Rahman Khalilov's interview to the RBC Market Research analytical agency

30 January 2018

2015 – 2016 were difficult for many companies, both from the retail and the industry sectors. Falling consumer demand, as well as increasing costs due to the rouble devaluation substantially complicated the rules of the game in the market. How you can describe the past years? What results were reached by the company in spite of, or, maybe, thanks to the developed market conditions?

Certainly, in the recent years the game has become more complicated, but our company managed to adapt to the market situation. In implementing anti-recessionary measures we tried not only not to lose the existing amounts, but to contract new ones: expenses have been cut down, and new logistic schemes have been developed so that clients do not feel heavy price fluctuations, while the service level remains high.

But in general, I must say that crisis years always do well to the market since to keep its clients, each company improves its performance and looks for solutions of issues and challenges it faces. As a result strong companies become even stronger, and weak ones drop out.

How you estimate competition level in the Russian market of transport and logistics services? Should we expect mergers and acquisitions, bankruptcies, or there are still opportunities for an extensive growth? What segments of transport and logistics services demonstrate the highest or, on the contrary, the lowest growth rates?

The competition in the market of transport logistics services does exist, after all there are little platforms for activity. In fact three largest of them are: Rosneft, Gazprom and Lukoil. We are certainly interested in cooperation with industry giants therefore we participate in tenders and try to do our best in meeting our obligations under signed contracts.

A difficult situation in the market of transport and logistics services, as well as in any other markets, contributes to the natural selection among market participants: difficulties make you stronger if you are capable of overcoming them. Therefore small companies are likely to be absorbed by their more successful competitors. Merges of peers are also possible, since in this case, by joining their capabilities, the partners may develop more efficiently and eat the “tidbit”.

What changes may happen in 2018? What factors and in what way will have a positive or a negative impact on the development of the industry during this period?

Of course, it is still early to sum up the results of this year, but, in particular, our company expects positive trends, one of which is uniting together operator efforts for joint participation in logistic schemes for optimizing expenses that finally shall bring about a reduction of prices for consumers.

Unfortunately, during the last years reduced cargo turnover has been increasingly affecting the development of the industry. Instead of rail transport the oil companies give preference to pipelines which have certain benefits. So, for example, only PAO Lukoil in 2017 transferred more than 3 million tons of light oil products to pipelines.

Do you feel any trends of improvement of the market situation?

2017 may be considered as quite successful for our company. We managed to increase volumes: by October we transported 18 million tons of oil products.

As for the situation in general, it should be noted that JSC RZhD pursues policy of attraction of highly profitable loads to the railroad. We offered to some companies decreasing coefficients as compared to the current rates that enabled us to keep volumes and to prevent churn of customers opting for an alternative transport.

Please share your plans for 2018. Are you going to expand your branch network, to implement smart logistic solutions, to retrofit the car fleet or to purchase/rent new warehouses?

We cannot stand still, we have to improve continuously to remain among the leaders of the industry. Therefore our company always monitors closely the degree of wear of the tank carfleet. Worn out and obsolete rolling stock is discarded. Instead, the company purchases innovative oil tanks featuring larger volume, and gas containers. Our own branches in Nizhny Novgorod, Orsk, Krasnodar and St. Petersburg make it possible to control quality of their subsequent repair. In future it will enable us to minimize costs of operation of the rolling stock.

Do you invest in employee training to increase the company’s efficiency? What technological innovations developed or purchased by you improve the company’s competitiveness in the market? I mean innovations in the field of warehousing services, tracking vehicle location and goods condition, as well as reducing delivery terms.

Investments into employee training is an important strategic aspect in a company management. This is an intangible asset of an organization that subsequently makes it possible to find more efficient logistic solutions. A company shall competently manage this resource, create conditions for its development, and make investments therein. Our employees often attend workshops and training lectures. I also think it is very important to carry out staff rotation from time to time because in order to better understand the client, we have to look at its needs, requirements and points of view from different perspectives.

As for technological innovations, we use software customised for our requirements: it enables us  to track rolling stock in real time and to take prompt measures for rendering cargo delivery services in due time with minimum costs.

Source: JSC RBC (RUS)