MHP EBITDA slides 4% yoy in 1Q18

The top Ukrainian
poultry producer MHP (MHPSA, MHPC LI) reported its EBITDA slid 4% yoy to USD
89.2 mln in 1Q18, according to the company’s financial statements published on
May 22. The key contributor to the decline was its poultry segment, in which
EBITDA fell 9.4% yoy to USD 77 mln in 1Q18. Grain-growing operations EBITDA was
flat yoy (USD 6 mln in 1Q18), while the meat processing segment generated
EBITDA of USD 8 mln, or 60.0% yoy growth.

The company’s CapEx
more than doubled yoy to USD 52 mln in 1Q18 due to the preparation of
construction of the second phase of the Vinnytsia poultry complex. The
company’s operating cash flow before working capital changes was USD 93.6 mln,
or 13.3% yoy growth, while working capital investments jumped 61.2% yoy to USD
39.7 mln in 1Q18. Net debt stood at USD 1,058 mln as of end-March, or 2.6% qoq
growth, while net-debt-to-LTM EBITDA worsened to 2.33x from 2.25x.

Andriy Perederey: The main impact on MHP’s EBITDA
occurred in its poultry segment where IAS 41 gains plunged to USD 2 mln in 1Q18
from USD 22 mln in 1Q17. Additionally, a USD 4 mln loss in government grants
and, likely, a 25% yoy drop in revenue from vegetable oil sales, contributed to
the yoy decrease in the segment’s EBITDA. These losses were offset by strong
poultry prices in both UAH and USD terms.

MHP plans to boost poultry export volumes to 260-270 kt and production
volumes by 40 kt until the end of 2018. So we see that MHP will be able to
generate EBITDA of USD 470 mln, or 2.4% yoy growth. We remain bullish on MHP
stock and neutral on its Eurobonds.