Avangard reports slight P&L weakening in 3Q13

Europe’s leading egg producer Avangard (AVGR LI) increased its sales 4.7% yoy to USD 446.5 mln in 9M13, according to the company’s November 29 release. Its EBITDA improved 5.7% yoy to USD 205.0 mln and operating cash flow before working capital changes improved 6.1% yoy to USD 175.1 mln. The company’s bottom line grew 3.2% yoy to USD 162.0 mln in 9M13. Avangard express its expectation to “achieve strong operating and financial results” for full year 2013.

Alexander Paraschiy: The 9M results imply the company’s 3Q13 was weaker yoy: net revenue was flat at USD 162.2 mln as almost 1.5x yoy growth in revenue of its egg products segment barely offset a 7% decline in revenue of its shell-egg segment and drops in other segments. The company’s 3Q EBITDA declined 2.2% yoy to USD 70.4 mln, and net profit fell 5.1% yoy to USD 56.4 mln.

Based on the company’s provided operating update for 3Q and 9M, we would expect Avangard to report improved operating profit in 3Q. Yet the result that we got today is a slight disappointment. At the same time, we expect Avangard will report strong operating and financial results for its fourth quarter: current prices for shell eggs in Ukraine, based on public sources, are almost 50% higher qoq and more than 40% higher yoy. This phenomenon make us remaining bullish about Avangard and its local peer, Ovostar (OVO PW).