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KIRILL KRAVCHENKO, C.E.O. OF NIS SERBIA
Last year was pretty turbulent. What stands out most in your mind? We could say that last year was both difficult and interesting. Regardless of hardships, I think that 2009 was quite successful for the company – we have stabilized its financial situation, started with modernization and devised a development strategy covering the period of next five years. Also, we have started to produce high margin petroleum products, primarily eurodiesel, and managed to secure the most profitable business direction for us – that is crude production. Regardless of the fact that the Q2, Q3 and Q4 were profitable, at the end of the year, we will see loss. First of all because the loss generated in the Q1 was quite high, and second, too many problems from the past have not been resolved due to an understandable reason – the economic downturn. Still, I think that we have laid a good foundation for further transforming of NIS from the sluggish stateowned monopolist into a company that will be able to compete with the biggest players on the Balkan oil market soon, as well as become the regional leader. Can we say that 2010 will be the year when we are finally going to see a dynamic and programmed development of NIS? Our aim is to make NIS the most efficient oil company in the Balkans and maintain its leadership position in Serbia. In 2009, our main aim was to stabilize the company. In 2010, we are going to make significant progress in quality, or as you put it, a dynamic and programmed development. Bearing in mind that NIS is a vertically integrated company, we are going to strive to accomplish a balanced development of all business segments – from increasing production and processing of our own crude to extending the retail network. What are the company’s strategic priorities in 2010? A whole year program including intensive fitness training, healthy way of living, abandoning bad habits, losing weight. That is how I would describe the priorities for 2010, for a person. But if we transfer this analogy to the language of business and to the corporate discussions, then it is called efficiency. For the first time in several years, NIS will be profitable, especially when we bear in mind a positive tendency that we managed to achieve in the latter half of 2009. Back then, we started to get ourselves ready for when the Serbian market of petroleum products opens up, which is planned for next year, as well as to cut back on the costs, develop NIS’s retail network in line with environmental standards and modernize the company’s oil refineries. As I said before, special attention will be given to developing the company’s retail network and building new petrol stations in accordance with the new marketing policy in NIS. As a result of this modernization, NIS will have the latest refining complex and the biggest network of petrol stations in Serbia. I am sure that this is an excellent prerequisite for victory. With regards to investments, aside from the money that we need to set aside for development of processing activities as per the SPA, NIS will invest its own funds in development of retail and exploitation projects. In addition to that, we are going to continue making active changes, as well as improving efficiency within the company. One of the priorities is also transforming NIS into a public limited company and I am sure that we are going to provide small shareholders with convincing evidence that the company is stable and has a great potential for increasing its value. When making plans for 2010 and with the aim of increasing ourbusiness range, we paid a great deal of attention to seeking out possible partners, as well as new assets, not only in Serbia, but abroad too. It seems that Gazprom Neft has been adhering to its obligations stipulated in the contract on acquisition of NIS. How much has the other side adhered to it? The state of Serbia and Gazprom Neft share the same goal – to increase NIS’s efficiency and make the company one of the leaders on the European oil product market. With that aim in mind, we are having regular consultations with both the Serbian president and Prime Minister. I do hope that, in the following few months, we will succeed in resolving the remaining problems, like the unregulated issue of registering the company’s property which makes a significant portion of its value, as well as settling close to 4,000 ‘old’ lawsuits filed against NIS, with the Serbian side being actually obligated to deal with them too. Together with the Serbian government we devised a certain plan, and I hope that by the time we float NIS’s shares on the stock exchange, most of these property issues will be worked out. I would also like to underline that at the beginning of this year, the Serbian government settled its obligations stemming from the sales contract relating to allocation of company’s shares to Serbian citizens. According to the information we dispose of, NIS is now a company with the highest number of shareholders in the world – 4.7 million, to beprecise. We began to get ready for the new circumstances back in the summer last year in accordance with the plan approved by our Board of Directors. I think that the process of floating our shares on the stock market will be relatively painless for the company. As soon as you were appointed C.E.O. of NIS, you announced more rational business operations and settling various claims. How much have you succeeded in that? In 2009, we stabilized the company’s finances, ascertained claims, reduced credit liabilities, and defined our reserves. We did a lot on restructuring our credit portfolio and reducing the amount NIS owes to banks. What is exceptionally important is that we have managed to achieve a positive cash flow of 17.4 billion dinars, which made it possible for us to implement our investment programme. In 2008, the operating cash flow was negative, in the region of 15 billion dinars. Russia says that it has made a uturn towards modernization, technological development, and rational utilization of natural resources. What is your view, as a young expert, of these changes taking place in your country? In the last 1015 years in the oil industry there were significant technological changes both in the area of crude production and refining. In Serbia, we are taking the same path and we have already started to exploit new technologies in production and we have introduced the new catalyst production scheme for refining of EuroFuel in our Refineries. Introduction of modern technological facilities such as hydrocracking will have a significant impact on technology. Modernization and technological development are a must for the countries that were economically lagging behind developed countries at the end of 20th century and are now rapidly developing. We need to make up for what we lost. We need to catch up with the leaders together. Mr. Kravchenko, for a person of 33 years of age your resume is quite impressive. You have graduated from the Lomonosov University, studied in Great Britain, received a Ph.D. in economy and finance, and worked in Siberia and Latin America. In which way has all of this helped you in Serbia? The graduate diploma in sociology and a doctorate degree in Economics have enabled me to look at things from various perspectives. Doing business also means managing people, and economy is simply a measuring instrument. If I compare Serbia to Russia, I would say that Serbia is closer to Europe, in terms of tradition, working hours, and practical approach to work. However, we share certain similarities. We have Slavic roots, deep souls, we like to work, but we also like to relax. At this moment, Serbia is in a very active stage amidst integration into international structures. The changes that are happening now are much faster than those from ten years ago. I am confident that in three years’ time, Serbia will be a completely new state. We are witnessing great changes taking place which are leading towards a great future and I am confident that NIS can make its contribution.
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The man who has been running the company throughout these trials and tribulations and who managed to untangle the complicated web that this huge company entangled itself in is called Kirill Kravchenko. He is only 33 years old, and with a rational and assertive management of the company, he succeeded in resolving the inherited problems, applying new solutions and raising overall company efficiency. Now, at the end of the first full business year, C.E.O. of Petroleum Industry of Serbia Kirill Kravchenko gave an exclusive interview to CorD magazine.