Development strategy
The Group‘s overall business strategy is to become a leading agricultural company of Ukraine and one of the world‘s leading agrarian producers economically, ecologically and in terms of social responsibility. The Company plans to implement this strategy by expanding sown fields and intensifying yields by utilizing state-of-the-art agrarian technologies and know-how. Key elements of the Group‘s strategy are summarized in the following paragraphs:
Expansion of harvested land bank
The Group intends to further expand its harvested land bank by continuing to increase its land-lease rights, with preference being given to the Odesa, Cherkasy, Vinnytsya, Khmelnytskiy, Ternopil and Chernihiv regions (oblasts). In particular, the Group intends to manageably expand its crop farming capacities by 20,000-25,000 hectares within the next two years at a rent and required increase of machinery and working capital necessary to put these lands into operation of approximately USD 1,550 per hectare by entering into new long-term leases and acquiring companies that control land plots.
By continuing to geographically diversify the agricultural land bank (i.e., entering into long-term leases of land in diverse regions of Ukraine), and focusing on high quality lands the Group intends to minimize agricultural, climatic, political and social risks to which the Group is exposed.
Investment into vegetable oil refinery plant and additional farming land
The Group plans to invest in the construction of a vegetable oil refinery plant in the territory of Ukraine.
The Group considers that its investment into the vegetable oil refinery business will offer significant growth opportunities to the Group both in the domestic Ukrainian and international markets, primarily due to the following reasons:
• there is a great demand for rapeseed and sunflower oil in Ukraine and worldwide;
• Ukraine is the largest sunflower oil producer in the world; and
• Ukraine exports approximately one million tons of raw rapeseeds per year and is the world‘s second largest rapeseed exporter and yet the country does not have any viable rapeseed oil production facilities in Ukraine.
The plant is envisaged to be mainly used for rapeseed and soybean refinery and is expected to produce around 1,000 tons per day. According to the Group‘s management, it should take up to 1.5 years to build the plant.
The Group estimates that the project will cost approximately USD 45 million.
Continued product specialization
The Group will continue to specialize in growing agricultural crops, particularly those bearing a high margin (e.g., wheat, rapeseed, corn, sunflower seed and barley) while putting an emphasis on optimizing the crop rotation structure (with the target structure being 60% winter crops and 40% spring crops). However, management will still consider other crop rotation structures, so as to ensure that maximum yields are achieved through the implementation of optimal strategies depending on the season and prevailing market opportunities.
Product marketability
The Group plans to increase product marketability by improving crop-growing techniques, utilizing improved cultivation technology and using seed material of better quality. The staff will also receive training in Western standards of agronomy to maximize the quality of the Group‘s products.
Enhance and upgrade business processes
The Group intends to renew, replace and renovate material and technical equipment and its machinery fleet by purchasing new agricultural machinery, and to optimize the use of the same in combination with adopting Western agrarian technologies and equipment, in order to increase operating efficiency.
Transparent and effective management strategy
The Company is implementing changes to its management processes under the guidance of experienced specialists; it is embedding modern corporate management methods, ensuring a management of strong credentials is in place and installing a new IT system in order to increase management transparency and efficiency.