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Ukrainian egg giant sees production figures half

Ukraine agricultural holding Avangard previously ranked as the second largest producer of eggs and egg products in the world, has seen its production figures almost half as the crisis in the country takes it toll.

In 2015 the company produced 4.43 billion units of eggs, a 46%  decrease compared to 2014, official reports from the company state. The overall poultry population dropped by 42% to 13.6 million heads, while laying hens stock also dropped by 42% to 10.7%. In 2016, the company expects to slightly restore it's population to 11 million hens.

Poultry stock and capacities reduced

The reduction of poultry stock and production capacities are primarily connected with the armed conflict in the east of the country. The company has had to halt production at some poultry farms which are located in the immediate proximity to the area of conflict.

Avangard operated 19 poultry farms in several regions of Ukraine. Following the crisis of 2014, two of their farms are now located in territory controlled by pro-Russian rebels. Each of them contained 1.5 million heads of poultry.

Both facilities have been closed, but lately rebels have nationalised one of them near Luhansk city, restoring production cycle. Avangard expressed protests against these actions, while rebels claimed that this measure is necessary to avoid shortage of food in the region.

Reduced egg volumes to domestic and foreign markets

The company is also facing significant problems with sales both at domestic and foreign markets. Overall the volume of egg sales to third parties last year dropped 35% to 2.798 billion pieces, while export sales reduced by 26% to 421 million units.

The reasons for the drop at the domestic market is connected with the reduction of consumer power in the population in Ukraine, as well as due to the fact that company lost access to the market in the east of the country and Crimea.
Export sales decreased amid numerous reasons, including armed conflicts and political crisis at some countries of Middle East and North Africa. Also the company noticed that competition at some of sales markets became stronger, so as a result Avangard last year had to stop the sale of eggs to Liberia.

Financial losses and debt restructuring

As a result, Avangard suffered losses in 2015 for the second year in a row of US$ 158.4 million, compared to US$ 26.9 million in 2014. The situation has forced management of Avangard's parent company UkrLandFarming to launch the restructuring of debts, as the overall size of repackaged debt of company as of May 2016 reached US$ 1.3 billion, according to the company's owner Oleg Bahmatuyk.
"We have liquidity virtually at zero level. The currency component is putting pressure on the company, there are not any new financial inflows, the domestic market is almost destroyed, plus we are also in a permanent negotiation on the process of debt repackaging. So we have actually worked [in 2015] without a penny of new loans. And it is more than difficult for a company with billions of dollars of turnover," he explained.
"And we have this year [2015] passed without the support of the banking sector, paying to the bank ourselves about US$ 180 million of interest and loans. I really hope that this year we will be able to focus not on the negotiations [with shareholders], but on the company's development and search for internal reserves," Bahmatuyk concluded.

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