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Rusagro, armed with $1.5bn warchest, unveils poultry deal

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Rusagro unveiled plans to move into poultry as the sugar-to-pork producer, whose shares have been one of the top performers in world farming, extends an expansion drive helped by Russia's ag import curbs.

Russia-based Rusagro, listed in London as Ros Agro, said that it had bought a minority stake in Uralbroiler with the aim of becoming a "major" shareholder – in fact owning 100% - within the next two months.

The deal expands the interests of Rusagro, which ranks second in both pork and sugar production in Russia, into the broiler sector, with Uralbroiler boasting capacity for 110,000 tonnes of poultry, besides 18,000 tonnes of pork.

And it represents the second acquisition within two weeks for Rusagro, which in September was revealed it had an investment warchest of some 100bn roubles ($1.5bn) to spend over the next three years on deals which would spread its operations into new markets.

The group on November 30 revealed it had spent 33.9bn roubles buying 20% stake, and outstanding debt, in Razgulay, with the aim of taking over the sugar mills and land owned by the distressed Russian sugar and gran producer when they are put up for sale.

Benefits from bans

Rusagro's expansion has been spurred by Moscow's ban since last summer on ag exports from the likes of the European Union and US, in a tit-for-tat move after Western powers imposed sanctions on Russia over its role in causing Ukrainian unrest.

Russia's top sugar producers, 2014, by market share

1: Prodimex, 22%

2: Rusagro, 15%

3: Dominant, 13%

4: Sucden 9%

5: Razgulay: 7%

Source: Sberbank CIB

Its average sugar selling price for the quarter, at 41.9 roubles per kilogramme, was up 49% year on year.

Meanwhile, the weak rouble has kept its operating costs depressed, allowing the group to report a 75% jump to 10.67bn roubles in earnings for the July-to-September quarter, and without the headache of large amounts of dollar-denominated debt which have tripped up some other Russian groups.

'Best stock'

The extent of the group's fortunes has made a top performer of Rusagro's - dollar-denominated - global depositary receipts, a proxy for shares, which stood at $12.35 in lunchtime deals in London, up 1.2% on the day, and more than double the $5.15 at which they entered the year.

Russia's top pork producers, 2014, by market share

1: Miratorg, 12.7%

2: Rusagro, 6.3%

3: Cherkizovo, 6.1%

4: Agro-Belogorie, 5.6%

5: Agrarnaya: 3.1%

Source: Sberbank CIB

And Rusagro and Suedzucker's returns had beaten by a distance those from the likes of Brazil's Sao Martinho and Ukraine's Astarta, with many peers, such as Brazilian giant Cosan, offering negative returns.

By Mike Verdin

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