Mhp Reg S Regulatory News (MHPC)

14 Oct 2009 07:00



PRESS RELEASE

October 14 2009, Kyiv, Ukraine 

MHP S.A.Pre-close trading update 

(Covering the nine months to 30 September 2009)

MHP S.A. (LSE: MHPC) ("MHP" or "The Company"), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, is pleased to announce today its pre-close trading update for the nine months to 30 September 2009. Financial results for Q3 2009 and the nine months to 30 September 2009 will be announced on November 19, 2009.

Poultry and Poultry Related Operations

In line with the management's stated plans, phase two of the Myronivka poultry farm, the Company's new state of the art production facility that launched in June 2009, reached full capacity during the third quarter. The combined production capacity of phases one and two of the Myronivka poultry farm is approximately 200,000 tonnes, making it the one of the largest poultry facilities in Europe.

During the third quarter of 2009, the volume of chicken meat sales to external consumers increased by 47% to 76,600 tonnes when compared to the third quarter of 2008, and by 19% to 192,900 tonnes during the first nine months of 2009. This increase was driven primarily by the launch of production at Myronivka phase two. Demand for chicken meat during the first nine months of the year remained high and the Company was able to sell close to 100% of the chicken produced.  

The average chicken meat price through the third quarter of 2009 decreased slightly by 4% to 12.53 UAH per kg of adjusted weight (excluding VAT) when compared to the third quarter of 2008. This decrease was driven by low chicken meat prices in July 2009. However, since August 2009 average chicken meat prices have increased and are currently higher than during the same period last year. 

Through the nine months of 2009 average chicken prices increased by 7% to 12.97 UAH per kg (9M 2008: 12.16 UAH per kg). 

MHP's production costs per 1 kg of poultry meat during the first nine months of 2009 were slightly lower than in the period of 2008 in UAH due to the use of self-produced sunflower protein and corn in chicken fodder. This decrease in the cost of production was despite an overall increase in utility prices. 

The new sunflower crushing plant, launched in September 2009, allowed MHP to increase its sunflower oil production volumes by 10% in Q3 2009. When the new plant reaches its full capacity, the Company's sunflower processing capacity will increase by 50%. The new sunflower crushing plant will enable the Company to meet the increased demand for protein required for the production of fodder following the launch of the second phase of the Myronivka poultry farm. 

Grain Growing Operations

MHP is on course to produce a good harvest for the year and despite Ukraine overall producing a high yield of crops, MHP's yield of crops per hectare will be significantly higher than Ukraine's average.

The Company currently has approximately 180,000 hectares of land under control, including 155,000 hectares in the Grain Growing segment and an additional 25,000 in the Other Agricultural Operations segment. 

As of today the Company has finished rapeseed harvesting and from 14,400 hectares 38,400 tonnes were harvested. Rapeseed yields averaged 2.7 tonnes per hectare compared to Ukraine averaging 1.9 tonnes per hectare (Ukrainian Statistics Committee).

The Company has now completed its wheat harvest and from 35,580 hectares of land 208,300 tonnes were harvested. Wheat yields averaged 5.9 tonnes per hectare compared to Ukraine's average of 3.0 tonnes per hectare (AgroPerspectiva). 

As of today the Company has completed 98% of its sunflower harvest. Sunflower yields averaged 3.1 tonnes per hectare (2008: 2.8 tonnes per hectare) compared to Ukraine's average of 1.5 tonnes per hectare (APK-inform estimation). The Company will use its entire sunflower yield to produce protein for fodder.

The Company's corn harvest is ongoing and as of today 40% of it is completed. The current net yield is averaging 8.5 tonnes per hectare (2008: 7.3 tonnes per hectare) compared to Ukraine's average of 4.7 tonnes per hectare as of October 9, 2009 (AgroPerspectiva).

The Company has concluded a forward export contract for the sale of almost all its rapeseed yield and approximately 50% of its wheat yield. MHP's export grain sales are an additional source of foreign currency income. 

Other Agricultural Operations

Through the third quarter of 2009, sausage and cooked meat production volumes increased by 40% to 7,400 tonnes compared to 5,300 tonnes during the third quarter of 2008. During the first nine months of 2009 sausage and cooked meat production volumes increased by 72% to 18,200 tonnes (9M 2008: 10,600 tonnes). This substantial volume growth was due primarily to the acquisition of "Ukrainian Bacon" in July 2008.

Average sausage and cooked meat prices during the third quarter of 2009 decreased by 3% to 17.22 UAH per kg. excluding VAT (Q3 2008: 17.69 UAH) and through the first nine months of 2009 decreased by 7% to 17.36 UAH per kg. excluding VAT (9M 2008: 18.75 UAH per kg).

The decrease in average prices was due to "Ukrainian Bacon" producing sausage and cooked meat products in the mass segment, as well as the Company shifting its total product portfolio mix towards low price products in accordance with consumer demand.

Outlook 

The launch of the Myronivka poultry farm has allowed MHP to significantly increase its poultry production capacity. This year the Company will produce 24% more poultry than last year (2008: 225,000 tonnes, 2009: 280,000 tonnes) and 2010 will see total poultry production capacity rise to 330,000 tonnes.

MHP's high level of vertical integration, effective land cultivation and growing meat processing volumes, along with the strong demand in Ukraine for poultry meat, all mean that the Company is well positioned to achieve a good set of financial results for the period. 

The financial results for the nine months of 2009 will be published on November 19, 2009.  There will be a conference call for investors and analysts on the day that will take place at 4pm Kyiv time (2 pm London/5 pm Moscow). Dialing instructions for the call will be published in a due course.

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Notes to Editors:

About MHP

MHP was admitted to the Official List of the London Stock Exchange in May 2008. It is the leading producer of poultry products in Ukraine, with a 2008 market share for industrially produced chicken meat of approximately 39%, according to the State Committee on Statistics of Ukraine. It's "Nasha Ryaba" brand is the market leader, whilst MHP also has several other national and regional brands for processed meat products.

MHP is fully vertically integrated owning and operating each of the key stages of chicken production processes, from feed grains and fodder 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 bio-security and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale.

MHP also has an important and expanding grain operation, producing and selling sunflower oil as a by-product of its fodder production. MHP also produces and sells beef, sausages, cooked meats convenience food products, goose meat, foie gras and fruit.