This means that Russia’s largest milk producer has doubled its milk output per day over the past 15 months and ranks among the world’s eight largest raw milk producers, according to the company.
The increase was achieved through the expansion of the dairy cow herd from just under 45,000 animals at the end of 2017 to almost 75,000 dairy cows as of the end of March 2019. The controlled agricultural land amounted to 535,000 hectares as of March 31, 2019.
Ekosem-Agrar AG recorded operational growth in all areas in the financial year 2018. The Group controlled about 504,000 hectares of agricultural land at year end, up 57% on the previous year. The total dairy herd grew by 42% in the course of the year to more than 133,000 animals at the end of 2018, up from 93,500. The Group’s total raw milk output in the financial year 2018 amounted to 484,000 tons, up 62% on 2017.
Based on the current daily output of 2,000 tons, the annualized milk output would total 730,000 tons.
In spite of the increase in milk output, the temporary decline in the raw milk price in 2018 had an adverse effect on business development, and Ekosem-Agrar said this will be reflected in the results.
While the average price of a kilogram of raw milk stood at €0.44 ($0.49) in 2017, it dropped to an average of €0.35 ($0.39) in 2018. The milk price has recovered noticeably since the second half of 2018. On a ruble basis, the level of 2017 has been reached again; on a euro basis, the raw milk price currently stands at around €0.39 ($0.44) including exchange rate effects.
Supported by government subsidies, Ekosem-Agrar said it will continue to expand its herd and its milk production. In 2018, the group began construction of 14 dairy cow facilities with capacity for more than 45,000 dairy cows.
Some of these facilities are already in operation; all remaining facilities are scheduled to commence activity in 2019. The company plans to use the resulting capacity to expand its dairy cow herd to over 100,000 animals and to increase the daily output to roughly 3,000 tons of raw milk.
The company is also working to expand its milk processing capacity to reduce exposure to the volatile raw milk market and to extend its value chain. By converting two existing dairies in the Voronezh and Kaluga regions, the company intends to increase its capacity for the production of higher-margin products such as curd, drinking yogurt and desserts in the current year.
A small cheese dairy in the Voronezh region is also under construction and scheduled for completion in 2019. A large dairy with a daily processing capacity of more 1,000 tons of raw milk is under construction in Novosibirsk. After its completion in late 2020, it will primarily produce cheese but also a wide range of fresh products for the Russian market as well as for export markets.
Stefan Dürr, main shareholder and CEO of Ekosem-Agrar, said, “We are highly satisfied with the development of our own milk processing activities. Our new ‘EkoNiva’ brand is already available in many stores of several large supermarket chains – including Globus Group, which operates high-turnover hypermarkets in the Moscow region. We will expand this market presence significantly in the current year and aim to cooperate with numerous other supermarket chains.”
The 2018 full-year results and consolidated financial statements will be published in June 2019.