Ovostar
Emitents -> Ovostar (WSE:OVO)
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  • 20 April 2017 - Y2016 financial report
  • 15 May 2017 - Q1 2017 financial report

Business description

Ovostar is one of the leading Ukrainian eggs producers, focused on production of branded eggs for middle class population and eggs products for leading Ukrainian and international food companies. As of 30.06.16 total flock of the company made 7.2M hens with laying hens at 5.9M. In Y2015 Ovostar accounted for about 7-8% of total eggs production in Ukraine (1.2bln of shell eggs was produced by the company in Y2015). As for industrial production, share of Ovostar has been close to 12%.

At the moment close to 30% of produced shell eggs have been processed with production of both dry and liquid eggs products. The rest of production has been sold as shell eggs. 55% of shell eggs sold in Y2015 was sold as branded product, 27% - exported.

Production facilities of the company are located in the Central part of Ukraine - in Kyiv and Cherkasy regions within 130 km from each other. Production premises include one breeder farm with parent flock, one hatchery producing day-old pullets, two young laying hens sites and two laying hen farms. The egg processing plant is located on the premises of one of the laying hen farms.

Operations are vertically integrated - beginning from grains storage and fodder production and till eggs processing. Silos capacities for grains storage amount to 29k tons, capacity of fodder plants – 56 tons per 1 hour.

During last period of time, following significant UAH devaluation and decrease of purchasing power of Ukrainian population, Ovostar has been concentrating on export operations expansion. In June’15 export to EU has been allowed for the company.

The company keeps realizing its investment program with an aim to increase total eggs production up to 2.0bln till Y2018.

Since June’11 Ovostar has been listed on WSE under the ticker symbol OVO. Current free float is 30%.

Operating Figures

9m 2016 9m 2015 .. 2015 2014 2013
Total flock, mln 7.2 - 6,5 5,4 5,0
Shell eggs production, mln 1 078 888 1 196 1 038 893
Shell eggs sales, mln 766 656 862 733 585
Eggs exported, mln 237 172 229 89 30
Eggs processed, mln 307 250 347 319 308

Financial information

USD k 9m 2016 9m 2015 .. 2015 2014 2013
Sales 53 665 52 777 75 606 74 780 80 342
Gross Profit 16 251 22 054 32 415 26 815 34 463
EBITDA 14 200 24 271 34 800 29 000 36 000
EBITDA margin, % 26% 46% 46% 39% 45%
Net Profit 12 219 22 326 31 944 25 825 31 227
30.09.16 .. 31.12.15 31.12.14 31.12.13
Total Assets 107 177 - 100 718 101 620 159 514
Fixed Assets 64 739 - 59 556 68 177 110 948
Current Assets 42 438 - 41 162 33 443 48 566
Inventory 21 004 - 19 399 18 231 26 768
Cash 7 019 - 10 962 2 471 8 608
Equity 83 219 - 78 507 85 065 139 326
Debt 18 149 - 17 032 9 511 13 538
9m 2016 9m 2015 .. 2015 2014 2013
Net Operating CF 10 244 15 304 25 599 14 034 22 996
Financing CF -1 707 519 -928 -2 982 -3 587
Dividends paid 0 0 0 0 0
Net Borrowings -1 707 519 -1 273 -2 982 -3 587
Investing CF -12 809 -8 618 -15 153 -16 082 -11 953

Latest financial report of the company

Comments to latest financials:

  • Total revenues of Ovostar Union in 9m2016 made USD 53.7M, approximately on the same level vs. 9m2015. The company remains focused on export operations – in 9m2016 export revenues grew by 26% y-o-y up to USD 19.4M (36% of total realization vs. 29% in 9m 2015).
  • Volume of eggs produced in last reporting period grew by 21% (1 078M eggs), so that both segments’ – shell eggs and processed eggs products – realization in natural terms increased (realization of shell eggs by 16.8%, eggs products – by about 23%). During last several years average annual eggs production growth by Ovostar is close to 18%.
  • Increase of realization in natural terms was offset by average price in USD terms decline. Moreover, if during FYs2014-15 eggs prices in local currency increased (mainly driven by UAH devaluation), since March’16 prices declined even in UAH terms. Please see dynamics during last period of time on chart below (along with EBITDA margin of Ovostar):

    Ovostar profitability dynamics

  • Average eggs realization price during 9m2016 made UAH 1.23 (vs. UAH 1.25 on average in 9m 2015, in the same period of time in USD terms average eggs prices declined by 17%).
  • In a view of prices decline, profitability of operations also decreased – EBITDA margin in 1H 2016 made 26.5% vs. 46% in Y2015. As Ovostar is perceived as one of the most cost-efficient companies in the industry, while results of competitors have been much worse, we have no concerns as for this decline of profitability.
  • Despite negative effect from UAH devaluation in last two years, balance sheet structure of Ovostar remains good with Equity being dominant source of assets financing.
  • Despite continuing investment program (USD 12.8M was directed to investments in last reporting period, in total since the beginning of Y2014 – USD 44M), debt burden of the company is quite low, investments are mainly financed by generated cash flow from operations (net operating cash flow during Y2014-9m2016 made about USD 50M).
  • Low debt burden and stable operations with increasing export provide the company with significant margin of safety in its activity
Summary
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