Avangardco pays agreed upon coupon, 2Q16 fundamentals may worsen



5 мая 2016 года
Конкорд Капитал

Ukraine’s largest egg producer Avangardco (AVINPU, AVGR LI) has paid USD 2.575 mln on its USD 206 mln in Eurobonds as a cash portion of its semi-annual 10% coupon, the company announced last week. The unpaid balance of USD 7.725 mln will be capitalized, in accordance with the agreed Eurobond restructuring. We calculate total Eurobonds outstanding has increased 3.8% since October 2015.



Roman Topolyuk: Avangardco paying at least a quarter of the amount accrued on its Eurobonds looks supportive for the current Eurobond price of 30-32 cents per dollar. At the same time, we see a risk that its ability to pay the agreed upon amounts in the near future will deteriorate. Recall in 2015, Avangardco generated just USD 1.2 mln in net operating cash flow, a decline from USD 41.2 mln in 2014. Between end-December and mid-April, local egg prices plunged 76% to USD 0.024 per unit, according to the Union of Poultry Farmers of Ukraine. This is far below Avangardco’s production cost of USD 0.052 reported for 4Q15, which implies that the company is making losses in its key business segment currently after having roughly broken even in 1Q16, based on our estimates.



Such a decrease in local egg prices is a seasonal pattern and usually prices bottom out in May. However, this year the decrease is unusually steep and the trough is low. Unless Avangardco sharply increases its exports of shell eggs (which stood at 15% of total shell egg sales in 2015), which will not be easy to implement, the company will face tough liquidity in the coming quarters. The Eurobonds maturing in October 2018, which could have principal of USD 236 mln by that time, are likely to be rescheduled further, while the payout period is uncertain so far. We reiterate our negative view on Avangardco’s Eurobonds.

Источник: Конкорд Капитал

Аналитик: Роман Тополюк


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