“The main problem for the company is the loss of sales, due to the ban on imported products to the Donetsk and Lugansk Oblasts, which is our base region, where we have maximum presence with our own line of products,” said company CEO Roman Raspopov.
Ukraine’s government has officially banned any food trade with self-proclaimed republics in the east of the country, so agricultural holdings have been unable to sell their products there. Given the situation, APK-Invest has temporarily stopped development of its retail chain and has closed 76 specialised meat stores in the region.
“Armed conflict has also resulted in damage to the centralised water supply system at the company’s pig farms and production units,” said Raspopov. “This means the company has to import water from neighbouring regions, spending 10 times more to do so, which caused losses of UAH34m (US$1.6m).”
Water supply problem
The water supply problem is a major threat to APK-Invest. Last year, the company’s owner Boris Kolesnikov even reported that it had to stop operating at a number of production units temporarily, as the water supply system was not operating. The other serious problem was that the company was not able to harvest feed crops from its own land this year.
“Due to the outbreak of hostilities [in the region], it was not possible to harvest our spring barley and winter wheat,” added Raspopov. “This brought additional damage of about UAH6.5m (US$0.2m).”
The company’s management also claimed APK-Invest suffered damage from loss of property. Since July 2014, seven cars and 11 units of specialised agricultural machinery, as well as several other items of equipment have been stolen in the region.
Dangerous area
APK-Invest has several assets in the Krasnoarmeysk and Constantine districts of Donetsk Oblast. Both districts are mainly controlled by Ukraine troops, but they are located almost at the contact line, which meant the region is a very dangerous area to live and work, as all businesses located there face the threat of damage from artillery bombardment.
The company’s situation may partly be improved by the fact that, in early June, Russia removed a two-year ban on APK-Invest’s pork products. In 2015, Russia increased imports of pork from Ukraine ten-fold compared to the same period last year, largely due to the devaluation of hryvnia, thus becoming the largest importer of Ukraine pork.