Russia boosts Mantsinen’s strong growth
16/08/2006
New contracts in Russia are giving extra impetus to the already-strong growth of the Mantsinen Group. Finnfund is one of the financiers for the eastward expansion of this specialist in materials handling.
Based in Liperi, eastern Finland, the Mantsinen Group is renowned for special cranes and machinery designed for bulk cargo handling but in recent years it has expanded rapidly 
from manufacturing into full logistic solutions for materials handling. Success has been based on an innovative combination of products and services, customized to meet its clients’ needs.
The Group generated net sales of 38.6 million euros last year, more than half of it from abroad. Managing director Ari Hakkarainen expects turnover this year to grow by another 20 percent.
“A fifth of it comes from Russia, and the economy there is continuing to expand strongly. We expect our sales of services and equipment in Russia to double this year,” he predicts. “The third phase of expansion of our Russian operations is now under way.”
First customers in forest products
For a Finnish SME, Mantsinen has solid experience of the Russian market. Its first customers there were Nordic forest products companies, StoraEnso and Metsäliitto. Mantsinen is responsible for round wood handling and logistics planning at their rail terminals.
Subsequently it has expanded operations to the ports. The St. Petersburg Timber Port is one of the places where it is a contractor.
In the third expansion phase, it has secured Russian customers. Local sawmills and pulp mills are some of the Russian organizations that are improving their efficiency by outsourcing materials handling to a specialist in the field.
Pulp mill picks Mantsinen
In early spring 2006, Mantsinen signed a contract with an integrated chemical pulp mill, OAO Segezha, in Russian Karelia, where the Finnish company will unload and transfer wood arriving at the mill’s wood yard. 100 thousand cubic metres of wood is handled each month.
“Mantsinen’s technology has a reputation for efficiency” says Segezha’s mill manager Vadim Samylichev. “It will prevent the metal used in wood transport from entering the production process, simplify wood processing and reduce the amount of wood handling required. The feedstock conversion rate will improve. The new model also curbs environmental damage considerably.”
No quick profits in Russia
The Mantsinen Group has a Russian subsidiary operating out of St. Petersburg. It is currently a subcontractor at 16 locations around St. Petersburg and Novgorod and in Russian Karelia.
Hakkarainen points out that success has come at a price, and there have been setbacks along the way. Faith in the Russian market was tested by the rouble collapse at the end of the 1990s. Immediately after that, operations were hit by difficult ice conditions at the end of the Gulf of Finland, which interrupted work at the timber port.
“To succeed in Russia, a company has to be in for the long term. There are no prospects for windfall profits. You need to understand how the Russians operate, have the right connections and pick the right people to do business with.”
Good partners needed
To handle its legal and business affairs, Mantsinen uses Russian experts, engaged under annual contracts. It is the logical choice for a small or medium-sized company, Hakkarainen says.
“Customs regulations and other rules affecting business are changing so rapidly that it would be a waste of our resources to try to keep up to date with them,” he explains.
The role of external finance is also important, he adds, because the company wouldn’t be able to finance its own rapid growth from current income. In addition to Finnfund, Finnvera and Finnish banks have been backing Mantsinen’s growth in Russia.
“Our collaboration with Finnfund has been very smooth. Finnfund operates by a clear set of rules but it can also be flexible in putting together a complete package.”
Senior Investment Manager Helena Korhonen of Finnfund says that Mantsinen is an interesting customer for Finnfund. It is taking a new service concept into Russia, where the market is, at least in theory, extremely large.
“It was indeed a great start to secure the first Russian pulp mill as a customer. We are proudly following developments and will be ready for follow-up investments if the need arises,” she says.
Ten million invested
Hakkarainen estimates that Mantsinen has invested ten million euros in Russia in the past few years. Another sign of expanding operations is that 250 of the Group’s 460 employees work in Russia. At the St. Petersburg office all the employees apart from two Finns have been hired locally.
“Finnish experts are involved in starting up projects but the rest of the work is done by local staff. Training is always a part of any project.”
He believes that it will become increasingly common for Russian companies to outsource their materials handling and logistics. More and more are reaching the conclusion that a specialist partner can do the job more cost effectively.
”There have been a few attempts to trip us up,” Hakkarainen says, “but in general the Russians have taken to outsourcing very well.”
In February 2006 Mantsinen Group was awarded The Internationalization Award of the President of the Republic of Finland. The Award is presented to a company or community that has actively participated in developing international Finland.
For further information please contact Ms Helena Korhonen, Senior Investment Manager, tel. +358 9 3484 3307 or by email helena.korhonen(at)finnfund.fi
