Volgograd - 2012

The heart of the projectTo create the feeding complex of broiler breeding and processing in Girnovskiy district of Volgograd region

Annual production program 11 000 t of slaughter weight

Total project cost 2 250 m rub

Project life-cycle 30 years

Payback period (discounting rate is 14%)

6,9 years

Rate of return (IRR) 20,4%

Project summaryProject summary

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Business model of the projectBusiness model of the project

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The key components of The key components of the business modelthe business model

Legal modelLegal model ( (functions of legal persons and assets in the functions of legal persons and assets in the projectproject))

Production modelProduction model ( (capacity, technologycapacity, technology))

Marketing modelMarketing model ( (markets, trade channels, markets, trade channels, segmentation, advancement strategysegmentation, advancement strategy))

Legal model of the projectLegal model of the project

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Name Functoins Assets

LLC “Agro-industrial company POVOLGIE”

Initiation,

ManagementShares of affiliators

Agricultural company “Krasnyi Yar”

Crop production 6.800 ha of the land

Public corporation “Adadurovskyi elevator”

Grain storage, formula feed production

Elevator and production department

LLC “Integrated Poultry Farm Girnovskaya”

Project operator (SPV) Anew built objects of

integrated poultry farm

Initiators investmentInitiators investment– 300-350 – 300-350 m rubm rub

Production model of the projectProduction model of the project

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The key technological and producing The key technological and producing solut ionssolut ions

CapacityCapacity – 11– 11 000 t of slaughter weight per year 000 t of slaughter weight per yearProduction alterations Production alterations –– vertical integration vertical integration including crop including crop

production, grain storage and processing, formula feed production, grain storage and processing, formula feed production, fattering, slaughtering, poultry meat processing and production, fattering, slaughtering, poultry meat processing and tradetrade

Broiler keeping Broiler keeping – – low-groundlow-ground ((ad referendumad referendum). ). Floor and coop Floor and coop systems are almost fungible. The disadvantage of the second systems are almost fungible. The disadvantage of the second system is that it is disrecommend in EU system is that it is disrecommend in EU

Vertical integrated productionVertical integrated production

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Production model of the projectProduction model of the project

Инкубатор

Crop production Formula

feed plant

incubator

Sale centre

Ultimate consumer

Department of slaughter and processing

Broiler breeding

infrastructure

Production model of the projectProduction model of the project

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Modeling preconditions – factors influencing the broiler weight

Production model of the projectProduction model of the project

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Processing degreeProcessing degree – – deepdeep . . The trunks and parts selling The trunks and parts selling will make up not more than 30-35% of product release. Adding will make up not more than 30-35% of product release. Adding 10% of mince and sirloin share increase the average price by 5 10% of mince and sirloin share increase the average price by 5 rub (7,5%).rub (7,5%).

Product pacingProduct pacing – – Shrink-wrap is going to be one of Shrink-wrap is going to be one of competit ive advantagescompetit ive advantages

The key technological and producing The key technological and producing solut ionssolut ions

indicatorShare in the whole

volume, %Volume , t

Production of the poultry meat in slaughter weight per year, including

100 10 983,9

Broiler chicken meat without bones 23 2 526

Processing products (mince) 30 3 295

Cut-up trunk (breast, leg, etc.) 18 1 977

Broiler trunks 17 1 867

By-products 8 879

Production model of the projectProduction model of the project

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Marketing model of the projectMarketing model of the project

The key marketing decisionsThe key marketing decisions

Key preconditions for modeling - a potential market small share involves the Key preconditions for modeling - a potential market small share involves the niche approach to sales niche approach to sales

Distribution channels Distr ibution channels – its own distribution channels – its own distribution channels (65-70%). Expected to create its own network (in (65-70%). Expected to create its own network (in a deep province, which is not fully covered by a deep province, which is not fully covered by networks) and wholesale company.networks) and wholesale company.

Participation in the state. procurement - Participation in the state. procurement - one of one of the competitive advantages of company will be a the competitive advantages of company will be a flexible approach to packaging, calibration and flexible approach to packaging, calibration and delivery of products (this is important for budget delivery of products (this is important for budget buyers, for example, delivery to schools)buyers, for example, delivery to schools)

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Marketing model of the projectMarketing model of the project

Key preconditions - poultry market has growth potential, competition increases, Key preconditions - poultry market has growth potential, competition increases, but they still have a space for maneuverbut they still have a space for maneuver

“old style “ companies 25-35%

“ new style “ companies 65-75%

The market has a niche where the The market has a niche where the competition is still possiblecompetition is still possible

USA is an example to followUSA is an example to follow

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Marketing model of the projectMarketing model of the project

Geographical segmentation - Geographical segmentation - target segment regions in a 500target segment regions in a 500 km km radius from Volgograd. The count is expected to do on Volgograd, radius from Volgograd. The count is expected to do on Volgograd, Saratov, Astrakhan region, where is the strong position of Saratov, Astrakhan region, where is the strong position of producers from Belgorod and Stavropol. They can compete for the producers from Belgorod and Stavropol. They can compete for the difference in the cost of delivery (3-5 rubles per kg.)difference in the cost of delivery (3-5 rubles per kg.)..

Advertising policy - Advertising policy - local (regional) promotion of its own brand, as well local (regional) promotion of its own brand, as well as the placement of the brand named networks ("MAN", "Magnet", as the placement of the brand named networks ("MAN", "Magnet", "Pyaterochka", etc.)"Pyaterochka", etc.)

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Budgetary and social efficiency of the Budgetary and social efficiency of the projectproject

Budgetary and social efficiency of the Budgetary and social efficiency of the projectproject

Tax proceeds*Sum, thousand rub.

1 year 5 years

UST / insurance fee 9 241 46 205 Professional insurance 186 930Income tax** 117 153 585 765PIT 6 059 30 295Total tax payments: 132 640 663 200

According to the project it’s provided the creation of 260 jobs.According to the project it’s provided the creation of 260 jobs.The company is preparing a program to build low-rise settlement for the The company is preparing a program to build low-rise settlement for the employees at 150 private houses.employees at 150 private houses.

* - * - 20152015 ((first full power year first full power year ))*** - including the tax benefits* - including the tax benefits

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strengthsstrengths weaknessesweaknesses

- High self-sustainment of feed

- The competitive market (lack of companies that can dictate prices in the market)

- Lower costs due to new equipment

- Location of production – close of consumption areas

- Own incubator and slaughter shop, which provide a complete production cycle

- The need to overcome the barrier of entry

- A possible mismatch in terms of a simultaneous realization of the project and purchase of equipment, delays in equipment delivery

-the risks of diseases

SWOT-ANALISISSWOT-ANALISIS

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opportunitiesopportunities threatsthreats

- The demand for poultry meat in Russia, CIS countries and the world is high and tends to increase

- Improved economic indicators of the project due to public support at the regional and federal level

- Stabilization of the quotas for the supply of imported meat to Russia for the long term

-threat of epidemics of bacterial and viral infections in poultry

-change of tax legislation

-change of exchange rates (during the purchase of equipment)

SWOT-ANALISISSWOT-ANALISIS

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Type of government support Sum , m rub.

Subsidies for growing 65 904

Subsidy for the construction of engineering networks costs 169 328

Interest rate subsidies 353 999

Subsidized property tax for 5 years 170 126

Subsidized income tax rate (for 5 years) 108 494

The volume of state support 867 851

State supportState support

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Making a decision on state support for the project in the requested amount Making a decision on state support for the project in the requested amount of time payback will be reduced on 0.9 - 1.1 yearsof time payback will be reduced on 0.9 - 1.1 years

THANKS FOR ATTENTION! THANKS FOR ATTENTION!

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