MHP poultry sales rise 4% yoy in 1Q16

Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA) reported poultry sales of 118 kt in 1Q16 (+4% yoy) in a trading update published on April 19. The increase was a result of the launch of several new rearing sites, as well as 23% yoy higher exports, mainly to the MENA and EU markets, while domestic sales were flat. Exports accounted for 27% of total company sales.

MHP’s average selling poultry price grew 17% yoy in hryvnia terms to UAH 29.6/kg in 1Q16, though it fell 4% yoy in dollar terms to USD 1.15/kg, based on our estimates, because of hryvnia depreciation. Its hryvnia price stood almost flat qoq, but it fell 11% qoq in dollar terms.

MHP reported that its winter crops (97,000 hectares out of 355,000 planned for the year) are in good condition. The company’s spring campaign is ongoing.

Roman Topolyuk: MHP’s dollar poultry price of USD 1.15/kg in 1Q16 is consistent with the 2016 EBITDA of USD 400-420 mln that was guided by the company in March (-8 to -13% yoy). With such EBITDA, we estimate the company will have a net debt-to-EBITDA ratio of 3.0-3.1x as of end-2016, compared to an effective covenant of 3.3x-3.4x, while having refinancing facilities available. MHP’s Eurobonds trade at 259 bps spread to sovereign, close to its historical average. We reiterate our neutral view on its Eurobonds.