KIEV: UkrAgroConsult experts would like to draw your attention to declining capitalization of Ukrainian Agro Holdings by 6.18% over the past month. Ukrainian Agrarian Index, calculated on daily basis indicated capitalization decline to EUR 1 821 million as of January 1, 2015. 7 days later index reached historical minimum of EUR 1 803. Later capitalization renewed its growth and reached 2015 high at EUR 2 466 million in mid-April. Later, growth was replaced with decline to EUR 2 293 million as of May 14, 2015. Volatility of capitalization was caused by multitude of factors, which characterize business, financial and operational climate.
Primary reason of capitalization decline was capital outflow from Ukraine, which started in the beginning of 2014 and is still relevant today. The outflow led to devaluation of Ukrainian Hryvnya. Companies, which had debt in foreign currency to their name, had to record losses from debt revaluation. Companies that were involved in exports of agricultural commodities will be able to recuperate losses at fast pace.
Companies which are vertically integrated and are oriented on domestic market, as well as markets of CIS region, will have to look for new markets, thus their recovery period will heavily depend on their success of finding such new markets.
Pricier fuel, crop protection products and fertilizers pressure financial results of the companies. Political and geopolitical risks associated with Ukraine, led to decline of asset prices in Ukraine, which eventually led to lower capitalization of the companies. Problems, related to debt repayment by several Ukrainian companies, led to reputational damage of other companies within the sector, leading to even lower expectations of their performance, ergo their value.
At the same time, companies that have long-term history of performance and high standards of investor relations suffered minimal losses and continued their operations, while continuing moderate growth and development.
