“The entire global diamond industry is now greatly affected. And we also have to make decisions to keep the company. We are working for the future, because some day, this crisis will end. ALROSA should emerge from it with the least losses, while maintaining its competitiveness,” said Aleksey Dyachkovsky, Deputy CEO for Social Policy, ALROSA, in his interview to taigapost.ru.
Aleksey Dyachkovsky found it difficult to forecast the company's profit amidst a sharp decline in activity in the global diamond market. “It is difficult to say now what it [profit - ed.] will be and whether it will be in 2020 at all,” he said. “What will happen in 2020? ... We see that the global pandemic is lasting longer than expected and the second wave has come to some countries. For example, to the United States, and this country is the world's largest market for selling diamond jewellery.”
According to the ALROSA’s Deputy CEO, in a situation when enterprises and businesses suspend their operations, people do not think about diamonds. In India where nearly all the world's diamonds are manufactured, cutting and polishing units have been shut down for several months due to the quarantine because of the high incidence of the coronavirus among the workers. As a result, the diamond trade suffered.
“All diamond companies have found themselves in a difficult situation, they have announced a reduction in their production targets for this year - some companies by 20%, some by 50%. This is a forced move as the market now simply will not ‘digest’ the same amount of diamonds which was mined previously and it is also impossible to accumulate them endlessly,” says Dyachkovsky.
Asked about the payment of dividends to eight uluses (districts - ed.) of the Yakutia diamond province, he said that since 2018, the dividends to the budgets of the Republic and uluses have been paid in two tranches.
The dividends based on the results of work in H1 2019 were paid at the end of last year, the second tranche was paid this year. “The next reporting period for dividends is the first half of 2020, and the performance for this period, of course, will be affected by the pandemic,” Dyachkovsky said.
He said that ALROSA suspended the work at some production facilities to reduce the output, not completely, but seasonally, and for each of them, the operation schedule was developed. This fall, after the suspension of operations, the Aikhal mine, Verkhne-Munskoye deposit, factory No.12 will reopen. “The employees of the divisions where activities were temporarily suspended were not laid off, but they continued to receive money due to the forced downtime - this makes two-thirds of the salary every month despite the fact that they didn't have to go to work. The company is interested in preserving the team, it values each employee and will do so in the future,” said the Deputy CEO of ALROSA.
As for the reports about the 6,000 workers allegedly laid off in the Mirninsky district and the transfer of some company departments outside Yakutia, Dyachkovsky assured that ”this is not true”. “In the Mirninsky district alone, more than 24 thousand people work at the ALROSA's subdivisions. According to the estimates, several hundred jobs will fall under the optimization as a result of the projects aimed to reduce the costs; if possible, these people will be offered an alternative work within the group,” he said.
At the same time, Dyachkovsky admitted that given the current negative market conditions, it is impossible to do without layoffs, but the company does its best to minimize them. “The company has taken a lot of measures for this, for example, the salaries of the administrative employees were decreased, costs were significantly cut, as well as all the projects that were not of primary importance,” he says.
Dyachkovsky explained that the orders to temporarily ban on hiring the labour force in Yakutia, which are so heatedly discussed in the media and social networks, were dictated precisely by ALROSA's desire to reserve jobs for those who would be laid off.
According to him, one cannot endlessly spend the same level funds when the incomes decline. “In this case, we will simply ruin the company and then the number of those laid off will be tens of thousands rather than hundreds people. These are the laws of economics. We all have to obey them. We also form the family budget based on our income. But I repeat: we believe that the end of the crisis is on the horizon. All crises come to an end, and after them, the growth comes,” said Dyachkovsky.
At the same time, he said that about 120 jobs would be transferred from Mirny to the ALROSA’s General Service Centre in Novosibirsk where the unified accounting department and other structures of the administrative apparatus operate.
In addition, the company has problems with its Yakutniproalmaz Research Institute. The today’s needs of the company do not provide the amount of work required to maintain the institute: as of today, all ALROSA’s large construction projects have been completed. Now, for some time, the number of orders received by the institute have decreased, so some of the departments will be transferred to Novosibirsk so that the company could work as much as possible on the market, including civil and industrial construction, explained the Deputy CEO of ALROSA.
Talking about the dividend payments, Dyachkovsky noted that ALROSA has never tried to recommend the local authorities how to spend the funds they owned. He denied the talks about the possible alienating the company's shares owned by the government of Yakutia (25.0002%) and eight uluses of the diamond province (8.0003%). “Even within the company, I have never heard such talks, moreover, there are no official intentions,” Dyachkovsky said.
According to him, the company has built up constructive relationships with the heads of the uluses and provides them with assistance in addition to the funds paid as dividends. But the dividends go to the ulus budgets and are spent through public hearings and approvals at the meetings of the Unions of ulus deputies.
At the same time, ALROSA has agreements on the social and economic development with the Nyurbinsky and Olenyoksky districts where the Nyurbinsky Mining and Processing Plant and the Verkhne-Munskoye deposit are located. “Under these agreements, we annually transfer over 320 mn and 100 mn roubles, correspondingly, to the uluses in addition to the dividends. We make our proposals on how to spend these funds, but we do not play a key role in making their decision. Nevertheless, we see how money is spent under the social and economic development agreement, we are informed about this,” Dyachkovsky said.
At present, ALROSA also participates in the republic’s programme to provide the residents of the Vilyui group of uluses with clean water, to which the Company allocates 150 mn roubles a year through the Future Generations Fund in addition to the dividends paid. The total amount of the ALROSA's participation in the programme will be 800 mn roubles. Moreover, these funds are paid in addition to the dividends and the social and economic development agreements of the Nyurbinsky and Olenyoksky districts.
“At the same time, we allocate another 800 mn to 900 mn roubles annually through the Future Generations Fund for the implementation of the social projects in the republic,” said the Deputy CEO of ALROSA.
ALROSA became a joint stock company in 1992. At the same time, the government of Yakutia and a number of uluses belonging to the so-called ‘diamond province’ received the shares in the company. The first dividends were paid in 1996 based on the results of work in 1995.
Until recently, the amount of dividends was small. Thus, according to the ALROSA's operating results in 2010, the uluses having approximately 1 percent of shares each received 18,300,000 roubles. However, in 2019, based on the performance in 2018, the dividends increased 40 times and amounted to 740 mn roubles paid to each district.
This was the result of our serious steps to reduce costs and increase profits, revise the dividend policy, which benefited not only ALROSA but also all its shareholders, including the republic as a whole and its eight uluses. Of course, the favourable global rough and polished diamond market conjuncture also played its role, Dyachkovsky concluded.
Alex Shishlo for Rough&Polished
