mandatory standards qualifications from the following groups in the qualification catalogue: • special processes
• professional qualifications • requirements of oversight bodies, managers, of blue-collar workers specialists, office staff and blue-collar workers
Employee qualification level (%)
2015 2016 2017 OMK 78% 78% 86% VSW 85% 86% 86% Trubodetal 83% 89% 86% APP 64% 74% 90% CSW 75% 83% 92% BVP 42% 45% 72%
OMK Annual Report 2017 71 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT STAFF DEVELOPMENT
OMK takes the creation of a talent pool Corporate competencies are evaluated using within the company very seriously. a 360-degree appraisal, an assessment The talent pool is formed so that employees centre, testing and questionnaires. can be promptly appointed to vacant To develop the competencies of a candidate, positions within a group, administrative risks a combination of standard training are reduced when making appointments programmes and an individual development to management positions, the time taken plan tailored to the specific candidate to adapt to a new role is shortened, optimum is offered. conditions are created for discovering and utilizing potential, and motivation Three basic development programmes for professional, personal and career for different categories of talent pool development is increased. candidate were created in 2017 and are due to be introduced in 2018: TALENT POOL • for the talent pool for senior management In forming the talent pool, special attention positions is devoted to the evaluation of candidates. Applicants are primarily selected according • for the talent pool for production to formal criteria (length of service and maintenance roles and performance in their current position). Introductory interviews are conducted • for the talent pool for auxiliary and support with candidates who meet the formal criteria functions to determine their loyalty to the company and their motivation for further development.
OMK Annual Report 2017 72 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
ANNUAL PERFORMANCE and for achieving annual performance SOCIAL FACILITIES MANAGEMENT CYCLE indicators. In 2017, these performance-based bonuses amounted to 3.4% of average salary. The company acted in accordance OMK has a single goal-setting system. with its approved strategy regarding The achievement of annual goals FLEXIBLE TIME MANAGEMENT social facilities owned by OMK. This is monitored using the software product strategy envisages transferring SuccessFactors. In 2017, category D managers The company continued to implement flexible to municipal authorities facilities which were incorporated into the system. Team time management, covering maintenance staff are socially important to the city as management is organized under the functional and employees in auxiliary subdivisions. a whole, and improving the efficiency, strategies. Every employee included safety and sustainability of facilities in the goal-setting system had the opportunity During a reduction in production volumes, designed to meet the needs of company to follow a personal development plan periods of downtime are declared. Downtime employees and veterans. Notably, agreed with their manager in SuccessFactors. periods are used for legally mandated staff the Zvezdny children’s health camp The system is supported by 52 HR partners. absences (leave, medical check-ups, time off in Vyksa was transferred into municipal in lieu). Where possible, downtime periods are ownership. The transfer included PERFORMANCE-BASED BONUSES also used for staff training. the provision of RUB 40 million in financial support and a requirement During the reporting year, the company If one shop is experiencing downtime while to allocate 600 places each year continued to implement a performance- another has an increased workload, then staff for the children of OMK employees. based bonus system, the aim of which is to may be temporarily assigned to assist shops motivate staff to improve production efficiency. dealing with increased volumes or unfilled Investment in developing facilities, The company gave employees the opportunity vacancies. particularly the healthcare facility and to earn additional performance-based Metallurg recreation facility at VSW, bonus payments for exceeding standard The gains derived from managing time in this amounted to around RUB 100 million. production indicators relating to the outcomes way are in the region of RUB 170 million. of organizational change projects, for implementing efficiency proposals
OMK Annual Report 2017 73 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
SUPPORTING INNOVATION visited the Massachusetts Institute of Technology (MIT), Carnegie Mellon Innovations Discovered, a strategic session University and Pittsburgh State University. aimed at expanding R&D in the company, These universities are world leading was held at OMK in October 2017. organizations in the training of technology An internship in the US was organized and management specialists and they for employees responsible for expanding provide the foundation for some major R&D R&D at company plants so that they could projects. learn about the experience of organizing innovation and R&D at major foreign The knowledge gained during the trip companies and leading research institutes. and the innovative approaches studied by OMK employees will be used in promising Participants travelled to Boston developments at the company, during and Pittsburgh. During their trip, colleagues project implementation and in other areas.
OMK Annual Report 2017 74 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT EMPLOYEE TRAINING
Total duration of training by category (man-courses)
Category 2017 VSW Trubodetal CSW APP BVP Total 87,158 Managers 14,259 305 968 1,753 1,430 18,715 Specialists 25,121 206 1,069 292 607 27,349 Total duration of training in industrial safety, occupational safety, environmental Office staff 186 1 8 0 30 225 protection and emergency preparedness, Blue-collar workers 93,843 1,824 6,041 2,116 1,273 105,097 (man-courses) Target groups Talent Pool 12 Young specialists 130 2017 87,158 Total 133,409 2,390 8,228 4,161 3,340 151,386 2016 92,860 The data for VSW shows a clear trend and testing on standard operating procedures 2015 75,640 toward a decrease in the duration and operation process charts. Conversely, of training. This is because in previous periods at CSW and Trubodetal, the duration The programme is cyclical due to the periodic nature the site’s programmes focused on mass of training is increasing because programmes of confirming qualifications and obtaining permits training, for example, the ‘Conscientious in the Learning Management System format which are valid for 1–5 years. Attitude Towards Safety’ and ‘Management were launched later at these plants and the Minimum’ programmes in a Learning bulk of the training took place in 2017. Management System format, and training
OMK Annual Report 2017 75 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT EMPLOYEE TRAINING
PROACTIVE TRAINING IN CRITICAL The main outcome of proactive training is PROFESSIONS the proper redistribution of shop workers during a peak load period or during Proactive training for employees at OMK a reduction in production volumes. is based on programmes for professional training, retraining, mastery of a second Due to the opening of new production (related) profession, and skills upgrading. facilities as part of the project to expand the Oil and Gas Pipes Division, proactive As a rule, the programmes are conducted training is being conducted at Vyksa in three areas: for the following professions:
• prior to the commissioning of production • flaw detection specialist facilities equipped with new and advanced technologies • process equipment engineer
• prior to laying off employees due to • control post operator production facilities being closed down or a reduction in production volumes • mechatronic engineer (electrician + fitter)
• before the launch of a project to modernize • equipment maintenance and service (restructure) a production facility. electrician
The proactive training system includes • metallurgical production facility crane additional training at basic educational operator institutions, training at OMK plant training centres, and specific training by equipment • boilermaker suppliers during start-up and commissioning work.
OMK Annual Report 2017 76 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT PROFESSIONAL RETRAINING PROGRAMME IN INDUSTRIAL FACILITY MANAGEMENT
OMK employees received training The training programme format was mixed: in an MBA programme in 2016–2017. 240 hours of classroom training, Twenty-six employees from four company over 250 hours of distance learning plants participated in the programme. through video conferencing, online training using the LMS, and internships The main objective was to train in-house at plants in the Vorsino industrial park professional managers for leadership in Kaluga Region. The participants worked positions to ensure continuity on projects during the training programme, of management for production departments. and the majority of these are already being The programme gives talented, high- implemented. potential employees opportunities to advance and realize their potential, MANAGEMENT MINIMUM and creates a team of like-minded managers who will implement the company’s This programme focuses on developing objectives and principles in the long term. basic managerial competence and improving managers’ professional skills. It has been The training modules were developed provided via online distance learning since by the National University of Science 2013. During that time, 3,874 managers and Technology MISIS in conjunction completed the training. More than 300 OMK with OMK experts and senior managers. employees completed the training in 2017.
OMK Annual Report 2017 77 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
THE SCHOOL OF EFFECTIVE In 2017, 142 plant foremen, team leaders MANAGEMENT and plant employees participated in the programme: some had been This programme aims to improve recommended by subdivision managers the managerial and professional competence and others had put themselves forward of line managers in production, service for the school. Everyone who wanted and auxiliary subdivisions so that production to take part in the programme was given problems can be solved quickly and skilfully. the opportunity to apply on their own It combines all aspects of subdivision initiative for the first time. Selection management, from staff management skills was carried out on the basis of a letter to knowledge of production processes of motivation from the participant and and technology. meetings with each of the self-referring applicants. The programme has been running successfully since 2013 and over a hundred PRODUCTION SYSTEM ACADEMY people have successfully completed it. Figures tracking participant development The aim of this programme is to improve show that the programme is highly production process efficiency for all effective: employees at Vyksa Steel Works. It has been ongoing since 2014, and during that time 20% of participants followed a managerial over 1,600 people have taken part. In 2017, career (from team leader to foreman, 220 leaders were trained. and from foreman to senior foreman); 37% followed an expert career (including A corporate production system standard a change in level); and 11% followed with more than 50 tools has been developed a horizontal career path. to improve the effectiveness of the training course.
OMK Annual Report 2017 78 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
INVESTMENT PROJECT MANAGERS’ TEAM-BUILDING WORKSHOPS ACADEMY FOR EMPLOYEES
Running the investment programme These workshops are held to improve at VSW requires continual upgrading the supportive environment within teams, of investment management skills. help people to work together more This programme was launched in May 2017. effectively, and solve practical problems Forty-five participants were selected, regarding the restructuring and merging and they spent five months studying of subdivisions, and the redistribution planning, from the fundamentals of functions among employees of project management to running projects or subdivisions. and integrating the results into operations. Following an evaluation of its effectiveness, In 2017, 1,500 people attended these the programme may be rolled out to other workshops (29 workshops). The engagement OMK sites. study showed an improvement of 14 percentage points in the ‘Interaction’ factor, confirming the effectiveness of such measures.
OMK Annual Report 2017 79 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT DIGITAL CIO
In 2017, OMK launched a unique training The concept of four types of career The fundamental principle for building programme for those who want to become PRO-CAREER was introduced at VSW in 2017. a career is the employee’s desire to do so a new type of manager — a CIO. Experienced and faith in their own success. The concept A long-term project business coaches hold workshops covering A managerial career involves moving of career paths is described in the PRO- at Vyksa Steel Works leadership, professional competencies, within various levels of management. It is Career manual and information booklet. modern approaches to management, a career path for those who see themselves The booklet contains a flowchart for building The plant has many talented and capable as leaders. a successful career at the company, including flexible Agile methods, employees who want to grow and develop a description and a selection of criteria and personal development. professionally. Some are constantly A horizontal career path means moving for success. The booklet’s appendices improving their work and becoming experts between job descriptions. It is for people demonstrate a selection of training Since 2017, the company has operated in a specific area. Others are mastering who are ready to face challenges, new and advancement programmes to help a game-type online platform for managing related fields and climbing the career ladder. projects, difficulties along the way — goal-oriented employees. The Piggy And there are those who combine their employees’ ideas and goals. people who are quick to establish new Bank of Achievements booklet, a special work and an active social life. The members contacts and connections. This is a career supplement to the PRO-Career booklet, of the Young Metallurgists’ Council and The platform is set up on the same principle for a navigator. is an album of personal success stories. as a social network. Everyone can post our volunteers are an example. They decide for themselves what path they will follow. their ideas, discuss them with colleagues, An expert career means moving within As part of the programme to build career assemble a team to make them happen, one professional field towards deeper paths for production staff, 89 meetings were and receive a reward once the outcome professional knowledge and skills. held with teams on the subject of career is achieved. Thanks to the game elements opportunities at VSW, which drew more than embedded in the process, participants can A social career path enables employees 6,500 attendees. think up a multitude of the most diverse to plot a trajectory through the company’s ideas, research various routes, and find out social and cultural space, for example, what works and what does not. voluntary active participation in the plant’s social, charitable and sports programmes and campaigns.
OMK Annual Report 2017 80 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
SHADOWING At the end of the apprenticeship/deputizing period, the mentor meets with the apprentice A shadowing programme was introduced and evaluates how well the plan has been in the reporting year to build up potential fulfilled. By temporarily getting involved successors to VSW managers. The plant in fulfilling the mentor’s key responsibilities, creates an environment for studying the apprentice gains unique experience the specific nature of the work of an adjacent and expands his or her competencies. or higher manager, who functions The purpose of shadowing is to improve as a mentor. The mentor has a meeting management efficiency when a manager with the apprentice, and they create is absent and a deputy is fulfilling his or her an individual apprenticeship plan, setting responsibilities, to speed up the process out development goals and methods whereby professional experience is passed and timelines for achieving them. on, and to support a spirit of succession. The programme is open to employees from the Talent Pool programme and employees already doing the work of managers.
OMK Annual Report 2017 81 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT SALARIES
Company policy on pay is based on the historic and economic particulars of the regions where the company’s key assets are located. % % 14.78 +5 53.5 +6 Staff costs (RUB billion) Average monthly payroll (RUB billion)
2017 14.78 +5% 2017 53.5 +6% 2016 14.03 2016 50.3
Average wage growth was more than twice the level of inflation in the Russian Federation.
Average salary in 2017 (RUB thousand per month)
Ratio of average salary at plant Plant Average salary to average salary in region (%) VSW 45.2 above market rate for the region CSW 32.1 at market rate for the region* BVP 37.8 at market rate for the region APP 33.5 at market rate for the region Trubodetal 47.8 above market rate for the region
* Due to the variability of the labour market and the impossibility of assessing it using just one value, a range of +/-15% of the average salary for the region was selected by experts as an acceptable range. OMK Annual Report 2017 82 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT Social support
For 1 RELATIONS WITH TRADE UNIONS • Wellbeing of employees and their employee children — 74% in 2017 Relations are based on the social partnership (RUB objectives and principles at OMK agreed • Social benefits and guarantees — 68% Type 2015 2016 2017 thousand) upon by the management and the trade unions in 2016. • Indexing and raising of salaries — 67% Total social expenditure, (RUB million) 553 598 558 22.8 The main relationship is built at plant level. In order to develop, a trade union should be Direct social payments At the OMK level, dialogue takes place actively involved in the following issues: to employees (grants, financial through a social council that includes trade assistance, severance pay, pay union leaders, the plants’ HR managers • Ensuring the social and labour rights for social leave, etc.) 201 197 164 6.7 and representatives of the managing and interests of employees — 62% Medical support company. There were no collective labour (voluntary medical insurance + disputes or strikes in 2017. • Keeping employees informed about expenses for medical care) 155 171 179 7.3 the trade union’s activity — 61% Nongovernmental pension support 30 43 23 1.0 Questions about trade unions were included in the engagement survey questionnaire, • Legal advice for trade union Sanatorium and resort treatment with the consent of the trade unions. members — 57% and wellbeing for employees The results showed that the most important and their family members 38 43 41 1.7 issues in a trade union’s relations with The shop trade union leaders were also Meal provision 92 97 106 4.3 the employer are: rated according to how well employees know them. Other 37 46 45 1.8
OMK Annual Report 2017 83 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
PENSION PROGRAMME In 2017, over 5,800 employees participated The additional pension increased by 11% in nongovernmental pension programmes, in 2017 compared with 2016 and amounted To ensure a decent standard of living after and 4,490 participated in voluntary to between 2% and 11% of the government retirement, various nongovernmental pension programmes. Pension payments pension for regions in which OMK operates. pension programmes are in place at OMK from the Gefest fund totalled RUB 21.9 via the Gefest Nongovernmental Pension million in 2017, 25% more than in 2016. The reason for the low percentage is that Fund. The basic principle is that the company This rise was due to an increase in the corporate pension programmes have existed doubles the voluntary contributions average time employees had been for a relatively short time. Future plans are made by its employees. Employees enrolled in the programme and the number to help company employees to increase their determine the amount of their contributions of retirees. pension income to 40% of salary (the world independently. standard).
21.9 4,490
Number Payments of participants in 2017, (RUB billion) as of 31 December 2017 (persons)
51.9 5,800
Mandatory pension insurance Additional insurance premium Nongovernmental pension support Nongovernmental pension support
OMK Annual Report 2017 84 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
OMK CODE FORUM CORPORATE GAME SERIES ‘WHAT? WHERE? WHEN?’ A corporate forum was held for the first time in 2017, at which company managers gave This game series is aimed at promoting presentations on topical issues, division the development of employees’ intellectual managing directors held meetings in a talk potential, team spirit and leadership show format, and questions were asked principles. Five games were held last year, of company management. and more than 160 employees participated in each competition. The games were held Forum participants exchanged ideas simultaneously via video conferencing. and thoughts on company successes and problems, what lies at the heart 14TH IVAN AND ANDREY BATASHEV of corporate culture and leadership, AWARD CEREMONY and the company’s strategy and social responsibility. The event was streamed Prizes were awarded in 11 categories, online to all employees. five of which were only open to blue- collar workers. In all, 197 candidates and 10 primary production teams were nominated for awards. By tradition, the winners were presented with their awards by the guests of honour: government representatives and outstanding figures in science and culture.
OMK Annual Report 2017 85 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT AWARDS
PIGGY BANK OF ACHIEVEMENTS and competitions, using their initiative Awards received by employees at key OMK plants in 2017 and supporting production system tools, VSW developed a new, non-financial and getting involved in sporting events and incentive for employees, the ‘Piggy Bank educational programmes. Employees can Total VSW Trubodetal APP BVP CSW of Achievements’ – an album of personal earn a separate ‘Thank You’ sticker from their Government 2 2 success stories in which employees supervisor as a sign of their appreciation receive stickers for various achievements. for a job well done. This is an inspiring and Departmental 110 92 3 8 7 For subdivision managers, the album motivating career-building tool that helps Regional 79 72 3 2 2 serves as a tool for positive feedback employees to gather together their personal Municipal 113 82 9 8 13 1 and for acknowledging the achievements achievements in all areas, and to maintain of their teams. and develop an interest in new triumphs. Corporate 79 Plant 1,185 870 39 26 50 200 There are 17 types of activity that Due to the introduction of this programme, employees can record in the album: the level of satisfaction with the ‘Career Total: 1,568 performing management responsibilities, Opportunities’ factor in the engagement entering foreman competitions, acting survey at VSW immediately went up by 25% as an instructor, taking part in social, in 2017, from 27% to 62%. cultural, charitable and creative activities
OMK Annual Report 2017 86 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
SOCIAL BENEFITS CAFETERIA which was held at VSW production sites in 13 main categories and one additional category. A ‘Social Benefits Cafeteria’ was set up The competition is held every three years and for key company employees in 2017. has two main goals: to increase the prestige Each employee can choose from more of working specialisms in the company and than ten benefits at his or her discretion to motivate employees to develop their within a specific budget. The programme professional skills. was launched at the managing company and the group’s largest plant, VSW, in 2017, More than 130 workers from seven United and is to be rolled out to other plants Metallurgical Company plants took part in 2018. in 2017. On the first day, competition entrants answered test questions on professional ‘Key’ employees are employees who skills, occupational safety, production have unique knowledge, play a key role system elements and company policies. in business processes, and have important connections to outside organizations. OPEN DAY FOR EMPLOYEES’ The business could not exist in the long term CHILDREN without them. Open days are held at all OMK plants PROFESSIONAL 2017 to develop the corporate culture CORPORATE COMPETITION and encourage loyalty to the company among employees’ children. During guided One of the biggest and most significant tours, children aged 4–16 find out about events of the year was the Professional 2017 where their parents work and learn about corporate competition for professional skills, what the company does.
OMK Annual Report 2017 87 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.3 HR MANAGEMENT
IMPROVING THE EFFICIENCY The establishment of the centre has freed OF THE HR SERVICE HR partners from standard routine operations and given them more time to spend on To improve the efficiency of the HR service, developing competencies and creating a single centre for operational work elements of corporate culture. Employees are with employees was set up in 2017. automating processes in order to reduce the The centre’s specialists perform all stages workload and the number of errors in manual of operational HR accounting — keeping input. Areas of expertise are to be allocated the staff register, personal record keeping in the centre so that uniform HR accounting and time keeping — and are responsible for processes can be established for the entire the end result. Bringing specialists at this group. level together in a single centre makes it possible to quickly divide up large workloads, discuss complex and non-standard situations, and share experience.
OMK Annual Report 2017 88 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS
The aim of OMK’s external social activity 2nd place Winner is to support the company’s strategy by creating a positive atmosphere in the category for Best Programme of Changing the World, a regional and making long-term investments for Determining Policies and Principles competition for social achievements, in the development of local communities. for Corporate Social Investments in the Charitable Activity in the Leaders in Corporate Charity by Commercial Organizations Cooperation with a wide range of sustainable competition and Individual Entrepreneurs development stakeholders in the areas category (Chelyabinsk Region where OMK operates is enabling us to bring Legislature) 3rd place about qualitative changes in the social sphere. Thanks to its serious approach to social planning, OMK is addressing in the Transparency of Charitable Activity 3rd place specific social problems in the regions category in the Leaders in Corporate Charity and improving their social and business competition in the Leaders of Russian Business: potential. Dynamics and Responsibility Winner of Champions competition in the Support In 2017, RUB 203 million was spent on of Good Deeds competition and Development of Social social and charitable campaigns, projects Entrepreneurship category and programmes aimed at implementing creative and educational initiatives, in the Pro Bono category (3rd place) supporting children, young people and Social Volunteering category (2nd place) Impulse for Good Prize and the elderly, and expanding sport in regions where the company operates Medal in the Best Corporate Programme (not counting social partnership agreements for the Development of Social with municipal authorities). for contributing to the development of civil Entrepreneurship category. society in Chelyabinsk Region (Our Future Fund for Regional Social Programmes)
OMK Annual Report 2017 89 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS KEY PRIORITIES FOR SOCIAL INITIATIVES
SUPPORTING SPORT EDUCATION
HELPING CHILDREN CULTURE
ASSISTING RELIGIOUS SOCIAL AND SPIRITUAL ENTREPRENEURSHIP ORGANIZATIONS
OMK Annual Report 2017 90 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS OMK PARTNERSHIP
OMK Partnership, the grant competition children, and providing support for people private funds), and more than RUB 800,000 BUDGET OF GRANT POOL for social and charitable projects, aims with disabilities and learning difficulties, was collected on the Planeta.ru platform. FOR SOCIAL INITIATIVES to combine the efforts of business, government involving them in an active life. A large number According to the evaluation by the Charities Aid and local communities to address acute social of projects were about promoting a healthy Foundation, the SROI of the OMK Partnership problems in the regions. It is by following such lifestyle and cultural and sporting events. competition for the entire company was 3.4:1. an approach that we will be able to find genuine This means that for each rouble invested 9.3 RUB million solutions to important problems affecting The competition’s expert panels included plant by OMK, the value of the social impact is more the cities where OMK operates, to spend funds managers, heads of local administrations, than three roubles. effectively, and to create sustainable long-term and representatives of various regional TOTAL GRANT POOL projects. ministries and departments. The SROI was 3.6:1 in Vyksa, 3.6:1 in Novosineglazovo, 2.5:1 in Blagoveshchensk OVER THREE YEARS In 2017, 233 applications for the competition In 2017, OMK invited experts from the Charities and 3.9:1 in Chusovoy. The competition has had were received: 64 projects from OMK Aid Foundation to evaluate the socioeconomic a positive impact on the relationship between employees and 169 from nonprofit impact of projects implemented in the course the plants and regional and local governments, 31.9 RUB million organizations across all of the regions where of the OMK Partnership competition and has improved relations with local residents the company’s plants operate. A panel of experts over the past three years. The evaluation and representatives of the social sector chose 78 projects to receive financial support was performed using the Social Return and the media. from OMK: 46 from organizations and 32 on Investment (SROI) approach. During 2015– SOCIAL RETURN from volunteers. OMK spent RUB 9.3 million 2017, 216 projects were implemented in the cities The OMK Partnership competition has to ON INVESTMENT (SPOI) on these projects in 2017. The best ideas were where the company operates, and the total grant a great extent promoted the development able to obtain additional funding from sponsors pool for the three years was approximately of personal leadership and city residents’ of the Planeta.ru crowdfunding platform, RUB 31.9 million. Furthermore, over the three personal responsibility for improving the urban 3.4:1 with which the company has been cooperating years of the competition, RUB 29.9 million environment. Many more people were involved since the third OMK Partnership competition. in social project funding was raised in the in the projects than was officially recorded, cities, which is roughly equal to the amount the potential of the community has been The applications that were singled out among the company invested in the competition. revealed, and a new mindset has been shaped the winners for their professional approach The funds were raised from federal and regional with regard to social good and people’s role focused on the social adaptation of orphaned grants (eight presidential grants and grants from in achieving it.
OMK Annual Report 2017 91 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS CORPORATE VOLUNTEERING
For OMK, corporate volunteering is a tool • Conscious volunteering: OMK employees the Big Brother project to help orphaned for attracting and retaining employees, have the opportunity to run social projects children and the Respect internet project for promoting their creative and professional independently, receiving mini-grants from for veterans. development, and for increasing their motivation. the company and involving other volunteers The readiness of staff to participate in volunteer in their initiatives OMK actively supports the blood donor projects and the projects themselves movement. Four blood donation drives were have a positive impact on employee • Individual volunteer projects as part of the OMK held at OMK’s Moscow office in 2017, in which engagement. A total of 7,694 OMK Partnership grant competition 201 people participated. Company employees employees are volunteers — more than 30% gave a total of over 90 litres of blood during of the company’s workforce. • Volunteer projects run by the young the year. Partners join in with OMK events, metallurgists’ councils at the plants include including employees of Metalloinvestbank, planting trees, clearing rivers, blood drives, the Russian Martial Arts Union, the National helping company veterans and residents University of Science and Technology MISIS, etc. 7,694 of senior citizens’ homes, and cleaning up plant sites (‘environmental paratroopers’) OMK employees In November 2017, OMK featured as are volunteers 2017 a partner in the section entitled ‘Corporate 30,776 The corporate volunteering programme volunteering as an HR strategy: a tool for 7,694 has been expanding since 2015. Four areas increasing engagement or an additional HR 1,282 for volunteer initiatives were successfully burden?’ at the Sixth Moscow International implemented in 2017: Forum on Corporate Volunteering: Business 2016 25,600 and Society. 6,400 • Event volunteering: participation in company- 1,066 wide volunteer campaigns jointly with the OMK As part of the forum, awards were given Number of volunteers Participation fund (Every Little Christmas to entrants in the Champions of Good Deeds 2015 21,988 Tree Helps, Heart to Heart, Let’s Take a Child competition for corporate volunteering projects. 5,497 Number of volunteer hours to School, and the ‘Who’s Running? Everybody!’ The winners included projects run by OMK 916 Number of days marathon). volunteers in Vyksa (Nizhny Novgorod Region): (in terms of volunteer hours)
OMK Annual Report 2017 92 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS PARTNER PROJECTS
START YOUR BUSINESS SOCIAL Our Future Regional Social Programmes Fund, PROJECTS IN CHUSOVOY ENTREPRENEURSHIP the State Committee for Entrepreneurship DEVELOPMENT PROGRAMME and Tourism and the Centre for Social Innovation of the Republic of Bashkortostan, Joined Perm This social entrepreneurship development and the Blagoveshchensk Municipal District Entrepreneurship programme was launched in Chusovoy in 2016. Administration. Development The project was extended to Blagoveshchensk Fund Federal in 2017. The programme’s total budget TRAINING FOR RESIDENTS Certified in social acceleration in 2016–2017 was RUB 9 million. WITH INITIATIVE Supported Launched entrepreneurship programme Jobs created 35 projects BUDGET FOR SOCIAL Various examples of social entrepreneurship (20 in 2016, ENTREPRENEURSHIP were examined at the introductory seminar 15 in 2017) 34 projects 2 projects 24 projects 37 DEVELOPMENT PROGRAMME ‘Business Models in Social Entrepreneurship: IN 2016–2017 Russian and Foreign Experience’ to give participants an understanding of the subject of social entrepreneurship and present possible entrepreneurs permanently resident The Cross Country Skiing Federation project RUB million templates for implementing a business model. in Chusovoy and Blagoveshchensk reached the final of the All-Russian Social 9 A practical seminar on Social Planning was and the corresponding municipal districts. Entrepreneurship Projects competition. The programme was implemented using social conducted for those who had decided to try partnership mechanisms. This builds additional to incorporate their own idea into the working Grant support was also provided to organizations The Recycle Plastic project received a regional sustainability into the project itself and means business model. working to address social problems in the city subsidy of RUB 850,000. the results achieved can be published on social and improve the quality of life of residents media. START YOUR BUSINESS of the region as a whole and representatives New leisure sites appeared in Chusovoy: a pay- COMPETITION of socially vulnerable groups. The main per-minute café, a cycling club, the Awesome The following participated in the criterion for awarding a grant is that the socially- Rabbit trampolining centre, a Montessori project in 2017: in Chusovoy: the Perm Residents of Chusovoy and Blagoveshchensk oriented activity be self-supporting after children’s club, a pastry shop, the Alph@ mental Entrepreneurship Development Fund, who were interested in the examples considered the implementation of the stated business plan. arithmetic club, the Free Sandbox (a space the Perm Territory Ministry of Industry at the seminars could obtain startup capital The budget for the grant competition in 2017 for young mothers and children to relax in), and Trade, the Chusovoy Municipal District to develop their ideas. The grant competition was RUB 4 million. and a gym for senior citizens. An eco-village, Administration; in Blagoveshchensk: was open to individuals and private petting zoo and laundry have been opened.
OMK Annual Report 2017 93 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS PARTNER PROJECTS
PROJECTS IN BLAGOVESHCHENSK
Joined the Social Projects Accelerator Created by (Centre for Social visually impaired Supported Launched Innovation) people Jobs created 11 projects 11 projects 11 projects 2 projects over 70
Facilities that have opened in Blagoveshchensk ACCELERATION PROGAMME include new developmental centres for children TO SUPPORT COMPETITION WINNERS and teenagers (an interactive foreign language learning club for children, including children The programme supporting young with disabilities, and the Today careers advice entrepreneurs is perhaps even more important and personal development centre); recreational than financial support for social initiatives. facilities (Grab and Go, a bike and roller-skate As part of the programme, arrangements hire shop, and Spin the Pedals, an indoor cycling were made for the competition winners studio); social services (a social assistance to take part in the federal School of Social INFORMATION SUPPORT service called Your Caregiver, the Pro Bono Entrepreneurship programme in Chusovoy and wellness centre (a salt therapy room), the acceleration programme of the Republic This programme provoked great interest among and the Joy massage centre, which offers jobs of Bashkortostan’s Centre for Social Innovation. journalists and social media users. During to visually impaired people); and new services A positive outcome was gained from sharing the programme, over 600 articles on social (mobile repairs of agricultural equipment, best practices at district conferences on social entrepreneurship projects and the programme and Button, a children’s clothing production entrepreneurship in Chusovoy and Perm itself appeared in local, regional, corporate, facility). and at regional entrepreneurship forums in Ufa. national and social media.
OMK Annual Report 2017 94 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS PARTNER PROJECTS
RUSSIA-WIDE BOOK FESTIVAL in the festival in each city. More than 10,000 people attended festival events. In 2017, OMK organized Book City: Architecture The total budget was RUB 9.4 million. of the Intellect, a large-scale festival for book lovers, in the areas where it operates.
There were cultural events and presentations of the latest books, libraries and publishers Number of participants for both children and adults. Great emphasis by city (visitors) was placed on involving local creative groups in preparing for and organizing the festival. Visitors to Book City were able to meet contemporary Russian authors: Chusovoy Anna Goncharova, Zakhar Prilepin, Rinat Valiullin, Sergey Litvinov, Ekaterina Vilmont, Dmitri Yemets, 1,700 Oleg Zhdanov and Tatyana Bulatova. The guest Novosineglazovo writers gave readings which were open to all. (Chelyabinsk) 1,300 The event was held in August and September 2017 in all of the cities where OMK Blagoveshchensk operates. The festival opened in Chusovoy, and later transferred to Blagoveshchensk, 2,000 Novosineglazovo and Almetyevsk. It closed Almetyevsk in Vyksa. Regional and local government representatives, creative groups, libraries 1,700 and local business communities were involved Vyksa 3,500
OMK Annual Report 2017 95 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SOCIAL 6.4 PROJECTS
VICTORS’ BALL THE ENERGY OF A DREAM
The 12th Victors’ Ball was held in Moscow OMK sponsored The Energy of a Dream, in December 2017. More than 400 veterans an exhibition held at the State Historical attended from 15 countries, including Museum in Moscow to mark the centenary Russia, the CIS and the Baltic states. Those of the October Revolution. The company’s invited included veterans of the battles support for the exhibition was its for Moscow and Stalingrad, as well as contribution to preserving historical heritage. Leningrad and Kursk, children of the war and concentration camp prisoners. They included artillerymen, gunners, paratroopers, tankers, radio operators and nurses. All have been awarded medals and decorations. The ball has been held since 2006.
OMK Annual Report 2017 96 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.5 CHARITY OMK PARTICIPATION CHARITABLE FOUNDATION
Founded in 2008, OMK Participation is funded workshops, and other happenings. The theme by contributions from company managers of the festival was ‘Water’, so the 300-hectare and employees. The foundation’s board Upper Vyksa Pond became the main festival site of trustees is chaired by Irina Sedykh. In 2017 for the first time. Famous architects and artists it held several events aimed at supporting from Russia and France developed their own art disadvantaged and seriously ill children, float projects, one of which was created from and supporting the development of educational a sketch by a woman from Vyksa who had won and medical techniques, culture and art. the competition for the best project.
ART OVRAG FESTIVAL The programme also included theatre productions, workshops and lectures on urban The seventh Art Ovrag festival of urban culture entrepreneurship, modern art, photography and was held in Vyksa from 16 to 18 June 2017. other subjects, concerts, creative activities for United Metallurgical Company and the OMK children, and sports demonstrations. The Vyksa Participation foundation have held this event Air art residence opened in Vyksa. This is a new every year since 2011. development in global modern art. The art residence in Vyksa is the only one in Russia that During the festival, the city was transformed is hosted in a provincial city. Artists now live into a single art gallery with outdoor exhibits and work in the residence, and their work will of works by famous artists. The festival later remain in Vyksa. The festival also featured is a catalyst for creativity among the city’s the unveiling of the largest mural in the world residents, who gain the freedom to transform on the wall of Mill-5000 at the Vyksa Steel their environment and create a new public Works. space. More than 10,000 residents of Vyksa and visitors The three-day programme in 2017 was packed to the city participated in the Art Ovrag festival full of cultural, educational and sporting events, over the three days.
OMK Annual Report 2017 97 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
6.5 CHARITY
SHOW AT NIKULIN CIRCUS SNARK Theatre, the Smart Bear folk puppet TOGETHER TO SCHOOL! theatre the Russian Marionette Theatre, This New Year event was held for the fifteenth the Figaro Marionette Theatre, the Cedar OMK Participation held this traditional time and was attended by about 2,000 guests. animation studio and the July Ensemble Theatre. charity event, during which more The special guests were children from than 2,000 employees helped 164 large and low-income families, beneficiaries ASSISTANCE FOR CHILDREN’S children from cities where the company of the foundation from Vyksa, foster children CANCER RESEARCH INSTITUTE operates get to school. from the Pelican social rehabilitation centre, children with health problems, disadvantaged For the first time in its history, the foundation WITH A LOVING HEART children, patients from the Paediatric received a presidential grant of RUB 1 million Oncology and Haematology Research Institute for a socially significant project — The foundation raised more than at the Nikolai Blokhin Russian Cancer Research the development of the website RUB 595,000 to buy a horse-riding Centre, children from Syria who are receiving pediatriconcology.ru, which was set up simulator for disabled children medical treatment in Moscow, families from in 2011 as a foundation initiative. The foundation at the Constellation developmental regions where OMK operates, and children supports the publication of the journal centre in Vyksa and a stationary of employees. Paediatric Oncology and in 2017 provided bicycle for Matvey Antropov from the Russian Cancer Research Centre with Blagoveshchensk, as well as medical EVERY LITTLE CHRISTMAS TREE HELPS medical equipment for young patients: treatment for foundation beneficiaries a BF-XP60 bronchofibrescope for thoracic in Almetyevsk and Chelyabinsk. Since 2012, the OMK Participation charitable surgery, 15 infusion pumps and five perfusors foundation has run the annual Every Little for chemotherapy. TARGETED ASSISTANCE Christmas Tree Helps project for children undergoing treatment at the Nikolai GIVING TUESDAY In 2017, 41 families from regions where Blokhin Russian Cancer Research Centre OMK operates received targeted of the Russian Academy of Medical Sciences. The OMK Participation foundation supported assistance from the OMK Participation In 2017, volunteers painted the ward the international #GivingTuesday initiative foundation, amounting to RUB 4.7 and inner courtyard of the Russian Cancer for the second year in a row. Charitable, million. Research Centre, presented gifts to young educational and patriotic events and blood patients, and held a theatre festival for them drives were held on 28 November in the regions featuring the Meyerhold Centre, where the company operates.
OMK Annual Report 2017 98 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
PRODUCTION 6.6 SAFETY
The OMK Management Board approved • Compliance with the requirements of law, 2. Effective management of these aspects a new policy on production safety in July a mandatory condition for company and hazards to prevent and/or minimize 2017. The policy was developed according operations the potential adverse impacts associated to Russian laws and the international with them standards ISO 14001:2004 and OHSAS • Support and encouragement of safe 18001:2007. There were no significant employee behaviour 3. Integration of this activity into the general INTERNATIONAL STANDARDS changes to the system of internal management system regulations determining production safety • Risk management to prevent accidents ISO 9001:2008 policy in 2017. 4. A corresponding organizational structure ISO 14001:2004 • Employee competence and responsibility, with clearly defined functions and allocation ISO 39001:2012 The company operates in accordance a basic condition for safe work of authorities and responsibility OHSAS 18001:2007 with the laws of the Russian Federation. OSHA 3132 2000 It is guided by international standards • Monitoring of production safety indicators 5. Specific training and distribution OSHA 3133 1994 and best practices in production safety of information to improve company RR363/2001 and strives to integrate them into all • Mutually profitable relationships employees’ general awareness ISBN 978-0-470-04309-7 business processes. with suppliers and contractors and to support the effective functioning of the management system IOGP International Association The policy includes the following principles: • Work to ensure production safety involves: of Oil and Gas Producers, 2011 6. Monitoring of key safety, health Customs Union Technical Regulation Safety • Priority of human life and health over 1. Identification and ranking of aspects and and environmental impact indicators of Wheeled Transport Vehicles, production indicators hazards of company operations in terms TR TS 018/2011, approved on 9 December of environmental protection, health and 7. Continuous evaluation of performance 2011 (No. 877) by a decision of the Customs • Integration of the production safety industrial safety and improvement of the integrated Union Commission management system into production management system and managerial operations
OMK Annual Report 2017 99 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY
OMK has created conditions in which staff and contractors can work safely, and efforts are continually being made to improve the environmental safety of the company’s operations
Stakeholders Requirements Measures Employee safety/safety in production, Joint production safety audits, development of safe working methods, staff training Consumers shipping and transportation of products and demonstration of processes to consumers Providing information on incidents (causes, measures). Consumers Information on safety/providing information on incidents Preparing and providing monthly reports on production safety Safety conferences/participation of production safety Consumers representatives in joint conferences Representatives of OMK safety offices and plant administrations participate in joint conferences Suppliers of goods and services Employee safety/safety in production, Joint production safety audits, development of safe working methods, staff training at the federal and local levels shipping and transportation of products and demonstration of processes to consumers Government authorities in regions where company operates Reporting/quarterly and annual Timely submission of reports Compliance with occupational safety and production safety Government authorities requirements/scheduled inspections by oversight in regions where company operates and regulatory bodies Compliance with production safety requirements
OMK Annual Report 2017 100 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY
The effective organization of the production safety management system at OMK plants is based on sharing experience and best 649 practices, and also on management decisions that aim to reduce the risk Number of industrial safety audits of injuries and incidents through the work in contractor companies of the production safety committees.
The OMK Production Safety Committee 2017 649 is joined by the plants’ occupational safety 2016 60 coordinating committees and shop working groups to form a unified managerial 2015 45 hierarchy. The aim of the committee’s work is to implement the company’s ideas, OMK’s main goals in both 2017 and the long term development strategy and policy in the are to prevent fatal injuries and achieve a systematic area of production safety. The managing reduction in work-related injuries and zero fires company includes the OMK production and accidents. safety office, which monitors the main areas of occupational, industrial, fire, transportation and environmental safety, Unit of Target and the management of staff health Indicator measurement 2015 2016 2017 2018 and production process safety. Expenditure on occupational safety and industrial safety RUB million 312.90 384.02 559.77 653.76 Expenditure on fire and radiation safety RUB million 86.70 54.63 23.43 22.69
OMK Annual Report 2017 101 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY PROGRAMMES TO IMPROVE PRODUCTION SAFETY IN 2017:
improving The programmes are implemented the production safety by running safety training courses, culture mentoring line managers, and carrying out comprehensive audits that include six main areas: monitoring and development • occupational safety of contractor safety • industrial safety
development • environmental safety of the production process safety system • transport safety
• fire safety introduction of a transport safety • production process safety system All of these programmes are due to continue in 2018–2020, with expanded employee introduction engagement every year. of a staff occupational health system
OMK Annual Report 2017 102 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY INJURIES
No fatal incidents were recorded at OMK The number of lost-time injuries recorded plants in 2016–2017. at OMK plants in 2017 was down 25% compared with 2016. 1.73
Lost time injury frequency rate, (LTIFR*) Number of recorded lost-time injuries (on graph):
2020 1.4** 2018 1.56 3 5 10 35 VSW 19 2017 1.73 Trubodetal 2016 2.22 CSW 2015 2.37 BVP 10 APP 11 For the safe performance of work, operation 71 49 process charts are placed directly at workstations at OMK plants. These 2016 2017 describe in detail which steps must be taken to perform a given operation.
12 9 6
* Lost Time Injury Frequency Rate. ** Target indicator OMK Annual Report 2017 103 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY TRAINING
Training on the development of the occupational safety Mentoring and industrial safety management system: for line managers
Seminar for senior managers on ‘Safety ‘Safe Driving’ seminar The mentoring programme makes it possible Management: Systems Used by Facility to reach a joint understanding of topical Managers’ ‘Production Process Safety’ seminar problems with the session participant and to determine what action he or she will • Seminar for line managers take to further improve occupational safety on ‘Effective Safety Management (internal investigations, safety audits). Techniques with Training on Conducting Behaviour-Based Safety Audits’
Seminar for workers on ‘Developing a Conscientious Attitude to Safety’ 1,895 226/38 Number of people trained Number of mentoring sessions ‘Investigation of Incidents and Analysis in safety programmes held with managers of Key Causes’ seminar on internal incident investigations 2017 1,895 2017 226 Managers 38 • ‘Organization of a Transport Safety System’ 2016 3,096 Sessions seminar 2015 4,293 2016 266 38
Over 30,000 OMK employees have 2015 231 attended corporate training programmes 33 on production safety over the last six years.
OMK Annual Report 2017 104 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY COMPREHENSIVE On the basis of this report, each plant prepares corrective actions and draws AUDITS up an individual implementation plan. Performance is monitored quarterly In the reporting year, comprehensive audits and during the annual audit of the production were conducted in all six areas of production safety management system. safety work:
1. Occupational safety — basic criteria PERSONAL 2. Industrial safety — basic criteria PROTECTIVE EQUIPMENT 3. Environmental safety — basic criteria Work was done in 2017 to introduce 4. Transport safety — basic criteria the automated SAP EHSM system 5. Production process safety — basic criteria for demand creation, which radically changed 6. Fire safety — basic criteria the procedure for supplying employees with protective clothing and other personal The report on the audits contains strengths protective equipment. Production safety (best practices and well developed specialists regularly attend exhibitions processes), areas for improvement, and seminars organized by suppliers and recommendations for preparing of personal protective equipment to keep measures to improve the operation up with trends and seek out areas of the production safety management for improvement with regard to the provision system. of modern protective equipment for employees.
OMK Annual Report 2017 105 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY WORKPLACE PREVENTING WORK-RELATED CERTIFICATION ILLNESSES
Pursuant to Federal Law No. 426-FZ To keep employees in good health A programme of rest and recovery ‘Special Evaluation of Working Conditions’, and prevent work-related illnesses, at spas and health resorts for employees an unscheduled special evaluation medical examinations were conducted and members of their families runs annually of workplaces was performed in 2017. at OMK in 2017, and 100% of those with the financial support of the company. requiring examinations received them. Employees working in harmful The examinations revealed a high risk and hazardous conditions are given of work-related illnesses among smokers, preference in the programme. Special evaluation of workplaces and therefore preventive actions were taken ‘Mother and Child’ packages are bought (number of workplaces) to combat smoking. for employees’ children aged 4 to 15.
Plant 2016 2017 An employee screening campaign APP 39 42 was conducted to highlight the risks and prevention of cardiovascular VSW 978 1,208 diseases. Flu vaccinations were organized CSW 225 120 for employees. Fluorography examinations Trubodetal 132 119 were conducted on site for early detection of cancer-related respiratory diseases. BVP 291 46 Women were offered cancer screening Total 1,665 1,535 examinations (ultrasound scans of the lower pelvic organs and breasts) on site.
The unscheduled evaluation of working conditions did not result in any substantive changes at OMK plants.
OMK Annual Report 2017 106 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY MINIMIZATION OF PRODUCTION SAFETY RISKS
To minimize the risks associated with • To ensure their readiness to respond the operation of hazardous production to accidents, the plants have: an accident facilities, a number of mandatory measures response action plan; their own fire and gas are taken at all OMK plants: rescue service (VSW); medical stations; a warning, communications and observation • Before being allowed to work system; and the necessary stock independently, staff attend training courses of firefighting equipment, personal protective in their working professions and designated equipment and emergency tools. Contracts role. are signed with professional emergency rescue units. • Each new employee undergoes an introductory briefing on occupational • Emergency drills, scheduled firefighting safety, an initial briefing at the workplace training sessions, and first aid drills are and an apprenticeship under the supervision held to reinforce employees’ knowledge of an experienced mentor and is only and practise the correct actions to take allowed to work independently after in emergencies. his or her knowledge of production safety has been tested.
• All facilities have developed instructions All of the measures listed above on the rules for safe operation of equipment help to reduce all risks associated and units, on production safety when with the operation of hazardous production performing various jobs, on occupational facilities to an acceptable level and reduce safety for individual categories the probability of accidents occurring of specialists and on the actions to be and escalating at OMK plants. taken by maintenance staff in the event of an accident. The instructions are approved by the appropriate facility managers.
OMK Annual Report 2017 107 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
OCCUPATIONAL 6.6.1 SAFETY REQUIREMENTS FOR CONTRACTORS
To ensure compliance with industrial safety All contractor employees undergo and occupational safety requirements an introductory briefing prior to starting by OMK’s contractors, the company work, and records are kept accordingly. introduced a corporate standard, ‘Contractor During the briefing, contractor employees management in the field of occupational, are informed of the occupational environmental and fire safety’. safety and environmental protection This standard establishes the requirements requirements, the policy on environmental for interaction with contractors to ensure protection, health and industrial safety, safe working conditions and compliance and the procedure for gaining access with environmental requirements when to and moving around plant premises, organizing work to be done by contractors including by vehicle. During contract work, at company facilities or at other facilities regular inspections of contractors are on the company’s behalf. conducted by OMK specialists. A database of suppliers and contractors is being created. When contracts are entered into, the contractor signs a mandatory addendum to the contract, ‘Requirement for compliance with laws in the field of occupational safety, industrial safety, fire safety and environmental protection’. Production safety specialists evaluate suppliers/contractors according to criteria for compliance with occupational safety and environmental protection requirements.
OMK Annual Report 2017 108 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY ENVIRONMENTAL MANAGEMENT SYSTEM
In accordance with the production safety All plant line managers are kept informed policy adopted in 2017, the company of topical environmental protection issues is constantly improving its environmental on a monthly basis, which facilitates protection, health and industrial safety the rapid introduction of comprehensive management system, integrating it into projects. the existing management system. Adhering to the precautionary principle, OMK has a multilevel environmental OMK creates safe working conditions management system. At the managing for staff and contractors and guarantees company level, all environmental protection the environmental safety of the company’s issues are monitored by OMK’s occupational products. To minimize the environmental safety, environmental protection and quality impact at OMK plants, work is under way office. Specialists from the environmental to introduce new, safer management protection services are responsible methods, technologies and equipment. for environmental oversight at the plants. Subdivision managers ensure compliance OMK invests in environmental protection with the requirements of environmental measures, prevents accidents and improves protection legislation and targeted its readiness to deal with them, develops environmental protection measures. responsible resource management, and takes action to mitigate and adapt to climate change.
OMK Annual Report 2017 109 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY MAIN ENVIRONMENTAL INDICATORS
A reduction in the volume of waste Greenhouse gas emissions 5.7 generation in 2017 was achieved thanks 91.4 determined for VSW and CSW Total atmospheric emissions of pollutants to an expansion of the range of by-products Total disturbed land (ha) (thousand tonnes) which enter the waste cycle at an earlier The calculation was performed according 2017 5.7 stage, and to the sale of limestone processing 2017 91.4 to the procedural instructions and manual 2016 6.30 capacity. The latter, in combination 2016 91.4 on the quantitative determination with the development of waste processing of greenhouse gas emissions 2015 5.43 capacity, has made a significant impact 2015 187.9 by organizations conducting business 2014 6.66 on the reduction of accumulated waste 2014 194.1 or other operations in the Russian residues. Federation. Emissions were calculated for the following categories of greenhouse 2.85 Total pollutant emissions were reduced 41.7 gas emission source: stationary combustion Total discharge into water bodies in 2017 by closing the water discharge outlet of fuel, ferrous metallurgy and rail transport. (thousand tonnes) Payments for adverse environmental impact, at VSW and redirecting the wastewater (RUB million) 2017 2.85 to the municipal sewage network. As a result Greenhouse gas emissions will be reduced 2016 3.17 of the actions taken in 2017 to prevent 2017 41.7 in the future by closing the VSW open- 2015 3.20 certain sections of the VSW Casting 2016 71.7 hearth plant. and Rolling Mill flooding during seasonal 2015 41.0 2014 4.92 rains and snow melt, there was an increase in the volumes of rainwater and drainage 2014 79.7 909.6 water discharged into open water bodies. Production waste generation % (thousand tonnes) A new section for application 563.9 +1.3 2017 909.6 of polyurethane foam coatings was launched Greenhouse gas emissions at VSW in 2017. The waste generation (thousand tonnes) (in CO2equivalent) 2016 1,037.9 volumes were recalculated as a result. 2017 563.1 2015 1,075.2 The limits for VSW in 2017 included this 2016 555.9 section. 2014 1,195.6
OMK Annual Report 2017 110 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY
Total mass of waste by type and disposal method (thousand tonnes)
Plant 2016 2017 Waste on hand at beginning of year 19,615.3 10,834.33 Identified and itemized in current period 873.6 0.00 Waste generated during year 1,156.6 913.85 Received due to reorganization of another legal entity 0.00 0.00 Waste received from third parties (with and without transfer of ownership) 109.3 62.37 received from Company third parties 109.3 62.37 Waste utilized during year 1,111.5 1,010.44 used by third parties 869.6 523.83 Waste neutralization and processing 356.7 347.35 by third parties 27.0 21.41 Total waste sent to landfill 253.3 82.92 by third parties 80.3 82.70 Ownership transferred 855.9 525.00 Waste on hand at end of year 19,231.9 10,362.97 Waste transferred to third parties 937.0 634.48 total transferred to Company third parties 413.1 158.40
OMK Annual Report 2017 111 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY
Volume of atmospheric emissions from OMK plants (tonnes)
2015 2016 2017 Mass of total atmospheric pollutant emissions 4,901.75 5,758.28 5,726.01 nitrogen oxides (NOx) 1,671.848 2,182.13 3,084.72 1 sulphur dioxide (SOx) 136.494 112.72 33.65 carbon monoxide (CO) 1,825.154 2,001.93 1,576.62 benz(a)pyrene 0.0004287 0.00 0.00 volatile organic compounds (VOCs) 246.663 257.54 115.04 hydrocarbons (not including VOCs) 17.603 27.05 6.80 solids 939.971 1,126.14 898.67 Other 64.018 50.77 10.51
1 Growth resulted from a doubling of the production volume of billets for manufacturing railway wheels by VSW’s Open-Hearth Facility in 2017. In March 2018, the Open-Hearth Facility was shut down due to a transition to outsourced billets, which significantly reduced the volume of pollutant emissions into the atmosphere. OMK Annual Report 2017 112 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY
Water consumption (thousand m3)
Issue 2016 2017 Water use from all sources 373,996.06 376,200.687 Water intake, including: 10,109.12 10,053.757 water intake from underground sources 4,134.33 3,953.540 water intake from surface sources 5,479.26 5,797.860 water supply from water supply networks of other entities 495.53 159.577 Percentage of water volume recycled by company 97.33% 97.47%
Energy consumption
Indicator Unit of measurement 2015 2016 2017 Target 2018
Electricity purchased (net of power transferred to third parties) MWh 1,503,823 1,521,895 1,640,540 1,659,204 Thermal energy generated for own needs (total) (Gcal) 627,181 570,359 561,947 574,526 Thermal energy purchased (net of thermal energy transferred to third parties) (Gcal) 7,395 6,975 5,310 5,093 Electricity (GJ) 5,413,761 5,478,821 5,905,945 5,973,134 Thermal energy (GJ) 2,656,843 2,417,180 2,374,990 2,426,748 Energy (fuel) consumption for product manufacturing (GJ) 8,101,956 7,981,376 8,366,730 7,803,359 Total energy consumption (GJ) 16,172,560 15,877,378 16,647,665 16,203,241
OMK Annual Report 2017 113 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY
Savings on purchased energy resources due to energy conservation programmes by core asset*
Year
Plant Type Unit of measurement 2015 2016 2017 Electricity (thousand kWh) 4,606 13,196 23,897 VSW Natural gas (thousand m3) 608 1,541 5,918 Electricity (thousand kWh) 17,811 6,318 2,124 CSW Natural gas (thousand m3) 28,945 1,191 488 Electricity (thousand kWh) 224 3,245 7,555 BVP Natural gas (thousand m3) 139 413 73 Electricity (thousand kWh) 368 394 273 Trubodetal Natural gas (thousand m3) 203 44 21 Total for OMK Electricity (thousand kWh) 23,009 23,153 33,849 Total for OMK Natural gas (thousand m3) 29,895 3,189 6,500
Total energy savings resulting from implementation of energy efficiency programme (GJ)
Indicator 2015 2016 2017 Target 2018 Electricity 84,443 84,972 124,226 124,226 Thermal energy 1,016,071 108,388 220,922 220,922 Total energy 1,100,514 193,360 345,148 345,148
* Factors: 3.67 for electricity and 29.3 for natural gas OMK Annual Report 2017 114 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY REDUCING ENVIRONMENTAL IMPACT
Constant efforts are being made from the pipe plasma cutting units at VSW was in the anthropogenic environmental impact COMPREHENSIVE PROGRAMME at the plants to detect any non-compliance modernized; this made it possible to reduce of at least 3% in comparison with 2017 was set TO INTRODUCE A SEPARATE WASTE with the requirements of environmental law, the number of emission sources exceeding as the target for 2018. COLLECTION SYSTEM and to identify and assess risks associated the maximum allowable emissions. with environmental aspects of production CSW, which discharges process wastewater This programme has made a significant operations. Corrective or preventive measures The most significant results include after treatment at local treatment facilities contribution to reducing adverse environmental are developed for all non-compliance the reduction of per-unit waste generation into the Chusovaya and Usva Rivers, has impact. The volume of solid domestic waste and risks identified. from the vanadium pentaoxide production an adverse impact on the water bodies, was reduced by 14.5% in 2017 in comparison facility at CSW (dehydrated residue from bioresources and their habitat. The plant makes with the same period in the previous year. PROJECTS AT INDUSTRIAL SITES neutralization of wastewater using quick payments to the Russian government for lime) from 2.4 kg/tonne to 2.1 kg/tonne. the adverse environmental impact associated The majority of waste generated at OMK plants Measures to manage key sources of adverse Modernization of the equipment at BVP made it with pollutant discharges into water bodies. is low-hazard and non-hazardous waste. environmental impact were developed in 2017. possible to reduce total atmospheric pollutant The volume of hazardous waste at OMK plants A plan for water conservation measures emissions from steel smelting arc furnaces To compensate, in addition to the payments, is very insignificant, amounting to 0.01% for the period 2017–2021 was developed from 2.5 to 0.7 tonnes/year. CSW has released pike fry, raised under of the total volume of waste generated. at VSW with the aim of reducing discharges contract for the plant by the Topol Fishery of pollutants with rainwater and drainage For 2018, the company has set a goal in Gorshki village, into the rivers of the Kama The introduction of separate waste collection water into the Ivailovka brook. of reducing the total anthropogenic reservoir since 2014. In 2017, 17,500 pike fry has enabled Vyksa Steel Works (which environmental impact caused by company weighing 9.6–10.6 grams were released generates 80% of the company’s waste) to stay Materials were prepared based on the results operations. To calculate the anthropogenic into the Chusovaya River. within the limits for disposal of solid domestic of air quality monitoring in the sanitary impact, an integrated indicator is used waste since 2015, and has also helped protection zone of the VSW production that considers the change in the impact An examination by state ecologists of a project to reduce waste transportation and disposal and domestic waste disposal site. of atmospheric pollutant emissions, pollutant to reclaim an area of land historically polluted costs and payments for adverse environmental The estimated sanitary protection zone discharges with wastewater into surface by production waste in the Blagoveshchensk impact. of the main plant area was revised. water bodies, and waste generation Valves Plant sanitary protection zone in the reporting year in comparison has been successfully concluded. Project The project took account of sources of adverse with the previous year. Changes in company implementation is scheduled for 2018–2021. environmental impact from planned investment production volumes are taken into account The technical phase of the reclamation is set projects. The equipment for collecting dust when the indicator is calculated. A reduction to take place in 2018.
OMK Annual Report 2017 115 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY
BATTERY DISPOSAL DEVELOPING THE DOMESTIC WASTE A system is also due to be installed to at the plants to organize and take measures DISPOSAL SITE IN VYKSA collect and treat rain, melt and wash water to prevent, respond to and control damage Several collection points for spent batteries from the office and amenities area, including from emergencies, catastrophes and have been established at VSW; the batteries The VSW production and domestic waste gravity-flow networks that collect the disasters, and to manage emergency are sent to specialist organizations disposal site is the only waste disposal site wastewater, accumulation tanks, sewer pump response manpower and equipment. for processing. in Vyksa municipal district. The company is station 1, rainwater treatment facilities, sewer working to improve environmental safety pump station 2 and a UV disinfection unit. The responsibility, authorities and interaction INDUSTRIAL WASTE at the site. An investment project of the staff and manager carrying out RECYCLING for reconstruction of the site was developed IMPLEMENTING THE PRECAUTIONARY and checking the work of the emergency in order to build a second waste disposal pit. PRINCIPLE and fire safety commissions are defined As well as working to reduce the volumes by orders. of solid domestic waste sent to landfill, Geoengineering, geodesic and environmental The company takes a risk-oriented approach OMK is constantly seeking ways to recycle surveys were carried out as part of in its operations. The procedure for identifying, preparing industrial waste. Of the more than 60 types the project; an environmental impact for and responding to environmental of waste generated at VSW, over 50 are used assessment was conducted, and there was Processes for detecting potential incidents and accidents, and developing either directly at the plant or by partners. dialogue with the local community in the form emergencies and accidents that may impact accident response action plans in production of public hearings. the environment have been established departments, is described in internal Cardboard, paper, rubber, polyethylene and introduced and are maintained in working regulations. waste, wood waste and containers are An anti-filtration screen was laid at the bottom order at company plants. Responses separated from the general mass of solid of the pit to protect the soil and groundwater to potential emergencies and accidents Third parties may be involved in accident domestic waste and accumulated separately. in accordance with modern landfill have also been determined. The purpose response and environmental monitoring. This means they can be sold to companies construction requirements. The principal of these processes is to prevent or mitigate that use them as raw materials in production function of the anti-filtration screen made the adverse environmental impact of likely instead of being sent to landfill. In particular, of 600 g/m2 geotextile — HDPE 2 mm emergencies and accidents. Emergency dust from ferrous metal grinding is sent for geomembranes — is to prevent water from prevention and response and fire safety recycling. filtering into the soil and adjacent sections. commissions have been established
OMK Annual Report 2017 116 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
ENVIRONMENTAL 6.6.2 SAFETY AUDIT
Environmental management systems have been Environmental protection specialists • P.20-541.1 Procedure for Organizing introduced and certified for compliance with the were trained in ISO 14001:2015 in 2017. Investigations and Recording Incidents requirements of ISO 14001 at all main company The documentation is currently being developed plants. and updated. CSW A second compliance audit of the integrated An audit of the environmental management management system for conformity to the system and occupational health and safety • Environmental Management System Manual requirements of ISO 14001:2015 and OHSAS management system was conducted at the (R SEM.43-39.4) 18001: 2007 was conducted at VSW in 2017. Blagoveshchensk Valves Plant in July 2017 Certificationcovered the steel smelting facility, in accordance with the requirements • Regulation Determination of Environmental railway wheels production facility, pipe of ISO 14001 and OHSAS 18001. Aspects, Impacts, Risks and Opportunities production facility and facility for production (R.43-540.1) of hot-rolled steel in rolls, sheets and strips. The results of the audit showed that these areas The following local regulations • Organizational Standard Waste correspond to operations. were updated in 2017: Management STO.43-540.3
Internal audits of the subdivisions are conducted according to a set schedule. The results VSW BVP of the internal audits are recorded upon completion of the audits. • Production Safety Policy • STO.53-35.1.1 Identification and Evaluation of the Environmental Aspects of Operations, Products The CSW environmental management • STO.20-30.1 Occupational and Environmental and Services system was certified for compliance Safety. General Requirements for Management with the requirements of ISO 14001:2004 in Systems • STO.53-20.1 Identification of Legal 2015, and compliance audits were conducted and Regulatory Requirements in the by the certifying body in 2016–2017. A new • STO.20-35.12 Requirements Field of Integrated Management Systems certification audit of the occupational for Waste Management and Evaluation of their Fulfilment safety, health, environmental and fire safety management system is planned for May 2018. • STO.20-35.1 Identification and Ranking • I.53-22.2 Environmental Safety of Environmental Aspects
OMK Annual Report 2017 117 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
SUPPLY CHAIN 6.7 MANAGEMENT
A key element of the company’s management In addition, to improve the occupational, and corporate social responsibility system is its industrial and environmental safety system, approach to supply chain management, which the company works actively with contractors has proven its effectiveness at OMK for over ten on issues of occupational and industrial safety years. It is based on the idea of determining the at its plants. OMK has developed a special company’s success by developing competitive form which is appended to the agreement with advantages — the reasons why customers contractors: ‘Requirements for compliance choose this company over many others. with laws on occupational, industrial and fire The operational processes for sales, production, safety and environmental protection’. procurement and logistics are organized By signing it, contractors undertake to follow and function in the company in such a way as OMK’s procedures, rules and instructions to achieve the level required, a specific indicator on occupational, industrial, environmental for each supply chain: reliability and speed and economic safety in order to prevent in filling customer orders, quality of the product, or minimize possible harm to the environment price, and level of innovation. and the health of OMK employees, visitors and third parties. The planning system is closely linked to a two- level supply chain management system that The company creates safe and reliable the company has been developing since 2007: products and guarantees their quality according to Russian and international • centralized level: uniform standards, standards. In its consumer relations, OMK methods and overall planning abides by the principles of product safety and open access for consumers to objective • division level: planning and management information that enables them to make of customer requests and orders; ensuring informed management decisions, and protects coordination of all processes from the supply against dishonest or deceptive advertising of raw materials to the shipping of finished or labelling. Compliance with these principles products leads to positive systemic changes throughout the entire supply chain.
OMK Annual Report 2017 118 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
RESPONSIBLE 6.8 PROCUREMENT
Corporate procurement management consists of two levels: OMK is a private company, and therefore billion roubles — its procurement operations are not subject procurement to regulation by Russian Law 223-FZ. 105 in 2017 Procurement is governed by internal regulations.
OMK’s supply policy is determined Procurement The procurement office of the by fundamental procurement principles: % within Russia managing company provides transparency; collegiality; competence; 85 planning, methodology, competitiveness; responsibility; and support control, development, for its own producers. and evaluation of In addition to the long-term cooperation OMK’s objective is to ensure timely procurement activity between OMK and NLMK for the supply fulfilment of orders required for production of steel slabs for Thick Plate Mill-5000 at VSW, with the optimum combination of quality in 2017 OMK and Metalloinvest signed a long- of the physical resources, labour and services term contract for the supply of steel blanks procured, reliability of supply, and economically for railway wheel production at VSW. A roadmap justified costs. has also been agreed for projects with Rosatom. Foreign purchases are made in Austria, The policy of expanding strategic partnerships the Netherlands, Japan, Germany, and other with key suppliers on mutually profitable countries. The plant terms was continued in 2017. The key tool for the implementation of this policy procurement offices The company is actively expanding import is the company’s introduction of category handle operations substitution in procurement. In 2017, OMK management, which involves comprehensive, continued its policy of developing strategic universal and long-term management partnerships with domestic suppliers of primary of categories of resources purchased. materials: slabs, sheets, steel billets, and anti- corrosion coatings.
OMK Annual Report 2017 119 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX A
KEY ABBREVIATIONS USED IN THE OMK ANNUAL REPORT 2017:
APP — Almetyevsk Pipe Plant NPO — non-profit organization LDP — large diameter pipes
BVP — Blagoveshchensk Valves Plant EP — environmental protection PV — pipeline valves
VSW — Vyksa Steel Works OS — occupational safety EPWS — electric pipe welding shop
VPS — Vyksa Production Site IS — industrial safety PIDF — Pipe Industry Development Fund
MMTUR — Mining and Metallurgical Trade PUF — polyurethane foam PACCC — Pipe Anti-Corrosion Coating Centre Union of Russia RUIE — Russian Union of Industrialists CSW — Chusovoy Steel Works EAEU — Eurasian Economic Union and Entrepreneurs IAS — Internal Audit Service CRM — Casting and Rolling Mill PF — pipe fittings
MKS-5000 — Thick-Plate Mill-5000 at VSW PPE — personal protective equipment
OGP — oil and gas pipes SEWC — special evaluations of working conditions R&D — research and development
OMK Annual Report 2017 120 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX B
BIOGRAPHIES OF MEMBERS OF THE OMK BOARD OF DIRECTORS AND MANAGEMENT BOARD
Anatoly Sedykh Natalya Eremina Vladimir Markin Anastasia Poletaeva
Chairman of the Board Chair of the Management Board, Deputy Chairman Attorney at the Moscow City Bar, of Directors Member of the Board of Directors of the Board of Directors Member of the Board of Directors
Anatoly Sedykh has been Chairman of OMK’s Board Natalya Eremina has been Chair Vladimir Markin was appointed Deputy Chairman Anastasia Poletaeva of Directors since July 2017. of OMK’s Management Board since July 2017. of OMK’s Board of Directors in February 2018. was born In 1972.
Previously, he was Chairman of OMK’s Management Ms. Eremina joined OMK as Head of the Controlling He has held management positions in the company She worked at OMK from 1998 to 2007 as a lawyer, Board from January 2013 to July 2017. Department in 2001. In 2004, she was appointed Director since 2001, including Director General of the OMK head of department, Legal Director, and Corporate for Corporate Finance and Investor Relations. She was Trading Centre and Marketing and Sales Director Management Director. He has held management positions at the company since OMK’s Vice President from April 2006 to January 2016 at OMK. He worked his way up from assistant foreman 1999. Mr. Sedykh first headed Vyksa Steel Works and led and Deputy Chair of the Management Board from in the pipe finishing shop at Vyksa Steel Works to Deputy She was elected to and served on the boards the plant out of crisis. He was subsequently appointed February 2016 to July 2017. Before joining the company, Manager of the Large Diameter Pipes Shop, Director of directors of the OMK Group companies Chusovoy OMK Director General and Chairman of the Board Ms. Eremina worked at Metallinvestbank as Head of the of the Marketingand Sales Department, and Deputy Steel Works, Almetyevsk Pipe Plant, Vyksa Steel Works of Directors of VSW. Interbank Lending Department, Head of the Lending General Director. and Trubodetal. Division, and Deputy Chair of the Management Board. In 2002, he was elected Chairman of the Board He was President of OMK from April 2006 She is a member of the Independent Directors of Directors, and was OMK President between 2003 Ms. Eremina was born in 1971 and graduated to January 2018. Association. Since July 2007, she has been an attorney and 2006. with a degree in Mathematics from the Faculty for the law firm Asnis & Partners at the Moscow City Bar. of Mechanics and Mathematics at Lomonosov Moscow Mr. Markin was born in 1954. He graduated from Born in 1964, Mr. Sedykh graduated from the Moscow State University. the Moscow Institute of Steel and Alloys with a degree Ms. Poletaeva graduated from the International Law Institute of Steel and Alloys with a PhD in Economics. in Metallurgical Engineering. Institute of the Russian Law Academy and the Master’s He began his career as an economist at the Central programme of the Faculty of Law at Moscow State Scientific Research Institute of Ferrous Metallurgy. University.
Member of the Board of Directors. Member of the Management Board. OMK Annual Report 2017 121 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX B
BIOGRAPHIES OF MEMBERS OF THE OMK BOARD OF DIRECTORS AND MANAGEMENT BOARD
Svetlana Obolenskaya Eduard Stepantsov Dmitry Chernyshev
Corporate Head Head of the Asset Development Secretary of the Commercial Department and Investment Department
Svetlana Obolenskaya has worked at OMK since 2000 Eduard Stepantsov is a member of OMK’s Management Dmitry Chernyshev is Head of the Asset Development and has served as Corporate Secretary since 2007. Board and the Head of the Commercial Department. and Investment Department and a member of the Management Board. She previously worked at the Moscow Region Property He joined OMK in 1999 as the Director General Fund. of the OMK Technical Centre. In 2001, Mr. Stepantsov was He has been with the company since 2002, as Project appointed as OMK’s Deputy Director General and Director Manager and First Deputy Director General of APP She was elected to and served on the boards for Commercial Issues. He worked in a private investment and Director for Strategic Development at VSW. of directors of the OMK Group companies Chusovoy business between 2003 and 2008. He was OMK’s Vice He was Vice President and Head of the Research Steel Works and Almetyevsk Pipe Plant, and was Chair President from December 2008 to January 2016. and Strategy Department from November 2007 of the Trubodetal Plant Board of Directors. to January 2016. Born in 1963, Mr. Stepantsov graduated from the Irkutsk Obolenskaya was born in 1970. She graduated Institute of National Economy with a degree in Economics Throughout 1996–2001, he held various positions from Moscow State Law Academy with a degree and Procurement Planning. in the business development divisions of several Russian in Jurisprudence (Civil Law) and retrained at the Higher industrial companies. School of Economics as a Corporate Secretary and Corporate Management Specialist. Mr. Chernyshev was born in 1974. He graduated from Lomonosov Moscow State University and the Russian Government Academy of National Economy with a degree in Strategic Management.
Member of the Board of Directors. Member of the Management Board. OMK Annual Report 2017 122 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX B
BIOGRAPHIES OF MEMBERS OF THE OMK BOARD OF DIRECTORS AND MANAGEMENT BOARD
Yulia Shkhiyants Petr Trushin Svetlana Nikolashina
Head of the Economy Efficiency Management Head of the Human Resources and Finance Department Director Department
Yulia Shkhiyants is a member of OMK’s Management Petr Trushin joined OMK’s Management Board Svetlana Nikolashina is a member of OMK’s Management Board and Head of the Economy and Finance in February 2017. Board and Head of the Human Resources Department. Department. He previously headed OMK’s Target Setting From 2002 to 2003 Ms. Nikolashina was the HR Director Ms. Shkhiyants joined the company in May 2007 and Evaluation Department. at VSW. She became OMK’s HR Director in 2003 as Director for Economy and Finance. She was appointed and was appointed Vice President in February 2015. Vice President of OMK in February 2013. She previously He joined the company in 2008 as the Head of Business She previously worked for Severstal in project teams served as Chief Financial Officer of Greenoak Holdings, Consulting. He has also held management positions and as HR Director at the company’s subsidiaries. Finance Director of Zepter International, and as a senior in company subdivisions involved in internal audit auditor at KPMG. and improving the efficiency of business processes. Ms. Nikolashina was born in 1979. She graduated Prior to joining OMK, he worked at Siberian Coal Energy from the St. Petersburg State University of Engineering Ms. Shkhiyants was born in 1975 and graduated Company (SUEK) and PwC. and Economicswith a degree in Finance and Credit, from the Peoples’ Friendship University of Russia and holds an MBA in Strategic Management with a degree in Economics. Mr. Trushin was born in 1982 and graduated from from the Russian Government Academy of National the National Research University Higher School Economy. She has also taken courses in staff of Economics in Moscow with a degree in Management. management.
Member of the Board of Directors. Member of the Management Board. OMK Annual Report 2017 123 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX С
DETAILED NOMENCLATURE OIL AND GAS PIPES DIVISION
Hot-rolled sheet steel in coils and sheets for Water and gas pipes and general-purpose pipes Casing pipes for development small and medium diameter pipes, also used for water and gas pipelines, heating systems, of oil and gas fields and well construction. in shipbuilding, machine building, and construction. construction, and agriculture. Diameter: 140–245 mm Width: 30–1750 mm Diameter: 12–133 mm Wall thickness: 5.2–11.1 mm Thickness: 1–12.7 mm Wall thickness: 0.8–6.0 mm Maximum capacity: up to 400,000 tonnes per year Maximum capacity: up to 1.2 million tonnes per year Maximum capacity: up to 300,000 tonnes per year
Straight-seam and single-seam electrically welded Shaped pipes for construction, machine building, pipes for gas, crude oil, refined product, and water furniture manufacturing, pipelines, heating systems, and development of oil and other industries. and gas fields. Cross section: from 10х10 to 300х300 mm Strength class: up to X70 and from 15х10 to 300х200 mm Diameter: 159–530 mm Wall thickness: 4–12.7 mm Maximum capacity: up to 1 million tonnes per year
Back to the Oil and Gas Pipes Division results page
OMK Annual Report 2017 124 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX D
Sustainable Development Goals (SDGs)*
№ UN SDG Area of operations Page
Total number of employees hired and staff turnover 64, 69 1 End poverty in all its forms everywhere Interaction with local communities 91-98 3 Ensure healthy lives and promote well-being for all at all ages Health and safety in the workplace 99, 101, 103 Training and education 74, 75, 104 Ensure inclusive and equitable quality education 4 and promote lifelong learning opportunities for all Social projects 89-98 Water sources significantly affected by the company’s 6 Ensure availability and sustainable management of water and sanitation for all withdrawal of water 112 7 Ensure access to affordable, reliable, sustainable and modern energy for all Activities, brands, products, services 6 Promote sustained, inclusive and sustainable economic growth, 8 full and productive employment and decent work for all Direct economic value generated and distributed 58 Build resilient infrastructure, promote inclusive 9 and sustainable industrialization and foster innovation Investment and R&D 31 Make cities and human settlements inclusive, safe, 11 resilient and sustainable Environmental safety 111-113 12 Ensure sustainable consumption and production patterns Reduction of energy consumption 114 Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse Habitats protected 15 land degradation and halt biodiversity loss or restored 115 Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable Social projects 16 and inclusive institutions at all levels in the areas where we operate 89-98 Responsible procurement 119 Strengthen the means of implementation and revitalize 17 the global partnership for sustainable development New projects with partners 30
* UN General Assembly Resolution — Transforming Our World: The 2030 Agenda for Sustainable Development (25 September 2015) OMK Annual Report 2017 125 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX E
ACCURACY OF DATA IN THE SUSTAINABLE The following operating indicators were verified The analysis of primary information DEVELOPMENT SECTION (According to the according to the decision made by the internal sources and data consolidation techniques examination of Internal Audit Service) audit service: enabled us to ascertain that the indicators selected for verification are accurate. Slight To ensure the accuracy of the information • LTIFR simplifications were noted in the calculations disclosed on OMK’s operations with respect for the indicators for injury rate, emissions, solid to sustainable development, all of the data • FIFR waste and consumption of energy resources, presented in the Sustainable Development but their impact on the final KPIs is assessed section underwent internal verification • total atmospheric pollutant emissions as non-critical. To improve the public reporting by the persons responsible in the company procedures, recommendations were made departments. Information on the interaction • total pollutant discharges into water bodies to the subdivisions responsible with regard of company representatives with various groups to adjusting the method for calculating these of stakeholders has been endorsed by OMK’s • total mass of waste sent to landfill in the natural KPIs in the next reporting cycles. corporate communications and official releases environment office for 2017. • total consumption of fuel and energy resources In addition, during the cycle for preparing (tonnes of fuel equivalent) information for the annual report, the OMK Corporate Social Responsibility Committee • correspondence of average pay to regional decided to conduct an internal audit labour market of the procedures for consolidating significant environmental and social indicators.
OMK Annual Report 2017 126 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
APPENDIX F
GRI Standards Page/comments
Universal Standards
GRI 101 Reporting principles 2
GRI 102 General Disclosures 102-1 Name of the organization 2 102-2 Activities, brands, products, and services 6 102-3 Location of headquarters 132 102-4 Location of operations 5 102-5 Ownership and legal form 2 102-6 Markets served 9 102-7 Scale of the organization 11 102-8 Information on employees and other workers 12 102-9 Supply chain 118 102-10 Significant changes to the organization and its supply chain 118 102-11 Precautionary principle or approach 109 102-12 External initiatives 91 102-13 Membership of associations RSPP 102-14 Statements from senior decision-makers 13, 45, 58, 60 102-16 Values, principles, standards, and norms of behaviour 23, 25 102-17 Mechanisms for advice and concerns about ethics 61
OMK Annual Report 2017 127 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
GRI Standards Page/comments
Universal Standards
102-18 Governance structure 39 102-19 Delegating authority 43 102-20 Executive-level responsibility for economic, environmental, and social topics 121 102-22 Composition of the highest governance body and its committees 121 102-23 Chair of the highest governance body 41 102-24 Nominating and selecting the highest governance body and its committees 38-39 102-25 Conflict of interest 38 102-26 Role of highest governance body in setting purpose, values, and strategy 38 102-27 Measures taken to develop and enhance the highest governance body’s collective knowledge of economic, environmental, and social topics 62 102-28 Evaluating the highest governance body’s performance 29 102-29 Highest governance body’s role in identifying and managing economic, environmental, and social topics and their impacts 60, 63 102-30 Effectiveness of risk management process 37 102-31 Frequency of the highest governance body’s review of economic, environmental, and social topics and their impacts, risks, and opportunities 61, 63 102-32 The highest committee or position that formally reviews and approves the organization’s sustainability report and ensures that all material topics are covered 45 102-33 Process for communicating critical concerns to the highest governance body 62 102-34 Nature and total number of critical concerns 83 102-35 Remuneration policies for the highest governance body and senior executives 37 102-40 List of stakeholder groups 100 102-45 Entities included in the consolidated financial statements 5 102-49 Significant changes from previous reporting periods in the list of material topics and topic boundaries No changes
OMK Annual Report 2017 128 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
GRI Standards Page/comments
Universal Standards
31 December 2016 102-50 Reporting period to 31 December 2017 102-51 Date of most recent report May 2016 102-52 Reporting cycle Annual Годовой 102-53 Contact point for questions regarding the report 132 This report has been prepared in accordance with the GRI Standards: 102-54 Claims of reporting in accordance with the GRI Standards: Core or Comprehensive Core option 102-55 GRI content index 127 102-56 External assurance 126
GRI 103 Management Approach 103-1 Explanation of the material topic and its boundary 16-18 37, 63, 64, 89, 97, 99, 101, 103-2 The management approach and its components 109, 118
Economic Standards
GRI 201 Economic Performance 201-1 Direct economic value generated and distributed 58 201-3 Defined benefit plan obligations and other retirement plans 83 201-4 Financial assistance received from government None
GRI 202 Market Presence 202-1 Ratios of standard entry level wage by gender compared to local minimum wage 82
GRI 204 Procurement Practices 204-1 Proportion of spending on local suppliers 119
OMK Annual Report 2017 129 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
GRI Standards Page/comments
Economic Standards
GRI 302 Energy 302-1 Energy consumption within the organization 113 302-3 Energy intensity 114 302-4 Reduction of energy consumption 114 302-5 Reductions in energy requirements of products and services 114
GRI 303 Water 303-1 Water withdrawal by source 112 303-2 Water sources significantly affected by withdrawal of water 112 303-3 Water recycled and reused 112
GRI 304 Biodiversity 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas None 304-3 Habitats protected or restored 115
GRI 305 Emissions 305-1 Direct (Scope 1) GHG emissions 112 305-5 Reduction of GHG emissions 112 305-6 Emissions of ozone-depleting substances (ODS) 112 305-7 Nitrogen oxides (NOX), sulphur oxides (SOX), and other significant air emissions 112
GRI 306 Effluents and Waste 306-1 Water discharge by quality and destination 111 306-2 Waste by type and disposal method 111
OMK Annual Report 2017 130 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
GRI Standards Page/comments
Social Standards
GRI 401 Employment 401-1 New employee hires and employee turnover 64, 69
GRI 403 Occupational Health and Safety 403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities 99, 101, 103
GRI 404 Training and Education 404-1 Average hours of training per year per employee 74, 75, 104 404-2 Programmes for upgrading employee skills and transition assistance programmes 71, 75 404-3 Percentage of employees receiving regular performance and career development reviews 80
GRI 405 Diversity and Equal Opportunity 405-1 Diversity of governance bodies and employees 121 405-2 Ratio of basic salary and remuneration of women to men No differences
GRI 413 Local Communities 413-1 Percentage of operations with implemented local community engagement, impact assessments, and/or development programmes 91-98
GRI 414 Supplier Social Assessment 414-1 New suppliers that were screened using social criteria 119
OMK Annual Report 2017 131 CONTENTS OVERVIEW STRATEGY MANAGEMENT KEY INDICATORS SUSTAINABLE DEVELOPMENT CONTACT INFORMATION
CONTACT INFORMATION
OMK VYKSA CHUSOVOY 28-2, Ozerskaya Nab., STEEL WORKS STEEL WORKS Moscow, 115184, Russia Tel.: (495) 231-77-71 45, Ul. Bratiev Batashevykh, 13, Ul. Trudovaya, Chusovoy, Fax: (495) 231-77-72 Vyksa, Nizhny Novgorod Region, 607060, Russia Perm District, 618200, Russia Email: [email protected] Tel.: 8 800 250-11-50 Tel.: (34256) 6-33-33 Corporate website: www.omk.ru Fax: (831-77) 3-76-05 Tel./Fax: (34256) 6-35-71 Email: [email protected] Email: [email protected]
ALMETYEVSK BLAGOVESHCHENSK PIPE PLANT VALVES PLANT
35, Ul. Industrialnaya, 1, Ul. Sedova, Almetyevsk, Republic of Tatarstan, 423450, Russia Blagoveshchensk, Republic of Bashkortostan, 453430, Russia Tel.: (85-53) 45-89-47 Tel.: (34766) 2-19-85 Fax: (85-53) 45-90-26 Fax: (34766) 2-13-78, 2-17-32 Email: [email protected] Email: [email protected]
TRUBODETAL PLANT
23, Ul. Chelyabinskaya, Chelyabinsk, 454904, Russia Tel.: (351) 216-02-70 Fax: (351) 280-12-13 Email: [email protected]
WWW.OMK.RU
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