This year, Metafrax, a large chemical holding, celebrates its 25th anniversary from the date of corporatization. The jubilee is on a positive note: by the end of the year the group of companies showed a significant financial performance and launched an ambitious investment project for more than 950 million euros. Seyfeddin Rustamov, the beneficial owner of Metafrax, summed up the results of 2017 and told about the development strategy of the group of companies for the coming years
Mr Roustamov, what are the main outcomes of Metafrax in 2017? Which areas impressed you and which ones became a disappointment? How you assess the market dynamics in terms of goods produced by your group?
In general, 2017 was very dynamic by any definition. After a difficult year 2016, we were able to load all production facilities at their full capacity. At the same time, the domestic market experiences a shortage of a number of products that we produce.
What products were in greater shortage? What is the reason?
Mostly, the methanol, pentaerythritol and urotropine. The shortage is caused by several reasons. The first is a favorable market, but not a “top premium” in the parlance of market players. The second is the efficient work of our traders. They build a strong export of urotropine and pentaerythritol, although not so long ago we could hardly ship a thousand tons. Now there is a significant shortage of these products, and we actively develop their sales as these products are in a great deficiency. We will not leave the Russian market because it is traditionally our target area. Metafrax is the only company in Russia that produces these goods.
Do you plan to increase the production capacity for scarce products?
We explore possible ways for modernizing our existing production facilities, namely the urotropine plants. We will definitely expand the urotropine production. A project for increasing the urotropine production by 10 thousand tons per year is currently under consideration. In 2017, we produced about 34 thousand tons.
I am sure that the capacity increase by 10,000 tons is just a beginning. This year, we established a joint venture with Samyang, a Korean holding, for sales of urotropine and pentaerythritol in the East Asia.
In addition, we have modernized the process of methanol production, and now the output reached 3,400 tons per day. As for today, it is the absolute maximum.
Did your export share increased in total sales as for 2017?
Yes, it was a little over 40%.
Do you satisfy 100% of domestic demands? Are they of your priority?
We have many strategic partners in Russia with whom we have a long-lasting collaboration and forge our business relationships for many years to come. The market changes, but our task is to strike the balance between the domestic and international markets. Our competitive strength is that we remain in the market even when the prices jump. Metafrax product sales are sustainable. Now we are discussing the results for 2017, while we clearly understand that all our products are already sold for 2018.
In 2016, the methanol market faced a difficult situation marked by a high volatility. Do you think that the year 2017 shows an uptrend?
The year 2017 was challenging, but our sustainable production allows us to survive price fluctuations with a minimum loss.
How do you assess the financial results of the company in 2017?
The financial result of Metafrax in 2017 in terms of revenue made up 19.5 billion rubles and became the highest in the company history. However, the result is not the same for the net profit. The most profitable was the crisis year of 2015 when the net profit exceeded 7 billion rubles.
As for the group as a whole, all our production sites operated at their full capacity. Our Austrian plant has never generated such a high profit as we have now. As for our Russian subsidiary Metadinea, the revenue for 2017 is 11 billion rubles, including the net profit of 600 million rubles.
The aggregate revenue of the group is 45 billion rubles. The gross profit is 16.3 billion rubles. In 2016, it was lower: 41.7 billion rubles in terms of revenue and 14.3 billion rubles as pertains to the gross profit.
How is your Austrian enterprise?
We bought the enterprise five years ago, and it is rather a small production site on a holding scale. Among other goods, its produces fine chemicals, high-value products used in the perfumery, food industry, and other sectors.
We are currently envisaging a new investment project worth of 10.5 million euros right at the first stage. We synthesize a product used in the tire industry. The component ensures the wear resistance of the tire, improves braking features, and increase the tire safety. The component is included in the special cord used as the wheel cover.
What are the prospects for this product?
Our target is the entire Europe. Several plants are under construction, and they will consume our product. We have already made successful trial sales. The current production volume is about 1,000 tons per year, but it will be further increased.
We have prepared a three-year budget in order to study all the trends and sales. It showed that the production of methanol has reached its maximum. We have a stable balance between the intra-plant consumption and sales in the domestic and foreign markets. As a result, we should invest in new products.
Do you have far-reaching designs for your project in Korea, such as the construction of a new production facility?
A new facility can be built no earlier than in one year. It is the period required to work out the future tasks. We must take on the Asian market and strengthen our position. Our Korean colleagues confirmed that they are ready to invest in the new production. In addition, we are considering the possibility of producing a product, which is not in our product line, the paraform. It is highly demanded in Asia.
Where the new facility will be built?
Nowhere but in Gubakha (Russia). Our Korean partners suggested an alternative site in Vietnam, but Metafrax has the ability to build a new production facility by its own effort. However, this construction project will be implemented within the joint venture and based on joint investments. The partners examined the industrial site in Gubakha and were convinced of the opportunity to build and develop a production facility in Russia.
How the construction of the ammonia-carbamide-melamine plant is going on?
This is the largest project in the history of our company since its corporatization. In 2017, we have signed all necessary contracts, including the construction, general contracting, financing, and insurance agreements. The full-fledged construction process began in 2018. Today, the construction runs according to the schedule. For the moment, the prilling tower base is made, and the installation of metal structures is under way. It will be the tallest and heaviest structure within the plant, of 5,000-6,000 cubic tons of concrete.
I think that the climatic conditions of Ural should be taken into account. We must try to work ahead of schedule when the weather is good, so that we have a certain cushion of time. The construction is ambitious and involves many butt works. Our experience has shown that in any case we will have some losses of time.
Does the group consider further asset purchases abroad?
We constantly monitor the methanol processing businesses. To move forward the company must keep up with actual trend.
The investment project for constructing the ammonia-carbamide-melamine plant is primarily aimed at the domestic needs for production of synthetic resins. Metadinea is positioned as the number-one company in the resin market. We must uphold our reputation and strengthen our position in the market so that to be unparalleled not only in quality but also in quantity.
Our competitive advantages are our scientific laboratory, and investments in quality and infrastructure. For example, we invested 500 million rubles in a new tank farm in Orekhovo-Zuevo. This is a huge amount of money that generates no product as such, but is necessary as the investment in future. Our Moscow site has the infrastructure that is almost completely brought into compliance with the European standards.
Seyfeddin Roustamov is a businessman, major shareholder of the chemical company Metafrax.
Mr Roustamov joined the Forbes 2018 list of the 200 richest Russian businessmen