The VESCO Group specialises in the extraction and supply of ceramic raw materials. With companies in Ukraine, Spain, Romania, Italy, Poland, Serbia, and Turkey, the Group produces 3.5 million tonnes of ceramic clay each year. Its products are exported to more than 20 countries. VESCO is one of the portfolio companies of umgi private equity firm. Dmitry Kostornichenko, chief commercial officer at VESCO, speaks exclusively to Asian Ceramics on the impacts of the ongoing Russian-Ukrainian war on business and what lies ahead for the company.
We are nearing the midpoint of 2024. How has the year been for you so far? Have you been able to meet your early goals for this year?
DK: So far, we have seen a significant improvement in 2024 compared to 2023. The main reason behind this development is that direct shipping has resumed from the largest Ukrainian seaports. The optimisation of logistics has resulted in a reduction in the costs of ceramic raw materials, making our products more affordable and more attractive to customers. We are currently increasing our shipment and production volume.
While operating in a challenging and unpredictable environment, we had set rather moderate goals for 2024. As of now, we have met and exceeded our early goals, getting close to the targets planned for the end of 2024. We are at present revising our business plan to include more ambitious goals.
What are your remaining objectives for 2024 and beyond? Could you share your key strategies to overcome challenges?
DK: We have a comprehensive strategy in place that we intend to follow over the next few years in order to reliably helm VESCO. To fully exploit the potential of the sea shipments, we are strengthening our logistics network in Ukraine. Another ambitious goal is to diversify our business. Our strategy envisions an expansion beyond Ukraine, mainly into the EU, but we have also started looking into expanding into Asia. Our company is committed to expanding our inventory of clays and minerals so that our clients can choose from a broader selection of products and services.
VESCO has recently resumed direct shipping from Ukrainian seaports to foreign markets. What are your thoughts on this?
DK: This development has already positively affected VESCO as well as the market on the whole. The restoration of logistics in the Black Sea is an important step on our way back to normal. Direct shipping has allowed us to substantially reduce logistics and increase the supply of Ukrainian clay to the global market.
The full-scale unjustified Russian invasion in Ukraine in 2022 disrupted logistics due to the sea routes’ blockade, causing many customers to search for alternatives to our clays. Now they are back again, recognising the high quality of our products and services. We expect a further rise in sales, once more ceramic producers recognise that we can guarantee reliable supplies.
What steps is VESCO taking to capitalise on the growth opportunities in your specialised area?
DK: We intend to expand our presence in other countries by providing more clays and minerals that are in high demand in the markets. We are preparing several new products for deployment and we are working on innovations to offer our clients more solutions.
You are one of the global leaders in the production and supply of ceramic raw materials. You announced in December 2023 that you have commenced extraction from a clay quarry in Spain, more precisely at the Encinarrata deposit, in Berge (province of Teruel). What do you hope to achieve by putting this quarry in operation?
DK: This quarry is the first step towards implementing our strategy of diversification and production expansion into the EU. Firstly, having commissioned a Spanish extraction site, we are now able to offer affordable minerals that give us a chance to supply for niches we were previously not present in. This strengthens our portfolio and enables us to create new formulations.
VESCO offers its customers individualised clay mixes to meet their economic and technological needs.
Secondly, such production does not depend on volatile logistics, which makes Spanish clients feel more secure.
Thirdly, we would like the European market to benefit from the high standards of service and work methods we have developed in Ukraine.
The VESCO Group recently opened a research and development hub to serve VESCO partners worldwide – can you tell us more about it?
DK: The R&D hub is part of our expansion strategy. Its primary goal is to provide our Spanish and European customers with various solutions incorporating both technological and economic parameters of the raw materials. The hub analyses samples from existing and potential extraction sites and draws up recommendations for each region depending on its economic and logistical factors. Our aim is to ensure as much flexibility as possible to our partners.
Could you share/explain any equipment/technology investments you have made in the past year, and how these investments have impacted on your competitiveness? Do you have any plans for expanding your capacity or improving your efficiency?
DK: VESCO regularly invests in its own development. Recently, we have invested in different exploration licences, and have also added a drilling division and an expanded laboratory. The total investments in 2023 exceeded $4 million. Such investments contribute to in-house expertise and flexibility, making VESCO’s business more sustainable.
In 2024, our investment in R&D projects continues. We plan to spend over $6 million on exploring opportunities and developing production in the EU and Asia, as well as further strengthening the R&D hub’s technological base.
What about the distribution network? Is there anything you plan to do to reach a more significant number of consumers?
DK: For now, our distribution network meets our needs completely—we are increasing the number of new customers from different regions around the globe, and our team is continuously working on building new countries. While VESCO is growing, the sales and distribution network continues to evolve steadily. Should a production delay arise due to a new country, we will be able to make necessary adjustments.
In a business environment that is becoming increasingly challenging, how do you stay competitive? What makes you unique?
DK: We just love our business. Passion, an open-minded approach, flexibility and adaptivity, a long-term view of the market, regular investments in development along with high working standards and a genuine desire to deliver the best quality, sustainability and service are what makes us different.
How do you view the current and future market trends for your products? What is the company’s next challenge?
DK: The ceramic industry has great potential for growth in the long run. Ceramics is one of the few completely natural and recyclable materials used in construction and related sectors. Our goal is to support this growth with a wide range of raw materials. VESCO continues to invest in the diversification of production and market expansion. In addition, we are also considering adding minerals other than clays that could be of interest to our customers.
What would be your wish for the next five years?
DK: Today, the whole world is eager for the war to end. Wars pull back civilisation and economies, regardless of whether you are part of a war or not. We are all global. Following this wish, I would be glad to see VESCO operating in every corner of the world.
