Yuriy Ryzhenkov runs Metinvest, the nation’s leading steel and mining holding. His job is to manage every link of the value chain from mining iron ore and coal to making steel and finished steel products.
His performance is ultimately assessed by Ukraine’s richest billionaire, Rinat Akhmetov, who owns Metinvest through System Capital Management, a business empire that also includes energy, telecommunications and media.
At 38, Ryzhenkov is a son of a former top manager in the Donetsk steel industry and holds a master’s in business administration from the London School of Economics. He embodies the high value that Akhmetov places in young, Western-educated professionals.
Ryzhenkov had been chief operating officer and chief financial officer with Akhmetov’s DTEK from 2007-2010 and, before that, worked as a chief financial officer for the ISTIL Group owned by Kyiv Post publisher Mohammad Zahoor.
Ryzhenkov walks a fine line in running a business that had $10 billion in sales last year, with revenue coming from both sides of the war front. Speaking to the Kyiv Post at Metinvest’s downtown Kyiv office, he stressed that the metals holding “is a Ukrainian company” and referred to combined Russian-separatist controlled areas as “occupied.”
He struck a more general tone in a corporate newsletter published this month by mentioning “our country” and “the state” without referring to Ukraine while using phrases that echo Soviet rhetoric popular with many in the Donbas.
When armed Kremlin-backed squatters seized the Donetsk government administration building in April 2014, Ryzhenkov was one of a small group of Metinvest managers who wanted to take them on and pull down the separatist flag.
“We are doers; we don’t like to sit around. But our senior leadership talked us out of it,” Ryzhenkov said as his smile turned serious. “We didn’t want blood on our hands.”
He said that summoning Metinvest’s employees to a peaceful rally would have been ineffective. Only a small fraction of the holding’s workforce was based in Donetsk. But he said the workers played a huge role in retaking Mariupol in the spring of 2014, where two of Akhmetov’s steel plants are located.
Ryzhenkov also dismissed claims that Metinvest and its owner could have done more to mitigate social and political tension in the depressed industrial heartland of Ukraine. He said that his company paid higher than average wages, invested in work safety and had an extensive program to support local communities. Even environmental projects focusing on reducing pollution were launched.
After causing serious disruptions and demanding money from Metinvest last autumn, the Russian-separatist forces have changed their tune. They now let Metinvest operate, allowing the workforce of tens of thousands of people to earn an income. “We told the self-proclaimed leadership that if we would bow and pay to them, our produce would be considered illegal by the Ukrainian authorities and it would be impossible to export, resulting in mass layoffs.”
Before the war, the group was 97 percent self-sufficient in coke and 49 percent in coal. But now many of its key assets are in Russian-separatist territories.
Those include the steel plant in Yenakieve, which accounted for 22 percent of crude steel production in 2014. Others in separatist areas include the Khartsyzk pipe plant and Krasnodon coal mine while Avdiivka coke plant, which supplies 27 percent of the group’s coke, is on the front line and constantly shelled, interrupting production.
On payday, employees must cross into Ukrainian territory to collect their salaries because banks don’t operate in separatist territories. “It’s very difficult to get cash in to the area,” he said.
Ryzhenkov said the Ukrainian government could do more to help the company and industry. For starters, red tape could be reduced to let Metinvest’s freight trains through much faster. Efficient use of assets is crucial for margins already hurt by low steel prices.
Only the sharp depreciation of Ukraine’s currency, the hryvnia, helped the steel industry avoid major bankruptcies in 2014. About 76 percent of Metinvest’s revenue comes from exports. However, sales decreased 18 percent in 2014 over the previous year.
The holding is in default on debts of $113 million amid restructuring talks with bondholders. Ryzhenkov dismissed speculation that the default would cause Metinvest to sell parts of its business. He instead urged the government to give overdue refunds on value-added tax worth Hr 3.6 billion ($150 million). The refund amount grows by Hr 1 billion monthly. “The government also needs to stop collecting taxes ahead of revenue,” Ryzhenkov said.
Asked whether it would be fair for Akhmetov to write off the VAT refund, considering how much his businesses benefited from close links with deposed President Viktor Yanukovych, Ryzhenkov said the steel mills may be shut down if the money is not reimbursed as the law requires.
“If they want to punish or tax an individual, they should change the law,” Ryzhenkov said, who was elected to the Donetsk Oblast council on the list of Yanukovych’s ruling Party of Regions.
In 2012, Akhmetov was worth $16 billion, according to Forbes, but it is less than half of that now and dropping. A record plunge in steel exports to Russia by 50 percent in 2014 and low global steel prices hit Akhmetov hard.
Here again, Ryzhenkov says government should help more.
Russian companies “get electricity, gas and rail transport much cheaper than we do,” Ryzhenkov said, complaining that rail tariffs and energy costs had doubled in Ukraine since 2011.
Yuriy Ryzhenkov
Age: 38
Nationality: Ukrainian
Job: CEO of Metinvest
How to succeed in Ukraine: “The best way the miners and the metal workers can contribute to a peaceful solution to the conflict in Ukraine is by ensuring stable operation of the enterprises in the steel industry.”
