OREANDA-NEWS. Metinvest raises salaries and INTENDS to boost production volumes.

- Today, amid the economic and political crisis, there is a crucial issue of maintaining social guarantees for employees of industrial businesses. What is your company doing in this regard?

- Recent developments in the country have created tension in the society. It is clear that the crisis will result in higher inflation. We are responsible for 120,000 employees across Metinvest Group, and I am sure that we must support them in these difficult times. We've undertaken to implement social guarantees and we won't go back on that commitment. Thus, it will be right to reconsider the salaries. There are several options to do that. The national currency is unstable: its rate dropped to UAH 13 per dollar and is now back to UAH 11.5. With such instability it's hard to determine the amount to compensate to the employees. However, we will estimate several scenarios of the development of events, covering different levels of inflation. We also want to evaluate the image of our companies against other industry players. In terms of salaries, there are some we fall behind and there are some we outrun. Anyway, we are getting ready to shortly reconsider the salaries and increase them. I think we will do that in mid-2014 depending on the situation in the country. It is important for us to see a certain stability, when it is clear where we are and what is happening. If the Ukrainian events continue to be negative, we will consider another salary rise, probably by the end of the summer.

- How does the process run exactly in the company?

- As planned, all businesses within Metinvest revised their salaries in April. In the beginning of May every employee will get a pay-list indicating those changes. The salary increase depends on a number of factors. First, we consider the salary level of an employee benchmarked against his colleagues across the Group with the same set of skills. Second, his performance for the past year is important. We look also at average remuneration changes occurred at other businesses in the industry. Salaries mostly grew 10-12%. The pay of some staff will not increase that high - I mean experts with a high salary for their positions. Yet in some cases the salary will gain more than 20%. I mean the positions underpaid in the past. For example, that was the situation in Krasnodon. We saw that many at Krasnodonugol were significantly underpaid compared both to the Group and other businesses in the industry. So, the rise will be higher there. Today we are levelling salaries according to the principles of our internal set of values, the pay system and performance.

- What do you think about the recent events at Krasnodonugol? What demands of employees did you satisfy to resume normal operation of the company?

- The political situation is very difficult now. People rally in front of the town council in Krasnodon almost every day. We see the government being inactive and unable to take the situation under control. As a result, the issues that should have been addressed on the operating level were taken to streets. There were a number of emotional and unrealistic demands. If they had been met, we would have had to shut down the company. For example, double the salaries - and this while we are not behind the industry by that far. Indeed, we were behind and we are levelling the situation up by revising salaries. We certainly are not going to pledge not-guilty or disclaim our obligations but that kind of problems should be addressed through negotiations, not strikes.

On average, the salaries at Krasnodonugol have gone up 20%. But I don't want to stick to this number as we had no objective to raise it by certain percentage. The average raise that we planned before was 12.7%. We looked carefully at salaries of workers on different positions across the industry and made adjustments that are the most appropriate reflection of the current remuneration in the market. As a result, salaries increased by up to 40% for some positions. I regret that we didn't correct the imbalance before but am very grateful to employees for helping us see it. Now we are in top 3 employers of the coal industry in Lugansk Oblast.

The people on the square were also demanding that safety standards should be softened but that is absolutely unacceptable for us. If someone violates safety standards in a mine, he puts both his life and the lives of all colleagues around him in danger. So, absolute compliance with these rules is a matter of principle for us.

Other demands are those operational points that we indeed needed to sort out by ourselves. The story at Krasnodonugol exposed those sharp angles that we must smooth down and see where we are being not efficient enough. The main point is that our employees eventually decided to return to the negotiating table and the company resumed operations. Our objective for the future is not to lose momentum we have gained now. The story at Krasnodonugol taught us that those issues should be addressed in advance at all businesses.

- Where do you find the resources to increase salaries amid the current crisis?

- Today we are working amid the declining global demand for steel products. This results in a fall of prices for iron ore raw materials and rolled steel. There's another problem: international banks are reluctant to lend money to Ukrainian businesses due to various negative expectations. With this in mind, we have to assess our reserves. Production volumes are our most evident potential, especially when we talk about production of iron ore raw materials, limestone and coal. A production ramp-up will help us to get additional income and pay higher salaries.

The current capital increase can be the second source of additional income. I mean, we need to reduce our reserves at warehouses. The work of our logistics specialists and sales managers is important here. We are going to decrease our reserves of iron ore products by 200,000 tonnes and steel products - by 250,000 tonnes as compared to 1 January.

Our operational improvements will be the third source. We have a continuous improvement system in place, which has gained steam and should provide some benefit to solve a string of problems.

I wouldn't expect any serious effect from a depreciation of the hryvnia projected by some experts. With such abrupt leaps in currency exchange rates, prices often increase even faster. As a result, even for exporters this effect becomes less significant than it may seem from the outside.