INTERVIEW WITH AZMOL-BP MARKETING DIRECTOR TO GMK CENTER PORTAL Maxim Tokin: “About €10 million has been invested in Azmol over the past five years”

15:27 | 23.09.2021


Last week Azmol British Petrochemicals, the largest manufacturer of engine oils in Ukraine, celebrated the fifth anniversary of British investments in its production. On this occasion, the company held an Azmol Industrial forum in Berdyansk for representatives of enterprises whose work is related to the use of lubricants.

About 200 delegates from industrial enterprises of Ukraine and abroad got acquainted with the reports of leading industry experts and visited the production facilities of Azmol. The GMK Center correspondent also visited the forum and the plant. The photo report is available here.

We also took the opportunity to talk with Azmol British Petrochemicals Marketing Director Maxim Tokin about the scale of the domestic lubricants market, the structure of demand for motor oils, the company's place in the industry and its prospects.

What is the annual volume of the lubricants market in Ukraine and how is it structured?

- The volume of the lubricants market in Ukraine is about 200 thousand tons per year. It can be split indefinitely into different sub-segments. But for ease of calculation, I would recommend dividing it into two main segments: lubricants for former Soviet and domestic equipment, that is, oils made in accordance with GOST, and lubricants for modern imported equipment. These two segments are approximately the same in volume - each of them is approximately 100 thousand tons per year in terms of tonnage.

And if we count in terms of financial capacity, then the priority of imports is two or three times higher. Because imported products are much more expensive.

Azmol British Petrochemicals is working and clearly intends to continue developing in the import substitution segment.  We will not plan to work in sectors dominated by old Soviet techniques, designed for the use of GOST lubricants.

When you evaluate the size of the market, do you mean all lubricants - industrial, transport, and consumer?

- Yes. The techniques markets are roughly divided into two similar segments. For example, in the consumer segment, there are still many "Zhiguly", there are still "Moskvich", there are still "Volga", "UAZ", "Tavriya", etc. Likewise, in the mining and metallurgical sector, there is equipment produced in the days of the USSR, and there is modern imported equipment.

The railway industry today is generally supplied up to 90% with lubricant produced in the CIS. Almost nothing new is happening there, to great shame. In the year before last, 30 locomotives of the American company General Electric were delivered to "Ukrzaliznytsia". But this is not enough for the serious transformation of the lubricants market.

At the same time, for example, metallurgy is developing much faster. Enterprises buy a lot of imported equipment.

How do you evaluate your market share now?

- Today we occupy 7-8% of the market.

Besides you, are there other Ukrainian manufacturers on the market?

- In the import substitution market - no. There are top five in this sector: Shell, Mobil, Castrol, Total, Fuchs. These companies tightly control the market. And there are also two dozen brands that occupy small segments. But the top five in the import segment make up the core.

How does the Ukrainian manufacturer feel in such a competitive environment?

- I would not call Azmol British Petrochemicals an exclusively Ukrainian manufacturer. We have imported technologies, imported production and laboratory equipment. We use the Western philosophy of using lubricants.

Five years ago, we attracted not only foreign investors. President of the European Lubricating Grease Institute (ELGI) Terry Dicken is our Technical Director. Note that the institute he leads brings together 160 of the best technologists in Europe.

Of course, we manufacture our products on Ukrainian territory. Here we create jobs, pay taxes. This is our contribution to the country's economy.

Due to this model, the self cost of our production is probably a little lower than if we manufactured products in Europe. And this gives us the opportunity to compete.

What are your plans to increase your market presence?

- We hope to get 20% of the market in the future. This is an ambitious goal for us. But market trends suggest that this is real.

How are the sales shares distributed in the domestic and foreign markets?

- We sell about 60% here, 40% is export.

So your focus is on the domestic market?

- Yes. In the industrial segment, it is definitely on the domestic market.

Please, tell us a little about the structure of demand in the industrial and retail sectors ...

- Now the industrial segment dominates in our sales. But in the long term, our task is to become leaders in each segment.

In theory, the market is divided into four sub-segments: the industrial sector, the agricultural sector, the commercial vehicle sector (these are large mainline trucks, buses, taxis, minibuses) and the private vehicle sector - these are our cars.

Today you are attending a conference where an industrial segment is considered. There will be similar conferences for agricultural, commercial vehicles and car services.

What products do industrial enterprises expect from you, what qualities do they require from liquids?

- The industrial sector is a priority for us for various reasons. There is no such level of responsibility as in the industrial sector. Miners and metallurgists acquire a lot of new high-tech equipment of the level of Siemens, Danieli, Doosan. This equipment costs millions, if not tens of millions of dollars. And you can't go there with old soviet GOST oil. The renewed fleet requires appropriate consumables and service. And the responsibility here is simply off the scale. Trust me, a large industrial company will find a way to ask for quality.

On the other hand, it encourages us to take action. Therefore, we have new approvals and research equipment. After all, most of the work takes place on the laboratory bench, in the research center. And then, for example, Zaporizhstal gives an opportunity to prove itself. It turned out - good. It didn't work out - they put up a cross.

Most of the equipment in our country is purchased on credit or lease. Do the warranty conditions somehow limit the demand for your products?

- This is our pain point. Warranty equipment is a segment that, unfortunately, is not yet achievable for us. If a consumer bought a new Mercedes on credit or lease, the service will require him to fill in the oil provided for in the warranty. But as soon as 5 years or 100 thousand kilometers pass, our company will have an opportunity to prove itself. It is the same in the industrial sector. For example, it will work at the Ilyich Iron and Steel Works equipment "Danieli" 5 years - and we can try to offer our products.

How do you convince the consumer to switch to your product?

- We make free test fills. For example, we have a company from Iraq among our clients. She has 600 Mercedes trucks in her fleet that carry oil to the port. Previously, they worked with another manufacturer's oil. But our Iraqi trader suggested trying it. We filled four trucks with Azmol oil. And after six months they checked. The condition of the engine is flawless, and the financial savings are tangible. As a result, we have been shipping products to them for the fourth year already.

Do you have orders from Ukrainian machine manufacturers in your portfolio?

- Today we are successfully working with such machine-building giants as: "Motor Sich", "Lutsk Bearing Plant", "Novokramatorsky Mashinostroitelny Zavod", "Corum Group holding", "Druzhkovka Harware Plant", "Hydrosila", "Kharkiv tractor plant", "Malyshev Plant" and others. These are excellent enterprises. They mainly use imported oils. Representatives of 90% of the listed enterprises are present at today's forum.

What are the prospects for the railway as a client?

- The main problem is that for Azmol the area of use on the Ukrainian railway is quite narrow. There is probably no point in changing engine oil to something very serious now, with serious approvals. After all, the locomotive fleet "Ukrzaliznytsia" with fairly high mileage. As soon as the park begins to be renewed, I think that the technical heads of the railway will remember us.

In the meantime, we supply products to more than a dozen roads in the near and far abroad. We cooperate with all major car manufacturers. In total, we supply products to 54 countries of the world.

How many investments were required to organize production and advance to domestic and foreign markets?

- Over the past five years, about € 10 million has been invested in Azmol. In the first 2-3 years, when the enterprise was being reconstructed, the dynamics of investments was higher, then the pace slightly decreased.

Only in 2020 we made quite serious investments in new machines for filling autochemical products. We will show the guests of the forum this site, as well as a block of tanks under construction, a new warehouse, a site for the production of AdBlue reagent for cleaning diesel engine exhaust gases. In the case of this product, only laboratory equipment and approval cost € 200,000.

How did the events of 2020 affect your business?

- Unfortunately, there was no global growth in 2020 for several reasons. The covid restrictions have hit very hard on the possibility of business trips. We move very actively around the world with presentations, with proposals, with industrial tests. This is our job. There was no such opportunity last year.

Nevertheless, there is an increase, and the increase is quite stable.

Due to the pandemic, the staff did not have to be laid off?

- No, people weren't cut. We suffer, like the rest of Ukraine, from foreign companies that lure people away. Already recruiting agencies are working seriously.

Imagine a situation: at the Azmol plant, only the mechanical repair shop is about 100 handy men. And they just hunt for them. Lured to Poland, Czech Republic. This is a big problem.

How many people work at the enterprise now?

- About 500 people.