Fyodor Andreev, President of ALROSA, said in his introduction to the diamond miner’s annual report that the company accomplished several major goals set one year ago. First of all, ALROSA managed to retain global leadership in terms of rough output by carats. In view of its results in 2011, ALROSA has become the world’s biggest diamond producer having increased its output to 34.6 million carats in 2011 from 34.3 million carats in 2010.
Fyodor Andreev also noted that the company was the sole producer of rough diamonds in the world which managed to achieve a substantial increase in production in the post-crisis period, at the same time boosting its earning capacity. "We made it our mission to learn how to trade efficiently and create a new distribution system in a competitive diamond market,” he said. “I believe that this problem has also been solved. As a result, ALROSA Group sold $4,454.8 million worth of diamond goods (of which rough sales reached to $4,273.7 million and polished sales - $181.1 million). Thus, the outgoing year was a record one in the history of ALROSA in terms of rough sales."
In the CEO’s statement it is also said that during 2011 the amount of liabilities born by ALROSA was reduced to $2.9 billion from $ 3.1 billion, while the share of long-term liabilities at the end of 2011 was 80.5% of the total debt. At the 2011 year end, ALROSA gained a net profit of RUB 29,519 million. "These positions were achieved due to the effective support of our shareholders, the Government of the Russian Federation and the Government of the Republic of Sakha (Yakutia), and also due to the efficient work of our major mining operations and marketing departments," Fyodor Andreev said.
According to ALROSA’ CEO, the company had to solve very serious production problems in 2011, in the first place strictly adhering to the underground construction schedule for the company’s new mines with a focus on the underground construction program for the Udachny Mine. The company spent 80% of its capital investments to implement this important project. Fyodor Andreev expressed his confidence that Udachny, being one of the largest diamond mines on this planet, would reach its planned level of production in 2017.
One of the limelights in Fyodor Andreev’s presentation was that Severalmaz, ALROSA’s diamond mining subsidiary, reached the break-even point. "Diamond mining in the Arkhangelsk Region ceased to be a kind of "extracurricular" operation for the company, becoming a full-fledged project within ALROSA Group,” the statement said.
It was also noted that the company’s good financial and economic performance in 2011 made it possible to raise wages, to continue the implementation of all corporate programs, including housing construction in Yakutia and in Orel, maintenance and development of therapeutic facilities, pension fund schemes, culture, sport and health programs. ALROSA launched a mortgage crediting program for company employees. Fyodor Andreev expressed his confidence that the transfer of the remaining housing stock into the ownership of Yakutia’s municipalities backed by full-scale financial support from the company will allow more than three thousand families finally solve the problem of housing privatization and turn their dwellings into private property.
The transformation of ALROSA into an open joint-stock company, making it an “open” entity was the most important event of the year, the statement said. It is a major step towards meeting the key objective - to maximize the growth of ALROSA value. After splitting its stock and starting to trade it on the stock exchange the company turned into one of the most attractive investment options for financial institutions and private investors. "I am confident that in the very near future ALROSA, remaining a state-owned entity, will be able to turn into a company with a high market value and efficient corporate governance - a real leader in the world diamond production," Fyodor Andreev said.
Modernization of ALROSA’s fixed capital stock should be the most important task for the next few years, due to which it is planned to give a significant boost to the company’s performance, including exploration, personnel policies, sales, marketing, forecasting and analysis, procurements and administration.
The statement pointed to the need to continue the policy of reducing the company’s debt, to sell its non-core assets which produce a negative impact on the fair market value of ALROSA. "Everything should be aimed at obtaining results – reaching efficient production and sales of rough diamonds, winning a fair share in the market for the company as its leader, boosting profits and wages," Fyodor Andreev said.
"We need to complete all the required corporate procedures to prepare ALROSA for possible privatization and to offer our vision of how to implement this decision in a most efficient way to the company’s shareholders,” he said. “In 2012, ALROSA turns 20 years old. Like all the new Russian economy, ALROSA went through a very tricky period of formation, development and adulthood. Today, the company has managed to achieve a leading position on a wholly new and competitive diamond market. The unique technical and industrial potential of ALROSA, its workers and engineering personnel, as well as the government support make it possible to expect that the objectives set by the shareholders of the company for 2012 will be fulfilled."
Rough&Polished
