MHP EBITDA falls 7% in 9M20

Revenue at Ukraine’s leading poultry meat producer and
farmer MHP (MHPSA, MHPC LI) slid 6.0% yoy to USD 1,414 mln in 9M20 and its
EBITDA decreased 7.0% yoy to USD 332 mln, according to its interim results published
on Nov. 18. The company’s poultry segment EBITDA dropped 24.4% yoy to USD 180
mln, while its farming segment EBITDA rose 11.6% to USD 106 mln in 9M20. The
meat processing segment contributed USD 15 mln, or 25.0% higher yoy. The
company’s EU-based facilities generated USD 40 mln of EBITDA in 9M20, or 37.9%
growth yoy.

MHP’s operating cash flow before working capital
changes fell 18.3% yoy to USD 196 mln, while net cash flow from operations
dropped 56.9% yoy to USD 138 mln in 9M20. The company’s CapEx was USD 58 mln,
or 39.6% lower yoy.

Its net debt-to-LTM-EBITDA ratio was 3.33x at
end-September, compared to 2.96x a year ago and 3.01x nine month ago.

In 3Q20, MHP’s total EBITDA declined 17.8% qoq to USD
106 mln (a 2.8% yoy decrease), while its poultry segment EBITDA rose 7.4% qoq
(or 24.7% lower yoy) to USD 58 mln. The company’s EBITDA from its farming
segment plunged 43.1% qoq (or 57.1% yoy growth) to USD 33 mln in 3Q20. The
company’s meat processing segment EBITDA doubled both qoq and yoy to USD 6 mln,
while its EU-based facilities EBITDA dropped 25.0% qoq (or 7.7% slid yoy) to
USD 12 mln in 3Q20.

MHP’s Nov.18 report also included the results and
forecast of its 2020 crop harvest. Its corn yield forecast was 5.7 t/ha (or
39.1% lower yoy), its sunflower seed forecast yield fell 20.2% yoy to 2.9 t/ha,
its rapeseed forecast yield declined 12.6% yoy to 2.6 t/ha and its soybean
forecast yield decreased 10.5% yoy to 2.4 t/ha in 2020. The company’s wheat
yield dropped 20.5% yoy to 5.1 t/ha.

Andriy Perederey: The
company’s main drag on EBITDA was its poultry segment (owing to lower poultry
prices), while its sales volume was slightly higher yoy in 9M20. On the other
hand, the company’s farming segment results were supportive for the company’s
total EBITDA in 9M20, despite the lower yield of key crops this season. Despite
the COVID-19 pandemic and an outbreak of avian influenza in Ukraine in 1Q20,
the company’s operating performance was satisfactory.

The qoq improvement of its poultry segment EBITDA in
3Q20 will likely not be enough to push the company’s total EBITDA higher than
our expectations of USD 400-415 mln in 2020 vs. USD 427 mln in 2019. Also, with such results, the company will not be able
to restore its leverage to a value below 3.0x, implying that MHP will not be
able to pay any dividends next year.