Chelyabinsk branch of OJSC Ural Forge. PAO "Ural Forge"

Open Joint Stock Company "Ural Forge" is a Russian leader in the production of hot-stamped billets from structural, carbon, alloy and stainless steels, heat-resistant nickel-based alloys, as well as titanium alloys. Since 2003, the company has been part of the Mechel group, which is one of the leading Russian companies. Mechel’s business consists of four segments: mining, metallurgy, ferroalloys and energy. Mechel unites producers of coal, iron ore concentrate, steel, rolled products , ferroalloys, high value-added products, thermal and electrical energy.Mechel's products are sold on the Russian and foreign markets.

The metallurgical plant in Chebarkul was launched in 1942. For the first time in world practice, a unique forging and stamping production was created on the basis of heavy and super-heavy units, the basis of which is stamping hammers with a mass of falling parts from 2 to 25 tons, as well as the world's largest roll-less hammer with an impact energy of 150 tons.

The plant’s equipment, which now includes Russia’s first complex for the production of large solid-rolled rings, allows the production of parts weighing from 500 grams to two tons, length and diameter up to four meters. Almost all stampings undergo heat treatment, after which some of the products are mechanically processed. The Izhevsk branch of OJSC Uralkuz, which was merged in January 2010, also specializes in the production of stampings.

Today, Ural Forge produces stampings from high-quality steels, heat-resistant and titanium alloys for almost all branches of mechanical engineering: rocketry and space industry; aircraft manufacturing, heavy, transport, energy and oil and gas engineering; production of hoisting and transport machines, chemical, food, mining and many other industries. The company's share in the Russian stamping market exceeds 20%; it occupies one of the leading positions in the domestic market for rough axles of rolling stock locomotives; thus, the wheel pairs of every third railway car in Russia are assembled from axles produced by Ural Forge.

One of the suppliers of metal blanks for OJSC Uralkuz is the Chelyabinsk branch of the enterprise. This high-tech production united the most modern metallurgical units for the smelting of all special steels and heat-resistant alloys known today, used in the aerospace complex, chemical and nuclear engineering and other areas of the national economy of the Russian Federation, where metal materials with special performance properties are required. The hammers, presses, thermal and grinding equipment available at the Chelyabinsk branch allow us to produce forgings, including unique large ones weighing up to 10 tons.

OJSC Uralkuz has a certificate of quality management compliance with the international standard ISO 9001:2008. The quality of the company's products is annually confirmed by the Association of American Railways (AAR), INVESTCOM a.s., the Certification Register for Federal Railway Transport, the IAC Aviation Register, and the Russian River Register.

We offer good conditions and prices. Our main advantages:

• 1 We are not intermediaries, so we give the best prices.
• 2 we buy shares in a large number of companies. Check if your company is on our list (this can be done through the search).
• 3 Payment is possible: in cash, using bank details, through a safe deposit box.
• 4 we complete transactions using a minimum set of documents - thereby saving your time.
• 5 we do not withhold personal income tax.
• 6 transparent contract structure.
• 7 free consultations.
• 8 For your convenience, we have developed a form: fill it out and we will call you back!

To conclude a purchase and sale agreement with you for shares in Ural Forge, we need and suffice:

• - know the number of shares you own.
• - you have a passport of a citizen of the Russian Federation.
• - a power of attorney for you from the owner of the shares (if the person is acting under a power of attorney).

You can call us even if just:

• - you are wondering how much you can get now by selling your shares in Ural Forge.
• - you want to discuss our prices.
• - want to receive detailed consultations.

For convenience and clarity, we provide a generalized description of the purchase and sale transaction of shares of OJSC Ural Forge.

First of all, when selling shares, you need to make sure the number of shares and the correct name of the company. An extract from the register of shareholders or a ballot for voting at a general meeting of shareholders is best suited for this. But if you don’t have these documents in your hands now, then you shouldn’t be upset either. Just call us. The company may reorganize in the course of its activities. Therefore, even knowing its previous name, we will be able to clearly determine the chain of reorganizations and understand which company shares you own.

If you still cannot find an extract or other documents, call us,
We will decide together what to do.

Let's say you know the name of the company (for example, OJSC "Ural Forge") and the exact number of shares you own. Next, you call us, and we will discuss the price with you and discuss in detail the entire chronology of the transaction. If everything suits you: we will meet with you to sign the purchase and sale agreement.

The sale of shares in Ural Forge and the signing of an agreement usually takes place in close proximity to the registrar of this company, this will significantly save time. Those. everything happens in one day (signing the contract, submitting documents for transfer of shares and payment) and usually takes about 2 hours.

It is clearly seen that the process of selling shares is quite simple:
one call to us and one meeting at the registrar.

If in order to re-register shares (in the general case) it is necessary to submit a transfer order to the registrar of the company, then payment can occur in different ways. We highlight three methods of calculation:

• in cash - on the day of signing the contract and submitting the transfer order,
• non-cash using bank details - the best method used for significant amounts under the contract,
• via cell - a relatively new method of settlement for stock transactions. But it has fully proven itself for a long time in the purchase and sale of apartments. Complete analogy of processes.

In any case, the contract states that:

Our obligations to you are fulfilled at the moment receipt by you of funds in the amount under the signed agreement.

If you have any questions, call us, we will try to give you answers.

The Group's loan agreements contain a number of restrictive covenants and measures, among others, also include restrictions in relation to the amounts of dividends on ordinary and preferred shares. These restrictions also apply to Mechel's subsidiaries.

All this time, Mr. Zyuzin was not creating shareholder value, although, given the current scheme of shareholder ownership of the holding, he had such an opportunity; he only needed to introduce a reasonable model of equity capital management (MUAC), increasing the value of Mechel’s subsidiaries, gradually reducing ownership shares (by selling them on the market) to a controlling stake (50% + 1 share), develop the business more organically...

...and Zyuzin followed the path of generating debt at all levels of the Holding.

Picture from last year. Mechel is refinanced and mortgaged at all levels. The black number is Mechel's share, the red number is pledged to banks.

What kind of fears? Manic need to control everything? If he owned 50% in each daughter, the situation with control would not change much. Perhaps we would have to give up several seats on the Board of Directors to “outsiders.” But I think this would only be beneficial for the entire holding, including Zyuzin.

Mechel's capital management scheme would be more balanced - the balance of debt and equity capital would have a positive impact on the sustainability of the business.

What Mechel has come to can hardly be called a success. Last year the company could not even service its debt (interest payments were higher than income). A miracle saved Zyuzin, or rather the devaluation of the ruble and the slowness of our bankers.

But the banks are also “well done” - they issued loans even higher than the book value of the companies whose shares they took as collateral. Here is a picture from the report at the end of 2013:

If we consider that Mechel took out loans secured by assets at all levels, the picture is even more terrible.

For example, they laid down Mechel-Mining - Yakutugol - Elgaugol, but this is a chain of one link, i.e. pledged shares of a company where subsidiaries were already pledged. Mechel's daughters and granddaughters, in turn, took out further loans secured by equipment, buildings and their subsidiaries and transferred the funds to the Holding. Some kind of debt factory.

The pursuit of profit by banks, adventurism and ambition...

Now, however, it’s better - the debt is not 9, but 6 billion dollars, ruble debts due to devaluation “reduced the debt” in dollar equivalent. The situation has moved from an acutely critical phase to a complex one.

By the way, from Mechel’s reporting as of December 31, 2014, it turns out that the shares of the Ural Forge in Uralsib were pledged at a cost of $2193 per share.

More than 2000 dollars! Charles! Those. the entire Uralkuz was valued at $1.2 billion. These are the pledges.

Invest. The idea then at the Ural Forge was that the banks should remove Zyuzin from management and begin restructuring the Mechel Group with the sale of its subsidiaries. And since UrKuznitsa’s economy was and is excellent, it was very interesting.

Invest. The idea for the Ural Forge continues to this day. Minors win only in extreme situations - either the bankruptcy of Mechel, a new owner, the payment of large divas, or a new flourishing of Mechel, clearing debts through the payment of large dividends. Mechel has survived the first and is moving towards the second; there is a possibility that now that the direct threat to Zyuzin has passed, the turn will come to increase the value of its subsidiaries.

There is no problem for the parent company Mechel to transfer funds in the form of dividends.

From January 1, 2008, the payment of intra-company dividends may be taxed at a rate of 0% (if, on the date of announcement of the dividends, the Russian organization receiving the dividends has continuously held a controlling interest (more than 50%) in the authorized capital of the company paying the dividends for one year or more, and also if the country of registration of the company paying dividends is not included in the list of offshore zones of the Ministry of Finance).

Unless, of course, Zyuzin’s greed is due to 6,2361% (which belong to the minors) will not slow down this process.

I am always amazed by the greed of the majors, when the minors own only 5, 10 or even 20% of the shares, why do this? Why can't you just pay dividends? After all, the remaining 95, 90 or 80% belong to the major.

By being greedy in small ways, they deprive themselves of much greater benefits from increasing the shareholder value of their business. Dorogobuzh, Ural Forge - the same story.

Ural Forge is included in my “portfolio of individual investment ideas”, along with Arsager Management Company, Cherkizovo Group and AFK Sistema.

For now, Uralkuz is a Cinderella whose evil stepmother does not let her go to the ball. And there's no guessing when she'll get to the ball.

One fine day, news may come out about the announcement of large dividends and the sale of the company to a strategic investor, for example, VSMPO-Avisma or the Welfare Fund (RZD) will want to buy it. And then the price of Uralkuz shares will soar by hundreds of percent in a couple of days. Only then will it be too late to buy, because everything will already happen. You need to buy it as an idea now.

I buy Uralkuz at 3% of my portfolio. If Uralkuz grows by an order of magnitude, then I will receive a profitability of +25-30% from it alone; if it is at the same level, I will generally not lose anything. A portfolio of such ideas will give me an advantage over the market.

Now, more details on the situation in the Ural Forge: its business, assets, debts, etc....

During the Great Patriotic War, a plant from the city of Elektrostal was evacuated to Chebarkul. In the shortest possible time, even during the construction of the buildings, the plant produced its first products at the new location. The Chebarkul Metallurgical Plant became the only one in the country supplying stampings of crankshafts, connecting rods and other parts for aircraft engines of all aircraft produced during the Great Patriotic War.

Now OJSC "Ural Forge" is a city-forming enterprise (it produces 77% of the total volume of industrial products in the city of Chebarkul).

Ural Forge is Russia's largest manufacturer of stamped products made from special steels and alloys. A unique forging and stamping production based on heavy and super-heavy units, the basis of which is stamping hammers with a mass of falling parts from 2 to 25 tons, as well as the world's largest roll-less hammer with an impact energy of 150 ton-force, allow the production of stampings weighing up to 2, 5 tons and up to 4 meters long. And the first complex in Russia for the production of large solid-rolled rings is designed for the production of parts weighing up to 2 tons and with a diameter of up to 4 meters.

JSC Uralkuz is engaged in the production of stampings and forgings for all branches of mechanical engineering. Its products are represented by: stampings of compressor and turbine disks for aviation gas turbine engines; crankshafts, camshafts and connecting rods for internal combustion engines and compressors; stampings for the fuselage, wings, landing gear, components and assemblies of modern aircraft, for rocketry and the space industry; axles and gear wheels of traction transmission for traction and rolling stock, railway axles, tires for trams; collar and flat flanges; discs made of heat-resistant and titanium alloys; shut-off valves in the form of bodies, covers, balls.

The company's share in the Russian stamping market exceeds 20%; it occupies one of the leading positions in the domestic market for rough axles of rolling stock locomotives.

Main consumers: JSC SMZ, NOJSC Gidromash, JSC Aviation Equipment, JSC Aviadvigatel, JSC VASO, JSC DNPP, JSC KUZNETSOV, JSC NPK Irkut, RSK MIG, Federal State Unitary Enterprise NPC Gas Turbine Construction Salyut, UMPO, etc.

The volume attributable to Russian consumers is Uralkuz - 91%, and the Chelyabinsk branch - 56%.

Main supplier of raw materials: ChMK.

Sales volume of forging products in physical terms (tons)

Volume of revenue from sales of forging products (thousand rubles)

The volumes of main production have stagnated since 2011, but there is a positive trend - a transition to the production of high-margin products, since sales volumes in physical terms are falling more rapidly than revenue in rubles.

The “Net profit” indicator increases from year to year. The main reason is an increase in the amount of loans issued to Mechel Group enterprises and, as a consequence, an increase in the amount of interest receivable.

The share of interest in net profit is growing year by year. As a result, for 9 months of 2015, net interest income is already 32%. But banking business should not be a core business for the Ural Forge.

The company became a kind of “money bag” for the entire Holding. It is used to finance Mechel’s subsidiaries, but only the majority shareholder benefits from this, while the minority shareholders are left with nothing. There are no dividends, and the market price does not correspond to the company's achievements.

Own funds and market capitalization

P/ B.V.

P/ E

What do you think of the company's price for one annual profit and only 0.17 net assets?

One thing I don’t understand is how banks issued loans against such assets? After all, the pledges were in fact fictitious. Loans were issued secured by shares of companies where all the company’s property (shares, inventory, real estate) was already pledged against other loans. I don't think the bankers didn't know about it. With such operations, Zyuzin destroyed the market value of the business.

In absolute terms, the company's profit is growing, but ROE is not.

Excessive capital of Uralkuz has a bad effect on business performance. There would be no questions if Uralkuz simply paid dividends, and Mechel withdrew money through dividends, and not through loans. According to my calculations, the ROE level would be 1.5-1.7 times higher if the company got rid of excess capital.

Accordingly, the price of the business would be at the level of 1.5-2 equity capital.

There is an advantage of being in Mechel Holding that is worth mentioning. This is practically a zero effective tax rate. Until 2012, the company paid income tax as usual, and the average effective tax rate was around 20%. Since 2013, the company has joined the consolidated group of taxpayers based on Mechel. The consequence was the almost complete elimination of income tax.

It turns out that all the profit that the Ural Forge earns is available to shareholders (tax-free). The benefit is about 500-600 million rubles per year.

True, for minority shareholders of Uralkuz this plus is again virtual.

While studying the annual report, I came across information about corporate governance. Even for Mechel this is already too much...

…protection of shareholders’ rights…effective management…organizational model…

The reality is very far from what is written in the Annual Report of OJSC Ural Forge for 2014.

It is worth starting with the organizational model - General Meeting of Shareholders, Board of Directors, Sole Executive Body - Management Company, Audit Commission.

In all components, decisions are made by Mechel people. And it’s clear in whose interests they act.

General Meeting of Shareholders

Free float is about 6% of the capital, someone might say that since you do not have the necessary share to influence the company’s affairs, then just sit and be silent. Anyone who says this forgets why public companies are created in the first place and how they differ from private ones.

If you have 94% of the shares, this does not mean that you can steal from those who only have 6%.

In Russia, there is a clear problem in protecting the rights of all shareholders; the judiciary is clearly stalling on this issue. This is a very important point - without protection of property rights there will be no economic development. Capitalists - people who invest their money in business, must also have protection for their capital. Otherwise nothing will work.

Board of Directors

SD Uralkuz - 5 people, consists of employees of the Management company - Mechel-Steel Management Company LLC or Uralkuz itself.

In fact, both the BoD and the Sole Executive Body are the same persons.

Sole executive body

By the decision of the annual general meeting of shareholders of OJSC "Uralkuz" dated May 18, 2012 (Minutes No. b/n dated May 21, 2012), the powers of the sole executive body of the Open Joint Stock Company "Ural Forge" were transferred to the management organization - the Limited Liability Company "Mechel Management Company" Steel" (Agreement on the transfer of powers of the executive body of the Open Joint Stock Company "Ural Forge" to the management organization - Limited Liability Company "Mechel-Steel Management Company" dated 06/01/2012).

Members of the Board of Directors are paid remuneration for the performance of their duties (salaries to members who are employees of the Company, bonuses, commissions, benefits and (or) reimbursement of expenses) - every year about 1 million rubles.

For exercising the powers of the sole executive body, the Management Organization was paid a remuneration of about 1 million US dollars (28-30 million rubles per year).

Until 2012, the management company was Mechel Management Company LLC.

Management remuneration level

The calculation method, the amount and procedure for payment of which is determined by the Agreement on the transfer of powers of the executive body of the Open Joint Stock Company "Ural Forge" to the management organization - Limited Liability Company "Mechel-Steel Management Company" dated 01.06.2012.

In order to stimulate (increase efficiency) the high-quality exercise of the powers of the sole executive body, the remuneration of the Managing Organization is formed from a fixed rate and a variable component, depending on the implementation of planned indicators of economic efficiency of the activities of the Managed Organization.

I could not find in the public domain the Agreement on the transfer of powers of the executive body of the Open Joint Stock Company "Ural Forge" to the management organization - Limited Liability Company "Mechel-Steel Management Company" dated 06/01/2012.

It would be interesting to see a system of incentives (increasing efficiency) for the high-quality exercise of the powers of the sole executive body.

The management company did not find any correlation between the amount of net profit or ROE and the amount of remuneration; apparently, this is only a fixed rate. 1 million dollars per year.

Limited Liability Company "Mechel-Steel Management Company" on 100% owned by Mechel OJSC.

This is another weak point - the window for withdrawing funds from the company. If you remember the story with Lomprom Rostov.

Mechel tried to withdraw money from the company by purchasing it through Uralskaya Kuznitsa for RUB 4.6 billion ($148 million) Lomprom Rostov. But according to the report of the appraiser invited by Arsagera, the real price of this asset was generally negative and amounted to minus 32 million rubles.

Audit committee

The Rev. Commission of the Ural Forge is the height of insanity. Appreciate the irony.

To exercise control over the financial and economic activities of the Company, the General Meeting of Shareholders elects the Audit Commission of the Company.

Members of the Audit Commission of the Company cannot simultaneously be members of the Board of Directors, or hold other positions in the management bodies of the Company.

Ha! But look at the composition of the Audit Commission:

Those. deputy The chief accountant will exercise control over his manager. The same story applies to the Head of the Financial Department - who will they check? Themselves.

There is a Head of the Methodology Department of the Internal Control and Audit Department from Mechel. But again we return to the major, there is simply no third-party control.

And by" openness" Question for the Ural Forge.

Since the annual report for 2014, they stopped publishing information about interested party transactions and major transactions, hello to our legislators.

There is not development, but degradation of the level of corporate governance in the country, both among state-owned companies and private ones.

Question about 2.8 billion rubles?

On the issue of openness and remembering the story with Lomprom Rostov, a new question arose for a billion rubles, or rather 2.8 billion rubles. ($44 million).

In the first quarter of 2015, fixed assets increased by this amount.

And from the explanations I found in the quarterly report for the 1st quarter of 2015 only...

These acquisitions did not bring growth in revenue and net profit from operating activities in 2015. What was it?

Purchase of buildings for 1.5 billion rubles, machinery and equipment for 800 million rubles, and land for 500 million rubles.

Honestly, I am suspicious of such operations at the Ural Forge. It's very similar for withdrawal of assets.

Let me remind you that management’s “assets” over the years include a passion for offshore schemes when selling products; purchases with huge leverage (on credit) of ineffective foreign assets; attempts to siphon off profits from subsidiaries by acquiring dubious assets (just look at the epic with Rostov Lomprom); replacing the dividend channel for redistributing profits within the group with a whole bunch of intra-corporate loans; declaring dividends on preferred shares when the company is chronically unprofitable, so long as they do not become voting (and really, why should owners of preferred shares interfere in the management of such a “successful” company); informational secrecy in terms of disclosing significant transactions and interested party transactions, which multiplied within the holding in the thousands every year.

At the same time, the management bodies of the company were not embarrassed by either the collapse of shareholder value, or the difficulties of creditors (including state banks), or the loss of thousands of jobs by the national economy, or taxes lost by the state...

It’s time for personal ambitions, unsupported by knowledge and originating in the era of the initial accumulation of capital, to give way to competent decisions in the production, financial and corporate spheres of business management and those people who personify them. Of course, you don't want to do this. It’s easier to beg for government help and “feed breakfast” to creditors instead of starting to clean up the company.

I hope that sooner or later our companies will begin to realize that the only correct ways for the Company to pay out funds to its shareholders are: share repurchase at a fair market price and dividends. In relation to Kuznitsa, this is all the more appropriate, since the company has high profitability of its core activities and a large amount of retained earnings. If Mechel wants to use retained earnings for its own purposes at the holding level, then it would be fair to pay dividends to all shareholders of Ural Forge. Having received the bulk of the dividends, he will subsequently be able to dispose of this amount at his own discretion.

Ural Forge is an interesting topic for investment. With enormous potential, but also associated risks.

Current market price 5000 rub. at the book price of 1 share in RUB 30,170

Growth potential +700%, based on fair value at 40,000 rubles.

I calculate the fair value of a share according to the following scheme:

1) To conduct the main activity, 5-7 thousand rubles are required. own capital. Those. the first action with a reasonable MUAC is payments in the amount 23-25 ​​thousand rubles. per share. Just this amount in the form of loans was transferred to Mechel’s subsidiaries.

2) Uralkuz has a net profit from its core activities (without financial investments) of about 3.5 thousand rubles per year. per 1 share. Now all funds are transferred to the holding, i.e. in principle, the company can pay at least 100% on dividends further. But even if we accept a 50% level of payments, we get about 1.5-1.8 thousand rubles. dividends per year. Such a business can be valued at 15-18 thousand rubles. per 1 share (this is DD=10%, P/E=5), very conservative.

As a result, it turns out 25+15 = 40 thousand rubles per 1 share. Simple Chelyabinsk mathematics.

Based on these numbers, I buy the Ural Forge :)

It is necessary to create an effective model for managing share capital. It would be nice if Zyuzin had reasonable advisers on his team...

Arsager Management Company has written more than once about what measures need to be taken to implement the principles of the equity capital management model (ECM) in the Ural Forge and the Mechel Group. I recommend checking out Appeal from Arsager Management Company to Mechel management .

Interesting slides from UK Arsager

When preparing the description of this investment idea, I used, among other things, information prepared by specialists from Arsager Management Company. Thanks to them for their openness on this issue.

They also have an interesting study on the level of corporate governance of Russian public companies - http://arsagera.ru/analitika/issledovanie_korporativnogo_upravleniya_v_rossii/analiz_sostoyaniya_korporativnogo_upravleniya/

Happy investment!

P. S. Tough places, tough investments. Not every investor will dare to buy shares of the Ural Forge.

You can observe my experience from the outside, I do not give recommendations, I just talk about my own actions. Everyone decides for themselves.