AVGR.L Regulatory News (AVGR)

March 21, 2012

AVANGARDCO INVESTMENTS PUBLIC LIMITED

FINANCIAL RESULTS FOR 2011

KYIV, UKRAINE - AVANGARDCO INVESTMENTS PUBLIC LIMITED (LSE: AVGR) (the «Company» or «AVANGARDCO IPL»), the largest producer of shell eggs and egg products in Ukraine and the second largest in the world, announces its financial results for the year to 31 December 2011.

Financial highlights

§ Revenue increased by 25.8% yoy to US$553.3 mln (2010: US$439.7 mln) driven by sales growth in shell eggs and egg products and the increase in egg prices;

§ EBITDA was up by 27% yoy and reached US$245.8 mln (2010: US$193.5 mln), with EBITDA margin of 44%;

§ Operating profit increased by 30% yoy to US$231.5 mln (2010: US$180.9 mln), with an operating profit margin of 41.8%

§ Net profit for the year grew by 6.2% yoy to US$196.3 mln (2010: US$184.8 mln), with profit margin of 35.5%;

§ Cash balance stood at US$230.6 mln at the end of 2011 (2010: US$183.1 mln).

Operational highlights

§ Total flock increased by 3.3% yoy to 25.1 mln (2010: 24.3 mln). In 2011 the number of laying hens increased by 9.6% yoy to 20.5 mln (2010: 18.7 mln);

§ Production of shell eggs increased by 34.7% to 5.955 bln (2010: 4.420 bln);

§ Sales of shell eggs to external clients increased by 25% yoy to 4.862 bln (2010: 3.888 bln);

§ The share of shell egg sales through modern retail chains (supermarkets) increased to 30% of total sales to external customers (2010: 16%);

§ The average selling price of eggs increased by 12.3% yoy and amounted to UAH 0.641/ US$0.082 (2010: UAH 0.573 / US$0.074);

§ The production of dry egg products increased by 19.6% yoy reaching 12.2 thou tonnes (2010: 10.2 thou tons), or 1.1 bln eggs in egg equivalent (2010: 0.8 bln eggs);

§ The Company exported approximately 1.1 bln shell eggs and dry egg products in egg equivalent;

§ The average sale price of dry egg products decreased by 1.9% yoy to US$8.05/kg (2010: US$8.21/kg);

§ Revenue from the export of shell eggs and egg products grew by 29.4% yoy to US$105.6 mln or 19% of total revenue. Key sales export destinations in 2011 were the Middle East (10.5%) and the Far East (8.3%);

§ In November 2011 the Company launched the renewed brand of packaged eggs "Kvochka" ("Mother Hen"), which combines high quality and affordability;

§ The Company launched the 1st stage of facilities for laying hens at its new egg production complex Avis.

1 Excl. VAT

2 Average exchange rate in 2011: 1 US$ = UAH 7.9677; 2010: 1 US$ = UAH 7.9353

3 Excl. VAT

4 Average exchange rate in 2011: 1 US$ = UAH 7.9677; 2010: 1 US$ = UAH 7.9353

Nataliya Vasylyuk, Chief Executive Officer of AVANGARDCO IPL, said: 

"I am pleased to report a strong performance by the Company in 2011 with significant growth in revenue, EBITDA and operating profit. This result was achieved on the back of the increase in shell egg production to almost 6 billion pieces and continued diversification of our sales channels, both domestically and for export. Our egg products production grew to 1.1 billion of eggs equivalent in the same period. This year we became the number one egg producer in Eurasia and the second largest company globally in terms of production volumes of shell eggs and egg products, an achievement unmatched by any other company from the former USSR. This success is testament to both our progress as a company, and also to Ukraine's agricultural potential."

Current trading and outlook

The Company expects further growth in sales due to high demand for shell eggs and egg products in Ukraine, as well as the active implementation of its export plans. Furthermore, levels of sales will be supported by an increase in the Company's poultry flock. The Company will continue to diversify its customer base in Ukraine, paying special attention to retail channel and development of additional brands. Due to record harvests in Ukraine in the fall of 2011, the Company was able to purchase grains at a very attractive price to use for feeding its flocks in the remainder of 2011 and the majority of 2012. 

Financial and Operational Review

Operational Review

The Company's revenue increased by 25.8% year-on-year as a result of 25% growth in sales volumes of shell eggs and 10% growth in sales volumes of dry egg products, as well as an increase in shell egg prices of 12.3%. The Company's Shell Eggs segment accounted for 70% of the Company's total revenue in 2011. Revenue from sales of shell eggs to external clients was US$389.3 mln, a 38.9% increase over the previous year (2010: US$280.3 mln). This result was achieved due to a 35% growth year-on-year in the production of shell eggs from 4.42 bln to 5.96 bln shell eggs.

In 2011, the Company increased its total flock by 3.3% from 24.3 mln to 25.1 mln. The number of laying hens increased by 9.6% to 20.5 mln (2010: 18.7 mln). 1.5 mln of the growth is as a result of the introduction of new production capacities in the new egg production complex Avis.

As previously announced, the Company's average price of shell eggs increased by 12.3% year-on-year to UAH 0.645/ US$0.086 (2010: UAH 0.577/ US$ 0.078). The average price growth in 2011 was connected with the significant increase in export volumes, particularly in Q4 2011, and the reallocation of distribution channels focused on modern sales channels (supermarkets).

The production of dry egg product increased by 19.6% year-on-year to 12.2 thou tons (2010: 10.2 thou tons), following a strong growth in demand in both domestic and export markets. The average selling price for dry egg products declined by 1.9% year-on-year to US$8.05 (2010: US$ 8.21) following a shift in sales mix and the lower volume of high-end products, including albumin.

In 2011, the Company exported approximately 1.1 bln shell eggs and dry egg products in egg equivalent. Key shell eggs and dry egg products export markets in 2011 were the Middle East - 10% and the Far East - 8.3%.

The Company's 2011 gross profit increased by 41.9% year-on-year reflecting strong sales volume growth and additional profit received from by-segments. Gross profit margin increased to 40.4%, compared to 35.9% in the previous year, due to rigorous control over the costs of sales.

General administrative expenses increased 83.6% year-on-year to US$13.2 mln (2010: US$7.2 mln) as a result of increased employment costs following expansion of the workforce and an increase in the minimum wage and the consequent increase in the services provided by third parties.

Distribution expenses increased by 98.4% year-on-year to US$10.0 mln (2010: US$ 5.1 mln), due to salary increases and transportation expenses growth following the diversification of the distribution channels and the increase in supermarket sales.

EBITDA grew 27% year-on-year to US$245.8 mln (2010: US$193.5 mln), EBITDA margin stood at 44% (2010: 44%).

Operating profit was up 28% year-on-year with operating profit margin increasing slightly from 41.1% to 41.8%.

In 2011 there were no changes in Ukrainian legislation regarding agricultural enterprises and government support, but the Company's income from state subsidiaries has decreased significantly year-on-year to US$0.3 mln (2010: US$17.5 mln) due to the absence of loans in the Company's portfolio, the interest on which is compensatory.

Net profit for the year increased 6.2% year-on-year to US$196.3 mln (2010: US$184.8 mln) with profit margin of 35.5%.

5 Excl. VAT

6 Average exchange rate in 2011: 1 US$ = UAH 7.9677; 2010: 1 US$ = UAH 7.9353

7 Excl. VAT

8 Average exchange rate in 2011: 1 US$ = UAH 7.9677; 2010: 1 US$ = UAH 7.9353

Financial Review

In 2011 the Company had net cash generated from operating activities of US$185.7 mln (2010: net cash used in operating activities - US$159 mln). This is a result of no significant fluctuations in the working capital, namely in stocks, trade payables and advances received if compared to 2010.

Net cash used in investing activities was US$161.6 mln in 2011, (2010: net cash generated from investing activities - US$147.5 mln) in line with the Company's investment programme.

Net cash generated from financing activities was US$31.7 mln in 2011 (2010: US$192.6 mln). The Company received US$95 mln of new loans and repaid US$38.1 mln, as well as repaying US$25.2 mln of interest on outstanding bonds.

The Company's cash balance stood at US$230.6 mln at the end of 2011 (95% of it was denominated in US$) (2010: US$183.1 mln). The Company's net debt amounted to US$80.3 mln at the end of 2011 (2010: US$77.7 mln).

Other information

In 2011 LLC Imperovo Ltd which owns property, plant and equipment of the Company's egg processing plant LLC Imperovo Foods was integrated into the Group.

# # #

There will be a conference call for analysts and investors today at 10.00 US Eastern time/14.00 UK time, 16.00 Kiev time and 18.00 Moscow time.

A live webcast of the presentation will be available at

http://wcc.webeventservices.com/r.htm?e=440167&s=1&k=57C796B9D8BA83BF03043FA424C149F4&cb=blank

Please register approximately 15 minutes prior to the start of the call.

Additional information:

For investor relations enquiries:

Victoria Korolchuk

AVANGARDCO IPL

Head of Investor Relations

phone.: +38 044 593 28 60

mob.: +38 067 214 84 23

e-mail: v.korolchuk@avangardco.ua

Information for editors

Avangardco IPL is one of the largest agro-industrial companies in Ukraine, specializing in the production of eggs and egg products. Based on figures for the year 2011, the Company holds a 32% share of the Ukrainian egg market (51% of the industrial egg market) and a 87% share of the Ukrainian egg products market. As of 31 December 2011, the total poultry stock of the Company was 25.1 million heads. The Company's plants are located in 14 regions of Ukraine and the Autonomous Republic of Crimea. In 2011 the Company exported its products to the Middle East and Asia. In 2011, revenues amounted to US$553.3 mln (2010: US$439.7 mln) and EBITDA was $245.8 mln (2010: US$193.5 mln).

The Company's shares, in the form of Global Depositary Receipts, have been traded on the London Stock Exchange since May 2010. Eurobonds of around $200 mln with a maturity on 29 October 2015 were included in the official list of the UK Listing Authority (UKLA) and admitted to trading on a regulated market of the London Stock Exchange since November 1, 2010.

Consolidated statement of financial position

AS AT 31 DECEMBER 2011

(in US$ thousands, unless otherwise stated)

Consolidated statement of comprehensive income

FOR THE YEAR ENDED 31 DECEMBER 2011

(in US$ thousands, unless otherwise stated)

Consolidated statement of cash flows

FOR THE YEAR ENDED 31 DECEMBER 2011

(in US$ thousands, unless otherwise stated)

Consolidated statement of cash flows (cont.)

FOR THE YEAR ENDED 31 DECEMBER 2011

(in US$ thousands, unless otherwise stated)