Ovostar EBITDA falls 42%, net profit falls 45% in 9M16

Egg producer Ovostar Union (OVO PW) reported a 1.7% yoy increase in net revenue to USD 53.7 mln in 9M16, according to its Nov. 15 filing. Sales in its core segment, shell eggs (75% share of total revenue), declined 5.1% yoy to USD 37.8 mln, which was a result of 17% yoy decline of shell egg prices in USD terms. Its egg product segment sales (28% share of total revenue) improved 28% yoy to USD 15.3 mln.

The company’s EBITDA decreased 42% yoy to USD 14.2 mln and its operating cash flow before working capital changes fell 45% yoy to USD 13.3 mln in 9M16. The company attributed the worse performance to declining domestic egg prices in USD terms, coupled with higher prices for fodder components, which boosted the cost of sales by about 20% yoy in 9M16.

Ovostar’s 9M16 bottom line declined 45% yoy to USD 12.2 mln. Ovostar’s net debt increased 1.8x YTD to USD 11.1, implying a net debt-to-LTM EBITDA ratio of 0.45x, still remaining among the lowest in Ukraine’s equity universe.

Igor Zholonkivskyi: Average USD-denominated shell egg prices in Ukraine declined due to weaker domestic demand, owing to diminishing purchasing power of consumers. We do not expect an increase in demand during 4Q16 as households will continue to struggle financially with the arrival of the newly hiked utility rates this fall. Nonetheless, we maintain a positive view of Ovostar due to its low level of indebtedness and robust business model, which should be able to produce solid financial results once the macro situation in Ukraine starts to gradually improve in 2017.