Ukraine-based agrifood group, MHP recorded a 2% increase in revenue for the last three months, despite a drop in exports resulting from an avian influenza outbreak in the region.
Totaling just over 82,000 metric tons (mt) for the first three months of this year, poultry meat exports were down 12% year-on-year, according to the latest quarterly report from MHP SE. As a result, export revenue for the first quarter of the year was US$31 million below the level for the same period of 2019 at US$237 million. As a percentage of total revenue, this was down at 54%. For the first quarter of 2019, the figure was 61%.
Reduction in exports was due to disease, reports MHP — to an outbreak of highly pathogenic avian influenza among poultry in the Vinnitsa region. This led to a temporary halt in the trade of poultry products from Ukraine to its key markets of the European Union, Saudi Arabia, and other Middle East and North African countries. Majority of these markets have since been restored.
In its unaudited results for the quarter, MHP reports a 6% fall in operating profit at US$47 million. As adjusted EBITDA margin increased by one percentage point year-on-year to 20%, adjusted EBITDA rose by US$7 million to US$90 million.
For the quarter, weakness of Ukraine’s hryvnia against the US dollar resulted in a US$182-million foreign exchange translation loss. This led to MHP reporting an overall net loss for the quarter of US$174 million. One year previously, the firm had reported a profit of US$33 million.
Prospects for 2020
Unlike many other meat companies, the coronavirus (COVID-19) pandemic had no significant impact on the firm’s business during the quarter reported. For the rest of this year, MHP is forecasting strong performance for its business.
Absenteeism of MHP workers has been at the same level as last year. Measures have been introduced to prevent the spread of infection within the company. At production facilities, work has been reorganizaed to reduce the number of people, and to limit contact time. The firm has a waiting list of potential workers to replace anyone who has been infected or quarantined.
Second quarter results are likely to be negatively affected by low prices. MHP expects the global market to be oversupplied, as global competitors drop prices to sell off the surplus production that resulted in the reduction in demand. The company reports that its business is in a good position to face these challenges.
First quarter poultry performance
At 178,640mt, MHP’s total poultry meat production for the quarter was 4% higher than in the same period of 2019. Output by its European Operating Segment was just short of 24,000mt. This compares with 7,730mt for the first quarter of last year. This significant jump results from the integration of the Perutnina Ptuj business. Acquired by MHP in February of 2019, Perutnina Ptuj is a poultry company with operations in four Balkan countries.
Average chicken meat price for the quarter was down 3% year-on-year at US$1.37/kg (excluding VAT). For the Balkans operations, the price averaged EUR2.56/kg, hardly changed from the same period of 2019.
Since its acquisition of Perutnina Ptuj, MHP (previously known as Myronivsky Hlibroproduct) has become the leading producer of poultry products not only in its home market of Ukraine, but also in the Balkans. Its business in Ukraine is fully integrated—from growing corn, soybeans and sunflower as feed ingredients, through feed milling and hatching to chicken rearing, processing, marketing, distribution, and sales. The firm also has its own truck fleet. From its production sites in Slovenia, Croatia, Serbia, and Bosnia Herzegovina, Perutnina Ptuj also operated a fully integrated business from feed production to further processed chicken products.
For the 2019 financial year, MHP reported total revenue of US$2.056 billion — 32% more than the previous year — and a gross profit margin of 19%.
With an annual slaughtering of 349 million broilers, MHP is in 8th position in the European rankings of WATTAgNet Top Broiler Producers.
