MHP poultry sales rise 15% yoy in 1Q17

Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA) reported its poultry sales rose 15% yoy to 124 kt in 1Q17 in a trading updated published on April 18. While domestic poultry sales slid 2% yoy to 74.8 kt, exports have surged 60% yoy to 49.2 kt. MHP’s overall chicken meat production in 1Q17 decreased 1% yoy to 142 kt.  Exports accounted for 40% of total company sales (compared to 27% a year ago).

MHP’s average selling poultry price grew 15% yoy in hryvnia terms to UAH 31.5/kg in 1Q17, while in USD terms it grew by 8% yoy to USD 1.16/kg.

MHP also reported that its winter crops (94,000 hectares out of 357,500 planned for the year) are in good condition. The company’s spring sowing campaign is ongoing.

The company also announced that it has changed the methodology of calculating its poultry volumes sold and produced starting from 1Q17, which added 1% to its 1Q17 sales volume, an effect that is not significant. For ease of comparison, MHP said it would disclose 2017 data in both the new and old formats.

Igor Zholonkivskyi: We think the company’s 2017 EBITDA will remain mostly flat as the positive effect of growing export sales volumes will be offset by completely phased out VAT refunds. This negative effect, however, will be partially mitigated by the implementation of direct government subsidies.

The USD-denominated poultry price will likely remain stable or will grow only slightly through the year, while domestic poultry demand will likely remain flat. Our outlook on MHP stock and Eurobonds remains neutral.