13 October 2011
Astarta (WSE: AST PW, HOLD), the largest sugar producer in Ukraine, reported yesterday its sugar beet yield increased to 45 mt per ha, with 40% of beets harvested. The yield is up 27% vs. full year data for 2010 vs. 26% growth in the Ukrainian average. The company also reported its yields on soybean (2.3 mt per ha, 12% up from Ukraine’s average) and sunflower (2.1 mt per ha, 13% up from Ukraine’s average), which amounted 17% and 5% of acreage this year, respectively. Yegor Samusenko: Though the full season figure for sugar is likely to be a little smaller, we can expect around 20% y-o-y growth, assuming no weather shocks. This figure confirms our expectations of 2.1 mln mt of sugar production in Ukraine this year, which combined with importing 0.26 mln mt of cane sugar, should create a sugar oversupply on the domestic market. This is already seen in domestic sugar prices, which fell 27% from their peak this year to USD 677 per mt as of early October. We confirm our expectations of sugar prices stabilizing at around USD 600 per mt. While this sugar price correction will have a limited effect on Astarta’s earnings in 2011, it should lead to a drop in its EBITDA margin next year from an expected 40% in 2011 to 32% in 2012, according to our estimates. We confirm our HOLD recommendation on the stock with a target price of PLN 75, upside of 7%.