Worsening financial performance for Ukraine’s largest poultry processor

At MHP, 9,400,000 heads are slaughtered per week. Photo: Canva

Ukraine’s largest poultry processor, MHP, saw its net profit plummet nearly threefold due to the devaluation of the hryvnia and a surge in conflict-related costs.

During the first quarter of 2024, MHP generated a net profit of US$16 million compared with US$49 million in the previous year, the company said in its quarterly report.

The decline was primarily attributed to a sharp devaluation in Ukraine’s local currency, the hryvnia, resulting in a foreign exchange loss of US$40 million compared to a modest profit of US$4 million in the first quarter of 2023, the company said.

The hryvnia has consistently lost value over the last year. At the end of May 2024, the National Bank of Ukraine raised the official dollar exchange rate above 40 hryvnias – a historic high – for the first time. In May 2023, the rate was close to 36 hryvnias per dollar.

A toll of hostilities

“War continues to have a major impact on company operations,” MHP said, citing the continuing drone and rocket attacks and power outages as key challenges. “We have made arrangements for electricity outages and have alternatives ready to replace the supply from the national energy network that remains under constant threat of bombardment,” the company said.

Air strikes in recent months have left the country with less than half of its electricity generation capacity, leading to daily power outages of 10 hours or more, government officials estimated.

MHP also reported that due to the shelling of the Odessa 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 US$8 million. As a result, the company suffered US$10 million of war-related costs in the first quarter of 2024, MHP calculated.

“Taking into account the war operational environment, we can give no assurance that this will not occur in the future and that our production facilities and the infrastructure that we use will not become a target of new attacks,” the company said.

No dividends

In view of continuing war-related uncertainties and the resulting need to preserve liquidity to support the company’s ongoing business operations, MHP’s management decided not to declare a final dividend for the 2023 financial year. No interim dividend has been declared for the 3-month period ending 31 March 2024, the company said.

In 2023, MHP generated a net profit of US$142 million, compared to a net loss of US$231 million a year earlier.