Milkiland survives cheese war with minor EBITDA decline in 1Q12

Milkiland (MLK PW) reported its financials for 1Q12 yesterday: revenues grew 6% yoy to EUR 67.7 mln, EBITDA decreased 30% yoy to EUR 6.6 mln (margin down 5 pp yoy to 10%), net income declined 3x yoy to EUR 1.9 mln. The company cited the cheese export ban to Russia and the lag in the reintroduction of the government’s raw milk subsidy system as key reasons behind the EBITDA margin decline. Milkiland also said its debt portfolio decreased by 27% during 1Q12, following the repayment of EUR 29 mln of its most expensive loans. The company will hold a conference call today at 15:30 Warsaw time.

Yegor Samusenko: The company seems to have survived the milk war with Russia far better than we expected: cheese segment revenues were up 10% yoy in euro terms, contrary to our expectation of a decline. The cheese segment EBITDA margin fell 7 pp yoy to 13%  in 1Q12 – a moderate figure given the company’s use of its most profitable export channel was limited and cheese oversupply on the local market. Of note, the company also reported the withdrawal of USD 40 mln from a USD 100 mln syndicated loan in May 2012, which in our view could indicate the company is close to the completion of a significant acquisition. According to the terms of the loan, Milkiland is required to spend a major portion on acquisitions, and can only use a small amount to repay loans; our understanding is that the company has already reached this limit after the drawing the first USD 29 mln tranche from the loan in late 2011. Earlier, the company said it was screening cheese production targets in Poland, Russia and Belarus.