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more than in the previous quarter but well below the 405 stores added in 2Q17. The gross margin contracted 2.7 pp y/y to 24.5%, missing our estimate of 25.0%. It came in at the lowest level since 2012 amid growing shrinkage and heavy promotional activity. The decline in the gross margin was partially mitigated by lower than expected opex, and EBITDA came in at R23.6bn, with the EBITDA margin expanding Q-o-Q to 7.7%, though this was the weakest result Magnit has ever posted for the second quarter. EBITDA was 2% above our estimate but 1% below the consensus. Importantly, the results included an inventory write-off and accrued provisions totaling R1.5bn. Excluding those one-offs, the EBITDA margin would have been above the consensus at 8.2%.
9.2.6 Agriculture corporate news
One of Russia's largest poultry meat producers Eurodon (Evrodon) of Vadim Vaneev plans to produce 0.15mn tonnes of turkey meat in 2018 and take the market lead back from its arch rival Damate, the company said on July 3. Eurodon was established in 2013 and lost the lead on the growing turkey market to newcomer Damate in the autumn of 2016 after it suffered from outbreaks of bird flu on its main farming cites in 2017. In 2018, however, it was Damate's turn as its facilities were also hit by the bird flu epidemic. In the first half of 2018 Eurodon already produced 0.063mn tonnes of turkey meat. The company claims that facilities launched back in 2015 would allow it to boost output to 0.15mn tonnes already this year. Overall, output of turkey meat in Russia went up by 52% y/y in 2016 to 226,400 tonnes compared with 36% y/y in 2015. However, according to previous estimates, turkey still accounts for only 2% of total meat consumption in Russia, with about 1.3kg per consumed annually, and has been losing in popularity to cheaper chicken meat. Russia’s chicken meat production has soared in recent years and Russia has gone from an importer to a net exporter.
Rusagro has released decent the second quarter of 2018 trading results, with an 8-11% Q/q increase in pork and sugar prices, due to lower balances for soft commodities toward the end of marketing year and a weaker local currency. Unconsolidated revenues were still 6% y/y lower, at RUB 18bn, primarily reflecting the stronger comparison base for prices. The company enters the seasonally strong the second half of 2018 , and we reiterate our forecast for a 15% y/y advance in 2018F EBITDA to RUB 16bn. The valuation multiples improve from 6.9x 2018F EV/EBITDA to 5.5x for next year, on our numbers, and we consider the stock as already offering a good entry point to gain exposure to the launch of the Russian Far East project (first sows supplied) and likely recovery in the sugar segment in the short term. We reiterate our Buy recommendation, with a 12-month TP of $13.50 and ETR of 30%. The prime highlight of the trading data was a more robust pricing environment (up 11% Q/q and 8% Q/q in sugar and pork, respectively) due to lower balances for soft commodities toward the end of Marketing Year 2018, and local currency weakening (down 9% Q/q). We consider the relief as not yet representing a structural improvement in Rusagro’s key oversupplied segments. Unconsolidated sales were down 6% y/y in the second quarter of 2018 to RUB 18bn as the comparison base and pricing last year implied a more favourable conditions for producers of soft commodities in Russia.
Russian agricultural and meat major Rusagro reported a swine flu
80 RUSSIA Country Report August 2018 www.intellinews.com