Astarta initiates acquiring own railcar fleet

Ukrainian farmer and leading sugar producer Astarta
(AST PW) reported on March 1 it has purchased 130 grain railcars as part of an
initiative to build its own fleet. It expects to purchase another 70 railcars
in March with the goal of its new fleet helping to optimize grain logistics,
particularly in times of peak demand for railcars in Ukraine.

In other news, Interfax-Ukraine reported that
Ukraine’s Cabinet approved on Feb. 28 a state program of support for farming
companies, according to which farmers can receive state compensation of up to
25% of the cost of grain railcars they purchase.

Alexander Paraschiy: The
acquisition of railcars by large farming companies has become a market trend
prompted by a deficit of railcars in the country and rising prices for their
rent. State deregulation of daily use rates in January 2018 has prompted state
monopoly Ukrainian Railway to hike rents several times. Recall, two weeks ago,
Ukrainian farmer Kernel also announced the purchase of a logistics company operating almost 3,000
railcars.

We estimate the payback period for Astarta’s new
railcars of about four years, and this can turn out to be even less if the
company secures state compensation, such as what the Cabinet approved. We
assess these acquisitions to be value-creative for both Kernel and Astarta.