Page 67 - UKRRptMay19

recognition of €77mn of lease liabilities as debt (by adopting IFRS 16 rules since 2018). The boosted net debt and worsened P&L resulted in the deterioration of the company’s Net Debt to Ebitda ratio to 5.2x as of end-2018 (or 3.8x, excluding lease obligations), which is a significant contrast compared to its 1.1x ratio as of end-2017. The company remains in breach of certain debt covenants, which prompted it to reclassify €112mn from non-current to current debt. Management expects the leverage covenants will be in breach in 2019 as well, and the company reported that all the banks are aware of the situation and "have a firm intention to continue with Astarta as the borrower". Alexander Paraschiy at Kyiv-based brokerage Concorde Capital believes that given the weak sugar prices, we were expecting rather weak P&L for Astarta, but the reality turned to be worse than we anticipated. "Clearly, such a result will be treated negatively by the stock market," he wrote in a note on April 9. "The year 2019 does not promise significant improvement in commodity prices, but we expect some improvement in Astarta’s P&L this year as a result of its measures to improve its operating efficiency."
● MHP
Ukraine's largest poultry producer MHP raised poultry meat sales 21.2% year-on-year (up 13.7% quarter-on-quarter) to 164 tonnes in January-March, according to the company’s trading update published on April 18. Total poultry production volume increased 12.6% y/y to 171.3 tonnes (a 7.4% q/q rise) in January-March. The company’s domestic sales rose 29.8% y/y to 93.0 tonnes (30.6% qoq increase), while export sales improved 12.4% y/y to 71 tonnes (a 2.7% q/q drop) in January-March. The average poultry price was $1.41/kg in January-March, which was slightly lower y/y and 4.8% less q/q. It implies MHP’s revenue from poultry sales rose 6.9% y/y to about $232mn in the first quarter. Also, MHP reported healthy conditions for its winter crops (wheat and rapeseed) sown on 94,000 ha. The company expects to harvest crops from a total area of 365,000 ha in 2019 (which is flat y/y). Andriy Perederey at Kyiv- based brokerage Concorde Capital believes that the company’s key Ebitda driver in 2019 will be a rise in poultry export volumes. Stable poultry prices and the Ukrainian currency exchange rate also will support the company’s financial results. Favourable weather conditions are also being forecasted, which will support the company’s farming segment and ability to produce strong results.
Ukraine’s leading poultry producer MHP (MHPC LI, MHPSA) has reached a final settlement price of 22.34 €per share in a deal to acquire a 90.69% stake in Perutnina Ptuj, a poultry meat and a meat-processing company based in Slovenia, according to the company’s April 25 announcement. MHP also confirmed it is currently in the final phase of the deal after completing an audit of the company's 2018 financials. A company spokesperson clarified with Concorde Capital that payments will be finalized by the end of April. This information implies that MHP will pay a total of €221mn (or about $246mn) for the Perutnina stake. The deal’s EV is €273mn ($304mn) and is higher than Concorde’s expectations of $100-120mn. The deal-implied multiple of EV to 2018 EBITDA is about 9.0x. This is far higher than MHP’s market-based EV/EBITDA of 5.2x, meaning the deal does not look value-creative for the company, at least in the short term. Therefore, we expect some negative reaction of the market to such an announcement.
9.2.7 TMT corporate news
Horizon Capital, the US private-equity firm specializing in Ukraine, is
67 UKRAINE Country Report May 2019 www.intellinews.com