FORTUNE: “DELO GROUP- a holding company with ever-expanding horizons“
July edition of the American “Fortune” magazine issued an article “DELO GROUP- a holding company with ever-expanding horizons “ based on the interview with the President of DELO GROUP, Sergey Shishkarev.
DELO GROUP – a holding company with ever-expanding horizons
One of the greatest untold commercial success stories of the 21st century has been that of the Russian container shipping industry, which between 2000 and 2010 registered a compound annual growth rate (CAGR) of over 18%—that’s 50% higher than either its Middle East or Far East counterparts.
And despite the recent slowdown in the country’s economic expansion in the past 12 to 18 months, there is little sign that this surge in performance is likely to go into reverse anytime soon; in 2012, for instance, throughput in Russia’s container terminals expanded at 2.7 times the underlying rate of Russia’s GDP growth rate and at more than twice that of the global container market—in the process, outperforming Brazil, China, and Turkey.
While the lion’s share of Russia’s container traffic is still handled by the Big Port of St. Petersburg in the Baltic Sea Basin and Vladivostok in its Far East Basin, the Black Sea Basin port of Novorossiysk is making an increasingly significant contribution to the container market’s overall national performance. With a throughput of approximately 761,000 TEU (20-foot equivalent units) in 2013, its ability to service the cities to the north and east of the Black Sea and its proximity to the Kazakhstan border (and so to the tantalizingly lucrative Chinese markets) have helped transform it into the biggest port in the Black Sea Basin, accounting for some 15% of all of Russia’s container traffic.
One man who has been instrumental in putting this port on the international map is Sergey Shishkarev, founder and owner of DELO GROUP, which in turn operates the Novorossiysk container terminal better known by its acronym NUTEP and currently enjoying CAGRs of 31%. The group also owns the KSK grain terminal; the GCS Group (Global Container Service); Transoil, which specializes in transhipment and bunkering services; and, under the Transportnaya Korporatsiya (TK) banner, its own fleet of railway tank wagons and container flatcars.
Shishkarev set up DELO GROUP in 1993, but his connection with the Novorossiysk seaport goes back even further than that, for his father was its operations director. “When I was a boy, I would visit him every Saturday,” he recalls. “We used to walk around the port, and that was how I got to understand how it worked.” That was back in the 1970s and ’80s before the collapse of the Soviet Union, but by the time the younger Shishkarev had graduated from the Red Banner Military Institute of the Ministry of Defense in 1992, the USSR was gone, and he had no chance to use his father’s connections to climb his way up the career ladder.
Shishkarev nevertheless seems somehow to have been destined to end up in the transport and logistics industry. After a short spell acting as an Australian trading and development company’s representative in Moscow, he worked beside several gentlemen who have turned out to be among the elite of Russia’s transport sector. Among them: railway and port operator N-Trans’ co-owners Konstantin Nikolaev, Nikita Mishin, and Andrei Filatov, the triumvirate responsible for floating Global Ports Investments for US$500 million three years ago. Twenty years earlier, the four of them began working together to ship oil and gas products through Novorossiysk, and in the summer of 1993 Shishkarev struck out on his own and started DELO GROUP.
“People need to understand that I wasn’t born with a silver spoon in my mouth and whatever I have achieved, I have achieved under my own steam and on my own initiative,” he says. He has certainly consistently displayed an eye for an opportunity. “In the Soviet era, the freight forwarding and shipping agency sector consisted of two companies, INFLOT and Soyuzvneshtrans. With the collapse of the USSR, I saw that there was a niche for a privately owned competitor, so I initially set up DELO GROUP as a freight forwarding and shipping agency.”
Both Shishkarev and his DELO GROUP have come a long way since then, and the company’s subsequent history is dotted with landmark and game-changing developments. Probably the most significant of these occurred in 2011 when it gained 100% control of NUTEP’s 27-hectare terminal after buying out Andrey Kobzar’s National Container Company. The deal gave Shishkarev full ownership of a strategically located terminal with an annual cargo capacity (at the time) of 250,000, as well as a springboard for the expansion required to accommodate double-digit growth in the port’s traffic.
Since this acquisition, new state-of- the-art post-Panamax Liebherr cranes have increased NUTEP’s terminal handling capacity to over 350,000 TEUs per year. It has also been improving its landside operations to cope with expected increases in future traffic by relocating and expanding its railway park so that it can simultaneously accommodate two (instead of the current one) block trains. This will also increase its intake capacity from 12,000 to 20,000 TEU.
While NUTEP’s stevedoring operations remain DELO GROUP’s core activity, growing a global logistics network through the GCS subsidiary is also seen as a key to future growth. GCS is already the largest private intermodal operator in southern Russia and itself is expanding, having recently added a further 224 80-foot- long flatcars to its fleet, with plans to increase the number of long-term leased and owned flatcars operated by its subsidiary Ruscon to over 1,000.
“GCS provides door-to-door container transportation,” explains Shishkarev. “It deals with all custom clearance issues and the transhipment of cargo by Russian railways. It also has contracts with the main container operators around the world including Maersk, MSC, CMA CGM, COSCO, and others.” GSC’s footprint consequently stretches from Seattle to Shanghai to Sydney, and DELO GROUP’s founder is constantly looking to improve and expand its network. Earlier this year, Ruscon launched Russia’s first regular intermodal services to carry Flexitank containers to Kazakhstan, and it has begun a weekly container rail service linking the Ust-Luga terminal on the Baltic Sea to the MANP inland terminal 45 kilometers southwest of Moscow. MANP is also the western terminal for a new regular intermodal service that runs to some of Russia’s more remote regions such as Blagoveshchensk on the Chinese border, Khabarovsk, and Komsomolsk-na-Amure—the regional centers, close to the Sea of Japan. The group also operates several off-dock terminals in Moscow and Novorossiysk.
DELO GROUP’s expansion is very much in progress and Shishkarev is looking for outside investors to accompany him on this journey. Late last year, he sold a 25% stake (plus one share) of the KSK grain terminal to the U.S.-based food, agriculture, financial, and industrial products conglomerate Cargill. Under the terms of the agreement, Cargill will be able to use a proportion of KSK’s annual grain capacity of 3.5 million metric tons to export its Russian produce, while it provides DELO GROUP with the investment to keep developing its state-of-the-art equipment and storage facilities across stevedoring, storage, and transportation operations.
Cargill executives would probably be the first to endorse the commitment that Shishkarev and his colleagues have shown to investment in new plants and technology. “Quite recently,” says Shishkarev, “we invited Cargill representatives from all over the world to come here and they were very happy with what they saw. We have passed some strict due diligence hurdles, and I believe that this demonstrates we are more than ready to enter into serious partnerships.”
Shishkarev has the flexibility and the vision to respond quickly and decisively when opportunities arise. Along with the Cargill deal, for instance, 2013 also saw the construction and inauguration of a roll on roll-off terminal designed specifically to handle 50,000 finished vehicles each year. The result of a joint venture between the group and the logistics operator Rolf SCS, the terminal is built on land freed up by the expansion of the KSK grain terminal at the port; its main rationale is to offer quicker access to dealers in the south of Russia, the North Caucasus, and the Urals.
Shishkarev predicts, however, that NUTEP’s container terminal will be the next main attraction for overseas investors. “In June we are going to make a decision about the level of investment and construction we are going to commit to build a new deep berth next to the pier,” he says. “At the moment, the idea is to invest around US$120 million and get it finished within three years. That means that by 2017 we will be able to accommodate vessels of up to 10,000 TEU, giving us an enormous competitive advantage, which we believe will make this an attractive investment opportunity to potential investors.”
What will have impressed the Cargill team as much as the size of the DELO GROUP operation in Novorossiysk and the quality of the equipment will have been something less tangible: Shishkarev’s business principles. “The most valuable lesson that my father taught me was that for the first part of your life you work for your reputation and in the second half your reputation works for you,” he says. “All my partners know that my word is my bond, because what I promise I will do, I do. That is critical to any partnership. And the second lesson he taught me was about ambition. Everybody at DELO GROUP is very ambitious, and this always gives us an edge. However routine the work we undertake, we have to do better today than we did yesterday, and then do better tomorrow than we did today. We can never afford to sit back and relax.”
FORTUNE MAGAZINE, 01-07-2014