OREANDA-NEWS. November 16, 2010. ASTARTA published report for the nine months of 2010. The Group's financial results demonstrate sustainable growth following efficiency improvements, successful consolidation of assets and positive market movements.

Key Financial Highlights

Consolidated revenues increased by 74% y-o-y to EUR 130.7 mln

Gross profit increased by 180% y-o-y to EUR 63.8 mln. Gross profit margin grew to 49% from 30%

EBIT up 179% y-o-y to EUR 81.6 mln. EBIT margin grew to 62% from 39%

EBITDA increased by 165% y-o-y to EUR 93.9 mln. EBITDA margin grew from 47% to 72%

Net income up 262% to EUR 76.2 mln. Net margin grew from 28% to 58%

Cash flows provided by operating activities grew to EUR 24.9 mln from EUR 8.6 mln a year before

Key Operational Highlights

ASTARTA holds the position of sugar producer No. 1 in Ukraine

Land bank increased up to 190 thousand hectares

Yields of main crops down y-o-y due to unfavorable weather conditions but still 15-30% above Ukrainian averages. Decrease in production will be compensated by higher prices for key products

Average consumption of natural gas per ton of beet processed down by 10% y-o-y

Winter sowing campaign for 2011 harvest finished on the area of 39 thousand ha, including 36 thousand ha of winter wheat or 9% up y-o-y

In full conformity with the technological scheme, cultivation of soil has been finished, mineral fertilizers for the next sugar beet harvest has been applied at over 40,000 ha

Revenues and gross profit

On the back of growth of the volumes of sales and favorable situation on all key markets, revenues grew 74% y-o-y to EUR 130.7 million. The cost of goods sold grew less significantly, by 45% to EUR 74 mln. Due to a rapid growth in the crop prices, the Group received an IFRS 44 gain from the remeasurement of agricultural produce to fair value of EUR 7.1 mln (a loss of EUR 1.3 mln. a year before). The above factors contributed to an almost triple rise in the gross profit from EUR 22.8 mln in the nine months of 2009 to EUR 63.8 mln in the nine months of 2010. The gross margin constituted 49% compared to 30% in the nine months of the last year.

Operating expense/income

The Group also made a considerable effort to control overhead expense. Despite an active expansion of the Group's assets and operations, the general and administrative expense was growing slower than the revenue and constituted 5.7% of the total revenue vs.7.9% in 9M 2009. As a result of growing transportation costs, as well as increased volume of sales, selling and distribution expense grew 68% to EUR 6.2 mln and constituted 4.7% of the total revenues (4.9% last year). Other operating income grew 158% to EUR 6.9 mln as a result of an increase in government subsidies related to cattle farming. A considerable growth in prices for all key products of the Group contributed to a positive change in fair value of biological assets (both in cattle farming and crop growing). The net result of such change was EUR 27.1 mln (EUR 15.3 mln a year before). As a result of the above factors and based on the growth of revenues,  profit from operations (EBIT) almost tripled y-o-y to EUR 81.6 mln. EBIT margin to 62% vs. 39% in

9M 2009. The EBITDA grew 165% to EUR 93.9 mln with EBITDA margin of 72% vs. 47% last year.

Profit before tax/ Net profit

Profit before tax grew 265% to EUR 77 mln from EUR 21.1 mln in the nine months of 2009, and the net profit 262% to EUR 76.2 mln. The net margin constituted 58% vs. 28% in 9M 2009.

Sugar production and sales

Volumes of sales of sugar grew 12.5%, and revenues from sugar sales amounted to EUR 93.3 mln that is up 114% y-o-y. At the end of August, ASTARTA started sugar production campaign of 2010/2011. Modernization policy performed on the sugar plans led to further cut in natural gas consumption by another 10% y-o-y.

In 2010, weather conditions were not favorable for beet producers. In contrast to previous years, when sugar content and beet weight usually grew in September and October, this year, sugar beet has not provided for expected growth of root and sugar content. Average gross yield of sugar beet through ASTARTA fields comprise around 37 tons per ha. In October, the Ukrainian National Association of Sugar Producers lowered the domestic sugar production forecast for the season 2010/2011 to 1.5-1.6 mln tons. Thus, sugar prices have significant potential of growth, as Ukraine faces a shortage of sugar in the domestic market, and cost of sugar of Ukrainian producers will increase due to lower crop yields following adverse weather conditions.

Crop production and sales

By the date of this report, ASTARTA's agricultural companies successfully finished harvesting of technical crops. Sunflower has been already harvested on the area of c. 15 thousand ha (+25% y-o-y) with an average yield of 2.0 tons per ha, soybeans on the area of 26 thousand ha with an average yield of 1.5 tons per ha (+73% y-o-y), and corn on the area of about 20 thousand ha (+12% y-o-y) with an average yield of 6.5 tons per ha. It should be noted that the best ASTARTA's yields in 2010 (except soybean) were traditionally 15-30% above Ukrainian averages.

Volumes of crop sales decreased 15% y-o-y following restrictions on exports, and revenues from crop sales didn't materially change y-o-y on the back of growing prices.

Production and Sales of Farming Produce

In the nine months of 2010, ASTARTA's farms produced 39.6 thousand tons of milk, of which 37.4 thousand tons were sold to dairy processors (+16% y-o-y). The Group's revenues from sales of cattle farming grew to EUR 11.1 million that is 90% higher y-o-y.

Viktor Ivanchyk, CEO of ASTARTA Holding N. V. said:

"Management efforts and investments into modernization provided for  a substantial growth of efficiency and as a result in an increase in the Group's profitability. After consolidation of the Group's main operational assets and improvement of the business processes, the non-production expense went down providing for better competitiveness of our products. We are well in schedule in all production activities, and continue our development through organic growth and quality improvements."