World meat industry news

According to Capt, 2022 was not only the most productive year in recent memory, but also one of the richest in terms of the number of transactions and their volume. In 2023, their number decreased, Pavel Lapshin, director of the department of investments and capital markets at Capt, said during the Agroinvestor conference “Agroholdings of Russia”. Over the 11 months of this year, 41 transactions worth RUB 102 billion were concluded in agriculture. versus RUB 180 billion. in 2022. “But we, as consultants, understand that only the number of transactions has decreased, while investment activity in the agricultural sector as a whole has remained at a high level. At least, our requests for transaction support this year have definitely not decreased,” he emphasized.

According to Lapshin, there are fewer and fewer “good properties” left on the market for investors. “By good properties we mean companies with stable cash flow, transparent reporting and, most importantly, reasonable seller requirements,” he explained. At the same time, the decline in transactions this year occurred not only in agriculture, but also in almost all industries, however, against their background, the agricultural sector looks good: in it the number of transactions for the first half of 2023, according to Capt, was greater than in the oil and gas, financial and healthcare sectors.

The decrease in profitability in agriculture had a negative impact: if in 2021 in crop production it reached 57% by EBITDA, then in 2022 it decreased to 27.4%, and in the nine months of this year to 17.9%. Accordingly, Lapshin noted, interest in the sector from non-core investors, which was high the year before, has decreased. In the meat industry, profitability has not been at the highest levels for a long time, so the other drivers there are not new players, but the consolidation of old ones, the struggle for efficiency, Lapshin said.

Among the major transactions of this year in crop production, Lapshin named the purchase by Signet Capital of the Komsomolsky breeding plant in the Trans-Baikal Territory; AFK Sistema and the BioTon company had two transactions each.

“The leader in the number of transactions in the agro-industrial complex was the Tavros company; it is associated with the purchase of the Lebedi company, which grows and packages rice on the side; the holding also had several acquisitions in poultry farming. In total, at the beginning of December, Tavros had seven transactions on its account,” Lapshin cited data.

The greatest variety of transactions this year was observed in the food industry. Foreign investors continued to leave the market. The most striking deal in the sector is the acquisition of a Heineken asset for 1 euro (plus debt obligations) by the Arnest group, which, the expert recalled, over the past year and a half has amassed a good collection of assets from departed foreigners. Chernogolovka also acquired two assets.

There were five transactions in the fish segment, two of which involved relatively new players - the Vostochny Aktiv company, which acquired two companies in Kamchatka this year, and AFK Sistema. Inarktika had two deals. In the greenhouse segment, the Rost group of companies is the leader in the number and volume of transactions. In the dairy sector, Lapshin singled out a major deal for the GAP Resurs company.

Managing Director of the Large Business Department of Rosselkhozbank Ilya Shumov noted that in terms of investment activity, the year can be divided into two time frames. The first is January-August, the second is the rest of the year. Until August inclusive, investment activity in the agricultural sector looked quite positive - Rosselkhozbank experts saw that there was a decline, but a small one. But the events of August showed that the situation was not developing as it should have developed; for example, the transfer of management of the Danone company to the Federal Property Management Agency was indicative, which pushed many foreign companies away from transactions. Plus, in September the factor of increasing the key rate of the Central Bank to 15% was added. As a result, those transactions that were already in progress were suspended or moved to next year.

“In general, the situation on the market is such that now the cost of financing M&A transactions is approximately key plus 3-4% - not everyone is ready to take money at 18-19% per annum in the hope that the key rate will fall,” he added. However, Rosselkhozbank notes quite good investment activity in the agricultural sector. Moreover, from an M&A point of view, there is increased interest in livestock farming, poultry farming, and pig farming, as margins have increased there.

Crop farming also remains an interesting area, although it is now out of favor because margins in the sector have fallen. “But the holdings remain interested in further consolidating the market and purchasing land assets,” Shumov noted. He does not exclude that large agricultural holdings will use the current decrease in margins to increase their land bank. In general, there is still uncertainty in the market - it is not entirely clear what will happen next year, he added.