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Sergey Makhlay: “I view Mazepin’s words as a real threat”

11:32 09/12/2014

Head of the Togliattiazot Board of Directors, on the threats made against him by the owner of Uralchem

Sergey Makhlay, who chairs the Board of Directors of Togliattiazot, one of the largest world producers of ammonia, does not take the risk of returning to Russia as yet because of the threats made against him. In his interview for Izvestiya newspaper he stated that he viewed the words of Dmitry Mazepin, the owner of a rival holding Uralchem and a minority shareholder of his enterprise, as a real threat of criminal prosecution.

- Sergey Vladimirovich, it seems that the current depreciation of the ruble is in the best interests of Togliattiazot. Net profit for 9 months has made 9.3 billion and earnings have made 31.9 billion. In 2013 there were registered the record-setting indicators: net profit made 9.3 billion and earnings made 37.7 billion. Due to the depreciation of the ruble and a rise in the ammonia prices, in 2014, all things considering,  the net profit will be record high and may exceed 10 billion rubles?

- Indeed, we expect a rise in earnings at the year-end; however, it is not a change in the ruble exchange rate, it is rather a growth in production. In spite of the fact that historically Togliattiazot has been an export-oriented enterprise, today we are actively working for the Russian market selling our products to Eurochem and Phosagro.

- Is there an estimate of dividends? Your current minority shareholder Dmitry Mazepin (9.7 per cent of shares in ToAZ) complains that your company pays out small dividends. At that, in 2011 the dividends made 2.9 billion rubles and in 2013 they already made 3.9 billion rubles, what was slightly above the half of the net profit.

- All shareholders are fully aware of our priority – it is a capacity modernization program to be completed in 2020. In the first place, the enterprise’s profit is commited exactly for these purposes. The decision concerning dividends will be taken after the results of 2014 are summed up.

- Minority shareholders of Togliattiazot complain that the enterprise uses only a half of its capacities, the rest is idle allegedly due to a lack of transit capacities. What percent of capacities is currently utilized?

- At the moment six out of seven ammonia units are in operation.

- By now, Togliattiazot has been involved in mutual claims, corporate information wars, criminal procecutions for more than 10 years. Yevgeny Korolev, the General Director of Togliattiazot, is afraid to return to Russia from his business trip. Criminal cases involving your father have been closed five years ago. What is the basis of the new criminal cases incriminating the company’s managers?

- All new criminal cases are similar to those previous and already closed cases, [our ill-wishers] are unable to devise anything new. It would not be so very serious if they used only dirty information technologies. However, as you see, we are under the heavy shelling: criminal cases are initiated, there is no end of interrogations of the company’s managers, offices are searched. It hinders the normal operation of the enterprise and destabilizes our team.

- What is the risk of your return to Russia in the capacity of the Chairman of the Board?

- The only reason preventing me to stay in my homeland are the words Dmitry Mazepin has personally addressed to me as concerns the organization of the criminal prosecution involving me and other top managers of Togliattiazot in the case I reject his conditions set for the sale of the enterprise. That is why I view his words as a real threat.

- What conditions of sale has Mazepin implied?

- None. You can see for yourself how the dispute with this minority shareholder has evolved. Earlier, we have settled corporate disputes in a proper way – via commercial courts, and it was a gentleman-style duel. However, now they prefer to resort to the use of force and their goal is an illegal takeover of the enterprise.

- In this case, wouldn’t it be an easier way to purchase the shares of the hostile minority shareholders?

- Last year, this minority shareholder received a respective offer of purchase. The answer was that the block was not for sale. The discussion of the exact amounts could not even be started.

- Lately, there has been published an information that Togliattyazot had become a foreign company.

- These rumors are not consistent with the reality. Togliattiazot has always been and remains a Russian company. The factory is a mainstay of Togliatti and is among the top three largest taxpayers in the Samara region. We are actively engaged in social programs; our social infrastructure is among the best across Russia. Our holding employs 10 thousand people and we have no program of the stuff crisis optimization – on the contrary, we are going to employ more workers.

- The conflict in Ukraine has affected Togliattiazot, among others. There was news that at the end of August the armed hostilities in the South-East of Ukraine, where the main channel of your exports – the Togliatti – Gorlovka – Odessa ammonia pipeline (ToAZ is exporting from 80 to 90 per cent of ammonia) is located, all but stopped the production and shipment. Has it turned well? Does Togliattiazot in any way participate in ensuring safe transit?

- The pumping is carried out without problems, our partner – a Russian company Transammiak – makes everything necessary to ensure the safe transit.

- You have mentioned a program of modernization of production your factory is implementing. Could you provide more details?

- Our program to be completed in 2020 is aimed at a major overhaul of all production units. The company started to implement this program in early 2012, by this time we could reduce the consumption of our primary raw material – natural gas – to the level of about 1050 cubic meters per one metric ton of ammonia. We are interested in an increase in capacities by 800 thousand metric tons, up to the total capacity of 3.9 million metric tons, and we are going to launch a new unit producing 2.2 thousand metric tons of ammonia a day. For this purpose, by the end of the year Togliattiazot is going to make a contract with an international construction and engineering company, which has provided the technologies used to build our four existing units. Also in the framework of our modernization program we are going to double the capacities for production of urea.

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Sergey Makhlay: “I view Mazepin’s words as a real threat”

11:32 09/12/2014 Sergey Makhlay, who chairs the Board of Directors of Togliattiazot, one of the largest world producers of ammonia, does not take the risk of returning to Russia as yet because of the threats made against him. In his interview for Izvestiya newspaper he stated that he viewed the words of Dmitry Mazepin, the owner of a rival holding Uralchem and a minority shareholder of his enterprise, as a real threat of criminal prosecution.
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