Milkiland halves EBITDA in 2014, re-focuses on in-country sales

Ukraine’s milk holding Milkiland (MLK PW) guided a 16% yoy decline in 2014 revenue to EUR 285 mln and a 50% yoy decrease in EBITDA to EUR 16.8 mln, according to its March 26 press release. The company attributed the decrease in its financials to the heavy devaluation of key currencies of operation (UAH, RUR) vs. Euro, as well as the closure of the Russian market for its Ukrainian and Polish assets since August 2014. Russia’s ban to import Ukrainian cheese, which was the most profitable business for Milkiland, has caused a decrease of sales from its Ukrainian facilities by 8% yoy, in local currency terms. At the same time, the isolation of the Russian dairy market has allowed Milkiland’s Russian assets to perform exceptionally well last year. Revenue of its Russian-based assets increased 13% yoy in 2014, in local currency terms, and EBITDA of its Moscow-based facility has increased 33% yoy. The group’s Polish assets increased revenue 76% yoy in 2014, in local currency terms.



The company announced a shift in its sales strategy that was prompted by the closure of the Russian market, where it was initially targeting to supply cheese from its Ukrainian and Polish facilities. Milkiland is now increasing the sales to domestic markets and developing export destinations outside the Russian market.



Alexander Paraschiy: Milkiland is one of the biggest victims of the trade war between Russia and Ukraine as well as the western world, so its decline in 2014 revenue and EBITDA is not a surprise. Milkiland’s strategic decision to re-focus the operations of its Ukrainian and Polish facilities on domestic markets and exports outside of Russia is a straightforward and forced move. We believe that the company will be able to mitigate the Russian market closure and increase the sales at its Ukrainian assets this year. At the same time, it seems that its Russian assets will start playing a leading role in the company’s turnaround in 2015.



The bad news is that by changing its delivery plans, Milkiland will not be able to benefit from the synergies that it had been promised from its previous strategy – the export of cheese from Ukraine and Poland to Russia. Such a plan was the core reason why the company purchased its Polish asset in 2012. Another bad piece of news is that the company’s decreased bottom line significantly deteriorates its solvency. Its end-9M14 net debt amounted to EUR 95 mln, implying that its net debt/EBITDA ratio has increased to a worrying 5.7x level.

Источник: Конкорд Капитал