Astarta 2016 profit skyrockets 5x, no dividends recommended

Ukraine’s leading sugar producer Astarta (AST PW) reported on April 10 its audited 2016 results in its annual report, which are in line with its preliminary results published on Feb. 24. Revenue advanced 17% yoy to EUR 368.9 mln, EBITDA rose 16% yoy to EUR 152.1 mln, and net debt decreased 16% yoy to EUR 145.9 mln in 2016.

 

The company’s net profit jumped 5.2x yoy to EUR 82.6 mln. Despite the increased profit, the Astarta board recommended paying no dividends for 2016.

 

The company’s 2017 outlook summary lacked details, only stating that the company will focus on efficiency and innovations, and may consider investing into expanding its core business segments, if market conditions allow.  

 

Its 2016 revenue growth was driven by higher sugar sales (+15% yoy to EUR 174.5 mln) and soybean processing (+48% yoy to EUR 75.0 mln), while its other segments (farming and cattle) showed moderate 3%-4% growth. Export revenue reached a 50% total share in 2016, compared to 35% a year before.

 

Astarta’s operating profit increased 15% yoy to EUR 124.4 mln, driven by its soybean processing segment (+82% yoy to 17.5 mln), while profit in other segments showed little increase.

 

Astarta received EUR 14.5 mln in VAT refunds from the state (21% yoy growth), which contributed 9.5% to its total EBITDA in 2016. Its cash flow from operations decreased 7% yoy to EUR 82.4 mln in 2016, mostly due to increased investment into working capital (to EUR 27.1 mln from zero in 2015). With the company’s CapEx being just EUR 20.3 mln (doubling yoy), Astarta managed to continue deleveraging as its total debt plunged EUR 45.6 mln (22% yoy) to EUR 158.3 mln.

 

Alexander Paraschiy: With its 0.96x net debt-to-EBITDA ratio in 2016, Astarta is one of the least leveraged companies in the Ukrainian universe. Keeping low leverage is important for any Ukrainian farming company, which may face a need to boost its spending and debt if an agri-land market is launched in Ukraine (which would force mega-farmers to buy some of the land they currently lease).

 

We expect Astarta will be able to generate similar or slightly better yoy EBITDA in 2017, which will be driven by robust sugar prices and further improvement in the company’s operating efficiency. We believe that will outpace a potential drop in Astarta’s operating profit due to a possible reduction of state subsidies.

 

With Astarta’s forward-looking EV/EBITDA being close to 3.3x, we believe the stock still has some growth potential in 2017. The decision to deny shareholders dividends is a slight disappointment. But overall, we are keeping our positive view on AST PW stock.