MHP EBITDA drops 34% in 1Q21

Ukraine’s top poultry producer MHP (MHPSA, MHPC LI)
reported its EBITDA dropped 34% yoy to USD 63 mln  in 1Q21, according to
its financial statements published on May 19. The company’s key segment,
poultry meat, generated USD 32 mln in 1Q21 EBITDA, or 53% less yoy. Its EBITDA
per kg of poultry meat decreased 44% yoy to USD 0.2. The company’s grain
growing operations EBITDA rose 27% yoy to USD 19 mln (or 30% yoy increase to
USD 13 mln net of IFRS 16) in 1Q21, while its meat processing segment EBITDA
dropped 33% yoy to USD 4 mln. The company’s EU-based facilities generated USD
12 mln of EBITDA in 1Q21, flat yoy.

MHP’s net revenue rose 0.9% yoy to USD 447 mln in
1Q21. Its bottom line turned to positive USD 1 mln (vs. negative USD 174 mln a
year ago), which was the result of a USD 20 mln in non-cash forex gain in the
quarter (vs. a USD 182 mln loss in 1Q21).

MHP’s 1Q21 operating cash flow before working capital
changes was USD 65 mln, or 16% lower yoy and cash outflow for working capital
was USD 101 mln vs. USD 116 mln a year ago. The company’s CapEx rose 9.5% yoy
to USD 23 mln in 1Q21. Net debt increased 8% yoy to USD 1,315 mln as of
end-March, while net-debt-to-LTM EBITDA worsened to 4.28x as of end-March, from
3.17x a year ago.

Andriy Perederey: The
company’s EBITDA decrease was driven mostly by its poultry production costs
increase due to the significant growth of grain prices, while poultry selling
prices showed a moderate growth in 1Q21. We expect the company’s grain growing
segment will be a key driver of the company’s EBITDA in 2021 due to favorable
weather conditions in spring 2021. However, the poultry segment results could
put pressure on the company’s total EBITDA in 2021.

Nevertheless, we see the company will be able to
decrease its net debt to EBITDA ratio this year below 4.0x (more precisely 3.4
– 3.8x) which will allow the company to preserve its current credit ratings.