Milkiland reports minor decline in profit in 1H12

Milkiland (MLK PW), one of Ukraine’s leading milk producers, reported a 5% yoy increase in 1H12 revenue to EUR 134.1 mln. Gross profit grew faster than sales: +8% yoy (to EUR 34.7 mln), mainly on lower milk purchase prices. Nevertheless, EBITDA declined 13% yoy in 1H12 (to EUR 16.2 mln), mostly thanks to 15% yoy growth in selling expenses (to EUR 11.6 mln) and recognizing a EUR 3.0 mln loss from building up provisions for VAT receivables. Net income declined just 6% yoy to EUR 6.3 mln. In 2Q12 alone, the company increased its revenue and EBITDA 4% yoy and improved profit 2.5x yoy. The company will have a conference call to discuss the results today, 15:30 Warsaw time.

Alexander Paraschiy: The company’s 1H12 results look very strong, taking into account that Milkiland was unable to export cheese to Russia for most of the period. 2Q12 is better than we expected (we expected a slight yoy decline in financials), which suggests Milkiland successfully survived the cheese war. We reiterate our BUY recommendation for the stock.