Avangardco reports a 57% decline in EBITDA in 2014

Ukraine’s largest egg producer Avangardco (AVGR LI, AVINPU) has reported weak financial results for 2014. The company’s revenue decreased 37% yoy to USD 420 mln (in-line with our expectations). EBITDA fell 57% yoy to USD 129 mln (2% higher than our projections). The bottom line has turned negative to a net loss of USD 27 mln. This was driven by a USD 24 mln impairment of production facilities in the occupied area and USD 71 mln in currency exchange losses. Cash on hand declined 25% during 4Q14 to USD 117 mln further below the principal of Avangardco’s USD 200 mln Eurobonds, maturing in October 2015.

The cash flow statement for 2014 displays a disappointing picture of Avangardco’s performance. Net cash generated from operating activities for the full-year 2014 was USD 41 mln, the same as in 9M14. Net debt to EBITDA sharply worsened to 1.75x from 0.6x a year ago.

In its outlook, the company stated that it does not plan to increase the laying hens flock, which has plunged drastically to 18.6 mln heads from 27.0 mln, as of end 2013, due to events in Crimea and Donbass.

The company is going to provide its detailed financial statements and auditor’s opinion later today. It has also initiated a conference call to discuss the results today, 4pm Kyiv time.

Roman Topolyuk: The financial performance of Avangardco came in close to our expectations, though a weak net operating cash flow causes the largest concern, as the company continues to suffer from working capital outflows. Being unable to restore the laying hens flock and total shell egg production, Avangardco will underutilize its operational potential and is likely to worsen its profitability in 2015. That being said, we believe that the chances of a smooth and timely repayment of Avangardco’s 2015 Eurobonds are very low.