MHP poultry sales rise 4% in 3Q15, sees lower crop yields

Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA) reported a set of solid operating results for 3Q15 and 9M15. Poultry sales increased 4% yoy to 150 kt in 3Q15 and grew 3% yoy to 407.7 kt in 9M15. Its average realized price grew 25% yoy to UAH 27.62/kg of poultry in 3Q15, but remained almost stable compared to 2Q15 (-0.4% qoq). MHP increased domestic sales 15% yoy in 3Q15 to 115.6 kt and 4% yoy in 9M15 to 307 kt, following customer preference for cheaper poultry over other kinds of meat. Poultry exports fell 22% yoy in 3Q15 to 34.6 kt and slid 1.5% to 100.6 kt in 9M15.

In addition, MHP presented its preliminary harvest results with 100% of wheat and rapeseed, 60% of corn, 98% of sunflower and 98% of soybeans gathered. Crop yields dropped as a result of dry weather conditions during the summer. Yields for wheat and rapeseed decreased 1.6% yoy and 10.5% yoy to 6.0 t/ha and 3.4 t/ha, respectively. Preliminary estimates indicated that corn yields declined 21.5% yoy to 7.3 t/ha, soy fell 19% yoy to 1.7 t/ha and sunflower decreased 5.8% yoy to 3.2 t/ha.

Roman Topolyuk: MHP demonstrated a moderate improvement of the operating performance of its key business segment of poultry production. Though having sold 408 kt of poultry in 9M15, the company is poised to sell around 550 kt in 2015, compared to initial guidance of around 600 kt for the full year. The increase of average selling prices paused in 3Q15, which could be the product of higher sales on the domestic market and lower exports. We would like to see further inflation of hryvnia-denominated prices on the local market or higher exports, so that the company would be able to compensate the 22.8% yoy decrease of its dollar- denominated prices to USD 1.28 per kg.

The lower yields will negatively impact the financial performance of MHP’s grain-growing segment and the management’s previous guidance of USD 500-520 mln EBITDA for 2015 is under risk, in our view.