Agriculture

Next year, the agricultural company Sintal Agriculture [SNPS GF] plans to place its shares on either the Warsaw or London Stock Exchange. According to the Company’s management, the Company is not considering the option of raising debt financing. In October, Sintal completed a private placement of 17.2% of its ordinary shares on the Frankfurt Stock Exchange (Germany), during which it attracted USD 13 mln. Using the resources that were raised, the Company plans to seriously expand its infrastructure, in particular, its elevator capacity and the amount of irrigated land under cultivation.

As of October 23, Ukrainian agricultural enterprises had gathered 6 mln metric tons of sunflower seeds, 5.6 mln metric tons of corn, and 6.9 mln metric tons of sugar beet. Corn was harvested from an area of 1.2 mln ha (56% of the forecast). The crop yield for which is 4.67 metric tons per ha, whereas the yield rate was at 4.33 metric tons per ha in 2008. The corn crop is forecast at 10 mln metric tons. Farmers have already gathered sunflower from 3.9 mln ha, representing 94% of the forecast. Its yield in 2009 is averaging 15.4 centner per ha, in comparison to 2008’s 15.6 centner per ha. The sunflower crop is forecast at 6 mln metric tons.

On October 20 Sintal Agriculture [SNPS GF] finished a private placement of 17.2% of its ordinary shares on the Frankfurt SE, for which it raised USD 13 mln. At present, several other agricultural holdings are in the process of making placements. One of them is already public: Mriya [MAYA GR], one of major Ukrainian producers of wheat, sugar and sunflower oil.

In September, Landkom International [LKI LN] reported that it is carrying out negotiations with respect to a potential merger with other international agricultural operators. However, upon further consideration of the potential transaction and after consulting with majority shareholders, the Company decided to abandon the talks. Currently, Landkom International’s board decided to obtain financing from existing shareholders and new investors. In particular, the Company reported on the planned issuance of 195 mln ordinary shares at 5 pence per share in order to attract an additional GBP 9.75 mln (about USD 16 mln) in financing. The actual issuance will be done after the meeting of shareholders that is scheduled for November 18 or a date thereabouts.

ABN AMRO Bank N.V. and Raiffeisen Bank Aval have prolonged short-term loans that had been granted to the agricultural holding Astarta [AST PW], until March and July 2011, respectively. As of June 30, 2009, the Company’s total debt amounted to EUR 85.33 mln. This includes short-term debt, up to one year, at EUR 45.54 mln; and from one to two years at EUR 7.45 mln. The debt structure includes its four largest loans, denominated in USD, amounting to EUR 54.4 mln at a rate of Libor +1.25% to Libor + 5.5%, as well as a short-term loan for EUR 9.95 mln, in UAH, at 25% per annum.

As of October 22, Ukrainian sugar refineries had produced about 0.6 mln metric tons of sugar in 2009. The sugar content of the beets and the sugar yield are 16.82% and 13.6%, respectively, which are higher than the figures for last year. The Ministry of Agrarian Policy of Ukraine forecasts the production of sugar from the 2009 beet harvest at 1.5 mln metric tons. In comparison, 1.574 mln metric tons of beet sugar were produced from the beet harvest in 2008.

As of October 21, 2009, the Ukrros association [36U1 GR, U / R] had processed 389 metric tons of sugar beets and produced 51 thsd metric tons of sugar, which is equivalent to about 13.5% of Ukraine’s overall sugar production for this season. Since the season began, the Company has managed to store 574 thsd metric tons of beets, or 52% of its plan. At the time that the Company posted its report, the Company had harvested 9025 hectares, representing 54% of the total sown area. Ukrros plans to produce 144 thsd metric tons of sugar in the new season. Due to technological innovations, natural gas consumption at the Orzhitskyy Sugar Refinery in 2009 fell from 43 cbm in 2008 to 37 cbm per metric ton of beets. As well, 19.2 metric tons of sunflower was harvested with an average yield of 1.75 metric tons per ha. 23% of the area sown with corn had been harvested, the yields for which exceeded expectations, reaching up to 7.0 metric tons per ha on some farms. In related news, Ukrros has already planted 30 thsd ha with winter crops, which equals 94% of its planned level.

Astarta [AST PW] has finished the winter crop sowing campaign for the 2010 harvest on an area of 37.5 thsd ha, 8% more than in the previous year. The area sowed with winter wheat is 33 thsd ha, while 3 thsd ha was sown with winter barley. Remarkably, Astarta sowed more than 30% of total area with seeds produced by Astarta itself. The harvesting of industrial crops has almost entirely been completed, as follows: 11.7 thsd ha of sunflower with an average yield of 2.7 metric tons per ha; 14.8 thsd ha of soybeans with an average yield of 1.6 metric tons per ha; and 4.6 thsd ha, or 34% of the total planned area, sowed under corn with a yield of 7.3 metric tons per ha.

The Agrarian Chamber of Ukraine (ACU) has suggested a shift from direct to indirect taxes in the agricultural sector for the purpose of full implementation of the land market. The rental rate is based on low land taxes and an underestimation of arable land. The President of the ACU also commented that the cost of 1 ha of land in Ukraine is estimated to be USD 2 thsd, on average, and the tax is USD 2 per year, i.e. 0.1% of the appraised value. The rental rate is about USD 60 per year, which corresponds to 3% of the value of one hectare.