Ukraine Food Sector Report - H1, 2013

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Ukraine Food Sector Report - H1, 2013

This report covers developments in the food sector in Ukraine through October 2013. It also discusses corporate news for firms including UkrLandFarming, Astarta, Nestle, Milkiland, and Alcohol Traditions, among many others.

Ukraine is emerging as one of the world’s largest suppliers of grain and oilseeds. Vast amounts of high-quality agricultural land, a reasonably moderate climate, and a favorable geographic location create a unique opportunity for agricultural growth today, and the potential for huge growth in the future. In H1, the highest number of profitable enterprises in Ukraine worked in agriculture and trade. The largest share (89.7%) of profitable enterprises was in agriculture in H1.

Some of the factors expected to help Ukraine boost its agricultural productivity are: a strategic import/export location between the European Union, Russia, and central Asia, with access to deep sea ports, railroads, and highway networks; uniquely fertile soil, the productivity of which can be strongly improved by the use of better machinery and higher-quality seeds; relatively low production costs; continuous introduction of new technologies; employee training; and an intense level of investment in expansion, primarily in capital expenditures.

In H1, agricultural production rose by 15.4% y/y, helped by a 27.5% y/y growth in the output volume of agricultural enterprises and a 6.4% y/y hike in households. In the first quarter of 2013, the country’s agricultural production expanded by 5.8% y/y, well above the 0.5% y/y hike recorded in Q1 2012. In particular, the output volume of agricultural enterprises grew by 10.5% y/y versus 1.9% y/y in Q1 2012. The output volumes in households rose by 1.6% y/y in Q1 2013 compared to a decline of 0.7% y/y in the same period of the previous year.

Key Points:

• In corporate news, UkrLandFarming agricultural holding plans to invest USD 70mn in the construction of a feed plant in Krasnohorivka (Donetsk region) by 2015.

• Sugar major Astarta posted a EUR 40.9mn net profit in Q2, with revenue growing by 3.43% y/y to EUR 80.92mn in the same quarter.

• Swiss-based Nestle, one of the world's largest food producers, plans in 2013 to invest UAH 36mn in its Lviv-based Svitoch confectionery factory.

• One of the largest cheese producers in Ukraine, Milkiland (MLK PW) reported a 13% y/y increase in net revenue to EUR 151.1mn in H1. Milkiland earned a net profit of EUR 5.5mn in H1.

• Alcohol Traditions, one of the largest alcohol companies in Ukraine, has started producing a new type of vodka called Perepelka. The new vodka is being promoted as a natural product produced through the processing of quail eggs.

• Ukraine’s agricultural production increased by 13.3% y/y in the first eight months of 2013, data from the State Statistics Service showed. In particular, the volume of production at agricultural enterprises rose by 23% and at households by 6.2%. In August alone, the volume of agricultural production grew by 9.7% y/y.

Table of Contents

Executive summary
1. Sector Overview
1.1 Agriculture and trade most profitable businesses in Ukraine
1.2 Agricultural production in Ukraine up 13.3% y/y in Jan-Aug
1.3 Exports of agricultural products up 10.7% y/y in Q1
1.4 Loans to Ukrainian agricultural producers reach UAH 38.3bn in H1
1.5 Ukraine hopes to attract USD 3bn agricultural investments this year
1.6 China to invest USD 2.6bn in Ukraine’s agriculture

2. Grain Sector
2.1 Ukraine harvests 40mn tonnes of grain
2.2 Ukraine’s grain exports reach 1.9mn tonnes since start of 2013/14 MY
2.3 Ukraine forecasts grain exports to reach 28mn tonnes in 2013/14 MY
2.4 Agricultural ministry sees no reason to limit grain exports
2.5 Ukraine expects to be among world's five grain exporters
2.6 Agricultural ministry forecasts maize exports to grow by 17% y/y in 2013/14 MY
2.7 Agroholding Mriya net profit down 13.4% y/y to USD 114.58mn in H1
2.8 Nibulon increases harvesting of early grain crops by 25% in H1
2.9 Creative group signs USD 300mn syndicated loan
2.10 UkrLandFarming to channel USD 70mn in development by 2015
2.11 Agroton posts USD 0.2mn loss for H1
2.12 Kernel group raises USD 140mn credit from Russian Bank

3. Sugar and Flavoring Sector
3.1 Ukraine begins sugar refining season
3.2 Farmers harvest 364,000 tonnes of sugar beet
3.3 Ukrtsukor predicts 10-11.5mn tonnes of sugar beet harvest in 2013
3.4 Agriculture Ministry raises sugar output forecast to 1.5mn tonnes for MY 2013/14
3.5 Sugar major Astarta posts EUR 40.9mn net profit for Q2
3.6 Confectionery Roshen may lose USD 200mn in trade wars with Russia
3.7 NESTLE to invest UAH 36mn in Lviv Svitoch confectionery

4. Bread and Bakery Sector
4.1 Bakery production down by 6.8% y/y in July
4.2 Agrarian Fund delivers 200,000 tonnes of flour to bakery enterprises in Jan-Aug
4.3 Ukrkhlibprom expects reduction in bread production in 2013
4.4 Bakers call for deregulation of bread prices
4.5 Khlibni Investytsii launches new production lines
4.6 Khlibprom Concern cuts consolidated loss in H1
4.7 Kernel Group closes deal on selling Khmelnytskyi Bread Baking Integrated Plant

5. Milk and Dairy Sector
5.1 Milk production up by 1.3% y/y in August
5.2 Industrial Milk Company to invest USD 50mn in development
5.3 Milkiland revenues up by 13% y/y to EUR 151.1mn in H1
5.4 Zvenyhorodka Cheese Factory to raise statutory fund by UAH 95.2mn

6. Meat Sector
6.1 Cattle population up by 2.8% y/y in August
6.2 Meat production up by 5.7% y/y in August
6.3 Kremenchukmiaso plans to increase output by 2% y/y in 2013 to 14,000 tonnes
6.4 Globino Meat Factory posts UAH 4mn profit for Q2
6.5 Belkozin intends to take a leading position on Ukrainian market of sausage skins
6.6 Avangard to pay 25% of 2013 profit in dividends
6.7 Myronivsky Hliboproduct EBITDA down by 16% y/y in H1
6.8 Ovostar Union to invest USD 90mn in production by 2017

7. Fruits and Berries Sector
7.1 Agricultural producers to gather over 9mn tonnes of vegetables this year
7.2 Prices of vegetables and potatoes still significantly higher than in 2012
7.3 Ukraine exports vegetables at USD 57.7mn in H1
7.4 Svarog West Group to acquire AMG Agroholding

8. Alcohol and Beverages Sector
8.1 Vodka production down 16% y/y in July
8.2 Ukrvodka sees 20% drop in vodka production in 2013
8.3 Global Spirits Holding concentrates 100% of Poltava distillery
8.4 Alcohol Traditions begins production of Perepelka Vodka
8.5 Vintage Cognac House Tavria extends vineyards area
8.6 France's Remy Cointreau to expand its share of Ukrainian cognac market
8.7 Grape wine production up 23.9% y/y in July
8.8 Beer production down 11.9% y/y in July
8.9 Beer production to decline in 2013
8.10 SUN InBev Ukraine sales down 5.6% y/y in H1
8.11 Efes Ukraine boosts beer sales by 12.2% y/y in H1
8.12 Production of soft drinks down by 23% y/y in July
8.13 Regina mineral water factory output down 13.5% in Q2
8.14 Global Spirits, T.B.Fruit to produce juices jointly
Appendix

Number of pages: 30
Release Date: Wed, 16 Oct 2013