Ukrainian dairy group Ukrproduct has warned of a “significant” decline in its profitability in 2015 as rising input costs and “difficult” pricing hit the group’s results.
In a trading update released ahead of its full-year figures, London-listed Ukrproduct flagged a number of headwinds. “The Ukrainian economy continued under pressure accentuated by the unrest in the east of the country. This has reflected in the major devaluation of its currency, deterioration of consumer confidence and geographic contraction of the available market. Closure of the Russian market further intensified the local competition,” the company noted.
While the group was able to grow revenues – with higher butter, hard cheese and skimmed milk powder sales – overall gross profit suffered a “significant” downturn on escalating raw material costs. EBITDA was also down “significantly”. The company said: “This decline was accentuated by the devaluation of hryvnia, weakening approximately 52% against the pound versus the comparative financial period, which induced increase in the interest rates and produced the negative exchange difference leading to an overall loss in 2015.”
Ukrproduct said it has started to “reset” its operations via a strategic review in response to the “very challenging marketplace”. It is streamlining manufacturing facilities and reducing overheads.
The company added it has identified a number of growth areas: its kvass business “remains one of the major focus areas of further growth” while the group is exploring export sales. It also said it sees “high potential” in exports to the EU, China and Kazakhstan.