Ukrainian pork on Europe’s fork

Photo: Konstantin Melnitskiy

Dan Farm Ukraina, a daughter company of the Danish Berry Farm ApS, acquired a pig-breeding company Agrolux in the Zhytomyr oblast, a source well-versed in the negotiations told Capital. A representative of an investment fund and manager of a consulting company, who requested anonymity, confirmed this information. The capacity of the company is more than 20,000 heads.

The EY law firm, which accompanied the transaction, refused to comment due to confidentiality. Senior Manager of the Danish investment fund IFU Oleksiy Parkhomchuk estimated that the sum of the transaction is no more than EUR 10 mn. «This is the minimum ceiling of comfort. If an investor has such an amount of money, entering the pig-breeding industry in Ukraine will be successful,» he says.

On a well-trodden road

This is not the first time that the Danish have tried to acquire Ukraine’s pig-breeding company. Last year, Dan Farm Ukraina was issued a permit from the Anti-Monopoly Committee for the purchase of the pig-breeding company Allians-Bekon located in the Novohrad-Volynskiy County with an output capacity of 15,000 heads per year. Despite this, the deal was not cut.

Besides Dan Farm Ukraina, other Danish companies expressed their interest in pig-breeding farms in Ukraine. As Capital wrote earlier, last year the International Finance Corporation acquired a minority share package of the Danish pig-breeding group valued at EUR 18 mn, which the Ukrainian company Danosha is a part of.

Genuine interest

Oversaturation, a high share of import and fragmentation (high concentration of enterprises in certain regions) are typical for the Ukrainian pork market, says Associate Director of Corporate Finance and Mergers & Acquisitions of EY Oleksandr Romanyshyn.
Expert of agrarian markets of the Ukrainian Club of Agrarian Business Alina Zharko noted that the share of import of pork was 25% before devaluation of the hryvnia. But, as Capital wrote earlier, in the first half of the year import of pork fell almost fourfold to 18,900 t and in monetary terms by 430% (to US $48.7 mn). This was mainly due to the unpredictable situation in the country and the outburst of the African swine plague in neighboring countries after which the import of pork was quarantined.

«While last year the EBITDA margin in the pig husbandry business in Ukraine was 25%, in Poland it was a mere 7-8%,» said founder of Axzon Tom Axelgaard. «For this reason, foreign investors are willing to enter the Ukrainian market,» Director of the Pig-breeding Association of Ukraine Artur Loza agreed.

The Danish investors will try to import Ukrainian products to the European market, says Director of the Analytical Division of the AAA Consulting Company Maria Kolesnyk.

Under the unilateral trade preferences offered by the EU to Ukraine, the latter can deliver 20,000 t of pork until October without having to pay an import duty. However, Director of the European Integration Department at the Ministry of Economic Development and Trade of Ukraine Vyacheslav Tsymbal said, «Earlier there were no export shipments and today there are none.» Export may become possible only after the law on feed and identification of animals is adopted and if Ukrainian pig-breeders are certified by Europe.