Effective own production and complex supply are combined to create OMK's unique business model

Mission

• We produce metal products for the fuel and energy complex, transportation and other industries, which best meet the needs of clients thanks to best consumer properties for money ratio

Vision

• OMK is a producer of metal products, having the lowest cost to produce these products at a commensurable depth of processing compared to competitors in the Russian Federation
• OMK is the largest producer of standard articles and a one-stop shop supplier of products and solutions for the Russian fuel and energy complex
• OMK is the best team of professionals among metallurgical companies and producers of fully integrated solutions for the fuel and energy complex in Russia

Key business principles

• OPERATIONAL LEADERSHIP
  • Leadership in Russia in terms of costs to produce products deemed essential for us.
  • Operating performance is the source for OMK development.
• PRODUCTION CONCENTRATION
  • We develop a limited number of production plants.
    
• RELIABILITY
  • Procurement reliability. We purchase raw materials, stock and parts by forging mutually beneficial long-term relations with suppliers offering the best value for money.
  • Supply reliability. We enjoy reliable long-term relations with consumers, using the long-term formula pricing system ensuring the company’s revenue reliability.
  • Production chain fulfillment reliability. We have a predictable order execution chain – from raw materials to delivery of products to consumers with minimum losses within processes.
• SYNERGY
  • We invest in businesses which allow us to use the company’s accumulated production and knowledge-based capital and interactability between divisions as smoothly as possible.
• RELATED DIVERSIFICATION
  • We enter market segments that are related to our core business, have similar technologies or same sales channels or that can add something to our main products line.
• OUR PRIORITY IS OMK EMPLOYEES
  • Human capital assets are essential.
  • First, creating teams of professionals, then investing other resources.
• LIQUIDITY
  • We should always be liable for our obligations to creditors.
  • We maintain the reliable level of the company’s debt/revenue ratio (debt/EBITDA), which will assure reliability of performance of the company’s obligations and our appeal to creditors.
• PRIORITY OF THE BUSINESS MODEL OVER THE PRODUCT
  The product should be augmented with a business model to give answers to the following questions:
  • What is the consumption value of our offer for clients?
  • What makes us different from other suppliers?
  • What does a consumer pay for, what makes the product profitable?
  • Key resources necessary for the product, their affordability, quality.
  • Key processes, their availability, uniqueness and replicability.
  • Competitivity factors, their continuity.

  Main Directions for Developing OMK

  1. Increasing operational efficiency:
  

  • Developing the production system
  • Debottlenecking
  • Using reserves to cut production and non-production costs

  2. Maintaining status and income level in traditional segments, including by means of increasing the share of non-standard and value added products.
  
  3. Expanding the product line, entering new product segments, increasing the presence in the OCTG segment.
  
  4. Setting up a new business model:
  

  • Integrating products and factories
  • Developing and using synergies

  5.    Managing critical risks
  
  The goal of OMK’s strategy is to turn into a supplier of solutions for the entire value production chain of the oil and gas industry.
  
  

  Large Diameter Pipes Division

  The production of large diameter pipes is of key importance to the company. OMK is the leader of the Russian LDP market, accounting for a 32% market share. OMK is a unique supplier of pipes for major strategic oil and gas pipeline projects inside the country and beyond. Our strong points in this market are: having our own plate production with Heavy Plate Mill 5000, two modern production lines for making welded LDPs, and pipe coating lines.
  
  This enables us to:
  

  • Manufacture the largest range of pipes with diameters between 508 mm and 1420 mm and up to 48 mm thick walls
  • Control the quality and costs at all stages from slab to coated pipe
  • Get a maximum profit from making the products through a flexible distribution of orders between mills
  • Design and introduce new unique products and technologies that add to the competitiveness of our business

  OMK currently holds the country’s most successful “off-shore resume”: we are the first and only Russian pipe company that participates in the Nord Stream gas pipeline project. The successful fulfillment of obligations under this project has guaranteed our victory in a number of off-shore projects: Baidaratskaya Guba, the underwater link between the Sakhalin Island and the mainland as part of the Sakhalin – Khabarovsk – Vladivostok, and Dzhugba – Lazarevskoye – Sochi projects. The company has also supplied LDPs to the following major pipeline construction projects: South Stream, Power of Siberia, Bovanenkovo – Ukhta, Southern Corridor, Zapolyar'e – Purpe, and Kuyumba – Taishet.
  
  The basis of the LDP division strategy is to keep the leading positions on the Russian market, differentiating the markets and products by participating in the new pipe delivery projects (for example, under the DNV for off-shore pipelines) and promoting sales on foreign markets in case of changes in the internal market.
  
  

  Oil and Gas Pipeline Division

  The division’s strategy in conditions of increasing competition is aimed at precise market segmentation, singling out priority directions, search and development of new application niches for welded pipes, focusing on the segment of extra characteristics pipes, readiness for price competition on the markets with maximum rival pressure. The division’s strong points on this market are as follows:
  
  

  • Using a synergy of pipe production facilities and making our own coils (Casting and Rolling Complex), maintaining a walkthrough control of pipe and coil adaptation
  • An advantageous geographical position in the consumer regions and for entering the export markets

  In the near future, the main tasks facing the Oil and Gas Pipe Division will be influenced by changes in the pipe consumption structure on the part of the oil and gas companies: the growing complexity of extraction conditions and the increase of the average well depth will contribute to the rise of demand for casing with extra features. At the same time, the revenues generated by the standard products is going down following the inauguration of new facilities and the emergence of new manufacturers. In this connection, the Oil and Gas Pipe Division puts the following development aims for itself:
  

  • Increasing operational efficiency by lowering the costs, improving quality and performance
  • Expanding the product range in the OCTG segment
  • Launching and increasing the share of sales of added quality pipes: resistant to corrosion, cold, extra durable, pipes with extra sealed threads

  Railway Wheels Division

  OMK is the Russian market’s leader of railway wheels, holding 54% of the market. The company shows a steady competitive edge by being able to produce wheels with unique consumer qualities: wheels with extra durable rims, L grade passenger wheels, wheels for high-speed trains, and wheels withstanding a 25/30 ton axis load.
  
  The strategic focus of the Railway Wheels Division is on the following:
  

  • Keeping its leading position on the Russian market, including by creating and offering unique products with extra properties
  • Maintaining technological competitive advantages for producing items with unique properties
  • Launching new types of products to increase sales on export markets
  • Promoting wheels with extra solid wheels to the CIS market
  • Cutting operational expenses

  The division’s most immediate task is to shift wheel production to the use of conticast billets. This should considerably upgrade end product quality.
  

  Pipeline Fittings and Valves Division

  OMK is the largest supplier of pipeline fittings on the Russian market and one of the leading manufacturers of pipeline valves. OMK’s product range contains unique items that no other manufacturer in Russia is able to produce; for instance: tees for large diameters and high pressures that meet the current and potential market requirements.
  Target investments into developing and launching unique complex products enabled us to become a key supplier for installation nodes at the Russkaya and Kazachya compressor stations in the Southern Corridor project.
  
  In line with OMK’s strategy to set up a new business model for the company by becoming a comprehensive solutions provider for the oil and gas industry, OMK opened a second engineering and technology center in Ufa in 2014. The Ufa center designs solutions for: entering the equipment set segments for the oil and gas industry, complex tank and vessel equipment, and oil and gas quantity and quality measurement stations.
  
  The following are the main guidelines for developing the division and increasing its operational efficiency:
  

  • Maximum satisfaction of client needs (range, equipment sets, properties)
  • Mastering the production of new items including for import replacement purposes
  • Entering new segments fully using existing facilities and technologies
  • Controlling production and non-production costs
  • Developing design competence and possibilities for making comprehensive deliveries of pipeline fittings and valves, block solutions, and items produced by all of OMK’s divisions.