MHP boosts chicken sales 24% qoq, local sales 20% yoy in 2Q13

Ukraine’s leading poultry producer MHP (MHPC LI) reported on July 16 its poultry facilities were working at full capacity in 2Q13. Its new Vinnytsia complex was gradually commissioned over the quarter, with 7 out of 12 planned rearing sites currently in operation. The increased capacity allowed MHP to boost poultry output 21% yoy (10% qoq) to 121.2 kt in 2Q12, which resulted in 18% growth in 1H output to 224.6 kt.

The company’s sales volumes of poultry meat increased 18% yoy to 113.6 kt in 2Q13, resulting in 13% growth to 205.3 kt for 1H13. Exports increased 3x yoy and 36% qoq to 31.6 kt in 2Q. With an increased share of exported (frozen, lesser priced) chicken, MHP suffered from a decline in average chicken prices: the 2Q13 price was 0.8% less qoq and 7.3% less yoy in 2Q13 (UAH 16.2/kg). The average 1H13 price declined 5.1% yoy, while as a result of higher volumes, total revenue from chicken sales increased 7.2% yoy in 1H13.

In other segments, MHP reported a 17% yoy increase in sunflower oil sales (a byproduct of its fodder crop production) in 1H13 at a 1% higher oil price. The company also reported it purchased 75K hectares of land in 1H13 to finish the period with a 360K ha land bank. The company plans to harvest from its 290K land bank in Ukraine and 40K ha of newly acquired land in the Russian Federation this season.

Alexander Paraschiy: The 2Q results slightly ease our concerns on MHP’s future on the domestic poultry market, the company’s most profitable direction. Recall in 1Q13, the company’s chicken supply to the Ukrainian market fell 9% yoy. In the last quarter, MHP showed 20% qoq growth in domestic supplies (to 82.1 kt). While MHP was still was unable to restore its prior-year levels (about 87 kt in 2Q12), the demonstrated progress suggests the company was able to find an additional niche for its products locally.

Given the company’s non-organic growth in the farming segment as well as its gradual increase in production capacity in its chicken segment, we expect MHP will show an increase in all its financial indicators in 2013. That being said, we remain bullish on the MHP story for this year.