Astarta’s full-year EBITDA increases 9% yoy

Ukraine’s leading sugar beet and soybean processor Astarta (AST PW) reported its full-year 2015 EBITDA at EUR 130.7 mln, according to its annual filing on March 29. This is a 9% improvement yoy and 5% better than the company’s preliminary estimate provided on Feb. 19. The result was achieved due to better gross profit (EUR 142.8 mln, an increase of EUR 11.9 mln or 9% yoy), with the key contributor being its sugar segment, as its gross profit rose EUR 17.4 mln, or 38% yoy, to EUR 63.0 mln.

Astarta’s 2015 top line fell 11% yoy to EUR 314.0 mln, caused mostly by a decline in soy processing revenue by 32% yoy to EUR 50.6 mln. The share of export sales in total revenue increased to 36% from 24% a year ago.

The company’s bottom line was positive in 2015 at EUR 15.9 mln (compared to EUR 68.1 mln in losses a year before) as its foreign currency translation losses were cut in half to EUR 62.7 mln.

At the same time, the company’s operating cash flow before working capital changes decreased 21% yoy to EUR 87.3 mln. Its investment activity remained insignificant in 2015 (its purchase of PP&E was EUR 10 mln, a 63% yoy drop) as the company chose to deleverage. Its net debt decreased 20% yoy to EUR 172.7 mln as of end-2015, and its net-debt-to-EBITDA ratio improved to 1.3x from 1.8x a year ago.

Despite a solid leverage multiple, the company remained in breach of some debt covenants, and thus had to classify most of its bank debt (EUR 129 mln out of a total of EUR 197 mln) as short-term obligations. At the same time, its short-term debt decreased from EUR 145 mln a year ago. The company reported it received waivers from most of banks, except IFC. It expects it will remain in breach of covenants to IFC this year as well.

Alexander Paraschiy: The company’s EBITDA margin of 42% in 2015 is a record for the last five years (in the previous four years, it was 20%-34%) and the second-best level in the company’s history. The higher margin came only in 2010 (46%) when sugar prices were surging in Ukraine.

This year, sugar prices remain strong in Ukraine too, which offers some hope that Astarta will repeat its 2015 success this year. At the same time, there is more likelihood that Astarta’s EBITDA margin will decrease in 2016, primarily due to weaker global soft commodity prices and a change in VAT regime for farmers in Ukraine since January. VAT refunds brought EUR 12.0 mln in income to the company, or 9% of its EBITDA in 2015. Nevertheless, we confirm our bullish view on Astarta. The company remains one of the most profitable and least leveraged in the market, meaning it’s open to new expansion opportunities, which may emerge in the currently tough conditions for many of its local peers.