Astarta EBITDA surges 72%, Forex headwind extends net loss in 1Q20
Ukrainian farmer and leading sugar producer Astarta (AST PW) reported a 10% yoy decline in net revenue to EUR 101.3 bln in 1Q20. The main factor was a 33% yoy decline in agro produce sales. At the same time, the company’s EBITDA surged 72% yoy to EUR 27.8 mln, which mostly a result of decreased farming COGS. Devaluation of the hryvnia, the company’s functional currency, vs. hard currencies resulted in a EUR 18 mln in Forex losses, which caused a bottom line of negative EUR 13.3 mln (up 2.7x yoy) in 1Q20.
Astarta’s net debt fell 31% yoy to EUR 227.7 mln and net debt to LTM EBITDA ratio improved to 2.54x as of end-1Q20, from 4.64x a year before. Nevertheless, the company reported it was still in breach of some covenants on the debt portion of EUR 65 mln, while seeing no negative consequences of the breach.
The company’s operating cash flow before working capital changes improved 65% yoy to EUR 18.9 mln, while a significant release of working capital resulted in a 17% yoy increase of net cash from operations to EUR 49.0 mln.
The company reiterated its plan to expand its sowing area by 1% yoy in the current season to 217,000 ha by reducing the share of all its key crops (corn, wheat, soybeans) and raising the planting area of sunflower by 32% yoy to 31,000 ha. Sowings of sugar beet are will remain flat at 35,000 ha.
Alexander Paraschiy: As usual, we are warning the 1Q is not indicative of the company’s full-year fundamentals as it is selling the goods produced in the last year during this period. If the company continues to implement its cost-cutting measures and improve the efficiency of its sugar production, it will be able to achieve smaller crop and sugar production costs this season.
Also, as the weather looks favorable for spring crops, the company might benefit from higher spring crop yields this year. All this should be sufficient for the company slightly improving its profitability and operating profits in 2020, despite expected weakening in prices for its core products. All in all, we remain optimistic about Astarta’s mid-term value generation potential.