Requires registration
Leading Ukrainian poultry and grain producer ready to capitalise on the ongoing food crisis
by Tom Sieber
The largest poultry producer in Ukraine is set to test the waters on the main market with a $500 million flotation in the face of the ongoing world food crisis.
Morgan Stanley and UBS have been engaged to sell around a quarter of Mironovskiy Hleboproduct’s (MHP) stock in an IPO that should value the company at around $2.3 billion, although as yet no timetable has been given for the float.
The agro-industrial producer is also a leading cultivator of grain and had a 36% share of all chicken meat produced in the former Soviet state last year. The company operates in a growing domestic consumer market – there are more than 46 million Ukrainians with increasing spending power, matched by an increasing appetite for meat.
MHP’s facilities are among the most technologically advanced in the Ukraine and this has helped it become the lowest cost poultry producer in the country. In 2007 it had revenues from continuing operations of $478 million and EBITDA of $164 million.
Obviously, rapidly rising grain prices do represent a problem for the group but, in the first quarter at least, the company has been able to offset these costs by passing them on to customers in the form of increased prices for chicken meat. MHP is also seeking to vertically integrate its operations in order to reduce dependence on suppliers and exposure to increases in the prices of raw materials.
A logical step for growth
Based on its 2007 harvest it expects to internally source around 60% of the corn used for fodder during the current agricultural year and aims to become self-sufficient in this area by the end of the decade. The firm is bullish about its current prospects and founder and current CEO Yuriy Kosyuk describes admission to the LSE as the ‘next logical step for the company’.
He says: ‘It will assist in achieving its ambitious growth plans. With Ukraine’s widely recognised potential as a country with fertile grain-growing soils and with over 46 million domestic consumers, Ukraine can be the bread basket of Europe and is a market with massive potential. I am very excited MHP is so well placed to benefit from that growing demand.’
Given the high prices and demand for grain, in the medium-term MHP is also seeking to expand capacity in this area, by 20% to 25% a year, picking up the rights to high-yielding land throughout the Ukraine.
The company will use the money raised in the flotation to expand its chicken production capacity in order to meet the expected growth in demand with the aim of reaching capacity of 350,000 tonnes by 2010. The group has also made diversification a priority and has added new business lines to capitalise as these markets develop in the country.
The announcement from MHP is one of a number in recent weeks as the market has begun to see a tentative upswing in new issues. Like MHP, Mexican silver producer Fresnillo, Czech coal firm New World Resources and Egyptian real estate group Palm Hills Developments are expected to have valuations of more than a billion pounds when they come to the market.