Ovostar decreases revenue 17%, EBITDA 19% in 1H20

Ukraine’s egg producer Ovostar Union (OVO PW) reported
a 17% yoy decline in net revenue to USD 44.63 mln, according to its Aug. 28
filing. This was solely a result of lower shell egg prices, which dropped 20% yoy in USD terms.
The company’s EBITDA decreased 19% yoy to USD 4.82 mln, with EBITDA margin
falling just 0.2pp to 10.8%. Ovostar’s bottom line decreased 33% yoy to USD
2.44 mln, which was largely a result of increased D&A charges.

The company’s operating cash flow before working
capital changes fell 32% yoy to USD 5.71 mln in 1H20, while net cash flow from
operations decreased 19% yoy to USD 8.90 mln. Ovostar’s CapEx fell 73% yoy to
USD 1.67 mln as the company put on hold its key expansion project referring to
the COVID-19 pandemic. Its net debt decreased 11% yoy to USD 9.05 mln, while the
cash balance fell 87% yoy to USD 1.67 mln as of end-1H20.

Alexander Paraschiy: Ovostar’s 1H20 revenue, which was 3% higher than we estimated, and its
stable yoy EBITDA margin is encouraging news. At the same time, a worrying
signal is the company’s significant decrease in cash position. Thus far, it
looks like egg prices in Ukraine will not be much better yoy in 2H20, implying
that the second half result for Ovostar will be again weaker yoy. All this
makes us skeptical about positive OVO PW share performance in the near term.