25 May 2017
Financial performance of the largest Ukrainian poultry producer in last reporting period have been rather good with growing chickens export and good profitability of this business segment in general.
Q1 2017 financial results
EBITDA margin, %
Driven by growth of poultry export and due to higher y-o-y grains sales in Q1 2017 total MHP revenues increased vs. Q1 2016 by 27% up to USD 279M (thereof almost 60% - export (47% a year ago)). Break-downs of realization by segment during last quarters looked as follows:
In last reporting quarter the company increased its poultry realization in natural terms (tons) by 15% y-o-y up to 124k tons. Domestic sales remained relatively flat (75k tons), so that general realization growth has been mainly driven by export, which grew by 60% vs. Q1 2016 and made 49.2k tons (almost 40% of total poultry sales in reporting period).
Average chicken meat price in Q1 2017 made UAH 31.5/kg, which has been by 15% higher vs. corresponding period of previous year. Domestic price (in UAH terms) grew y-o-y by 12%, while export price (in USD) – by 11% (in addition UAH devaluated by about 5%). According to CFO of the company at the moment export price remains by about 5% higher vs. domestic one.
Volume of vegetable oils sales slightly decreased y-o-y in both natural and money terms.
In reporting quarter profitability of poultry&oil segment worsened vs. Q1 2016 – GPM (gross margin) declined from 39% to 33%, reason – lower vs. previous year income from biological assets revaluation (due to more substantial increase in poultry meat stock in Q1 2016 compared to Q1 2017). In absolute terms segment’s EBITDA comprised USD 85M (USD 86M in Q1 2016), which is main constituent of total MHP EBITDA for the last reporting period (USD 93M).
As for grains growing operations, segment’s revenues made USD 18M (vs. just USD 2M in Q1 2016, which was related to low grains stock as of Y2016 beginning due to weak harvest in Y2015). EBITDA of grains growing direction in Q1 2017 made USD 6M, in its report the company noted that both winter and spring crops have been in good condition as of the date of report. Total MHP sown area for the new season is 360k ha.
Despite one-time loss from disposal of Crimean subsidiary in amount of USD 20M, net profit of the company in Q1 2017 made USD 37M vs. loss of USD 62.3M in corresponding period of Y2016. Reason – FX loss in Q1 2016 in amount of USD 106.5M.
In Q1 2017 net operating cash flow of the company before changes in working capital made USD 39M, which was lower than in Q1 2016 (USD 47M), main reason – in last reporting quarter MHP realized upfront payment of interest on its senior notes in amount of USD 31M that is normally due in Q2, however as a result of non-banking days on 1-2 April 2017, payment was settled in Q1.
As for changes in working capital of the company during reporting period, we note increase of VAT Receivables from USD 31M as of 31.12.16 up to USD 50.1M as of 31.03.17. Other changes in current assets of the company have been in line with normal business seasonality. Net operating cash flow after changes in working capital in Q1 2017 made USD 14.6M.
In Q1 2017 cash inflow from sale of Crimean assets made USD 75.6M, CAPEX – about USD 16M (MHP starts realization of its Vinnitsa poultry complex second stage), so net cash inflow from investment activity made 58.6M. Along with operating cash flow funds have been utilized for payment of dividends in amount of USD 52.6M and repayment of borrowings in net amount of USD 45.7M.
Important to note here is that in April 2017 (after reporting date) MHP realized placement of new Eurobonds in total amount of USD 500M with maturity in Y2024. Proceeds from new Eurobonds are to be used in following way: USD 245M will be directed to redeem part of existing Eurobonds (USD 750M with maturity in Y2020), the rest mainly to refinance more short-term obligations of the company.
With new Eurobonds placement the group is to significantly improve its debt maturity profile and increase margin of safety in its activity. Balance sheet structure of MHP as of 31.03.17 looked as follows:
Balance Sheet structure