Large Russian poultry producer facing bankruptcy

26-09-2016 | |
Large Russian poultry producer facing bankruptcy. Photo: Bart Nijs
Large Russian poultry producer facing bankruptcy. Photo: Bart Nijs

Russian agricultural holding Kirovhleb has accumulated debts of RUB7 billion (US$120 million) and has had to virtually stop operation at its 3 broiler farms and 2 eggs farms, as it prepares to enter bankruptcy.

In what is believed to be the largest bankruptcy in the Russian poultry industry in recent years, it may bring serious consequences to the Kirov Oblast, as the region will have to apply for poultry purchases from neighbouring regions.

Drop in poultry production

According to the information from the regional Agricultural Ministry the problems of Kirovhleb resulted from the fact that chicken production in the region in the first half of 2016 dropped by 80% compared to the same period of last year. The company was the largest poultry producer in the region and one of the top-5 largest manufacturers of chicken in Volga Federal District with the overall capacity of 28,000 tonnes of broiler meat.

Kirovhleb was already on the edge of bankruptcy at the beginning of 2012, when due to monies outstanding for electricity, farms had been disconnected from the grid, resulting in the deaths of 100,000 chickens in a short period of time. However, the facility had been given a reprieve with a special loan from Rosselhozbank, the Russian state-owned bank who fully focuses on loans to agricultural producers.

Further investment not worth it

“There were certain promises from investors and we were willing to believe them. But from an economic point of view, for the long time we saw it would be hard to save these poultry farms. They were operational, but these farms, constructed in the 1960s, were not able to compete with factories re-built and are on another technological level,” commented regional MP Vladimir Yagovkin.

“Even those large investments were not able to improve the situation. They need a lot of money, but for the state it turned out to be better to invest the same funds into construction of a facility from scratch,” he added.

This is also one of the main problems regional bailiffs are facing, since they need to put 5 poultry farms of the holding up for sale after possible bankruptcy, while it is hard to imagine there could be any investors ready to offer money for these assets.

Further scandals reported

The bankruptcy has also been associated with numerous scandals, as according to employees, the owners of the holding have not been paying salaries to operational staff for the past 6 months. In addition, according to employees, management has even stolen equipment to hide it from law enforcement agencies.

“The bailiffs have opened enforcement proceedings and assets of the company have been seized. But part of the liquid assets, such as live chickens, equipment and vehicles have disappeared in spite of the seizure. Now bailiffs tells us that poultry farms do not have funds to pay off salary debts and probably will never has them,” explained one of the company’s employees, Natalie Udnikova.

Vladislav Vorotnikov Eastern European correspondent