MHP ramps up chicken output 17% in 2013, plans 15% boost for 2014

Ukraine’s leading poultry producer MHP (MHPC LI)  increased its poultry production 17% yoy to 472.8 kt in 2013, the company reported on Feb. 4. The growth resulted from a gradual commissioning of its brand new Vinnytsia complex, which the company plans to fully load in 2H14. That will result in an increase in poultry production volumes of more than 15% yoy in 2014, according to the company’s plan.

MHP’s chicken sales increased 19% yoy to 447.0 kt in 2013, mainly fueled by growth in supplies for export (+112% yoy to 122.7 kt, we estimate). Domestic deliveries of chicken meat only increased 2% yoy to 324.3 kt, based on our calculations. As its share of (lower-priced) export meat increased, MHP reported a decline in average achieved chicken price for 2013 by 7% yoy, to UAH 16.0/kg.

In 4Q13 alone, the company increased its chicken output by just 15% yoy (and 3% qoq) to 125.8 kt and improved chicken sales by 21% yoy to 121.6 kt (+1% qoq). Export sales increased 49% yoy and 26% qoq to 37.9 kt, while domestic deliveries rose 11% yoy and fell 7% qoq. Average prices fell 9% yoy and 4% qoq to UAH 15.4/kg. The company also reported the result of its 2013 farming operations, with its total crop harvest advancing 23% yoy to 1.98 mmt backed by an increase in total harvest area by 15% yoy to 287,000 ha.

Alexander Paraschiy: We found no surprises in the company’s trading update so we believe the company will be able to deliver its 2013 EBITDA promised at USD 400-410 mln. While that would be less than the 2012 figure (USD 468 mln), we believe the result will be rewarded by the stock market as the company will report much higher free cash flow generation in 2013 than a year before. That’s because the company’s 2013 CapEx is estimated to be USD 120-140 mln smaller than a year before, as MHP has completed most of the work in its his huge Vinnytsia complex project. Combined with expected further declines in CapEx needs in 2014, this trend allows shareholders to count on more generous dividends from the company this year.