Ukrlandfarming won’t be able to sow 17% of its land bank in 2015

Ukrainian agricultural producer Ukrlandfarming (UKRLAN) will leave 110,000 ha of its land bank (17% of its total 654,000 ha) unsown in 2015, its deputy CEO announced on March 11. Of the unsown land, that which is in the Ukrainian mainland will be kept fallow and that which is in Russian-occupied Crimea and Donbas is inaccessible, the company said.

Roman Topolyuk: The announced plans imply that Ukrlandfarming will reduce its harvested area by 11% in 2015, which will pressure its earnings potential as 24% of its 9M14 revenue was generated by its crops segment. There is a number of other challenges the holding might be facing in 2015, including the necessity to fund the working capital for the spring sowing campaign and organizing refinancing of the Avangardco’s Eurobonds (AVINPU, egg producing subsidiary of Ukrlandfarming) maturing in October 2015. Ukrlandfarming hasn’t succeeded in placing its preferred shares, which was announced in October 2014 and could have helped.

Steep hryvnia devaluation has significantly hurt the profitability of its egg production business and the warfare in Donbas led to its laying hens flock falling 30% throughout 2014. The probability of AVINPU’s notes restructuring remains high, we estimate, which may pose certain risks for Ukrlandfarming’s debt profile as a whole.