Fitch affirms Ukrainian agricultural holding MHP at 'CC'
MOSCOW. June 3 (Interfax) - Fitch Ratings has affirmed the long-term foreign- and local-currency issuer default ratings (IDRs) on Ukrainian agricultural holding MHP at 'CC', Ukrainian media quoted the agency as saying in a press release.
"The affirmation reflects our view that the company's credit risk remains high, despite the redemption of its $500 million bond that matured in May 2024 [...] as well as high refinancing and liquidity risks, which together lead to a high probability of default," Fitch said.
It said MHP will continue to be able to refinance its existing short-term credit facilities for its operating needs, while access to new funding is likely to remain limited in the near term.
Fitch also said the National Bank of Ukraine's moratorium on cross-border foreign-currency payments potentially limits the companies' ability to service its foreign-currency obligations. Exceptions can be made to this moratorium but it is unclear how these will be applied in practice.
Also, cash generated from exports of grains and vegetable oils must be repatriated to Ukraine within 90 days, reduced from 180 days, which could constrain MHP's ability to service its foreign-currency debt in the near term. These risks are partly offset by MHP's large cash balance kept outside Ukraine - around 80% of cash as of end-2023 - and only 50% of its export revenues being subject to the regulation.
Disrupted have affected profitability, Fitch said. MHP's EBITDA declined to $495 million in 2023 from $544 million in 2022 as its price mix only partly offset reduced sales volume, higher logistic, utilities and personnel costs, and the devaluation impact of the local currency.
"We assume a moderate reduction in commodities prices in international markets in 2024, which together with our cautious estimates for sales volumes, leads to a reduction in EBITDA margin to 16.1% in 2024 with limited profit recovery to 2027," it said.
"We view MHP's refinancing risk as high despite the recent timely redemption of its senior notes," Fitch said. MHP's next significant maturity of $550 million is due in April 2026.
Fitch forecasts MHP's revenue will fall 2.8% in 2024. EBITDA margin of around 16% in 2024 will gradually increase towards 17% over the rating horizon (2025-2027). Capex of $300 million in 2024 will reduce to $200 million in 2025 and $160 million per year over the rating horizon. Working capital outflow will be around $50 million in 2024.
"No dividends and M&A to 2027," Fitch said.
MHP, the largest producer of chicken in Ukraine, swung to net profit of $67 million in H1 2023 from a loss of $89 million a year previously, while sales revenue grew 35% to $1.555 billion.