12 january 2012 | All

Meeting of the Investment Committee of Russian Railways OJSC

December 29, 2011 a meeting of the Investment Committee of Russian Railways OJSC was held to discuss the program of renovation and modernization of the railway equipment for the period 2012-2016. A large part of this program is devoted to the factories of RPM Group. This is the production of new track machines, and huge amounts of capital repairs.
What exactly can RPM Group count on within the investment program of Russian Railways OJSC? What are the planned volumes of orders? What new machines does our strategic partner want to see? These are the questions that we asked Evgeny YAKOVLEV, the Director General of RPM Group.

— Renovation and modernization program for track equipment for the next five years was unanimously adopted by the Investment Committee of Russian Railways OJSC. This document provides for the purchase of track equipment through several sources. Following a public tender for the provision of financial services, a leasing agreement will be concluded between the preferred tenderer and Russian Railways OJSC. In turn, Kaluga Plant Remputmash will sign a long-term supply contract with the leasing company. Another part of the Program will be financed through the Investment component, similarly to past experience.

I would like to emphasize that in 2012 the scope of the Program adopted will exceed the annual output of track equipment supplied for the needs of Russian Railways OJSC in 2011, by more than two times. At the same time in 2013, the volumes of machines sold will increase exponentially. This is a serious technical and technological challenge for RPM Group, which we have to accept.
Of course, the list of equipment purchased by Russian Railways OJSC includes a number of machines produced earlier, as well as innovative machines. Currently the Vice-President of Russian Railways OJSC Vorobyov V.B. together with the Central Directorate of infrastructure is checking specifications of new machines that the customer would like to see. But already now we can say with confidence that the newly formed Engineering center in the RPM Group will not be bored in the near future.

— Evgeny Kirillovich, what are the plans within the Program of renovation and modernization of the track equipment for RPM Group for the next 5 years concerning the output?

— In the next 5 years, the capacity utilization of plants of the RTM Group will be provided to the maximum. I think that in some way we will have to negotiate with third-party companies for cooperation. Now, we even have to refuse some customers: either they are asking to produce something non-standard — much fuss and no time and resources, or the price does not suit us. Not like it was previously — we were taking everything.
But if more about our plans, we have now finally formed a portfolio of sales and approved the budget of the Company for 2012 — 2014 years. The largest volume of orders in it — up to 3/4, for the next five years, will be provided to RPM Group by our strategic partner and the major customer of the track equipment —
Russian Railways OJSC.
Of course, for us a real Christmas present was the adoption December 29, 2011 by the Investment Committee of Russian Railways OJSC of the Renovation and modernization program for the track equipment for the period 2012-2016. Its implementation will contribute to the technological development of enterprises and the development of new production; will keep qualified personnel, and will provide an opportunity to position RPM Group as the absolute leader of track engineering in Russia and a significant player in the world.
I would like to stress that our access to international markets will continue. In addition to sales of production of the plants to the Russian railways, it is planned to sell a large number of railway equipment to Kazakhstan, the Ukraine, India, the Middle East (Syria, UAE, and Iraq), North and South Africa (Egypt, South Africa, and Mozambique).

— But such a large-scale program of Russian Railways OJSC demands changes of our businesses, as well as a major technical upgrade.

— We started to solve the problems of modernization already in 2011. Our ideas and inputs were the basis of the Group’s investment program for RPM next three years. Its goal is to provide the level of technical capacity of the Group and sufficient for implementation of the program of Russian Railways OJSC, increasing the competitiveness of the company’s products by increasing the speed and flexibility, the level of product quality and customer service. Decisions we make must provide the technical basis of the break-even since 2012. Expected upgrade results will determine not only the ability to achieve current goals and needs, but will also allow the RPM Group to take up a position of a technology leader in the industry.
Investments are already directed both at modernization, and the implementation of organizational changes in production processes. For the first part of the program, new modern machine equipment has already begun to enter the enterprise. Putting it into operation will increase the productivity, quality and efficiency of work. According to preliminary estimates, labor productivity should increase by at least 3 times, which will allow the Group to enter the European level by this indicator. Modernization is straightly connected with the organizational changes of the production process. The basis of the reorganization is the principles of subject specialization of sites and production units, to ensure the continuity and rhythm of the material flow, improving the quality of the working conditions.
RPM Group Investment program includes also new projects oriented on development. One of them is the creation of a test bed for track machines. This will allow us to reduce costs during commissioning, certification and other tests.

— Strategic partners of the Group in the technological direction: which companies are considered the most promising for cooperation for the new equipment production?

— According to the new positioning, RPM Group intends to develop cooperation with the world leading railway equipment manufacturers in order to create new technology, improve the quality and performance of products and to develop the sales markets. A successful collaboration is the one with the international manufacturers of track machines and equipment in 2011 — Plasser & Theurer, MFL, Geismar, DISAB. They ensure continued cooperation with RPM Group in the field of establishing cooperative production.
In addition, due to the significant increase in production volumes, as well as plans for new sample track equipment, the Group is actively seeking potential partners, concludes agreements with manufacturers of separate parts and units, works out issues to purchase and lease new production facilities. I will not hide the fact that currently a number of Russian engineering companies have submitted to RPM Group their proposals on cooperation.

— Speaking about the prospects of the Group development for the next five years, we can not but tell at what stage the company is now, what economic results we had at the end of 2011?

— The final results are being formed now, but already now it can be noted that RPM Group managed the main objective set for 2011: fulfillment of its obligations to customers, the main of which is Russian Railways OJSC. It should be noted that, despite some difficulties, above all, the lack of funding, we managed to perform even stronger commitment in the form of additional corporate order of Russian Railways OJSC in the amount of 1.3 billion rubles, obtained in the middle of the year, and also substantially increased orders of independent buyers — from India, Kazakhstan, and Russian industrial companies.
Unfortunately, not all of the plants of the group managed to finish the year with a positive financial result, but the overall positive trend is clear — as a result of deliberately and systematically carried out measures during the year we managed to reduce losses and increase the efficiency of the company.
This will be done in the future as well. Large orders for 2012 and subsequent years, and systematic work to improve the efficiency of each of the manufacturing sites — all this defines an ambitious goal for 2012: to ensure the profitability of RPM group activity at the level of the leaders of mechanical engineering. In the end, it is this that guarantees the plants development and the welfare of their employees.