12 February 2015

NLMK Group and Freight One to pilot transport outsourcing

NLMK Group (LSE: NLMK), the largest steelmaker in Russia and one of the most efficient in the world, and Freight One (PGK), the largest rail freight operator in Russia, are to launch a pilot project for outsourcing the internal logistics at NLMK Long Products Division in the Urals region.

Freight One will manage railway transportation operations at the Urals sites of the Division (NSMMZ and NLMK Metalware): it will lease the rolling stock from NLMK Group and manage the railway department shared by the two plants; as well as provide maintenance of track facilities and locomotives.

The project is expected to reduce the sites’ transportation and maintenance costs by at least 8%.

Sergey Likharev, NLMK Group Vice President for Logistics, said:

“In line with Strategy 2017, the Group is implementing programmes which improve the efficiency of all production and business processes. One such initiative involves the outsourcing of a number of logistic functions. We have successfully implemented similar projects at the Lipetsk site. For instance, we’ve outsourced car transport which has reduced costs by 13.8 million rubles per year. The Freight One project is more complex as we are outsourcing railway transportation which is part of the production chain. We are certain that with a partner like Freight One we will achieve the goals we have set and, based on the results of our cooperation, and we will leverage this experience to roll this project out to other NLMK Group sites.”

Alexander Sapronov, Freight One Executive Director, said:

“We are convinced that in providing this new service to the sites of Russia’s largest steelmaking company, Freight One will help optimize and improve their logistics. For us, further expansion of industrial logistics will secure opportunities for a more efficient cooperation with our key customers and become a reliable source of freight transportation development.”

About NLMK Long Products

NLMK Long Products (part of NLMK Group), is the leading manufacturer of long products and metalware on the Russian market.

NLMK Long Products companies make up an integrated production chain from the collection and processing of ferrous scrap to the manufacture of HVA steel products – rebar, wire rod and metalware.

Long Products Division’s production facilities produce up to 3.7 million tonnes per year of liquid steel; and 2.9 million tonnes per year of rebar and wirerod that is both sold to the market and reprocessed at the company’s in-house metalware operations that have a capacity of 0.5 million tonnes per year.

NLMK Long Products key companies are NSMMZ (EAF steelmaking and long products) and NLMK Metalware located in the Urals (Sverdlovsk region), and NLMK Kaluga (EAF steelmaking, rebar and sections) located in the Central part of Russia (the Kaluga region).

Raw materials are provided by Vtorchermet NLMK, one of the largest associations of scrap-collecting companies in Russia operating in different regions across the country.

In 2014, NLMK’s Long Products Division produced 2.7 million tonnes of steel, up 21.1% on the same period a year earlier. Steel product sales grew by 25.4% to 2.6 million tonnes. Scrap collection at in-house capacities totalled 2.3 million tonne.

About NLMK Group

NLMK Group is the largest steelmaker in Russia and one of the most efficient in the world. NLMK’s high-quality metal products are used in various industries, from construction and engineering to the manufacture of power-generating equipment and offshore wind turbines.

NLMK's production assets are located in Russia, Europe, and the United States. The Company’s liquid steel production capacity is over 17 million tonnes per year, of which about 16 million tonnes are produced in Russia.

NLMK has the most competitive cash cost among global manufacturers; and one of the highest profitability levels in the sector. During the first six months of 2014, the company generated $5.4 billion in revenue; $1,1 billion in EBITDA; and a net profit of $332 million.

NLMK’s ordinary shares are traded on the Moscow Stock Exchange (ticker symbol: NLMK), and its global depositary shares are traded on the London Stock Exchange (ticker symbol: NLMK:LI).

About Freight One (PGK)

Freight One is the largest rail freight operator in Russia. The company offers a comprehensive range of freight transportation services. Freight One operated about 200,000 units of rolling stock, including gondolas, tank cars, platforms and other types of cars. Freight One’s regional network includes branches in 14 cities around Russia. Internationally, it is present in the Ukraine and Kazakhstan, and has a joint venture in Finland.

Freight One is part of the railway division of Universal Cargo Logistics Holding (UCL Holding), an international transportation group. Alongside railway assets, the group operates stevedoring companies in the North-West and South of Russia, and large Russian shipping assets.