Ukrainian farmer Industrial Milk Company (IMC PW) released its annual report on April 14, reporting a 2% yoy increase in 2015 revenue to USD 140.4 mln. Its key revenue component remained corn, rising 5% yoy to USD 94.1 mln on a 20% yoy increase in volume to 609 kt. Revenue from sunflower seed sales increased 38% yoy to USD 24.5 mln, on 43% higher volumes.
The company’s normalized EBITDA increased 16% yoy to USD 66.5 mln in 2015, caused by increased cost efficiency. Among other EBITDA drivers were USD 7.4 mln in VAT benefits (up 2.3x yoy), which will decrease in 2016 as grain farmers will be able to retain only 15% of their VAT payable this year. IMC’s operating cash flow before working capital changes was also strong at USD 73.7 mln (+9% yoy). Its net income was USD 14.0 mln in 2015, compared to USD 47.3 mln in net losses a year before.
IMC’s investing cash outflow decreased to just USD 2.9 mln in 2015 from USD 25.8 mln in 2014. In fact, its CapEx changed little yoy, as the largest part of its investment spending in 2014 (USD 22.6 mln) was payments for earlier acquired subsidiaries.
The company’s total debt was USD 98.7 mln as of end-2015, which is 23% less yoy and in line with the company’s plan to reduce its debt to about USD 100 mln. Its net debt decreased 26% yoy to USD 92.0 mln and its net debt-to-EBITDA ratio improved to a solid 1.4x from 2.2x a year before. Since the end of 2015, IMC has repaid USD 12.4 mln in loans and interest and now it is waiting for a decision from the EBRD to provide a loan to finance its working capital needs.
Alexander Paraschiy: We expect the market to reward the IMC’s strong financials. Currently IMC stock trades at just a 2.2x EV/EBITDA multiple, which promises good upside. IMC remains among our top picks in Ukraine’s stock universe. The key risks for the company in the short term is volatility of global corn prices, while in the mid-term the key risk is the execution of IMC’s earlier revealed ambitious plan to increase its land bank by more than 50% by 2020.