IMC
Recommendation*: BUY
12M TP*: PLN 22.56
â– In 3Q22 revenues stood at USD 17.3mn, i.e. 15% above our forecast of USD 15.0mn, mainly due to the higher volumes sales. IMC managed to sell 63kt of corn and 13kt of wheat compared to 60kt of wheat we’ve assumed in 3Q22 previews.
â– The reported gain from changes in fair value of biological assets and agricultural produce amounted to USD 12.0mn, only 8% down yoy and double of what we’ve estimated in our previews. The major reason for the beat were higher corn volumes used for the calculation of fair value. However, due to the absence of active market for grains in Ukraine, the valuation was based on cash flows method which apparently resulted in lower corn price used for calculations equal to mere USD 150/t vs. USD 200/t in 3Q22. Drop of that price may herald lower sales price in 4Q22 stemming from unfavorable conditions offered by international commodities traders.
â– Consolidated EBITDA in 3Q22 came in at USD 14.9mn, beating our forecast of USD 8.3mn by wide margin.
â– Net profit came in at USD 1.0mn vs. USD 2.9mn estimated by us, due to the USD 8.5mn FX losses.
â– OCF came in at negative USD 2mn vs. USD 10mn last year in the same time and USD 27mn year before.
â– Net debt came in at USD 152mn vs. USD 184 in 2Q22 due to the drop of long-term liabilities as to right-of-use assets
Our view: NEUTRAL
The 3Q22 results look decent, however the main reason for the beat was higher than expected gain on changes in FV of biological assets, which is non-cash P&L item. On the cash flow side, there is improvement vs 2Q22, but IMC’s ability to generate cash in 3Q22 was still far cry from previous years. Thankfully, along with reporting the end of harvest in 2022 the company said that in September and October IMC export reached 40.3kt and 56.7kt, which if extrapolated on the remaining months in 4Q22 should provide decent cash inflow (if the payment for sold produce is going to be realized in 4Q22 as well). For the moment being we remain cautious with respect to IMC, though we see the chance it’s out of the woods really soon. Clearly, we’ll be able to say more after 4Q22 report publication, when we know if sales numbers remain stable and what are realized prices vs. the market, or if higher sales are not paid for with hefty discounts.
Analyst: Krzysztof Kozieł
GPW’s Analytical Coverage Support Programme 3.0
