The Story of a Builder Who Became a Producer of Construction Materials

A large brick factory has been opened by local businessman Vadim Moskvichev in Toki, Vanino District. His company has acquired the status of the Free Port resident, which, as the entrepreneur admits, allows to significantly save on taxes. However, he says that there are still a lot of problems in developing the project – from establishing the distribution chain to upgrading operational assets. Mr. Moskvichev, using all his companies, plans to create a "wheel" providing all services and materials needed for any type of construction.

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In 2003, after leaving his job at Toki town hall, Vadim Moskvichev started his first business – Abris Manufacturing Commercial Enterprise LLC. The company's business was associated with land allocation and has been operating in this market ever since, acquiring contracts from all over the Russian Far East. Mr. Moskvichev then established another company, Vostokregionstroy LLC, a construction company. In 2008, the enterprise received an order from Mechel mining company to build two high-rise apartment blocks on Oktyabrskaya Street in Vanino, and after this it started building the forty-apartment "House of Youth" building.

"It was on these two construction sites that we had to deal with poor municipal infrastructure for the first time, mainly in power networks: we had to build four kilometers of power lines to supply our own projects," Vadim Moskvitchev told us. "At the same time we discovered how expensive it was to deliver construction materials to the village; it was actually more expensive than the materials themselves. For example, a brick bought in Sinda cost 7–8 rubles, but increased to 22 rubles when delivered to the House of Youth construction site. Naturally, this had a dramatic impact on the cost price. To meet the rate of 36,000 rubles per square meter, we needed to find alternative solutions. That's why 48% of building envelope at the House of Youth is made from glass. This created the Vanino signature: at night, the house is bright. But the problem of the high cost of construction materials remains unsolved."

The standard design currently used for brick housing construction, according to Vadim Moskvichev, consists of brickwork, an overlay of basalit thermal insulation, a subsystem, and a suspended facade. Considering the conditions we have in Vanino, this is too expensive. So, the entrepreneur has proposed a new design that makes it possible to avoid using suspended constructions: building a layer of hollow bricks with an overlay of heat insulation followed by a layer of face bricks. "The region does not manufacture any kind of suspended constructions, so, money spent on them doesn't stay here. Low quality ones are imported from China, expensive ones come from Japan, while the nearest Russian manufacturer is in Krasnoyarsk," said Vadim Moskvichev.

That's how the entrepreneur's new business idea came about. He is confident that it is possible to satisfy the demand for bricks in the regional construction industry by creating a new brick factory on the coast. "Why Vanino? First, by switching to a different technology, we can get rid of expensive suspended facades, save at least 25 percent and freeze the final cost of house construction on the local market. Insulation wadding still needs to be delivered from Khabarovsk, but this is easy as it is not heavy. While bricks are expensive to transport," he explained.

But Moskvichev is certain that the project will not be limited to local market demand. The demand for bricks from the village's construction sites is approximately 5.5 million a year. Komsomolsk-on-Amur, where there are no brick factories left, is ready to buy up to 2 million bricks made in Vanino a year, according to the entrepreneur. Metallurgstroy Company, for example, is interested in buying about 700,000 bricks, but it is too early to talk about contracts, reserves need to be built up first. "Sakhalin, Magadan and Kamchatka have also shown some interest; our construction materials could be delivered there, as we have a port," he added.

Vadim Moskvichev admits that it was not a simple journey from the idea to the operating production facility. His company borrowed 13 million rubles from the bank to buy out a half-ruined old sawmill and obtained a license for the clay quarry in Datta. Effectively, the sum spent on preparing the site and equipment has already reached about 80 million rubles. The equipment was bought in China and the burning furnace was designed by a design institute in Cheboksary. "We built a furnace, but couldn't start it up for a long time: we tried four times. It was getting better each time. But we lacked experience, and even the experts from Cheboksary couldn't do it. It turned out that our clay is high-melt, we needed 1,050°C sintering temperature, while we could only reach up to 850°C," he told us.

To resolve these issues, they had to go Poland to consult specialists on European ceramics. "They suggested that we recycle all our equipment and buy used equipment in Europe. However, it was a useful experience for us. In the end, we bought carbon torches near Warsaw: two have already been installed, and we have bought a third one. The technology is essentially simple: a fill of carbon is dusted and fed with oxygen, allowing the temperature to reach the required level," he said.

The Toki Brick Factory now has two types of certified products: solid brick branded M-175 and hollow brick branded M-100. Vadim Moskvichev believes that ordinary bricks will enter the local market. He told us, "In the future, I think we will be able to extend the range with high-endurance products with clinker-like properties. We will try to make paving slab and other types of products. We are announcing production of both glazed and face bricks. We had the idea to start buying glass waste, then grade it, dust and use it to manually cover one side of a brick. The long-term goal of the factory is to make high-grade products with high added value. At the moment, nobody is making such products here."

Vadim Moskvichev believes that the Toki Brick Factory products can also enter the Khabarovsk market. The so-called micro-block, a 30 percent hollow double brick, may have potential. "I believe, it will be successful if we try to introduce it to the low-rise construction market. Today, gas and foam scalping blocks are normally used to build low-rise houses. But they require suspended facade technology which is, as I said before, expensive. Implementing our technology that consists of blocks and face bricks makes construction cheaper. I hope that builders will accept it."

Bricks can be delivered from Vanino to Khabarovsk and Komsomolsk-on-Amur by trucks that now leave Vanino empty, or by gondola cars that have been unloaded of coal in the port. "If we use our own resources, the approximate final cost of delivery to Khabarovsk is 5 rubles; if we use trucks that would otherwise leave empty, it is 3 rubles. The cost of using rail is about the same. But trucks are less trouble: all you have to do is load your cargo at the warehouse and then unload it at the site," the head of the brick factory explained.

According to him, the most important thing at the first stage is for the brick factory to break even or to have minimal losses. He explained, "The brick production launch is in effect funded by Abris; these funds may last about two months. We need to use this time to solve distribution issues, learn how to sell and fine-tune shipping". "If we send a truck loaded with bricks to Khabarovsk, on the return leg we can collect deficit construction materials, including sand, which is imported in Vanino, therefore, expensive," he added.

At the same time, Moskvichev's plans are much more ambitious than simply organizing the production and sale of bricks in Vanino: "I have devised the concept of a so-called 'wheel'. There are four companies. Abris allocates lands, performs the planning and surveying, mapping, etc. Vostokregionstroy is responsible for the construction itself. The third enterprise is Vanino Power Company, a number of substations and power lines that we built after Mechel projects. And the Toki Brick Factory is the fourth one. When the brick factory starts operations, these four companies can provide the whole complex package of services required to build any facility."

So, according to Vadim Moskvichev's vision, the Toki Brick Factory could become the foundation for a center providing all construction-related services. "For example, someone comes to us and says, 'I need a two-car garage.' Then he spends half an hour creating a design with our engineer. He receives a full breakdown of materials – from the foundation to the frame system – and, most importantly, specifications of the products he can buy from us. We issue him a simple drawing and a receipt. As a result, we supply him with sand, cement, fittings and ceramics in the exact quantities he needs, instead of counting truckloads. Next, our cadastral engineers step in, performing mapping and cadastral registration," he clarified.

In addition, the brick factory site provides enough space to allocate a number of facilities apart from a warehouse for storing construction materials. The territory has all the necessary infrastructure, first of all, power supply. The factory has its own 2 MW substation, while it only needs 500 kW. Vadim Moskvichev said, "I would like to create a house building factory. We already have our own little sawmill."

He also plans to provide the brick factory with new equipment and to optimize production. For instance, by the end of the summer, the head of the company plans to purchase a robot manipulator for product stocking, which will make 10 workers redundant. "Another optimization plan is power efficiency," said Vadim Moskvitchev. "A 50-meter furnace split into segments. Even today we have a boiler installed in the cooling zone. It collects heat. At 1,000°C, ceramics shine as brightly as a light bulb. That is how we are going to heat the plant. Secondly, we only use energy efficient lights bulbs. All the furnace elements and powerful pumps have engine frequency control drives. We are going to install one on the most powerful engine, a 100-kW extrusion machine that spins the basic shaft of the press. It is not cheap, about 300,000 rubles."

"At the beginning of the project, people were not sure about it. I hope that the coast will develop, its economy will grow – both in Vanino and in Sovetskaya Gavan. So, no matter how scared we may be, we shut our eyes and move forward," said the entrepreneur. The businessman says that the idea of the Free Port is "very good". "Projects to be developed at the first stage are ones that would not need intervention by the Corporation or Minvostokrazvitiya to be accomplished. But they will see a more rapid development," he added.

The Free Port regime will enable the company to save at least 2.5 million rubles in payroll, which "never hurts". "Zeroing income tax makes it possible to make additional investments. We are going to seek for new forms of production on the same site. For example, recycling tires: there are a lot of them both in Arkaim and in the port. We need to create a system, where, figuratively speaking, in summer we 'cook' bricks, in the inter-season, we saw timber, while in winter, we are busy recycling tires, bending iron, etc.," said Vadim Moskvichev. 

Reference

(according to materials from the Khabarovsk Krai Ministry of Investment, Land and Property Policy)

Investment project for the organization of structural ceramics manufacturing Toki Brick Factory LLC. Declared investments: at least 14 million rubles. Funding sources: own and borrowed funds. Number of jobs created: 25. Budget effectiveness of the project: in 10 years, payments to budgets of all levels and funds will amount to 60 million rubles. Rated capacity of the enterprise: 5 million standard bricks per year (10,000 cubic meters of structural ceramics). Capital investment period: 2017–2019. The plan for the first stage is to produce whole, hollow and double-size bricks, for the second stage, to produce ceramic blocks and glazed bricks. TKZ LLC is the property of its CEO Vadim Moskvichev. According to Kartoteka.ru, he is also the owner of Vostokregionstroy LLC, non-public limited corporate society Vanino Power Company, and Abris Manufacturing Commercial Enterprise LLC.