Wondered about a Trump trade/ bounce, along Ferrexpo lines, but spread is bonkers. 3p to buy, 1.5p to sell! |
Encouraging results and a better outlook than might have been expected. Clearly the business has been so cash-starved for so long that it's going to take a while to repair the balance sheet.
The economy is still going in roughly the right direction. The land sales law should be good for UKR but the crucial bit doesn't take effect until 2024. The new IMF swap line is also good and there's political stability at least for now.
Book value is around 7-8p a share. That seems like the best metric until there's some prospect of generating free cash flow. |
Is this still the latest thread? No posts for 5 years is a bit quiet!
The business is growing impressively of late and H2 numbers are remarkable, given the market cap. It's just a shame all the usual caveats apply about cashflow being used up in capex, working cap and interest. Then there is the lingering covenant breach and exchange rate volitility. If the business would stop swinging so much and could just hold numbers similar to H2, the market cap would be 5-10 times higher. I got my fingers burned on this years ago but I've just been tempted back with a small purchase. That will probably be it, though! |
Pretty impressive operating result but EBRD loan has wrecked the balance sheet. Hard to see a recovery while Ukraine needs IMF life support. |
Could Russian sanctions be easing. |
Price trends for SMP don't look too encouraging: hxxps://www.globaldairytrade.info/en/product-results/skim-milk-powder/ |
This is an excellent set of results given what Ukraine has been through. Russia's export ban appears to have helped at the operating level by collapsing the price of raw milk.
The question is whether this is the bottom. It looks like Ukraine will stay in recession for a while, the Russian market will stay closed and it will be a challenge to meet EU standards. Skimmed milk powder to emerging markets is going to be the main opportunity.
My guess is it will bump along at the current price level for a while but looks more appealing than it has done for quite a while. |
 KEY FIGURES
(Figures in brackets are for the six months ended and as at 30 June 2013 when the exchange rate was the 12.33 UAH/GBP compared to 16.99 UAH/GBP in this reporting period)
· Total revenues decreased by 30% year on year to GBP 17.2 m (GBP 24.7 m), however the decrease in national currency made up 5%
· Gross profit margin improved to 22.7% (15.0%) resulting in gross profit increase by 5% to GBP 3.9 m (GBP 3.7m)
· Revenues in dairy branded products segment decreased by 41% year on year to GBP 11.3 million (GBP 19.1 million) and gross profit decreased by 20% year on year to GBP 2.1 million (GBP 2.7 million)
· In kvass the revenues decreased by 40% year on year to GBP 0.7 million (GBP 1.2 million) and gross profit down by 39% year-on-year
· Skimmed Milk Powder (SMP) revenues increased by 36% to GBP 4.7 million (GBP 3.5 million) and gross profit increased to GBP 1.3 million (GBP 0.3 million)
· EBITDA increased by 42% to GBP 1.8 million (GBP 1.3 million) year-on-year
· Profit from operations more than doubled year on year reaching GBP 1.3 million (GBP 0.6 million)
· Profit before FOREX increased to GBP 835 k (GBP 33 k)
· The negative effect of currency exchange differences amounted to GBP 2.8 million
· Cash balance of GBP 0.4 million (GBP 0.6 million).
more... |
Ceasefire due to come into effect 6pm Kyiv time, let's hope it holds.
Hryvnia down a bit from its recent bounce. |
That's a pleasant rise today after such a long downward spiral. |
IMF says Ukraine's recession will be worse than expected this year: minus 6.5% instead of minus 5%.
hxxp://www.imf.org/external/np/sec/pr/2014/pr14351.htm |
Most exports are skimmed milk powder. Just imagine if they could get up to 20% of sales exported again. With costs down 30% or so, what a fabulous profit margin they would have. Then add in a reduced price of milk in Ukraine and the increase in global SMP prices in the last year and export margins would be fabulously fabulous. Just got to get through a few little local problems and reschedule some debts first! :-) |
One thing I never understand in these UKR reports is how they talk about hard cheese exports to Russia as if it's something they can't do themselves.
Anyway, at the margin it's an encouraging report, because the outlook statement is fairly upbeat. It's very hard to tell until we see some post-upheaval financials. |
Although it was stated in the January update that results would be released in April it is a strange time to release them at 3:22 pm on 30th April. I had given up so did not see the announcement and therefore missed the conference call at 4:00 pm.
I will have a look at the annual report in detail later, but worth observing (as the auditors did as an emphasis of matter point) that the Crimea accounted for 21% of operating profit in 2013.
Positive noises in the outlook statement but need to be considered against the backdrop of the political situation. |
NEt debt up from £8.4m to £9.9m. Gross debt near enough 50/50 UAH and EUR. Both at 31st December, before the devaluation.
There was a conference call at 4pm. I rang up to see if a recording was available. Not at the moment and didn't know if one would be. |
Results about what I expected, maybe a touch worse. Moderate loss. Cashflow not quite as bad but need to improve things to continue to meet interest and debt payments. Looks like they may seek a debt reschedule. Things were expected to get better but the change of government and Russian interventions messed up the plan. So what is the outlook? Actually, it doesn't sound too bad but is it just positive spin on a sticky situation?
Outlook
The unstable political and economic situation, as to be expected, has had an adverse effect on businesses throughout Ukraine including Ukrproduct Group.
In the early year the Company revenues in hryvna were below expectations as consumer confidence fell, a range of open markets servicing mass and mid-market closed and a number of agents in other sales channels withdrew from the market not least for the reason of bad debt risk. Sales were also adversely affected as higher unit costs due to a currency devaluation of the hryvna and sustained high raw milk prices has necessitated the consumer price increases.
Trading has now improved. Sales are recovering across all product categories. At the same time hryvna devaluation is having a positive influence on the export revenues thus Ukrproduct will aim to grow its export oriented sales. More positively margins are increasing with the declining milk prices. This follows on an increase in milk availability given the constraints on exports to Russia.
Plans internal to the Company are little affected as Ukrproduct has been engaged in restructuring - simplify and modernize - its operations to improve cost, quality and speed of its supply chain. This embraces site consolidation, outsourcing of distribution, boosting sales force efficiency and overheads elimination. This program is fundamental to the Company turnaround plans. Progress has been made and the benefits will be are expected to be evident throughout the year ahead.
In summary Ukraine has been facing political and economical challenges. Within the context of such headwinds, Ukrproduct has adjusted its business model to allow viable progress through the current turbulent environment so far as it can be assessed successfully. |
It's very hard to see how the changes will wash through. The currency devaluation could see a huge boom in exports but there are loads of cost increases to come through. |
18.83 now. |
Hryvnia gone to new lows of over 17 to £. I hope they can crank up the exports. |
They probably want to get the $ peg back. |
At the same time hryvna devaluation is having a positive influence on the export revenues thus Ukrproduct will aim to grow its export oriented sales.
On the other hand the sizable increase in US Dollar exchange rate will significantly decrease the consolidated results of the Company after the translation into the presentation currency of GBP Sterling.
$ rate has recovered most. |
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