Knauf Drywall

Going Long on Russia

Manfred Grundke knows his gypsum from drywall. Source: Handelsblatt
Manfred Grundke knows his gypsum from drywall.
  • Why it matters

    Why it matters

    Knauf, a German maker of gypsum drywall and other building products, employs about 5,400 workers in Russia.

  • Facts

    Facts

    • In 1932, brothers Alfons and Karl Knauf secured gypsum mining rights along the Obermosel River – establishing the Knauf Group.
    • The firm, based in Iphofen in Bavaria, employs 24,000 employees worldwide and had 2014 sales of €6.4 billion, or $7 billion.
    • Knauf last year acquired U.S.-based Guardian, a maker of fiberglass and insulation.
  • Audio

    Audio

  • Pdf

Manfred Grundke is the head of the Knauf Group, a global leader in gypsum drywall and other building products. Mr. Grundke attracted the attention of the Knauf family while leading the engineering specialist Bosch Rexroth in nearby Lohr on the Main. In 2008, the mechanical engineer became the first non-family member to lead Knauf. Today, Mr. Grundke, who is 59 years old, guides the company together with Alexander Knauf, the grandson of one of the founders. Mr. Grundke’s contract runs to 2018.

Handelsblatt: Mr. Grundke, do you still like to read newspapers?

Manfred Grundke: Yes, why not?

Because leading stories are often about the Russian crisis and your company Knauf is extremely active in the former Soviet Union. Is it true that it doesn’t worry you that carmaker Opel is retreating from Russia?

That is possibly a fundamental decision of the parent company General Motors. As we have found out, GM is going to strengthen its production in Uzbekistan, where GM has already invested.

So no alarm signals for Knauf?

No. We do not intend to reduce our engagement. Naturally, our business there is not going as well as before. We are adjusting our cost situation – like other market participants.

What does that mean?

Because the ruble is falling in value, we have to pay higher prices for materials from euro countries for manufacturing in Russia. So we to regionalize the sourcing of materials – to buy more primary products in Russia. For example, we have been shipping our plaster from Western Europe. Now we are looking for Russian producers for that. We also had planned to replace the energy source at our St. Petersburg plant with a turbine from Siemens. But that has become 40 percent more expensive because the euro has risen so much against the ruble. So we will not purchase a German turbine, but rather one from Russia.

Is there one of equal quality?

No, definitely not. But probably of sufficient quality.

You had 7,000 Russian employees. Now you have about 5,400.

We had been reducing the number of employees in past years. This process is being speeded up by the crisis. We are growing as before, calculated in rubles. But converted to euros, sales have dropped. Losses are in the hundreds of millions.

That is no trifling matter. Nikolaus Knauf, one of the two company owners, went to St. Petersburg in 1993 and knows the Russian president well. What does he report from his talks with Vladimir Putin?

We have the same information as all German companies, even when there are good contacts to the Russian authorities. Knauf does not get any special treatment.

Nikolaus Knauf has always advertised for investments in Russia. Does that fit into an era in which Western sanctions are straining business?

We are investing more. Right now, we are trying to gain a firmer footing in private residential construction in Russia. We are working with the Russian company Sveza, which belongs to the Mordashov group. Together, we want to build modular homes with production methods similar to the automobile industry.

The construction industry is complaining about the crisis.

The financial sanctions have greatly limited financing for big projects, particularly in construction.

Have the Russians reached the limits of their resilience?

No, one should not underestimate the willingness and ability of Russians to suffer. They can tighten their belts more tightly than we could imagine for ourselves. Sanctions are not helping us.

Of course, they are not helpful for your business …

No, generally not. A year ago, a poll found that Russians generally counted Germans as friends. That is no longer the case. I am in Russia at least every other month. Our leadership team confirms that there has been a change in mood, even in our workforce.

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