Astarta - good results in sugar business expected

According to recent press-release the company successfully finished its sugar beets harvesting campaign, demonstrating close to record yield of 55 tons per 1 ha, which was by 6 tons higher than in previous year.

In a view of general sugar over-supply on Ukrainian market in previous season, main part of sugar producers, including Astarta, decided to decrease harvested area for sugar beets in new season. As a result, sugar beets harvested area for Astarta made close to 34.0k ha (vs. 49k ha in previous season), total sugar beets harvest comprised 1.87mt (vs. 2.4mt in Y2014). In previous season own sugar beets accounted for more than 75% of total sugar beets processing volumes, figure for the current year is currently unknown, earlier the company planned to produce close to 350k tons of sugar (vs. 466k tons in previous year).

According to press-release the company continues its processing season (to be finished till the end of December), the average sugar yields are at record for the group 15.6% (quite good result, vs. close to 15% in previous year), so, taking into account increase of sugar price on Ukrainian domestic market by close to 30% in UAH terms since July (partially offset by UAH devaluation by close to 10% during this period), we expect improvement of profitability of Astarta sugar operations in new season (actually for the whole value chain, including farming direction in a view of better sugar beet yields and estimated to be somewhat lower net cost per 1 ha (in USD)). In 1H 2015 EBITDA margin for sugar operations made 35%, but figure was distorted by positive influence of UAH devaluation, disregarding this effect, we estimate real EBITDA of operations to be significantly lower.

In addition to update on sugar business, basing on information of the company, majority of its winter crops is in optimal condition for winter period, which is important, as in some Ukrainian regions due to unfavorable weather conditions, winter crops are far from good conditions.

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