17th Sep 2013 08:05
LONDON (Alliance News) - Ukrproduct Group Ltd Tuesday warned that its full-year profits would be below last year after high raw milk costs hit margins for its dairy branded products, even though sales of those products rose 20% in the first half of the year.
It said it had tried to offset the higher input costs by raising the prices of its products, but hadn't managed to do so due to competition.
The producer of dairy foods and beverages in Ukraine reported higher sales for both dairy products and its kvass beverage, but overall earnings before interest, tax, depreciation and amorization fell to GBP1.3 million in the six months to end-June, from GBP1.5 million a year earlier, while revenues were down to GBP24.7 million, from GBP25.3 million, as skimmed milk powder sales declined 13% due to a shortage of raw milk supply.
Its net profit declined to GBP173 million, from GBP636 million.
Finance costs doubled to GBP541,000 as interest charges on a loan from the European Bank for Reconstruction and Development increased. It said the EBRD has approved a further EUR1.3 million loan, which will be used to upgrade the production platform for butter and spreads, improving the quality of the products and bringing down costs.
"The economic environment in the first half of 2013 continued to be challenging," Chief Executive Sergey Evlanchik said in a statement. "The dairy sector was mainly marked by the significant increase in raw milk prices across both domestic and global markets and shortage of raw milk supply in Ukraine."
"The company made an effort to offset the pressure on the margins by lifting the consumer prices but the competitive market environment did not allow compensation for the increase in costs," he added.
The CEO predicted that the company would improve profitability in the second half of the year as it improved sourcing of of milk, cut costs and planned "responsible" price increases, but this wouldn't be enough to make up for the first-half downturn.
The company's shares were down 23% at 11 pence early Tuesday, the biggest fall on AIM.
By Steve McGrath; [email protected]; @SteveMcGrath1
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