21st Aug 2015 08:53
LONDON (Alliance News) - Ukrproduct Group Ltd Friday said that revenue in the first half of 2015 grew, but gross profit declined significantly, while earnings before interest, tax, depreciation and amortisation also fell as it faced "significant headwinds" in the period resulting from political unrest and a declining economy.
The Ukrainian dairy foods and beverages company said that it faced a challenging market in the six months to June 30 as the Ukrainian economy continued to decline and consumer confidence deteriorated amid political unrest in the east of the country. It added that the closure of the Russian market put further pressure on the Ukrainian market due to oversupply.
Ukrproduct said that in the dairy sector, the domestic market capacity shrank across the company's key product categories leading to stricter competition, while raw milk prices increased year-on-year by around 12%.
However, branded dairy products are expected to show a slight increase in revenue as a result of an increasing shift of sales focus from the occupied eastern regions to other highly populated areas. The company said that its marketing campaign for the "Our Dairyman" brand contributed to an improvement in sales for packaged butter and processed cheese, and that while the hard cheese category was challenged by the ban on exports to Russia, the company was able to resume sales to Crimea via a distributor and expects good progress in both volume and revenue in the first half.
Gross profit in branded dairy products, however, is expected to show a "sizeable decrease" as contracting average wages meant that the company could not offset a sharp rise in input costs by raising consumer prices.
The skimmed milk powder segment meanwhile suffered a "considerable decline" following the contraction in global dairy commodities prices due to the oversupply caused by the Russian embargo, Ukrproduct said, adding that revenue and gross profit will decrease substantially. Revenue and gross profit in third-party services, though, is expected to show "a healthy increase year-on-year" as the company improved the efficiency of its production capacities utilisation via placement of third-party orders.
"The company is adapting to this most challenging business environment and is working to restore profitability according to a programme. The sales and marketing are orientated to the non-occupied regions with sales geared to cash and not just revenue. The productivity improving efficiencies and cost eliminations are being achieved and more are targeted. In this volatile trading environment working capital is subject to most strict control. Finally cash is the focus of all these initiatives," Ukrproduct said in a statement.
Shares in Ukrproduct were untraded on Friday, last trading at 3.80 pence.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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