Danish Idavang plots Eurobond-financed pig meat expansion in Russia

By Eugene Vorotnikov, in Voronezh, Russia

- Last updated on GMT

Danish Idavang plots Eurobond-financed pig meat expansion in Russia

Related tags Russia Meat Livestock Pork

Danish meat producer Idavang has announced plans to build a new pigmeat processing complex in Russia’s St Petersburg region this year (2018), according to the company.

To generate funds for the project, the company has issued €85 million-worth of Eurobonds.

Tatyana Sharygina, general director of Idavang-Agro, a Russian subsidiary of the company, said in a note to GlobalMeatNews​ that the company had resorted to a Eurobond issue because Russian farming and livestock companies were finding it tough to secure direct financing. The Eurobond securities have been placed on the Frankfurt Stock Exchange in Germany, and the company said it also planned to lodge securities on the Nasdaq Copenhagen exchange, in Denmark.

The company has yet to reveal its planned production capacity for the new plant. Idavang already has Russian operations: it operates a pigmeat complex in the Tosnensky District in Leningrad Oblast, able to produce 200,000 pigs per year. It also has a facility in the Ostrovsky District of the Pskov Oblast, near the Latvian border, which can produce 100,000 pigs per year. This output already makes Idavang the largest pigmeat producer in north-west Russia, claimed the company.

Despite this promising background, analysts at Russia’s Ministry of Agriculture believed the company could face difficulties in proceeding with this latest initiative, as the Russian pork market and industry are becoming increasingly competitive.

A spokesman for agriculture minister Alexander Tkachev noted that wholesale prices for pork in Russia have been declining for several years, falling by 25% since 2014. However, demand for pork in Russia has been projected to grow by about 1.5% annually for the next several years, meaning producers have been reluctant to quit the market.

Also, a significant volume of pork in Russia – about 14% of overall production – is still produced by small, part-time farmers, who can be undercut by larger players, providing another incentive for big producer investment. Imports currently account for 8% of the market or 300,000 tonnes, but ministry of agriculture officials said they believed these would decline as domestic production continued to grow. As a result, the Danish company would face serious competition with other Russia-based producers, they argued.

According to Idavang, in 2017, the overall turnover of the company was about €100m, of which about €40m was generated by Russia-based activities. Last year, Idavang sold 755,000 pigs, equivalent to 65,000 tonnes of pork.

The company also operates in Lithuania, where it owns 12 farms with a combined capacity of 15,300 sows.

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