Yurii Kosiuk, Founder and CEO of MHP agroholding: MHP to invest about $100 million in EU, Saudi Arabia
19 February 2020
A vertically-integrated agroholding with 370,000 hectares of farmland, 30 subsidiaries and 30,000 employees in 13 regions of Ukraine, MHP is the country’s largest producer and exporter of poultry meat today. It also owns the Slovenia-based Perutnina Ptuj, one of Europe’s largest meat processing corporations that employs more than 3,500 people in eight countries. In his interview to liga.net, the founder and CEO of MHP Yurii Kosiuk shares his vision of existing agricultural and land policies in Ukraine, sheds light on his company’s international investment and development plans and speaks of the role of happiness and alcohol in the workplace.
Mr. Kosiuk, after 18 years of moratorium on farmland sales in Ukraine, the Parliament of Ukraine wants to finally lift it and launch a full-fledged farmland market. Do you think this step is necessary today?
In my opinion, the launch of land market will not solve any problems in Ukraine today. At the same time, if this is said to be the first step toward more transparency and certainty in the society, this is right. I also think that constraining landowners' rights reduces the price of land and is unfair.
So, you are in favor of land market liberalization and access of foreigners to the farmland in Ukraine?
In general, yes. I support free market.
Do you plan to purchase farmland?
No, I am not interested. It is too expensive.
Does MHP have long-lasting land-lease agreements?
Yes, and I see no problem in operating leased farmland. I do not care who will own the land after the moratorium is lifted because, in general, the farmland owners have no intention to work on their land plots. They have no technologies, no team and no people that could efficiently operate a farm. At the end, they will come to my office and my total of 200 lease agreements will merge into 30 or so contracts with the landowners who do not know what to do with the land.
The government wants to subsidize loans for small farmers who are willing to buy farmland. Do you perceive small farmers as competitors?
Absolutely no. I do not care. I think small farms are inefficient in producing cash crops as compared to large-scale industrial farms. However, they may be successful in producing niche crops – that is a different story.
Can MHP be profitable without public subsidies?
Today MHP is profitable anyway and does not depend on any state support.
Your company is no longer subsidized by the government. How does this correlate with the fact that MHP does not have any ongoing large investment projects in Ukraine?
Sure, this is one of the reasons why we are currently giving consideration to investment opportunities abroad.
MHP received about $ 81.7 million in public subsidies in the past three years. How much has the company invested over the same period?
Let us compare. For instance, our total investment in the Vinnytsia poultry farm was about $ 1 billion.
What is your assessment of the share of MHP on the domestic poultry market?
For now, MHP exports over 50% of its poultry products. Our share on the Ukrainian market is about 30%.
Last year, the Anti-Monopoly Committee of Ukraine investigated the case of potentially anticompetitive behavior by MHP related to the increase of prices for poultry. Back then, the Committee estimates showed the share of MHP on the domestic market was 45%. Has this case been resolved?
Our legal department submitted all the requested documents and the Committee continues investigating the case. As a transparent company, MHP is open for any kind of audit.
Did the appreciation of Ukrainian currency that had lasted over past 6 months affect MHP?
Yes, this was a serious challenge for our business. I think that we lost about $ 70 million of EBITDA.
This year, the EU joined Saudi Arabia in the decision to ban imports of poultry from Ukraine due to the outbreak of bird flu. Accordingly, you made a decision to reduce the production by 10%. What will be the consequences of this decision for your company?
The EU restrictions are rather unpleasant but they will not last long. In the meantime, Saudi Arabia has already reopened its market for Ukrainian poultry. But we really suffered from this situation and, therefore, we decided to improve it. We work together with Ukrainian authorities as there were quite a few drawbacks on their side, in particular, regarding paperwork. The bottom line is that public officials are aware of their mistakes and are ready to correct them.
What share of MHP’s exports does go to the EU?
Of our total export volume of 350,000 tonnes, 30% goes to the EU market.
Last year MHP acquired a large Slovenian poultry plant of Perutnina Ptuj. How is the plant doing now? Which markets does it supply?
Last year we managed to increase the production volumes of Perutnina Ptuj by 30%, and this year we plan to grow by another 30%. The EU market is of priority for us, as it is still growing and there is room for development.
You are currently building new facilities in Saudi Arabia and the EU. How big are your investments in these regions?
MHP has lately invested in the projects in Saudi Arabia, the Netherlands and Slovakia. At the moment, we are considering the opportunities to invest in Serbia and Croatia. These are dozens of millions of US dollars of investments. I think the total sum can be estimated at about $ 100 million.
In your opinion, when will China recover from coronavirus and be ready to open its market for Ukrainian poultry? Which volumes do you expect to supply to China?
I hope the Chinese market opens until mid-spring. This year, if our test shipment to China reaches 30,000-50,000 tonnes, it will be great. Although this is a negligible volume for such a big country, this would be a great start for us.
MHP is currently under transformation. What would be the outcome of the recently announced digital transformation of your company?
We plan to digitize the majority of routine processes to avoid the effects of human factor.
Does it mean that you plan to reduce the number of employees? How will this impact on the MHP’s business model?
Yes, the number of employees will decrease, especially in the head office, but not much. Some employees will be redirected to our customer service department. The aim is to increase the efficiency of business processes inside the company. Our business model will not be affected.
What are the results of your experiment on monitoring employees’ emotions?
The experiment is still in progress and shows good results. Importantly, this program is useful for our employees. They can check exactly when they are most efficient and satisfied at work as well as figure out which factors impacted their efficiency and satisfaction. For instance, if somebody is involved in performing routine tasks and feels dissatisfied at that while being happier and more efficient accomplishing creative tasks, this is a sign for us that creative rather than routine tasks should be assigned to this person. An important thing to mention is that we do not dismiss the employees who feel unhappy in their workplace. On the contrary, we aim to create an environment in which everybody can enjoy what he or she is doing and, at the same time, achieve good results. I want that people at MHP like what they are doing, like the company and like themselves within the company.
At that, staff turnover at MHP is high. How many people leave the company annually?
Quite a lot. About 20% of staff each year.
Why so many?
Well, some people are not well-prepared to work for MHP. But this is an open world: people are free to choose an appropriate job. And vice versa: businesses are free to choose the type of employees they need. It is great when employees become a real team, professional and friendly.
Is it true that you have reorganized your head office into open-space zones?
Yes it is true, but our new HR Director Andrei Bulakh convinced me we should go further and equip it with a bar.
Oh, really? Will it serve alcohol?
Why not? I think there should be some alcoholic drinks available. We employ a lot of creative people and they need to relax from time to time. Lots of modern offices all around the world allow their staff to have a drink in the morning if they want to. I am open to new experiences if these make our employees more productive and creative.