Interview with CEO of PRESTORUS: Foreign Markets and Future Development
Geosynthetics are technically complex products that require a special approach. However, many Russian manufacturers were able not only to establish production and sales within Russia but also to gain a foothold in the international market. Mikhail Azarkh, CEO of PRESTORUS LLC, talks about the obstacles the company overcomes on the way to foreign consumers and its plans for the coming years.
— As far as I know, PRESTORUS is a resident of the Lipetsk Special Economic Zone. What does this status mean?
— Previously, PRESTORUS’s manufacturing plant was located in Moscow, then we moved to Lipetsk and became a resident of the Special Economic Zone. This prestigious status opens up many opportunities. You work side by side with dozens of large international enterprises in a territory with a developed infrastructure. SEZ «Lipetsk» is an industrial zone with great conditions for doing business.
One of the most important benefits is tax preferences. The government exempts enterprises from paying income tax for a certain period, and taxes on property and transport are not levied at all. The preferential tax regime allows residents to invest more funds into the development of production.
I can say that running a business as a resident is beneficial in many ways, but there are some drawbacks. For example, there is a well-developed railway infrastructure on the territory of the SEZ, but the possibility of loading goods is virtually absent. We are forced to look for workarounds: we transport products by trucks or reload cargo on railway platforms in Moscow or the vicinity. SEZ «Lipetsk» is a protected area, and here the imported goods are very carefully monitored. Manufacturers are trying to save money, to import goods teaming up with other companies, but the fact is that you cannot unload cars with someone else’s cargo on the territory of the zone. At one time, we even kept our own warehouse for storing goods, which, frankly, was quite pricy.
— You have been working with foreign clients for a long time. How did it all start? In what areas did you manage to fill a niche?
— PRESTORUS entered the international market in 2016, and in 5 years of hard work, we have established cooperation with 34 countries. We entered the most promising areas: road construction, park infrastructure and green energy, reinforcement of slopes and soils of technological roads. Now the export volume averages about 1 million m2 of geocells per year, which is about 20% of the company’s total turnover.
The mining industry has recently become one of our top priorities. Our company has developed a unique solution for the construction of roads in underground mines— GEOCORD®— yellow reinforced 3D geocell. With its help, the repair time is reduced, and the roads are better protected from wear by heavy machinery and equipment.
Innovative Solution for the Mining Industry: Road Construction with GEOCORD®
Before the market launch, the technology was tested at several mining sites in Russia, particularly in Apatity. Over time, we began to receive more and more inquiries from customers, as the industry realized how huge the economic effect achieved with GEOCORD® is. To date, more than 30 km of underground roads have been built using our geocells. Foreign companies highly appreciated the PRESTORUS solution. Today these geocells are ordered in Peru, South Africa and Australia.
— How expensive is it to work in the international market of geosynthetics?
— Since we work abroad, we are closely cooperating with the Export Support Center of the Lipetsk region. As you know, exporters are not subject to VAT, which also frees up significant amounts that can be invested in the business.
Working in the international market, PRESTORUS LLC spends a lot of money on product certification and testing. Another expense item is the reception of experts from the certification authorities at our manufacturing plant. All this requires significant investments, and cooperation with the Lipetsk Export Support Center helps us a lot. We also spend quite a lot on participation in international exhibitions and advertising campaigns in foreign markets. Again, the export program is of great help for this work.
A separate conversation is the cost of product patenting. In some countries, patents can be reviewed for 5-10 years. PRESTORUS spends up to 5-10 million RUB ($70 000–$140 000) a year only on the protection of intellectual property in the international arena. We have secured government support in the form of subsidies for patent registration, and we would like the government to continue to help in this challenging endeavor.
— Are there any difficulties with product certification?
— Our company is certified according to Russian and international standards, both state and industry ones. Russian industry standards can be a big headache for a manufacturer. The system is at sixes and sevens in our country: each organization tries to create its own certification center and forces manufacturers to undergo certification. Let’s take the road construction industry: Rosavtodor has developed some standards, and Russian Railways has its own. There are on average 3-4 systems in other countries, while there are dozens of them in Russia. These are huge costs that no one will compensate for.
PRESTORUS LLC accepts the existing rules of the game. For example, we supply large volumes of geosynthetic materials to the facilities of PJSC «GAZPROM», and for this, we undergo an annual audit of their structure, «Intergazsert». This system has very strict requirements, but our products comply with them, so we have long been included in the register. I am glad that in the mining sector, there is no such register and separate certificates. So, when building underground roads, everyone is guided by the Rosavtodor standards, which, in my opinion, is absolutely correct.
PRESTORUS projects in the mining industry
— One way or another, certification is necessary for quality control and therefore, it is better to focus on trusted manufacturers.
— Exactly. PRESTORUS produces high-quality products; they are more expensive but still in high demand. Our capacities are already fully loaded, so we plan to expand: we want to increase productivity by at least 2-3 times over the next couple of years. Given the growing presence in the foreign market, we realized that we needed to build our own factories abroad. Negotiations have been going on for a long time, and there are some agreements on joint integration with enterprises in South America, Asia and Europe. PRESTORUS is also considering opening warehouses and offices for technical support in other countries and creating an international engineering center.
— Thinking big! Are there any new products in development?
— Based on the tests carried out and customer requests, we always strive to improve our products—our focus products in particular. Thanks to the feedback from customers, we have improved our products GEOSTEP® and GEOCORD®, extending the life of the material to up to 100 years.
Also, now we are working on increasing the width of the GEOSTEP® rolls. One of our clients, who successfully uses GEOCORD® for road construction in underground mines, is thinking about the prospects for the next 5-15 years. One of their strategic tasks is to find a solution to «refine» mines at the final stage of the mining cycle. Wide GEOSTEP® can become such a solution due to its key features: its price, quality, and because you can reinforce the slope along the entire length without extra fasteners (you get a monolithic structure).
I would also like to add that we are now planning to introduce a new product, geogrids. We believe that the more expansive our assortment of high-quality geosynthetics is, the better it will be for the client.
The interview was originally published in the magazine «Mining Industry» («Добывающая промышленность») No. 4, 2021: https://dprom.online/arhiv/