Seven years ago, Robert Masarovič joined the Pražská Strojírna Machine Works to save it from bankruptcy. Last year, the plant brought in more than half a billion crowns. His original plan was merely to save the company, put it on the right track, and move on. However, it has now become an inseparable part of his life.
I recall that right after our interview three years ago, you had to rush back to the factory...
And it won't be any different this time – we're planning to launch a new bending machine that was manufactured for us in Italy. We'll be running checks on functionality, bending, the digital camera that measures the bend angle. It is a CNC machine with automatic, semi-automatic, and manual operation modes. Three years ago, we were bending about 1.5 kilometers of rails per year, last year that number went up to thirty-one, and this year we're at more than forty. It's a robust machine with a massive piston, two-thirds of it embedded underground. Including the excavation and construction work, it is a 450-thousand EUR investment. We must be one of the few companies that are investing at this time.
Back then, you spoke of international orders, coming also from Russia and Belarus...
We worked on the largest depot in the Russian Federation territory, the first according to European standards, which we did for a private company there. Our French competition ended up staying in the Russian market, but the government blocked all of our exports due to the unfortunate geopolitical events, so we're unable to meet even the contractual obligations we already have in Russia and Belarus. It's difficult for us. We spent years building business relationships and we had a few interesting projects over there, the revenue was around 100 million CZK. The Saint Petersburg depot itself brought in roughly 53 million, and we took part in much bigger tenders, too. We've found other markets, though, such as Poland, Germany, Australia... By the way, Australia is the second largest long-term customer just behind the Prague Public Transit Company, which we've just signed a new eight-year contract with. It will be Slovakia next year. We're working on a depot in Košice as part of a consortium, and we also won a tender for two depots in Bratislava, so the sales volume in Slovakia will reach 120 million next year. We're still looking for promising markets, though.
Are you looking actively, or do potential clients approach you instead?
I don't want to jinx it, but since we've returned to European and global markets following the restructuring of the business, we're being approached 99% of the time. We're taking on, and also turning away in the last two years, more business than would be advised. Our sales strategy will change to a slightly more proactive one; my plan is to start traveling next year to meet key potential and active customers around Europe, get to know them face to face. We have some rather sizeable projects planned in Italy, we've recently finished orders in Belgium and Sweden. Last year, we supplied the first setting device to South Korea and, in the summer, we won a tender for the Museum of Transport and Technology in Auckland, New Zealand. We also had meetings in Sydney about tram transport.
So your plans are big.
Yes, but this year is likely the second most difficult one for the factory because our revenue grew rapidly between 2022 and 2023. Last year was the first time we brought in half a billion, and this year we're coming up on 600 million. We need to ease up. We're short on space, the machine tools are running 24 hours a day, seven days a week, people are tired. We don't want to turn down big orders, which is why we're planning a new storage area as well as the construction of a 90-meter warehouse. We're looking for contractors and, the patriots we are, we'd prefer a Czech company. And we'll be hiring more staff.
Is staff easy to find?
Easy to look for, not easy to find. We have the highest welding certification, so we can't bring in welders from just any company, they need to go through expensive certification courses. We defended our German welding certificate, which is even more strict than the Czech one. The biggest issue usually happens with people who come from outside the company and have a tough time keeping up with our pace. There's a lot of craftsmanship before you step up to the line and do your work. Each design is an original, 98 percent bespoke production. We have a margin of two millimeters per five meters for weldments weighing multiple tons! Speaking of certificates, last year we finished our ISO 37301 anti-corruption certification as, to my knowledge, the first company in Central and Eastern Europe. It's the highest standard that helps eliminate risk related to crime, economic crime, and competition law. Any and all information is safe with us, nobody is looking for bribes, the system is set up in a way that an individual has no authority to affect operations. Not even me. The CFO comes before me, and his work is governed by a separate approval process.
You mentioned a rapid revenue increase. What caused it?
Major things like depots can take up to three years to get approved. This year, we had a major order in Warsaw that went quite quickly, plus a customer changed plans in Melbourne where we did two depots. On top of that, there was a malfunction at the Kingswood junction, which needed urgent fixing, and then another order for the depot in Košice that had been dragging on for years, we weren't even expecting it to work out. So we had to huddle up and devise a plan for who would be doing what, when, and where.
I've been hearing people complain that there's no work but it seems like you're just drowning in it...
I'm not going to lie, I'm happy about it... [laughs] But we worked hard to get here, we paid for everything ourselves, not a single crown of funding. We're also not subject to crises and depressions – infrastructural rail units are constantly being built and require repairs. Transport companies turn to us even though we're not the cheapest; sometimes, our prices are higher than the Germans'. Our strong suits are keeping deadlines and providing a high degree of quality. Everything we make is of such good quality, so robust and solid, that we have no warranty claims. We didn't have a single one last year! For instance, we made a junction with multiple turnouts for the city of Tallinn, Estonia; we were the third most expensive but also the only one who could guarantee delivery on time.
When you took over the business in 2016, it was in rather dire straits and in need of a massive intervention. I hear they called you the Butcher...
And also Massacrovich... [laughs]
Three years ago, you said that people hate you for the first few months, then they start merely disliking you, later still some start listening to you, and a few ultimately even grow fond of you in the end. Are people fond of you here?
I don't want to know... [laughs] I didn't come here to make friends, I came to fix the plant. But I'm not going to lie, the factory is my baby. The dangerous thing is that if the factory grows too close to your heart, you start forgiving things. I'm trying to avoid that. I'm constantly running around with a flashlight and a can of spray paint and as soon as I spot anything out of order, I spray it with bright yellow paint and it needs to get removed. The operations director says I see things nobody else would.
Did you expect the business to be running at such a speed seven years later when you started?
Absolutely not. The goal was to save the plant. My plan was to move on afterward, but things got complicated here. I felt it would be cowardly to run away from it all. And, well, now our nominal capital is 266 million, which is unheard of in our business anywhere around the world. We've moved up to the top spots in global rankings and our customers no longer need to insure our work because we have a lot of in-house capital. What we need now is to flatten out the growth curve a little. We need to take a breather. We won't be making cheap products; we provide high-quality work with a long period of after-sales service. A five-year warranty and complex post-warranty services globally are nothing to smirk at. If they run into a snag in Melbourne, we're online buying plane tickets and our maintenance people are on the next flight out. Growth isn't everything. Profit is the goal, that's how you drive expansion, not revenue. Expansion comes from quality EBITDA. And we're keeping that above 16 percent. It isn't easy to maintain at a time when input prices are skyrocketing. The price for one kilogram of rail, and even billet, grew by a hundred percent over the last two years; personnel expenses have also doubled in five years. The money we generate is used to further expand our facilities. Besides the things I've already mentioned, we're planning to repair the roads, construct a new sewage system, install insulation, build a small inflatable warehouse...
Would you be capable of just sitting in the director's office and not seeing how things are going on the floor?
No, I need to be everywhere, see everything. I've always told myself, "You need to work on yourself, you can't stay in place and regress, keep studying. You're not the smartest guy in the world, so don't prance around being clever, but listen more instead." Also, when I'm on the floor every day, people don't see me as a foreign element. I'm running around, jotting down notes, thinking. Now that the plant has been nursed back to health, my role is to set it up for the next seven to ten years. I don't meddle with the decision-making process, the authority for that has been delegated to individual specialized managers, but I do discuss things with them. Yes, an executive decision does need to be made from time to time, but the strategy I form in my head is based on input provided by top management that needs to know where the plant is headed. In 2023, I'm asking myself questions such as: Who are we going to sell to in 2030? At what prices? How do we transport it there? What materials will we use, what machines, what people? In order to answer these questions, I need to know the operations more intimately than just looking at them from the director's office. You need to know it, understand it, feel the pulse of the place. I don't want people to be working longer hours. I want them to be more productive and for the customer to pay for it.
PRAGUE
Even though Pražská Strojírna supplies its products to various countries around the world, Robert Masarovič swears by the Czech capital. “We like working for Prague, it's good for learning more difficult things as well,” he says. “There are a lot of interesting designs because it has everything – small and large radii, turnouts, complex crossings and switches. I feel that it's in a better state than Berlin, which is often given as a shining example. Prague has amazing transport coverage, it's definitely in the top five of all public transport companies globally.”
SOLAR PANELS
All the buildings at Pražská Strojírna have been fitted with solar panels during the summer. "We had a full launch on October 19, 2023, after plugging into the network. If they are in constant operation from April till September in the future, the output should fully cover our consumption with plenty left over. In theory, we should be able to produce 10 megawatts per day, so we'll be selling around 60 percent of our power. At current prices, we have projected the investment to fully return in about six to seven years, which is quite quick. We build everything in-house, no loans. It's a short-term investment for us, and it further feeds the cash flow as well, of course."
CV BOX
Robert Masarovič (born August 30, 1973, in Nové Zámky, Slovakia) is the CEO of Pražská Strojírna and a member of the Havířov and Moravian Silesian Region assemblies for the ANO movement.
He has a degree in economics and management from Nottingham Trent University and in profitability and economic management from the MCI Institute of Michael Cloud in the USA, as well as an MBA and DBA in strategic management from the Jagiellonian College in Torun, Poland, and a Master of Laws degree. He taught crisis management and corporate restructuring at university and led a course for insolvency administrators at the Mendel University Institute of Lifelong Learning.
His career kicked off in the 1990s when he was hired by the first movie theater chain in Central and Eastern Europe, opening cinemas in Czechia, Slovakia, Hungary, and Poland. He worked in a consulting company, managing the restructuring of Zenit Čáslav. He took part in the restructuring of Kostelecké Uzeniny as an external consultant. He started at Pražská Strojírna in December 2016.
Masarovič enjoys beekeeping and riding bikes. He is divorced but has a long-term relationship. He has two children.
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