Avangardco reports encouraging 3Q15 results

Ukraine’s leading egg producer Avangardco (AVGR LI, AVINPU) reported its laying hen flock was 13.7 mln as of end-3Q15, according to its Nov. 30 filing. This is 13% more qoq, but still 26% less yoy and half of what the company had at the peak of its business in late 2013 (27.0 mln). The company’s shell egg production was 843 mln in 3Q15, which is 41% less yoy, but slightly more qoq. Its sales of shell eggs fell 45% yoy and 4% qoq to 608 mln in 3Q15. The average price of a shell egg was UAH 1.28, or 60% more yoy.

Avangardco's 3Q15 revenue decreased 43% yoy to USD 55.1 mln and EBITDA improved 83% yoy to USD 13.2 mln. The key reason for the improvement was stabilization of the company’s business, with none of the write-downs that affected the results for the previous year and previous quarters. The 3Q15 bottom line was USD 1.1 mln compared to a USD 47.6 mln loss in 3Q14.

The quarterly results still helped little to improve Avangardco’s YTD results after an awful 1H15, in which the company had to write down USD 102 mln in impairments. Its 9M15, revenue decreased 50% yoy to USD 176.5 mln, while its EBITDA and bottom line remained deeply in red at USD -84.3 mln and USD -150.5 mln, respectively. The company’s operating cash flow before working capital changes fell 74% yoy in 9M15 to USD 28.4 mln. Its CapEx decreased 41% yoy to USD 32.5 mln.

The company’s total debt remained flat yoy at USD 340 mln and net debt grew 32% yoy to USD 298 mln as of end-9M15, solely on a decrease in cash. Short-term debt, net of the recently restructured Eurobonds, amounted to USD 70 mln. Avangardco’s LTM EBITDA was USD -63 mln as of end-3Q15.

Alexander Paraschiy: The company’s 3Q15 results were unexpectedly strong, which is a sign of its recovery from the war-related shocks of late 2014 and early 2015. Its cash flow generating potential still does not enable it to fully service its short-term debt, but the company has the potential for further improving its operations in the coming quarters. For instance, the company’s profitability still deeply contrasts with what was reported by its more successful peer, Ovostar (OVO PW), which reported an EBITDA margin of 42% in 3Q15 (vs. 24% for Avangardco). Shell egg prices remain strong in Ukraine, allowing Avangardco to hope for better profit in the fourth quarter.

While our optimism regarding the company has improved, we still recommend being cautious with investments into its stocks and bonds, as they bear the high risk of Avangardco's parent company, Ukrlandfarming.

Источник: Конкорд Капитал