Evgeny Tugolukov
00:00 — 07.04.2020 / Media coverage

Leader in the Russian agriculture business – An interview with Don Agro’s top management


Don Agro (GRQ.SI) is one of the largest agricultural companies in the Rostov region in Russia. It is principally engaged in the cultivation of agricultural crops and production of raw milk. Don Agro has a controlled land bank of approximately 53,200 hectares, of which approximately 41,167 hectares are arable land.

 On 14th February 2020, Don Agro has made its debut on the Singapore Exchange's (SGX) Catalist at S$0.25, 13.6% higher than its initial public offering (IPO) price of S$0.22 per share. Don Agro’s IPO consist of issuance of 23 million placement shares at S$0.22 each to raise S$5.1 million.

 To update retail investors with the development of Don Agro and the potential of agriculture in Russia, Investor-One catches up with Evgeny Tugolukov, Executive Chairman of Don Agro International for an interview.  

1. With Don Agro being a Russian-based company, what are the compelling reasons to choose its listing on SGX rather than Moscow Exchange? 

The Southeast Asian region has become the world’s largest importer of wheat, our key crop. Within the region, the domestic production of wheat is almost non-existent, meeting less than 1% of demand requirements and its growth in consumption has led directly to higher import demand.

Based on surging demand for food, Indonesia for example has more than doubled its wheat imports in the last decade, becoming the world’s second-leading importer after Egypt. In 2020, South East Asia is forecast again to be the world’s top wheat importing region, with Indonesia and The Philippines continuing to be the driving forces.

As we are one of the largest agricultural companies in the Rostov Region of Russia which specialises in wheat production, listing on the SGX is a strategic move allowing us to gain closer proximity to key high-growth markets and explore opportunities in mergers and acquisitions, joint ventures and strategic alliances which will add fuel to our growth trajectory.

 Moreover, Singapore’s thriving capital market serves as a gateway to investors across the Asia-Pacific region and the rest of the world. Its location and superior infrastructure enable easy access to key developing markets. Our listing on the SGX will help raise our profile and allow investors across the world to gain access to Russia’s growing agricultural industry. 

2. The majority of Don Agro’s revenue is derived from wheat. Is there any intent to venture into other type of crops to reduce the reliance on one source of product? 

At present, we have a superior competitive advantage and a longstanding reputation with our customers for our wheat production capabilities.

The Rostov region of Russia, which is known for its rich black soils and favourable geographic proximity to the Azov Sea and Don River international ports, is also where key international traders such as Cargill, Bunge, Glencore and Louis Dreyfus are located and operate from. 

Russia is one of the global players in the production of wheat and the largest exporter of wheat in the world in 2019. The expansion of Russian agricultural exports, especially wheat, still has much room to grow as Russia explores untapped new trade opportunities abroad in Southeast Asia, the Middle East and Latin America. According to the USDA, it is projected that global wheat trade will increase by nearly 32.7 million tonnes or approximately 17.7% during the period from 2019 to 2029. We are well positioned to ride on this new wave of growth.

Wheat production is also resilient against changing economic trends due to the stable consumption of domestic agricultural produce as wheat is an essential grain crop for food security in Russia. 

3. The Russian’s economy faced with challenges such as slowing GDP growth rate over the past few years, what is the implication for Don Agro’s business?

Despite economic fluctuations or challenges such as unfavourable weather conditions, the demand for food remains. For an agribusiness, when you have a good season, sales are good due to bigger volumes. When it is not a good season, higher prices compensate for lower sales volumes

Especially in Russia, the agriculture sector plays an important role in Russia’s economy. Today, Russia is a leading exporter of agricultural products in the global marketplace.

As the agricultural industry forms a key component of Russia’s overall economy, the government views the sector as a strategic one to further the country’s long-term growth. Today, a myriad of subsidies is in place to boost Russian agribusinesses.

An additional factor which showcases the resilient demand of our produce is the overall stable consumption of domestic agricultural produce. Local demand for wheat, corn and sunflower is high and in case of decrease in export quotes, it will support the local producers. We can easily switch from export to domestic sales with no loss in price.

Against this backdrop, we are confident in the long-term sustainability and profitability of our operations regardless of the near-term economic fluctuations. 


Source: Don Agro International - From left: Don Agro International CFO Artur Nazaryan; Executive Chairman Evgeny Tugolukov; and CEO Marat Devlet-Kildeyev 

4. What are the company’s strategies for growth opportunities?

With our new platform and higher profile in the region, we are actively exploring opportunities in mergers and acquisitions, joint ventures and strategic alliances with both domestic and foreign companies. We are looking to expand our network and learn from business partners. Within Russia, we are looking to seek suitable opportunities to expand into other high growth regional markets by leveraging on our expertise and experiences. The regional markets include the Rostov region and the Krasnodar region.

Our near-term future growth plans also include the expansion of our arable land bank. We intend to expand through the acquisition of companies engaging in similar businesses or through the acquisition of arable plots of land. We intend to focus our acquisition of land on plots of land which are near our current operations and/or nearer to the ports in the Rostov region.

We will also be acquiring new machinery to upgrade our existing equipment and machinery as we continue to expand our land bank. Such equipment and machinery may include seeders, tractors and harvesters. We believe that the acquisition of such new equipment and machinery will improve our efficiency, productivity and yield for our crop business.

5. What are the greatest challenges you have encountered with the company?

The production of crops is vulnerable to extreme weather conditions such as prolonged wet weather. For example, we had a late harvest of corn and sunflower in late 2017 due to prolonged wet weather conditions which resulted in our Group incurring expenses to dry our corn and sunflower before storage and sale. In addition, due to good weather conditions in early 2017, there was a record harvest in Russia but the quality of crop was lower as lesser fertiliser was used. As such, the oversupply of lower quality agricultural produce had resulted in lower local market prices for agricultural produce.

Despite such challenges, we have delivered a track record of profitability over the last six financial years. This is attributed to our strong management team with extensive day-to-day operational experience along with our reputation as one of the leading crops and dairy farming businesses in the Rostov region.