16 November 2011
Milkiland (MLK PW), the #4 dairy producer in the CIS, reported 6% y-o-y revenue growth to EUR 201.3 mln in 9M11, according to yesterday’s release. EBITDA declined 24% y-o-y to EUR 25.4 mln and net income declined 20% y-o-y to USD 13.9 mln. The company attributed the EBITDA decline to ruble devaluation and the de-facto cancellation of raw milk subsidies in Ukraine. Yegor Samusenko: The company’s 9M11 results were in line with our expectations (see our report dated September 28, 2011). As we expected, profitability from cheese exports to Russia were hindered by ruble depreciation (2% vs. the hryvnya on average in 3Q11 vs. 1H11). This led EBITDA margin for the company’s cheese segment to decline to 19% from 22% in 1H11, which was a key driver of the overall drop in EBITDA. We expect 4Q11 financials to be even weaker as most of the effect of ruble devaluation should be felt then. We confirm our projections of a 13.8% EBITDA margin for 2011 vs. 14.8% in 9M11 and EUR 271.9 mln in revenue in 2011, up 5% y-o-y (vs. 6% y-o-y in 9M11). We confirm our BUY recommendation on the stock. We believe the deterioration in the dairy market has been priced into Milkiland shares following the release of its 1H11 financials; we confirm our BUY recommendation on the stock.