Ukrlandfarming reports 2014 EBITDA plunged 48% yoy

Ukraine’s largest farming company and egg producer Ukrlandfarming (ULF, UKRLAN) reported on May 7 its 2014 EBITDA plunged 48% yoy to USD 434 mln. Revenue fell 25% yoy to USD 1,557 mln, while profit from operating activities plummeted more than 3.5x yoy to USD 261 mln. ULF experienced a huge working capital outflow: operating cash flow before working capital changes fell 28% yoy to USD 553 mln, while net cash flow from operating activities nosedived 88% yoy to just USD 100 mln.

The company’s total debt remained almost unchanged at USD 1,677 mln as of end 2014. At the same time, its total debt to LTM EBITDA jumped to 3.86x from 1.99x as of end 2013 and from 2.93x in September 2014, thus having crossed the 3.0x Eurobonds covenant. Its short-term debt amounted to USD 643 mln as of end-2014, including USD 200 mln in Avangardco (AVINPU) Eurobonds due in October 2015.

Roman Topolyuk: ULF’s weak figures reflected the adverse performance of one of the company’s key subsidiaries, egg producer Avangardco, which were published previously, most notably a 57% plunge in 2014 EBITDA. Another significant business segment, crop production, faced a 15% EBITDA plunge to USD 236 mln, but Ukrlandfarming still may report somewhat overstated profitability in this segment, we beleive. Its EBITDA per hectare is around USD 391, whereas MHP (MHPC LI), one of the most efficient crop producers in Ukraine, reported USD 294 in EBITDA per hectare in 2014.

In the big picture, Ukrlandfarming’s earnings power is trending downwards, and the company has already broken its Eurobond covenant, which will cap its ability to raise new debt. We expect its egg-producing segment to perform at least flatly, in terms of 2015 EBITDA, and we expect further normalization of earnings in its farming segment, which still will lead to further worsening of its solvency ratios.

One of the largest debt repayments ahead is a USD 200 mln Eurobond redemption, which will require refinancing or restructuring as ULF lacks the ability to repay the notes smoothly. On the bright side, we don’t expect any haircuts or coupon decreases on any ULF bonds, at least at this stage.

Источник: Конкорд Капитал