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Ukraine Markets Daily (September 13, 2017)

Market news

  • Avangard reduced its net loss by 64.1% y/y to USD 11.7 mn in H1 2017
  • NBU simplified loan-raising from international financial institutions

Market comment

The UX index increased by 0.5% yesterday while the PFTS index remained unchanged (in UAH terms). The WIG-Ukraine decreased by 0.3%. On the interbank exchange market, the USD/UAH was down by 0.1% to UAH 26.00 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 26.01.

 

Avangard reduced its net loss by 64.1% y/y to USD 11.7 mn in H1 2017

According to the financial results for the first half of 2017, published by the Company its net loss reduced by 64.1% y/y to USD 11.7 mn. At this time, Company’s total assets grew by USD 5.3 mn (+1.0% h/h) and total liabilities by USD 23.6 mn (+6.0% h/h), while the total equity decreased by USD 18.3 mn (-13.2% h/h). Despite the fact of the Company’s revenue drop by USD 10.1 mn (-15.5% y/y), its reduction of other operating expenses by USD 20.8 mn to a zero level, in combination with the USD 19.2 mn of profits from currency exchange, resulted in the net loss reduction by USD 20.9 mn (-64.1% y/y) to USD 11.7 mn. Avangard’s total assets growth by USD 5.3 mn (+1.0% h/h) to USD 535 mn, is a result of simultaneous increase in non-current assets by USD 9.3 mn (+2.4% h/h) to USD 393 mn and decrease in current assets by USD 4.1 mn (-2.8% h/h) to USD 142 mn. Meanwhile, the total equity decrease by USD 18.3 mn (-13.2% h/h) was mostly caused by the reduction of retained earnings by USD 10.9 mn (-1.3% h/h) to USD 854 mn. At this time the Company’s total liabilities grew by USD 23.6 mn (+6.0% h/h) to USD 414 mn as a result of non-current liabilities reduction by USD 37.8 mn (-11.0% h/h) to USD 306 mn and an increase of current liabilities by USD 61.4 mn (x1.3 times h/h) to USD 108 mn. During the first six months of 2017, net cash outflow decreased by USD 13.6 mn (-94.0% y/y) to USD 0.9 mn. In particular, net cash outflow from operating activities decreased by USD 0.3 mn (-36.7% y/y) to USD 0.5 mn, from investing activities by USD 8.8 mn (-95.7% y/y) to USD 0.4 mn, while no cash was used in financing activities.

Our view:

Changes in Avangard’s assets are caused mostly by property, plant and equipment revaluation as a result of Ukrainian Hryvnia revaluation during the H1 2017 and by some minor acquisitions of buildings, equipment and machinery. In addition, total assets were influenced by the 28.2% h/h reduction of accounts receivable. Company’s net loss during the period reduced its retained earnings and as a result its total equity. Meanwhile, total liabilities structure changed due to maturing of the large part of the Company’s long-term loans (47.3%). An absence of provisions for doubtful debts during the period in combination with Hryvnia strengthening resulted in the Company’s net loss decrease.

 

NBU simplified loan-raising from international financial institutions

According to the National Bank’s of Ukraine (NBU) press-release, it simplified the conditions of loans raising from international financial institutions by the Country’s residents. In particular, to service a debt nominated in foreign currency, residents should not register their contract in the NBU. In addition, loans from international financial institutions attracted in Ukrainian Hryvnia can be serviced in foreign currency if that is provided by the contract.

Our view:

We think that these changes will have a positive impact on the amount of financing attracted from international financial institutions, as they are making the process simpler and faster. In addition, residents can reduce their foreign currency risks by getting Hryvnia nominated loans from international financial institutions.

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Kind regards

Research Team

EMPIRE STATE CAPITAL PARTNERS