Ros Agro PLC (AGRO) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us. My name is Egor Sergushov. I'm Head of Investor Relations. Today's conference call will be held by Deputy CEO, welcome, Alexander Tarasov. Alexander, you have the floor.

Yes. Ladies and gentlemen, dear shareholders and investors and colleagues, good afternoon. Today, we decided to hold today's call outside our regular schedule of quarterly reporting because the past week saw in years about the inclusion of Ros Agro in the list of economically significant entities. This is an event which is one of the expected things by us, and we think we have to make comments on further steps that will be taken, and we wanted to ask the questions, which we collected before the call. The format of the call will be as follows. I answered the questions that we received. At the beginning of August, we will, as usual, hold a regular results call, and there will be some update on the situation, I guess, by that time. And we will be able to ask further questions at that time one by one. We will highlight the most important things based on the questions that you asked. So the first thing, there is a fact of inclusion of Ros Agro in the list of economically significant entities. And all my further comments will be based on the provisions of 470 federal law. And this is our preliminary understanding of how things are going to evolve, how the process will unfold. There is an experience of X5 Group, which recently has been included on the list as well. And we are closely monitoring the developments in that case. And we are learning from that too. Number one, what does the inclusion in the list mean for Ros Agro? It means as follows. In the current structure of the group, there is a foreign holding company that is Ros Agro PLC, whose GDR owners are all our shareholders. It's registered in Cyprus. So Ros Agro PLC owns PJSC Rusagro, our Russian company, which holds all the assets of Rusagro Group. Inclusion of PJSC Rusagro in the list means that the relevant federal authority, in this case, this is the Ministry of Agriculture will be able to apply for the court of arbitration about the suspension of corporate rights. As regards the parent company, that is Ros Agro PLC. And in this case, the shares of Russian subsidiary will be transferred to the ultimate beneficiaries of Ros Agro PLC. In other words, the shareholders of Ros Agro PLC will own the shares of PJSC Rusagro Group. This is the basic fact. What about the timing? That's the second most popular question. The practice of this redomiciliation mechanism following the inclusion in the list of economically significant entities. Optimistically, we think that the procedure will take starting from 6 months. As a management team, we will take all the necessary steps in order to maximize the efficiency of the process. And we will respect all the rights of our shareholders in full. And we will do our best which I will talk about in detail a bit later on today. Now I would like to talk a little bit about further steps after inclusion in the list of economically significant entities. Actually, there are a few steps that are expected. The first step is the application from the Ministry of Agriculture to the arbitration court and the second steps that is the suspension of trading of GDRs of Ros Agro PLC. Step 3 is the arbitration court decision about the suspension of corporate rights of Ros Agro PLC and transfer of those corporate rights to PJSC Rusagro Group, and step 4 is distribution of PJSC Rusagro Group among the holders of Ros Agro PLC shares. I'll provide a bit more details on that. After the first step, that is inclusion in the list of economically significant entities, there is a likelihood that the ministry will apply to the arbitration court. And it will decide on the suspension of corporate rights. And we'll accept the application on the date of receiving that application. And then there will be proceedings according to the law that these may take from 5 days to a month after the application's received, and the ministry may request a number of restrictions. We will have information about that when the application is filed. For example, there may be a request to limit the rights of Ros Agro PLC shares as regards to the subsidiary. And the request to distribute the shares of the subsidiary between shareholders and holders of GDRs of Ros Agro PLC in proportion to their interest in the foreign holding company. And if there is the step 1, but that's the fact. And the other 3 steps are just probable events. This is our vision, what happens if this application is filed by the Ministry of Agriculture. After that, we expect that trading on the Moscow Exchange will be suspended and the duration will depend on the court decision. But it's also expected to happen. Next step, if the application is satisfied, PJSC Rusagro Group shares will be distributed between shareholders in proportion to their holdings in Ros Agro PLC. And after that, the mechanism of distribution will be initiated. So we expect that this will happen in the following manner. It has 2 parts, depending on where the GDRs are registered, whether in the Russian depository or in a foreign depository. So, for our GDR holders who have them in the Russian depository, the mechanism is quite simple. It's formulated in the resolution of Bank of Russia Board. The conversion will be automated and no additional steps or measures from the holders are necessary. So they don't need to do anything. And the process, in this case, will take a few weeks. The second part of questions regards the holdings of GDRs via a foreign depository, specifically Euroclear and for residents of Russia. Such holders will have to apply for the conversion of GDRs into shares, and will be able to receive shares in proportion to their holding of Ros Agro PLC. So these are foreign shareholders. If we are talking about foreign shareholders who are registered with Euroclear, they have the same situation. They're entitled to file an application to convert their GDRs into Rusagro Group shares proportionally, and in order to become the owner, the holder, there will be a permit from the Russian authorities. And sometimes, the registration and accounting of the shares for foreign holders may be going on via Type C accounts. So the applications will be received within 4 months. And for GDR holders via foreign depositaries, there will be a record date, and this is the court decision date. So if GDRs held via foreign depository are acquired after that date, so applications for them will not be accepted. So one more. There was a question about the events, what if holders of foreign depositaries don't file an application for exchange. So those holders who do not file for a conversion of GDRs, will remain GDR holders in the foreign depository. We expect when this process is finalized, the trading of Rusagro Group PJSC will be launched. And there's an obvious question, when will that happen? And what dividends are expected to be paid and for what periods? We discussed it at our previous calls, and I can say as follows. As you see, Ros Agro has been demonstrating very strong performance, and we have substantial net income accumulated on our accounts, and we expect to start paying dividends as soon as all these redomiciliation processes are completed. We have the dividend policy approved by the Board, which provides for a dividend payout in the amount of 50% of net profit, and we are planning to stick to this policy. It's in our interest, and the management team will facilitate this process in order to resume dividend payments to our shareholders as soon as possible. What periods will be covered by dividend payouts? This decision will be taken by the Board at the point when this decision is possible, and it will depend mainly on the available cash flow at that point, our investment plans, and it will also depend on the situation, which will be prevailing at that point. So we will be deciding on that as soon this becomes relevant. Again, I can reiterate that we want to complete this process as soon as possible. We're interested in that. We want to resume dividend payments, and we want to respect the rights of our shareholders. It's very important for us. We don't want to discriminate between our shareholders, and we want everyone to exercise their rights in full. We will provide timely updates on the developments. In this regard, you can ask any questions, which we haven't covered today. You can send your questions to our ir@rusagrogroup.ru mailbox. And our team will be providing comments very quickly and efficiently. Thanks for your time. I hope we have covered all of your questions. Again, if you have any other questions, we will be ready to handle them outside this call. Thank you very much.

Thank you very much for taking part in the conference call, and goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]