Financial Regulatory Forum

INTERVIEW-Russia’s richest man calls for less red tape

By Reuters Staff
April 30, 2010

By Polina Devitt

MOSCOW, April 30 (Reuters) – Reducing regulation is a key to stimulating Russia’s domestic growth after the recession, Novolipetsk Steel Chairman Vladimir Lisin said on Friday.

“In my opinion, the biggest problem is stimulating production growth,” Lisin, ranked Russia’s richest man by Forbes magazine, said in an e-mailed response to questions. “And how to stimulate (production) when business is regulated so tightly.”

The executive joined the chorus of prominent Russian businessmen who have echoed calls by President Dmitry Medvedev to modernise the economy and fight corruption in order to spur growth.

Russia’s economy is expected to return to growth of around 4 percent this year, but the raw material and oil-fuelled expansion masks domestic stagnation.

Russia’s manufacturing purchasing managers’ index (PMI) stood at 50.4 in the first quarter, indicating a slight expansion after contracting for 16 of the 17 months up to December 2009.

“If they have decided to modernise the economy, then it is necessary, in succession … to modernise industrialisation, industrial policy … and continuing, without pause, education, tax policy, customs, the legal system and so on,” he said.

Lisin, 53, is a rare example of a career steel man becoming a leading player in Russia’s fragmented steel industry, which is mostly run by financiers after sell-offs in the 1990s.

A graduate of a Siberian steel institute and a senior steel plant manager in the late 1980s, he had to learn fast after the Soviet Union’s demise was followed by the sale of state assets in the 1990s.

As a junior partner to the powerful Cherney brothers, Mikhail and Lev, Lisin helped their TransWorldGroup (TWG), a metals trader with links to the political elite in President Boris Yeltsin’s Russia, gain control of some of the country’s most lucrative metals assets.

The steel baron’s fortune was estimated at $15.8 billion by Forbes earlier this month, putting him more than $2.0 billion ahead of his closest Russian rival, Mikhail Prokhorov.

NOVOLIPETSK STEEL

Lisin acquired Novolipetsk Steel, or NLMK, in part through buying out a large stake from U.S. financier George Soros, and floated the company in London in 2005.

It is consistently one of the most profitable in the Russian steel sector, posting a net profit of $215 million on sales of $10.6 billion in 2009, while larger rivals such as Evraz Group and Severstal stayed in the red.

Lisin said the company has succeeded in part because it avoided the type of expensive foreign acquisitions that have landed rivals billions of dollars in debt.

“In the final analysis, acquiring non-core assets that have no synergies with the core business, and at the same time increase borrowings extraordinarily, acts as a ballast on growth in our sector,” he said.

NLMK, Russia’s fourth-largest producer, had debts totalling $2.5 billion at the end of last year, compared with leading producer Severstal’s $7.2 billion and number two Evraz’s $7.9 billion.

Lisin also said NLMK plans to expand value-added production and to ship more crude steel to its rolling mills abroad.

The company wants to increase annual crude steel output to 12.4 million tonnes at its main production site in Lipetsk by next year, up from 8.5 million tonnes in 2009.

“We will continue to expand our capacity to produce steel at low cost, we will build new blast furnaces and modernise steelmaking capacity,” Lisin said.

NLMK ships Russian slabs to its DanSteel operation in Denmark and also operates a joint venture with Luxembourg-based Duferco.

It has production assets in several countries including Belgium, France and the United States.

(Writing by Alfred Kueppers; Editing by Jon Loades-Carter and David Holmes) ((alfred.kueppers@thomsonreuters.com; Tel +7 495 775 1242; Reuters Messaging: alfred.kueppers@thomsonreuters.com@reuters.net))

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