June 21, 2022

Ukraine's MHP unable to provide outlook as war with Russia drags on

Ukrainian chicken and grains processor MHP has warned that it cannot give an outlook for the year due to the war with Russia and challenges exporting goods.

The company, which usually produces tens of thousands of tonnes of meat, wheat and vegetable oil every month, said poultry production capacity had been reduced to 80-85% of normal levels so far.

"I can't predict anything," MHP's chief financial officer Viktoria Kapelyushnaya said during a conference call. With Ukraine's Black Sea ports controlled by Russia, the company had to divert produce by road and air or to ports as far away as Romania, she said.

"Taking into account current working environment and uncertainties it brings, as of today, it is quite challenging to predict how the financial and operational results for the year of 2022 will look like," MHP earlier said in a statement.

MHP said poultry and vegetable oil prices are likely to remain high at least into 2023 due to global supply constraints and cost pressures amid the ongoing conflict.

"In addition, due to port closures, exports of poultry and vegetable oils were severely impacted," said the company, which supplies poultry products to 85 countries, including those in Europe and the Middle East.

Ukraine's economy has been battling multiple challenges ever since the start of the war, and with no end in sight for the conflict, businesses there are staring at an uncertain future.

Strong sales during the pre-conflict period meant MHP's first quarter revenue grew 24% to $553 million, while export revenue jumped 42% to $308 million. Still, higher costs pushed it to a first-quarter net loss of $122 million, compared to a profit of $1 million in the year-ago period.

MHP said it is focused on improving poultry sales in the domestic market, although it said its domestic gross margins were "significantly lower" than last year due to the various problems.

- Reuters