It’s arguably Ukraine’s biggest prize and thorniest challenge. Metals and mining are both Ukraine’s traditional economic heavyweight and a highly politicized arena dominated by complex business groups, sometimes with murky origins.
Yet many of Ukraine’s heavy industry giants are modernizing fast, adopting the international standards required to tap global capital markets. Bringing them up to speed is John Campbell, an assurance partner at global auditor PwC who specializes in financial reporting, internal controls and corporate governance issues.
After 15 years working as partner focused on industrial products at PwC’s office in Montreal, the Canadian moved to Moscow in 2008 to work on Russian metals and mining. Since April 2012, he has followed the same track in Kyiv.
John Campbell
Age: 55
Citizenship: Canadian
Position: Partner at PwC
Years in country: One year
Tips for succeeding in Ukraine: “Tap into the business associations to do your homework on the market and business partners.”
“It was very welcoming,” Campbell comments of the move, highlighting a greater will to open up to strangers. “I was surprised at how much English was spoken, compared to Russia,” he adds.
But while Kyiv may be more easygoing, Ukraine’s industrial capital, Donetsk, which Campbell visits around once a week, is more formal and business-oriented. There’s also a greater need to get to know clients, he adds, to “make them comfortable with you.”
The greater emphasis on organization also comes with greater interest in adapting international financial reporting standards and corporate governance standards – the path to Western capital markets. The need for Western investment has made metals and mining one of the most advanced sectors in Ukraine, Campbell explains, but much more remains to be done.
A quick look at some of the top players’ websites confirms this opinion. Many companies have audited IFRS annual reports readily available for three or more years – a key requirement for public offers or bond issues.
But this doesn’t mean Ukraine will see an initial public offering any time soon, Campbell warns. Liquidity has dried up and equity markets are not yet interesting enough. Bond markets are more appealing though, he added, with low interest rates in the West prompting international institutions to seek the kind of premiums that Ukrainian companies offer.
Yet a global slowdown has hit heavy industry hard, causing export revenues to slip to equal footing with a booming agricultural sector for the first time in Ukraine’s history. According to Campbell, the first half of 2013 does not promise much improvement, though business could pick up by the end of the year.
Meanwhile, metals and mining companies can tackle some persistent problems, like minority shareholder rights. As in Russia, many Ukrainian companies are still dominated by a single owner, Campbell noted, which can make things difficult for smaller investors.
With margins squeezed by the crisis, many companies are inevitably also taking a closer look at their books to eliminate waste and theft, the expert said.
“There’s a much more serious attitude being taken towards fraud. If you’re a shareholder of a company, you want to make sure your employees are not stealing from you,” Campbell said.
New transfer pricing policy consistent with international guidelines, which the government is pushing, will also help increase clarity and improve international taxation issues, he added.
Waiting for the sector to return to full steam, Campbell says he is enjoying Kyiv perks. An avid runner, putting in some 10 kilometers on weekends, he praised the capital’s green spaces and hills – particularly around Mariinsky Park and the Golden Gate neighborhood, where he resides.
“But its very hard to walk around this time of year, as the streets are quite treacherous,” he adds.
Kyiv Post editor Jakub Parusinski can be reached at [email protected]
