Kyiv, Ukraine – 23 September, 2009 – Ukrproduct Group Limited, a leading producer and distributor of branded dairy products in Ukraine, today announced its unaudited interim consolidated IFRS financial results for the six months ended June 30, 2009.
FULL YEAR HIGHLIGHTS
(Figures in brackets are for the six months ended or as at 30 June, 2008)
•Ukrainian economy has slowed down further and local currency depreciated by 22.7% year on year against GBP
•Revenue in branded products segment held up at GBP 16.0 million (GBP 16.3 million)
•Gross profit for branded products increased by 8.1% year on year to GBP 4.1 million (GBP 3.8 million) with gross margin of 25.9% (23.5%)
•Global market conditions for skimmed milk powder segment remained weak
•Total revenue declined by 6.5% year on year to GBP 22.1 million (GBP 23.6 million)
•Gross profit decreased by 8.9% year on year to GBP 4.2 million (GBP 4.6 million) with gross margin of 19.1% (19.6%)
•Earnings per share declined 37.0% to 1.5 pence (2.4 pence) and were impacted by GBP 0.2 million of foreign exchange losses
•Positive cash flow with cash balance improved to GBP 2.2 million (GBP 0.7 million at 2008 YE)
•Interim dividend of 0.20 pence per ordinary share for the first six months ended 30 June 2009
Sergey Evlanchik, CEO of Ukrproduct, commented: “We continued to witness a significant slowdown of the Ukrainian economy in the first half of 2009. Despite challenging market conditions, Ukrproduct has generated positive growth of gross profit in its strategically important segment, branded products, with revenues broadly holding up. Ukrproduct has significantly improved its financial position. We expect this to continue as the Company works to improve its performance in the second half.”
CEO’S REPORT
“We remain focused on developing the branded products segment, which comprises processed and hard cheeses, and packaged butter, however, we have adjusted our production to current market realities. Our production processes are flexible, and as a result we are well positioned to promptly react to changes in market demand by offering a range of products at different price points for the majority of consumer segments.
In line with our stated strategy, we continued to look for opportunities to optimise our costs; as a result we have consolidated our manufacturing activities at four plants and shut down operations at Zhmerinka plant. We have transferred the production of processed cheese and butter to other plants following the end of the reporting period. We expect to see sizable cost savings from this initiative in the second half.
During the first six months of 2009, Ukrainian hard cheese producers responded to the weakening domestic demand by cutting prices and over saturating the market. As a result, the difference between the price of hard and processed cheeses has narrowed leading to a partial shift in consumer demand from processed to hard cheese. Ukrproduct’s sales volumes and margins of hard cheeses were impacted by this change.
Ukrproduct became the largest producer of butter in Ukraine and maintained our leading market shares of packaged butter and processed cheese at 13% and 22% respectively, despite the contraction of the processed cheese market. Both sales volumes and profit margins in packaged butter remained above management expectations in the first half. The Group’s sales volumes of processed cheese have stabilised in June and showed a recovery since then.
In June 2009, the Russian authorities banned imports of Belarusian dairy products. Belarus has historically exported more than half of its total dairy output to Russia. As a result, this has exacerbated the trading of dairy products in Ukraine.
Furthermore, skimmed milk powder (SMP) segment export volumes have increased by 48% year on year, however, segment revenues declined as a result of pricing pressure with margins further impacted by the increase in energy costs.
Looking forward, we are focused on increasing our market share in each product category and segment of operation. We believe that we have the right strategy for this market and expect to successfully come through this challenging period. We intend to continue promoting our brands and products through a series of targeted marketing campaigns and take further steps in developing and optimising our sales and distribution network.
We continue to look further for productivity improvements, which are necessary to implement in order to withstand the pressure on our margins. Overall, we are looking for a performance improvement in the second half, with the cash situation improving further although profitability level is expected to continue to be below last year.”