13 May 2016
Despite some decrease of operations profitability, the company demonstrated acceptable financial results in last reporting quarter, as before, being largely focused on development of export operations.
Realization in money terms slightly (by 5%) increased vs. Q1 2015 (up to USD 17.7M), mainly because of minor increase of average general realization prices. Along with it, after seasonal significant growth of eggs prices in Ukraine during November-January, starting from February prices fell, so that in Q1 2016 UAH-denominated price at 1.52 per egg was already lower than in Q4 2015 (UAH 1.77 per egg). We expect that average realization price will further decline in Q2. In natural terms for shell eggs (63% of total sales) decline in domestic sales was offset by growing export (+56% to Q1 2015). In addition, because of eggs products export growth, the volume of shell eggs processed increased by 19% year-on-year to 94M eggs.
It is worth to mention that in Q1 2016 Ovostar export to EU countries made more than USD 1M (the company started export to EU in the middle of Y2015 and considers this market as target one for its further development).
As was mentioned in the beginning, in last reporting quarter profitability of operations decreased: GPM made 43% vs. 47% in Q1 2015 (though it was on the average level of Y2015), but most notably EBITDA margin decreased to 39% vs. 52% in Q1 2015 and 46% in the whole Y2015. Apart from GPM decline, main reasons have been 1) growth of selling and distribution expenses, and 2) absence of income from special VAT treatment (USD 1M in Q1 2015).
Not surprisingly balance sheet structure and quality of Ovostar remains good, though gross debt slightly grew (up to USD 20M), net debt is still about USD 5M, while Equity as of 31.03.16 stood at USD 76M.