MHP divests all its assets in Crimea

Ukraine’s largest poultry producer MHP (MHPC LI, MHPSA) announced on Feb. 21 that Raftan Holding Limited (a Cyprus subsidiary of MHP), has disposed its entire shareholding in all its Crimean subsidiaries. This includes Druzhba Narodiv meat processing plant, Druzhba Narodiv poultry farm, and a fruit production company. The selling price was not disclosed and no further details were provided by the company.

Igor Zholonkivskyi: Following the occupation of Crimea by Russia, MHP decided to retain its poultry production assets in Crimea, and continued its operations there up till now under Russian legislation. MHP remained virtually a monopolist in terms of poultry production in Crimea.  Based on our estimates,  the Crimean assets of MHP accounted for about 12% of the MHP’s total poultry and meat production and generated approximately 10% of the company’s total operating profit in 2013.

We think the disposal of the Crimean assets should be positive for MHP overall. Occupied Crimea remains de-facto a territory of Russia, which at the very least means additional custom duties and taxes levied throughout the logistics chains for MHP from Ukraine to Crimea, as well as the constant presence of unforeseeable political risks. Also, the disposal of assets in occupied Crimea will eliminate any reputational risks for MHP’s owner Yuriy Kosyuk, while the additional cash from the sale proceeds would come handy for the investments required at the new Vinnytsya – based poultry plants. As a possible negative consequence, MHP may report one-off losses from the disposal, as we don’t believe that the selling price was good.