Viktor Ivanchik, CEO of agricultural company Astarta, in Kyiv, Ukraine on Feb. 2.Olga Ivashchenko/The Globe and M/The Globe and Mail
The portfolio of Prem Watsa’s Fairfax Financial Holdings FFH-T has always been stuffed with insurance companies and banks. But take a look at its under-the-radar Ukrainian spread and you will find an entirely different set of assets: eggs – millions of them – thousands of cattle and vast amounts of sugar, soybeans and milk.
In Ukraine, Fairfax is an agribusiness as well as an insurance player. And the company’s agribusiness, Astarta-Kyiv, is managing to expand in the thick of Ukraine’s war with Russia.
The war has not been pleasant for Astarta’s 7,000 employees, hundreds of whom have been put in uniform to fight the Russian invaders. Still, mouths have to be fed in Ukraine and exports maintained to earn foreign currency, preserve employment and pay taxes to a government desperate for income to buy weapons. Ukraine, known as the “breadbasket of Europe,” is essentially one enormous farm and Astarta is becoming one of its biggest producers and exporters of agricultural products.
“The one thing the war did was open up agricultural exports,” said Wade Burton, chief investment officer of Fairfax’s investment arm, Hamblin Watsa Investment Counsel, referring to the European Union’s decision in 2022 to remove the tariffs on Ukraine’s exports to keep the country’s crucial farming sector alive.
Fairfax owns 30 per cent of Astarta, which trades on the Warsaw stock exchange. The share price collapsed in the late autumn of 2021, when Russia began amassing troops and armour on its borders with Ukraine. The shares came back to life in 2023 and have climbed more than 15 per cent over the past 12 months, giving the company a market value of 738 million Polish zlotys, equivalent to about €170-million ($250-million).
Fairfax bought into Astarta in 2016, when the share price was much higher. But at least the stock is now moving in the right direction. Barring Russia’s unlikely takeover of the whole of Ukraine – the front lines have barely changed since last winter – the company’s bosses think the worst is over. “What doesn’t kill us makes us stronger,” Astarta chief executive Viktor Ivanchyk told The Globe and Mail in an interview in Kyiv in February.
While Astarta is a diversified agribusiness, its strength is sugar. The company is Ukraine’s, and one of Europe’s, largest producers of sugar, whose feedstock is sugar beets. In the 2023-24 operating season, it produced 377,000 tonnes of sugar from its five refineries.
Astarta also has 220,000 hectares of farmland under management and grows soybeans, corn, wheat, sunflower and rapeseed, in addition to beets. It is a big name in soybean oil and meal, and just raised US$60-million from a Ukrainian bank to build a new soybean processing plant. The company’s 25,500 dairy cattle make it the biggest producer of milk in Ukraine, and its energy division extracts biogas from its industrial activities to offer manufacturers a more climate-friendly alternative to natural gas.
A separate minority Fairfax investment, Ovostar, is Ukraine’s biggest producer of eggs and liquid egg products. It has almost eight million hens and, last year, exported 530 million eggs to 50 countries. On the non-agribusiness side, Fairfax, through three subsidiaries, ARX Insurance, Colonnade Ukraine and Universalna, is Ukraine’s top property and casualty insurer.
Revenues from all of Astarta’s main agribusinesses climbed last year, none more than sugar. In the first nine months, sugar sales grew by 32 per cent, year-on-year, accounting for more than a third of total sales. The reopening of the grain-shipping corridor in the western Black Sea late last summer, after Ukraine’s military sank or damaged about a third of Russia’s once-mighty Black Sea fleet, boosted exports.
But profits fell as agriculture commodity prices came back to earth – they had soared in first year of the invasion as Russia blockaded or bombed most of Ukraine’s ports, creating shortages. Nine-month net earnings fell 10 per cent to €56-million ($82-million).
Fairfax has a history of taking chances in troubled countries, as it did in Greece, whose long financial crisis – crushing public debt and collapsing banks – nearly sent it packing from the euro zone a dozen years ago. While the company doesn’t always get the timing right, it is typically a long-term investor and figures good management will eventually produce good results (Mr. Watsa, Fairfax’s chairman and CEO, is often called “Canada’s Warren Buffett”).
Take Eurobank Ergasias, one of Greece’s biggest banks. Fairfax first invested in Eurobank in 2015, betting on a Greek economic revival. The revival was a long time coming, but it did come. Eurobank is now making profits of more than €1-billion a year ($1.5-billion) and its shares have climbed 37 per cent in the past 12 months, giving it a market value of €7-billion ($10.3-billion). Fairfax owns 32 per cent of the bank.
Ukraine is a similar story. After the 2014 Maidan Revolution, which saw the ouster of the pro-Russian president at the time, Viktor Yanukovich, Fairfax began sizing the country up for investment opportunities. Mr. Wade travelled to Ukraine a year later and examined about 50 companies in various industries. “The banking system was a mess, so we looked at the farming business,” he said. “Farming is in their blood, and we found [Mr. Ivanchyk].”
The Astarta CEO, now 67 and owner of 40 per cent of the company, launched his agribusiness in 1993 as a fuel supplier to sugar plants. The barter system saw him take payment in sugar, which he exported. “At the beginning, I had no strategic concept,” he said.
In the late 1990s, he ended up with a sugar plant when its owners could not pay him cash for his fuel deliveries. Within a few years, he owned four other plants. The initial public offering came in 2006. The second decade of this century saw Astarta, expand its land holdings, build storage silos and a soybean processing plant, enter the dairy farm business, develop a carbon-credit trading system under the Kyoto Protocol framework, establish an in-house IT arm and recruit Fairfax as an investor.
Russia’s invasion, which began on Feb. 24, 2022, hurt all Ukrainian agribusiness, though a few companies, notably Nibulon, the country’s leading grain exporter, suffered more than Astarta.
There were other tragedies as well. More than 500 Astarta employees were mobilized. By late February, 29 had been killed, 58 wounded and nine were missing (Astarta is paying the salaries of employees who are in the military). In May of last year, a guided missile fired from a Russian fighter jet killed a farmer on Astarta land as he drove his tractor across a corn field. Some of the company’s properties in the north of Ukraine, near the Belarus and Russian frontiers, were temporarily occupied and laced with land mines.
“Russian aggression is not just against the military,” said Mr. Ivanchyk. “It’s against civilians.”
His goal is to create a pan-European company. Despite the war, that prospect does not seem unrealistic. Astarta’s exports are up 50 per cent from 2021, the year before the war started. The war-related tariff- and quota-free access to the EU has been a godsend for all Ukrainian agribusinesses, though there is a chance that restrictions will be put on those exports. Polish farmers have blocked the Ukraine border twice in recent months to protest cheap Ukrainian grain and other products undercutting their own output.
The ultimate prize for Astarta – and Fairfax by extension – is Ukraine’s accession to the EU, which would give the country permanent free access to a market of 450 million consumers and farm subsidies under the lavish Common Agricultural Policy.
“It’s really important for us to have open markets,” Mr. Ivanchyk said. “Our capitalization will increase when Ukraine joins the EU and that gives me the strength and desire to plan for the future. I have no plans to sell my stake in Astarta.”