MHP releases Q4 operating report

2 February 2016

Reported results are worse than expected with total poultry realization decline in natural terms vs. previous quarter by 14% (to 129.6k tons, on the level of Q4 2014) and with export decline vs. both previous quarter and corresponding period of previous year (as MHP is struggling to deal with decline of realization in CIS countries).

Total export in Q4 2015 made 31.5k tons (24% of total realization), which was by 19% lower vs. Q4 2014 and by 9% lower vs. Q3 2015. For the whole Y2015 result is better, as volumes of export realization declined by 6.3% vs. Y2014 (132.1k tons). According to report decrease took place mainly in a view of lower export to CIS market (Uzbekistan, Georgia, Kirgizstan etc) due to local currencies devaluation and temporary export suspension from Kazahstan side in Y2015. Along with it export to EU region grew by 65% vs. previous year, up to 27.3k tons (Basing on existing regulations all certified by the EU authorities Ukrainian enterprises can deliver to EU market on annual basis 16,000 tonnes of fresh/frozen chicken parts and 20,000 tons of frozen grillers (whole chicken)). The company tries to develop other export destinations mainly MEA markets.

Domestic meat market keeps its stagnation, following significant decrease of Ukrainian population purchasing power. Domestic poultry consumption can be more resilient to general decline, as poultry meat is cheaper vs. pork or beef, so some shift in consumption toward poultry can take place. MHP reported increase of domestic realization in Y2015 by 5%, which compensated export decline. As MHP takes more than 40% of total domestic poultry consumption and market is stagnating, further share increase can be reached only with dumping, using good market brand and vertical integration. Along with it, significant part of other market players can be ready for such situation and has margin of safety to withstand such kind of market wars.

Average poultry realization price in Q4 reached USD 1.3 per 1 kg (vs. USD 1.25 in 9m 2015). Along with it, USD-nominated price is still significantly lower than in Y2014 at USD 1.68.

On positive side for the company are good reported conditions of winter crops (which is not the case for Ukraine in general). Sown area under winter crops in current year made 97.3k ha, thereof 60% - under wheat, 23% - winter rapeseeds.

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