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. Last Updated: 07/27/2016

UralMash to Restructure,Focus on Main Units

With sales booming, the nation’s largest producer of heavy machinery said Wednesday it would sell off all non-core units to generate the tens of millions of dollars it needs to expand its main business.

Machinery tycoon Kakha Bendukidze said restructuring his Uralmash-Izhora holding company, formerly known as Uralmash Zavody, will streamline its machinery production to concentrate on five areas: mining, drilling, metals, energy and shipbuilding.

"The company will become larger and thinner," Bendukidze told a press conference.

The first two-year stage of the restructuring calls for Uralmash-Izhora, which is comprised of 25 enterprises that hold 60 percent of Russia’s heavy machinery market, to sell non-core units that make everything from sausages to mufflers.

"This will bring Uralmash-Izhora $20 million," Bendukidze said.

The second stage is to sell its trucking, publishing and other service units.

And the third stage is to invest some of the sell-off’s proceeds into increasing production volume of its main units.

The company currently produces 70 percent of all drilling equipment in Russia, 60 percent of galvanized steel, more than 90 percent of mining equipment, 78 percent of steel equipment and 50 percent of heavy machinery used in nuclear power stations. It also is the sole supplier of diesel torpedoes to the navy.

The company posted a 70 percent increase in sales in 2000 to 6.5 billion rubles ($228 million) on the back of the booming oil sector, Bendukidze said. In 2001, sales should grow 30 percent to 9.5 billion rubles "at a minimum," he said.

The biggest boom was in sales of machinery used in nuclear plants, which grew sixfold, he said, adding that three export contracts were signed last year for two nuclear energy units in India and one in Iran.

The Uralmash-Izhora chief painted a bright future that should get even brighter once the restructuring plan is implemented, citing last year’s sale of an unprofitable rolled iron plant to steel major Severstal for $20 million, which saved the company $1 million a year.

"In the Olympics there has never been a pentathlon champion who won each of its five competitions," he said. "Many Russian companies are too integrated, they produce everything. Companies all over the world started specializing on their core business a long time ago. We will do the same."

Analysts polled applauded the move.

Eugene Satskov, a heavy machinery specialist for Renaissance Capital brokerage, said the restructuring plan was "absolutely logical" given the situation on the world market and Uralmash-Izhora’s chances of increasing exports.

United Financial Group’s Yulia Zhdanova said the plan was "very positive" for the company because it simply produced too many different products that were often "one-off" or unique.

Despite the thumbs up, however, Zhdanova cautioned that the plan doesn’t make the company a capitalist darling.

"Generally, the company is very nontransparent, slowly managed and its structure is unclear," she said.

Uralmash-Izhora is 30 percent owned by Rosindustria, of which Bendukidze is board chairman. Domestic investors own 4 percent and foreign investors own 40 percent, with 13 percent held by the company as a strategic share, according to United Financial Group.