Russian investor relations – just a few years ago, this would have been an oxymoron. But Russian companies are no longer renowned for their mysterious ways; instead, many have adopted best practices in communication and shareholder relations.
A testament to this welcome development was the launch this year of the annual IR Magazine Russia Awards. The inaugural event, held in Moscow on January 29, was attended by representatives of major Russian companies including Yukos, MTS and Rostelecom, and the evening recognized just how far Russian companies have progressed in investor relations over the past few years.
Of course, talk of the evening didn’t just focus on Russian IR. With recent events at oil firm Yukos dominating international headlines, the fate of CEO Mikhail Khodorkovsky – and of the company itself – was a hot topic among attendees.
However, Yukos’s CFO Bruce Misamore – winner of the award for best IR by a CEO or CFO – is keen to turn attention to the positive developments at the company, and he stresses the importance of a good IR program when the going gets rough.
‘In turbulent times it is particularly important that management continues to communicate with investors, so we did our best to maintain a consistent dialogue with the market,’ Misamore says.
‘Obviously over the past several months, the company has had to navigate through some extraordinary circumstances and periods of uncertainty. However, we’ve learned how important it is to stay in touch with the financial community, providing clarity on areas of concern and keeping the market informed about how the business is going.’
Strong foundations
Yukos’s IR department was created in late 1999 as part of the company’s decision to establish, in Misamore’s words, ‘a world-class company with the latest technologies, managed according to international business standards.’ Along with changes in its operations, Yukos built an international management team and adopted best practices in corporate governance, transparency and US Gaap financial reporting.
The company’s IR department currently consists of four full-time employees, including clerical support. This in-house IR team is supplemented by external help, which includes an international and a local IR consulting firm, as well as other information and service providers. Senior management members – and not just Misamore – make sure they’re heavily involved in the IR function, too.
‘Transparency for investors is one of the values shared by the entire company and supported by senior management,’ Misamore explains. ‘Accordingly, the IR team has always had access to senior executives, and senior management has frequent direct interaction with investors and analysts.’
Misamore emphasizes that IR has to be an integrated function at a company, with proper commitment from those involved. ‘Our view is that success in IR can only be long term,’ he explains. ‘A single high-quality presentation or conference call does not make the IR function successful unless it is one of many high-quality IR events that, combined, provide investors with the accurate information they need for their investment decisions.’
Misamore estimates that he dedicates between 10 per cent and 15 percent of his time to investor relations. He is involved in quarterly visits to major financial centers, speaking at conferences, investor meetings at company headquarters, one-on-one meetings in many locations, analysis of investor feedback and day-to-day contact with the IR department.
Some of the locations Misamore visits might be considered unusual for CFOs in other countries. ‘One of our biggest oil fields is in the middle of a Siberian swamp,’ he explains, ‘and we have to take analysts there in the dead of winter when the field is more accessible over the ice.’ Not your typical facility visit, but for those involved in Russian IR, it’s all in a day’s work.
Problem solving
Despite Misamore’s positive outlook, no one can deny that the Russian investment scene has had its fair share of difficulties. Valery Goldin, vice president of international and investor relations at telecommunications company VimpelCom – winner of the grand prix for best overall investor relations at a large-cap company – says the firm’s three-strong IR department has had to overcome various hurdles since its establishment in the summer of 1996, prior to the company’s IPO on the NYSE in November that year.
‘A recent challenge has been to get more than 50 percent approval of major annual meeting decisions by all registered ADR holders,’ he explains. ‘We have had to persuade ADR holders to support certain decisions (some of which involved substantial dilution) and to actively vote.’
The Russian financial crisis of 1998 also created problems, Goldin notes. ‘After the crisis, VimpelCom made losses for more than two years,’ he says. ‘The challenge was to get our strategy across.’
But the fact that Russian companies have overcome various difficulties makes this IRO optimistic that IR in Russia will remain on its current course. ‘IR is developing as a profession in the world economy,’ Goldin comments. ‘If positive trends in the Russian economy continue, we will see IR departments being established at many more Russian companies, and further improvements in the professional development of IROs.’
And it appears that once a Russian company does create an IR department, it can rapidly achieve success. Dairy products and juice producer Wimm-Bill-Dann established its IR department only two years ago, just after its IPO in February 2002. At this year’s IR Magazine Awards, the company was the recipient of the grand prix for best overall investor relations at a small or mid-cap company.
IR manager Maria Eliseeva notes that the department of two works closely with the two people in the PR department. The aim of this quartet, says Eliseeva, is to provide ‘a unified information policy for the company.’
In 2003 the company established a disclosure committee, comprising the heads of key departments and the executive directors of several business units. ‘The committee meets before big information disclosures – such as earnings announcements and SEC filings – to collect and coordinate information to be discussed,’ explains Eliseeva.
The IR department’s biggest success so far, she continues, was its roadshow on the eurobond in May 2003. ‘This roadshow consisted of meetings with institutional investors in Europe and the rest of the world,’ Eliseeva remembers. ‘This resulted in the raising of approximately $150 mn in the international bond markets. The deal was also oversubscribed by more than five times, and was distributed across Europe, Asia and the US.’
At the awards event in Moscow, every company had similar examples of recent investor relations successes. Anna Kareva, director of public and investor relations at telecommunications company Rostelecom – and winner of the award for best investor relations officer – says the company’s IR function has ‘completely changed investor perception’ of Rostelecom. ‘The company image was of a ministry-style, inefficiently run, stagnating organization,’ she says. ‘But we have proved to the investment community that it has changed fundamentally, and is now an attractive investment opportunity.’
While the IR Magazine Russia Awards were about looking back and celebrating what had been achieved, most conversation – and most acceptance speeches – focused on the future, as IROs made plans for further improvement and even greater successes next year.
The key now for many Russian companies is to raise the level of IR to international standards, says Misamore. ‘The investment business is global,’ he explains. ‘So Russian companies must gravitate to internationally recognized norms and best practices in the field of IR.’
With such big steps already taken in a short period of time, it looks like there’s nothing to stop Russian IROs entering – and thriving in – the international arena. So at next year’s awards, we expect to hear even more tales of Russian success.
