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Business Forecasts: what was talked about at EBA Global Outlook?

23/ 09/ 2021
  What will happen to Ukraines economy and what is next for some of the most crucial industries in the country? Together with business leaders, we tried to navigate the answers to this question at EBA Global Outlook on September 21. Besides, the major industry representatives shared their vision of Ukraines economic development and the necessary conditions for its acceleration. So, how do CEOs of Ukrainian and international companies see the future? We have collected the most interesting insights for you below:  Alessandro Zanelli, CEO Nestle in Ukraine and Moldova The FMCG sector is looking into the future with confidence and optimism. We see the overall categories back to growth in both volume and value. And over the past two bimonthly periods, the industry has grown by an average of 15-18%. This positive trend is reassuring and inspiring. In 2021 we achieved robust results in all our categories on Ukrainian market and see a great potential for further growth as we plan to increase it to double-digit next year. At the same time, we have somewhat modest expectations of the profit. The cost of our products is rising due to high prices of raw materials, logistics, transportation, and electricity. Having that confidence looking towards 2022 we expect to continue our double-digit growth and plan further investments in the modernization of our factories, product innovation, sustainability, and regenerative food systems. Following the concept of regeneration, we keep our commitment to make 100% of our packaging recyclable or re-usable by 2025, to half CO2 emissions by 2030, and to achieve net-zero emissions by 2050. We are implementing bold initiatives in Ukraine such as our waste management project Lighthouse, which is a pilot project to test the EPR system in Ukraine, and the Hospodar project that is focused on the implementation of regenerative agricultural practices in the country.  Тоmаs Fiala, СЕО Dragon Capital We see an increase in the purchasing power of the population, which has a positive impact, in particular, on retail. Due to extreme prices in world commodity markets, the current year is also successful for producers of metallurgical products and related industries. Besides, this year we expect record harvests of grain and other crops, which will be a positive factor for agricultural companies and the economy as a whole. However, the data on GDP dynamics published by Ukrstat is somewhat disappointing. This year, we expected the economy to grow by 4.5% but lowered our forecast to 3.5% after unexpectedly low growth in the second quarter. Also given the high inflation, nominal GDP will reach a record level of almost $ 200 billion this year, exceeding the figures we had before the occupation of Crimea and Donbas. Among the main economic risks, we should mention a significant reduction in prices for basic export goods, which is partially happening now. Also, rising gas prices will increase the expenditures of producers, including agricultural, and will lead to a deterioration in the foreign trade balance. According to our forecasts, the hryvnia-dollar exchange rate will weaken slightly next year to 28 UAH/$. But no shock jumps are expected in the currency rate. The NBU is one of the most reformed and professional institutions, the Banks board continues to pursue a conservative monetary policy, adheres to the inflation targeting regime and a flexible exchange rate. As long as the NBU remains independent, we can be sure of the stability of the foreign exchange market. Other external risks include high inflation in the world economy and Russias actions, while the main internal risk, to my mind, is the increased populist steps made by the government and parliament in connection with the upcoming elections 2023-24. Mauro Longobardo, CEO ArcelorMittal Kryvyi Rih Indeed, the world economy is recovering, so no big drop in demand for steel is expected shortly. At the same time, there is a problem with business profitability. Over the past three months, energy prices have risen significantly, in particular, for gas - three times, for electricity - by 40%. Also, the price of iron ore fell twice - from $ 200 in the second quarter to $ 100. Therefore, the cost of production increases, and its price decreases. If this situation remains unchanged, then next year we will reach only 30% of this years profits. But all these are short-term forecasts for the next three quarters. What is more important now is our long-term plans. By 2050, ArcelorMittal Kryvyi Rih co will have to achieve carbon neutrality. So, we are investing $ 700 million in the current investment program of modernization and plan to invest an additional $ 1 billion in green metallurgy projects. ArcelorMittal Corporation is ready to allocate these funds, but if only Ukraine manages to establish a positive investment climate. Stanislav Dmitrik, Co-Founder & CBDO Rocket The world is now experiencing global shifts due to changing generations. Every day, a new young audience appears in the markets, triggering the rapid development of online products. For three years in a row, ever since the launch of our project, it continues to grow every month in the number of orders, and therefore, we see great prospects. In fact, processes are now lagging behind market growth, and our goal is to constantly work to optimize and improve business processes to meet growing demand. Also, new trends are emerging. In this context, Rocket seeks to create a single ecosystem, a kind of super-app, which will integrate delivery from restaurants and shops, as well as from dark kitchen and darks stores, which will significantly reduce the time of receipt of the order. We see that people are forming new habits - they prefer ordering online rather than going to the store for products and goods. Currently, the share of such orders is about 5%. And in 10 years, according to various estimates, it may increase to 20%, so we are very interested in the development of this segment. Alex Lissitsa, СЕО, ІМС  2021 was an exceptionally successful year for Ukrainian agribusiness, especially in the south, due to a number of factors, the first of which is the weather. According to forecasts, this year we will have a record grain harvest - about 80 million tons, of which we will export more than 50 million tons, it will be a real challenge for the Ukrainian transport infrastructure. After a great year in 2021, both in terms of production and financial indicators, we hope and predict the next one to be just as successful. There are all the prerequisites for the growth of crop production to continue – we talk, in particular, about stable prices. But for animal husbandry, things may be slightly worse. The states attempts to change the taxation, namely, in the field of poultry farming and this does not add much optimism. Also, the domestic agricultural sector, especially in the last 20 years, is significantly affected by climate change. In part, we owe to it such bountiful harvests and the opportunity to grow certain crops in new regions where just some time ago it was not possible. However, in the long run, climate change will have a negative effect, as it will significantly impact the quality of the harvest. There is also a lot of talk about the need for irrigation reform which already has attention from the authorities, but first, it is necessary to conduct a comprehensive study of soil moisture in Ukraine. Oliver Gierlichs, Managing Director & CFO Bayer Ukraine As you may know, Bayer is working in the areas of agriculture and healthcare. And this year we have seen some positive legislative developments relevant to our business. The situation looks favourable for crop protection products (CPP) and seed industries in Ukraine. With the unblocking of the importation of samples of innovative CPPs in Ukraine, farmers will get novel agrochemicals that in turn will support harvest growth in the country in the future years. Also in 2021, our corn seeds produced in Ukraine will be exported to the EU countries for the first time and we shall continue to invest in local seed production, as it has great potential for growth. Besides, Bayer has launched its Carbon Initiative in Ukraine, which helps farmers making their production more sustainable by adopting climate-smart farming practices like using cover crops, tillage reduction, and crop rotations. And when it comes to healthcare, we are seeing continuous growth in cardiology along with a return to growth in ophthalmology and womens health. I believe that for the development of the pharmaceutical sector, Ukraine needs to ensure effective intellectual property rights protection. And if we talk broader, the country has to make further progress in establishing the rule of law and fighting against corruption. Thank you very much to all the speakers and participants for their active involvement, interesting insights, and meaningful discussion. We would also like to thank our friends and partners Nestlé Ukraine, PJSC Grawe Ukraine Life Insurance, and Redcliffe Partners for supporting the event which unites the bright minds of our community. We hope that all optimistic forecasts will be proven true, so Ukraine will be able to unleash its economic potential and embark on the path of accelerated growth! Partners  

What will happen to Ukraine’s economy and what is next for some of the most crucial industries in the country? Together with business leaders, we tried to navigate the answers to this question at EBA Global Outlook on September 21. Besides, the major industry representatives shared their vision of Ukraine’s economic development and the necessary conditions for its acceleration.

So, how do CEOs of Ukrainian and international companies see the future? We have collected the most interesting insights for you below: 

Alessandro Zanelli, CEO Nestle in Ukraine and Moldova

The FMCG sector is looking into the future with confidence and optimism. We see the overall categories back to growth in both volume and value. And over the past two bimonthly periods, the industry has grown by an average of 15-18%. This positive trend is reassuring and inspiring. In 2021 we achieved robust results in all our categories on Ukrainian market and see a great potential for further growth as we plan to increase it to double-digit next year.

At the same time, we have somewhat modest expectations of the profit. The cost of our products is rising due to high prices of raw materials, logistics, transportation, and electricity.

Having that confidence looking towards 2022 we expect to continue our double-digit growth and plan further investments in the modernization of our factories, product innovation, sustainability, and regenerative food systems. Following the concept of regeneration, we keep our commitment to make 100% of our packaging recyclable or re-usable by 2025, to half CO2 emissions by 2030, and to achieve net-zero emissions by 2050. We are implementing bold initiatives in Ukraine such as our waste management project Lighthouse, which is a pilot project to test the EPR system in Ukraine, and the Hospodar project that is focused on the implementation of regenerative agricultural practices in the country. 

Тоmаs Fiala, СЕО Dragon Capital

We see an increase in the purchasing power of the population, which has a positive impact, in particular, on retail. Due to extreme prices in world commodity markets, the current year is also successful for producers of metallurgical products and related industries. Besides, this year we expect record harvests of grain and other crops, which will be a positive factor for agricultural companies and the economy as a whole. However, the data on GDP dynamics published by Ukrstat is somewhat disappointing. This year, we expected the economy to grow by 4.5% but lowered our forecast to 3.5% after unexpectedly low growth in the second quarter. Also given the high inflation, nominal GDP will reach a record level of almost $ 200 billion this year, exceeding the figures we had before the occupation of Crimea and Donbas.

Among the main economic risks, we should mention a significant reduction in prices for basic export goods, which is partially happening now. Also, rising gas prices will increase the expenditures of producers, including agricultural, and will lead to a deterioration in the foreign trade balance. According to our forecasts, the hryvnia-dollar exchange rate will weaken slightly next year to 28 UAH/$. But no shock jumps are expected in the currency rate. The NBU is one of the most reformed and professional institutions, the Bank’s board continues to pursue a conservative monetary policy, adheres to the inflation targeting regime and a flexible exchange rate. As long as the NBU remains independent, we can be sure of the stability of the foreign exchange market. Other external risks include high inflation in the world economy and Russia’s actions, while the main internal risk, to my mind, is the increased populist steps made by the government and parliament in connection with the upcoming elections 2023-24.

Mauro Longobardo, CEO ArcelorMittal Kryvyi Rih

Indeed, the world economy is recovering, so no big drop in demand for steel is expected shortly. At the same time, there is a problem with business profitability. Over the past three months, energy prices have risen significantly, in particular, for gas – three times, for electricity – by 40%. Also, the price of iron ore fell twice – from $ 200 in the second quarter to $ 100. Therefore, the cost of production increases, and its price decreases. If this situation remains unchanged, then next year we will reach only 30% of this year’s profits. But all these are short-term forecasts for the next three quarters. What is more important now is our long-term plans. By 2050, ArcelorMittal Kryvyi Rih co will have to achieve carbon neutrality. So, we are investing $ 700 million in the current investment program of modernization and plan to invest an additional $ 1 billion in green metallurgy projects. ArcelorMittal Corporation is ready to allocate these funds, but if only Ukraine manages to establish a positive investment climate.

Stanislav Dmitrik, Co-Founder & CBDO Rocket

The world is now experiencing global shifts due to changing generations. Every day, a new young audience appears in the markets, triggering the rapid development of online products. For three years in a row, ever since the launch of our project, it continues to grow every month in the number of orders, and therefore, we see great prospects. In fact, processes are now lagging behind market growth, and our goal is to constantly work to optimize and improve business processes to meet growing demand. Also, new trends are emerging. In this context, Rocket seeks to create a single ecosystem, a kind of super-app, which will integrate delivery from restaurants and shops, as well as from dark kitchen and darks stores, which will significantly reduce the time of receipt of the order. We see that people are forming new habits – they prefer ordering online rather than going to the store for products and goods. Currently, the share of such orders is about 5%. And in 10 years, according to various estimates, it may increase to 20%, so we are very interested in the development of this segment.

Alex Lissitsa, СЕО, ІМС 

2021 was an exceptionally successful year for Ukrainian agribusiness, especially in the south, due to a number of factors, the first of which is the weather. According to forecasts, this year we will have a record grain harvest – about 80 million tons, of which we will export more than 50 million tons, it will be a real challenge for the Ukrainian transport infrastructure. After a great year in 2021, both in terms of production and financial indicators, we hope and predict the next one to be just as successful. There are all the prerequisites for the growth of crop production to continue – we talk, in particular, about stable prices. But for animal husbandry, things may be slightly worse. The state’s attempts to change the taxation, namely, in the field of poultry farming and this does not add much optimism.

Also, the domestic agricultural sector, especially in the last 20 years, is significantly affected by climate change. In part, we owe to it such bountiful harvests and the opportunity to grow certain crops in new regions where just some time ago it was not possible. However, in the long run, climate change will have a negative effect, as it will significantly impact the quality of the harvest. There is also a lot of talk about the need for irrigation reform which already has attention from the authorities, but first, it is necessary to conduct a comprehensive study of soil moisture in Ukraine.

Oliver Gierlichs, Managing Director & CFO Bayer Ukraine

As you may know, Bayer is working in the areas of agriculture and healthcare. And this year we have seen some positive legislative developments relevant to our business. The situation looks favourable for crop protection products (CPP) and seed industries in Ukraine. With the unblocking of the importation of samples of innovative CPPs in Ukraine, farmers will get novel agrochemicals that in turn will support harvest growth in the country in the future years. Also in 2021, our corn seeds produced in Ukraine will be exported to the EU countries for the first time and we shall continue to invest in local seed production, as it has great potential for growth. Besides, Bayer has launched its Carbon Initiative in Ukraine, which helps farmers making their production more sustainable by adopting climate-smart farming practices like using cover crops, tillage reduction, and crop rotations. And when it comes to healthcare, we are seeing continuous growth in cardiology along with a return to growth in ophthalmology and women’s health. I believe that for the development of the pharmaceutical sector, Ukraine needs to ensure effective intellectual property rights protection. And if we talk broader, the country has to make further progress in establishing the rule of law and fighting against corruption.

Thank you very much to all the speakers and participants for their active involvement, interesting insights, and meaningful discussion. We would also like to thank our friends and partners Nestlé Ukraine, PJSC Grawe Ukraine Life Insurance, and Redcliffe Partners for supporting the event which unites the bright minds of our community. We hope that all optimistic forecasts will be proven true, so Ukraine will be able to unleash its economic potential and embark on the path of accelerated growth!

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