Ondrej Hronec (left) and Ian Robson say IFC has succeeded on the "coattails of US Steel".photo: Chris Togneri
KOŠICE - A tiny company in this eastern Slovak city has not only found a way to survive Slovakia's corporate lean years, but is even managing to turn a profit. In creating a symbiotic relationship with the steel giant US Steel Košice, the IPC Refractories firm says it has created sufficient financial stability to allow them to pursue plans for expansion onto foreign markets.
Ian Robson, IPC marketing manager, said that the key to success for his firm of 12 employees - besides "riding the coat tails of US Steel" - was its ability to bend to meet client needs. "We've got an advantage over a lot of Slovak companies because we are very flexible," he said. "We don't turn anything down. If somebody asks if we can do something differently from how we usually do it, we'll take a look and see if it's possible."
IPC produces refractories, made of a concrete-like material with a high melting point, which serve as high-temperature linings for containers used in steel production. The company was established in 1993 in Košice; the site was chosen by owner Ivan Prisor so that IPC could feed the colossal demands of the Eastern Slovak Steelworks (VSŽ), which was last year acquired by US Steel.
Today, over 60% of IPC's total output (120 to 130 tonnes per month) goes directly to US Steel Košice.
IPC's relationship with the steel maker has kept the firm afloat through lean years. "1998 and 1999 were very difficult years financially," said IPC's Ondrej Hronec. "But last year we turned a profit and this year we will as well." IPC declined to release exact financial figures.
US Steel Košice spokesman Jozef Marko summed up the cooperation between the two companies. "We have extremely good relations," he said.
The US Steel connection has been enriched, said Robson, by US Steel Košice head John Goodish's August 4 announcement that his firm was instituting a zero-tolerance policy for corruption, including any form of bribery.
"This really opened the market for us, and our sales to US Steel have increased a lot in the last few months," Robson said. "We are not corrupt, meaning that we didn't in the past sell as much to them [US Steel] as we would have liked because we didn't put money in people's pockets."
With a profitable relationship seemingly secure with US Steel, IPC says it can now afford to put export expansion plans into action. Exports have risen steadily since the firm's 1993 start-up, when all its production stayed within Slovakia. Last year, however, nearly 44% of IPC's total production was exported, mainly to the Czech Republic and Slovenia, but also to Poland, Austria, Germany, Russia, Ukraine and Montenegro.
"Right now our main customer is US Steel, but the whole point of expansion is to avoid putting all your eggs in one basket. The Slovak market cannot sustain us at the level at which we can produce, so we have to look to other markets," Robson said.
"We'd like to export to the Persian Gulf region, and we're now in the process of signing a contract with an import firm in Egypt, which has a big market with four new steel factories which import all their refractories. We are also in negotiations to begin exporting to Italy, mainly in the Milan area. We hope to finalise these deals in October."
Small firms' concerns
Although the future appears promising for IPC, company representatives say many hazards exist for small businesses in Slovakia, themselves included. To begin with, IPC is fretting over next year's national elections, which could very well determine its future in Slovakia.
"If the wrong government gets into power, many small businesses would actually move their headquarters to the Czech Republic," Robson said. "If the wrong government, meaning the [Vladimír Mečiar-led] HZDS party [which tops most polls with about 30% voter support - ed. note] were elected, we don't know how foreign customers would view the country, we don't know if exporting would become more difficult. Nobody knows, it's very uncertain."
In that case, Robson continued, the firm would have to decide just how much flexibility it would be willing to exercise. "We have talked about [moving] as well. The only thing that's really holding us here is US Steel, but we would think about moving out of Slovakia if the wrong government came to power."
The firm is also concerned by factors over which it has no control, such as a feared recession on the western European steel market. The September 11 terrorist attacks in the US could also affect business.
"I'm hoping that because Slovakia over the last few decades has not really been linked to America, we'll be treated differently by the Arab world, given that this is a Slavic country. If we were an American company, maybe it would affect us doing business in Egypt. [But] we are from Slovakia, not from America," Robson said.
"But nobody knows what will happen. We're going to try and move ahead. I don't think it's going to affect us that much, but security at US Steel, for example, has already become amazingly tight. Nevertheless, the outlook is very good for us if we can further expand abroad."
