Astarta Lifts Net Income 4x in 2007

The second-largest domestic sugar producer, Astarta (AST PW: BUY), increased net income fourfold to USD 31.3 mln (margin of 26%) in 2007, according to the company’s website. EBITDA rose 35.6% yoy to USD 37.6 mln (margin of 31%) in 2007, while sales reached USD 121.7 mln. Olha Pankiv: While Astarta’s sales met our expectations, reported profitability is significantly higher than the 25% EBITDA margin and 17% net margin we projected. This is mostly due to revaluation of Astarta’s cattle and crops in its fields, which came to USD 12.5 mln or 33% of EBITDA, and was not accounted for in our forecasts. Adjusted for the revaluation, the company’s EBITDA margin comes to 21%. In our projections, we recognize profits at the moment of crop and dairy product sales, instead of projecting unrealized gains from their revaluation in the period preceding sale. This makes our profit projections indirectly comparable to the management’s figures, even after the company’s EBITDA is cleared of the revaluation. We consider the adjusted management figures to be broadly in line with our expectations. The company’s share price has increased by 24% since the time of our last report, squeezing upside to 4% currently. That said, we confirm our BUY recommendation on positive market momentum and expectations of more positive news from the company, such as new land acquisitions and capacity increase.