The decrease has occurred alongside a change in the firm’s export structure, as deliveries to the Commonwealth of Independent States (CIS), in particular, are falling "due to devaluation processes" in the post-Soviet Union bloc countries.
As noted in the report, the armed conflict in the Middle East was a major reason for the reduction in exports. MHP supplies poultry to 50 different countries, including Iraq, Libya, Syria and Yemen, which are currently affected by instability and armed conflict. However, the company has managed to increase exports to countries in the European Union (EU).
Total sales in Q1 2015 increased by 2% to 140,370t, while sales to third parties remained at similar levels to last year – at 113,640t. The company has mitigated the impact of the decrease in exports with increased sales on the domestic market, which rose 7% in the first three months of the year.
According to the head of MHP’s export department Sergey Gorbenko, for a long time exports to the Middle East, North Africa and Asia were a rapidly developing segment of growth for the company and, in 2014, accounted for 38% of all chicken meat that MHP supplies abroad, or 53,000t, with the overall export figure standing at 142,920t. The plans for 2015 are to bring that figure to 39%, so given the overall growth in exports it should total 60,000t.
Developing trade with Middle Eastern countries still remains one of the main priorities of the Ukraine authorities. Approved on 11 December 2014, by Verkhovna Rada, the ‘New Economic Policy’ envisages that, by 2018, the country should sign a free trade zone agreement with the Gulf Cooperation Council, which includes Bahrain, Qatar, Saudi Arabia, Kuwait, the United Arab Emirates and Oman. It is anticipated that this measure would enable Ukraine exporters to double the volume of supplies to those countries by 2020.
Meanwhile, the company is still enjoying rising demand on the domestic market and believes it can further increase exports this year. MHP CFO Victoria Kapelyushnaya announced earlier this year that the company’s capital investments will amount to US$150-$170 million.
"The company’s capital investment program for 2015 allows for the establishment of a new parent stock business at the ‘Peremoga Nova’ poultry farm and the construction of additional facilities at the Starinskaya poultry farm, which will enable the company to gradually reduce the import of hatching eggs in 2015 by 20% and fully abandon it in future," she stated.
MHP plans to invest US$15m in the modernisation of the factory. The company also plans to expand the Mironovskaya and Orel-leader poultry farms this year.
"Also in 2015, MHP will put into operation a plant for processing soybeans, which will start up in September this year. It is expected that this business will provide MHP with additional export revenues from the sales of soybean oil, as well as greater cost control in the poultry production segment," Kapelyushnaya added.