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Agricultural M&A makes life better for us, says Russia fertilizer giant

Consolidation in the agricultural sector has a win-win outcome, the chief executive of PhosAgro, the Russian agrichemicals giant, told CNBC on Tuesday.

"I believe in consolidation of business so for me it creates a clearer environment in terms of production and it's easier to analyse the supply and demand so it's very positive," Andrey Guryev told CNBC in Moscow.

His comments come amid several big mergers in the agricultural sector. Last week, German drugs and crop chemicals company Bayer finally persuaded U.S. seeds firm Monsanto to agree to a takeover with an improved offer of around $66 billion. The deal ended months of negotiations although competition authorities are expected to look closely at the purchase.

Meanwhile earlier this month, Canada's Agrium and Potash Corp of Saskatchewan said they would form a combined company in a deal that would create a fertilizer and farm retailing giant. The deal would create a company with proforma enterprise value of $36 billion but would also trigger U.S. regulatory scrutiny, Reuters reported.


Remarking on the latter deal, Guryev said the deal would make the company more profitable and lift the entire sector, "It'll make it much more easier for them to bring more prosperity of what they want to achieve in the market for all participants."

Guryev said PhosAgro was doing well despite Russia's shaky economic backdrop and wider sector pressures, such as excess capacity, weaker demand and competition from Chinese fertilizer exporters.

"Annually, PhosAgro is doing 10 percent in terms of volumes so we have a huge modernization program and investment program worth $1.5 billion, so we're building new factories, new facilities and we're expanding our mine and that's what we're seeing on other businesses such as the steel business."

Guryev said PhosAgro was doing well despite Russia's shaky economic backdrop and wider sector pressures, such as excess capacity, weaker demand and competition from Chinese fertilizer exporters.

"Annually, PhosAgro is doing 10 percent in terms of volumes so we have a huge modernization program and investment program worth $1.5 billion, so we're building new factories, new facilities and we're expanding our mine and that's what we're seeing on other businesses such as the steel business."

He said the Russian central bank was on the right path towards creating a stable price environment although he would like to see lower interest rates in order to encourage more borrowing and spending.

Last week, the Russian central bank made its second interest rate cut this year, although its key rate remains high, at 10 percent, as the bank is wary of re-stoking inflation in Russia.

"Together with that we have strong central bank policy so they're targeting the inflation rate and they've decreased interest rates which is very important for the construction business in Russia, for domestic credit and private credit to the people. I believe this monetary policy is the correct stance- of course, we'd like to see a lot of credit here in Russia but maybe next year," Guryev said.

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