Capitalization of Ukrainian agri holdings in 2017


The capitalization of Ukrainian agri holdings listed on foreign exchanges generally showed growth in the first half of the year and a decline in its latter half (see the diagram below). It was within a range of EUR 2.6-2.7 Bl at the start and end of 2017. Its all-time peaks occurred on March 2 (EUR 3.162 Bl) and April 27 (EUR 3.144 Bl).

Last year’s capitalization trend contrasted with the 2016 exponential growth curve of the agri holdings’ market value. capitalization

The upturn in the capitalization  was observed in January-May 2017. In our opinion, it resulted from quite steady development of the agricultural sector, sales of products carried over from the previous year, successful planting, favorable crop prospects and some macroeconomic stabilization in the country.

The trend turned down in June. The relative decrease in the agri holdings’ capitalization is explained by a combination of factors, including the following noteworthy ones:

  • occasional market setbacks (for instance, ASF), a drop in prices for some relevant commodities (for example, corn and sugar) and a concurrent rise in input prices pressured profit margins of the agri holdings;
  • some macroeconomic stabilization achieved in the country by mid-year started fading out in view of troubled relations with international lenders. Mounting complications in the financial domain brought about loss of control over inflation (the September-October inflationary spike) and decreased optimism toward steady economic development in 2018-2019.
  • slackness (or, rather, inactivity) of the government and parliament with regard to agricultural reform, the postponement of lifting the land sale moratorium for another year also could not but affect investors’ sentiment.

uaindexThe UAIndex of agri holdings followed a serpentine trend last year: it opened the year at 4.7-4.9 pp, then increased to 5.5-5.6 pp in March-April, plunged to 4.4 pp in November and closed the year at 4.6, i.e. below its January start.

Remarkably, the majority of the Ukrainian public agri holdings are represented on the Warsaw Stock Exchange.

The Polish zloty (PLN) gradually strengthened against the euro last year. Its exchange rate passed the way from PLN 4.38/EUR on the first days of January to PLN 4.18/EUR late in the year (roughly 4.5%) (see the respective diagram).

Since the capitalization and UAIndex of the Warsaw-listed agri holdings are calculated by converting their asset prices from PLN into EUR, strengthening of the zloty (or weakening of the euro – that is the same) must increase the holdings’ capitalization in euro terms.

However, the currency exchange rate seems to have failed to work effectively, the capitalization of the Ukrainian agri holdings sank toward year’s end.

exchange rate

In fact, the capitalization gain achieved in 2016 did not continue in 2017. For various reasons, the aggregate market value of Ukraine’s top agri businesses represented on European stock markets did not grow last year.

Hopefully, the current 2018 year will bring them a new gain. This indicator is important because the capitalization of public agri holdings and its trend reflect the financial appeal of Ukraine’s agri business as a whole. 



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