Astarta decreases sugar output, increases its quality in 2017

Ukraine’s leading sugar producer Astarta (AST PW)
reported that it had produced 430 kt of sugar in the current production season
as of Jan. 9. It highlighted the production season is on-going with two out of
its eight sugar plants still working (the sugar production season in Ukraine
usually starts in September and lasts for about 100 days). The company also
highlighted that 86% of the sugar produced this season is of the highest
quality category (vs. 71% in the previous season). It also reported that it had
managed to decrease use of natural gas per unit of sugar production by 6% yoy.

Ukraine’s total sugar production this season had
reached 2.018 mmt as of Jan. 9, which is already more than in the previous
season (2.008 mmt), according to the Ukrsugar association.

Alexander Paraschiy: In the previous season, Astarta produced 505 kt of sugar, so this
season’s output will be about 11-13% smaller for the company. As the company
hinted, the output under-performance will be partially offset by higher pricing
(due to the larger share of high-quality product) and higher cost efficiency.
Given the smaller sugar output and grain harvest in the current season, Astarta
will most likely report decreasing revenue in the next year compared to 2017,
but its efforts to improve production efficiency in the sugar segment could
allow it to improve its operating margin slightly. All in all, we keep our
optimistic view on Astarta’s ability to raise its equity value in the mid-term.