6 August 2014
Europe’s top poultry producer MHP (MHPC LI) announced on Aug. 5 that it temporarily suspended the operations of its breeding farm in Shakhtarsk, Donetsk region, for the sake of employee safety amid ongoing warfare. The Shakhtarsk farm is one of two MHP breeding enterprises, supplying up to 30% of the company’s egg-hatching needs.
For the period when the Shakhtarsk farm remains idle, MHP will increase the operations of its second breeding enterprise in the Kyiv region, as well as start importing hatched eggs from the EU. The company said it expects its decision will have a “slightly negative impact” on its poultry production cost.
Roman Topolyuk: Despite MHP’s toned-down description of the implications of the Shakhtarsk suspension, the company previously told us that the enterprise contributes about 5% to its total EBITDA. Meanwhile, production costs at the second breeding factory have been 30% higher than at Shakhtarsk. Since the timing of a possible restart of the enterprise is uncertain, the news is negative for the stock.