"Avangard-Agro" choked on grain

Agrarian holding Kirill Minovalov demonstrated an impressive decline in financial performance. Reasons were overproduction of grain in Russia and reduction of state support.
One of the largest owners of agricultural land in Chernozemye and the large grain exporter of Avangard-Agro Kirill Minovalov in 2018 continues to worsen the financial indicators. After tenfold, up to 466 million rubles., The decrease in the holding's profit in 2017, its main legal entity in the first half of 2018 showed a drop in profits from 3.4 billion to 607 thousand rubles. The company explains the decline in indicators by almost a twofold decrease in the cost of grain, and experts also note a decrease in subsidies to the agricultural holding by the state.

The worsening of the financial situation in the agricultural holding is stated in the published quarterly report of its head structure - Avangard-Agro JSC. According to the report, the legal entity for the first six months of 2018 reduced its revenues to 285 million rubles. at 340.7 million rubles. for January-June of 2017. "Other" income of the company decreased from 16.6 billion rubles. up to 56.2 million rubles, "other" expenses - from 13.1 billion rubles. up to 4.4 million rubles. As a result, net profit decreased from 3.4 billion rubles. up to 607 thousand rubles. The documents stipulate that the indicators of the main legal entity that does not carry out significant production activities may be irrelevant to the indicators of the whole group. At Avangard-Agro itself, Kommersant was told that the deterioration of the indicators was due to the "fall in the cost of grain from 10-12 thousand rubles. up to 6-8 thousand rubles. per tonne, while increasing the cost of fertilizers and chemicals due to the growth in the exchange rate. "
Negative impact of prices on the company's performance continues at the same time as a decrease in exports.

If in 2016 the entire agricultural holding received 11.6 billion rubles. proceeds from sales of products in Russia and 6.4 billion rubles. from export operations, then in 2017 - 9.7 and 3.1 billion rubles. respectively. The head company Avangard-Agro does not deal with foreign deliveries - OOO Avangard-Agro-Trade LLC is responsible for them. According to SPARK-Interfax, in 2017 this company received revenue of 10.1 billion rubles. (9.7 billion rubles in 2016), but reduced profit from 22.5 to 4.6 million rubles. And the increase in the cost of fertilizers and chemicals adversely affected the performance of the group's production structures. Thus, in 2017, Avangard-Agro-Tula LLC lost (35.6 million rubles) with profit (77.7 million rubles) in 2016. Almost threefold (from 1.6 billion rubles to 596 million rubles.) Decreased profits Orel structure of the agricultural holding, more than twice - Kursk and Voronezh. As a result, by the end of 2017, the consolidated revenues of the agricultural holding decreased to 12.7 billion rubles. (at 18 billion rubles a year earlier), net profit - up to 466 million rubles. (4.74 billion rubles in 2016).

According to its own data, Avangard-Agro owns about 400 thousand hectares in Belgorod, Voronezh, Kursk, Lipetsk, Orel and Tula regions. The holding company includes 51 agricultural enterprises. The number of employees is 4.75 thousand. The main crops are wheat, sunflower, sugar beet, barley, buckwheat, corn. It also produces milk, is supplied by young cattle. The general director of the head JSC "Avangard-Agro" is Alexei Kirkin.

According to Rusagrotrans, Avangard-Agro is among the twenty largest Russian exporters of grain - about 400 thousand tons for the 2017-2018 season. It is noteworthy that another large grain exporter from the Chernozem region, the Kursk group "Russian House", in 2017 showed an increase in financial indicators of the main legal entities. In particular, the revenue of the main operating legal entity (JSC "Russian House") increased from 8.4 billion rubles. in 2016 to 9.2 billion rubles., Net profit - from 164.5 to 273 million rubles. However, the growth of indicators could be facilitated by the gradual putting into operation of the objects of the own grain terminal under construction at the Shchigrovsky Bakery Plant: there the company has already launched two grain dryers, three grain cleaning machines and a separator. The general director and the ultimate beneficiary of the company Oleg Kananykhin yesterday could not comment on the growth of the company's performance.

"According to preliminary data, this year the situation should change for the better," the Avangard-Agro expects.

The growth of grain exports also speaks in favor of this: according to the Federal Center for Safety Assessment and Quality of Grain, from July 1 to August 14, Russia exported 7.9 million tons with 4.9 million tons for the same date last year. With an expected harvest of 103 million tons, the Ministry of Agriculture forecasts grain exports from Russia this season at 44-45 million tons, but there are already proposals from the regions to limit exports. Lack of grain is feared by consumers, in particular meat producers. According to the Ministry of Agriculture, on August 16, export prices for Russian wheat (12.5% ​​protein, FOB Novorossiysk) were at $ 230 per ton. Export prices grew throughout the year 2018; parallel to the positive dynamics showed domestic prices.

"The reason for the sharp drop in the financial performance of Avangard-Agro is the overproduction of grain crops, which began not even in the past, but the year before," said Alexor Antonov, an analyst at Alor Broker. - The problem of grain surplus does not go away: this year the carryover stocks can grow up to 23-25 ​​million tons. At the same time, Avangard-Agro2 receives fewer subsidies: in 2016 their total amount was 410 million rubles, in 2017 - 240 million rubles, while last year, having received half the subsidized loans, the company doubled its borrowing volume to 22.7 billion rubles. Under current conditions of the grain market, the increase in the cost of servicing the fleet of vehicles, the purchase of expensive mineral fertilizers and the growth of the debt of significant improvement of financial indicators this year should not wait. "But then a positive impact on the performance of the holding may be a low yield of the upcoming season, believes Mr Antonov.

One of the market participants, who wished to remain anonymous, also partly relates the deterioration of the company's financial indicators with the reduction of subsidies, as well as the rising prices for fuel and lubricants. At the same time, he recalled that the previous financial indicators of the agricultural holding were better than the average for the market: in 2015, for example, the net profit margin of the company reached 47%.