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Ukrainian Agro Holdings: Sources and Effectiveness of
Investments 2012/13
Alex Morgun
Table of contents
1. Ukraine: current outlook
2. Key Statistics in Ukrainian Agriculture
3. KPIs for Agri Business in Ukraine 2012-2013 season
4. Main sources/use of investments
5. Expectations and forecast for 2013
2
Ukraine: current outlook
GDP per capita (2012): USD 1 076 Global ranking: 116 out of 219
Total exports (2012): USD 69,8 billion Global ranking: 51 out of 223
Agriculture share in GDP (2012): 12% up from 8% in 2010
3
Ukraine: current outlook
24,5%
11,4%
10,5% 9,9%
8,2% 8,1%
7,0%
6,0%
14,5%
Major Grain Exporters
United States
Argentina
Australia
Russia
EU-27
Ukraine
Canada
Brazil
Other
4
Ukraine: current outlook
-2,0
0,0
2,0
4,0
6,0
8,0
10,0
12,0
Ukraine Russia Argentina EU
Sunflower seed production, 2012Sunflower oil production, 2012Oil export/import
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0
Wheat export, 2012 Corn export, 2012
Barley export, 2012
•42% of seeds processed into oil; •80% of sunflower oil is exported.
•4% of wheat exported (top-8 world); •17% of corn exports (top-8 world); •11% of barley exports (top-8 world).
5
Table of contents
1. Ukraine: current outlook
2. Key Statistics in Ukrainian Agriculture
3. Agro Holdings during 2012-2013 season
4. Main sources/use of investments
5. Expectations and forecast for 2013
6
Key Statistics in Ukrainian Agriculture: cattle and pigs
0
1 000
2 000
3 000
4 000
5 000
6 000
2009 2010 2011 2012 2013
Current volume, thousand units
Cattle Including: cows
6 800
7 000
7 200
7 400
7 600
7 800
8 000
8 200
8 400
8 600
2009 2010 2011 2012 2013
Current volume, thousand units
Pigs
7
Key Statistics in Ukrainian Agriculture: sheep, goats and poultry
1 780
1 800
1 820
1 840
1 860
1 880
1 900
1 920
2009 2010 2011 2012 2013
Sheep and goats
170 000
180 000
190 000
200 000
210 000
220 000
230 000
240 000
2009 2010 2011 2012 2013
Poultry
8
Key Statistics in Ukrainian Agriculture: animal products
2 500
2 600
2 700
2 800
2 900
3 000
3 100
3 200
2009 2010 2011 2012
Meat, all types, live weight
10 800
10 900
11 000
11 100
11 200
11 300
11 400
11 500
11 600
11 700
2009 2010 2011 2012
Milk, all types
9
Key Statistics in Ukrainian Agriculture: eggs
0
5 000
10 000
15 000
20 000
25 000
2009 2010 2011 2012
Eggs, all types
10
Statistics Indicator 2009 2010 2011 2012
Average selling price (excluding VAT , transportation expenses, additional costs)
Grains and legumes UAH/ton 799 1 121 1 374 1 547
Sunflower seeds UAH/ton 1 897 3 019 3 312 3 584
Sugar beet UAH/ton 1 299 479 516 427
Potatoes UAH/ton 1 299 2 131 2 033 1 140
Vegetables UAH/ton 1 790 2 552 2 139 1 957
Greenhouse vegetables UAH/ton 6 055 7 320 7 760 8 962
Fruits and berries UAH/ton 2 707
Cattle and Poultry (live weight) UAH/ton 10 363 10 797 11 967 13 457
Milk and milk products UAH/ton 1 889 2 939 3 042 2 662
Eggs UAH/thsd pieces 404 471 522 627
Key Statistics in Ukrainian Agriculture: domestic selling prices
% change
12,6%
8,2%
-17,3%
-43,9%
-8,5%
15,5%
12,5% -12,5%
20,1%
11
61,9%
2,1%
18,7%
5,7%
2,0%
9,7%
Sown area, 2011 Grains andlegumes
Sugar beet
Sunflowerseeds
Potatoes
Open soilvegetables
Forage crops
60,6%
1,8%
20,4%
5,6%
1,9%
9,7%
Sown area, 2012 Grains andlegumes
Sugar beet
Sunflowerseeds
Potatoes
Open soilvegetables
Forage crops
Key Statistics in Ukrainian Agriculture: domestic selling prices
12
Key Statistics in Ukrainian Agriculture: Sown area
Statistics Indicator 2009 2010 2011 2012
Sown area
Grains and legumes thsd. Hectares 15 837 15 090 15 724 15 449
Sugar beet thsd. Hectares 322 501 532 458
Sunflower seeds thsd. Hectares 4 232 4 572 4 739 5 194
Potatoes thsd. Hectares 1 409 1 408 1 439 1 440
Open soil vegetables thsd. Hectares 451 462 498 494
Forage crops thsd. Hectares 2 658 2 599 2 477 2 475
Total sown area thsd. Hectares 24 909 24 632 25 409 25 510
13
Statistics Indicator 2009 2010 2011 2012
Crop yiled, by culture
Grains and legumes Tons/Hectare 2,98 2,69 3,70 3,12
Wheat Tons/Hectare 3,35
Barley Tons/Hectare 2,47
Corn Tons/Hectare 6,44
Soybean Tons/Hectare 2,04
Rapeseed Tons/Hectare 1,73
Sugar beet Tons/Hectare 31,50 27,90 36,30 41,10
Sunflower seeds Tons/Hectare 1,52 1,50 1,84 1,65
Potatoes Tons/Hectare 13,90 13,20 16,80 16,10
Open soil vegetables Tons/Hectare 18,30 17,40 19,50 19,90
Fruits and berries Tons/Hectare 7,07 7,82 8,49 8,99
Key Statistics in Ukrainian Agriculture: Crop yield
% change
-15,7%
13,2%
-10,3%
-4,2%
2,1%
5,9%
14
Table of contents
1. Ukraine: current outlook
2. Key Statistics in Ukrainian Agriculture
3. Agro Holdings during 2012-2013 season
4. Main sources/use of investments
5. Expectations and forecast for 2013
15
Agro Holdings during 2012-2013 season: grain top 10 (1-5) #1: UkrLandFarming (Beneficiary: Oleg Bahmatyuk) Market share: 9.4%, acquired Dakor, Rise, Avangard, 21 regions + Crimea Production volume range: 1.3 – 1.5 Mt of grains per annum
#2: Myronivskiy Khliboproduct (Beneficiary: Yurii Kosyuk) Market share: 9.3%, Central, Western regions + Crimea Production volume range: 1.3 – 1.5 Mt of grains per annum
#3: New Century Holding (Beneficiary: NCH Capital George Rohr) Market share: 7.2% Production volume range: 1.0 – 1.3 Mt of grains per annum
#4: Kernel (Beneficiary: Andrey Verevskiy) Market share: 4,4%,West, South of Ukraine, Cherkassi, Sumi, Chernigiv reg. Production volume range: 0,6 – 1.0 Mt of grains per annum, top-5 exporter
#5: Mriya (Beneficiary: Ivan and Klavdiya Guta) Market share: 4,4%,Western Regions of Ukraine. Production volume range: 0,6 – 1.0 Mt of grains per annum
16
Agro Holdings during 2012-2013 season: grain top 10 (6-10) #6: Ukrainian Agrarian Investments (Beneficiary: Steven Jennings) Market share: 3.9%, Central Ukraine Production volume range: 0.4 – 0.6 Mt of grains per annum
#7: Astarta (Beneficiary: Viktor Ivanchik, Valeriy Korotkov) Market share: 3.5%, Central, Western regions Production volume range: 0.4 – 0.6 Mt of grains per annum
#8: Agroprodinvest (Beneficiary: Petro, Oleksii Poroshenko) Market share: 3.0%, Vinnitsa region Production volume range: 0.4 – 0.6 Mt of grains per annum
#9: HarvEast (Beneficiary: Rinat Akhmetov, Vadim Novitskiy) Market share: 2.3%, Eastern, Central regions + Crimea Production volume range: 0,3 – 0.4 Mt of grains per annum
#10: Drugba Nova (Beneficiary: Sergey Gaidai) Market share: 2,1%,Chernigiv, Poltava, Sumi regions Production volume range: 0,3 – 0.4 Mt of grains per annum HOLDING HAS BEEN ACQUIRED BY KERNEL IN APRIL 2013 17
Statistics Indicator 2009 2010 2011
Profitability of agricultural production (Profit/Sales Revenues)
Total % 13,8% 21,1% 27,0%
Plant % 16,9% 26,7% 32,3%
Grains and legumes % 7,3% 13,9% 26,1%
Sunflower seeds % 41,4% 64,7% 57,0%
Sugar beet % 37,0% 16,7% 36,5%
Potatoes % 12,9% 62,1% 17,7%
Vegetables % 19,1% 23,5% 9,9%
Animal % 5,5% 7,8% 13,0%
Cattle meat % -32,9% -35,9% -24,8%
Pork % 12,1% -7,8% -3,7%
Sheep and goat meat % -31,8% -29,5% -39,6%
Poultry meat % -22,5% -4,4% -16,8%
Milk % 1,4% 17,9% 18,5%
Eggs % 13,1% 18,6% 38,8%
Agro Holdings during 2012-2013 season: profit margin
18
Agro Holdings during 2012-2013 season: funding sources
6,3% 3,2%
59,2%
16,1%
8,3%
6,9%
Funding by source, 2012
Government budget
Local budgets
Companies' own capital
Bank and other loans
Population for own housing
Other sources
19
Agro Holdings during 2012-2013 season: funding sources
Statistics Indicator 2009 2010 2011 2012
Funding by source
Government budget M UAH 8 361 10 952 18 395 16 531
Local budgets M UAH 5 915 6 368 8 801 8 308
Companies' own capital M UAH 127 435 114 964 152 279 156 149
Bank and other loans M UAH 25 588 23 336 42 324 42 527
Foreign investments M UAH 10 893 4 068 7 196
Population for own housing M UAH 10 298 20 830 19 573 21 975
Other sources M UAH 4 389 8 543 11 364 18 238
20
Agro Holdings during 2012-2013 season: Kernel performance
Statistics Indicator 2008 2009 2010 2011 2012 Kernel Revenue M USD 663,1 1 047,1 1 020,5 1 899,1 2 157,4 EBITDA M USD 123,2 190,1 190,0 309,6 322,0 Net income M USD 83,2 135,5 152,0 226,3 206,7
21
Agro Holdings during 2012-2013 season: MHP performance Statistics Indicator 2008 2009 2010 2011 2012
MHP Revenue M USD 802,91 711,00 994,21 1229,09 1407,52
Poultry M USD 1083,00 Grain M USD 169,00
Other ag products M USD 155,00 Net income M USD -223,80 153,55 216,22 259,36 310,92
22
Statistics Unit 2009 2010 2011 2012
Financial results
Revenue M USD 320 440 553 629
EBITDA M USD 152 194 246 280
EBITDA margin % 47,5% 44,1% 44,5% 44,5%
Net Profit M USD 134 185 196 228
Cash and cash equivalents M USD 162 183 238 204
Debt M USD 103 78 80 148
Cash % 61,1% 70,1% 74,8% 58,0%
Debt % 38,9% 29,9% 25,2% 42,0%
Agro Holdings during 2012-2013 season: Avangard performance
23
Table of contents
1. Ukraine: current outlook
2. Key Statistics in Ukrainian Agriculture
3. Agro Holdings during 2012-2013 season
4. Main sources/use of investments
5. Expectations and forecast for 2013
24
№ Company IPO / SPO value
2006 2007 2008 2009 2010 2011 Total, M
USD 1 Kernel 218 84 81,4 142 525,4 2 Agroton 54,3 54,3
3 MCB Agricole (Ukrzernoprom) 56,11 56,11 4 Rise 0 5 MHP 323 165 488 6 Astarta 31,7 31,7 7 Dakor 21 21 8 IMC 30 30 9 Mriya 90 90 10 Avangard 208 208 11 Ukrproduct 11 11 12 Sintal 35 13 48
Main sources/use of investments: IPO & SPO
IPO 1078,11 68,95%
SPO 485,4 31,05%
Subtotal 1563,51
25
2012 loans: banks and funds
USD, M
Mriya 5
CFGP 15,9
Agrogeneration 18,8
IMC 28,8
KSG Agro 53,25
Milkiland 100
Astarta 149,81
Kernel 557
Total 928,56
Main sources/use of investments: loans, 2012
26
Main sources/use of investments: loans, 2012
27
Source Volume, M USD Target
Credit Agricole 3 Working Capital
Vnesh Torg Bank (Russian Commercial Bank Ltd.) 3,8 NA
Alfa Bank 6,25 Working Capital
Unicredit Bank 10 Working Capital
Wells Fargo Bank (USA) 10,6 NA
Landesbank Baden-Wuerttenberg (LBBW): purchase of agricultural equipment (EUR 9,3) 12,21 NA
Global Emerging Markets 23,1 NA
EBRD 27,9 Green energy
Citibank group and (Overseas Private Investment Corporation, OPIC) 50 NA
IFC (The International Finance Corporation) 95 NA
The Royal Bank of Scotland plc, UniCredit Bank AG, London Branch, Raiffeisen Bank International AG and ZAO
Raiffeisenbank 100 NA
Main sources/use of investments: loans, 2012
28
Main sources/use of investments: loans, 2012
29
Main sources/use of investments: loans, 2012
30
Table of contents
1. Ukraine: current outlook
2. Key Statistics in Ukrainian Agriculture
3. Agro Holdings during 2012-2013 season
4. Main sources/use of investments
5. Expectations and forecast for 2013
31
Expectations and forecast for 2013: performance
Winter crops state
32
Expectations and forecast for 2013: external funding
Loans from banks, funds
33
Expectations and forecast for 2013: stock performance, 2012
34
• MHP will pay out total of USD 120 million dividends (USD 1.13 per share) (March 5, 2013);
• Mriya has placed bonds total worth of USD 200 million on London Stock Exchange (March 21, 2013);
• New Old Player: UkrLandFarming issued USD 275 million bonds on Irish Stock Exchange (March 26, 2013);
Expectations and forecast for 2013: guaranteed interest
35
Investor relations (issues with companies)
• MCB Agricole (Ukrzernoprom) failed to comply with requirements of Frankfurt Stock Exchange in terms of reporting financial results and was de-listed from Frankfurt Stock Exchange in the end of 2012-beginning of 2013.
• Agroton received rating downgrade from S&P due to liquidity issue and potential failure to pay interest on debt (April 14, 2013). Company lost 98% of its market capitalization in the following 2 days.
Expectations and forecast for 2013: main issues
36
0
50
100
150
200
250
300
350
400
450
500 France, FOB
Ukraine, EXW
Ukraine, FOB
Oct.11, 2006 quota was settled
Jun8, 2007 wheat qouta cancelled
Oct.11, 2006 quota was set
Jun8, 2007 wheat quota cancelled
Jun.20, 2007 quota was settled
May 22, 2008 export restriction was cancelled
Oct.18, 2010 export quotas were settled
May 19,2011 export tax was introduced
Oct.7,2011 export tax was canceled
Expectations and forecast for 2013: main issues Investor relations (issues with government)
37
Uncontrollable risks
• Weather risks (such as draught of 2011/2012 season);
• Political and legislative risks (Land Law);
• External country risks (EU crisis, US crisis, Middle East escalation, Cyprus problems)
Expectations and forecast for 2013: main issues
38
Expectations and forecast for 2013: our thoughts
Darwinism Ukrainian style: survival of the fittest:
• Smaller sized companies will continue to be acquired by larger ones;
• Political risks are to be managed by purchasing production facilities abroad (see: Milkiland acquisition in Poland; MHP acquisitions in Russia etc.)
• More Ukrainian businesses will be acquired by foreign ones (as an example: acquisition of CFGP in March by Saudi Arabia United Farmers Holding Company). At the same time Ukrainian management with local market expertise will remain.
• Companies will continue pursuing aggressive expansion and modernization strategies;
• Funding will become even more limited and will be provided after through examination of company’s performance.
39
Expectations and forecast for 2013
40
Thank you for your attention, questions are more
than welcome.
41
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