Ukraine Markets Daily (January 25, 2017)

Market news

  • MHP reported a slight worsening of operating results for 2017

Market comment

The UX index decreased by 0.8% yesterday while the PFTS index remained unchanged (in UAH terms). The WIG-Ukraine index increased by 1.3%. On the interbank exchange market, the USD/UAH remained unchanged at UAH 28.80 (mid price), according to Thomson Reuters. The official exchange rate reported by the NBU was UAH 28.86.

 

MHP reported a slight worsening of operating results for 2017

According to the Company’s report, for the twelve months ended December 31, 2017, its poultry production reduced by 8.1 kt (-1.4% y/y) to 566.2 kt. Total poultry sales decreased by 1.6 kt (-0.3% y/y) to 532.7 kt, in particular sales on the local market dropped by 32.4 kt (-9.4% y/y) to 311.7 kt, while the export volumes grew by 30.8 kt (+16.2% y/y) to 221.0 kt. At this time, Company’s sales of sunflower oil decreased by 30.8 kt (-9.0% y/y) and of soybean oil by 6.9 kt (-20.1% y/y). During the fourth quarter of 2017, MHP produced 141.5 kt of poultry, which is 6.7 kt less (-4.5% y/y) than for the same period of the previous year. Poultry total sales reduced by 17.3 kt (-13.2% y/y) to 113.7 kt, particularly, sales on the local market decreased by 14.7 kt (-17.6% y/y) to 68.7 kt and the export sales dropped by 2.6 kt (-5.5% y/y) to 45.0 kt. Meanwhile, the sunflower oil sales reduced by 20.6 kt (-23.4% y/y) to 67.6 kt and the soybean oil sales decreased by 5.1 kt (-51.5% y/y) to 4.8 kt.

Our view:

The worsening of the MHP's operating results in Q4 2017 had the greatest impact on the Company's total results for 2017. It should be noted that the overall level of sales of poultry meat remained almost unchanged due to the increase in exports during the first half of the year. At the same time, the level of local consumption declined, which is most likely due to the increase in prices for poultry meat. The drop in oil exports turned out to be more significant, but it will not have a significant impact on the MHP's financial results since it is a way to hedge the Company's currency risks. Overall, operating results for 2017 were slightly worse than last year, despite this, we expect the MHP's financials to improve due to an increase in the share of exports, as well as a rise in the price of poultry meat.

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Research Team

EMPIRE STATE CAPITAL PARTNERS