OREANDA-NEWS. November 16, 2009. ASTARTA published report for the nine months of 2009. The Group's financial results demonstrate sustainable growth following successful consolidation of assets and positive market movements.

Key Financial Highlights

Consolidated revenues increased by 6% y-o-y to EUR 75.3 mln

EBIT up 10% y-o-y to EUR 29.2 mln. EBIT margin grew to 39% from 37%

EBITDA increased by 8% y-o-y to EUR 35.4 mln. EBITDA margin grew from 46% to 47%

Net income up 5% to EUR 21.1 mln. Net margin stable at 28%

Cash flows provided by operating activities grew to EUR 8.5 mln from EUR 0.8 mln a year before

Key Operational Highlights

ASTARTA's share in the national sugar production increasing, position of the No. 1 sugar producer strengthened

Vertical integration reinforced, over 90% of in-house grown beet used in sugar production (last year 84%)

Yields of main crops down y-o-y due to unfavorable weather conditions but still 30-50% above Ukrainian averages

Sugar yield up to 14.9% (for the same period of the previous year - 13.5%), well above the national industry average of 13.5%

Average consumption of natural gas per ton of beet processed down by 20% y-o-y, limestone by 33% y-o-y and coal by 27% y-o-y

Winter sowing campaign for 2010 harvest finished on the area of 37.5 thousand ha or 8% up y-o-y

Revenues

In the nine months of 2009, the Group's revenues grew by 6% to EUR 75.3 mln (57% to UAH 839.8 mln). Revenues were growing due to an increase in sales of the Group's products, as well as rising sugar prices and a recovery on commodity markets.

Gross profit

The cost of revenues also demonstrated a 6% growth y-o-y to EUR 51.2 mln (57% in UAH equivalent). A loss arising from remeasurement of agricultural produce to fair value of EUR 1.3 mln (instead of gain of EUR 8.9 mln stated for the same period of 2008) contributed to a gross profit decrease by 28% to EUR 22.8 mln (while in the Ukrainian hryvnia equivalent, the gross profit grew 11%). As a result, the gross margin constituted 30% against 44% a year before. The reason for such a difference is that in 2008 the Group had considerably higher inventories of agricultural produce that was remeasured to fair value according to the IFRS.  

Operating expense/income

The current year has been marked with an optimization of the Group's structure aimed to improve manageability of the business and to minimize transaction costs. The management efforts to cut non-production expense as well as UAH depreciation resulted in a considerable cut in operating expense in the EUR equivalent. In particular, general and administrative expense decreased 32% y-o-y to EUR 5.9 mln and constituted 7.9% of the revenues (12.3% in 9M 2008). Selling and distribution expense fell 20% in the Euro equivalent to EUR 3,7 mln vs. EUR 4.6 mln in 2008, and constituted 4.9% of revenues vs. 6.5% in 9M 2008.

The change in fair value of biological assets was EUR 15.3 mln against EUR 2.2 mln a year earlier as a result of increased areas under crops and positive price trends for the Group's products.

Profit from operations and EBITDA

As a result of the above factors, profit from operations grew 10% to EUR 29.2 mln (61% in UAH terms), EBIT margin rose from 37% to 39%. EBITDA increased 8% to EUR 35.4 mln (59% UAH terms), and EBITDA margin grew to 47% vs. 46% in 9M 2008.

Profit before tax/ Net profit

Profit before tax grew 6% to EUR 21.1 mln (50% in UAH terms), and net profit grew 5% y-o-y to EUR 21.1 mln (49% in UAH terms). The net margin remained stable at 28%.

Sugar production and sales

In September, ASTARTA started sugar production campaign. This year the vertical integration of sugar production was reinforced, with over 90% of in-house grown beet used in sugar production (last year 84%). ASTARTA's share in the national sugar production is increasing, and its position of the No. 1 sugar producer will be strengthened. Investment into modernization and management efforts resulted in cuts of average consumption of natural gas per ton of beet processed by 20% y-o-y, limestone by 33% y-o-y and coal by 27% y-o-y. As of 12 November, 2009 the Group produced more than 160 thousand tons of high quality sugar (137 thousand tons a year before).

In the first nine months of 2009, the international sugar market demonstrated an aggressive growth. The wholesale Ukrainian price also significantly augmented. Industry experts expect sugar markets to stay at their highs for approximately another year.

In 9M 2009, the Group was strengthening its market position among big industrial sugar consumers while demonstrating flexible marketing approach. About 83% of the Group's sugar was sold to big Ukrainian and international producers of beverages and confectionary. In terms of volumes, sugar sales increased by 14%. The revenues from sugar sales grew by 13% to EUR 43.6 mln (67% UAH terms).

Crops production and sales

In the first nine months of 2009, revenues from crop sales grew 4% y-o-y to EUR 18,7 mln (54% in UAH terms). In terms of volumes, sales of key crops grew 12%.

By the date of this release, ASTARTA's agricultural companies harvested 222 thousand tons of early grains on the area of 59 thousand hectares and 111 thousand of technical crops on the area of 35 thousand hectares. ASTARTA's yields in 2009 were mostly 30-50% above Ukrainian averages. The total harvest of crops is forecasted at 375 thousand tons. In 2009, the quality of grain harvested is much higher than in the previous year and thus has better pricing on the market.

ASTARTA's regional subsidiaries finished winter sowing campaign for 2010 harvest on the area of 37.5 thousand ha or 8% more than in the previous year. The Group's agricultural companies have also finished cultivation and application of mineral fertilizers on about 36 thousand hectares for the next sugar beet production season.

Viktor Ivanchyk, CEO of ASTARTA Holding N. V. said: "Following a dynamic recovery in agricultural and sugar markets, ASTARTA's financial performance in the first nine months of 2009 exceeded the previous year's results despite the current economical environment. Management efforts and investments into modernization resulted in substantial cuts of energy and materials during this production season. After consolidation of the Group's main operational assets, the non-production expense went down providing for better competitiveness of our products. 

We have also successfully completed restructuring of the Group's loan portfolio, and as of today, more than 90% of bank debt is a long-term one. We are well in schedule of all production activities, and continue our development through organic growth and quality improvements."