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Milkiland banned from supplying dairy to Russia from Ukraine

Milkiland banned from supplying dairy to Russia from Ukraine

7 July 2014

Among the biggest Ukrainian exporters of cheese products to Russia, Milkiland (MLK PW), has been banned from delivering any dairy products to Russia from its seven Ukraine-based plants, the Russian consumer rights protection service reported on July 4. Earlier, a ban was active for two other Ukraine-based plants operated by Milkiland. The reason for the widened ban was “noncompliance of the fatty acid composition” found in two samples of Milkiland’s cheese.

 

Alexander Paraschiy: It’s strange to see the results of just two samples leading to the prohibition of the supply of all the dairy products of a big group of dairy plants owned by a single holding. But this is now what should be expected to happen at any time, given that political and economic relations between Russia and Ukraine are as poor as never before.

 

For Milkiland’s Ukrainian assets, the Russian market was the second-most important after the local one. Its Ukrainian dairy plants supplied 38% of their output to Russia in 2013, we estimate. The share of export to Russia in Milkiland’s total revenue was 20% in 2013, we estimate. As we expected, this year is especially challenging for Milkiland, and the prospects of opening the Russian market for its Ukrainian plants are as dim as ever. The new challenges will negatively affect the company’s 2014 top line, and to a lesser extent, its bottom line, in 2014. At the same time, the ban is a good chance for Milkiland to refocus its sales to other markets, including the EU, which is going to open soon.

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