KSG Agro revenue rises 34%, EBITDA doubles in 1Q18

Ukrainian farmer KSG Agro (KSG PW) reported a 34% yoy
rise in revenue to USD 3.9 mln in 1Q18, according to its May 15 filing. Its
revenue from livestock breeding increased 38% yoy to USD 2.3 mln. The share of
crop production in total revenue was only 6%, compared to 36% in 2017.

Its EBITDA more than doubled yoy to USD 2.9 mln,
mainly due to “other income” of USD 1.2 mln, which the company did not specify.
This, as well as USD 0.8 mln in foreign currency gain, enabled the company to
report a 9.7x yoy surge in its bottom line to USD 2.2 mln in 1Q18. The
company’s operating cash flow before working capital changes jumped 4.2x to USD
1.0 mln in 1Q18. Its total debt climbed 0.5% YTD to USD 47.4 mln, while net
debt-to-LTM EBITDA was 3.3x as end of March vs. 2.6x a year ago.

Andriy Perederey: The company’s tiny 1Q18 revenue in crop production is the result of the
segment’s high seasonality that has been demonstrated in the last two years
(91% of the segment’s revenue last year came in the third quarter). The sale of
most crops just after harvest suggests the company has insufficient liquidity
to wait until seasonally better prices. This, as well as the worsened financial
leverage indicator in 1Q18, suggests KSG Agro remains a risky investment.