Ukrproduct Group Ltd
04 October 2005
4 October 2005
Ukrproduct Group announces the offer to acquire
Jhmerinka Butter & Cheese Plant Ltd and Letichiv Dairy Plant
Ukrproduct Group ('UPG') is pleased to announce the offer to acquire 100% of the
capital of the Jhmerinka Butter & Cheese Plant Ltd and a 62% stake in the
Letichiv Dairy Plant for a total cash consideration of £1.3 million. The offer
is being financed through the funds raised at the Group's admission to AIM in
February 2005. Completion of both deals is expected in the next four weeks.
The offer to acquire both plants is in line with UPG's strategy of developing
its market-leading position in its two core segments of processed cheese and
packaged butter, increasing its presence domestically in what is a fragmented
market, expanding the product offering of the Group and reacting quickly to
opportunities as they arise. The dairy-based food market continues to be a
direct beneficiary of the sustained rise of consumer affluence in Ukraine,
especially in the shift towards the consumption of packaged quality products.
The acquisitions of the Jhmerinka Butter & Cheese Plant and Letichiv Dairy Plant
will provide UPG with the necessary increase in production and raw material
capacity to meet rising consumer demand. The transactions will also expand the
geographic coverage of the Group, provide complementary products to the Group's
existing product ranges and extend the Group's raw milk supply zone. The
Directors of UPG believe that the operating performance of both plants can be
significantly improved through the introduction of improved cost controls,
leveraging of the distribution network and optimisation of the product mix.
The Jhmerinka plant, located in the region of Vinnitza, produces a range of
regional, well established processed cheeses and butters. According to the
official data of the Ukrainian State Committee of Statistics, it was the twelfth
largest manufacturer of processed cheese in Ukraine, having produced 1,012
tonnes in the year to 31 December 2004. The plant is also the region's leading
supplier of packaged butter, selling over 1,000 tonnes per annum. The management
of Ukrproduct Group estimates that the plant will add 2.4 percentage points to
UPG's current domestic market share of 30% in the processed cheese segment. In
the year ended 31 December 2004 the plant reported sales and assets totalling
£4.8 million and £1.2 million respectively. The Operating profit of the plant
was £74,000.
The Letichiv plant, located in Ukrainian region of Khlmelnitski, produces
various dairy-based products such as cream, butter and casein* with the capacity
to collect up to 100 tonnes of raw milk per day. The acquisition of the plant
expands UPG's raw milk zone in the region, which is central for ensuring the
continued supply of raw materials needed for the increase in production at the
Group's Starkon plant. The plant also provides UPG with the option to develop
hard cheese. The acquisition will also provide UPG with the opportunity to
optimise the product mix in order to react better to the seasonal demand for its
products. In the year ended 31 December 2004, the plant had sales of £1.25
million and assets of £0.3 million. The operating profit of the plant was
£154,000.
Commenting on the offer, Sergey Evlanchik, CEO of Ukrproduct Group, said,
"I am delighted to announce the offer to acquire Jhmerinka and Letichiv, our
first acquisitions as a public company. The plants provide a complementary fit
in terms of products and operational capabilities as well as the necessary
capacity and raw materials to expand production of the Group's core segments.
Both acquisitions are low-risk operating purchases that are reasonably priced
and well-capitalised. I expect only a limited capex requirement for both
companies. These acquisitions further strengthen UPG's position in capturing the
rising consumer demand for quality, branded dairy based products. Going forward,
UPG will continue to look for opportunities that enhance the overall strength
and future growth of the business, but most importantly shareholder value."
*Casein is a protein that is precipitated from milk by the action of rennin,
forming the basis of cheese.
For further information:
Ukrproduct Group +38 044 502 8014
Sergey Evlanchik, CEO, and Dmitry Dragun, CFO
Financial Dynamics +44 20 7831 3113
Ben Foster/ Charles Watenphul
This information is provided by RNS
The company news service from the London Stock Exchange
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