Milkiland 1Q20 operating losses widen on sales volume drop

Net revenue at dairy firm Milkiland (MLK PW) fell 23%
yoy to EUR 22.79 mln in 1Q20, according to its May 15 filing. The decline was caused
by plummeting dairy product sales volume, which the company attributed to
reduced demand in its core markets due to lockdown measures related to the
COVID-19 pandemic. As a result of the reduced revenue, the company’s gross
profit declined 37% yoy to EUR 2.29 mln and its EBITDA turned to negative EUR
1.14 mln in 1Q20 (from positive EUR 0.13 mln a year before), while net losses
doubled yoy to EUR 7.62 mln.

Milkiland’s total debt decreased 2% YTD to EUR 77.6 mln
as of end-1Q20, still remaining too high for the company’s size. On top of
that, at one of its Russian subsidiaries, Kursk Milk, an insolvency complaint
has been filed by local authorities and an external arbitrage administrator has
been appointed. The company’s ability to control the asset “is dependent on
upcoming negotiations during the bankruptcy procedures,” it wrote.

Alexander Paraschiy: With the recent crisis, Milkiland’s business is continuing to worsen,
leaving increasingly little chance for a turnaround. So we maintain our
negative view on Milkiland’s prospects.