KSG Agro revenue declines 4%, EBITDA rises 5% in 1H19

Ukrainian farmer KSG Agro (KSG PW) reported a 3.7% yoy
decline in revenue to USD 8.4 mln in 1H19, according to its Aug. 13 filing. Its
revenue from crop production decreased 4.4% yoy to USD 1.6 mln, food processing
plunged 47.2% yoy to USD 1.1 mln, livestock breeding dropped 15.3% yoy to USD
3.7 mln, while revenue from other operations (fuel pellets and other) surged
4.1x yoy to USD 1.9 mln in 1H19.

The company’s operating profit increased 15.6% yoy to
USD 1.3 mln and its EBITDA rose 4.9% yoy to USD 2.0 mln in 1H19. The company’s
operating cash flow before working capital changes turned to negative USD 1.3
mln vs. USD 0.2 mln a year ago. Its net debt was USD 39.3 mln as of the
end-1H19, which is 16.3% lower yoy.

Andriy Perederey: The
company’s revenue was slightly lower yoy, but over 2/3 of its revenue is
traditionally generated in the second half of the calendar year. Therefore, we
see room for improvement in the company’s 2019 results due to the higher harvest results among early
crops and favorable weather conditions for the spring crop this season.

Also, the company’s 2019 bottom line will be supported
by about USD 4.3 mln in 1Q19 one-off financial income. On the other hand, the
company’s debt reduction slightly improved financial leverage but it remains at
a high-risk level, as the net-debt-to-LTM-EBITDA ratio was 14.1x at the end of
1H19. So, KSG Agro shares remain a risky investment.