Avangardco revenue declines 24.4% yoy in 9M17

Ukraine’s largest egg producer Avangadrco (AVGR LI,
AVINPU) reported its 9M17 revenue declined 24.4% yoy to USD 83.9 mln, according
to its interim financial results reported on November 30. The revenue from its
core segment, shell egg production, dropped 11.2% yoy to USD 48.3 mln, while
its egg product segment revenue plunged 70.9% yoy to USD 10.2 mln in 9M17.

Avangardco’s grain trading operation generated USD 9.7
mln of revenue in 9M17. The revenue decline was driven by decreasing average
egg selling prices by 23.8% yoy to UAH 0.96/egg (or 28% yoy to USc 3.6 per
egg), which was partly offset by a sales increase by 21.8% yoy to 1,331 mln
eggs in 9M17. The company’s dry egg product sales decreased 64.2% yoy to 2,210
t, while average selling price dropped 18.9% yoy to USD 4.59/kg.

The company’s EBITDA was negative USD 11.9 mln in 9M17
vs. negative USD 9.8 mln a year ago and its net loss was USD 20.6 mln in 9M17
(up from negative USD 38.6 mln in 9M17). Avangardco’s operating cash flow
before working capital changes turned to negative at USD 2.5 mln in 9M17 from
positive USD 14 mln year ago.

The company’s net cash from operations was positive
USD 2.8 mln in 9M17 vs. negative USD 4.6 mln a year ago due to cash flows
related to working capital turning positive at USD 8 mln in 9M17, while the
company’s working capital investments were USD 16 mln in 9M16.

Andriy Perederey: The
company’s 9M17 financial results remained depressed as shell egg prices dropped
below the level of production costs. One positive development in the company’s
results was the termination of grain trading operations in 3Q17 and we expect
that it won’t distort the company`s P&L in 4Q17. But we expect that the
company wouldn’t be able to generate positive cash flow in 4Q17.

Also, Avangardco
continues to have a discussion with creditor groups to restructure the company’s
debt portfolio, about 63% of which consists of Eurobonds. But we still remain
bearish about the prospects of Avangardco securities.