Avangard Asset Management revealed plans for selling Razgulay's most poorly-performing assets, and raising its stake further in the Russian farming group further, after backing its control of the group with a $50m investment.

The fund manager said that it would next month unveil plans to pare back the grains-to-sugar company, which its founder admitted had been "marking time", to its best-performing operations.

"The most important factor is the return on a rouble that each hectare of land is able to return," said Rustem Mirgalimov, the Avangard chairman, who took the same role at Razgulay in July.

This meant in part closing the "efficiency gap" between European and US farming operations. It also signalled "increasing the returns we got for a small number of regions in Russia", Mr Mirgalimov said.

Razgulay's current portfolio of silos, grain milling operations, sugar factories and dairy processing facilities, besides its production enterprises, are scattered through a large area of western Russia.

Debt burden

 Mr Mirgalimov said that cash from the disposals would be directed at lowering the burden of debts run up during expansion drives which increased even into this year, with land under crops increasing by 5% to 330,000 hectares, out of total holdings of 460,000 hectares.

Debt paydowns would be aimed at reducing the interest on borrowings and increasing their maturity, besides reducing overall levels.

Despite a restructuring last year of 80% of debt into long-term borrowings, staving off the threat of bankruptcy, debt levels for 2010 are estimated by analysts at more than four times earnings before interest, tax depreciation and amortisation, implying a significant burden.

Indeed, Mr Mirgalimov failed to rule out measures to ask shareholders for cash when plans for the Razgulay shake-up are unveiled next month.

'Marking time'

The statement followed Avangard's purchase of a 21.4% stake in Razgulay from founder Igor Potapenko, who Mr Mirgalimov replaced as chairman.

Mr Potapenko, who retains a 25.3% stake, said he had been prompted to sell in the interests of attracting a fresh investor into a company which had been "literally marking time" for three years.

Razgulay last year reported a loss of 1.57bn roubles, after a 6.2bn-rouble loss in 2008.

Mr Potapenko, who also owns meat-sector assets, added that he had not taken a decision on what to do with the proceeds of the Avangard deal, which was taken at prices close to market values, implying that it was worth $50m.

Mr Mirgalimov said that Avangard was interested in buying a further 8.6% of the group from the open market, where currently 53% of Razgulay shares are held.

The stock stood 3.0% higher at 46.00 roubles in late trade in Moscow.

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