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Loss-making Agrokultura shugs off Ukraine crisis

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Agrokultura revealed a "positive outlook" despite the onset the Ukraine crisis, saying that this had had "no significant impact" on its farming operation in the country, nor deterred potential buyers for the loss-making business.

The Black Sea farm operator, which has a landbank of 216,500 hectares, said that its 69,500-hectare Ukraine operation, in the west of the country, away from the Russian border, had not been affected by the unrest as Viktor Yanukovych was unseated as president.

"Change of governmental control has been peaceful and unopposed in the cities around the group's farms with no significant impact on operations being experienced," Stephen Pickup, the Agrokultura managing director, said.

Nor was the depreciation in the hryvnia expected "to have significant negative performance consequences", given that many of the group's revenues as well as liabilities are linked to the dollar, the main currency in which commodities are denominated.

'Acquisition interest'

Neither had the Ukraine crisis brought the shutters down on the potential sale of its Ukraine operation, into which the group launched a strategic review in October.

"Despite the political events in Ukraine, the assets are valuable, and the group has received interest from parties for the acquisition of the whole or part of the Ukraine business," Mr Pickup said.

Indeed, with plans to cut costs in Ukraine by 30% this year, and commodity prices on the rise, the group was viewing 2014 "with a positive outlook", Mr Pickup said.

'Clearly unacceptable and unsustainable'

The hopes contrasted with a performance he deemed "clearly unacceptable and unsustainable" for 2013, for which Stockholm-listed Agrokultura unveiled a 158% jump in losses to SEK316.2m.

The decline reflected in part a drop in commodity prices, which sent revenues 8.2% lower to SEK617.3m.

However, Mr Pickup also highlighted a "disappointing" cereals harvest at the Ukraine operations, and the relatively high costs at the division, which suffered "another year of substantial losses".

The group said it would cut payrolls costs in Ukraine by 30% this year, while cutting input costs – three times higher than in the group's Russian operations for winter wheat – by use of generic chemicals in place of more expensive branded names.

Agrokultura is also to take a holiday on potash and phosphate fertilizer applications, with soil analysis suggesting it can just apply nitrogen, the third major nutrient, this year "without loss of yield".

Harvest plans

The group made no comment on prospects for its 2014 harvest, for which it has cut winter plantings in Ukraine by 23%, to 24,700 hectares, amid a switch to "more profitable" spring-sown crops such as corn and sunflowers.

In Russia, wet autumn weather prompted a tumble of one-third in plantings, which the group said it intends to make-up through raised spring seedings.

Total sowings will reach 118,800 hectares.

The comments come amid some concern over immediate weather conditions for Black Sea crops.

"Cold temperatures are scheduled to hit southern Russia later this week, while major growing areas in Ukraine haven't seen rain in months," Jonathan Watters at Minneapolis-based broker Benson Quinn Commodities said.

Agrokultura shares stood 1.2% higher at SEK2.48 in morning deals.


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