Fitch affirmed MHP SE at 'B' with Stable Outlook

Fitch Ratings has affirmed MHP SE's Long-Term Foreign-Currency (FC) and Long-Term Local-Currency (LC) Issuer Default Ratings (IDR) and senior unsecured rating at 'B'. The rating Outlook is Stable.

The acquisition of Slovenia-based Perutnina Ptuj D.D (PPJ) (90% controlling stake completed in February 2019) is beneficial to MHP's business profile and not materially detrimental to the group's financial profile. An increasing scale and business diversification could lead to an additional one-notch uplift for its LC IDR to 'B+', assuming MHP maintains a prudent balance sheet but likely not before 2021.

By the Fitch assumption, revenue should grow to USD 2.2 billion by 2022 vs. USD 1.56 billion in 2018. EBITDA margin is expected at 23.4% in 2019 (pro forma for PPJ), trending towards 25.8% by 2022. Revenue from export of poultry products is projected to increase towards 68% of total sales in 2021, absorbing the majority of production volume growth. Capex is estimated at 9%-13% of sales in 2019-2022.

Fitch estimates that PPJ will represent around 7% of the group's EBITDA in 2019, enabling MHP to generate two-thirds of its revenue and around 57% of EBITDA from exports, or outside Ukraine.

"The acquisition of Slovenia-based Perutnina Ptuj D.D (PPJ) (90% controlling stake completed in February 2019) is beneficial to MHP's business profile and not materially detrimental to the group's financial profile. PPJ has strong market positions in the Balkan region and is also vertically-integrated from the production of animal feeds and poultry breeding to poultry and meat processing, and enjoys a high share of added-value products (more than 40% of PPJ's sales)," the agency notes.

Previously MHP reported an increased by 42 per cent year-on-year revenue to USD 436 million (Q1 2018: USD 306 million).

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