Industrial Milk reports 20% revenue drop in 9M16, EBITDA remains flat

Famer Industrial Milk Company (IMC PW) reported a 20% yoy drop in its 9M16 revenue to USD 80.3 mln, according to its Nov. 17 filing. Corn sales generated USD 54.5 mln of revenue, or 26% lower yoy. The company sold 358kt of corn in this period, or 24.5% less yoy. IMC attributed the sharp drop to greater volumes sold at the end of 2015 in connection with the repayment of accounts payable in larger amounts than previously. As a result, its inventories at the beginning of the the year 2016 were lower.

The company’s 9M16 EBITDA amounted to USD 56.3 mln, or 1% lower yoy. IMC’s operating cash flow before working capital change plunged 56% yoy to USD 21.9 mln. Net profit fell 17% yoy to USD 16.7 mln. IMC’s total debt amounted to USD 84 mln as of end-September 2016, which is 15% lower YTD. Its net debt was USD 75.3 mln, implying a net debt-to-LTM EBITDA ratio of 1.14x.

The company also reiterated its previous guidance for its 2016 financial results as follows: revenue at USD 122 mln, EBITDA at USD 55 mln, and total debt at USD 97-103 mln.

Igor Zholonkivskyi: Global corn prices remained low during the last 12 months as the average price dropped 2% yoy further to USD 152 per ton during 9M16. So IMC’s weaker financial results did not come as a surprise. On the positive side, IMC maintains one of the lowest leverages in the Ukrainian equity universe and should be well-poised to benefit from a possible recovery in global corn prices. We remain bullish on IMC stock.