Avangardco reports negative EBITDA of USD 98 mln in 1H15

Ukraine’s largest egg producer Avangardco (AVGR LI, AVINPU) reported a set of adverse financial figures for 1H15 on Aug. 28. Revenue decreased 54% yoy to USD 121 mln during the period, pulled down by a 29% yoy decline in shell egg sales to 1.7 bln units, and a 54% drop in sales of dry egg products to 5.7 tons. The shell egg sales price fell 23.5% yoy in dollar terms to USD 0.05 per unit and the selling price of egg powder declined 19% yoy to USD 5.4/kg. Gross profit plunged 91% yoy to USD 7.5 mln.

Avangardco reported negative EBITDA of USD 98 mln in 1H15  compared to positive EBITDA of USD 108 mln last year, driven by USD 112 mln in other operating expenses, which the company attributed to a write-down of inventories, provisions of doubtful debt and loss of cash held at the bank Financial Initiative, which had been declared insolvent, and which is related to Avangardco’s major shareholder Oleg Bakhmatyuk. The net loss for the period came in at USD 154 mln, compared to a net profit of USD 52 mln last year.

Avangardco’s laying hen flock plunged to 12.1 mln heads compared to 16.6 mln heads in March and below the company’s guidance of 14.5 mln heads for end-June.

The company hasn’t yet made any restructuring offers regarding its USD 200 mln maturing in October 2015, as it has preliminarily guided.

Roman Topolyuk: Avangardco’s financial and operating performance is deeply disappointing. The reasons and nature for such a steep continuing decline in its laying hen flock is beyond any reasonable explanation so far. The performance comes as a particular surprise when compared with the financial report of its closest peer Ovostar, which reported EBITDA of USD 15.9 mln in 1H15 (+30% yoy) while having sold 75% less eggs than Avangardco.

Having such a 1H15 financial report in place, Avangardco might be setting the stage for a Eurobond restructuring scenario that might be rather tough, including not only a maturity extension, but also possibly some haircut.