Mind nominations 2022: Companies and people who impressed during the year. Agro-industrial complex
We nominate people, businesses, and institutions that have shown themselves in the best way in this stunning war year or vice versa
Ukraine is close to the end of 2022, which has divided the country's history into "before" and "after." The full-scale russian invasion has affected all aspects of business and people's lives. Even regions relatively not involved in active hostilities are affected, as economic systems and industries are closely interconnected.
Mind decided to summarize the results of the year, highlighting people and structures in each sector of the national economy that showed themselves especially strikingly after 24.02, even if not always successfully, or faced unprecedented challenges, even adjusted for the general crisis. This list is not a rating, but it reflects the opinion of the specialized part of our team about the most important things that have happened in the activity of a particular industry. Although the internal sectoral factors paled in comparison with the war – trend No. 1, their influence was still tangible enough for entrepreneurs to take them into account and could resist them. Or they could not.
There is no doubt that at the end of 2022 we are living in the country, with businesses and people, other than we were 12 months ago. It is crucial to apprehend what has made them so.
Mind has selected several nominations that will reflect the main events in key industries for Ukraine.
"Victim of the Year" is a company/brand that suffered irreparable damage due to the war.
"Unbreakable of the Year" is a company/brand significant for the industry and suffered huge losses due to the war, but managed to resume and continue its work.
"Deal of the Year" is the most meaningful deal for the country/industry, the largest in size and/or impact, becoming even more important given the war and future reconstruction of the country.
"Positive Surprise of the Year" is a company/brand/person who, against the backdrop of armed aggression, managed to become a leader/increase profits/take a proactive position, becoming a surprise for the industry/professional community/markets and contributing to additional stability of the industry/country.
"Disappointment of the Year" is a company/brand/person who, against the backdrop of armed aggression, having huge resources, failed to properly dispose of them or took a destructive position.
"Unlucky of the Year" is a company/brand/person who had invested heavily in a project/asset/niche on the eve of the war, but the war destroyed it radically or the initiative lost its relevance for many years.
"Failure of the Year" are structures, individuals, and institutions that made the most unsuccessful/controversial/inappropriate decisions in wartime.
"War's beneficiary" is a company/brand/person who gained more profit than losses in the face of armed aggression.
Since the operations format and the intensity of events differ considerably in various fields, there can be from four to seven nominees in each industry.
The Mind Nominations 2022 project starts with the agro-industrial complex.
Estimating losses in the leading sector of Ukraine’s economy is largely useless. At least at the current stage. Firstly, taking into account the occupation of some territories and the ongoing de-occupation processes, it is impossible to compile and verify the total losses for the whole of Ukraine. Secondly, even if we accept the available estimates as accurate, unfortunately, they are not final.
In June, according to the KSE Institute's analysis "Ukraine's Agricultural War Damage Survey", the total losses incurred by Ukraine's agricultural sector as a result of the full-scale russian invasion amounted to $4.29 billion.
As of September 15, this figure was adjusted, according to the KSE Agrocentre’s calculations, and it amounted to $6.6 billion in direct losses and $34.25 billion in indirect losses. The largest losses from this amount were generated by destroyed or damaged agricultural land and crop losses, reaching $2.135 billion.
The estimated cost of replacement and repair of damaged irrigation infrastructure in the South, including Kherson Oblast, was estimated at $225 million. Another almost billion ($926 million) is the cost of replacement and repair of damaged machinery in the agricultural sector.
The total amount of losses due to the damage or destruction of granaries is estimated at $272 million. The estimated cost of dead animals is more than $136 million.
By the end of the year, the total figure of direct damage increased again and approached $10 billion. According to Oleksandr Zakharchuk, the head of the investment and logistics department at the National Scientific Centre "Institute of Agrarian Economics", as a result of the russian invasion, the Ukrainian agricultural sector will receive $9.3-9.8 billion in losses in 2022.
This figure is shaped by the blockade of seaports and changes in the export transportation logistics ($7.5-8.0 billion), the cost of unsold last year's grain ($0.5 billion), the cost of warehouses and elevators destroyed or seized by the occupiers ($1.3 billion). "In total, it amounts to $9.3-9.8 billion, or almost the total profit of agricultural enterprises received in 2020 and 2021," he said.
According to the FAO, Food and Agriculture Organization of the United Nations, one in four rural households has reduced or stopped agricultural production due to the war. In some regions of Ukraine, this figure reaches 40%. Up to 30% of sown areas have been lost.
However, the industry-wide result was better than it could have been expected in spring, at the start of the season. To a large extent, this was facilitated by the stocks of resources formed by February 24 and the successful winter sowing campaign for the current year's harvest in autumn 2021.
And although for the first time in the history of independent Ukraine, market participants do not operate with reliable data on the real volumes of the harvested crop, the estimates of the Ministry of Agrarian Policy and Food are doubtful, and up to 30% of corn crops still remain in the fields, but 50 million tonnes of grain and 15 million tonnes of oilseeds seem quite plausible.
Compared to the pre-war performance of the industry, this is a failure. Compared to the situation and apocalyptic expectations of early March, this is a success that can be compared to a miracle. It has to be repeated with much more modest starting resources in 2023..
Below we present Mind nominations in the agricultural sector.
"Victim of the Year"
The Nibulon company, due to the death of its founder Oleksiy Vadatursky and his wife.
Oleksiy Vadatursky, Hero of Ukraine, General Director of JV Nibulon Oleksiy Vadatursky and his wife Raisa were killed on the night of July 30-31 as a result of a massive attack on Mykolaiv. The house was hit by a russian S-300 missile.
Considering the importance of Vadatursky's personality for Mykolaiv Oblast and the country's agricultural sector in general, theories about a targeted attack on his home appeared almost immediately. Some commentators even saw a connection between the attack and the Istanbul Agreement. This cannot be ruled out, however, given the almost daily shelling of the city in the summer, the likelihood of civilian casualties among many other Mykolaiv residents seems more plausible. Andriy Vadatursky, the company’s new CEO, hired a private foreign company to investigate the circumstances of his parents' death.
Nibulon, which is the same age as independent Ukraine, celebrated its 30th anniversary last year, ranking 20th in the country in the rating of the largest private companies according to Forbes. Vadatursky's fortune was estimated at $430 million.
The active hostilities in Mykolaiv Oblast have threatened, among other things, one of the largest business projects of the company, which has been implementing a comprehensive investment programme to revive the Dnipro and Southern Bug as the main through-passages of Ukraine for more than 10 years. Over $2.3 billion was invested in the creation of special infrastructure, including the construction of new vessels.
In the autumn, it became known that Nibulon JV LLC appointed an international advisory board to formulate a strategy for the next stage of development. "The company continues adapting to the new operating realities caused by the war. I am pleased to announce that I have hired a remarkable group of international business experts to help the management team shape the development strategy in these challenging conditions," said CEO Andriy Vadatursky.
However, it is impossible to replace Oleksiy Vadatursky, even with a professional management team.
"Unbreakable of the Year"
The Bureau of Wines (GoodWine) company, due to the loss of its warehouse for 1.6 million bottles of wine and resumption of work even after that.
On March 3, at the height of the fighting near Kyiv, a russian missile destroyed the central warehouse of the GoodWine store located in the village of Stoyanka, Bucha Raion, one of the most iconic retailers and distributors of alcohol beverages in the capital.
The 10,000 sq. m. warehouse had 1.6 million bottles of wine, 15,000 of which were collectible wine. It also stored spirits, food, beer, water, soft drinks, home accessories, books, and decor.
The overall estimated loss was $15 million, but much more painful was the collapse of further work due to the physical absence of goods and the inability to fill the deficit due to blocked imports. To understand the level of losses: in the pre-war year, the flagship store Good Wine received revenue of about 2 billion UAH.
A wine market without wine seemed to be a finished story, but it turned out otherwise.
Suppliers, who agreed to write off or restructure the debt, supported the company. Some went even further and simply donated to the Kyiv partner. These donations covered employee salaries and other critical payments. The company was also supported by the fact that it entered the full-scale war without a significant credit load.
After May 9, there was a massive return of people to the capital, and in early summer, import restrictions were lifted – so GoodWine began to restore its range and sales. At that time, the company focused on cooperation with local suppliers, bringing their share in sales from 40% to 50%. By autumn, sales reached 70% of pre-war volumes.
After the loss of the warehouse in Stoyanka, GoodWine sold the miraculously survived, heavily smoked bottles with the slogan "Wines that survived." This phrase can be applied to the company itself.
Read also: Going in blind: Blackouts have become a challenge for the food industry. Meat, milk, vegetables are at risk. Bread is not so bad
"Deal of the Year"
Kernel Holding, from which the beneficial owner Andriy Verevsky bought 130,000 hectares of land.
Kernel, one of the largest agricultural holdings in Ukraine and Eastern Europe, has reduced its land bank from more than 500,000 hectares to 380,000 hectares in 2022. It happened in the first half of the year, in particular under the pressure of the sowing season, uncertain export prospects, and the ability to service loans.
More than 130,000 ha were bought by companies related to Kernel’s beneficiary Andriy Verevsky. This deal had many readings on the market, including conspiratorial ones – "withdrawal of assets", especially given the location of the land – in the relatively safe Western region.
Verevsky in his message to shareholders explained that the idea to reduce the land bank did not come from him at all: considering the limited progress made then [in March] with creditors on a new debt repayment schedule, in April 2022 the board of directors decided to sell some farms to reduce risks to the business.
It is clear that at that time, there was no need to rely on increased interest from investors and attractive offers. Ukrainian assets were worth almost nothing. "So I decided to intervene and offered a price of $210 million. An independent appraisal confirmed that the proposed price corresponded to the fair value of the assets disposed of as of the date of the transaction," Andriy Verevsky said in the company's report for the last fiscal year.
"Unlucky of the Year"
UkrLandFarming Holding that lost its largest poultry farm – Chornobaivska. Several times.
Chornobaivka, in addition to a vivid war meme associated with the repeated, but futile attempts to capture this settlement by the occupiers, is also the address of one of Europe’s largest and most modern chicken egg production enterprises.
Chornobaivska poultry farm, being a part of the Avangard holding (part of UkrLandFarming), found itself in the epicentre of the fighting, and by March 2 lost access to electricity due to the shelling.
Due to the refular incoming shellings, the company was unable to feed the poultry, maintain sanitary conditions, and transport workers. As a result, 4.5 million chickens died at the enterprise.
Avangard Agro Holding estimates losses at $330 million. In particular, losses from the death of poultry amount to about $20 million, lost income from unlaid eggs – $160 million, and destroyed or stolen equipment worth about $150 million.
At the same time, Chornobaivska poultry farm is the largest, but not the only loss of Oleg Bakhmatyuk's egg business. The Areal-Snigurivka poultry farm in Mykolaiv Oblast was bombed, and production in Mykolaiv, Volnovakha, and Bakhmut was also stopped for obvious reasons.
By autumn, five poultry farms out of the pre-war 11 remained afloat in the company. The largest, which accounts for 80% of production, is the Kamyanets-Podilsky one. As a result, Avangard's egg production has decreased by 60% of the pre-war volume. In kind, the decline in production is about 100 million pieces per month.
The holding’s actual land bank has decreased from 470,000 ha to 310,000 ha. The land in the occupation and in the "gray" zone, where military operations are underway: in Kherson, Mykolaiv, Donetsk, Lugansk, part of Zaporizhzhia and Kharkiv oblasts, was lost. The loss of machinery is estimated at $80-100 million, and material resources, such as fertilizers and seeds, at a comparable amount.
For any other company, losses of such magnitude could be called a catastrophe. However, Oleg Bakhmatyuk has repeatedly proved his ability to get out of the most hopeless situations.
Read also: russians destroyed production at Chornobaivka poultry farm – losses amounted to 12 billion UAH
"Positive Surprise of the Year"
MHP Industrial Holding and its beneficial owner Yuriy Kosiuk
Like every other representative of the agricultural industry, MHP Holding, the largest poultry producer, faced war, logistical, and energy challenges and suffered inevitable losses. The most notorious of these are the rocket attack on Ukraine's largest warehouse in the village of Kvitneve (Kyiv Oblast) on March 12, which destroyed more than 3,000 tonnes of products, and the shutdown of the 34,000-tonne-per-year Ukrainsky Bacon meat processing plant in April.
However, this notwithstanding, the company's performance during the war, although decreased, turned out to be almost the best among players of a comparable scale. And they demonstrated what real business stability is.
Thus, the volume of chicken production for the three quarters in Ukraine decreased by only 7% and amounted to 515 488 tonnes. At the same time, the European segment showed growth – the volume of chicken production increased by 11% to 92,900 tonnes.
MHP's export revenues increased by 32% to $1.1 billion, accounting for 59% of total revenues. Operating profit decreased by 57% to $176 million year-on-year. The operating margin decreased from 25% to 9%.
For the period that has ended September 30, the company estimates war-related expenses at about $45 million. It seems like a significant amount (and it is) until you compare it with others. For example, the Kernel holding estimates its war-related losses at more than half a billion dollars – $543 million.
MHP was also distinguished by a very competent approach to the provision of humanitarian aid, controlling and optimizing this process. And then, after the normalization of the situation around the capital, it delicately redirected the aid to the areas that need it more.
The company’s beneficial owner also added points to his personal image. Yuriy Kosiuk, who was associated with the attributes of luxurious life and wide lobbying opportunities, did not join the nominal "Monaco Battalion", but continued to stay in Ukraine. Hardly 100% of the time, but constantly enough that it did not go unnoticed by the industry.
Read also: Mind nominations 2022: companies and persons, who impressed during the year.
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