Year results, the fat-and-oil market prospects and the profit — Creative Group
Creative Group is the leading Ukrainian integrated agro-industrial company and one of the largest producers of agricultural commodities in Ukraine. It produces fats and margarines, sunflower oil and meal, soybean meal and oil and biofuel pellets and is engaged in agriculture, particularly farming and livestock breeding. The group is among of the top 3 Ukrainian sunflower seed processors on the Ukrainian market, being one of the major exporters. Besides the Creative Group is also a major player on the fats and margarines production market (with a market share of over 30%) and #2 on the soybean processing (holding a market share nearly 24% of its total capacities).The Chairman of the Board of the Creative Group, Yuri Davydov, and the Chief Financial Officer, Viktoria Berezkina agreed to tell about the company's achievements in 2013 and share with the future plans.
- Did the company achieve the intended targets in 2013?
Yuri Davydov (Y.D.): Being based on the founded strategy, the Creative Group successfully completed 2013 and improved its positions on the major business lines – sun seed and soybean processing. The sun seed processing exceeded 1 mln tonnes, so the company is free to improve its positions among the three leaders of seeds processing and crude oil exports. In 2013 the soybeans processing increased to 171 thsd tonees, as opposed to 80 thsd tonnes in 2012. Note, in the segment of the fats and margarines our company is on top positions.
- What were the financial results of the Group and the certain areas in 2013? What are the factors of success?
Viktoria Berezkina (V.B.): In 2013 there was the key financial rates increase. Thus, the value increased by 55% - to 1.06 bln USD (682 mln USD in 2012), owing the full capacity utilization of the sun seeds processing and putting into operation the new soybean processing capacities. The gross profit totaled 196 mln USD, up 34% compared to the rate of the previous year (146 mln USD). The EBITDA rate reached 176 mln USD, up 23% compared to the rate of 2012 (143 mln USD).
The key business lines of the company (sun oil and meal production) provided 78% of the total value. The stable fats and margarines segment provided nearly 12% of the value. As for the soybean area there was the value increase of 8%.
In 2013 the company improved the export operations and found the new advanced markets. Thus, the sun oil, sun meal, margarines and fats sales provided 72% of the value in a foreign currency.
In the previous year the Creative Group developed the partnership with the large-scale international finance institutes and the Ukrainian banks. The company successfully borrowed the syndicated loan of 8 international banks at the amount of 300 mln USD. The stable financing helps to provide the raw-materials by the due date purchasing and the processing capacities' effective utilization.
At the same time, the costs' optimization and the internal processes' improvement positively influenced on the financial results of the company. The company calculated the revenues of all the projects and realized more profitable ones, owing the debt load decreasing and middle level of the capital investments. Thus the company decreased the capital costs to 54 mln USD, down three times compared to the previous rate. In 2013 the Group put into operation the soybeans processing second production line and the two elevators.
- What changes have the sun oil and sun meal sales streams faced in the recent three years?
Y.D.: The Creative Group declared the exports as the key strategic priority and to date effects the sales over 20 countries of the World. At the same time, two years ago the company was oriented on the crude sun oil and sun meal sales on the domestic market. To date North Africa, South Europe, India and China are the major markets of the crude sun oil supplies. The refined bottled oil is sold in CIS, Germany, Great Britain, UAE, Panama and Israel. The Ukrainian and foreign pork producers and poultry farms face the active demand for the company's commodities. Besides, the modified fats' major selling market is CIS, owing the geographic location and short storing life of the commodities.
- What are the prospects on the stated stage?
Y.D.: In 2013 the company exported nearly 420 thsd tonnes of sun oil, and this year the stated rate will face a significant increase. The strategic export countries are still Middle East, China and India, being the major global sun oil consumers.
Previously the foreign supplies were provided on CPT. Last year the company developed the direct sales and opened its own representatives offices in China and UAE, providing the effective work on the stated markets. The Creative Group continues to improve the stable sales system, develop the new sales markets – European ones in particular, and increase the bottled sun oil sales volume.
- What were the specific features of the oil-fat sector in 2013?
Y.D.: Five years ago, the first 5-6 players' share totaled 40-50% of the refinery capacity, at the same time to date the stated rate reach 70% of the total capacities. The Group will keep the market extension trend, owing the less effective players leaving the market.
Also, there is the planted and harvested areas geographic relocation tendency, as well.
- How did the stated issue influence on the raw-materials purchasing policy for the oil-producing enterprises?
Y.D.: The issue on the raw-material is still the critical one, despite the record general production of oilseeds and sunflower, in particular. Besides, to date the processing companies face the severe competition on the raw-material market. To date the Creative Group is working with over 150 farming enterprises all over Ukraine. Thus, the stable financing allows to propose more profitable purchasing conditions. The company founded the number of sun seeds purchasing new regional representative offices and modernized the purchasing managing system.
In 2013 there was the record volume of sun seeds processing, being the great gain as opposed to the season 2012/13, which faced the sun seeds offer decrease compared to the processing total capacities on the market.
- What were the changes in the company's logistic infrastructure in 2013? What are the plans on the stated area for 2014?
Y.D.: Since the beginning of 2012-2013 the Creative Group has been focused on the logistic infrastructure, necessary for the provision of the production areas with raw-material and commodities promotion on the target markets.
In 2013 the company put into operation the three elevators in Nikolaev and Dnipropetrovsk oblast. In 2014 the Group plans to put into operation the two elevators with the sun seeds and grain crops storing total capacity of nearly 126 thsd tonnes. Thus the agriculture crops storing total capabilities will exceed 500 thsd tonnes.
- How many machinery units are there in the vehicles fleet and what regions is the traffic geography focused on?
Y.D.: As of to date, the vehicles fleet of the Creative Group includes over 300 units of freight machinery – grain-bulkers, road-tankers, tented auto trucks, in order to provide the long-range logistic traffic, specialized machinery. The company allows to lease the last ones in order to support its farmer-partners.
In 2013 the Creative Group transported over 545 thsd tonnes of agricultural commodities by its own vehicles fleet, at the same time the sun oil and sun seeds traffic totaled 18%.
The traffic geography is focused on Nikolaev, Kirovograd, Odessa, Kiev, Cherkassy, Donetsk, Poltava, Kharkiv, Dnipropetrovsk, Vinnytsia and Sumy oblasts.
- What about the sun seeds' husk granulation new line?
Y.D.: The company developed the husk, chaff and black granulation production in order to provide the resources' maximum usage and achieve the synergistic effect of the different business areas. On the one side, the agricultural commodities' (sunflower and soybean) by-products are used as the alternative energy carrier, providing the demand in energy resources by 70-75%.
On the other side, the granulated commodities are the competitive export ones, being supplied to Poland, Baltic countries and Belarus. The stated commodities are produced on the two enterprises of the company – the new oil extraction plant and the biofuel pellet producing plant in Kirovograd oblast.
On March, 2014 the company completed the granulation new line mounting for the seeds' husk and the oil extraction plant screening. The Group invested 2.4 mln UAH in the line with the capacity at the level of 40 thsd tonnes. The stated line provided an increase of the by-products granulation total capacity to 500 tonnes daily.
- What are the nearest prospects on the market?
Y.D.: The current marketing year will be favorable on the raw-material supplies for the sun seed processors. According to the data of the Creative Group, in 2014/15 MY the sunflower planted areas will keep the last year rate. Besides, the soybean planted areas will face an increase of 20-25%.
A lot of agricultural producers face the difficulties with the financing and the floating capital availability for the planting campaign on the stated stage. Thus, the producers will partly refuse from the capital-intensive crops (maize, for example) and prefer the sun seeds production with the capital intensity down three times compared to the previous one.
- What is the financing strategy for 2014? How will the company decrease the debt load level in the current year?
V.B.: In the current year, Ukraine continues to focus on the value increase, owing the processing capacities' total utilization, being put into force in 2013 on the soybean area, in particular. Besides, the second producing line increased the soybean processing capacity to 270 thsd tonnes.
One of the major issues, in relation to financing strategy, is the debt load decrease. The company is working on the stated issue, owing the moderate level of the capital costs.
- What areas does the company plan to invest in 2014?
Y.D.: In the current year, along with the putting into force the two new elevators, the company plans to build own terminal in order to ship the sun oil. The stated terminal capacities will total nearly 1 mln tonnes.
Interviewed by Anna Platonova
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