With a 3.5 percent global market share in seamless stainless steel pipes and tubes, and as the fourth largest supplier in the EU by sales volume, Centravis is a leading example of how Ukrainian companies are moving away from a Soviet-era model and investing heavily in modern management techniques and new technology to become competitive players on the global stage. Here the company’s CEO outlines industry trends and what makes Centravis stand out on today’s competitive international marketplace

What is your business model and how has it contributed to the company’s success?

Centravis’ business model is quite simple: long ago we realized that we had to develop our international presence. In the past, Ukraine was part of the Soviet empire and in many aspects, our industrial model was heavily reliant on the markets in former Soviet countries. More recently, we experienced consistent pressure from Russian trade regulators to limit our business presence in the Russian market, so we were forced to develop other markets. We started in 2001 with Europe and invested heavily in new equipment during this period. We also focused on developing customer relations and implementing new technology. The name Centravis is made up of “center” and “vis,” which means strength. We are at the center between Russia and Europe, and at the center of business relations with our customers to let them know that we appreciate their loyalty and trust in us. The important thing is not to be 100 percent perfect, but to respond correctly to any customer claims. If you make the proper corrections, you have a chance to develop good business relations.

How was your experience entering the European market?

Italy was our first success story in Europe: the Italian market accepted us, and we listened to their feedback. Germany, on the other hand, was the most difficult market to enter. It took us years to master the processes to bring our products in line with German customer expectations, but today Germany represents over 25 percent of our sales. 

What gives you a competitive advantage in your line of business?
We are very focused on the customer relationship, consistency and doing everything possible to keep our promises. Our European competitors became a little less flexible than we like to be, and this helped us gain a foothold. We once had a price incentive, but we no longer have that, so we had to develop other advantages.

Do you foresee more room for growth or have you reached your optimal quota?
We have reached a 15 percent market share in Europe and we feel we have reached the point where you can grow too big. This is an optimal share for us. Unfortunately, there is currently a negative trend worldwide in terms of trade barriers, and steel producers face certain limitations due to Donald Trump’s initiatives on quotas and tariffs.

What kind of partners do you have in Germany, and what segments of the economy are you serving?

Our products, stainless steel tubes and pipes, have several applications. We have customers in the petrochemical industry, companies like Linde, BASF and large oil refineries are part of our customer base. We also serve the automotive sector: we went through tough certification processes and now we are certified to supply VW, Porsche, Audi, BMW via Benteler, who use our products for fuel injection and braking systems, for instance. Machine building is another main sector that we serve, just as the energy sector, both conventional and nuclear. We supply tubes for nuclear energy applications in France and the UK.

You’ve invested $130 million up to 2017 in machinery, digitalization and other upgrades. What is your strategy for the next three to five years?
Our main focus now is to continue investing in our plant here in Nikopol, as we have not yet completed the investment program that began in 2006. We were delayed by the financial crisis of 2008, which we entered with a heavy debt burden. It took us several years to clear that, but we are now back to normal and have renewed our investment strategy, deciding to focus on our current production, and on improving efficiency by streamlining all our processes. We were facing a challenge in that we had a 60-year-old factory for very modern products. We had limitations on the production floor, we had an old-fashioned design, and we desperately needed to improve productivity. Our investment program is now $10 million a year, and that includes improving working conditions for our workers.

How will all these measures impact productivity?

Since last year we have been prioritizing investment in better working conditions, and this is the part where we don’t calculate for a specific return on investment, but we believe that at the end of the day it is a highly desirable expenditure. In the past, we focused more on capacity increase and on purchasing more equipment while leaving behind the second part of our strategy. And even though we live up to all workplace safety standards, this is more about improved working conditions, about having a bright and friendly environment to work in every day. We have moved from a pure profit-driven concept to trying to become a company focused on people, one that they are motivated to work for and are proud to be a part of. The return on this is hard to calculate in dollars, but you see it every day through our various projects and activities.

How will the new mobility achieved by Ukrainian citizens and companies affect the corporate culture here?

We have seen a new trend in Ukraine ever since the EU opened its borders to our citizens for travel and work opportunities. I feel that this is a great chance for Ukrainians because people who travel and work abroad will learn how other people run their businesses, and when they come back home they will be ready to transform our own models. We want our people to be prepared for change, we don’t want to be frozen in time; we want to be a part of this culture of transformation. A second positive point about this openness is that Ukrainian companies are being forced to compete for the labor in Ukraine. In a closed market, you can easily source cheap labor, but that is no longer the case, so now you have to offer better wages, better conditions and more benefits to attract workers. And you have to learn to run your business more productively. Productivity is finally becoming a major focus in Ukraine, and companies are learning that they have no choice but to adapt. This is a great trend for Ukraine.

Companies in the West are investing heavily in digitalization, robotics and other technologies. Where is the company going with this?

In the steel sector we are not trendsetters, rather we are followers of the developed world. Industry 4.0 is, in many cases, still a dream for us here. We are still at an earlier stage where we need to build the foundations for that to happen. But in the IT industry, there are many great Ukrainian companies that do outsourcing for global companies and which are offering their own products. This sector offers a great opportunity for the country.

Are you open to partnerships with international players?

Yes, we are open to that. For nine years we were in a shareholder partnership with the European Bank of Reconstruction and Development and they were a great help in reshaping our finances during the crisis, as we came under great stress. Then, in 2018, we repurchased their stake. But this gave us experience working with European partners, and we are open to future possibilities.

You reported an increase of 14.8 percent in the production of stainless pipes up to June 2018. What do you expect this year?

We will grow five to 10 percent this year, despite limitations caused by market uncertainties derived from the international situation.

How challenging is it to be the CEO of a company where geopolitical issues can play such a role?

The answer is to diversify and develop our international presence. The industries we serve are different, so we don’t have one single customer that we are heavily dependent on; we have many good customers. The global market dictates the rules, and you cannot be content with success in one single market, say Europe, even if they were to give us unrestricted access. To be part of the international market, one has to understand that there are many manufacturers from many countries and you need to compete with all of them.

How is your brand viewed by your partners and by those whom you don’t work with yet?

Those who work with us support us and trust us. As for new potential customers, this is a niche sector but there are new players coming in every day, and I don’t have the impression that we are well known by everyone. It’s a continuing process. Sometimes it takes years for us to open the doors to a new customer, but you have to be consistent and keep doing your job right.

What would you say to potential clients and investors?

We can do a lot of talking and show them many presentations, but at the end of the day I believe in what I see, so I invite investors to come to Ukraine in person, visit companies, and meet with people here. We will be happy to organize these visits and show the world what we have to offer.