30 Aug 2012 07:00
30 August 2012
AVANGARDCO INVESTMENTS PUBLIC LIMITED
Financial results for the first half of 2012
Кyiv, Ukraine - AVANGARDCO INVESTMENTS PUBLIC LIMITED (LSE: AVGR) (the «Company» or «AVANGARDCO IPL»), the leading producer of shell eggs and egg products in Ukraine and number one producer in Eurasia, today issues its financial results for the six months ended June 30, 2012.
Financial highlights
·; Revenue increased by 26.6% year-on-year to US$283.6 million (H1 2011: US$223.9 million);
·; EBITDA increased by 33.9% year-on-year and reached US$122.1 million (H1 2011: US$91.2 million), with EBITDA margin increasing up to 43.1% (H1 2011: 40.7%);
·; Operating profit increased by 36.1% year-on-year to US$114.5 million (H1 2011: US$84.1 million);
·; Net profit for the year grew by 45.6% year-on-year to US$97.6 million (H1 2011: US$67.0 million), with profit margin of 34.4% (H1 2011: 29.9%);
Operational highlights
·; Total flock increased by 6.2% year-on-year to 25.9 million (H1 2011: 24.4 million). The number of laying hens increased by 9.6% year-on-year to 20.6 million (H1 2011: 18.8 million);
·; Production of shell eggs increased by 8.0% to 3.106 billion units (H1 2011: 2.875 billion units);
·; Sales of shell eggs to external clients increased by 12.8% year-on-year to 2.412 billion units (H1 2011: 2.139 billion units);
·; The share of shell egg sales through modern retail chains increased to 31% of total sales to external customers (H1 2011: 30%);
·; The average egg price increased by 26.4% year-on-year and amounted to UAH 0.67 excluding VAT (H1 2011: UAH 0.53 excluding VAT);
·; The production of dry egg products increased by 22.4% year-on-year reaching 7.1 thousand tons (H1 2011: 5.8 thousand tons), or 541 million eggs in egg equivalent (H1 2011: 534 million eggs);
·; The average price of dry egg products increased by 9.1% year-on-year to US$7.54/kg (H1 2011: US$6.91/kg);
·; In H1 2012 export of shell eggs and egg products in egg equivalent amounted to 342 million eggs.
Nataliya Vasylyuk, Chief Executive Officer of AVANGARDCO IPL, said:
"I am pleased to report a strong first half performance, with all key financial metrics significantly ahead of the same period last year, which shows the effectiveness of our chosen strategy. Despite the presence of substantial price growth of eggs and egg products, demand for our products continued to increase. Due to this, the Company was able to significantly increase its exports to the Middle East, North Africa and Asia, as well as to increase sales of its products in the domestic market.
I would like to note that despite the fluctuations in world grain prices, the achieved result proves the effectiveness of the strategy of hedging the cost of grain in the forward contracts.
The Company continues to implement its investment projects "Avis" and "Chornobaivske". The projects comply with the highest international standards and with the EU regulations on poultry keeping. Positive negotiations between Ukraine and the EU on the export of poultry products to Europe should yield new commercial opportunities.
The high quality of our products and our well-organised operating activities will allow us to continue our successful expansion into international markets and maintain market leadership in Ukraine in the second half of 2012, which will have a positive impact on the Company's financial results."
Financial results review
Units | H1 2012 | H1 2011 | Change, % | |
Revenue | US$' 000 | 283 562 | 223 940 | 26.6% |
Gross Profit | US$' 000 | 113 938 | 84 263 | 35.2% |
Gross Profit Margin | % | 40.2% | 37.6% | 2.6% |
EBITDA | US$' 000 | 122 127 | 91 194 | 33.9% |
EBITDA Margin | % | 43.1% | 40.7% | 2.4% |
Operating Profit | US$' 000 | 114 483 | 84 097 | 36.1% |
Operating Margin | % | 40.4% | 37.6% | 2.8% |
Net Profit | US$' 000 | 97 600 | 67 036 | 45.6% |
Net Profit Margin | % | 34.4% | 29.9% | 4.5% |
In H1 2012 the Company's revenue was US$ 283.562 million (H1 2011: US$ 223.940 million). The26.6% year-on-year increase is due to growth in sales volumes as well as growth in export sales. The increase in the Company's revenues has also been affected by significant increases in the prices of shell eggs (26.4%) and egg products (9.1%). Total sales revenue of shell eggs and egg products amounted 83.7% (H1 2011: 78.7%) of the Company's revenues in the first half of 2012 and reached US$ 237.309 million (H1 2011: US$ 176.231 million). Export revenues were US$ 35.708 million (H1 2011 US$ 10.495 million) or 12.6% of the total revenue of the Company.
Gross profit amounted to US$ 113.938 million (H1 2011: US$ 84.263 million), a 35.2% year-on-year increase is due to steady growth in sales and an increase in selling prices in the two main segments of the Company. Gross profit margin also increased to 40.2% (H1 2011: 37.6%)
In the first half of 2012, EBITDA grew 33.9% year-on-year to US$ 122.127 million(H1 2011: US$ 91.194 million). EBITDA margin increased from 40.7% to 43.1%, mainly due to a significant increase in the sale prices of the products and the grain stocks purchased in 2011.
Net profit for the first half increased 45.6% year-on-year to US$97.600 million (H1 2011: US$67.036 million) with 4.5% profit margin increase to 34.4% (H1 2011: 29.9%).
General administrative expenses increased 144.6% year-on-year to US$12.258 million (H1 2011: US$5.011 million) as a result of increased employment costs following an expansion of the workforce and an increase in the minimum wage. The increase was also due to a consequent increase in the services provided by third parties.
Distribution expenses increased by 124.0% year-on-year to US$7.958 million (H1 2011: US$ 3.553 million), due to increases in transportation expenses following a diversification of the Company's distribution channels and a broader geography of sales. The increase in sales through supermarkets and an active marketing support for the Company's packaged products under the umbrella brand "Kvocka" also contributed to the increase in distribution costs.
In the first half of 2012, the net inflow from the operating activities of the Company amounted to US$ 147.219 million(H1 2011: US$ 25.972 million). The significant increase in cash flow from operations is due to a reduction of trade receivables and a reduction in levels of provision as a consequence of their use in the operating process.
Net cash used in investing activities increased slightly to US$50.574 million in the first half of 2012 (H1 2011: US$ 50.686 million).
Net cash generated from financing activities was US$1.847 million in the first half of 2012 (H1 2011: US$11.774 million).
The Company's net debt amounted to US$ (4.372) million at the end of reporting period (1H 2011: US$114.836 million). The decrease in net debt is due to the funds accumulated at the Company's accounts for its investment program.
Net debt to EBITDA ratio decreased to -0.02 (based on 12-month EBITDA) from 0.3 as of December 31, 2011. Compared to the leaders of the agrarian market of Ukraine this is a low ratio of equity and debt. EBITDA covers the interest on the loans by 7.1.
Operating performance review by segment
Shell Egg Segment
Units | H1 2012 | H1 2011 | Change,% | |
Total Production | Pieces (mln) | 3 106 | 2 875 | 8,0% |
Total Sales to Third Parties | Pieces (mln) | 2 412 | 2 139 | 12,8% |
Total Exports | Pieces (mln) | 154,2 | 6,3 | 2347,6% |
Average Sales Price | UAH (excl. VAT) | 0,67 | 0,53 | 26,4% |
During the first half of 2012 the Company increased its shell eggs production volumeby 8.0% to 3.106 billion eggs year-on-year (H1 2011: 2.875 billion) mostly as a result of the growth in the population of laying hens in the first half of 2012. As of June 30, 2012, the Company's flock of laying hens was 20.6 million heads (H1 2011: 18.8 million heads).
Sales to external customers increased by 12.8% year on year as the Company developed its existing sales markets and reached new ones. The share of shell egg sales through modern retail chains (supermarkets) reached 31% of total sales to third parties (H1 2011: 30%).
The first half of 2012 results have shown robust growth in sales of "Kvochka" branded eggs ("Kvochka", "Organic eggs", "Kvochka Domashnyaya"). Furthermore, the sales of branded shell eggs in the first half of 2012 have increased by 7 times year on year.
In the first half of 2012, the Company has significantly increased its export volumes of shell eggs by 2347.6% to 154.2 million eggs (H1 2011: 6.3 million eggs) following increase of demand and diversification of the Company's export markets. The key export destination of the Company was Iraq. In addition to its core target markets the Company has started exporting shell eggs to new markets such as Mauritania, Republic of Djibouti, Gambia, Angola and Libya.
In the first half of 2012, the average egg price increased by 26.4% year on year as a result of the overall growth of shell egg prices in Ukraine, significant growth in export volumes of the Company and increases in sales to supermarkets. In the second half of 2012, the Company expects a further increase in the average egg price.
Revenues from sales of eggs increased by 42.5% to US$ 201.506 million (H1 2011: US$ 141.423 million), representing 71.1% of the Company's revenues. The Company's revenues from the export of shell eggs have increased by 3501.3% to US$ 19.915 million (H1 2011: US$ 0.553 million).
Egg Products Segment
Units | H1 2012 | H1 2011 | Change,% | |
Shell Eggs Processed | Pieces (mln) | 541 | 534 | 1,3% |
Overall production | Tons (thousand) | 7,1 | 5,8 | 22.4% |
Average Sales Price | US$/Kg | 7,54 | 6,91 | 9,1% |
In the first six months of 2012, the Company processed 541 million eggs (H1 2011: 534 million eggs) and produced 7.1 thousand tons of dry egg products (H1 2011: 5.8 thousand tons).
In the firsthalf of 2012, exports of egg products amounted to about 188 million eggs in egg equivalent. In the first half of 2012 the main markets for export of dry egg products have become Jordan, Turkey, Egypt, South Korea and Pakistan. In the first half of 2012, the Company began to export egg products to new markets of Taiwan and Egypt.
The average sales price for dry egg products increased 9.1% year on year primarily due to the changes in product mix sold as well as the growth of prices for all kinds of egg products in the market.
Revenues from the sale of dry egg products amounted to US$ 35.803 million (H1 2011: US$ 34.808 million), representing 12.6% of the Company's revenues. In the first half of 2012, revenues from the export of egg products increased by 59% and made US$ 15.793 million.
Investment Projects
The construction of two poultry complexes for egg production "Avis" and "Chornobaivske" in Khmelnytsky and Kherson regions is going according to schedule. At these complexes, the Company uses equipment from OFFICINE FACCO & C.SpA, Big Dutchman International GmbH and SALMET International GmbH, the recognized leaders in the production of equipment for poultry farming.
Enriched cages used at the poultry farms meet the European Council Directive № 1999/74/EC on the protection of laying hens.
Avis:The development of the second stage of the site for the rearing young laying hens at the "Avis" poultry complex has been completed. Currently, the Company is in the process of construction and assembly.
The construction of the second stage of the site for the laying hens is progressing according to schedule. The capacity of the facilities for the laying hens is expected to increase to 5 million heads when they are fully commissioned in the first quarter of 2013.
The actual utilisation of the sites corresponds to the operational plans of the Company.
The construction of elevator with the capacity of about 60 thousand tons is complete.
Chornobaivske:At the end of the first half of 2012, the first stage of the site for the rearing of young laying hens was operating at full capacity. The Company is starting construction on the second stage of the rearing facility.
At the end of the reporting period the first stage of the facilities for the laying hens was operating at 20% of its capacity. Placement of birds is continuing according to schedule.
The actual utilisation of the sites corresponds to the operational plans of the Company.
LLC Imperovo Foods Egg Processing Plant: The first stage of the capacity expansion at LLC Imperovo Foods egg processing plant was completed. Currently the Company is working on doubling the capacity for processing eggs from 3 to 6 million units per day.
Activities for the second half of 2012
In the second half of 2012, the Company expects further growth in sales due to the high demand for eggs and egg products in Ukraine, as well as in the markets of the Middle East, Africa and Asia as a result of rapid economic development and the increase in income per capita in these regions. Part of the Company's sales growth will be driven by reduced exports from the EU.
As part of the export strategy, the Company plans to increase the number of export markets to 38 countries by the end of this year from 21 at the end of the last year.
The Company also plans to increase the sales of packaged eggs under the Kvochka brand in national retail chains, as well as to expand its presence in regional networks and traditional retail.
The Company continues to make advances in the liquid egg market, with its product range manufactured at the LLC Imperovo Foods egg processing plant. By the end of 2012, the Company plans to increase the production and export of liquid egg products, which today is in demand both in Ukraine and in the world.
In the second half of 2012, in line with the Company's plans, the first phase of the site for laying hens at the poultry farm "Chornobaivske" will be fully operational.
The Company continues to pursue its strategy and plans to achieve strong operating and financial results at the end of 2012.
- Ends -
There will be a conference call for analysts and investors today at 9.00 US Eastern time/14.00 UK time, 16.00 Kiev time and 17.00 Moscow time.
International number: | +44 (0)20 7162 0025 |
Russian toll free number: | 81 0800 2806 3011 |
Password: | Avangard |
A live webcast of the presentation will be available at
http://wcc.webeventservices.com/r.htm?e=505463&s=1&k=7439FB9CCCE6BF2F32D3DA1C3A86AEB6&cb=blank
Please register approximately 15 minutes prior to the start of the call.
###
For investor's inquiries:
Alina Korniets
AVANGARDCO IPL
Acting Head of Investor Relations
Phone: +38 044 593 28 60
Mobile: +38 067 664 49 99
e-mail: a.korniets@avangardco.ua
FTI Consulting London Larisa Millings +44 20 7269 7216 |
FTI Consulting Moscow Oleg Leonov +7 495 795 06 23 |
- Ends -
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 first half of 2012, the Company holds a 32% share of the Ukrainian egg market (53% of the industrial egg market) and a 93% share of the Ukrainian egg products market. As of 30 June 2012, the total poultry stock of the Company was 25.9 million heads. The Company's production facilities are located in 14 regions of Ukraine and the Autonomous Republic of Crimea. As of 30 June 2012, the Company exported its products to 34 countries of the world, mostly to the Middle East, Asia and the CIS countries. As of 30 June 2012, revenues amounted to US$283.562 million (1H2011: US$223.940 million) and EBITDA was $122.127 million (1H2011: US$91.194 million).
The Company's shares, in the form of Global Depositary Receipts, have been traded on the London Stock Exchange since May 2010. The Eurobond issue for approximately $200 million with a maturity on 29 October 2015 was included in the official list of the UK Listing Authority (UKLA) and admitted to trading on a regulated market of the London Stock Exchange on November 1, 2010.
# # #
Interim consolidated statement of financial position
AS AT 30 JUNE 2012
(in USD thousand, unless otherwise stated)
Note | 30 June 2012 | 31 December 2011 | |
ASSETS | |||
Property, plant and equipment | 5 | 574 880 | 512 697 |
Non-current biological assets | 6 | 45 557 | 44 304 |
Deferred tax assets | 19 | 1 912 | 1 922 |
Other non-current assets | 7 | 73 217 | 93 041 |
Total non-current assets | 695 566 | 651 964 | |
Inventories | 9 | 165 595 | 202 279 |
Current biological assets | 6 | 46 590 | 58 916 |
Trade accounts receivable, net | 10 | 29 992 | 51 437 |
Prepaid income tax | 19 | 7 | - |
Prepayments and other current assets, net | 11 | 79 258 | 26 946 |
Taxes recoverable and prepaid, net | 8 | 67 876 | 76 298 |
Cash and cash equivalents | 12 | 332 617 | 237 814 |
Total current assets | 721 935 | 653 690 | |
TOTAL ASSETS | 1 417 501 | 1 305 654 | |
EQUITY | |||
Share capital | 13 | 836 | 836 |
Share premium | 13 | 201 164 | 201 164 |
Reserve capital | 13 | 115 858 | 115 858 |
Retained earnings | 769 427 | 673 909 | |
Effect of translation into presentation currency | (68 114) | (67 761) | |
Equity attributable to the owners of the Company | 1 019 171 | 924 006 | |
Non-controlling interest | 17 409 | 15 333 | |
Total equity | 1 036 580 | 939 339 | |
LIABILITIES | |||
Long-term loans | 14 | 4 684 | 15 384 |
Long-term bond liabilities | 15 | 195 152 | 194 563 |
Deferred tax liabilities | 19 | 55 | 86 |
Deferred income (non-current portion) | 33, c) | 5 205 | 5 351 |
Long-term finance lease | 23 | 2 554 | 3 830 |
Total non-current liabilities | 207 650 | 219 214 | |
Short-term bond liabilities | 24 | 25 023 | 25 013 |
Current portion of non-current liabilities | 18 | 34 169 | 26 565 |
Short-term loans | 16 | 66 967 | 53 063 |
Trade payables | 20 | 19 809 | 17 894 |
Accrued expenses | 21 | 1 900 | 1 601 |
Other current liabilities and accrued expenses | 22 | 25 403 | 22 965 |
Total current liabilities | 173 271 | 147 101 | |
TOTAL LIABILITIES | 380 921 | 366 315 | |
TOTAL EQUITY AND LIABILITIES | 1 417 501 | 1 305 654 |
Interim consolidated statement of comprehensive income
FOR THE 6 MONTHS ENDED 30 JUNE 2012
(in USD thousand, unless otherwise stated)
6 months ended | |||
Note | 30 June 2012 | 30 June 2011 | |
Revenue | 25 | 283 562 | 223 940 |
Income from revaluation of biological assets at fair value | 6 | 19 684 | 15 561 |
Cost of sales | 27,28 | (189 308) | (155 238) |
GROSS PROFIT | 113 938 | 84 263 | |
General administrative expenses | 28 | (12 258) | (5 011) |
Distribution expenses | 29 | (7 958) | (3 553) |
Income from government grants and incentives | 33.1 | 153 | 159 |
Income from special VAT treatment | 33.2 | 18 935 | 11 231 |
Other operating income/(expenses), net | 30 | 1 673 | (2 992) |
OPERATING PROFIT | 114 483 | 84 097 | |
Finance income | 32 | 420 | 829 |
Finance cost | 31 | (17 298) | (15 766) |
PROFIT BEFORE TAX | 97 605 | 69 160 | |
Income tax expense | 19 | (5) | (2 124) |
PROFIT FOR THE PERIOD | 97 600 | 67 036 | |
OTHER COMPREHENSIVE INCOME FOR THE PERIOD: | |||
Effect of translation into presentation currency | (359) | (1 113) | |
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | 97 241 | 65 923 | |
PROFIT FOR THE PERIOD ATTRIBUTABLE TO: | |||
Owners of the Company | 95 518 | 64 774 | |
Non-controlling interests | 2 082 | 2 262 | |
97 600 | 67 036 | ||
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: | |||
Owners of the Company | 95 165 | 63 661 | |
Non-controlling interests | 2 076 | 2 262 | |
97 241 | 65 923 | ||
Earnings per share for the period USD | |||
(basic and diluted) | 36 | 15 | 13 |
Interim consolidated statement of cash flows
FOR THE 6 MONTHS ENDED 30 JUNE 2012
(in USD thousand, unless otherwise stated)
6 months ended | |||
Cash flows from operating activities | Note | 30 June 2012 | 30 June 2011 |
Profit before tax | 97 605 | 69 160 | |
Adjustments for: | |||
Depreciation of property, plant and equipment | 5 | 7 644 | 7 097 |
Change in allowance for irrecoverable amounts | 30 | 894 | 366 |
Other provisions | 299 | 882 | |
Loss on disposal of current assets | 367 | - | |
Loss on disposal of property, plant and equipment | 4 | 115 | |
Impairment of current assets | 30 | 658 | 15 |
Other income | (2 824) | - | |
Effect of fair value adjustments on biological assets | 6 | (19 684) | (15 561) |
Gains realised from accounts payable written-off | 30 | (136) | (6) |
Amortization of deferred income on government grants | 33 | (153) | (197) |
Loss from disposal of VAT government bonds | - | 32 | |
Discount on long-term bonds amortization | 589 | 530 | |
Interest income | (420) | - | |
Interest payable | 15 691 | 15 089 | |
Operating profit before working capital changes | 100 534 | 77 522 | |
Decrease/(increase) in trade receivables | 21 131 | (15 134) | |
Increase in prepayments and other current assets | (52 489) | (24 815) | |
Decrease/(increase) in taxes recoverable and prepaid | 8 422 | (2 727) | |
Decrease in inventories | 36 026 | 570 | |
Increase in deferred income | 7 | 38 | |
Increase/(decrease) in trade payables | 2 051 | (4 305) | |
Decrease in biological assets | 30 757 | 9 650 | |
(Decrease)/increase in finance leases | (1 279) | - | |
Increase/(decrease) in advances received and other current liabilities and accruals | 7 195 | (10 778) | |
Cash generated from operations | 152 355 | 30 021 | |
Interest paid | (5 099) | (4 046) | |
Income tax paid | (37) | (3) | |
Net cash generated from operating activities | 147 219 | 25 972 | |
Cash flows from investing activities | |||
Purchases of property, plant and equipment | 5 | (50 994) | (50 916) |
VAT government bonds sale | 230 | ||
Interest received | 420 | - | |
Net cash used in investing activities | (50 574) | (50 686) | |
Cash flows from financing activities | |||
New loans received | 30 742 | 38 540 | |
Repayment of loans | (19 941) | (37 757) | |
Interest paid for bonds issued | (12 648) | (12 538) | |
Proceeds from long-term bonds issued | - | (19) | |
Net cash used in financing activities | (1 847) | (11 774) | |
Effect from translation into presentation currency | 5 | 1 | |
Decrease/ (increase in restricted cash | 1 200 | (9 879) | |
Net increase/(decrease) in cash and cash equivalents | 96 003 | (46 366) | |
Cash and cash equivalents at the beginning of the period | 230 640 | 183 065 | |
Cash and cash equivalents at the end of the period | 12 | 326 643 | 136 699 |