Astarta rival Radekhiv Sugar to purchase six sugar plants in west Ukraine

Radekhiv Sugar, among the largest sugar producers in Ukraine, plans to purchase six sugar plants in the Ternopil region, the company announced on Dec. 2. Radekhiv Sugar is a subsidiary of international sugar producer Pfeifer & Langen GmbH. The six plants had belonged to Ukrainian farming company Mriya (MRIYA), which declared its insolvency in August 2014. The plants were taken over by Ukrane’s Prominvestbank upon Mriya’s default on loans.

Igor Zholonkivskyi: Radekhiv Sugar was the third-largest Ukrainian sugar producer in 2015, having produced 270 kt with a 13% market share. Out of the six sugar plants that Radekhiv Sugar plants to purchase, two were relaunched this fall following a production halt and transfer of asset rights due to Mriya’s bankruptcy: the Zbarazh and Khorostkiv sugar plants. For the aforementioned plants, the Agrarian Ministry of Ukraine has awarded 2016 sugar production quotas for 2016-17 at 43kt and 5kt, respectively.

If the deal is finalized, we estimate it will enable Radekhiv Sugar to potentially boost its annual production capacity by at least 100 kt of sugar. That should enable the company to become the second-largest sugar producer in Ukraine after Astarta (AST PW).

Radekhiv’s strengthened market position might entail a potential loss of market share of 1% to 2% for Astarta in the mid-term. So far, we remain optimistic on Astarta stock, as the company recently posted quite solid 9M16 financial results and continues to benefit from strong sugar prices, both domestically and abroad.