The lack of production facilities in Ukraine and the import of its confectionery products into the country allows Mars Corporation to successfully conduct its business amid a crisis in the industry caused by the rise in prices for raw materials and energy resources, Chief Financial Officer (CFO) of Mars Ukraine LLC (Brovary, Kyiv region) Svitlana Hrukhal has said. “In the field of confectionery, we have everything under control. We import products, and this makes it possible to distribute the raw material base and production resources in several countries and thus compensate [for crises],” she told Interfax-Ukraine on the sidelines of the Ukrainian CFO Forum on Wednesday.
According to her, the key trend in the industry is the growth in demand in Ukraine and neighboring countries, which is most pronounced in the segment of chocolate and chewing gum. Hrukhal said that in order to meet this demand, it is necessary to increase production of confectionery products in the region, which is hindered by the rise in prices for raw materials, their shortage, as well as the lack of labor resources.
“If we talk about assessing the development of confectionery products specifically for Mars Corporation, then we have everything under control, and we hope to successfully close this year,” the company’s CFO said.
During the forum, she also said that in 2007 the company planned to build a plant in Boryspil district (Kyiv region) for production of animal feed, but due to unstable business conditions in Ukraine, it abandoned this idea. According to her, for large international companies, the presence of clear and understandable “rules of the game” in the country is a more important factor for investment than well-developed measures of state support for business.
Mars Ukraine LLC is a Ukrainian division of the large international confectionery company Mars. The company sells food and pet care products in Ukraine, produced in Russia and Hungary. Its major brands are Snickers, MARS, Twix, Bounty, Milky Way, M&M’s, Maltesers, Dove, Pedigree, Chappi, Whiskas, Kitekat, Sheba and others.
Main trade partners of Ukraine in % from total volume (import from other countries to Ukraine) Jan-June 2021
SSC of Ukraine
Foreign trade turnover by the most important positions Jan-june 2021 (import)
SSC of Ukraine
Structure of import of services in Jan-June 2021 (graphically)
SSC of Ukraine
The Interdepartmental Commission on International Trade (ICIT) published its decision of April 23 this year in the Uriadovy Kurier newspaper on the application of a special duty on the import of wires to Ukraine, regardless of the country of origin for a period of three years: in the first year of the duty application it will be 23.5%, in the second – 22.3% and in the third – 21.2%. According to the announcement, the decision will take effect 30 days after publication. “This case is unprecedented, since the decision of the commission was not published for almost five months due to pressure from some MPs and officials who lobbied for the interests of importers,” Olena Omelchenko, a partner at Ilyashev & Partners, which represented the interests of Ukrainian manufacturers, said, commenting on this publication in a Tuesday release.
According to her, special duties will only apply to interchangeable goods to prevent problems with shortages.
According to the ICIT document, on July 28, 2020, at the initiative of the Odeskabel and Yuzhcable factories (in total, they produce over 50% of these products in Ukraine), the ICIT initiated a special investigation into the import of insulated wires, cables and other insulated electrical conductors to Ukraine, and also fiber optic cables. These are commodity codes according to Ukrainian foreign activity classifier 8544 49 20 00, 8544 49 91 00, 8544 60 10 10 8544 60 10 98, 8544 60 90 10 8544 60 90 90, 8544 70 00 10 8544 70 00 90.
During the investigation period – from the beginning of 2017 to the middle of 2020 – import volumes surged by 128.8%, the share of imports in total production – by 180.4%, in consumption – by 74.8%.
“The growth of imports of goods to Ukraine was due to such unforeseen circumstances as an increase in production, an increase in warehouse stocks and exports of goods from China, an exacerbation of trade tensions between China and the United States, a decline in demand in Belarus, global trends in the development of the renewable energy industry and the introduction of 4G technology,” the commission said.
According to the ICIT, as a result, with an increase in consumption by 30.9%, the volume of domestic production decreased 7.3%, sales fell by 8.6%, sales profit slid by 38.9%, while prices decreased 9.2%, and an increase in production costs by 3% was seen.
According to the State Customs Service, imports to Ukraine under code heading 8544 insulated wire, cable and other insulated electrical conductors, optical fibre cables in the first half of 2021 amounted to 30,200 tonnes by $310.95 million, having increased by 24.6% vs. 44.9%.
The export of these products in January-June-2021 amounted to 40,900 tonnes for $882.6 million, which, respectively, is 40.1% and 57.9% higher than in January-June 2020.
Among the countries from which most of the similar products are imported to Ukraine in monetary terms are Hungary (29.4%), Poland (17.2%), China (9.6%), Romania (11.4%), Czech Republic (7.7%) and Germany (7.4%), while the main countries of export of Ukrainian products are Germany (23.2%), Poland (19.7%), Romania (14.3%) and Hungary (13.8%).
The commission said that duties will not be applied to imports originating from a number of countries, including Iceland, Liechtenstein, Norway, Switzerland, Montenegro, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Moldova, Uzbekistan, Tajikistan, Turkmenistan, Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic.
This list also includes Chad, the Union of the Comoros, Congo, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Republic of Kiribati, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal , Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Sudan, Timor Leste, Togo, Tuvalu, Uganda, Tanzania, Yemen, Zambia, Brazil, Mexico and Indonesia.
The introduction of duties was supported by the Ukrelektrokabel association, which unites 16 enterprises, including 12 manufacturers of cable products, three manufacturers of basic materials and Ukrainian Research Cable Industry Institute. More than 95% of cables and wires used in Ukraine are annually produced at the facilities of the enterprises belonging to the association, with a total value of more than UAH 3.9 billion per year.
At the same time, the American Chamber of Commerce in Ukraine opposed it. “The potential introduction of additional import duties will actually be an additional tax for the telecommunications industry. This will negatively affect the investment ability of mobile network operators, since they will have to pay additional duties instead of investing in infrastructure,” the American Chamber of Commerce said.
When calculating the updated electricity forecast balance, the Ministry of Energy of Ukraine does not consider the import of a resource from the Russian Federation and Belarus, First Deputy Energy Minister Yuriy Vlasenko has said.
“When calculating the forecast balance, we do not envisage the import of electricity from Russia and Belarus,” he said on the margins of the energy forum in Kyiv, organized by Energy club, on Wednesday.
At the same time, he drew attention to the fact that imports are prohibited until October 1, but are not considered in the future.
At the same time, Vlasenko said that a feature of this autumn-winter period will be the operation of the Integrated Power System, as well as Burshtyn TPP energy island in an isolated mode, providing for their disconnection from all power systems.
“We need to work this way for three days in winter and summer. As for winter, we are also working on it with Ukrenergo, when we will work in an isolated mode – in late January or early February,” Vlasenko said.
