Vladislav Vorotnikov , Russia Correspondent03.12.21
Founded in 1838, JSC Russian Coatings is among the oldest coatings producers in Europe. Its plant, located in Yaroslavl – 155 miles northeast from Moscow – employs 1,200 workers. With a revenue of Rub7.4 billion ($100 million) and production performance of 36,500 tons in 2020, JSC Russian Coatings ranked 80th in the Coatings World’s Top Companies report – the sole Russian company listed.
Valery Abramov, general director of JSC Russian Coatings, shed some light on how the company has been pushing through the pandemic, as well as future plans.
How was the past year for your company and the Russian coatings industry?
For the JSC Russian Coatings, the past year was quite positive. We experienced a noticeable growth, both in monetary terms and tons. Some business directions showed solid sales growth: by 12.5 percent in the decorative segment, by 10 percent in the auto repair segment, and by 10 percent in the powder segment.
A sharp decline was seen in the finished vehicle assembly business and a modest in the industrial segment. Our misfortunes are primarily attributed to our clients’ inability to maintain full-fledged operations: the second quarter [of 2020] was disastrous, while in the third things began to level out, which let us finish the year with a relatively good performance. In this year, it is essential that amid the pandemic, import has been impacted to a larger extent than domestic production.
Are there any changes in demand or consumer preferences?
The coronavirus and the economic situation caused by it have formed quite harsh working conditions. In general, analysts estimated that the market had shrunk by six to seven percent. The decorative segment experienced severe problems. Due to the Russian population’s falling purchasing power, the demand for building materials has dropped and shifted towards the cheaper segments. In this context, the companies developing online sales have been affected less than the others. They swiftly reacted to the situation and increased their turnover drastically.
The crisis was very painful for the automotive industry, industrial and civil construction. The automotive industry suffered the most. In the first half of the year, the market slumped by 25 percent, but it recovered from the shocks and grew by 12 to 13 percent at the end of the year. Coatings producers managed to resume the supplies to car plants.
At the same time, some industries, on the contrary, showed growth [in sales] in 2020, for example, the shipbuilding industry and furniture industry. The [demand for] market of coatings for metal strictures and road markings remained flat.
Could you provide some details on your modernization campaign?
Our company’s technical re-equipment took place mainly in the 2000s. The company’s new owner invested heavily in the reconstruction. In only five years, we modernized enamel production – we have updated bead mills, dissolvers, and mixers. When buying equipment, we laid down new technological approaches. It was a period of cooperation with the Spanish company Oliver & Batlle and the German NETZSCH. In those years, they were quite active in the Russian market, and they had the most advanced technologies. And then we not only tried to replace the equipment but in fact – to create a new production. Together...we designed a workshop for water-dispersion materials. From scratch, we were engaged in the establishing of powder production.
At that time, we liaised with different manufacturers: European companies Coperion, BUSS, and OMC. General engineering we created on the basis of the OMC company, which transferred its European experience to the ground of Russian production potential. We strived so that the level of infrastructure, equipment, and technology was most up-to-date. And today, they are no different from European in terms of production capabilities. The quality of coatings really confirms this.
How is your R&D division operating? Any new products or segments you consider the most promising?
An undeniable advantage over other manufacturers is that we ourselves develop both the binder and the finished product. This is the purpose of our R&D. We obtain patents, certificates, and other conclusions of independent bodies for all products, which confirm the novelty, quality, durability, and other parameters of coatings materials. The company’s specialists can create materials for any application. These include transport equipment, oil equipment, shipbuilding, and aircraft, where the products’ requirements are challengeable. But we know and can match them. We transfer this knowledge to other areas as well. For example, aviation materials of our production are also successfully used in shipbuilding. There they secure entirely different features in terms of durability and even design.
The ecological properties of coatings are essential for us. They must be not only of high quality but also safe for humans. We have been producing PREMIA antimicrobial coating for ten years. Now we are working on improving its formula in order to get antivirus properties. We expect that the product will be not only in demand in Russia but also compete with many foreign brands.
We consider the shipbuilding niche to be promising. Here we compete with large multinational companies. In terms of quality characteristics, the product range will have to meet any requests from shipbuilders. And the prospect for the next few years is to create a new production of waterborne automotive paints with our partner Axalta, which will produce products for painting the finished vehicle production.
What is your export development strategy?
Export markets are of great interest to us. We are traditionally presented in all post-Soviet countries. Today, we export eight percent of our products. In the pre-crisis times, this figure amounted to 12 percent. We take steps to reach out to Europe. We have experience in supplying products to Bulgaria, Poland, Serbia, and Moldova. The experience showed us that our products are competitive. The demand has not been falling for three years. Regrettably, we fail to establish cooperation with China and India. South-East Asia is a tricky market in terms of liaising with partners. So far, we have no successes to report there. However, we don’t give up on our attempts, as there are niches where we could compete.
How would you assess the state policy in the Russian coatings industry? Is there any state aid?
Coatings are not an industry in which the state provides some serious supportive measures to producers. They are mainly linked to the R&D. Many coatings producers are collaborating with the state, which assists them. Concerning science, coatings are not the industry where fundamental researches are needed. There are examples of the state subsidizing under some studies, but they have no significant influence on the industry. We have no projects subjected to state aid. In this field, JSC Russian Coatings is self-sufficient. But we are in negotiations with the government bodies to push forward the industry’s interests and form priorities for the local Russian production.
As a part of the Centrlack association, we initiate various proposals, for example, concerning equalizing the competitive advantages on the coatings market between Russian and foreign companies. Just recently, we faced a sharp rise in prices for raw materials. We did not remain indifferent to this and turned to the Ministry of Industry and Trade with a request to help resolve the situation so that it would also take into account market ups and downs when making decisions.
In general, the state does not allow relaxing. Last year, we had an active discussion of the new technical regulation “On the safety of coatings” – a necessary document, awaited for many years. We expect it [to be adopted] in November 2022. Some of its provisions will have a significant impact on our products. Some of them may even have to be discarded. Will we be able to take this blow in times of economic hardship? We hope that the Eurasian Economic Commission, which is currently preparing the technical regulation, will consider the parameters and terms of implementation proposed by us, and they will be reflected in the final document.
What would you say about the current Eurasian Union’s standards on coatings? Do you have to adapt your production to foreign market requirements?
Since Soviet times, the coatings industry has been highly regulated and harmonized with foreign standards. We are already accustomed to this; therefore, we perceive it normally. We tried to introduce rationality into understanding the parameters listed in the requirements for materials in the technical regulations I mentioned – “On the safety of coatings.” Manufacturers may have to change some products to make them more environmentally friendly. In the future, we see that the products we manufacture fit into the parameters that exist today in Europe. Sometimes we set even more stringent requirements for products ourselves.
From the point of view of quality, we have never had the task of adapting products to any standards. This raises the question of product economics. Asian markets tend to swing towards the economy segment, while the European ones are in a more medium segment. Fitting into these parameters is one of the main tasks. Concerning safety or environmental requirements, our coatings are suitable for any market.
What are your plans and forecasts for the future?
Over the 180 years of the company’s existence, we have experienced revolutions, Perestroika, and crises. We know how to face and adapt to any troubles... most important thing is not to stand still and take steps to master and even create new niches. Business always requires growth. In recent years, many large objects have appeared in Russia – Olympic construction sites, bridges, metallurgical, and oil plants. All this creates opportunities for the coatings market. The company’s task is not only to grow but also to look for new niches. A draft state program for the Arctic development until 2030 has now been developed [by the Russian government]. This is an entirely different level of products, with different requirements. We believe that this is our point of growth.
We associate our future, first of all, with the Russian market. Of course, any development is associated with modernization. We take steps in this direction every year. A year and a half ago, we launched a section for anti-corrosion materials. This made it possible to solve many tasks more purposefully. In recent years, we have been focusing on small-scale production. We can produce any volume, starting from a kilogram. This is very much demanded by customers because the market today is very demanding. In the future, we will invest in equipment for the production of binders, especially since there are ideas for new materials that require new capacities. We will install two more technological lines at the powder paint factory. It is now operating at total capacity.
There is no limit to perfection in any production. There are always new ideas, new materials, and new technologies. Our task is not to lag behind but to run ahead.
Valery Abramov, general director of JSC Russian Coatings, shed some light on how the company has been pushing through the pandemic, as well as future plans.
How was the past year for your company and the Russian coatings industry?
For the JSC Russian Coatings, the past year was quite positive. We experienced a noticeable growth, both in monetary terms and tons. Some business directions showed solid sales growth: by 12.5 percent in the decorative segment, by 10 percent in the auto repair segment, and by 10 percent in the powder segment.
A sharp decline was seen in the finished vehicle assembly business and a modest in the industrial segment. Our misfortunes are primarily attributed to our clients’ inability to maintain full-fledged operations: the second quarter [of 2020] was disastrous, while in the third things began to level out, which let us finish the year with a relatively good performance. In this year, it is essential that amid the pandemic, import has been impacted to a larger extent than domestic production.
Are there any changes in demand or consumer preferences?
The coronavirus and the economic situation caused by it have formed quite harsh working conditions. In general, analysts estimated that the market had shrunk by six to seven percent. The decorative segment experienced severe problems. Due to the Russian population’s falling purchasing power, the demand for building materials has dropped and shifted towards the cheaper segments. In this context, the companies developing online sales have been affected less than the others. They swiftly reacted to the situation and increased their turnover drastically.
The crisis was very painful for the automotive industry, industrial and civil construction. The automotive industry suffered the most. In the first half of the year, the market slumped by 25 percent, but it recovered from the shocks and grew by 12 to 13 percent at the end of the year. Coatings producers managed to resume the supplies to car plants.
At the same time, some industries, on the contrary, showed growth [in sales] in 2020, for example, the shipbuilding industry and furniture industry. The [demand for] market of coatings for metal strictures and road markings remained flat.
Could you provide some details on your modernization campaign?
Our company’s technical re-equipment took place mainly in the 2000s. The company’s new owner invested heavily in the reconstruction. In only five years, we modernized enamel production – we have updated bead mills, dissolvers, and mixers. When buying equipment, we laid down new technological approaches. It was a period of cooperation with the Spanish company Oliver & Batlle and the German NETZSCH. In those years, they were quite active in the Russian market, and they had the most advanced technologies. And then we not only tried to replace the equipment but in fact – to create a new production. Together...we designed a workshop for water-dispersion materials. From scratch, we were engaged in the establishing of powder production.
At that time, we liaised with different manufacturers: European companies Coperion, BUSS, and OMC. General engineering we created on the basis of the OMC company, which transferred its European experience to the ground of Russian production potential. We strived so that the level of infrastructure, equipment, and technology was most up-to-date. And today, they are no different from European in terms of production capabilities. The quality of coatings really confirms this.
How is your R&D division operating? Any new products or segments you consider the most promising?
An undeniable advantage over other manufacturers is that we ourselves develop both the binder and the finished product. This is the purpose of our R&D. We obtain patents, certificates, and other conclusions of independent bodies for all products, which confirm the novelty, quality, durability, and other parameters of coatings materials. The company’s specialists can create materials for any application. These include transport equipment, oil equipment, shipbuilding, and aircraft, where the products’ requirements are challengeable. But we know and can match them. We transfer this knowledge to other areas as well. For example, aviation materials of our production are also successfully used in shipbuilding. There they secure entirely different features in terms of durability and even design.
The ecological properties of coatings are essential for us. They must be not only of high quality but also safe for humans. We have been producing PREMIA antimicrobial coating for ten years. Now we are working on improving its formula in order to get antivirus properties. We expect that the product will be not only in demand in Russia but also compete with many foreign brands.
We consider the shipbuilding niche to be promising. Here we compete with large multinational companies. In terms of quality characteristics, the product range will have to meet any requests from shipbuilders. And the prospect for the next few years is to create a new production of waterborne automotive paints with our partner Axalta, which will produce products for painting the finished vehicle production.
What is your export development strategy?
Export markets are of great interest to us. We are traditionally presented in all post-Soviet countries. Today, we export eight percent of our products. In the pre-crisis times, this figure amounted to 12 percent. We take steps to reach out to Europe. We have experience in supplying products to Bulgaria, Poland, Serbia, and Moldova. The experience showed us that our products are competitive. The demand has not been falling for three years. Regrettably, we fail to establish cooperation with China and India. South-East Asia is a tricky market in terms of liaising with partners. So far, we have no successes to report there. However, we don’t give up on our attempts, as there are niches where we could compete.
How would you assess the state policy in the Russian coatings industry? Is there any state aid?
Coatings are not an industry in which the state provides some serious supportive measures to producers. They are mainly linked to the R&D. Many coatings producers are collaborating with the state, which assists them. Concerning science, coatings are not the industry where fundamental researches are needed. There are examples of the state subsidizing under some studies, but they have no significant influence on the industry. We have no projects subjected to state aid. In this field, JSC Russian Coatings is self-sufficient. But we are in negotiations with the government bodies to push forward the industry’s interests and form priorities for the local Russian production.
As a part of the Centrlack association, we initiate various proposals, for example, concerning equalizing the competitive advantages on the coatings market between Russian and foreign companies. Just recently, we faced a sharp rise in prices for raw materials. We did not remain indifferent to this and turned to the Ministry of Industry and Trade with a request to help resolve the situation so that it would also take into account market ups and downs when making decisions.
In general, the state does not allow relaxing. Last year, we had an active discussion of the new technical regulation “On the safety of coatings” – a necessary document, awaited for many years. We expect it [to be adopted] in November 2022. Some of its provisions will have a significant impact on our products. Some of them may even have to be discarded. Will we be able to take this blow in times of economic hardship? We hope that the Eurasian Economic Commission, which is currently preparing the technical regulation, will consider the parameters and terms of implementation proposed by us, and they will be reflected in the final document.
What would you say about the current Eurasian Union’s standards on coatings? Do you have to adapt your production to foreign market requirements?
Since Soviet times, the coatings industry has been highly regulated and harmonized with foreign standards. We are already accustomed to this; therefore, we perceive it normally. We tried to introduce rationality into understanding the parameters listed in the requirements for materials in the technical regulations I mentioned – “On the safety of coatings.” Manufacturers may have to change some products to make them more environmentally friendly. In the future, we see that the products we manufacture fit into the parameters that exist today in Europe. Sometimes we set even more stringent requirements for products ourselves.
From the point of view of quality, we have never had the task of adapting products to any standards. This raises the question of product economics. Asian markets tend to swing towards the economy segment, while the European ones are in a more medium segment. Fitting into these parameters is one of the main tasks. Concerning safety or environmental requirements, our coatings are suitable for any market.
What are your plans and forecasts for the future?
Over the 180 years of the company’s existence, we have experienced revolutions, Perestroika, and crises. We know how to face and adapt to any troubles... most important thing is not to stand still and take steps to master and even create new niches. Business always requires growth. In recent years, many large objects have appeared in Russia – Olympic construction sites, bridges, metallurgical, and oil plants. All this creates opportunities for the coatings market. The company’s task is not only to grow but also to look for new niches. A draft state program for the Arctic development until 2030 has now been developed [by the Russian government]. This is an entirely different level of products, with different requirements. We believe that this is our point of growth.
We associate our future, first of all, with the Russian market. Of course, any development is associated with modernization. We take steps in this direction every year. A year and a half ago, we launched a section for anti-corrosion materials. This made it possible to solve many tasks more purposefully. In recent years, we have been focusing on small-scale production. We can produce any volume, starting from a kilogram. This is very much demanded by customers because the market today is very demanding. In the future, we will invest in equipment for the production of binders, especially since there are ideas for new materials that require new capacities. We will install two more technological lines at the powder paint factory. It is now operating at total capacity.
There is no limit to perfection in any production. There are always new ideas, new materials, and new technologies. Our task is not to lag behind but to run ahead.