New terms develop new approaches to the company management –Lauffer Group

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APK-Inform

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Despite the loss of some part of its assets in Donetsk and Luhansk oblasts and the Crimea, Lauffer Group is one of the largest companies-producers of bread and bakery products in Ukraine, especially in south-eastern oblasts. In late February, it was reported about change of the company's management - Ljubomir Mudric resigned as the company`s Chairman and CEO. The Commercial Director at Lauffer Group, Vladimir Ugolnikov reported APK-Inform Agency on the person who takes the vacant position, as well as the company's development prospects.

 

- In the last week of February, it became known that Ljubomir Mudric stepped down as the Chairman of the Board and CEO at Lauffer Group. What is the reason for changes in the company management? What is the name of new head?

To date, the position of CEO at Lauffer Group is vacant. To date, the company is reconsidering its business case, working to optimize its production capacities, and reorganize the management structure. During two recent years, the market has significantly changed, and new market terms conditions dictate the need for development of new approaches for the Group management. The company sets new goals for itself, and develops in new directions, including even foreign markets. We should start negotiating with potential CEO, only after reaching of the precise understanding of the company future goals.

At the same time, to date the company is run rather effectively. Lauffer Group and its businesses departments are headed by highly qualified top managers, who are completely cope with their tasks. And, it is the most important - the majority shareholder at Lauffer Group, Alexander Leszczynski has always managed and continues managing the company. Therefore, the current absence of CEO, of course, somewhat changes the management structure from the point of view of the company organization, but nevertheless, the company still continues operating and developing in active way.

 

- How have the market positions of Lauffer Group changed during L.Mudric worked as the company head?

It is rather loaded question. If the company keeps its share of commodity production on the falling market - it is rather a growth than a reduction. Lauffer Group comes to the TOP-5 leaders of the bakery goods production in Ukraine. The company lost its assets in the Crimea and in the east of the country - of course, it influenced the production results. Nevertheless, the company still keeps the leading positions in the regions where we are working to date. In particular, in 2015 the Kharkiv bakery plant Saltovskii produced 43 thsd tonnes of goods, which meets the plant indicators of 2014. Our Odessa enterprises showed the results at the level of 2014 - 64 thsd tonnes in Odessa and the oblast. Lauffer Group launched a new distribution network Zefir, continues actively developing the export direction. As for the question about changes of the company's position during two recent years, Lauffer Group managed to keep its leadership and continues steady growing. We just use another part of production sites.

Experience and professionalism of Ljubomir Mudric allowed to the Group to optimally develop in the most difficult period for the business, and realize the assigned development plans, including the work on foreign markets, as well as realize the large-scale industrial investment projects.

 

- Lauffer Group owns the facilities, some of which are located in the zone of conflict at the territory of Donbass. How do you manage the reporting assets?

All assets, located at the territory, which is not controlled by Kiev, were withdrawn from the group management.

 

- What impact did worsening of the current economic and political situation in the country provide at the strategy of development of the Group? Did you have to give up some projects, or vice versa, the company plans to develop some projects?

Bread production segment is the engine of our business. It is our key direction in Ukraine, we are the leaders of the market segment, and plan to strengthen our leadership positions. Also, we see the significant potential of foreign markets. Lauffer Group office in the United Arab Emirates is developing the export direction. Veg oils, meals, flour, wheat bran are the key export products, and the potential commodity range can enlarge at the expense of canning products. Lauffer Group products are much in demand and competitive on foreign markets. Ukraine is able to become the breadbasket of the world, and we give very much attention to the qualitative parameters, which makes such success on foreign markets.

 

- Lauffer Group is the largest company-producer of bread and bakery products in south-eastern oblasts of Ukraine. How would You estimate the situation on the market of raw materials and finished goods?

In 2015, all leading bakery companies demonstrated some reduction of their sales volumes.

Due to falling of real earnings of Ukrainian citizens, lawful bread producers faced the drop of demand for high-marginal products. In 2015, the market of bakery products in Ukraine lost ground by 7-10% depending on the region. Profitable commodity group less and less cover its costs for production of mass varieties of bread.

In particular, Lauffer Group faced rather serious impact due to the losses of production capacities and sales markets in the annexed Crimea and the occupied territories of Donetsk and Luhansk oblasts.

At the same time, the company managed to keep its previous production indices in the regions where we operate.

To date, the market of major raw material is quite stable.

As for the harvest volumes of grains in 2016, then despite the negative forecasts, the market in Ukraine runs in surplus terms every year. The raw material volumes will be quite enough to ensure the bakeries` demand in full measure.

The harvested grain volumes in the country mainly do not influence at price formation of the final product, as opposed to fluctuations of the foreign currency exchange rates and global prices for the commodity. Also, the public policy on the exports of grains and flour plays rather important role, as well as the state actions for interventions in the flour milling and grain market segments in the country.

 

- How profitable is the production of bakery goods to date? Do you think it possible to cancel the state regulation of prices in the market segment? Will the market be able to make self-regulating operations? What prices for bakery products can be called as commercial?

The State Statistics Service data show not only that the Ukrainians began consuming less bread, but also that rather significant share of the bread market (60-65%) is “the shadow market”, and the statistics does not calculate it, and the most important thing is that it is not controlled by the state. "Shadow" producers undercharge their indices, the other share (mainly self-employed persons) does not report on its indices at all. In addition, the share of large-scale distribution networks is not considered, but they significantly increased its own production of bread during several recent years.

It is important to note that the state regulation of price formation provides its significant impact at the production volumes. Administrative influence in formation of the market price makes the bakery production as low-margin business.

Unfortunately, the current system of state regulation does not contribute to further development of the industry, but drives it into stagnation. The present profitability of bakeries is minimum - 0.5-3%. Many large-scale enterprises and associations which are legally working, play it on the edge of starvation. Of course, profitability of the "shadow enterprises" is higher in several times due to tax evasion, and the absence of any obligations for production of social varieties of bread, as well as price control by the government. So, it is hard to compete with them.

The industry requires updating of the legislation and the mechanisms for production incentive.

 

 

 

- Fat-and-oil and mayonnaise business form another activity of the Group. How do You estimate the current situation in the market segment? What factors do influence at formation of the main trends?

To date, the fat-and-oil industry is one of the most successful sectors of the Ukrainian agro-industrial complex. The market is saturated with products, the export trading is growing, and the processing capacities are gradually expanding.

Also, the State Statistics Service confirms the reporting trend. So, in 2015 the sold volumes of vegetable oils and animal fats in Ukraine totaled 78.62 bln UAH, i.e. 5.2% of the general sold volume of foodstuffs.

In particular, the volume of Ukrainian oils and fats, sold on foreign markets, totaled 41.103 bln UAH in monetary terms (52.3% of the general volumes of foodstuffs sold on foreign markets).

The prices for final products became the main factor determining the reporting trend in the market segment.

Sunflower oil on foreign markets is the exchange-traded product, and many factors influence its price formation. Further development of the price situation will directly depend on the global market situation. The relatively stable price situation with rather mild downward trend on the export market of crude sunflower oil will have the corresponding impact at price formation on the domestic market.

 

- What products and what country does Lauffer Group export to? How did the geography of exports change during two recent seasons? Generally, what markets are the most prospective for Ukrainian agricultural products, especially when it is about the value-added products?

Flour is the main export product for Lauffer Group. Also, we supply veg oils, oilseed meals and wheat bran on foreign markets. Indonesia, Thailand, Georgia, Belarus, the EU countries and China are the main export destinations.

In 2015, the company began exporting flour to the African market. We organized the long-term cooperation, and successfully provided the first supplies of our products to Angola. The company provides active work on the supply of flour to other countries of the continent. Also, the Middle East countries are traditional active consumers of our products.

Also, Lauffer exports sunflower oil. The export geography of sunflower oil is very extensive. The list of importers includes the EU, Turkey, Middle East, etc. The export trading covers more than 90% of produced fat-and-oil commodities.

 

- And the last question, what plans will the company start realizing in the nearest future (investment projects, enlargement of the line of goods and geography of exports, expanding own presence on the domestic market, etc.)?

Lauffer Group continues developing, and we are considering new business lines, develop specialized affiliate programs, but it is too early to announce them. In the nearest future, we will inform about our new projects.

 

APK-Inform Agency

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