MHP Agro and Industrial Holding (MHP) the Kiev-based integrated poultry meat producer and agribusiness, was hit by a perfect storm of events in 2020 with profitability and revenues both falling by 7%. It expects the current year to be similarly challenging.
While executive chairman John Rich noted the company was affected by the unprecedented global outbreak and spread of Covid-19, he adds that the Eastern European protein agri-business was also affected by outbreaks of avian influenza and exceptionally dry weather conditions in the Ukraine that reduced harvest yields. The business is a major grower and processor of sunflower and soybeans.
Looking ahead, Mr Rich says the global outlook for poultry in 2021 is set to be “very challenging” through a combination of continued COVID-19 disruption; soft economic conditions; high feed prices; a highly active Avian Influenza winter season and a global oversupply of poultry meat. For example, the EU has some 500,000 tonnes of frozen poultrymeat in cold storage.
These challenges are accelerating MHP’s strategic shift from a commodity producer to a food company “transforming our relationship with retail, food service and franchisees to reach more customers and meet their evolving needs through new safe and high-quality products”.
MHP believes its vertically integrated model means the company has a lower cost base than its industry peers, while enabling it to maintain enhanced levels of quality control and poultry flock biosecurity. Its scale also reduces exposure to raw material price volatility.
Poultrymeat is the strongest meat protein sector with demand going up as demand for red meat falls, stated MHP. This is primarily based on affordability – especially in developing country markets where increasing numbers of citizens are in the financial position to purchase meat for the first time. But poultry consumption is not impeded by religious barriers and is more sustainable – using less water and feed than red meat production - having a significantly lower carbon footprint.
The company also claims that its unique poultry feeding systems produce meat that is lower in saturated fats and higher in polyunsaturated. This makes it more attractive and healthier for consumers as they revaluate their diets in the aftermath of Covid-19. Antibiotic free meat will become an important market differentiator and MHP is committed to eliminating the use of antibiotics in its chicken meat production.
It is working to reduce greenhouse gas emissions with a long-term goal of being carbon neutral for every kilogram of poultry meat produced. MHP is researching carbon sequestration – long term storage of carbon dioxide and other forms of carbon in the soil.
Financials down 7%
MHP made an operating profit of $201 million on revenues of $1.91 billion in the year ended December 31st 2020, compared to $216m and $2.06bn in the previous year. The decrease is mainly attributable to the smaller volume of grain sales after the small 2020 harvest.
Exports accounted for $1.02bn or 53% of revenues, down from $1.19bn (58% of revenues) in the prior year.
“Overall, MHP is well-placed to navigate the anticipated continuing disruption of 2021,” said Mr Rich. “Our vision is to be a world-leading sustainable food producer and I remain confident that the company is well-positioned in the current turbulent markets to capitalise upon significant and sustainable long-term opportunities.
“We continue to monitor global developments and potential M&A opportunities - MHP is well positioned to be an active participant in continued industry consolidation.”