Ilya Korotkov: “We have the main thing – the people and Russian forest”

The Director General of CPFP, JSC, answered questions about the situation in the region’s timber complex and support measures for plants.

CPFP are sure that the plant will not only overcome all difficulties, but will eventually become even stronger. They have more than half a century of experience behind, and the team consist of efficient and professional staff.

— Ilya Yevgenyevich, how has the sanctions pressure affected your company?

— The sanctions continue to be imposed, and markets continue to close. It’s not an easy situation for timber processors right now. Each new package of sanctions introduces new restrictions. At the moment, CPFP can’t sell its products to North America and Europe, the most developed high-tech markets, which naturally affects the plant’s export potential. With exports to North America and Europe gone, CPFP have lost 40% of its export sales. Now we’re actively searching for and developing new sales markets, first of all Asian regions. However, it’ll take a lot of time to establish supplies to new markets. Unfortunately, it usually takes a very long time to establish such relations. Asian markets are new for our company, but they’re growing fast. It’s a positive fact, so our main task is to enter new markets efficiently and gain a stable foothold. It won’t be easy, it’ll take a lot of effort and time, but it’s absolutely solvable.

— You’ve said that you can’t sell your products to North America and Europe. For what reason? Are they refusing or are there logistical problems?

— No, it’s a complete embargo on Russian goods. The governments of those countries prohibit their customers from buying goods from Russia. That’s one problem, and the second is logistics. The same governments of those same countries prohibit transport companies from working with goods from Russia and going to Russian ports.

— And what are prospects for the development of the domestic market?

— We should honestly admit that the domestic market for our exports has always been insufficient. Over the last few years, we’ve been in a dialogue with our government, relevant ministries and departments about the development of the domestic market and stimulating demand in Russia for wooden housing construction. This would make it possible to use our industry’s products in Russia in a larger volume. Until recently, we used to export up to 90% of plywood and lumber because the Russian market couldn’t give us such volumes. So now it’s hard to say that we can replace exports with the domestic market. Yes, most likely we’ll be able to sell additional volumes on the domestic market, just like all other producers, if the government keeps stimulating domestic demand: preferential mortgage, affordable credits, and large infrastructure projects. That’s what I see as the government’s main task: to create conditions for rapid economic growth, for rapid growth of domestic consumer demand through the implementation of large infrastructure projects, the creation of new production facilities including in high-tech industries, the development of agriculture and processing complexes, rapid housing construction including individual housing, and the construction of social facilities.

— And what will prices on the domestic market be like?

— We’d like prices on the domestic market to be dictated by the market itself, rather than by the political and economic situation in the country. We’ll be working under such conditions. The main thing is that prices shouldn’t fall below a certain margin, which allows the company to implement investment programs and modernization programs, create new jobs, develop and be on-stream.

— The Russian government has just decided to postpone the fulfillment of obligations for priority investment projects in forest exploitation. How relevant is this to your company? What priority measures should the government take to support the timber industry in the near future?

— I’d like to say that we’ve been working very closely with regional and federal authorities since this whole situation arose. We’re already feeling the effects of federal support measures. Today, all of our woodworking plants in the region have been given the status of those that are strategically important for the economy. Oleg Kuvshinnikov, Vologda Region Governor, supported us in this matter by sending a corresponding appeal to the Ministry of Industry and Trade. This will give industrialists an opportunity to take advantage of most federal benefits and subsidies. I should say that there’s a good team of professionals in the Ministry of Industry and Trade who support the industry and try to implement all the initiatives and support measures that we propose in the government. If you monitor the information field, you can see that new support measures are announced in Russia every day. One of these initiatives was the extension of the official terms of investment projects in forest exploitation. CPFP, JSC together with GK Vologodskiye Lesopromyshlenniki are implementing a priority investment project on the production of large-format plywood Plitwood in Gryazovets District. Most of the plant has already been built. So far, we’re not stopping or slowing down anything, the project is underway, but we can’t avoid delays in equipment delivery due to logistic problems, so the project implementation timeline is likely to be shifted. We very much insisted that such complicated bills as the third federal law, which greatly complicates things for timber processors and loggers, be suspended, and this measure is now being considered by the Russian government. The timber industry will be granted a deferral of rent payments under forest lease agreements, a procedure for granting a deferral of the forest use charge credited to the regional budget, is being developed. All this is being implemented, and we’re glad that we have a productive dialogue with local, regional and federal authorities. We’ll fight this with all our might. The measures being taken are really a good help for companies for which preserving their business and staff is a priority today. These support measures allow us to focus our on the most important things, so that later we can calmly return to development issues.

— About human resources and social policy. Aren’t you planning any changes here due to the current situation? You’ve said you would transfer your staff to a shorter workweek…

— We’ve always said that we have social responsibility in the territories where our production assets are located. Nothing has changed in this context. We fulfill all our social obligations and the requirements of the collective labor contract. Our social facilities, such as the stadium and the health center, are operating as usual, and the staff enjoy all the benefits they are entitled to. Moreover, our social facilities actively offer their services to the staff of other organizations, public sector workers, and pensioners. The Vologda Region government is actively engaged in supporting employers. In this agenda, the preservation of labor resources at all the region’s enterprises comes to the forefront. I don’t think any company is planning to reduce its staff even if the production volume drops. We want to avoid that, so we work out support programs together with the regional government. Transition to reduced workdays is one of the decisions we’ll have to make, but only if it’s impossible to ensure the desired level of production load for a certain short period. It’s important to understand that this is a way to preserve the staff. It’s the right social step to keep the people employed and paid.

— Ilya Evgenyevich, and yet, with what mood do you look into the future?

— As of today, the plant is running in a normal mode, with planned programs and projects underway. COFP, Fibroplit, as well as Sheksna Wood Board Plant and Vokhtoga-LesDrev, established together with Vologodskiye Lesopromyshlenniki, are included in the list of strategic companies, which means they’re government-supported. Yes, it’s not easy to work under current conditions. But CPFP is a plant with more than half a century of history. During this time, enormous competences have been accumulated – both production and technological. The plant has a very efficient team of like-minded people. Moreover, we’ve managed to build a vertically integrated production system with a large degree of diversification and a wide product range, working effectively in cooperation with the largest enterprises of the Vologda timber industry. During our history, we’ve overcome several crises, though they were very tough. But the coordinated work of professionals allowed not only to get out of them successfully, but also to increase production capacity. We’ll also overcome this crisis, develop new markets, build new logistic flows, and expand our competencies. Maybe we’ll enter new market niches that we haven’t thought of before. After all, unlike our competitors in Europe, we have the main thing: people and raw materials – Russian forest.