Export issues hit MHP Group’s poultry sales in Ukraine

A dip in exports by its domestic operation has adversely impacted Ukraine-based poultry company MHP Group in the first quarter of its financial year.

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A dip in exports by its domestic operation has adversely impacted Ukraine-based poultry company MHP Group in the first quarter of its financial year. Recently, military shelling of a warehouse in southern Ukraine resulted in significant losses of its poultry products. In contrast, production and sales were higher year-on-year for its European poultry operation based in the Balkans region.  

For the three months ending March 31, 2024, MHP SE (MHP Group) reported a 4% dip in overall revenue year-on-year at US$719 million. As a percentage of total revenue, exports increased by one percentage point to 63%, and a value of US$453 million.

Profitability was generally in line with the same quarter of the previous year. Operating profit was reported unchanged at US$84 million, while operating margin also rose one percentage point to 12%.

At US$119 million, adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was just US$3 million higher than in the first quarter of 2023. Adjusted EBITDA margin increased by one percentage point year-on-year to 17%. However, reported net profit of US$16 million was down sharply from the US$49 million for the comparable period. 

Early signs of recovery in Ukraine poultry sales

For MHP’s Poultry business in its home market, overall production for the January-March quarter was described as stable at around 178,500 metric tons (mt). For the same period of 2023, output amounted to just over 176,600mt.

Excluding tax, the group achieved a 6% year-on-year increase in average sales price at US$1.99 per kilo.  

For the three months, third-party sales by the company’s Ukrainian operation were down 10% year-on-year at just around 164,000mt. However, this was a 5% increase over the previous quarter, which MHP attributed to logistical disruptions in the flow of product to European Union (EU) countries, which reduced the group’s export sales. Overall, poultry meat exports by the Ukraine business were down 12% year-on-year at 98,055mt.

In April of this year, EU authorities finally reached agreement over a new trade deal between the bloc and Ukraine on agricultural products — despite opposition from some EU farming groups. MHP executives said that EU farmers’ anger over the previous deal had been rooted in misinformation and political involvement.

Meanwhile, MHP’s Processed Poultry Meat operations in Ukraine delivered a 19% increase in sales for the quarter just ended at 9,715mt, as a result of higher poultry meat production and further development of the sector.

Overall, higher average prices helped to offset the loss of export sales for the group in Ukraine, reducing the drop in revenue to 4% year-on-year.

Along with an increased valuation of the group’s biological assets, MHP reports that higher prices also contributed to improvements in gross profit and adjusted EBITDA for the January-March period compared with the same period of last year. 

Improved output, sales for European Operation

MHP’s European Operation is the former Perutnina Ptuj poultry company, based in the Balkans region.

At just under 34,000mt, production volume by this operation in the first quarter of 2024 was 7% higher than the corresponding period of last year. At EUR3.44 (US$3.74) per kilo, the average price was slightly lower than the EUR3.51 reported for the first three months of 2023.

Increased production of fresh and frozen poultry meat (parts, ground meat, and marinated products) was the main driver for a 16% year-on-year expansion of poultry meat sales to 21,102mt, according to the company report.

Comprising mainly sausages and convenience foods, the processed meat business expanded its output by 6% to around 11,400mt in the last quarter. Average price per kilo was as 2% higher year-on-year at EUR3.37.

For the three-month period, MHP’s European Operation delivered a 9% increase in revenue compared with the previous year at US$136 million, while adjusted EBITDA dipped by US$1 million to US$18 million. 

More on MHP Group

With annual production of around 697 million chickens, Ukraine-based MHP is the largest poultry company not only in its home market, but in Europe, according to WATTPoultry.com’s Top Poultry Companies survey.

For the last full financial year (ended December of 2023), MHP reported a 14% increase in revenue compared with the previous 12 months. At almost 397,000mt, exports by the Ukrainian operations were up 8% year-on-year from 2022.

The war in Ukraine continues to impact MHP’s operations, according to the company.

As its quarterly results were published, the company reported it was operating close to capacity. However, a warehouse partly leased by the company to store frozen chicken meat products was destroyed as the result of shelling by occupying forces in the Odesa region in mid-May. While none of its employees was injured, the firm lost poultry products worth US8 million.

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