Ovostar revenue rises 27%, EBITDA drops 17% in 2018

Net revenue at Ukrainian egg producer Ovostar Union
(OVO PW) increased 26.6% yoy to USD 125 mln in 2018, according to its annual
report published on Apr. 19. Revenue rose in both its core segments, including
34.2% yoy to USD 91 mln in its shell egg segment and 13.0% yoy to USD 34.0 mln
in egg products.

The company’s EBITDA dropped 17.4% yoy to USD 21.9 mln
in 2018. The key drivers of the EBITDA decrease were higher transportation
costs and higher trading volume of low-margin goods. The company’s SG&A
costs jumped 45.2% yoy to USD 8.9 mln and its COGS rose 33.7% yoy to USD 91.0
mln in 2018. Ovostar’s net income fell 23.8% yoy to USD 17.5 mln in 2018.

The company’s cash flow from operations increased
22.3% yoy to USD 23.2 mln for 2018 and its CapEx surged 8.7x to USD 13.8 mln.
Ovostar’s total debt dropped 31.6% yoy to USD 9.3 mln in 2018, while its net
debt improved to negative USD 5.0 mln in 2018 vs. negative USD 1.3 mln a year
ago.

In other news, Ovostar’s shell egg sales decreased
2.0% yoy to 335 mln units in 1Q19, according its operating update published on
Apr. 22. The company’s shell egg exports advanced 34.8% yoy to 186 mln units,
while domestic sales of shell eggs dropped 27.0% yoy to 149 mln units in 1Q19.
The average egg selling price decreased 8.3% yoy to USD 0.069 in 1Q19.
Ovostar’s sales of liquid egg products increased 11.2% yoy to 3.5 kt, while its
price declined 1.4% yoy to USD 1.46/kg in 1Q19. Its sales of dry egg products
dropped 10.4% yoy to 0.53 kt and their price slid 8.1% to USD 4.36/kg in 1Q19.

Andriy Perederey: Ovostar’s 2018 revenue result is
in line with our expectation of USD 124 mln, while the company’s 2018 EBITDA is weaker than we
expected. Also, the company’s quarterly results imply that in 1Q19, its revenue
was about USD 30 mln, or a 9% yoy decrease.  We expect a negative market
reaction to the company’s annual report and trading update, but we are keeping
our neutral view on Ovostar stock.