Business news from Ukraine

Philip Morris officially opens new factory in Lviv region

On Wednesday, tobacco manufacturer Philip Morris International officially opened a new factory in Lviv region, in which it has invested $30 million.

“The first line is already in operation. The second line is almost completed and will start operating in June… In total, five lines will be installed, 10 billion cigarettes will be produced, which will fully meet the needs of the local market of Ukraine,” said Philip Morris Ukraine (PMU) CEO Maxim Barabash at the opening of the factory.

He emphasized that the focus of the production is to cover the market demand for cigarettes.

According to Barabash, there are no plans to expand production for export or manufacture other products.

According to PMU, 250 jobs will be created at the factory. By now, the company already employs about 100 people relocated from the Kharkiv factory, which was “mothballed” on February 24, 2024, the day of the Russian invasion, and another 150 people are planned to be relocated by the end of the year.

“My dream for the future after the victory is that we have two factories. One would produce cigarettes, and the other would be in Kharkiv, working on new products that would be relevant and relevant at the time when this comes true,” Barabash summarized.

According to him, this year Philip Morris celebrates 30 years of operation in Ukraine. During this time, the company has invested about $750 million in the Ukrainian economy and is one of the largest taxpayers.

Philip Morris was spun off from Altria in 2008 and is one of the world’s largest tobacco manufacturers. The company’s revenue for 2023 increased by 10.7% compared to 2022 to $35.2 billion, and for the first quarter of 2024 – by 9.7% to $8.79 billion. The report states that Ukraine accounts for approximately 2% of total sales in physical terms and 1% in monetary terms.

In 2022, PMI reduced shipments to the Ukrainian market by 30.1% to 11.07 billion cigarettes and tobacco sticks due to the war, but in 2023 it managed to increase shipments of finished products by 8.4%, including 14.9% in the fourth quarter. Last October, the company announced that it had recovered its share of the Ukrainian market to 24% after it fell to 14% from 28.5% in the first months after Russia’s invasion.

Prior to the launch of the new factory, PMU was forced to import products from eight PMI factories outside the country and a temporary partnership with another international manufacturer in Ukraine.

In addition to cigarettes, PMI develops and manufactures smokeless products, such as systems for electrically heating tobacco, POD systems containing nicotine, and nicotine products for oral administration. Sales of smokeless products accounted for 39% of PMI’s total net revenue in the first quarter of 2024.

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Ukrnafta prepares to drill two wells in Lviv region

PJSC Ukrnafta is preparing to drill two wells #32 and #34 at the Verkhnemaslovetske field in Lviv region, the company’s press service said on Thursday.

Both wells are planned as directional and exploration and production wells.

Well No. 32 with a depth of 1,250 meters is expected to uncover the Stryian deposits. According to the digital 3D geological and hydrodynamic model of the field, the current recoverable oil reserves in the productive horizons of the Stryy formation amount to 1.121 million tons. The initial production rate is expected to be 42.5 tons of oil per day.

Well No. 34 will be drilled to a depth of 1,550 meters to the mesolithic deposits. The current recoverable oil reserves in the productive horizons of the Mnemiolite formation amount to 464 thousand tons. After the well has developed the drained reserves of the Menelitic deposits, it will be transferred to the overlying horizons of the Stryian deposits. The initial flow rate is 30.1 tons per day.

“The facilities will be built by a contractor with experience in western Ukraine, Horizons Drilling Company LLC, selected through a transparent procurement procedure, and will be completed on a turnkey basis,” said Sergiy Koretsky, Ukrnafta’s CEO.

As reported, in late June Ukrnafta announced a tender for the construction of three inclined wells at the Verkhnemaslovetske field with an expected cost of UAH 184 million (excluding VAT). The new facilities are to be commissioned by June 30, 2024. The new wells should discover promising deposits within the field discovered in 2000.

In total, four new wells are planned to be constructed at the Verkhnemaslovetske field in 2023 and five more in 2024. These will be both directional and horizontal wells.

“In 2023, Ukrnafta plans to increase oil production by 5.8% (by 0.077 million tons) compared to last year to 1.447 million tons, and gas production by 0.3% (by 0.003 million cubic meters) to 1.04 billion cubic meters.

On November 5, 2022, the Supreme Commander-in-Chief’s Office decided to seize Ukrnafta shares (except for the controlling stake in Naftogaz of Ukraine) as military property for the duration of martial law. Before the seizure, the structures of Ihor Kolomoisky and Hennadiy Boholyubov owned about 42% of Ukrnafta shares.

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New industrial park appeared in Lviv region

The Cabinet of Ministers has created the Stryi Valley industrial park in the Lviv region, which will ensure, in particular, the development of the processing industry in the region and create about 700 new jobs, Prime Minister Denys Shmygal said.
“We hold a consistent course on all-round business support. Today we are creating another industrial park, the Stryi Valley in the Lviv region,” Shmygal said at a government meeting on Tuesday.
According to the Prime Minister, the implementation of this decision is expected to create about 700 jobs and the development of processing in the region, particularly in the food industry, woodworking and mechanical engineering.

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BEB seized more than 330 thousand packs of counterfeit cigarettes in Lviv region

Detectives of the territorial department of the Bureau of Economic Security (BES) in Lviv region have exposed a large-scale scheme of selling illegally manufactured tobacco products and smuggling them abroad, the agency’s website reported on Wednesday.
According to its data, the detectives of the Bureau in Lviv region conducted an immediate inspection of a truck with excisable goods, and in Zakarpattya region they searched a warehouse. During the search revealed and seized more than 330 thousand packs of tobacco products without excise tax marks, about 1.5 tons of hookah tobacco, a vehicle, as well as rough records and documentation evidence of illegal activities. The preliminary total value of excisable products seized from the illegal turnover is almost 18 million UAH.
Currently, measures are taken to establish the full range of persons involved in the scheme, the primary investigative actions.
BEB clarified that the pretrial investigation into criminal proceedings on criminal offence under Part 1 of Article 204 of the Criminal Code of Ukraine (illegal storage and transport with intent to sell excisable goods) is carried out by detectives of the territorial administration of the Lviv region, under the procedural guidance of prosecutors of the Lviv Regional Prosecutor’s Office.
As reported with reference to the tobacco market research institute “Kantar Ukraine”, the share of illegal tobacco products on the Ukrainian market in August 2022 increased by 5 percentage points (p.p.) compared to the annual average of 2021 – up to 21.9% from 16.9%, the volume of shadow market was the highest since the independence of Ukraine.
The Institute specified that 56% of the tobacco products illegally sold in 2022 as export or Duty Free products have the mark of production of Vinnikivska Tobacco Factory (Vinniki, Lviv region) and marked as not intended for sale in Ukraine. The share of unidentified producers was 24% (in 2021 – 23%), United Tobacco LLC (Zheltye Vody, Dnepropetrovsk oblast) – 19% (in 2021 – 15%).

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Kharkiv manufacturer “Kulinichi” invests EUR20 mln in construction of bakery in Lviv region

LLC “Kulinichi” (Kharkiv region), a major manufacturer of bread and bakery products, has begun construction of a bakery in the Lviv region with a capacity of up to 150 tons of bread per day, part of which will be sold for export, according to the Ukrainian diplomat’s Facebook page Mikhail Bno-Ayriyan.
At the same time, it is specified that investments in the enterprise will amount to EUR 20 million over two years, part of the equipment for the plant will be transported from the Kulinichi plant in the Kharkiv region.
In turn, the bread manufacturer on his official Facebook page confirmed that he had begun construction of an enterprise in the Lviv region, but stressed that this did not mean the closure of the plant in the Kharkiv region.
“Yes, we are really building a new plant near Lviv. We are not closing the plant in Kharkiv, we are not closing our retail outlets in Kharkiv (…) We will bake bread for you, no matter what,” the Kulinichi page says in social network.
LLC “Kulinichi”, operating in Ukraine since 1995, unites 8 bakeries of the Kharkiv region and plants of the Poltava, Donetsk and Kyiv regions.
Since 1999, LLC has been cooperating with the Slovenian enterprise Gostol-Gopan.

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IT IS PLANNED TO BUILD IT CAMPUS FOR REPRESENTATIVES OF CREATIVE INDUSTRIES IN LVIV REGION

It is planned to build an IT campus for representatives of creative industries in Lviv region, Artem Honcharenko, President of the International Technology Transfer Association (ITTA) and the Fund for Reconstruction and Development of Ukraine, has said.

“Currently, we are implementing such a project, we have found a site in Lviv region. The legal process will begin soon. We plan to build the first campuses during the summer, where it will be possible to attract foreign partners and IT specialists, creative industries, youth to create a platform for discussion and start-ups,” Honcharenko said during a press conference at Interfax-Ukraine on Thursday.
He clarified that there are already agreements on the allocation of a land plot in Lviv region with an area of 8 hectares. The project provides for construction of campuses no more than five floors, the total area of spaces will be 10,000 square meters.

According to Honcharenko, the campuses of the town will be able to host up to 1,000 participants, and construction of places of temporary residence is also envisaged. In addition, a rehabilitation center as part of the technology park will be designed for 500-600 people.
Previously, the creation of such towns was planned in Kyiv region, Kharkiv, Odesa, and Lviv.
“We postponed construction of such a center in Kharkiv to the post-war period. We will start talking with local authorities about what needs to be taken into account for construction of such a town of creative industries in terms of restoring the city,” the ITTA president said.
“We would like to create not only a place for communication, but also, perhaps, with flexible taxation conditions, with the possibility of entering international markets,” he stressed.
The Ukrainian non-profit organization International Technology Transfer Association (https://itta.org.ua/) was founded in 2020, its activities include software development, development of the IT sector in Ukraine. In April 2022, ITTA co-initiated the creation of a charitable foundation for Reconstruction and Development of Ukraine to organize and deliver humanitarian aid to Ukraine.

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