Ukrainian dairy group Ukrproduct has said it expects the group's net profits for the year to be affected by more stringent tax regulations.

However, in a mixed trading update issued yesterday (15 December), the firm said profit before tax for the full year is expected to show low double-digit growth year-on-year, at the lower end of current market expectations. Ukrproduct added that the competitive situation in Ukraine remained "challenging".

"The purchasing power of the Ukrainian population has deteriorated further in the second half of 2010 with information from food retailers suggesting that the value of an average retail food bill fell by 20% in the beginning of November, compared to October 2010," the firm said. "At the same time, the competitive situation in Ukraine remained challenging with restrictions on exports of dairy products to Russia resulting in overstocking by domestic producers."

Nonetheless, Ukrproduct said it expects group sales in the second half to be higher than in the first half of the year. Full-year sales for the 12 months to the end of December are anticipated to be in line with the previous year.

The group said it benefited from the upgrading of its spreads production line during the summer. As a result, average monthly sales volumes have been "recovering steadily", it said.

However, group sales of hard cheese are expected to be "significantly below" the 2009 level.

The firm said it expects capital expenditure for the full year to amount to GBP0.4m (US$0.6m), "well below" its previous estimate of GBP0.7m.

Click here to view the full trading update.