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The coming winter may be the most difficult challenge for Ukrainian businesses. The government is already making such gloomy forecasts. Kyiv Cardboard and Paper Mill (Kyiv CPM), a large enterprise with more than 2,500 employees near the capital, is ready for these challenges.

Oleksii Katyshev, Commercial Director of the Kyiv Cardboard and Paper Mill, told delo.ua about possible blackouts and their impact on the business, competition and opportunities, challenges and motivation.

How do blackouts affect the work of the Kyiv Criminal Procedure Commission?

Blackouts cause uncertainty. For our company with continuous production, unpredictable blackouts affect our production processes the most.

Even at the time of the full-scale war, the implementation of force majeure measures enabled the mill to operate smoothly, provide customers and partners with products, pay taxes and reduce energy consumption. These changes were initiated by Dr Heinz Zinner, the new Austrian owner of Kyiv Cardboard and Paper Mill, and the investments have already given advantages in our market.

Are innovations at Kyiv CPM a way to energy independence for production?

Kyiv CPM uses Lean thinking to improve the efficiency of the enterprise. It involves forecasting resource consumption based on the range of products, continuous correction of mill`s equipment operation (prompt assessment of deviations, maintaining the nominal level of machine load, eliminating no-load operation, etc.), and effective work with staff.

Precise daily and hourly planning of energy consumption for the main production processes makes it possible to accurately determine order volumes and plan purchases of natural gas and electricity from suppliers, preventing any imbalance and the corresponding negative financial consequences.

Today we are able to operate fully autonomously, which is the result of the hard work of the mill’s Austrian owner and the entire team of Kyiv CPM. Of course, this is more costly, but it ensures independence for a continuous-cycle enterprise.

How have the company`s sales volumes changed during the full-scale war?

The four core products of the company – cardboard, corrugated packaging, moulded packaging (egg trays) and sanitary products (which include the “buyer`s choice” Obukhiv 65) – have dropped by 20 to 40% in sales.

Have changes in the supply chain, reduced customer purchasing capacity, and an increase in debts for shipped products had a significant impact on your work with counterparties? How have you had to resolve such cases, or have you met your customers halfway?

By the beginning of 2022, Kyiv CPM had been selling its products to more than 35 countries, including such distant destinations as Mexico, Tanzania and Mongolia. However, the war changed things: the railway and sea delivery options were limited, which affected export sales to Central Asia and the Caucasus. We started looking for new ways of delivery: we transported our products to the Caucasus countries by road around the Black Sea. We also considered delivery through the Romanian port of Constanta, but this option failed.

For customers in Ukraine, Kyiv Cardboard and Paper Mill uses only road transport. Amid the war, we reviewed and optimized our logistics processes: we signed new agreements with transporters and introduced innovative approaches to warehouse inventory management.

By the beginning of 2022, Kyiv CPM had been selling its products to more than 35 countries, including such distant destinations as Mexico, Tanzania and Mongolia. The war changed things

Oleksii Katyshev, Commercial Director of Kyiv CPM

Despite the challenging situation, most of our customers continue to fulfil their payment obligations for the supplied products.

In some cases, the mill meets them halfway by agreeing on debt repayment ratios, payment and shipment schedules. For example, it offers extended payment terms for partners who experience temporary cash flow difficulties.

How has the sales geography of Kyiv CPM changed during the full-scale war? Which regions have become a priority, and has the customer base changed (large chains, industrial enterprises, small businesses)?

The sales geography varied depending on the regions: some production facilities were evacuated to the west of the country. Kyiv Cardboard and Paper Mill is constantly trying to develop available export destinations, looking for innovative solutions to compensate for losses on the domestic market. However, this is very difficult due to logistical limitations.

However, the customer profile has generally stayed the same. Entrepreneurs are used to the high-quality cardboard and paper products of Kyiv CPM. In these difficult times, stability and service are an important advantage.

However, there are some definite distinctions. Industrial enterprises and large chains have become less active due to economic challenges and uncertainty. As for small and medium-sized businesses, their behavior is completely different. New promising directions are developing in this segment: we are observing an increase in demand from small businesses and e-commerce.

Many business owners have to adapt their business to the new reality by moving to online trading or re-profiling their activities, which requires new packaging and logistics solutions.

We have also noticed one interesting detail: sales at markets and pop-up markets are noticeably reduced as they move to retail chains.

Kyiv Cardboard and Paper Mill offers innovative solutions that help in these processes. We actively cooperate with our partners among buyers, offering individual solutions for each segment. This enables them to maintain stable sales even in the difficult conditions of martial law. Heinz Zinner, the owner of Kyiv CPM, supports this strategy, focusing on long-term cooperation with Ukrainian entrepreneurs.

What is the share of exports in your sales? How has the share of exports changed over the past two years? Has the geography of exports changed, or have you entered new markets?

As of the first half of the year, the mill`s exports amounted to 4.2% of total sales, and in 2021 it was 23.5%. So you can make your own conclusions. Due to the high cost of production, it is becoming more difficult for us to compete on foreign markets. Unfortunately, the government does not introduce protectionist measures to support domestic producers. This is extremely important for Ukraine in terms of tax revenues and jobs.

How strong support does the parent company provided in the process of entering foreign markets? 

If we speak only about business issues and production, the Austrian owner of Kyiv CPM, Dr Heinz Zinner, does not stop investment projects, even in the current situation. Since 2022, almost €15 million has been spent on modernizing the equipment of Kyiv Cardboard and Paper Mill.

Does Kyiv CPM plan to implement large-scale projects?

At the end of last year, we approved a modernization program for 2024. Today`s realities are making their own changes: as of the beginning of August, the equipment at Kyiv CPM has been upgraded for €1.7 million. This figure is expected to increase at least five times by the end of 2024, as several large-scale projects are planned to be implemented in the coming months.

In addition to upgrading equipment and looking for new markets, we have another priority area of investment – social programs. A company is not only equipment, but people first and foremost. Almost 250 of our employees, that is, virtually every tenth employee, were mobilized, and the mill continues to pay their salaries and provide financial support to the families of the defenders on its own initiative. In total, Heinz Zinner and the Board of Directors of Kyiv CPM contributed more than UAH 100 million to fulfil their social obligations last year.

Paper machine (photo of Kyiv CPM)

Is there significant competition with other manufacturers within the country? Is the competition from the EU significant? 

EU manufacturers have a huge advantage – access to low-interest capital markets. So, they can upgrade their equipment much faster than we can.

But competition is what keeps us going. This applies to both Ukrainian and European manufacturers. The work of foreign plants makes us move faster.

What motivates you the most in these difficult times? How important are the charitable initiatives you are implementing on your own or in partnership with other companies?

Motivation depends on how you look at the market – from the problems or opportunities points of view. During the war, we faced challenges like no other paper mill managers in the EU have ever faced. Since the first day of the war, we have not stopped solving the challenges of the war. Therefore, my motivation and the motivation of the entire team of Kyiv Cardboard and Paper Mill is to overcome them.

Based on the material of delo.ua.

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