Altay Grain Processor PAVA: Cost Optimization During the World Financial Crisis

Operating on both domestic and international markets and looking to launch a grain fractionation plant, we started developing a plan of business enhancing measures long before Russia was affected by symptoms of the crisis.

05/12/08 In the unstable economic environment and intense competition, only the most efficient companies can develop successfully. Cost cutting is a means of optimizing profits, lowering product prices, and consequently - improving competitiveness and financial stability.

The largest grain processor of Siberia and the Far East started the anti-crisis campaign from optimizing the company structure. Two new departments were set up: the International Business Department that collaborates with countries of far and near abroad and the Market Development Department whose objective is to sign off-take contracts with partners from Russia and overseas. This secures the company from possible decline in sales during the crisis.

“Operating on both domestic and international markets and looking to launch a grain fractionation plant, we started developing a plan of business enhancing measures long before Russia was affected by symptoms of the crisis”, says Andrey Ananin, OJSC PAVA Director General.

Cost cutting was one item of the plan. Heads of departments determined the expenditure articles subject for reduction. For instance, by changing provider of Internet services the company was able to lower telecommunication costs by almost 19%. Expenses on mobile connection services, mail and transport were also revised along with business trips logistics.

Modernization of production capacities is another important measure. During 1.5 years the flour mills integrated in the structure of PAVA have been re-equipped. Up-to-date equipment was installed with the payback period on investment not exceeding one month. This allowed to achieve a considerable decrease in the cost of processing per 1 tonne of grain.