Slobodan Petrović: Profitable assets management

Today there is much more assets in investment funds than in banks, because people have realized that the banks give small interests and make money on them, whereas the funds give far greater money returns but at the same involve greater risks

Salford has, on the behalf of the investment fund “New World Value” in March 2003. in Serbia first bought “Imlek”, and then dairies followed: that of Mlekara Subotica, Mlekara Zemun, Mlekara Novi Sad dairies , of „Impaz“ Zaječar . Afterwards followed healthy food concern “Bambi“and in January 2005. “Knjaz Miloš“. All those companies constitute the “Danube Foods Group” Holding, and the turnover of those companies in the past year was around 350 million euros.

Slobodan Petrović, general manager of “Danube Foods Group” and general manager of “Knjaz Miloš” company in the interview for Magazin Biznis says they are satisfied with what has been achieved in these five years. “Imlek“ and “Knjaz Miloš“ will for the first time in 2007. have a favourable balance, “Bambi” has completely changed its design, and all the dairies have reached European standards. In primary milk production only they have invested around 30 million euros.

“New World Value Fund” started investing in Serbia, it was told that your plan was to make a food holding and sell it in 2008. Is that still your aim?

– Nothing has changed in our plans. Even then we were saying that 2008. was our goal. That, of course, can be half a year longer or shorter. But it can also be longer than that if we opt for the partnership sale model, in which the buyer buys off the majority package and wants us to stay in the partnership for a certain period of time. There is, therefore, such a possibility as well, although it is, for the time being, only theoretical.

The competition in the market has been quite strengthened in the meantime: “Coca Cola” has bought “Rosa”, “Vrnjci” water has also had an excellent start, new brands of water have appeared…?

– Yes. The competition is tough. We are happy that “Knjaz” has been preserved from difficult situations, because it really was in a bad situation. What we encountered was far worse from what we had expected.  

– It has proved that both our vision and our strategy were good. We worked the way we had planned and the way it should be done. Naturally, we also made some mistakes that we corrected as we went. But when we look back now, we can say that we are one of the rare funds that did not just come, buy and wait for money to make itself, but that worked actively. We have completed, for instance, the restructuring of “Knjaz Miloš“, according to the “textbook” model, or as it is said “by the book”.

And what are the plans of “Salford” for this year?

– Further investments. In “Imlek”, for instance, we are planning to invest around 26 million euros this year, and into Knjaz Miloš around 15 million euros. In this year we have great plans for investing into marketing in a great number of companies. In “Knjaz” for example, the plan is to invest into marketing a sum in the amount of 10 percent of the last year’s earnings of that company. These are enormous assets. By doing that we invest in the company, make brands, but also invest in Serbia.

With respect to the confectionery industry there has been and stayed only Concern “Bambi” in Požarevac?

– “Bambi” has been a good company before as well, but “Bambi” then and “Bambi” now are two different stories. The management can see that now. When we bought “Bambi” and talked about what should be done, they considered that it was impossible to make the two key moves. Firstly, they did not think that the number should be reduced. They considered that they were optimally organized. Today they see that we were right and that with a lesser number of workers far more can be achieved. The second key move regarded the volume of growth. Their estimates were that it was possible to raise the volume of growth by a maximum of up to eight percent, and we thought it was by a whole fifteen percent. Last year too we had a growth of over 20 percent, and for this year we are planning the growth of almost 30 percent. I consider this a considerable succss. Considerable in the sense that it enables the mentality of people to change, that they see that the profit is theirs and that this is possible. In “Bambi” the local management has remained, but we have changed the philosophy. We have brought consultants in the field of marketing from abroad, and that is the knowledge that was missing in Serbia and the results are there. What is our strong point here in Serbia is the technology, we know hoe to make good new products, but in the field of marketing there were not enough experts, nor enough personnel to carry out all that. But that too is slowly being created.

The owner of “Salford” is Eugene Jaffe, but whose is the money?

– “New World Value Fund” has made a contract with “Salford” that in its name and on its behalf “Salford” manages its money throughout the world. “Salford” has opted for the former Soviet Union countries and of the Balkans. The way in which “Salford” organizes those investments is such that, in order to avoid double taxing, it has registered a firm in Holland named “Danube Foods Group” to remind of this region. And that is the whole system. In the case of “Bambi” the condition for the increase of share capital was that the “New World Value” fund directly buys it and that was what happened. And that is the only exception.

We are dealing with a private investment fund, a fund of a small number of individuals with significant resources. They do not want their names to be known and that is their right, which is why this is a closed investment fund. In the last five years the members of this fund have been changing, some of them left, like a sheik and Boris Berezovskiy, others joined. There have never been Serbs, that is, people from these surroundings in this fund. There are not even people who are citizens of other countries but of Serbian origin. Therefore, there is no Serbian money in “New World Value” fund and for this claim I can take full responsibility. There are members from England, Germany, there are those of Russian origin, there are the American citizens of different origin… but not of Serbian.

The restructuring of “Knjaz” lasted for entire two years. Was such an amount of time really necessary?

– We encountered losses in “Knjaz” of around 25 million euros of public debt and around eight million euros of covert debt. In two years, apart from repaying debts, investing and marketing, we also invested around 15 million euros into redundancy pays for lay offs. In “Knjaz” there were 1,800 workers and today there are around 950. Therefore, for the repair of that company we have given the amount of money that would have been sufficient to buy two or three companies. Only starting from this year “Knjaz” will have a favourable balance in doing business. Only 2007. will be this first year with a favourable balance for “Knjaz”. “Knjaz” will have a favourable balance in doing business.

What is happening with the ambition to spread regionally?

We are already present in the region. We have three dairies in Bosnia, a dairy in Macedonia, and we are just expecting the outcome of a tender for a dairy in Croatia. In Slovenia we have not yet done anything, but that is still an option. 

In our country, when it is acted with that sort of goal- to buy, improve a company and sell it- usually a negative connotation is given. It is said: “Yes… they bought to resell..!”?

– That is what all funds do. Some funds do it by buying smaller share packages on the stock market, keep them until their value rises, then sell and buy others. The commitment of our fund is to buy companies of which we deem that, with certain investments, good potential can be made, and that it can be achieved within the period of four to five years. The point of all that work is, of course, the earnings. I suppose that each citizen of Serbia also works in order to earn something.

What Salford deals in is to enrich its knowledge and earn on that: it buys a company, restructures it and sells it. That is a sort of business, like any other. I do not know what is negative there. We work hard, risk enormous resources, invest our efforts, knowledge…

Today there is much more assets in investment funds than in banks, because people have realized that the banks give small interests and make money on them, whereas the funds give far greater money returns but at the same involve greater risks.

Do you expect that one day, when you decide to put “Danube Foods Group” on sale there will be buyers?

– For certain. Buyers are not the problem, but the price. That is, whether we will be able to get as much as would satisfy us.

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