Cherkizovo finalises takeover of major grain producer

By Vladislav Vorotnikov

- Last updated on GMT

Cherkizovo has taken over Russia’s leading grain producers Napko
Cherkizovo has taken over Russia’s leading grain producers Napko

Related tags: Agriculture

Russia’s Cherkizovo has acquired one of Russia’s leading grain producers Napko, in a deal that appears to be the largest single merger in the country’s agriculture sector over the past few years. 

The takeover, finalised on 28 April, is designed to improve Cherkizovo’s self-sufficiency in grain and develop it from its current level of 30% to 60% within the next few years, said Sergey Mikhailov, CEO of Cherkizovo, in a press release published on the company’s website. Mikhailov also noted that the company expected to see some synergy between new and existing assets, as well as improved profitability in the grain segment as a result of the deal.

According to the press release, Cherkizovo paid nearly RUB4.9 billion (US$85.1m) for Napko and took on an obligation to repay the latter’s debt, which amounted to RUB751m (US$13.1m) as of 31 March 2017.

Cherkizovo has estimated that the acquisition should more than double the holding’s land bank bringing it to 287,000 hectares (ha) in total, as Napko currently owns 147,000 ha of agricultural land in the Lipetsk, Tambov and Penza Oblasts of Russia. Cherkizovo also purchased all the accompanying infrastructure for the cultivation and storage of grain, the press release said.

Focus on raw materials

According to official information, last year, in order to produce 903,000 tonnes (t) of meat, Cherkizovo, manufactured 1.6 million t of feed, increasing this figure by 6.5% compared to 2015 and becoming the leader in terms of feed output among all of Russia’s agricultural holdings.

Also last year, Cherkizovo harvested 465,000t of grain, meeting just 24% of its grain needs, the company said in a press release earlier this year.

Cherkizovo is constantly striving for a better rate of self-sufficiency in raw materials for feed, as last year it increased grain output by 40% and, in 2017, it plans to boost this by a further 20% to 562,000t, the company revealed recently.

To achieve this, the company is increasing corn production volumes, which should be boosted by 30% this year compared to 2016, it said, although it declined to reveal specific figures.

Cherkizovo has experienced a sharp fall in net profit for two years in a row​; in 2015 this collapsed by 60% year-on-year to RUB 6bn (US$104m), while in 2016 it reduced more than threefold to RUB 1.9bn (US$33m). The low level of self-sufficiency in raw materials for feed during this period was considered one of the company’s key challenges.

Cherkizovo spokeswoman Elena Trifonova told GlobalMeatNews the company was not providing any further information in regard to the Napko takeover, apart from what had already been revealed in the press releases.

Miratorg and RusAgro also buy land

Meanwhile, the focus on self-sufficiency in raw materials for feed is now common for Russia’s meat industry. In particular, another Russian agricultural holding Miratorg has recently unveiled plans to purchase 32,000 ha of agricultural land in Kaluga Oblast​ to help meet the company’s needs in terms of quality feed.

Also, for several years, RusAgro was purchasing agricultural land in Russia’s far eastern region​, in particular Primorsk Krai, with its land bank amounting to 83,500 ha as of the end of 2016. The company needs land to cultivate grain for several pig farms it is currently building in the region.

Related topics: Meat

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