Milkiland EBITDA improves 55% in 9M17

Dairy producer Milkiland (MLK PW) continued to
surprise the markets with boosted profitability in 9M17, according to its Nov.
16 report. Its EBITDA improved 55% yoy to EUR 8.16 mln and EBITDA margin
reached 7.7% (up from 4.7% a year before) which the company attributed to cost
optimization and higher focus on value-added products.

Its revenue decreased 6% yoy to EUR 105.7 mln, which
was a result of a 22% decline in volume of products sold. At the same time, the
company reported doubled supplies of butter, for which it found good demand.
The company’s biggest contributor to growing EBITDA was its ingredients
segment, which shifted from a negative result in 9M16 to positive EUR 1.52 mln
in 9M17.

Appreciation of the company’s key currencies versus
the euro allowed it to significantly improve its bottom line in 9M17: net
profit was EUR 4.55 mln, up from its negative result of EUR 24.81 mln a year
ago.

The company’s 9M17 results imply it generated EUR 3.14
in EBITDA in 3Q17, which is 69% better yoy and 13% more qoq.

Milkiland also managed to deleverage slightly by
repaying net EUR 5.26 mln in debt during 9M17. Its total debt decreased 14% YTD
to EUR 87.5 mln and net debt fell 15% YTD to EUR 86.4 mln as of end-September.
This resulted in visible improvement of its net debt-to-LTM EBITDA ratio to
10.4x as of end-September, compared to 18.6x as of year’s start.

The company reported it gained some progress on
restructuring of its debt, signing an agreement with Ukrainian PUMB (PUMBUZ) to
restructure EUR 9.7 mln. Its biggest debt facility, EUR 49.6 mln due to
UniCredit Bank Austria AG and ZAO Raiffeisenbank, has yet to be restructured.

Alexander Paraschiy: The company’s turnaround in operations looks sustainable now, with two
quarters of increasingly better profitability. This increases the chance that
the company will be able to survive, but to completely remove the uncertainties
it needs to agree on debt restructuring with its major creditors. We expect a
positive market reaction to Milkiland’s results. At the same time, we abstain
from issuing any positive mid-term recommendation on its stock.