Mhp Reg S Regulatory News (MHPC)

13 Nov 2008 07:00



PRESS RELEASE

November 13, 2008, Kyiv, Ukraine 

MHP S.A.Pre-close trading update for the first nine months of 2008 ended 30 September 2008

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 first nine months of 2008 ended 30 September 2008. Financial results for Q3 2008 and the first nine months of 2008 will be announced on December 16, 2008.

Poultry and Poultry Related Operations

During the third quarter of 2008, the volume of chicken meat sales to external consumers increased by 18% to 52,000 tonnes when compared to the third quarter of 2007, and by 37% to 162,000 tonnes during the first nine months of 2008. 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. During the first nine months of 2008, consumer demand for chicken meat remained high and all the Company's poultry production facilities continued to operate to their full production capacity. 

Average chicken meat price through the third quarter of 2008 increased by 48% to 13.04 UAH per kg. of adjusted weight (excluding VAT) when compared to third quarter of 2007, and though the first nine months of 2008 it increased by 53% to 12.17 UAH per kg. when compared to the first nine months of 2007. 

MHP's production costs per 1 kg. of poultry meat during the first nine months of 2008 remained at the same level as the end of 2007 due to the high level of the Company's vertical integration.

Grain Cultivation and Storage 

The Company currently has about 180,000 hectares of land under control.

As of today the company has finished sunflower harvesting and from 11,900 hectares 33,575 tonnes were harvested. Sun flower yield averaged 2.8 tonnes per hectare, which is 87% higher than Ukraine's average yield of 1.5 tonnes per hectare. The Company will use 100% of its sun flower yield to produce protein for fodders. 

The Company continues corn harvesting and the current yield is averaging 7.3 tonnes per hectare. 

The Company's yields across all crops are on average 70% higher than Ukraine's average yields due to MHP's efficient land cultivation, usage of modern foreign agricultural equipment and good management.

The Company expects that the grain segment's profits will be below expectations due to the record low price of corn in Ukraine. Lower than expected corn prices will lead to profit redistribution from the grain cultivation segment to the poultry and poultry related operations segment. Profits will also be distributed from the 2008 year end results to the 2009 year end results, as most of the 2008 corn harvest will be consumed by the Company's poultry segment during 2009. 

In general, MHP's business is not dependable on market corn prices due to a high level of integration between the two main business segments and the fact that 100% of the Company's corn yield is used to produce fodder for the poultry segment.

Other Agricultural Operations

Throughout the first nine months of 2008 sausage and cooked meat production volumes increased by 108% to 10,800 thousand tonnes compared to 5,200 thousand tonnes during the first nine months of 2007. Approximately 40% of this growth was due to the acquisition of the new meat processing facilities of "Ukrainian Bacon" in July 2008. As of today, average production volumes of Ukrainian Bacon reached 45 tonnes of meat products per day. Q3 2008 sausage and cooked meat production volumes increased by 143% to 5,330 thousand tonnes compared to 2,190 thousand tonnes during the Q3 2007.

Average sausage and cooked meat prices during the first nine months of 2008 increased by 20% to 18.76 UAH per kg. excluding VAT (first nine months of 2007: 15.67 UAH per kg.). Due to the fact that "Ukrainian Bacon" produces sausages and cooked meat products in mass segment the growth of the segment's prices in Q3 2008 was below the level of H1 2008 and reached 10% with average price reached 17.57 UAH per kg. excluding VAT (Q3 2007: 16.13 UAH per kg.). 

Tax Regime

On October 31, 2008 The Verkhovna Rada of Ukraine adopted the Law #639-VI "On Immediate Measures to be taken to prevent Negative Consequences of Financial Crisis". In accordance with this law certain tax rules and policies for agricultural producers were amended, these include:

extending VAT payments benefits; and

rescinding the date of term for the fixed agricultural tax (previously this tax exemption was effective until 31 December 2009).

The adopted law does not restrict the duration of VAT and profit tax benefits regimes for agricultural producers and the new law will be effective until January 1, 2011.

Debt and Liquidity

As on September 30, 2008 the Company's total debt was US $500 million, with most of this debt being denominated in US dollars. US$ 250 million of the debt is in Eurobonds, which are not redeemable until November 2011. During the next nine months the Company will only have to refinance approximately US $20 million.

On September 30, 2008 the Company's cash reserves were US $109 million, approximately $83 million of which is in US dollars. As a hedge for currency risks the Company uses sales revenue from sunflower oil exports, this fully covers debt service expenses and the majority of other currency expenses. 

Commenting on the trading update, Yuriy Kosyuk, Chief Executive Officer, of MHP, said:

"We are satisfied with the strong performance so far in 2008 and we are confident that the financial results for the period will be in line with expectations. Our poultry division has significant potential for further growth as poultry meat remains the cheapest source of animal protein at approximately half the level of beef and pork. Our high level of vertical integration, effective agricultural technologies, significant land bank and solid capital structure makes us confident that MHP will continue to outperform".

MHP's financial results for Q3 2008 and the first nine months of 2008 will be published on December 16th, 2008 and the conference for investors and analysts will take place at 4.00 pm Kyiv time (2 pm London/5 pm Moscow) the same day. Dialing instructions for the call will be published in a due course.

For further information please contact:

For investor relations enquiries

Iryna Bublyk (MHP)

ir@mirohleb.kiev.ua