What was behind the EFKO Group's decision to establish operations into the oil and fat crop segment in Kazakhstan?
EFKO has been present in the Kazakhstani market for 15 years now; however, before 2015 our operations were mainly focused around the export and distribution of goods produced in Russia. Gradually we realized we needed to localize production for further development. Besides, the investment climate of Kazakhstan is one of the most favorable in the world. In 2015, at the Foreign Investors Council, we presented a project to create an oil and fat cluster in Kazakhstan, which President Nazarbayev approved. Our business model is a vertically integrated one, and the production process includes the full cycle, starting from the fields to the final products ready for retail. Two stages of the oil and fat cluster project can be outlined: the first is the reconstruction and modernization of our oil and fat production facility. The last phase was completed in 4Q2017 and required an investment of about KZT11 billion (USD32.67 million). During this renovation period, we also managed to create 750 new jobs locally and all this allowed us to establish a local production in a fairly short amount of time. We also plan to invest KZT7 billion (USD20.79 million) into the second stage, which includes creating a network of service manufacturing centers in Almaty region that will provide a wide range of services for growing soy in the region.
How do you expect your production portfolio to develop in Kazakhstan compared to operations in Russia?
Currently, in Kazakhstan we process oilseeds and produce the value-added products on their basis: the vegetable oils in bulk and packed; oilseed meals, which are used as animal feed ingredients; and specialized fats and margarine. Due to the technology transfer from Russia, Kazakhstan went from being a net importer of oil and fat products to a net exporter. Around 40% of the manufactured production is sold for export while 60% remains in the local market. According to the results of 2017, the total volume of oilseeds processing was 32,000 tons, oils in bulk realization increased by three times, and specialized fats and margarine realization increased by 35%. In addition, a sunflower oil press factory started production. Also, there is an actively growing export flow to countries in Central Asia such as Uzbekistan, Tajikistan, Turkmenistan, and Kyrgyzstan. The other EFKO products that are popular—mayonnaise, ketchup, and dairy and fermented milk products—are currently not being produced in Kazakhstan yet, and we import them from Russia.
What are your expectations for the coming year?
We hope 2018 will be even stronger for us, especially in soybean processing market. On top of this, the new state program aimed at developing agricultural industry for 2017-2021 has a special focus on oil crops. In the following five years, total sown area will be enlarged by 600,000ha, 126,000ha of which will be located in Almaty. To balance the disproportion between the production capacities and the gross yield, we need at least 70% of that land to be allocated for oil crops. The major goals for us will be to increase crop yields and the gross harvest through our collaboration with the local agriculturists. Taking into consideration all the mentioned programs, the government's special attention to the sector, and our own plans, we are optimistic about the future despite some unfavorable macroeconomic conditions. We have the support of the government and therefore, in five years, we expect to be able to allocate 20,000 tons of high-quality fats used in food industry for export. We also hope the subsidiary amount for each kilogram of a grown product will be increased, so that farmers can receive the necessary financial support, and it also will reduce the raw materials' export from the Republic. Today, the key goals are to secure the safe food production and to expand the republic's export potential.