OREANDA-NEWS. February 01, 2011. MHP S.A. (LSE: MHPC) (“MHP” or “The Company”), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, announces its pre-close trading update for Q4 2010 and the full year ended 31 December2010.

Despite Ukraine's total poultry production volumes in 2010 only increasing 9% (Source: Association of Poultry Producers of Ukraine), MHP 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.

 

Q4

Q4

%

FY

FY

%

Sunflower oil

2010

2009

change

2010

2009

change

Sales volume, third parties

 

 

 

 

 

 

tonnes

46,200

49,150

-6%

195,800

140,400

39%

Price per 1 tonne net VAT, USD

1,173

770

52%

919

721

27%

Following a year of full capacity operation of MHP's Katerynopilsky sunflower crushing plant, 195,800 tonnes of sunflower oil was produced in the full year 2010, compared to 140,400 tonnes in the full year 2009, an increase of 39%. All of the sunflower oil produced was sold to external customers at an average price of USD 919 per tonne which was an increase of 27% on the 2009 average of USD  721, in line with world pricing trends.

In Q4 2010, 46,200 tonnes were produced and sold for export at an average price of USD  1,173 per tonne (Q4 2009: USD  770). The increase in both sales volumes and price resulted in the growth of foreign currency income from export sales of sunflower oil, accounting in 2010 for USD  180 million (compared to USD  100 million in 2009).

Grain Cultivation

During 2010 the Company continued to execute its stated strategy of gradually increasing its land bank and at the end of the period it had more than 280,000 hectares of land under control. At the same time, in 2010 the bulk of the Company's harvest will be generated from land that was under the Company's control at the beginning of the year (total land bank as on December 31, 2009: 180,000 hectares, including 150,000 hectares in Grain Growing segment).

MHP's 2010 harvest was lower yielding than 2009 due to adverse weather conditions, but still significantly higher than Ukraine's average per hectare. The lower yields in Eastern Europe also effected price increases resulting in increased profitability per hectare for MHP compared to 2009.

 

control as of 01.01.2010)

 

 

 

Production,

Cropped

Production,

Cropped

 

tonnes

hectares*

tonnes

hectares*

Corn

492,642

63,165

432,603

48,540

Wheat

183,785

39,360

208,002

35,529

Sunflower

65,455

25,630

79,845

24,002

Rapeseed

9,010

3,020

38,618

14,423

Other**

162,166

15,442

201,412

24,757

Total:

913,058

146,617

960,480

147,313

* - Actual hectares under crop and excluding land left fallow as part of crop rotation

** - Includes soybean, barley and sugar beet

Other Agricultural Operations Meat processing products

Q4 2010

Q4 2009

%

change

FY 2010

FY 2009

%

change

Sales volume, third parties

 

 

 

 

 

 

tonnes

8,800

6,400

38%

32,900

24,650

33%

Price per 1 kg net VAT, UAH

18.52

17.24

7%

17.59

17.33

2%

Following further expansion of Ukrainian Bacon facility production of sausage and cooked meat volumes increased by 33% to 32,900 tonnes in 2010 compared to 24,650 tonnes in 2009. Q4 2010 sausage and cooked meat production volumes increased by 38% to 8,800 tonnes compared to 6,400 tonnes during Q4 2009.

Average sausage and cooked meat prices during 2010 increased by 2.0% to UAH 17.59 per kg excluding VAT (FY 2009: UAH 17.33 per kg.). The average price in Q4 2010 increased 7% to 18.52 UAH per kg compared to UAH 17.24 per kg in Q4 2009. MHP is a market leader in meat processing in Ukraine and management expects further increases in its market share.

The exact date for the financial results for Q4 2010 and full year 2010 will be confirmed in a due course.