The regional government in the central Russian Oblast of Sverdlovsk have approved a program for the development of local poultry and egg producer JSC Poultry "Reftinskaya".
With the government's help Reftinskaya will start feed production to satisfy the fed needs of its poultry operations. With the plan the company will be able to greatly reduce their feed costs, and will receove help to enable it to distribute their product to neighbouring regions and increase its market share in the region. The government also hope to increase food security in the region with the plan.
The government's investment plan includes a tital investment of 2.316 billion rubles, with 779 million of which will go to the account "Reftinskaya" later this year. With the money the company will buy new equipment, construct and reconstruct industrial sites, purchase machinery and equipment, measures were taken to increase the electrical capacity, upgrade networks and so on. The financing will be funded through debt and equity.
Under the terms of the program, in 2016 the volume of poultry production should increase from the current 45.6 to 80 thousand tonness of poultry meat in live weight. The company's revenue is expected double from 3.8 to 7.2 billion rubles, with net profit increasing from 200 to 330.2 million rubles.
General directory of JSC Poultry "Reftinskaya", Mykola Toporkov said that in line with the "Russian trend: almost all the major poultry producers in the country are vertically integrated and have their own feed milling," he continued saying that the company's feed production, will be built from scratch. With a site for the facility to be choosen shortly.
Cost savings from a new feed mill
The cost of feed for the company in poultry production currently accounts for 70%, while with the company producing its own feed this cost could feed costs by 20-25%.
The company said that in 2012, for the production of 45 600 tonnes of live weight poultry, 1.4 billion rubles was needed for the purchase of feed for the year.
"If by 2016 the company increased production to 80,000 tonnes per year, (at 2012 rate) the cost of feed would be 2.5 billion rubles," Reftinskaya said at the presentation of the development plan.
If the company was producing feed for itself it could realise a savings of up to 500 million rubles per year.
The opening of a poultry feed mill would cost the company around 450 million rubles, with the savings return on investment expected to be around 2 years.
"Also today, the Sverdlovsk region has a controlling interest in the Bogdanovich feed mill. If you include it to the "Reftinskaya" poultry farm, profitability will increase significantly without any investment," said the company.
Benefits of integrated feed production
JSC Poultry "Reftinskaya currently ranks as the 19th largest poultry enterprises of Russia. Market share in the Sverdlovsk region is 21.7%, while in other regions it is up to 9%.
With many regions of Russia having a significant shortage of its own meat, and needing to import from other regions, it presents a great opportunity for JSC Poultry "Reftinskaya".
With the savings in feed costs allowing them to significantly reduce the cost of meat, there is a great opportunity for the company in the sales and promotion of their poultry products.
The company aims to bring the volume of meat production from 45,600 tons a year in 2013 to 80,000 tons in 2016. And thereby increase market share in the Sverdlovsk region from 21.7 to 30%, in the Omsk from 10 to 15%, in the Tyumen from 3 to 10%, and in Perm from 1 to 5%.
The project of creating Reftinskaya's own feed production was endorsed the Prime Minister of the Sverdlovsk region Denis Pasler.
He asked the managment of the poultry farms to provide more detailed estimates of cost, as well as all the documentation on the implementation of the construction. In addition, the Prime Minister instructed the management of "Reftinskaya" to develop a plan for the development of unprofitable production site in Talitsa (the Talitsky slaughterhouse saw a loss of more than 76 million rubles in 2012). The government also required to calculate the gas supply to poultry. The rest of the development plan for "Reftinskaya" was unanimously approved.
From its formation as a state enterprise in 1981 , JSC Poultry "Reftinskaya" has increased its poultry meat every year. In 2012 the company produced 45.6 thousand tons of this live poultry with this figure expected to increase to 50 million tonnes this year.