The government has to make a step toward supporting shipbuilders

Interview with Michael Aivazov - Director of Shipbuilding, Marine and Oil-and-Gas Projects Group of companies (MNP); Member of the Boards of Directors at: Krasnoye Sormovo Shipyard, Volgograd Shipbuilding Yard, Astrakhan 3rd International Shipyard, Nizhegorodsky Teplokhod Shipyard, Corall Central Design Bureau.

– What is the market niche for MNP and who are your customers?

– I can point out two basic sectors of the shipbuilding market, on which the development strategy of our company is focused.

The first one is designing and building of commercial fleet ships. This sector can be subdivided into two segments: river-sea class ships and small-deadweight marine vessels. The customers of these commercial fleet ships are Russian, European companies, Azerbaijan, Iran.

The second sector is designing and production of shelf development technical facilities. And here the strategic region for our Group is the Caspian Sea, where we have implemented several big projects over the last couple of years. And this is just a beginning; the prospects for development of hydrocarbon exploration and production on the Caspian Sea shelf are impressive.

– Marine and Oil-and-Gas Projects Group is specialized in commercial shipbuilding. The participants of this industry - primarily, those, who are focused on defense orders – often refer to its low profitability. Do you agree with such judgment?

– Certainly, naval shipbuilding is the most profitable – up to 20-30%, then, so called, offshore sector, i.e. construction of technical facilities for shelf exploration and production, and the commercial one takes the third line only. Ideally, profitability of commercial shipbuilding comes to nearly 5%, and, practically, never above this. At the same time, we have to take into account a lot of neighboring risks – advance in prices for equipment and materials (thus, in 2003-2004 the price for steel increased by 100%), appreciation of labor power, currency risks. For example, a steady tendency of rouble consolidation results in a situation when a contract that we concluded half a year ago has gone down in value by somewhere about 10-15% by now.

– How do you evaluate the plans of RosProm as regards to foundation of holdings in the shipbuilding industry and restructuring the overall industry?

– The existing capacities in naval shipbuilding cover the current needs in military products many times. Since the role of the government order is growing, the government has the right to control the industry and the funds it allocates to the government order. Another issue is how effectively this will be controlled. Here, a lot of things depend on what persons will manage restructuring and how accurately details of this reform were elaborated.

– In March MNP announced about purchase of the block of shares of Nizhny Novgorod “Lazurit” CDB – the designer of deep-sea vehicles and gas production and transportation technologies. Last year you sold several enterprises – manufacturers of drilling equipment, as well as St. Petersburg “Almaz” shipbuilding company specialized, generally, in naval shipbuilding. Restructuring of the group has been completed?

– Initially, nearly 33% of “Lazurit” belonged to United Machine-Building Plants, from which MNP emerged as an independent group. The shares of this design bureau were of profile interest for MNP, that is why we decided to redeem them. Now our two enterprises – Krasnoye Sormovo Shipyard and Nizhegorodsky Teplokhod Shipyard work on orders by the projects of “Lazurit”.

Also, by now we have consolidated 38% shares of Astrakhan “Lotos” plant, where we are the second major shareholder after the government. If the government takes a decision on privatization of its block of “Lotos” shares, we, undoubtedly, will consider the question of its purchase. Thus, by now the group has, principally, been formed.

– What kind of investments to own enterprises are made by the Group?

– This year we are finishing our investment project for modernization of the assembly-welding production facilities at Krasnoye Sormovo Shipyard. The enterprise carries out pre-commissioning of an advanced mechanized flat-section assembly line delivered by the German company IMG. In total, we will allocate about 10 mln US dollars for modernization of our biggest enterprise - Krasnoye Sormovo, and another 10 mln US dollars – to our other enterprises.

Interviewed by Gulnora Narzikoulova

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# 2(16), 2006