SERGIY KASIANOV: “KSG Agro’s strategy is adapted to possible risks: the agricultural holding is increasing investments and export volumes,” reads the company’s statement

How does Ukrainian business react to the threat of a military invasion from Russia? This question has been frequently asked to me by our European and American partners since 2014. However, the latest events around Donbass require that you get an answer to it, as they say, first-hand. There has been a lot of information about this in the media lately. Unfortunately, it contains a lot of inaccuracies. Therefore, using the example of KSG Agro agricultural holding and confirmed European data, I would like to show how the real Ukrainian environment reacts to possible risks associated with Russian aggression.

The geopolitical situation around Ukraine remains difficult. The threat of invasion from Russia has a negative impact on the macroeconomic indicators of the country. The recent decision of the government of the Russian Federation to include the occupied territories of the Luhansk and Donetsk regions into its structure also does not add optimism. However, I will take the liberty and on behalf of the entire Ukrainian business I want to state the following: the aggressive policy of Russia and other challenges have never been considered by serious Ukrainian companies as a reason to curtail economic activity.

Since 2014, businessmen in Ukraine have demonstrated the effectiveness of their adaptive strategies. To the full extent, this also applies to our company KSG Agro. We have learned not only to survive, but also to show dynamic growth in the face of growing uncertainty, economic and political crises, the threat of a Russian invasion and the coronovirus epidemic. And this is by no means my subjective opinion, but the general state of the Ukrainian business environment. In particular, it is confirmed by Deloitte. Its analysts are confident that official statistics do not reflect the real state of affairs in Ukrainian business (https://finance.liga.net/ekonomika/article/gde-okazalsya-ukrainskiy-biznes-v-2021-godu-i-chto-ego- jdet-intervyu-s-partnerom-deloitte). Despite COVID-19 and the conflict in Donbas, the last six years have been the longest period of relatively stable growth in the history of independent Ukraine. For my part, I can confirm that the results of the work of our agricultural holding really confirm Deloitte’s data.

The recently published report of the European Business Association (EBA), of which KSG Agro is a member, also speaks about the over-adaptation of Ukrainian business to the situation of military conflict

https://eba.com.ua/biznes-prodovzhuvatyme-robotu-v-ukrayini-navit -u-razi-vijskovogo-vtorgnennya.

EBA includes dozens of both Ukrainian and major Western companies that have been operating on the Ukrainian market for a long time. According to the survey, only 7% of them believe that external aggression can lead to the closure of their business. 45% of the surveyed companies will continue to operate on the territory of Ukraine even in the event of an invasion by the Russian Federation. 17% are considering moving to the western regions, and another 10% consider doing so in the worst case scenario. Possible business relocation may be necessary only for those companies that operate directly near the conflict zone. There are actually very few of them.

If we talk about KSG Agro, our entire production and raw material base is located far beyond from the Donetsk and Lugansk regions, i.e. outside the zone of not only the current, but also the potential conflict. All state institutions, enterprises and offices of the Prydniprovsky region and the Dnipropetrovsk region work as usual. Including hundreds of our employees – machine operators, pig breeders, veterinarians, drivers, agronomists – all who make up the staff of our agricultural holding. Every day, products are shipped to foreign markets and the largest retail chains of Ukraine – Silpo, Varus, etc.

KSG Agro takes care of the safety of personnel and the safety of all business processes on a permanent basis, for many years this has been an important part of our corporate strategy. Stable, mainly on its own raw materials, a feed mill operates, providing the maintenance of 52 thousand heads of pig herd. Export shipments of grains, flour and sunflower oil continue through the Black Sea ports to Africa and the Middle East through our Swiss company, a trading company Abbondanza SA.

Moreover, KSG Agro not only does not reduce, but also continues to increase the investments provided for by the development strategy. In particular, the reconstruction of the fattening building at the pig farm in the village is in full swing. Niva Trudova (Apostolovsky district, Dnepropetrovsk region). The total amount of investments planned for the current year is about UAH 15 million plus the equipment of the German company Big Dutchman, purchased by us earlier. The crop growing business has carried out fertilizing winter crops and is preparing equipment for spring field work. Our holding purchased fertilizers before their significant rise in price due to growing gas prices.

Today, we have also completed the development of a pilot project for land irrigation for corn and hold a tender for the purchase of equipment. The project will be implemented this spring.

The margin of stability obtained by KSG Agro due to a 75% increase in the grain and oilseeds crop last year allows the holding to look into the future with confidence. Same is true for the economy of Ukraine as a whole. Thus, according to the data of the National Bank of Ukraine, the net inflow of foreign direct investment in Ukraine in 2021 reached $6.0 billion. For comparison, the net outflow of investments in 2020 amounted to $58 million. According to the National Bank, the inflow in 2021 was formed mainly for income reinvestment account in the amount of $4.2 billion, while in 2020 investors, on the contrary, withdrew income in the amount of $488 million. These income reinvestment figures also include the share of our agricultural holding.

The absence of any panic is also demonstrated by the recently opened land market in Ukraine. Thus, in Ukraine for the week of February 11-18, 4.35 thousand land transactions for agricultural plots were carried out, which corresponds to the indicators of the week before last (4.44 thousand transactions), and in terms of the total area of sold land plots it exceeds it by 2%.

Despite the intensity of passions in the information space, seasonal agricultural work, production, logistics – everything is working steadily as planned. Me, my family, children – we are all at work – at our enterprises located in the Dnipropetrovsk region. This year we are preparing to celebrate extensively the twentieth anniversary of founding KSG Agro. We have something to be proud of, we survived the difficult years of 2014-2015 and became one of the industry leaders in Ukraine. Today we are much stronger, more experienced and more self-confident.

And today, at a meeting of the Board of Directors, we made a decision to revise our strategic options aimed at enhancing the development of our business. All this gives me every reason to assert that our company will be able to successfully overcome all the challenges of the external environment in the future. Including the negative consequences of information wars, to which Ukrainian business has become accustomed to over the past 8 years of the conflict in the east of the country and has developed a certain immunity.

Taking this opportunity, I would like to address partners, investors, shareholders, media journalists – let’s calmly and in a balanced way assess what is happening, not give in to panic and objectively assess the risks. I am sure that by achieving our business goals, maintaining social and economic stability, creating new jobs, we are making a decisive contribution to peace.

Sergiy Kasianov,

Chairman of the Board of Directors at KSG Agro