Ukrproduct Regulatory News (UKR)

4 Oct 2005 18:09

Ukrproduct Group Ltd04 October 2005 4 October 2005 Ukrproduct Group announces the offer to acquire Jhmerinka Butter & Cheese Plant Ltd and Letichiv Dairy Plant Ukrproduct Group ('UPG') is pleased to announce the offer to acquire 100% of thecapital of the Jhmerinka Butter & Cheese Plant Ltd and a 62% stake in theLetichiv Dairy Plant for a total cash consideration of £1.3 million. The offeris being financed through the funds raised at the Group's admission to AIM inFebruary 2005. Completion of both deals is expected in the next four weeks. The offer to acquire both plants is in line with UPG's strategy of developingits market-leading position in its two core segments of processed cheese andpackaged butter, increasing its presence domestically in what is a fragmentedmarket, expanding the product offering of the Group and reacting quickly toopportunities as they arise. The dairy-based food market continues to be adirect beneficiary of the sustained rise of consumer affluence in Ukraine,especially in the shift towards the consumption of packaged quality products. The acquisitions of the Jhmerinka Butter & Cheese Plant and Letichiv Dairy Plantwill provide UPG with the necessary increase in production and raw materialcapacity to meet rising consumer demand. The transactions will also expand thegeographic coverage of the Group, provide complementary products to the Group'sexisting product ranges and extend the Group's raw milk supply zone. TheDirectors of UPG believe that the operating performance of both plants can besignificantly improved through the introduction of improved cost controls,leveraging of the distribution network and optimisation of the product mix. The Jhmerinka plant, located in the region of Vinnitza, produces a range ofregional, well established processed cheeses and butters. According to theofficial data of the Ukrainian State Committee of Statistics, it was the twelfthlargest manufacturer of processed cheese in Ukraine, having produced 1,012tonnes in the year to 31 December 2004. The plant is also the region's leadingsupplier of packaged butter, selling over 1,000 tonnes per annum. The managementof Ukrproduct Group estimates that the plant will add 2.4 percentage points toUPG's current domestic market share of 30% in the processed cheese segment. Inthe year ended 31 December 2004 the plant reported sales and assets totalling£4.8 million and £1.2 million respectively. The Operating profit of the plantwas £74,000. The Letichiv plant, located in Ukrainian region of Khlmelnitski, producesvarious dairy-based products such as cream, butter and casein* with the capacityto collect up to 100 tonnes of raw milk per day. The acquisition of the plantexpands UPG's raw milk zone in the region, which is central for ensuring thecontinued supply of raw materials needed for the increase in production at theGroup's Starkon plant. The plant also provides UPG with the option to develophard cheese. The acquisition will also provide UPG with the opportunity tooptimise the product mix in order to react better to the seasonal demand for itsproducts. In the year ended 31 December 2004, the plant had sales of £1.25million and assets of £0.3 million. The operating profit of the plant was£154,000. Commenting on the offer, Sergey Evlanchik, CEO of Ukrproduct Group, said, "I am delighted to announce the offer to acquire Jhmerinka and Letichiv, ourfirst acquisitions as a public company. The plants provide a complementary fitin terms of products and operational capabilities as well as the necessarycapacity and raw materials to expand production of the Group's core segments.Both acquisitions are low-risk operating purchases that are reasonably pricedand well-capitalised. I expect only a limited capex requirement for bothcompanies. These acquisitions further strengthen UPG's position in capturing therising consumer demand for quality, branded dairy based products. Going forward,UPG will continue to look for opportunities that enhance the overall strengthand future growth of the business, but most importantly shareholder value." *Casein is a protein that is precipitated from milk by the action of rennin,forming the basis of cheese. For further information: Ukrproduct Group +38 044 502 8014Sergey Evlanchik, CEO, and Dmitry Dragun, CFO Financial Dynamics +44 20 7831 3113Ben Foster/ Charles Watenphul This information is provided by RNS The company news service from the London Stock Exchange