Emitents -> IMC (WSE:IMC)

IMC is one of the largest Ukrainian agri-holdings with a total land bank of 120,000 hectares, located in Poltava, Chernihiv and Sumy regions. By the size of the land bank, the company belongs to TOP-10 Ukrainian agricultural companies.

After the IPO on the Warsaw Stock Exchange in May 2011 and until the beginning of 2014, Industrial Milk Company carried out a significant expansion, increasing its land bank from 40 thousand hectares in 2010 to 137 thousand hectares.

Silo capacity was also significantly increased - from 172 thousand tons of one-time storage to 550 thousand tons. Such aggressive development was largely financed by bank loans, so the company's overall debt load increased as well.

Since 2014, IMC management decreased investments, it has been focused on business efficiency and reduction of the debt burden, which contributed to better financial stability of the holding. During 2014-2020, IMC reduced its loans portfolio by more than $100 million, and since then the company's financial condition has remained good.

The company's profitability indicators are quite good as well, taking into account changes in crop yields and the general dynamics of grain prices. The dynamics of the company's EBITDA and operating cash flow are shown in the graph below:

IMC EBITDA Operating cash flow

Since 2017, IMC has been paying dividends to its shareholders. From 2017 to 2021, a total of more than $60 million was paid out, which helped to increase the company's market capitalization (even as of March 2023, under full-scale war conditions, IMC's capitalization is twice as high as it was at the beginning of 2017).

In recent years, corn takes more than 50% of the total sown areas of the IMC. Other crops in the crop rotation are sunflower, wheat, soy.

At the moment, the company's total grain storage capacity is 554,000 tons. The presence of significant silo capacities allows the holding to be more flexible in terms of choosing the period of grains sales during the season, as well as to have savings on drying, storage and shipping of grain.

The main operating risks of the company are the lack of diversification (IMK focuses on late grain crops, which makes it dependent on weather conditions in the main operating regions in July - August), as well as absence of vertical integration.

At the same time, the company's land bank is mainly located in a region with a fairly high rate of precipitation, so, for example, the drought in Ukraine in 2020 had almost no effect on the yield of the main crops in IMC (corn yield in IMC was 9.3 t/ha compared to 5.6 t /ha on average in Ukraine).

The full-scale invasion of the russian federation significantly affected the company's activities. A significant part of the IMC land bank was located in the region of active hostilities in March, so despite the withdrawal of the russian troops from northern Ukraine at the end of March, large areas were still mined.

Thus, in 2022, the total planted area of IMC decreased by 32,000 hectares (mainly in Chernihiv region) to 88,000 hectares.

From the point of view of the yield of the main crops in 2022, the situation was quite good - the yield of corn was 10.5 t/ha, sunflower - 3.4 t/ha, wheat - 6.7 t/ha.

We can expect quite good financial performance of the company for 2022 and the first half of 2023.

Sown areas and yield of main crops:
Season 2022/2023 2021/2022 2020/2021 2019/2020 2018/2019 2017/2018
Sown area, ha 50 20068 00069 20069 50068 40067 000
Yield, t/ha 10.510.69.39.711.19.1
Sown area, ha 19 20025 70025 80022 80023 70024 700
Yield, t/ha
Sown area, ha 18 30021 40021 20013 10012 70013 700
Yield, t/ha
Total area, ha 87 700120 000123 000123 000123 900129 600

Financial information

$ mln 2021 2020 2019 2018 2017
Revenue 182 161 170 132 127
Gross profit 111 79 51 66 50
EBITDA 110 72 39 51 39
EBITDA margin, % 60% 45% 23% 38% 31%
Net profit 79 32 7 28 18
31.12.21 31.12.20 31.12.19 31.12.18 31.12.17
Total assets 414 280 298 198 180
Fixed assets 235 163 182 77 88
Current assets 178 116 121 117 92
Inventory 138 93 105 109 77
Cash 29 18 5 4 6
Equity 191 138 133 121 104
Debt 33 33 47 45 63

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