Ukraine: MHP increases poultry production by 20%

Despite Ukraine’s total poultry production volumes in 2010 only increasing 9%, MHP, the leading producer of poultry products in Ukraine, increased its poultry productions volumes by more than 20%, thereby significantly outperforming the market.

During the fourth quarter of 2010 the volume of chicken meat sales to third parties increased by 2% compared to the fourth quarter of 2009, reaching 81,900 tonnes. Full year volumes increased by 21% to 331,400 tonnes.

The volume growth was primarily a result of the phase two of the Myronivka poultry farm operating at full capacity full year. All the Company’s existing poultry production facilities operated at their full production capacity during the year.

The price of all kinds of meat has increased in both Ukraine and the wider world as a result of the increased cost of grain. Chicken meat prices were less affected by the grain prices growth due to better fodder conversion ratio compared to other meats. As a result, during the year, consumer demand for chicken remained high and consumers continued to substitute other meats with locally produced chicken. As a result, the Company was able to sell close to 100% of the chicken produced.

Average chicken meat sales prices to third parties in Q4 2010 increased by 16 % to UAH 14.35 per kg. of adjusted weight (excluding VAT) when compared to the fourth quarter of 2009. For the full year 2010 prices increased by 7% to UAH 13.65 per kg against 2009.

Poultry production costs in Q4 2010 rose slightly in UAH compared to Q4 2009 due to the increase of the price of corn on the open market, which the Company uses to calculate its costs.

However, as MHP is 100% self sufficient in corn and has a high level of vertical integration, these higher prices in Q4 2010 will have a positive effect on the financial performance of the Company’s Grain Growing segment.

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