Top Events from the Lives of Largest Ukrainian Latifundists in 2017
The expiring 2017 year turned out to be fruitful for agrarians. While politicians and industry experts were looking for the optimal solution to the land and tax legislation, agricultural producers were actively developing their businesses. Some companies rapidly increased the land bank or changed the management strategy, while others introduced various innovations. The year is coming to its end and it is time to strike a balance. Like the last year, Latifundist.com collected the main achievements and failures of the leading agricultural holdings of the country.
UkrLandFarming: is the war over?
The confrontation between Oleg Bakhmatiuk and the National Bank of Ukraine lasted throughout 2015-2017. Agroholding was accused of non-payment of UAH 37 billion loans, and there were attempts to seize the property of its founder and leader. Because of such undivided attention from the NBU to the owner of the country's largest agricultural company, agro market experts accused Valeriia Gontareva, the Head of the NBU, of trying to destroy UkrLandFarming. In an attempt to resolve this conflict, Bakhmatiuk addressed an open letter to the President of Ukraine Petro Poroshenko. As a result, Gontareva resigned.
Immediately after a new head of the NBU was appointed, Oleg Bakhmatiuk suggested hiring a loan broker for negotiating between the structures in order to return the loan to the state regulator and the Deposit Guarantee Fund within 7 years.
Also this year UkrLandFarming decided to revise the directions of its product sales. So, in May, Oleg Bakhmatiuk said that the company was reoriented to the domestic market, since the price level contributes to this. Nevertheless, the company does not plan to completely abandon export. According to estimates by Oleg Bakhmatiuk, the grain export of the holding in 2017 should amount to 2 million tons.
The company’s structure has also undergone some changes. At the business breakfast Nataliia Romanenko, HR director, said that the decentralization took place in UkrLandFarming. 11 company’s clusters became more independent, acquired more power to increase the efficiency and promptly solve the emerging issues.
Now the holding actively continues its loan restructuring. In July 2017 UkrLandFarming and Avangard selected a London-based Ziff-Ivin Associates Ltd as a financial consultant for the restructuring of USD 500 million loan and USD 200 million loan, respectively.
In addition, UkrLandFarming has actively worked to increase the company's EBITDA 10-15% in 2017. The results of the work have not yet been reported.
Following the results of 2017, Kernel is definitely the main newsmaker of the year. Agrarian (and not only) media now and then reported on the company’s news.
Undoubtedly, the main achievement of 2017 is the increase of Kernel’s land bank. In June, the company bought Ukrainian Agrarian Investments (UAI) holding with more than 190 thousand hectares of land and 200 thousand tons storage capacity. And in early July, Kernel added the assets of Agro Invest Ukraine — 170 thousand tons elevator capacity and more than 27.5 thousand hectares of land. As a result, the total land bank of Kernel amounted to 602.5 thousand hectares, which guarantees Kernel the 2nd place in the list of Top 100 latifundists of Ukraine and the place in the list of the top 20 largest companies in the world in terms of the land bank.
In addition, following the results of FY 2017, the company increased revenue by USD 180.4 million (9.1%) to USD 2.17 billion. At the same time, the company's net profit in FY 2017 was USD 176.2 million, which is 21.7% less compared to the same period of 2016. EBITDA decreased by 7.8% to USD 319.2 million. Also in FY 2017 Kernel exported a record of 5.06 million tons of grain, increasing its exports 14.8%.
The blow to the company's reputation was the recent charge of the criminal transfer of USD 5 million abroad. According to the investigators of the State Fiscal Service of Ukraine (SFS), Crystal Asset Management Inc. with the direct participation of the officials from banking institutions used Kernel-Trade as a tool to withdraw currency. At the moment, SFS investigators are studying the company's implication in the crime.
As for the plans for the next year, in October, Kernel announced the construction of the largest oilseeds processing plant in Khmelnytsky region. The planned annual capacity is 1 million tons of sunflower seeds. USD 130 million will be invested in the project. Setting of the production facilities into operation is planned for mid-2020.
Agroprosperis (NCH): course on logistics and banking
2017 for Agroprosperis Group turned out to be a complicated year due to the pressure from law enforcement bodies and the number of court cases. Nevertheless, the list of the company’s achievements was replenished with several points.
At the very beginning of the year, the latifundist launched 50 own new wagons among 60 company’s enterprises and 12 elevators. New wagons were made on request at the Kriukiv Railway Car Manufacturing Plant. The carrying capacity of each car is 70.5 tons, which allows more than 3.5 thousand tons of grain to be carried in one block train. After the purchase of new wagons, the company's logistics fleet now consists of 200 grain cars with a total capacity of about 14,000 tons.
Three months later, Agroprosperis signed a contract with CLAAS for the purchase of more than 200 CLAAS Axion 930 and Arion 430 tractors.
The company also developed a banking sector. So, in April 2017 it was reported that within 3 months Agroprosperis Bank issued 17 agricultural receipts. In total in 2017, the bank issued 43 agricultural receipts, which is 41% of all receipts issued in Ukraine.
In November, Agroprosperis Bank increased its nominal capital 1.5 times up to UAH 310 million. According to the bank management, this decision was made due to the high demand for agricultural receipts and loans among agricultural producers.
A New Year’s surprise for the company was the rating of Agroprosperis Bank a long-term credit at the uaAA (very high creditworthiness) level, as well as the rating of deposits at the level of ua1 (the highest score). The decision to assign ratings was taken by Expert-Rating agency on the basis of the bank's report, the results of its work for 2016-2017, as well as data on the bank's shareholder.
MHP: mill becomes innovative
2017 for Myronivsky Hliboproduct (MHP) became a year of innovations. And the updated logo of the modernized mill symbolically complied with the strategy of the agro-industrial holding.
In the first half of the year, the company was actively engaged in capacity expansion. In January, MHP announced the opening of its own processing plant in Slovakia. Later company’s intention was to buy 5 processing plants in Europe. Yuri Kosiuk spoke about the plant for the production of meat semi-finished products in Poland, but so far there has been no official confirmation of the agreement.
Also, the company successfully purchased 8 new IH Axial-Flow 6130 and 6140 combine harvesters under the Trade-in program. The total transaction amount was USD 2.32 million. According to MHP representatives, the acquisition of new machinery is one of the steps of introduction precision farming in the company. Shortly thereafter, OTP Leasing reported a leasing agreement for a 5-year period with MHP for the purchase of agricultural machinery worth of EUR 5 million.
Yet precision farming is not the only innovation in MHP. In October, Yuri Kosiuk said that the company is moving away from increasing the land bank to improving its efficiency. To do this, the company creates "incubators" for the implementation of the innovative ideas. One of those was the MHP Accelerator start-up program, which is implemented together with Radar Tech and Agrohub.
If we talk about the company’s financial achievements, then, according to the London Stock Exchange, in 9 months of 2017, the company's net profit increased 39.7% as compared to the same period in 2016 and amounted to USD 257 million.
But the company faced some problems. In June, unknown people set fire to a tractor owned by Oril-Leader poultry farm in Dnipropetrovsk region. As it turned out, the arson was a personal revenge to the driver of the poultry farm.
Now the company is increasing its alternative energy production capacity up to 40 MW to become independent of gas supplies. MHP attracted a EUR 25 million loan from the European Bank for Reconstruction and Development (EBRD) for the construction of a biogas plant with a capacity of 10 MW in Vinnitsa region. In addition, solar panels are being installed on the agroholding’s production facilities. According to Yuri Kosiuk, in 5 years the company plans to completely refuse the external power sources.
Astarta-Kiev: not by sugar alone
Astarta-Kiev agri-industrial holding has been leading the sugar production in Ukraine for several years in a row and is not going to lose its positions. In 2017, the company invested about USD 13 million in the modernization of sugar plants. In addition, the holding attracted a USD 25 million loan from the Dutch FMO bank to re-equip sugar plants within the energy-saving technologies program. It was reported that Astarta plans to create a closed water supply cycle connecting its three enterprises in Poltava region.
Also in 2017, the company received a certification permit for the supply of granulated beet pulp to China. In order to provide the sufficient export volumes, Astarta established a pulp drying complex, a granulator and a warehouse for storing dry pulp at Narkevichi sugar plant.
Although sugar industry is a priority for the agroholding, it is not the only indicator of Astarta’s success. According to the report for 9 months of 2017, the company's revenues increased 147% to EUR 106 million. The report also indicated that dairy segment brought the company EUR 23 million of revenue for the same period (35% more as compared to 2016). In general in the indicated period, the consolidated revenues of the agri-industrial holding increased 61% and amounted to EUR 349 million.
In addition, in September, the company opened the first in Ukraine feed center on the basis of the Agrofirm named after Dovzhenko in Poltava region. The new feed center makes it possible to produce the same quality animal feed. More than USD 3 million was invested in the feed center. But this is only the beginning of a major project to increase profitability of dairy production. The company plans to build 4 more similar feed centers.
In 2017, the company began constructing the elevator complex with the capacity of 100 thousand tons. The elevator is being built on the basis of Dobrobut agrofirm in Poltava region as part of the ASTARTA Grain investment program. In Poltava region, the preparation of pile fields for the construction of three more elevators started. The total capacity will exceed 250 thousand tons.
In addition, Astarta-Kiev launched the implementation of organic farming. In November, the production unit of List-Ruchki passed the first stage of certification in Organic Standard. The total area of certified land will amount to 1.76 thousand hectares, where corn, buckwheat, oats and soybean will be produced. In case of successful certification at the next stages, the company will harvest the first organic crops in 2020.
Agroholding 2012: the latifundist is expanding
Agroholding 2012 has the habit to burst into agro market. When the company started its activity in 2015, AgroMaidan in Khmelnitsky region was organized against the unlawful actions of Aleksandr Gerega, the owner of Agroholding 2012 and the Epicenter hypermarket chain. Newly-baked agrarian had to accept the rules of the agrarian market and form a land bank according to the law.
Neither in 2015 nor in 2016 no one could say exactly how many lands are leased by Agroholding 2012. In 2017, the company broke into the list of the top-latifundists in Ukraine with a land bank of 120 thousand hectares. But Aleksandr Gerega says that he will not stop there and plans to increase the company's land bank to 300 thousand hectares in several years.
Let us remind that in July 2016 Aleksandr Gerega acquired 80% of the assets of Vinnitsa Agro-Industrial Group. At the same time, market players started talking about the fact that Agroholding 2012 intends to buy Obolon-Agro. There was no official confirmation of the transaction, and the participants themselves did not comment on that information. Nevertheless, in November the Antimonopoly Committee of Ukraine (AMCU) approved the purchase of a stake in the capital stock of Agroholding 2012.
In early November it was announced that Agroholding 2012 owns 62.06% of the shares of Zakupne grain receiving enterprise in Khmelnitsky region. Also our sources in the market report that now Gerega’s company is negotiating the purchase of part of the IMC assets.
No one knows who the next target of the latifundist will be. Perhaps, in 2018 Agroholding 2012 will report its achievements not only in increasing the land bank, but also in agricultural production or in processing.
NIBULON: no risks of default
This year, Aleksei Vadaturskyi, CEO of NIBULON, turned 70 years old. But, it seems that the head of the company gains more and more strength and enthusiasm over the years.
The beginning of 2017 was rather modest for the company. According to StockWorld, the holding's revenue for 2016 does not allow it to fulfill its credit obligations to banks. Assumptions were voiced about the company's default risk. Nevertheless, in 2017, NIBULON managed to raise a USD 3 million loan from Piraeus Bank and an USD 18 million long-term loan from ING Bank. The company received another USD 100 million from IFC (International Finance Corporation). Now the EBRD is considering granting NIBULON a loan of USD 40 million.
Despite credit obligations, the holding successfully implemented several logistics projects. Thus, the company completed the first stage of modernization of the ship building and repair plant, which is implemented in cooperation with the European Investment Bank (EIB). It was reported that the modernized plant will produce up to 15 units of cargo fleet per year.
In addition, within six months, a terminal in Golaia Prystan was built and put into operation in Kherson region. USD 74 million was invested in the terminal construction. Also this year the terminal with the capacity of 77 thousand tons was built in Belenkoie village in Zaporozhie region. The terminal construction cost the company UAH 500 million. In two months after the tornado, destroyed silos were restored at Zolotonosha elevator complex.
In July, NIBULON significantly renovated the car fleet by purchasing Volvo FH grain cars from Volvo Ukraine. This was the largest supply of Volvo FH trucks to Ukraine.
Thanks to NIBULON, for the first time in 14 years in Ukraine cargo was supplied by barge along the Dnieper River. The whole country was tracking the journey of watermelons for the Fozzy Group trading network.
In the framework of the development of river logistics, this year the holding conducted experimental works on the dredging of the Dnieper. As part of the experiment, the company deepened the section (15 m in width and 50 m in length) by 40 cm in the Dniprodzerzhinsky Reservoir. The whole project envisages the restoration of the full-scale operation of the E-40 waterway and river transport on the Baltic Sea — Gdansk — Dnieper — the Black Sea route.
NIBULON does not stop. Aleksei Vadaturskyi intends to invest over UAH 5.5 billion in the development of the agrarian sector infrastructure in the next few years. The company also announced plans to construct at least 10 river transshipment terminals for bulk cargo on the banks of the Dnieper, the Southern Bug and other navigable rivers of the country. In February 2018, NIBULON plans to open a new complex for transshipment of grain and oilseed crops with a capacity of about 43 thousand tons in Nikolaev.
Svarog West Group: a new wave
Last year for Svarog West Group Corporation was a year of restructuring. After Andrei Gordiichuk handed over the management of the corporation to the Board (the collegial body) headed by Nikolai Agarkov, the company underwent a series of management changes. But the results of the year show that such changes were beneficial for the company.
Read more: Svarog 2.0: Agroholding in a New Format
It is a tradition for Svarog West Group to update crop records annually. This year, barley yield of 8 t/ha became the main fruitful achievement. While the average yield rate for Ukraine in 2017 was at 6 t/ha. Sebastian variety of barley, which was produced for Soufflet Agro Ukraine on the area of 1.3 thousand ha, set a record yield.
Also, the corporation continues to actively promote international cooperation, representing Ukraine at various events. So, in February for the first time, Svarog West Group introduced its organic products at the international exhibition BIOFACH in Nuremberg (Germany). During the exhibition organic spelt, brown and golden flax, fennel and buckwheat were presented.
In addition, in October the corporation took part in the Ukrainian-Lebanese business forum, held in Beirut and Tripoli. During the business forum, a Memorandum of Cooperation was signed between the Chamber of Commerce and Industry of Tripoli and the CCI of Khmelnitsky region. Thus, Svarog West Group got the opportunity to occupy an important niche in the Lebanese market.
Now the company’s employees are settling into a new office, which was opened on the Day of Agricultural Worker, and are preparing for a new season and new records.
Agrotrade: filling new niches
2017 was stable for the Agrotrade group of companies. There are neither significant projects, nor failures on the list of the company’s achievements in the expiring year. The company confidently opens new sales markets, increases organic production and develops storage capacities.
Thus, at the beginning of the year, Agrotrade opened the Middle East market. For the first time, the company exported flour to Israel and Palestine. In March, 245 tons of premium flour were delivered to these countries. The company also announced its intention to export products to Africa, South-East Asia, and Moldova.
In addition, in 2017 the company announced the increase in organic production. In 2016, Agrotrade passed the Organic Standard certification. Organic pumpkin, chickpeas, soybean, flax, lentils, and wheat are produced on 2 thousand ha. And recently the company shared its plans to increase the area of organic production to 5,000 hectares. Now the land is in the transition period.
Within the year, the company managed to add 10,000 hectares to the land bank. Also, the machinery fleet of the company was updated by 30%: about USD 3 million was invested in the purchase of new Case tractors. The purchase of equipment is aimed at facilitating active introduction of precision farming at Agrotrade. In spring, the company applied the integrated crop management system Cropio. Now the company’s employees undergo additional training and try new features of the system.
Read more: Integrated Crop Management System
The company also completes the construction of the Chernigov elevator. The third phase of the construction works is scheduled to be finished by October, 2018. The company raised USD 1.1 million of loan from the EBRD for its construction, which began in 2012. The total elevator’s capacity is about 50 thousand tons.
Such was 2017. And what achievements by the Ukrainian latifundists do you remember?
Ekaterina Nikonchuk, Latifundist.com