Capitalization of Ukrainian agricultural holdings in 1st quarter of 2018

17.04.2018

In the 1st quarter of 2018, capitalization of Ukrainian agricultural holdings, whose shares are quoted on foreign exchanges, was generally characterized by unstable dynamics.

Starting the year from EUR 2.57 billion and reaching the level of EUR 2.93-3.0 billion during January 24-30, capitalization of agricultural holdings declined and fell to EUR 2.75 billion at end of the 1st quarter. It is noteworthy that at the beginning and at the end of 2017, it also ranged EUR 2.6-2.7 billion. This indicates a certain stability in cost of Ukrainian agricultural holdings in the world market.

This year, the trend line of capitalization loses with a steeper exponent of growth in market value of agricultural holdings than in the 1st quarter of last year.

In UkrAgroConsult’s opinion, it is connected with a fact that the beginning of last year was remarkable for:

• favorable forecasts of weather conditions for a high crop;

• some stabilization of macro financial situation in the country;

• issue transfer of land market opening into practical level.

The trend of capitalization is determined by market value of major agricultural holdings. The largest – MHP and Kernel – set the direction of trend. The diagram shows how more "expensive" agricultural holdings form a capitalization curve.

Their shares are quoted on London and Warsaw exchanges, which were in mainstream of the world market growth at the beginning of 2018. However, from the first days of February the adjustment started. Experts also explained drop in quotations by rapid growth in profitability of the US government bonds and related concerns about the growth of inflation and an increase in interest rate of the Federal Reserve System.

In its turn, stock quotations of MHP responded to the bearish trend, probably on voltage factor with a debt restructuring of MHP beneficiary. Kernel's shares also reacted the same way to the reduction in financial results and an intention to reduce land bank.

In the 1st quarter, UAIndex of agricultural holdings fluctuated within 4.5-5.2 points. The year opened at 4.56 points, and at the end of March the index came out at 4.87.

In making an assessment of aggregate dynamics of agricultural holdings capitalization expressed in EUR, certain role is played by exchange rates. Most of Ukrainian public agricultural holdings are represented on Warsaw Stock Exchange, and the largest on capitalization - MHP - on London Stock Exchange.

During the 1st quarter we may observe a gradual weakening of PLN against EUR and a small strengthening of GBP (see the diagrams below).

The change in exchange rates did not become a significant factor in the change of capitalization of Ukrainian agricultural holdings during the reporting period.

 

UkrAgroConsult

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