Ukrproduct Group, Ukraine's large producer of packaged butter and processed cheese, increased revenue in January - June 2015, while its gross profit considerably fell, the company has said, adding that the interim financial report will be published in September.
According to the company’s report on the London Stock Exchange last week, over the past six months Ukrproduct has faced significant headwinds. The Ukrainian economy continued to decline mostly owing to the continuing unrest in the east of the country and the pressured state of Ukrainian economy overall. This reflected in hryvnia devaluation, deterioration of consumer confidence and shrinking of the domestic market. Furthermore the closure of the Russian market put further pressure on the Ukrainian market due to oversupply.
Ukrproduct said that in dairy the domestic market capacity shrunk across the company’s key product categories leading to stricter competition. At the same time the raw milk prices showed a year-on-year increase of circa 12 percent.
Branded dairy products are expected to show a slight increase in revenue in hryvna terms not least as the result of an increasing shift of sales focus from the occupied eastern regions to other highly populated areas as well as the consumer price increases where appropriate.
Ukrproduct reported that the comprehensive marketing campaign for the company’s “Our Dairyman” brand launched in the end of 2014 continued in 2015 and largely contributed to the improvement of Ukrproduct’s packaged butter and processed cheese sales and overall strengthening of the company’s market position.
The domestic sales of hard cheese category were the most challenged by the ban on exports to Russia. Thus the company strived to expand its geography of sales and successfully resumed the sales to Crimea via a distributor. As result the sales of hard cheese are expected to show a good progress compared to the first half of 2014 in both volume and revenue terms.
The gross profit of branded dairy products is expected to show a sizeable decrease mostly owing to the packaged butter and processed cheese categories, the company said.
Skimmed Milk Powder (SMP) segment showed a considerable decline following the global dairy commodities prices contraction due to the oversupply caused not least by the Russian embargo. Thus the company expects the revenues in foreign currency and the gross profit in this segment to decrease substantially.
Meanwhile the company continued to improve the efficiency of its production capacities utilization via placement of the third party orders for skimmed milk. As a result the revenues and the gross profit of the third party services is expected to show a healthy increase year on year.
