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The fastest growing company in the world will work in the Far East

Rusagro General Director Maxim Basov: "We are ready to increase production as soon as we get more opportunities for export to the countries of the Asia-Pacific region"

- Maksim Dmitrievich, not so long ago information appeared in the media that Rusagro was withdrawing from the Mikhailovsky TOR project and was saying goodbye to ambitious plans to “fill up with cheap pork” the Far Eastern regions of the Russian Federation. Was there really a question with your participation in the TOP: to continue or to leave?

The fastest growing company in the world will work in the Far East
- Nothing like this. The point is that we do not rely on traditional Russian, perhaps, but on economic logic, we act in real time. The matter is moving forward, negotiations are underway with the federal and regional authorities. It’s just, apparently, the journalists interpreted too harshly and exaggerated our reaction.

At some point, we did not really like that during the past year, practically no documents were signed that determine which infrastructure facilities in the TOP will be built at the expense of the budget. But, at the end of December, the agreement was concluded, now we have two residents at Mikhailovsky, both of them signed the relevant documents with the Corporation for the Development of the Far East.

For today, everything is clearly defined. The construction of modern pig farms in Primorye requires three types of infrastructure: gas, electricity and road. The first was not taken over by either the Rusagro corporation or the regional leadership, since this is the sphere of competence of the natural monopolist - Gazprom. We have separate joint plans with him and with Mezhregiongaz as to what facilities and in what time frame will be built.

As for roads and electrification, in accordance with an agreement with the Corporation for the Development of the Far East, we will be allocated the necessary capacity. Part of the infrastructure, at the same time, will be built at the expense of the federal and regional budgets, the rest - at our own funds. The processes will run simultaneously and in parallel.

- And when will it happen?

- Over the next three years - 2016 th, 2017-th и 2018-th we must create the infrastructure. We must be supplied with gas by 2019. Unfortunately, the gasification of these territories was not included in the Gazprom program. We now need to work with the leadership of the Mikhailovsky District to supplement the gasification plan for the Primorsky Territory accordingly. If something fails, it means that we will have to gasify some of the facilities ourselves or work on liquefied gas. But all these problems are completely solvable.

- Do the federal and regional authorities help in the implementation of your project?

Yes, it should be noted here that even for the planned advancement of a project that will develop for more than one year, prompt decisions and assistance from the federal regional authorities are needed, which we are not denied by the Plenipotentiary Mission of the Far Eastern District and the Ministry of the Russian Federation for the Development of the Far East. We are in direct contact with the heads of these departments and receive timely support.

- What will be the total investment in Mikhailovsky's projects?

- I will not give an exact figure - the exchange rate changes every year, and with it the nominal volume of ruble investments. I can only say that the project consists of three parts, now it has been officially announced that we are taking on obligations for the first of them, the cost of which is about 22-25 billion rubles. The second and third stages will total about another 30 billion. But we will start them if everything goes well - first of all, if we manage to "open" the Chinese and Japanese markets for our products.

In order to meet the demand of the entire Far East, we need only one and a half stages of construction of pig farms. The rest of the facilities are designed for export. But it does not happen by itself, this is preceded by the signing of agreements, for example, between the state veterinary services of China and Russia on the admission of our meat products to the PRC market. Also, a specific facility - the slaughterhouse that we are building in the Mikhailovsky District - must be certified in accordance with the requirements of Chinese legislation.

Now Russian meat is not supplied to China directly, but through a chain of intermediaries in other countries. But there is hope that this year two Russian enterprises will receive similar permits and we will also pass such certification. Such things take time: the meat market in all countries is strictly regulated, and strict veterinary control standards apply everywhere. But this is a profitable business for Russia, and we certainly need to develop the export of meat - chicken, pork, and other types of products ... The largest foreign pork markets are Japan and China, where prices are much higher than ours. That is why we are building our own complexes in Primorye: they will allow us to bring chilled meat at one of the lowest cost prices in the world to the most expensive markets.

- And what is the reason that our cost of pork production is one of the lowest in the world?

- We have the cheapest grain in the world, this is due to the large volumes of its production and the fact that it is unprofitable to export it because of transportation costs. Our market price is the world price minus shipping costs. Simply put, if 1 kg of pork needs 3 kg of feed, then the costs usually need to be multiplied at least threefold (the feed still needs to be delivered). And we have an advantage in this sense. Therefore, in Russia, the cost of meat production is second only to the Brazilian one, and we have a very high profitability - about 30%.

The Russian Federation provides itself with pork for 90%, imports - less than one tenth of the total production volume, depending on the situation in the consumer market. Moreover, consumption is now decreasing due to a decline in living standards, while production is growing. It is clear that we need to find new export opportunities. They are gradually opening, and this also applies to other types of food. Previously, we just imported food, now we are turning into a good supplier. We are now actively promoting our products on the world market and I am confident that we will be able to "discover" it for ourselves on a large scale.

- What prevented you from nurturing such ambitious projects before - even before the widely announced “turn to the east” and the creation of TOPs?

- The very lack of infrastructure that we talked about at the very beginning. Until the state began to participate in its creation, the projects were impracticable. Private investment alone is not enough, tools of a different order and level are required - federal targeted programs, tax incentives, etc. When production is based on modern technologies, you cannot go anywhere without electricity, gas pipelines, new technology, and good access roads. Even a large business alone cannot handle such a scale of investments and social obligations. On the other hand, answering your veiled reproach, I can say that in other cases we did not expect help from the state. For example, we have been engaged in plant growing for a long time and successfully, although, unfortunately, there is not so much arable land in our Primorye - only 28 thousand hectares. We are interested in increasing the land bank by one hundred or two hundred thousand hectares - as much as possible. In total, we have a total of 500 thousand hectares in Russia, we plan to increase the area. In Primorye, we do not consider the results to be optimal for ourselves (we were somewhat delayed at the start), but even from these more than modest areas in our farms we have already sent the first 10 thousand tons of corn out of 15 thousand grown to Japan, sold a good harvest on the domestic market soybeans. We will develop this direction and also hope for the gradual opening of new markets.

- What plans do you associate with the Far East in general, and with the TOP system in particular?

- We have three business units in Primorye. One plant growing, which I have just mentioned, the second - a fat and oil plant in Ussuriysk. It produces a food additive for animals - soybean meal, which we sell mainly in the Urals and the European part of the country, as well as packaged oil (it goes to China) and mayonnaise (more for the domestic market). The enterprise is large, with about 400 staff working at full capacity. The third type of business is being created now - we plan to build meat processing plants within three years. We follow the market conditions closely enough and have always tried to make our strategy flexible. So, we abandoned the idea of ​​doing aquaculture, but decided to develop greenhouses and grow vegetables in greenhouses. So far, we are building greenhouses in the European part of Russia, but over time, if the Chinese sales market opens up, such a business can be expanded to Primorye. Theoretically, a greenhouse can be built everywhere, but small units are not very interesting to us, and large greenhouse complexes need a powerful energy resource component. Again, it's all about infrastructure. In this respect, TOPs and other systems of state support can give a business a good starting chance.

- Does the company have plans to enter the Eastern export sugar market?

The same problem as with pork. First, a lot of work needs to be done to open up the Chinese and Japanese markets for Russia to supply Russian sugar. And for this, our products must meet many parameters for food products in China, Japan and other countries. Today these markets are closed to us. Previously, there was nothing to export, and therefore this problem was not addressed. If we can overcome the barriers to entering Asian markets, this will be another huge opportunity for the production of additional types of agricultural production in the Far East. There are such plans in our long-term strategy.

- But for new industries, new workers are also needed. Do you think that people will still go to the Far East in droves?

- It's hard for me to judge what a "mass order" is. I can only say that our company has its own experience in this respect. We now have a queue for employment in Primorye - although at first no one seemed to be eager for such a desire. But people quickly saw that we were building our own housing in the Far East, building modern beautiful houses according to the Dutch project. Now our business volumes are not too large, so not so many employees are needed. But when the pig-breeding complexes are put into operation, we will talk about thousands of jobs ... I see interest right now. Many of those who now work at our enterprises in the Volga region, the Urals or in the central part of the country like the microclimate of Primorye, they are ready to live close to the sea. It is also important that Asia is nearby, and these are the prospects for large projects in the near foreseeable future. People believe in the future, and we are ready to provide them with it. In this regard, the interests of everyone converge - business, citizens, and the state, which now pays so much attention to the Far East.

- 2015 was a very difficult year for the Russian economy. What was it like for your company in general? Are you satisfied with its results?

- For Rusagro, the year was eventful. Against the background of the unstable economic situation in the country and in the world, the company was able not only to improve its production performance last year, but also significantly increased its assets, getting into the list of leaders in its segment. The company's shares have doubled. In addition, according to information from investment banks, Rusagro is today the No. 2 company in terms of growth and profitability in the world. As for the increase in assets, it was in the Far East that we acquired the only producer of soybean oil and soybean meal in the Far East. Today the plant is 1 percent loaded and processes 100 tons of soybeans per day. Our brand "Maslava" is officially registered in China. Therefore, we are optimistic about the movement of our business to the East and about the opportunities that will be realized as a result of working in new markets.


REFERENCE ER:

In 2015, Rusagro's revenue grew by 25%, to 82,5 billion rubles, according to the operating statements of the agricultural holding. The growth rate was more than two times lower than in 2014, when the company's revenue increased by 57% over the year.

The largest contribution to the growth of the agricultural holding's revenue in 2015 was made by sugar sales, which increased by 46% to RUB 32,9 billion, thereby providing more than a third of the company's revenue. Revenue from crop production increased by 32% (against 23% in 2014-m), up to 14,2 billion rubles. The growth of the fat and oil sector slowed down four times compared to the previous year and amounted to 16% (+ 67% a year earlier), to 17,3 billion rubles. The least increase in revenue from sales of meat products - only 2%, to 18,1 billion rubles, and in the fourth quarter revenue from this direction even fell by 6% compared to the same period in 2014.

Rusagro ranks fourth in the ranking of the largest Russian agricultural holdings compiled by BEFL based on the results of 2014. The company's sugar business is represented by six sugar factories in the Tambov and Belgorod regions. Rusagro's meat business is represented on the Russian market by two enterprises: OJSC Belgorodsky Bacon, which has production facilities in Shebekinsky and Volokonovsky districts of the Belgorod region, and LLC Tambovsky Bacon, in Zherdevsky, Znamensky and Sampur districts of the Tambov Region. The oil and fat division of the company includes JSC Fat Plant in Yekaterinburg and an oil extraction plant in the village of Bezenchuk, Samara Region - JSC Samaraagroprompererabotka. In addition, the company is engaged in crop production, growing barley, sugar beets, winter wheat, peas, sunflowers and other crops.
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