Sergiy Bulavin. "EBITDA per Hectare". An Agricultural Company's Key Performance Indicator. Presentation on the conference organized by ProAgro. November 10, 2017.

1. Presentation on the conference organized by ProAgro. November 10, 2017
“EBITDA per Hectare”
An Agricultural Company’s Key Performance
Indicator
Sergiy Bulavin

2. 2
“EBITDA per hectare”
Opinion of agricultural companies
‘EBITDA per hectare’ is the most common indicator of efficiency in the
agricultural business
(Source: http://www.svarogagro.com/en/newsroom/news/novostj/forbes-recognized-svarog-westgroup-
corporation-the-most-efficient-agricultural-company-of-ukraine)
AgroGeneration is more focused on ‘EBITDA per hectare’ (or ‘cash per hectare’)
than on yields
(Source: http://agrogeneration.com/files/invest_securities__etude_agrogeneration_-_160715_-_gb.pdf)
The favored performance metric of First Resources is ‘EBITDA per hectare’ of
mature nucleus because it represents the cash earnings generated by each
productive nucleus hectare that they worked on
(Source: http://www.firstresources.com/upload/file/20150624/20150624164945_80177.pdf)
MHP pays significant attention to EBITDA, land under control and its derivatives
as ratios that characterizes the performance of agricultural company and affects
its valuation
(Source: http://www.mhp.com.ua/library/file/pr-fs-9m-2016.PDF)
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

3. 3
“EBITDA per hectare”
Expert opinions
EBITDA is an especially important calculation for farms and agricultural
companies, due to their extended levels of fixed assets that have high
depreciation values and/or farms with high debt financing. Furthermore, EBITDA
is used to compare agricultural companies
(Source: Manzagol, B. 2014. Interplay of factors influencing organic vegetable farm profitability and entrance into
natural foods market. Undergraduate honors thesis at the University of Colorado, Boulder. (Paper 150))
Efficiency of activity of agricultural companies and holdings can be traced by
means of the index of EBITDA. This allows for the tracing of profit on all levels,
and furthermore makes it possible to compare agricultural companies with other
of comparable activities and sizes. The EBITDA index settles accounts on the basis
of the financial reporting of the company and is used for the estimation of
profitability
(Source: Melnyk, K. 2013. The peculiarities of formation and development of agricultural holdings in Ukraine.
Scientific Journal: problems of world agriculture, 13(4):122-129. Warsaw: Warsaw University of Life Sciences Press.)
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

4. 4
“EBITDA per hectare”
Ratings
Landlord.ua rating of the Best Performing Agricultural Crop Producers (by EBITDA
per one hectare) as of 02.08.2017
(Source: http://www.landlord.ua/samyie-effektivnyie-agrokompanii/)
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

5. 5
“EBITDA per hectare”
Points for discussion
1. Why is “EBITDA per hectare” used as an agricultural company’s key
performance indicator?
2. Why does “EBITDA per hectare”-based comparison of agricultural
companies make no sense?
3. What does it take to make this comparison expedient?
4. What key drivers will have a positive influence on “EBITDA per
hectare”? What will increase “EBITDA per hectare”?
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

6. Why is “EBITDA per hectare” used as an
agricultural company’s key performance
indicator?

7. EBITDA (classic definition) stands for an English abbreviation of Earnings
Before Interest, Taxes, Depreciation and Amortization
"EBITDA per hectare" in agriculture means income generated by every
cultivated hectare
7
"EBITDA per hectare" as performance indicator
What is "EBITDA per hectare"?
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

8. 8
"EBITDA per hectare" as performance indicator
Users of "EBITDA per hectare"
Potential buyers, investors, co-investors
Benchmarking & Comparative valuation
Owners, Boards of Directors
Benchmarking & Comparative valuation
Indicator that has impact on investment attractiveness
Assessment of management’s efficiency / KPIs
Indicator that may be used as a strategic or tactical target of the company
Management
Strategic or tactical target set by owners or by the Board of Directors
KPI for the management set by owners or by the Board of Directors
Production planning
A way to analyze best practices and to find additional efficiency
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

9. 9
"EBITDA per hectare" as performance indicator
Benchmarking & Comparative valuation
Users of "EBITDA per hectare"
Benchmarking Categories
(long list)
Benchmarking Categories
(short list)
 Potential buyers, investors, со-
investors, such as:
• High net worth individuals
• Private equity, hedge funds, commodity
investors
• Pension funds, endowments, foundations
• Venture capitalists
• Food and agriculture entrepreneurs and
corporations
• Governments
• Impact investors
• Sovereign investment funds and family
offices
• Sovereign wealth funds
• State-owned enterprises
• Large commodity and food traders
• International development banks
• Private and publicly traded real estate
investment trusts, etc.
 Owners, Boards of Directors
 Management
• `EV / EBITDA`
• `EV / Land Under Control`
• `P / E`
• `EV / EBITDA`
• `Land Under Control`
• `EBITDA`
• `Sales / Land Under Control`
• `EBITDA / Land Under
Control`
• `Debt / EBITDA`
• `EV / EBITDA`
• `Land Under Control`
• `EBITDA`
• `EBITDA / Land Under
Control`
• ‘EBITDA / ha’
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

10. Comparison of agricultural companies based on
"EBITDA per hectare“
• Real case and disappointing outcomes
• What can be done?

11. 11
Comparison of Ag Companies based on “EBITDA per ha”
Real case and disappointing outcomes
Comparison in this form loses sense!!!
Some factors complicating the comparison:
Financial and accounting specifics:
– CashFlow terms
– EBITDA and `EBITDA Adjustments` calculation
approach
– Biological assets revaluation approach
Regional specifics:
– Soil and weather
– Labor market
– Pricing for seeds, fertilizers, plant protection
agents, and products
– Land market and land bank maintenance costs
– Taxes and tax benefits
Level of vertical integration
Off-season prices for seeds, fertilizers, plant
protection agents, and production of agricultural
companies
Real case comparison of agricultural
companies based on "EBITDA per hectare"
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

12. 12
Comparison of Ag Companies based on “EBITDA per ha”
Impact of vertical integration and regional specifics
Landlord.ua rating of the Best Performing Agricultural Crop Producers (by EBITDA
per one hectare) as of 02.08.2017 (Source: http://www.landlord.ua/samyie-effektivnyie-agrokompanii/)
Name Regions
EBITDA per
ha, USD
Land under
control, ha
Cultivated
land, ha
Vertical Integration
1 I&U Group Kirovograd, Mykolaiv $630 42,000 42,000 Sugar production
2 LNZ Group Chernyhiv, Poltava, Sumy $486 60,000 50,000 Seeds production
3 IMC Chernyhiv, Poltava, Sumy $432 136,600 136,600 No
4 MHP
Sumy, Kyiv, Vinnitsa, Ternopil,
Khmelnytsk, Lviv, Ivano-Frankovsk,
Dnepropetrovsk
$432 370,000 355,000 Chicken meat and eggs
5 Nibulon
Mykolaiv, Lugansk, Vinnitsa, Khmelnitsk,
Poltava, Kharkiv, Cherkassy, Zhytomir,
Sumy, Odessa
$375 82,500 80,600 Storage & Logistics
6 Astarta
Poltava, Vinnitsa, Zhytomir, Ternopil,
Khmelnitsk, Chernyhiv, Kharkiv,
Cherkassy
$371 250,000 237,000 Sugar production
7 Rostok-Holding Chernyhiv, Sumy $369 60,000 52,000 No
8 Kernel
Ternopil, Khmelnitsk, Chernyhiv, Sumy,
Kharkiv, Poltava, Cherkassy, Kirovograd
$322 390,000 390,000 Sunflower oil
9 Agroprodservice Ternopil, Lviv, Ivano-Frankovsk $322 33,818 31,222 No
10 Grain Alliance
Kyiv, Cherkassy, Poltava, Chernyhiv,
Khamelnitsk
$318 48,342 46,954 No
11 Ukrprominvest-Agro
Vinnitsa, Poltava, Kirovograd, Zhytomir,
Cherkassy, Dnepropetrovsk
$308 118,000 113,500 Sugar production
12 Agroton Lugansk, Kharkiv $277 118,000 118,000 No
13 Agromino Kharkiv, Kirovograd, Mykolaiv $256 46,000 46,000 No
14 Agrotrade
Chernyhiv, Sumy, Poltava,
Dnepropetrovsk, Kharkiv
$211 65,000 64,068 Seeds production, organic crops
15 AgroGeneration Lviv, Ternopil, Zhytomir, Sumy, Kharkiv $197 120,000 109,000 No
16 KSG Agro Dnepropetrovsk $194 33,000 33,000 No
17 HarvEast Donetsk $119 97,000 83,000 No
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

13. 13
Comparison of Ag Companies based on “EBITDA per ha”
What does it take to make the comparison meaningful on the practical side?
What can be done?
Use the same principles by the calculation of "EBITDA per hectare"
Calculation methodology
‘EBITDA Adjustments’
Apply comparison of "EBITDA per hectare“ for Ag Companies in the same regional
conditions
Climate, soil
Crops
Other regional conditions
When calculating "EBITDA per hectare“ keep crop farming separate
Exclude impact of vertical integration
Exclude impact of non-monetary factors that are not related to crop farming
How can it be done?
Get access to the accounting system of the compared agricultural companies
Come to agreement with other agricultural companies on the application of the same
calculation methodology
Is it feasible?
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

14. 14
Comparison of Ag Companies based on “EBITDA per ha”
How can one use it despite existing limitations
Production planning
Use "EBITDA per hectare" per crop
Evaluate ‘contribution to EBITDA’ per crop
Changes and improvements planning
Use "EBITDA per hectare" as a decision-making criterion
Company’s development monitoring
Make YOY comparison of "EBITDA per hectare" in crop growing and
"EBITDA per hectare" per crop
Compare "EBITDA per hectare" of company entities (farms)
Finding additional efficiency
Compare "EBITDA per hectare" of and among agricultural companies
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

15. 15
Drivers increasing “EBITDA per
hectare”

16. 16
Drivers increasing “EBITDA per hectare”
Types of drivers
General drivers pertaining to
any industrial production
Legal structure
Management structure
Budgeting
Sales and supplies
Finance
Security and control system
HR
IT systems
Production excellency
Management techniques
Vertical and horizontal
integration
Agriculture-specific drivers
Agricultural technologies
Management of agricultural
production
Agricultural production planning
Machines, equipment, and
infrastructure
Agricultural and technological R&D
Agriculture risks management
Soil productivity
Land bank management
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

17. 17
Drivers increasing “EBITDA per hectare”
Top 5 from 70 grades based on influence (analysis of 242 drivers)
Each driver listed below has exact criteria of its implementation
Grade I
Crop rotation planning
Selection of seeds, sowing and growing techniques
Tender-based sales and purchases
Grade II
Effective communication in the company
Grade III
Determination of fertilizer application rates on the basis of soil tests
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

18. 18
Drivers increasing “EBITDA per hectare”
Top 5 from 70 grades based on influence (analysis of 242 drivers)
Grade IV
Clear separation of powers and responsibilities in the management structure
Executives need to have strong managerial and leadership skills
Qualified staff at all levels, rigorous selection and continuous training
Experienced agronomists with practical approach and farm economy background
Integrated IT system including GPS, ERP, support of agronomic decisions, risks and EBITDA
modelling
Buying inputs and selling outputs at the right time and with the right financing structure
Grade V
Ongoing improvement, search-testing-introduction of new production and technological
solutions
Reduction of lands with low productivity, their exchange for more productive lands, zero
share of wasteland
Strictly defined responsibility for results for management and employees
Effective management: managerial competence, has clear strategy and understands
agricultural production process
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.

19. 19
Q & A

20. 20
"EBITDA per hectare"
Points for discussion
1. Why is "EBITDA per hectare" used as an agricultural company’s key
performance indicator?
2. Why does "EBITDA per hectare"-based comparison make no sense?
3. What does it take to make this comparison expedient?
4. What key drivers will have a positive influence on "EBITDA per
hectare“? What will increase "EBITDA per hectare"?
Sergiy Bulavin. Presentation on the conference organized by ProAgro. November 10, 2017.