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April 13, 2022updated 14 Apr 2022 7:19am

Ukraine’s MHP halts operations at Donetsk unit

The agri-food group has suspended business at a meat-processing subsidiary in the eastern region.

By Dean Best

MHP, one of Ukraine’s largest food companies, has paused operations at a meat-processing business in the eastern region of Donetsk.

The UK-listed company said it had made the decision to suspend business at Ukrainian Bacon after advice from the Ukraine government.

Meanwhile, in more positive news, MHP, which is also a major supplier of grain, said its spring sowing programme “is expected to progress significantly”.

MHP’s Ukrainian Bacon business is based in Kramatorsk district in Donetsk. Despite the war, the company says it has operated the unit, which has an annual capacity of around 34,000 tonnes, “for more than a month”.

However, in a business update to the London Stock Exchange, MHP said Ukraine’s Ministry of Defence had “advised that the occupying forces of the Russian Federation continue to concentrate large forces in the east of Ukraine”.

It added: “Escalation of the situation in the Donetsk region increases the risks and dangers of the company’s employees’ security and, as such, the decision has been made to temporarily suspend operations at this facility.”

Ukrainian Bacon employs more than 1,900 staff. MHP added: “Some employees will be redeployed to other MHP production facilities. All employees of Ukrainian Bacon will continue to be provided with financial compensation during April.

“MHP is working actively on the commissioning of similar production sites at MHP facilities in order to continue to provide Ukrainians with high-quality products under its Bashchynsky brand, which were originally produced at Ukrainian Bacon. However, such commissioning will require additional time and resources.”

MHP has already started sowing in some regions of Ukraine and said it has “all the necessary resources and materials to successfully complete the 2022 spring campaign, including seeds, fertilisers, plant protection materials and diesel fuel for tractors”.

It added: “Despite significant challenges with export logistics, the company is not substantially changing crop rotation as its first priority is to produce crops for fodder production. Production in excess of this requirement will be exported.

“The company wishes to advise that the Russian troops withdrew from the Kyiv and Sumy regions of Ukraine last week. Ukraine’s special forces are currently de-mining the Kyiv and Sumy territories. However, agricultural fields are a third priority behind residential areas and infrastructure. Nevertheless, the MHP team now believes there is a probability that the 15,000 hectares of the land previously under Russian occupation in the Kyiv and Sumy regions can be sown this spring.”

Last month, MHP sought bondholder approval to defer interest payments and avoid a claim on assets as the company grappled with disruption from the Ukraine conflict.

A majority of the bondholders have given the green light for the company to have an extra nine months to meet interest payments on US$1.4bn of bonds. MHP made the request after it missed an interest payment on its 2029 bonds due to be paid on 19 March.

Earlier in the conflict, MHP was forced to halt exports amid logistical limitations but shipments via road have since restarted.

In mid-March, MHP, which is responsible for about half of chicken production in Ukraine, saw one of its warehouses damaged by Russian shelling, destroying millions of dollars worth of chicken products.

In the first nine months of 2021, the company saw its revenue rise 16% to $1.65bn. Export revenues stood at $843m, up 11% on the corresponding period a year earlier.

MHP’s nine-month operating profit more than doubled to $416m. The company’s net profit was $377m, compared to a net loss of $109m in the first nine months of 2020, on the back of non-cash foreign-exchange gains.

For more on Just Food’s coverage on how the conflict in Ukraine is affecting the food industry, please visit our dedicated microsite.

Just Food parent GlobalData is providing an ongoing analysis of the war’s impact across business sectors.

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