“Ukrproduct Group, a major Ukrainian producer of packaged butter and processed cheese, posted a net profit of GBP0.39 million in 2023, compared to a net loss of GBP0.80 million in 2022.
According to a report posted by the company on the London Stock Exchange, revenue decreased by 5.4% to GBP36.99 million, but increased by 19.5% in hryvnia terms.
“Ukrproduct’s consolidated revenue in FY2023 increased by 8% in UAH. The overall sales growth was driven by a focus on the development of key products, namely processed cheeses and processed cheese products, the development of new product categories, snacks and beverages, as well as the expansion of the group’s presence in retail chains,” the document says.
It is specified that in the processed cheese and processed cheese products category, sales amounted to GBP24.9 million, which reflects a 25.7% increase in revenue in hryvnia compared to the previous year, while in physical terms, sales increased by 12.4%. This was mainly due to an increase in exports to the Middle East, the focus of marketing campaigns on these product categories and the development of new positions, the report says.
According to the report, sales of butter in 2021 amounted to GBP3.1 million, reflecting a 3.4% increase in revenue in UAH terms, while sales in volume terms decreased by 4.3%. “A significant increase in the purchase price of raw milk and butter in Ukraine in the second half of 2023, rising logistics costs and increased competition in the market led to a decrease in the margin of butter sales,” Ukrproduct added.
Spreads sales decreased to GBP4.6 million in 2023 from GBP5.6 million in the previous year, down 6% in hryvnia terms and 12.9% in volume terms. The decline was mainly due to increased competition in the market, the company explained.
It is indicated that sales of skimmed milk powder fell by 52.1% in hryvnia, or to GBP1.1 million from GBP2.5 million a year earlier. In volume terms, skimmed milk powder sales decreased by 43.4%. Due to the significant decline in skimmed milk powder prices in 2023, the Group minimized the production of this product for sale in favor of using it as an ingredient in the production of processed cheeses.
Sales of kvass and beverages in FY2023 amounted to GBP1.8 million, up 90.2% in UAH terms and 42.8% in volume terms. The growth was driven by the resumption of a full sales period in fiscal 2023, while in 2022 the sales season in key kvass regions was postponed until June due to the Russian invasion of Ukraine.
It is noted that in 2023 Ukrproduct focused on trade marketing activities, in particular on providing discounts to customers and consumers, rather than on advertising campaigns, resulting in a 51.3% decrease in marketing expenses compared to 2022.
Other operating expenses in 2023 amounted to GBP1.1 million compared to GBP1.6 million in 2022, including impairment losses on inventories of products that the company was unable to export due to the blockade of Ukrainian Black Sea ports, as well as minor fines and some VAT losses.
According to the report, Ukrproduct’s EBITDA for 2023 amounted to GBP2.4 million, which is 32.8% higher than in 2022.
It is noted that financial expenses in 2023 increased by 67.6% to GBP0.78 million, mainly due to higher interest rates and recognized additional interest expense on the loan from the European Bank for Reconstruction and Development (EBRD) for previous periods. It is specified that in June 2023, despite the difficult operating environment due to the war in Ukraine, the EBRD decided to exercise its right under the loan agreement and increased the interest rate on the loan retroactively from September 2021. At the same time, the company has not yet paid the EBRD a tranche of EUR 2.1 million, which was due in December 2022, and did not pay interest on the debt in the amount of about EUR 5.7 million from March 2022 to December 2023. Restructuring negotiations are ongoing.
Ukrproduct’s free cash flows at the end of 2023 amounted to GBP0.4 million, the same as a year earlier.
“In 2024, the group plans to focus on maintaining its existing production facilities, supporting sales volumes and continuously improving operational efficiency,” the document emphasizes.
It is also reported that as of June 19, 2024, Jack Rowell resigned from the Board of Directors after 19 years as its Chairman. Serhiy Yevlanchyk became the interim chairman of the board in addition to his role as Ukrproduct’s executive director.
As reported, the company earned GBP0.65 million in net profit in the first half of 2023, compared to a GBP0.20 million net loss in the same period of 2022. Its revenue in the first half of the year remained at the level of the first half of 2022 – GBP18.3 million, but increased by 19.5% in hryvnia.
