RusAgro: The first quarter of 2021 turned out to be a record year, the group is thinking about changing its divisional policy

The Rusagro Group published on Monday, May 17, financial results (IFRS) for the first quarter of 2021.

The group increased net profit by 115% to 6.526 billion rubles from 3.041 billion rubles in the first quarter of 2021. Rusagro's EBITDA also more than doubled (by 123%), to 11.169 billion rubles, the profitability of this indicator was 22% versus 15% a year earlier. Revenue increased by 52%, to 49.933 billion rubles.

The oil and fats segment, the largest in the group, increased revenue in the first quarter by 62%, to 27.69 billion rubles, and EBITDA by 55%, to 3.114 billion rubles. The oil and fat segment's EBITDA margin fell to 11% from 12% a year earlier.

Revenue from the sugar division in the first quarter increased by 65%, to 8.641 billion rubles, EBITDA by 120%, to 2.245 billion rubles, EBITDA margin was 26% versus 19% a year earlier.

, the meat division of Rusagro increased revenue by 26%, to 8.561 billion rubles, and EBITDA by 73%, to 1.745 billion rubles. The division's EBITDA margin was 20%, up from 15% a year ago.

Revenue agricultural business increased by 35%, to 5.96 billion rubles, and EBITDA by 129%, to 3.026 billion rubles. EBITDA margin amounted to 51% versus 30% a year earlier. CFO in the first quarter of 2021 amounted to 8.417 billion rubles compared to 6.479 billion rubles a year earlier (an increase of 30%).

The total debt of Rusagro in the first quarter of 2021 increased by 5% compared to the end of 2021, to 120.438 billion rubles. Net debt decreased by 10%, to 61.927 billion rubles. The net debt to EBITDA ratio was 1.62x versus 2.15x at the end of last year.

Market situation

At the end of 2021, official inflation in Russia became the highest in the last 4 years and amounted to 4.9%. Since the beginning of the year, its growth rate has accelerated and reached 5.7% year on year in April. On April 23, the Bank of Russia raised its inflation forecast for 2021 from 3.7 - 4.2% to 4.7 - 5.2%, and the population's inflation expectations rose to a record 11.9% since February 2021.

At the same time, prices for basic food products rose significantly above official statistics. The dynamics of export prices are even more depressing. If in Russia sugar prices increased by 58%, then over the past 12 months dollar prices for corn and sugar increased by 123 and 95%, for grains and meat - by 40 and 41%, respectively.

The obvious beneficiaries of the current price increase are food producers with a share of exports in revenue. There are few public agro-industrial companies in Russia, and the leader among them is held by the country's largest vertically integrated agricultural holding, Rusagro.

Stock dynamics

Receipts of Rusagro increased by 1.3% to 932 rubles. At the same time, the Moscow Exchange index increased by 0.06% to 3639.61 points. Therefore, the security looked better than the market.

In mid-April, the securities went below the 50-day MA, but remained above the 100-day moving average, which has been strong support since the spring of 2021. Resistance in the area of ​​950 - 1000 rubles looks quite strong. This area may well be attacked, however, it is quite possible that on the first attempt you will not be able to break through higher, a correction will be required.

About the issuer

Rusagro shares are listed on the London Stock Exchange (LSE). On the Moscow Exchange you can buy global depositary receipts of the company, with 5 GDRs equaling 1 share. As of March 6, 2021, the number of shares outstanding in GDR equivalent is 134,531,352.

The main owner with a share of 71.9% is the family of entrepreneur Vadim Moshkovich. The free float is 20.8%, the rest of the stake is in the hands of the company's management.

Founded in 1995 to import sugar to Russia, today Rusagro independently produces sugar, oil and fat products and pork, and grows grain crops. Over two and a half decades, the company acquired a number of elevators, sugar and fat factories, and also formed the largest land bank for the production of sugar beets and grain crops.

The sugar and meat segment of the agricultural holding ranks 3rd in terms of production volume among all Russian companies, including non-public ones. The company controls approximately 13% of the sugar and sunflower oil markets and more than 6% of the pork market.

After acquiring assets from the Razgulay group, Rusagro's land bank reached 665 thousand hectares, of which 54% is owned by the company. The company's assets are located in 12 regions of the Russian Federation, including the production of vegetable oil and pork in the Primorsky Territory located near China.

The company's business model is based on the idea of ​​vertical integration. The sugar, meat and fat-and-oil divisions have a full production cycle, and the agricultural segment provides them with raw materials. This reduces Rusagro’s dependence on third-party suppliers of raw materials and increases business margins.

Not limiting itself to domestic supplies, the company is actively increasing the export of products. In 2021, the export share of revenue was 32%, which is 8% more than in the previous year. Export volume in absolute terms increased by 33%.

In February 2021, Rusagro signed an agreement to supply packaged sunflower oil to the Century Mart hypermarket chain in China. This is the first direct agreement with a Chinese network, which brought the company to a huge and actively growing market with prices higher than in the domestic market.

Revenue structure and operating indicators

The oil and fat segment generates the main share of revenue - 44%. Agricultural and meat - 20 and 19%, sugar and dairy - 16 and 2%. But the main source of profit in terms of adjusted EBITDA is the high-margin agricultural segment:

In 2021, Rusagro achieved significant growth in operating indicators in almost all segments. The total revenue of the agricultural holding increased by 15% - 158.97 billion rubles; adjusted EBITDA - by 65%, to RUB 31.98 billion.

The Agriculture segment grew revenue and adjusted EBITDA by 33% and 157% for 2021; oil and fat - by 22% and 177%; meat - by 26% and 34%. Sugar - reduced revenue by 10%, but increased EBITDA by 59%. The main contribution to the three-digit profit growth rate was made by rising prices, as well as an increase in production volumes of meat products by 23% and fat and oil products by 6%.

The company continued its history of exponential growth in 1Q 2021, according to published operating results. The agricultural holding's consolidated revenue increased by 51% compared to the 1st quarter of 2021 and reached RUB 50.9 billion. In just one quarter, the company generated 1/3 of its 2021 revenue.

Commentary "Opening Research"

Alexey Pavlov, PhD, chief analyst at Otkritie Broker for the Russian market:

“Strong financial results are expected, primarily due to favorable pricing conditions in all main markets where we operate. With the exception of the oil and fats division, all business segments of Rusagro in the first quarter of 2021 demonstrated positive dynamics in sales volumes and an increase in EBITDA margins. We still have a current idea for purchasing depositary receipts for the company’s shares.”

We have a current investment idea for Rusagro securities, the target is 1148 rubles.

Balance

Since 2012, the company has undergone significant growth through the purchase of assets. Over 8 years, the size of the company's total assets increased by 225% - to 276.15 billion rubles. The ratio of liabilities to assets of the company is at an acceptable level and amounts to 54%.

The company's capitalization has remained virtually unchanged since 2015 and amounts to ~121 billion rubles, despite a more than twofold increase in sales over the comparable period. Most likely, the reason for this is the small capitalization and low liquidity of the shares, which does not allow the company’s GDRs to be included in indices, and institutional investors from entering its capital.

Dynamics of assets and the ratio of liabilities to assets of the company

Dynamics of market capitalization

Revenues and profitability

The average growth rate of the company's revenue over the past 5 years is 15%, net profit - 34.3% year on year. Thanks to inflationary pressures and rising food prices, Rusagro's growth rate has accelerated significantly over the past year.

At the end of 2021, the company's revenue amounted to 158.97 billion rubles. (+15% per annum), while adjusted EBITDA increased by 65% ​​- RUB 31.98 billion. Due to the increase in margins and the passage of the peak of investment, net profit increased by 150% - to 24.3 billion rubles.

The company's net debt at the end of 2021 amounted to 68.9 billion rubles. Short-term loans that need to be repaid or refinanced in 2021 amount to RUB 39.69 billion. The company's leverage ratio based on net debt/adjusted EBITDA is 2.15x. Taking into account actively growing income, repayment or further refinancing of debt will not cause difficulties for the company.

The company will present financial statements for the 1st quarter of 2021 on May 17. Based on the operating numbers reported, this could be another quarter of triple-digit growth.

Rusagro has the best margins in its sector:

• Gross profit margin - 28% (+11% per annum)
• Adjusted EBITDA margin at the end of 2021 amounted to 20% (+6% per annum)
• Net profit margin - 15.3% (+8% per annum)

The quality of a company and its management is usually assessed by its ability to earn profit per unit of invested capital. Rusagro is doing great with these metrics:

• Return on equity — 19.3%
• Return on investment - 11.7%.

Income dynamics

Key financial performance indicators for 2021

Dividends on Rusagro shares in 2021 - size and register closure date

Home → Dividends→ Rusagro shares - forecast, payment history

A table with the complete history of dividends of the Rusagro company, indicating the amount of payment, the date of closure of the register and the forecast:

*Note 1: The Moscow Exchange operates on the T+2 trading system. This means that settlements for buying and selling shares occur within 2 business days. Therefore, to be included in the register of shareholders and receive dividends, you must be a shareholder 2 days before the cutoff.

*Note 2: Exact payout date varies by broker and issuer. The predicted earliest date for receipt of dividends to the brokerage account for Rusagro: October 1, 2021.

Total dividends of Rusagro shares by year and changes in their size compared to the previous year:

The amount of dividends paid by Rusagro for the entire period is 421.32 rubles.

Average amount for 3 years: 63.52 rubles, for 5 years: 50.74 rubles.

You can buy Rusagro shares with minimal commissions from stock brokers: Finam and BCS. Free deposits and withdrawals. Online registration.

Brief information about the issuer Rusagro (AGRO-gdr)

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Calendar with upcoming and past dividend payments

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Dividends

Rusagro has a relatively short payment history, which can be explained by the active growth phase in recent years. The existing dividend policy regulates the allocation of at least 25% of net profit under IFRS to dividends. Actual dividend payments for 2021, 2021 and 2021 were 35%, 47% and 50.01% of net income.

Rusagro has passed the peak of investment expenses and does not plan to increase them in the coming years. This will allow the company to increase the size of dividend payments. At the conference following the results of 2021, the CEO said that management gives priority to dividend payments and intends to switch to a payment of 50% of net profit under IFRS.

If prices for the company’s product basket remain unchanged in 2021, then we can expect the company’s net profit to increase to ~31 billion rubles. (+27.6%). In this case, the dividend amount for 2021 could be 115 rubles, which targets a forward yield of 12.8%.