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The Board of KSG Agro S.A. headquartered in Luxembourg (“the Issuer”)
hereby informs that June 8, 2021
the rating committee of the Agency “Expert-Rating” made
a decision
to assign a credit rating to KSG Agro S.A. at the level BBB
according to the agency’s international
scale.
The borrower or the separate debt instrument with the
rating uaBBB is characterized by sufficient credit status in comparison
with other Ukrainian borrowers or debt instruments. Credit status level
depends upon the influence of adverse commercial, financial and economic
conditions
According
to the results of the rating research, the following main conclusions
can be drawn:
1.
KSG Agro S.A. is a vertically integrated agricultural holding, which
includes 27 companies operating mainly in Ukraine. The holding produces
agricultural products for both domestic consumption and export. KSG Agro
S.A. According to the results of 2020 year the Holding received 48.35%
of its revenues
from pig farming, 39.29% – from crop production, 12.36% – from other
activities. In 2011, KSG Agro S.A. became one of the first issuers with
business in Ukraine, which successfully performed public offering of its
shares on the Warsaw Stock Exchange. As of the beginning of April 2021,
35.17% of the shares of KSG Agro S.A. were in free circulation and
quoted on the WSE.
2.
KSG Agro S.A. used short-term and long-term loans in its activities. In
particular, as of March 31, 2021, the share of loans in the liabilities
of KSG Agro S.A. amounted to 47.70%, namely: short-term loans – 5.12%,
long-term ones – 42.58%. As of the beginning of 2021, the shareholders’
equity of KSG Agro S.A. covered 44.16% of bank loans and 19.64% of the
total volume of loans from banks and the parent company. In 2020-2021
the management of the Holding took measures aimed to improve its credit
history by fully repaying and restructuring the overdue debts on bank
loans, as well as reduced the impact of currency risk on the
creditworthiness of KSG Agro S.A., by changing the lending currency from
the US dollar to the functional currency, i.e. the currency of
operations of subsidiaries.
3.
The analysis of key balance sheet indicators and financial results of
KSG Agro S.A. for 2019-2020 and for the first quarter of 2021 shows the
profitable activity of the Company, the increase in the level of the
ratio between shareholders’ equity and liabilities, and a significant
increase in the ratio between EBITDA and liabilities of the Company. In
particular, according to the results of the 2020 year compared to the
2019 year, the ratio between EBITDA and total liabilities of the Company
grew by 8.04 p.p. up to 11.35%, the ratio between EBITDA and the total
amount of loans received by KSG Agro S.A. (including a loan from the
parent company) grew by 16.70 p.p. up to 23.94%, and the ratio between
EBITDA and bank loans increased by 34.81 p.p. up to 54.28%. Current
EBITDA level of KSG Agro S.A. covers a significant share of the
Company’s interest-bearing liabilities, and according to the results of
2020 year it more than in 4 times exceeds the cost of interest on loans,
and more than in three times exceeds the total financial costs of the
Holding (which also include the cost of renting land). This means that
the Company is able to generate a significant amount of revenue that can
be aimed at financing continuous
activity and debt service..
4.
The fact of the availability of listing of KSG Agro S.A. shares in the
main market of the Warsaw Stock Exchange, under certain conditions,
creates opportunities for the Company to access a conditionally free
source of financing. In particular, the increase in investors’ interest
in KSG Agro S.A. shares, which results in an increase in the liquidity
and share price of the Company, improves its ability to increase the
shareholders’ equity by placing shares of the new issue. In particular,
for the period from January 1, 2020 to May 17, 2021, the share price of
KSG Agro S.A grew 2.83times:
from PLN 1.2 to PLN 3.40. At the same time, the higher the share price
on the stock exchange, the better the Company's chances of raising
additional capital through SPO and even replacing part of the borrowed
resources with its own funds. As well, the availability of listing of
KSG Agro S.A. shares on the WSE contributes to the improvement of
corporate governance practices in the Holding. 5. As of the beginning of
2021 year, the agroholding KSG Agro S.A. did not issue other debt
securities, except for short-term promissory notes (as of December 31,
2020, the amount of debt on issued promissory notes was estimated at USD
2.349 million). The Agency notes that if the Company issues other debt
securities, including bonds, its rating may be revised depending on the
terms of issue. 6. The parent company of KSG Agro S.A. is OLBIS
Investments LTD S.A. (Panama), which owns 64.62% of shares of the
Holding, and the ultimate controlling party is Sergyi Kasyanov (Chairman
of the Board of Directors). Based on the above, the level of external
support of KSG Agro S.A. the Agency considers it uncertain that is
traditional for companies whose beneficial owners are individuals.
The
full substantiation of the rating assessment of RA "Expert-Rating" is
contained in the Rating Report: http://www.expert-rating.com/data/upload/INDIVIDUAL_ratings/ENG_KSG_Agro_Report_1q_2021.pdf
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