How are things going with investment activity in the agro-industrial complex

The next crisis has traditionally become for the agricultural sector a period of both new challenges and risks, as well as potential opportunities. True, investing in business development, and even more so in new projects, is becoming increasingly difficult in the current situation. Nevertheless, interest in the agro-industrial complex does not fade away, including in the wake of a new phase of import substitution. However, even in more favorable periods, many projects remained on paper.

Despite the difficult geopolitical and economic situation, this year during the St. Petersburg International Economic Forum (SPIEF) 695 agreements were signed for a total of almost 5.7 trillion rubles. At last year's forum, more than 800 agreements were concluded for 3.86 trillion rubles. Many new projects in the agro-industrial complex are traditionally announced, although in the end not all of them are implemented, however, as in other sectors.

Another "new reality" in which RUSSIA lives after February 24, on the one hand, does not motivate investors, since the risks and uncertainty have multiplied. On the other hand, when people around the world talk about the threat of hunger and food shortages, it is obvious that investments in food production look promising. However, although state support for the agro-industrial complex this year reached an unprecedented 0.5 trillion rubles, increased regulation in the industry rather negatively affects the mood of market participants and further increases the overall tension.

According to the results of the first quarter (latest available data at the time of writing), according to Rosstat, investments in fixed assets in agriculture decreased by 0.9% compared to the same period last year, amounting to 91.6 billion rubles. Although, taking into account forestry, hunting, fishing and fish farming, they increased by 10.8%, to 114.5 billion rubles. At the same time, investments in food production decreased by 9% to 50.3 billion rubles.

An outflow of business from the agro-industrial complex is now being recorded - for example, according to the SPARK database, since February 24, 878 new companies have been registered, the main activity of which is Food Production, but at the same time, 1215 companies have left since then, in total, the industry has lost 337 players, counts analyst at the Institute for Comprehensive Strategic Studies (ICSI) Nadezhda Kanygina. “Similarly, a net outflow was noted in the field of Agriculture and Forestry, Hunting, Fishing and Fish Farming - minus 565 companies. So while the statistics of business registrations in the agro-industrial complex is not encouraging and indicates a trend for market participants to leave,” she notes.

At the same time, Anton Vinogradov, DIRECTOR of the practice of providing services to agro-industrial complex companies at Doveria Technologies, draws attention to the activity of the mergers and acquisitions market - it is higher than expected at the beginning of the year (continuation of the M&A topic - on page 52). According to him, this was influenced by several factors: firstly, the entry into the market of a certain number of assets of foreign owners, as well as some Russian owners who decided to leave the country; secondly, restrictions on the free movement of capital and, as a result, the accumulation of liquidity within the country; thirdly, rising food prices. “Unlike the M&A market, the situation with investment projects is a bit more complicated. Most of them require revision in terms of both purchased equipment and supply chains and marketing of finished products,” the expert says.

It is clear that the risks of doing any business have now increased, the cost of production has also increased, and all this against the backdrop of a fall in the already low level of effective demand, Kanygina notes. On the other hand, without a doubt, this crisis period is also a time of opportunity, despite the fact that, in general, profitability in many sectors of the agro-industrial complex remains high, she points out.

Taking into account recent events, it can be said that the investment potential of the agricultural sector has grown, because in the context of the necessary import substitution and ensuring food security, great hopes are placed on it, says the HEAD of the Healthy Nutrition direction of the REAM Management investment fund, a member of the board of directors of the Greenhouses of the Regions company » Dmitry Tulyakov. At the same time, if interest in the industry has grown among core investors, then among non-core investors it has decreased: now they are dealing with the main areas of their activities.

“The main investments will be in grain,” Tulyakov believes. - Fields that have not been interested in for years are now beginning to be developed. A number of large companies have already built a new development path for themselves: they are returning fallow lands to circulation. If large holdings go to such huge expenses, it means that they understand that the future lies with grain, and this is important. Grain is the bread that will be the first thing to be missed in any food crisis.”

Unlike other backbone industries, Western sanctions bypassed the agro-industrial complex, which, of course, was influenced by the global public's concern about the problem of food shortages, Vinogradov draws attention. Against this background, the agro-industrial complex remains one of the most attractive industries for investors. However, the limiting factor is a high degree of uncertainty in the development of the macroeconomic situation, as well as the fact that most companies are now adjusting their business strategies and processes: they are looking for suppliers and markets in “friendly” countries, domestic analogues of equipment, software, etc. ., lists the expert.

“Therefore, if in the case of M&A the price of the asset is market, and it is not sold at a discount (as is the case with the departure of international companies), then investors will be careful and want to make sure that the business has adapted to current realities,” he argues. “The situation is similar with investment projects – only after a thorough review of the risks will investors be ready to invest in them.”

Cherkizovo Group last year during the SPIEF announced the most expensive project in the agro-industrial complex: it intends to create the country's largest MEAT processing cluster worth 48 billion rubles, as well as invest 8.4 billion rubles. in the construction of a poultry processing plant in the Tula region. In addition, the company announced that it would invest 3 billion rubles. in the development of the Pit-Product meat processing plants purchased from the Finnish Atria.

The events of recent months have not globally affected Cherkizovo's plans - all previously announced investment projects remain in force and will be implemented, Rustam Khafizov, the group's chief analyst, comments. At the same time, some adjustments are not ruled out, in particular those related to the position of foreign suppliers to fulfill their obligations. “For example, if it is impossible to supply foreign equipment, the company is considering options for acquiring it in friendly countries, which may affect the duration of projects, but not the projects themselves,” he notes.

The Konoplex holding (growing and processing technical hemp) has a similar position, which at last year's SPIEF signed a protocol of intent on mutual cooperation with the government of the Penza region. The document implies the implementation of projects for the creation and development of enterprises that grow and process agricultural products (including bast crops). The company wants to create in the region the production of high-quality cellulose for further use in the textile industry, for the manufacture of biodegradable tableware and bags, environmentally friendly biocomposite materials and polymers, in the paint and varnish, chemical and pharmaceutical industries. Investments in the project will amount to about 3 billion rubles. The capacity of the site after reaching the planned indicators in 2026 will reach 4 thousand tons of pulp per year with the possibility of a phased expansion,

Basically, it was not the plans that changed, but the ways of their implementation, says Milena Alexandrova, general director of the Konoplex Management Company. “We, like many investors, did not abandon our plans, but we must reckon with the changed conditions. For example, now it is not always possible to buy imported equipment, she says. - Instead, we are acquiring Russian, and what is planned will be built in any case. There is nothing wrong with that - an effective business must be flexible, be able to adapt to circumstances.

ECO-Culture continues to build a number of greenhouse projects, in particular, in 2023 it plans to complete the construction of the third stage of a complex with an intelligent supplementary lighting system in the Tula Region with an investment of 12 billion rubles. The events of recent months have affected the economy of investment projects - building materials, components and equipment have increased in price, logistics has become more complicated and expensive, says Yury Voronov, director of the credit management department of the agricultural holding. However, according to him, the company continues to implement a large-scale development program in full and does not change previously adopted plans. “Our agricultural holding is in an active investment phase: only during this year we will invest 10.1 billion rubles in the construction of new greenhouses.

The mood of Russian companies regarding the prospects for the next 12 months in June 2022 fell sharply, becoming the worst on record since 2009, follows from the Russia Business Outlook survey of global financial information provider S&P Global. Among the threats to further development, survey participants most often named rising prices for raw materials and materials, the negative impact of sanctions on external demand for Russian goods, and a significant decline in the purchasing power of Russian consumers.

S&P Global calculates business optimism as the difference between the shares of companies that plan to increase production in the coming year and companies that expect a decline. In June, this balance fell sharply to 5% after 34% in February. The previous anti-record was set by Russian business in the fall of 2020: then the expectations of companies worsened due to the CORONAVIRUS pandemic, the balance of sentiment then amounted to 6% in favor of the optimists.

Vinogradov draws attention to the fact that the focus of investment projects has shifted - now the focus is again on import substitution. Given the aggravated problem of providing the agricultural sector with the means of production, a number of companies during SPIEF 2022 announced that they were planning significant investments in this direction. For example, the company "August" intends to build a research center for the development of plant protection products in the Moscow region. The total investment is 3.4 billion rubles. Work will begin in the third quarter of this year and is scheduled for completion in 2025. On the basis of the Research Center, the company plans to develop and research 16 new formulations of chemical plant protection products. The volume of production of prototypes will be up to 100 kg per year.

Also, an agro-complex for growing, researching and producing up to 1 ton of vegetable seeds per year will be created in the Moscow region. The investor, the agricultural company Partner, intends to invest 1.2 billion rubles in the project. The first stage has already been launched, the project is planned to be fully implemented by 2030.

The Belarusian machine-building holding Amkodor is implementing two projects in Bashkiria with a total cost of 2.5 billion rubles. The company plans to launch the production of equipment for post-harvest processing of grain and create a production and service center in Ufa. Completion of the facilities is scheduled for March 2023.

Agrotek Group of Companies signed an agreement on the construction of a seed plant in the special economic zone Lipetsk with investments of 1.5 billion rubles. The complex will be engaged in the production of seeds of soybeans, peas, wheat and rye. The planned capacity is 30 thousand tons of seeds per year. The entire technological process of production will be implemented at the enterprise - from acceptance to further storage. In addition, the new complex will become a central hub, from where not only seeds will be supplied, but also fertilizers, as well as plant protection products. The implementation of the project has already begun: now the design documentation for construction is being finalized and coordinated.

Last year, a project was announced at SPIEF to build a selection and genetic center for dairy farming with a seed production station and an embryo transplantation laboratory. It is assumed that it will be designed for a one-time maintenance of 1.2 thousand cows. The investor, the Kuban Breeding and Genetic Center, intends to start building the center in 2022 and complete it in 2025. When it reaches its design capacity, it will produce 14.5 thousand tons of MILK, 200 heifers, 5 thousand embryos, 250 thousand doses of semen per year. The cost of the project was not specified.

In July 2022, the Governor of the Krasnodar Territory, Veniamin Kondratiev, assured that the project would be implemented. “Under the conditions of sanctions, our main task is to do everything possible so that this livestock industry does not depend on foreign breeding material. It is important for us to create our own highly productive gene pool of cattle breeds,” he emphasized.

Talks about the need to reduce dependence on imported means of production have been going on for a long time and at different levels, Vinogradov comments. Projects in breeding, genetics and production of equipment are quite capital-intensive, with long implementation periods and, accordingly, payback periods, while, like any other R&D (R&D), they can be either successful or not. “We can definitely say that such projects are now being activated, but the first large-scale results can be seen no earlier than in five years, and during this period it is necessary to find temporary solutions in order to prevent a decline in agricultural production,” he said.

If we talk about import substitution in the final product, then the dairy sector retains a good potential. So, for example, last year at the SPIEF, the Dairy Culture company announced that it would invest 1 billion rubles. in the construction of a complex for the production of curd cheeses and desserts in the Leningrad Region. The planned production volume is 4.8 thousand tons of products per year. The enterprise was launched in March this year.

Also at SPIEF-2021, cheese production projects were announced on the territory of the Syrnaya Dolina agricultural park near Moscow. Thus, Zvezda Podmoskovye will build a plant for the production of cheese and dry dairy products by the end of 2022. The planned capacity of the enterprise is 4.5 thousand tons of cheese and almost 14.3 thousand tons of dry and dry demineralized whey per year. The estimated volume of investments is 1.52 billion rubles. The French company Savencia will also place a cheese production plant with a capacity of 3.5 thousand tons per year there. Construction should be completed in 2024. The cost of the project is not specified.

In early July, the press service of the Glavgosstroynadzor of the Moscow Region reported that the Syrovar company had completed the construction of the first object of the Cheese Valley agricultural cluster. The capacity of the plant will allow processing up to 190 tons of milk per day and producing about 5.4 thousand tons of cheese per year, the enterprise will become the largest in the cluster. In total, the Cheese Valley project involves the construction of five factories, which in total will produce 20.5 thousand tons of products per year.

This year, a significant project for the dairy industry at SPIEF was announced by AgriVolga. In three years, she will create a biofactory in the Yaroslavl region for the production of bacterial starter cultures and concentrates for the food industry. The estimated capacity is 160 tons per year, which will be more than 25% of the demand of the Russian market. The volume of investments will exceed 3 billion rubles. Uglich Biofactory plans to produce starters and concentrates for the production of cheese and fermented milk products (cottage cheese, sour cream, fermented baked milk, yogurt, etc.). In May, the participants of the dairy market spoke about the high dependence on imports of starters and feared their shortage.

Head of the National Meat Association Sergey Yushin:

“To solve the problem of sustainable growth in agricultural production by at least 3% per year, we need to accelerate the start of the second powerful wave of investment in agriculture. The first was from 2010 to 2020 - during this period the state allocated the most funds for the development of the industry.

Now a new cycle of investment activity in agriculture is needed. There are several reasons for this. The first is to increase supply for the domestic market to stabilize prices. The second is the maximum use of the EXPORT potential of Russia as a major agricultural supplier and, accordingly, increasing the influence of our country in terms of ensuring global food security. The third is an increase in food stocks at enterprises, in trade organizations, in the corresponding reserves in case of unforeseen situations - a new wave of pandemic, technogenic, climatic, political, geopolitical and others. To do this, there must be stocks of raw materials and materials, and in order to have them, a business needs cheap working capital.

If we want to have an increase in agricultural production by at least 3% per year from 2023, we cannot allow a decrease in investment activity in the sector. However, there are factors that stop investors from expanding production. In particular, they are baffled by the constant talk about the imminent state intervention in pricing issues, limiting markups, and strengthening price regulation. Any investor will be demotivated to go into that industry or increase the production of those goods where the risks of administrative pressure are high. Especially if this pressure is motivated by the search for the guilty, is associated with accusations and labeling. Of course, the issue of prices is very important, but it is not solved by administrative pressure, but primarily by stimulating production, increasing supply and, accordingly, increasing competition.

Also, the state should be extremely careful in making statements about restricting or banning exports. Shipment of products to foreign markets, the ability to sell them there at a good price - this is what stimulates an increase in production, gives confidence in the success of the enterprise, makes the country and the economy richer. Of course, the domestic market has been and remains a priority in our work, but building fences at the border for our products is fraught not only with the loss of markets and reputation, but also with the economic degradation of agriculture. The state has the right and should regulate the markets from time to time, but this must be done very carefully: we need to learn how to work for a long time.”

However, despite the potential for the development of the industry, financing of projects in the agro-industrial complex is stalling, there is a significant decline in lending, Kanygina notes. Thus, according to the data of the Bank of Russia for January-May 2022, the volume of loans granted to resident legal entities and individual entrepreneurs in the field of agriculture, hunting and forestry decreased by 8.8% in annual terms, to 510.5 billion rubles. in the production of machinery and equipment for agriculture and forestry - by 6.5%, to 11 billion rubles; , she gives the data. “Even in relatively prosperous times, lending to farmers was problematic; now, against the background of increased risks, without state support, we can hardly expect an improvement in the situation,” says the ICSI expert.

At the same time, depending on the region, the situation with lending to businesses in the field of agriculture, hunting and forestry varies greatly: for example, in the Smolensk region, in the first five months of this year, lending decreased by 80% compared to January-May 2021, in Kaliningrad region - by 58.7%, compares Kanygina. In the field of food production, a difficult situation is observed in Murmansk (-87.1% in annual terms), Orenburg (-77%), Tula (-72.2%), Volgograd (-65%), Astrakhan (-62.2%) %), Kursk (-56.9%) regions, lending in this direction was actually stopped in Chechnya and Ingushetia.

Banks are ready to finance projects in the agro-industrial complex, Vinogradov disagrees, and, according to him, despite the increase in the key rate, lending conditions for the agro-industrial complex remain quite attractive due to various forms of state support. Priority in financing will now be given to projects that solve national problems, such as import substitution, ensuring food security, the expert believes.

If we take the situation as a whole, then the willingness of banks to finance projects in the agro-industrial complex is high, Tulyakov estimates. This, in particular, concerns projects to ensure the country's food security and solve global problems: grain, meat, milk, vegetables. In his opinion, the priority is projects for the production of seeds, fertilizers, machinery and other means of production, because now they are highly dependent on imports. “It is the fundamental part that needs to be developed, on which the success of agribusiness will fundamentally depend,” Tulyakov emphasizes. - First of all, a significant part of the investment should fall on seeds. If there is no genetic potential (seeds), then there will be no success. Increasing productivity is now the main goal of any company.” As a result, those projects that show effectiveness will receive funding, players who cannot solve the global problems that our country is now facing will face failure, he adds.

The agricultural sector is part of the real sector of the economy, the main advantage of which is much less dependence on political processes, unlike the financial or trade sectors, Aleksandrova notes. To some extent, the Russian agro-industrial complex has become even more attractive for investment due to a pronounced trend towards import substitution and, accordingly, greater attention from the state. “However, the players still do not have much euphoria, since the situation on the market is still unstable,” she clarifies.

However, according to Alexandrova, industry financing is still available if a potential borrower has a good investment idea. “True, the interest rate has changed: at first it rose a lot, then it dropped, but still it has not yet returned to the level of the beginning of the year,” notes the general director of Konoplex.

The Cherkizovo group does not face problems in attracting financing for the implementation of investment projects through commercial loans, says Khafizov. At the same time, in his opinion, the agricultural sector is still attractive for investments if companies that are professionally engaged in agriculture invest. “Cherkizovo is consistently implementing its investment strategy. For example, the largest oil extraction plant in Yelets, Lipetsk Region, will be launched in August,” he adds.

Voronov also believes that the agricultural sector is still attractive for investors: in the new circumstances, it is very important to ensure an uninterrupted supply of food to the domestic market. “All manufacturers, including us, make a significant contribution to the implementation of the Food Security Doctrine of Russia, replacing imported products with high-quality domestic products,” he emphasizes. Debt financing remains quite affordable, banks are ready to continue lending to projects in the agro-industrial complex, Voronov continues, noting that, of course, in the new conditions, banks are strengthening the attention and control of borrowers, and this is normal.

In the greenhouse sector, there is now a diversification trend: enterprises are expanding their primary range, starting to grow berries, flower crops, etc., Dmitry Tulyakov draws attention. “I will not say that now in our direction there will be large investments in the construction of new facilities. Manufacturers tend to work first of all to increase the volume of harvesting products per hectare, primarily through the improvement of technologies, new developments, I hope domestic ones, and raising the level of knowledge,” he comments. — In addition, in this area everything depends on demand and purchasing power. This is not grain that can be stored for years and shipped at the right time.”

The activity of investments in the greenhouse sector has decreased in recent months, but this was not affected by the foreign policy situation, says Natalia Rogova, director general of the Greenhouses of Russia association. According to her, more than 200 hectares of modern greenhouses are currently being built, in addition, there are several projects for the preparation and construction of greenhouses in the Far Eastern Federal District. Starting from 2022, this region has additional state support — 20% reimbursement of the costs incurred for the creation and (or) modernization of greenhouse complexes for the production of vegetables in protected ground. Given the results of the construction of greenhouse complexes over the past seven to eight years and the double increase in vegetable production over this period, banks continue to participate in financing projects in the greenhouse sector, Rogova notes.

Lack of funding is one of the most common reasons why projects do not move beyond agreements. Tulyakov believes that the main problem is the lack of fundamental elaboration of projects: from choosing a site for construction to an unreasonable and undeveloped budget for a future project. “If the bank and investors have questions and misunderstandings, there will be no funding, the project will remain on paper,” he explains. “The willingness to finance and invest in a project is also affected by real support from the state and local administrations, from subsidizing industries to creating external infrastructure for the operation of projects: roads, power lines, gas networks, etc.” If an investor sees the help of the region, he is more willing to invest in the project, he is sure.

According to Kanygina, one of the key problems is the inefficiency of state support, constant changes in the “rules of the game”: conditions conducive to long-term activity have not been created for agribusiness. “In this regard, we can recall a large-scale, strategically important project - a plan to build a network of wholesale distribution centers (ORC) in Russia in 2015-2020, which was never implemented,” she gives an example. Within the framework of the subprogram "Development of ORP and the infrastructure of the social catering system", 79.3 billion rubles were allocated; Initially, it was supposed to compensate part of the capital costs for construction (20%) and part of the interest rate on short-term and investment loans. However, in 2015, out of the planned 750.9 thousand

To continue the story, on September 27, 2021, the concept for the development of wholesale food markets in Russia was approved, which, in fact, repeats the idea of ​​the ORC construction program, but it only provides general directions, there are no target indicators, Kanygina complains. In March 2022, guidelines for the organization of wholesale food markets were published, which are only advisory in nature for the regions. In April, the Action Plan for the implementation of the Concept for the Development of Wholesale Food Markets was approved - this is four pages of text, where there are no indicators yet and it is declared that only in a year, by the first quarter of 2023, programs to support projects to create ODA and annual monitoring will be developed spheres of their activity, says Kanygina.

The state is trying to support the agricultural sector, for example, there are tax incentives, a moratorium on checking legal entities has been introduced, the interest rate on loans is subsidized, Alexandrova lists. “I would like the amount of subsidies in absolute and percentage terms to be increased. This would make it possible to bring them into line with the significantly increased prices in the spring and, possibly, to make them more ambitious,” she says.

State support works effectively, estimates Voronov: in recent years, the greenhouse industry has been developing and providing accelerated import substitution thanks to active systemic assistance from the state, attracting credit resources at preferential rates, with the receipt of subsidies and benefits. And now this development continues. “We all see that there are more and more domestic products in stores, but, on the other hand, protective measures associated with a special military operation and an increase in the cost per unit of production have practically paralyzed importers - there are fewer and fewer products from foreign suppliers,” he notes. . “This is an undoubted driver for an objective assessment of the potential of our country's production capacities with a possible course towards rebooting the industry subsidy program as a whole.”

Khafizov thinks that the most important tasks today are the formation of sustainable domestic demand and the opening of new markets for the export of products - this, in turn, forms new growth drivers for the agricultural sector as a whole.

The export component is important for assessing the investment attractiveness of projects in the agricultural sector, Anna Builakova, an analyst at FG Finam, agrees. However, operations are hampered by issues of getting paid for deliveries as the financial system has been sanctioned, and issues of physical movement of goods as some large logistics companies have exited the Russian market. “The increase in insurance premiums for cargo transportation reduces the profitability or competitiveness of export goods from Russia. Such factors add elements of uncertainty when assessing the attractiveness of investments in the agro-industrial complex,” she comments.

Nevertheless, in the first five months of this year, agricultural exports increased by 16%, and this is after a growth of 21% in 2021. A positive factor for exporters is the rise in food prices in the world, she continues. “The investment attractiveness of the industry is also enhanced by state support measures for the sector both at the federal and regional levels to ensure food security,” the expert adds. — For example, recently the government has allocated an additional 700 million rubles. to subsidize preferential transportation of agricultural products by rail”.

Miratorg announced a number of major projects during SPIEF 2022 and became the leader in terms of the number of agreements concluded among companies in the agricultural sector. The company intends to invest 12 billion rubles. in the expansion of capacities in the Bryansk region. The funds will be used to build two grain drying complexes, expand the poultry project and build six pig farms. Including, it is planned to invest 2.9 billion rubles in the complex for growing, slaughtering and processing broiler meat.

The agricultural holding also plans to launch two projects in the Kursk region, including the production of gelatin worth 3.5 billion rubles. and for the production of heparin on a parity basis with Van Hessen Holding BV In addition, this year the company will begin construction of a selection and seed center in the region. Investments in the project will amount to 847 million rubles, production capacity - 27.4 thousand tons. Another 3.8 billion rubles. Miratorg will invest in the construction of a wholesale distribution center with a capacity of 30 thousand pallet places in the Belgorod region. A complex for freezing, storing and shipping meat products will be built on the territory of the Korocha IC, owned by the company. It is planned to start pre-commissioning and launch of the ORC in the fourth quarter of 2023.