It’s only spring, but Ukraine’s agricultural sector has already had a bumper crop of investment in the last two days.
“It looks like a good week for Ukrainian agriculture,” said Oleksandr Paraschiy of BG Capital brokerage, talking up the nearly $350 million raised by three major companies in a 48-hour period on April 28-29.
The companies include: Avangard, the country’s largest egg producer; Kernel, a leading sunflower seed and oil producer; farming group Mriya Agro Holding.
Yaroslav Udovenko of the Sokrat brokerage in Kyiv said investors’ interest in Ukrainian agriculture has also been stimulated by macroeconomic stabilization, the start of economic recovery and political stabilization, including the passing of a budget.
Ukraine remains, of course, a long way from fulfilling its black-earth potential as an agricultural Saudi Arabia. The country still lacks what many experts say are prerequisites to rapid growth in the sector, such as a private land market, for starters.
But these deals show that, compared to the wreckage of the once-booming sectors such as construction, the agricultural tortoise is crawling doggedly on.
Avangard announced on April 30 that it raised just more than $200 million, placing a 22 percent stake on the London Stock Exchange.
Avangard is owned by Oleg Bakhmatyuk, a former deputy head of Naftogaz, the country’s notoriously murky gas transportation and extraction monopoly. The company in its present form resulted from the merger of a range of agricultural assets in 2008, allegedly after Bakhmatyuk sold his previous interests in Ukraine’s local gas distribution networks in 2007.
According to the company’s initial public offering prospect, the firm’s net profit before tax has more than quadrupled over the last three years, from $31.5 million in 2007 to $135 million in 2009. It holds a 39 percent share in Ukraine’s egg market and 53 percent in the egg product market.
Udovenko said the company will use the proceeds to upgrade its facilities with a view towards exporting to the European Union. The IPO prospectus details the completion and expansion of two egg-production and one egg-processing plant.
Kernel, the sunflower seed and oil producer, announced one day earlier, on April 29, that it raised $81 million by placing a 6.3 percent stake on the Warsaw stock exchange. Board chairman and parliament lawmaker Andriy Verevskiy said he was “pleased with the level of interest and the support shown by our existing shareholders.”
According to brokerage Renaissance Capital, “roughly 50 percent of the cash will pay for the acquisition of rival producer Allseeds. The rest will go towards possible future mergers & acquisition opportunities.”
The offer “suggests to us that Kernel is looking for a quick way to raise cash, which would increase the probability of an upcoming mergers & acquisitions transaction,” said Renaissance Capital’s Konstantin Fastovets.
Analysts also mention that Kernel has been hard hit by the government’s failure to reimburse value-added tax to exporters, has considerable debt and also needs to pay down Allseed’s crippling debt burden.
Third up was grain producer Mriya Agro Holding, which sealed a $75 million credit from the International Finance Corporation, the private sector wing of the World Bank.
The company has said it will use the money to expand the area of land it controls by 80 percent, from 200,000 to 365,000 hectares.
“This is a great time to buy land rights,” said Udovenko, “with prices having fallen to $200 per hectare for lease rights to black earth land.” Since the announcement of the IFC funding in February, Mriya’s stock price has jumped 50 percent.
These deals follow AgroGeneration, a French oilseed producer in Ukraine, which conducted a $15 million private placement in Paris in March, and Agroliga holding’s announcement of a $3 million offering of shares to be made in Warsaw in July 15. Sintal Agriculture also recently declared plans to move from the Frankfurt Stock Exchange to the Warsaw Stock Exchange in 2010 because of the greater investor pool there.
Kyiv Post staff writer Graham Stack can be reached at [email protected].
