In many minds an image of a Financial Director paints a picture of a male dominated world that demands analytical thinking, iron will, and cold blood. Statistics prove this true. Yet, there is an exception to every rule. In 2013 AgroGeneration chose to follow this exceptional way by inviting Olena Levchenko to take the post of a financial director. No doubt, the choice was not made by chance. The matter was not only about the candidate’s background, which included an ACCA Diploma in International Financial Reporting and 10-year experience as a financial director at Volia Cable, but also about her personal traits, which made Olena LEVCHENKO one of the top 10 CFOs in Ukraine based on the first professional rating of the Finansist magazine in 2008.
Olena LEVCHENKO shares her activities about the service that she runs, about AgroGeneration’s last year financial results, and targets for 2017.
Q: Olena Mykhailivna, finances are called the “blood system” of a company. This accurate comparison is proof of how important the role of the financial service is for the company’s operation and development. What tasks are on the agenda of AgroGeneration’s financial service?
OL: On the one hand, these are regular tasks typically filled by the financial department of any company, on the other hand, ours has some specifics. The most important and crucial task is to ensure the company’s cash flow management. Effectively managed cash flow is the principal symptom of the company’s “financial health” and ultimately a key to high overall business results.
Secondly, but no less important, the task is to ensure the preparation of fair accounting statements. AgroGeneration is a public company with audited results. Its reporting must comply with international standards because it is listed on the stock exchange. Moreover, such reporting allows estimating the actual state of the company’s business and provides top management with the information necessary for strategic decision-making. In addition to that, there is a task of tax planning, which is also typically fulfilled by the financial department.
Q: Looking back at 2016, was it a successful year for the company?
OL: Yes, it was quite successful not only in terms of financial reporting, but also from the business perspective, despite some weather challenges. And you know that weather is a crucial external factor in our work. But we kept ourselves busy while waiting for the rain – agronomists have numerous solutions to handle such cases and their response to weather was fast. Thus, our farms managed to achieve good results.
Q: Taking into consideration AgroGeneration’s performance reports for the past several years, its financial standing is increasingly strong. So, results of H1 2016 show that AgroGeneration turned a net profit of EUR 0,2 million comparing to EUR 5.4 million losses in the similar period last year. Obviously, there is a lot of hard work behind those figures. Please, share the secret of such positive dynamics.
OL: There is no secret at all. The company has a clearly defined strategy for the upcoming years, as well as an effective and well-coordinated team of top managers, specialists, general directors of farms, and agronomists.
Our financial sustainability is shaped by and growing in the fields, that is why the most important thing is to have an accurate production planning and a detailed financial analysis, so that we would clearly see what we’ll have at the end of the season. Then, if we see that the result is not the one that we wanted, we can adjust production processes by thoroughly inspecting and analyzing our fields, cultures, yield, the breakdown and structure of profit, and logistics. As a rule, such cross-divisional interaction brings good results.
In the last year we have developed and introduced a system of KPIs (Key Performance Indicators) in the company. This is a system of balanced performance indicators that help achieve the company’s strategic and tactical targets. Also we have generated its vision and mission, its strategy and targets for the upcoming decade. In line with that we have determined our working priorities and tasks to be fulfilled and brought them down to the middle management. Based on our preliminary financial results we see that the introduction of the KPI system delivered a positive outcome – all of the planned projects have been realized.
Q: One of the indicators of AgroGeneration’s outstanding performance was the fact that it joined TOP 5 companies on the Reputation and Financial Reliability Rating. How did the company manage to win such a high appraisal?
OL: Yes, that was a pleasant news. At the beginning of 2015 AgroGeneration reduced its long-term debt and increased the shareholders’ equity by issuing OSRANE subordinated convertible bonds. This restructuring allowed the reduction of interest expenses for the next four years. Through that issuance the company has additionally attracted EUR 3 million from an American investor at the end of the year.
The company is actively hedging its pricing risks. Among others, it sells 40% of its production under forward contracts. At the beginning of 2016 AgroGeneration signed two prepayment agreements for a part of its crops. To international players such agreements witness about good credit solvency and about the company's ability to supply high-demand goods in its industry.
In general, the fact that we were a part of the TOP 5 Reputation and Financial Reliability Rating was the result of a hard and multifaceted work that was done to build a sustainable business reputation of AgroGeneration, which we highly esteem. Its underlying principle is that the company fulfills its obligations. One can see it in everything we do. We produce reports and provide information to the market on a timely basis. Our words comply with our deeds – our counterparties receive exactly what we promise. The same principles apply to our employees.
Q: Both landowners and residents of villages, where the company operates, say that AgroGeneration is a reliable partner.
OL: AgroGeneration is a socially responsible company that provides ongoing financial aid to the communities, where it rents the land. In our charge we have schools and kindergartens, primary healthcare units, culture clubs and centers, and sports grounds; we also take care of such issues as repairs of roads, street lighting, water supply etc. The company allocates more than one percent of its earnings to implement such projects. This is an important daily routine reflected in the company’s mission – we work with a caring attitude to land and people.
Q: Olena Mykhailivna, what event in the past year would you call the most challenging or downgrading?
OL: Not only our company, but also all agricultural enterprises will remember 2016 as a year of the shift from the special VAT treatment to the regular taxation system, which deprived agrarians of their state-backed support and had a negative impact on their work.
Q: How did it affect the operation of your company?
OL: Well, consider the following. This year the amount of VAT grant decreased fivefold comparing to 2015, whereas next year we won’t get anything at all. Here we talk about funds that could be used for production. We won’t have them, which means that we will lose about 5 million dollars. This is a significant amount for a company, especially against the background of continuously falling world prices for the agricultural produce over the last couple of years. The situation is difficult. We are forced to look for other sources of investments in production, which in the present context is an issue of its own. Moreover, such sources will have high interest rates. In my opinion, cancellation of the special VAT treatment was an ill-considered step.
Q: What financial institutions does your company cooperate with in terms of crediting?
OL: In our case it’s primarily seasonal and short-term financing. Our short-term financing is covered by the credit line with Alfa-Bank. Our long-term financing is ensured by the European Bank for Reconstruction and Development. That’s all when it comes to bank financing. We also use forward contracts, commodity loans, and agrarian receipts. We use all instruments available on the market, because in the present context it’s very difficult or even almost impossible to get credit facilities.
Q: Let’s not end our interview in a sad manner. Thinking of the coming year, all of us have new hopes and build new plans. What about AgroGeneration, does it have any?
OL: This was a difficult but quite successful year. It laid the platform for new tasks and plans. It is true that every year has its turmoil. Remember the challenges of 2014 or 2015… When making plans for 2016 we realized that it’s going to be more difficult than 2015. Now, as we plan the next year, we realize that it won’t be easy as well. Yet, we learn how to withstand difficulties diversifying risks and achieving good results. This means that our task for the next year is not to have lower expectations, but to overcome difficulties and move forward. These are not empty words, they assume the daily dedicated service of all employees of our company.