Milkiland, a dairy group with assets in Ukraine, the Russian Federation and Poland, saw EUR 7.62 million of net loss in January-March 2020, which is 2.1 times more than in the same period in 2019.
According to the group’s report on the Warsaw Stock Exchange website, Milkiland revenue in the first quarter decreased by 22.8%, to EUR 22.79 million, gross profit – by 37%, to EUR 2.29 million, while operating loss increased 1.6 times, to EUR 2.86 million. Milkiland increased EBITDA with a negative value 5.6 times, to EUR 1.25 million.
Ukraine contributed 34.9% to the group’s revenue in Q1 2020 (1 pp decline y-o-y). Segment revenue decreased by 25.7% to c. EUR 7.95 million, again mainly due to increased selling prices for finished goods in line with general markets trends, as well as selling of higher value-added goods.
Poland contributed 7.8% to the group’s revenue in Q1 2020 (up 1 pp y-o-y), the segment’s revenue decreased by 10.3% y-o-y to c. EUR 1.79 million on the back of lower sales volumes.
Russia was the largest geographical segment in terms of revenue generation for Milkiland in Q1 2020 providing for 58% (up 0.7 pp compared to Q1 2019). The segment’s revenue was down by 21.9% y-o-y and stood at c. EUR 13.22 million, mainly due to selling volumes contraction triggered by lower processing volumes.
Whole-milk dairy was the largest segment in term of revenue providing for c. 41% of revenue in Q1 2020 (vs 51% in Q1 2019). The segment’s revenue declined by 38.4% y-o-y in Q1 2020 to EUR 9.3 million on a back of lower sales volumes.
Cheese & butter segment contributed approximately 33% to the group’s total revenue in Q1 2020 (35% in Q1 2019). Segment’s revenue decreased by 26.4% to EUR 7.6 million due to lower sales volumes in Russian, as well as export markets.
In Ingredients segment, revenue grew by c.41% y-o-y to EUR 5.9 million on the back of increased sales volumes, including at EU market. It contributed c. 26% to the group’s total revenue versus 14% in Q1 2019.
In the first quarter of 2020, Milkiland decreased its overall sales volumes by c. 40% y-o-y, mainly due to implications of the global COVID-19 crisis in the markets of the group’s operations. Lower volume sales of cheese and butter and whole-milk products were partly offset by increase of sales volumes of ingredients.
Aiming to support the profitability of the business Milkiland Ukraine focused on the development of sales of high value-added products, including innovative lactose-free cheese and whole milk products, primarily in the key accounts channel. But massive import of dairy to Ukraine, primarily from EU, growing competition in the local market together with limited export opportunities on the back of relatively high raw milk farmgate prices brought the EBITDA of Milkiland Ukraine to negative territory (c. EUR 0.2 million, negative vs c. EUR 0.2 million in the same period of 2019).
The lion’s share of the contraction of sales volumes in Q1 2020 was delivered by the group’s main Russian subsidiary – Ostankino. Fist reason for that is the inability of Ostankino to persuade some key clients, namely local retailers, to increase the shelf prices for the finished goods in line with general Russian dairy market trends. As the result, the collaboration with some key clients was diminished or interrupted in the reporting period.
Milkiland said that second reason is that Ostankino faced the most deep negative implications of the COVID-19 crisis in Russia. Strict quarantine measures imposed by the Russian Government, as well as municipal authorities of the City of Moscow in March 2020, inter alia, were included closure of the shopping centers, obligatory self-isolation of the population in their households. The latter requirement provoked the migration of a significant amount of Moscow inhabitants to the rural areas during quarantine period. On the back of this situation, Ostankino’s sales declined significantly (by more than c. 40% in value terms in Q1 2020 on y-o-y basis), which brought the EBITDA of this subsidiary to the negative territory.
On March, 6, 2020, the Arbitrage Court of Kursk oblast of Russian Federation adopted a decision of insolvency of LLC Kursk Milk, subsidiary of Milkiland RU, implemented the arbitrage management of this company and appointed an arbitrage administrator. Since that time, the group lost the control on operations of LLC Kursk milk, the financial results of this company was incorporated to the consolidated results of Milkiland Group only partially. This situation led to some difficulties in production and sales of several SKU’s in the product portfolio of Milkiland in Russia, including under Dobryana and Latter brands. The management of the group has been striving for entering into the debt settlement agreement with the creditors of LLC Kursk Milk.
Milkiland EU in Q1 2020 reported tiny positive profitability on EBITDA level of c. EUR 0.014 million due to better pricing environment for sales of dry milk products in EU and globally in comparison with negative EBITDA of c. EUR 0.4 million in Q1 2019.
In Q1 2020 Milkiland continued to develop its sales in new export markets and catch the opportunities of profitable international trade in the global dairy market. In particular, Milkiland Intermarket managed to increase the sales of dry milk products in Q1 2020 by 20% in volume terms on y-o-y basis due to the restoration of sales of the respective products produced by the group’s Polish subsidiary Milkiland EU in the European market.
The consumer confidence of Ukrainians in April 2020 worsened by 6.8 points, to 66.2 points on a 200-point scale, and their assessment of their current situation by 18.4 points, to the level of 2017, or to 48.8, according to data from Info Sapiens research agency.
“The Consumer Confidence Index (CCI) lost 7 more points during the second month of the quarantine. Such loss is not big comparing with negative dynamics of the CCI in March-April in European countries. Namely, in Poland and Hungary the index decreased by 37 points, in Germany by 26 points, in Spain by 13 points, and Italy by 13 points,” according to a report on the agency’s website.
“The Index of Current Personal Financial Standing equaled 52.3, which is 7.8 points lower than the indicator in March, while the Index of Propensity to Consume decreased by 29 points and reached the indicator of 45.3,” the report says.
“The propensity of Ukrainians to believe in the short-term nature of the crisis (in the perspective of one year) and optimistic expectations about economic development in the next 5 years keeps consumer confidence from rapid decline. At the same time, the most sensitive to the current crisis was the Index of Propensity to Consume: the April value of this index is the lowest for the period June 2014-April 2020. Approximately the same level of this Index was observed in July-August 2015. The decrease of propensity to consume indicates a strong sense of uncertainty among consumers and a strategy of cautious consumer behavior,” Info Sapiens analysts comment.
“In April, the Index of Economic Expectations increased insignificantly by 0.9 points to the level of 77.8. The indicator of the Index of Expectations of Changes in Unemployment equaled 168.9, which is 35.5 points higher than in the previous month. The Index of Inflationary Expectations decreased to the level of 172.7, which is 12.7 points lower than last month. Expectations of Ukrainians regarding the hryvnia’s exchange rate in the coming three months have improved: the Index of Devaluation Expectations decreased by 7.2 points and reached the level of 146.8,” according to the document.
DTEK Oil & Gas LLC, which is responsible for the oil and gas business in the structure of DTEK energy holding, in May 2020 reached a record daily level of natural gas production both for the company and private companies in the amount of 5 million cubic meters (mcm), the company said in a press release.
“In May, DTEK Oil&Gas reached the daily natural gas production level of 5 million cubic meters. This figure was achieved for the first time in the history of the company and the entire private gas production of Ukraine,” the report said.
The daily maximum update was achieved through the implementation of infrastructure projects, a deep drilling program with the commissioning of new high-yield wells at Semirenkivske and Machukhske fields, as well as through measures to stimulate wells in the existing fund, the press release said.
“Despite the unstable economic situation in the country and the difficult conditions in the gas production sector due to record low gas prices, we are working hard to implement a strategy to increase natural gas production,” DTEK Oil & Gas CEO Ihor Schurov said.
As reported, in 2019 the company increased natural gas production by 0.66%, to 1.66 billion cubic meters.
DTEK Oil & Gas is an operating company responsible for the oil and gas sector in the structure of DTEK Group.
DTEK, GAS, OIL&GAS, PRODUCTION, RECORD
Odesa seaport handled 8.295 million tonnes of cargo in January-April 2020, which is 3.5% more than in the same period in 2019.
According to the data of the Ukrainian Sea Ports Authority, for the specified period, the port increased the transshipment of exported cargo by 0.1%, to 6.181 million tonnes, imported cargo by 24.5%, to 1.708 million tonnes. Coastal cargo handling decreased by 33.2%, to 23,880 tonnes, and transit cargo by 11.6%, to 382,910 tonnes.
The transshipment of bulk cargo at the Odesa Sea Port increased by 29.6%, to 570,740 tonnes, dry and bulk cargo decreased by 11.2%, to 3.061 million tonnes, package cargo increased by 13%, to 4.663 million tonnes in January-April.
Processing of containers for the period amounted to 218,475 TEU (an increase of 10.6% compared to the same period in 2019).
Odesa seaport is located in the southwestern part of Odesa Bay on an artificially created area of 109.5 hectares.
The port serves ships up to 270 meters long with a draft of up to 13 meters. The total length of the mooring line is more than eight kilometers.
DCH Group of Oleksandr Yaroslavsky and ZTE Corporation, a large Chinese telecommunications equipment manufacturer, have signed a memorandum of cooperation under the Ecopolis KhTZ project, the DCH press service has said.
The document was signed on behalf of DCH by the managing company of the Ecopolis KhTZ business park, and on behalf of ZTE – the Ukrainian division of ZTE Ukraine Corporation. The ceremony was held in a video conference format due to quarantine restrictions in Ukraine.
According to the report, ZTE became the first Ecopolis KhTZ business resident in the industrial park (industrial cluster) and the technology park (IT and R&D clusters). The promising areas of cooperation are the creation of a ZTE office, an R&D center, and a production site in the territory of Ecopolis KhTZ.
“You are the first in the development of the Ecopolis KhTZ technology cluster. I hope other Chinese companies will follow you, such as, for example, Alibaba Group,” DCH said.
In turn, the vice president of ZTE Corporation emphasized the compliance of the Ecopolis KhTZ project with his company’s strategic priorities, and the CEO of ZTE Ukraine said that ZTE is ready to offer its expertise for the implementation of Smart City digital transformation projects in Kharkiv.
Kharkiv Mayor Hennadiy Kernes, who was present at the signing ceremony, noted that the city will fully assist in the implementation of the initiative of DCH Group.
Dynamics of the consumer price index in 2002-2020, in %
