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What will be like year 2021 for business? NV Business asked the owners and CEOs of large companies operating in key sectors of the Ukrainian economy.
The founder of OKKO Group, Vitaly Antonov, told NV Business about Group's new businesses, the construction of a ski resort in Lviv region, and development opportunities of the country's economy.
OKKO Group is a Ukraine-wide holding, the flagship of which is the network of fuel stations OKKO ("Concern Galnaftogaz"). The group includes more than 10 different businesses in the field of production, trade, construction, etc. More than 15,000 people work at OKKO Group enterprises. In total, our business invested more than $1 billion in the economy of Ukraine.
1. Does the company plan new investments in Ukraine in 2021?
OKKO Group is represented on the market in various areas: fuel stations network all over Ukraine; construction sector (residential and commercial real estate); food industry and provision of corporate catering services; production of household, auto chemicals and auto cosmetics; agricultural sector; sales of mineral fertilizers and gas. Previously, we announced our plans to invest in the development of tourist attractions of our country, namely to build a ski resort in the Lviv region, and we are actively moving in this direction. But the flagship business for OKKO group remains the network of fuel stations.
At the beginning of the pandemic — in March of this year — we were forced to shorten some investment projects, financing only those that started long before the quarantine and the crisis or that were critical for companies. If we talk about networks, the management reviewed and reduced part of the expenses on service and maintenance of fuel stations. But definitely it did not affect the safety conditions of employees and customers. Since mid-summer, we have resumed some investment programs. We are talking, for example, about the external and internal renewal of our fuel stations. We plan to continue investing in rebranding next year. We expect that in the end of next year, 76% of our fuel stations will be in the updated format. It’s about the external update. And talking about internal update, we plan to renew 330 out of 410 complexes as well. This is in addition to those that we have already updated into American and Scandinavian formats. Also, we plan to install solar panels at 97 fuel stations.
OKKO network quit long ago aggressive quantity growth, now we are aiming qualitative growth. We are talking about the maximum number of services at one point: from eating to picking up a parcel, buying what you need at a minimarket and all this at a fuel complex. But this does not mean that we will stop opening new fuel stations, it’s logical that we are revising our map. Next year, we plan to launch 5 new filling stations. And also, we continue our investments into increasing of gas modules number.
The holding has been investing into development, expansion and technical improvement of fuel storage facilities for many years. For example, few years ago we opened a modern gas storage station, that is the largest in western Ukraine. The tank park allows simultaneous storage of 2,000 cubic meter of liquefied gas. Its capacity is sufficient to cover the operational needs of the company, as well as to provide storage services for third-party customers.
The tank farms, that are not used for direct purposes were converted into storages of bulk and liquid mineral fertilizers: in Yarmolintsy (Khmelnytskii region), Nova Lyubomirka (Rivne region) and in Vapnyarka (Vinnytsia region). As a matter of fact holding has been investing in agriculture for already 4 years. Our specialized operator OKKO Agrotrade is actively developing the forward program. Its idea is simple: we provide fuel, mineral fertilizers, and natural gas to farmers, and they pay us with their products. Thus, under the forward program in 2019 we funden farmers by more than UAH 1 billion. We are looking forward to see the results of this year, but we have already exceeded indicators of the previous year. The total cost of processed applications from farmers during the total period of program operation is more than UAH 10.1 billion. There is also room for further growth.
Every year, the holding deepens its presence in the agricultural sector. In addition to providing the agricultural sector with all of the mentioned above, the company also purchases oil crops, processes them at domestic enterprises, receiving oil and meal (schrot). The vast majority of received products are exported. Export increases the added value of goods produced in Ukraine and brings foreign exchange earnings into the company. Let me also remind you, that in the current year we opened two credit lines. We plan to direct the received funds exactly on the broadening of the support program for agricultural producers, as well as the improvement of the logistics infrastructure and modernization of fuel stations and oil depots. Returning to the latter question, I would like to note that our network is one of the few that invests in the improvement of storage facilities. Next year, we plan to increase the tank park, for a long time we have been providing services for storing the market resource - and the need is growing. These projects are quite expensive, but the company definitely would not save on the technical conditions of our storages.
2. Will the company hire or cut staff in the upcoming year? Will you raise salaries in the company in 2021?
Today, the group of companies employs totally about 15,000 people, if we talk about the network, then it is 10,000. Taking into account the development of new directions, we do not plan to cut the staff. In 2021, if, of course, there are no extraordinary force majeure events, we plan to increase salaries. I’d like to note, the program of free medical insurance for network employees was also extended for the next year. Medical program has been working since the end of 2019. Each of the 10,000 employees is insured for UAH 100,000. To provide an insurance program for such a big number of people throughout Ukraine was not easy, not only considering financial point of view, but also because clinics of the appropriate level are not available in all settlements where we are present. But together with our partner we managed to do it. We have planned out the program so that all employees have the opportunity to receive the maximum amount of help — from doctor's consultations and the purchase of medicines to outpatient and inpatient treatment.
3. What, in your opinion, is the key opportunity that the Ukrainian economy doesn’t use?
I would talk here about a few growth points for all of us.
First. The state must create conditions for the normal operation of business, forming a clear paradigm that transparent work is honorable and profitable. Businesses must see that their taxes are used correctly and used for intended purposes.
Second. Strengthening of corporate governance in the public sector.
Third. I think that we should also pay more attention to increase processing of raw materials within the country and export of the finished product. When a country becomes a producer and sells products with high added value, it becomes rich.
The fourth. The pandemic will end someday. Accordingly, tourism will also recover. According to various data, Ukrainians spend about $8 billion on tourist services abroad — part of these resources can be redirected to domestic tourism. This is a growth point for us. The country does not have a culture of relaxing at home — and there will not be until the infrastructure is raised to the appropriate level, until there is no choice, no service. Consider neighboring Poland, see how many ski resorts there are. In Ukraine, you can count on fingers of one hand places that are equipped with normal safe tracks and lifts, hotel complexes and normal services.
And far from the last, but the most important. All this does not make sense if you do not keep the human capital of the state. This also needs to be worked on before labor migration would not wash it away.
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