Astarta revenue falls 30%, EBITDA drops 38% in 1H18

Ukrainian farmer and leading sugar producer Astarta
(AST PW) reported EUR 175.1 mln in net revenue in 1H18, according to  its Aug.
16 filing. This is 30% less yoy, with declining revenue being reported in all
its segments, including sugar (-38% yoy to EUR 67.5 mln) and crop farming (-38%
yoy to EUR 49.8 mln).

The company’s EBITDA decreased 38% yoy to EUR 60.1 mln
in 1H18. Farming EBITDA improved 13% yoy to EUR 51.9 mln, becoming the key
contributor to Astarta’s profit. EBITDA in its sugar segment plunged 82% yoy to
EUR 7.4 mln, which was a result of weak sugar prices. The company mentioned
that overall sugar stockpiles in Ukraine are currently at low levels, before
the approaching start of the sugar production season. Therefore, it said it
expects that domestic sugar prices will be relatively stable in the short term,
unlike global sugar prices, which are expected to decrease further. Astarta’s
bottom line was EUR 37.3 mln in 1H18, or 49% less yoy.

The company’s operating cash flow before working
capital changes fell 76% yoy to EUR 13.4 mln and net cash generated from
operations decreased 54% yoy to EUR 28.3 mln in 1H18.

Astarta’s debt obligations increased 33% yoy to EUR
173.1 mln and net debt swelled 2.3x yoy to EUR 226.0 mln as of end-June 2018
(largely due to an accounting policy change that includes EUR 74.4 mln in land
lease obligations to Astarta’s debt). In this way, the company’s net debt/LTM
EBITDA ratio reached 2.68x as of end-June 2018. Net of land lease obligations,
its net debt/LTM EBITDA ratio reached 1.80x (up from 1.08x as of end-December
2017 and 0.71x as of end-June 2017).

Alexander Paraschiy: The
company’s 1H18 revenue was almost in line with our estimate of EUR 176.1 mln,
while its EBITDA and operating cash flow before working capital changes are
disappointing. In particular, its semi-annual EBITDA is at the lowest level
since 2010.

With such results in hand, we see Astarta’s full-year
EBITDA will be between USD 70 mln and USD 78 mln, or 35%-41% less yoy. As the
company’s balance sheet remains strong, we see no concerns about the company’s
long-term value growth. But with weak global sugar prices, Astarta will have
weak P&L in the near-term that is likely to depress its stock price.