Astarta revenue rises 24%, EBITDA falls 21% in 2017

Revenue at Ukraine’s leading sugar producer and farmer
Astarta (AST PW) increased 24% yoy to EUR 458.6 mln in 2017, according to its
annual report released in the evening of Mar. 21. Its EBITDA fell 21% yoy to
EUR 120.2 mln. Government grant volumes dropped 81% yoy to EUR 2.7 mln and
contributed just 2.3% to its EBITDA (vs. 9.5% a year ago). Its sugar segment
was a key EBITDA contributor, generating EUR 62 mln. Its grain EBITDA was
halved to EUR 39 mln and its dairy segment EBITDA advanced 4.7x yoy to EUR 17
mln.

Astarta’s net profit fell 25% yoy to EUR 61.8 mln, and
the company announced no intention to pay dividends from its annual profit, as
tradition.

In 2017, Astarta sold a record-high amount of sugar
(444,000 tons, up 14% yoy), grains (810,000 tons, up 68% yoy) and milk (105,000
tons, up 2% yoy).

Astarta’s cash from operations decreased 17% yoy to
EUR 68.7 mln, most of which the company spent to acquire PP&E and
subsidiaries (EUR 60.4 mln, up 2.4x yoy) in 2017. Despite the increased CapEx,
the company’s net debt decreased 11% yoy to EUR 130.3 mln. Its net
debt-to-EBITDA ratio stood at 1.08x as of end-2017, up from 0.96x a year ago.

In 2018, the company is going to focus on efficiency,
logistics and new technologies, thereby having no tangible expansion plans. At
the same time, it does not rule out investments into asset expansion in its
core segments, if there is an opportunity to do so.

Alexander Paraschiy: The
company’s 2017 revenue is in line with our estimates
of EUR 460 mln, while EBITDA fell below our forecasted range of EUR 130-135
mln, mostly due to government grants less than we expected, as well as other
operating expenses that were higher than we expected, including inventories and
VAT write-offs.

In 2018, we expect the company’s EBITDA will
continue to decline, mostly due to commodity prices, with an expected
improvement in its grain segment results to be offset by worsening sugar
segment profit. We remain optimistic on its mid-term value growth taking into
account Astarta’s moderate leverage, cautious expansion policy and focus on
efficiency.