Yet, its improved operating performance has been undermined by the imposition of the stringent new Ukraine Tax Code.
The Ukrainian business environment has become more challenging following the introduction of the new Tax Code and pressure from the tax authorities. The dairy sector was also affected by a new milk subsidy regime, which led to an increase in raw milk prices of approximately 20% for all processors.
Announcing its unaudited interim consolidated IFRS financial results for the six months ended 30 June 2011, Ukrproduct CEO Sergey Evlanchik said: “In the first half of 2011, the Group achieved a significant increase in sales volumes and revenues led by branded/own-label products and distribution services for third-party products. Margins came under pressure, not least from changes to the milk subsidy regime in Ukraine. SMP revenues fell due to market conditions. Overall, Ukrproduct saw strong growth in operating profit.”
Ukrproduct achieved strong increases in sales volumes and revenues driven by a new sales and marketing strategy led by a new management team.
Revenue in the first half of 2011 was up 21.1% year-on-year, mostly driven by sales of branded products, Ukrproduct’s core offering.
The Group strengthened its leading position in the overall butter segment, increasing market share by 1.5%. Sales of packaged butter and spreads increased by 28%, with gross profit up 68%.
There was extreme price competition at the lower end of the processed cheese market as consumer demand switched to lower priced goods and the market contracted.
In the second half of 2011, the Group aims to further increase the sales of branded/own-label products with trade marketing campaigns and further adaptation of the product portfolio to meet new market requirements, including the launch of new products.
Sales of distribution services for third-party products are also expected to improve. The SMP market is expected to remain subdued.
Margin pressure will continue given the new milk subsidy regime. The Group also expects a seasonal increase in raw milk prices as well as further increases in fuel and other input costs. In addition to increasing sales, Ukrproduct will therefore be focused on cost-cutting measures to sustain profitability.
Source: Ukrproduct
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