Agriculture
July 25, 2014
Avangard’s 2014 financials will be hit hard by this spring’s devaluation of the Ukrainian hryvnia, as some 70% of its production cost is linked to the UAH/USD rate while only 40% of sales are in hard currencies. We model the company’s FY14 EBITDA as falling by 22% YoY to USD 234mn. The likely elimination of some of Ukraine’s generous tax preferences for large agro producers in 2015 also bodes poorly for Avangard’s earnings next year. Meanwhile, our analysis of the company’s 1Q14 financial statements raises concerns about their transparency. We derive a target price for Avangard at USD 8.93 per DR, implying a HOLD recommendation.
