Faced with complex and continuous challenges as the war in Ukraine continues, MHP reported a loss of US$122 million for the first quarter of fiscal year 2022.
MHP had just passed the midway point of its first quarter when Russia invaded Ukraine on February 24. The quarter concluded on March 31, and the results were released on June 17.
The quarterly loss of $122 million represented a substantial change on a year-over-year basis, as the company reported a net profit of $1 million during the first quarter of 2021.
MHP estimates that $25 million worth of those losses were related to the war, and of that, community support donations represented 53%. Write-off of inventories and biological assets represented another 33%, while the company attributed the remaining 14% to “other war-related experiences.”
Export situation
In recent years, MHP has steadily seen its export sales increase, but since the war began, that trend ended. The company reported that as Black Sea ports remain blocked, it has been able to find alternative export routes. However, those alternative routes are “longer and significantly more complex.”
The company also reported it is experiencing bottlenecks involving numerous subcontractors along the way to European Union (EU) ports, complex logistics due to differing railway gauges, and long queues at the border.
Production and facilities
At the present time, MHP’s Ukrainian business is operating at about an 85% capacity.
War-related damage to facilities has been somewhat limited, with the greatest loss being the destruction of a leased storage facility and millions of dollars worth of chicken meat product contained in that facility. The company has also suspended operations of its bacon facility in the Donetsk region.
Staffing
Since the beginning of the war, 1,600 MHP employees have been mobilized to the armed forces or territorial defense forces. However, the company stated that to date, it “has been able to re-balance its resources and does not face difficulties in operations as of today.”
Grain operations
For the most recent quarter, MHP’s grain operations reached a revenue of US$35 million, a dramatic increase from the US$9 million recorded during the first quarter of 2021. That increase was largely attributed to the higher amount of crops in stock designated for sale as of the conclusion of 2021.
MHP also disclosed that since the conclusion of the first quarter, the company was able to complete its spring planting campaign on schedule, and early growing conditions have been good. The company has not significantly changed its crop rotation, prioritizing crops for fodder production. Any excess production will be exported, MHP stated.
