Page 112 - RusRPTNov18

Antimonopoly Services (FAS) announced on October 11 that Miratorg, which is one of the largest meat producers in the country, filed a motion to buy a stake in RAV Agro-Orel LLC, the holding that the land fund in the Oryol region, writes Kommersant. Experts estimated the entire land fund of the company is worth about RUB7bn ($105.6mn).
One of Russia's largest agricultural producers Miratorg plans to invest RUB27.5bn ($0.4bn) in domestic production of lamb , Vedomosti d aily reported on October 10 citing the co-owner of the holding Viktor Linnik. The company has launched a pilot farm in the Kursk region with imported livestock from Australia and plans to increase the number of farms to 12. The pilot farm is projected to have 3,000 tonnes of meat annual capacity, with the first delivery planned in February 2019. Total lamb capacity of Miratorg is planned at 35,000 annually, with 50% of it to be exported. Currently the holding owned by brothers Viktor and Alexander Linnik produces pork , beef, poultry, milk and dairy products , as well as grain crops. Currently the meat output is 42,000 tonnes annually.
Rusagro has released robust the third quarter of 2018 operating results,
supported by the recovery in global and domestic prices for soft commodities. Meat prices showed 9% y/y growth, while grain quotes surged 45%-115% y/y, lifted by the easing supply-demand balances and weaker USDRUB. We see the most promising piece of the trading update as being the 28% y/y surge in beet prices, which is a derivative on sugar prices (down 10% y/y from the high base) at the beginning of the marketing year in Russia. Beet was the key reason for the weak performance of the farming division last year and the recovery comes from the elimination of the sugar oversupply. While the release creates upside risks to our model, we are reiterating our Buy recommendation as our 12-month Target Price of $13.50 implies a 35% ETR.
According to the estimates from IKAR, sugar production in MY19 is going to be down 11% y/y to 5.8mn tonnes which is good news for RosAgro. The consumption of sugar in Russia has stabilised at 6.1mn tonnes per year and the outlook for production indicates the first year out of the last three without an oversupply. The ending stocks of sugar are going to ease 25% y/y to 1.2mn tonnes for MY2019, according to our estimates. The prime reason for this was the dry weather conditions in the Russia south, that saw a decline in the beet yield of some 25% y/y, while the crops planting area was down 6% y/y in the spring campaign as farmers had generated negative EBITDA in the previous season. In October-September, sugar prices surged 39% y/y and were 13% above those in the summer (June-August). Rusagro is a leading supplier of white sugar (15% of the market in 2017) and is likely to see a significant improvement in its economics in 2H18-2019. As beet prices in Russia are a derivative on the price of sugar at the beginning of the marketing year, Rusagro has also released a 28% surge in beet prices for 3Q18. The crop pressured farming EBITDA in FY17 to zero and is set to underpin a recovery this year alongside grain prices (up 45-115% y/y in 3Q18). Buy reiterated.
The Greenhouse Group of Arkady Abramovich, thought to be the son of London-based billionaire Roman Abramovich, plans to build 300 hectares of high-tech greenhouses producing tomatoes, cucumbers, and bell peppers in the Russian Far East district, Vedomosti d aily said on October 12. The investment is estimated at $2.5mn-3mn per ha or $750mn-900mn overall. Abramovich-junior already invested in greenhouses in Russia's
112 RUSSIA Country Report November 2018 www.intellinews.com