MHP revenue drops 13%, EBITDA 15% in 9M15

Ukraine’s leading poultry producer and grain farmer MHP (MHPC LI, MHPSA) reported a 13% yoy decline in net revenue to USD 898 mln in 9M15, according to its filing today. Revenue in its flagship segment, poultry, decreased 20% yoy to USD 715 mln, mainly on the drop in average chicken prices in USD terms. Deliveries of poultry meat, as the company reported earlier, increased 3% yoy to 408 kt.

MHP’s EBITDA decreased 15% yoy to USD 386 mln in 9M15. Government grants and refunds decreased 29% yoy to USD 48 mln, thus their contribution to EBITDA decreased to 12% in 9M15, compared to 15% a year before. MHP’s EBITDA margin decreased just 0.8pp yoy to 43.0% – mostly caused by reduced IAS 41 gains as a percentage of sales (by 1.8pp yoy). In its poultry segment, MHP’s EBITDA fell 26% yoy to USD 286 mln.

The company’s net loss plunged 88% yoy to USD 37 mln in 9M15, as foreign currency translation losses were halved yoy to USD 289 mln.

In 3Q15, MHP reported net revenue of USD 347 mln (-13% yoy), EBITDA of USD 116 mln (-36% yoy) and a positive bottom line at USD 24 mln (vs. negative USD 32 mln a year before).

The company’s net debt remained nearly unchanged YTD as of end-September at USD 1,106 mln, while its ratio of net debt-to-LTM EBITDA worsened to 2.3x from 2.0x as of the beginning of the year.

MHP also updated on its harvest result of its late grains to report slightly weaker final yields as compared to interim data reported a month ago: 1.6 t/ha for soybeans (vs. 1.7 t/ha reported a month ago and 2.1 t/ha last year) and 3.1 t/ha for sunflower (vs. 3.2 t/ha reported a month ago and 3.4 t/ha last year). Yields of corn, not yet fully harvested, are reported at 6.8 t/ha, compared to 7.3 t/ha a month ago and 9.3 t/ha last year.

MHP also revealed some of its 2016 plans, targeting to increase chicken meat production by 40kt (about +7% yoy) and increase its farming land bank by about 50,000 ha (+13%).

Alexander Paraschiy: With 9M15 results in hands, it looks clear that the company is very unlikely to meet the lower band of its earlier EBITDA guidance for this year, USD 500 mln. Now we expect the company’s 2015 EBITDA will be about USD 470 mln (-16% yoy). Despite weakening profit this year, which is a result of lag between devaluation of the local currency and respective adjustments in chicken prices, as well as a crop harvest decline, MHP remains the brightest spot in Ukraine’s fixed income universe. Its leverage ratio, 2.3x, still remains safely distant from debt covenants of 3.0x, and its ability to generate cash remains solid.