Milkiland reports 13% sales growth, 15% EBITDA decline in 1H13

Milkiland (MLK PW), one of Ukraine’s leading cheese producers, reported a 13% yoy increase in net revenue to EUR 151.1 mln in 1H13. The company’s flagship cheese and butter segment showed just 1% growth yoy to EUR 69.0 mln. The key contributors to the revenue growth were the whole milk products (WMP) segment (+23% yoy to EUR 68.1 mln) and ingredients (+29% yoy). EBITDA of the latter segment doubled yoy in 1H13 to EUR 2.1 mln, which Milkiland attributes primarily to an advance in skim milk powder prices globally, or more than 50% yoy, according to the company.



The increase in dairy commodity prices and decline of raw milk supply in Ukraine affected negatively Milkiland’s profitability, as raw milk producers raised their prices. Milkiland faced a 14% yoy hike by the end of June, while Astarta reported a 25% yoy increase in milk prices in 1H13. In turn, EBITDA from the company’s cheese and butter segment declined 29% yoy. While the company was able to keep flat EBITDA in its WMP segment in 1H13, that was only because of spectacular growth in 1Q13: in the second quarter, WMP EBITDA declined 26% yoy.



Milkiland’s consolidated 1H13 EBITDA declined 15% yoy to EUR 13.7 mln. The company expects raw milk prices will correct themselves in 2H13, which would enable compensating the yoy decline in operating profit reported in 1H13.



Milkiland’s net profit declined only 12% yoy in 1H13 to EUR 5.5 mln, as the company increased its financial income 1.5x, reported a 3x growth in foreign exchange gain and a 1.4x decline in profit tax.



In its update on operations, the company reported it obtained a permit to import its products from Polish Ostrowia to Ukraine – starting the first shipments in August – and is now is working to gain a green light in Russia. Meanwhile, the company confirmed that its products were among those affected by strict customs clearance in Russia earlier this month. Milkiland is reportedly working to increase its self-sufficiency in raw milk by attracting more households to its cooperative program and commission its newly constructed dairy farm in 2013.



Alexander Paraschiy: While there is indeed a high chance that raw milk prices will start declining in Ukraine and Russia (to follow the decline in grain prices), this time we are not sure that Milkiland will be able to catch up to the 1H13 decline in EBITDA by the end of the year. Notably, the Russian trade conflict – which spoiled the company’s results a year ago – is likely to again affect the company’s results in the current quarter. As Ukraine draws closer to signing the Ukraine-EU Association Agreement in November, we see the potential for new trade restrictions emerging for Ukrainian companies. Milkiland could become the first to suffer.

Источник: Конкорд Капитал