STOCK MARKET: More Ukrainian Agri-Firms Land on the Warsaw Bourse

24 Jun 2011 • by Natalie Aster

The Warsaw Stock Exchange (WSE) has long since become a financial Mecca for the Ukrainian food and agro businesses. The last month saw IPOs of already two major players, and more are gearing up to follow in their footsteps.

KSG Agro, a large agricultural company operating in central eastern Ukraine, raised PLN 108m (around USD 39.6m), having offered 33% of its equity capital to investors. Given the share issue price of PLN 22, the company's post-IPO capitalization has exceeded PLN 328m (about USD 120m).

"As KSG's shares have been substantially oversubscribed, the company has been valued at USD 2,800/hectare," says Denis Alyoshyn, Corporate Finance Director of the Kyiv-based Visum Capital, the IPO organiser and financial adviser, to news2biz.

He adds that the WSE is a natural choice for KSG Agro due to the market's leading position in Central & Eastern Europe (CEE), the wide presence of both Polish and foreign investors and the friendly approach to Ukrainian firms. According to him, the gross proceeds from the sale of new shares will be used primarily to carry out the group's investment programme and to finance planned acquisitions.

Specifically, the group is going to invest approximately USD 10.7m in the expansion of its land bank by about 20,000 ha by the end of the current year. By 2016, the company hopes its land bank to reach 150,000 ha, up from the current 33,700 ha and to double the operational efficiency of land usage, which is now USD 350.

KSG Аgro is a vertically integrated group comprising 12 subdivisions located mainly in the Dnipropetrovsk and Kharkiv regions. The group operates virtually in all the segments of the agri market, including production, storage, processing and sale of farm produce. In 2010, it generated revenues of USD 15.6m, with its EBITDA and net profits settling at USD 12.2m and USD 10m, respectively. In 2011, the company forecasts its revenue at USD 27.0m, EBITDA at USD 24m and net profit at USD 20m.

Buying up faming land

The other Ukrainian business to hit the Warsaw bourse in April was Industrial Milk Company (IMC), a crop and dairy producer with operations in central and northern Ukraine (Poltava and Chernigiv regions), which raised PLN 80.73m. New investors acquired a 23.9% stake in the company’s increased share capital. With its market capitalization of PLN 338m. IMC started listing its shares on the WSE in the first week of May.

The IPO proceeds would, according to IMC CEO Ievgen Osypov, be allocated to finance the company's ambitious investment programme, which assumes tripling the existing land bank of 38,000 ha, doubling storehouse capacity and the development of the machine park.

IMC is focused on corn, oil plants and potato farming. The company is one of the biggest milk producers in Ukraine. In 2010 the company reported net sales of USD 34.8m, EBITDA of USD 19.5mn and net income of USD 14.8m.

Cheap financing & exposure

Besides the WSE's main market, also its alternative trading platform NewConnect is attracting Ukrainian businesses. Lutsk Foods, one of Ukraine's leading producers of tomato sauces (known under Runa and Ridny Kray trade marks), has scheduled a placement of its minority stake on NewConnect, the WSE's alternative trading system, for Q4 of the current year.

"Lutsk Foods is planning to raise around EUR 1.5m in the course of the placement in order to finance expansion of its business in Ukraine, improvement of the applied production technologies and entrance into the Polish food product market," says Bogdan Adamowicz, the managing partner of the Polish investment company Progress Holding, Lutsk Foods' authorised IPO advisor, to news2biz.

"The expenditures for raising funds on NewConnect are lower than credit rates," he says explaining the reason of entering the Warsawbased trading floor for Lutsk Foods. "Additionally, NewConnect is a very good place for hooking companies up with their potential investors and business partners, promoting and boosting an own brand internationally, entering international markets and acquiring new contractors.

Lutsk Foods was set up in 1997 as a stock company on the basis of the municipal food factory, which had operated in the city of Lutsk in north-western Ukraine since 1945. In addition to a broad range of tomato sauces, the company manufactures ketchup, mustard, mayonnaise and vinegar of various sorts. While Lutsk Foods has not yet disclosed its operational results for the whole year 2010, its net profit and net revenues during the first nine months of the year made up UAH 1.2m and UAH 68.35m, respectively.

New index: WIG-Ukraine

To distinguish Ukrainian issuers, which have successfully staged their IPOs on the markets operated by the Warsaw Stock Exchange (WSE) and are likely to be followed by other Ukrainian companies, the WSE has launched a new index – WIG Ukraine.

The index incorporates companies with their registered office in Ukraine or running vast majority of their operations in Ukraine. WIG Ukraine Index's underlying companies will have to have at least 10% of their shareholders' equity in free float and belong to one of the following segments on the WSE Main List: 250PLUS, 50PLUS or 5PLUS.

The Index will be revised on a quarterly basis. New issuers will become eligible for the incorporation into the Index after three sessions from IPO have elapsed. "The index of Ukrainian companies listed on a non-Ukrainian stock exchange is the first such index in Europe and it is the best evidence of developing Polish-Ukrainian business relations as well as successful implementation of the WSE regional growth strategy. The Warsaw Stock Exchange will continue taking measures to enhance its attractiveness for entrepreneurs and investors as well as to set up a "trading floor for foreign companies" listed on the WSE," Ludwik Sobolewski, President and CEO of the WSE Management Board, is quoted as saying by a WSE press release.

To date, seven Ukrainian companies selected the WSE Main List as a platform for financing their growth through Initial Public Offerings worth almost PLN 1.8bn. Besides the newcomers KSG Agro and IMC the index include agri sector firms: Agroton, Astarta Holding, Kernel Holding, Milkiland and mining group Sadovaya Group. The first Ukrainian issuer – Agroliga – was also listed on the NewConnect market.

In the focus

High interest in WSE-listed Ukrainian companies is evidenced not only by their successful IPOs – their valuation and stock trading volumes are also growing. The record holders in this area include Astarta Kyiv (an almost fivefold increase of capitalization since its IPO, from PLN 475m to PLN 2.033bn) and Kernel Holding (almost fourfold increase of capitalization since its IPO, from PLN 1.520bn to PLN 5.526bn).

Warsaw Stock Exchange is the largest stock exchange in the Central and Eastern Europe and organizes trade on one of the fastest-growing capital markets in Europe. Since 2006 it has been in the lead amongst the European stock exchanges in terms of the number and value of IPOs (in 2010, it came on the second place in terms of the number and value of IPOs).

The WSE operates a regulated market for stocks and derivatives and also the New Connect market, which is an alternative stock market for growing companies. The WSE is also developing the Catalyst market – designed for the issuers of corporate and municipal bonds.

Since 11 December 2010, the Warsaw Stock Exchange has also operated the WSE Energy Market, which enables the investors to make day-to-day purchases and sales of electricity and to open longer trading positions.

The above news abstract has been taken from a bi-weekly newsletter to professionals doing business in Poland "news2biz - Poland".

To apply for the subscription or get more information please contact



MarketPublishers, Ltd.

Tanya Rezler

Tel: +44 208 144 6009

Fax: +44 207 900 3970