Nibulon owner talks Mykolaiv port, competition and IT solutions in agriculture

Well-established logistics has always been the magic that has made Nibulon profitable and given the company the strength to expand across Ukraine. That's why, by 2022, a river fleet was being built in addition to the elevator network, and a powerful port infrastructure appeared on the Dnipro and then the Southern Buh, all of which technologically resembled a powerful export-oriented grain pump.

The war destroyed this system, and its founder, Oleksiy Vadaturskyy, was killed. In 2022, the "pump" turned into a bunch of individual elements, some of which were damaged or even destroyed, while the rest worked at half capacity. Now, two years later, Nibulon is once again one of the leading exporters of Ukrainian grain. In an interview with LIGA.net, Andriy Vadaturskyy, owner and CEO of Nibulon, shared what was done to get the grain pump working again.             

LIGA.net: As soon as the war broke out, Nibulon's expenses for grain exports increased tenfold. But now Nibulon has reduced its logistics costs by three times. What has been done to achieve this?

Andriy Vadaturskyy: We have always invested heavily in logistics. From the very beginning of its history, Nibulon has been building elevators and granaries, developing shipbuilding, and investing in river infrastructure.

In the first days of the war, in February 2022, my father and I traveled to the borders and ports and realized that exports from Ukraine would be blocked. The Russians would do everything to prevent anyone from exporting Ukrainian grain.

So, when we saw the problem of blocking grain exports, we invested $22.5 million in the terminal in the port of Izmail. This was followed by investments in vehicles and railroad cars. Thanks to these steps, we began to reduce the cost of grain delivery: from $150 per ton in 2022 to $100, and then to $70 and finally to $62.

Before the war, this figure was $12 per ton at Nibulon.

Is $62 per tonne of grain delivery a ceiling or rather a floor below which it is impossible to reduce the cost of exporting through the Danube?

We see progress. The Ukrainian corridor is fully operational, and the ports of Odesa are in operation. The only issue that has not been resolved is the unblocking of the port of Mykolaiv. Its potential is to handle 15% of the country's grain exports. If Mykolaiv becomes operational, there will be competition and export costs will be reduced by another $10 per ton. Thus, the entire agricultural sector will receive additional revenues from exporters' profits, which will also mean revenues to the state budget.

An interim solution is to move the grain fleet from Mykolaiv to the Danube. This will reduce export costs during transportation from Izmail to Constanta, Romania. Another step is to introduce subsidies for grain transportation by Ukrzaliznytsia (Ukrainian Railways) towards the Danube ports. This will level the playing field with the ports of Odesa.

However, the most effective action will be to unblock the port of Mykolaiv, which should add capacity to the Ukrainian corridor. The effect will be felt by all farmers, as it will allow them to receive more for their crops. And further down the chain, they will be able to invest in land, in machinery, and maintain the level of rent. This is how the economic multiplier works.

Are you going to expand your grain railcar fleet?

We have 212 such cars, 50 of which were provided by the USAID project. Yes, we plan to increase their number. Everything depends on the money. Our desires are limited by our access to loans.

I would also like to note that, in addition to purchasing railcars, we have renewed our vehicle fleet together with Scania. Thanks to investments of $15 million, we have reduced fuel and repair costs. This sphere is highly efficient.

Okay, if you've squeezed almost everything out of logistics and hardware, what are the other ways to increase the company's profitability? By the way, what are the company's financial results?

The EBITDA for last year, which has already been confirmed by the audit, amounted to $131 million. For the marketing year 2023-2024, which ended on July 1, this figure is $99 million.

When asked what other areas are important for the company, I will allow myself the following analogy. Nibulon is now like an athlete who finds himself in difficult conditions. Imagine a climber who has climbed an eight-thousander mountain and was left without oxygen tanks because of criminals. So we are now like this athlete – we are concentrating, leaving the most necessary things behind, looking for a position from which we will move to the top again.

Here's an example: you may have heard that Nibulon is exiting the livestock industry, namely, selling its pig farm and meat processing plant. This is true. We are ready to sell this business because it is not a core asset. We are building a strong, clear structure in which we leave only the elements that are fully understood, those in which we have the best expertise.

What does it look like in the agricultural sector? Next year, we will plant wheat and rapeseed in the south and corn and soybeans in the north and center. This will allow us, firstly, to ensure an optimal crop rotation. Secondly, we will be able to maneuver our existing agricultural machinery in an economical manner, moving it from south to north in a timely manner. At the same time, the specialists who operate and maintain it will earn more. This is how optimization can improve the cost per hectare.

What was Nibulon's figure for the previous year?

We managed to reduce costs by about 25%.

Nibulon has taken up IT solutions. You spent more than $2 million on them. Isn't this a misallocation?

First of all, this is to improve our service for partners. We are talking, for example, about a project with the working title "Farmer's Office" that will allow our elevator business to work more efficiently. Everyone who cooperates with us will receive the most timely and complete information about the volume of operations, quality parameters, and payment status. At the same time, there will be stock quotes, market analytics with trends and tendencies. All this will allow grain producers to navigate the market, reduce risks, and earn more.

Nibulon's total investments in the last marketing year amounted to $50 million. Can you describe the main items in Nibulon's investment structure so that readers can form an idea of the company's priorities?

Yes, the main investments in the last marketing year were $17 million in the agricultural sector. We are grateful to the Export and Investment Fund of Denmark (EIFO), thanks to whose support we purchased modern combines, tractors, seeders, and other equipment, as well as invested in providing modern technologies during the sowing season. $20 million is invested in logistics, with the latest acquisitions being modern trucks and trailers, as well as portal cranes. We spent $7 million on our elevator facilities, including modernization, upgrading of laboratory equipment and new construction at our Khmilnyk branch in Vinnytsia Oblast. We invested $2.2 million in IT solutions and digitalization, which we have already mentioned.

Last question. How did the blockade of the western border of Ukraine by Polish farmers affect Nibulon's business?

To be honest, it hasn't. I am sure that Poland has lost more than Ukraine from this blockade. Look at the supermarket shelves, the number of Polish goods has decreased, and Ukrainians do not want to buy them. In general, this blockade is a typical example of propaganda, when there is more infoglut than real consequences.

Nibulon did not feel these actions in any way. For us, something else is more tangible – the inertia of Western financial institutions. There are almost no real financial assistance projects from Western banks, only protocols of intent. The only real cooperation comes from Ukrainian banks, and primarily from state-owned ones. We are grateful to them for this.