16 May 2016
The company keeps on struggling to remain profitable under unfavorable business environment in both Russia and Ukraine, in absence of export opportunities trying to focus on local markets of operation.
Total revenues in EUR terms in Q1 2016 further declined vs. corresponding period of previous year (-22% to EUR 36.5M). As before, close to 60% of total realization (EUR 22.3M) made whole-milk products, mainly produced by Russian subsidiary – Ostankino Dairy Combine. Sales in segment decreased by 19%, driven by both decline in volumes (-12%) and realization prices (largely due to RUB devaluation, which made 19% in Q1 2016 vs. Q1 2015). In the last reporting period the company tried to concentrate on the most profitable segments of its activity, which, for example, led to decline of WMP, but growth of cheese sales (by 3 times vs. Q1 2016) in Russia. Despite an effort to support profitability, largely because of devaluation in Q1 2016 for WMP products EBITDA margin decreased to 6% (vs. 10% in Q1 2015).
Revenues from cheese&butter realization in last reporting period made EUR 11.2M, by 22% lower than a year ago. Main part is still Ukrainian production, which though was main driver of total segment sales decline (as was mentioned above Russian cheese sales grew up). Segment profitability improved: EBITDA margin made 7% vs. -1% in Q1 2015, as (according to report) Milkiland focused on profitability in this segment as well. Another segment – ingredients – earlier not profitable, became profitable in Q1 2016 (6% EBITDA margin despite sales declined by 40% vs. Q1 2015).
As a result of all a/m developments, total EBITDA of Milkiland in Q1 2016 grew by 7% vs. Q1 2015 (despite sales decline) and made EUR 2M (EBITDA margin 5.6%).
After significant amount of bad assets write-down in Y2015, during last reporting period balance sheet structure of the company has been more or less stable. As before, current debt burden (EUR 109M as of 31.03.16) is large as to volumes of business, but there is certainly probability that it will change in the future, so for the time being a lot will depend on ability of Milkiland to agree restructuring terms with financing banks. Up to the moment agreement has not been reached.