Avangard’s 1H10 top line grew 68% y-o-y to USD 165.9 mln

Avangard Agroholding (LSE: AVGR LI) increased its 1H10 top line by 68% y-o-y to USD 165.9 mln, driven by a 29% y-o-y increase in shell-egg output to 1,910 mln pieces coupled with  a  44% y-o-y in price to UAH 0.52 per egg (ex-VAT). EBITDA surged 47% y-o-y to USD 63.5 mln, although EBITDA margin lost 6 pp y-o-y to 38% due to increased grain prices in 1H10. Net profit jumped 86% y-o-y to 61.9 mln, while net margin grew 3 pp y-o-y to 37%. As of June 30, 2010, Avangard’s total debt amounted to USD 268.0 mln (-64% y-o-y and +3% vs. December 31, 2009), while its net debt was USD 162.4 mln (-78% y-o-y and -37% vs. December 31, 2009). Ruslan Patlavskyy: The 1H10 financials support our forecasts of USD 382.9 mln (+20% y-o-y) for Avangard’s full-year sales and EBITDA of USD 145.5 mln (-4% y-o-y; EBITDA margin: 38% or -10pp y-o-y). We believe the company will mitigate rising grain costs by executing forward grain contracts at below the market price in 2H10, and thus anticipate a low probability of AVGR’s EBITDA margin decreasing below the current 38% in both 2H10 and FY10. At the same time, a successful Eurobond placement should decrease financing costs in 2H10, suggesting a higher net margin than we originally forecasted in our July 28, 2010 note.