Avangardco reports negative egg segment EBITDA in 1Q17
1 June 2017
Ukraine’s largest egg producer Avangardco (AVGR LI, AVINPU) reported on May 31 that its 1Q17 revenue dropped 15% yoy to USD 34.0 mln. This decline was a result of an output decrease (production of eggs fell 26% yoy to 462 mln units) and lower prices for its key product, shell eggs (-30% yoy to USc 4.18 per unit). It explained the decreased production by the replenishment of the laying hens flock, which caused the lower productivity of the laying hens. Its laying hens flock was 10.6 mln heads as of end-1Q17 (vs. 10.7 mln a year before and 10.3 mln as of end-2016).
The company sold 360 mln shell eggs (-24% yoy) in 1Q17, including 330 mln units in Ukraine (-18% yoy). Avangardco‘s sales of dry egg products fell 32% yoy to 1.111 kt with an average price decline 7% yoy to USD 5.27/kg.
Its consolidated EBITDA was USD 0.1 mln (vs. USD 9.6 mln a year before) and EBITDA without grain trading segment was negative USD 0.5 mln in 1Q17. Its net loss increased 35% yoy to USD 5.3 mln. Avangardco’s operating cash flow before working capital changes was negative at USD 1.5 mln (vs. positive USD 14.8 mln a year ago), while cash flow from operations improved 52% yoy to USD 3.0 mln, fuelled by USD 14.2 mln in recovery of trade receivables.
Avangardco’s total debt rose 1.7% YTD to USD 350 mln as of end-March, and its net debt was flat at USD 330 mln. Also, the company reported that it is in discussion with an ad hoc committee of bondholders on the restructuring of its Eurobonds and the latest failed coupon payment.
Andriy Perederey: The company’s results look suspiciously depressed, especially if we compare them to those of its smaller peer Ovostar (OVO PW). For instance, Ovostar’s average egg price was USc 5.17 per unit, or 24% higher than for Avangardco, in 1Q17. A year ago, their average egg prices were identical. Ovostar’s EBITDA margin was also much higher than for Avangardco in 1Q17: 26%.
While a slight increase of the laying hen flock promises a growth in Avangardco egg production in 2Q17, it looks like the company won’t be able to generate positive operating cash flow this quarter. We remain negative about Avangardco securities.
