Milkiland reports 2015 financials, plans to restructure large debt in 1H16

The 2015 net revenue of dairy firm Milkiland (MLK PW) dropped 34% yoy to EUR 191.4 mln, according to its annual report released last week. Its EBITDA decreased 42% yoy to EUR 9.9 mln, mostly due to 69% yoy plunge in the results of its Ukrainian assets (to EUR 3.8 mln). Its Russian assets have become the key contributor to EBITDA at EUR 9.1 mln (-1% yoy). Its Polish subsidiary reduced its negative EBITDA by 15% yoy to EUR -1.4 mln for 2015, and reportedly reached a breakeven point in late 2015, with a chance to show positive EBITDA in 2016. Its final results are marginally better than its preliminary reported top line and EBITDA (EUR 191.0 mln and EUR 9.6 mln, respectively).

The company’s net loss increased 1% to EUR 73.3 mln as a result of lower EBITDA and one-off losses, including EUR 8.2 mln in write offs of its deposits in a failed Ukrainian bank.

Milkiland’s net debt increased 16% yoy to EUR 106.6 mln as of end-2015, and its net debt-to-EBITDA ratio almost doubled yoy to 10.8x. The company reported it is going to sign a loan restructuring agreement in 1H16 with its key creditors, the holders of a syndicate loan for USD 58.6 mln. It also noted that the Polish Pekao Bank is seeking to take control of Milkiland’s Polish assets pledged under a EUR 2.5 loan, declaring its expectations to settle the conflict and prevent the takeover.

Alexander Paraschiy: Reaching a restructuring agreement under a syndicate loan with UniCredit Bank Austria and AO Raiffeisenbank could become encouraging news for the company. Nevertheless, it will take lot of time and management efforts to turn over Milkiland’s business and remove the looming bankruptcy risk. We maintain our cautiously neutral view on Milkiland’s stock.