Ovostar - the best year in history continues

4 September 2023

In the first quarter of 2023, one of the largest Ukrainian producers of chicken eggs and egg products demonstrated strong financial results.

Ovostar has published its financial report for the first half of 2023.

The main operating and financial figures are shown in the table:

2кв 2023 1п 2023 1п 2022
Eggs output, mln 370732794
Shell eggs sales, mln 237478541
Shell eggs export, mln 103208128
Revenues, $ mln 47.388.756.6
EBITDA, $ mln 12.321.7-15.5
Operating cash flow, $ mln 32.656.35.5
Adjusted operating cash flow*, $ mln 17400.5
*- operating cash flow before changes in working capital and excluding investments into biological assets

The total eggs output by Ovostar in the second quarter of 2023 amounted to 370 million pieces, which almost corresponds to the output figures of the previous two quarters, but is significantly lower y-o-y (in the second quarter of 2022, the volume of egg production was 423 million pieces).

The dynamics of Ovostar egg production in recent years is shown in the graph below:

Ovostar eggs output H1 2023

In total, in the first half of 2023, Ovostar produced 732 million eggs, which is 8% less y-o-y.

The dynamics of sales of shell eggs was in accordance with the production volumes (sales in the second quarter were at the level of the previous quarter, for the first half of Y2023 sales decreased y-o-y by 12%).

The company is trying to maximize the export volume of shell eggs, in H1 2023, they increased by 62.5% y-o-y.

The average selling price of shell eggs in Q2 decreased vs. Q1 ($0.114 per piece versus $0.139), but remains significantly higher compared to H1 2022 ($0.066 per piece in the second quarter of 2022).

Significant increase of prices (which took place in the autumn of 2022) was the main factor that affected the revenue and the profitability of the company's activity during the last few quarters.

Revenue of Ovostar in the second quarter of 2023 was $41.4 million (vs. $47 million in the previous quarter and $29 million in the second quarter of 2022). In the first half of 2023, the company's turnover increased by 57% compared to last year (due to the increase in the average selling price).

We also note that due to relatively low domestic prices for grain and oilseed crops in Ukraine, the cost of feed in the current year was lower y-o-y, which, in combination with higher eggs prices, led to a significant increase in profitability of the company.

The formal EBITDA of Ovostar in the reporting period (the first half of 2023) amounted to $21.7 million (a year ago the loss made -$15.5 million), even despite the depreciation of biological assets in the amount of $23 million (the first half of 2022 - $19.2 million).

An increase or decrease in the value of biological assets is a rather subjective factor, therefore, to understand the real financial performance of the company, in our opinion, the most objective figure is the adjusted operating cash flow before changes in working capital (the adjustment should be made for the amount of investments in biological assets, which is reflected in investment cash flows).

So for the second quarter of 2023, adjusted operating cash flow was approximately $17 million compared to $23 million in the previous quarter (a decrease due to a decrease in the average selling price of eggs).

In total, for the first half of 2023, Ovostar's adjusted operating cash flow amounted to $40 million (for comparison, in the first half of 2022, this indicator was close to zero).

Due to good performance and the reduction of the receivables of related companies, the total operating cash flow for the reporting half year period amounted to $56 million, of which $5 million was directed to investments in the replacement and expansion of the chicken population, another $8.5 million - to repay loans, and $4.2 million - to pay dividends to shareholders (Ovostar shares are listed on the Warsaw Stock Exchange).

As of the end of June, the amount of cash in Ovostar's balance sheet was $50 million (while total gross debt amounted to $2.5 million, the structure and quality of the company’s balance sheet are strong).

In August, domestic prices for eggs in Ukraine decreased by another 15-20%, but their growth is expected already in autumn, so our opinion that 2023 will be absolutely the best year for Ovostar in its entire history, remains unchanged.