Astarta EBITDA increases 94% in 9M21

Ukraine’s leading sugar producer and farmer Astarta
(AST PW) increased its revenue 4% yoy to EUR 300.9 mln in 9M21, according to
its interim report published on Nov. 9. Key revenue drivers were its sugar
segment (revenue increased 30% yoy to EUR 113.0 mln) and soybean segment (up
18% yoy to EUR 63.0 mln). The sugar segment benefited from a 59% yoy increase
in the dollar sugar price. Meanwhile, its farming segment showed a 22% decline
in revenue (to EUR 94.6 mln), which is a result of the low harvest volume of
the previous season.

The company’s EBITDA increased 94% yoy to EUR 158.5
mln in 9M21, mostly driven by revaluation gains. Net of revaluation gains and
related costs, Astarta’s EBITDA increased 19% yoy to EUR 88.7 mln. Fueled by
IAS 41 gains, its farming EBITDA doubled yoy to EUR 120.9 mln. Its sugar EBITDA
increased 129% yoy to EUR 30.4 mln, fueled by better prices. Meanwhile, its
EBITDA in the milk and soybean segments showed a decline. Astarta’s net income
was EUR 102.2 mln in 9M21, vs a net loss of EUR 4.7 mln a year ago.

Astarta’s operating cash flow before working capital
changes increased 5% yoy to EUR 54.0 mln in 9M21 and its cash flow from
operations decreased 59% yoy to EUR 43.3 mln. The company decreased investments
into the purchase of PP&E by 25% yoy to EUR 7.7 mln and generated EUR 7.6
mln from assets disposal (zero a year ago). It spent net EUR 15.6 mln for debt
repayments (vs. net EUR 47.0 mln spent a year ago).

Its financial debt decreased 25% YTD to EUR 40.0 mln,
while its total debt (including land lease liabilities) increased 7% YTD to EUR
162.8 mln as of end-September. Its net debt increased 34% YTD to EUR 152.0 mln,
while the ratio of net debt to LTM EBITDA fell to 0.8x as of end-September
(from 0.9x as of the year’s start).

Alexander Paraschiy: Astarta’s
2021 P&L benefits from both better prices for grains & sugar and better
harvests of key crops. While the first factor will drive mostly this year’s
revenue and profits, the latter will also drive the next year’s results.

That said, we admit that it is hard to predict the
company’s EBITDA for the year 2021, taking into account that a significant
portion of this year’s main crops (corn and sugar beet) is yet to be harvested,
processed and sold (as of end-September, they are represented mostly as
biological assets worth EUR 105.8 mln, up 72% yoy). The release of such
biological assets may significantly affect 4Q21 P&L in either direction.
Therefore, we see the company’s annual EBITDA this year in a wide range of EUR
150 – 195 mln. This implies that Astarta trades now at 2021 EV/EBITDA multiple
of about 2.2-2.9x, which looks attractive. We remain bullish on AST PW stock.