Rusagro (MCX: AGRO) — one of the largest agricultural holdings in Russia. This is one of the few Russian food public companies, whose securities are sold not only on the Moscow Exchange, and on the English Stock Exchange.
Despite the fact that the parent company of the holding company is the Cypriot Ros Agro, and the main consulting and management office is located in the capital of Russia, the birthplace of the holding company can rightly be considered Tambov: the real main office is located there.
About company
Rusagro works with 2010 of the year, having occupied its niche in the production of sugar. At first, the main economic activity was carried out in the Tambov region, but then it expanded to the entire Black Earth Region.: to Lipetsk, Voronezhskaya, Belgorod and Kursk regions, areas with more soils in the Russian Federation.
Then the management diversified its products, moved away from focusing production on the sweet industry, and in the near future intensively expands its activities with access to the Saratov region and the Primorsky Territory, increases export supplies.
Main characters of the holding company: founder Vadim Moshkovich and CEO Maxim Basov, owned by more than seven percent of the shares.
The group of companies has a difficult structure, which can be divided into several levels. The top level is occupied by a Cypriot firm, registered in the offshore Ros Agro, which has the main owners of shares, judging by the latest minutes of the meeting of shareholders, Act, not counting Vadim Moshkovich and Maxim Basov, by Fiduciana Nominees (Cyprus), Fiduciana Trustees (Cyprus), Fiduciana Directors, Fiduciana Management, RIGPA, BNY (Nominees), Granada Capital CY.
Ros Agro Function – Management and Consulting. She, from my side, is the founder of Tambov JSC "Rusagro Group"", Hong Kong's Ros Agro Trading and Ros Agro China and one of the founders of Belgorod LLC "GC "Agro-Belogorye"". Ros Agro China is the founder of two more Chinese companies, engaged in wholesale sales in this country of products, produced by a group of companies in Russia.
But the main assets are concentrated in the hands of LLC "Group of Companies "Rusagro"". It owns 36 Enterprises, making up the production capacity of the holding.
What he earns
If initially the main product of the holding was sugar, now, as a result of the diversification of production and the purchase of new enterprises, products can be divided into four categories.: sugar, meat, fat-and-oil and dairy products.
The main revenue is brought by the fat-and-oil segment - this is mayonnaise, margarine, Spread, mustard, ketchup and vegetable oil. This trend is characteristic of both 2019 And 2020 years, so for 1 Half 2021 of the year.
The holding significantly increased revenue from the production of products of the fat-and-oil segment - it was he who most influenced the company's total revenue in 1 Half 2021 of the year.
However,, if we take rusagro's revenue growth for a problematic one due to the coronavirus 2020 year, then the holding shows not the best results among competitors, although it is in first place in terms of revenue.
Revenue structure by product segment, million rubles
| 2019 | 2020 | Δ 2020 | share 2020 | |
|---|---|---|---|---|
| Sugar | 31 195 | 28 113 | −10% | 16,02% |
| Meat | 25 834 | 32 434 | 26% | 18,48% |
| Agriculture | 25 845 | 34 348 | 33% | 19,57% |
| Oils and fats | 62 375 | 76 160 | 22% | 43,40% |
| Milk and cheeses | 3870 | 3786 | −2% | 2,16% |
| Other | 300 | 631 | 111% | 0,36% |
Revenue structure by product segment in 1 Half 2021 of the year, million rubles
| Revenue | Revenue growth for the year | Share in total revenue | |
|---|---|---|---|
| Sugar | 16 386 | 15% | 15% |
| Meat | 18 182 | 29% | 17% |
| Agriculture | 11 887 | 49% | 11% |
| Oils, Fats, milk products | 61 571 | 68% | 57% |
| total revenues | 108 025 | 48% | 100% |
10 the largest Russian agro-industrial companies in terms of revenue growth for 2020 year
| "Resource" | 34% |
| Agrosila | 21% |
| «Miratorg» | 17% |
| Rusagro | 15% |
| "Clear Dawns" | 10% |
| "Komos group" | 10% |
| "Agro-Belogorye" | 8% |
| Vyselkovsky Agricultural Complex | 8% |
| "Cherkizovo" | 7% |
| Agropromkomplektatsiya | 0% |
34%
IN 2020 year the company was only in fourth place in terms of revenue growth, but in 2021 year there is explosive growth. It can be explained by the increase in world food prices., especially considering the wide geography of Rusagro's exports. But there is another explanation.: the company reoriented to the market of fat-and-oil products and launched an aggressive expansion in it.
Also in 2018 The holding company bought the Saratov Fat Plant at auction. IN 2019 And 2020 Further expansion plans appeared in the Saratov region. the standard scheme is applied: holding buys shares in problematic fat-and-oil enterprises of the region, then bankrupts those of them, which bring real income, and completely acquires them.
IN 2021 Over the year, these enterprises provided a serious increase in the indicators of the group of companies, which is to be expected: Saratov region is a valuable region in the industry, there are the highest sunflower harvest rates in the country. Saratov Fat Plant, purchased by the holding, is the industry leader in the Russian Federation.
Even despite the beginning of the construction of pig complexes in the Tambov region, can be stated, that the company is refocusing on recycling, and not to cultivate their own agricultural and pig products. This can be judged., in particular, in the place of "Rusagro" in the ranking of the largest landowners in Russia.
10 russia's largest landowners
| Location of lands | Area of agricultural land, thousand hectares | Land value, billion rubles | |
|---|---|---|---|
| JSC "Firma "Agrocomplex" im. N. AND. Tkachev " | Krasnodar region, Adygea, Stavropol region, Rostov region | 660 | 88,6 |
| Prodimex, including "Agriculture" | Voronezh, Tambov, Kursk, Lipetsk, Belgorodskaya, Penza region, Krasnodar, Stavropol Territory, Bashkortostan | 892,2 | 65,1 |
| «Miratorg» | Belgorodskaya, Kaliningrad, Tula, Bryansk, Orlovskaya, Kaluga, Smolensk, Kursk region | 1047 | 49,1 |
| "Steppe", including RZ Agro | Krasnodar, Stavropol Territory, Rostov region | 474,8 | 48,2 |
| Rusagro | Belgorodskaya, Tambov, Orlovskaya, Kursk, Voronezh region, Primorsky Krai | 609 | 43,9 |
| Concern "Pokrovsky" | Krasnodar region | 242 | 36,3 |
| "Eco-APK" | Voronezh, Kursk, Orenburg, Ryazan, Kaluga, Smolensk, Novosibirsk, Tyumen, Moscow, Leningradskaya, Samara region, Tatarstan, Bashkortostan, Altai region | 630,3 | 32,9 |
| Avangard-Agro | Voronezh, Belgorodskaya, Kursk, Lipetsk, Orlovskaya, Tula region | 448 | 32,5 |
| GAP "Resource" | Rostov region | 320 | 32 |
| Volgo-Don Agroinvest | Volgograd, Kursk, Lipetsk, Tambov, Voronezh, Ryazan, Samara region | 451 | 27,4 |
Rusagro sales volumes by product type, thousand tons
| 2019 | 2020 | Δ 2020 | |
|---|---|---|---|
| Cream | 1,4 | 4,2 | 190% |
| Soy | 225 | 331 | 47% |
| Industrial fats | 243 | 313 | 29% |
| Pork meat products | 169 | 215 | 27% |
| Bottled oil | 147 | 160 | 9% |
| Live pigs | 33 | 34 | 3% |
| Mayonnaise | 136 | 138 | 2% |
| Sunflower | 80 | 78 | −3% |
| Cheese and cheese product | 8,4 | 8,1 | −3% |
| Corn | 156 | 149 | −4% |
| Margarine | 45 | 43 | −5% |
| Bulk oil | 406 | 384 | −5% |
| Dry mixes | 15,4 | 14,6 | −6% |
| Shrot | 647 | 589 | −9% |
| Sugar | 1022 | 812 | −21% |
| Wheat | 831 | 653 | −21% |
| Beet | 3875 | 2952 | −24% |
| Barley | 278 | 122 | −56% |
| Butter and spread | 1,9 | 0,8 | −57% |
The leaders in terms of sales growth were soybeans and industrial fats, from which we can draw a conclusion, that the holding has two priority areas:
- Oil and fat industry.
- Export of products to China.
The dynamics of the company's financial performance is ambiguous - this can be attributed to an increase in logistics costs and problems., related to coronavirus. Most likely, the decline in three of the four basic multipliers can also be attributed to the adoption of government regulation of food prices in a number of countries.: if during the crisis 2020 for a year, the company had the opportunity to earn on inflation, now this possibility is somewhat limited.
Dynamics of financial ratios "Rusagro"
| 2019 | 2020 | 1п2021 | |
|---|---|---|---|
| Gross margin | 20,05% | 27,51% | 21,78% |
| EBITDA margin | 14,51% | 20,12% | 18,03% |
| Net margin | 9,89% | 14,91% | 13,20% |
| ROE | 12,17% | 18,99% | 17,05% |
Plans
Expansion into the fat-and-oil market of the Saratov region. The main plans of the company are concentrated around the oil and fat factories of the Saratov region. Already now the company owns the Aktara and Balakovo creameries - one of the leading enterprises in russia in the industry. And this year, the holding's assets also included the Saratov Fat Plant., purchased for 5 billion rubles. Saratov region, if we consider the recent actions of the company's management in terms of product diversification, is a key region. There from Moscow completely transferred the production of mayonnaise.
However, for the volzhsky Terminal creamery in Balakovo, also still part of the holding "Solar Products", Rusagro has yet to fight. Two more companies claim it: "Aston" and "Bio-tone". Naturally, to be expected, that the resolution of the situation in favor of Rusagro will have a positive impact on the value of the holding's shares — and, probably, it will be that way, since most of the debts of Volzhsky Terminal to Rosselkhozbank were covered by Rusagro.
It could be considered, that the expansion of the group of companies in the Saratov region already has a positive effect on the price of its shares and will also affect in the future.
Expansion into Primorsky Krai. Top management of the holding has never hidden, which considers China to be a promising sales market: it is the world leader in the consumption of pork and soybeans. If Rusagro exports soybeans to China mainly from the Black Earth Economic Region, then pig farms were bought and built in the Primorsky Krai bordering China. IN 2019 Russian pork was allowed on the Hong Kong market - earlier there was a ban in connection with African swine fever. Now Russian pork producers are calculating the benefits of the possible admission of their products to the market throughout China.
The company plans to continue the development of pig farming in Primorye, to launch six pig complexes this year. But investors should pay attention rather to another fact.: suspended production of soybean products at the Primorskaya Soya plant, owned by the holding, this year it resumed - we can expect an increase in the supply of soybean oil and meal to China, located near Primorye.
Oriental vector. Rusagro considers the development of production facilities in China itself. Negotiations are underway on a project for the construction of pig farms and the production of mixed fodder in China. But plans to develop pig farms directly in China are still rather vague.. Nevertheless, the market outlook can be assessed positively.: in the cuisine of Southeast Asia, pork predominates among meat, as the most accessible.
Risks
Natural risk. All agro-industrial companies have one of the main, if not basic, risks are considered natural. For Rusagro, a typical example was the failure of the beet harvest in 2020 year. Despite the fact that against the background of high demand and inflation, the holding raised sugar prices, revenue from its sale still fell.
At the same time, it is predicted, that because of the drought this year the sugar beet harvest will also be low. But, taking into account the reorientation of the holding to the fat-and-oil and meat segments, implications for the company's stock performance, apparently, will feel less, than before, – especially when you consider, that for the feed base the company mainly uses not beets, and corn and cereals. Also, the risk can be compensated by the tendency to higher sugar content of beets in recent harvests..
Risk of government food price controls. Rusagro is the beneficiary of global inflation, caused primarily by the coronavirus and increased logistics costs, and rising food prices. Naturally, that government measures to regulate the prices of basic food products bring damage to the company, which the management of Rusagro directly stated. In particular, top management of the holding estimated losses from the agreement with the government to regulate prices for sugar and fat-and-oil products at the end 2020 year in 1-2 billion rubles.
In comparison with the company's EBITDA, such a financial risk is not very significant.. But, as practice has shown, news, to one degree or another related to state regulation of prices, have a negative impact on the dynamics of the company's shares, reducing investor optimism.
The risk of banning artificial bankruptcies of enterprises. That, that Rusagro is bankrupt enterprises, mainly in the Saratov region, has long caused complaints from experts in the legal industry and from some banks. In fairness it should be said, that they are not the only ones who are, and in April 2020 the government even imposed a moratorium on bankruptcies for six months., but then a number of businesses, in respect of which Rusagro conducted bankruptcy proceedings, himself refused to apply this moratorium to them. However, there is another risk factor.: challenging bankruptcies by enterprise creditors, which was in 2020 year.
conclusions
The growth of shares of the holding "Rusagro" is not threatened by anything. Despite the fact that the group of companies does not occupy the first places among the enterprises of the industry nor in terms of revenue growth for the problematic 2020 year, neither by area of agricultural land, revenue growth in 1 Half 2021 year impressive.
Investors should pay attention primarily to the reorientation of the company's business to the fat-and-oil industry., increasing supplies to China and organizing pork production directly in China itself, planning more with 2018 year of listing of the company's shares on the Hong Kong Stock Exchange, as well as a share of the food market, occupied by the company: 7% – pork, 13% – sugar.
The risks are still insignificant. Given the company's reorientation from the sugar industry to meat and fat-and-oil and a significant increase in soybean production., rather rare sugar beet crop failures are unlikely to greatly affect the dynamics of shares. Two other risks: prohibition of artificial bankruptcies and government price controls – can be assessed as not very significant.
Various stock rumors do not have such a significant impact on the company's shares., as objective data: published financial statements and news on business expansion. Therefore, the rally of shares can be considered justified and believed, that it will continue further as the company diversifies production and expands.
