LocoTech Group has been managing assets, providing maintenance, repair, upgrade and lease of locomotives, manufacturing of parts and assemblies for railway engineering, for five years already. Production facilities of the enterprise comprise 10 locomotive repair plants and over 90 locomotive service depots in the country. LocoTech also manages an engineering centre in Yaroslavl. Company CEO Aleksey Belinsky told in an interview to RIA Novosti about the new operations directions in Russia and abroad business development plans.
— Aleksey, what are the plans of LocoTech for the year? Do you plan proceeds growth? How much do you plan to expand?
— As to the expansion of production, business development is not always associated with its expansion. We have already achieved results greater than expected from us. I am now talking about the locomotive technical readiness factor (TRF), the level of which on the whole network has reached 89%. This is stably higher than was provided for by our service agreement with Russian railways, which has a rate of 87%. But we continue to work to improve the quality. Despite the initial victory, and we have much to be proud of, ideal state is yet far away. You need to increase the capacities when you have solid ground under your feet, and the quality and reliability of the technology is the foundation, which supports us.
As to the proceeds growth, everything depends on the mileage of locomotives. Now the cargo turnover grows, so we expect a small revenue growth. If last year consolidated proceeds as per RAS was 92.7 billion rubles, this year we expect about a hundred billion rubles. This is an aggregate figure for all contracts to the company, not only as per the contract with JSC RZD.
— Do you have competitors in Russia?
— Yes, there are several companies. These are strong professional guys, who provide the service maintenance of these or that series of locomotives. But nobody else has such a broad line of locomotives series and a strong manufacturing base as we do, in this sense, we are the largest and unique in the kind.
— What investments do you plan to make in construction and upgrade? How much money has been invested in the past year?
— Unlike machine building the service business is not so capital-intense. The current world practice is that service companies operate on the industrial sites of the customer and do not have their own depot capacity. In this case, the main production facilities are owned by JSC RZD. Investment in heavy equipment, which requires construction works, is their prerogative. In our view, precisely this year enough funds are allocated for capital repairs of the depot, but more investments in equipment are required. We talk to the customer on that, they hear us and, I hope that the dialogue will lead to an adequate budget level for the next year.
— What are, in your opinion, the main challenges to be addressed?
— The main problem of the fleet reliability is that a large number of equipment on the locomotives is in worn-out condition. Worn assembly cannot function without a hitch. Serious investments are required here, that are unlikely to be fully covered by us. RZD will, possibly, need some kind of dialogue with the state. To cope with such a high degree of wear of the equipment on the locomotives the tariff adjustment will be required. Locomotives serve 40 years and equipment - 15-20 years. We need to seriously invest in maintaining the established parameters of machines reliability, that will contribute to fully utilize the turnover capacity.
— What do you invest in?
— We invest in operations mechanization means. Hundreds of millions of roubles are invested annually by us - a little more this year, a little less last year. As for those plants that we own, ten plants of JSC Zheldorremmash, this year we’ll invest over 1.3 billion rubles. with the term of activities implementation before 2019.
— Where do you generally take money for development?
— We earn it. In some cases we received support from the Ministry of Industry in part of subsidizing the interest rates on loans.
— And have you tried to use the other tools? Bonds, for example?
— We think about it. But it is necessary to accumulate a positive story in order to issue bonds. We are accumulating it, in particular, therefore we are reporting as per IFRS.
— You do not only repair and service, but also leasing. What plans do you have for 2017 in this sector?
— For us leasing is rather secondary industry. This complements our product. The complete solutions are quite in demand abroad. For example, a country decides to upgrade the traction rolling stock at its railways. They are looking for someone who buys it, conducts an upgrade with the service life renewal and not simply leases it, but will provide traction service. It turns out to be such a comprehensive project.
— In what countries does the company operate abroad?
— We communicate mainly with the Middle East, North Africa. In addition, we are also focused on the Latin America. We are present where there is some mix of different manufacturers. As a rule, it exists where there is no unified state service company, and our services are in demand. We may come, "take" the railway fleet and restore it.
— Let’s go back to Russia. Now, special attention is paid to the Far East. And the export potential implementation is impossible without the development of transportation. Do you have any interest in the region?
— We are present in the Far East, we own a factory in Ussuriysk. We have the largest factory in Ulan-Ude. East is a strategic direction for us. Naturally, we are interested in how it evolves. In addition to carrying out our main work on upgrading and maintenance of locomotives, our factories are producing spare parts. We are, of course, interested in diversifying the client base, including in the Asian market. But our primary task is to ensure reliability of the railway fleet, involved in the transportation of products to the Eastern ports. There are a number of inherited problems. If they are not solved, Far East will reach the limit and even reduced turnover capacity. We "will do our best" in the part that concerns us. But we require the support of our key client from the state to provide an adequate level of funding for upgrading of fixed assets in the locomotive complex. You cannot achieve the radical improvement of the situation by the organizational measures alone.
— It is planned to implement two large projects in the Far East — international transport corridors "Primorye-1" and "Primorye-2". Would you like to take part in them?
— Sure. Our key partner, Transmashholding company is interested in producing the rolling stock for major infrastructure projects. And we are interested in maintaining it, us service company. We believe that the transportation by rail of all the land transportation is the most economically feasible. Mankind has invented nothing better than the railway over the past two hundred years.
— Are you interested in becoming a resident in the priority development area (PDA)?
— We plan to establish the engineering centre in Komsomolsk-on-Amur. We have a number of initiatives in terms of engineering and IT, which we would like to promote for those businesses that are now built and developed in the Far East. We hope to enter the advanced special economic area "Komsomolsk".
If we find a market for spare parts, for equipment, that is produced at our factory in Ussuriysk, we will, of course, enter the other PDAs. Everything that relates to the production of vehicles, including the aviation, and in the rail engineering industry, is within the scope of our Committee for transportation means and components of the "Business Russia" (Belinsky is a member of the Board of the "Business Russia” - ed.).
— Do you have any plans to enter the Chinese market?
— We see potential for cooperation with Chinese colleagues to maintain and upgrading their equipment in the markets, where their position is not that firm. Ruble depreciated against the dollar, and we now have a competitive advantage in terms of labour costs and energy resources, but it is still to early to talk about specific projects.
