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Ros Agro mulls fish move even as pork profits soar

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Ros Agro, the Russian sugar-to-grains group, revealed a potential move into fish farming even as it unveiled plans to expand its existing meat business, which is profiting from the boost pork prices from the country's sanctions.

Maxim Basov, chief executive of the Moscow-based company, told investors that the group was considering a "very large project" in the far east of Russia, on the Pacific, potentially backed by Chinese investors.

The group had held "some discussions" with Chinese investors and local officials about the project, which was still in early stages, and was also investigating aquaculture in the Atlantic too.

Growth in aquaculture would add to the expansion that Ros Agro already has in place, the group also unveiling the purchase of a 20,000-hectare plot in Ussurisjsk, near the eastern Russian city of Vladivostock, for the development of a pig breeding plant, with capacity for 50,000 tonnes of meat a year.

The development, costing an estimated 10bn roubles ($270m) to develop, will also accommodate farm to provide corn and soybeans for feed.

And Ros Agro - which already controls more than 470,000 hectares of land, an area half the size of Cyprus, or approaching the size of the UK county of Northumberland – also said it was considering a 14bn-rouble extension to its pig rearing facility in Tambov, in western Russia.

The plan was dependent on the availability of government funding help, Mr Basov said.

Meat leads

The comments followed the group's release of results showing a jump in earnings to 3.77bn roubles for the April-to-June period, from 295m roubles a year before.

All the group's four operational divisions – agriculture, meat, oils and sugar – reported growth in earnings before interest, tax, depreciation and amortisation (ebitda), lifting by rising prices and volumes.

"All business units are growing and improving performance," Mr Basov said.

However, the ebitda rise was particularly large – to 2.46bn roubles from 406m roubles a year before – in meat as the Ros Agro lifted pork sales volumes in a Russian market seeing soaring prices, with the group's average pork sales price for the quarter up 70% at 99.4 roubles ($2.67) per kilogramme, excluding VAT.

Pork prices

And this price is before Moscow's imposition bans on food imports from some Western exporters, such as Canada, the European Union and the US, imposed as a tit-for-tat measures on sanctions against some Russian enterprises introduced in the wake of the Ukraine crisis.

In fact, the "biggest changes" to pork import costs, which Mr Basov said were the key determinant of Russian domestic prices, were from curbs against European Union supplies introduced earlier in 2014 after the discovery of African swine fever in parts of north east Europe.

That had proved a problem in particular to Russian sausage makers, which had "depended very much" on EU pork fat, and were forced to experiment with alternatives such as vegetable oils, Mr Basov said.

However, the European ban had also switched Russian pork importers to Canadian and US supplies which were now no longer available either, thanks to Moscow's sanctions, turning demand to Brazil instead.

"Normally there would be no problem to find pork in Brazil. But this time, there is a difficult pork market globally," reflecting the outbreak of porcine epidemic diahorrea virus (PEDv) in the US, and its spread to Canada, Japan and South Korea.

Ros Agro depositary receipts, a proxy for shares, stood 0.8% lower at $6.65 in afternoon deals in London.


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