A Lithuanian company that not long ago ran a two-ship service has grown fivefold in a few years with a shift in focus and is now talking of new buildings and acquisitions, writes Janet Porter Friday December 03 2004.
For the first six years in business, Kursiu Linija hardly set the world alight with its tiny two-ship service. A pair of 200 TEU vessels operated a weekly connection from Latvia and Lithuania to a handful of northwest European ports.
Management showed little inclination to expand and reluctance to invest. Since 2001, however, Kursiu Linija has suddenly burst into life, with volumes growing fivefold, seven ships now deployed and the company contemplating new buildings and acquisitions.
What happened? A new owner, some fresh thinking and a willingness to spend money.
Arijus Ramonas gained control of the Lithuanian shipping company just over three years ago and immediately set about transforming the business from one still trapped in Soviet-style thinking to a company that could compete in the open market and provide customers with a new-style service.
Central to corporate strategy was a shift in focus. Instead of regarding other shipping lines as the competition, Mr. Ramonas and his fellow directors quickly realized it was the road transport market they should be targeting.
"We think in exactly the same way as the trailer operators", says Mr. Ramonas. That understanding immediately opened up a whole new potential customer base.
The number of cross-border truck moves from Lithuania alone is put at around 350,000 a year. Add in international roadfreight to and from neighbouring Latvia, Estonia and Kaliningrad, and a vast market starts to appear.
Mr. Ramonas estimates that at least a third of that cargo could be switched to shortsea shipping services.
The line, which will celebrate its 10th anniversary next April, was handling less than 20,000 TEU a year in the late 1990s. This year, volumes are expected to reach 100,000 TEU with further growth to 150,000 TEU projected for next year.
Kursiu Linija now operates a fleet of seven vessels ranging in size form 150 to 500 TEU, all chartered in.
But, with charter rates soaring and Kursiu Linija determined to keep a tight control on costs, the aim now is to purchase its own ships.
The company is already talking to brokers and yards about new buildings and hopes to lace an initial order to purpose-built ships of 700 TEU capacity. Eventually, a total of 10 ships could be ordered.
But owning vessels requires shipmanagement skills, and Kursiu Linija is also planning to acquire a company that would be able to run its fleet. A takeover candidate has already been identified and a deal could be finalized some time next year.
So where did it all began?
Mr. Ramonas was brought up in Lithuania when small Baltic state was still part of the Soviet Union.
His father went to sea working on the notorious fish factory ships and was away from the family for extended periods.
While his son also wanted a career at sea, he quickly decided that the fishing fleet was not for him, choosing instead merchant shipping.
He graduated from one of the Soviet Union's top maritime training academies in Leningrad, and then joined Lithuanian Shipping Co, part of the former Morflot.
Back then there was little opportunity for a seaman from the eastern bloc to see much of the world, with shore leave rarely granted.
"For a Soviet seafarer there were more ISPS (International Ship and Port Facility Security) rules than today", Mr. Ramonas recalls.
But, as conditions began to relax during the Gorbachev era, new opportunities started to open up and it was a Swedish sea captain who told a young Mr. Ramonas he ought to run his own shipping company.
That prompted him to join a former college friend who was then in charge of Maras Linija, a Latvian shipping company and the first in the region to gain independence.
Mr. Ramonas was put in charge of trucking down containers that frequently went missing in the USSR's monolithic and bureaucratic transport network.
The various state-run entities were meant to swap container equipment with each other but, with no proper controls, that invariably left Maras Linija with totally unsuitable containers.
Mr. Ramonas managed to find 600 of the 800 boxes that had gone astray, at the same time setting up a container tracking and management system.
Shortly after he set up his own business, JSC Ariju, and became an agent in the region for some of the leading container lines such as P&O Containers, NYK and CMA CGM that were just starting to pay attention to the Baltic states. Maras Linija was another client.
Subsidiary company Marikonta is still the local agent for NYK.
Kursiu Linija had been set up by then to provide Lithuania with its own direct shipping services, but was not a great commercial success.
"The shareholders did not understand that you need to speculate to accumulate", says Mr. Ramonas. "They wanted a quick profit, but they did not want to invest."
Both Maras Linija and Kursiu suffered as the Russian economy came close to collapse in the late 1990s. The former eventually ceased trading while the latter limped on.
In the meantime, Mr. Ramonas' career took a somewhat unexpected turn. Shortly after Lithuania gained independence from the former Soviet Union, he was asked to become deputy transport minister, an unelected and non-political appointment.
"The government needed someone who understood transport systems", he explains.
At first he was responsible for transport policy during negotiations with Brussels on Lithuania's accession to the European Union. Later he was put in charge of IT matters before returning to commercial life.
As Kursiu Linija struggled on, Mr. Ramonas seized his opportunity. JSC Arijus bought the company for a nominal $1 in 2001 - although total investment came to around $1,5 m - and set about its transformation.
At his side was Martin Dale, the line's former British agent who joined Kursiu the same year and is now its commercial director. Born in Britain but with a Latvian father and French mother, he has brought an international dimension to Kursiu's revival.
The two men share firm views on the future direction of Kursiu.
"We provide door-to-door transport services", says Mr. Dale.
That excludes stock control, purchasing or the many other services that the new breed of logistics providers now like to offer.
Neither has Kursiu tried to turn its back on the shipping element of its service.
"We are in the business of shipping", Mr. Ramonas insists.
The company sees itself as a provider of integrated shortsea shipping services rather than a feeder operator, however.
With the exception of its feeder service from Hamburg and Bremerhaven to Kaliningrad, most of the freight carried is shortsea cargo.
The fledgling Kursiu learned the hard way that working with the deepsea carriers brings no commercial security.
The big lines show "zero loyalty" to the feeder lines, Mr. Dale found out from experience.
That is why Kursiu turned its attention to the shortsea shipping trades where business is booming. This market segment accounts for an estimated 60% of total troughput, with feeder and shortsea services kept completely separate.
"It is a mistake to combine the two", says Mr. Ramonas.
Of the shortsea cargo, three-quarters represents direct shipper business and the rest freight forwarder accounts.
The company has now set its sights on expanding services to cover Sweden, Estonia, Russia, Denmark and Ireland.
But keeping control on costs is vital if the venture is so succeed in offering an alternative to trailer operators, which in some respects have greater flexibility but are not able to cope with large volumes.
That is why the investment in new buildings is regarded as so important.
Kursiu also believes it may be at the forefront of a new trend that is becoming discernible.
A number of manufacturers have started to turn their backs on Asia, preferring to locate factories in the Baltic states and the eastern Europe in order to reduce supply chains.
Mr. Ramonas cites the example of a furniture maker that recently moved its factory from Thailand to eastern Europe, so slashing the time between raw material being shipped and the final product reaching the stores from about nine weeks to seven days.
With ocean freight rates rising and congestion at the deepsea ports becoming a serious problem, Mr. Ramonas and Mr. Dale, with their local knowledge, are actively encouraging business to consider the European alternatives to Asia.
Despite half a century under Soviet control, Mr. Ramonas does not think the Baltic states ever lost their entrepreneurial drive, work ethic and determination. "We always believed there would be a better future", he says.
He again demonstrated his own willingness to take risks earlier this year by purchasing Air Lithuania which was about to be shut down. The airline has just two turboprops on three routes, but Mr. Ramonas now plans to expand the fleet to a dozen aircraft operating on a bigger network. He regards the airline and shipping business as being similar in many ways, with the only difference being the end users.
As for Kursiu Linija, a sizeable investment program is on the agenda, with €10m ($13,3m) earmarked for new equipment in the coming year. The number of employees working for Kursiu Linija is set double to 50 in the coming year as the network expands.
The shipping line is 80% owned by JSC Arijus and 20% by Mr. Ramonas' wife and the whole company lost money last year. But 2004 has proved much better, with a profit of €412,000 reported in the first nine months.
A credit report found mixed views on service quality and some complaints about late payments, but recent feedback suggests an improved performance over the past few months. Group turn-over is expected to total €100m in 2004 and Kursiu is becoming more familiar name in northern Europe.
