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Developing Service

07.02.2014
- What is the reason for rebranding of a manufacturer of mining machinery? Usually, this is the problem that mainly refers to companies operating in mass markets; but you only have fourteen major customers, large corporations…

- It is true that rebranding is more important to FMCG markets or banks, for instance. However, there may be exceptions. We reached this necessity due to several reasons. First, the name Mining Machines did not reflect the essence of the company’s current strategy suggesting that we provide our customers with comprehensive solutions for efficient and safe extraction of natural resources. Second, the former name was difficult to pronounce in many languages spoken in the markets where our company is present. Moreover, we constantly enlarge the list of our customers. Besides Ukraine, Kazakhstan and Russia, we are establishing contacts with Poland, Vietnam, India, South Africa and China, and by 2016, we plan to export up to 40 % of our products. In fact, rebranding was conducted to avoid problems and misunderstandings in the future.

- What should the brand of a company which operates in the corporate market be? 

- It does not matter what kind of market you operate in; the name should reflect a company’s philosophy and strategy. By the way, we were offered more than a hundred variants of the company name. Among them, there were a lot of bright and sounding, but they did not match the major idea of our business. We left three variants in the short list and, finally, chose Corum. This name originates from the word 'сore', suggesting the Earth’s core, and the expression 'core competences'. It means that we provide solutions for extracting natural resources and always try to fix our priorities and accentuate our key competences. 

- You have been positioning your company as a supplier of comprehensive solutions for the last several years. What do you mean by this notion and what services do you focus on? 

- We have developed a lot of new areas of operation. Along with the machinery and equipment designed for certain customers, we conduct service maintenance, build mines turn-key, render processing services to receive end products. We are oriented by the model functioning in Australia, when a mine’s owner is only the bearer of the licence and all operations are carried out by contractors. We believe that this principle will become a world trend. 

- By the way, what is the current share of your company in the world market and what will it be, say, by 2016 or in five years?

- Globally, our share in the market for mining equipment amounts to less than one per cent. However, if we speak about our historical segments, i.e. machinery for thin bed mining, we are among the market leaders. For example, not counting China, whose market volume is problematic to evaluate precisely now, our share in the market for thin bed mining can reach 75 %. In five years’ time, this figure will rise, as today development of thin and super-thin beds is becoming a global trend. For instance, the Chinese government has recently started focusing on developing thin beds, which used to be left undeveloped. Now local companies are obliged to develop thin beds in order to use the decreasing coal reserves more rationally. We developed such technologies long ago, and this gives us good opportunities. 

- Everything is rather simple when we speak about service maintenance: a company manufacturing certain equipment can maintain it. However, you did not use to have mine building specialists: so, how did you come to a decision to enter a completely alien market? 

- When working for DTEK, our CEO Yevgeniy Romashchin and I noticed that Ukraine did not have a developed market for mine building and large infrastructure project services. And when, while already working with Corum, we studied the Asian markets, particularly Vietnam, we found that we needed comprehensive projects. We were invited to participate in a tender. After evaluating all risks, we prepared a comprehensive offer with the expertise by our various partners, took part in the tender and won it. In 2012, we started building the first Vietnamese facilities together with our Ukrainian mine building partner, but after conducting preliminary works at the facility, we began developing vertical pit shafts by ourselves. Currently, our engineers carry on the entire organisational and technical work. In the future, Corum plans to acquire a company specialising in this area. 

- You declared last autumn that the company’s strategy for the following five years suggested reaching UAH 5 billion sales volume, which is a 1.7-fold increase. Does this goal remain of high priority and does this figure include the development of mine building? 

- The target figure remains the same as it was in 2012: UAH 5 billion. Generally, we set ambitious objectives; we have gathered such a team. Unfortunately, the macroeconomic situation negatively affects our plans. The market capacity for several products went down by more than 2.5-fold. For example, for long face machinery. Although for other products, we planned too conservative expectations. In particular, for open-pit mining machinery and storage equipment. However, service maintenance remains the principal area for Corum. One year ago, we saw it as repair, supply of spare parts and consumables and assumed that we could also provide non-warranty service. Now we see the service portfolio wider: it includes training services, product life management, mounting, dismantling, adjusting. The demand for large investment products is likely to restore only in 2015, most likely at the end of 2015. The entire market for mining machinery and equipment falls down by approximately 18 % per year and service demonstrates a 5 % growth. So, if aftersales service in the total sales volume gives about 46 % of Corum’s proceeds, then by 2016 we plan to approach our target figure of 60 %. 

- How do you determine whether a certain country in interesting to you when searching for new markets? 

- There are two important factors. The first one is the capacity and the prospects of a market; the second one is whether we are able to successfully compete in a market. Let us take Vietnam as an example; they plan to increase production from 45 up to 74 million tonnes. There are very complex conditions there: inclined beds; the history of engineering science in that country is not so long and our services are in demand. If we take Poland, then there, despite the long mining history, thin bed mining is still very important, and we have what to offer at a proper level; therefore, at the moment the market of that country is also interesting to us. The USA market is quite different. It is rather receptive, but it has a long history of mining, good mining and geological conditions; so, it is problematic to show our core competences there. 

- What are the major risks that the company sees in 2014? 

- The major risk is uncertainty with the sales of our customers’ products. Our principal customers either have not approved their investment plans or, if they have, warn that they will review these plans in February-March: therefore, we have certain risks there. Nevertheless, we expect that we will remain at the 2013 level, even if we take into account that none of the large world producers showed a sales growth in 2013. On average, they demonstrated an average decrease by 25-27 %. Caterpillar, for instance, showed a 40 % decrease year on year in the third quarter. So, in the decreasing market our result will be rather good.

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