KSG Agro revenue rises 26%, EBITDA drops 67% in 1H18

Ukrainian farmer KSG Agro (KSG PW) reported a 25% yoy
increase in revenue to USD 8.7 mln in 1H18, according to its Aug. 13 filling.
Its revenue from crop production surged 9.8x yoy to USD 1.7 mln and from
livestock breeding rose 16% yoy to USD 4.4 mln in 1H18.

The company’s EBITDA dropped 67% yoy to USD 1.9 mln as
its COGS increased 39% yoy to USD 8.9 mln, mainly due to “revaluation effects”
of USD 2.5 mln, which the company did not specify. Also, the company’s gains on
initial recognition of biological assets and agricultural produce dropped 74%
yoy to USD 1.2 mln. The company’s operating cash flow before working capital
changes plummeted 83% yoy to USD 0.2 mln in 1H18. Its net debt was USD 47.0 mln
as of end-1H18, which is 1% more YTD and 6% more yoy.

Andriy Perederey: Usually, over 2/3 of KSG’s revenue is generated in the second half of
a calendar year, so its 1H18 results are not much indicative. We see room for
improvement in the company’s 2018 results due to high prices on crops that the
company focuses on, particularly wheat, rapeseed and sunflower. The key
question, however, is whether the company will be able to deliver a good
harvest this year (the company did not report on that). Given this uncertainty
and the company’s high leverage, KSG Agro remains a risky investment.