Astarta sugar output falls 8%, sugar sales rise 14% in 2017

Ukraine’s leading sugar producer and farmer Astarta
(AST PW) produced 463,000 tons of sugar in its 2017 production season that extended
into late January 2018, according to its Feb. 7 press release. This was 8% less
than the company produced in the previous season. The company’s crop harvest
dropped 14% yoy to 786,000 tons and its sugar beet harvest decreased 12% yoy to
2.3 mmt.

The company sold 443,500 tons of sugar in calendar
year 2017, or 14% more yoy, Concorde Capital estimated based on the company’s
Feb. 6 trading update. Its crop sales surge 80% yoy to 846,100 tons last year.

In 4Q17 alone, the company sold 110,900 tons of sugar
(flat qoq, down 27% yoy) at the average price being 12% less qoq (and 9% less
yoy). Also in the quarter, it sold 202,000 tons of crops (-8% yoy) at an
average hryvnia price that was 6% less yoy.

Alexander Paraschiy: Based on
the company’s operating data, we estimate Astarta generated EUR 460 mln in net
revenue in 2017 (a 25% yoy rise) and EBITDA of about EUR 130-135 mln, or a
11-15% yoy drop.The key trend drawing our concern is the recent plunge in
Astarta’s selling price of sugar in 4Q17, which is about 22% less than in 9M17
and 20% less than in 4Q16, in euro terms. With no improvement so far this year,
such price weakness will likely lead to a further decline in the company’s
profit in 2018.

On the positive side, we see the company may increase
its overall farming results this year based on what we expect to be more
favorable weather conditions. It also has the potential to improve its sugar
production and further extend its sugar sales operations. All in all, we remain
optimistic about Astarta’s mid-term value growth, though this time our optimism
is more cautious.