French companies see Ukraine as a rewarding destination for agricultural businesses. But banking remains a challenge.
“Ukraine is a fantastic country for agriculture,” Linen of Desna owner Michel Terestchenko told the Kyiv Post, noting that the size of Ukraine’s arable land is 27 percent that of the European Union’s.
France’s big businesses began to ramp up their investments in Ukraine after the 2004 Orange Revolution. In December 2005, France’s largest lender BNP Paribas acquired Ukrsibbank for $347 million from local businessmen Oleksandr Yaroslavsky and Ernest Galiev. Several months later, in May of 2006, another major French bank, Credit Agricole, announced the acquisition of Viktor Topolov’s Index-Bank for $260 million.
However, Index-Bank’s financial performance dipped after the deal. By 2009, it fell from 21st to 38th among Ukrainian banks in terms of assets. Now the bank is rebranded under its parent entity’s name – Credit Agricole – and is in 19th position. It earned $46 million last year, down 10 percent from the previous year.
For BNP Paribas, doing business in Ukraine turned out to be a significant challenge. Its local entity, Ukrsibbank, had a net profit of $3.1 million last year, after making $8.3 million in 2012. In March 2014, its parent bank announced the layoff of 1,600 employees at its Ukrainian unit, which is more than 20 percent of its workforce. Analysts believe that BNP Paribas Group is getting ready to leave Ukraine.
The French food sector, however, is having better luck. Danone, the French dairy producer, opened a strawberry farm in Ternopil Oblast in 2013. It covers all the needs of the company’s local production capacities, churning out some 150 tons of strawberry annually.
Despite its intention to close the Galakton plant in Kyiv before May 2015, Danone remains one of the biggest dairy producers in Ukraine. Its market share reaches 18 percent, according to Gartner research firm. Danone’s share in the Ukrainian yogurt market is even greater at 37 percent.
It manages three plants, and its workforce increased from 800 to 2,100 from 2008 to 2012. During that same period, the company’s sales increased fourfold, to nearly $250 million. However, Danone Ukraine suffered $25.5 million in net losses in 2012, according to Forbes Ukraine.
Grain giant Louis Dreifus Ukraine also had lukewarm figures in 2012. Its net profit was just $3.8 million, with $650 million in revenue.
Still, “Ukraine’s agricultural potential is the largest in Europe,” says Charles Beigbeder, supervisory board chairman of the Paris-listed AgroGeneration company that farms 120,000 hectares of farmland in western and eastern Ukraine, as well as land in Argentina.
French Ambassador to Ukraine Alain Remy told the Kyiv Post about the recommendations he gives to French businesses willing to invest in Ukraine. He advises they invest only if the new Kyiv government succeeds in implementing essential reforms.
“I haven’t had any days off or any vacation since the beginning of the political crisis in Ukraine (in November). Nearly half of my time is devoted to providing consultations for French businessmen in Ukraine,” the ambassador added.
Ousted President Viktor Yakukovych’s regime was very unfriendly towards international business, says Linen of Desna’s Terestchenko, adding that he believes Ukraine to be a very risky country because it does not have effective bankruptcy laws and corruption remains a problem.
Terestchenko sees the decrease in banks’ interest rates as a key issue for stimulating businesses. Prime Minister Arseniy Yatsenyuk has promised rates will go down in the future as the central bank implements a more loose monetary policy.
“If you borrow money, you will only work for the benefit of a bank, not for the benefit of your business,” concludes Terestchenko.
Thomas Moreau, president of the French Chamber of Commerce in Ukraine,
hopes for political steadiness in the country after presidential elections in
May. He emphasizes the importance of hryvnia rate stabilization, which would
allow building long-term business plans.
“As for me, the good news is that not a single French company is going to
leave the Ukrainian market. They are all going to stay here, even in the
current, tough situation,” Moreau told the Kyiv Post.
All French companies see great potential in Ukraine, he says. Even if
some investment projects have stalled, this does not mean they are cancelled,
he added.
Kyiv Post
staff writer Vladyslav Golovin can be reached at [email protected].
