Astarta reports weak 2018 financials

Ukraine’s leading sugar producer and farming holding
Astarta (AST PW) posted 2018 revenue of EUR 372.2 mln, according to its annual
report released on Apr. 8. This is a 19% decline yoy. Its EBITDA dropped 53%
yoy to EUR 56.9 mln in 2018 and its bottom line turned to negative EUR 21.1 mln
(from positive EUR 61.8 mln a year before).

In Astarta’s key segment, sugar and related products,
revenue fell 40% yoy to EUR 119.4 mln and gross profit dropped 78% yoy to EUR
15.7 mln. In its crop segment, revenue decreased 10% yoy to EUR 126.8 mln and
gross profit slid 4% yoy to EUR 15.0 mln. In its soybean segment, revenue
increased 2% yoy to EUR 74.3 mln and gross profit improved 14% yoy to EUR 9.6
mln.

Its net cash generated from operations plunged 88% yoy
to EUR 8.5 mln, while its CapEx was corrected by just 4% yoy to EUR 49.1 mln,
forcing the company to increase its debt.

Astarta’s net debt reached EUR 295.4 mln as of
end-2018, which is 2.3x, or EUR 165.2 mln higher yoy. The increase was mostly
the result of EUR 75 mln in new debt attracted and the recognition of EUR 77
mln of lease liabilities as debt (by adopting IFRS 16 rules since 2018). The
boosted net debt and worsened P&L resulted in the deterioration of the
company’s Net Debt to EBITDA ratio to 5.2x as of end-2018 (or 3.8x, excluding
lease obligations), which is a significant contrast compared to its 1.1x ratio
as of end-2017.

The company remains in breach of certain debt
covenants, which prompted it to reclassify EUR 112 mln from non-current to
current debt. Management expects the leverage covenants will be in breach in
2019 as well, and the company reported that all the banks are aware of the
situation and “have a firm intention to continue with Astarta as the borrower.”

Alexander Paraschiy: Given the weak sugar prices, we were expecting rather weak P&L for
Astarta, but the reality turned to be worse than we anticipated. Clearly, such
a result will be treated negatively by the stock market. The year 2019 does not
promise significant improvement in commodity prices, but we expect some
improvement in Astarta’s P&L this year as a result of its measures to
improve its operating efficiency.