Milkiland revenue decreases 11%, EBITDA falls 29% in 1H18

Dairy producer Milkiland (MLK PW) decreased its
revenue 11% yoy to EUR 66.15 mln in 1H18, according to its Aug. 31 report. The
decline occurred in its two core geographical segments, Russia (-17% yoy) and
Ukraine (-7% yoy), while its Polish assets showed a 17% yoy increase in
revenue. The company’s EBITDA worsened 29% yoy to EUR 3.55 mln, declining in
each of its geographical segments. Its operating cash flow before working
capital changes followed the EBITDA change and decreased 26% yoy to EUR 3.85
mlm. Smaller foreign currency devaluation gains, as well as losses related to
the revaluation of fixed assets, made the company’s bottom line negative at EUR
2.52 mln (vs. a positive EUR 1.57 mln a year before).

Milkiland’s total debt stood at EUR 87.53 mln as of
end-June 2018, which is 6.1% less yoy but 1.1% more YTD. Its net debt-to-LTM
EBITDA was 9.9x as of end-June 2018, which is better than a year ago (13.0x)
but worse than half a year ago (8.3x). The company still hasn’t achieved any
restructuring deal with its core lenders, namely a syndicate of UniCredit Bank
Austria and ZAO Raiffeisenbank, putting the aim to reach a deal in its
strategic plans for 2H18.

Alexander Paraschiy: After a
relatively good 2017, the company’s P&L continued to deteriorate for the
second quarter in a row, confirming that management efforts to improve profits
and relatively beneficial demand on core markets was not enough for the company
to start turning around. Worsened P&L hardly improves the chances for the
company to complete the restructuring of its core debts, which is the issue
that the company has not been able to resolve over the last four years. With
all this, Milkiland remains a highly risky equity investment.