Milkiland further worsens P&L in 1H20

Dairy firm Milkland (MLK PW) reported a 44% yoy
decrease in its top line to EUR 37.0 mln in 1H20, according to its Aug. 31
filing. The decline was the result of a 52% yoy fall in sales in Russia (to EUR
17.5 mln), a 23% yoy fall in Ukraine (to EUR 19.1 mln) and the discontinued
consolidation of its Polish subsidiary (whose revenue was EUR 4.1 mln in 1H19).
As the result of a new strategic investor appearing at the Poland-based
Ostrowia plant, Milkiland’s share in the facility decreased to 20%. The deal
allowed Milkland to decrease its consolidated debt by EUR 1.9 mln.

The company’s EBITDA decreased 79% yoy to EUR 0.1 mln
in 1H20 as the improvement of the result in Ukraine (up 6.6x yoy to EUR 1.0
mln) was offset by weakness in Russia (where EBITDA fell to negative EUR 0.8
mln from positive EUR 0.8 mln a year ago). Due to increased ForEx losses (to
EUR 13.0 mln), the company’s net loss surged to EUR 22.8 mln in 1H20, from EUR
7.3 mln a year ago.

Milkland’s total debt decreased 9% yoy to EUR 75.1 mln
as of end-1H20, still remaining solid as compared to the company’s size. Its
cash position decreased 77% yoy to EUR 0.7 mln as of end-1H20. The company is
planning to continue negotiations on debt restructuring and will search for the
settlement of debt related to its Russian Kursk Milk facility which is
undergoing a bankruptcy procedure now.

Alexander Paraschiy: The company continues to under-perform on both the Russian and
Ukrainian dairy markets due to its debt issues, which undermine the normal
activity of its facilities. Despite management’s efforts, the company remains
in a distressed position with unclear prospects for a turnaround. Therefore,
Milkiland shares remain a highly risky investment.