Homepage
PR Newswire
31-01-2012, 07:42 AM
The Straits Times
Jan 31, 2012
Olam in tie-up to pour up to $1b in dairy venture
Plan to develop Russian facility into biggest milk plant in Europe, Asia
By Melissa Tan
COMMODITY trader Olam International is teaming up with a Russian firm to invest as much as US$800 million (S$1 billion) in what may be the biggest cow farm and milk production facility in Europe and Asia.
Olam's investment comes hot on the heels of a recent surge in interest in commodity players. These firms have seen their stocks being run up as more people turn to investing in scarce resources.
It will capitalise on the surging market for food resources, particularly milk, which was the best performing commodity on world markets last year.
The deal with Russian Dairy Company (Rusmolco), the largest milk producer in Russia's Penza region, gives it an immediate market presence.
The first phase involves Olam buying a 75 per cent stake in Rusmolco, which then plans to increase its milking herd from 3,600 to 20,000 cows, lifting annual milk output to nearly 208 million litres.
Rusmolco will also double its grain cultivation area from 52,000ha to 106,000ha.
Olam told the Singapore Exchange yesterday that the total investment in the first phase will 'aggregate up to US$400 million to be spent over the next four to five years'.
Out of the US$400 million in the first phase, up to $320 million will come from Rusmolco, with support from the Russian government, which does not tax dairy and agricultural activities.
After the first phase is completed by around 2017, a second stage could increase the herd to 50,000 within four years. Olam and Rusmolco are also considering expanding the grain-growing area to 130,000ha and investing in sugar cultivation, milling and refining.
The second phase will involve an investment of between US$350 million and US$400 million from the two firms, said a Bloomberg report.
'At a steady state, Rusmolco will have an annual milk production of 500 million litres, making it the leading milk producer in Russia and among the top 10 private milk producers globally,' Olam said.
Its chief executive Sunny Verghese said the proposed scale of the dairy venture would make it the largest dairy farm and milk production site in Europe and Asia, according to Bloomberg.
The firm has been in Russia since 1993. It described the country yesterday as 'one of the most attractive markets for dairy farming today', due to a high demand for milk and a large, widening gap between supply and demand.
Olam also pointed to a need for a 'modern, reliable supplier of high-quality milk' and the low cost of cattle feed due to the availability of fertile agricultural land at 'competitive prices'.
Mr Verghese noted that Rusmolco 'brings a strong dairy platform as well as 106,000ha of land suitable for agriculture, an attractive platform and asset base that is hard to replicate in a short period of time'.
This deal is the latest in a string of acquisitions. Olam bought a 75.2 per cent stake in Spain's Macao Commodities Trading for €15 million (S$24.7 million) last month. Last October, it bought parts of an Indian spice export business for US$18 million, and in August it bought an Indian sugar mill for US$73.8 million.
The move comes on the back of rising commodity prices and a surge in investor interest in the sector.
Commodity shares have recovered sharply since the beginning of the year after a decline towards the end of last year.
Olam shares fell 11 cents to close at $2.53 yesterday before its announcement, but the stock has posted a 40-cent gain from its closing price of $2.13 on Dec 30 - a 19 per cent rise.
The shares of fellow commodity player Noble Group closed at $1.33 yesterday, up 18 per cent since Dec 30.
Even firms dealing in hard commodities like rig-building have seen their counters move upwards. Sembcorp Marine rose from $3.82 on Dec 30 to close at $4.75 yesterday - a gain of 24 per cent.
melissat@sph.com.sg
Jan 31, 2012
Olam in tie-up to pour up to $1b in dairy venture
Plan to develop Russian facility into biggest milk plant in Europe, Asia
By Melissa Tan
COMMODITY trader Olam International is teaming up with a Russian firm to invest as much as US$800 million (S$1 billion) in what may be the biggest cow farm and milk production facility in Europe and Asia.
Olam's investment comes hot on the heels of a recent surge in interest in commodity players. These firms have seen their stocks being run up as more people turn to investing in scarce resources.
It will capitalise on the surging market for food resources, particularly milk, which was the best performing commodity on world markets last year.
The deal with Russian Dairy Company (Rusmolco), the largest milk producer in Russia's Penza region, gives it an immediate market presence.
The first phase involves Olam buying a 75 per cent stake in Rusmolco, which then plans to increase its milking herd from 3,600 to 20,000 cows, lifting annual milk output to nearly 208 million litres.
Rusmolco will also double its grain cultivation area from 52,000ha to 106,000ha.
Olam told the Singapore Exchange yesterday that the total investment in the first phase will 'aggregate up to US$400 million to be spent over the next four to five years'.
Out of the US$400 million in the first phase, up to $320 million will come from Rusmolco, with support from the Russian government, which does not tax dairy and agricultural activities.
After the first phase is completed by around 2017, a second stage could increase the herd to 50,000 within four years. Olam and Rusmolco are also considering expanding the grain-growing area to 130,000ha and investing in sugar cultivation, milling and refining.
The second phase will involve an investment of between US$350 million and US$400 million from the two firms, said a Bloomberg report.
'At a steady state, Rusmolco will have an annual milk production of 500 million litres, making it the leading milk producer in Russia and among the top 10 private milk producers globally,' Olam said.
Its chief executive Sunny Verghese said the proposed scale of the dairy venture would make it the largest dairy farm and milk production site in Europe and Asia, according to Bloomberg.
The firm has been in Russia since 1993. It described the country yesterday as 'one of the most attractive markets for dairy farming today', due to a high demand for milk and a large, widening gap between supply and demand.
Olam also pointed to a need for a 'modern, reliable supplier of high-quality milk' and the low cost of cattle feed due to the availability of fertile agricultural land at 'competitive prices'.
Mr Verghese noted that Rusmolco 'brings a strong dairy platform as well as 106,000ha of land suitable for agriculture, an attractive platform and asset base that is hard to replicate in a short period of time'.
This deal is the latest in a string of acquisitions. Olam bought a 75.2 per cent stake in Spain's Macao Commodities Trading for €15 million (S$24.7 million) last month. Last October, it bought parts of an Indian spice export business for US$18 million, and in August it bought an Indian sugar mill for US$73.8 million.
The move comes on the back of rising commodity prices and a surge in investor interest in the sector.
Commodity shares have recovered sharply since the beginning of the year after a decline towards the end of last year.
Olam shares fell 11 cents to close at $2.53 yesterday before its announcement, but the stock has posted a 40-cent gain from its closing price of $2.13 on Dec 30 - a 19 per cent rise.
The shares of fellow commodity player Noble Group closed at $1.33 yesterday, up 18 per cent since Dec 30.
Even firms dealing in hard commodities like rig-building have seen their counters move upwards. Sembcorp Marine rose from $3.82 on Dec 30 to close at $4.75 yesterday - a gain of 24 per cent.
melissat@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/