Ukraine’s MHP sees a drop in net profits in 2024

During the first 6 months of 2024, the largest Ukrainian poultry processor, MHP, earned a net profit of US$45 million, which is 33% less than in previous years. The financial performance is going south as mobilisation and other war-related challenges take a toll on operations.

As of today, over 3,000 MHP employees have been mobilised to the Armed Forces of Ukraine, MHP said. In 2023, MHP estimated its total workforce strength to be 30,000 employees, meaning roughly 10% of the workers were drafted.

Ongoing mobilisation and the resulting labour shortage are some of the key challenges Ukrainian businesses face today. A recent opinion poll conducted by the Ukrainian Economy Ministry indicated that workforce deficit was the most pressing issue for 60% of the 3,000 interviewed companies.

Mounting losses

over 3,000 MHP employees have been mobilised to the Armed Forces of Ukraine. Photo: MHP

Several other factors are putting pressure on operations. MHP indicated that irregular and frequent drone and rocket attacks against critical infrastructure have resulted in a challenging and disruptive operational environment, leading to “unforeseen war-related costs” estimated at US$26 million in the first half of 2024.

Remarkably, the cost associated with the ongoing hostilities doubled compared with the first half of 2023, when they totalled US$13 million.

Bracing for a blackout

“MHP continues to invest in alternative energy sources to mitigate operational disruptions caused by Russia’s targeting of Ukraine’s national grid and energy sector,” the company said.

If energy disruptions lead to a complete blackout in Ukraine, MHP will not be able to operate at full capacity, and its operations will face a significant increase in production costs, which will negatively impact financial results, the company added.

Ukraine’s largest power generation company, DTEK, forecasted that under an adverse scenario, a blackout during the winter could last for 20 hours per day.

Destroyed warehouse

MHP emphasised that all production facilities in Ukraine continue to operate at close to full capacity and none out of operational facilities of the MHP’s directly-owned assets have suffered significant physical damage from the recent Russian attacks.

“Unfortunately, as a result of shelling by the occupying forces on 17 May in Odesa region, a warehouse partly leased by the company to store frozen MHP chicken meat products was completely destroyed, resulting in the loss of poultry products worth around US$7 million,” MHP said.

“Considering the fast-moving nature of the war, MHP can give no concrete assurances that its production facilities and associated infrastructure will not be targeted or adversely affected in the future,” MHP admitted.