Import ban and inflation make food sector Russia’s top investment opportunity

Import ban: The EU food import ban imposed by the Kremlin  last August has turned Russian producers of meat, fruit, vegetables, cereal crops, sugar and fish into the  country’s top investment priority according to Citibank’s chief economist in Moscow Ivan Tchakarov. Their performance has also been boosted by galloping food price inflation, which is climbing at its fastest pace since 1999 and, while officials currently forecast that overall inflation will peak at above 15% this year, while the Ministry of Economic Development is predicting that food prices could  have risen by more than 23% by July.
Among the top performers and prospects  identified by The Moscow Times this week are:   

  • Cherkizovo Group, Russia’s largest meat manufacturers in Russia and one of its top three suppliers of poultry, pork and meat processing markets.  The company is also Russia’s largest producer of fodder. Year-on-year net profits were up 195% in Q4 last year, while revenues grew by 30% for the whole of 2014 and its share price on The Moscow Interbank Currency Exchange (MICEX) has risen by 36 .7% since August.
  • The Razgulay Group has the largest network of grain elevators in Russia; grows cereal crops, sugar beet, rice and soya beans; and, with control of 10% of the Russian sugar market, stands to benefit from the sharp rise in sugar prices which have already jumped by more than 20% this year. Although it is struggling with a debt mountain estimated at around $492m, its share price jumped almost 40% in the days following the Kremlin’s introduction of the food import ban  as investors gambled on the company  benefitting from reduced competition.
  • Rusagro: Although the farming conglomerate’s  share price on the London Stock Exchange has dropped by 7% since last August, revenues for 2014 hit $1.1bn – a 57% increase on 2013. Turnover from its sugar and meat business rose by 32% and 142% respectively. Rusagro is also one of the 199 firms designates as “strategic” by the government last month, which makes it eligible for state aid to see it though the current economic  crisis.
  • Russkoe More (Russian Sea)/Russkaya Akvakultura: Shares in the fishing business co-owned by the son-in-law of President Putin’s close ally Gennady Timchenko leapt by  70% when the food import ban was introduced, although they have fallen bank since then. The company has just rebranded itself Russkaya Akvakultura and is set to pay out its first ever dividend.  
  • Miratorg: Owned by the Linnik brothers, Miratorg is the biggest pork producer in Russia and employs 20,000 people. Last year, the company began producing beef and has since become a key supplier for a number of McDonald’s branches.  In January, it secured a $426m loan from Vneshekonombank  for the development of its beef production activities over the next 15 years. While it has not released any financial information for 2014, its revenues stood at $880k for 2013.