General Director of "Ukrtransagro" Pavel Plotnikov: "It was a year of strength tests"
What has UTA Group achieved and what has it lost in the outgoing marketing year? What are your plans for the new season? Ports of Ukraine talked about this and many other things with one of the top managers of UTA Group, Pavel Plotnikov.
- Pavel, let's start with the actual - news about the interest of the SBU in the readings of the ASRZ electric meters and the reasons for the use of two berths by Ukrtransagro. Was this letter from the SBU continued?
- So far there has been no continuation. The information they asked for is a little funny. Our legal department, of course, is working on the answer, but it has not yet influenced our work. In any case, you must agree, it seems that someone really doesn’t want neither ASRZ nor the terminal to work?
It was very hard ...
- Then let's talk in more detail about the resumption of transshipment by the terminal at the berth in the Mariupol port. Who made the decision to unblock the berth? Indeed, in early February, the captain of the port of Mariupol, by his order, banned the use of the berths of the ASRZ, allegedly due to the lack of permits for the operation of hydraulic structures and their unsatisfactory condition.
- Yes, that's right. Unfortunately, since February 1, our company has become hostage to the situation that arose in connection with the ban on the use of berths in the water area of the ASRZ. Since that time, our terminal has not operated as a marine terminal. The management of SRZ LLC, the management company, made every effort to resolve this problem as soon as possible.
And we can say that everything worked out for us even a little better than one could assume and what we were preparing for, what we were waiting for. It was strategically important for us to get access to the berths by the beginning of the new season, it is advisable to ship a couple of ships to show clients that we have resumed work and there are no risks in the new season. So we planned for ourselves back in February-March, but, to be honest, it was not hard to believe in it. Our work depended on the state, on the SPF. Understanding the mechanism of the bureaucratic machine, the terms in which it was used to working, it was hard to believe that at least until the summer something would become clear. But the pace with which the SPF began to accept the property of the shipyard and register berths in the Register pleasantly surprised us. At the end of May, the entire package of documents was completed, and we resumed loading ships from our terminal.
- That is, you have an agreement with the SPF? Or with SE "ASRZ"?
- You know that SRZ LLC transferred all property to the SPF. SE "ASRZ", as the new owner, received from the Register passports for the berths - those that we allegedly did not have, which is why the port captain closed the water area for us. And we signed an agreement with SE "ASRZ" for access to the berth.
- Is the contract urgent? After all, an early privatization of the property complex of SE "ASRZ" is being announced.
- Urgent, for three years. It involves termination by agreement of the two parties. For our part, we have thoroughly worked it out legally. It is important for us that some views and moods do not change again - we have contracts, ships are chartered. And so that we are not told unilaterally: sorry, but tomorrow you cannot ship there. It has been proven that everything can be expected from the state. When the water area was closed to us, no one asked: how much are your ships worth? How long does it take? How many goods do you have on the terminal? How many employees are employed and how do you plan to pay them wages? Therefore, we were serious about proofreading the contract.
- What are the consequences of the four-month blocking of the berths of the ARSZ for your enterprise? Did the extra logistic link in the form of cargo delivery from the terminal to the berths of the Moscow Sea Port affect profitability?
- It was significant and pleasant for us - not a single client left. We made sure of partnering with clients, and they made sure that we are serious about our obligations. We fulfilled all obligations to them, and they went to meet us. So, everyone agreed that we slightly reduced the loading rate. We have on average 5 thousand tons of loading under the contract, usually we loaded up to 6 thousand tons, fodder is even faster.
After the water area was closed, we were forced to conclude contracts with SE "MMTP" for stevedoring services and with the forwarder "Asket Shipping" - for registration. We are grateful to these partners for their help and support. Plus, we hired carriers to transport all goods from the terminal. Of course, we have suffered losses during these four months. We completely took over them, the clients paid the rate, which was agreed in the contracts. We also preserved all social obligations to our employees, we did not reduce the staff, this was also one of the priorities. Despite the fact that we went into a deliberately unprofitable model, we continued to pay salaries.
- And yet, how many were the losses in figures? At least straight.
- According to our calculations, the losses amounted to about $ 200 thousand. It was difficult. Thank God, there were no demurrage or contract failures - this was the most important thing for us.
- The marketing year is coming to an end. Are you ready to summarize its preliminary results?
- Last marketing year we shipped almost 700 thousand tons, I think we will finish this year at 430 thousand tons. To say that this is not enough - with all the events that took place in the outgoing season - I will not turn my tongue. This is actually a very good figure. With the exception of the last two fruitful and record years, we previously produced 420-430 thousand tons per year.
- The results of the work of grain terminals in the outgoing grain season were affected by the poor harvest of grain in Ukraine and the global coronary crisis. Can this be asserted in relation to the UTA Group?
- You know, the closure of the water area has become such a fat point in this anomalous season. And it's not even a pandemic. First, in July, after the hurricane winds, the silo fell at the terminal - on the auto reception and grain dryer. And this is the height of the season - lines of 300 cars at the accumulation site! We managed, although only by November the equipment was completely restored.
Then in August there was an explosion in the port of Beirut. And our clients made up to 30% of deliveries there: during the explosion, two ships from Mariupol were just standing there for unloading. This was the second blow for us - our clients began to reconsider sales markets and logistics to them.
Then fluctuations began in the market - prices were rising, and everyone thought: to sell or not? There were clients who stopped purchasing for a month and a half, not understanding what was happening.
By December, it had leveled off. And in February the water area was closed for us. And soon the first information appeared that Russia was beginning to pull troops to the border. Customer concerns again. And ours too.
In general, everything that could and could not happen in this marketing year, probably - everything happened! It was a year of testing our strength. But we did it. We managed to retain all clients, fulfill all obligations and retain the full staff of the staff.
About logistics and not only
- Are there any changes in the geography of shipments following the results of the outgoing marketing year? Perhaps new markets have emerged?
- Turkey, Egypt, Lebanon, Italy, Spain, Israel remain the main ones for us. Naturally, the directions change in different months, but in principle there are no special changes.
- What is the number of employees of your enterprise now? What is the dynamics of the number: growing or declining? Average salary at the enterprise?
- The main staff is about 80-85 people. We recruit about 10 more people during the season. This is due to the opening of an accumulation site at the entrance to the city, where 200-300 vehicles accumulate at the terminal before unloading. We dispatch them and direct the flows so that there are no traffic jams in the city.
We have formed a reliable motivated team, so there is no problem with staff turnover. The average salary at the enterprise is about UAH 14 thousand. Our HR department is working very seriously. We are constantly analyzing personnel in all areas, we have training cards and motivation cards. No matter what tests take place, I can say with confidence that every employee empathizes and will always support our company.
- Which of the grain crops processed by the terminal can show positive dynamics next year? What are the predictions of marketers?
- If we talk about our clients and take the last two years, then 90% is wheat of food varieties, the rest is fodder. Customers try to ship oats, corn and sunflowers. Peas this year can be up to 40 thousand tons. But the meal is for the second year already logistically more profitable to send to Nikolaev, and I doubt that it will return to us.
If we talk about UTA Group and our chain from the field to the port of unloading, then we focused on monocultures - turnover is important for us, and if we start to accept different types of crops, productivity decreases. It is more profitable to abandon some crops and focus on the main ones. In the new season, we plan to focus on wheat. Taking into account the weather, we predict that there will be more forage. We are not planning to work on barley. Depending on ripening and weather, it is possible that peas will go before the wheat.
- Are your clients located in Donetsk region or are there from neighboring regions?
- Everything is determined by logistics. We are open to clients from all regions. There are those who strategically and vertically develop their business in this region and do not go anywhere else. Some, on the contrary, work from Russian ports to Odessa - with linear elevators, with supplies by rail and cars.
- What is the ratio of rail and road logistics when delivering grain to your terminal? What does it depend on?
- 100% to zero - everything comes to us by road. And if we take four or five years ago, it was 30% by rail, 70% by cars. Cargoes from the Kharkov and Lugansk regions, the north of the Donetsk region were going along the piece of iron. Now the tariffs of "Ukrzaliznytsia" are the same - from Kharkov to Odessa, that to us. Accordingly, it is not profitable to bring to us because in Odessa the prices for products are higher. At one time we turned to the Ministry of Infrastructure, to Ukrzaliznytsia to introduce regional special tariffs, but they did not hear us. Classical European logistics assumes that within a radius of 200 kilometers, goods are delivered by cars, and anything larger - by rail. Our cars carry goods within a radius of 600 kilometers, the journey takes 2-3 days. So there are no cars, and I see no prospects for them to come to us.
- Are you, besides everything, a top logistic company "UTA Logistic"? Has the group's work become more effective with her?
- If we start with the ideology of the processes in the UTA Group, then we get our advantages from each company in it. In the context of a global decline in rates - Nikolaev, Odessa this year again lowered their rates - and we understand that customers will come to us and tell us that, on the big water, it costs so much, and this is so much - let's go even lower! Therefore, each of our companies in this chain from field to ship, earning a little bit, help us create the margin that keeps us afloat and beneficial to our clients.
As for UTA Logistic specifically, initially there were doubts: why do we need this? There are many carriers - raise your hand and they will all be here. But today, three years later, we clearly see the benefits of this option. Our fleet has grown from five own cars to 25 (including leased ones) at the expense of other carriers who see the effectiveness of our work and want to work with us. The plus is that at any given time you have your own transport, you have a partner transport. You understand that these are "white" companies that pay taxes, and the client will not get any problems associated with this. We and our clients understand that our cars will not disappear with cargo in an unknown direction or will not reach the terminal, as happens every season with those who decided to save money and hired a carrier according to an advertisement and lost their cargo.
Plus, we have a flexible approach to the formation of rates. For example, there is volume and there is a tender, and we understand that we are interested in this cargo in order to bring it to the terminal. It is very difficult to apply flexible rates on the terminal itself because they are already low. It's easier in logistics - it's easier to find an opportunity to shrink on volumes and get this cargo. In general, there are more pluses.
- And what are the disadvantages?
- Cons in the absence of uniform rules for everyone. This applies not only to the transportation market. This is a huge problem in any industry for the whole of Ukraine. Someone works "in black", and someone - "in white", someone - with overload, and someone - without ...
"Neat" plans for the year
- Are the plans for transshipment and logistics for the new marketing year already known? What qualitative changes can occur in your work?
- According to the data of our and external marketers, from communication with the heads of farms, we assume that the season will be almost a record one. The weather is favorable, there is moisture, the main thing is not to overdo it with it. We plan to process at least 600 thousand tons.
But these plans are very neat, so to speak. We do not understand how government agencies will behave in relation to SE “ASRZ” and to “Ukrtransagro”. While we are planning, accepting applications, concluding new contracts for the next season. Rounded in the plans - 500-550 thousand tons of wheat, 60-70 thousand tons of corn and, possibly - 10 thousand tons of peas.
- How will you compete for cargo flows after the full launch of the grain terminal of the State Enterprise “MMTP” in September? What solutions are being considered?
- We have a long-term partnership with the Moscow Sea Commercial Port, and I always wish them every success. But our experience shows that the stage of commissioning can be delayed. I think that they will reach their design capacity next season. But this does not mean that today we are not thinking about increasing competition. There is nothing bad or terrible about it. It makes you develop, and any monopoly does not lead to anything good.
Today we are already competing with AP-Group and their linear elevator, with the Mariupol mill - they are 500 meters away from us. Therefore, MSCP will simply expand the number of our competitors. In competition with them for cargo flows, UTA Group has been building vertical integration for more than five years, providing a full range of services to our clients - from the field to the ship: purchase, transportation, storage, forwarding, fumigation, agency service, as well as consultations at any stage of the supply chain.
Therefore, if you look at it from the other side - what MSCP will be able to offer the client in competition with us? Today the food market is a trader's market: he chooses where and with whom to work. And who will provide the best service and more services, so he will work. We believe we provide good service and quality service.
Let me emphasize that I am talking about fair competition, where everyone works in the same legal field, on equal terms and competes at the quality level.
Investment and development
- What has been done as part of the modernization of the terminal equipment on the eve of the new grain season?
- To be honest, since February, when the water area was closed to us, we have completely frozen all projects: from modernization and replacement of equipment to personnel training. By June 20, we plan to complete the current repairs. And capital investments ... We planned to change the collection point for cars, scales - we will move everything to the next season. It was important for us to start working steadily, but we will wait with capital investments.
The main task now is to ensure work this season and fulfill the shipping plan. We are ready to invest in software and equipment improvements, but we are waiting for the climate favorable for investors that we are promised ...
- Your colleagues in the Black Sea ports pay great attention to increasing the operational efficiency of grain terminals by introducing appropriate software products. How is performance management structured at your terminal? How are you developing in this direction?
- For about a year and a half, we have been developing an IT product that will be responsible for all group reporting and process management. I think that at the end of June we will get the result and the top managers of all the companies of the group will be able to use this system. This is a single information space from which all participants will be able to take information that everyone needs: track their business processes, see the prospects of partners, form their plans, requests and needs. We have already tested this product when loading from warehouses at the berths of the ASRZ, we found many bottlenecks there, which we are very pleased with - there is something to work on and something to digitalize.
- Are there any plans for the development of UTA Group in the medium and long term?
- In 2015, we adopted a strategy for ourselves until 2020 - the main thing was to build a vertically integrated company. In January 2021, we put an end to this strategy when we bought an agricultural enterprise near Mariupol. Small, 500 hectares, but it was strategically important for us. Now our production chain has all the links: land logistics - from the field of our grain farming to the terminal and sea - from the terminal through agency services, chartering and operating ships to the final customer at the mill, relatively speaking, in Turkey. As a result, we now have information about the problems at each stage and the opportunity to improve work productivity.
Naturally, we should have already written and adopted a new strategy - for the second five-year plan, as we joke. But in February, already well-known events took place and it was necessary to solve the priority problems that we faced here and now, and we simply could not raise our hands to draw "castles in the air" of the new strategy.
In the short term, it is important for us to build the correct work in the legal and documentary field with the State Property Fund and SE "ASRZ" and other government agencies in order to be able to work stably at the berth and, of course, so that the events of last winter do not repeat themselves.
In the long term, within the grain group, over the next five years, we plan to invest in each of the companies of the MIG group - Sweet Agro Trade (grain purchase), UTA Logistic (ground logistics), Ukrtransagro (sea terminal) , Martlet (fumigation), Maritime Logistics (maritime logistics and agency services). Also in the plans is the expansion of the land bank, the increase in the vehicle fleet. One of the important directions of the further strategy will be the formation and improvement of interaction with agricultural producers. We plan to develop and create a consulting service for them - perhaps, help with the organization of cooperatives. With the beginning of the land reform, we see that such cooperation will be necessary. We want to offer services for the supply of plant protection products, fertilizers, and forward financing.
- You periodically mention ASRZ. Is there a willingness to participate in the process of its privatization?
- We are engaged in the grain business of MIG - our task is to develop it. As for ASRZ, this is a matter within the competence of the MIG Management Company.