11 November 2016
Astarta Holding keeps demonstrating solid operating and financial performance. Despite the company slowed down sales of sugar and agri-products in last reporting period, financial results have been on the level of previous year. Taking into account current target market fundamentals, we expect good results in new season (with EBITDA at least about EUR 170-175M).
EBITDA margin, %
Revenues in key segments in last reporting quarter and for 9m in total are presented in following table:
Anticipating higher sugar prices Astarta slowed down its sugar sales - in reporting quarter revenues from sugar realization decreased by 10% y-o-y (to EUR 40M, along with it stocks of sugar as of 30.09.16 made EUR 18M, by EUR 8M higher y-o-y). Despite this fact sugar accounted for 58% of total realization in Q3. In addition, as sugar export from Ukraine is growing in general, in last reporting period export accounted for 25% of total sugar realization of Astarta (the company itself accounted for 25% of total Ukrainian sugar export during July-September, which is also close to general market share of Astarta).
As for the whole nine months period, revenues of the holding from sugar sales made EUR 100.2M (vs. 103.8M in 9m 2015). Decline of realization in natural terms made 11%, partially compensated by growth of average price, which in Y2016 on average made EUR 423/t. With this price, taking into account estimated net cost per 1 ton of sugar for Astarta is in EUR 200-250/ton range, estimated EBITDA margin for sugar business of the company (taking into account margin on sugar beets growing side) is about 40-45%. Profitability of export operations is higher as export price during last months is estimated at about EUR 470-500/ton.
In new season Astarta is to produce more than 450k tons of sugar (vs. 355k tons in last year), which should provide for EBITDA of at least EUR 90M (under current assumptions).
In the last reporting quarter sales in Farming division have been low (EUR 7M vs. EUR 14M a year ago and EUR 35M in 1H 2016), along with it, taking into account already disclosed by the company results of harvesting campaign and current market prices, we can expect good segment results in new season. Reported yield for soybeans is 2.2t/ha, sunflower seeds – 2.6t/ha, wheat – 5.6t/ha, preliminary yield for corn – about 8.3t/ha. Basing on current prices and estimated net cost per 1 ha, we expect that EBITDA per 1 ha of Astarta farming operations (disregarding sugar beets) in current season will be in EUR 350-400 range, which means total EBITDA of at least EUR 65-70M. Part of this EBITDA is already reflected in financials as income from biological assets revaluation (book value per 1 ha of corn as of 30.09.16 was at EUR 690).
In 9m 2016 total Astarta soybeans crushing volume made close to 154k tons of soybeans, flat y-o-y, along with it sales in segment grew by 36% (up to EUR 53M), largely as year ago the company worked on tolling basis with MHP (so soybean meal realization increased by 62% to 107k tons). Dairy sales volume in last reporting period in money terms made EUR 17M, by 5% lower than in previous year (on positive side is increase of cow productivity by 7% vs. previous year). In news season we expect combined EBITDA of two above-mentioned segments at about EUR 25M.
Summing up our previous estimations we forecast total EBITDA of Astarta in new season to make at least EUR 170-180M. In previous season (October’15-September’16) EBITDA of the company made about EUR 150M, so formally increase is not large, but it should be specially noted that because of influence of devaluation (like for main part of Ukrainian agrarians) formal profitability of holding has been overstated during FY2014-15 (as costs were incurred under lower USD/UAH rate vs. rate when production was realized).
Balance Sheet structure
Financing structure of Astarta remains quite healthy (Debt/Equity is close to 0.55x), the company is financed by reputed institutions, such as IFC, EBRD, also it increased export volumes, to provide more natural hedge for FX risk (which was one of main risk factors before, as previously main part of produced sugar was realized on domestic market). So we see the company to be well positioned for further development.