MHP EBITDA rises 16% in 1Q20

Ukraine’s top poultry producer MHP (MHPSA, MHPC LI)
reported its EBITDA rose 15.7% yoy to USD 96 mln in 1Q20, according to 
its financial statements published on June 2. The company’s key segment,
poultry meat, generated USD 68 mln in 1Q20 EBITDA, or 5.6% less yoy. Its EBITDA
per kg of poultry meat slid 2.7% yoy to USD 0.36. The company’s grain growing
operations generated USD 9 mln in 1Q20 EBITDA, or 18.2% lower yoy, while its
meat processing segment EBITDA was flat yoy (USD 6 mln). The company’s EU-based
facilities generated USD 12 mln in 1Q20, or 3.0x jump yoy.

The company’s net revenue rose 1.6% yoy to USD 443 mln
in 1Q20. Its bottom line turned negative USD 174 mln (vs. positive USD 33 mln a
year ago), which was the result of USD 182 mln in Forex losses in the quarter (vs.
a USD 21 mln gain in 1Q19).

MHP’s 1Q20 operating cash flow before working capital
changes was USD 77 mln, or 3.8% yoy lower, while cash outflow for working
capital was USD 116 mln vs. inflow of USD 62 mln year ago. The company’s CapEx
decreased 27.6% yoy to USD 21 mln in 1Q20. Net debt increased 6.8% YTD to USD
1,216 mln as of end-March, while net-debt-to-LTM EBITDA worsened to 3.17x as of
end-March, from 3.01x as of end-December. As leverage exceeded the 3.0x
incurrence covenant under Eurobonds, the company reported it had introduced
additional control measures to supervise and assess additional indebtedness.

Andriy Perederey: The
company’s EBITDA increase was driven by its EU-based operating segment
(Perutnina Ptuj), while the company’s key poultry segment EBITDA declined due
to halted export sales after the outbreak of avian influenza in Ukraine in
Jan.-Feb. 2020. The export sales were partly offset by rising domestic sales in
1Q20. Due to COVID-19 issues, the company’s 2Q20 results are likely to be
slightly weaker yoy, though we expect the company will nevertheless boost its
poultry sales, as well as its key P&L metrics in 2020.