Over the past 4-5 years, the cost of agricultural enterprises in Ukraine has increased significantly. If in 2014, the valuation of assets was $600-800 per hectare, then in 2017 it was $1300-1400, according to a study published on ePravda.
In 2018, the average transaction amount in the agricultural sector in the leading regions reaches $1500–1800/ha.
Experts explain that the cost of agricultural enterprises increases mainly due to the increase in the cost of renting land.
Usually, the assessment of agricultural enterprises is carried out by summing the value of individual groups of assets. Separately they evaluate the land (depending on the terms of its lease and the quality of the soil), and then the equipment and real estate, including working capital reserves and debts.
Considering the risks of doing business in the Ukrainian market and investors’ “appetite” for profitability, the majority of domestic assets are estimated at 4-5 EBITDA.
Roughly speaking, the buyer of the agricultural enterprise expects to receive a return over the next 4-5 years.
If you take, for example, crop production, then the level of profitability there is $300-350/ha, and in 2014-17 crop assets paid off in 2-4 years. Now we need all 5, because the cost of renting land increased. That is, in fact, investments in the agricultural sector in terms of attractiveness have become equal to other sectors of the economy.
The opening of a land market may improve the position of the agro-industrial complex in the eyes of investors, the material says. Then the investment in the agricultural sector will be less risky. Even though, the return will take longer, from 7 to 10 years.