12 August 2016
The company demonstrated solid operating and financial performance in last reporting period with growth of sales and good profitability in each business segment. In addition Astarta keeps its deleveraging and as of reporting date has good balance sheet structure and quality.
EBITDA margin, %
By business segments (data for 1H 2016)
Total revenues of the company in 1H 2016 increased vs. corresponding period of previous year by 17% and made EUR 147.8M. As before main part of revenues (41% of total in 1H 2016) made realization of sugar, which remained on the level of 1H2015, as growing prices compensated for decrease of sales in natural terms by 10% (to 140k tons, reasons are lower than in previous year stocks and most likely expectations of further international price increase). Average realization prices through reporting period made EUR 428 per 1 ton. As international market first time during last several years turned to deficit, which was main reason of prices increase (and we can generally forecast growth trend till mid-year 2017, when new regulations in EU sugar industry are to be imposed), international sugar price in June’16 exceeded domestic Ukrainian price (also for the first time during last years). It resulted in significant increase of Ukrainian producers’ interest in sugar export operations. So, as general sugar production by Astarta in new season is expected to grow (main reasons: 1) increase of own sugar beets sown area (from 34k ha a year ago to 45k ha); 2) in its report Astarta stated about its intention to outsource sugar beets from 27k ha of 3rd parties farming land; 3) relatively good sugar beets harvest expectations for new season; if this projections will materialize, Astarta is to produce up to 550k tons of sugar in new season (vs. 355k tons in last one)), we can forecast significant increase of sugar export by the company (in 1H2016 20k tons was exported, just 14% of total realization). With estimated for Astarta net cost for sugar at EUR 200-250 per 1 ton, EBITDA margin of sugar operations is 45-50%.
In 1H 2016 total Astarta soybeans crushing volume made close to 119k tons of soybeans, by 9% higher y-o-y, along with it sales in segment grew by 23% (up to EUR 38M), largely as year ago Astarta worked on tolling basis for MHP (so soybean meal realization increased by 59% to 85k tons). Soybeans prices increased through Q2 2016 by more than 20% (also influencing prices on oil and meal), which also positively influenced sales level. In 1H2016 82% of segment production was exported.
Agricultural segment remains main driver of profits for the company. In 1H2016 3rd party sales in segment made EUR 35M (vs. EUR 21M in 1H 2015), as Astarta has rather high stock of agricultural production as of the end of previous year (EUR 47.6M). EBITDA of segment made EUR 74M, mainly driven by biological assets revaluation. Gain from it in last reporting period made EUR 45M (or EUR 214 per 1 ha) vs. EUR 48.7M a year ago. Astarta’s approach for revaluation was slightly less aggressive vs. previous year. Wheat is booked at EUR 566 per 1 ha. With reported record-high yield of 5.8t/ha and current average Ukrainian CPT price of USD 145 per 1 ton, the company is expected to show additional profit of at least EUR 10 per 1 ton after wheat realization. For corn book value per 1 ha is EUR 778 vs. EUR 690 in previous year, though current crops conditions are rather good (average yields during last 6 years has been 7.3t/ha), also it is likely the company contracted some volumes of crops on forward basis in May-June, when corn price in Ukraine for November delivery reached USD 170 per 1 ton. In any case we estimate currently shown gains as acceptable, they will not be reverted in second half of the year, moreover the company is to show additional profits after grains harvest realization – today we estimate it at least at EUR 15-20M (only grains, disregarding sugar beets).
Dairy sales volume in last reporting period in money terms made EUR 12M, on the level of previous year with quite strong EBITDA at EUR 5.4M (EUR 825k in 1H 2015). Sales volume in natural terms grew by 4% as a result of further improved efficiency (milk yields per cow grew by 8%, which is very good result, in general, increase of efficiency during last years has been main factor of current profitability figures, which are much lower for some other Ukrainian producers).
As for total EBITDA (EUR 109.2M in 1H 2016 vs. EUR 88.6M a year ago), important factor of growth was other operating profit in amount of EUR 20.4M, which mainly represents VAT refund, almost absent in corresponding period of previous year.
Balance Sheet structure further improved vs. previous reporting periods, as during last reporting period Astarta repaid EUR 42M of its borrowings (during last 12 months – EUR 62M). Current financing structure is quite healthy (Debt/Equity is close to 0.5x), Astarta is financed by reputed institutions, such as IFC, EBRD, also it increased export volumes, to provide more natural hedge for FX risk (which was one of main risk factors before, as previously main part of produced sugar was realized on domestic market). Basing on our opinion, the company is well positioned for further development and new investments.