Milkiland reports flat revenue, 15% drop in 1H14 EBITDA

Ukraine’s milk holding Milkiland (MLK PW) reported a 0.9% yoy decline in its net revenue to EUR 149.8 mln in 1H14, according to its Aug. 30 release. The core reason for the decline was the significant devaluation of the Ukrainian and Russian currencies against the euro. In its flagship segment, cheese and butter, the company demonstrated the worst performance as revenue decreased 15% yoy to EUR 54.7 mln. The company has blamed the ban of cheese supplies from its Ukrainian plants to Russia, which resulted in a one-third decrease in sales in this segment on the Russian market. Milkiland’s whole milk products segment became the biggest in terms of sales in 1H14: revenue increased 7% yoy to EUR 73.1 mln in 1H14. Sales in its new segment, ingredients, grew 56% yoy to EUR 21.9 mln.



The company’s EBITDA declined 15% yoy to EUR 13.5 mln in 1H14, which was the result of a decreased share of its most profitable segment, cheese and butter, in the total revenue mix, as well as a slight decrease in the profitability of all its segments. At the same time, the company reported that the EBITDA of its Russia-based Ostankino plant increased 50% yoy. Milkiland’s bottom line suffered from EUR 33.4 mln in exchange losses, mostly related to the devaluation of the Ukrainian currency, leading to a EUR 27.3 mln 1H14 net loss.



In 2Q14 alone, the company’s revenue decreased 9% yoy to EUR 72.5 mln, mainly due to a 38% yoy decline in revenue in its cheese and butter segment. Its EBITDA decreased 11% yoy as a 42% yoy decrease in its cheese and butter segment was not offset by a 44% yoy growth in operating profit from its whole milk products segment.



In its operating update, the company reported it’s continuing to build cooperatives for raw milk production in Ukraine, with the share of cooperative-produced milk in its total milk intake in Ukraine amounting to 27.4% in 1H14. Raw milk prices in Ukraine declined 16% YTD, in local currency terms, as demand for it fell due to limited delivery of cheese products to Russia, according to Milkiland. In Russia, raw milk prices also declined in 1H14, while remaining about 30% higher, on average, in yoy terms. After Russia imposed sanctions on the EU’s and Ukraine’s dairy products, the company expects an increased deficit in raw milk supplies in Russia and inflation of raw milk prices.



Alexander Paraschiy: The company’s 2Q14 results provided little surprises and reflects the tightened supply of milk products from Ukraine to Russia. In 2H14, we expect the company’s Russian subsidiaries will be core revenue drivers, given smaller competition on the market after bans of imports from the EU and Ukraine. At the same time, we do not expect any increase in EBITDA of the company’s Russia-based plants due to increased competition for raw milk on the Russian market. All in all, we see Milkiland’s revenue will fall about 5% yoy in euro terms in 2014, while its annual EBITDA will fall no less than 10% yoy.

Источник: Конкорд Капитал