Mechel Group, one of Russia's leading steel and mining companies, intends to continue the investment and personnel cutback programmes, at steel plants in from Targoviste and Campia Turzii, with investments worth 55m dollars (some 44 million euros) budgeted for the two facilities by 2009.
Also, the group plans to conduct redundancy programmes at the two factories, as well as raise the wages of the remaining staff, aiming to ensure the optimal number of employees. The company took the same steps at the factories it holds in Russia.
"We intend to match the Romanian factories we control, to those from Russia. We are concerned with the losses posted for this year, but we think there are optimistic prospects at both of the factories and, for the time being, we don't believe selling them is timely," said Alexey Ivanushkin, chief operating officer with Mechel group.
He says the Russian factories are more competitive than the Romanian ones, due to the lower production costs. Unlike Romania, where 1000 cubic meters of methane gas cost approximately 240 dollars, in Russia the gas price stands at some 30 dollars per 1000 cubic meters.
The company also holds its own power station in Russia that provides electricity for prices lower than the market ones, as well as an iron ore extraction company, that supplies the raw material.
The raw material in Romania mainly consists of scrap iron, whose price doubled over the last three years, according to the company's estimates.
"We did a lot at COS Targoviste, which runs much better this year, in terms of economic indicators. Product sale is going very well. Substantial investments are still necessary at Campia Turzii, for a more efficient activity," said Ivanushkin.
At Targoviste, Mechel intends to install a new continuous casting machine, with a capacity of 500,000 tonnes per year. The production activity in Targoviste will be partially stopped early next year, for the new machine to be installed, which will begin operating at maximum capacity in mid next year. The investment value for this machine amounts to 10 million dollars (some 8 million euros).
"Once this continuous casting machine starts functioning, we estimate we will start making profit," said Vladimir Titski, senior vice-president for strategy and integration with Mechel.
In first half of the year, Mechel Targoviste posted losses amounting to 2.48 million euros, 55% lower than the 15.7 million-euro losses posted in the corresponding period of last year.
"Eight months later, the losses posted by Mechel Targoviste went down to 320,000 dollars and we project to close the year with profit,", stated Titski who is also a member of the Board of Directors at Mechel Targoviste.
The investments projected by Mechel Targoviste by 2009, amount to 35 million dollars (28 million euros).
Mechel in Romania
Owns two plants in Romania, in Targoviste (former COS Targoviste) and Campia Turzii (former Industria Sarmei Campia Turzii) it acquired in 2002 and 2003 for less than 10m dollars (8m euros) together
Plans to invest 55m dollars (44m euros) in the two facilities by 2009
Its two plants posted about 40m euro losses together in 2005, against a turnover of over 220m euros
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