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Feature: the three steps to farm turnarounds

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Vitaliy Skotsyk is, according to the Landkom chief executive himself, a man of ideas.

They aren't always good ones, which may be one reason why he is reluctant to reveal a few.

"I like to see a board with elder guys, with a long life experience, able to filtrate my ideas," he tells Agrimoney.com.

He declines to expand on what happened to a proposal he revealed to this website in March to get the Ukraine farm operator into biofuels refining.

"When our shareholders see we can succeed with our existing plans, then we have earned the right to test fresh ideas," he says.

'Practically dead'

And Landkom's redemption that may not be so far away.

Maybe just two months, Mr Skotsyk says, when Landkom will possess more tangible results of his initial shake-up, which has turned a company he terms "practically dead" when he arrived last year into one which Kiev brokers Sokrat believe will report an after-tax profit next year.

London broker Liberum is more guarded, believing Landkom will wait until 2012 for black ink.

Nonetheless, that would represent quite a turnaround for a company which ran up combined losses of more than $90m in 2008 and 2009, on revenues of $25m.

Magic formula

Mr Skotsyk's revival formula has three major ingredients.

The first is to cut costs. Through measures such as increasing spring crops, so making fuller capacity of staff and equipment, and eschewing ex-pats he has halved to some $550 per hectare the group's expenditure per hectare.

The second is to raise yields. Mr Skotsyk is, unlike his predecessor Richard Spinks, the entrepreneur who founded Landkom, a farmer by background.

While a Ukrainian national, he earned a diploma from America's Purdue University, and worked for three years in West Sussex, in southern Britain on a vegetable farm -"strawberries, lettuce and so on".

"There is luck in farming. But it is best not to leave too much to luck," he says, estimating that proper fieldwork should leave only about 20% of the crop's outcome to the weather.

Locking in buyers

The third is to sell crops well.

That doesn't only involve employing, as Landkom does, four dealers "whose whole life is grain trading"

"For winter rape, we have at least 12 different options to sell at the moment."

Nor does it mean just following simple rules of avoiding sales in the autumn and spring planting seasons, when many farmers sell crop to pay for seed, diesel and fertilizer, and between mid-December and mid-January, when the country closes down for Christmas.

It also means increasing the security of revenues by agreeing long-term supply contracts, a shift Mr Skotsyk has also put in the pipeline.

"If you also control your costs, that means you are stable not for just for one year, but a number of years."

Vegetable plot

If that doesn't sound like the kind of idea to tax Landkom's elders, his plans for vegetable growing in the southern Ukrainian region of Crimea, where the group has 6,100 hectares, may give them more to chew on.

"Everyone told me not to bother with this land, but it has great potential," he says.

For growing vegetables, even, with an injection of expertise from his former employers in West Sussex, and potentially sold to Tesco, the UK supermarket chain which has in the past made noises about getting into Ukraine.

"I am sure now the economy is rising again, they will come."

Of course, Tesco may be deterred by the dearth of local meat and fish supplies which, Mr Skotsyk says, forced Ukraine to import record levels of both last year.

But maybe he has ideas for producing these too.

By Mike Verdin

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