Page 118 - RusRPTJun20
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(from flattish in oil and fats to a 32% y/y decline in sugar).
• The oil and fats business was a key driver of the release. Following the consolidation of SolPro assets, segment revenues surged 20% y/y to account for 49% of total. The inclusion of the targets’ financial results also meant a 10pp y/y advance in the EBITDA margin to 12% in 1Q20.
• The sugar segment saw increased demand in March and raised sales 1.6x to 169,000t, which offset a 32% y/y price correction. The latter is a factor of material oversupply this season (7.7mnt production vs 6.1mnt consumption annually), while the aforementioned decline in the beet planting area improves next season’s outlook, in our view, in addition to our expectations of lower beet yields (some 5% y/y required on our estimate) and lower sugar content (additional 5% y/y).
• Higher breeding capacities brought a 43% y/y increase in the sales of the processed pork, while prices lost 7% on building domestic supply from industrial companies. Rusagro’s EBITDA margin in meat improved 4pp to 17% in 1Q20, implying a mid-cycle level to us at the current market balance.
• The agriculture division was the only one with lower revenues (down 9% y/y to RUB4.4bn) as last year’s base included the transfer of sales from 2018 to 1Q19 due to exercise higher prices. The quarterly EBITDA margin improved to 30% from 18% a year ago not seeing revenues from beet that received the greatest hit this season.
• In 1Q20, Rusagro generated decent net operating cash flow of RUB6.5bn (up 1.7x y/y) and employed RUB2.2bn in capital expenditures (48% allocated to meat). Net debt slightly declined q/q, to RUB60bn and 2.7x net debt/EBITDA as of March.
RusAgro has announced that it is considering selling its subsidiary, Primorskaya Soya, which has a crushing capacity of 180,000 tonnes of soybeans per annum, providing around 30,000 tonnes of oil and 140,000 tonnes of soybean meal. The company purchased a 75% stake in the asset in October 2015 for a total consideration of RUB 1bn. The oil and fats business has gained strategic importance for Rusagro in the last five years, as the company saw opportunities to conduct M&A on attractive terms in appealing regions and gain critical market share (up to 25%). The acquisition of the SolPro assets boosted the 2019 segment revenues 2.4x, meaning that they represented 45% of the total (and made the largest contribution). Primorskaya Soya accounts for 11% of total crushing capacity but in our view faces challenging operating conditions due to the unfavourable supply-demand balance for soya, which is popular for exports to Asian destinations from the Russian Far East.
9.2.7 TMT corporate news
Russian largest online retailer Wildberries announced it is entering Slovakia’s market and developing a distribution centre in the country worth €200mn, media platform Eurobuild CEE reported on May 12. “E-commerce is actively developing in Slovakia and its residents are open to online shopping. Wildberries will offer its new customers in the country a wide range of products in various price categories. As a large online retailer, we cooperate with
118 RUSSIA Country Report June 2020 www.intellinews.com
