The credit rating of Rusagro Group PJSC (hereinafter, Rusagro, the Company, the Group) is based on its strong market position, very strong business profile and geographical diversification, and the strong corporate governance. The financial risk profile assessment reflects the high profitability, medium leverage, coverage and cash flow scores, the large size of the Group’s business, and the strong assessment of liquidity.
The Watch status on the credit rating is associated with uncertainty caused by certain investigative actions against some of the Company’s beneficiaries. The current rating assumes that the group structure and shareholder ownership will remain in their current form. Any significant changes may lead to a revision of Rusagro’s rating.
Rusagro is one of the largest agro-industrial holdings in Russia that focuses on the production of food products in four areas: fats and oils, sugar, meat, and agriculture. The Group’s land bank is 815,000 hectares, and its assets are located in 15 regions of the Russian Federation.
KEY ASSESSMENT FACTORS
Strong market position. The Company holds leading positions in the production of oil and fats, sugar production, and pig farming, and maintains a stable position in the agricultural segment. In 2024, the Company completed the consolidation of 100% of the assets of Agro-Belogorye Group, which boosted the synergy in the agricultural and meat segments. This M&A transaction also increased pork production capacity by 1.8 times, elevated the market position to the second place in the country, and expanded Rusagro’s export potential.
Very strong business profile and geographical diversification. The Company’s very high product diversification is ensured by a wide range of products sold under well-known brands, covering key segments of the agro-industrial market, from sugar and meat products to fat and oil products, including mayonnaise and vegetable oils. The demand sensitivity to price changes is relatively low, since the Company’s main products (meat, oils, sugar, and dairy products) are essential goods with low exchangeability and stable demand. The business profile is supported by a high degree of vertical integration of the Group, whose assets include its own agricultural land, feed production, pig farms, slaughterhouses and meat processing plants, sugar and oil extraction plants, as well as fat-and-oil and dairy plants, which ensures the Company’s control over the supply chain from raw materials to finished products.
The very high level of geographical diversification is ensured by the sale of products in the B2B and B2C segments in most regions of Russia through the largest retail chains, as well as significant exports, primarily in the fat-and-oil segment, mainly to the CIS and Asian markets.
The strong corporate governance reflects the Group’s steady growth through the construction of new production sites and the acquisition of companies, as well as the deepening of product processing, the expansion of its presence in retail channels, and the development of its own brands. In addition to the sub-factor Management Strategy, the sub-factor Management Structure is highly assessed due to the presence of four independent directors out of ten members on the board of directors, as well as the presence of key committees. The document regulating the risk management strategy is under development, but the current risk management system allows the Company to control the main risks. The assessment of the group structure reflects its complexity, which is typical for vertically integrated holdings. Financial transparency is assessed as very high as the corporate website regularly discloses the Company’s operational and financial performance, as well as information for investors.
Large business size and high profitability. By the end of 2024, the Company’s revenue increased by 23% to RUB 340 bln. The Agency expects the high revenue growth to continue in 2025 due to the expansion of production assets in the fat-and-oil and meat segments, followed by a slowdown in 2026–2027. According to ACRA’s calculations, the weighted average FFO before net interest and taxes for 20222027 will amount to RUB 68.2 bln, which, according to the Agency’s methodology, corresponds to a high score for the size of the business.
In 2024, the FFO before net interest and taxes margin decreased from 21% to 15% yoy due to lower margins in the agricultural business caused by adverse weather conditions in the Central Federal District; this indicator also declined in the sugar business as a result of outstripping growth in sugar beet prices. ACRA expects that the synergy effect of the takeover of Agro-Belogorye Group will positively affect the profitability of the meat segment, which will support Rusagro’s overall profitability in 2025–2027. As a result, the Agency estimates the Company’s weighted average FFO before net interest and taxes margin for the period from 2022 to 2027 at 17.6%, which is assessed as high per ACRA’s methodology.
Medium leverage and medium interest coverage. The Company’s debt portfolio consists of bank loans and leasing liabilities. The debt is denominated in rubles and raised primarily at a floating rate. According to the Agency’s estimates, the weighted average ratio of total debt to FFO before net interest for 2022–2027 will be 2.7x. The quality assessment of the leverage is determined as high due to a significant proportion of long-term liabilities, comfortable repayment schedule, and a highly diversified portfolio of creditors.
The Company’s ability to use credit products at subsidized rates has a positive impact on interest coverage, although a prolonged period of tight monetary policy increases borrowing costs, which is negative for the debt coverage. The weighted average ratio of FFO before net interest to interest for 2022–2027 is expected to be 4.2x, which corresponds to the medium score for coverage.
Strong liquidity and medium cash flow assessments. Rusagro’s liquidity assessment is high due to the significant amount of undrawn credit lines and funds held in the Company’s accounts. The medium score for cash flow is based on the medium score for the FCF margin and the high score for the ratio of capex to revenue. In its calculations of FCF for 2025–2027, ACRA took into account the potential dividend payments after the Company’s transition to Russian jurisdiction. The Group’s investment program is designed to implement its business development strategy. The ratio of capex to revenue was 8.9% in 2024, vs. 6.9% a year earlier. In the following years, the Agency expects that as revenue grows on the increasing effect of investments, the ratio of capex to revenue will be within 6%.
KEY ASSUMPTIONS
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The Company’s revenue to grow by at least 20% in 2024, and the annual average growth of revenue at 8–10% in 2026–2027.
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Capex in the forecast period in line with the financial model presented to the Agency.
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Annual dividend payments at no more than 50% of net profits.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Watch status assumes that the credit rating will stay unchanged or be downgraded.
The removal of the Watch status and affirmation of the credit rating may be prompted by:
- Cease of investigative activities against the beneficiaries, without any impact on the Company’s credit quality.
The removal of the Watch status and downgrade of the credit rating may be prompted by:
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Investigative activities against the beneficiaries resulting in a situation that may negatively affect the Company’s credit quality;
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The weighted average ratio of total debt to FFO before net interest exceeding 3.5x;
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The weighted average ratio of FFO before net interest to interest declining below 2.5x;
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The weighted average FCF margin falling below 0%.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): aa-.
Support: none.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to Rusagro Group PJSC under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating has been assigned to Rusagro Group PJSC for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on data provided by Rusagro Group PJSC, information from publicly available sources, and ACRA’s own databases. The credit rating is solicited and Rusagro Group PJSC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to Rusagro Group PJSC. No conflicts of interest were discovered in the course of credit rating assignment.
