Chemical and Petrochemical Industry in Russia and CIS

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Chemical and Petrochemical Industry in Russia
and CIS 2004 International
Conference Amsterdam, The Netherlands18th 19th
November 2004 from CONSOLIDATION
to CAPITALIZATION
Ravil Akhtyamov, Ph. D., Head of Research and
Corporation Finance Bashkortostan Securities
Commission
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Agenda

• Chemical companies too small to be invest
• The industry value EATING or crEATING?
• The structure of financing of the industry
• Conditions of IPO
• Potential investors to the industry

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Chemical companies too small to be invest

• Russia 591 companies in 1990, more than 7000 in
  2004
• Russian chemical companies mainly small cap
  companies (Mcap less than 500 mln. EUR), no IPO,
  no financial buyers
• Too small share in output compared G7
• Global dynamics consolidation, financial buyers,
  multinational players

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Chemical companies too small to be invest Share
of the industry in output,
Source Federal Statistics
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The industry value EATING or crEATING? Key
management ratios

• E Ratio or equation of the balanced growth Ratio
  between revenue growth, net income and current
  assets (by Ciaran Walsh, IMI)
• If E gt 1 its O.K.
• If E lt its a signal to managers to improve
  politics of creating value
• Russian companies need decades to reach world
  chemical companies MCap
• Consolidation is the simplest way of growing
  value

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The industry value EATING or crEATING? World
Top Mcap
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The industry value EATING or crEATING? Russian
Top MCap
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The structure of financing of the industry
World companies capitalize
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The structure of financing of the industry

• Russian chemical holdings arent public companies
• Self-investing and banking financing vs. IPO
  and bond market
• Fast growth of the short-term debt
• Lack of long-term investment recourses for the
  technical reconstruction
• Some capital-intensive investment projects in the
  industry

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The structure of financing of the industry
(Bashkortostan case)
Aggregate data of the Salavatnefteorgsintez,
Ufaorgsintez, Ufakhimprom, Kauchuk, Kaustik,
Soda, UZEMIK, Sterlitamakneftekhimzavod,
STEKLONIT
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Conditions of IPO

• Consolidation of business the central company
  the company with high E ratio
• Mcap more than 500 mln. EUR
• Volume of emission more than 100 mln. EUR
• High transparency of the companies
• High standards of the corporate management, PR
  etc.

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Conditions of IPO (consolidated data of
Bashkortostan sector), mln. euro
Look so appetizing. Est. value more than 671 mln.
EUR
Aggregate data of the Salavatnefteorgsintez,
Ufaorgsintez, Ufakhimprom, Kauchuk, Kaustik,
Soda, UZEMIK, Sterlitamakneftekhimzavod,
STEKLONIT
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Conditions of IPO (consolidated data of
Bashkortostan sector), mln. euro
Look so appetizing. Est. value more than 671 mln.
EUR
Aggregate data of the Salavatnefteorgsintez,
Ufaorgsintez, Ufakhimprom, Kauchuk, Kaustik,
Soda, UZEMIK, Sterlitamakneftekhimzavod,
STEKLONIT
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Potential investors to the industry

• Global investment funds
• Pension funds
• Insurance companies
• Commercial banks
• Individual investors