Industrial Milk posts strong 2014 P&L, breaches debt covenants

Farming holding Industrial Milk Company (IMC PW) posted a 20% yoy increase in net revenue to USD 138.3 mln in 2014, according to its annual report released on Apr. 16. The key contributor to its revenue growth was corn, sales of which increased 94% yoy to USD 89.5 mln (and 145% yoy in physical terms, to 506 kt). The company generated USD 57.4 mln in EBITDA, up 16% yoy, which have been confirmed by strong growth in operating cash flow before working capital changes (+82% yoy to USD 67.8 mln). IMC’s bottom line was negative at USD 47.3 mln in 2014 (vs. positive USD 25.8 mln) mainly due to reported currency exchange losses of USD 73.5 mln.

The company’s cash flow from operating activities increased more than fivefold to USD 25.2 mln, but the net cash balance decreased almost fivefold to USD 3.0 mln as of end-2014.

IMC’s net debt has remained nearly flat yoy at USD 124.4 mln, with net debt/EBITDA ratio improving to 2.2x as of end-2014. Despite this, the company has breached some of its debt covenants, according to the auditor’s report, and failed to receive a waiver from an international lender, as of the date of the report’s publication. This might potentially trigger an acceleration of the loan in amount about USD 30 mln. IMC commented it “has strong confidence” that the waiver will be obtained shortly. The company’s other short-term debt amounted to USD 59.6 mln as of end-2014.

Alexander Paraschiy: The company’s revenue is in line with our estimates, while its EBITDA has surprised us positively. Due to its efforts to improve its operating efficiency, the company remains as one of few bright spots in the Ukrainian equity universe. Clearly, the breached covenant on international debt is a risk, especially given the currently tough credit environment in Ukraine, and the large amount of IMC’s outstanding short-term debt. We believe that the latter might limit a positive reaction from the stock market on the overall strong reported P&L.

Источник: Конкорд Капитал