Enterprise Activity Modeling in Walnut Sector in Ukraine

: The main goal of this study was to provide a critical analysis of the oil and fat sub-complex for deep walnut processing, to determine and compare the proﬁtability of enterprises’ activities under different business models for implementation in the agro-food value chain. The latter was considered as an important factor for the development of the domestic market of walnuts and export opportunities. Business modeling of the enterprise activity in the oil and fat sub-complex for deep walnut processing was carried out. The stages of production and marketing activities of the enterprise from the garden planting or the purchase of the processed raw materials to the sale of the processed raw materials and products obtained from walnut processing depending on the chosen business model were considered. A comparative analysis of proﬁtability of the enterprise activity and absolute values of income and proﬁtability indicators under various business models of the enterprise activity were shown. The most cost-effective business-model entailed the combination of walnut production and its processing, which will provide proﬁtability of up to 4640.32% in the 20th year of the project implementation. The results of the given study are intended for the agricultural enterprises of central region of Ukraine.


Introduction
In the context of global climate change and through new trends in the agri-food market, over the past two decades, there has been a tangible increase in the demand for the production and consumption of nuts. Official data testifies to the relevance of growing nuts. Thus, according to the annual report of the International Nut and Dried Fruit Council Foundation (INC) over the past 10 years, global nut production has grown steadily and in the 2019/20 financial year amounted to 4,600,000 t [1].
The main types of nuts include the so-called "Big Five": walnuts, almonds, pistachios, cashews and hazelnuts. In terms of harvest, almonds and walnuts are the leaders, accounting for 31% and 21% of world production, respectively, followed by cashews (17%), pistachios (14%) and hazelnuts (12%). The remaining 5% comes from the production of pecans, macadamias, Brazil nuts, and pine nuts [2].
Currently, walnut production in Ukraine is a profitable type of entrepreneurial activity at the level of farms, which appeared to be a systematic business in the country during the last years. The area of industrial walnut plantations in Ukraine is growing dynamically

Literature Review
The study by and O. Lyulyov [5] illustrated that currently, researchers are greatly interested in the problems of environmental management, food security, development of new technologies and products of nut industry worldwide that are highlighted in a number of scientific papers. For instance, M. Kachel et al. studied the biodiesel production on the basis of selected oils of natural origin using [6]. R. Botta et al. devised the genetic tools in order to ensure the supply of hazelnut [7] that corresponds with multiple connected studies of the post-harvest practices [8], storability improvement [9], etc., in the given sector. Likewise, sustainable development and its prospects include a number of measures encouraging agricultural entrepreneurs to be involved in social activities [10].
There is a worldwide discussion about the possibilities of expanding the potential of the raw material base [11] of walnuts in particular [12], and the utilization of raw materials in the agro-food value chain to enhance the competitiveness of products. In the given sense there were different aspects studied: the development of the logistic strategies as well as the place and structure of logistic costs [13], eco-industrial parks maintenance, circular economy projects [14], savings in diverse segments of the supply chain [15], quality assessments of delivery [16] and many others. In particular, for the oil and fat sub-complex for deep walnut processing and the development of functional food products, the latest studies include: investigations on oil content in kernels [17], the effective use of the by-products of walnut production for the removal of hazardous materials [18,19], the researches on functional properties of walnut protein [20], production processes energy consumption [21], maintenance of the organized quality management systems [22] etc.
The sub-complex analysis (SA) is an effective approach to gain a full understanding about the different connected stages of product or service transition from the raw material base to production and to the final consumer [23,24]. SA and enterprise activity modeling are the sources of information for value chain stakeholders at different levels. E. M. Nang'ole et al. [25] provided a set of guidelines and manuals for the analysis of the agricultural value chain from the perspectives of SA. The PMC Research Center and Batumi Shota Rustaveli State University of the Autonomous Republic of Ajara in their report elaborated the in-depth description of walnut production and sales process [26]. The study of N. A. Qammer and S. H. Baba while discussing the modernized supply chain of walnut, has boiled down to the fact that the given chains involve heavy investments and that the value addition of walnut in the processing units are exclusively targeted for export markets [27]. W. Bourne studied the production and marketing conditions for walnut and underlined the great potential of walnut production and processing in terms of gross margin taken [28]. G. Pandey and S. K. Shukla dedicated their study to the walnut industry in India in the light of cultural practices, growing regions and marketing trends [29] that determines the multiple connections in the sub-complex of walnut production. A. Szelag-Sikora et al. provided the comparative analysis of the farm's production systems from the perspectives of the technologies implemented that allowed her to evaluate the different aspects of plant nutrients management [30]. Next, Shamra P. et al. investigated the walnut processing industry and the potential value of the added products that brought her to the point of quality procuring [31]. So, the versatile approach to the sub-complex analysis provides a number of opportunities for further researches. For this reason, the sub-complex can be determined by the raw material, that is processed by its enterprise, or by the end product/service intended for the certain market [32][33][34][35][36].
There was proposed the provision of economic substantiation of the expediency of planting industrial, intensive walnut gardens by the local researches. Their suggestions allowed for the peculiarities of indigenous grades of walnut trees, while focusing on possible yield [37][38][39][40]. It is equally important that there are a lot of different aspects of deep walnut processing that are considered widely and should be allowed for further researches, such as: walnut production technology [41,42]; genetic resources [36,43,44]; walnut peeling processes [45][46][47]; walnut processing waste valorization that emphasizes the high interest in providing technological non-waste processing considerations [48,49].

Materials and Methods
The general purpose of the research is providing critical analysis of the oil and fat sub-complex for deep walnut processing, to determine and compare the profitability of enterprises' activities under different models and implementation forms in the agro-food value chain, which will justify the development strategies of business entities. This work is part of a chronological and systematic study devoted to the problem aspects of the sub-complex in central Ukraine region, particularly in the perspective of the world and national dynamics. To analyze profitability at the farm level and the level of processors, a simplified gross margin or profitability is used. The analysis of profitability is based on the optimal indices of walnut yields in the central Ukraine region under different models.
Based on the analysis of expenses for the preparation, planting, and maintenance of the garden, we modelled the profitability of the farm according to different models concerning the business model. When analyzing farm profitability, a comparison is made. Modeling of profitability is carried out according to the models of farms' activities in the cases when they grow a fruit garden and sell walnut kernels, and when they process walnut kernel and sell oil in bulk and unprocessed walnut oilcake using the B2B business model. Cost-effectiveness of production (farm level): model 1, in which the farmer sells walnut kernel. Profitability (farm level): model 2 where a farmer sells walnut oil and oilcake. For this model, two implementation forms are possible: (1) when the farmer organizes the production of oil and oilcake at his own farm; (2) when the farmer provides raw materials for processing and receives the finished oil and oilcake. Each of these implementation forms may have its advantages and disadvantages, which should be taken into account in the process of decision-making on business organization. Profitability of production (farm level): model 3, when the processor buys walnut and sells oil and oilcake.
To analyze profitability at the farm level and the level of processors, a simplified gross margin or profitability was used [50][51][52][53][54][55][56][57]. The gross margin characterizes the ratio of the direct costs and gross profit to the selling price. The gross margin makes it easier to compare the results, since the results are presented in relative units. In addition, each model contains a number of related assumptions that are reflected in the results for convenience.

Results
In the modern market, walnuts can be used in two most common ways: (1) shelled fruits can be used for the production of seeds (2) unshelled fruits can be used for feeding domestic animals and birds, as well as for food production. As G. Mir, N. Owais, and I. Uzma [37] investigated, seeds of varieties of oilseed crops contain 50 to 70% of oil and up to 40% of protein. As a rule, a high-quality walnut has a relatively thin shell that remains freely attached to the kernel, which enables to grow fruits that are quite full of kernels. According to O. Bozhok and V. [12,58], low-quality walnut fruits are filled with kernels by 30-55%, while high quality walnuts are filled by 45-55%. Fruits of low-quality hybrids, as a rule, vary in size, filling fruits with kernels, shell thickness, and oil content.
The analysis of profitability is based on the optimal indices of walnut yields in the central Ukraine region under different models. According to the main model, the optimum walnut yield is achieved through the application of scientific and production practices. The yield of walnut is a function of two factors: (1) Proper farming practice, such as planting schemes (density of trees in the garden), pollinators, establishing and pruning, crown formation, soil retention, pest and disease control, fertilization and irrigation, harvesting and post-harvesting [13,59,60]. (2) Genetic potential: zoned and selection varieties provide higher yields than wild varieties. However, they are characterized by higher inputs [12,[61][62][63][64][65].
This research outlines walnut yields and productivity, as shown in Table 1. 10 and more Sources: comprised by the authors according to [12,39,40,54,66]. Table 1 presents the approximate average data that should be investigated under conditions of a particular farm, especially as the periods for which the yield data are given are conditional. Under proper garden maintenance and normal climatic conditions, it is expected that the yield of the garden will increase with each passing year. However, such data can be used for preliminary estimates of profitability of the value chain in the oil and fat sub-complex.
When analyzing farm profitability, a comparison is made. The modeling of profitability is carried out according to the models of farms' activities in the cases when they sell walnut kernel, and when they process walnut kernel and sell oil in bulk and unprocessed walnut oilcake using B2B business model. Assumption 1 made when calculating costs of walnut production are as follows: − Calculations were made for the scheme of walnut planting 10 × 10 m (100 seedlings per hectare); − Estimated cost of 1 high-quality seedling, which is zoned according to the local climatic conditions and begins to bear fruit starting from the 4th year of vegetation, EUR13; − Land rent, 55 EUR/ha; − Protection: the first two years, for 8 months, starting from the 5th year. for 3 months (during harvesting); − Watering: 1 time × 3 weeks × 30 L; − Period before fruiting lasts for 2 years.
The summarized calculations of farmers' expenses for walnut production on 10 ha of the garden before fruiting are shown in Table 2. Table 2. General analysis of farmers' expenses for walnut production on 10 ha of the garden before fruiting. Source: adopted by the authors according to [12,39].

Item of Expenses
The summarized calculations of walnut production costs are shown in Table 3. According to Table 3, during the first four years, the largest share of expenses is intended for planting walnut seedlings, which includes the cost of high-quality seedlings and the cost of their planting. The lowest costs are expected for pre-planting soil preparation and maintenance of seedling during the first year of vegetation.
Based on this analysis of expenses for the preparation, planting and maintenance of the garden, we modelled the profitability of the farm according to different models concerning the implementation forms.

Statistical Analysis
In order to provide the statistical analysis of the values of gross expenses, gross income, profit, profitability through the investigated timeframe, we carried out further stages: − Summarizing all expenses (the structure of the expenses is covered in the assumptions 1 for the particular business model); − For establishing the overall amount of expenses for the particular business model during the investigated timeframe, we calculated the expenses of the progressive total; − Calculating the yield for each year of gardening until the 20th year allowing for the function (1) representing the yield of walnuts through the analyzed period; − Calculating the gross income allowing for the assumptions 1 that correspond to the particular business model; − For establishing the overall amount of the gross income for the particular business model during the investigated timeframe, we calculated the income of the progressive total; − Calculating of the profit were provided by subtraction of the gross expenses from the gross profit; − For establishing the overall amount of the profit for the particular business model during the investigated timeframe, we calculated the profit of the progressive total; − The calculation of profitability was carried out through the division of the gross profit by the gross expenses. The obtained results were represented in %.
Cost-effectiveness of production (farm level): model 1, in which the farmer sells walnut kernel.
Assumption 2: − calculations are based on yields per hectare of land; − the assumed tree density is 150 trees per hectare for the zoned variety of the low growing walnut; − kernel output under its primary processing is 45%; − the selling price of 1 kg of walnut kernel is EUR4.76; − the yield of the walnut garden changes by the exponential function according to the basic yield points corresponding to the age of the garden, for the data given in Table 1 (0.625 t/ha for the garden aged from 2 to 9 years, 2 t/ha for the garden aged from 10 to 20 years and 10 t/ha for the garden aged over 20 years), this function will have the following form: where y is the yield of the garden, x is the age of the garden. The reliability of approximation for this model is R 2 = 0.9992; − expenses for sales and expenses for the primary walnut processing (calibration, shelling); − profitability is calculated as the ratio of gross profit (item 6) to the aggregate expenses for planting and maintaining a walnut garden (item 2).
The results of the calculations (Table 4) show that, according to assumptions 2, in the 2nd year of the garden a positive profitability of 332.06% is achieved (item 9), and in the 3rd year there is a return of all invested funds and profits from activities in the amount of EUR5900 is obtained (item 8). The average profitability increases after reaching its positive value of 233% per year up to the age of 20, and it reaches the value of 4100% in the 20th year of the garden. The function of changing the garden profitability by the based assumptions 2 is as follows: where y is profitability of the walnut garden, x is the age of the walnut garden. The reliability of the approximation for this model is R 2 = 0.9975. The graphic is shown in Figure 1. Profitability (farm level): model 2 where a farmer sells walnut oil and oilcake. For this model, two implementation forms are possible: (1) when the farmer organizes the production of oil and oilcake at his own farm; (2) when the farmer provides raw materials for processing and receives the finished oil and oilcake. Each of these business models may have its advantages and disadvantages, which should be taken into account in the process of decision-making on business organization. The first implementation form involves the organization of a special production unit at the farm, which must specialize in the processing of walnut kernel into oil and oilcake Thus, when modeling the profitability of walnut production, additional costs associated with this should be taken into account (Table 5). (2) when the farmer provides raw materials for processing and receives the finished oil and oilcake. Each of these business models may have its advantages and disadvantages, which should be taken into account in the process of decision-making on business organization. The first implementation form involves the organization of a special production unit at the farm, which must specialize in the processing of walnut kernel into oil and oilcake Thus, when modeling the profitability of walnut production, additional costs associated with this should be taken into account (Table 5). Table 5. General analysis of costs for oil production from walnut kernel.

Basic expenses
Purchase of equipment and its introduction into operation EUR8600   Table 5. General analysis of costs for oil production from walnut kernel.

Item of Expenses Amount
Basic expenses Purchase of equipment and its introduction into operation EUR8600 Organization expenses EUR3200 Overheads Wages with charges 3800 EUR/year Production costs 10 EUR/t Source: authors' development.

Assumption 3.1:
− Equipment costs involve the purchase, transportation, customs clearance and installation of the basic production equipment and include the cost and installation of the auxiliary production equipment; − Wages are calculated in the form of a single rate of monthly salary, regardless of the volume of production; − Production costs include electricity costs (tariff of 0.06 EUR/kW), 10 EUR/t of walnut kernel, materials and tools; − Organization expenses include the costs for meeting the requirements of the control services and obtaining permit documents for production.

Assumption 3.2:
− Calculations are based on the data concerning the expenses; − Investments in the production of walnut kernel products are made in the second year of business operation and garden growth; − Oil output from walnut kernel is 42%; − The cost of processing walnut kernel into oil and oilcake is 0.57 EUR/ kg of walnut kernel; − The output of oilcake in oil production is 48%; − The selling price of 1 kg of walnut oil is EUR19; − The selling price of 1 kg of walnut oilcake is 0.63 EUR/kg ( Table 6).
The results of the calculations (Table 6) show that, according to Assumptions 3.1.and 3.2, in the 2nd year of the garden, a positive profitability of 17.96% is reached (item 9), while in the 3rd the return of all invested funds and profits from activities in the amount of EUR5690 is achieved (item 8). The average profitability increases after reaching its positive value of 282% per year until the age of 20, and it reaches the value of 4640% in the 20th year of the garden (item 9). At the same time, the production of walnut oil and oilcake from walnut kernels ensures the profitability of the garden from the first year of fruiting. The second implementation form of the model where a farmer sells walnut oil and oilcake requires outsourcing support for walnut production, which involves paying for walnut processing into the products with the added value by a specialized processor (Table 7).  Table 7. General analysis of expenses for the payment of services for production of oil and oilcake from walnut kernel.

Item of Expenses Amount
Basic expenses Organization expenses 320 EUR Overheads Payment for services for the walnut kernel processing 320 EUR/t Total Source: authors' development.

Assumption 4.1:
− Organization expenses may consist of expenses for ensuring the conditions for the implementation of the signed contract for the walnut kernel processing into oil and oilcake; − Payment of the services for the walnut kernel processing includes payment for the transportation of raw materials and products of its processing, cargo loading services, preparation of raw materials for the processing, packaging, laboratory examination of the quality of obtained products, other production costs included in the processing of walnut kernel into oil and oilcake.

Assumption 4.2:
− Conditions for product storage are provided at the farm; however, expenses for the given measures do not have a significant impact on the changes in the profitability and income of the project; − Contractual production of walnut oil and oilcake does not require additional investments (Table 8). The results of calculations (Table 8) show that under the Assumptions 4.1 and 4.2 made in the 2nd year of the garden a positive profitability of 463.54% is achieved (item 9), as well as a return of all invested funds and profit from activities in the amount of EUR1770 (item 8). At the same time, the average profitability increases after reaching its positive value of 86% per year until the age of 20, and reaches the value of 1,966% in the 20th year of the garden. At the same time, the profitability of the enterprise in the 14th year becomes equal to profitability of the enterprise in the previous situation, and then it begins to lag behind, so that in the 20th year, the profit margin is already 2674%. However, in the first 14 years, the given model still has significant advantages in gaining profit.
When analyzing the profitability of small and medium-sized businesses, it is also advisable to determine profitability at the processing level. At the processing level, the processor buys the walnut kernel, processes and sells oilcake and walnut oil in bulk according to B2B model. Profitability of production (farm level): model 3, when the processor buys walnuts and sells oil and oilcake.
Assumption 5: − In the first year of activity, the enterprise spends money on the establishment of production; − Unshelled walnut is purchased for production; − The cost of primary walnut processing (shelling and sorting) is not taken into account; − Productivity of the equipment is 80 t per year of processed raw materials or 33.6 t of walnut oil and 38.4 t of oilcake due to the fact that the number of working days per year is 250 w.d./year, or 4.000 h (production is performed in two shifts); − Kernel output under primary walnut processing is 45%; therefore, to obtain 80 t of walnut kernel, it is necessary to purchase 180 t of unshelled walnut fruits. − When applying the given implementation form ( Table 9).
The profitability of production in the first year is 267.62% (item 9), which enables to obtain higher profits than under other initial conditions during the period from 12 to 16 years. Production ensures the return of initial investments in the first year of work and profit in the amount of EUR460,000 (item 7). Profit remains higher than under other initial conditions during the period from 8 to 11 years. Table 9. Analysis of profitability of walnut processing into oil and oilcake when purchasing raw materials.
Year of the Project Implementation The results of calculations in the comparative analysis of various models and implementation forms when implementing the project on the production and processing of walnuts in the oil and fat sub-complex are given in Table 10. Table 10. Results of realization of various models and implementation forms when implementing the project on walnut production and processing.
Year of the Project Implementation According to Table 10  According to Table 11, the most cost-effective is the combination of walnut production and its processing, which will provide profitability of up to 4640.32% in the 20th year of the project implementation. In addition, such an approach has a number of strategic advantages, which are based on production diversification and reduction in operational risks. However, it is necessary to take into consideration a number of factors that were not displayed in the given models, especially marketing ones [55]. Their inclusion will enable to optimize production, increase added value, and develop a competitive strategy when exporting products. Table 11. The main indicators of models of the project implementation in the oil and fact sub-complex for walnut processing.

Year of Achieving a Positive Profit
Year  According to Table 11, the most cost-effective is the combination of walnut production and its processing, which will provide profitability of up to 4640.32% in the 20th year of the project implementation. In addition, such an approach has a number of strategic advantages, which are based on production diversification and reduction in operational risks. However, it is necessary to take into consideration a number of factors that were not displayed in the given models, especially marketing ones [55]. Their inclusion will enable to optimize production, increase added value, and develop a competitive strategy when exporting products.

Discussion
As shown by the studies presented in [34,35], sub-complex of deep walnut processing produces walnut kernels for the confectionary industry and for animal feeding, food walnut oil, industrial oil and oilcake, that can be processed in to the food products or used for animal feeding as well at global and foreign markets. Sub-complex produces residuals, that can be used for biofuel production or be the raw materials for other industries. Walnut fruits are deemed as a product of the sub-complex. Other walnut derivative products are being investigated currently. Among them are such products as: walnut shell [19], organic walnut kernel [27], walnut kernels mixed with wild honey [28], jaggery coated walnut kernels and honey glazed walnut kernels [31], green walnut [36], derivative produces that allows to receive complementary benefits from walnut (anti-ageing, improving of skin quality, treatment of psoriasis, treatment of skin infection, treatment of eczema, healing qualities) [37], by-products of walnut, such as green husk and walnut shell [38]. The given study emphasizes walnut fruits, confectionary kernels and oil.
Our research proves that the implementation of model 3 enables to provide profitability of 244.66% in the first year and 267.62% in the second year. By the closest value of this indicator in the model, this level of profitability can be achieved no earlier than the second year, and by implementation form 1 of model 2 only in 3 years. Thus, in the short-term prospect this model can be treated as the most rational one.
In the future, the proposed model can be improved due to the consideration of additional factors and conditions [3]: − It is expedient to process walnut in accordance with its grade, since the confectionery walnut can be sold at a fairly high price without additional costs for further processing; − The profitability of the enterprise will be higher than in the proposed model if the sale price of walnut oil cake is taken into account; − Profitability of the enterprise will be higher if walnut shell is processed into biofuel or food for animal feeding and sold; − The increase in production capacity will lead to the increase in the income of the enterprise; − Development of B2B model into B2C model, development of the individual innovative functional food products from walnuts fruits, and access to the consumer market with its individual trademark can significantly increase the profitability of production. In this case, the cost analysis should be supplemented by the marketing costs, in particular, for sales.

Conclusions
As a result of the analysis of profitability of the enterprises of oil and fat sub-complex for deep walnut processing, it can be concluded that the enterprise is highly profitable, according to the obtained data, due to obtaining the added gross profit. Profitability is higher when a farmer increases value added and sells walnut oil and cake. The passive growth of profitability of walnut farms can be caused by an increase in the current price for walnut kernel and products of its processing. The active development of the business is possible through the creation of its own brand, entering the consumer market and use of the B2C model.
To achieve the set goals, the approach of the sub-complex analysis was used, which has given an opportunity to obtain a systematic view of the various stages of interaction associated with the creation of products beginning with the procurement of raw materials and ending with the production of consumer goods. This approach enables to obtain results that are useful for both the participants of the agro-food value chain at different levels and subjects engaged in decision-making. Thus, the sub-complex analysis approach provides the basis for sectoral actions. The prospect of the agro-food chain ensures that these actions will not be limited by the local level. This will facilitate relations with the global (internal) economy. Such relations include infrastructure improvement, affordability of loans, marketing tools, and a range of services required for trade.