Rusagro expecting production to increase this year
MOSCOW. Oct 16 (Interfax) - The Rusagro group anticipates new production records this year and is looking for opportunities for investment in new business, company chief Maxim Basov told the press on the sidelines of the FMCG in Russia forum organized by the Adam Smith Institute.
"Our first-half results were very good. And in the second half, I think, they will also be very good. We expect that this year will be a record-breaker for us. But everything could change," Basov said.
The sugar content in sugar beet is lower this season that last year, he said. "The thing is, beet in a large part of the Central Black Earth region is infected with a disease that that has a very strong impact on beet sugar content. Because of this, our sugar output is down. That is not very good for sales costs, but, on the other hand, it's already clear that the harvest in Russia will be smaller than last year. The question is by how much. And it's clear there will be more raw sugar imported next year," he said.
Sugar prices are now higher year-on-year. "The price is higher and it is not falling at this point. So the sugar price situation is fairly good. Prices are holding at a high level," Basov said.
The company plans to produce roughly 500,000 of sugar beet sugar this seasons, Basov said. "I think we will produce around 500,000 tonnes of beet sugar. That is less than we were thinking some time ago, because sugar content is lower," he said.
Rusagro's seven sugar plants produced 463,000 tonnes of sugar from sugar beet last year, more than twice the previous year's output.
The company also anticipates production growth in its agricultural division. Grain prices are "at an unprecedented high," and the company had "a good harvest," including that of sugar beet and seed-bearing crops, he said.
"So agriculture is showing us a very good outcome this year," he said.
Rusagro also expects meat production to increase to 65,000-67,000 tonnes this year. The company sold 62,500 tonnes of meat last year versus 62,400 tonnes in 2010.
Basov pointed out that meat prices have come down a lot - 20% from the peak high at the end of H1. "Now the price, with VAT, for live hogs is roughly 72 rubles [per kilogram]," he said. "This is, in principle, a seasonal decrease that happens each year. Prices fall at the end of September. But the drop this year was very strong," he said.
Whether that is due to Russia joining the World Trade Organization earlier this year is not yet clear. Basov said there are various prerequisites for pork prices to rise - including high grain prices - at play. "There is the view that quite a lot of small producers are slaughtering hogs so as not to have to feed them in the winter, and selling them, so supply has risen greatly. There is the point of view that [supply] has gone up due to adherence to non-quota imports at a low duty abroad, where the duty has fallen to zero percent, and the amount of this meat on offer has also gone up," he said.
"The main question is whether they [prices] will rise at the end of November. If they do rise, that's a seasonal subject. If not, it means there are other factors here," Basov said.
Rusagro plans "huge growth" in the production of meat in the coming two years. The company is now building new hog farm complexes. When they are in operation, production will increase to over 120,000 tonnes next year and to more than 200,000 tonnes in 2013, Basov said. Furthermore, Rusagro has begun building slaughterhouses and is looking to move into a new market for the company - that of semi-finished meat products - in 2014.
What other production sectors are interesting to the company Basov did not say. "The task for management is to always be on the look-out for new opportunities. We will have a board of directors, we are [generating] different ideas, there will be a big discussion, we will look at projects, and the board of directors will decide which projects they will allow us to do," he said.
Rusagro is one of Russia's largest producers of pork, sugar, packaged margarine and mayonnaise. The group includes more than 35 agribusinesses, seven sugar refineries, the Oil and Fats Plant in Yekaterinburg and a number of trading branches. The group also controls 414,000 hectares of land. The group is indirectly and directly owned by Senator Vadim Moshkovich and members of his family.