MMK announces that it acquired 99.99% of ZAO “Profit” – the largest metal scrap collector and processor in Russia. The acquisition of the strategic raw material supplier will significantly strengthen MMK security in terms of raw materials supplies.
The Board of Directors approved of the transaction at its meeting on May 20, 2009. The transaction encompasses acquisition of subsidiaries of ZAO “Profit” specializing on collection and processing of scrap.
ZAO “Profit” historically covered in full the demand of MMK in outsourced scrap. ZAO “Profit” supplies accounted for 75% of more than 5 mln tons of scrap consumed by MMK in 2008.
The financial results of ZAO “Profit” will be consolidated in MMK Group of companies IAS results starting from 6 months 2009 reporting.
ZAO “Profit” is the leading Russian company in terms of buying scrap in the Russian market. As of full year 2008 the market share of ZAO “Profit” accounts for 16.2%. The company carries out scrap purchases in 64 regions of Russia. The Chelyabinsk, Moscow, Nizhniy Novgorod, Samara regions and the Republics of Bashkortostan and Tatarstan account for more than 40% of scrap purchases.
Total supplies of scrap by ZAO “Profit” in 208 stood at 5.2 mln tons. The revenue of ZAO “Profit” amounted to RUR 60 bln, net income RUR 1.1 bln.
MMK is the key customer and strategic partner of ZAO “Profit”. The share of shipments to MMK accounted for more than 80% of the overall sales volume (83% in 2007 and 87% in 2008). Besides, ZAO “Profit” is in contracts with other steelmakers – Severstal, Chelyabinsk steel mill, Ural Steel, Volzhsky pipe mill, Izhstal, ZSMK.
AO “Profit” started in 1996. Since 1998 the group has adhered to the strategy of creating its own chain of regional scrap collecting units. The group counted more than 25 scrap collecting and processing members in the beginning of 2009. These members are situated in 26 regions of Russia and unite more than 300 scrap collecting sites.
The largest suppliers of scrap are subsidiaries of ZAO “Profit”. Scrap supplies volumes to ZAO “Profit” in 2008 amounted to 2.711 thousand tons, shipments from third party companies – 1.698 thousand tons.