MHP profit nearly halves in 2013, though 2014 outlook positive

Ukraine’s leading poultry producer and crop farmer MHP (MHPC LI) reported a 6% yoy increase in 2013 revenue to USD 1,496 mln, according to an April 2 release. The revenue growth was fueled mainly by an 11% yoy increase in sales of its flagship poultry segment. Its grain segment demonstrated a 21% yoy decline on weaker prices.



The company’s EBITDA decreased 16% yoy to USD 391 mln, again dragged down by its grain segment, where EBITDA declined 2.9x yoy to USD 39 mln. MHP’s EBITDA performance was broadly in line with the company’s guidance of about a 15% yoy decline, while it looks worse than analysts’ consensus of -14% yoy presented by the Interfax-Ukrayina news agency a day before. The company’s bottom line fell 48% yoy to USD 162 mln and was 3.9% below the Interfax consensus.



MHP’s capital expenditures declined by a third to USD 264 mln in 2013, as the company’s biggest investment project, its Vinnytsia production complex, reached its final stage of completion. The company reported it will fully load the Vinnytsia factory, with annual poultry production capacity reaching 220 kt (adding 60% to MHP’s total capacity) by the end of 2014. The company’s net debt increased 8% yoy to USD 1,130 mln, and its Net Debt/EBITDA ratio reached 2.9x, very close to its 3.0x covenant under Eurobonds.



At the same time, MHP management reported it’s looking positively toward 2014, with the first months having demonstrated strong results in its poultry segment. In particular, the company claims domestic chicken demand increased 20% yoy in the beginning of 2014, and MHP was able to increase its chicken exports by more than 20% yoy, even though it has been banned from exporting to Customs Union countries since early February. The company also commented on its Crimean operation (which generated 9% of MHP operating profit in 2013), assuring “business as usual” at all the facilities.



Dividends to be declared in May will “reflect both the profits generated in 2013 and the outlook for 2014,” MHP reported.



Alexander Paraschiy: While MHP’s results are slightly worse than our expectations, we remain positive on the company’s value growth in the near future. We expect the higher load of its new Vinnytsia complex will enable the company to boost chicken sales by 10-15% yoy and improve EBITDA in the segment on higher volumes and lower costs (mainly on falling fodder costs). Hryvnia devaluation in 2014 will play to worsen the company’s leverage ratio (as most of P&L is generated in UAH, while all its debt is in foreign currencies).



At the same time, we see no risks for MHP from the leverage ratio possibly exceeding 3.0x. The company is not allowed to raise new debt after the leverage ratio exceeds the 3.0 threshold, while we believe MHP will not demand new borrowings. We expect the company will further decrease its CapEx in 2014 to raise free cash flow and start deleveraging fast.



We believe the company is including its 2014 outlook in the dividend payment for this year to ensure it doesn’t decrease the DPS (even though EPS nearly halved yoy). A year ago, MHP declared a USD 120 mln dividend payment (USD 1.13 per share).

Источник: Конкорд Капитал