Metinvest plans four months ahead, reviews market and production capacity monthly amid strikes – CFO

Metinvest, a mining and metals conglomerate with headquarters in Donetsk, Luhansk, Zaporizhia, and Dnipropetrovsk regions, anticipates four months into the future, carefully assessing market dynamics and production capacity each month. Chief Financial Officer Yulia Dankova shared this insight during the 24th Ukrainian CFO Forum in Kyiv.

Despite potential changes even within this short timeframe, Metinvest maintains its annual business planning, creating a plan for the upcoming year each autumn. However, the process has evolved to include a baseline operating scenario, possible risks, and contingency reserves for unforeseen events.

Dankova noted that circumstances could significantly alter between planning cycles due to factors like attacks, Black Sea port closures, EU steel import quotas, and national program changes. The company chooses the most plausible scenario and prepares additional measures for its most aggressive plan. They then monitor which contingency measures are utilized, which risks materialize, and any unexpected events, or black swans, that arise.

The company has also revised its planning assumptions, focusing on practical operating conditions instead of predicting the end of the war. This includes when Black Sea ports may reopen, the railway's ability to transport cargo, and the operational capacity of its plants. Dankova emphasized that businesses must continuously revise plans to stay adaptable.

The planning process aids management in understanding objectives, evaluating scenarios, and making economically and operationally sound decisions. For large corporations like Metinvest, the key lies in swiftly assessing the impact of a single factor's change on the entire business.

Recently, another strike occurred on October 17, causing the plants to halt operations. Nevertheless, Metinvest is already planning the next four-month cycle, which will cover two months of the following year, and preparing decisions based on the selected scenario. The company reviews its scenarios whenever significant events could impact operations, such as Black Sea port blockades or modifications to EU export conditions under the Carbon Border Adjustment Mechanism (CBAM).

Metinvest utilizes dedicated platforms for sales and production planning, as well as consolidating plant cost data, while still relying on Excel for certain tasks. Decisions are made at both local and centralized levels based on the nature and scale of the problem. For instance, when allocating raw materials among multiple plants, management must determine which allocation will yield the greatest benefit.

Regular plan and decision revisions have become essential to Metinvest's operating model, akin to adaptive management in crisis situations. This model has been in place since 2014.

Dankova highlighted the importance of rapid information sharing and collaboration among departments. Decisions hinge on teams understanding each other's needs, with working capital management coordinating with the commercial director and inventory and procurement management involving the operations director. Metinvest, a vertically integrated mining and metals group primarily operating in Donetsk, Luhansk, Zaporizhia, and Dnipropetrovsk regions, has major shareholders including SCM Group (71.24%) and Smart-Holding (23.76%). Metinvest Holding LLC serves as the group's managing company.