Ovostar EBITDA rises 21% in 2015

Ukrainian egg producer Ovostar Union (OVO PW) released its annual report on April 14, revealing that its revenue increased 1% yoy to USD 75.6 mln, owing to a 15% yoy increase in egg production volume to 1.20 bln units for 2015. Its EBITDA improved 20% yoy to USD 34.8 mln as cost inflation lagged behind the rise in its products’ prices. The company’s bottom line advanced 24% yoy to USD 31.9 mln. 

VAT benefits contributed USD 4.5 mln to its EBITDA (+78% yoy), though they weren’t the key driver – net of VAT benefits, Ovostar’s EBITDA grew 14% yoy. In 2016, following a change in Ukraine’s tax legislation, Ovostar will lose part of its VAT benefits as it will be allowed to retain only 50% of VAT payable, not 100%.

Ovostar’s cash flow from operations before working capital changes was close to its EBITDA number, or USD 34.8 mln (+26% yoy). Its spending for investments decreased 14% yoy to USD 15.2 mln. While its total debt increased 77% yoy to USD 17.0 mln as of end-2015, its net debt decreased 14% yoy to USD 6.1 mln. Thus, Ovostar remained one of the least leveraged companies in Ukraine’s investable universe.

The company also updated its growth plans, expecting to boost its shell egg production 21% yoy in 2016 (to 1.45 bln units) and by another 17% in 2017 (to 1.7 bln). It also is going to further develop its export markets in its sales strategy to increase the share of its shell egg exports to over 30% (from 26% in 2015 and 12% in 2014) and the share of dry egg product exports to over 50% (from 47% in 2015 and 48% in 2014).

Alexander Paraschiy: The company’s strong results confirms its status as one of the most trustworthy and prospective companies in Ukraine’s stock universe. The only fly in the ointment is the relatively weak financial performance of its egg product segment – it seems like processed eggs are generating less revenue per unit as compared to its unprocessed shell eggs. However, the company seems to be slightly improving this imbalance to concentrate more on the production and marketing of dry egg products that go for export (as compared to its domestically focused liquid egg products).

It’s also worth noting that Ovostar’s result deeply contrasts with what its bigger peer Avangardco (AVGR LI) has reported. And it’s not only in regards to its change in production volume and costs. Interestingly, while Avangardco reported in 2012 the price of its shell egg at a 6% premium to what Ovostar was showing, in the year 2015 Avangardco was selling its eggs at 11% discount to Ovostar’s.