Milkiland reports weak 9M16 results

Dairy producer Milkiland (MLK PW) reported a 23% yoy drop in its revenue to EUR 112.9 mln in 9M16, according to its Nov. 14 filing. All its regional divisions showed a sales decline, which the company attributed to devaluation of local currencies, as well as a decline in real volume sales. Revenues in Ukraine fell 33% yoy to EUR 32.9 mln, and in Russia fell 16% yoy to EUR 72.7 mln in 9M16.

The company’s EBITDA dropped 45% yoy to EUR 5.3 mln in 9M16, with a significant decline in Ukraine and Russia. Only its Polish segment demonstrated an EBITDA increase to positive EUR 0.01 mln, rising from negative EUR 0.96 mln a year before.

The company’s total debt decreased 3% YTD to EUR 103.9 mln, while its leverage remained high. In particular, the company’s net debt-to-LTM EBITDA ratio was 19x as of end-9M16, swelling from 11x at the year’s start. Milkiland reported on the restructuring of a EUR 13.1 mln loan with Credit Agricole, which was its only successful debt operation. Its biggest loan, for USD 58.6 mln from UniCredit and Raiffeisenbank, still has not been restructured as the company expects to finalize it in late 2016 or early 2017.

Igor Zholonkivskyi: The company’s operating performance and financials continue to deteriorate with little silver lining in sight, as the prospects of Russia’s lifting the ban for Ukrainian cheese imports in the near future look completely unrealistic. While the company’s efforts to diversify its sales outside of its two core markets deserve credit, the volumes sold outside of Russia and Ukraine still remain negligible, having amounted to just 6.2% in 9M16. Heavily burdened with debts, the company continues to remain a very risky investment.