Strategy in the Russian Agriculture

Deutsche Leasing International GmbHGVM Harald QuanteMoscow, 03.03.2010

Strategy in the Russian Agriculture Perspectives for Agricultural

MachineryEffective Financing as a Key to Success in Agricultural Businesses

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03.12.07, Deutsche Leasing plus Partner Master, Folie 2

Agenda

– Speaker's portrait

– Company portrait

– Useful methods of sales financing for dealers

– Useful financing strategies for farmers and investors

– Decision making in financial service provision

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Profile Harald Quante

Global Vendor Manager at Deutsche Leasing AG

– Responsible for relationship development with manufacturers and dealers of agricultural machinery and equipment worldwide

Vita

– Born 1962

– Apprenticeship as farmer

– University of agriculture in Bonn

– Sales manager different sectors of agriculture

– Sales manager financing agricultural equipment (Nat West Bank and AGCO Finance)

– Since 2007 Deutsche Leasing International

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Company Overview

– founded 1962 as first manufacturer-independent leasing company in Germany

– German market leader

– successful global expansion (19 dependences)

– owned by 410 Sparkassen

– over 1.650 employees (450 outside Germany)

– 7,2 billion € turnover

– 5 major business segments: IT, International, Sparkassen & MS, Fleet, Retail/Finance

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Deutsche Leasing International

Local knowledge – international expertise.In 22 countries of the world.

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Local Challenges and Limitations in Financing (as of 2009/2010) – example: Russia

• Financing at local banks is expensive for importers – interest rate approx. 15 % and higher

• Borrowing abroad for importers of internationally recognized credit rating (IFRS accounting and securities Testate)

• Decisions concerning credit terms and guarantees will be made in the H/Qs of local banks; due to difficult economic conditions in Russia this was currently associated with significant delays

• Capital markets for Russian banks, given the financial crisis are ‚dried up‘;

• No Liquidity for the farmers

• Result: big decrease in sales of machines

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Contacts with banks

– Initialization of contacts at an early stage of business recommendable

– Set up of credit lines

– Continuous contact care

– Always initialize a second bank contact

– to be save in case of cancellation

– to be save in times of economic crisis

– to secure financing solutions for your customers

– to get competitve financing offers

– to secure further growth

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Demands for high quality dealers

– Commercial leader with extensive expertise (Master of Business, Agricultural Engineer, etc.)

– Balance sheet management

– Controlling (inventory, credit lines, bench-marking, asset/ capital turnover)

– Corporate financing and sales financing

– Corporate development planning (personnel, financing,…)

– Contacts with banks

– Contacts with suppliers

– Contacts / consultancy with key account customers

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Recent Developments in Machinery Sales

– Agricultural machinery business links industry and customer

– Exclusiveness of franchises and areas

– large area size – few dealers per area

– Focus on service quality

– Focus on special services

– Concentration on good end customer

– Developement of advanced services is vital

Decision making in financial service provision

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Asset Devaluation and Remarketing

– DL has database for more than 20.000 different machines of all industries

– the asset value curve is continuously adjusted to the defaults and/or machinery prices realized.

– The higher the support of a partner in remarketing is, the higher is our readiness to decide in our partner‘s favour in case of insecurities in enconsumer business.

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0 12 24 36 48 60 72 84 96 108 120 Month

Value %

Difference:

Legal costs

Interst costs

Transport

Repair

Market price

Value for the bank

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Financing requirements of farmers

Land and buildings

Machinery and equipment

Production costs(seeds, fertilizer, petrol)

long term credits

short term credits

medium term credits

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Asset Devaluation and Remarketing

– Loan 1: Value of the credit is not backed by the value of the Machine

– Possible losses are evaluated based on asset values and remarketing experience of the financer.

– A typical strength of an experienced object financer like Deutsche Leasing is its fair evaluation and strong expertise that facilitates remarketing. The customer profits from this.

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0 24 48 72 96 120

Loan 1ValueLoan 2

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Points to discuss

– Special programms for the need of Russian farmers

– Developement for price of second hand machines

– Support of dealer and producer in case of default

Thank you. Questions?

Strategy in the Russian Agriculture

Documents

Transcript of Strategy in the Russian Agriculture