AGROGENERATION - "SUCCESS STORY"

April 28, 2017

Over the decades, since AgroGeneration appeared on Ukraine’s map for the first time, this dynamic and successful company has grown to have nearly 1,500 employees and concentrated the land bank of ca. 120 thousand hectares in five regions of Ukraine — Lviv, Ternopil, Zhytomyr, Sumy, and Kharkiv.

Its experience along with skillful management from the West and the application of efficient practices has laid the foundation for a good start leading to growth and development of AgroGeneration. The results of our first decade give solid grounds for optimism. The Company’s production capacities reach up to 390 thousand tons and storage capacities exceed 240 thousand tons.

 

The share of export sales increased up to 45%. Yet, AgroGeneration’s ultimate key to sustainable profit is its healthy business; that’s what the company is focused on.

“We are a resolute team sharing a common company mission. One of our main principles is to have a caring attitude towards our land and to treat the environment with respect,” emphasized John Shmorhun, Chief Executive Officer of AgroGeneration.

Aimed at responsible farming, the company improves each step of the operational process. AgroGeneration’s effective production management strategy lies in clustering. In the opinion of the company’s Vice President Serhii Bulavin, such an approach allows for the diversification of geographical assets and mitigation of weather risks. That is the reason why winter wheat, legumes, and sunflower are grown in the Eastern cluster, whereas barley, rapeseed, winter wheat, soybeans, and peas are grown in the Western cluster. Good results are secured by a well-designed crop rotation, quality fertilizers, seeds, and crop protection products.

AgroGeneration actively invests in up-to-date technologies and human capital. When planning its resources, the company uses advanced information systems. Availability of bigdata encourages deep information analysis. This additional technical statistical process is widely applied throughout the company. All farm vehicles at the company’s farms are equipped with fuel sensors and GPS-navigation allowing not only to save on fuel consumption, but also to ensure precise sowing and to reduce harmful emissions into the atmosphere.

Lean Six Sigma is one of the many innovations introduced by the company and its clusters. It is essentially about resource-saving production, optimization of costs, enhancement of agricultural technologies, and improvement of production quality. Presumably, Lean Six Sigma will penetrate into all levels of the company – from top management to minor participants of the production process. AgroGeneration hopes to achieve this by the end of 2017. For the time being, this is the first practical implementation of the system in the industrial agriculture of the post-soviet states. Thus, our pioneer results will be of great value not only for the business itself, but also for further development of the entire agricultural sector of the country.

“After the introduction of progressive principles and approaches along with the consolidation of structures and systems – financial, managerial, technological systems etc. – we see a growing interest of the market in our company and in its financial results,” said the CEO of AgroGeneration John Shmorhun.

Effectively organized cash flow is an important sign of the company’s sound financial standing and of its valuable business reputation. For example, having a spectacular reduction in net losses from EUR 7.9M in 2015 to EUR 0.9M in 2016 demonstrates a positive tendency. AgroGeneration’s financial director Olena Levchenko believes that this is the result of the aligned interaction among the top-management, farm directors, agronomists, machine operators, analysts, and employees of even the smallest production link.

By the way, all employees of the company have individual key performance indicators (КРІs). Based on the strategic and tactical targets, there have been defined working priorities and tasks to be fulfilled by the company. They were disseminated to middle management and, in the future, to every employee. Preliminary financial results show that the introduction of the KPI system delivered a positive outcome – all of the planned projects have been realized. Such indicators as yield per hectare, expenditures, land KPIs, and others help visualize the long-term development perspectives of the company.

Now we are also testing precision farming. Last year, having made soil tests, the company increased its application of fertilizers and crop protecting products, which also lead to the increased cost of agricultural production. Striving to balance this difference, every cluster gives top priority to the introduction of advanced agricultural technologies and the achievement of higher farming productivity (by way of the growing crop profitability and yields).

Our financial sustainability is shaped by and growing in the fields, which is why the most important thing is accurate production planning and a detailed financial analysis of all chains of the agricultural technology. This will ensure the achievement of planned results at the end of the season. Moreover, as a rule, cross-divisional interaction during the adjustment of production processes brings good results.

In order to hedge its risks, AgroGeneration sells 40% of its products under the forward contracts. The concluded prepayment agreements for a part of the harvest demonstrate not only the company’s ability to supply the industry with high-demand products, but also its credibility in the eyes of the international players.

By the way, AgroGeneration allocates more than 1% of its revenues to support local communities in the territories where it rents its farmland. Over the past three years it has realized 40 thousand charitable initiatives. Is this a big or a small number? Every project reveals somebody’s story or a little piece of rural life history. A sound business won’t brag about its social responsibility. It takes care and gives help simply because it has its principles and follows them day after day.

 

About AGROGENERATION:

Founded in 2007, AgroGeneration is a global producer of grain and oilseed. Following its merger with Harmelia, the new Group has become one of the top five producers of grain and oilseed in Ukraine, with close to 120,000 hectares of farmland. Through the high-potential farmland it leases, the Group's ambition is to meet the food challenges of tomorrow as global consumption doubles in scale between now and 2050.