Avangard ups egg output 6% yoy in 2012, considers closure of old facilities

Ukraine’s leading egg producer Avangard (AVGR LI) reported a 5.6% increase in egg output to 6.23 bln units in 2012, of which the company sold 5.22 bln in the form of shell eggs (+7.4% yoy). The company increased its share of shell egg sales via supermarkets to 35% in 2012 from 30% a year before. Its share of exported shell eggs increased to 9.9% from 6.1% in 2011. The average price for shell eggs advanced 9.4% in 2012 to UAH 0.70 per unit. At the same time, the price of egg products showed a minor 0.7% growth yoy to USD 8.1/kg.

For 4Q12, Avangard reported egg output of 1.6 bln units, or 2.9% growth yoy and a tiny 1.5% growth qoq. Average egg prices were reportedly UAH 0.84, 6.7% smaller yoy but 33% higher qoq.

The company’s laying hen flock increased 11.2% yoy to 22.8 mln as of end-2012, resulting from the commissioning of the first stages of Avangard’s biggest projects, Avis and Chornobaivske (which increased laying hen capacity by 4.75 mln). In 2013, the company plans to launch new production stages for these factories to boost their laying hen capacity by another 6.43 mln.

Meanwhile, Forbes.ua reported on Jan. 30 that Avangard has started decommissioning its old factories in southern and eastern Ukraine, with five of them (with a total laying hen capacity of above 5 mln) having been already stopped. Avangard confirmed an asset restructuring plan, telling journalists that it would not harm the holding’s capacity but is targeted to improve operating efficiency.

Alexander Paraschiy: The production results look a bit disappointing as quarterly growth was the weakest in the last two years. However, the slowdown was offset by the encouraging egg prices that were posted by the company.

The reportedly launched closure of Avangard’s old-fashioned factories suggests the company is starting to take a very conservative approach to its ability to sell outside of Ukraine the extra eggs to be produced by its new factories. On the positive side, this move looks like the most efficient way for Avangard to cope with an oversupply of eggs on the local market and thereby to control prices. The egg supply in Ukraine could increase 7% in 2013 if Avangard proceeds with its output growth plans and won’t be able to export extra output. Egg prices in Ukraine are unusually high as of mid-January (25% higher yoy), according to the ptichki.net database, which might be the result of Avangard’s old factories possibly idling already.