Dmitry Lyubimov, 34, Buhler President

Nine months after acquiring Buhler, new Russian president discusses changes

In late May, Farm Equipment visited Buhler at its Winnipeg, Manitoba, headquarters to interview new president Dmitry Lyubimov, 34, about his first months in North America and plans for Buhler. Combine Factory Rostselmash Ltd., a $400 million combine manufacturer — the largest in Russia — acquired Buhler (TSX: BUI) in an unsolicited offer last October.

Lyubimov is one of two Russian nationals at the 750-employee firm. Born and educated in Russia, he permanently moved his wife and child to Winnipeg in March.

About Rostselmash
"Rostselmash is the biggest combine manufacturer in Russia, Ukraine and Kazakhstan, with 65% market share," he says. "We had good dealers (220 dealer-owners in Russia) and good share, but only in combines," says Lyubimov. The heavy tractor market in Russia is growing 33% annually, with no signs of slowing down, as agri-business investment now trumps even oil, mining and raw materials. "There's been much land purchases and investments in equipment and technology, and the price of crops has been a boon. The ROI can be returned very quickly. In Russia, it's very easy for technology to make a 50% improvement in yield because the base level is so low."

Rostselmash viewed a tractor line as a way to maximize the significant growth opportunities ahead. "There's no Russian competitor in the high horsepower segment. With the Buhler acquisition, we now have a full ag equipment division — combines, tractors (high horsepower and utility tractors) and other shortline ag machinery."

Rostselmash is guided by three shareholders, all 38 years old, who started the business together in 1992 after completing their university studies. Their holdings also include soap and painting divisions, where Lyubimov was an executive for 2 years previously.

Buhler projects rapid growth projections over the next 3 years.

Putting His Stamp on Buhler
In the heavy tractor business, Lyubimov says time is needed to affect major change. "We need another 6 months to a year," he says, admitting that as a Russian, he's accustomed to quicker decision making and change than seen in American business culture. "Dealers hopefully have seen a change in the company being more market- and customer-oriented."

Last fall, he met with territory managers and salespeople to discuss problems. From that exercise came a clarification of key issues and a prioritized list of action plans.

Limitations in production and engineering prompted new managers and a focus on adding engineering staff. Sales was another area of change. Instead of one individual overseeing sales, parts and service warranty, these functions are now handled by dedicated positions to provide better service to dealers.

He understands that Versatile didn't satisfy dealers in units, marketing, sales support or parts and service. "Now, we have programs in place to improve parts, service and warranty, and communication. Next year, we'll be able to satisfy them in the numbers of tractors."

In October, the firm is hosting its first-ever tractor dealer meeting (in Winnipeg), at which new sales policies, retail programs, finance programs and products will be unveiled to dealers. "By the end of this year, the changes will be clearer," he says.

When asked about dealer sign-on plans, Lyubimov says he is taking a moderate approach, stressing that strengthening the current dealer network is the first priority. "We'd like to add perhaps 25% more," he says about expanding beyond its current level of 200 dealers, which leans heavily toward New Holland, its former parent. Strongest in Canada and the North-Central U.S., he sees good dealer recruitment opportunities in the South. Plus, the expansion of the Genesis line will open up new areas, including the Eastern Seaboard states.

Putting Rumors to Bed
Lyubimov admitted that the rumor mill has worked overtime since Buhler was acquired by Russians. He confronts talk of plans to move production to Russia, or that all tractors are ending up overseas. "We've invested $140 million in the facility, technology and people. This facility has very good capacity — 40 tractors per day. It wouldn't make any sense to move it." Further, he adds that the firm has hired 52 new employees since January, and is planning to fill another 11 engineering positions.

As far as tractor production, the plan remains to ship 55% of tractors overseas, with 45% reserved for North America. That percentage share will remain about the same in 2009, though a near-50% increase in tractor production means far more units will be available for U.S. and Canadian dealers.

Financially, the firm is on solid ground, he says. Unlike some other traded firms, the Russian owners have a longer horizon. In fact, the first dividend check was paid only recently, 15 years after the company's founding. "We spend our profits to develop new products, increase sales and support the dealer network," he says. "It's been easy to invest in development first and then provide for the shareholders. The owners don't require too much profit now — they understand that to make a profit in the future, you must invest."

Future Plans
Lyubimov plans to improve the Versatile brand both here and abroad, and to keep tractors simple and reliable. He adds that the firm is concentrating in 4WD, and also the Genesis tractor, with boundaries of 200-600 hp.

It has aggressive tractor production goals — from 1087 this year to 2,000-plus in 2010 — which will boost sales from $230 million to $300 million in '10.

"Demand is increasing dramatically around the world. Our limits are our suppliers," he says noting that tractors consist of 4,000-5,000 components with 400 different suppliers. He is in the middle of a significant travel to all suppliers to explain their plans and seek commitments.

Companywide, Rostselmash has clear objectives for global growth. When asked about combines, he admitted that American dealers may see Rostselmash combines here within the next 2 years, as the firm adapts to the larger-scale units desired in North and South America.