MHP EBITDA improves 16% in 1Q15

Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA) imporved its EBITDA 16% yoy in 1Q15 to USD 123.2 mln against a 22% yoy decline in revenue to USD 242.2 mln, the company reported on May 26. The decline in top line was mostly the result of hryvnia devaluation, which slashed the average price of its key product, poultry, by 32% yoy, in hard currency terms, to USD 1.20/kg. The company’s poultry output increased 2% yoy to 140 kt, and the average selling poultry price, in local currency, grew 63% yoy to UAH 25.35/kg.

Due to hryvnia devaluation, MHP reported USD 394.5 mln in currency translation losses (+8% yoy) and a negative bottom line of USD 291.7 mln (8% smaller yoy) in 1Q15.

The company guided on it plans to produce 600 kt of poultry in 2015 (implying a 10% yoy increase) and intends to increase poultry exports 20% yoy (that is to 169 kt, meaning that the share of exported poultry would inch up to 28% from 27%).

In 1Q15, MHP spent USD 48 mln in CapEx (+66% yoy), mainly for the construction of the Peremoha Nova breeding farm (which intends to substitute the capacities of the Shakhtarska Nova farm that was left behind in occupied Donbas) and soya oil crushing plant. The company’s net debt stood almost flat at USD 1.1 bln, and its ratio of net debt to LTM EBITDA improved to 1.9x as of March 2015 from 2.0x in December 2014.

Roman Topolyuk: MHP reported a set of strong financials, indicating its solid financial position and outlook for further improved operations. However, the company needs to further pass along the negative impact of hryvnia devaluation throughout 2015 onto its customers in order to maintain the current level of profitability. As poultry is a cheaper and more competitive kind of meat in Ukraine, we estimate this goal of further inflating the selling price is doable for MHP and will contribute to another strong financial result in the coming quarters.