Mriya downgrades long-term EBITDA and FCF projections
6 October 2015
Ukrainian farmer Mriya (MRIYA), which defaulted in August 2014 on all of its debt, published on Oct. 2 its updated performance projections until 2021. The company’s new management – consisting of creditors that took control of the business – determined that out of a total 180 Kha of land currently under control, around 20 Kha are suboptimal. Management projects it will sell 9.6 Kha of suboptimal land plots, purchase 5-6 Kha in more suitable places and terminate land lease agreements for 4.5 Kha. Another 6 Kha are needed to be kept non-farmed. So management estimates Mriya’s long-term target land bank at 164 Kha, compared to the previous estimate of 178 Kha.
The lower projected land bank and lowered expected long-term crop yields by the company (a 5% downgrade of yields for corn to 8.5 t/ha, a 9% reduction of yields for wheat to 5.5 t/ha) were the causes of the 27% lower EBITDA seen in 2020 by current management, which stands at USD 70 mln currently. Projected 2020 free cash flow is at USD 60 mln (-12% to previous projections). Its nearest short-term financials forecast for FY2016 (ending in June 2016) projects EBITDA of USD 28 mln (revised from its last projection in May of USD 23 mln) and negative free cash flow of USD 21 mln (compared to zero in the last projection). Mriya has also increased its estimates of working capital requirements in 2016 to USD 55 mln from USD 40-45 mln.
The company’s outstanding debt is currently USD 1.15 bln. Mriya expects to finalize negotiations with all creditors by the year end, management said in mid-September.
Roman Topolyuk: The downgrade of projected long-term crop yields by Mriya’s management is a healthy move, as we considered the previous figures too upbeat. Overstating real performance was a constant problem of the company’s previous management, and repeating this pattern wouldn’t have been merited by the stakeholders.
Mriya Eurobonds are currently trading at 17 cents per dollar. With zero value of its equity, such a bond price implies Mriya’s enterprise value of USD 196 mln, which is more or less the fair price for such an asset.
