Milkiland EBITDA jump 47% yoy in 1H17

First-half 2017 EBITDA at dairy producer Milkiland
(MLK PW) jumped 47% yoy to EUR 5.0 mln on just an 1% yoy increase in net
revenue, the company reported on Aug. 30. The key P&L driver for the period
was its cheese and butter segment, where EBITDA doubled yoy to EUR 3.6 mln,
despite a revenue decline by 15% to EUR 20.8 mln. The company attributed such
success to its refocusing on butter production for which it found lucrative
markets, particularly Israel. Another success factor listed was a more
selective raw milk procurement policy.

The company’s bottom line was positive at EUR 1.57 mln
in 1H17, up from EUR 15.1 mln in losses a year ago. The result was due to the
strengthening of Milkiland’s functional currencies, the hryvnia and the Russian
ruble, which enabled it to turn heavy exchange losses of the previous periods
(EUR 7.3 mln in 1H16) into an exchange gain (EUR 6.5 mln in 1H17).

Milkiland’s total debt decreased 9% (or EUR 9.0 mln)
YTD to EUR 93.3 mln as of end-June 2017, which also was mostly the result of
hryvnia appreciation. The company repaid net EUR 3.4 mln of debt over the
period, which became possible due to its ability to generate EUR 5.5 mln in
operating cash flow (4.5x yoy growth).

The company’s net debt decreased 9% YTD to EUR 91.8
mln, and its net-debt-to-LTM-EBITDA ratio decreased to 13.0x as of end-June,
from 18.6x as of the year’s start. Most of the company’s debt remains overdue,
particularly a USD 58.6 mln UniCredit/Raiffeisenbank facility and a loan in
equivalent of EUR 5.1 mln from Vozrozhdenie bank.

Alexander Paraschiy: The company’s P&L indicators look exceptionally strong, suggesting
the company did a solid job in marketing its products and working with its
suppliers. This is what the company lacked during the last three years. If
these efforts are maintained, Milkiland has a good chance to turn around –
possible faster than in 2-3 years, as we estimated in May. Meanwhile, little progress was made in 1H17 with
the company’s key creditors, which means the risk remains that its operations
will cease.