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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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.
0
10
20
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40
50
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90
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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120
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?