Ukraine’s direct and guaranteed public debt stood at $134bn as of end-September, flat m-o-m and up 20% or $22bn YTD, translating into an est. 78% of 2023E GDP.

WSE-listed Ovostar Union, one of the largest shell egg producers in Ukraine, published its 3Q23 operating update, reporting production of 416 million eggs (+12% q-o-q and +5.1% y-o-y) and volume sales of 256 million eggs (+8.0% q-o-q but -9.5% y-o-y). Domestic sales jumped by 37% q-o-q to 184 million eggs (-2.1% y-o-y) while exports fell 30% q-o-q to 72 million (-24% y-o-y). The average sale price fell by 22% q-o-q to $0.09/egg, still up 18% y-o-y. The volume of shell eggs processed rose by 17% q-o-q to 141 million eggs (+15% y-o-y). In turn, sales of dry egg products decreased by 12% q-o-q to 0.6 kt (-28% y-o-y) while sales of liquid egg products dropped by 1.7% q-o-q to 3.0 kt (+28% y-o-y). The average sale price of dry egg products slid by 6.5% q-o-q to $8.2/kg (-11% y-o-y) and that of liquid products lost 14% q-o-q to $2.1/kg (+15% y-o-y). (Company)

Naftogaz published its 1H23 financial results, reporting revenue of $3.1bn, up 9% h-o-h but down 29% y-o-y, and EBITDA of $729m, down 32% h-o-h but up from a loss of $581m in 1H22, for an EBITDA margin of 24%, down 14pp h-o-h and up 37pp y-o-y. Net income came in at $180m, recovering from net losses of $470m in 2H22 and $2.0bn in 1H22.

WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, has published its 2023FY financial results (July 2022-June 2023), reporting sales of $3,455m (-35% y-o-y), EBITDA of $544m (up 2.5x y-o-y) and net income of $299m (vs. net loss of $41m in 2022FY). End-2023FY net debt stood at $595m (-29% q-o-q and -60% y-o-y), yielding a net debt to EBITDA of 1.1x (vs. 6.8x as of end-2022FY) and EBITDA coverage ratio of 4.4x (vs. 1.8x in 2022FY). Separately, Kernel reported its 1Q24FY (July-September 2023) operating results, booking vegetable oil sales of 369 kt (+16% q-o-q and +83% y-o-y). The volume of oilseeds crushed declined by 5% q‑o‑q to 610 kt (but +32% y‑o‑y). Grain exports stood at 203 kt over the period, down 68% q-o-q and 72% y-o-y due to the termination of the UN-brokered Black Sea grain deal in mid-July. Crop throughput at Kernel’s export terminals in the Odesa region port of Chornomorsk totaled 162 kt, down 83% q-o-q and 78% y-o-y.

The Donetsk city suburb of Avdiyivka remained the scene of heaviest fighting for a third week after Russian forces launched an army-level offensive in the area in early October in an attempt to encircle this long-held Ukrainian salient. Russia’s pincer moves northwest and southwest of Avdiyivka visibly slowed last week, with the main Ukrainian supply line to the town reportedly remaining unhindered. This sector is likely to remain the main front-line hotspot this week, with Russian forces expected to resume their assaults after bringing in new reinforcements to make up for the prior weeks’ heavy personnel and equipment losses.

The NBU Board cut its key rate by 400bp to 16% p.a. and concurrently altered its operational design by linking the key rate to the rate on overnight certificates of deposit (CDs). The rate on overnight CDs remained unchanged at 16%, as were the rates on other key instruments. The rate on 3-month CDs was left at 20% (key rate + 400bp) and that on refinancing loans at 22% (key rate + 600bp). The central bank justified the change in its operational design by the need to reinforce the key rate’s signaling role at a time of persistent excess banking liquidity, arguing that the “lower bound” operational regime would make the key rate more instrumental in influencing economic agents’ expectations. The NBU said that it intends to keep the new operational regime for a long time and revised its forward guidance, projecting a 100bp key rate cut, to 15%, in December, a flat rate next year, and another 400bp of cuts in 2025, to 11%.

With recent battlefield developments in Ukrainian regions occupied by Russia making it increasingly unlikely that Ukrainian forces will liberate any substantial territory soon, we change our base-case assumptions for 2024, expecting the war to last throughout next year.

The Ukrainian Economy Ministry has estimated that real GDP rose by 9.1% y-o-y in September (+/-2pp), bringing 9M23 growth to 5.3% y-o-y.

The Consumer Confidence Index (CCI), a survey-based indicator calculated by local research agency Info Sapiens, stood at 83 on a 0-200 scale in September, down 2.1 points m-o-m but up 8.8pt-o-y.

The Ministry of Finance placed UAH 12.2bn ($334m) of hryvnia-denominated bonds and $300m of USD-denominated paper at a primary auction yesterday.

According to Infrastructure Minister Oleksandr Kubrakov, Ukraine has exported around 1.5 Mt of commodities via its Black Sea ports since the UN-brokered Black Sea grain deal was suspended in mid-July due to Russia's withdrawal. This volume included 0.7 Mt of grain, according to Agriculture Minister Mykola Solsky.

Ukraine has received a EUR 1.5bn tranche from the EU, the ninth disbursement from a EUR 18bn one-year MFA+ facility. Similar to the previous disbursements, the latest one was made up of a 35-year loan, with interest costs to covered by the EU, and will cover the state budget’s non-military expenses. On a related note, First Deputy Economy Minister Oleksiy Sobolev said the EU’s planned new aid package for Ukraine, the EUR 50bn 2024-2027 Ukraine Facility, would include $39bn of 35-year budget support loans with a 10-year grace period and subsidized interest, $8.0bn of guarantees aimed at generating EUR 30-40bn of investment, and EUR 2.5bn of technical assistance including EUR 1.0-1.5bn in interest coverage for the EUR 39bn of loans. Ukrainian authorities plan to finalize the underlying reform program by early November.

DTEK Energy reported that one of its power plants sustained damage from Russian shelling. The state power transmission operator Ukrenergo specified that the power plant is located in eastern Ukraine. There were no casualties, but the plant’s equipment suffered substantial damage.

WSE-listed Kernel Holding, Ukraine’s largest sunflower oil producer and grain exporter, has secured waiver letters to postpone principal repayments on all its pre-war bank debt until Jun. 30, 2024, as well as waive potential or actual defaults on this debt in view of Russia’s invasion of Ukraine. The cumulative outstanding balance of the bank debt in question was reported at $773m, including the ING PXF Facility, the Natixis PXF Facility, the EBRD and EIB loans, and bilateral agreements with undisclosed European and Ukrainian banks. The waivers also outlined several conditions to be met by Kernel, including maintaining CAPEX at a level necessary to sustain ongoing operations and executing cash-sweep prepayments. Additionally, one of the company’s lenders agreed to accept the redemption of its debt with a 25% haircut. Kernel confirmed its intention to service all Eurobond coupon payments and ensure interest payments on all credit facilities.

US President Joe Biden asked Congress to approve a $106bn emergency funding package for fiscal year 2024 to provide support to Ukraine and Israel as well as finance measures directed at enhancing the United States’ internal security. The package includes $61bn of Ukraine-related support, including $46bn for military purposes and $15bn of economic assistance. The latter amount in turn includes $11.8bn of direct aid for the Ukrainian budget. The budget support package assumes monthly tranches ranging from $0.8-1.1bn, to be disbursed via the World Bank. According to the White House, the funding request is based on the latest IMF estimates of Ukraine’s 2024 funding gap and the US assumption of robust burden sharing by the US, Japan, and other donors.

The Donetsk city suburb of Avdiyivka remained the main hotspot for a second week as Russian forces renewed their offensive around the town (see map below). Ukrainian forces repulsed the assaults and made only minor pullbacks while inflicting heavy losses on the Russian military. According to reports from the ground, Russian forces largely switched to infantry assaults in the Avdiyivka sector towards the end of the week after suffering heavy losses in tanks and armored vehicles. As per Ukrainian General Staff data, Russia’s total ground equipment losses (mostly tanks, armored and other vehicles and artillery) totaled 723 last week, down from 795 a week earlier but well above 516 per week on average since the start of the Ukrainian offensive on the southern front in June.