WSE suspends trading of three Ukrainian stocks

The Warsaw Stock Exchange (WSE) resolved on May 2 to suspend trading of four companies, including shares of Ukrainian companies Sadovaya Group (SGR PW), KSG Agro (KSG PW) and WESTA (WES PW), the stock exchange declared on May 5. The reason for the suspension is that the companies did not provide their 2013 annual reports by the deadline of April 30, as well as not providing “sufficient information concerning reasons of the failure”. 

Alexander Paraschiy: Last month, all the issuers of suspended stocks announced their plans to postpone submission of annual reports. In our view, only the farming company KSG Agro has a good excuse for delay in reporting. It declared on April 29 that its report would be released on June 20. As much as 21% of its land bank is located on the occupied Crimean territory. The company cited an “extraordinary political situation” and declared that it is “still in the process of completing the accounting and subsequent audit work”. We understand that the auditors and the company may have different view on risks related to KSG’s Crimean operations. So far, the Ukrainian Parliament have not regulated business activity in the occupied territory – the law on this issue is still in progress – and we believe it is hard to properly estimate all the related risks without such law. 

The Sadovaya Group declared on April 24 that the date of its reporting will be June 16. As we understand, the company has no sufficient cash to pay for auditors’ services as it has been facing troubles concerning sales of its coal since late 2012. WESTA reported on April 30 that it will publish its annual report by the end of May – the reasons for delay are not clear at the moment. We note that aside from trading suspension, these companies may be fined by the market regulator for breaching their reporting obligations, which could further aggravate their poor financial positions.