Astarta EBITDA falls 33% in 9M19

Ukraine’s farmer and leading sugar producer Astarta
(AST PW) generated EUR 333.6 mln in net revenue in 9M19, according to the
company’s interim report published on Nov. 14. This is a 32% increase yoy. The
growth was driven by increased sales of its agricultural segment (up 104% yoy
to EUR 155.5 mln) and soybean segment (up 15% yoy to EUR 61.5 mln).

At the same time, the revenue of its sugar segment
decreased 10% yoy to EUR 86.8 mln. The company’s EBITDA fell 33% yoy to EUR
45.5 mln, which was mainly the result of a smaller revaluation of its
agricultural produce: its revaluation plunged 57% yoy to EUR 24.0 mln in 9M19,
which resulted in farming EBITDA dropping 57% yoy to EUR 28.7 mln.

EBITDA in its soybean segment increased 29% yoy (to
EUR 5.9 mln) and in its sugar segment rose 4% yoy (to EUR 3.9 mln) in 9M19.
Improved sugar EBITDA was solely the result of sales and distribution costs
declining by 37% yoy to EUR 6.4 mln. The company’s net profit plummeted 70% yoy
to EUR 4.3 mln.

Astarta boosted its cash generation from operating
activity to EUR 124.9 mln in 9M19, up from EUR 8.1 mln a year ago. This was
mostly the result of plunging inventories: operating cash flow before working
capital changes reached only EUR 22.3 mln (still 55% better than a year ago).

Astarta’s net debt (excluding lease obligations) stood
at EUR 164.6 mln as of end-9M19, which was a 14% yoy decrease. The company’s
ratio of net debt to LTM EBITDA reached 4.8x as of September 2019, up from 2.5x
as of September 2018 and 3.8x as of December 2018. With such leverage, the
company continues to breach debt covenants, but expects that such breaches will
be waived, the report said.

Alexander Paraschiy: Astarta’s
P&L is disappointing even taking into account the key effect on the result
being weak revaluation gains. We understand that this is a result of recent
weakening in corn and wheat prices, as well as a worsened harvest outlook.

All this offers little chance the company will be able
to show any better profits in full year 2019 compared to the previous year. The
company’s increased leverage also is disappointing, but still is not a reason
for worry. It is likely the stock market won’t welcome such results, which
bring Astarta’s EV/LTM EBITDA ratio to 8.0x.