Agroton updates on its losses related to military actions in Donbas

Farming company Agroton (AGT PW) offered an update on its hardships in the Luhansk region, where the company’s entire business is located, in a Nov. 4 filing. Its poultry business is fully located in the part of the region controlled by separatists and will be discontinued, bringing write-off losses of USD 15 mln, the company reported. This represents 8% of the company’s total assets as of end-2013.

Additionally, the company reported on limited access to a part of its land bank of 20,000 ha (out of a total 124,000 ha, reported as of end-2013) due to the presence of armed separatist groups there. On top of that, Agroton warned on extra crop transit expenses of USD 30-50 per ton due to damaged transportation infrastructure in the region and risks for transporters.

Alexander Paraschiy: The exposure of Agroton’s farming segment to war-torn locations of the Luhansk region (16% of the total) is much smaller than we had estimated (40%). At the same time, the effect of military actions on Agroton’s harvest for this season is unclear, as the company did not provide information on its currently utilized land bank that is affected by military actions. The company sowed no more than 62% of its total land bank last season, we estimate.

The war factor clearly adds some uncertainty to Agroton’s operations and its future, though that does not change much, given that the company wasn’t transparent and predictable in previous seasons either.