The Baltic Course

A Monopolist's Dream

By Olga Pavuk

Anatoly Tyutyunov started off as a simple worker...

Keramin is the largest company to produce building materials in the CIS, making ceramic tiles, plumbing equipment, producing its own bricks and packaging. Its produce was presented at the annual Belarus Expo 2001, held in Riga this March. From the point of view of foreign specialists - Keramin is one of the most up-to-date ceramic tile producers in the world. Just before exhibition day, the BC visited Keramin in Minsk and interviewed its CEO Anatoly Tyutyunov, who reorganized the company's production line and adapted it to the market economy.

Anatoly, do you see yourself as a capitalist?
Well, if one respects himself, he should feel so. In fact, today there are no capitalists, but simply wealthy people. Their wealth is not the result of genetics, but from taking the situation as it is and running their business correctly. To be a capitalist means not just to realize your potential intensely, but also efficiently.

Does the state have any share in your joint stock company?
There was no state capital in our company three years ago. Today the state owns 2.4 percent of the shares.

Your company is a public company. This means that your shares are listed on the market?
Undoubtedly, the shares of a public company must be quoted on the stock exchange; although the stock market in Belarus is still only dawning. We tried to determine the real level of our share liquidity by issuing just a small stake of shares on the stock exchange. I thought our shares will be quite expensive.

The history of Keramin

The cornerstone of Keramin was the Minsk Ceramics Plant, up and kicking in the beginning of the Twenties as a company for clay brick production. The year 1950 is considered the establishing year of the company as it is today. Since 1975 Minskstroimaterial, or Minsk construction-ware manufacturing association, was the flagship company for the industry of construction materials in the entire territory of the former USSR. In 1994 during a privatization process the company was transformed into Keramin. Anatoly Tyutyunov became the Director General of the manufacturing association 8 years before the company was auctioned; he had a lot of work experience both up and downstairs, he has tried himself as a foreman, as a head of department and a shop and as director of a factory. Now his son Maxim is a deputy director responsible for legal issues at the joints-stock company Keramin.
Today Keramin property covers 47 hectares. It owns not only the industrial estate, but also its own car park, train depot and diesel-engines. Reconstruction, having begun in 1994 with the first Sacmi production line (an Italian company) was put into operation, was essential for the company's existence and made its produce competitive on the world market and price-available for eastern neighbors. Today, four new production plants from Italy are already operated. Ceramic produce from Keramin meets international standards and has been awarded the ISO 9002 certificate. Wholesale traders frequently pass off tiles made in Belarus as the real Italian product, as it is almost impossible to tell the difference between tiles made by Keramin and those made in Europe.

What is the nominal price of one share?
According to planned investments by the European Bank for Reconstruction and Development, Deloitte&Touche evaluated our capital to be worth 25 million dollars - that's a deliberate underestimation. In fact the real price is 75 million. Justification given by the European experts is as following: you do not have the politics guaranteeing the price of your shares being equal to liquid capital, you have large risks, you have reserved the option a golden share. Eventually, the price of one share turned out to be 30 dollars. To my mind, it will not go any lower on the market.

Do your shareholders receive dividends?
Of course. No less than 10 percent of the profit is channeled into the dividend fund (net profits in 2000 were at 10.6 million dollars). Keramin's policies in previous years were quite reasonable - aimed at capitalizing profit and avoiding the waste of dividends. Our leading plant manufacturing ceramic tiles was modernized basically during the last five years.

How much money was invested towards modernization?
Modernization - is not a very precise term. Investments are maid into innovative and technically advanced projects. As a rule the minimum size of annual investments makes up 12 million dollars.

Where do you get the loans?
As of 1994 we used the services of domestic banks, for example, Belyromstroibank, specializing in industrial construction. Their interest rates fluctuate between 12 and 19 percent. To offer such interest rates is simply reckless, so we broke off from them. Today we prefer to cooperate with Italian banks where loans are short - for a year - but annual interest rates are at 6 or 7 percent. We have also been working with a leasing company for the third consecutive year. As soon as our company has settled the previous loan, we receive the next.

Baltic links

The Baltic market is saturated with ceramic tiles and other building materials imported from Europe. Nevertheless, until only recently the produce of Keramin could be found only in the shops of Lithuania.
Keramin is officially represented In Lithuania by the leader in wholesale and retail of construction goods - Senuku Prekubos Centras (its turnover in 2000 exceeded 75 million US dollars). Aidas Spiljauskas, manager of CIS business development department, said that Senuku has been dealing with partners from Belarus ever since 1995, and one can buy goods from Keramin at their chain of shops. Spiljauskas gave us an example in the comparison of the most sought after tiles (200x 300mm in size) at their stores : Belarus tiles - $5.50, Polish tiles - $6.50 -$ 8.50, Spanish tiles - $10.50 and onwards.
After the Belarus Expo in March, a new company aimed at cooperation with Belarus was founded in Riga. The director of Belimpex-R, Ivan Parafinyuk, who also works as the deputy director of a large construction company called Stats, boasting an annual turnover of more than 6 million US dollars, told the BC that an agreement has already been made with Keramin on its official representation in Latvia by Belimex-R. Besides this, they also agreed upon the Riga company's participation in a tender for building another Keramin factory in Minsk. It was estimated that the approximate cost of this project would be from 17 to 20 million dollars. There is a possibility that the Riga company will also take part in building similar factories in Kiev and the Urals.

What will happen now, with manufacturing being neglected?
We have two big investment projects. The fist - with a value of 25 to 30 million dollars - is on for reconstruction of plumbing plant. The other needs 35 million dollars to be channeled into the large ceramics production plant with an annual output of 6 million square meters of gress tiles. The aim of the first project is not really modernization, but the revolutionary upgrading of a factory manufacturing plumbing goods. Completely new technological methods will be used, like casting under high pressure. Taking this into consideration, productive capacity is decreasing, but the output is doubling: 1.3 million instead of 640,000 items a year. The second project is to be started from scratch. We are not able to invest in these two projects with the company's own existing funds. We are therefore considering cooperation with investors.
We have the following suggestions: as for the ceramic production project we possibly will establish a limited liability company, where besides Keramin - there will be also other investors, maybe Russia's Gazprom could be among these.

Why Gazprom?
Manufacturing uses large quantities of gas, in 1999 - 57 million square cubic meters of gas was used, in 2000 - 68 million cubic meters. If Russia's gas giant Gazprom was a member of the joint-stock company, our products would be more attractive in terms of price, as energy costs for manufacturing would be optimized.

Where do you export your produce?
The largest part of our production goes to Russia. 80 percent of our ceramics is directly exported to the CIS and Baltic countries, as well as other foreign countries. Today the demand of gress tiles, manufactured in Belarus, is considerably exceeding supply in Russia and other CIS countries.

How is your relationship with the Baltic countries developing?
Exports to Lithuania are stable. We have our own dealer in Kaunas. Recently our company has signed an agreement for selling our produce through partners in Latvia. We are eager to expand our business in Estonia.

Who exactly are your shareholders?
Keramin was set up as a result privatizing the state-owned company upon the initiative of personnel; 92 percent of the company's shares belong to our workers. Such a division of capital allows an absolute understanding between shareholders and the management of the company.

So what's the average salary at Keramin?
It's no secret; the salary is equivalent to 180 dollars. [the average monthly salary in Minsk is only 70 dollars - ed.].

Do you have any other benefits?
Various payments, for example, we cover travel costs for our workers and their family members; our company takes part in financing the building or buying of housing for our staff, this allows them to acquire flats much cheaper than they would on the market. We support our pensioners paying them the equivalent of one and a half monthly pensions each year, and provide them with food at acceptable prices. We also managed to find funds for developing the health-improving children's summer camps that belong to our company.

Does this directive come from the state?
Undoubtedly it is supported by the state. But I treat this task deliberately. A child left in town for the summer does not feel very happy.

What is the attitude of your shareholders towards the fact that their money is spent not only for direct company needs?
They take it easily and understand the situation. My answer to such questions is always: Our future - is a well-off old age.

What does a company manager nowadays dream of?
A good capitalist always dreams of a monopoly. Monopoly and only this, but not by offending the end customers.

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