Milkiland reports expected 2012 results, plans dividends

Ukraine’s leading cheese maker Milkiland (MLK PW) reported its 2012 revenue rose 3% yoy to EUR 387.0 mln. The company’s key top line driver was its segment of whole milk products, where revenue improved 14% yoy to EUR 114.7 mln. Sales in its flagship cheese segment showed expected worsening (due to a conflict with Russia in 1H12)  by 5% to EUR 145.3 mln.

Despite a challenging year, the company was able to show 10% growth in EBITDA to EUR 37.9 mln. Notably, the company’s operating cash flow before working capital changes appeared to be much larger than EBITDA (EUR 43.3 mln). Milkiland’s increased leverage (net debt grew 1.7x to EUR 73.1 mln) made it incur higher financial costs to report a 9% yoy decline in its 2012 bottom line of EUR 13.6 mln.

In dollar terms, the company’s results were slightly less encouraging, with revenue falling 12% yoy (to USD 369.0 mln), EBITDA advancing just 1% yoy (to USD 48.7 mln) and profit falling 16% yoy (to USD 17.4 mln).

In 2013, the company plans to complete projects initiated earlier, including the launch of a new dairy farm (6,800 cows) and the recovery of its acquired Ostrowia Dairy (which may add up to 10% to Milkiland’s sales). Total CapEx for this year is planned at EUR 15-20 mln (vs. total EUR 49.6 mln spent in 2012).  

In a separate note, Milkiland said it will start paying modest dividends based on 2012 results.

Alexander Paraschiy: The company completed the year fully in line with our forecasts and its 2012 indicative results revealed on March 7. That being said, we look positively towards Milkiland’s prospects for 2013, which have created a significant basis to deliver growth in both revenue (due to the Ostrowia Plant’s launch) and operating efficiency (the new dairy farm will allow for improved control over milk input costs and quality). All in all, we confirm our bullish outlook on Milkiland stock, one of the few stories in the Ukrainian universe that look promising for 2013. We expect the company’s announced opening of dividend payments will be an additional sweetener for investors. The company’s high cash generation ability and considerably decreased CapEx appetite create the opportunity for such a move.