Last checked at 15 Aug 2008 07:00
PRESS RELEASE
15 August 2008, Kyiv, Ukraine
MHP S.A. Pre-close trading update
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, today announces its pre-close trading update for the first six months of 2008 ending 30 June 2008.
Poultry and Related Operations.
During the first half of 2008, all the Company's poultry production facilities continued to operate to their full production capacity. Sales of chicken meat increased by 50% to 110,000 tonnes when compared to the first half of 2007. This was primarily due to the launch of the first phase of the Myronivka chicken farm complex in the middle of 2007, which reached its full production capacity in October 2007.
Average chicken meat prices for the first six months of 2008 increased by 58% to 11.75 UAH per kilogramme (excluding VAT) when compared to the first half of 2007.
During the first six months of 2008 average production costs per 1 kilogramme of poultry meat in adjusted weight remained at the same level as at the end of 2007 due to the Company being fully vertically integrated.
On 6 August 2008 the Ukrainian Cabinet of Ministers approved an increase in state subsidies by an average of 50% per 1 kilogramme of produced meat in live weight for agricultural producers that breed poultry, pork and cattle. As from 1 August 2008, financial support for bred and slaughtered cattle and poultry will be granted in the following amounts - 1.00 UAH (as compared with 0.65 UAH) per kilogramme of chicken; 2.90 UAN (as compared with 1.90 UAH before 1 August 2008) per kilogramme of beef produced; 2.20 UAN (as compared with 1.45 UAH) per kilogramme of pork produced. The Cabinet of Ministers' decision was a consequence of the reduction in the number of cattle and pig livestock during the first half of the year as a result of significant grain price increases since 2007.
Management expects that due to increases in state subsidies poultry market prices will remain stable during the second half of the year.
Grain Cultivation
The company currently has over 150,000 hectares of land under cultivation.
In 2008 cultivated land cropped with wheat increased by 60% to 32,500 hectares and land cropped with rape increased by 130% to 14,000 hectares. As of today the Company's rape harvest has ended and it is close to finishing its wheat harvest. Based on management's preliminary estimates, wheat yield was averaging 6.3 tonnes per hectare (2007: 3.9 tonnes per hectare) and rape yield was averaging 3.5 tonnes per hectare (2007: 1.9 tonnes per hectare).
Rape price in the first six months of 2008 increased by 40% to 2,415 UAH per tonne, excluding VAT (2007: 1,737 UAH per tonne). As of today the company has sold 90% of its rape yield.
As most of the wheat that MHP produces is food wheat, the Company expects that wheat sale prices will be higher in 2008 than they were in 2007.
Other Agricultural Operations
During the first six months of 2008 sausage and cooked meat production volumes increased by 81% to 5,300 tonnes, mostly due organic growth. Consumer demand for high quality meat products still exceeds the Company's production capacity.
As MHP set out at the time of its Initial Public Offering, its strategy is to continue agro-industrial diversification through further development and expansion of its meat processing facilities. As part of that strategy, on 8 July 2008 the Company announced that it had acquired an 80% stake in Private Enterprise "Ukrainian Bacon", a private Ukrainian meat production company with a production capacity of 50 tonnes of meat products per day and production potential of 200 tonnes per day. Currently "Ukrainian Bacon" produces sausages and cooked meats products in the mass segment market.
Average sausage and cooked meat prices during the first six month of 2008 increased by 30% to 19.80 UAH per kilogramme excluding VAT (first six month of 2007: 15.33 UAH per kilogramme).
The Company is satisfied with its operating results for the fist six month of 2008 and confident that financial results for the period will be in line with expectations.
Financial results for the first six month of 2008 will be published on 17 September 2008 and there will be a conference call for investors and analysts at 4.00 pm Kyiv time (2 pm London/5 pm Moscow) on the day. Dial in details will be published in a due course.
For further information please contact:
| Financial Dynamics Ben Foster (London) Marc Cohen (London) Leonid Solovyev (Moscow) | London: +44 20 7831 3113 Moscow: +7 495 795 06 23 |
For investor relations enquiries
ir@mirohleb.kiev.ua