15 November 2022
Ukrainian ports blockage had significant impact on the IMC crops sales dynamics, though its financial standing remains acceptable.
Last year the company sold almost all Y2020 corn crop in the first half of the year, so as of H1 2021 end crops inventory stocks were almost equal to zero. In Q3 2021 IMC mainly sold new crop wheat.
The war changed it all. Ukrainian ports have been blocked while new export routes were slow and expensive. As a result in H1 2022 IMC sold only half of its corn harvested in Y2021 (along with it Y2021 corn harvest was by 10% higher y-o-y).
As of 30.06.22 IMC corn stocks (Y2021 crop) made about $50M.
During Q3 2022 the company sold another 64k tons of corn for $13M. It means that as of 30 September, before the start of Y2022 corn harvesting, last year’s corn stock stood at about 150k tons.
Also in reporting quarter IMC sold 13k tons of harvested in Y2022 wheat (total wheat output of the company in the current year made 122k tons) – vs. about 100k tons of wheat sold in Q3 2021.
Further IMC sales dynamics will depend on grains corridor out of Ukrainian ports operating (it started to operate in August, but the deal maturity is 22nd November).
If to speak about general financial performance, IMC revenues in 9m 2022 made $62M, by 45% lower y-o-y. EBITDA made $44.5M (-58% y-o-y).
Due to accounting specificity, current period EBITDA is almost fully composed of projected profits from Y2022 crops sales (meaning that 9m 2021 EBITDA reflected projections on Y2021 crops sales, while IMC has not sold its Y2021 crops yet).
It means that we should be careful with the meaning of EBITDA, especially for short-term analysis. Probably operating cash flow is better metric for this case.
IMC operating cash flow in 9m 2022 made -$9.3M and was covered by cash on hand available as of Y2021 end (cash decreased by $16M to $13M as of 30.09.22).
It is not excluded (especially if Ukrainian ports will not operate after November 22), the company will need to attract new credits to finance its working capital needs related to late crops harvesting and inputs purchase for new year.
As of last reporting date IMC bank debt was quite moderate - $38M in total of approximately $300/ha.
As a reminder in the current season due to russian invasion to Chernigiv and Sumy regions in the spring total IMC sown area made just 88k ha (out of total land bank of 120k ha). Y2022 wheat yields made record-high for the company 6.7 t/ha (19k ha harvested), sunseeds yields – 3.4t/ha (18k ha).
Corn harvesting is under way, total corn sown area is 50k ha.
As a summary in case general situation in Ukraine will not worsen, we positively estimate middle- and long- term perspectives of IMC. For the other Ukrainian companies today main focus of the company should be on liquidity and cash sufficiency for operating activity financing.