REG - Ukrproduct Group Ltd - Trading update <Origin Href="QuoteRef">UKR.L</Origin>

UkrproductAnnouncement

27/01/2017 13:00

RNS Number : 3565V
Ukrproduct Group Ltd
27 January 2017
FOR IMMEDIATE RELEASE January 27, 2017
TRADING UPDATE
Kyiv,Ukraine-January27,2017 -UkrproductGroup Limited("Ukrproduct"orthe "Group")(AIM:UKR),oneoftheleading Ukrainianproducersanddistributorsofbrandeddairy foodsandbeverages(kvass),todayannouncesthefollowingtradingupdatefortheyearended 31 December 2016.
During 2016 Ukrproduct has continued to face the headwinds induced by the political situation and the Ukrainian economy. Currency weakness continued with a contracted geographic market place and intense competition. Consumers are low in spending power and confidence. 
In this challenging context Ukrproduct's response is to focus on cash: ensure its product offering is competitive; focus on customers affording acceptable margins and therefore on cash production. Ukrproduct seeks further to underpin the trading effort with productivity/cost improvements. 
Trading
As to be expected, overall volumes fell although revenues improved given product mix and price inflation. Gross margins in most product lines improved apart from skimmed milk powder. 
Branded products were given more focus with key categories butter and spreads showing improved volume and margins. Margins on processed cheese were maintained on slightly lower revenues. Private label made improved gross profits on significantly reduced volumes as marginal contracts were terminated. Those retained/developed reflected the quality demanded by the retailer and commensurate margins. The kvass beverage continued to make a strong gross profit contribution. This category offers opportunities and the product offering has been extended with white kvass and healthy rose hip drinks being test marketed. 
The exchange rate depreciation has facilitated development of the export business not least to CIS countries. More recent growth of domestic dairy prices in the Ukraine has provided some constraint.
 
Skimmed milk powder has been a negative in terms of available prices being historically low across the world, particularly in the first half. Spare capacity at our Starokonstantyniv facility has however afforded opportunities for profitable contract processing.
 
In 2016 Ukrproduct maintained its approved supplier status with a major international company, confirming that the company's products meet high international quality requirements.
Finances
Whereas overall volumes fell in 2016, revenues improved. In difficult markets gross margins generally showed some improvement, subject to skimmed milk powder which returned a shortfall in excess of 0.6m year on year.
. 
However given significant cost reductions, EBITDA improved by several points into positive territory. This was encouraging and although the Group expects to report a loss for the year this will be sizably lower than in 2015.
Cash in such trading circumstances continues to be the focus. Along the lines mentioned the Ukrproducttrading model is cash oriented not least through release of working capital. This is allowing ongoing servicing of its debt obligations, including interest payments to EBRD under the terms of the more favourable debt restructuring agreement signed last June. 
Outlook
Ukrproductwill continue to work towards profitability whilst delivering positive cash flow. Plans as defined above delivered improved performance in 2016 will be further implemented. Management agility will be required in the febrile market place but confidence has risen not least as also has the Ukrainian economy. 
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Forfurtherinformation, pleasevisit www.ukrproduct.comor contact:
Ukrproduct Group Ltd

Jack Rowell, Non-Executive Chairman
Tel: +380 44 232 9602
Alexander Slipchuk, Chief Executive Officer 
www.ukrproduct.com 
ZAI Corporate Finance Ltd.

Nominated Adviser and Broker
Peter Trevelyan-Clark, Jamie Spotswood
Tel: +44 20 7060 2220
www.zaicf.com


This announcement contains inside information forthe purposes of Article 7 of EU Regulation 596/2014.
UkrproductGroupLtdisoneoftheleadingUkrainianproducersanddistributorsofbrandeddairy
productsandkvass,atraditionalfermentedbeverage.TheGroup'sproductportfolioincludes
processedandhardcheese,packagedbutter,skimmedmilk powder (SMP)andkvass.Ukrproduct has built arange ofrecognisable product brands ("Our Dairyman","People'sProduct", "CreamyValley", "Molendam","Farmer's")that are wellknownandhighlyregardedbyconsumers.TheGroupreported unaudited consolidated total assets of approximately GBP 13.8 million as at June 30, 2016and unaudited consolidated revenues of approximately GBP 8.2 million for the six months then ended. In its full year ended 31 December 2015, the Group reported audited revenues of approximately GBP 22.2 million.Ukrproduct'ssecuritiesaretradedunderthesymbol"UKR"onAIM,amarketoperatedbythe
London StockExchange.
Some of the informationin this press release may contain projectionsor other forward-lookingstatements regardingfutureeventsorthefuturefinancial performance oftheGroup.Youcanidentifyforwardlooking statements bytermssuchas"expect,""believe,""anticipate," "estimate,""intend,""will,""could,""may"or "might"thenegativeofsuchtermsorothersimilarexpressions.Thesestatementsareonlypredictionsandthey may differmateriallyfromtheactualeventsorresults.We donotintendto updatethese statementstoreflectevents andcircumstancesoccurringafterthedatehereoforto reflecttheoccurrenceofunanticipatedevents.Manyfactors couldcausetheactualresultstodiffermateriallyfromthosecontainedinsuchprojections orforward-looking statements,including,amongothers,generaleconomicconditions,ourcompetitiveenvironment, risksassociated withoperatinginUkraine,rapidtechnological andmarketchangeinourindustry,aswellasmanyotherrisks specificallyrelatedtotheGroupanditsoperations.

This information is provided by RNS
The company news service from the London Stock Exchange
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