EBRD board approves USD 50 mln loan to MHP

The European Bank for Reconstruction and Development announced on Friday that its board approved a USD 50 mln loan to Myronivsky Hliboproduct (LSE: MHPC LI) at a meeting on May 6. The financing will be directed at (1) energy savings via installation of a biomass boiler and modernization of existing and construction of new cold storage units for meat processing, (2) strengthening backward linkages to farmers via larger volume of sunflower seed purchases, and (3) expansion aimed at satisfying growing demand for protein products. Ruslan Patlavskyy: The planned +16% yoy increase in chicken meat output guidance to 330 ths mt of poultry, provided by MHP for 2010, requires a respective increase in sunflower seed supply as company’s fodder is ~30% comprised of sunflower proteins. Since currently MHP is ~17% self-sufficient in sunflower seeds, its plans to strengthen its protein supply chain came as no surprise to us. This said, the additional USD 50 mln should raise MHP’s 2010E net debt by 6.6% to USD 804 mln (assuming ~USD 100 mln of short-term debt will be covered by yearend), which implies net debt/EBITDA ratio of 2.2x, fully compliant with the company’s Eurobond (MHP-15) covenants (net debt/EBITDA not higher than 2.5x).