MHP S.A., one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, is has announced its pre-close trading update for the third quarter and nine months ended 30 September 2014.

Poultry and Poultry Related Operations

Shakhtarska breeding farm had to suspend its operations since August due to the active hostilities in the region (zone of ATO, currently controlled by DNR) and is still not in operation. The farm provided MHP with around 30 per cent of its hatching eggs needs. MHP has been importing hatching eggs from the EU (predominantly Hungary, Germany and the Netherland) and partially Ukraine, so that during the first nine months of 2014, MHP’s poultry production facilities (broiler farms) worked at full capacity.

At MHP's Vinnytsia complex, 11 out of 12 production sites have been fully operational since September and the final rearing site will be added in the fourth quarter 2014.

Poultry production volumes in the third quarter of 2014 were up by nine per cent at 133,700 tonnes (Q3 2013: 122,350 tonnes) and in the first nine months of 2014, output was up 16 per cent at 403,300 tonnes (9M 2013: 346,940 tonnes).

As a result of an overall increase in poultry production volumes during the third quarter of 2014, sales volume of chicken meat to external consumers constituted 144,790 tonnes, which is 21 per cent higher than in Q3 2013. During nine months of 2014, third-party sales amounted 396,780 tonnes of poultry, which is 22 per cent more than in 9M 2013.

Due to significant depreciation of local currency, domestic demand for chicken meat is strengthening, as a result of consumers’ trade down from more expensive meats (pork and beef) to more affordable chicken. MHP’s domestic sales volumes in Q3 and 9M 2014 increased by around 12 per cent and 23 per cent year-on-year, respectively.

During the third quarter of 2014, the volume of chicken meat export was almost 48 per cent higher than in Q3 2013 and reached 44,580 tonnes. During the nine months of 2014, poultry export sales were 20 per cent higher than in 9M 2013 and reached 102,145 tonnes.

MHP continues to follow its strategy of diversified export markets and seeks for new business opportunities in the countries of Asia, the Middle East and Africa building-up the export volumes of chicken meat in those regions.

Since June 2014, MHP has continued exporting poultry meat to the EU at zero import duty, a situation due to end in November. Due to the preferential export regime, the Company’s export volumes to the EU have grown to around 7,400 tonnes of chicken in Q3 2014, which is nine times more than in Q1 2014 and 2.8 times more than in Q2 2014.

The average chicken price in Q3 2014 increased by 37 per cent year-on-year to 22.08 Ukrainian Hryvnia (UAH) per kg (excluding VAT) predominantly due to depreciation of the UAH. Through the nine months of 2014, the average chicken prices increased by 15 per cent to UAH18.61 per kg (excluding VAT) compared to the nine months of 2013 as a result of increased export operations to the EU within the preferential – zero import duty – regime as well as due to substantial increase of poultry price in Q3 2014 on domestic market and depreciation of local currency during the reporting period.

As a result of increased production of feed at the Vinnytsia complex, in Q3 2014 MHP sold 74,950 tonnes of sunflower oil, which was 17 per cent higher than in Q3 2013, mainly for export. The average price of US$847 per tonne in Q3 2014 was 20 per cent lower than in Q3 2013 in line with world market trends. During 9M 2014, 212,115 tonnes of sunflower oil, this was 21 per cent higher than during 9M 2013. The average price during 9M 2014 was 22 per cent lower than in 9M 2013 in line with world market trends.

Meat Processing

During the third quarter of 2014, sausage and cooked meat production volumes decreased by six per cent to 8,780 tonnes compared to 9,360 tonnes during the third quarter of 2013. For the first nine months of 2014, production volumes decreased by six per cent to 23,950 tonnes.

At the same time, the average sausage and cooked meat prices during the third quarter of 2014 increased by 19 per cent to UAH28.65 per kg (excluding VAT) and through the first nine months of 2014 by 14 per cent to UAH23.34 per kg (excluding VAT).

MHP is currently one of the leading meat processing products producers in Ukraine. The Company uses internally produced chicken meat, enhancing its profitability in meat processing business segment.

Grain Growing Operations

In 2014, the Company's grain growing operations is to harvest around 290,000 hectares of land in Ukraine and 40,000 hectares of land of newly acquired asset in Russia as well as to cultivate around 30,000 hectares of land in other agricultural operations.

Due to the favourable weather conditions in Ukraine, operational efficiency and employment of best practice, MHP expects yields across all crops to be good and significantly higher than Ukraine’s average.

The Company’s harvest of late crops (corn, sunflower and soybeans) is on track. So far, 41 per cent of corn, 98 per cent of sunflower and 94 per cent of soybeans have been harvested.

All crops yields are in line with MHP’s forecast for this year, which are higher than average in Ukraine.

The company's autumn sowing campaign of winter wheat, rapeseed and barley is almost complete. MHP is now presenting the results of wheat and rapeseed harvest from its land bank in Ukraine (excluding Voronezh Agro).