MHP EBITDA slid 1% yoy in 9M19

Revenue at Ukraine’s leading poultry meat producer and
farmer MHP (MHPSA, MHP LI) surged 32.8% yoy to USD 1,505 mln in 9M19, while its
EBITDA slid 1.4% yoy to USD 357 mln, according to its interim results published
on Nov. 19. The company’s poultry segment EBITDA rose 1.7% yoy to USD 238 mln,
while farming segment EBITDA dropped 25.8% yoy to USD 95 mln in 9M19. The meat
processing segment contributed USD 14 mln, or 14.3% lower yoy. The company’s
EU-based facilities generated USD 29 mln of EBITDA in 9M19.

MHP’s operating cash flow before working capital changes
rose 9.3% yoy to US 330 mln, while net cash flow from operations jumped 61.9%
yoy to USD 320 mln in 9M19. The company’s CapEx was USD 99 mln, or 54.2% lower
yoy and mostly related to the launch of its Vinnytsia poultry factory complex.
Also, the company received state compensation for the construction and
reconstruction of livestock farms in the amount of USD 7.6 mln in 9M19.

Its net debt-to-LTM-EBITDA ratio was 2.96x at
end-September, compared to 2.60x a year ago and 2.51x nine months ago.

In 3Q19, MHP’s total EBITDA dropped 33.5% qoq to USD
109 mln (a 10.1% yoy growth), while its poultry segment EBITDA decrease 13.5%
qoq (or 2.5% lower yoy) to USD 77 mln. The company’s EBITDA from its farming
segment plunged 66.7% qoq (or a 16.7% yoy growth) to USD 21 mln in 3Q19. The
company’s meat processing segment EBITDA decreased 20.0% qoq (or 33.3% yoy
growth) to USD 4 mln, while EU-based facilities EBITDA increased 8.3% qoq to
USD 13 mln in 3Q19.

MHP’s Nov. 19 report also included the results of its
crop harvest. Its corn yield decreased 13.8% yoy to 9.4 t/ha, while its
sunflower seed yield rose 12.5% yoy to 3.6 t/ha and soybean yield decreased
10.0% yoy to 2.7 t/ha.

Andriy Perederey: The poultry
segment’s 3Q EBITDA was slightly lower than our expectations of USD 80 mln.
Also, the restrictions at the market was a factor in the company’s weak EBITDA
growth in 9M19. Despite that, we are keeping unchanged our expectations about
MHP’s ability to generate EBITDA of about USD 335 mln in its poultry segment in
2019, or an 8% yoy increase. On the other hand, the lower yoy spring crop yield
– as well as low global crop prices – will exert pressure on the company’s
farming segment EBITDA. So, we are changing our expectations about the
company’s total 2019 EBITDA to about USD 480 mln, or 7% higher yoy, from our
previous expectation of USD 500 mln.