Astarta - analysis of the financial report for Q1 2024. Next is dividends?

May 26, 2024

Despite the decrease in the profitability of some key segments, the overall Astarta financial results are quite good.

Astarta, one of the largest Ukrainian producers of sugar and milk, as well as soybean processors, has published its financial report for the first quarter of 2024.

EUR M 2022 2023 Q1 2023 Q1 2024
Sugar output, kmt 282377
Soybean crush, kmt 2112326061
Milk output, kmt 1021153032
Revenue 510619164166
EBITDA Total 1551453829
EBITDA Sugar 3539124
EBITDA Agriculture 76641112
EBITDA Soybean crush 2828107
EBITDA Milk 181956
Operating cash flow 39914570

Sugar

The volume of sugar sales by the company in the first quarter of 2024 made almost 70 thousand tons vs. 50.8 thousand tons in the corresponding period of 2023 and 81 thousand tons in the previous quarter.

A negative factor was the further decrease in the sale price of sugar, which is connected with the general dynamics of world prices. In the first quarter of 2024, Astarta's average selling price for sugar was 598 per 1 ton, compared to around 620 in the previous quarter and 669 a year ago.

Since the last quarter of 2023, logistics costs related to the sale of sugar have increased significantly (in the reporting quarter they amounted to 6.9 million euros against only 1.5 million euros a year ago).

Accordingly, EBITDA per 1t of sold sugar in the first quarter of 2024 was approximately 60 euros (in the first quarter of 2023 more than 200 euros). The segment's total EBITDA was 4.1 million euros (11.7 million euros a year ago). Currently, the segment's profitability is at the lowest level in the last three years.

Astarta EBITDA volume sugar 2023

Ukrainian producers are also to face significant restrictions on sugar exports to EU countries (during 2022 and 2023 Ukraine exported sugar factually only to the EU), so having a significant surplus of production over domestic consumption in 2023, Ukrainian producers tried (and not without success) to maximize exports in the first months of 2024, and (including Astarta) began exporting sugar through deep-water Ukrainian ports to countries in Africa and Asia.

Considering that in 2024 the surplus of sugar production over domestics consumption in Ukraine is expected to happen again, in our opinion, there are quite serious risks for this segment in terms of further decrease in profitability.

Processing of soybeans

EBITDA of the soybean processing division also decreased - from last year's 10.2 million euros to 7.1 million euros. The EBITDA margin was 24%, which is lower than in the first quarter of 2023 (33%), but higher than in the second half of 2023, so the current result can definitely be considered as quite positive.

The direction's profitability is supported by the increase in soybean acreage in Ukraine (Astarta itself is increasing soybean acreage from last year's 55,000 ha to 70,000 ha), but we can expect an increase in competition between processors and exporters in the new season as well, so the crush margins in the new season may also decrease and be closer to the historical levels (after abnormal years of 2022 and 2023):

Astarta EBITDA volume soybeans 2023

Milk

The results in milk production and agricultural production and trade segments were quite good.

In the milk production segment in the reporting quarter, EBITDA amounted to 5.8 million euros compared to last year's 5.1 million euros (with almost no revaluation of biological assets in the current quarter and 1 million euros of revaluation a year ago). Milk production itself increased by 2,000 tons to 32,000 tons compared to the corresponding figure of the previous year, the average sales price increased from 350 euros per 1 ton to 404 euros per 1 ton.

In general, during the last years, this segment shows quite good and stable results (besides being an important part in the vertical integration of the holding).

Agriculture production and grain trading

As for the direction of Agricultural production and grain trading, its EBITDA in the reporting quarter was also quite good at 12.1 million euros (a year ago - 10.5 million euros, for 2023 in general - 63 million euros, primarily due to the revaluation of biological assets - harvest of 2023 - in the amount of 52 million euros).

The company does not separately disclose the results of grain trading operations, but in our opinion, the main factors of the good results of the segment in 2023 and the beginning of 2024 (despite the significant decrease in world grain prices during 2023) was a rather successful crop mix in Y2023 with a bet on soybeans, rapeseed and sugar beet, which became the most profitable for Ukrainian farmers in 2023.

On the other hand, the company reduced corn planting area from 38,000 hectares in 2022 to 19,000 hectares in 2023. Moreover, in 2024, Astarta's corn acreage will amount to only 6,000 tons.

The historical distribution of acreage and yield of Astarte is shown in the table below:

Season 2024/2025 2023/2024 2022/2023 2021/2022 2020/2021 2019/2020
Corn
Sown area, ha 6 00019 10038 00059 00060 58066 780
Yield, t/ha 10.39.08.66.98.7
Soybean
Sown area, ha 70 00056 90040 00031 00027 39032 400
Yield, t/ha 3.12.93.02.32.5
Wheat
Sown area, ha 49 00042 00055 00047 00047 91750 200
Yield, t/ha 5.74.85.84.85.1
Sunflower
Sown area, ha 18 00028 20030 00028 00040 45031 040
Yield, t/ha 3.03.02.72.22.9
Sugar beet
Sown area, ha 38 00038 90033 00033 00034 50035 255
Yield, t/ha 5849474347
Total land, ha 220 000220 000220 000220 000220 000230 000

Summarizing the results of all segments, Astarta's EBITDA in the first quarter of 2024 amounted to EUR 28.6 million (a year ago EUR 37.0 million). Despite the decrease compared to last year's figure, we consider the current result to be very good.

Due to current profits and the reduction of the company's inventory stock, in the reporting quarter Astarta generated a positive operating cash flow in the amount of almost EUR 70 million (a year ago EUR 45 million).

Part of the cash flow was directed to the payment of land lease obligations (12 million euros) and repayment of bank loans (8 million euros). At the same time, the amount of cash in the balance sheet increased from 13 million euros at the end of 2023 to 56 million euros.

Astarta EBITDA cash flow Q1 2024

According to our expectations, part of these funds in the following quarters will be used to finance working capital needs in the new production season. We also expect the company to pay dividends based on results in 2023. The expected amount of dividends is 12.5 million euros, the decision will be taken by the general meeting of the company's shareholders, which will be held on June 4.

Given the good structure of Astarta's balance sheet (the company finances its assets mainly with its own capital, the company's debt as of March 31 was only EUR 45 million with cash of EUR 56 million and inventories of EUR 206 million), the company can afford to pay dividends, as well as make new investments.

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