MHP EBITDA slides 7% in 1Q19

Ukraine’s top poultry producer MHP (MHPSA, MHPC LI)
reported its EBITDA slid 6.9% yoy to USD 83 mln in 1Q19, according to its
financial statements published on June 12. The company’s key segment, poultry
meat, generated USD 77 mln of EBITDA in 1Q19, or 6.5% less yoy. Its EBITDA per
unit of poultry meat dropped 35% yoy to USD 0.36/kg. Its 1Q19 grain-growing
operations EBITDA swelled 83% yoy to USD 11 mln, while its meat-processing
segment EBITDA fell 25% yoy to USD 6 mln. The results excluded its newly
acquired assets. The company’s revenue advanced 42.8% yoy to USD 436.3 mln,
while the recently acquired Perutnina Ptuj plant contributed USD 25.7 mln to
total revenue.

The company’s CapEx decreased 36.5% yoy to USD 33 mln,
while net cash flow on subsidiary acquisition was negative USD 156 mln. The
company’s 1Q19 operating cash flow before working capital changes was USD 87.5
mln, or 6.5% yoy lower, while working capital turned positive USD 61.7 mln vs.
negative USD 39.7 mln a year ago. Net debt increased 9.5% qoq to USD 1,239 mln
as of end-March, while net-debt-to-LTM EBITDA worsened to 2.60x from 2.51x. MHP
included in its calculation of the debt covenant the LTM adjusted EBITDA of
Perutnina Ptuj, which was USD 36 mln as of end-March.

Andriy Perederey: The driver
for MHP’s EBITDA drop was mainly its poultry meat segment, which suffered from
higher production and delivery costs. On the other hand, the company expects to
boost its poultry exports to 380 kt in 2019, or by 17% yoy. We expect that
higher export volumes and cost improvements at its newly acquired assets will
allow the company to generate EBITDA of about USD 335 mln in 2019, or an 8% yoy
increase. We remain bullish on MHP stock and neutral on its Eurobonds.