IBI-Rating has affirmed the credit rating of LLC «ZERNOPROM AGRO» bonds at uaBBB- grade

IBI-Rating informs on affirming of the long-term credit rating of LLC «ZERNOPROM AGRO» bonds at uaBBB– grade with «negative» outlook and CreditWatch listing.

The activity of LLC «ZERNOPROM AGRO» (Zhytomyr oblast) is focused on accepting, storing, and shipping grain and oil crops. Therefore, the issuer's activity is seasonal and dependent on the state of the agricultural sector, which is highly sensitive to the impact of natural and climatic conditions, government regulation, and fluctuations in product prices. In the analyzed period, the Issuer's revenue increased primarily due to an increase in revenues from product sales. As a result, the іssuer's net income for the first half of 2023 increased tenfold compared to 6 months of 2022 and amounted to UAH 519.4 million, in addition to the increase in production costs. The result of LLC «ZERNOPROM AGRO» activities over the first half of 2023 was a net loss of UAH 7.9 million, which led to a decrease in the company's equity to UAH 380.1 million.

Bonds with a nominal value of UAH 40 million, with maturities in 2029, were issued to finance the construction of the second phase of the elevator with the installation of a shaft-type dryer and to fund the current activities of the company. The decision to issue Series A bonds without a public offering was made on April 30, 2020 by the participants of the issuer.

The affirmation of the credit rating with a negative outlook and CreditWatch listing is due to the instability of the financial and economic performance and the loss-making activity in the first half of 2023, prolonged military actions in the territory of Ukraine due to the aggression from the Russian Federation, deterioration of operating conditions, and uncertainty regarding the prospects for economic development. Taking into account the negative financial result and the full placement of bonds, the level of debt burden of LLC «ZERNOPROM AGRO» rated as high. However, considering the seasonality of the elevator activity, the ability of the Issuer to fulfill its obligations regarding the payment of interest will largely depend on its ability to manage liquidity.

In order to conduct the analytical research the materials provided by LLC «ZERNOPROM AGRO» have been used, including: financial statements for 2020-2022 and 6 months 2023, information on the issue of bonds, other necessary internal information, as well as the information from the public sources, which the Rating agency considers credible.

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