Business news from Ukraine

PROFIT OF UKRAINIAN PORTS SHOULD BE RETURNED TO CITIES FOR INFRASTRUCTURE DEVELOPMENT

The profits of ports should be returned to the cities in which they are located for the development of their infrastructure, Mykolaiv Mayor Oleksandr Senkevych has told Interfax-Ukraine on the sidelines of the International Mayors Summit (IMS).
“Mykolaiv was a city of shipbuilders. Now the factories are standing idle, Mykolaiv has turned into a port city. However, we do not receive money from the port infrastructure to the local budget, except for personal income tax and land lease,” Senkevych said.
He recalled that last year the net profit of the Ukrainian Sea Ports Authority amounted to more than UAH 2.6 billion.
“I think that this amount needs to be “halved.” Half of the profits is to be divided between the port cities, in proportion to the transshipment of goods. Cities should receive a portion of what they have earned for the country. Then we will be able to restore our infrastructure,” he said.
In his opinion, it will be possible to talk about the restoration of production and the attraction of significant investments in shipbuilding after the adoption of a law on technology parks. Senkevych considers promising a mechanism for the establishment of tax credits and preferential rates by local governments.
“Roughly speaking: they built a plant for EUR 100 million, you are provided with a tax credit for 50% of this amount for five to seven years. Personal income tax and land tax are paid from this amount. It is profitable for the enterprise to work officially, pay high salaries to employees,” Senkevych said.

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UKRAINIAN BANKS RECEIVE UAH 45.6 BLN OF NET PROFIT IN JAN-AUG

Solvent banks of Ukraine in January-August 2021 received UAH 45.592 billion of net profit, which is 1.4 times more than in the same period in 2020 (UAH 32.677 billion), according to data published on the website of the National Bank of Ukraine (NBU). According to the report, bank incomes for the eight months of this year increased by 2.2% against the figure for the same period last year – up to UAH 172.681 billion, in particular commission income increased by 35% – up to UAH 58 billion.
At the same time, the result from revaluation and from sales and purchases was negative and amounted to UAH 1 billion, while for the same period last year it was positive and amounted to UAH 20.4 billion.
At the same time, the expenses of the banking system in January-August 2021 decreased by 6.8% compared to this indicator in 2020 – to UAH 127.09 billion, including deductions to reserves – by 2.8 times, to UAH 20.4 billion. At the same time, commission expenses increased by 1.5 times – up to UAH 21.8 billion.
As reported, Ukrainian banks in 2020 reduced their net profit by 29% – to UAH 41.3 billion, but in the fourth quarter the decline was 63% due to increased allocations to reserves.

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INTERPIPE SEES PROFIT FALL FROM $115 MLN TO $29 MLN IN JAN-JUNE

In January-June of this year, the international vertically integrated pipe and wheel company Interpipe reduced its net profit by about 74.4% compared to the same period last year, to $29.431 million from $115.529 million.
According to the company’s interim report on operating and financial results for the second quarter and the first half of 2021, pre-tax profit in January-June decreased 58.3%, to $50.766 million from $123.495 million in the same period in 2020.
At the same time, operating profit halved – to $62.847 million from $128.058 million.
Interpipe received $111.209 million EBITDA in the first half of this year, which is 25.4% less than the same period last year ($148.980 million). The company’s revenue during this period decreased by 1.7%, to $460.471 million, while capital investments increased by 66%, to $31 million.
In addition, Interpipe increased its free funds from $96.631 million at the beginning of this year to $206.008 million by the middle of the year. In the same period last year, Interpipe reduced free funds from $256.148 million (at the beginning of 2020) to $186.790 million (as of mid-2020).
As reported in the company’s press release, Interpipe’s net debt at the end of the first half of 2021 was $199 million, while the net leverage ratio (net debt to EBITDA) remained stable at 0.9x.
In the second quarter of this year, revenue increased by 29% compared to the previous quarter, to $260 million, EBITDA increased by 75%, to $71 million, and the amount of capital investments increased by 20%, to $14 million.
Capex in new projects tripled year over year, to $21 million.
As of June 30, 2021, the company’s total debt increased to $199 million following the successful placement of a new $300 million eurobond issue with a rate of 8.375% maturing in 2026. The net leverage ratio remained stable at 0.9x.
Interpipe in January-March this year reduced its net profit by 90.4% compared to the same period last year, to $12.826 million from $133.064 million. In the second quarter, revenue decreased by 19.9%, to $200.952 million, EBITDA – by 53%, to $40 million, the amount of capital investments increased by 58%, to $17 million. Net debt was $53 million with the net leverage ratio of 0.2x. As of March 31, 2021, the company’s total debt fell to $110 million following the full redemption of the 2024 eurobonds on January 26, 2021, keeping the net leverage ratio low at 0.2x.
Interpipe is a Ukrainian industrial company, a manufacturer of seamless pipes and railway wheels. The company’s products are supplied to more than 80 countries all over the world through a chain of commercial offices located in the CIS, Europe, the United States and the Middle East.

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STATE-RUN NAFTOGAZ PLANS TO SEE PROFIT BY LATE 2021

NJSC Naftogaz Ukrainy plans to end 2021 with a net profit, CEO Yuriy Vitrenko has said.
“We are doing everything to show that, in the results of this year, Naftogaz is no longer a loss-making company and is financially stable,” he told Interfax-Ukraine on the sidelines of the YES Brainstorming 2021 forum in Kyiv on Friday.
Vitrenko recalled that the stability of Naftogaz largely depends on the solvency and financial discipline of its counterparties to whom it sells natural gas: thermal energy enterprises, industrial and household consumers.
In addition, the financial activities of Naftogaz are also influenced by the results of Gas Transmission System Operator of Ukraine (GTSOU), on which the dynamic payments of Mahistralni Gazoprovody Ukrainy (MGU) for the infrastructure transferred at the end of 2019 depend.
“The situation when a critical element of the infrastructure – GTSOU – incurs losses that are not replenished, for example, due to unauthorized selections or nonpayment for balancing services, is not normal,” Vitrenko said.
“Naftogaz has enormous problems associated with the fact that the entire industrial chain was financially unstable. Our task is precisely to make sure that, on the one hand, the entire market can develop financially sustainably, and on the other hand, Naftogaz is a financially stable company. which can increase production and really ensure, and not at the level of declarations, the country’s energy security,” he said.

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OVOSTAR REDUCES NET PROFIT BY ONE THIRD IN H1

The agro-industrial group of companies Ovostar Union, one of the leading producers of eggs and egg products in Ukraine, in January-June 2021 received $1.62 million in net profit, which is 34% less than in the same period in 2020, its EBITDA decreased by 27% – up to $3.5 million.
According to the company’s report, published on the website of the Warsaw Stock Exchange on Friday evening, Ovostar’s revenue in the first half of 2021 increased by 37.6% to $61.42 million, its gross profit decreased by 13.8% to $6.24 million, operating profit doubled to $1.37 million.
“Since the third quarter of 2020, the Ukrainian egg industry has been decreasing in terms of the total number of laying hens and production volumes. A poor harvest last year led to an increase in the prices of the main components of the feed mixture, which subsequently increased the cost of production. This, along with the very unfavorable dynamics of the selling prices for eggs, caused huge losses to the industry. Many egg producers are cutting their herds,” the report says.
The report indicates that the company’s net debt as of June 30, 2021 increased by 20% compared to the same date last year, to $8.9 million, while the total volume of new or refinanced loans amounted to about $4.0 million. Long-term debt of Ovostar’s liabilities as of the indicated date increased by 43.2% – to $7.15 million, and the current ones – by 47.1%, to $23.86 million.
The total amount of the company’s assets as of June 30, 2021 increased by 8% compared to the same date in 2020 – to $141.2 million, mainly due to an increase in the fair value of Ovostar’s biological assets.
“Against the backdrop of the COVID-19 pandemic and the general unfavorable situation in the agro-industrial complex, it was decided to focus on operational efficiency and suspend the investment program until further notice. Thus, in the reporting period, only minor investments were made in production capacity and infrastructure,” the message says.

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KSG AGRO BOOSTS NET PROFIT 48 TIMES IN H1

In January-June 2021, the KSG Agro agricultural holding increased its net profit 48 times, year-over-year, to $13.7 million, of which the group of companies received $12.86 million through the sale of a number of its assets.
According to the holding’s statement on the website of the Warsaw Stock Exchange on Sunday, its revenue for the specified period decreased by 12%, to $6.81 million.
“In May 2021, the group sold its subsidiaries Soyuz-3 LLC, Agrofirma Vesna LLC, UAIH Trading House LLC. Agrofirma Vesna LLC and UAIH Trading House LLC are inactive organizations. Soyuz-3 LLC is a production organization engaged in crop production, but acquired with large commitments and remains outside the group’s ownership structure until such obligations are settled,” the company said in a statement.
It is specified that proceeds from the disposal of the subsidiary company Soyuz-3 LLC (Novopokrovka, Dnipropetrovsk region) from the agricultural holding amounted to $6.5 million, UAIH Trading House LLC some $4.27 million, Agrofirma Vesna LLC some $2.01 million.
KSG Agro for the reporting period reduced gross profit by 27%, to $2.48 million, operating profit by 28%, to $1.89 million, its EBITDA decreased by 22%, to $2.69 million.
According to the statement, the company in the first half of the year reduced profit in the crop segment by 37%, to $1.46 million, in the livestock segment by 19.4%, to $ 700,000, while in the segment “other operations” (production of fuel pellets and heat energy) increased by almost 44.5%, to $310,000.
“In 2021, the group started a project to gradually renew the sow population in Ukraine to increase the birth rate of piglets. To this end, the group is negotiating with Suisag, a Swiss pig genetics company, and Genesus, a Canadian genetic company. As of the date of these financial statements, the group expects to receive first batches of sows from Genesus,” the company said in the statement.
The agricultural holding said in the report that it is considering an international investment project with several partners to build a breeding pig farm in Kazakhstan for 50,000 pigs with an estimated total cost of EUR 30 million.
At the same time, KSG Agro said the total debt of the group of companies in U.S. dollars as of June 30, 2021 decreased by almost 44.5%, year-over-year, to $15.3 million, while it increased from UAH 82,000 to UAH 14.8 million
“In 2020, the group has already managed to increase its net current assets from negative $23.5 million as of January 1, 2020 to negative $6.3 million as of December 31, 2020. The group plans to complete the second phase of the process by the end of 2021, bringing net current assets to a positive value. As of June 30, 2021, the total balance of ‘other financial liabilities’ compared to December 31, 2020 decreased even more,” the group said.
According to the report, the majority shareholder and head of the board of directors of the agricultural holding KSG Agro Serhiy Kasianov, who owns it through Olbis Investments Ltd. (Panama), on August 2, sold 1 million shares (6.66%) of the group of companies to two legal entities with Polish jurisdiction, after the transaction, the share of Olbis Investments Ltd. amounted to 57.96% of the charter capital.
The vertically integrated holding KSG Agro is engaged in pig breeding, as well as in the production, storage, processing and sale of grain and oilseeds. Its land bank is about 21,000 hectares.
According to the agricultural holding itself, it is one of the top five pork producers in Ukraine.

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