Avangard fragile stabilization

2 December 2016

At least despite during last two quarters eggs prices in Ukraine have been relatively low, production volumes are stable. In addition in Q3 2016 EBITDA of USD 3M was reported by the company.

In Q3 2016 total shell eggs production of the company made 646 mln pieces, approximately on the level of two previous quarters. For the total 9m 2016 period production comprised 1 895 mln eggs, by 30% lower than in corresponding period of previous year. Quarterly dynamics during last period of time looks as follows:

AvangardCo eggs production dynamics 2016

Because of significant drop of Ukrainian domestic eggs prices in Q2 2016, Avangard decreased shell eggs sales and concentrated on processing. As a result, in 9m 2016 sales of shell eggs in natural terms declined y-o-y by more than 50%, whereas processing volumes grew by 33% and made almost 40% of total 9m 2016 production.

Average shell eggs selling price in Q3 made UAH 1.08 per egg (+8% to previous quarter, but -15% y-o-y), as in October retail eggs prices in Ukraine significanly grew, we expect increase of Avangard average price in Q4.

As for main financial performance figures, at the moment we can hardly estimate if they reflect real picture in the business (taking into account all uncertainties related to owner of Avangard in Ukraine), anyway, for Q3 and 9m 2016 in general they have been as follows:

Key financials
USD k Q3 2016 9m 2016 9m 2015
Sales 46 328 111 105 176 477
EBITDA 2 982 -10 018 -84 300
EBITDA margin, % 6% -9% -48%
Net Profit -6 162 -38 769 -150 486

During 9m 2016 Avangard paid less than USD 5M of interest under its debt pile of USD 345M (average effective interest rate is 2%. Reminder a year ago Avangard restructured its Eurobonds in amount of USD 200M. According to restructuring scheme, until H1 2017 the company pays to bonholders only 25% of coupon, bonds maturity shifted till October18.

BS structure remains weak, we see debt burden of the company as not sustainable under current market fundamentals.

Balance Sheet structure
30.09.16 31.12.15
Total Assets 548 383 624 171
Fixed Assets 392 310 430 357
Current Assets 156 073 193 814
Inventory 73 281 71 885
Equity 158 304 235 055
Debt 345 347 336 419

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