AGM Statement

Ukrproduct Group Ltd
21 June 2007



21 June 2007


                Ukrproduct Group Ltd ('Ukrproduct' or 'the Group')

                        AGM STATEMENT AND TRADING UPDATE


Speaking at Ukrproduct's Annual General Meeting today, Iryna Yevets, Chief
Executive Officer of Ukrproduct made the following comments:


"During 2006, the Group was challenged by a combination of trading difficulties,
including the Russian import ban on Ukrainian dairy products and weak prices for
skimmed milk powder on world markets. Notwithstanding these, Ukrproduct finished
the year with a good operating profit and a strong balance sheet. In an
extremely challenging environment, we strengthened the group's asset base,
retained our market-leading positions and preserved our core distribution
capability.


Since the start of the current year I am pleased to report that the difficulties
of the past year have alleviated. Trading overall has been fully in line with
expectations in all three product segments.


In processed cheese , low-quality, low-price domestic competitors active in the
aftermath of the Russian export embargo found themselves under increasing
pressure by a mixture of internal and external factors such as their inability
to secure trading terms with supermarkets, quality problems, inadequacy of their
existing distribution networks, financial insufficiencies and the return of
consumers to quality products. Under these conditions, the Group has preserved
its market position by careful differentiation of its brands through selected
retail and wholesale partners. Stable quality and predictability of supply from
the Group has proved a major factor of attraction for the emerging retail
chains. As a result, sales volumes of the Group's processed cheese products
stabilised and, in the opinion of the management, will remain steady for the
remainder of the summer. Later in the year, volumes should pick up due to the
traditional autumn increase in consumption. Margins have remained satisfactory
and supporting merchandising and store promotion campaigns for selected
varieties of processed cheese are being carried out by the Group.


Packaged butter has enjoyed a continuing good run since the beginning of the
year. Regarded as a commodity elsewhere, butter plays an important role in the
context of the Ukrainian dairy sector and the Group's product portfolio. While
butter is produced on a substantial scale in Ukraine by some 200 manufacturers,
the quality, packaging and branding, by and large, continue to remain
inadequate. Over the last several years, Ukrproduct has invested in quality,
branding  and new packaging of its butters. These efforts have borne fruit by
providing the Group with stable sales volumes and good margins. Owing mainly to
the increase in volumes of production of skimmed milk powder (SMP) in the
current year, the Group has had an extra supply of its own butter for packaging
and has thus captured the incremental margins that hitherto went to third-party
butter producers. With volumes of butter increasing, the Group has the potential
for further improvement in margins, although the management expect such progress
to be very gradual due to the significant increase in margins already achieved
in 2006.



Skimmed milk powder ("SMP") has remained buoyant since the beginning of the
current year. The timing of the installation of the new SMP dryer facility in
December 2006 proved prescient; in January 2007, world SMP prices started
increasing by some 15% per month. This price run continued unabated until June
when supply-demand parity was somewhat restored at a price level favourable to
the Group. The new SMP dryer is the newest such facility in Ukraine with the
capacity to produce milk powder of premium quality. Consequently, the Group's
own skimmed milk has a distinction in quality grade and thus commands a material
price premium vis-a-vis other SMP producers in Ukraine. The ongoing programme
for improvement of milk quality, the progress of which was recently reported to
the market, has also been a significant factor in securing the uninterrupted
supply of quality milk to the Group's processing plants. Going forward in the
current year, management expects continued strong demand for skimmed milk
powder. While the recent price increases are likely to take some time for end
consumers to absorb, the strong world demand remains conducive to the successful
financial performance of the Group's SMP operation.



Final preparations for the production of the Group's new product, hard cheese,
are continuing to plan. The hard-cheese facility is currently undergoing full
operational testing, and equipment is being examined by the supplier's quality
check team. Production of trial batches of hard cheese product is currently
under way and personnel are receiving the appropriate training. Increasing milk
loads for the new facility and initiation of the maturation process for trial
batches are expected to result in the gradual accumulation of mass-supply stocks
of hard cheese within the next several months. The packaging design has been
agreed, and the suppliers of the label materials, a crucial element of the
Group's branding strategy, have been notified of the quantities required.
Marketing, merchandising and store promotion are planned in time for the release
of the initial stocks of hard cheese into certain retail channels. "



For further information, contact:


Ukrproduct Group                                      [phone]
Iryna Yevets, CEO
Dmitry Dragun, CFO



WH Ireland                                            0161 832 2174
David Youngman






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