Ovostar improves egg production 11% yoy in 1H14

Ukraine’s leading producer of liquid egg products Ovostar (OVO PW) improved its egg production 11% yoy to 468 mln units in 1H14, according to its July 28 report. The company’s laying hen flock increased to 4.1 mln, up 23% yoy and 5% YTD. Ovostar reported its sales of shell eggs increased 16% yoy to 298 mln in 1H14, including 74% yoy growth in egg exports (to 42 mln units) and a 10% yoy increase in domestic deliveries. The average price of a shell egg increased 17% yoy to UAH 0.70 in 1H14.



Ovostar processed 150 mln shell eggs (up 10% yoy) and increased sales of dry egg products 10% yoy to 786t in 1H14. Sales of liquid egg products by the company fell 7% yoy to 2.96kt. The company attributed the decline to smaller demand from eastern Ukrainian companies. Average prices of dry egg products increased 17% yoy to UAH 53.2/kg, while prices of liquid egg products advanced 9% yoy to UAH 16.35/kg in 1H14, according to the company.



The 1H14 results imply that Ovostar sped up its egg output to 15% yoy in 2Q14, from 7% yoy in 1Q14. Sales of shell eggs in the quarter increased 19% yoy, compared to a 16% yoy rise in 1Q14, while sales of egg products declined in 2Q14.



Alexander Paraschiy: As prices for eggs and egg products, in dollar terms, failed to increase in line with the appreciation of the U.S. dollar vs. the local currency, Ovostar will likely to show a single-digit increase in its revenue in 1H14. We estimate its semi-annual top line grew 5% yoy to USD 34.7 mln. At the same time, we expect the company’s bottom line will remain strong in 1H14, as it was in 1Q14, given that the company continues to benefit from low prices for fodder, which is the company’s core cost component.



With the company’s 1H14 production results on hand, we see that its full-year output of eggs will be about 1.0 bln, or 10% below the bottom of the initially targeted range (1.1-1.2 bln units). We expect the company’s profitability will shrink in 2H14, compared to the first half of the year, as the prices of its outputs will advance slower than costs of inputs. However, Ovostar, which has very small leverage, should be among the few Ukrainian public food companies that will deliver an improved bottom line this year.

Источник: Конкорд Капитал