We reiterate our negative view on the name: BEF has recorded negative EBITDA in 13 consecutive quarters to 3Q11 and we think its poor crop mix is to blame. While there are signs that BEF could eventually become profitable (it initiated changes in its crop mix in 2011), the company still faces a long and difficult road to prosperity. The full effect of crop mix changes will not be seen for several years: we forecast the company will generate an EBITDA margin of 23.8% in 2016 when 20% of its land is under sugar beets, the most profitable crop in Russia. In the meantime BEF will likely continue to disappoint investors, in our view. Its balance sheet looks weak while its operating cash flow is negative and we see no reasons for the situation to improve in the foreseeable future. On the contrary, our analysis suggests that BEF will have to borrow $50-60mn in 2012 to finance its operations. This will apply additional pressure to its bottom line, which we expect to be in the red until 2014. We reiterate our SELL rating on BEF and cut our target price to SEK11.6/SDR from SEK13.7/SDR
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