Top Achievements of Ukraine's Leading Agricultural Companies in 2018

Alla Silivonchik

The past year was marked by unprecedented harvests. Many agricultural companies broke their own records for crop volumes or yields. The increase in production forced agribusiness to focus on the development of logistics and elevator capacities. No reports of large land bank extensions made the news in 2018. Except for the case of merging the cultivated lands of the Mriya agroholding and the lands of its new owner, other market players declared the plans to increase the efficiency of the already cultivated areas. Following the established tradition, has summarized the main achievements of the leading agricultural companies of Ukraine for you.
The patient is rather alive
Oleg Bakhmatyuk, the owner of Ukrlandfarming, once said that the company "weathered many storms" over the past 4 years. In 2018, the country's largest agricultural holding continued to negotiate with the Deposit Guarantee Fund (DGF) and external creditors and attempted to build a constructive dialogue with the NBU. To remind you, the total amount of the company's debt that requires restructuring is UAH 19 billion. At the end of November, Deputy CEO of Ukrlandfarming Igor Petrashko said that the company had every chance to complete its debt restructuring in 2019.
Earlier that month, Head of Research at Concorde Capital Alexander Paraschiy reported that Ukrlandfarming planned to update its debt restructuring proposal for all its creditors. The offer assumed a 70% haircut for unsecured creditors and 50% for secured, as well as extending the loans for 10 years at an interest rate of 10%.

According to Galina Kovtok, Chief Operational Officer of Ukrlandfarming, the land bank of the holding has increased by 4 thousand hectares since the beginning of 2018. Today it stands at 570 thousand hectares. 2018 was the fourth season that the holding's sugar factories were not running. Due to the lack of working capital, the company reduced its distribution by 80%. Besides, the number of employees decreased from 37 thousand to 31 thousand people in the past years.
However, the fact that the company continues to sow and harvest despite all the hardships is definitely a good sign. Ukrlandfarming maintains all the areas of its production. Crop, livestock, seed production, and grain elevation remain the basic activities of the company. Not to have to wait for a VAT refund, the agricultural holding focused on selling cereals in Ukraine in 2017/2018. Its 2018 yield of cereals and oilseeds was the best in the last 5 years. Livestock production turned out quite profitable as well.
Unlike cereal sales, the company chose to export eggs and egg products aiming to increase the export market shares of the Avangard holding products to 70% in five years. The company plans to reach a 30% share in the domestic market over the same period. In 2018, the company sought to increase its egg product exports from 35% to 45%. In addition to that, Ukrlandfarming made its first egg deliveries to Hong Kong in 2018. The company plans to increase exports to this country in the near future.
On a course to efficiency
Having increased its land bank by almost 200 thousand hectares in 2017, the company has realized its ambitious growth strategy. Its CEO Yevgeny Osipov said that Kernel had optimized the landbank to 560 thousand hectares and planned to manage those volumes in the coming years. Same as before, the company relies on the land use efficiency. However, its yield per hectare markedly declined in the past fiscal year.
According to the company's financial report for 2018 (July 1, 2017/June 30, 2018), EBITDA per hectare decreased by 61% from USD 378 to USD 149. The decline in profitability followed the growth of the company's land bank by 1.5 times. Yevgeny Osipov said that the holding would need several years to integrate, introduce technologies, automate processes, and train the personnel in order to achieve the usual indicators.
In FY2018, Kernel's EBITDA was USD 222.5 million, which was lower than in FY2017 by one third. However, high volumes of grain exports and expanded trading operations increased the company's revenue 2.1 times to USD 1.14 billion, and EBITDA 2.2 times to USD 100.5 million in the first quarter of FY 2019 (July 2018/September 2018).

In 2018, Kernel launched the Open Agribusiness online platform to let its partners follow the results and yields of Kernel's and other program participants' fields. Given that the company's crop yield is 30-50% higher than the average results for the country in almost every region of the company's presence, the holding has much to share with partners.

Essentially, Kernel opened up its assets for its colleagues, sharing experience in the use of modern technologies and implementation of innovative projects. The company believes that it is through open partnership that Ukraine can get to producing 100 million tons of grain per year.
In 2018, the company changed its investment strategy. Compared to 2017 investments in subsidiaries acquisition, the company turned to expansion and modernization of fixed assets in 2018. The company's solid investment program for the next three years includes a USD 500 million investment in the construction of a terminal in the port of Chernomorsk, an oil extraction plant in the Khmelnytsky region, a network of elevators, etc.
Strengthening logistics
In 2018, the Agroprosperis Group of companies focused its efforts on improving the efficiency of its elevators, namely the ones that provide 1.5 million tons of turnover per marketing year. To enhance efficiency, the company installed two new dryers at the Krolevets and Radivilov elevators to double the speed of corn receiving and drying, and reconstructed the Agrodar-Bar elevator.

In addition to that, Agroprosperis strengthened its own railway logistics, thus avoiding the difficulties that most market operators faced. According to the company, Agroprosperis exported 580 thousand tons of the Group products and those produced by small and medium-sized Ukrainian farmers using its own 300 wagons from July 1, 2017 to September 1, 2018. The high turnover was also achieved owing to 8 diesel locomotives, owned and leased by the company, which had the permission to travel the station tracks.

In October 2018, the Group expanded its car park with another hundred new cars by Kriukiv Railway Car Manufacturing Plant. Due to the expansion, the holding could increase the volume of rail transportation of agricultural products up to 800 thousand tons per year and provide logistics services to its partners – small and medium-sized Ukrainian farmers. Currently, the company has no plans to purchase any more cars.

As the car fleet increased, the company's land bank decreased by 30 thousand hectares to 400 thousand hectares in 2018.

Agroprosperis pioneered the use of new financial instruments. In March 2018, the company entered into the first Ukrainian swap contract for the supply of 10 thousand tons of maize on the CPT basis with reference to the Thomson Reuters price indicator in Odesa. The company believes that this form of trade can be an effective tool to hedge sales and create an image of reliable partners for the Group's manufacturing companies and customers — small and medium-sized Ukrainian farmers — in the world.

The company continued to develop its banking business. In November 2018, Agroprosperis Bank signed a partnership agreement with the supplier of agricultural equipment Agrimatco-Ukraine for lending the purchase of agricultural equipment on favourable terms. Due to this agreement, farmers of a land area of 100 hectares can purchase equipment from global manufacturers on credit for 7 years at 0.01% in USD and 6.57% per annum in UAH.

Myronivsky Hliboproduct:
On a course to globalization
The past year was rather eventful for the Myronivsky Hliboproduct (MHP) agro-industrial holding: expanded production in Ukraine, attacks from environmental activists, the launch of its own vlog, summing up the accelerator of agricultural innovations and much more.

In early July, the company launched a second line at Vinnytsya Poultry Farm, having invested USD 300 million in the project. Due to the expansion, the company will be able to increase the production of chicken to 560 thousand tons by 2020.
In 2018, the company continued to increase its output and exports. In the first nine months of 2018, MHP, the leading producer of chicken in Ukraine, increased the production of chicken meat by 8% to 458.5 thousand tons compared to the figures of the same period in 2017. The exports also increased by 22%. Thereby the company increased the share of produced chicken deliveries abroad to 50%.

In 2018, the agro-industrial holding continued its expansion abroad and signed an agreement of intent to acquire Perutnina Ptuj, a Slovenian company which specializes in production and processing of chicken and turkey meat. Perutnina Ptuj owns 19 companies in Slovenia, Croatia, Bosnia and Herzegovina, and Serbia. The Balkan Group produces 88 thousand tons of meat annually and exports to more than 20 countries. MHP reasonably believes that this acquisition will strengthen its position as a global player. The company plans to increase the sales of Perutnina products in the Balkans and Eastern Europe.
Increase in elevator capacity
In 2018, Astarta-Kyiv actively increased its elevator capacities as well. In July, the company put into operation three elevators in the Poltava region. The new Yareskovsky (100 thousand tons of storage), Lutovinovsky (100 thousand tons) and Skorokhodovsky (30 thousand tons) elevators have already accepted the grain of the new harvest. The launch of the new elevators is part of the Grain of Astarta investment program. The program presupposes the creation of new elevator complexes with a total storage capacity of over 500 thousand tons. The company has been implementing the program since 2015. The investments in the construction of the three elevators amounted to about EUR 32 million.

The financial results of the company, however, leave much to be desired. According to the company's financial report for the first nine months of 2018, Astarta's consolidated revenue decreased by 27% to EUR 253.5 million due to lower sales volumes and a significant reduction in prices for the company's main product — sugar. In addition, EBITDA fell by 39% to EUR 68 million following the decrease of the world market price of major agricultural products.
In 2018, the agroholding increased the oilseed (sunflower and soybean) production by 21% to 183 thousand tons. Taking into account the corn harvest, the company collected a record harvest of grain and oilseeds (over one million tons).

Another 2018 achievement was the introduction of the Astarta Select brand to the Ukrainian market. Astarta Select offers producers proven seeds and agronomic services. The company representatives say that the production capacity of Astarta's two seed plants can provide partners with 5-8 thousand tons of soybeans and wheat seeds. The figure can be increased to 15 thousand tons in the coming years.
Dreams come true
The Mriya agroholding is a true blue ribbon champion of the 2018 Achievement nomination. The rumors about the company sale and the bidders for its purchase had been around for a long time. Having successfully completed the debt restructuring process in August 2018, the agroholding reduced the total debt load from USD 1.1 billion to USD 309.5 million. On September 12, 2018, Mriya Farming PLC and Saudi Agricultural and Livestock Investment Co. (SALIC) entered into a share purchase agreement for the sale of the Mriya's group assets to SALIC. The contract was signed in Kyiv.

The acquisition of the Mriya company by the SALIC group of investors from Saudi Arabia and SALIC's subsidiary Continental Farmers Group became the deal of the year. It was reported that Mriya would become the management company and the Ukrainian enterprises Agro LV Limited, Agromark UK, Agrolandinvest Ukraine, and Grain Land that are part of Continental Farmers would become part of the new holding. The subsidiaries of Continental Farmers control 45 thousand hectares, while Mriya leases 165 thousand hectares, i.e., the total land bank of the new holding is 210 thousand hectares.
On November 5, 2018, the day after the transaction was closed, Mykola Huta, the ex-co-owner of Mriya, was extradited from Switzerland to Ukraine.
Whatever plans the ex-co-owner might have for Mriya, the new owners have their own agenda.
We focus on investments in cereals and meat production, processing of animal products. 20-25% of our investments can be directed to Ukraine for these categories of goods,
said Khaled Al-Aboodi, Chairman of SALIC.
Next year, the agricultural holding may become one of the largest potato producers in Ukraine.

In early December, as the new owners were restructuring the holding, it became known that Mriya would close its representative office in Kyiv and consider the possibility of relocating the employees to Ternopil and Lviv branches.
Yield increase
In 2018, the IMC company, whose main beneficiary is Alexander Petrov, improved both production and financial indicators. In May, Alexander Petrov increased his stake in the company to 70.61% since Agrovalley Limited, controlled by the IMC chairman of the board of directors, acquired 32 thousand shares of IMC.

In the first quarter of 2018, the net loss of IMC was USD 8.23 million compared to USD 5.68 million for the corresponding period in 2017. According to the results of the first nine months of 2018, the agricultural holding increased its net profit by 16% to USD 32.1 million compared to the same period in 2017. The company's EBITDA for the said period increased by 18% to USD 50.6 million compared to the same period in 2017.

On November 30, IMC completed the harvesting campaign having collected 762 thousand tons of corn and other crops. 2018 yields were higher than the previous year.
The experimenter of the year
In the first half of FY2018, AgroGeneration received EUR 1.83 million of net profit compared to EUR 305 thousand loss for the same period in 2017. With revenue growth of over 50%, the company did not show the same financial dynamics. According to the financial report of the company for the indicated period, the gross profit decreased by 36% and the financial result from operating activities by 44%, although EBITDA grew by 6%.
In the first six months of 2018, the AgroGeneration agroholding sold more than 95 thousand tons of grains and oilseeds. The geographical structure of the company's revenue changed. In the first quarter of 2017, the revenue ratio received in Ukraine and France was 30:70. However, in the first quarter of 2018, it was 46:54, respectively. During the mentioned period, the company's income grew by 50% not only due to the sale of agricultural products, but also the drying, storage, or grain transshipment services provided to the third parties.

Cultivating about 120 thousand hectares, AgroGeneration actively experimented with growing new crops. In the fall, the holding sowed the first experimental hectares with winter peas in the Kharkiv region. The holding plans to sow 20 hectares of amaranth to work out the technology and test two varieties of the crop in 2019. Besides, the company does not abandon plans to enhance its elevator capacity.
Record crop production and beet processing
Like other operators, the UKRPROMINVEST-AGRO company set records in 2018. According to the agricultural holding representatives, the company harvested 65 t/ha of its most significant crop — sugar beet — from an area of 28.4 thousand hectares. In the Vinnytsya region, the average test crop yield of corn exceeded 11.6 t/ha and 3.7 t/ha of soybeans. Both yields hit the company's historic highs.

Evgeny Saenko, Chief Operation Officer of UKRPROMINVEST-AGRO, explained the production achievements as the logical result of a consistent improvement of production processes, performance discipline, and a clear division of responsibilities between agronomic, industrial, and engineering branches.

Another major 2018 achievement of the company was an almost 50% increase in the volume of beets received for processing by the sugar factories of the agroholding. The increased processing was the result of higher beet yields, a significant expansion of partnership programs, and an increase in the volume of raw materials received from the third-party suppliers.

Respectively, the volume of beet processed by the company's factories in the production season of 2018-2019 should reach 2.28 million tons with tolling beets making 480 thousand tons of the production. Thus, UKRPROMINVEST-AGRO will break another record in sugar production this year.
In 2019, the company intends to continue working on improving efficiency (by reducing indirect costs) and increasing productivity. In 2018, the land bank of the company remained relatively stable (a slight outflow of shareholders was compensated by the arrival of new ones). This year the land bank may slightly increase after the acquisition of corporate rights of small agricultural companies, says Evgeny Saenko.
Structural changes and expansion of grain elevators
The main achievement of Epicenter-Agro in 2018 was the increase in productivity by 10-15%. In MY2017/2018, the company gathered 760 thousand tons of grains and oilseeds. The total yields included over 501 thousand tons of corn with 12.16 t/ha in bunker weight, 138.8 thousand tons of winter wheat with 6.04 t/ha in bunker weight, and 123.4 thousand tons of sunflower with 3.47 t/ha in bunker weight.

According to Vasily Moroz, head of the agricultural division of Epicenter K, 2018 was quite successful for the company. The agricultural sector consolidated about 111 thousand hectares and joined the top ten largest agricultural holdings of Ukraine while demonstrating high business efficiency.

In 2018, the company engaged in modernization and expansion of its elevator capacities. Two new elevators of the company are currently being built in the Vinnytsya region in the villages of Vapnyarka and Vendichany. Meanwhile, the Vinnitsa elevator and Zakupnyansky cereal receiving enterprise are being reconstructed.

Some changes were made to the organizational structure of the company.
We established a corporate center (central office) and production clusters named Vinnytsya, Central, Western, and Kriazh,
explained Vasyl Moroz.
In 2018, the company closed legal issues related to the registration of the previously acquired lands. According to the head of the agricultural division, the company plans to gradually increase the land bank. However, the company's priority lies in the effective management of the already existing assets.

The company does not abandon the plans for the port terminal acquisition but sets their fulfillment for the longer term perspective. Vasily Moroz said that the key tasks of the company for the near future would be to increase the efficiency of the agricultural division and strengthen the company's position in grain logistics and industrial storage of crops. Epicenter-Agro will continue to update its machinery park, develop seed production, and implement the elevator investment program aimed at constructing four new elevators.
Strengthening the machinery park
The Agrain agricultural holding cultivates 110 thousand hectares of land in Ukraine, owns 17 agricultural enterprises in 6 regions, and develops crop and livestock production, elevator business, and transportation services. Agrain CEO Pavel Mamin believes that 2018 will be remembered for a number of the company achievements.
To begin with, we received an average of 11 tons/hectare of corn on an area of 10.5 thou. hectares. This is a good result. In the future, we aim to double the area under this crop. The second point is that we sowed high-oleic sunflower for the first time. We harvested a good yield for this crop, all the demands that customers put to high-oleic sunflower were also met. This is a profitable market due to the good interest the processors pay. In some cases, it reached USD 70 per ton. Another important point is that due to the fact that we planned and efficiently organized the implementation of all technological operations, such as tillage, sowing, and spraying, we managed to carry out all the work without involving the leased machinery. The machinery constitutes a considerable part of the cost. Besides, the season was complicated by the simultaneous harvesting of sunflower, corn, and soybeans. It was almost impossible to hire harvesters. But we planned all the work so that we didn't need any leased machinery,
he said.
In the summer of 2018, the company expanded its machinery park with John Deere tractors. Agrain concluded a leasing deal with OTP Leasing for the purchase of the equipment for a period of five years.

Seven years ago, the livestock production in the holding was unprofitable and maintained at the expense of the crop production. Today, the situation has changed. Agrain simultaneously breeds 16 thousand pigs and produces about 30 thousand pigs per year in the Odesa region. Besides, the agrogroup produces 15% of all the cattle in Ukraine. Yuri Gudz, head of the Agrain cattle breeding department, said that the holding had been exporting almost 90% of its cattle for three years in a row.
Expansion in central Ukraine
In 2018, HarvEast continued the implementation of one of its strategic projects. In summer, the company put into operation the second line of irrigation, which provided water to 740 hectares of land in the Mangush district of the Donetsk region. The holding launched the first phase of irrigation for 350 hectares in 2017. In 2019, the company plans to put into operation another 9 sprinklers on 900 hectares. In just 5 years, it is planned to provide irrigation to at least 5 thousand hectares of the cultivated land. On June 1, 2018, the company disbursed USD 2.5 million of investments for the project.

Since 2017, HarvEast has begun to develop the seed branch. It has evolved as a separate business out of the project of sunflower seeds hybridization for the MAS Seeds company. In 2018, the agricultural holding expanded its cooperation with the French partner to three other projects and began growing seeds for Euralis Semences, Corteva Agriscience™, and Alta Seeds. In October, the company launched a line for seed processing with a capacity of 8 tons per hour.

In addition to implementing production programs, the holding also expanded its structure. At the end of the year, it became known that HarvEast, which cultivates more than 90 thousand hectares of land, received permission of the Antimonopoly Committee of Ukraine for the purchase of Agro-Holding MC, whose land bank amounts to 25 thousand hectares in the Kyiv and Zhytomyr regions. The market participants estimate the value of the transaction at USD 20-25 million.
Focusing on Egypt
The NIBULON company continues to invest in infrastructure. In the summer of 2018, the agricultural holding launched two transshipment terminals for grains and oilseeds in the Zaporizhzhya and Kherson regions, investing USD 200 million.
In early July, the news that NIBULON began the implementation of the long-term investment program in Egypt shook the market. The news of such a large-scale expansion came as a surprise despite the fact that the company was one of the main suppliers of Ukrainian grain to the country and delivered more than 12 million tons of wheat, corn, sorghum, and soybeans to Egypt in the last 10 years.

Within the scope of the investment project, NIBULON will modernize the existing elevators and construct the new ones in Egypt and create a fleet at the country's shipyards to transport the grain down the Nile. According to the CEO of the NIBULON company Alexey Vadatursky, the program is designed for 7-10 years and USD 2 billion of investments. The first stage of investment in 2018-2019 will be worth USD 200 million. To implement the program, the company will open its own enterprise in Egypt.
Updating the holding
A new company, AgroVista, was founded in 2018. In May, the Antimonopoly Committee of Ukraine allowed AgroVista, which was part of the UkrAgroCom and Hermes-Trading group, to acquire Inter-Contact-Agro in the Kirovograd region. In July 2018, UkrAgroCom and Hermes-Trading changed its name and formed a new group together with AgroVista Cyprus, which is located in Cyprus and owns the AgroVista subsidiary in Ukraine. The Ukrainian holding, in its turn, owns the majority of the assets of the group.

This year, the group expanded its land bank from 75 thousand hectares to 82 thousand hectares. The company cultivates land in the Kirovograd, Dnipropetrovs'k, and Odesa regions. The agricultural holding has its own elevator infrastructure with a total storage capacity of 353 thousand. In addition, the group has been investing in the construction of its own rolling stock. In November 2018, it acquired the first 55 vehicles and intends to buy 54 more in 2019. To solve logistic problems, the company also purchased 2 tugs and 4 barges, which enabled a simultaneous delivery of about 8 thousand tons of cargo down the Dnieper to the sea.
LNZ Group:
More elevators and a new brand of plant protection products
The vertically integrated agribusiness holding started this year with the acquisition of agricultural assets of the Shpola-Agro Industry company which owned 10 thousand hectares of land. After the acquisition, LNZ Group increased its land bank to 70 thousand hectares. Like other players, the holding faced logistics problems in 2018. In July, the company invested in rolling stock and acquired 108 grain cars for two routes.

The company also expanded its grain storage facilities and put into operation an elevator complex with the capacity of 44 thousand tons in the Sumy region, having invested about USD 15 million in it. There is more expansion to come. The director of Lebedyn Seed Plant Anatoly Tkachenko said the company would increase its elevator capacities in the next 1.5-2 years.

Other achievements of the company include the launch of DEFENDA, a new brand of generic plant protection products (PPP). Experts estimate the market share of DEFENDA PPP at 5%. In general, LNZ Group is the second large PPP distributor in Ukraine today.
Concentration and optimization
Known as Trigon Agri till 2017, Agromino began 2018 with the sale of the Novomirgorodskiy Elevator for USD 2.6 million. Thus, the company completed the liquidation of the Kirovograd granaries cluster as part of its strategic plan of concentration on fixed assets. The company also carried out staff optimization and reduced the size of the board of directors to 3 people in the summer of 2018.

At the beginning of the year, the Czech investment fund Mabon acquired a controlling stake in Agromino, which leases 44.6 thousand hectares in Ukraine.

Mabon provides funding to another company called Resilient Group, which is less known in the domestic market. Nevertheless, with a land bank of almost nine thousand hectares, the Ukrainian subsidiary of Resilient has been operating here for four years. After the transaction with Agromino, the total land bank of the companies amounts to 55 thousand hectares and allows the "tandem" to firmly establish itself in the TOP 100 agricultural companies in Ukraine.

However, the financial results of the holding, which operates in Ukraine, Russia, and Estonia, leave much to be desired. In the first nine months of 2018, the Agromino company lost EUR 6.3 million having received EUR 6.6 million of profit in the same period of 2017. In 2018, the company's revenue decreased to EUR 16.93 million.

In general, the company's management took steps to increase the company's equity. In May 2018, it was reported that Agromino would attract a credit line of EUR 2 million aimed at meeting the needs of working capital in the summer and fall.
BKW Group:
Versatile development
Fast-developing BKW Group started 2018 quite actively. In February, the owners decided to include Ocean Invest into the group.

Before the acquisition, BKW Group had 3 business areas: seeds distribution, plant protection products, fertilizers (Bizon-Tech); trading (Ambar Export BKW); agricultural production (the LANDFORT agricultural holding). The acquisition of the Ocean Invest can be explained by the decision of BKW Group to be more active in the generic PPP market. The portfolio of Ocean Invest includes 28 registered trademarks of plant protection products manufactured at two largest factories in China.

Having increased its size, the Group did not cease to develop other areas. In May, one of the market leaders in the supply of seeds, plant protection products, and fertilizers Bizon-Tech, a member of the BKW group of companies, opened a new line of business — sales and service of agricultural machinery. Bizon-Tech became the official distributor of the Massey Ferguson machinery by AGCO Corporation in Western Ukraine – the Lviv and Ternopil regions.

Soon the company expanded its presence to the Poltava, Dnipropetrovs'k, and Rivne regions. The owner of BKW Group Vadim Kovernik does not hide the fact that this brings the company closer to the goal of becoming the leading and universal supplier of farming products.

The Group is also actively developing its trading direction. In the current season, Ambar Export BKW continues to successfully operate in the deep-water ports of the Black Sea. Moreover, Ambar Export BKW received ISCC certification (international sustainability and carbon certification — ed.). This is a mandatory requirement for all EU members involved in rational production and processing of biomass and energy derived from it. The company was also included in the list of accredited exporters to China.

These steps let the company strengthen and expand its market potential and achieve its goals. In addition to them, Ambar Export BKW made a rebranding in 2018. The new brand reflected the principles and the essence of the company: a course to becoming a larger trader.
Overall, 2018 was good to the agrarian industry and its players. There were no high-profile defaults. The major players worked hard to implement their investment programs and strategic plans. They optimized land banks and increased the efficiency of its usage.

As expected, the moratorium on farmland sales in Ukraine was extended. It seems there are no new and resonant legislative initiatives planned, so there is hope that the new year will also be stable and productive for Ukrainian farmers.
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