Bloomberg News

Ros Agro Misses 2011 Profit Target on Lower Sugar Prices

February 03, 2012

(Updates with investment, debt in the seventh paragraph.)

Feb. 2 (Bloomberg) -- Ros Agro Plc, a Russian grain and sugar producer listed in London, missed its profit target for last year after a bumper beet harvest pushed domestic sugar prices lower, Chief Executive Officer Maxim Basov said.

“Our company’s financial results last year are apparently lower than our own expectations and those of most analysts,” Basov said in an interview in Moscow today, declining to be more specific until the Ros Agro publishes its annual report.

Domestic sugar prices fell as low as 17 rubles a kilogram last year, Basov said.

Ros Agro’s stock fell 5.1 percent the most since Jan. 23, to $6.50 by 4:32 p.m. in London trading, reducing the company’s market value to $780 million. The global depositary receipts cost $15 each at Ros Agro’s initial public offering in April.

The company also sees risks with Russia’s accession to the World Trade Organization in the second half of the year, which may cut into the profitability of its pork output, Basov said.

European pork is cheaper than Russian, and market liberalization along with increasing domestic pork output may damp Russian prices, Basov said.

“Our company’s cost of pork production is lower than in Europe but we will earn less on pork sales as a result of WTO membership,” he said. “The scale of the decline is unclear.”

Pork Investments

The company plans to invest from 10.5 billion rubles ($350 million) to 12.5 billion rubles in agricultural projects this year, Basov said. Net debt will rise by no more than 5 billion rubles this year from 11 billion rubles at the end of last year, he said.

Most of Ros Agro’s borrowing will be OAO Sberbank loans, Basov said. No bond or stock sales are planned, he said.

Ros Agro will devote 7 billion to 8 billion rubles of its total investment to pork production, Basov said. Output of the meat will increase about 5.5 percent this year to 67,000 metric tons, doubling to 140,000 tons in 2013 and rising to 200,000 tons in 2014.

The company may invest 1 billion rubles this year to start meat processing, depending on whether the government offers subsidies for the sector, Basov said.

From 1 billion rubles to 1.5 billion rubles will go toward increasing sugar beets refining capacity by 6 percent to 36,000 tons a day, Basov said. Investments in grain are planned at between 1.5 billion and 2 billion rubles this year, he said.

Ros Agro, also known as Rusagro Group, farms 420,000 hectares (1 million acres) of land, of which 380,000 hectares are sown with crops. Grain production exceeded 0.5 million tons last year.

Ros Agro plans to acquire 150,000 hectares of fields in the black-earth Tambov region in central Russia and decrease fallow land area this year, Basov said.

--Editors: Torrey Clark, Reed Landberg

To contact the reporter on this story: Marina Sysoyeva in Moscow at msysoyeva@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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