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RusAgro acquires large pig business in European Russia

Russian agricultural holding RusAgro has acquired CapitalAgro together with its distribution company CapitalAgro Trade House for 1.8 billion roubles (US$ 30 million), the company said in a statement on its website.

Within the deal, RusAgro gained control over several pig farms in Belgorod region in European Russia designed for 10,400 sows, and a slaughterhouse with the capacity of 400,000 finishers per year.

Investments in pigs despite a debt

RusAgro bought CapitalAgro despite the fact that RusAgro had accumulated a huge debt of 1.9 billion roubles (US$ 32 million). Through the acquisition, RusAgro targeted to increase its share at the Russian market of half carcasses, big cuts and consumer-oriented products, the company added.

A piglet on a Russian farm (not owned by RusAgro). Photo: Henk Riswick
A piglet on a Russian farm (not owned by RusAgro). Photo: Henk Riswick

In addition, RusAgro said that it planned to invest 300 million roubles ($ 4.5 million) into the modernisation of the CapitalAgro’s production assets.

Manufacturing premium marbled pork

CapitalAgro is known for having been one of the 1st companies in Russia that started manufacturing premium marbled pork. Sergey Yushin, chairman of the Russian National Meat Association told the Russian newspaper Kommersant that the very definition ‘marbled pork’ has remained relatively unknown to average Russian consumers, unlike e.g. marbled beef.

The company said it was growing finishers with some premium feed, e.g. by using olive oil in feeds. CapitalAgro established the capacity to produce 28,000 tonnes or pork per year; it is unknown how much of that was marbled pork.

Future plans for CapitalAgro assets

So far, RusAgro has not revealed any additional information about its further plans for the CapitalAgro’s assets. Citing sources in the Russian meat industry, Kommersant suggested that RusAgro may not be interested in the marbled pork part, and will re-design the production process at the CapitalAgro pig farms, in order to start manufacturing conventional pork products.

Read more on swine farming in Russia (and elsewhere) in the World of Pigs Tool

Opinions have been differing nevertheless. Marat Ibragimov, senior analyst at the consulting agency BCS Global Markets, said that RusAgro may be interested in using products of CapitalAgro to strengthen the position of its own brand ‘Slovo Myasnika’ on the Russian market.

In 2017, RusAgro sold 6,000 tonnes of pork products under its own brand, and there were plans to increase that figure in 2018.

RusAgro: strong financial results

RusAgro posted strong financial results for the 1st half of 2018. Despite an ASF outbreak registered at one of its pig farms in Belgorod region, the holding boosted net profit by 10 times as compared to the same period of the previous year to 2.2 billion roubles (US$ 35 million).

Maxim Basov, general director of RusAgro, admitted that the margins of the meat division have been under pressure during this period, as the prices on the Russian market were low. On the other hand, Mr Basov said, the production costs also decreased compared to the previous year, and that factor has been supporting the overall business profitability.

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