Industrial Milk`s sales down 15% y-o-y in 9M11; corn should be visible in 4Q11

Industrial Milk Company (IMC PW), a 48 ths ha farming enterprise in Ukraine, yesterday reported USD 14.8 mln in revenues in 9M11, down 15% y-o-y. Non-adjusted EBITDA was USD 24.8 mln, up 47% y-o-y, including net gain on revaluation of biological assets of USD 28.6 mln, up 75% y-o-y. The company said its corn yield was up 57% y-o-y to 9.0 mt per ha, sunflower yield up 21% y-o-y to 2.6 mt per ha, and potato yield up 76% y-o-y to 30 mt per ha. In November, the company signed a preliminary agreement to acquire farming enterprises with 9.5 ths ha under management, which will increase the company’s landbank to 57 ths ha (vs. 38 ths ha at IPO in May 2011). Yegor Samusenko: The company’s EBITDA figures are hardly comparable to peers, in our view, as the company reports only gain on revaluation of biological assets and does not disclose the corresponding amount in the cost of sales breakdown, which makes it impossible to recalculate income on a cost basis. In the top line, the 15% y-o-y decline is generally in line with peers. In 3Q11, farmers were reluctant to sell their new harvest as domestic grain prices were suppressed by export duties and market players were holding inventories on expectations of the removal of the duties. We expect more solid revenue in 4Q11 when the company sells most of its corn (~40% of sown acreage this year; solid yield of 9.0 mt per ha compared to the Ukrainian average of 6.1 mt per ha).