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9.2.6 Agriculture corporate news
RusAgro’s 4Q19 operating results were mixed, as they continued to show growing volumes whilst suffering from the soft pricing environment. Total revenues increased 13% y/y to RUB 45bn, reflecting the 2.1x y/y surge in volumes of sugar sold and the 53% y/y increase in oil & fats sales. The contribution of the lower-margin vegetable oil segment slightly decreased from the start of the year, but continued to represent 40% of total revenues. The prices for sugar, livestock pork and grain declined 37% y/y, 16% y/y and 21% y/y, respectively, due to the high base, the y/y harvest recovery, and the significant oversupply of sugar. The latter is one of our prime concerns for the current marketing year, and is likely to jeopardise the financial results of sugar refineries and beet growers in Russia. We do not envisage a rapid recovery in sugar prices in the near term.
Total revenues increased 13% y/y to RUB 45bn, with 40% of the performance driven by the oil & fats division, which benefited from the consolidation of volumes from recently acquired assets. Sugar volumes more than doubled to 295,000t, up from a low base, as Rusagro was going for prices over volumes a year ago.
Prices were under pressure for all of Rusagro’s segments, as the supply-demand balances were looser for the new season. We estimate beet sugar production of up to 7mnt vs. consumption of 6mnt, adding negatively to the already existing elevated stocks. The grain harvest recovered 7% y/y in Russia to 121mnt, while exports are 9% y/y lower in the current season due to declining FOB quotes.
Rusagro saw a 37% y/y decline in sugar prices in 4Q19, while beet prices lost 42% y/y on the strong production. As we estimate record high production in MY20, which is to bring a material oversupply of sugar, we do not anticipate a rapid recovery in sugar prices in the near term.
Farming and meat products saw a blended 9% y/y and 21% y/y correction in prices, on the strong comparison base and the aforementioned pressure on balances. The oil & fats division demonstrated the most resilient trends, with price corrections in the low single digits.
Rusagro is down 18% in the last twelve months, which we believe is due to the less impressive outlook on the 2020 marketing year (July-June). We believe that a potential re-rating requires a clear outlook on the balances for prime commodities, full integration of the SolPro assets and deleveraging.
9.2.7 TMT corporate news
The valuation of e-commerce platform Ozon.ru has been boosted from $1.1bn to $1.8bn by the analysts of VTB Capital in a special note that analyses the asset of Russian multi-industry investment conglomerate AFK Sistema. As profiled by bne IntelliNews, Ozon is one of Russia’s big-four online retailers and is battling it out in the e-commerce market, which is growing in double digits and seen as prime for consolidation. VTB Capital notes that Ozon enjoyed rapid growth in 2019, and will likely repeat that in 2020. The company recorded 87% y/y Gross Merchandise Volume growth in 10M9, far ahead of the market growth of 25%. VTBC estimates that Ozon.ru gained 1.7pp in
98 RUSSIA Country Report March 2020 www.intellinews.com
