13.03.2012 NCSP Group Development Strategy until 2020: numbers and facts
On March 13, 2012 NCSP Group management published Master Plan Presentation «NCSP Group Development Strategy until 2020».
The document took approximately a year to prepare as the new management team defined main focus areas for long-term development of the Group.
The Strategy is aimed at turning NCSP into the largest port operator in Russia and a major port operator in Europe with long-term growth of NCSP share price being the key priority.
The new management team of NCSP Group aims to create the most effective port operator in Russia, to strengthen the Group’s position as the largest port-logistics company in Russia and one of the largest in the world. NCSP Group is the etalon in terms of quality of services, advanced technologies integration, as well as in social and ecological responsibility.
Key tasks for the company:
Ø To ensure equal access to the Port infrastructure for all freight forwarders
Ø To achieve maximum efficiency of current assets
Ø Cargo turnover growth
Ø To ensure high rate of return on investments
Ø Attracting and retaining professional personnel
Ø Partnership with key clients based on mutual trust and long-term cooperation
Ø Strict adherence to best corporate governance principles
Ø Responsibility and initiative in respect of health, safety and environment
Ø Social and economical prosperity of regions of presence
NCSP Group strategy for 2011-2020 consists of three consecutive stages: short-term (2011-2012), Medium-term (2012-2015) and Long-term strategy (2015-2020)
During the first stage (2011-2012) improvements relate to increasing operating efficiency of current assets. Certain works have already been completed.
During the second stage (2012-2015) - capital expenditure as a precondition to upgrading handling technologies.
During the third stage (until 2020) - terminal specialization
NCSP Group continues to implement the investment program which was approved by the previous team. The main emphasis of the program was made on new terminals construction (Sheskharis, NMT, BSC). Out of $538 mln, $416 mln had been invested as of the end of 2011. Upon completion of the investment program, the Group throughput capacity will increase by 5.5-20.5 mln. tons and 238 thousand TEU.
As a part of the Master Plan, the NCSP Group management offers the New Development Concept. The new concept proposes transition from specialization by stevedoring companies to specializing by production areas with a focus on high-marginal cargoes
▪ NLE specializes in containers handling. Construction of a specialized container terminal with capacity of 500 thousand TEU
– Once the new NLE facilities are utilized at least by 75%, the Group will commence a new project to build a container terminal on the basis of the NCSP Western Area, which will allow to increase NCSP’s container throughput capacity from 170 to 700 thousand TEU, which together with NLE will amount to 1.2 mln TEU
▪ Extending the range of services provided through acquisition and development of extra land in the port
▪ Construction of a terminal for handling iron ore and ore concentrate with capacity of up to 12 mln tons with an option of using the same technology to handle other types of bulk cargoes (mineral fertilizers, coal) as well as with a reverse cycle option
▪ Redirection of pipes, ferrous and non-ferrous metals, timber (potentially), perishable, oversized, and other types of cargo to the NCSP Eastern Area and to NSRZ
▪ Construction of multi-purpose deep-water port in Primorsk: increasing export potential for the Russian economy, business diversification due to the long-term terminal development program in Primorsk for containers, metal, iron ore, mineral fertilizers and oil products
▪ Expanding the range of services rendered and creating added value along the cargo supply chain.
The Master Plan also contains model outputs for main NCSP cargo markets development.
NCSP Group main objectives concerning containers handling are to ensure appropriate growth of transshipment capacities, to create a schedule of capacity growth, starting from the least costly projects and to widen the spectrum of services provided.
Grain remains one of the top cargoes for NCSP Group. The company intends to create capacity reserve for consolidation of NCSP grain market share, to examine infrastructure development options, to examine possibility of establishing a regular service for the most demanded routes, taking into consideration grain market cyclicality.
NCSP Group plans to create a unique offer for producers of iron ore and ore concentrate, to focus on universal technologies in bulk cargo transshipment with a reverse cycle option and to establish long-term relationships with Metalloinvest and other key producers.
The Company continues to monetize its competitive advantages in Russian oil transshipment in the Azov-Black Sea and North-Western Basins. The company will monitor oil production outlook, including East Siberian oil fields, and will work with Federal Tariff Service (FTS) aiming to improve tariff regulation.
The Company intends to increase NCSP Group’s share in oil products transshipment volumes in the Baltic Sea Basin as well as in Azov-Black Sea Basin and to ensure new investment projects being consistent with projected oil product exports.
Regarding coal transshipment, NCSP Group will ensure universal technologies in bulk cargo transshipment with reverse cycle option and will detalize coal transshipment model, identifying producers naturally leaning towards Azov & Black Sea Basin, taking into consideration coal export volatility and global consumption trends.
Master Plan describes in detail rail bottlenecks in Primorsk and Novorossiysk, and offers solutions to these issues.
▪ 2012 Federal budget contains target increase in RZD charter capital by 7.5 bln rubles for development of railway connection Vyborg-Primorsk-Ermilovo. NCSP Group expects that in case of uninterrupted financing of the project, it can be completed within two to three years
▪ In Novorossiysk it is the railway Yard A of Novorossiysk station that represents the bottleneck, not the main railway or railway access to the port, that is why it is necessary to commence Yard B construction project as soon as possible.
To achieve the identified goals NCSP Group plans to shift away from specialization of stevedoring companies to specialization by production area, to focus on fast-growing high-profitable cargoes while retaining the universal nature of the assets, build new terminals and invest in development of new technologies and production processes.
Current Areas of Efficiency Improvement of NCSP Group
As of today, Moscow Representative Office has been restructured with over 50% support staff reduction. Efficient support for the Group’s operations is organized by transferring top managers to the business units to provide support in the field. Restructuring and optimization process of all NCSP business units has been launched in order to achieve high standard management efficiency and effectiveness. Number of administration levels and overall management headcount has been reduced, vertical & horizontal organization structure is established providing effective communications, proper work planning, efficient decision making process and timely control of results.
For operating efficiency improvement matrix organizational structure of the Group’s key functions is planned. Integrated commercial department was created. Implementation of operations efficiency plan (28 recommendations) suggested by international consulting company was launched which may result in overall productivity improvement of up to 14% with little to no extra cost. Technical audit and implementation of long-term action plan is organized in order to achieve maximum utilization of existing assets and to explore new business activities. Review of all business processes is being conducted to identify ways to improve productivity and reduce cost. The Company launched an audit of existing port infrastructure to design a road map for most cost efficient investments in modern facilities that would enable uninterrupted operations and sustainable business growth by attracting new cargoes to the ports of Novorossiysk, Primorsk and Kaliningrad. Energy safety of production processes review is being carried out to identify possibility to introduce additional energy sources, implementation of energy consumption reduction and energy recycling. Operations department was restructured. Number and headcount of departments was decreased. Two management levels were eliminated. The port gained ability to switch workforce among port facilities on demand. Flexibility in controlling and managing cargo flow was increased. Effectiveness of mobile equipment was increased: PMC, locomotives, cargo lifting transport. Internal logistics function was introduced which allows to increase the Port storage space utilization and to reduce number of moves within the Port facilities.
HR management improvement steps include: Creation of unified motivation system for the Group of companies on the basis of KPIs and their relation to strategic development directions. Setting up KPI system for top managers based on their achievements and considering the Shareholders‘ interests. Developing measures to reduce current operating costs, to create a valuation mechanism of planning, budgeting and approval labor economic indicators in the Group. Enhanced focus on training & development, recruitment, for employees and management by introducing world best practices and innovative technologies. Growth of talented and loyal personnel reserve to supply the business with management resources. Wages indexation for engineers/technical staff and workers on the ground already done this year. Mutual collaboration with the Trade Union is established.
Corporate governance focuses on improving the image and reputation of the Port as a reliable business partner. Cargo turnover growth is ensured by means of collaboration with long-standing clients and attraction of new clients by providing higher quality and widening scope of services.
The company is actively engaged with the city and regional authorities. Creation of one dispatch center together with the regional rail, resulting in increase in daily railcar handling productivity. Conducting personnel planning jointly with RZD, training and certification, increased control over traffic safety in the Port.
Best corporate governance principles developed and approved, which are designed to protect interests of all shareholders.
In HSE the Company introduces highest safety, health and environment standards to protect employees’ health and to prevent accidents and to protect environment. Obligatory introduction of HSE KPI’s for top- and middle management, engineering/technical personnel. Establishing of competition between departments for the title of the best department with highest HSE standards. Involvement of Trade Unions and press in the process.
About NCSP Group
Novorossiysk Commercial Sea Port is the largest Russian port operator and the 3rd operator in Europe in terms of cargo turnover. NCSP shares are traded on Russia's MICEX exchange (NMTP) and on the London Stock Exchange in the form of GDRs (NCSP).
50.1% shares of PJSC "NCSP" belongs to Novoport Holding Ltd, beneficiaries owners of which are JSC “Transneft” and Ziyavudin Magomedov (Summa Group). NCSP Group consolidated cargo turnover in 2011 totaled 157 million tons. Consolidated revenue according to IFRS for the nine months of 2011 totaled $782 million and EBITDA of $404 million. NCSP Group combines the following stevedore companies: OJSC Novorossiysk Commercial Sea Port, Primorsk Trade Port Ltd (since 2011), PJSC Novorossiysk Grain Terminal, OJSC Novorossiysk Shipyard, PJSC Fleet of NCSP, OJSC NLE, OJSC IPP, and Baltic Stevedoring Company Ltd.
For more information please contact:
Media: M.Sidorov@nmtp.info; email@example.com;
Investement Community: MGrigoriev@nmtp.info
(Download PDF 3,35 Mb)