Miodrag Kostic, owner of MK Group - We will be the first real Serbian international company

(Miodrag Kostić)

It is most likely that the "Plow King" and "Sugar King", which are the nicknames for Miodrag Kostic in Serbia, will soon become the king of the entire agrarian sector, and not only in our country. He is getting closer to the takeover of Slovenia's Zito Group, Greece's Hellenic Sugar sugar plants and Apatin-based Shipyard, and it is also speculated that he has joined the race for the acquisition of Carnex. In an interview for eKapija, Miodrag Kostic speaks about his objections to those "swearing on agriculture", the reasons why he believes that MK Group will be the first real Serbia international company, and why ht plans to enter the London Stock Exchange at the time of the crisis.

eKapija: You've recently opened a USD 20 million silo in Ukraine. Does MK Group have plans for some new investments? Should we expect a new investment cycle?

- MK Group is a company that is relatively free of debts at this time of illiquidity that most companies find difficult. We do not have such problems, especially because the European Bank for Reconstruction and Development (EBRD) has granted us a favorable loan (EUR 80 million). It is for sure that we are going to invest that money in the company's further development, in the core business - agriculture, as well as in everything related to our activities in the agrarian sector.

eKapija: Although you object to a number of moves made by the government, your main objection still concerns the insufficient amount of earmarks for the agrarian sector in the budget of Serbia?

- That is absolutely true. But that is not something that I privately wish for. It is only a logical move if we follow the practice of developed European countries where the agrarian budget is larger, even in the countries whose budget is drastically bigger, whereas the share of agriculture is much smaller than in our economy. It is an absurd that Serbia as a country whose revenues from the agricultural sector account for a high percentage of GDP, which is relatively small, sets aside only 3% of the budget for agriculture. That does not make any sense. And everybody swear and say that agriculture is a big chance of our country. It cannot be a chance if we do not give enough attention to that sector.

eKapija: A favorable loan granted to MK Group indicates that the situation regarding the financing of agrarian activities is somewhat better. Aside from the loan to your company, the EBRD has also approved a total of EUR 50 million worth of risk sharing facility to business banks in Serbia, with the aim of financing the seasonal working capital needs of Serbian agribusiness companies, using warehouse receipts as collateral. Would have it been better to grant that money as long-term loans to agribusiness companies, with the repayment period of 10 to 20 years and lower interest rates?

- No. Although that money is granted to finance the needs for short-term working capital, the essence of such loans is to create an infrastructure making it easier for banks to access that market. Now commercial banks experience a problem because they do not possess that infrastructure and aforementioned collateral to be able to grant more loans to the agricultural sector. The situation is exactly the opposite from what you've said - I believe that that relatively small amount of loans granted with the aim of developing the infrastructure through the use of warehouse receipts as collateral will also allow for drastically bigger funding by banks once these warehouse receipts start to be deemed as a valuable document.

eKapija: Few months ago you said that most of MK Group's investments would be directed to the field of renewable energy sources. It's been a long time since you mentioned the announced investment in the wind park near Vrsac. What is going on in that field?

- If the state continues to do nothing when it comes to the development of both administrative and institutional infrastructure, the implementation of investments such as wind farm will remain slow. Namely, we are waiting for a building permit for 30 months now, which is why we have not started the implementation of that project yet.

eKapija: Do you expect to take over Slovenia's Zito Group and, if you do, when do you expect to do that?

- Considering that we have submitted the best bid, I am optimistic and I do expect us to acquire that company. A takeover agreement should be signed in one month, after Slovenia and investment funds decide if they accept our offer.

eKapija: And what about the shipyard in Apatin?

- We are awaiting a decision of the bankruptcy judge, but I believe that we will soon take over that company as well.

eKapija: After Ukraine and Slovenia, what are the next markets you are targeting?

- Our aim is to start generating 35 percent of all our revenues and 50 percent of our profit in the markets outside Serbia in few years. We will practically become the first real international company from Serbia.

eKapija: You have announced the entrance to the London Stock Exchange in 2012. What are the chances for that now since you already announced the same move back in 2007?

- We were about to enter that stock exchange in 2007 when the global crisis occurred. If it had started two months later, we would have already been listed on the London Stock Exchange.

eKapija: But the situation in the capital market is not much different now. Is this the right moment for that move?

- I agree that the moment is not the best, and that is what is bad. On the other hand, what is good is that investors are still interested in the agrarian and energy sectors and renewable energy sources, and we count on that.

eKapija: You have been avoiding the capital market in Serbia for years. Why?

- I do not have an opinion about our capital market because it is much too small. The reason why we are entering aforementioned stock exchange is to collect up to EUR 300 million of fresh capital, which is something that cannot be done in any other market but in London, or possibly in Warsaw.

J.Đ.