Diseases hit MHP’s poultry business

So far this year, two diseases — avian influenza and COVID-19 —have negatively impacted Ukraine-based agri-food group MHP SE.

Phongphan, Bigstockphoto.com
Phongphan, Bigstockphoto.com

So far this year, two diseases — avian influenza and COVID-19 — have negatively impacted Ukraine-based agrifood group MHP SE.

According to the MHP’s report of its second quarter (Q2) and first-half year (H1) results for 2020, an outbreak of H5N1 avian influenza in poultry in the Vinnytsia region of Ukraine earlier in the year led to the suspension of exports from Ukraine to the European Union (EU), Saudi Arabia, other Middle East and North African markets, and the Commonwealth of Independent States (CIS).

While the trade to all these destinations was restored by May, these hiatus have severely hit the firm’s Ukrainian poultry business. Following a decision by MHP management to cut production by 10% temporarily, its operations returned to full capacity in April.

In Q2, third-party sales of poultry by MHP were just under 171,000 metric tons (mt), which is 6% below the level of 12 months previously. At around 82,400 mt, the firm’s sales in Ukraine were down by 2% year-on-year in volume terms, while exports took a 9% hit for the period at just over 88,500 mt.

At 170,553 mt, a year-on-year reduction of 10% in export sales by MHP for H1 of 2020 has impacted total poultry sales by the group’s Ukrainian operation. Despite a 2% improvement in domestic trade, total overall poultry sales of 328,385 mt were 5% lower for the six months than in the same period of 2019.

Average prices achieved by the firm took a double-digit knock in Q2. Year-on-year reductions of 15-16% are recorded in both local currency (UAH) and the U.S. dollar. For the half-year, MHP received average prices that were 9% lower year-on-year in US-dollar terms, and 13% less in UAH.

MHP attributes this price erosion to changes in the product mix — with a marked drop in sales of fillets to the EU, and increased sales to the Middle East-North Africa region — as well as weaker fillet prices in the EU.

COVID-19 pandemic impacts MHP’s Ukrainian convenience food business

In Q2 of this year, MHP’s convenience food business was hit by the sudden halt in the fast-food sector arising from the coronavirus (COVID-19) pandemic. As a result of changes to the product mix, average prices were 5% lower year-on-year, and third-party sales were also down 1% at 4,361 mt. Comparing H1 figures, sales were 1% higher at 8,537 mt, at an average price just 2% lower.

At 8,607 mt, MHP’s sales of processed meats were 5% lower in Q2 than 12 months previously. A 6-percent improvement in average price was recorded year-on-year for both for the quarter, and half-year. H1 sales in this category were 1% lower at 16,522 mt.

Slovenia-based poultry business pursues production expansion policy

In Q2 of 2020, sales volume achieved by MHP’s poultry operation outside Ukraine — Perutnina Ptuj — amounted to 15,855mt. This was almost unchanged year-on-year, while the average price was 6% lower at EUR2.50 per kilo (net of tax). As a result of the firm’s strategies to grow poultry output and expand capacity utilization in Serbia and Croatia, its total poultry production (chicken and turkey meat) was 67% higher year-on-year at just over 26,100 mt for the same quarter.

At almost 8,300 mt for Q2, sales of the firm’s sausages and convenience foods was 2% lower than in the same period of 2019. Average price of these sales was marginally down at EUR2.69 per kilo. Production of these products over the period amounted to 10,708 mt.

In February of 2019, MHP completed its acquisition of Slovenia-based Perutnina Ptuj poultry company. As a result, H1 figures for 2020 cannot be compared directly with the previous year.

Update on MHP’s grain, oilseed operations in Ukraine

According to MHP, harvesting of winter crops from its total 365,000 hectares (901,000 acres) is proceeding as expected this year. Yields of rapeseed, barley, and wheat are in line with forecasts. Meanwhile, its corn (maize), soybeans, and sunflower are “in good condition,” the company reports.

Over Q2 of 2020, lower use of sunflower meal in animal feeds reduced the MHP’s sunflower oil production by 5% year-on-year. Changes to business conditions in H1 led to export sales falling by 12%.

In contrast, soybean oil exports were up 19% for H1 compared with a year earlier, despite reductions in soybean meal inclusion in livestock diets, and third-party sales.

MHP notes that it regards its exports of vegetable oils as a “natural hedge,” by which it can accumulate additional hard currency revenues, and protect against volatility of the local currency.

MHP poultry: genetics, production systems

In its Ukraine operations, 72% of its broilers are Cobb 500 birds, according to the firm’s recently published report on non-financial results in 2019. Ross 308 make up the balance in its local production. Of the almost 428.3 million chicks place last year, the mortality rate was 4.2%. Total slaughterings amounted to just under 410.38 million birds, or 1.003.5 million metric tons of liveweight.

At the company’s European Operating Segment — Perutnina Ptuj — the use of genetic lines is reversed, with 78% Ross 308 birds used in 2019, and 22% Cobb 500. During 2019, the operation slaughtered more than 49.6 million chickens with a total liveweight of over 112,900mt. At 4.1%, the mortality rate was unchanged from the previous year. Its turkey farms used equal numbers of BUT Big 6 and Converters.

Within Ukraine, all MHP broilers are housed in sheds, using floor systems. Around 18% of the facilities at Perutnina Ptuj and its contract growers allow the birds access to a covered and fenced outdoor area with litter for dustbathing, and other environmental enrichments.

Antibiotic reduction policy

Antibiotic use at MHP facilities is minimized, and follows veterinary investigation and guidance, the firm reports. Overall in 2019, 15% of the company’s poultry flocks were reared without antibiotics.

In May of this year, independent audits revealed that no antibiotics had been used at MHP’s parent stock and broiler facilities at Vinnytsia and Myronivska. None of these medications had been applied in water, feed, meat, or in egg hatching. As a result of the findings, the firm can use the “Class A” certification from the Poultry Union of the Ukraine for its products from these sites. MHP now plans to apply for this certification for its Oril-Leader site.

As part of its commitment to continued reduction in antibiotic use, MHP has set targets for this measure to rise to 30% this year, 50% in 2021, and 80% by 2023. Use of probiotics and organic acids by its business outside Ukraine will help the group to achieve these targets, according to MHP.

More on MHP

MHP (formerly Myronivsky Hlibroproduct) is among the Top 10 poultry companies in Europe, according to the WATT Ag Net database.

For the first quarter of 2020, the group recorded a 2% increase in sales revenue, despite a drop in exports resulting from the avian influenza outbreak in Ukraine.

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