S&P Global Ratings downgraded its long-term issuer credit rating on MHP to Selective Default (SD) from CC after the company completed a buyback of 2024 Eurobonds ($151m tendered at 85% of par value) on Nov. 8, which the agency viewed as a distressed debt exchange.

The State Custom Service reported a merchandise trade deficit of $3.0bn for October, up from $2.7bn in September. Imports rose by 4.6% m-o-m to $5.6bn, up 15% y-o-y and the highest level YTD, while exports were flat m-o-m at $2.7bn (-29% y-o-y). In 10M23, the merchandise trade gap stood at $22bn, widening sharply from $7.3bn in 10M22 as exports shrank by 19% y-o-y to $30bn and imports rose by 18% y-o-y to $52bn.

Ukraine’s iron ore exports rose by 7% m-o-m to 1.5 Mt in October (+44% y-o-y), bringing the 10M23 volume to 14.2 Mt (-37% y-o-y). In value terms, iron ore exports were up 3% m-o-m at $146m (+42% y-o-y), falling by 47% y-o-y to $1.5bn in 10M23. October steel exports dropped by 9% m-o-m to 290 kt  (+32% y-o-y), bringing the YTD volume to 2.4 Mt (-44% y-o-y). In value terms, steel exports rose by 12% m-o-m to $180m (+16% y-o-y), sliding by 51% y-o-y to $1.5bn in 10M23.

Naftogaz CEO Oleksiy Chernyshov said the company would buy the entire volume of gas offered by private producers in 2024 if an export ban expiring at the end of this year is extended. Thus far in 2023, Naftogaz has acquired 0.7-0.8 bcm of gas domestically.

State rail monopoly Ukrainian Railways (RAILUA) reported a freight transportation volume of 13.6 Mt in October, up 12.8% m-o-m and 12.6% y-o-y.

The IMF and Ukraine reached a staff-level agreement (SLA) on the second review under the Fund’s $15.6bn 4-year EFF program, paving the way for the IMF Board to approve disbursement of the next loan tranche of $900m. The IMF said that Ukraine, reflecting its commitment to the reform agenda, had met all end-September performance criteria and the majority of structural benchmarks, with the remaining ones being on track. The IMF revised its 2023 growth forecast for Ukraine to 4.5% y-o-y from 1-3% expected before, praising the authorities’ prudent policymaking and welcoming the NBU’s successful transition to a flexible exchange rate regime. However, the IMF projected softer 2024 growth of 3-4% y-o-y, in line with its previous forecast of 3.2%, due to substantial downside risks. The Fund revised its base-case estimate of Ukraine’s funding needs during the life of the program (2023 to early 2027) up by $7bn to $122bn.

WSE-listed Ukrainian agricultural producer IMC reported 9M23 net sales of $99m (+60% y-o-y), a gain from change in fair value of biological assets (IAS 41) of $24m (-44%), and EBITDA of $14m (-62%; incl. IFRS 16), with a net loss of $2m (vs. net income of $5m in 9M22). These figures imply 3Q23 sales of $27m, down 11% q-o-q but up 55% y-o-y, zero IAS 41 gain (vs. +$12m in 3Q22), an EBITDA loss of $3m (vs. +$16m in 2Q23 and +$8m in 3Q22), and a net loss of $9m (vs. $10m net income in 2Q23 and a $7m loss in 3Q22).

Last week saw continued heavy Russian assaults along the eastern front and more limited Ukrainian offensives in parts of the southern front. The overall operational situation remained unchanged, with the front lines barely shifting despite the high intensity of fighting in many spots.

Headline CPI inched up by 0.8% m-o-m in October on top of +0.5% m-o-m in September but decelerated on a y-o-y basis to 5.3% from 7.1% in September and a high of 26.6% y-o-y last December. Core inflation, an indicator adjusted for administratively regulated tariffs and prices of raw foods and energy, rose by 0.4% m-o-m in October, slowing to 6.8% y-o-y from 8.4% in September and a peak value of 22.7% in February.

Parliament approved the 2024 budget law in second and final reading yesterday, making no major changes to the government’s proposal and thus keeping the deficit target at UAH 1,574bn, or 21% of the government’s nominal GDP forecast, and gross external financing estimate at $41bn.  On a related note, Finance Minister Serhiy Marchenko said that deficit monetization by the NBU was not being discussed and expressed his confidence that the US will continue supporting Ukraine financially. Next year, the government counts on EUR 18bn in financing from the EU, $8.5bn from the US, $5.4bn from the IMF, and is in talks on additional budget support with Canada, Norway, Japan and South Korea.

The National Energy and Utilities Regulatory Commission (NEURC) set new price caps for the day-ahead power market (DAHD) effective Nov. 30, increasing them by 4-34% for selected day and night peak hours.

News: WSE-listed Astarta Holding, Ukraine’s largest sugar producer, reported 3Q23 net sales of $114m (-15% q-o-q and -7.8% y-o-y), EBITDA of $21m (-67% q-o-q and -68% respectively) and net income of $1m (-97% q-o-q, -96% y-o-y). The company reported end-9M23 net debt of $152m, including $127m of lease liabilities, yielding a Net Debt/LTM EBITDA of 1.0x, flat compared to end-2022. Astarta will hold a conference call at 16:00 Kyiv time today.

A Russian missile hit a foreign civilian vessel on Nov. 8 as it was entering a Ukrainian Black Sea port, damaging the ship’s upper structure, killing the pilot and injuring three crew members. The ship sailed under the Liberian flag.

The European Commission, the EU’s executive body, announced yesterday its decision to recommend opening accession negotiations with Ukraine and Moldova. The recommendation was part of the 2023 Enlargement Package to be considered by the European Council, which includes the heads of state or government of the 27 EU member states, in December. European Commission President Ursula von der Leyen said Ukraine had completed “well over” 90% of the EU’s conditions for starting accession talks that had been set forth in 2022. Ukrainian President Volodymyr Zelensky said he expected the EU leaders summit, scheduled for Dec. 14-15, to approve the “political decision” on opening accession talks with Ukraine.

Vodafone Ukraine (VFU), Ukraine’s second largest mobile operator, reported 9M23 revenue of $435m (-9% y-o-y), EBITDA of $247m (-9%) and net income of $104m (vs. $20m net loss in 9M22). The EBITDA margin was unchanged y-o-y at 56.9%. CAPEX surged by 57% y-o-y to $103m over the period. VFU reported 3Q23 ARPU of UAH 112.4, up 3.7% q-o-q and 21.1% y-o-y ($3.1 in USD terms, up 3.7% q‑o‑q and 16% y-o-y). The customer base was stable q-o-q at 15.2 million subscribers (-3.8% y-o-y).

Fitch Ratings downgraded its long-term foreign currency issuer default rating (IDR) on DTEK Energy to Restricted Default (RD) from C, reflecting the company’s completion of a Eurobond repurchase ($82m of principal acquired for $50m) on Oct. 30, 2023, which the agency viewed as a distressed debt exchange. Fitch simultaneously upgraded the rating to CC, reflecting DTEK’s post-restructuring profile.