In the beginning of new year, it seems to be appropriate to take a look back at the year passed in terms of Ukrainian Agrarian Public Companies. Ukrainian Agricultural Businesses had been innovative in terms of growing in size and exploiting economies of scale to their own advantage. Rapid size growth led to lower production costs and greater effectiveness of operations. Consistent performance and great potential of these companies led to the new opportunities in terms of their ability to attract investment funds. Foreign stock exchanges became the new investment source opportunities as well as international recognition tool.

Since Initial Public Offering of Ukrproduct (placement of shares) on London Stock Exchange in 2005, 17 other agrarian companies with assets in Ukraine placed their shares on foreign stock exchanges. As of December 31, 2013, 16 of these initial 18 companies are still being traded on foreign stock exchanges with the most recent one, Cereal Planet PLC having completed IPO in December of 2013. The current year (2013) had been especially tough for agricultural holdings. Lowering prices of agricultural commodities, growing prices for raw materials, as well as several difficulties on the global level (changes in Bank regulations in Cyprus) combined directly led to worse financial performance with net revenue and net profit declining and even finishing in red for the period.

Loans, acquired by the companies previously, led to growing financial expenses in the form of interest payouts. Diversification of revenue streams as well as additional revenue from re-evaluation of biological assets played major role for the companies that were able to implement these techniques.

According to UkrAgroConsult calculations, Ukrainian Agrarian Index Capitalization figure fell from EUR 5.7 billion on January 4, 2011 to EUR 4.1 billion on December 30, 2013, which constituted 29% decline for the period of 3 years with 7 companies having carried out their IPOs and 2 companies having had their shares delisted. At the same time decline constituted 13% in 2013, down from EUR 4.7 billion in the end of 2012. Two companies: MCB Agricole and Continental Farmers group got delisted from their respective stock exchanges.

Average price per share drop for the current 16 companies within UAIndex (Agrokultura AB, Sintal, MHP, Kernel, Mriya, Agroton, Astarta, Agrogeneration, Avangard, Milkiland, IMC, KSG Agro, Ovostar, Ukrproduct, Agroliga, Cereal Planet PLC) constituted -13% on average. Highest price per share growth was indicated by Agroliga (62%) with the lowest price per share decline of -81% by Agroton.

2014 is expected to show slight improvement mainly due to slight macroeconomic improvements indicated by countries in EU as well as expanding exports markets for Ukrainian Agrarian Holdings. We also expect slightly improving fiancnial performance for these companies as commodity prices are expected to stabilize as well as prices for raw materials.

UkrAgroConsult