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Astarta of Ukraine Seeks to Restructure Loan Portfolio, CEO Says

Astarta Holding NV (AST), a Ukrainian agricultural company and sugar producer, seeks to restructure its loan portfolio, the Chief Executive Officer Viktor Ivanchyk said.

Astarta, which raised about $32 million at an initial public offering in Warsaw in 2006, is now in talks with banks in Europe and the U.S. on seven, eight, or even 10-year credit resources as it seeks to boost grain, sugar and milk output and cut natural gas consumption, Ivanchyk said.

The ability of Ukrainian companies to tap foreign markets declined amid investor uncertainty as the financial crisis in Europe is aggravated by elections in Greece. The local banking system was shaken by the global credit crunch of 2008 which caused devaluation of the Ukrainian currency, the hryvnia, and shortened liquidity available for crediting business.

“We are working on prolonging our loan portfolio and on prospects to attract long-term financing,” Ivanchyk said in an interview today in his office in Kiev. “We are constantly working on leveling payment peaks and on having a balanced credit portfolio, including funds to refinance certain loans.” Astarta is not planning to sell Eurobonds, he said.

The company, which has sugar, grain, milk and cattle farm segments, plans to keep this year’s investments around 60 million euros ($75.49 million), almost the same level as last year, Ivanchyk said.

Astarta shares fell 43.6 percent in the past 52 weeks, according to data compiled by Bloomberg. Shares opened at 58.8 zloty today in Warsaw almost unchanged from 58.7 zloty at close yesterday.

Shares Drop

“Astarta’s share prices dropped to around 55 zloty recently and given the company’s improved performance indicators in 2011, it seems to lack logic,” Ivanchyk said. “This is aggravated by the worsening situation in the world and in Ukraine which everyone is talking about.”

Ukraine is struggling to secure cheaper energy imports from traditional ally Russia and unlock international aid, at a time when the economy is losing steam. Halfway into President Viktor Yanukovych’s five-year term, credit markets signal a 44 percent chance of a Ukrainian default, while Societe Generale SA predicts the hryvnia will be devalued.

The Kiev, Ukraine-based company’s 2011 profit rose by 9.4 percent to 87.53 million euros from 80 million euros a year earlier.

Foreign-currency revenue accounted for 31 percent of the total in the first quarter, Ivanchyk said, adding that it will be close to 20 percent by the end of the year. This compares with 13 percent in 2011, when foreign-currency revenue exceeded the need for external loan repayment three or four times, he said.

Grain Exports

Grain export sales will increase “essentially” in the second quarter this year after an 11-fold annual jump in the first quarter, Ivanchyk said. Astarta exports corn, wheat and soybeans in the grain segment. Grain prices are not going to decline as demand remains “lively,” Ivanchyk said.

The decline in sugar prices in Ukraine “is temporary” and they will rise at the end of the second quarter or early in the third quarter. The company estimates refined sugar output will rise this year to 400,000 metric tons from 376,000 tons last year, according to Ivanchyk.

The company wants to cut natural gas consumption needed to process 1 ton of sugar beet into refined sugar to 25 cubic meters in three to five years compared with 30 cubic meters last year, which helps it cut production costs, he said.

Milk output is estimated to increase this year to 80,000 tons from 70,000 tons last year, Ivanchyk said. Milk prices will rise by the third quarter after a seasonal decline in June through August, he said. Russia’s restrictions on Ukraine’s cheese exports in February also cut prices, he added.

Increase Efficiency

Astarta increased corn plantings for the 2012 harvest, to over 40,000 hectares (98,800 acres) compared with 33,000 hectares a year ago and soya plantings rose to 47,000 hectares from 34,000 hectare last year, he said.

Astarta’s agricultural land in operation expanded from 90,000 hectares in 2006, the year it sold the IPO, to 245,000 last year, according to the company’s website.

The company now “places an emphasis on increasing the efficiency of its existing assets, land and infrastructure,” rather than expand harvestable fields, Ivanchyk said.

Ukrainian authorities have delayed the introduction of a farm land market until 2013. The country’s legislature has been debating the farm land sale law since last year.

The bill may limit the allowed use of farm land in each of the country’s 490 rural districts to 6,000 hectares. This will force large agricultural companies to divide their business and worsen their efficiency, Ivanchyk said. Investors are “cautious about business climate and administrative pressure.”

To contact the reporter on this story: Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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