MHP reports 3Q18 poultry sales jump, expects bumper crop

Ukraine’s largest poultry producer MHP (MHPC LI,
MHPSA) sold 160.8 kt of poultry meat in 3Q18, a 19.3% yoy increase (and a 4.9%
qoq increase), according to its Oct. 18 trading update. The increase was driven
by export sales that surged 51.6% yoy (and 14.6% qoq) to 80.4 kt in 3Q18, while
local sales decreased 1.8% yoy (and 3.1% qoq) to 80.4 kt. So poultry exports
accounted for 50% of total poultry sales in 3Q18 vs. 40% a year ago. During the
quarter, the average selling poultry price in UAH terms rose 2.5% qoq (or 6.6%
yoy) to UAH 40.4/kg, but slid in USD terms by 1.8% qoq (or a 1.2% yoy rise) to
USD 1.48/kg.

In 9M18, MHP’s poultry sales advanced 7.2% yoy to
449.2 kt, as the average selling price in UAH terms jumped 16.4% yoy to UAH
39.7/kg and climbed 14.1% yoy to USD 1.47/kg in USD terms. Sales volumes rose
due to a 21.5% yoy increase in exports to 213.9 kt, while local sales decreased
3.2% yoy to 235.3 kt in 9M18.

MHP also updated investors on the interim results of
its harvesting campaign, estimating its corn yields will reach 10.2 t/ha this
season (a 40% yoy advance). Its sunflower yields will reach 3.2 t/ha (a 7% yoy
increase) and soybean yields will reach 2.9 t/ha (a 38% yoy rise). Also, the
company provided final results on its 2018 wheat yields at 6.1 t/ha (a 1.7% yoy
increase) and rapeseed yields at 3.2 t/ha (a drop of 3.0% yoy).

Andriy Perederey: The surge in MHP’s poultry sales and high crop yields will be the key
drivers of its revenue growth in 2018. But we see that the company’s poultry
segment EBITDA in 2018 will be lower yoy due to higher selling costs, which
support export sales growth. So we expect that MHP’s poultry segment EBITDA
will be in the range of USD 320-330 mln in 2018 vs. USD 367 mln in 2017, but
the yoy decrease will be offset by better results of its grain segment (based
on the company’s estimates about bumper crop yields). And in our view, the
company will have the ability to generate total EBITDA of USD 470-480 mln in
2018 (up from USD 452 mln in 2017). So we remain bullish on MHP stock and
neutral on its Eurobonds.