Paving the way
Visit any city in Russia and you will see busy construction sites. Wherever you look, there are towering cranes and new buildings. Mikhail Skorokhod, President of Eurocement Group, shares his views on the future of Russia’s building industry.
Russia’s construction boom has been under way for many years, though there was some contraction following the 1998 economic default and the global crisis of 2008.
The Russian Eurocement Group, headed by Mikhail Skorokhod, has weathered these storms to become the largest cement manufacturer in the CIS in a matter of 10 years.
“We did the impossible: we became one of the world’s top 10 industrial companies in only 10 years,” says Skorokhod, who began his career in the mining industry. “The experiences of cement companies such as Holcim and Lafarge show it usually takes manufacturers decades to achieve a respectable position in the market.
Eurocement Group has 16 plants in Russia, Ukraine and Uzbekistan, which collectively produced more than 40 million tons of cement per year.
“Our holding operates more efficiently than international giants such as Holcim and Lafarge. This has to do, first of all, with favorable market conditions. Second, we’ve boosted our energy and eco efficiency by implementing an efficient cost management system at our enterprises,” says Skorokhod.
“This market has seen colossal growth rates in recent years and still has tremendous potential.”
The company’s development strategy includes a number of projects to modernize production. The first has already been completed: a new plant began operating in the Voronezh region in 2012 using state-of-the-art equipment, which has resulted in a 40% reduction in costs.
In the second stage, all the company’s plants will be converted to the dry process of cement production, in which raw materials are mixed and added to the kiln without water. This will be done using existing equipment and without any disruption in the company’s operations.
For Russia, these innovations mean a new technological base for the cement industry. For Eurocement Group, the changes will bring a 15% growth in capacity, a cost reduction of between 30% and 40%, and the company’s impact on the environment will be two and a half times lower.
“There are many who say you need new markets in order to diversify risks, but Russia is a gigantic market in its own right.”
Eurocement Group also has strong positions in other CIS countries. Markets such as Ukraine, Belorussia, Azerbaijan and Uzbekistan help the company maintain a high level of sales.
“Deliveries to Azerbaijan and Uzbekistan allow us to make the most of our production capabilities, despite seasonal dips in some areas of Russia. Thanks to the climate, our products are in demand almost all year-round,” he says.
Eurocement’s priority, however, is Russia, where a number of projects for the development of residential, industrial, transport and social infrastructure will be launched in the near future. These projects will require large quantities of materials produced by Eurocement.
“The demand for construction materials on the Russian market has enormous growth potential,” says Skorokhod. “The Russian Government’s plans for the period up to 2020 involve growth in housing construction by up to 120 million square meters per year. In 2012, only 63 million square meters were built, so we need to double the rate.”
According to Skorokhod, Russia has a severe housing shortage when faced with the need to accommodate its population of 140 million. In Western countries, one square meter of housing per capita goes into circulation each year. However, the figure for Russia is less than half of this, and a large number of old buildings have already been condemned.
Developing Russia’s infrastructure
The road situation in Russia also leaves much to be desired. “Russia’s total road length is four times less than in most countries and three times less than in America,” says Skorokhod.
Russia also needs cement for new infrastructure projects in the oil, gas, atomic and transport industries, and for the 2018 FIFA World Cup, during which the country will host football matches in 10 different cities.
“In the past four years our turnover has seen over 15% annual growth,” says Skorokhod, “and it has already grown more than 15% in the first four months of this year. That’s a good start.”
Though its line of business can hardly be called creative, the company is widely known as a patron of the arts. Eurocement Group provided financial support for a unique publication. Geniuses of War, Weal and Beauty is the first monograph devoted to the British artist George Dawe, who was officially appointed First Portrait Painter of the Russian Imperial Court in 1828.
Eurocement Group has also collaborated with the Moscow International House of Music and the State Tretyakov Gallery for many years. In 2012, the Group received a Golden Mask Award for his contribution to Russian culture and his pioneering work in developing and supporting the theatrical arts. He was the first businessman to receive such an accolade.
Supporting communities and staff
The company often has to take on the role of chief employer in small cities that lack a developed industrial base, as well as being a city patron and playing an active part in developing the social infrastructure.
“Helping communities is not something we have to do. We could pay our taxes and leave it at that, but we feel our support is important,” stresses Skorokhod.
He speaks of Eurocement Group’s approach to staff training and development with particular enthusiasm. “We’ve put together an outstanding staff and management team at our plants, and the proof is that our employees are in high demand on the market,” he notes.
Thanks to its working conditions and effective management, Eurocement Group is frequently included in expert ratings of leading Russian firms. In 2012, for example, five Eurocement Group managers were listed among the top 1,000 Russian managers by the business newspaper Kommersant.
“The most powerful machinery and the most advanced technologies won’t work without the right people.”
The company identifies talented employees, focusing on their strengths and weaknesses, and gives them an opportunity to upgrade their qualifications in a particular area so that they can move up the career ladder.
Eurocement Group works closely with universities and vocational schools to help students find jobs in its enterprises. “They have an opportunity to experience the life of the plant, see everything first-hand and learn to love the field,” says Skorokhod, who himself graduated from an institute in Donetsk as an engineer-economist.
“Many today are interested in working not for a bank or insurance company, but in large-scale industry. Work in the real sector can be stressful and involve exhausting trips around the country, but it’s inspiring to know that your company’s output is essential to the nation’s economy.”