Milkiland increases revenue 9% yoy in 2011

Milkiland (MLK PW) reported revenues of EUR 280 mln in 2011 (+9.1% yoy and 1.5% below preliminary figures published in February) and EBITDA of EUR 35 mln (down 21% yoy, in line with preliminary figures), according to an annual report published on Friday. EBITDA net of biological revaluation and other management adjustments was EUR 27 mln, down 40% yoy. Net income stood at EUR 13 mln in 2011, down 41% yoy. The company’s revenue split remained almost unchanged yoy: whole milk products, cheese & butter and ingredients segments contributed 39%/55%/9% to revenues in 2011. Reported EBITDA margins in those respective segments was 7%/17%/12% in 2011 vs. 8%/24%/14% a year ago. The company will hold a conference call today at 15:15 Warsaw time.

Yegor Samusenko: The reported financial results were slightly disappointing to us because of two reasons. First, the reported EBITDA margin for 4Q11 in cheese & butter was 6% vs. 19%-25% in each of the seven preceding quarters. While a low margin was anticipated for this period (due to ruble depreciation that harmed the margin on exports to Russia), the actual figure was much weaker than we expected. Second, the size of expenses the company treates as non-operating or non-recurring (and are excluded from management’s EBITDA calculation) – bonuses to the ex-CEO, consulting fees, biological asset revaluation and more – stood at EUR 8.4 mln and thus raised the company’s reported EBITDA by 1/3. Nonetheless, we believe most of the negatives are already priced in to the stock’s 2011 EV/EBITDA (adjusted) multiple of 6.7x. With margin improvements expected in 2012 from the renewal of milk subsidies (see our note dated December 28, 2011), ruble appreciation vs. 4Q11 and renewed cheese exports to Russia, we keep our BUY rating on the stock, which is trading at 4.7x EV/EBITDA 2012.