Astarta EBITDA drops 20% yoy in 2013

Ukrainian farmer and leading sugar producer Astarta (AST PW) reported a 5% yoy increase in its revenue to EUR 370 mln in 2013. Its flagship segment, sugar, was the core driver for revenue growth as it expanded 10% yoy to EUR 223 mln, primarily on a 18% yoy increase in sugar deliveries to 387 kt. While sugar production fell in the 2013 season by 29% yoy, to 305 kt, its share of the domestic sugar market increased 7pp to 26%. Astarta’s cattle farming (milk) segment was another important driver: revenue increased 21% yoy to EUR 39 mln, on just an 8% yoy increase of milk output to 91 kt. Revenue in its crop segment decreased 8% to EUR 90 mln. The company reported that export revenue amounted to 20% of its sales in 2013.

Astarta’s 2013 EBITDA fell 20% yoy to EUR 68 mln, as costs in all its segments except cattle farming were growing faster than revenue. As a result, the company’s bottom line fell 44% yoy to EUR 26 mln. The company’s CapEx increased just 6% yoy to EUR 54 mln, and its net debt advanced 10% yoy to EUR 264 mln.

As its core achievements in 2013, the company listed the commissioning of a biogas facility in Hlobyno, the launch of a soybean crushing plant with a processing capacity of 220 kt p.a., and improved fuel efficiency in sugar production by 7% yoy. Astarta reported it will focus on further improving the efficiency of its sugar and cattle farming segments, developing bioenergy projects and adopting additional savings measures in 2014, given the expected short-term macroeconomic instability. The company’s management expects that its brand new soybean processing facility will contribute significantly to its bottom line this year.

Alexander Paraschiy: The company’s 2013 bottom line certainly does not look encouraging, especially taking into account that prices of sugar, the company’s core product, significantly improved in the second half of the year. As about 80% of the company’s revenue is generated on the local market, we expect Astarta’s revenue will decrease in EUR terms in 2014, mostly due to the devaluation of the local currency. At the same time, we expect Astarta will improve its profitability this year on its further efforts to increase production and cost efficiency in all its segments. All in all, we take a neutral position on Astarta’s value growth prospects in the near term.