MHP may see mixed impacts from Ukrainian crisis

By Vladislav Vorotnikov

- Last updated on GMT

Related tags European union Livestock Poultry

MHP faces uncertain future in face of Ukrainian crisis
MHP faces uncertain future in face of Ukrainian crisis
The ongoing political crisis in the Ukraine has left one of the country’s largest poultry producers facing an uncertain future.

During 2013, MHP produced 472,800t of poultry meat, 17% up on the previous year, with sales up by 19%. As well as improving its position within the domestic market, the company also reported an increase in exports.

However, with the current crisis, market watchers said this year looked uncertain for MHP, although some suggested the company might benefit from the situation, which could allow it to increase exports to the European market – President of the European Commission, José Manuel Barroso, recently said the European Union (EU) could cancel import duties for Ukrainian goods.

"If that happens, than agricultural producers will feel the effects first, as the abolition of protective duties would give strong impetus to the development of the sector,"​ said Vladimir Klimenko, CEO of the Ukrainian Grain Association. According to various estimates, Ukrainian producers pay about €380m in export duties to the EU.

"Chicken producers are ready to increase exports to Europe on a virtually unlimited scale,"​ said Oleksandr Bakumenko, chairman of the Association of Poultry Breeders of Ukraine. "The capacity of Ukraine poultry producers greatly exceeds the demand of the internal market."

Initial forecasts predict that Ukraine may increase poultry exports to 200,000t in the next two to three years.

In addition, the crisis may benefit MHP as it affects the country’s currency – the hryvnia. "The weakening of the hryvnia will be positive for large Ukrainian export-oriented producers, as most of their revenues are denominated in US dollars,"​ said Moody’s analyst Catherine Lipatov.

Crimean issue

However, MHP still may face some difficulties, in particular because of the Crimea crisis as it owns two assets on the peninsula – the meat-processing plant Friendship of Peoples and poultry farm Friendship of Peoples Nova.

An MHP spokesman said that at the moment all holding companies were operating as normal.

"We are in constant contact with our facilities; everything is fine, there are no problems with importing chickens in Crimea and sending finished food products to the main part of Ukraine,"​ said Anastasia Sobotyuk, head of investor relations and media at MHP. The company did not comment on possible business registration changes if Crimea becomes an independent state or part of Russia.

It is still not clear how this would affect the company. In both scenarios, Crimea would create a border with Ukraine and all goods would be a subject to export and import custom duties.


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