Page 123 - RusRPTJun19

output of pork and beef, plans to enter the dairy market with the launch of its branded pasteurised milk, Vedomosti daily reported on May 21 citing the vice president of the company Alexander Nikitin. Most recently a market study revlealed that Miratorg is the largest holder of agricultural land in Russia, with a land bank of over 1mn hectares. The company also revealed its plans to enter the lamb market in autumn 2018. Miratorg eyes the dairy marker since 2017, Vedomosti reminds, with a $400mn investment in vertically integrated business including milk farms, production of milk, dairy products, and cheeses. Currently the company is still holding on to the investment plans, and is choosing the region for its realisation, Nikitin told the daily, without specifying the investment amount. Currently Russia is 80% self-sufficient with domestic milk supplies. The main owner of Ekoniva, Russia's largest dairy producer, Stephen Duerr welcomed the entry of new players to the market, claiming that it would make the battle against counterfeit milk and dairy products easier.
One of Russia's largest agricultural holdings Rusagro more than doubled both revenues and Ebitda in 1Q19 under IFRS, the company said on May 20. Previously in the fourth quarter of 2018 Rusagro showed positive dynamics across all sectors, but was somewhat undermined by continuing weakness in sugar prices. In the reporting quarter the earnings have dramaticlly improved, and Ebitda "did not even include the contribution from the recently acquired Solnechnie Produkti [major vegetable oil company], which appeared below EBITDA in the interest income line," Sberbank CIB commented on May 21. Rusagro's agriculture division saw the biggest increase in profitability on the back of increased grain prices, with Ebitda improving from almost zero in 1Q18 to RUB1.4bn in 1Q19, making a 26% margin. In the meantime the sugar division's results bounced from high sugar prices and last year's low cost base. The Ebitda increased 67% y/y to RUB1.1bn, despite 40% lower sugar sales volumes. However, the average sugar selling price has fallen by 15% since the start of the year to just RUB28.2 per kg in May, well below the RUB30.8 per kg average recorded in May 2018, Sberbank warns. Rusgaro's meat division saw Ebitda decline of 27% year-on-year to RUB0.8bn, brought down by increased production costs and loss of livestock due to the outbreak of foot-and-mouth disease at a pig facility in Primorsk Region. "Overall, the negative factors for the division were partly offset by an increase in the average selling price of processed pork," Sberbank CIB commented. In the meantime, thanks to the consolidation of production at rented Solnechnie Produkti facilities and an increase in bottled oil production, the revenues of Rusagro in the oil and fats division almost quadrupled in the reporting quarter. Going forward, Sberbank expects the sugar division to remain under pressure and be less profitable in 2Q19 due to lower prices. But "the profitability of the meat and agro segments should remain stable, while potential upside for the quarter is a potential increase in the profitability of the oil and fats segment." The 3Q-4Q19 results of Rusagro will heavily depend on the 2019 harvest, the analysts believe, and maintain a neutral view on the stock.
Russian meat, dairy and agricultural producer Damate launched a new plant for turkey meat processing with 155,000 tonnes annual capacity, the company said on May 29. The new plant in the Penzenskaya region can process 6,000 birds an hour and is the largest of its kind in Europe. Since 2016 Damate has become Russia's largest turkey meat producer, in rivalry with peer Eurodon (aka Evrodon). Turkey meat has a sizable upside as currently it only accounts for only a few percent of total meat consumption in the country. Damate invested RUB11bn in the new plant, including own funds and loans raised from state-controlled Rosselkhozbank (Russian Agricultural Bank), which could have been worth RUB5.7bn according to previous reports,
123 RUSSIA Country Report June 2019 www.intellinews.com