Russian ag machinery sector begins to defrost

30.09.2016

The investment freeze in Russian agriculture is "thawing out," thanks to this year's good harvest, and government subsidies, tractor-dealer Ekotechnika said.

Shares in Ekotechnika soared, as the group reported rising revenues and profits this year, thanks to increased farmer spending in Russia, with a sharp increase in tractor and combine harvester sales.

Ekotechnika is the German holding company for EkoNiva Group, the largest dealer of foreign-branded tractors in Russia, particularly John Deere products.

Rising sales

EkoNiva's tractor sales are up by around one third so far this year, with sales of combine harvesters up by two thirds.

The group's preliminary results show sales revenues in the first nine months of the year at around E87m, up 13% year on year.

And this increase was even higher when the relative weakness of the rouble against the euro was factored in, with exchange-adjusted sales up 38%.

Ekotechnika expects to see earnings before interest and taxation rise to E6.7m, up from just E1.9m over the same period last year.

Shares in Dusseldorf jumped some 73%, to highs of E10.35, and were trading at E8.50, up 42% on the day, in afternoon deals.

Investment freeze eases

The improvement is being driven by increasing famer spending, which marks the end of a long period of tightened belts.

"Sales and profit growth was driven by the strong performance of the Russian agricultural sector, buoyed by an exceptionally good harvest as well as government subsidies for the sector which have enabled farmers to invest in machinery again".

"It seems that the freeze on capital spending in the agricultural sector is slowly thawing and that the sector has emerged from the trough marked in the crisis year 2014-15," said Stefan Dьrr, chief executive of Ekotechnika.

Russian farmers have benefitted from a record large wheat harvest, at when the weak rouble makes Russian supplies very competitive in the world market.

But Mr Dьrr warned that "the high cost of financing in Russia remains a drag on our business because it makes state-subsidised equipment from local manufacturers more attractive to farmers".


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