MHP S.A. ("MHP" or the "Company", LSE ticker: "MHPC"), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, today announces its unaudited results for the second quarter and the six months ended 30 June 2010.

Key operational highlights

Poultry and related operations

o  All the Company's chicken production facilities continued to operate at full capacity.

o  Consumer demand for chicken remained high and the Company was able to sell close to 100% of the chicken meat produced.

o  The Company's share of industrially produced chicken in Ukraine reached approximately 50% in H1 2010 as some of its competitors continued to downsize production

o  Volume of chicken meat sales to external customers in H1 2010 increased by 45% year-on-year to 168,500 tonnes.

o  The average chicken meat price through the second quarter of 2010 is, in line with seasonal trends, 12% higher compared to Q1 2010, and remained flat compared to Q2 2009.

o  The Company has become self-sufficient in hatchery eggs following the launch and achievement of full utilisation at its Starynska breeding farm.

Grain growing

o  Land bank increased to 220,000 hectares under control.

o  MHP's current yields of wheat and rape are close to twice Ukraine's average.

Other agriculture

o  Sausage and cooked meat production volumes in H1 2010 increased to 8,000 tonnes. The substantial volume growth was driven by increased production at "Ukrainian Bacon" and growing consumer demand in Ukraine.

o  The Company's market share of Ukraine's sausage and cooked meat products in Ukraine has exceeded 10%.

Key financial highlights

Debt position and liquidity

·     MHP has successfully issued U.S.$330 million 10.25% Senior Notes due 2015 (the "New Notes") for an issue price of 101.452% of the principal amount (effective coupon rate of 9.875%). This issue was in addition to U.S.$255 million 10.25% Senior Notes of Exchange Notes that were issued to exchange 96.01% of the outstanding U.S.$250 million Existing Notes.

·     MHP repaid approximately U.S.$100 million of short-terms loan facilities provided by certain Ukrainian banks and the balance of Senior Notes proceeds being used for the expansion and diversification of its poultry and grain businesses, principally through the construction of the Vinnytsia poultry complex and land expansion (including expansion of companies holding land) to increase its aggregate land holdings.

Q2 2010 highlights

o  Revenue increased in UAH terms by 36% to UAH 1,765 million (Q2 2009: UAH 1,298 million), in US dollar terms revenue increased by 32% to U.S.$223 million (Q2 2009: U.S.$169 million).

o  EBITDA in UAH increased by 11% year-on-year to UAH 662 million (Q2 2009: UAH 596 million), in US dollar terms EBITDA increased by 7% to U.S.$84 million (Q2 2009: U.S.$78 million).

o  Consolidated EBITDA margin increased quarter-by-quarter from 25% in Q1 2010 to 37% in Q2 2010, but decreased year-on-year (Q2 2009: 46%).

o  Net income in UAH terms increased by 35% to UAH 527 million (Q2 2009: UAH 390 million) and in US dollar terms net income increased by 31% to U.S.$67 million (Q2 2009: U.S.$51 million) partially due to the foreign currency gains.

H1 2010 highlights

o  Revenue increased by 44% in UAH terms to UAH 3,364 million (H1 2009: UAH 2,337 million), and in US dollar terms revenue increased by 39% to U.S.$423 million (H1 2009: U.S.$304 million).

o  EBITDA in UAH terms increased by 8% year-on-year to UAH 1,055 million (H1 2009: UAH 976 million), in US dollar terms EBITDA increased by 4% to U.S.$133 million (H1 2009: U.S.$127 million)

o  Consolidated EBITDA margin remains high, however it decreased to 31% (H1 2009: 42%).

o Net income in UAH terms increased by 18% to UAH 812 million (H1 2009: UAH 689 million) and in US dollar terms net income increased by 14% to U.S.$102 million (H1 2009: U.S.$90 million) partially due to the foreign currency gains.

 Post period end

o  Despite unfavorable weather conditions during July and August 2010, the Company's harvest of early grains is good. Whilst yields are weaker than last year, they are still significantly higher than Ukraine's average. The impact of weaker harvests is expected to be compensated by rising grain prices.

o  Rapeseed harvesting has ended and the average yield based on 3,000 hectares is 3.3 tonne per hectare (2009: 2.7 tonne per hectare), which is close to twice Ukraine's average yield.

o  The wheat harvest is almost finished and the current yield based on 37,000 hectares is averaging 4.8 tonne per hectare (2009: 5.8 tonne per hectare), which is close to double Ukraine's average yield.

Commenting on the results, Yuriy Kosiuk, Chief Executive Officer of MHP, said:

"We are pleased with our financial performance during the first half of the year with sales volumes and financial results continuing to grow and our market share increasing.

"The unpredictably hot weather that we have seen in Ukraine and across the region is having a significant growth on grain prices, which will impact all meat producers as grain is a principal component of animal fodder. Contrary to other meat producers, MHP is insulated from the rising grain price due to the vertically integrated business model, and therefore benefits from grain growing operations. Due to the high grain prices, prices for all kinds of meat will start growing in the forthcoming months. Poultry, however, will be less affected than pork and beef as they require twice and even more grain to their produce, and therefore it will be more affordable to the customers.

 "We are confident that MHP's vertically integrated business model and market leading position will ensure that we remain well placed during this turbulent period for grain and meat markets. We therefore expect to achieve a good set of financial results for the full year".

 

UkrAgroConsult