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region, according to Ekaterina Poduto, the Head of the Commercial Department of the Siberia Region. There are currently 435 Pyaterochka stores in the Siberia Region, or some 4% of all Pyaterochka stores (as of 30 September 2018). The projected growth implies a total amount of 196 openings, which would be 10% of the annual openings guidance provided by the company during its capital markets day. The company has previously mentioned that it is going to focus on developing operations in those regions where it is currently present (Novosibirsk, Omsk and Kemerovo regions), and that the most likely new region is Krasnoyarsk. The company has highlighted that it will start operations in Eastern Siberia, which will include the construction of its own distribution centre. We expect further comments on the company's geographical expansion strategy.
One of Russia's largest retailers Lenta appointed current CFO of Carslberg Eastern Europe Rud Pedersen as its new CFO, replacing Jago Lemmens, with the appointment taking effect no later than 31 March 2019. "Petersen has more than 25 years of experience, having held a number of senior management positions in various companies, including Cadbury, Astazeneca, Levi Strauss and IC Group," VTB Capital commented on November 12. VTB reminds that Lemmens has worked in Lenta since 2010. He is stepping down due to family reasons and will remain a full-time consultant for the company in order to support the transition process. Lenta 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.
9.2.6 Agriculture corporate news
Rusagro held a conference call dedicated to its the third quarter of 2018 IFRS results. Management disclosed its cost base for the new marketing year, which favours profitability expansion. For 2018, the capex guidance was cut to RUB 21-22bn, as the construction of breeding facilities is running behind schedule. The company sees a number of opportunities (organic and M&A) and could consider a SPO in 2019-20. We note the reversion of the financial results after two disappointing years, while the company could benefit from the increased number of assets on sale in the Russian agricultural sector, and potentially improved stock liquidity. Our unchanged 12-month Target Price of $13.50 implies a 36% ETR: Buy reiterated.
• The company updated the market on its cost base from the new harvest, seeing all costs higher y/y, while breeding cash costs are set to advance from RUB 50-55/kg in the last season to RUB 60-65/kg. However, management pre-acquired most of the short-term cost for the upcoming season and anticipates the inflation behind the price advances for soft commodities, thus securing a profitability build up.
• The CEO sees sugar prices (with VAT) for the current market year at no less than RUB 36.5/kg, implying a 30% y/y uplift and becoming a key factor for the recovery in financials, particularly in the beet growing and sugar reefing businesses.
• Capex guidance for 2018 has been cut to RUB 21-22bn, from the previously discussed RUB 25-30bn. The greenfield projects in the pork division in Tambov and the Russian Far East are running 3-6 months behind schedule, and the Russian Far East is only likely to see production in 2020, implying moderate downside risks to our model. Subject to acquisitions, next year’s capex is likely to be lower y/y.
• Rusagro kept an aggressive stance on increasing volumes, highlighting greenfield opportunities in pork and milk (in the Russian Far East
110 RUSSIA Country Report December 2018 www.intellinews.com