BDP - Milutin Gajic 19.07.2013 - Slanje
Transcript of BDP - Milutin Gajic 19.07.2013 - Slanje
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BUSINESS DEVELOPMENT PROPOSAL FOR BUILDING A FUTURE
AGRICULTURE LEADER IN SERBIAN MARKET
(The Business idea will set new objectives, modify existing, keep upward trend of
operations with comprehensive investment policy and adequate know-how)
By
MILUTIN GAJIC
LSC & UWIC STUDENT NUMBER: 0012gzgz0312
Presented as part of the requirement for the award of MBA at Cardiff Metropolitan
University (CMU)
December 2011
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Table of Contents
Executive summary ....................................................................................................... 3
I Chapter ........................................................................................................................ 5
1. Introduction ............................................................................................................... 5
1.1 Rationale for the business idea .................................................................... 5
1.2 For this final assignment chosen scenario ................................................... 6
1.3 Aims and objectives in BDP ....................................................................... 6
1.4 Structure of the work ................................................................................... 7
Chapter II ...................................................................................................................... 7
2. The business concept................................................................................................. 7
Chapter III ................................................................................................................... 11
3. Feasibility ................................................................................................................ 11 3.1 Primary and secondary market research ................................................... 11
3.2 Feasibility – product- market- organizational- financial ........................... 16
3.3 Resource requirement evaluation .............................................................. 26
Chapter IV ................................................................................................................... 30
4. Business Model ....................................................................................................... 30
4.1 Strategic Analysis of the business Idea: identification of sources of
competitive advantage and sustainability........................................................ 30
4.3 Development of appropriate Business Model ........................................... 34
Chapter V .................................................................................................................... 35
5. Business Plan .......................................................................................................... 35
5.1 Business Plan schedule ............................................................................. 35
5.2 Discussion of critical success/failure factors ............................................ 41
Conclusion .................................................................................................................. 45
Appendices .................................................................................................................. 46
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Executive summary
Main business idea is to improve business operation in Vojvodina region and to be
one of main company on the Serbian Market. Purpose of this BDP is to improveexisting business operation and achieve bigger market share on Serbian market. Aims
and objectives in BDP are to change capital structure and better employ assets in
order to gain more revenue. Second main objective is to make organisation more
efficient with significant cost cutting where it necessary for better business operation
– to be more productive. The business idea will set new objectives, modify existing
objectives in next period of 3 years (time frame), and in practice this mean to keep
upward trend of operations, comprehensive investment policy, adequate know-how,
secured distribution channels with main goal to become another agricultural giant on
the market.
Agriculture is also the only sector in Serbia with a positive foreign trade balance, and
it represents the core of foreign export development for our country. Serbian
agriculture has great potential and favourable trade conditions – with preferential
access to key foreign markets (CEFTA, EFTA, EU, Russia, Belarus, Turkey and the
USA)
For next 3 year Group will expand, with higher profit margin, business operation in
Serbia. Investment in new Silos capacity 15.000 T, organisational structure improved,
better funding source as well as increased sales with better sales channels. Financial
resources for this will be about 7 EUR mio. From this EUR 7 mio, EUR 5.5 mio need
to be refinanced with cheaper funds, and EUR 1.6 mio need to be borrowed for new
silos (long term investment loan).
Operation Plan prepared in order to improve current business operation as well as
better financial structure:
Meeting with the Banks
Meeting with the business partners
Financial analysis of whole Group
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Refinance existing loans with cheaper funds for financing purchase material
Investment in Silos with capacity of 15.000T
Organisational consolidation ( expanded sales region)
Improved sales - joint production to improve profitability
KPIs will be monitor weekly, monthly and at end of every business year. Analyzing
these indicators Mirotin Group will achieve objectives, and will be able to perform
correction in business operations. Beside KPIs, management of the Group need to be
aware of all identified risks and this is the best way to success and final goal of BDP:
MIROTIN GROUP - FUTURE AGRICULTURE LEADER IN SERBIANMARKET
Adopted competitive advantage which permanent improvement of business
operation, Group will be always ready to make necessary changes in business
operation and be a leader not a follower. This strategy will secure success and
expansion and resolve all problems which currently exist in business (indebtedness,
high leverage, low profit margin, new investment)
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I Chapter
1. Introduction
Parent Company Mirotin doo consolidates its accounts with these Serbian companies:
Mirotin-Tisa, Sava Kovačević, Fabrika ulja Banat, R.G. Ečka, Mirotin Invest, Mirotin
Vet, and Mirotin Energo. The biggest impact on Group business operation has three
companies:
- “Sava Kovačević” JSC , Vrbas, 94% ownership ,
- „Banat“ JSC, Plant oils, Nova Crnja 73% ownership,
- “Ečka” Fish farm, JSC Lukino Selo 47% ownership,
1.1 Rationale for the business idea is to achieve improvement in existing business
operation of the Company where I am currently employed. Members of the Board
chose me for this task in order to develop BDP for next 3 year to meet their
expectations. Company Mirotin need to fight to stay competitive and the only
alternative is constant struggle for every new customer-buyer and achieve savings in
business operations. It is obvious that the macroeconomic business conditions will
not improve over the short term. Improving profitability with cheaper source of funds
and better organization is something what will be the most important task for the
company in next 3 year. But also in time of crisis new investment need to be
completed in order to be market leader not the follower.
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1.2 For this final assignment chosen scenario is my employing organisation Mirotin
in managerial role where I am looking for opportunity to prove myself in eyes of
Company’s owners and prepare a 3-year business plan. These business plans need to
resolve all problems which are currently existing in business (indebtedness, high
leverage, low profit margin, new investment). Observing 2012 performance on the
Mirotin group level (FU Banat, Sava K, Mirotin), it is noticeable that despite harsh
weather conditions during the previous summer, the growth of operating income has
been preserved. With debt and operating liabilities that grew slower than the
operating activities, Total liabilities / Sales and Debt / Sales ratios had improved over
2012. But due to the fall in profitability, Debt / EBITDA surpassed tolerable level
reaching 7.5x marks in 2012. The Group is driven by heavy leverage (mainly
financial), and high, sustainable profitability is an absolute must for ensuring regular
debt servicing ability.
1.3 Aims and objectives in BDP are to change capital structure in favour of cheaper
cost of funds as well as to better employ assets in order to gain more revenue. Second
main objective is to make organisation more efficient with significant cost cutting
where it necessary for better business operation – to be more productive.
In first year goal is to reorganize funding sources – to eliminate all banks
loans with high price (interest rate over 7% p.a.) and finish new Silos with
capacity 15.000 T .
In second year goal is to change organisation in order to be more efficient and
to be able for better answer on competitor’s challenges (improved customer
care, and better supply chain).
Third year is crucial where profitability of the business operation need to be
on targeted level as well as to get bigger market share with better sales
channels (new buyers, new markets).
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1.4 Structure of the work - this BDP for improving existing business operations as
well as to change organisational structure will be explained in five separate chapters
as follows: I chapter: Introduction (idea, scenario, aims, and structure of BDP for
next 3 year), II chapter: The business concept (in this part whole business concept
will be discussed and explained), III chapter: Feasibility (feasibility studies, research
of the market in order to secure our success), IV chapter: Business Model (show
how improvement will be achieved in order to have successfully business operation
in next 3 year) and V chapter: Business plan (will be explain in detail)
Literature and concept used in this final work are:
Porter, M. (1980), Competitive Strategy
Porter, M. (1985), Competitive Advantage
McCarty, (1960) Basic Marketing
Ross, Westerfield and Jordan (2008), Fundamentals of Corporate
Finance,
Cavusgil, Knight & Riesenberger, (2008), International business
Porters 5 forces model
Porter’s value of chain
4Ps
SWOT analysis
BCG Matrix
Red Ocean Strategy
Pricing strategy
Chapter II
2. The business concept
Main business idea is to improve business operation in Vojvodina region and to be
one of main company on the Serbian Market. Purpose of BDP is to improve business
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relationship with existing and new successfully companies on market. When selecting
customers (dispersion of customers) company will apply adequate control, especially
over the limit and volume of business cooperation in order to check the credit
worthiness and secure its claims in the event of a problem with collections (bills,
compensation, factoring ....). The Business idea will set new objectives, modify
existing objectives and relate these to a future time frame of 3 years, and in practice
this mean to keep upward trend of operations, comprehensive investment policy,
adequate know-how, secured distribution channels with main goal to become another
agricultural giant on the market. Aim is profitable and safe business operation
secured with strong support from maximum three Banks (to have better negotiation
position, and to reduce dependent for only one creditor). The opportunity for
improvement is significant.
For the Company first priority are buyers and to keep them loyal we need
continuously to improve quality of products and services in line with their needs,
expectations and desires of its clients (Porter's five forces analysis: Industry
competitors, Buyers power , Suppliers , Threat of substitutes, Threat of new entrants).
According to Porter (1980) “the state of competition depends upon five basic
competitive forces”. Also new investment will be performed in new Silos with
storage capacity 15.000 T. This service will allow company to generate only form
rents additional income in amount of EUR 500.000 per year.
The Company together with subsidiaries operates in the market of Serbia and foreign
markets. Over 70 percent of its foreign operations are related to the export of dairy
products, primarily to the markets of former Yugoslav republics (Slovenia, Croatia,
Macedonia, Bosnia and Herzegovina, and Montenegro), as well as to the markets of
the EU countries: Italy, Hungary, Germany, and others. The Mirotin Group is the
fourth ranked agriculture system in Serbia measured by sales in three consecutive
years - higher income had had only Victoria Logistic and Delta Agrar.
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Crucial for 1st year is to refinance all expensive Banks loan what the company Sava
Kovacevic has, because this is too much weight for cash flow (interest expense is too
high as well as repayments of principal). With this reduced funding costs will be on
proper level and in line with the Company profit margin. To finish investment in
Silos (capacity 15.000T) with Market Value EUR 2.864.485,00. Increased storage
capacity will allow to the company to have always available products to sell when
price is higher and row material base for oil production during whole year. Also
additional storage space will generate income from rent to other companies. New
Silos 15.000T with MV (market value) EUR 2.864.485 will be finish in three phases
in next 6 months as follows: Phase I - the current MV in this phase of construction is
EUR 589.290, Phase II: MV EUR 987.685, Phase III: MV EUR 1.876.800.
In 2nd
year plan is to on Group level change organisation structure – actually to
improve some parts to be more efficient for new demands and challenges in third yearas well as to start preparation for development business operation on new foreign
market (Greece). Mirotin group will produce Oil Private Label for retail chains, and
in return they ask for good shelf positions for Banat and Sava Kovacevic brands. This
Production:
- Wheat and crops production ( Sava K)
- Milk production and cattle breeding ( Milkfarm “Dana”)
- Oil and fats production ( FU Banat )
- Fish production ( Ecka)
Trade:
- Oil products ( Mirotin , FU Banat)
- Grains ( Mirotin, Sava K)
- Industrial crops ( Mirotin)
- Feedstock for nitrogen fertilizers ( Mirotin)
- Artificial fertilizers ( Mirotin)
Mirotin Group
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will be achieved through exclusive arrangement with Veropulos Group as well as
active agreement with Delhaize Group, IDEA and Mercator S.
In 3th year goal will be increasing sales with much higher profitability in order to be
leading agricultural company on Serbian market, and will be analyzed every segment
in business operation – primarily activities and support activities in line with
Porter’s value of chain (Porter, 1985) , to improve efficiency .
SWOT analysis is the best way for screening about strengths and weaknesses inside
the Company, and what situation on the market are - opportunities and threats outside
of the company. Strong global demand for food is creating new markets for Serbian
agribusiness companies. Now exporters need investment to continue expanding, yet
capital has been scarce since the financial crisis. Based on all this, it can be
concluded that the enterprises in this sector recorded an enviable growth but not as a
result of primary production. This growth was launched by enterprises dealing with a
higher procession phase (milling and animal food), as well as trade in agricultural
products (milling enterprises have appropriate capacities for this, and the Group
intensifies organization of primary production and purchase of agricultural products).
Opportunity
increasing the market share
new markets - global demand for food
export
production activity helps to increase margin
Green energy - Power plant with the use of biogas from cattle manure
Fish farm Ecka that consumed vast amount of capital injections in the recent years
not showing yet the ability to retrieve these investments at a relatively fast pace.
However, from the long run perspective, this could turn out to be strong pillar of the
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group’s future growth having in mind Serbian market of fish products traditionally
lacking of stable, cheaper domestic supply. Because of consumers' requests and
market needs, with the price playing a decisive role, products are about 15 percent
cheaper than competitive ones.
Price strategy is very effective element of Group marketing strategy. With the
business motto "Quality above all", Mirotin Group has managed to enter on highly-
demanding market of Greece. Mirotin Group products already are in Roda markets
and the stores of market chains Valdi, Gomex, Metro, Delhiaze.
Biogas factory with the capacity of 1 megawatt (MW ), by building this plant, Sava
Kovacevic is the first company in Serbia to use biogas from livestock manure to
generate electric and heating energy. This investment was finished, and it is
reasonable to expect positive effects for the entire group through energy
independence and cost reduction. Power plant with the use of biogas from cattle
manure, produces electricity and thermal energy for needs Sava Kovacevic AD.
Chapter III
3. Feasibility
3.1 Primary and secondary market research
Purpose of this market research is to justify necessity for changing capital structure
(less expensive funding costs), improve/strengthen organisation and sales growth
with better profitability. This research will investigates and examines financial costs,
distribution channels as well as competition – main competitors on the market. The
result of this activities will be used in for achieve the objectives for BDP in next 3
year periods.
Research questions:
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1. Current financial structure (LTL vs. STL) and financial expenses (interest
rate structure )
2. Midterm investment loan for finance new Silos with capacity 15.000 T
(primary research)
3. What is alternatives for refinancing expensive loans (primary research )
4. Employees with low performance and with inadequate behaviour (desk
research)
5. Organizational chart – what need to change (primary research)
6. Client satisfaction with current products (literary research and primary
research)
7. Payments behaviour (desk research)
8. What is market trends in agro business (literary research, desk research )
9. Profitability (desk research)
Research Objectives:
1. What cause indebtedness with interest rate over 7% (primary research)
2. To prove investment according market demands3. Selecting new core Bank or Investment fund (new shareholder)
4. Reorganisation in order to achieve better performance
5. Logistic and supply value of chain
6. Product mix – improvement
7. Clients complaints and difficulty
8. Identify (if there any) gap in the market
9. Cost cutting , better profit margin
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Data needs
matrix
Primary Secondary
Quantitative What is alternatives for
refinancing expensive loans
Midterm investment loan for
finance new Silos with capacity
15.000 T
Current financial structure ( LTL vs.
STL) and financial expenses ( interest
rate structure )
Payments behaviour - invoices and
payments orders
What is market trends in agro business
Profitability
Qualitative Organizational chart – what need
to change
Client satisfaction with current
products
Employees with low performance and
with inadequate behaviour
With provided data and information will be presented to the owners of the company
and explain what cause current situation and what future actions need to be done. All
collected data and information first will be analyzed and compared in order to get real
picture. Intensive meetings with business owners and management who are
company’s major buyers in next period will be arranged in order to give answer about
their satisfaction with existing business relationship and collect all necessary
information. Final goal is to make clients satisfied and loyal as well as to achieve
higher sales. For this purpose first 50 buyers in total turnover and outstanding are
checked in order to have all necessary information. Through secondary research we
will get evidence about what factors inside the company what cause these low
performed payments (bad collection) and will be analysed account statement history,
invoices, as well as financial data.
For measure of financing two main ratios are crucial: debt ratio (debt/equity) as well
as debt vs. assets ratio (debt/assets). The company need to choose best solution for
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the capital structure so that the WACC is minimized’ (Ross, Westerfield and Jordan,
2008: p. 553)
Performed research shows us where the problem is and how we will find best
solution. Problem of availability, and the price of capital, i.e. illiquidity of the Serbian
economy, is still evident. The pressure of common illiquidity, which is characterized
by a general failure to settle liabilities leads to an irrational use of the borrowed
capital, which primarily means that fixed assets are financed from short-term sources.
The continual trend of a low common liquidity ratio shows that business entities have
to provide new indebting to settle their short-term liabilities. This consequently leads
to the further accumulation of liabilities and an increase in illiquidity. This shows that
the economy of Serbia, although already highly indebted, undertakes short-term loans
to mitigate the increasing illiquidity to a certain extent and maintain initial levels of
operation. Keeping in mind that for the amount of negative net working capital, fixed
assets were financed from short-term sources, this warns of a serious threat in the
settlement of current liabilities, i.e. insufficient liquidity of business entities. Besides,
operations of business entities in the Republic of Serbia are continuously burdened by
the high value of accumulated losses from the previous period. Payment of high
interests and coverage of exchange differences on the borrowed capital also indicate
that the economy of Serbia has become too sensitive to “shocks“ from the
environment, i.e. very dependent on changes imposed by creditors, meaning, very
inflexible when it comes to macroeconomic developments in the country. In the
structure of combined sources of financing, the biggest share belongs to short-term
liabilities (40.9 percent), capital (39.8 percent), and long-term liabilities (17.9
percent).
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Current financial structure of the Group: Frequent money spill-over is another
difficulty in assessment of the group overall performances, but this is mitigated with
the fact that there are undisputed synergy effects spanning across the group. It should
be noted that in 2012 there were no substantial crediting between the companies, but
neither existing debt decreasing.
Agriculture in Serbia represents an extremely powerful economic force, which is the
basis of the national economy and is the foundation for the development of rural
areas. Agriculture is also the only sector in Serbia with a positive foreign trade
balance, and it represents the core of foreign export development for our country.
Serbian agriculture has great potential, and it provides positive results for the national
economy due to the favourable geographic position of Serbia (in the central Balkans,
the centre of South-Eastern Europe). Serbia also offers favourable climatic conditions
and soil quality, and significant crop and food processing capacities, as well as
favourable trade conditions – with preferential access to key foreign markets.
Agriculture is Serbia’s most profitable export branch. Market trends in agro business:
The adopted measures are aimed at stopping further economic decline and then at
creating conditions for development and also to distribute the crisis burden evenly.
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The government has also taken measures aimed at boosting industry and agriculture,
with a minimal increase of taxes and excise taxes.
“Overall, the market is differentiated in the sense that there are clear market leaders inindividual sub-sectors. But some less known companies are becoming a more
dominant and unavoidable part of Serbia's agriculture. Together with leading
companies in the industry, it is expected that they will become the carriers of the
modernization of Serbia's agriculture industry with machinery and equipment
improvement, expansion of irrigation systems, further merger of parcels and other
measures” (Serbia Investment and Export Promotion Agency (SIEPA) - Newsletter,
Sep, 2011).
3.2 Feasibility – product- market- organizational- financial
“The Marketing Mix is the set of controllable, tactical marketing tool that the
Company combines to produce desirable response on the target market” (Kotler,
Armstrong, Wong and Saunders, 2008: p. 157). Mirotin Group could benefit from
Croatia entering the European Union on 1 July 2013. Officials at the Serbian
Chamber of Commerce have revealed they expect Croatian products to become too
expensive for the region and that therefore, there will be more demand for Serbian
products in the Balkan. In this part will be explained Group products/services:
Product, service: The main activity of the company Sava K . is cultivation of maize,
wheat, and other crops (industrial and forage crops, fruit), manufacture of cattle and
milk production and processing (Dairy Dana). The main crops they are growing are:
seed and mercantile wheat, maize, barley, soy and sugar rape. The Company possess
warehousing capacities for 21.000 tons of cereals. With new investment in Silos
capacity 15.000 T they will increase storage up to 36.000 T . Processing capacity of
the new dairy is 45,000 litres of milk a day, for which the milk from its own farm will
be provided on a daily basis. The dairy plant, with 1,800 square meters, producing
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sour pasteurized cream, yogurt made of pasteurized milk, full-fat semi-hard cheese,
Serbian cheese, crumbled cheese, fruit yogurt.
Oil Factory Banat products are: pressed virgin oil from sunflower seeds, salad and
spicy oil, „Cvet Banata“ sunflower edible oil is the most popular product. The
Company can maintain stable repayment capacity. Debt repayment ability remains
well preserved. Most inflows are from edible oil. The product range includes
sunflower edible oil known under the brand The Cvet Banata, and assortment of cold
freshly squeezed oil. This range of products reduces business risk, meet the demands
of the market and provide stable and increased sales year after year. Also almost 30%
of sales are income with foreign currency from foreign market.
Industry, market : The largest agricultural areas with oil plants are located in
Vojvodina (94%) due to convenient climate and soil conditions and the fact that the
processing capacities and supplier and purchaser network are located in this part of
the country. Also, Vojvodina is also suitable for the enlargement of the agricultural
parcels which facilitate the production. The Republic of Serbia is one of the largest
edible oil producers in Europe – among the top five in production of soya and among
the top seven in the production of sunflower oil. The domestic market is affected by
the regional market trends (Romania, Hungary, and Bulgaria) and others (Russian
Federation and Ukraine) in terms of making production decisions and price
regulation.
According to the Register of agricultural
households of the Republic of Serbia,
approximately 26,000 family households and
220 legal entities carry out soya production
whilst 22,000 family households and 190
legal entities carry out sunflower production. In terms of rape seed oil, there is still
little interest – 660 family households and 70 legal entities. The production of
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pumpkin seed oil is still in early stage; therefore there are only 600 registered
households and 8 legal entities producing this kind of edible oil. The agriculture
sector - the government adopted a bill on agricultural subsidies and rural development
and sent it to the parliament for urgent adoption. This bill will create a stable, long-
term and predictable agricultural policy. It will enable short and long-term
agricultural investments, make the sector more competitive, and introduce a
centralized record keeping system and better budget planning, alongside a higher
level of compliance with EU regulations. This decision is in tune with the Interim
Trade Agreement, made between the European Economic Community and Serbia,
and with the agreed implementation of customs duties for agricultural products.
Serbia is to fully liberalize imports of industrial products and most agricultural
products from the EU as of January 1, 2014. After the interim trade deal expires,
Serbia will keep its customs protection of some agricultural products until it joins the
EU, including all types of meat, meat products, some types of yogurt, butter, various
types of cheese, honey, vegetables, wheat, flour, fruit juices, tobacco, sugar, and
sunflower oil. Serbia and the EU signed the SAA in 2008, but the agreement has not
yet been ratified by all members of the bloc. In the meantime, Serbia is implementing
the interim trade deal. Serbia is in a final phase of accession to the WTO, adding that
the country is not required to allow the production of GMOs, but rather to change the
law provisions referring to trade in GMOs.
In 2013, the state will pay subsidies of RSD 12,000 per hectare and RSD 20,000 per
head of cattle, as well as meat production subsidies of RSD 10,000 per head of cattle
and RSD 1,000 per pig, he said. Also, the state will pay premiums of RSD 7 per litre
of produced and delivered milk, he said. Serbia’s agricultural budget for 2013 is
about RSD 40 billion, or 4.5% of overall budget spending.
Preliminary agreement on investment in agriculture between the Republic of Serbia
and the UAE with the Al Dahra Company in Abu Dhabi. According to this
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preliminary agreement, the Emirates' leading agro-industrial company Al Dahra is
going to invest about EUR 200 million in eight state-owned agricultural farms under
a joint investment project. Thanks to this arrangement, Serbia's agricultural sector
will obtain investors that currently have the biggest capital at their disposal in the
world, and capital and up-to-date agricultural practices are exactly what fertile land in
Serbia has been needing for decades to give maximum yields, reads the release.
Nine Serbian industrial sites are occupied with oil processing plants and organized
primary production. Six of them are located in Vojvodina (“Banat”, “Sunce”,
“Vital”, “Victoria Oil”, “Sojaproteini” and “Dijamant”) and three in Central Serbia
(“Bioprotein”, “Plima M” and “Dunavka”). Seven of these factories alternately
process of soya, sunflower and pumpkin oil during the production year whilst two of
them process only soya. The total processing capacities in Serbia are:
918,000 tons of sunflowers
745,000 tons of soya
588,000 tons of oil pumpkin
The purchase of the oil plants is realized according to the processing capacities of the
companies/factories. Generally, two thirds of the produced soya are purchased by
“Sojaproteini” Becej, the dominant companies in sunflower purchase are “Invej”
Belgrade that owns two oil factories in Vrbas and Sombor, “Victoria Oil” Sid and
“Dijamant” Zrenjanin. “Victoria Oil” Sid also does the processing of pumpkin oil.
The decision regarding the prices of oil plants is driven and regulated by price trends
in the regional and international markets. During the purchase some price
modifications are common and mostly affected by the demand/supply conditions in
the domestic market. According to the realized exports, soya and sunflower oil are
the most important export products derived from oil plants.
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Observed in cumulative terms, all enterprises in the sector can be divided into basic
agricultural enterprises (primary production), milling enterprises, and enterprises
focused on animal food production.
Victoria Logistics is focused on organization of primary production of plants and
grains (they organize production of soya on about 90,000 ha, sunflower on 80,000 ha,
and oilseed rape on about 10,000 ha) distribution of raw materials, and trade and
storage of all goods for the needs of Victoria Group . They carried out the purchase of
said products, wheat and maize in the total amount of about 900,000 tons. At the
same time, the enterprise is largely burdened by debts (almost 120 million Euros),
and it is thus forced to generate growth and development in the upcoming years in
order to settle all its liabilities on time . Victoria Group commissioned Sojaprotein's
new factory, with the capacity of 70,000 tonnes, in which about EUR 30 million was
invested. In that way, the total annual processing capacity was increased to 250,000
tonnes of soybeans. The new factory for producing traditional soybean protein
concentrates in Becej is a unique complex in Europe because it brings together all
phases of soybean processing. The products of the newly opened factory have the
widest application in the food industry, as well as in the pharmaceutical industry,
considering a high percentage of proteins they contain. Thanks to this investment
Sojaprotein will be exporting nearly 80 percent of products, which are mainly based
on non-genetically modified soybean
Enterprises focused on primary production recorded good results:
Delta Agrar - the real potential of this enterprise will be seen in the upcoming several
years. Namely, after the sale of Delta Maxi, Delta Agrar was recognized as the heart
of Delta’s system, and a considerable part of the money from sale is thus expected to
be directed to the enterprise.
Delta Agrar 2012 in EUR
Operating income 192.135.602
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Sales income 185.037.115
Operating profit 12.463.106
Net profit 3.204.708
Almex : among other related enterprises, this company becoming more distinguished
for its results. For years already the enterprise has been taking over and consolidating
small agricultural enterprises and recording good growth rates and excellent
profitability.
Almex 2012 in EUR
Operating income 78.115.796
Sales income 77.233.478
Operating profit 9.340.788
Net profit 6.287.965
Enterprises focused on the milling activity:
Mlinostep and Granexport and animal food Gebi, Erakovic, Farm Comerc, Konzul
and Sto Posto,. Besides milling, Mlinostep and Granexport also deal with trading of
agricultural products, and this is where the reasons for rapid growth and high return
on equity of these enterprises should be searched for. For Granexport it is necessary
to underline that the enterprise operates within MK Group, as its only representative
in the agriculture sector. Namely, MK Group is essentially focused on agriculture, but
its enterprises are not designated in a way that would clearly show the operating
results directed exclusively to agriculture. Among animal food producers Gebi has
already become the market leader. The remaining three enterprises will only struggle
for domination and the position of the closest follower.
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Gebi 2012 in EUR
Operating income 55.660.504
Sales income 54.943.000
Operating profit 4.740.053
Net profit 1.405.788
Agriculture is the most important economic sector and a primary source of
employment in most emerging markets. Strong global demand for food is creating
new markets for Serbian agribusiness companies. In 2011, Serbia’s agricultural
exports increased five-fold. Now exporters need investment to continue expanding,
yet capital has been scarce since the financial crisis. IFC is helping Serbiancompanies convince sceptical investors that they offer good opportunities for
profitable business. Recent IFC transactions have provided more than €250 million in
direct financing for Serbian agribusiness companies, aiming to improve corporate
governance and introduce new standards in order to reach lucrative new markets.
Organisational : Owners’ of the company has full commitment and sufficient capital
to provide an acceptable level of equity risk funding. Djoko Vujicic (62 year old),
owner 33.34 %. – career start in Sava Kovacevic , and later continued as director of
procurement in company Poljooprema from Vrbas.. Aleksa Janicic (72 years old),
owner 33.33% He was the CEO of the company “Mepol” and commercial director of
the company “Vital” Vrbas. Zdravko Pavicevic (63 years old), owner 33.33% He
was director of procurement at the famous meat industry „Carnex“ Vrbas. They are
on top-managerial position because they are skilled people with high integrity (all of
them having clear background - double-checked and confirmed) and with experience
appropriate to the nature and scale of business and the markets in which they operate.
It should be noted that both CFOs (of Mirotin Group and of Sava Kovacevic) are
independent professionals both of them highly educated (PhD and MSc). The
headquarters and production units of Mirotin Group are in Vrbas and Nova Crnja. At
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this location are also cattle farm and mechanic workshop. The cattle farm is on the
right side of Vrbas - Feketic highway. Dairy unit is in centre of the town Vrbas , in
Maršal Tito 121 Street.
Financial feasibility issues: Sava Kovacevic Financial Analysis
Revenue growth compared with the same period last year is a result of service
production: mostly drying and processing of maize seeds and diary production which
is increasing due to opening Dairy factory „Dana“. Operating income is higher than
in the previous period. Inventories are increased in line with the volume of business,
in the almost same percentage as trade receivables. Operating liabilities are increased
but financial liabilities are on lower level as well as financial expenses. The structure
of financial liabilities - long-term loans prevail. Term structure of debt continued to
improve, in favour of LT debt.
Profit and Loss
Operating revenues EUR 13.6 million are generated almost entirely from sales of
products on domestic market. Sales income EUR 11.9 mio are 14% higher related to
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2011. They are generated almost entirely from sales of products on domestic market,
with a stable volume of business in year 2012. Revenue growth compared with the
same period last year is a result of service production: mostly drying and processing
of maize seeds and diary production which is increasing due to opening Dairy factory
„Dana“. Draught in summer 2012 is reflected in 2012 turnovers and results of the
company initial plans for 2012 have not been met completely. Maize production fell
short (negative effect of drought and high temperatures in summer 2012) by ca € 1mil
(in 2011 production value of maize was € 2.8mil, and in 2012 is € 1.9mil).This
actually reflect on lower profit rate than they planned, but growth rate stay stabile in
2012 (20% increase in sales). However, milk production that generates steady inflows
throughout entire year combined with the cattle breeding represents alternative source
of repayment available at any time. Biggest part in structure of sales has maize 33%,
milk 11%, wheat 8% and sugar beet 8%:
in EUR 2011 2012
WHEAT 1,020,000 1,431,039
MAIZE 2,800,000 1,890,943
PEA 1,080,000 805,656
SUGAR BEET 1,300,000 1,169,917
DAIRY (milk) 3,000,000 3,920,885
Sales in 2012 (after effect of drought and high temperatures)
Work performed by enterprise and capitalized EUR 0.34 mio. Increase in inventory
value EUR 1 mio. Other incomes EUR 0.5 mio are premiums from Ministry of
Agriculture for milk and rents. Operating expenses EUR 11.8 mio. Structure: value
of sold goods 27%, raw material 34%, salary 21%, amortization 13% and other
operating expenses (increased due to growth in gross wages and benefits under a
contract of temporary employment, as well as the cost of rent related to lease land,
transportation costs, insurance, etc) 5%. Related to 2011 this expenses are much
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higher due to effect of drought and high temperatures in summer 2012. Operating
profit EUR 1.9 mio
Financial incomes EUR 0.7 mio are interest 75% and positive exchange rate
differences 25%. Financial expenses EUR 1.5 mio are interest expenses 68% and
negative exchange rate 32%. Other income EUR 0.65 mio from sale is from sale of
livestock and other expenses EUR 0.4 mio are related to impairment of breeding
stock and other expenses. Net Profit EUR 1.4 mio
EBIT Margin & Net profit margin – Sava Kovačević ad
Balance sheet
Fixed assets EUR 15 mio : land (EUR 3 mio), buildings (EUR 6.6 mio), equipment
(EUR 3 mio), fixed assets in preparation (EUR 1.5 mio) and breeding stock ( EUR
0.9 mio). Equity investments EUR 4k are related to the old shares in PIK Vrbas from
the period when it was a public company; long-term investments EUR 5 k are related
to housing loans for employees. Current assets EUR 16 mio : Inventories EUR 4.4
mio are finished products 41% (mostly maize and wheat), unfinished production of
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36%, raw material 13%, given advances 7% ( to the company Radun Ing related to
construction on “Dana”), and goods 3%.
Receivables EUR 11.6 mio are from domestic customers EUR 7.5 mio, short term
fin. placement EUR 3.1 mio ( borrowings to the : Mirotin Tisa, Mirotin doo, Ecka,
Komercservis, Mirotin Energo, Aretol, Agrimax) and other receivables and delimited
exchange differences EUR 0.9 mio. The biggest buyers in turnover are: Aretol, Delta
Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko, ZZ
Agrodunav Karavukovo.
Capital EUR 12.5 mio. Share capital EUR 9.3 mio, reprovisions EUR 1.6 mio and
retained earnings EUR 1.6 mio. Long term loans EUR 7.4 mio (Intesa, Komercijalna,
OTP, Privredna Banka, Hypo,MArfin, Fond, Credit Argicole , Procredit , Univerzal)
Other long-term liabilities EUR 0.5 mio - leasing liabilities for agricultural
equipment and vehicles
Short-term liabilities EUR 6.9 mio are loans in Alpha Bank, Komercijalna i Univerzal
(EUR 1.6mio), part of long-term liabilities due within one year ( EUR 4.8mio), and
leasing liabilities.
Operating liabilities EUR 3.5 mio are from domestic l suppliers 70% related
companies 25%, received advances and others liabilities from business operations
5%. The biggest suppliers in turnover : ZZ Agrodunav, Aretol, Bankom, Delta
Agrar, Hajfer, KWS Seme, Merkator S, Naftachem , Promist, Sunoko,
Off balance record EUR 1 mio : others good on stock (peas , corn) and state land
3.3 Resource requirement evaluation
Organisational structure - this business concept will be realized with me in a role of
Project manager (with professional background in Banking sector, develop new
business lines, sales achievement , finance and corporate management) for BDP with
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the selected team of very skilled and competent professionals: CFO Mirotin Ana
Marojevic (Msc), CFO Sava Kovacevic Mr. Boris Milovic (Phd). Also concept
predict to secure support from three bank (Alpha Bank, Komercijalna, and Credit
Agricole) ready to support our aims for better loan pricing, to get cheaper funding
sources.
Financial - Sava Kovacevic JSC need to pay whole process related to sowing /
harvesting: work force, fuel, spears parts for mechanisation. Most inflows from corn
seed are generated in late autumn and winter period (prior to spring sowing). This is
related to the very nature of the business (sawing, vegetation cycle, harvesting,
storing, processing are activities that precede the sale and all of those require huge
expenses) and it is of repetitive nature. Financial resources for this will be about 7
EUR mio. From this EUR 7 mio, EUR 5.5 mio need to be refinanced with cheaper
funds, and EUR 1.6 mio need to be borrowed for new silos (long term investment
loan).
CF analysis next 12 months: Repayment of the existing revolving lines approved by
Banks will be from operating income. The diversification of business (inclusion of
providing services – drying, corn seeds processing) and some vertical integration
have brought about improving sales & profitability, with higher-than-average sector
margins as well as , de-leveraging strategy for the next period are in line with their
business activities, with alternative source of repayment available at any time.
Company’s trade cycle is evaluated along with the Company liquidity, in conjunction
with any existing approved credit limits from other Banks. As liquidity and cash
flow are the lifeblood of any business, we are opinion that provided CF projection is
realistic and in line with their business activities
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Timely settlement of interest and principal of existing liabilities with Alpha Bank
upon withdrawn tranches proved that the Company can maintain stable repayment
capacity. Debt repayment ability remains well preserved.
Since the vegetation cycle is one-year long what happened in 2012 had already been
locked in 2012 results and it could only lead to growth in 2013 (until new harvest is
ripped and collected). On the other side, such harsh weather conditions that not even
the most modern irrigation system could completely neutralize are not usual and
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normal climate for Vojvodina / Serbia. Even if the draught happens again please bear
in mind that the way Sava Kovacevic land is equipped with irrigation system and all
the agro-technical measures that are employed at the company. Thus, when
estimating last year's losses on aggregate level, one should not take those estimations
as a benchmark applicable to Sava Kovacevic.
For finishing new Silos with capacity 15.000 T investment plan is like follows:
Investment plan in EUR
Funding sources - total 2.457.822
own sources -already invested 857.822
Borrowed (Midterm loan) 1.600.000
With structure of costs:
EUR
already
invested
new
investment Total
fixed assets 632.205 820.000 1.452.205
material 70.140 150.000 220.140
services 155.476 630.000 785.476
total: 857.821 1.600.000 2.457.821
Financial resources EUR 1.6 mio need to be borrowed for new silos (long term
investment loan). This investment will allow company to generate only form rents
additional income in amount of EUR 500.000 per year.
Refinance existing loans with long term loans approved from Alpha Bank,
Komercijalna or Credit Agricole will be performed in next 6 months. Beside
mentioned Banks BDP will analyzed possibility to get fund from EBRD who support private agribusiness companies in Serbia. This will facilitate private agribusinesses’
access to finance and thus support the expansion of a vital sector of the Serbian
economy. The EBRD’s participation is providing interested banks with comfort and
will demonstrate that lending against agricultural commodities is feasible.
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TOTAL LIABILITIES TO BANKS in EUR on date on date 31.12.2012
Chapter IV
4. Business Model
This chapter will explain how existing business will be improved in order to achieve
final goal - profitable and safe business with dominant market position. On that way
revenue for the company owners will be much higher as well as future business
growth.
4.1 Strategic Analysis of the business Idea: identification of sources of competitiveadvantage and sustainability
For choosing strategy, beside all other tools, the SWOT Analysis of Mirotin Group
will help us to make right decisions. Cavusgil, Knight & Riesenberger (2008, p.
309) stated that “Once they understand the firm’s strengths, weaknesses,
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opportunities, and challenges, they decide which customers to target, what product
lines to offer, how best to contend with competitors, and how generally to configure
and coordinate the firm’s activities around the world”
STRENGTHS WEAKNESSES
long business history
diversification of business activity
good and long relationships with
suppliers as well as buyers
strong management
know – how well know brand
nearness of the raw material base
Business support from Group
Long experience and tradition in this
area and knowledge of the market
the best quality soil in this part of
Europe, over 90% is under the pivot
irrigation system
Indebtedness- capital
investment performed in past
few year
OPPORTUNITIESTHREATS
increasing the market share
new markets
export
Major investment are finished
production activity helps to increase
margin
Power plant with the use of biogas
from cattle manure
New Silos with capacity 15.000T
economic crisis
drought
Government decision
Other strong Groups in
agribusiness
Adopted strategy is competitive advantage which permanent improvement of
business operation. With this strategy Group will always be ready to make necessary
changes in business operation and be a leader not a follower. This strategy will secure
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success and expansion on foreign EU market as well as Greece. Mission: profitable
revenue from local and foreign market with better financial structure. Vision-
“Quality above all
All subsidiary companies under the guidance of Mirotin llc have successfully
business operation, with total number of employees 700. Analysis of own value chain
in order to get competitive advantage:
Evaluation of the Sava Kovacevic performance
Evaluation of the sales per Region
Risk analysis regarding drought in 2012, what crops to cultivate: maize, wheat,
and other crops (industrial and forage crops, fruit),
Product Analysis (Oil. Fish, Milk, Corn, Wheat, Maize)
Profitability Analysis (Oil. Fish, Milk, Corn, Wheat, Maize)
Technology & Operational issues: MIS, CRM, SAP
Organizational issues
Analysis of top 50 clients.
Financing Plan – Investment Plan ( break even, cost of funds, CF)
Marketing - planned activities ( media, presentation )
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After performed analysis main elements of selected strategies are:
Management with integrity and experience, with best performing employees -
team of skilled hardworking people dedicated to their work..
Optimisation and improvement in logistic and sales network. This will be
reorganized and five regions will be established instead existing two as
follows: Belgrade region, Novi Sad region, South region East region and
Export Division (included new foreign market – Greece). New reorganization
will support our attentions to increase market share and better sales of Mirotin
Group products/services.
Customer perspective: “Quality above all" best product on the market Financial perspective: increased profitability with better financial structure
and less financial expenses
4.2 Selection of strategies for success
This strategy free huge potential of Mirotin group, as well as ideas for improvements.
Employees are crucial element of for the business performance and survival on the
competitive market, especially in rough time. Implementation of this strategy the
Group secure planed objectives. This actually means to transfer strategic objectives to
the operational level (clearly defined and measurable). This strategy is classics Red
Ocean concept (beat the rivals with better sales, costs, products, organisation ...etc)
on existing Serbian market, where market players struggle for increased market share
and better profit margin. Mirotin will be market leaders on Serbian market with
constant increase in market share and successful regional development strategy. The
Company’s growth allows expansion on foreign market. This decision will improve
logistics operations and reduce costs and increase production efficiency and
profitability. Decision to reduce financial costs and invest in new Silos is strategic
decision made after lots of planning and checked internal and external factors.
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Great position of the Sava Kovacevic production facilities and excellent qualities of
the purchased raw material for FU Banat is the main advantages of the Mirotin
Group. With better prices of its products / services Mirotin Group is on right truck for
further expand, and increase market share as well as clients base. With new
investments and planned joint production with excellent business operation chosen
strategy will beat – wipe out current competition. The cheaper funds will be used by
the Mirotin Group companies: Sava Kovacevic, FU Banat and Mirotin to provide
advance payment to their main suppliers. Mirotin Group employ thousands of peoples
when comes time for harvest.
4.3 Development of appropriate Business Model
Here will be explained Business model like follows:
Identity: “Quality above all"
Main customers are one of the largest companies in agribusiness in Serbia. The
biggest buyers in total turnover are: Pantomarket Herceg Novi, Bimal Brcko, Studen
& Co Vienna, Gebi, Sto posto, Interkomerc, Delhaize, FSH Komponenta -. Aretol,
Delta Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko (MK
Commerce)
Added Value: The product range includes the best quality on teh Serbian Market
sunflower edible oil known under the brand The Cvet Banata, and assortment of cold
freshly squeezed oil. Green energy - Sava Kovacevic is the first company in Serbia to
use biogas from livestock manure to generate electric and heating energy and supply
free of charge general hospital in Vrbas.
The competition: all enterprises in the sector can be divided into basic agricultural
enterprises (primary production), milling enterprises, and enterprises focused on
animal food production. Delta Agrar - potential of this enterprise will be seen in the
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upcoming several years. Almex , Matijevic, MK Commerc, Dijamant. However,
Delta’s focusing on agriculture, together with already recognized new pillars (Almex,
Mirotin, Gebi, Elixir Group, etc.) should contribute to the recovery of agriculture in
Serbia.
The channels: wholesale to other large companies and direct sales to business
partners as well as through discount shops.
Competitive Strategy: Red Ocean Strategy
Chapter V
5. Business Plan
5.1 Business Plan schedule
Gant chart - Operational activities with time period of 3 years.
For next 3 year – expand, with higher profit margin, business operation in Serbia,
investment in new Silos capacity 15.000 T, organisational structure improved, better
funding source, and increased sales with better sales channel. Financial resources for
Start
DateEnd Date
1 9 - J u n
1 9 - J u l
2 0 - A u g
2 5 - S e p
2 5 - O c t
1 0 - N o v
1 7 - N o v
2 4 - N o v
1 - D e c
8 - D e c
1 5 - D e c
2 2 - D e c
2 9 - D e c
5 - J a n
1 2 - J a n
1 9 - F e b
2 0 - M a r
2 0 - A p r
2 1 - A p r
2 0 - J u n
2 5 - J u l
2 5 - A u g
1 - S e p
1 - O c t
1 - N o v
3 1 - D e c
BPD Project : FUTURE AGRICULTURE
LEADER IN SERBIAN MARKET19-Jul 31-D ec
• Meeting with the Banks BDP Team
• Meeting with the business partners Owners
• Financial analysis of whole GroupCFOs
• Refinance existing loansCFOs
• Investment in Silos with capacitzy of 15.000TOwners
• Organisational consolidationBDP Team
• Improved sales - joint productionBDP Team
Milestone
Task finished
Gant chart - Operational activities:
Activity Resource
2013 2014
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this will be about 7 EUR mio. From this EUR 7 mio, 5.5 mio need to be refinanced
with cheaper funds, and EUR 1.6 mio need to be borrowed for new silos.
1. Industry background, the company, the product/service: parent Company Mirotin
doo consolidates its accounts with 7 other Serbian companies: Mirotin-Tisa, Sava
Kovačević, Fabrika ulja Banat, R.G. Ečka, Mirotin Invest, Mirotin Vet, and Mirotin
Energo. The Company was established in august 19, 1992 and engaged in trading of
agricultural commodities and raw materials for primary production and food industry.
The company has good business connections with companies in EU (Hungary,
Austria) as well as Ukraine, Romania, Russian Federation.
Product/service:
• Wheat and crops production ( Sava K)
• Milk production and cattle breeding ( Milk farm “Dana”)
• Oil and fats production ( FU Banat )
• Fish production ( Ecka)
All subsidiary companies under the guidance of Mirotin llc have successfully
business operation. Number of employees 700
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Improved sales division:
2. Market, market analysis, market research
Agriculture is the most important economic sector and a primary source of
employment.
In 2012 The European Bank for Reconstruction and Development's EUR 10 million
loans to the agricultural company Victoria for the installation of two biomass-fired
boilers at its oilseed crushing subsidiaries. It was estimated that overall the project
would help cut consumption of fossil fuels by 20,000 tonnes per year, which would
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result in a substantial cost saving of EUR 5.8 million. The biggest competitor on
domestic market is Victoria Group.
Victoria Group consolidated 2012 in EUR
Operating income 487.786.000
Sales income 465.419.000
Sales on foreign market 206.025.000
EBITDA 78.186.000
EBIT 46.880.000
Net profit 15.217.000
EBIT Margin & Net profit margin: Dark green: industry average / Light green:economy average
Strong global demand for food is creating new markets for Serbian agribusiness
companies. Because of consumers' requests and market needs, with the price playing
a decisive role, products are about 15 percent cheaper than competitive ones. Main
customers are: Sto posto, Interkomerc, Delhaize, FSH Komponenta -. Aretol, Delta
Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko ,
Veropulos.
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3. cost/volume /profit analysis
For improved sales Mirotin doo and Mirotin Tisa doo will sign a Contract on joint
production of corn based products. Based on the Contract, Mirotin doo is obliged to
provide RSD 40mln for procurement of 1.6 metric tones of 2012 corn. Mirotin Tisa
doo is obliged to provide storage and production capacities, to perform technology
process and extend the produced output to final buyers. This contract does not specify
participation in profit. This is to be addressed through an addendum to the existing
contract. Economic and financial efficiency, feasibility and justifiability of the
project are analyzed. Based on the existing capacities (storage and producing) of
Mirotin Tisa doo and planned 1/3 of those capacities to be employed during this
project, our team performed the following calculation:
Project Financial Flow
In TEUR (1EUR = 114RSD) Year 0 Year 1 Year 2 Year 3
Total Inflows 1,172 4,179 4,263 5,521
Sales 4,179 4,263 4,348
Financing 1,172
Own sources 909
External sources 263
Remaining investment value 1,172
Profit and Loss Statement Forecast
In TEUR (1EUR = 114RSD) Year 1 Year 2 Year 3
Sales Income 4,179 4,263 4,348
Operating Expenses 3,424 3,509 3,577
Financial Expenses 18 0 0
Gross Profit 738 754 771
Tax 111 113 116
Net Profit 627 641 656
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Total Outflows 1,172 3,635 3,834 3,904
NWC Financing 1,172
Other OPEX 3,544 3,606 3,667
Tax 91 94 98
Repayment of loan 134 140
Net Inflow 0 544 429 1,616
The investment payback period is 3 years. As shown in the CF projection, the
financial flow is neutral in the zero year of investment, while in the following 3 years
it is positive ranging between € 0.4 mln and € 1.6mln. Project NPV (at the discount
rate d = 3%) is cca € 1.5mln, with very high IRR (47%), and Benefit Cost Ratio
exceeding 1, all indicating acceptability and profitability of the project.
Breakeven point (in terms of minimum required capacity usage) is between 86% in
the first productive year, and 88% in the third year. Project sensitivity analysis reveals
that the project remain profitable with change in key variables (increase of expenses,
or decrease of output prices) up to 17% in average
4. Marketing plan- Despite increasing competition, with adopted strategy supported
by the necessary investment, the Company in next 3 year will be leader and take
BCR In TEUR Total:
Total Inflow per years 4,179 4,263 5,521 13,963
Discount Factor 1.03 1.0609 1.092727
NPV Inflow 4,058 4,018 5,052 13,128
Total Outflows per years 3,635 3,700 3,765
Discount Factor 1.03 1.0609 1.092727
NPV Outflow 3,530 3,488 3,445 10,463
1.25476733
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above 30 % of market share. Strong advertising support beside top quality products
will give the Group a high level of recognition and clients loyalty.
5. Design and development plan - To be new agro business pillar on Serbian Market
However, milk production form Sava Kovacevic will generates steady inflows
throughout entire year combined with the cattle breeding represents alternative source
of repayment all liabilities available at any time. In practice this mean to keep upward
trend of business operations, better investment policy, know-how, secured
distribution channels with main goal to become agricultural giant on the Serbian
market. Aim is profitable and safe business operation secured with strong support
from first class commercial Banks
6. The management team - with the team of good people dedicated to their work and
hungry for success, everything is achievable. This people have all necessary
experience and knowledge.
7. Operation plan
In order to improve current business operation as well as better financial structure:
Meeting with the Banks
Meeting with the business partners
Financial analysis of whole Group
Refinance existing loans with cheaper funds for financing purchase material
Investment in Silos with capacity of 15.000T
Organisational consolidation ( expanded sales region)
Improved sales - joint production to improve profitability
5.2 Discussion of critical success/failure factors
Critical factors for success :
The diversification of business (inclusion of providing services – drying, corn seeds
processing) and some vertical integration have brought about improving sales &
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profitability, with higher-than-average sector margins as well as, de-leveraging
strategy for the next period are in line with their business activities.
New reorganization will support our attentions to increase market share and better
sales of Mirotin Group products/services.
The Group need constantly improving and developing its products as well as business
processes, providing sustainable development. Profitability with enough capacity to
servicing all financial expenses and performed investment. To have always available
products to sell when price is higher and row material base for oil production during
whole year. Also additional storage space will generate income from rent to other
companies
Importance of modern irrigation systems, especially when having in mind an
unprecedented drought that hit Serbia last year, and climate changes bringing hot
summers or heavy rains, which imposes a growing need for efficient irrigation and
drainage systems.
Key Performance Indicators or KPIs
Sales per region ( Belgrade, Novi Sad, South, East , West , Export)
Profit from maize, milk, oil, fish
Profit from servicing activities ( mill, storage capacity)
Operational cost
Customer satisfaction (customer care)
These KPIs will be monitor weekly, monthly and at end of every business year.
Analyzing above mentioned indicators, the Mirotin Group will achieve objectives,
and will be able to perform correction in business operations.
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Beside KPIs, management of the Group need to be aware of all identified risks. This
identified risk can be minimised but first need to be assessed like follows:
First we identify the risk
After that we measure and assess the risk
To be able for managing the risk
And on the end we keep our eyes on identified risk – monitoring
Range of products reduces business risk, meet the demands of the market and provide
stable and increased sales year after year. Also almost 30% of sales are income with
foreign currency from foreign market. For identified significant risk we will able to
apply mitigating factors:
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Risks Mitigates
Market Risks
Volatility of margins,
input prices; output prices;
F/X exchange rate;
Strong competitors
agribusiness market in
Serbia
Potential new competition
drought and hightemperatures
Recognized brand
Good diversification/substitution of the products
Good storage capacity
Strong growing potential
Strong support from the Group
Long experience and tradition in this area and
knowledge of the market
Good relationship with both, suppliers and
buyers
Environmental Risks
Risk from Industrial
Accidents.
The company is constantly improving and
developing its products and business processes,
providing sustainable development in
accordance with internationally accepted
principles and trends in business.
F inancial Risks
Higher indebtedness
Loans with F/X clause
Short term expensive loans
Crucial investments were finished
Higher indebtedness is common for this type of
industry and is related with production cycle.
Good profitability with enough capacity to
serving additional financial expenses.
Managerial Risks
Key -man risk
Management is well-organized and business is
run by professionals
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Conclusion
For Mirotin Group presented BDP is way (start from where are we now in 2013, and
where we will be in 2016) to success with adopted competitive advantage (Red
Ocean) which permanent improvement of business operation. This strategy will
secure success and expansion and resolve all problems which currently exist in
business (indebtedness, high leverage, low profit margin, new investment) Mirotin
Group will be always ready to make necessary changes in business operation and be a
leader not a follower.
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Appendices
References:
Cavusgil, Knight & Riesenberger, (2008), International business: the new
realities, 2nd
edition, Prentice Hall
Porter, M. (1980), Competitive Strategy: Techniques for Analyzing Industries
and Competitors
Porter, M. (1985), Competitive Advantage: Creating and sustaining superior
Performance
Ross, Westerfield and Jordan (2008), Fundamentals of Corporate Finance,
(8th
edition), The McGraw-Hill
Kotler, Armstrong, Wong and Saunders, 2008: p. 157
Serbia Investment and Export Promotion Agency (SIEPA) - Newsletter, Sep,
2011.
www.ebrd.com
Bibliography
BCG Matrix (Boston Consulting Group, 1970)
Ciaran Walsh, 2006, “ Key Management Ratios”, fourth edition, Prentice Hall
McCarty, (1960) Basic Marketing: A managerial approach, Homewood IL:
Irwin
Harrison, S . (2006) Idea spotting: How to Find Your Next Great Idea,
Cincinnati: How Books.
www.mirotin.rs
London School of Commerce, Research Methodologies , Course manual
LSC, The Business Development proposal, Course Manual
LSC, Corporate Finance, Course Manual
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LSC, Financial Management , Course Manual
LSC, Strategic Management , Course Manual
William F. Sharpe (1963), A Simplified Model of Portfolio Analysis,
Management Science
www.bloomberg.com