Rusagro (MOEX: AGRO) is the largest Russian agricultural holding, which divides its business into four segments: oil and fat, meat, sugar and agricultural. Currently, the company sells products in 80 regions of Russia and in 60 countries of the world.
Financial results
In mid-November, Rusagro presented financial results for the third quarter of 2021: almost all segments of the company showed double-digit growth compared to the data for the third quarter of 2020.
Fat and oil segment. Largest segment, which takes more than 50% in the overall results of the company and to which in 2021, as a result of the merger of two business areas, the dairy segment was added. Revenue in the third quarter of 2021 increased by 82%, from 17.822 billion to 32.390 billion rubles, compared to the same period last year. The main reason is rising prices.. For example, sales price of bottled sunflower oil jumped to 95 P per liter. Another reason is the increase in bulk oil sales., which grew due to the increase in export duties on sunflower oil.
The main negative point in the results was a strong increase in production costs: increased raw material costs, sunflower has risen in price, bulk oil and palm oil. As a result, the rapid growth rate of production costs compared to revenue led to a drop in the EBITDA margin of the fat-and-oil segment by 9 points and to a decrease in adjusted EBITDA by 12% — up to 2.591 billion rubles.
Sales volumes, thousand tons
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| Shrot | 138 | 126 | 9% |
| Bulk oil | 121 | 60 | 103% |
| Industrial fats | 85 | 88 | −4% |
| Dry Whey Blends | 4 | 4 | 0% |
| Consumer fat-and-oil products | 72 | 80 | −10% |
| Consumer Dairy Products | 4 | 3 | 17% |
Meat segment. The second largest business of Rusagro. The rise in prices for the company's meat products and the full capacity of new pig complexes in the Tambov region allowed the agricultural holding to increase revenue by 25% — from 8.767 billion to 10.276 billion rubles.
The increase in revenue was completely offset by the cost of feed and veterinary medicine, the launch of production in Primorye and the growth of labor costs for new personnel. All this led to a reduction in the EBITDA margin by 11 points and to the fall in adjusted EBITDA by 25% — up to 1.941 billion rubles.
Production and sales volume, thousand tons
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| Volume of pig production | 75 | 76 | −1% |
| Volume of sales | 61 | 61 | 0% |
Sugar segment. Sales of sugar to Russian retail chains in the third quarter of 2021 were held at a price not higher 36 P per kg at the factory for a bag of white sugar weighing 50 Kg. Rising prices have led to an increase in the number of prices. 13% Rusagro's revenue — from 6.809 billion to 7.727 billion rubles.
At the same time, adjusted EBITDA grew less – only by 9%, up to 1.589 billion rubles. This is related to, that the rise in sugar prices was partly offset by lower sales volumes. But the company connects the decrease in sales with a decrease in demand and an increase in the supply of sugar due to the fact that, that the period of processing of sugar beet of the new harvest has begun.
Production and sales volume, thousand tons
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| Sugar production volume | 169 | 171 | −1% |
| Volume of sales | 179 | 205 | −12% |
Agricultural segment. This is the smallest business of Rusagro, which brought in the third quarter of 2021 the largest income due to the revaluation of biological assets and agricultural products. The segment brought the company more than 10.266 billion rubles of net profit.
Revenue in the current quarter remained virtually unchanged and amounted to 6.824 billion rubles. At the same time, adjusted EBITDA still grew by as much as 25%, from 2.882 billion to 3.609 billion rubles, by reducing the cost of sales.
Volume of sales, thousand tons
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| Sugar beet | 720 | 769 | −6% |
| Winter wheat | 223 | 186 | 20% |
| Soy | 19 | 46 | −59% |
| Barley | 2 | 41 | −96% |
| Corn | 0 | 20 | −100% |
Key financial indicators of all segments, billion rubles
| 3к2021 | 3к2020 | The change | |
|---|---|---|---|
| total revenues | 53,204 | 36,601 | 45% |
| Fat and oil segment | 32,390 | 17,822 | 82% |
| Meat segment | 10,276 | 8,767 | 17% |
| Sugar segment | 7,727 | 6,809 | 13% |
| Agricultural segment | 6,824 | 6,750 | 1% |
| Other | 0,143 | 0,109 | 31% |
| Elimination | −4,155 | −3,657 | 14% |
| Adjusted EBITDA | 8,603 | 8,293 | 4% |
| Fat and oil segment | 2,591 | 2,946 | −12% |
| Meat segment | 1,941 | 2,588 | −25% |
| Sugar segment | 1,589 | 1,451 | 9% |
| Agricultural segment | 3,609 | 2,882 | 25% |
| Other | −1,103 | −0,479 | −130% |
| Elimination | −0,024 | −1,096 | 98% |
| EBITDA margin | 16% | 23% | −7 p. P. |
| Fat and oil segment | 8% | 17% | −9 p.m.. P. |
| Meat segment | 19% | 30% | −11 p. P. |
| Sugar segment | 21% | 21% | 0 P. P. |
| Agricultural segment | 53% | 43% | 10 P. P. |
| Net profit | 17,822 | 5,948 | 200% |
| net debt | 69,452 | 68,900 | 1% |
Why did net profit increase?
Looking at Rusagro's financial results for nine months of 2021, then you can notice, which out of 35.422 billion rubles of net profit, which was earned by the company, 14,219 billion rubles is the revaluation and dissolution of reserves, that is, in fact, paper profit. But is it really that paper??
After harvesting in the third-fourth quarters of 2020, the agricultural holding displayed income in the reporting at prices for that period, but the main sales of these products occurred in 2021, when prices have risen strongly. This is what caused the overestimation., which, in my opinion, can not be called paper.
Given that, that historically the third and fourth quarters are the most profitable, the company can pay a three-digit dividend for the second half of 2021. Rusagro distributes according to its dividend policy 50% net profit, making payments twice a year - for the first and second half of the year. For the first six months of 2021, shareholders were returned 0,89 $, or 64,4 R. For the second six months, more than 100 R: 65,2 P on dividend policy earned in the third quarter plus 30 P on average for the quarter on dividends, the agricultural holding earned in 2021 without taking into account revaluation, reserves and write-offs.
What's the bottom line?
Strong financial results of Rusagro in the third quarter of 2021 created a good foundation for the final dividend payments for the second half of 2021. For the first time in the company's history, shareholders can receive a three-figure dividend payout., if fourth quarter results are as good as any other quarter in 2021.
In the results for the third quarter, you can not get around one more fact, but with a minus sign: agricultural holding announced that, that Rusagro CEO Maxim Basov, who has led the company since 2009, resigns from his post with 1 January 2022. He will be succeeded by an employee of the group., whose name will be announced before the end of the year. Officially, the reason for leaving is not commented on., but earlier the media wrote, that Basov wants to tackle his projects.
