Ekosem-Agrar to become an integrated manufacturer of dairy products

By Jim Cornall

- Last updated on GMT

Ekosem-Agrar will soon start construction of a cheese factory in Novosibirsk, Russia.
Ekosem-Agrar will soon start construction of a cheese factory in Novosibirsk, Russia.

Related tags Russia Milk

Ekosem-Agrar AG, the German holding company of Russian milk producer EkoNiva Group, benefited from the benign business conditions in Russia and further accelerated the growth of its business segments. The company was able to double not only its agricultural land but also its milk output in the past 18 months.

In the first nine months of 2018, the dairy cow herd grew 27% to 57,060 animals. The strong expansion of the dairy cow herd sent the average daily milk output rising sharply from 1,090 tons at the beginning of the year to roughly 1,400 tons. This means that a total of approx. 350,620 tons of raw milk were collected between January and September 2018, which already exceeded the total output in 2017 (297,000 tons).

The management board projects a total annual milk output of about 500,000 tons for the full year 2018. Russian milk prices, which stayed at a low level in the first half of the year, have picked up again since the summer and currently stand at about €0.38 ($0.43).

Subsidies available

The other business conditions in Russia also remained positive. The government continues to subsidize investments in the dairy sector. To leverage these benefits, Ekosem-Agrar AG started to build another 14 dairy cow facilities for more than 45,000 animals this year, most of which will be completed before the end of the year. Low-interest loans and non-repayable investment grants have been secured to finance these investments, which allows the facilities to generate positive cash flow after a short period.

The constant increase in raw milk production goes hand in hand with the systematic expansion of the milk processing facilities with the aim of becoming the first vertically-integrated manufacturer of dairy products that is active in throughout Russia in the medium term.

At the end of November, Ekosem-Agrar will launch the new “EkoNiva” umbrella brand to sell fresh milk, yogurt, curd, semi-hard cheese as well as long-life milk and milk powder in the Russian market.

The production facilities for the approximately 600 tons of daily processing capacity are currently being optimized. In addition, the company will shortly start to build a cheese factory in Novosibirsk.

Land purchase

Ekosem-Agrar is also pushing ahead with the acquisition of additional farms and farmland. Although agricultural land in Russia is still relatively cheap, land prices have lately picked up noticeably, which is why the board said it will be difficult to get good land at attractive prices in two to three years’ time. For this reason, the company once again significantly expanded its agricultural area in the course of the year.

“A successful year, which was also quite challenging because of our strong expansion, is drawing to a close,”​ said Stefan Dürr, main shareholder and CEO of Ekosem-Agrar AG.

“Our growth is meanwhile supported by far more than 9,000 employees, who are fully committed to helping us establish a manufacturer of dairy products that is active throughout Russia. Our new brand will write a new chapter in the history of EkoNiva and will hopefully convince Russian customers of the high quality of our products ‘Made in Russia with German quality assurance’.”

The company plans to continue its expansion and build another 15 dairy facilities for 51,000 dairy cows in 2019. At the end of 2019, the herd will then comprise 100,000 to 120,000 animals and the raw milk output will amount to between 900,000 and 1.1m tons.

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