Astarta EBITDA increases 46% in 2020

Ukraine’s leading sugar producer and farmer Astarta (AST
PW) generated net revenue of EUR 416 mln in 2020, down 7% yoy, according to its
annual report published on April 12. The key factor in the revenue decline was
smaller sales of crops, down 15% yoy to EUR 175 mln. Meanwhile, its revenue
from sugar sales increased 9% yoy to EUR 127 mln. Its revenue from soybean
processing fell 9% yoy to EUR 75 mln and from cattle farming decreased 4% yoy
to EUR 33 mln.

The company’s EBITDA improved 46% yoy to EUR 113.4 mln
and EBITDA margin improved 10pp to 27% in 2020. Net of the effect of biological
assets and agricultural produce revaluation, its EBITDA improved 14% yoy to EUR
102.7 mln and margin improved 5pp to 25%. Key EBITDA growth drivers were crop
farming (50% yoy increase to EUR 80.2 mln) and sugar (up 9.4x yoy to EUR 21.5
mln). EBITDA in the soybean segment stayed flat yoy at EUR 7.4 mln and in
cattle farming declined 44% yoy to EUR 8.7 mln. The company’s net profit
increased 5x yoy to EUR 8.6 mln.

Astarta’s cash flow from operations before working
capital changes increased 77% yoy to EUR 64.0 mln and net cash flow from
operations decreased 8% yoy to EUR 159.3 mln. With the company’s spending for
investment activity decreasing 38% yoy to EUR 13.6 mln, Astarta continued to
deleverage by repaying net EUR 87.7 mln of debt in 2020. Its net debt
(including land lease liabilities) halved yoy to EUR 129 mln and the net debt
to EBITDA ratio decreased to 1.1x as of end-2020, from 3.5x a year ago.

The company is planning to maintain low financial
leverage in the future, has no plans to increase its sugar business and expects
to retain its 20%-25% share of the domestic sugar market, while it plans to
undergo “selective expansion” of soybean processing. It also plans a careful
expansion of its product mix “towards higher value added processing.”

Alexander Paraschiy: Astarta’s
revenue and EBITDA are in line with our estimate
of EUR 415 mln and about EUR 100 mln (net of revaluation gains and losses),
respectively, so our positive outlook on the company’s mid-term value growth
potential remains in place. The company’s EBITDA and net leverage are the best
in the last three years, making it one of the least risky farming and food
companies in the Ukrainian universe.

As soon the company has heavily deleveraged and
adopted a careful expansion strategy, we see it is a good time for it to start
paying dividends (the company said nothing concrete about its intention to pay
dividends this time).