MHP revenue rises 17%, EBITDA slides 2% in 9M18

Revenue at Ukraine’s leading poultry meat producer and
farmer MHP (MHPSA, MHP LI) rose 17.1% yoy to USD 1.14 bln in 9M18, while its
EBITDA slid 2.4% yoy to USD 362 mln, according to its interim results published
on Nov. 14. The company’s poultry segment EBITDA decreased 13.3% yoy to USD 234
mln, while farming segment EBITDA rose 32.0% yoy to USD 128 mln in 9M18. The
meat processing segment contributed USD 14 mln to 9M18 EBITDA, or 6.7% lower
yoy.

MHP didn’t receive any state subsidies in 9M18 (vs.
USD 40.9 mln received in 9M17), which caused net profit to plunge 43.6% yoy to
USD 141.7 mln in 9M18. The net profit plunge was also connected to “the one-off
transaction costs related to the new Eurobond issued in April 2018,” the
company said. MHP’s operating cash flow before working capital changes
increased 6.3% yoy to USD 320.5 mln, while net cash flow from operating
activities decreased 2.4% yoy to USD 193.1 mln in 9M18.

MHP’s CapEx surged 2.35x to USD 216 mln mostly due to
the launch of the second phase of constructing the Vinnytsia Poultry Complex.
Its net debt-to-LTM-EBITDA ratio was 2.60x in the end of 9M18, compared to
2.44x a year ago and 2.25x at the year’s start.

Also, the company offered an update on its harvesting
campaign. In 9M18, sunflower seed yield rose 6.7% yoy to 3.2 t/ha, soybean
yield gained 38% yoy to 2.9 t/ha and the preliminary corn yield (from 90% of
area harvested) jumped 40% yoy to 10.2 t/ha.

In other news, MHP plans to invest EUR 200 mln in
CapEx in the next five years in the Perutnina Ptuj poultry plant in Slovenia,
according to the company’s press release published on Nov. 13. MHP plans to
complete its acquisition by the end of 2018.

In 3Q18, MHP’s poultry segment EBITDA increased 3.9%
qoq to USD 80 mln, or a 20.0% yoy decline. The company’s net revenue increased
13.9% qoq to USD 442.4 mln, rising 19.4% yoy.

Andriy Perederey: The
company’s EBITDA fell mainly due to the absence of government grants. Without
these grants in 9M17, the company’s EBITDA would have improved 9.4% yoy in
9M18. The grants are likely to be awarded in 4Q, which may boost the company’s
bottom line.

The high poultry sales and strong harvesting results,
along with expectations for higher poultry prices in the fourth quarter,
support our expectations for MHP’s poultry segment EBITDA being in the range of
USD 320-330 mln in 2018 (vs. USD 367 mln in 2017) and the company’s total
EBITDA being in the range of USD 470-480 mln in 2018. We remain bullish on MHP
stock and neutral on its Eurobonds.