REG - AVANGARDCO INV - 1st Quarter Results <Origin Href="QuoteRef">AVGRq.L</Origin>

Avangardco Investments PublicAnnouncement

16/07/2015 08:23

RNS Number : 5762O
AvangardCo Investments Public Ltd
29 May 2015
29 May 2015
AVANGARDCO INVESTMENTS PUBLIC LIMITED
FINANCIALRESULTSFORTHE FIRST QUARTER OF 2015
yiv, Ukraine - AVANGARDCO INVESTMENTS PUBLIC LIMITED (LSE: AVGR) (the "Company" or "AVANGARDCO IPL"), the largest producer of shell eggs and egg products in Ukraine and number one producer in Europe, today announces its financial results for the first quarter ended 31 March 2015.
Financial highlights 
 Consolidated revenue amounted to US$72.4 mln, a decrease of 52% YoY (Q1 2014: US$152.2mln).
 Export sales revenue amounted to US$24.0 mln or 33% of the Company's consolidated revenue (Q1 2014: US$61.6 mln or 40% of the Company's consolidated revenue).
 Gross profit amounted to US$14.6 mln, a decline of 76% YoY(Q1 2014: US$59.7 mln).
 EBITDA amounted to US$6.4 mln (Q1 2014: US$61.2 mln), with EBITDA margin of 9% (Q1 2014: 40%).
 Net loss amounted to US$52.2 mln(Q1 2014: net profit of US$46.8 mln). 
Operational Highlights 
 Production of shell eggs totalled 1.051 bln units, adeclineof 44%YoY(Q1 2014: 1.889 bln units).
 Sales of shell eggs to external clients amounted to 1.067 bln units, down by 16% YoY(Q1 2014: 1.264 bln units).
 Export of shell eggs decreased by 33% YoY to 108 mln units (Q1 2014: 162 mln units).
 The average sales price of shell eggs was UAH 1.07 per unit, excluding VAT, up by 60% YoY (Q1 2014: UAH 0.67 per unit, excluding VAT).
 The production of dry egg products amounted to 1,150 tonnes (Q1 2014: 6,802 tonnes).
 Sales of dry egg products totalled 3,251 tonnes (Q1 2014: 7,286 tonnes).
 The average sales price of dry egg products was US$5.24kg (Q1 2014: US$ 7.04/kg). 
 As at 31 March 2015, the total poultry flock amounted to 20.0 mln hens, a decrease of 41% YoY (31 March 2014: 34.1 mln). 
 As at 31 March 2015, the number of laying hens amounted to 16.6 mln, down by 37% YoY (31 March 2014: 26.5 mln).
IrinaMarchenko, ChiefExecutiveOfficerofAVANGARDCOIPL, commented:
The ongoing military confrontation and economic instability in Ukraine contributed to another challenging quarter for the business. In Q1 2015, the Company's financial performance continued to be impacted by the devaluation of the Ukrainian hryvnia against the US dollar, as well as reduced sales volumes of shell eggs and dry egg products resulting from decreased production, a decline in domestic demand and loss of salesin Crimea and Eastern Ukraine.
In spite of these factors, the Company remains the biggest producer of shell eggs and dry egg products in both Ukraine and Europe. The Company continues to explore new export markets, having entered Bangladesh and the United Kingdom in Q1 2015. The Company's management team is taking all necessary steps to navigate AVANGARDCO IPL through this challenging period, to ensure the business' short and long term stability and growth.
# # #
The management team will host an investor and analyst conference call at 15.00 pm (London), 17.00 pm (Kiev/Moscow) and 10.00 am (EST) on Friday, 29 May 2015, including a question and answer session. 
Name:
AVANGARDCO Q1 2015 FINANCIAL RESULTS
ID:  
ID 53688579
UK Free call
0800 694 2606
Russia Free call
8108 002 436 2044
USA
1877 327 2806
UK Standard International
+44 (0) 1452 556 664
A live webcast of the presentation will be available at: https://webconnect.webex.com/webconnect/onstage/g.php?MTID=e0c1a8c74b261466af0edfb7a01c82a31
Please register approximately 15 minutes prior to the start of the call.
Financial results for the first quarter of 2015 ended 31 March 2015 are available on the Company's website at:: http://avangard.co.ua/eng/for-investors/financial-overview/financial-reports/interim-reports/
# # #
Financial results overview

Units
Q1 2015
Q1 2014
Change
Consolidated Revenue
US$ '000
72,426
152,199
(52%)
Gross Profit
US$ '000
14,610
59,745
(76%)
Gross Profit Margin
%
20%
39%
-
EBITDA
US$ '000
6,357
61,163
(90%)
EBITDA Margin
%
9%
40%
-
Operating Profit
US$ '000
160
54,720
(100%)
Operating Margin
%
0.2%
36%
-
Net Profit
US$ '000
(52,179)
46,799
-
Net Profit Margin
%
-
31%
-
The exchange rates used for the preparation of consolidated financial statements:
Currency
31 March 2015
Weighted average for the 1 quarter ended 31 March 2015
31 March 2014
Weighted average for 1 quarter ended 31 March 2014
US dollar to Ukrainian Hryvnia
23.4426
21.1157
10.9546
8.8627
In the first quarter of 2015, the Company's consolidated revenue decreased by 52% year-on-year, amounting to US$72.4 mln (Q1 2014: US$152.2 mln). The decline in consolidated revenue was primarily due to the sharp 138% year-on-year devaluation of the Ukrainian Hryvnia against the US dollar (calculated at the weighted average rate for the quarter) and the significant reduction in the number of laying hens due to the closure of poultry farms in the Crimea and Eastern Ukraine. Additionally, the consolidated revenue was affected by the decline in sales volumes of shell eggs and egg products as well as the decrease in the average sales price of all the Company's products in dollar terms. However, the decline in the Company's consolidated revenue was partially offset by the increase in average sales price of shell eggs and egg products in Hryvnia.
In the first quarter of 2015, the Company's export revenues decreased by 61% year-on-year to US$24.0 mln (Q1 2014: US$61.6 mln) as a result of the decrease in export sales of shell eggs and dry egg products and their sales price. The share of export revenue in the consolidated revenue amounted to 33% (Q1 2014: 40%).
In the first quarter of 2015, the cost of sales in dollar terms fell by 37% year-on-year and amounted to US$64.2 mln (Q1 2014: US$101.7 mln) as a result of the devaluation of the Ukrainian Hryvnia against the US dollar. The cost of sales in Hryvnia terms increased as the cost of more than 70% of the cost components (grain, veterinary medicines, and packaging materials) is linked to other major currencies.
As a result, the Company's gross profit was down by 76% year-on-year to US$14.6 mln (Q1 2014: US$59.7 mln). Gross profit margin amounted to 20% (Q1 2014: 39%).
EBITDA was down by 90% year-on-year to US$6.4 mln (Q1 2014: US$61.2 mln). This was due to decreased revenue together with the increased cost per unit of output in Hryvnia terms as well as the reduction in income from the revaluation of biological assets and inventories of finished goods with the expired shelf life date being written off. EBITDA margin was 9% (Q1 2014: 40%).
In the first quarter of 2015, the Company reported a net loss of US$52.2 mln(Q1 2014: net profit of US$46.8mln) which includes FX losses of US$45.9 mln.
Cash flow
As at 31 March 2015, net cash outflow from operating activities amounted to US$3.4 mln (31 March 2014: US$39.4 mln) due to the decrease in operating profit coupled with the increase in credit receivables and decrease in credit payables.
Net cash used in investing activities amounted to US$7.9 mln (31 March 2014: US$28.7 mln).
Net cash received from financing activities was US$6.3mln (31 March 2014: US$14.6 mln).
As at 31 March 2015, the Company's cash and cash equivalents decreased and amounted to US$89.9 mln (31 March2014: US$178.5 mln) as a result of the negative cash flow from operating and investing activities.
Debt Structure
As at 31 March 2015, the Company's total debt amounted to US$339.3 mln (31 December 2014: US$343.8 mln). Net debt amounted to US$249.4 mln (31 December 2014: US$225.9mln). 
The Company's Eurobond issue with a maturity date of 29 October 2015 amounted to 59% of the Company's total debt.
Segment review
Shell Eggs Segment

Units
As at 31.12.2015
As at 31.12.2014
Change
Total Poultry Flock
Heads (mln)
20.0
34.1
(41%)
Laying Hens
Heads (mln)
16.6
26.5
(37%)
As at 31 March 2015, the total poultry flock was down by 41% year-on-year to 20.0 million heads (Q1 2014: 34.1 million heads) and the number of laying hens decreased by 37% year-on-year to 16.6 million heads (Q1 2014: 26.5 million heads). The decrease in the number of poultry flock was largely due to the closure of poultry farms in the Autonomous Republic of Crimea and Eastern Ukraine. 
As at 31 March 2015, approximately 64% of laying hens flock is at the Avis and Chornobaivske poultry complexes. 

Units
Q1 2015
Q1 2014
Change
Total Production
Pieces (mln)
1,051
1,889
(44%)
Total Sales to Third Parties
Pieces (mln)
1,067
1,264
(16%)
Export
Pieces (mln)
108
162
(33%)
Average Sales Price
UAH (excl. VAT)
1.07
0.67
60%
In the first quarter of 2015, the production volume of shell eggs decreased by 44% year-on-year to 1,051million units (Q1 2014: 1,889 million units) due to the reduction in the number of laying hens.
Sales of shell eggs to external customers decreased by 16% year-on-year to 1,067 million units (Q1 2014: 1,264 million units). 
In the first quarter of 2015, exports of shell eggs decreased by 33% year-on-year to 108 million units (Q1 2014: 162 million units) due to the decrease in production volumes. The decline in exports was also due to the increased competition between egg producers for export markets. The Company believes that this trend is only temporary and plans to increase the share of exports. The main export markets for shell eggs were the Middle East and North Africa, Central and West Africa and the CIS. 
In the first quarter 2015, the share of shell eggs sales to supermarket chains increased to 38% (Q1 2014: 31%) of the Company's total sales to third parties, while sales through the lower margin wholesale channel declined to 52% (Q1 2014: 56%).
The average sales price of shell eggs increased by 60% year-on-year to 1.07 UAH per unit, excluding VAT (Q1 2014: 0.67 UAH per unit, excluding VAT). 
In the first quarter of 2015, the shell egg segment's revenue decreased by 44% to US$53.9 mln (Q1 2014: US$95.6 mln). This year-on-year decrease was due to two main factors, namely a slight decrease in shell egg sales to third parties as well as the sharp devaluation of the Ukrainian Hryvnia against the US dollar as approximately 82% of the segment's revenue comes from sales in Ukraine.
Dry Egg Products Segment
Units
Q1 2015
Q1 2014
Change
Dry egg products production
Tonnes
1,150
6,802
(83%)
Sales volume
Tonnes
3,251
7,286
(55%)
Average Sales Price
US$/Kg
5.24
7.04
(26%)
In the first quarter of 2015, the production of dry eggproducts declined to 1,150 tonnes (Q1 2014: 6,802 tonnes) as sufficient inventory of finished products was available as well as due to the changes in the Company's sales strategy. 
As a result, sales of dry egg products declined to 3,251 tonnes (Q1 2014: 7,286 tonnes). 
In the first quarter of 2015, the export of dry egg products decreased to 2,120 tonnes (Q1 2014: 5,973 tonnes) due to the Company's strategy to balance its sales structure. The main importers of the Company's dry egg products were the Middle East and North Africa, Asia, Oceania and the EU. In the first quarter of 2015, the Company entered the new export market of Bangladesh and the United Kingdom. 
In the first quarter of 2015, the average sales price of dry egg products decreased to US$5.24/kg (Q1 2014: US$7.04/kg) due to a reduction in export volumes. 
In the first quarter of 2015, as a result of the decrease in sales and average sales price of dry egg products, revenues in the dry egg products segment decreased by 67% year-on-year to US$16.9 mln (Q1 2014: US$51.3 mln).
For investor's inquiries:
Valeriya Myagkohod 
AVANGARDCO IPL 
Investor Relations Manager 
phone: +38 044 393 40 50 
mob.: +38 067 223 46 88 
e-mail: ir@avangardco.ua
FTI Consulting London
Elena Kalinskaya
phone: +44 (0) 20 3727 1279
e-mail:avangard@fticonsulting.com
- Ends -
Information for editors
AVANGARDCO IPL is one of the largest agro-industrial companies in Ukraine, specialising in the production of shell eggs and dry egg products. As at 31 December 2014, the Company holds a 49% share of the industrial shell eggs market and a 91% share of the dry eggs products market in Ukraine. The Company's laying hens flock is one of the largest globally. 
AVANGARDCO IPL has a vertically integrated production cycle. The Company's facilities are located in 14 regions of Ukraine and the Autonomous Republic of Crimea. The Company has 19 farms for laying hens, 3 second order breeder farms, 10 farms for rearing young laying hens, 6 feed mills, 3 long-term storage facilities and the Imperovo Foods egg processing plant, which is one of the most technologically-advanced facilities for processing eggs in Europe. 
The Company exports its products to 37 countries, with its primary export markets in the Middle East, Africa, Asia, the CIS and the EU. 
The Company's shares, in the form of Global Depositary Receipts, have been trading on the London Stock Exchange since May 2010. The Eurobond issue for approximately US$200 mln 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 1 November 2010.
# # #
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of AVANGARDCO IPL. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might", the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in the Company's geographical locations, rapid technological and market changes in our industry, as well as many other risks specifically related to AVANGARDCO IPL and its operations.


Interim consolidated statement of financial position
AS AT 31 MARCH 2015
(in USD thousand, unless otherwise stated)

31 March 2015
31 December 2014
ASSETS


Property, plant and equipment
394 370 
579 922 
Non-current biological assets
11 112 
21 637 
Deferred tax assets
1 675 
2 489 
Held to maturity investments
10 527 
17 959 
Other non-current assets
19 
28 
Total non-current assets
417 703 
622 035 



Inventories
77 799 
115 896 
Current biological assets
26 860 
28 228 
Trade accounts receivable, net
84 337 
79 221 
Prepaid income tax
47 
48 
Prepayments and other current assets, net
16 734 
29 094 
Taxes recoverable and prepaid
22 630 
45 949 
Cash and cash equivalents
89 890 
117 856 
Total current assets
318 297 
416 292 
TOTAL ASSETS 
736 000 
1 038 327 



EQUITY


Share capital
836 
836 
Share premium
201 164 
201 164 
Reserve capital
115 858 
115 858 
Retained earnings
1 025 445 
1 077 158 
Effect of translation into presentation currency
(1 009 099)
(776 404)
Equity attributable to owners of the Company
334 204 
618 612 
Non-controlling interest
12 675 
27 276 
Total equity 
346 879 
645 888 



LIABILITIES


Long-term loans
73 828 
79 844 
Deferred tax liabilities
17 
26 
Deferred income
1 385 
2 245 
Long-term finance lease
50 
63 
Total non-current liabilities
75 280 
82 178 



Short-term bond liabilities
199 034 
198 635 
Current portion of non-current liabilities
16 471 
15 368 
Short-term loans
50 000 
50 000 
Trade payables
3 497 
6 907 
Other accounts payable
44 839 
39 351 
Total current liabilities
313 841 
310 261 
TOTAL LIABILITIES
389 121 
392 439 
TOTAL EQUITY AND LIABILITIES
736 000 
1 038 327 






Interim consolidated statement of profit and loss and other comprehensive income
FOR THE 3 MONTHS ENDED 31 MARCH 2015 THE 3 MONTHS ENDED 31 MARCH 2015
(in USD thousand, unless otherwise stated)
Revenue
72 426 
152 199 
Profit from revaluation of biological assets at fair value
6 387 
9 275 
Cost of sales
(64 203)
(101 729)
GROSS PROFIT
14 610 
59 745 



General administrative expenses
(1 554)
(5 456)
Distribution expenses
(3 586)
(5 660)
Income from government grants and incentives
24 
68 
Impairment of non current assets
- 
- 
Income from special VAT treatment
4 535 
5 680 
Other operating expenses
(13 869)
343 



PROFIT FROM OPERATING ACTIVITIES
160 
54 720 



Finance income
1 119 
39 
Finance costs
(7 574)
(7 663)
Losses on exchange
(45 867)
(223)
(LOSS)/PROFIT BEFORE TAX
(52 162)
46 873 



Income tax credit
(17)
(74)



(LOSS)/PROFIT FOR THE PERIOD
(52 179)
46 799 



OTHER COMPREHENSIVE INCOME:


Items that are or may be reclassified subsequently to profit or loss


Effect from translation into presentation currency
(246 829)
(436 600)



TOTAL COMPREHENSIVE INCOME
(299 008)
(389 801)



(LOSS)/PROFIT FOR THE PERIOD ATTRIBUTABLE TO:


Owners of the Company
(51 713)
46 157 
Non-controlling interests
(466)
642 

(52 179)
46 799 



TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:


Owners of the Company
(284 406)
(371 785)
Non-controlling interests
(14 602)
(18 016)

(299 008)
(389 801)






(Loss)/earnings per share, USD (basic and diluted)
(8)
7 
Interim consolidated statement of cash flows
FOR THE 3 MONTHS ENDED 31 MARCH 2015
(in USD thousand, unless otherwise stated)

3 months ended

31 March 2015
31 March 2014
CASH FLOWS FROM OPERATING ACTIVITIES





(Loss)/profit before income tax
(52 162)
46 873 
Adjustments for:


Depreciation of property, plant and equipment
6 197 
6 443 
Change in allowance for irrecoverable amounts 
6 945 
5 
Other provisions 
- 
(675)
(Profit)/loss on disposal of current assets
9 
21 
Loss on disposal of property, plant and equipment
(1)
6 
Impairment of current assets
7 704 
324 
Effect of fair value adjustments on biological assets
(6 387)
(9 275)
Gains realised from accounts payable written-off
(1)
(11)
Amortization of deferred income on government grants
(24)
(68)
Discount bonds amortization
399 
359 
Discount on VAT government bonds on initial recognition
- 
- 
Discount on VAT government bonds amortization
(542)
- 
Impairment of non current assets
- 
- 
Interest income
(1 119)
(39)
Interest payable on loans
7 170 
6 795 
Losses on exchange
38 490 
- 
Operating profit before working capital changes
6 678 
50 758 
(Increase)/decrease in trade receivables
(27 993)
15 936 
Decrease in prepayments and other current assets
2 590 
8 423 
Decrease/(increase) in taxes recoverable and prepaid
9 190 
(5 836)
Increase in inventories
(7 534)
(19 609)
Decrease in deferred income
(115)
(1 277)
Decrease in other non-current assets
- 
100 
Decrease in trade payables
(1 275)
(5 239)
Decrease in biological assets
1 464 
3 584 
Increase/(decrease) in finance leases
4 
(699)
Increase/(decrease) in other accounts payable
14 173 
(5 023)
Cash generated from operations
(2 818)
41 118 
Interest paid
(505)
(1 681)
Income tax paid
(33)
(28)
Net cash generated from operating activities
(3 356)
39 409 



CASH FLOWS FROM INVESTING ACTIVITIES





Payments and receipts - property, plant and equipment
(11 227)
(28 689)
Interest received
1 076 
39 
Repayment of VAT government bonds
2 267 
- 
Net cash used in investing activities
(7 884)
(28 650)


Interim consolidated statement of cash flows (cont.)
FOR THE 3 MONTHS ENDED 31 MARCH 2015
(in USD thousand, unless otherwise stated)

3 months ended

31 March 2015
31 March 2014
CASH FLOWS FROM FINANCING ACTIVITIES





New loans received
8 592 
17 590 
Repayment of loans
(2 334)
(2 948)
Net cash generated from/(used in) financing activities
6 258 
14 642 



Net decrease in cash
(4 982)
25 400 



Cash and cash equivalents at 1 January
117 856 
156 804 
Effect from translation into presentation currency
(22 984)
(3 732)
Cash and cash equivalents at 31 March
89 890 
178 472 




This information is provided by RNS
The company news service from the London Stock Exchange
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