Page 111 - RusRPTNov18

while the absence of federal competitors implies the prospect of consolidation.
One of the world's largest B2B cocoa producers and grinders Swiss Barry Callebaut acquired Inforum , Russia's largest producer of industrial chocolate , compound coatings and fillings, the companies said on October 4. Russia's is the second-largest chocolate market globally, with 4.8kg of chocolate consumed per capita annually. The market grew at 9.2% in natural volumes year-on-year as of April 2018, by a large margin outpacing the global growth of 2.5%, Kommersant d aily said citing the Nielsen data.
Russian second-tier supermarket chain L enta showed a decline in revenue growth from 16.6% year-on-year seen in second-quarter of 2018 to 12.6% year-on-year in 3Q18. Lenta continued downgrading expansion plans, and could see negative sentiment following 3Q18 results, despite resilient second quarter performance and recent GDR buyout announcement . In the third quarter Lenta's results were "primarily pressured by turned negative headline like-for-like that saw 0.3% decline in ticket and similar traffic outflow," VTB Capital commented on October 29, noting that "Lenta highlights soft consumption backdrop and worsened of a late and brings lower number of items per check and less frequent visits to the store." Specifically October also turned out to be weak for Lenta and worsened prospects for the traditionally seasonally strong 4Q18. The market leader X5 Retail Group also experienced a slowdown in September (15.4% vs. 18.2% in August), but saw a rebound in October with a 16% growth of revenues, VTB reminds. The explosive growth of Russia’s supermarket chains has come to an end as organised retail starts to run up against structural constraints . The leading chains have switched from expansion to grab more market share to improving profitability and have even begun to close some of their more unprofitable stores. The analysts now expect the annual roll-out forecast at only five hypermarkets from the previously anticipated eighteen. Nevertheless, VTB maintained a Buy recommendation on Lenta's shares, but revised the target price downwards by 9% to $5, which translates into estimated total return of 39%. "Key downside factors include deterioration in consumption backdrop, lower profitability margins, lesser stock liquidity, and vague strategy over future accumulation of treasury shares [post buy-out]," VTB warns.
9.2.6 Agriculture corporate news
The agricultural arm of Russian multi-industry investment conglomerate AFK Sistema , Steppe, will triple its out put with a new milk and dairy farm in the Rostov region with 33,000 tonnes annual capacity, the head of the holding Andrei Neduzhko told Vedomosti. Together with the existing project in the Krasnodar region and another farm planned there, Steppe could boost its dairy output from 40,000 tonnes in 2017 to 130,000 tonnes by 2022, according to Neduzhko.
The Czech investment group PPF Group that belongs to Czechia’s richest man Petr Kellner, is trying to sell its only Russia-based agribusiness, the RAV Agro-Pro holding, Kommersant reported on October 11. Kellner has a large part of his portfolio in Russia and bought RAV Agro-Pro holding in 2011. Leading Russian agribusiness Miratorg is reportedly interested in the asset, due to its land fund. RAV Agro-Pro is among the top 50 owners of agricultural land in Russia with 111,000 hectares, located in the fertile “black earth” Voronezh and Oryol regions. Russia’s Federal
111 RUSSIA Country Report November 2018 www.intellinews.com