Agroproteinka: The Company Forced into Export by Mad Cow Disease

The impetus for development was also the rapid adaptation to EU requirements. Today, exports account for 30 percent of revenue. The export of technical fat for biodiesel and proteins for pet food will further increase this share.

Written by: Bojana Božanić
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Photo: Željko Jelenski

Agroproteinka, a company for the processing of animal by-products, is one of the few in Croatia that will soon fully complete its adaptation to EU standards. The finale is an investment in the construction of a biological wastewater treatment facility worth 12.5 million kuna. The importance of the investment is even greater as the management of Agroproteinka has managed to overcome all obstacles to funding from SAPARD, a European Union fund. The largest processor of slaughterhouse waste in Croatia, in addition to its facility in Sesvetski Kraljevac, also owns a recently opened collection point near Benkovac, and the construction of a collection point near Vukovar is also in preparation, also funded by SAPARD. As Ivica Grlić Radman, the CEO of Agroproteinka, who succeeded his father Ante Grlić in this position in 2002, the majority owner and now a member of the Supervisory Board, says, the procedure for obtaining funds from European Union funds is not simple.

– In addition to fully completing the project and obtaining a usage permit to disburse funds from SAPARD, the company must prove with its financial indicators that it is capable of fully financing the project on its own – says Grlić, adding that this is also an indicator of Agroproteinka’s good business performance. The company ended last year with total revenues of 60 million kuna, assets of 65 million kuna, and liabilities, both long-term and short-term, of 23 million kuna. Daily, with the help of about twenty trucks, Agroproteinka collects around 300 tons of waste, sourcing from several large slaughterhouses. – There are 260 slaughterhouses and four collection points in Croatia, but due to geographical distribution, waste is not easy to collect – explains Grlić, but despite this, the company increases the quantities of processed waste year after year. Thus, of the 75 thousand tons of animal by-products in Croatia in 2006, about 65 thousand tons were processed in Agroproteinka, which is 25 percent more than the previous year. If the figures are accurate, Agroproteinka holds 86 percent of the Croatian market for the processing of animal by-products.

Compliance with EU Rules

The company that originated from the former Sljeme facility was often mentioned when it came to mad cow disease, and when in 2001 the ban on the use of meat-and-bone meal for animal feed was introduced, Agroproteinka found itself at an important turning point in its development, as it could no longer sell its processed products on the Croatian market. At that time, the company had no export experience, and now its share of exports in total revenue is 30 percent. The reason for this, says Grlić, is numerous investments in the company since 2002.

– Investments have been intensive, and they have been directed towards compliance with European regulations from 2002, specifically EU Regulation 1774. Thus, we separated processing into two facilities, one for animal by-products that we treat as riskier, and one for those less risky or non-risky – explains Grlić. In other words, processing is divided into that with a public role, to prevent the spread of animal diseases, and a more commercial part of the business. In that second facility, non-risky by-products are processed so that the product can be utilized, for example, for pet food. For such a division of processing facilities, a new facility worth 28 million kuna had to be opened, which was done in mid-December last year.

– The share of exports in total revenue will significantly increase due to investments, but it will not be so much about quantitative increases as about increasing the value of products. As the processing facilities are now separated, exports will start towards EU countries and Russia, to which we will export technical fat that serves as a component for biodiesel production. Exports will also be directed to China, where protein used in pet food production will be exported – says Grlić. Exports are also a way for the company to cover losses due to waste collection costs that have remained the same since 2002, even though, for example, fuel prices have increased. Precisely for this reason, a waste management plan is being worked on, and with the domestic company Tehnix, says Grlić, Agroproteinka will create mobile and quickly assembled standard collection points.

Kitchen Waste for Biogas

– The time factor is a pronounced element in such waste management, which is why it is the most demanding method. Waste must be processed within 24 hours, a maximum of 48 hours, but the situation can be improved by using refrigerated containers, as waste can be processed with a delay – explains Grlić. Part of the plan for this year includes a system for managing animal by-products, or classes down to the smallest facility. Thus, facilities from the smallest shops and markets should be included in waste collection, and waste would be transported from collection points to the facility.
– Two more central collection points need to be built, and standard collection points should be set up where there is a higher concentration of livestock facilities. In addition, facilities will be recorded, their production will be balanced, and then waste, so by fulfilling this plan, there would no longer be any doubt about the extent to which waste is managed – adds Grlić.

Agroproteinka will also start managing kitchen waste from economic facilities: hotels, restaurants, public canteens, student centers, all of which currently go to the Jakuševac landfill. – In this way, we will obtain biogas and be able to meet our needs for thermal energy, and the rest can go into the grid or, depending on interest, be used for heating, for example, swimming pools for the needs of the public – suggests Grlić. Thus, the company, in addition to managing waste by-products, will also use it to strengthen energy efficiency, or as a renewable energy source. Namely, the company produces four times more energy than it consumes, so with the help of investments from SAPARD, it will not only engage in purification but also in the production of biodiesel and biogas. – We have been working slowly for four years because this process takes time. And now the largest part of the technical fat we produce is used instead of heating oil – says Grlić, adding that the company is indeed alone in the country, but soon it will not be alone in the region, which is why it is necessary to align operations with regulations before entering the EU, and the new investment will ensure compliance with the IPPC directive.

– Compliance will ensure our competitiveness, but it is also necessary to increase the capacities of processing facilities because the larger the capacity, the lower the fixed costs. We will face companies with larger capacities, and we are not an activity that can buy raw materials for production. As much waste as there is in Croatia, that is how much we can process. That is why we will expand capacities in neighboring countries, and for example, considering the export potential of Croatian companies, we will help Bosnia and Herzegovina adequately manage waste. Products will also be able to be exported from that country, which gives the whole story a regional significance – explains Grlić.

Without Diversification

Agroproteinka still intends to stick exclusively to its core business and will not expand into new areas, but will invest in new technologies. The ultimate goal is to reduce waste management costs and increase values in processing to prevent competition from the EU. As Grlić says, we already feel the exposure that will be even more pronounced with EU accession, and the profitability of long-term investment will depend on capacities and their increase. In addition to funding from the funds, the company also finances investments through credit lines. Although it is listed on the Varaždin Stock Exchange, there has been no trading on the free market since mid-2000, and there are no further plans regarding the stock exchange. However, there are plans to increase the number of employees from the current 84 to approximately one hundred, divided into sectors: Transport, Production, Technical Maintenance, and the Environmental Protection Sector, which is increasingly gaining importance due to the programs in which Agroproteinka participates and is now the sector responsible for production supervision.

Alongside Ivica Grlić as CEO, the business is overseen by his father Ante and the Chairman of the Supervisory Board Branko Ivković, who owns about 20 percent of the shares. The remaining shares (about 15 percent) are in the hands of small shareholders, and as Grlić says, among them are some retired employees. This year, the plan is to complete the project from SAPARD, so the biological wastewater treatment facility should be put into operation by the end of the year. In this way, says Grlić, Agroproteinka will resolve all issues related to compliance with the EU several years before entry, while, for example, the same facilities in Slovenia met the standards after entering the EU. This could also contribute to calming the local population that has protested due to unpleasant odors from the facility. However, Grlić believes that the problem has been resolved.
– The location of the facility is one of the farthest from residential areas compared to similar ones in Europe, and although we were responsible for some unpleasant odors until 2003, after that we invested 100 thousand euros in an air purification filter. The new facility also has a biofilter that only Zagreb’s wastewater has – concludes Grlić, dismissing insinuations about relocation.