Analysis of Astarta's financial report for the second quarter and first half of 2023

6 September 2023

In the reporting period, Astarta demonstrated strong results in its main operating segments, primarily in the sugar segment and soybean processing.

Astarta, one of the largest Ukrainian producers of sugar and milk, as well as soybean crushers, has published its financial report for the second quarter and first half of 2023.

EUR mln Q1 2023 Q2 2023 H1 2023 H1 2022
Sugar sales, kmt 516912096
Soybeans crush, kmt 6164125113
Milk output, kmt 30295950
Revenue 164124287218
EBITDA Total 38599768
EBITDA Sugar 12122412
EBITDA Agriculture 11334444
EBITDA Soybeans crush 1010209
EBITDA Milk 5494
Operating cash flow 452469-2

In the second quarter of 2023, Astarta's revenue amounted to 124 million euros, for the first half of the year - 287 million euros, which is 31.5% more than in the corresponding period of 2022.

In the sugar segment, sales volumes in the second quarter of 2023 amounted to almost 69,000 tons, which is 35% more than in the previous quarter. In total, Astarta sold 120,000 tons of sugar in the first half of this year (versus 96,000 tons in the first half of 2022).

The increase in the turnover of the segment in the reporting quarter compared to the previous one took place due to the increase in sugar export (even despite the ban on sugar exports from Ukraine, starting from June 5) - if in the first quarter of 2023 Astarta exported sugar for 5.5 million euros, in the second - for almost 17 million euros.

The increase in exports also led to an increase in the average selling price of sugar (active export supported domestic sugar prices as well) - from 669 euros per 1 ton in the first quarter of 2023 to 712 euros per 1 ton in the second quarter (at the same time, transportation costs also increased).

The weighted average sugar sale price during the first half of the year was EUR 693 per 1t, against EUR 613 a year ago (a difference of EUR 80 per 1t), which became the main factor in the growth of the segment's profitability - EBITDA per 1t of sold sugar in 2023 was EUR 194, in 2022 - 124 euros. The total EBITDA of the direction in the reporting period (the first half of the year) amounted to 24 million euros (twice as much as last year).

The ban on the export of sugar from Ukraine for the period from the beginning of June and till the middle of September will have an impact on Astarta performance primarily from the point of view of sales volumes. As for sales prices, domestic Ukrainian sugar prices have remained relatively stable - since world sugar prices remain at a relatively high level, producers are waiting for an opportunity to resume exports, holding back sales.

Results in the soybean processing segment remain at a record level for the company. Despite the fact that the year 2022 for this segment of Astarta was one of the best in history (the segment's EBITDA increased more than five times compared to the previous year and amounted to 27.7 million euros), the results of 2023 look even better.

The profitability of soybean processing in the second quarter of 2023 almost did not change compared to the previous quarter, in the first half of the year Astarta processed 125 thousand tons of soybeans (+10% compared to last year), while EBITDA of the segment amounted to EUR 20.1 million (a year ago - EUR 8.6 million ). The margin per 1 ton of processed soybeans in the reporting period was 161 euros (in the first half of 2022 76 euros per 1 ton).

At the beginning of the season 2023/24, the profitability of processing may be supported by the inability to export soybeans through deep-water Ukrainian ports (which will mean relatively low domestic prices), as well as the expected increase in the soybean harvest in 2023 due to a significant growth of soybeans planted area in Ukraine.

In the Agriculture segment, we note two main points related to the company's operational activities. The first is that by the end of June, the company has sold almost all the rest of the 2021 and 2022 harvests, so it enters the new season with a small amount of unsold products. This is important, given the suspension of the grain corridor from Ukrainian deep-sea ports, and the subsequent price uncertainty associated with this fact.

The second factor relates to the distribution of sown areas in the 2023/24 season between different crops. Astarta halved the area under corn (from 38,000 ha to 19,000 ha), the area under wheat also decreased (from 55,000 ha to 43,000 ha), while the area under sugar beet, soybean and rapeseed was increased.

This change means that Astarta continues to bet on processing activities, and plans to produce and export more goods with a higher added value (for which the share of logistics costs in the net cost is smaller), while reducing dependence on grain export routes (relates mainly to corn and wheat).

With a generally negative market situation (due to the impossibility of exporting grain through the deep-sea ports of Ukraine), from a positive point of view, we note the good yield of wheat in Astarta (as well as in Ukraine as a whole) in 2023 6.3 t/ha (which is the highest figure for recent years), a total of 271,000 tons were collected.

Rapeseeds total crop made 56,000 tons with a yield of 4.1 t/ha.

As for the profitability of the segment, we note one more time the general accounting practices of agricultural holdings - according to IFRS standards, companies book a revaluation profit related to their crops long before harvesting, accordingly reflecting unrealized profits in its reporting.

In the second quarter of 2023, Astarta's profit from the revaluation of biological assets (crops in field) amounted to about 31 million euros (out of the total EBITDA of the direction of 33 million euros, while EBITDA does not include land lease payments, which in the reporting quarter amounted to 7.5 million euros).

Whether this profit will be realized will depend on the yield and selling prices of grain and oilseed crops. As for wheat, taking into account the balance sheet value of 1 ha of crops as of 30.06 (about 500 euros per 1 ha) and the current yield and prices, it can be predicted that it will be profitable commodity for Astarta in the 2023/24 season.

As a result of mentioned segments activities, the total EBITDA of Astarta in the first half of 2023 amounted to EUR 97.2 million (including land lease payments - EUR 75 million), of which EUR 32 million is the revaluation of biological assets (unrealized profit that will become realized only after harvesting and selling the crops).

At the same time, the result is better y-o-y, in H1 2022 the total EBITDA was 68 million euros (including unrealized profit in the form of revaluation of biological assets in the amount of 34 million euros).

Astarta's operating cash flow before changes in working capital in the reporting half year amounted to EUR 90 million, after the changes - EUR 69.3 million (in the first half of 2022 - EUR 46.6 million and EUR -2 million, respectively).

Operating cash flow was directed to the payment of dividends (EUR 12.1 million), land lease payments (EUR 22.6 million) and debt reduction (EUR 27.3 million). It is interesting that during the last twelve months (from July 2022 to June 2023), Astarta's total debt decreased by 45.4 million euros to 40 million euros (at the same time, the amount of cash also decreased - by 8 million euros to 21 million euros).

Currently, Astarta's financial position remains good, with relatively little debt. As usually we also note good activities diversification and vertical integration.

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