MHP keeps 2016 EBITDA guidance at USD 400-420 mln

Viktoriya Kapelyushnaya, the CFO of Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA), reiterated the company’s earlier guidance of its 2016 EBITDA at USD 400-420 mln, a decline of 9-13% yoy, during an Aug. 17 conference call with investors that followed the publication of its 2Q16 financials. She provided a set of other projections for operating and financial performance:

– The company models a rather stable selling dollar price of poultry, driven by weakness at the local and export markets, with only a mediocre increase possible in the nearest future (from USD 1.15/kg in 1H16);

– MHP sees its EBITDA per hectare in farming surging 45% yoy to USD 400, driven by exceptionally high crop yields this season;

– CapEx in 2016 will be USD 100-110 mln, with its budget allocated mainly into expanding its breeding farm and two rearing sites. CapEx in 2017 will be USD 170 mln, including USD 130 mln budgeted for the first line of the second stage of its Vinnytsia poultry facility. The first meat from this facility will be produced in 2018 (50-60 kt additionally, and another 60 kt in 2019);

– A working capital release of USD 42 mln in 1H16 will be offset by working capital investment in 2H16, as MHP will build up its sunflower seed stock, bringing total change in working capital to zero. These investments will come in at USD 30-40 mln in 2017, and USD 50-60 mln in 2018;

– MHP has USD 60 mln in cash currently, and USD 60 mln in undrawn loan facilities. The company expects to extend its existing short-term debt (USD 273 mln in June 2016), as well as sign new PXF lines in the nearest future. MHP is aiming to reduce its debt load;

– Management expects dividend outflows next year to be on par with USD 80 mln in 2016, though they will be subject to the exact market situation and the company’s performance.

Roman Topolyuk: Being Ukraine’s sole corporate public borrower that repaid its Eurobonds without maturity extension in 2015 (with a fresh loan from the IFC), MHP continues to operate by trying to keep all its stakeholders happy, despite challenging market conditions. During the conference call, Kapelyushnaya also guided a continuation of its expansion program in its poultry segment and reiterated a hefty dividend payment and debt reduction. The stability of the hryvnia will be among key prerequisites for such ambitious goals to materialize, as around 70% of MHP’s poultry is being sold locally. We affirm our neutral view on MHP’s Eurobonds.