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Expert Opinion

21.08.2008

The Ukrainian dairy industry is gettiing over the difficulties

Credit-Rating believes that the ban introduced on export of dried milk and temporary decrease in the number of Ukrainian exporters of cheese to Russia will not deeply affect the output of dairy products, neither the financial performance of milk-processing companies.

Before 2006 the national cheese market was characterized with annual increase in output, which was driven by domestic consumption and export, including that to the Russian Federation. The Russia`s market was of strategic importance to Ukrainian producers, specifically over 40% of goods produced and over 90% of export accounted for the market of this country. The year of 2006 saw plunge in output prompted by Russia`s embargo on export of milk and dairy products, with the specific gravity of export shrunk almost 2 times and was generated mainly by 8 companies, which were the leading cheese producers.

In the next 2 years the majority of the producers adjusted themselves to this situation; still some companies had to leave this segment. During 2006-2007 the number of companies which obtained right for export grew almost 2 times, with the specific gravity of cheese exported in the overall volume of output grown insignificantly by 2 p.p. Taking into consideration the fact that, starting from August 20, 2008 the right for export has been granted to almost the same companies, which formed the main export volumes in 2006 and which retained their positions, the restrictions introduced will not weigh on decrease in cheese production output and on financial performance of the companies.

In Credit-Rating`s view the ban introduced on dried milk export will not affect drastically the companies` performance either, for they utilize less than 10% of the overall country`s milk produced. Thereat, three quarters of dried milk is consumed within Ukraine, but not more than fifth part of dried milk, for which production was used not more than 2% of the total amount of milk production, was supplied to the Russian Federation. In the judgment of the head for agricultural sector ratings of Credit-Rating Ekaterina Vasina, the decrease in dried milk export will not negatively affect the further development of dairy industry.

Taking into account the above-mentioned Credit-Rating is not going to downgrade the credit ratings of the issuers-producers of milk products.  

For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua

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