The Index crew had the opportunity to take a look at the works at the Romanian plant. Almost everything is digitalised and automated, as a result of which only three people per shift are involved in continuous, 24-hour production. “Not only are we unique in the region, but we are also in the top 5 in Europe in terms of the technical content of the factory. At the next level, we are already working on integrating artificial intelligence into production,” points out Dénes Laczkó.

From lagging behind to growth potential

UBM’s Romanian subsidiary looks to the future with high expectations. This is because Romania is an EU great superpower in grain – with an annual volume of 30 million tonnes, two-thirds of which is exported – and the country’s livestock sector is also facing a huge boom. The industry expects the centre of gravity of livestock production to shift from Western to Central and Eastern Europe where, as livestock farming becomes more concentrated, there will be an increasing demand for quality feed produced on a large scale using good technology. From a crop production point of view – and therefore also from a feed material point of view – the situation is ideal, as many raw materials are available at low prices.

“However, in terms of added value, there are still huge shortcomings in the Romanian agricultural, livestock and food chain, which is why the country is an exporter of raw materials and an importer of added value. These shortcomings, however, also represent a huge potential for UBM, as the group can disseminate the most advanced technology and know-how in Central and Eastern European countries, which are 10-20 years behind in the field of feed mixing technologies, through its R&D activities, which cost several hundred million forints a year,” said Dénes Laczkó.

As the Managing Director put it, the huge industrial potential of the neighbouring country is well illustrated by the fact that while Romania produces 2.8 million tonnes of feed annually, Hungary, which is one third the size of Romania, produces 3.5-3.8 million tonnes. “What needs to be done is to reallocate resources to local production capacities instead of huge transport costs. Romania is a very strong producer of raw materials, so the opportunity is given to turn the steering bar towards local feed and food production,” said Dénes Laczkó.

The way for digitisation must be paved

It is, however, not only in the neighbourhood that there is plenty of room for growth. According to an announcement by Minister of Agriculture István Nagy last November, the government will spend some HUF 4,300 billion on the development of domestic agriculture, the food industry and rural settlements by 2027. “When spending the subsidies, companies should focus mainly on developments in the field of digitisation,” this was said to our paper already by Péter Horváth, CEO of UBM Hungary, adding that the development varies from sector to sector. While digitisation is more advanced in companies involved in crop production, livestock farmers have some catching up to do. “The operating model to be followed in Hungary is the same as the one already implemented at our subsidiary in Kerelőszentpal, i.e. achieving high production capacity through automation and robotisation,” the CEO pointed out. This process could be partly a response to the labour force shortage in agriculture.

Increasing efficiency in productivity could be a key issue for the food industry of the future, as the world’s population is projected to grow sharply in the coming decades, to more than 10 billion people. According to Péter Horváth, in addition to

the relocation of production capacities to our region in the coming years, the rapid population growth will also lead to an increase in poultry and pork consumption by about 10 percent. And the food industry must be ready for these developments.

They would push the boundaries

The value of Hungarian agricultural exports has grown dynamically in recent years, but the bulk of exports still go to the European Union, including Germany, Italy and Romania. Although UBM now exports to 15 countries, in their case exports are still mainly destined for Italy, Romania and Austria. Domestic sales still account for a slightly larger share of the company’s results – 44 percent of turnover in the recently closed financial year came from exports – but the aim is to increase this proportion to over 50 percent on a sustainable basis. Precisely for this reason, the group would like to be present not only in its home market, but also in other cross-border markets.

Thus, the company is also busy with investments looking for investment and acquisition opportunities in the region in anticipation of the dynamic growth outlined above, focusing mainly on Romania, Serbia and the Western Balkans, but despite the difficulties, it also sees potential in the Ukrainian market.

Moreover, the political will to invest is also there. Indeed, in order to improve the profit balance, the government would like to see more foreign investment by domestic firms. At present, foreign companies are still generating more than six billion euros more profit in Hungary than Hungarian companies abroad. “We are able to gain market advantage from the level of technology that UBM has. We have a 10-15 year advantage over our competitors, and if we can maintain that advantage, we ‘only’ need to concentrate on timing, so that when more and more livestock farms start operating in the regional markets we should already be there with feed in our hands,” said Péter Horváth.