MHP SA Considers Increasing Poultry Sales to EU23 October 2013
UKRAINE - Ukrainian poultry meat processor MHP SA reports marked increases in poultry meat sales for the periods compared to the previous year in its pre-close trading update for the third quarter and nine months ended 30 September 2013. While its export efforts are focused on Asia, the Middle East and Africa, the company is considering expanding sales to the EU.
MHP S.A. is one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain.
Poultry and Poultry Related Operations
Owing to the increasing production volumes at the Vinnytsia poultry farm, poultry production volumes in the third quarter (Q3) of 2013 increased by 17 per cent to 122,350 tonnes (Q3 2012: 104,600 tonnes) and in 9M 2013 increased by 18 per cent to 346,940 tonnes (9M 2012: 294,790 tonnes).
As a result of an overall increase in poultry production volumes during the third quarter of 2013, sales volume of chicken meat to external consumers amounted to 120,080 tonnes, which is 29 per cent higher than in Q3 2012. During the nine months of 2013, third-party sales amounted 325,430 tonnes of poultry, which is 19 per cent higher than in the same period of s012.
Implementing the Company’s strategy of export sales growth, during the third quarter of 2013, the volume of chicken meat export was 2.3 times higher than the volume of Q3 2012 and reached around 30,000 tonnes.
During the nine months of 2013, poultry export sales were 2.6 times higher than the same period of 2012 and reached 84,780 tonnes.
MHP continues to explore new business opportunities in Asia, the Middle East and Africa; building-up its export volumes of chicken meat in those regions.
In the near future, the Company is considering expanding its export sales in the EU countries.
Despite the fact that average chicken price in Q3 2013 remained almost at the same level as in Q2 2013, through the nine months of 2013 average chicken prices decreased by six per cent to UAH16.21 per kg of adjusted weight (excluding VAT) when compared to the nine months of 2012 as a result of stable price for fresh chicken in Ukraine and increased export sales of frozen chicken meat.
As a result of increased production of feed at the Vinnytsia complex, in Q3 2013 MHP sold 64,100 tonnes of sunflower oil, which was 22 per cent higher than in Q3 2012, mainly for export.
The average price of US$1,057 per tonne in Q3 2013 was three per cent below that in Q3 2012 (US$1,084 per tonne) in line with world market trends. During the first nine months of 2013, MHP produced 175,260 tonnes of sunflower oil, which was 19 per cent more than the same period of 2012. The average price during 9M 2013 remained at the same level as in 9M 2012.
Grain Growing Operations
In 2013, the Company expects to harvest in Ukraine around 290,000 hectares of land for grains as well as to cultivate around 30,000 hectares of land in other agricultural operations. The contribution of the newly acquired asset in Russia (40,000 hectares) in operational results of 2013 is expected to be negligible.
Due to the favourable weather conditions in Ukraine, operational efficiency and employment of best practice, MHP expects yields across all crops to be good, stronger than last year and significantly higher than Ukraine’s average.
The Company’s harvest of late crops (corn and sunflower) is on track.
Corn and sunflower yields are in line with MHP’s forecast for this year despite challenging weather conditions in the time of harvesting campaign. Corn and sunflower harvesting is ongoing and as of 15 October, 35 per cent and 80 per cent, respectively, is complete accordingly and current yields are around 20 per cent higher than last year.
Other Agricultural Operations
Meat processing products
During the third quarter of 2013, sausage and cooked meat production volumes decreased by seven per cent to 9,360 tonnes compared to 10,100 tonnes during the third quarter of 2012. During the first nine months of 2013, volumes decreased by four per cent to 25,470 tonnes (9M 2012: 26,610 tonnes).
At the same time, the average sausage and cooked meat prices during the third quarter of 2013 increased by eight per cent to UAH24.16 per kg excluding VAT (Q3 2012: UAH22.34 per kg ) and through the first nine months of 2013, it increased by six per cent to UAH23.34 per kg excluding VAT (9M 2012: UAH22.02 per kg).
MHP continues to lead the market of meat processing products, by using internally produced chicken meat, enhancing its profitability in meat processing business segment.
MHP is the leading producer of poultry products in Ukraine with the greatest market share and highest brand recognition for its products. MHP owns and operates each of the key stages of chicken production processes, from feed grains and feed production to egg hatching and grow-out to processing, marketing, distribution and sales (including through MHP's franchise outlets).
Vertical integration reduces MHP's dependence on suppliers and its exposure to increases in raw material prices. In addition to cost efficiency, vertical integration also allows MHP to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale. To support its sales, MHP maintains a distribution network consisting of 11 distribution and logistics centers, within major Ukrainian cities. MHP uses its trucks for the distribution of its products, which Management believes reduces overall transportation costs and delivery times.
MHP also has a leading grain cultivation business growing corn to support the vertical integration of its chicken production and increasingly other grains, such as wheat and rapeseed, for sale to third parties. MHP leases agricultural land located primarily in the highly fertile black soil regions of Ukraine.
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