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Industry Happenings


August 23, 2019

  

Report: Is Russia about to have a new top pork producer?

 

 

Russian farming conglomerate Rusagro said on Wednesday it has bought a 22.5% stake in local competitor Agro-Belogorie, Reuters reported.

 

Rusagro and Agro-Belogorie are among the top five pork producers by production capacity in Russia, which has seen consolidation in the meat industry in recent years. VTB Capital said Rusagro and Agro-Belogorie's combined pork production accounts for 13% of the domestic market. Privately-owned Miratorg is currently leading the pack, accounting for 10.2% of all pork production.

 

"This deal is definitely a way to gaining control, otherwise Rusagro would not have done it," a banking source told Reuters.

 

Russia's pork market is seeing consolidation as "the industry has gone through a stage of rapid growth, now it is at a mature stage," said Dmitry Rylko, the head of agriculture consultancy IKAR.

 

He added that the local pork market is saturated and margins are falling. Besides pork production, Agro-Belogorie owns large areas of farmland which could benefit Rusagro's business in sugar, wheat and soybean production, Rylko said.

 

"They are not a private equity fund, but a strategic investor," another financial market source said.

 

"For 2019, we estimate the total output of the two at 500,000 tonnes, which would make the combined entity the country's leading pork production unit, with a market share of 13%," said Nikolay Kovalev, analyst at VTB Capital.

 

Rusagro has said it would consider a secondary share offering, and some banking sources expect the placement to happen later this year.

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