UKRAINE - A new expansion project, a 17 per cent increase in poultry meat production and 17,000 hectares more arable land all contributed to boost MHP's results for the last financial year.
MHP S.A., one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, has announced its financial results for the fourth quarter 2013 and full year ended 31 December 2013.
On its expansion project at Vinnytsia, Phase 1 of the two-phase expansion project is now in its final stages of completion.
During 2013 the number of poultry production units increased from three to nine, all working at full capacity.
In the first half of 2014, Phase 1 is expected to produce at a rate of 220,000 tonnes of poultry per annum.
Owing to increasing production volumes at the Vinnytsia poultry farm, poultry production volumes in 2013 increased by 17 per cent to 472,800 tonnes (2012: 404,000 tonnes).
The Company’s total volume of chicken meat sold to third parties increased by 19 per cent to 447,000 tonnes (2012: 375,300 tonnes).
MHP’s market share of industrially produced chicken in Ukraine was approximately 50 per cent and about one-third of total poultry consumption.
The average price decreased by 7 per cent year-on-year to UAH 15.99 per kg (excluding VAT) compared to UAH 17.19 in 2012 mainly due to a significant increase in the share of lower-priced exports sales from 15 per cent in 2012 to 28 per cent in 2013.
Total export sales of poultry in 2013 more than doubled compared to 2012, constituting close to 123,000 tonnes of chicken meat, which is around 28 per cent of total chicken sales. In 2013, MHP opened 20 new export sales markets in Asia, the Middle East and Africa.
In July 2013, MHP received permission (“EU numbers”) from the EU authorities for exports of poultry products to the European countries. MHP has started to export its poultry products to the European market in October 2013 with sales of around 500 tonnes.
In 2013, MHP sold 240,100 tonnes of sunflower oil, 23 per cent more than in 2012, due to the increased production of the feed mill at the Vinnytsia complex.
The total land bank at the end of 2013 comprised 360,000 hectares, an increase of around 75,000 hectares (35,000 ha are in Ukraine and 40,000 ha in the Russian Federation) from 2012.
MHP harvested 287,000 hectares of grain and oilseed resulting in the production of around two million tonnes of crops, 23 per cent more than in 2012.
Grain prices in 2013 in Ukraine were lower than in 2012 but in line with international commodity market trends: however this has had a positive and continuing effect on MHP’s poultry production costs since the start of 2014.
Processed meat production remained the main contributor to the other agricultural segment.
MHP is a market leader with close to 10 per cent market share in meat processing in Ukraine.
In 2013, MHP sales volumes slightly decreased by six per cent to 33,210 tonnes compared to 35,200 tonnes in 2012 due to optimisation of the product portfolio during the year.
Average sausage and cooked meat prices during 2013 increased by six per cent to UAH23.53 per kg compared to UAH22.20 in 2012. (Prices quoted exclude VAT)
Key Financial Highlights for FY 2013
Revenue increased by six per cent to US$1,496 million (2012: $1,408 million), primarily due to increased production of poultry.
EBITDA decreased by 16 per cent to $391 million (2012: $468 million), and EBITDA margin decreased by seven percentage points to 26 per cent primarily due to low grain prices for the 2013 harvest.
Net income decreased by 48 per cent to $162 million (2012: $311 million) in line with EBITDA trends combined with increased depreciation and finance costs.
Commenting on the results, Yuriy Kosyuk, Chief Executive Officer of MHP, said: "Although 2013 was a challenging year for MHP, we made an important progress on a number of fronts. During the year, and in line with all Ukrainian grain growers, we faced lower market prices for our output year on year. Our robust and broadly-based operation served us well, and our vertically integrated model means that those low grain prices are now working in our favour in the form of lower poultry production costs in 2014.
"Our agricultural capacity was boosted by our successful acquisition of 75,000 additional hectares of arable land. For the first time, this included 40,000 hectares outside our borders, in the Russian Federation.
"Having previously announced our intentions to increase production, during 2013, we continued to gradually phase in extra capacity at our new Vinnytsia complex. The Vinnytsia complex reinforces our ethos of self-sufficient vertical integration, bringing together the different facets of agriculture and poultry production under the efficient control of a single facility.
"During the year, we substantially increased our exports, taking our poultry products to around 20 new countries with a wide geographical spread, ranging across Africa, the Middle East, China and Asia. This diversifies our customer base and provides a valuable hedge against any potential domestic issues and fluctuations.
"We were also delighted to receive full EU certification for our products in September 2013. This was the successful conclusion of five years’ concerted work to satisfy all compliance issues, and it will open up important possibilities.
"It is also a sign of our growing maturity that we were in a position to make our first dividend payment in 2013. With our previous phase of major capital expenditure largely complete, we deemed the time was right to share the Company’s success with our loyal shareholders. The dividend of $1.13 per share, which was declared as an interim payment for 2013, amounted to US$120 million, or 39 per cent of net profit. Our intention is to maintain dividend payments in the future and, for 2014, to declare an interim dividend in May 2014; the amount of this dividend is expected to reflect both the profits generated in 2013 and the outlook for 2014.
"We have entered 2014 with optimism as we have created a sound platform for future progress in operational and financial performance. Despite the recent political turmoil in Ukraine, domestic demand for poultry during the first months of 2014 remained strong; increasing by around 20 per cent compared with last year, and all of MHP’s facilities have continued to operate normally through the first quarter. With the investment in the first phase of the Vinnytsia complex scheduled to be completed in 2014 and our expanded land bank, we will have the production capacity to penetrate more international markets than ever before," said Mr Kosyuk.
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