Climate Change Data

Environmental Metrics

ESG Focus Areas

• Employees
• Health and safety
• Environment
• Food safety
• Community support

Environmental Achievements

• Focus on cutting water and energy consumption, as well as reducing the volumes of waste.
• Adopted the environmental laws and regulations of Ukraine to reduce, control and eliminate various types of pollution and to protect natural resources.
• Monitors and controls all its production facilities regularly in order to ensure that air quality is not adversely impacted by its operations.

Social Achievements

• Committed to ensuring equal opportunities to all its employees, both current and prospective.
• Regular training and development workshops are conducted for Ukrproduct’s staff.
• Keen to further enhance and maintain its partnership with local communities by supporting their initiatives and charitable events.
• Contributes cash donations and gifts, as well as employee time, by encouraging staff to participate as volunteers.

Governance Achievements

• Effective corporate governance is a priority of the Board.
• The Board has a wide range of experience directly relevant to the Group and its activities and its structure ensures that no one individual or Group dominates the decision making process.
• The Chairman of the Board is an independent non-executive Director.
• The Board is assisted by Audit and Remuneration Committees.

Climate Goals & Targets

Environmental Challenges

• Challenging market conditions during the period under review, including constricted retail demand, lack of monetary liquidity and falling Hryvnia as a result of the broader global financial crisis.
• Price volatility in global dairy markets impacted the skimmed milk powder (“SMP”) segment.
• Import restrictions on the Ukrainian hard cheese and SMP exports introduced by the Russian authorities in August 2008 impacted domestic pricing.
• 35% increase year on year in energy and raw material costs, as well as higher inflation in 2008.

Mitigation Strategies

• Focus on branded products, including processed and hard cheese and packaged butter.
• Increased the production of processed cheese and spreads to respond to shifting consumer demand towards less expensive dairy products.
• Continued to increase the production volume of hard cheese.
• Introduced a set of measures to effectively manage its cost base.
• Optimised the delivery schedules of both raw materials and finished goods which enabled it to have a better control over its distribution costs.

Supply Chain Management

Responsible Procurement

• Established long-term relationships with its suppliers over the last eight years.

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 22000:2005

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Employees
• Health and safety
• Customers
• Environment
• Food safety
• Community support

Environmental Achievements

• The Group adopted the environmental laws and regulations of Ukraine to reduce, control and eliminate various types of pollution and to protect natural resources.
• The Group focuses on cutting water and energy consumption, as well as reducing the volumes of waste.

Social Achievements

• The Group is committed to ensuring equal opportunities to all its employees, both current and prospective.
• Regular training and development workshops are conducted for Ukrproduct’s staff.
• Customer satisfaction is at the core of the Group’s business model.
• The Group contributes cash donations and gifts, as well as employee time, by encouraging staff to participate as volunteers.

Governance Achievements

• Effective corporate governance is a priority of the Board.
• The Board has a wide range of experience directly relevant to the Group and its activities and its structure ensures that no one individual or Group dominates the decision making process.
• The Board is assisted by the Audit and Remuneration Committees.
• The Group adheres to comprehensive and strictly regulated budgeting and reporting procedures that are aimed at more efficient internal control and risk management.

Climate Goals & Targets

Environmental Challenges

• Challenging external environment in 2010 including low real wage growth and high inflation in Ukraine, high raw milk prices, Russian import restrictions on dairy products, and intense competitive pressure in the domestic market.
• Extreme competitive pressure in the mass market processed cheese segment.
• Sales of hard cheese were below 2009 levels.
• World SMP prices fell in H2 2010 due to falling milk consumption and rising exports from the EU; rising domestic raw milk prices eroded the international competitiveness of Ukrainian SMP; and the government complicated the VAT refund system.

Mitigation Strategies

• Adjusted the product offering to match shifting consumer preferences into cheaper goods, whilst maintaining a robust presence in the medium and premium segments and keeping a keen eye on costs.
• Maximised the profitability of its milk protein supplies, alternating between SMP and hard cheese production as relative prices shifted.
• Leveraged its distribution network by expanding distribution of third-party products.
• Successful realignment of the product mix and strong marketing activity in H2 2010.
• Aggressive marketing campaign for the middle market ‘Our Dairyman’ brand in Q4 2010.
• Adjusted its hard cheese product mix to create a more sustainable business model.
• Redirected milk protein supplies to the production of hard cheese, which was more profitable than SMP export.

Supply Chain Management

Responsible Procurement

• Ensuring high standards are maintained within its supplier base.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 22000:2005

Environmental Metrics

ESG Focus Areas

• Employees
• Health and safety
• Customers
• Environment
• Food safety
• Community support

Environmental Achievements

• Focus on cutting water and energy consumption, as well as reducing the volumes of waste
• Development programme of 2008-2012 puts specific emphasis on acquiring and installing only the most advanced and environmentally-friendly production and auxiliary equipment

Social Achievements

• Promoting equality and fairness among employees, partners and suppliers
• Ensuring safe working conditions
• Regular training and development workshops are conducted for Ukrproduct’s staff
• Customer satisfaction is at the core of the Group’s business model
• Community support: The Group contributes cash donations and gifts, as well as employee time, by encouraging staff to participate as volunteers

Governance Achievements

• Effective corporate governance is a priority of the Board
• The Board has a wide range of experience directly relevant to the Group and its activities and its structure ensures that no one individual or group dominates the decision making process
• The Board is assisted by the Audit and Remuneration Committees
• The Group adheres to comprehensive and strictly regulated budgeting and reporting procedures that are aimed at more efficient internal control and risk management

Climate Goals & Targets

Environmental Challenges

• Challenging business environment with 9.2% inflation (IMF estimates) and 10% unemployment
• Higher effective tax charges due to the new Tax Code
• Significant increase in raw milk prices due to changes in the milk subsidy regime
• Hike in energy prices
• Contraction of market capacity across all dairy categories
• Difficult to fully recover high cost inflation by increasing prices
• Subdued SMP market with high input costs negating profit-making opportunities
• Decreased milk production

Mitigation Strategies

• Focus on branded/own label products, distribution services, and exports
• Cost reduction program implemented in Q4 2011
• Reconstruction of flagship plant in Starokostiantyniv under EBRD loan to improve energy efficiency and productivity
• Acquisition of LLC “Zhyvyi Kvass” to improve efficiency and ensure security of supply and branding
• Improved planning to mitigate the impact of the new Tax Code
• Amendments to the Tax Code and management efforts to reduce effective tax rate
• Limiting SMP output to volumes necessary to satisfy existing contracts and seeking other opportunities for protein utilization

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 22000:2005

Environmental Metrics

ESG Focus Areas

• Employees
• Health and Safety
• Customers
• Environment
• Food Safety
• Community Support

Environmental Achievements

• Focus on cutting water and energy consumption, as well as reducing the volumes of waste. Collection and processing of waste have been organised through the local waste collection plants.
• The Group’s development programme puts specific emphasis on acquiring and installing only the most advanced and environmentally-friendly production and auxiliary equipment.

Social Achievements

• The Group is committed to ensuring equal opportunities to all its employees, both current and prospective. Each employee’s efforts are highly valued and the Board believes that a diverse mix of the workforce facilitates innovation, efficiency and teamwork.
• Regular training and development workshops are conducted for Ukrproduct’s staff. These are aimed at all employee groups, including managerial, technical and production personnel.
• Customer satisfaction is at the core of the Group’s business model.
• Regular market research and surveys are conducted to ensure maximum value is consistently offered to customers.
• The Group is keen to further enhance and maintain its partnership with local communities by supporting their initiatives and charitable events. The Group contributes cash donations and gifts, as well as employee time, by encouraging staff to participate as volunteers.

Governance Achievements

• The Board is committed to developing and implementing corporate social responsibility (CSR) policies aimed at: Promoting equality and fairness among employees, partners and suppliers Ensuring safe working conditions Maintaining the Group’s corporate reputation and dedication to business ethics Supporting the communities in which the Group operates Establishing long-term and healthy relationships with the Group’s partners, customers and other affiliated parties.
• The Group adheres to comprehensive and strictly regulated budgeting and reporting procedures that are aimed at more efficient internal control and risk management.

Climate Goals & Targets

Environmental Challenges

• Significant headwinds in the Ukrainian economy due to the conflict in the East, weakening of the economy, devaluation of the hryvnia, deterioration of consumer confidence, geographic market contraction, and closure of the Russian market.
• Shrinking domestic market demand leading to fierce competition and a 16% year-on-year increase in average raw milk prices.
• Significant decline in gross profits due to rising input costs (energy and dairy ingredients, including raw milk) and difficulty in increasing consumer prices.
• Loss before taxation for the year of £3.847m (2014: £3.433m) due to negative exchange rate differences and reduced revenues.

Mitigation Strategies

• Revising regional sales focus, enhancing sales and operating efficiency, adjusting sales mix to changing consumer preferences (in consultation with the EBRD).
• Increasing export volumes to mitigate domestic market pressures.
• Productivity improvements and cost efficiencies in warehousing, marketing, and delivery; optimization of Zhitomir subsidiary overheads.
• Close control of working capital to generate cash.
• Reducing overdue receivables to improve cash generation and decrease financial costs; new operating procedures and incentives reduced average cash collection period from 45 to 39 days.
• Restructuring of the EBRD loan with an extended maturity date and grace period.

Supply Chain Management

Responsible Procurement

• Certified food safety management system in compliance with ISO 22000

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: IFRS

Certifications: ISO 22000

Third-party Assurance: Baker Tilly Channel Islands Limited

Sustainable Products & Innovation

• Rosehip-based beverage
• Uzvar (traditional Ukrainian drink)

Environmental Metrics

ESG Focus Areas

• Equality and fairness among employees, partners and suppliers
• Safe working conditions
• Corporate reputation and business ethics
• Supporting local communities
• Long-term relationships with partners, customers and other affiliated parties
• Environmental practices

Environmental Achievements

• Focus on cutting water and energy consumption, as well as reducing waste volumes.
• Collection and processing of waste organised through local waste collection plants.
• Acquisition and installation of advanced and environmentally-friendly production and auxiliary equipment.

Social Achievements

• Commitment to equal opportunities for all employees, reflected in selection, recruitment and training policies.
• Regular training and development workshops for all employee groups.
• Encouraging staff to progress up the career ladder.
• Maintaining high standards within its supplier base.
• Implementation of a certified food safety management system in compliance with ISO 22000.
• Community support through cash donations, gifts, and employee volunteer time.

Governance Achievements

• Adherence to comprehensive and strictly regulated budgeting and reporting procedures for efficient internal control and risk management.
• Clearly defined lines of responsibility in the organisational structure.
• Management structure facilitating ease of communication.
• Annual budgeting and monthly reporting procedures.
• Internal audit department ensuring asset safety and accounting record reliability.
• Controlling and risk analysis department identifying issues and optimizing operations.

Climate Goals & Targets

Environmental Challenges

• Volatile political and economic situation in Ukraine, including significant currency devaluation and high inflation.
• Breach of loan covenant terms with the European Bank for Reconstruction and Development (EBRD).
• Loss of GBP 1,115,000 for the year ended 31 December 2017.

Mitigation Strategies

• Received waivers from EBRD for breaches of loan covenant terms.
• Continued timely settlement of obligations regarding EBRD loan agreement.
• Extended loan agreements with OTP Bank multiple times.
• Secured a new loan agreement with PJSC Creditwest Bank for UAH 65.0 million (approximately £1.8 million) to refinance OTP Bank loan and increase working capital.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Employees
• Health and safety
• Customers
• Environment
• Food safety
• Community support

Environmental Achievements

• The Group focuses on cutting water and energy consumption, as well as reducing the volumes of waste.
• Collection and processing of waste have been organised through the local waste collection plants.
• The Group’s development programme puts specific emphasis on acquiring and installing only the most advanced and environmentally friendly production and auxiliary equipment.

Social Achievements

• The Group is committed to ensuring equal opportunities to all its employees, both current and prospective.
• Regular training and development workshops are conducted for Ukrproduct’s staff.
• Customer satisfaction is at the core of the Group’s business model.
• The Group is keen to further enhance and maintain its partnership with local communities by supporting their initiatives and charitable events.
• The Group contributes cash donations and gifts, as well as employee time, by encouraging staff to participate as volunteers.

Governance Achievements

• The Company applies the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”).
• The Board meets four times a year.
• All Directors have access to the Company Secretary.

Climate Goals & Targets

Environmental Challenges

• The unprovoked and illegal aggression of Russia has completely obscured the peace and life of all Ukrainians and placed a heavy toll on the business in Ukraine.
• Inability to export goods via Ukrainian Black Sea ports, which significantly reduced the Group’s export operations in the first half of 2022.
• General decline in sales in the domestic market is due to a decrease in the solvency of consumers, the outflow of Ukrainian population and the loss of part of the Ukrainian sales market due to active hostilities and the temporary occupation of territories in Ukraine.
• Severe power outages in Ukraine caused by Russia's attacks on Ukrainian power generation and distribution infrastructure.
• Loss of the market in the east and south of Ukraine.

Mitigation Strategies

• The Group focused its efforts on establishing alternative export routes via the border between Ukraine and the EU.
• The Group optimized costs for payroll, rents, communication and banks services.
• The Group’s Central Warehouse was closed, and its functions were transferred to production warehouses in Zhytomyr.
• Marketing campaigns were also significantly reduced.
• The Group equipped its key assets with diesel generators.
• Selling, general and administrative and other operating expenses, as well as CAPEX, have been reduced to the minimum required to meet the primary needs of the Group’s core business.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: QCA Code

Certifications: ISO 22000