Astarta revenue rises 28%, EBITDA 2% in 1Q19

Ukraine’s leading sugar producer and farmer Astarta
(AST PW) generated EUR 115.8 mln in net revenue in 1Q19, according to its May
20 interim report. This is a 28% yoy increase. The growth was mostly fueled by
higher sales of grains (up 2.4x yoy to EUR 62.0 mln). At the same time, revenue
in its core segment, sugar and related products, dropped 44% yoy to EUR 19.7
mln.

The company’s 1Q19 gross profit increased 6% yoy to
EUR 19.7 mln, as a plunge in sugar segment profit (by 70% yoy to EUR 2.2 mln)
was offset by a 33% yoy gain in its grain segment profit (to EUR 10.9 mln) and
a 3.2x surge in soybean profit (to EUR 4.3 mln). Its bottom line turned to be
negative at EUR 4.4 mln, compared to a positive result of EUR 3.7 mln in 1Q18.

Astarta’s reported 1Q19 EBITDA increased 6% yoy to EUR
13.6 mln, but remained weaker than its cash generated from operations (before
working capital changes), which amounted to EUR 9.0 mln (up 9% yoy). Its net
cash from operations surged 87% yoy to EUR 40.4 mln, which was mostly the result
of destocking of inventories by EUR 42.2 mln (90% more than in 1Q18).

The company’s net debt (excluding capitalized lease
obligations) increased 65% yoy to EUR 208.9 mln, and its ratio of net debt to
LTM EBITDA surged to 3.66x as of end-1Q19 (from 1.41x a year before). In this
way, the company continued to be in breach of its debt covenants.

The company’s 1Q19 CapEx increased 24% yoy to EUR 12.0
mln. It declared that its 2019 investment program will be limited to
maintenance CapEx, the completion of a silo infrastructure program and the acquisition of railcars.

Alexander Paraschiy: The company’s results reflect weak sugar prices, but in general were
better than our expectations for a EUR 110 mln top line and yoy EBITDA decline.
As the company sees domestic sugar producers will reduce their output in 2019,
there is a chance that sugar prices will improve later this year, which would
enable Astarta to maintain its EBITDA at least at the level of the previous
year. With the company’s cautious expansion program and focus on improvement of
internal efficiency, we remain optimistic about its mid-term value growth.