Ovostar revenue rises 38%, EBITDA slides 27% in 1H21

Ukraine’s egg producer Ovostar Union (OVO PW) reported
a 37.6% yoy growth in net revenue to USD 61.4 mln, according to its Aug. 27
filling. The company’s EBITDA slid 27% yoy to USD 3.5 mln, with the EBITDA
margin decreasing 5pp to 6%. The company’s revenue from shell egg sales jumped
56% yoy to USD 44.8 mln and egg product sales contributed USD 16.7 mln to the
company’s revenue in 1H21, or 6% more yoy.

The company’s operating cash flow before working capital
changes increased 16% yoy to USD 6.2 mln and net cash flow from operations grew
23% yoy to USD 9.6 mln. Ovostar’s CapEx decreased 87% yoy to USD 0.2 mln, while
the company’s investments in biological assets jumped 34% yoy to USD 9.3 mln in
1H21.

Its net debt decreased 18% YTD to USD 7.3 mln and its
net debt-to-LTM-EBITDA ratio reached 1.09x at the end of June 2021, from a
negative 1.85x year ago.

In 2Q21, Ovostar’s net revenue slid 9% yoy to USD 29.3
mln. Shell egg sales contributed USD 20.6 mln to company’s net revenue in 2Q21,
or 15% less qoq, while egg product sales rose 11% qoq to USD 8.8 mln in 2Q21.
The company’s EBITDA turned to negative USD 1.9 mln in 2Q21 vs a positive USD
5.4 mln in the previous quarter.

Andriy Perederey: The company’s top line was driven by the increase of sales volumes of
shell eggs and price jumps for all of the company’s products. The substantial
increase of key cost components (corn and wheat) have driven the margins
decrease. We expect that egg prices will correct in the second and third
quarters, but will remain stronger on a year-on-year basis, while feed prices
will be higher yoy, too. So, we see that the company’s margins will remain
weaker yoy in 2H21. All this makes us skeptical about positive OVO share performance
in the near term.