Ukraine bans exports of MHP’s biggest factory to Russia

The State Veterinary Service of Ukraine has restricted as of Feb. 6 exports to the Customs Union of all products of the Myronivska factory, the biggest asset of poultry producer MHP (MHPC LI), according to a press release of Russian Agricultural Inspection (Rosselhoznadzor) on Feb. 5. The Russian regulator explained to the Kommersant-Ukraina newspaper that it had been earlier concerned about quality issues of the Myronivska factory’s products and asked the Ukrainian Veterinary Service to initiate an inspection. In response to the request, the Ukrainian side just decided to ban the exports, Kommersant reported. Russia accounts for 35% of MHP’s total exports in 2013, according to Kommersant. That amounts to 43 kt of poultry meat, or nearly 10% of MHP’s total poultry sales in 2013.  

Alexander Paraschiy: The export ban is unlikely to encourage investors as it raises the risk that MHP’s poultry production growth plan (+15% in 2014) may not materialize. Yet we expect the ban will last for a short period and will not have a material impact on MHP’s operations. Similar restrictions against MHP were already introduced in May 2013 and it has not been the Russian side initiating the bans (otherwise the export recovery would have been much more difficult). So we remain bullish on the MHP investment case for 2014.