MHP: record EBITDA in 3Q thanks to poultry prices, biological revaluation

MHP (MHPC LI), the largest poultry producer in Ukraine, this morning reported 30% y-o-y growth in 9M11 revenues to USD 880 mln. EBITDA increased 30% y-o-y to USD 301 mln and net income by 27% y-o-y to USD 201 mln. The company also reported its latest harvest update for its key crop: with 80% of corn harvested, the yield was 9.8 mt per  ha, up 25% y-o-y and 55% above the Ukrainian average. The company will host a conference call later today to discuss the results at 14:00 by London time. Yegor Samusenko: The company’s EBITDA of USD 143 mln in 3Q11 was a historical high thanks to both biological revaluation of the harvest and recovering poultry prices. Poultry price growth was enormous in 3Q: +15% q-o-q to UAH 16.1 per kg, after being traded in a UAH 12.0-14.5 range over the last three years. This, in our view, means that poultry producers have finally been able to pass through cost increase to consumers. MHP’s grain segment contributed USD 65 mln to 3Q EBITDA, most of this was due to biological revaluation of corn, which was undergoing early harvesting at end-3Q11. As revaluation largely depends on management assumptions, we believe there is a room for an upward revision in revaluation from corn harvest gains in 4Q: as of late September, corn export duties were still in place and seemed to push down corn price expectations. Corn export duties were removed as of October 19. We believe the strong EBITDA removes the risk of MHP breaching its Eurobond covenant in short-term, which was one of the key factors, in our view, why market depressed MHP’s share price earlier this fall (see our note dated October 6, 2011).