Investors are squeezing sauces

Wilmar, a major global palm oil trader headquartered in Singapore, may exit the Russian business by selling its stake in the manufacturer of Ryaba mayonnaise and Astoria sauces to NMGK Group of Companies to the Rusagro group. The deal will allow the buyer to significantly increase its market share in oil and fat products. But the decline in purchasing power carries risks for demand.

Wilmar International may sell its stake in a major producer of sauces and margarines, NMGK Group of Companies, to the Rusagro group, a source in the agricultural market and an interlocutor close to one of the companies’ competitors told Kommersant. According to one of Kommersant’s sources, agreements can already be reached. Wilmar, NMGK and Rusagro did not provide any comments.

NMGK includes two oil and fat plants in Nizhny Novgorod and Samara, oil extraction plants in Uryupinsk and Sorochinsk, elevators. It produces Ryaba mayonnaise, Astoria sauces and ketchups, Khozyayushka margarine, as well as soap, snacks, etc. rub.

Wilmar, headquartered in Singapore, calls itself the largest producer and marketer of palm oil, and also produces sugar, flour, rice, and specialized fats. It operates in more than 50 countries of the world, including over 500 enterprises. In 2021, Wilmar’s revenue grew by 30.2% to $65.79 billion.

Rusagro is also one of the leading Russian producers of oil and fat products, in addition, it produces sugar, meat, and dairy products. The brand portfolio includes the brands Dream of the Hostess, Generous Leto, Chaikofsky, Slovo Butcher, etc. In January-September 2022, Rusagro’s revenue increased by 16%, to RUB 182.02 billion, EBITDA grew by 15%, up to 35.3 billion rubles. The main owner of the group is ex-senator Vadim Moshkovich.

Wilmar announced the creation of a joint venture with NMGK founders Nikolai Nesterov and his partners in 2008. During the deal, Wilmar and Singaporean Delta Exports exchanged 50% of their Ukrainian business for 50% of the parent company NMGK Cypriot Sethal Holdings Ltd. According to the latest Wilmar reporting, at the end of 2019, its stake in Sethal Holdings was 52%. Kommersant sent questions to another NMGK co-owner Ivan Sidorok on social networks and through his website, but did not receive a response.

According to Kommersant’s interlocutors in the market, Wilmar’s participation in Russian business has probably become more complicated after the outbreak of hostilities in Ukraine and a new wave of sanctions. Singapore was included in the list of “unfriendly countries” by the Russian Federation, and the presence of big business in Ukraine could also have influenced Wilmar’s departure from the country, they say. Ukrainian Delta Wilmar owns two oil refineries, a transshipment complex in the port of Yuzhny and a Chumak product manufacturer. In March, Delta Wilmar suspended processes due to the outbreak of hostilities, local Forbes wrote.

Andrey Sizov, director of Sovecon, notes that the stake in NMGK could be sold at an attractive price, and the debt load of Rusagro looks comfortable enough to attract financing for new deals. At the end of September 2022, the ratio of Rusagro’s net debt to EBITDA was at the level of 1.98. Marat Ibragimov, senior analyst at Gazprombank, adds that Rusagro may use the accumulated amount of money in the accounts to place part of the funds in assets in sectors where synergy with its business is possible. At the end of September, Rusagro had 59.19 billion rubles. cash and cash equivalents. According to Mr. Ibragimov, most likely, Rusagro will be interested in consolidating control over the asset if it can agree on terms with the remaining co-owners.

According to Andrey Sizov, due to the transaction, Rusagro can significantly expand its share in the Russian market of sauces and margarines, but domestic demand should be negatively affected by a decrease in income and an outflow of consumers. According to the Director General of the Institute for Agricultural Market Studies Dmitry Rylko, although the domestic market for oil and fat products is saturated, NMGK has a good position in the Chinese oil market, and also actively exports products to Iran.

Anatoly Kostyrev