KSG Agro improves P&L in 2016, completes some debt restructuring

Net revenue at Ukrainian food and farming company KSG Agro (KSG PW) rose 9% yoy to USD 20.9 mln in 2016, according to its April 28 filing. Its operating profit improved 18% yoy to USD 16.0 mln and EBITDA (as reported) increased 5% yoy to USD 17.3 mln, mostly due to higher revaluation gains (+ 71% yoy to USD 10.6 mln) and other operating income (surging 2.3x yoy to USD 4.4 mln, mostly due to gains from payables written off in the amount of USD 3.3 mln). Its net income was USD 3.9 mln in 2016, compared to a net loss of USD 1.9 mln a year before. Its cash flow from operations increased 12% yoy to USD 2.0 mln.

Its total debt was almost unchanged yoy at USD 45.3 mln as of end-2016, of which USD 12.5 mln is a loan from related party (also flat yoy). KSG Agro reported that it managed to postpone repayment of most of its loans from third parties, with the maturity of USD 13.4 mln in debt postponed till 2026 in November 2016 and the maturity of USD 4.7 mln debt postponed till 2027 in February 2017. Also KSG has a loan with contractual maturity in 2021, but had to classify it as short-term debt as it breached some debt covenants. The company has yet to agree on the restructuring of USD 6.7 mln in overdue  debt.

Alexander Paraschiy: The company’s success in restructuring most of its third-party debt facilities significantly reduces its default risk. At the same time, despite sound P&L numbers, its ability to generate cash from operations remains weak, and so is its ability to smoothly service debt. The company has yet to demonstrate an ability to generate money to become an investable story.