Long way in a short time

Metinvest Group contribution to the socioeconomic development of Ukraine

Metinvest is a global group of companies represented in 100 countries around the world. But the Groups’ core business is in Ukraine where Metinvest has 12 out of its 17 industrial assets and 3 associated companies. This year, Ukraine celebrates its 30th anniversary of independence. The country has made almost half of the way together with Metinvest Group, sharing both successful and dramatic events. In this short but eventful time, Metinvest has become an international vertically integrated company, one of the global market leaders creating conditions for the development of enterprises, regions and the entire economy of Ukraine.

Metinvest is a basic element of Ukrainian economy and its share in GDP is 5.0%. Salaries in Metinvest enterprises are 50% higher than the average in Ukraine. The Group is a responsible taxpayer, and its contribution accounts for 69% of budget revenues in the regions of presence. Metinvest accounts for 7.8% of industrial capital investments and for one in seven dollars in exports of goods. Metinvest is guided by the best international practices and sets standards in the areas of social development and environmental protection.

Metinvest Group is a global vertically integrated company and a large supplier of steel products and raw materials. Metinvest Group peaked its steel production following the acquisition of Ilyich Iron & Steel Works.

Shut-down of open-hearth shops at Azovstal in 2011 and at Ilyich Iron & Steel Works in 2014 has helped reduce emissions and improve energy efficiency. But it has also led to a reduction in production capacity and production volumes.

The armed conflict in Donbas struck a heavy blow against the Group’s business in 2014–2017, as the Donetsk region was and remains the location of the Group’s major production assets.

Having lost its grip of the companies in the temporarily occupied territories, the Group is ramping up steel production every year. 2020 saw the highest steel production growth rate since 2011 — 9.2%. In 2020, Metinvest Group was ranked among the TOP 45 steel producers in the world.

In August 2021, the Group acquired the DMK integral property complex, which will increase annual steel production to about 13 million tons.

Metinvest Group is one of the largest producers of iron ore globally. The volume of concentrate production increased significantly in 2007, following the integration of Ingulets GOK into the Group’s business.

From then on, the Group has been focusing on the quality rather than on volumes and making products with a higher Fe content. In 2020, Metinvest Group ranked in the TOP 10 producers of iron ore in the world.

Over 15 years, Ukrainian assets of Metinvest Group produced 57.7 million tons of coking coal concentrate. The potential of this sector has been restored as a result of the acquisition of the Pokrovske Coal Mine in March 2021.

Ukrainian economy. The Group’s total share in GDP of Ukraine was 5.0% in 2020. Metinvest’s companies generated ₴103 billion (2.46%) of gross domestic product. The basic nature of the Group’s activities is emphasized by the fact that Metinvest’s companies are large buyers of engineering products, transport services, and large electricity consumers. That makes it possible to secure another ₴107 billion of GDP (2.54%) in other sectors.

Metinvest Group is a backbone employer. In 2020, 65,000 people were directly employed by the Group’s companies in Ukraine, which created jobs for another 88,000 people working in other sectors. Metinvest’s share in the total employment in Ukraine was 2.1% in 2020, and its associated companies accounted for another 1.1%.

Jobs within Metinvest Group are highly paid. Average wages in Metinvest Group companies were by 50.3% higher compared to average wage rates across Ukraine in 2020. The surplus was 41% in 2019 and 37% in 2018. That means that the Group keep on improving its conditions for recruitment, retention, motivation and development of the best human resources.

The payroll bill of the Group in Ukraine rose beyond ₴17.5 billion in 2020, and another ₴20.6 billion in salaries are generated in other industries. Metinvest’s share in the total payroll bill in Ukraine was 3.7% in 2020. The associated companies’ payroll bill amounted to ₴7.4 billion, which makes it possible to generate ₴10.5 billion in other industries, or 1.8% of the total payroll bill in Ukraine.

Metinvest Group is one of the largest investors in Ukrainian economy. The Group’s investments totaled $10 billion throughout its history, which accounts for 7.8% of the total capital investments in the industrial sectors. Over the last 5-year cycle, the Group’s average CAPEX has been $700 million per year, or one in ten dollars of investments in the industrial sectors in Ukraine.

Metinvest’s CAPEX per ton of steel reached a record level in 2018–2019 — about $70 per ton of steel against the global average of $50.

Today, the Group implements a number of large-scale projects, in particular those aimed at achieving environmental goals. Over 15 years, Metinvest exported products worth $100 billion. That is, Metinvest Group provides one in seven dollars of foreign exchange revenues from exports of goods, and one in six in 2020. Its share in total exports from Ukraine reached its peak in 2018 and accounted for 18%. The main export markets for the Group are the EU Member States (38.8% of the total exports) and the countries in the Middle East and North Africa (23.6%).

Metinvest Group activities are vital for the prosperity of Ukrainian industrial regions. Thus, the Group provide almost half of the GRP (gross regional product) of Donetsk region, taking into account their both indirect and induced contributions. That means that all business activities in the region depend on Metinvest’s operations. Similarly, the Group’s share in GRP in Dnipropetrovsk region is 23.8%, which only emphasizes the high importance of industry and the Group itself in the region’s economy.

Metinvest Group is a responsible taxpayer. Over the 15 years of its existence, the Group paid ₴165 billion to budgets of various levels; those funds provide the local communities with resources for development.

Importantly, budgets of such cities as Avdiivka, Mariupol, Pokrovsk and Kryvyi Rih much depend on the tax revenues generated by the Metinvest. In that context, taxes paid by the Group to the budget of the city of Avdiivka account for up to 69% of the local budget revenues; its share is 35% in Mariupol and 17% in Kryvyi Rih. Stable operation of the Group companies facilitates development of the regions.

Still, the Groups’ contribution in the well-being of the regions of presence is expressed not only in the amounts of taxes paid. Metinvest implements a number of social partnership programs.

Metinvest takes comprehensive efforts to mitigate the adverse environment impact. In 2020, 40% of the total environmental CAPEX in Ukraine provided by Metinvest’s companies.

The Group takes measures to mitigate the environmental impact at each stage of its production process. Shutting down open-hearth shops at Azovstal and Ilyich Iron & Steel Works, closure of the sinter plant at Azovstal, reconstruction of gas cleaning equipment and dusting systems within the blast furnace, converter and sinter production facilities are among the largest implemented environmental projects. As a result, dust emissions have reduced by 51% over the past decade.

Metinvest tries to create the safest and most comfortable working conditions. In 2020 alone, investments in occupational health and safety totaled $106 million. That is 32% of the total investments in sustainable development.

Metinvest is an integral part of local communities in all its regions of presence. That is why Metinvest implements, on a regular basis, social projects that promote community development and improve living standards. In 2020, Metinvest’s social investments exceeded $15 million. That was the largest amount since 2008.

Employees are the most important asset of the Group. Metinvest provides ample training opportunities. In 2006– 2020, Metinvest’s investment in staff development totaled $55 million.

To ensure sustainable development of Metinvest cities of presence, the Group is constantly expanding its strategic social partnership programs with the local society.

Metinvest regularly invests in improving social infrastructure to create better living conditions for its employees and all local residents. In 2019 alone, 52,000 sq. m of roads and 55 apartment buildings were repaired at the expense of Metinvest Group.

Healthcare is one of the key priorities in the area of sustainable development. In 2020, Metinvest’s investments in this area amounted to $6.5 million. The Group provides healthcare facilities with equipment and oxygen, which is essential in the context of the coronavirus pandemic. As part of the Group’s shareholders’ charitable initiatives, Metinvest provided COVID-19 expresstests, ventilators and personal protective equipment to hospitals throughout Ukraine.

Metinvest regularly supports cultural and sports events, recognizing their significant contribution to strengthening social ties and improving the quality of life. Overcoming the COVID-19 pandemic will make it possible to further expand this line of activity in the future.

Metinvest offers internship and employment opportunities for students and graduates receiving technical education. The Group provides scholarships to encourage technical education.

According to Metinvest, in 2020, 592 university graduates were employed by the Group’s companies (9% of the total number of those employed during the year).

Notes

[1] Steel production and gross production of iron ore concentrate by the Group companies, excluding associated companies. Data on Metinvest Group’s production volumes were taken from annual reports for 2008–2019, Datakit for 2020. The source of data on production in Ukraine was the World Steel Association.

[2] The total contribution to the GDP of Ukraine, which reflects the total direct, indirect and induced contributions, taking into account the associated companies, in accordance with the share in capital. The Pokrovske Coal Mine was not included in the Group’s consolidated returns in 2020, so its contribution in 2020 is calculated as one of an associated company. Direct contribution is calculated using the income method as the sum of gross income for each of the Group’s companies, their salary costs, payroll and depreciation charges. Data for the calculation of direct contribution were sourced from the open data portal, particularly the financial results report. Indirect and induced contributions are calculated on the basis of industry average multipliers, particularly the ratio between direct contribution and indirect and induced contributions, based on the analysis of the input-output table prepared by the State Statistics Service of Ukraine. The multipliers were calculated separately, by types of activity (steelmaking, iron ore mining, coke production, coal mining), and were used separately for each of the Group’s companies.

[3] The Group’s share in the total payroll bill is calculated with an account taken of the direct, indirect and induced contributions, under the methodology similar to the one used for the Group’s contribution to, and share in, GDP, but without taking into account the associated companies. Data for the calculation of direct contribution were sourced from the open data portal, particularly the financial results report.

[4] The Group’s share in Ukrainian workforce is calculated with an account taken of the direct, indirect and induced contributions, under the methodology similar to the one used for the Group’s contribution to, and share in, GDP, but without taking into account the associated companies. Number of jobs maintained by the Group in other sectors is a reflection of indirect and induced contributions, which are calculated on the basis of indirect and induced contributions to the total payroll bill and average wage rates in Ukraine. Data source was annual reports of issuers on the websites of the Group’s companies.

[5] The data were provided by Metinvest Holding.

[6] Amount of capital investments of the Group’s companies. Data source was annual reports for 2008–2019, Datakit for 2020. The data include indicators of the Group’s companies abroad. These indicators are ignored for the purpose of calculation of the amounts of investment in Ukraine because they are irrelevant in that context.

[7] The Group’s sales revenues outside Ukraine. Data source was annual reports for 2008–2019, Datakit for 2020.

[8] Contribution to GRP was performed by company similarly to the method of calculating the total contribution to GDP of Ukraine.

[9]–[12] The data were provided by Metinvest Holding.

[13] Data from the Sustainable Development Report for 2017–2018 and for 2019; data for 2020 were provided by Metinvest Holding.

[14] The data were provided by Metinvest Holding.

[15] Data from the Sustainable Development Report for 2019.