Ukrainian farming holdings begin a period of recovery and growth

The Ukrainian economy, along with Ukrainian businesses, experienced one of the most troubled periods in 2014-2015. Although the economic decline must give way to growth in 2016, agricultural businesses already are showing signs of recovery. This is suggested by several factors: firstly, strong operational performance of companies that continued growth; secondly, more active crediting of companies and investment in the development; finally, market capitalization of companies stopped falling and stabilized, regularly reflecting growth.

In view of shrinking demand in the domestic market along with the national currency devaluation, company strategies were oriented to exports. The main export markets were the EU, Africa, Asia, and the Near East. Companies boosted production, simultaneously increasing exports. So, MHP stepped up chicken sales in the first half year (2%) and simultaneously increased sunoil production (6%); Kernel boosted sunoil and grain production; IMC exported 85% of the grain and oilseed harvests. All the companies show these trends. As before, the main problem is debts, which increased in hryvnia terms after the devaluation.

Lending to companies has intensified. The above-mentioned Kernel and Astarta announced the receipt of loans: the former took a USD 65 Ml credit facility for its working capital, while Astarta borrowed USD 35 Ml to support its soybean processing. MHP swapped its assets with Agrokultura back in early June and thereby increased the land bank in Ukraine. Recently Agroliga also announced the expansion of its land bank after the acquisition of the corporate rights of LLC Mayak. These factors indicate a revival of Ukrainian agricultural businesses, which are gradually recovering from the crisis shock.

The stock markets began to respond to the stabilization in the country and positive performance of companies back in early summer. Back at that time, the Ukrainian Agricultural Index, which is calculated by UkrAgroConsult, slowed its almost one-year-long decline and began to recover. The index remains quite volatile, but its mean trend is still close to the average.

Thus, UkrAgroConsult experts believe Ukrainian farming holdings were the first to begin recovering after the crisis. This implies they will be followed by small and medium-sized enterprises. This forecast is based on a positive scenario of geopolitical developments in the region

Author: Alex Morgun, Financial analyst, UkrAgroConsult

Consulting agency "UkrAgroConsult" - an independent company, founded in 1994, which provides accurate timely information on agricultural market of Ukraine and Black Sea region countries.