TIDMUKR
RNS Number : 9255Q
Ukrproduct Group Ltd
01 July 2022
1 July 2022
UKRPRODUCT GROUP LIMITED
( Ukrproduct", the "Company" or, together with its subsidiaries,
the "Group")
Trading Update 2021
Further to the Company announcement on 7 June 2022, due to the
Russian invasion of Ukraine, Ukrproduct has not been able to
complete its audit for the financial year to 31 December 2021, and
post its 2021 Annual Report, by 30 June 2022, and therefore trading
of the Company's shares will be temporarily suspended from 7.30am
today pending completion of the audit and posting of the Annual
Report.
Ukrproduct sets out below unaudited financial highlights and
commentary for the year ended 31 December 2021.
-- Turnover in 2021 was GBP51.9 million, 6.4% less than in the
previous year, though in local currency it grew 0.6%.
-- EBITDA 2021 was GBP1.1 million, 21.6% lower than in 2020 with
EBITDA margin dropping from 2.6% in 2020 to 2.2% in 2021.
-- Net profit in 2021 was GBP0.3 million compared to a GBP1.2 million loss in 2020.
2021 commentary
In 2021, Ukrproduct experienced several global challenges. There
was an acute, ongoing shortage of dairy raw materials, and an
increase in imports of dairy products from abroad hampered the
development of the Ukrainian dairy products market. Rising costs of
raw materials and consumables, energy and transport have created
additional problems. Increases in selling prices could not keep
pace with the growth in costs and this has affected manufacturers
in 2021.
Due to an increase of 18% in the price of raw milk over the
period, the Group limited the volume of raw milk procured and used
previously purchased, semi-finished products for production (e.g.
callata cheese and butter). The Group also suspended operations at
their minor production facility in Letychiv due to the rise in raw
milk prices in its captive raw milk zone.
Despite the difficult situation and limited marketing
activities, Ukrproduct exceeded its expectations in sales of
branded dairy products in 2021 achieving 11% growth in the domestic
market compared to 2020. This increase in sales was delivered
following a revision of the Company's marketing strategy with
renewed focus on processed cheese and processed cheese products,
which sales have grown by 24% and 98% respectively. The overall
group market share in processed cheese and processed cheese
products in Ukraine increased from 14% in 2020 to 21% in 2021.
Also in 2021, the Group resumed cooperation with the largest
national retail chain in Ukraine, ATB-Market LLC, for the
production of Private Label Cheese. However, due to a significant
increase in costs as a result of the above noted factors, the sales
margin of processed cheese and other processed cheese products
decreased from 20.2% and 7.5% in 2020 to 16.0% and 6.4% in 2021,
respectively.
In order to maintain profitability in the Company's key segment,
butter, Ukrproduct reduced low-margin sales of packaged butter in
retail chains in the second half of 2021 and utilised the butter in
the production of processed cheeses. This led to a 46.3% decrease
in sales of packaged butter in 2021, but allowed for a significant
increase in the category's margin (from 7.4% in 2020 to 10.6% in
2021), which almost maintained the gross margin at 2020 levels.
The Group increased sales of spreads by 8.1% in 2021, despite
the market contraction in Ukraine. However, a significant increase
in the cost of vegetable fats (35% compared to 2020) led to a
decrease in sales margin from 19.9% in 2020 to 14.7% in 2021.
An additional factor contributing to the slight growth of
turnover in 2021 (in local currency) was an increase in sales of
kvass and beverages of 5.8% in volume and 5.9% in value. Ukrproduct
continued to increase their range of products in 2021, launching
several new drinks into the market in 2021.
The Group expanded its exports in 2021 both in terms of
geographic locations and penetration in existing markets, which
resulted in an increase in sales of exported branded products by
55.5% in volume (from 3,600 tons in 2020 to 5,600 tons in 2021),
and by 60.5% in value (from $7.1 million in 2020 to $11.4 million
in 2021). The main growth was delivered in the processed cheese
category, sales of which increased 2.4 times in volume (from 1,900
tons to 4,600 tons) and 2.6 times in value (from $3.2 million in
2020 to $8.4 million in 2021).
In 2021, the Group minimised the export of skimmed milk powder
using the raw milk for the production of other semi-processed
products.
The export of spreads declined significantly compared to 2020
due to cost inflation, the impact of COVID-19 lockdowns on
transportation, and a reluctance by major customers including
retailers to pass on the respective price increases.
Additionally, Ukrproduct undertook a number of initiatives to
improve its operational cost efficiency, including optimised energy
consumption and production standards complemented with increased
productivity. The Group was also successful in maintaining the same
level of logistical costs as in 2020 due to further optimisation of
transportation routes and processes. This was a material
achievement offsetting the fuel inflation in 2021.
In 2021, the Group overheads rose by 15.5% compared to 2020,
mainly driven by increases in salaries, legal and audit costs,
marketing and fuel expenses.
2022 commentary
Trading in 2022 has been severely affected by the Russian
invasion of Ukraine and the ongoing war. Ten out of twenty four
Ukranian regions have experienced heavy military damage and
overall, these ten regions supply 42% of raw milk in Ukraine.
Moreover, damaged infrastructure, and increases in fuel prices
complemented with fuel shortages, have impacted transportation and
adversely affected logistics costs, both on the supply and
distribution side. As the Ukrainian sea ports have been blockaded
by the Russian Navy, there is increased pressure on the remaining
routes for export. Ukrproduct expects to make provisions for some
of its distributors who operate in the regions engaged in military
activities and cannot not pay on time.
For further information contact:
Ukrproduct Group Ltd
Jack Rowell, Non-Executive Chairman Tel: +44 1534 814814
Alexander Slipchuk, Chief Executive Officer www.ukrproduct.com
Strand Hanson Limited
Nominated Adviser and Broker Tel: +44 20 7409 3494
Rory Murphy, Richard Johnson www.strandhanson.co.uk
This announcement contains inside information for the purposes
of Article 7 of EU Regulation No. 596/2014, which forms part of
United Kingdom domestic law by virtue of the European (Withdrawal)
Act 2018.
Ukrproduct Group Limited is one of the leading Ukrainian
producers and distributors of branded dairy products and kvass, a
traditional fermented beverage. The Group's current product
portfolio includes processed and hard cheese, packaged butter,
skimmed milk powder (SMP) and kvass. Ukrproduct has built a range
of recognisable product brands ("Our Dairyman", "People's Product",
"Creamy Valley", "Molendam", "Farmer's") that are well known and
highly regarded by consumers. Ukrproduct's securities are traded
under the symbol "UKR" on AIM, a market operated by the London
Stock Exchange.
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END
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Ukrproduct (AQSE:UKR.GB)
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