4148852

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4148852

  1. 1. Industry Review – September 27, 2011Food and beverageMain product groups:structure and dynamics of productionTOP 10 manufacturers in 2010by major product groupsBalance of productionand foreign economic activity
  2. 2. Industry Review - Food and beverageSummaryDespite the gradual reduction of the share of expenditure on food, households of Ukraine still spend half theirbudgets on food. This reflects the high value of this sector to the economy. Price increase for agricultural productson world markets combined with steady demand have created favorable conditions for development of foodprocessing industry.Stabilization of the countrys economic state has allowed food and beverage to attract more long-term loans on thecapital market. In late 2009, the share of loans with term more than 5 years increased from 2% to 12%. Overall,from the beginning of 2009 the volume of UAH loans increased by half. Since mid-2010 the volume of loans inforeign currency grows. It shows promising reliability of industry as the borrower.The share of exports of food and beverage from total Ukraines exports over the past three years is the largestamong neighboring countries. Most powerful part of the export processing industry is the production of sunfloweroil. Ukraine is the largest manufacturer and exporter of this product in the world. Also significant amounts ofcheese, vodka, beer and cigarettes are exported. This forms the highly competitive industry in foreign markets.Ukraine moves towards the free trade zone with the EU. The competitiveness of domestic products in this contextpromises to open new perspectives for food and processing industry and the economy as a whole.Erste Bank – September 27, 2011 Page 2
  3. 3. Industry Review - Food and beverageIntroductionThis review focuses on the food and beverage industry. The basis for the analysis is the group of goods named"Processed food" in the state classification of industrial products (section 15 DKPP). Also the corresponding groupsof food commodities of the Ukrainian Commodity Classification for Foreign Economic Activity (UKTZED) areanalyzed. The purpose of this report is to provide information about the structure of the industry and analyze itsactivity in capital markets.The value of food and beverage industry for localand global economyFood industry is one of the leading industries of the country in terms of consumption in the domestic market andexport volume of finished products. This is caused by strong agriculture coupled with significant expenditures ofhouseholds on food. Households expenses structure 100% 29 25 28 31 32 32 32 35 36 35 35 50% 65 65 63 59 59 58 57 53 51 49 50 0% `99 `00 `01 `02 `03 `04 `05 `06 `07 `08 `09 Food and non-alcoholic drinks Alcoholic drinks and tobacco Nonfood goods and services Nonconsumer total expensesSource: UkrstatWith the financial crisis the volumes food production began to decline, but in 2010 returned back to its growthtrend. Compared with neighboring countries, Ukraine consistently demonstrates a positive increase in productioncompared with the baseline period 1999-2001. % Food-processing, % 40 Food production index deviation 20 y/y industrial output index (1999-2001 = 100%) 30 15 10 20 5 10 0 -5 0 -10 -10 -15 -20 -20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2007 2008 2009 2010 2011 2007 2008 2009Source: Ukrstat Source: BloombergErste Bank – September 27, 2011 Page 3
  4. 4. Industry Review - Food and beverageExports of food and processing industry makes up almost a quarter of total country exports. This is the highestlevel among neighboring countries. Import of the industry is 10% of total imports, which is similar to the share offood import in total imports of the Eurozone. % 25 Food exports % Food imports 20 20 (% of merchandise exports) (% of merchandise imports) 15 15 10 10 5 5 0 0 2007 2008 2009 2007 2008 2009Source: Ukrstat Source: BloombergFood and beverage and capital marketsFood and food processing industry is an active borrower in the domestic market. The volume of loans to food andbeverage amounts 6% of all loans of Ukrainian banks. Food and beverage loans share in total 7,0% bank loans 6,5% 6,0% 5,5% 5,0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2009 2010 2011 UAH loans share FX loans shareSource: NBUIndustry has been actively credited since 2009. With the onset of the crisis the volume of credit granted (especiallyin foreign currencies) began to decline. A more active lending resumed in 2010, and in 2011 the volume of UAHloans reached new record levels. Since 3Q 2010 the total amount of foreign currency loans increases. The share ofoverdue foreign currency loans for 2009 - 2010 years increased from 5% to 15% and stabilized at this level in 1Q2011. The percentage of overdue UAH loans increased during the crisis period from 6% to 11%, and also stabilizedat this level in 1Q 2011. UAH bn млрд.грн. UAH loans UAH bn FX loans 20 13% 15 20% 18 11% 14 15% 16 13 9% 10% 14 12 7% 11 5% 12 10 5% 10 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2009 2010 2011 2009 2010 2011 Total UAH loans % of UAH overdue loans Total FX loans % of FX overdue loansSource: NBU Source: NBUErste Bank – September 27, 2011 Page 4
  5. 5. Industry Review - Food and beverageDuring 4Q 2009 the share of long-term loans to food and beverage has grown from 2% to 10%. From 2009 and onthe share of long-term loans in foreign currency is gradually growing. Since 2009 the share of loans in foreigncurrency for more than five years term increased from 6% to 12%. Also in 2010 share of loans trerm from 1 to 5years is growing. This generally reflects the increasing stability of the industry. UAH loans FX loans 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2009 2010 2011 2009 2010 2011 UAH loans, year or less UAH loans, 1 to 5 years FX loans, year or less FX loans, 1 to 5 years UAH loans, over 5 years FX loans, over 5 yearsSource: NBU Source: NBUIndustry structureIndustry produces all major types of food and beverage production. Specific of the industry is defined byagriculture. tsd tons Main food and beverage products Main food and beverage products 1000 manufacture manufacture in 2010, mn tons 800 600 1,3; 1,7; Meat products 400 6% 3,7; 16% 7% Dairy products 200 0 1,7; 8% Bakery Nov Nov Oils and plant fats Jan Jan Jan Jul Jul Mar Mar Mar May May May Sep Sep 3,3; 14% Sweets 10,2; 45% Non-alcoholic drinks 2009 2010 2011 Alcoholic drinks Meat products Dairy products Bakery Oils and plant fats Sweets Non-alcoholic drinks 1,0; 4% Alcoholic drinksSource: Ukrstat Source: UkrstatSunflower oil and vegetable fatsSunflower oil is the lions share of production of oils and fats. As of 2010, Ukraine is the largest producer andexporter of sunflower oil in the world. Sunflower oil world production Sunflower oil world export 2010/11 (10M), tsd tons 2010/11 (10M), tsd tons 2 667; Ukraine EU-27 Ukraine EU-27 16% Russia Turkey Russia Turkey 1 140; 26% 7 147; 43% China Pakistan South Africa USA 2 533; 15% South Africa USA 2 500; 57% Paraguay Moldova 2 082; India Kazakhstan Mexico Croatia 12% Other Other 306; 2% 671; 4% 140; 3% 160; 4%Source: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 5
  6. 6. Industry Review - Food and beverageTotal production of oil amounted to 3.3 mn tons. This is 14% by volume of natural equivalent from all food producedin the country in 2010. Sunflower oil production, Sunflower oil production, 2010, tons 1Q 2011, tons Cargil Cargil 15% Kernel 13% Kernel MHP 4% MHP 39% 6% 3% Ukr.Chornomor.Industriya 44% Ukr.Chornomor.Industriya 4% Kirovogradoliya 6% Kirovogradoliya 6% Zaporizh. Oliyakombinat 6% Zaporizh. Oliyakombinat ZAT Kreativ ZAT Kreativ 6% Dnipropetrovskiy Zavod 9% Dnipropetrovskiy Zavod 7% 6% Pologivskiy Zavod 7% 4% 6% 5% 4% Pologivskiy Zavod Other OtherSource: Erste Bank Research Source: Erste Bank ResearchIn 2010 "Kirovograd Oil" and "Ukrainian Chornomorskaya Industry" passed to the property of Kernel Group.Dnipropetrovsk Oil Extraction Plant is owned by Bunge Ukraine. Average output of oil extraction plants 1Q 2011has not changed significantly since 2010. tsd tons Sunflower oil producers Sunflower oil producers 300 100% 80% 200 60% 100 40% 20% 0 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2008 2009 2010 2011 2008 2009 2010 2011 Cargil Kernel MHP Cargil Kernel MHP Ukr.Chornomor.Industriya Kirovogradoliya Zaporizh. Oliyakombinat Ukr.Chornomor.Industriya Kirovogradoliya Zaporizh. Oliyakombinat ZAT Kreativ Dnipropetrovskiy Zavod Pologivskiy Zavod ZAT Kreativ Dnipropetrovskiy Zavod Pologivskiy Zavod Other OtherSource: Erste Bank Research Source: Erste Bank ResearchSunflower oil is inherent in the natural seasonality. In the period from 2008 till 2011 its production increased everyyear. TOP 10 plants that produce oil account for more than half the output of the country. The number of smallerproducers is gradually decreasing. Market leaders in recent years are Krenel Group and Bunge Ukraine.Trademarks of Krenel Group: "Schdriy Dar", "Chumak", "Stozhar," "Lybonka", "Oriya". Trademarks of BungeUkraine: "Oleyna", "Zolota kraplynka", "Rozumnytsya" Less in production capacity, but significant in terms ofproduction are: UkrOliya ("Dykanka", "Dykansky Khutorok", "Maslynka», «Garna»), Oliyar ("Mayola"), Polohovskyyoil extraction plant ("Slavia"), Victor and Co. ("Korolivskyy Smak"). UAH/ ton tsd tons UAH/ ton 14 000 Sunflower oil producer and export Oil export 2010: 400,0 10 000 prices price and volume 12 000 8 000 300,0 10 000 6 000 200,0 8 000 4 000 6 000 100,0 2 000 4 000 0,0 0 Feb Nov Jul Oct May Jan Jun Mar Apr Dec Aug Sep 2 000 2007 2008 2009 2010 2011 Sunflower oil Price of sunflower oil, EXW, demand, companies Other fats Price of sunflower oil, FOB, export Sunflower oil export price, UAH/tonSource: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 6
  7. 7. Industry Review - Food and beverage UAH bn 3,0 Oils and fats export 2010 Oils and fats import 2010, UAH bn 2,5 2,0 3,5; 16% 1,5 Sunflower oil 1,0 Other oils and fats 0,5 18,7; 84% 0,0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sunflower oil Other fatsSource: Ukrstat Source: UkrstatSunflower oil is 84% of exports of oils and fats by 2010. Seasonality of export follows the seasonality of productionwith a shift in a month. Export of sunflower oil is growing rapidly. In 2010 it was exported more than 90% of oilproduced during this calendar year. tsd ton 350 Sunflower oil production and 350 Sunflower oil production and export, 2010, tsd tons export, 2010, mn tons 300 300 250 250 0,2; 8% 200 200 150 150 Export 100 100 50 50 Production for domestic market 0 0 2,7; 92% Oct Apr Dec Nov Feb Aug Sep Jul Mar May Jan Jun Production ExportSource: Ukrstat Source: UkrstatIn the last three years the largest importer of Ukrainian sunflower oil was India. The share of exports to India tototal exports in the 2008/09 season was 20%, in 2009/10 - 23%, in 2010/11 - 26%. The second and third largestexport volumes are to Turkey and Egypt. The share of Turkey in the 2010/11 season is 12% of all exports, theshare of Egypt is 9%. Ukrainian sunflower oil world export Ukrainian sunflower oil world export by countries, 2010/11 (10M), tsd tons by countries, 2009/10, tsd tons India Turkey India Turkey 527; 22% Egypt Netherlands 598; 23% Egypt Netherlands 603; 26% Russia Italy 926; 35% Russia Italy 124; 5% Spain Belarus Spain Belarus 283; 12% 379; Saudi Arabia Georgia 14% Saudi Arabia Georgia 64; 3% 207; 174; 9% Other 114; 64; Other 150; 6% 7% 4% 2% 132; 6% 67; 3% 170; 6%Source: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 7
  8. 8. Industry Review - Food and beverageAlmost two-thirds of all imports of oils and fats in 2010 is palm oil. 19% of imports are food and margarine mixture,9% for palm kernel and coconut oils. UAH bn 1,2 Oils and fats import 2010 0,2; 4%Oils and fats import 2010, UAH bn 0,2; 4% 0,8 0,9; Other vegetable fats and oils 19% Margarine; food fat mixtures 0,4 Palm kernel, coconut oils 0,4; 9% Sunflower oil 0,0 3,0; 63% Palm oil Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Other fats Other vegetable fats and oils Margarine; food fat mixtures Palm kernel, coconut oils Sunflower oil 0,01; <1% Palm oil Other fatsSource: Ukrstat Source: UkrstatMeat productionProduction of meat products almost fully meets the domestic market demands. Total production of meat products innatural equivalent accounts for 6% of total food production in 2010. tsd tons Meat production, tons Meat production, tons 140 100% 120 80% 100 80 60% 60 40% 40 20 20% 0 0% Nov Nov Jul Jul Mar Mar Mar May May May Jan Sep Jan Sep Jan Nov Nov Jan Sep Jan Sep Jan Jul Jul Mar Mar Mar May May May 2009 2010 2011 2009 2010 2011 Pork Beef Fresh Poultry Frozen Poultry Sausages Pork Beef Fresh Poultry Frozen Poultry Sausages 7 Cattle population, mn 9 Pig stock, mn 6,5 8,5 6 8 5,5 7,5 5 7 4,5 6,5 4 6 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 Stock Trend Stock F Trend F Stock Trend Stock F Trend FSource: Ukrstat Source: UkrstatThe structure of meat products remains almost unchanged over the past two years. The exception is the productionof beef, which is being gradually reduced. At the same time the share of pork production increases. These twotrends are long term. They are a direct reflection of the dynamics of changes in cattle and pigs population.Erste Bank – September 27, 2011 Page 8
  9. 9. Industry Review - Food and beverage UAH mn UAH mn 120 Export 2010: Meat and edible offal 600 Import 2010: Meat and edible offal 100 500 80 400 60 300 40 200 20 100 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Other meat and edible offal Other meat and edible offal Pork, fresh, chilled or frozen: Pork, fresh, chilled or frozen: Meat and edible offal of poultry Meat and edible offal of poultry Meat of bovine animals, frozen: Meat of bovine animals, frozen:Source: Ukrstat Source: UkrstatExports of meat and edible offal amounted to less than a quarter of imports in 2010. The basis of exports mademeat of cattle and poultry and edible offal of poultry. The largest volume of imports in monetary terms have porkand poultry products.Shelf, sausages and canned meatPrepared meat products represent over 20% of all meat products. Production of finished products has noseasonality. The monthly total production ranges from 30 to 40 thousand tons. The total production of this group ofgoods in 2009 decreased compared to 2008. In 2010, total production is gradually increasing. tsd tons Shelf, sausages and canned meat 50 100% Shelf, sausages and canned meat 40 80% 30 60% 20 40% 10 20% 0 0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2008 2009 2010 2011 2008 2009 2010 2011 OTHER TOV "VMP" OTHER TOV "VMP" PAT "GORLIVSKIY MK" STOV "DRUZHBA NARODIV" PAT "GORLIVSKIY MK" STOV "DRUZHBA NARODIV" ZAT "LUGANSKIY MK" ZAT "UKRAINSKIY BEKON" ZAT "LUGANSKIY MK" ZAT "UKRAINSKIY BEKON" VAT "YATRAN" TOV "YUVILEYNIY" VAT "YATRAN" TOV "YUVILEYNIY" TOV "GLOBINO" TOV "FAVORIT" TOV "GLOBINO" TOV "FAVORIT" MYRONIVSKIY MPZ MYRONIVSKIY MPZSource: Erste Bank Research Source: Erste Bank ResearchTOP 10 manufacturers in 2010 produced 46% of finished meat products in physical terms. The same list ofmanufacturers for 1Q 2011 produced more than half of production. This shows the consolidation trend of theindustry. Shelf, sausages and canned meat, Shelf, sausages and canned meat, 2010, tons 1Q 2011, tons 7% MYRONIVSKIY MPZ MYRONIVSKIY MPZ 7%TOV "FAVORIT" 9% TOV "FAVORIT" TOV "GLOBINO" TOV "GLOBINO" 5% 8% TOV "YUVILEYNIY" 6% TOV "YUVILEYNIY" 5% VAT "YATRAN" 4% 49% 3% VAT "YATRAN" 54% ZAT "UKRAINSKIY BEKON" ZAT "UKRAINSKIY BEKON" 4% ZAT "LUGANSKIY MK" 5% ZAT "LUGANSKIY MK" STOV "DRUZHBA NARODIV" STOV "DRUZHBA NARODIV" 3% PAT "GORLIVSKIY MK" 5% PAT "GORLIVSKIY MK" 4% TOV "VMP" 4% TOV "VMP" 4%3% OTHER 4% 4% 3% OTHERSource: Erste Bank Research Source: Erste Bank ResearchErste Bank – September 27, 2011 Page 9
  10. 10. Industry Review - Food and beverageThe total export value of finished meat products in 2010 amounted to UAH 33 mn. Sausages and similar productshave been exported to UAH 10 mn. Packaged and preserved meat were exported to 23 mn. The largest share ofexports accounted for canned meat products from cattle (UAH 11 mn). Other prepared or preserved meat, offal or blood, 2010, tsd tons 108 7,84 0,69 Production Export ImportSource: UkrstatAlmost all prepared sausages and similar products of meat produced in 2010 were consumed in the domesticmarket. Out of 108 thousand tons of other finished meat products 7% were exported in physical terms. UAH mn UAH mn Export 2010: Shelf, sausages and Export 2010: Prepared or preserved 3,5 meat 5 canned meat 3,0 4 2,5 3 2,0 2 1,5 1 1,0 0 0,5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0,0 Sausages and meat products, meat offal, food Jan Feb Mar Apr May Jun Jul Aug Sep Oct NovDec preparations, manufactured from these articles: of pork of poultry Prepared or preserved meat, meat offal or blood: of liver of any animal of cattle homogenous prepared food otherSource: Ukrstat Source: UkrstatImports of products in 2010 is characterized by rapid growth. Most of the growth was generated with import offinished products and canned pork. UAH mn Import 2010: Shelf, sausages and UAH mn Import 2010: Shelf, sausages and 40 canned meat 40 canned meat 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sausages and meat products, meat offal, food Sausages and meat products, meat offal, food preparations, manufactured from these articles: preparations, manufactured from these articles: Prepared or preserved meat, meat offal or blood: Prepared or preserved meat, meat offal or blood:Source: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 10
  11. 11. Industry Review - Food and beverageFresh poultrySince 2007 there is a clear tendency to increase of poultry population. It naturally leads to increase of poultry meatproduction. Market of poultry is dominated by a several large vertically integrated agricultural holdings. The mostpowerful producer in physical volume terms is Myronivsky Hlib Product (MHP) tsd tons 60 Fresh poultry 270 Poultry, mn 250 40 230 210 20 190 170 0 150 1Q 2Q 3Q 4Q 1Q 130 2010 2011 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Other CJSC "KURGANSKY Broiler" Volodymyr-Volin. Poultry "Peremoga NOVA" Subsidiry 2007 2008 2009 2010 2011 2012 LLC "RUBI ROSES AGRIKOL CO" LLC "Agro-OVEN" DNІPROVSKY Poultry CJSC OREL LIDER CJSC "Druzhba NARODIV-NOVA" LLC "Complex Agromars" Stock Trend Stock F Trend F CJSC MHPSource: Erste Bank Research Source: Erste Bank ResearchMHP produces one third of poultry meat. The second in output is the Complex Agromars. Its production sharemakes up 14% of 2010 and 16% of 1Q 2011. TOP 10 manufacturers make up three quarters of all manufacturingof industry both in 2010 and 1Q 2011. Fresh poultry, 2010, tons Fresh poultry, 1Q 2011, tons CJSC MHP CJSC MHP LLC "Complex Agromars" LLC "Complex Agromars" 22% CJSC "Druzhba NARODIV-NOVA" CJSC "Druzhba NARODIV-NOVA" 26% 33% CJSC OREL LIDER 32% CJSC OREL LIDER 2% DNІPROVSKY Poultry DNІPROVSKY Poultry 3% LLC "Agro-OVEN" 2% LLC "Agro-OVEN" 3% LLC "RUBI ROSES AGRIKOL CO" LLC "RUBI ROSES AGRIKOL CO" 3% 4% "Peremoga NOVA" Subsidiry "Peremoga NOVA" Subsidiry 6% 3% 14% 7% 16% 8% Volodymyr-Volin. Poultry Volodymyr-Volin. Poultry 8% 8% CJSC "KURGANSKY Broiler" CJSC "KURGANSKY Broiler" Other OtherSource: Erste Bank Research Source: Erste Bank ResearchProduction of frozen poultry meat amounted to 7% of total production of poultry meat in 2010. One third of frozenpoultry meat was exported in 2010. Imports of frozen poultry products exceeded frozen poultry production morethan three-fold. tsd tons 35 Production, import and export of 35 Production, import and export of frozen meat of poultry, 2010 frozen meat of poultry, 2010 30 30 25 25 20 20 15 15 10 10 166 5 5 0 0 51 18 Oct Apr Dec Nov Feb Aug Sep Jul Mar May Jan Jun Production Import Export Production Export ImportSource: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 11
  12. 12. Industry Review - Food and beverageExports of frozen poultry in 2010 consisted of chicken carcasses and their parts and offal. During this period mostlyfrozen chicken carcasses and offal were imported. UAH bn UAH bn Export 2010: Meat and edible offal of Import 2010: Meat and edible offal of 45 160 poultry 40 poultry 140 35 120 30 25 100 20 80 15 60 10 5 40 0 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0 Chickens not cut in pieces, frozen Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Parts of chickens and offal, frozen Parts of chickens and offal, frozen Other meat and offal of poultry Other meat and offal of poultrySource: Ukrstat Source: UkrstatBeef and pork, fresh and frozenProduction of meat of slaughtered animals and products of it is uniformly distributed among a large number ofplants. tsd tons tsd tons Meat other than poultry: 10 Meat other than poultry: 40 35 ТОР 10 manufacturers in 2010 8 ТОР 10 manufacturers in 2010 30 6 25 4 20 2 15 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 10 5 0 2008 2009 2010 2011 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q "Kremenchugmiaso" JSC "ANTONIVSKYY MK" Ltd. 2008 2009 2010 2011 "Agro-Oven" LLC "Lugansk MK" CJSC MK "YATRAN" "HORLIVSKYY MK" PJSC "ZEUS" Ltd. "MK MELITOPOLSKYY" JSC TOP 10 manufacturers in 2010 OTHER "APK-INVEST" JSC "Globino" Ltd.Source: Ukrstat Source: Erste Bank ResearchTOP 10 manufacturers accounted for one third of the industry production in 2010. Industry tends to consolidate. Meat, fresh and frozen, Meat, fresh and frozen, 2010, tons 1Q 2011, tons 6% "Globino" Ltd. 7% "Globino" Ltd. 6% 7% 4% "APK-INVEST" JSC "APK-INVEST" JSC 3% 3% "MK MELITOPOLSKYY" JSC "MK MELITOPOLSKYY" JSC 1% 3% "ZEUS LTD" Ltd. "ZEUS LTD" Ltd. 3% "HORLIVSKYY MK" PJSC 2% "HORLIVSKYY MK" PJSC MK "YATRAN" 3% MK "YATRAN" 2% "Lugansk MK" CJSC 3% "Lugansk MK" CJSC 67% 2% 2% "Agro-Oven" LLC 71% "Agro-Oven" LLC "Kremenchugmiaso" JSC "Kremenchugmiaso" JSC "ANTONIVSKYY MK" Ltd. "ANTONIVSKYY MK" Ltd. OTHER OTHERSource: Erste Bank Research Source: Erste Bank ResearchErste Bank – September 27, 2011 Page 12
  13. 13. Industry Review - Food and beverageExports of meat of slaughtered animals was 5% of the total production in 2010. 63% of frozen beef produced wasexported. Half of the meat imports in 2010 was fresh and frozen pork. tsd tons Production, import and export of tsd tons Production, export and import of fresh 3,5 frozen beef, 2010 4 and frozen pork, 2010 40 40 3,0 3 35 35 2,5 3 30 30 2,0 2 25 25 1,5 2 20 20 15 15 1,0 1 10 10 0,5 1 5 5 0,0 0 0 0 Oct Oct Apr Nov Dec Apr Feb Nov Dec Jul Mar May Aug Sep Jan Jun Feb Jul Mar May Aug Sep Jan Jun Production Import Export Production Import ExportSource: Ukrstat Source: UkrstatDairyingDairying is inherent in a clear seasonality. The largest volume of production in physical terms is the production ofliquid milk and cream. tsd tons Milk products and ice cream Milk products , 2010, tons 300 250 200 4% 6% Butter (from milk) 150 100 18% Liquid milk and cream 50 0 30% Powder milk 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Other dairy products 2008 2009 2010 2011 39% Cheese rennet, curd Ice cream, food ice Cheese rennet, curd 3% Other dairy products Powder milk Ice cream, food ice Liquid milk and cream Butter (from milk)Source: Ukrstat Source: UkrstatTOP 10 manufacturers make up a third of the industry production in physical terms during periods of 2010 and 1Q2011. The scale of the largest producers is sufficient to minimize the seasonal factor. tsd tons tsd tons 350 Dairy products: share of TOP 10 90 Dairy products: share of TOP 10 manufacturers in 2010 80 manufacturers in 2010 300 70 60 250 50 200 40 30 150 20 10 100 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 50 0 2008 2009 2010 2011 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q "MOLOCHNYY DIM" Ltd. OJSC KPEMEHCHUK MMZ 2008 2009 2010 2011 PJSC "BEPSHADMOLOKO" OJSC "GALAKTON" JSC "Pridneprovskoy" "Danone Dnepr" Ltd. JSC "VIM-pain-DAN" "Lustdorf" Ltd. Other manufacturers TOP 10 manufacturers in 2010 CJSC MMW DONETSK no.2 JSC "GALICIA"Source: Ukrstat Source: Erste Bank ResearchErste Bank – September 27, 2011 Page 13
  14. 14. Industry Review - Food and beverageThe largest producer by volume in physical terms is CJSC "Galicina". Dairy products: share of TOP 10 Dairy products: share of 2010TOP 10 manufacturers in 2010, tons manufacturers in 1Q 2011, tons 7% JSC "GALICIA" 7% JSC "GALICIA" 15% CJSC MMW DONETSK no.2 8% 19% CJSC MMW DONETSK no.2 8% "Lustdorf" Ltd. "Lustdorf" Ltd. 9% JSC "VIM-pain-DAN" 9% JSC "VIM-pain-DAN" 12% "Danone Dnepr" Ltd. 13% "Danone Dnepr" Ltd. 9% JSC "Pridneprovskoy" 10% JSC "Pridneprovskoy" 11% OJSC "GALAKTON" OJSC "GALAKTON" 9% PJSC "BEPSHADMOLOKO" 11% 12% PJSC "BEPSHADMOLOKO" 10% 10% OJSC KPEMEHCHUK MMZ 11% OJSC KPEMEHCHUK MMZ "MOLOCHNYY DIM" Ltd. "MOLOCHNYY DIM" Ltd.Source: Erste Bank Research Source: Erste Bank ResearchExports of dairy products in 2010 had exceeded imports four times. UAH bn 700 Dairy products: export and import 2010 Dairy products: export and import 2010 100% 600 90% 80% 500 70% 400 60% 50% 300 40% 200 30% 20% 100 10% 0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Import Export Import ExportSource: Ukrstat Source: Ukrstat79% of exports of dairy products are all kinds of cheese. The second largest group of exports (14%) in monetaryterms is condensed milk and cream with sugar. The remaining groups of dairy products is up to 7% of industryexport in 2010. UAH bn UAH bn Dairy products: export 2010 1% 450 Dairy products: exports in 2010 1% 400 14% 350 Butter, fats from milk 300 2% Buttermilk, yogurt, kefir 250 200 3% 150 Milk and cream, concentrated 100 or sugar 50 Milk and cream non- condensed without sugar 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Whey 79% Other dairy products Milk and cream, concentrated or sugar Cheese of all kinds, milk Cheese of all kinds, milk cheese cheeseSource: Ukrstat Source: UkrstatErste Bank – September 27, 2011 Page 14

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