Business news from Ukraine

UKRAINIAN RDS GROUP READY TO PROVIDE 850 JOBS

The RDS group of road construction companies is ready to provide 850 jobs to Ukrainians returning from abroad, as well as to all people who have lost their jobs due to the COVID-19 pandemic, co-owner of the group Yuriy Shumakher has said.
“Our team has more than 1,200 employees. And we will be glad to welcome about 850 new specialists to work in eight regions of Ukraine, where we build roads and important infrastructure facilities,” he told Interfax-Ukraine.
According to him, the coronavirus not only threatens the health of people, it also robs them of their work, confidence in the future.
“The construction industry is not quarantined! And we want to provide jobs for those who need it most,” he said.
The Ukrainian group of companies RDS includes Kyivshliakhbud and Rostdorstroy. Its core business is construction, modernization and maintenance of roads and bridges, construction of airfield complexes.
The company is building concrete road H-14 Kropyvnytsky-Mykolaiv. As part of the reconstruction of the H-31 Dnipro-Reshetylivka highway in Poltava region, RDS is building an overpass over the railway and the section of the first concrete road in Ukraine. In 2019, the company won a World Bank tender for work on the first category highway M-03 Kyiv-Kharkiv-Dovzhansky.
As of April 2020, the company operates in eight regions of Ukraine and has ten production facilities.
The ultimate beneficial owners of RDS are Ukrainian citizens Yuriy Shumakher and Yevhen Konovalov.

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UKRAINIAN BUSINESS CONTINUES PROVIDING SUPPORT IN FIGHTING CORONAVIRUS

Ukrainian business continues providing its support in fighting the coronavirus disease COVID-19 pandemic, sending money to crisis response teams or buying artificial lungs ventilators, other equipment and protective equipment for medical workers.
In particular, the RDS group of companies, involved in the construction and operation of roads belonged to Yuriy Shumakher and Yevhen Konovalov, bought the Oricare V8600 artificial lung ventilation machine (the United States) for the city of Odesa, and also provides financial assistance to local authorities for the purchase of protective equipment (masks, disinfectants) in the seven regions where it operates.
Makar Paseniuk and Kostiantyn Stetsenko’s ICU investment group purchased COVID-19 tests and intensive care equipment for Kyiv designated hospitals. In particular, for the Oleksandrivska City Clinical Hospital, which receives the main flow of patients with possible COVID-19 disease, the ICU acquired 200 additional polymerase chain reaction (PCR) tests. The investment group provided the city hospital No. 4, one of the three designated hospitals in Kyiv, with almost 5,000 units of intensive care supplies: virus-bacterial filters, breathing circuits, endotracheal tubes, oxygen masks and drainage bags, and the Kyiv perinatal center received three all-in-one intensive care monitors.
The Regional Gas Company (RGC) of Dmytro Firtash purchased medical equipment, components for it, protective equipment, as well as materials and medicines for the amount of UAH 10 million and plans to send another tranche of assistance. In particular, RGC was able to purchase an artificial lung ventilator and monitors for existing ventilators, 2,000 express tests, 30,000 masks and FFP2respirators, 5,000 special glasses, about 5,000 gowns and special overalls and about 3,000 biosecurity kits, as well as disinfection solutions, medicines and fuel for ambulances.
The P&O Maritime Ukraine towing company transferred UAH 6.8 million to the Odesa crisis response team, and TIS-Grain sent UAH 3 million.

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UKRAINIAN RDS WILL CONTINUE ALL ROAD CONSTRUCTION PROJECTS AMID QUARANTINE – CO-OWNER

The RDS group of road construction companies will continue road work during the quarantine established due to the spread of coronavirus, and plans to continue to fully fulfill its obligations, RDS co-owner Yuriy Shumakher has told Interfax-Ukraine.
“We express support for the decision of the Ukravtodor management not to curtail the planned projects. The development of infrastructure in the country is the key to Ukraine’s competitiveness and success,” he said.
“The group of RDS road construction companies minimized attendance at work for the staff, but we continue to fully implement all of our road construction projects,” Shumakher added.
According to him, contractors and suppliers in all regions of the presence of RDS Group are working smoothly, there are no problems with the provision of construction materials.
Ukravtodor on March 17 announced its support for the government’s initiatives to prevent the spread of the coronavirus COVID-19 in Ukraine and continuation of all roadwork as usual.
“Ukravtodor supports the government’s initiatives to prevent the spread of the coronavirus COVID-19 in Ukraine. Therefore, we strongly recommend that everyone who can work remotely take this opportunity. At the same time, we want to emphasize that the deceleration of the season of road works is not yet expected. All construction and repair work continues as normal,” the state agency said.
The Ukrainian group of companies RDS includes Kyivshliakhbud and Rostdorstroy. Its core business is construction, modernization and maintenance of roads and bridges, construction of airfield complexes.
The company is building concrete road H-14 Kropyvnytsky-Mykolaiv. As part of the reconstruction of the H-31 Dnipro-Reshetylivka highway in Poltava region, RDS is building an overpass over the railway and the section of the first concrete road in Ukraine. In 2019, the company won a World Bank tender for work on the first category highway M-03 Kyiv-Kharkiv-Dovzhansky.
As of January 2020, the company operates in seven regions of Ukraine and has ten production facilities.
The ultimate beneficial owners of RDS are Ukrainian citizens Yuriy Shumakher and Yevhen Konovalov. The charter capital of the company is UAH 5.13 million.

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RDS ROAD CONSTRUCTION GROUP TO EXPAND IN UKRAINE

The RDS road construction group, which is already represented in seven regions of Ukraine, is preparing for the expansion of its geographic footprint in the country, the co-owner of the group, Yevhen Konovalov, has said.
“Today we work in seven regions – Odesa (in the region and its central city), Mykolaiv, Kirovohrad, Cherkasy, Poltava, Vinnytsia and Kyiv regions. I would like to keep the list of the regions we are planning to enter this year a secret, but we have plans for at least three regions today. We will give more information about them soon,” he said in an exclusive interview to Interfax-Ukraine.
According to Konovalov, competition on the road construction and maintenance market has increased in recent years due to a growth in activities of Ukrainian and foreign companies.
“In order to stay afloat, we should expand the chain of our plants and production facilities. This will allow us saving the usual level of production and work load. They say that big companies are monopolizing the market, acting in collusion, but this is not true. Competition in our market is extremely high, we are competing using technologies and human resource,” the co-owner of group said.
While commenting on peculiarities of tenders in this area in Ukraine, Konovalov stressed that the cost of further maintenance should be included in the price of road construction.
“The tender amount can be very big at once, as it should include both the construction and road maintenance for a term of three to five years. Hence, tender financing should be as follows: UAH 100 million directly for the construction and another UAH 30 million for maintenance,” he said.
The co-owner of RDS also said that the group is currently discussing the issue with the management of Ukravtodor State Agency of Automobile Roads of Ukraine.
“The main thing is that the contractor, who had won a road construction tender, should be in charge of maintenance of new roads instead, and not the state represented by regional automobile road agencies with their outmoded equipment,” Konovalov said.
He added that besides maintenance the company should monitor the road quality on its own for five to ten years, as this is guaranteed by banking institutions.
“If the road service requests road repairs, then we will fix it. Otherwise, the bank with withdraw money from our account,” the co-owner of RDS said.
The Ukrainian group of companies RDS includes Kyivshliakhbud and Rostdorstroy. Its core business is construction, modernization and maintenance of roads and bridges, construction of airfield complexes.
The company is building concrete road H-14 Kropyvnytsky-Mykolaiv. As part of the reconstruction of the H-31 Dnipro-Reshetylivka highway in Poltava region, RDS is building an overpass over the railway and the section of the first concrete road in Ukraine. In 2019, the company won a World Bank tender for work on the first category highway M-03 Kyiv-Kharkiv-Dovzhansky.
As of January 2020, the company operates in seven regions of Ukraine and has ten production facilities.
The ultimate beneficial owners of RDS are Ukrainian citizens Yuriy Shumakher and Yevhen Konovalov. The charter capital of the company is UAH 5.13 million.

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RDS IS CARRYING OUT REBRANDING TO EXPAND PRESENCE IN UKRAINE AND ENTER EUROPEAN MARKET

Exclusive interview of co-owner of the RDS road construction group Yuriy Shumakher for Interfax-Ukraine
The first question is about your rebranding. Has the company completed it, or is it in progress? What are your goals? Why did you decide to rebrand the company?
Today companies have to monitor the market and the latest technologies not only in their business areas. We and our brands have gone through a long way of transformation. Initially, the company was created as the Rost (Growth) investment group for construction of housing and commercial real estate. Actually, that is from where the name came from – to grow. When we decided to invest money in roads in 2005, we named the project Rostdorstroy.
Now we work in the field of road construction and are already in the top three companies in this market. We monitor worldwide trends not only in the sphere of road construction. Ubiquitous digitalization and a huge flow of information make brands and companies to grow more rapidly and keep up with the time. Therefore, their visual and media image changes. Everything is becoming more simplified, easy. That is why we decided that the name of the company Rostdorstroy is long and heavy, especially for the European market, in which we, in addition to the Ukrainian market, want to be represented. We decided to move to a new level and rebrand the company, starting from the name, changing it to RDS, and ending with a new approach to advertising.
In general, we want to take the company’s image to a whole new level. Our rebranding is in progress. We have created the company’s accounts on Facebook and Instagram. This is connected with numerous factors.
The main thing is that since the new president had been elected, we can see in general how the approach to road construction has changed. It has become a priority of the state. A planned approach is being used, and it is planned to double the financing of roads in 2020. We can see that big and powerful foreign companies are entering our market. We need to keep up with their level, to purchase high quality equipment so as to save our positions in the market. Technologies are upgrading every year. When we visit trade shows in Dubai or Germany, we can see that road construction equipment, construction materials and specialists’ skills are getting better year after year.
Anyway, I call all of them partners, and not competitors, because we are together in construction of modern roads. Therefore, we should hold relevant talks, properly introduce ourselves and stand for the company’s position. That is what we need rebranding for.
In December 2019, the Cabinet of Ministers allocated additional UAH 15.2 billion to close 2019. How much public funding will the sphere receive in 2020? And do you find it acceptable for the country?
I find them not just acceptable, but really sufficient. Even we are sometimes surprised by the fact that such money is allocated for roads. Over UAH 30 billion has been allocated, the Verkhovna Rada backed this decision. Moreover, the Verkhovna Rada also voted in favor of another UAH 20 billion, which will allow the government to attract extra loan funds. And this means that more than UAH 50 billion will be allocated for roads.
As the heads of both the Infrastructure Ministry and Ukravtodor say today, it is planned to attract additional UAH 10-15 billion from other sources so as to, let’s say, complete a record number of kilometers of roads this year. The money has been allocated and we have to do our job next. We have to do it both in quarries and on railway. This is very important, because not any spot can be reached by vehicles in the country. Today there is no comparison between the possibilities of motor vehicles and the possibilities of railways. Therefore, we are very concerned about proper arrangement of logistics.
In previous years the work of railways was really tough – the cars fleet was outmoded and it was poorly upgraded by Ukrzaliznytsia, taking into account that, thank God, the country had a record harvest and, as a result, there was a lack of cars for both the road business and grain transportation. That is what concerns us.
The main thing, which makes today’s government of the country in general, the ministry, Ukravtodor, etc., significantly different from the governments of past years, is the fact that today we have got an adopted resolution. Usually we saw the following picture: the national budget is adopted, but they issue the list of roads only in April (if we are lucky!). Tenders take a long time and it was not until June that a road company could start its work. As of today, the budget had been adopted by January, we have the list of roads, hence this helps the customers and Ukravtodor’s services to carry out tender procedures and us, as contractors, to bid, win or lose. And, above all, we can start our activities from late February if weather allows. Today, to spend UAH 60 billion of budget funds (not including the money from the European bank, which are allocated separately), a symbiosis of the customer and the contractor is necessary, as well as various types of road repairs. There is intermediate road maintenance – a simplified system of tenders and, respectively, of types of work which do not require licenses and expert assessment for projects at all, although some customers make it. Speaking about overhauls and construction of new roads, they require expert assessment and state licenses. We know that with regard to many aspects these agencies and expert assessments are unable to change rapidly just like many other institutions did under the new president and government. Therefore, there is a lot of bureaucracy which has to be defeated by stipulating the procedures in the legislation. We have some problems here so far.
Is the structure of Ukravtodor effective today? Can your company propose some innovations as a market participant?
They are already being implemented. Let’s say, the current structure of Ukravtodor, in my opinion, completely meets modern requirements. It is a state mechanism when the automobile roads service is the distributor of public funds. Naturally, there are various mechanisms and, probably, Ukravtodor could hold all tenders in all regions on its own. But it was created to reform a bulky machine which was supposed to be headquartered in Kyiv. Now each region has its own automobile roads service.
So, you mean the distribution of Ukravtodor’s powers in regions was effective?
Yes. But today in the composition of Ukravtodor there is the so-called SJSC (state joint-stock company), which unites the operation of roads. It is also a bulky machine with lots of employees, numerous, if you remember, DEUs (road maintenance sections), RaiDUs (district road authorities) in every district, which were in charge of road maintenance. A serious confrontation is under way in this area, and in their time they used to win all tenders for road operation in all regions, which included patching repairs, road maintenance, snow cleaning, road marking, guard rails, etc.
They used to win billion worth tenders and ‘operated’ these roads, because constructing a road is half the trouble, one has to operate it. And operations add at least 50% to roads’ durability. The state companies won tenders and used outmoded equipment which had not been upgraded for decades. They always lacked funds and faced other problems. The situation is changing today.
Firstly, private companies (like us) have been invited, and due to a new bidding system they are ready to invest money in machinery and equipment. I mean very expensive equipment for snow cleaning, blades, sand spreaders and other modern staff. All these guard rail pile drivers and various other equipment used for road operation. They never invested in this before, because they did not want to take a risk. I think the fact that today tenders are held for three years in advance is a serious renovation, which is being implemented in Ukravtodor. Tenders are held normally in the ProZorro system. Such an establishment like SJSC can be eliminated without any troubles.
Should there be a system of government audits in the sphere? What should it be like? What part can public control play in this system?
I think that the current format of road checks is the main sticking point, which in many aspects hinders us, as a road company, from development. The system of checks in the sphere of road construction is ineffective and outdated. The number of checks in the sphere is much higher than in any other spheres, which have them at all.
I think that reform of this system is one of priority tasks of the National Association of Road Builders of Ukraine today. It appears that road builders in Ukraine work in line with one system when money is received from the European Bank for Reconstruction and Development (EBRD), but switch to a different system while working through public procurement. This is nonsense.
Our major initiatives are related to the necessity for a unified system of tenders and performance quality checks. So, if we have the ProZorro system and a company wins a tender in this system, one should not say that something was wrong about it. This system was created to carry out all procedures transparently. Secondly, all tenders should be held only with firmly fixed prices. Why they used to be held with variable prices? That is because there was no financing, it was divided into tranches for four years. Obviously, the prices could change during these three years and that is why the customer held tenders with variable prices. A variable price is a reason for all law enforcement agencies to think that we are deceiving the government.
Today almost every law enforcement agency has a department in charge of controls in the road construction sphere. Inside the automobile roads service, there is a technical service which checks us when we submit forms. In the structure of Ukravtodor, there are the DerzhdorNDI (the State Road Research Institute) and the DorCenter (the State Center for Road Quality Check and Certification), which additionally check us. Ukravtodor always has the right to schedule its audit in order to check one or another road. There is also the accounts chamber, which can come to audit road builders. This is wrong. I think one independent agency should carry out road audits. An absolutely independent expert, who won the customer’s tender for engineering support, carries out checks abroad or when the construction in Ukraine is financed by Europe. It is like an audit company that signs every conclusion and stakes its reputation, which it had been building for decades, on it.
An independent audit system, in which not public officials, but independent experts audit road construction, should be developed. That is what we created the National Association of Road Builders of Ukraine for. It works very effectively, although we have been working for less than a year, and the law on public procurement has been amended due to our initiatives. We are ready to keep working in this direction.
You are building your company as a part of Ukrainian business. Do you or others have ambitions to move to the international level? Have you made any attempts to bid for foreign tenders, and are you also preparing the company for the international environment?
We already have been participating in international tenders in Ukraine for five years. International tenders have their own problem. We also have raised it in our national association. We are trying to make our government hear us. We prepare for tenders in line with international standards as long as money from international institutions are involved there. Today, we have signed a contract worth $12 million for the construction of the M03 highway.
Moreover, we have ambitions to participate in tenders abroad. Unlike Ukraine, tenders in Europe have very strict criteria. A mandatory requirement, in particular, is experience in the European Union for at least three to five years. We participated in tenders in Moldova several times, but having no experience, we lost. Now, we are trying to analyze the market and participate in tenders in Moldova and Romania. We also plan to try to enter the Polish market as a subcontractor.
We have to stand in the market, therefore we plan to improve our profitability. It should be higher in the countries with higher risks. If risks in the country are smaller, then profitability is lower too, however they pay better there. We want to try to enter the European market. In addition, we are already buying almost all machines abroad. Ukraine practically does not produce its own machines. We also can buy Belarusian machines. Leasing packages are cheaper there, thus we will have lower cost price for project implementation. That is why we are trying to enter that market too.
How much did you spend on machine fleet in 2018-2019?
In general, the acquisition of modern machines, mechanisms and vehicles cost the company UAH 167 million. We annually invest about $8 million in the renewal of our fleet of road machines. In 2019, the company’s fleet was expanded with 114 units of road machines and equipment.
RDS uses its own funds, funds borrowed from Ukrainian banks and leasing companies to upgrade its fleet. Also, part of the equipment is bought through financing of manufacturing companies such as Wirtgen and Zeppelin. We purchase mainly foreign equipment from leaders in modern machine building.
There is an interactive map of road repairs on Ukravtodor’s website. Both the repaired roads and the sections which are yet to be repaired are marked on it. If you glance at this resource, you will see a noticeable imbalance in the volume of repairs in certain regions: while large-scaled works are being carried out on dozens of sections in Kyiv region, for example, in Khmelnytsky region only four sections with completed works are marked, and repairs on two of them took more than ten years. We have the same situation in Cherkasy and other regions. Does this mean that roads in Khmelnytsky or Cherkasy regions are better than in Kyiv region?
Today, the government’s approach to the distribution of funds for road construction is different from the schemes that were used in past years. Unfortunately, everyone and their dog participated in it before. This referred, in particular, to making decisions on which regions should receive financing. The issue passed through the Verkhovna Rada committee in which relevant parliamentarians worked and each of them wanted to not offend the regions from which they were elected to the Verkhovna Rada. Therefore, in fact, if we look even at the last year’s budget, the distribution looked as follows: let’s say, there were UAH 10 billion for 20 regions and each region received UAH 500 million.
Such an approach makes it impossible to develop the strategy of transport corridors, which, in turn, stimulate tourism, logistics and development of ports. They started to build a road in Khmelnytsky region and, respectively, they made a section worth UAH 500 million. For this the contractor built a big expensive plant and they failed to provide it with a normal amount of orders then. Next year new lobbyists came, this region was deprived of lobbying, hence no money was allocated for it. That is what this approach looked like. Any other contractor in Ukraine can tell you.
The situation has changed now. Since the new management had been appointed at the Infrastructure Ministry and Ukravtodor, a consistent policy has been carried out for the development of priority transport directions. One or another region may suffer [in terms of financing] this year in connection with this policy. For instance, local roads, which are financed under an individual program from the automobile road fund, will be constructed there. Meanwhile, national roads will be constructed to a lesser extent. It is because we have a strategy. I believe it is the right thing to do, as we will have one completed road, instead of several unfinished. We will certainly have all of the roads completed, not in a year, but in five years, as the president said, and all of them will be real, finished roads. Thus, roads will be built by areas in the coming years. There is an obvious imbalance, but it is linked with the strategy. I find it absolutely correct.

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YURIY SHUMAKHER: RDS GROUP INVESTS UAH 167 MLN IN ROAD CONSTRUCTION MACHINE FLEET IN 2019

The RDS road construction group invested almost UAH 170 million in the upgrade of its machinery fleet in 2019 and ready to enter the road construction markets of Poland and Romania, the co-owner of the group, Yuriy Shumakher, has said.
“The acquisition of modern machines, mechanisms and vehicles cost the company UAH 167.16 million. For several years now, we have been investing annually about $8 million in the renewal of our fleet of road machines,” he said in an interview with Interfax-Ukraine.
According to him, in 2019 the company’s fleet was expanded with 114 units of road machines and equipment.
Shumakher said that RDS uses its own funds, funds borrowed from Ukrainian banks and leasing companies to upgrade its fleet. Also, part of the equipment is bought through financing of manufacturing companies such as Wirtgen and Zeppelin.
The co-owner of the group said that RDS purchases mainly foreign equipment from leaders in modern engineering.
“We have ambitions to participate in tenders abroad,” Shumakher said.
According to him, unlike Ukraine, tenders in Europe have very strict criteria and a mandatory requirement, in particular, is experience in the European Union for at least three to five years.
“We participated in tenders in Moldova several times, but having no experience, we lost. Now, we are trying to analyze the market and participate in tenders in Moldova and Romania. We also plan to try to enter the Polish market as a subcontractor,” the RDS representative said.
According to him, one of the options for entering a Ukrainian company working in the field of road construction a foreign market is to buy a company abroad.
Shumakher said that RDS has been participating in international tenders for five years, working at facilities in Ukraine, which are funded by international institutions.
“We are already taking part in tenders in Ukraine for the money of international institutions. Today, a contract has been signed for the construction of the M-03 road for $12 million provided by the World Bank,” he added.
The Ukrainian group of companies RDS includes Kyivshliakhbud and Rostdorstroy. The core business is construction, reconstruction and maintenance of roads and bridges, construction of airfield complexes.
The company is building concrete road H-14 Kropyvnytsky-Mykolaiv. As part of the reconstruction of the H-31 Dnipro-Reshetylivka highway in Poltava region, RDS is building an overpass over the railway and the section of the first concrete road in Ukraine. In 2019, the company won a World Bank tender for work on the first category highway M-03 Kyiv-Kharkiv-Dovzhansky.
As of January 2020, the company operates in seven regions of Ukraine and has ten production bases.
The ultimate beneficial owners of RDS are Ukrainian citizens Yuriy Shumakher and Yevhen Konovalov. The charter capital of the company is UAH 5.13 million.

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