Ukrainian Food Company sells six of its 11 sugar plants

Ukrainian Food Company (UPK), Ukraine’s third-largest sugar producer, is concluding the sale of five sugar plants in Ternopil region to Mriya Group, Ukraine’s major agricultural producer, said Kommersant-Ukraine today, referring to an undisclosed source. Mriya confirmed that one more mill was bought from UPK last year. Volume of the deal was not declared. Mriya Group cultivates 100 ths ha of land in Ternopil, Ivano-Frankivsk and Chernivtsi regions. It used to supply sugar beets to UPK mills for processing on commission. Olha Pankiv: As we expected (see our report of February 25), vertical integration of sugar production into beet harvesting is increasing, and those unable to manage growing beets are exiting the business. Due to lack of its own beet supplies, UPK decreased sugar production 30% last year to 175 ths mt (its market share dropped from 9.6% in 2006 to 7.4% in 2007). In our view, both Astarta (AST PW: BUY) and Dakor (DAKOR: BUY), whose internal beet supplies meet over 70% of their needs, are well positioned to withstand these competitive pressures and maintain their share of the market.