KSG Agro reports losses in 2013, 1Q14

24 июня 2014 года
Конкорд Капитал

KSG Аgro (KSG)

Ukraine’s farming company KSG Agro (KSG PW) reported part of its unaudited financials for 2013, as well as interim results for 1Q14 on June 24. According to the draft financials, the company’s 2013 revenue increased 56% yoy to USD 59.7 mln, while its EBIT turned negative at USD 4.1 mln, vs. positive USD 17.6 mln a year before. KSG’s 2013 net losses amounted to USD 27.2 mln, vs. USD 11.7 mln profit in 2012.


In 1Q14, KGS Agro generated USD 4.5 mln in revenue, down 45% yoy and USD 2.0 mln in EBITDA, down 59% yoy. Foreign currency losses of USD 5.9 mln made the company’s bottom line deeply negative in 1Q14 at USD -7.7 mln.


The company’s total debt jumped 1.8x yoy to USD 105.4 mln as of end-2014, while it further declined to USD 83.8 mln as of end-1Q14. The company was able to repay net loans for just USD 7.3 mln in 1Q14, so most of decrease in its total debt seems to be explained by the devaluation of the hryvnia, which resulted in the smaller value of local currency borrowings.


In other news, the company reported it divested an agricultural company that had leasing rights to 1,700 ha in the southern Kherson region of Ukraine, cutting its land bank to about 94,000 ha (or slightly above its end-2012 level, which was reported at 92,000 ha).


Alexander Paraschiy: The delay in the delivery of the results of KSG Agro, which failed to pass an independent audit, was a troubling sign in and of itself. More discouraging news is that KSG’s 2013 results look even worse than those for 1Q14, when the company really faced deep trouble as more than 20% of its land bank is located in Crimea, which had been occupied by Russia in March.


Based on the company’s provided results, we estimate its EBITDA fell 6x yoy to USD 4.1 mln in 2013. This is a significant deterioration of EBITDA compared to its 9M13 results (USD 22.8 mln), which cannot be explained solely by a high downward revaluation of its biological assets (from USD 25.9 mln in 9M13 to USD 13.3 mln in 12M13).  We suspect that a change in the business environment in Crimea could have affected the company’s results and revaluations of future gains in a negative way, while at the moment we don’t have enough information to confirm this theory.


Based on the company’s results, its Net Debt/EBITDA raio is 21x as of end-2013, vs. 2x a year before. It seems that KSG Agro will focus its efforts on turning around its business in 2014, and we see a 50/50 chance of success. Meanwhile, KSG Agro is starting to resemble its peer Agroton (AGT PW), not only by its risky crop mix and ill-grounded investment projects, but also by the poor predictability of its financial results.

Источник: Конкорд Капитал


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