IMC
Recommendation*: SELL
12M TP*: PLN 13.33
â– In 2Q22 revenues stood at USD 6.6mn, i.e. 23% below our forecast of USD 8.5mn, mainly due to the lower realized corn price. Almost entire revenues in 2Q22 were generated by corn sales.
â– The reported gain from changes in fair value of biological assets and agricultural produce amounted to USD 28.6mn i.e. 43% lower vs. our forecast and 61% lower than last year in the same time. The major reason for the miss were lower volumes used for the calculation of fair value, stemming from lower area sown. On top of that, due to the absence of active market for grains in Ukraine, the valuation was based on cash flows method which apparently resulted in some discount vs. global market benchmarks for grains.
â– Consolidated EBITDA in 2Q22 came in at USD 29.1mn, missing our forecast of USD 50mn by wide margin.
â– EBIT amounted USD 23.7mn vs. USD 76.9mn in 2Q21
â– Net profit came in at USD 22.1mn vs. USD 76.1mn year ago
â– OCF came in at negative USDs 17mn due to the limited inflows and inventories build-up
â– Net debt came in at USD 178mn vs. USD 164 in 2Q21.
Our view: NEUTRAL
Even though the miss looks terrifying, given the nature of reported EBITDA in 2Q which always was based on accrual rather than cash method, we wouldn’t panic on account of that fact only. Aside from lower volumes, the fair value of biological assets was lowballed due to the lower assumption with regard to achievable prices, not reflecting for the moment being global grain benchmarks. It’s more concerning than the result itself because it could be indication of lower realized prices via seaborne export vs. rail export, and therefore considerably lower cash inflow going forward, in spite of increased throughput in Black Sea ports. For the moment being we remain cautious with respect to IMC shares, and we monitor the market for the additional information with regard to the price terms in seaborne grain trade.
Krzysztof Kozieł, Equity analyst
