Azov ship-repair: with trust in present

 Located in the zone of conflict in Donbass, “SRZ”Ltd – “Azov Shiprepair Yard- has saved its production, team and is making plans for the future. 

At present it is the only Ukrainian shipyard happened to be within ATO boundaries in the east of the country. It would seem – what else to speak about? For the enterprise focused on foreign customers such situation sounds as the death sentence.

But actually the case is different – the plant works, the number of staff remains practically unchanged, even the salary has been rising. Many will take this information with a large dose of skepticism, but it’s the truth, with any exaggerations.  

In early 2015, the plant management was changed - 39-yea-old Dmitry Lyashov, just defended a thesis on “Industrial personnel performance management”, was appointed as General Director. 

About the real situation at Azov Shipyard and plans for he near future – in an interview with Dmitriy Lyashov.

 

- Mr. Lyashov, the situation in which Azov Shipyard found itself by virtue of geopolitical collisions can seem almost fatal for the vast majority of professionals in marine branch. Nevertheless the enterprise works. Why?

 

- Let’s call it like it is – situation is difficult. The volume of work in most areas is either significantly decreased or even absent. The plant went on a four-day schedule.

For management company “Mariupol Investment Group” and for me as the head, it was important in such situation to solve a strategic problem - to save the enterprise.  Thus there were taken into account not only the social responsibility before our workers and members of their families but also strictly pragmatic reasons - if the plant is stopped, then it would be hard if not possible to gather in metallurgical Mariupol skilful repairmen able to work according to the rules and standards of the Shipping Register of Ukraine.

The maximum optimization of production process, rational management and strict economy were required from us. In many respects the versatility of Azov Shipyard has helped. Machine –building production lost ground least of all.

Up to now the yard holds the leading positions in production of lifting gears for the industrial enterprises and port terminals.

We turn out various products in interests of metallurgical complex: steel work for gas flues, furnaces arches,  cast products for rolling mills and self-discharging box.

Work in the mode of port is continued.  But to be honest, the possibility to transship within 100 000 tons monthly was realized only for 25-30%. Some cargoes, such as pitch and mineral fertilizers, exited the market, the proportion of rolled metal products has essentially decreased.

And now the cooperation with agrarians became urgent. We send grains for export. 

 

- And what about ship repair? Previously the 200-meter floating dock was steadily loaded...

- Ship repair is reduced to a minimum today. Since the beginning of 2015 we delivered only two relatively large ships - bulk carriers of project D-080 "Slavutich-15" and "Slavutich-16" used for coastal navigation on the Sea of Azov.

We consistently carry out restoration to small vessels of auxiliary service fleet of Mariupol and Berdyansk ports and departments of the Administration of Seaports of Ukraine, as well as to local fishing seiners and trawlers.

Recently the contract with State frontier service of Ukraine was signed and we’ll repair coast guard cutter of project 205P "Donbass" and a few cutters of project 1400M "Grif".

As for the large vessels calling at Mariupol, we perform only emergency and voyage repairs to them. 

Such volumes cannot ensure a full load of ship-repair profile of Azov Shipyard,  after all we are capable to execute almost all kinds of work - docking, metal renewal, restoration of serviceability of electrical equipment, main and auxiliary engines, bushings and bearings and also machining of propeller shafts.

And these are just main types of work. We can also render unique operations: our experts are able to restore by building-up the propellers with a diameter of 5 meters having deformed and missing blades.

Earlier ship-owners from Russia constituted about 60-65% of customers, also there were many Turkish and Greek companies. For obvious reasons, they don’t cooperate with the Yard now, although there are no organization or technical obstacles: a way across Azov and through the Kerch Strait is free and draught limit of Mariupol Sea Commercial Port approach channel to 7,2m is quite enough for the vessels making for repair.

The limiting factor for our partners from the far-abroad countries is the impossibility of risks insurance and in addition the negative and often exaggerated information about Mariupol has an impact on their decision.

We can do nothing with it, but we hope that more informed Ukrainian ship-owners, especially those who is in possession of old fleet and objectively assesses what’s going on, shall be interested in our commercial offers.       

Their essence is simple: even in previous years Azov Shipyard showed faired price policy at rather high quality.  And now in light of unutilized capacity and the fact that current energy prices and personnel salaries are little pegged to US dollar, we are ready to offer our clients even more attractive terms for repair and modernization of ships.

 

- The serial oil-and-debris collectors being delivered to all ports of the former USSR and abroad have always been considered as the trademark of Azov Ship-repair yard. Are there any chances in this area of activity?

- Shipbuilding was and I’m sure will remain one of the main priorities of the yard. We can manufacture any small floating crafts, but preference is naturally given to the traditional products – environmental response boats.  All necessary production facilities, Technology Design Bureau and technical documentation are saved at the enterprise for this purpose.

Totally in the course of its existence the Yard has delivered over 200 orders: 121 sea oil-and-debris collectors (project 2550), which have been produced from 1967 to 1986 in two modifications and 69 units of more up-to-date oil-and-debris collectors (project 25505).  And the last delivered vessels were collectors (project 205A), which may be also used as waste water collector vessels.

Today our oil-and-debris collectors are exploited not only in the ports of CIS countries, but also in Germany, Greece, Poland, Romania, Bulgaria, India, Cuba and the UAE. Many of these vessels have already exceeded their life cycle and need replacement. In view of the fact that they worked almost without claims, we can expect that our Yard will obtain orders for new collectors.

According to estimates of operators and our experts, both projects, 2550 and 205A are not essentially outdated and require only adaptation of modern equipment and power plants. For development of documentation for new modifications of collectors it is necessary to spend about one million hryvnias. After that the yard can start their building.  

But we have another option. In Europe the multifunctional vessels are manufactured. They are capable not only to clean water area of pollution and may be used as tugs, fuel vessels, supply ships and wastes collectors. Quite possible, we’ll find some western partners for implementation of such project.

And the other segment of ship-building at the yard remains operative. These are mooring floats of project ПРП-52МС designed in various variations, suitable for vessels with water displacement from 4000 to 8000 tons.  For many years now they are in operation on the Volga, the Black, Azov and Caspian seas and in the far East.

It is obviously that implementation of these programs requires rather serious investments, but I’m sure, we’ll have them. And ship-building is of key importance for the Shipyard development strategy.

 

- You managed to provide a partial workload under conditions of ATO, to continue work on promising projects and even to maintain the previous staffing level. It is difficult to understand how it happened... Perhaps you have any reserves?

- You are absolutely right. It is a case of efficient management and resources conservation. I think, our experience will be useful for many Ukrainian enterprises. 

At the very beginning of my work as CEO, I called all heads of yard’s departments and said them simply the following: “Everyone who allows leaving at workplace the idle light on, flowing tap water, powered during the break time welding apparatus shall be considered as my personal enemy.

And we started not pretentious but real combating of thefts, negligence, and shortcoming of the personnel. Also we’ve “suddenly” got defective products. To be more precise, we started to record and analyze the reasons of defects on a case by case basis,   and this never has been done earlier at all.  And consequently losses on production began to decrease.

As the result, compared to 2014, unit cost in terms of power production decreased by 40%. We’ve got economy almost in everything: water, air, gas, steam, power. For some items consumption has reduced multi-fold. Number of employees remains at the same level – about 1050 people, moreover despite of four-day week we managed to raise wages, which is, by the way, officially shown. Salary of production personnel is increased by 30%, of all others – by 10%. Today a worker’s average salary amounts to 4300 hryvnias. And this quite good criteria for Mariupol, where is impossible to get a consumer’s loan and where inflation is higher, than on other territory of Ukraine.

It may seem that we have concentrated on social aspects; however, on the contrary, at the bottom of each our step is rigid economic pragmatism, which aim is to maintain an efficient enterprise. We are forced to take hard decisions, such as reduction of uninvolved supporting personnel, but at the same time we hire new experts, for example, power engineering specialists and technologists; we are continuously working at establishment of a personnel reserve.

At Azov Shipyard a great attention is paid to compliance with the international standards of production management. We became more demanding to meeting the requirements of quality management ISO 9001: 2008; have established a system of internal auditing. With the assistance of Kiev consulting company EBS we are introduce the ERP-system, providing the centralized recording of materials and resources flow at the enterprise; also there is an adaptation of  professional safety and health management system OHSAS 18001:2007.

All this, taken as a whole is the very same management inventories, which, together with the greatest possible under such conditions production loading, allowed to keep the enterprise.

 

-  Nowithstanding all difficulties, you probably have vision of the near future? What kind ofyard it will be in a few years?

- I’ll start with the main. We are staying afloat. All enterprise’s units are workable, team is working as before. In order to obtain the largest possible production performance we shouldn’t de-preserve anything and we may hit the ground running.    

This is the real picture, without embellishment, if it will seem overly optimistic to you, you may come and see firsthand. And now let’s speak about the near future. Next year the lease of Azov Shiprepair Yard as integral property complex comes to end. An essential part of our strategy is participation in the privatization of enterprise and attraction of investors to its modernization and development.

For the independent assessment of the Yard potential, we invited the Ukrainian branch of the Roland Berger Strategy Consultants company which is a top ten consulting firm in the world.

Based on features of a geographical position and indisputable competitive advantages of plant, Roland Berger gave the forecast for the next five years (2016 - 2021). By the end of this period our shipyard will be able annually: build 2 sea oil and debris collectors, 8 mooring floats; to repair about 50 vessels; to perform transshipment as many as 1,1 mln. tons of cargo. Turnout of machine-building production should increase triple.

To our opinion this is rather weighted estimate of Yard’s capability. I think that if we managed to keep stability and manageability under present conditions, then with improvement of a political and economic situation, the yard can join the ranks of the most effective Ukrainian companies.

For this purpose we need peace.  All the rest we’ll do by ourselves

 

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Located in the zone of conflict in Donbass, “SRZ”Ltd – “Azov Shiprepair Yard- has saved its production, team and is making plans for the future.  At present it is the only Ukrainian shipyard happened to be within ATO boundaries in the east of the country. It would seem,  what else to speak about? For the enterprise focused on foreign customers such situation sounds as the death sentence. But actually the case is different – the plant works, the number of staff remains practically unchanged, even the salary has been rising. Many will take this information with a large dose of skepticism, but it’s the truth, with any exaggerations. 

 About the real situation at Azov Shipyard and plans for he near future – in an interview with Dmitriy Lyashov.