Ukrlandfarming fires 13K employees, refers to pressure from NABU

Among the largest agricultural holdings in Ukraine, Ukrlandfarming
(UKRLAN) reported on Jan. 21 that it had shut down 37 companies and fired
13,000 employees as a result of “unprecedented illegal pressure” on the holding
from the National Anti-Corruption Bureau (NABU). “Instead of fighting top-level
government corruption, NABU director Artem Sytnyk is forcing his employees to
fight a major Ukrainian producer,” the holding complained in a statement on its
website.

The holding also reported it had to close some of its
egg farms and is continuing to do so, warning that this could result in the
skyrocketing of egg prices in Ukraine (in 2018, the holding’s market share in
domestic egg production was over 30%).

In its release, Ukrlandfarming also appealed to the
president and prime minister, warning that “unless Artem Sytnuk stops breaking
the law,” the holding’s business will shrink further.

Alexander Paraschiy: It has
become tradition for Ukrlandfarming and its owner Oleg Bakhmatyuk to complain
about pressure from different government bodies. In January 2017 and March
2018, Bakhmatyuk accused the then-governor of central bank Valeria Gontareva of
undermining his holding’s business. Once Gontareva resigned in April 2018, the
role of  “Ukrlandfarming’s personal enemy” was awarded to NABU head
Sytnyk. This scapegoating approach can only partially explain all the business
troubles that Ukrlandfarming and its related Avangardco (AVINPU, AVGR LI) have
had since late 2016.

Amid the absence of the company’s official financial
reports, the size of Ukrlandfarming’s troubles can be seen from its press
releases in which it refers to the size of its workforce. For instance, in
January 2017 (nearly at its peak), Ukrlandfarming stated it was employing
37,000 workers, while in November 2019 it referred to 27,000 employees. In this
latest release, it is referring to 13,000 workers who lost their jobs, without
a clear indication of the period (so, we conclude that this is compared to peak
levels). This implies Ukrlandfarming has scaled down its business since early
2017 by about a third, which is a significant loss.

What is clearly true in Ukrlandfarming’s most recent
complaint is that the closure of the egg-producing facilities of Ukraine’s
biggest player (for whatever reason) has resulted in rising prices for eggs.
Wholesale prices for shell eggs have grown quickly since late November and
reached their historic high of UAH 2.94/unit in Ukraine as of mid-January,
which is 73% more yoy, according to ptichki.net website.

While negative for Ukrlandfarming and Avangardco,
such a development looks beneficial for their competitor, WSE-traded egg
producer Ovostar (OVO PW).