20 August 2017
Leading Ukrainian poultry producer notably improved its operating and financial performance in reporting period of time.
Q2 2017 financial results
EBITDA margin, %
Due to export growth, average poultry realization prices increase and higher grains sales to 3rd parties, in Q2 2017 MHP revenues increased y-o-y by 22% (up to USD 321M). The share of export made 58% of total sales (export proceeds made USD 185M vs. USD 132M in Q2 2016).
Break-downs of sales by segment during last quarters looked as follows:
As for poultry segment we firstly note significant growth of export supplies – by 31% vs. Q2 2016 (up to 71.3k tons, in reporting quarter export comprised 45% of total MHP poultry sales). Domestic sales have been stable y-o-y at close to 86k tons.
Another positive for the company news is growth of average poultry realization price. In Q2 2017 it made UAH 32.9/kg, which has been by 20% higher than in corresponding period of previous year and by 4.5% higher than in Q1 2017 (taking into account certain UAH appreciation vs. Q1 2017, growth of average price in USD terms has been even higher). We note that both domestic and export poultry prices grew in reporting period – domestic prices increased y-o-y by 15% in UAH terms, while average export price grew mainly at account of change in the structure of exported products (though global poultry prices somewhat stabilized after two years of decline).
As a result of mentioned above factors, total MHP proceeds from poultry sales in Q2 2017 increased y-o-y by 25% up to USD 214M.
Total vegetable oils sales by the company in reporting quarter made 91k tons (+4.4% vs. Q2 2016). Due to certain average realization price decline segment’s revenues decreased by 3% y-o-y (to USD 67M). The whole vegetable oils production by MHP is exported.
Because of average poultry realization prices growth EBITDA of the segment (poultry and oils) increased up to 30% (vs. 27% in Q2 2016).
Revenues of Farming segment on Q2 2017 made USD 10M (in the same period of previous year – USD 1M). We note that in its report MHP disclosed yields of its early crops for the current season (the company has already finished early crops harvesting campaign). According to report wheat yield of MHP made 6.1t/ha (6.5t/ha a year ago), rapeseeds – 3.7t/ha (3.4t/ha), barley – 6.0t/ha.
H1 2017 results
EBITDA margin, %
Total MHP proceeds in H1 2017 made close to USD 600M, by 24% higher vs. previous year, revenues breakdowns by segments look as follows:
Due to increase of export supplies (+44% y-o-y, along with it domestic sales declined by 1.5%) and growth of average realization prices (+18% in UAH terms, while in USD y-o-y growth made 12%), total MHP revenues from poultry sales made 28%.
Sales of vegetable oils in natural terms increased by 2%, in money terms – declined by 3%.
Segment’s profitability remained approximately on the level of previous year – EBITDA margin 33-34%, We note that lower income from revaluation of biological assets (- USD 12M y-o-y) was offset with higher income from VAT compensation (+ USD 14M) owing to changes in Ukrainian tax legislation in Y2017 (increase of poultry producers support).
Due to higher sales volume total segment’s EBITDA in H1 2017 made USD 170M (USD 150M a year ago).
In Farming segment MHP increased its revenues from USD 3M to USD 28M, which has been driven by good crops of Y2016, resulted in higher grains for resale stocks as of Y2016 end.
We also note lower income from biological assets revaluation in Farming segment – in reporting period this income made USD 51M (in H1 2016 it comprised USD 76M), which means more conservative approach to profits accounting vs. previous year. EBITDA of Grains growing segment in H1 2017 made USD 95M (USD 90M a year ago).
Total MHP EBITDA in H1 2017 comprised USD 266M vs. USD 243M a year ago.
From positive side we note that due to operating income growth and also due to FX income (USD 42.5M vs. FX loss of USD 40.3M in H1 2016), net profit of MHP in reporting period increased from USD 103M in H1 2016 up to USD 190M.
Operating cash flow of the company in reporting period made USD 64M, main part of changes in assets of the company related to seasonal factors and growth of VAT Receivables, probably related to higher export in Y2017.
Balance Sheet structure
As for general balance sheet structure, as a result of significant UAH devaluation during Y2014-H1 2015 it remains average. Debt burden remains quite high – total MHP debt makes USD 1 224M, Debt/Equity ratio now stands at about 1.44x, Equity/Fixed Assets – 0.65x, on positive side we note that main part of debt is long-term.
Positive for the company is that with recent Eurobond issue (USD 500M with maturity of Y2024) MHP refinanced part of its more short-term obligations (the company repaid bonds with maturity in Y2020 in total amount of USD 245M and practically all of its short-term debt).
As a result of mentioned developments liquidity position of MHP improved (Current Ratio now stands at 5.8x), which means that the company can now concentrate on its investment program – in Y2017 MHP started construction of its Vinnitsa complex second stage. Main objective – to increase total poultry meat production from current 570k tons up to 730k tons. As for sales, focus of the company remains on export operations development (plans for Y2017 – 220k tons of poultry to be exported vs. about 190k tons in Y2016).