Operating & EBRD Financing Facility Update
Summary by AI BETAClose X
3 November 2026
UKRPRODUCT GROUP LIMITED
("Ukrproduct", the "Company" or, together with its subsidiaries, the "Group")
UPDATE ON OPERATING CONDITIONS AND ON LEGACY EBRD FINANCING FACILITY
Ukrproduct Group Limited (AIM: UKR), a Ukrainian producer and distributor of branded dairy foods and beverages (kvass), provides an update on the increasingly challenging operating environment affecting its Ukrainian businesses and on developments concerning its long-standing financing arrangements with the European Bank for Reconstruction and Development ("EBRD").
Operating conditions
The Group continues to operate in exceptionally difficult and deteriorating circumstances arising from the full-scale invasion of Ukraine, now in its fifth year. As reported in the Company's interim results announced on 29 September 2026, the cumulative impact of the war on the Group's operations, financial position, workforce and supply chains remains substantial.
Since the publication of the interim results, the security environment has continued to deteriorate, with further attacks on industrial facilities, food-processing infrastructure, warehouses and energy networks. The Board remains particularly concerned about the implications for the forthcoming winter, as the country's electricity, heating and water infrastructure continues to sustain significant damage.
Russian attacks on national electricity generation and transmission infrastructure have resulted in repeated and extended interruptions to energy supplies across Ukraine. These disruptions affect production scheduling, refrigeration, storage, transportation and the ability of suppliers and customers to maintain normal operations. The Group remains exposed to additional expenditure on alternative energy arrangements, including the rising cost of diesel to run generators and increased transportation costs, which are having a significant impact on the cost of production.
Two of the Group's facilities sustained damage from missile strikes during the first half of 2026, as previously disclosed. More recently, further strikes have affected industrial and warehousing facilities in the areas where the Group operates, including on a warehouse immediately adjacent to one of the Group's own production sites. Whereas in earlier periods attacks occurred predominantly at night, in recent months strikes have occurred at all hours, and the Board considers the continuing proximity of attacks to its operations a serious threat to employee safety and to the preservation of productive assets.
The wider Ukrainian food-processing sector has experienced repeated and sustained attacks on production and storage facilities, with a number of dairy, ice cream and meat-processing businesses in the regions where the Group operates sustaining significant or total damage in recent months. The destruction of industrial facilities, cold storage, distribution centres and associated transport infrastructure has created increasing uncertainty across the entire food supply chain, including for businesses whose own facilities remain operational.
The Group's domestic distribution arrangements have been particularly affected. One of Ukraine's largest supermarket operators and a major distribution partner of the Group has publicly reported the loss or damage of more than 60 per cent of its warehousing capacity during the conflict. These disruptions have affected the storage, transportation and distribution of goods, including the Group's products, and continue to constrain the ability of producers to reach domestic consumers. The Board continues to assess the consequences for inventory recoverability, customer balances and distribution costs, and further losses, provisions or impairment charges may arise as the financial effects become sufficiently identifiable and measurable.
The wider agricultural sector continues to experience structural disruption, as previously reported and workforce availability remains a further significant constraint with the recruitment and retention of skilled personnel increasingly difficult as the available domestic labour pool continues to contract.
As reported in the interim results for the six months ended 30 June 2026, revenue expressed in sterling decreased compared with the corresponding period of 2025, notwithstanding modest growth in local-currency revenue. The Board continues to manage significant uncertainty concerning future demand, energy availability, logistics, production costs and the recoverability of certain assets, and these conditions materially limit the Group's ability to provide reliable forecasts.
The Directors reiterate the material uncertainty relating to going concern disclosed in the interim financial statements published on 29 September 2026. The Group continues to operate under substantial financial and operational constraints, and no assurance can be provided that further deterioration in the security or economic environment will not materially affect its financial position. The Board's immediate priorities remain employee safety, the preservation of operating assets, continuity of food production, and disciplined liquidity management.
Legacy EBRD financing facility
It is within this exceptionally difficult operating and financial context that the following development should be read. EBRD has been a financing partner of the Group since 2011, when it advanced a facility to the Group's Starokonstantinovskiy Molochniy Zavod SC to fund processing equipment. The Board wishes to record its sincere appreciation of EBRD's role in supporting economic development in Ukraine over many years, and of the constructive, patient and understanding manner in which EBRD has engaged with the Group throughout an extended and exceptionally difficult period. EBRD's willingness to work with borrowers facing genuine distress, in the midst of a full-scale war, reflects the important role the institution plays in Ukraine.
Over the sixteen years since the facility was advanced, and notwithstanding the profound external shocks the business has faced, the Group has sought to meet its obligations to the fullest extent its circumstances have allowed, while preserving the viability of its operations through successive periods of acute difficulty, including the years of the full-scale invasion. Following extended negotiations, EBRD and Dairy Trading Corporation ("DTC"), an existing wholly-owned subsidiary of the Group, have today entered into an agreement under which DTC will acquire EBRD's remaining rights and interests under the facility through assignment of EBRD's outstanding claim under the facility, together with the related security over the operating subsidiary's production assets.
The consideration payable by DTC for the assignment is EUR 335,000 in cash. DTC will finance the acquisition entirely from its own financial resources, generated through its ordinary business activities. No new equity contribution or external financing is being introduced into the Group in connection with the acquisition, and no funding is being provided by the borrowing subsidiary or by any other Group company.
The transaction is structured as an assignment of creditor rights, and not as a reduction, waiver or forgiveness of the underlying borrower's obligations. The outstanding obligations remain legally payable by the original borrowing subsidiary, with DTC replacing EBRD as creditor upon completion. The carrying value of these obligations (including accrued interest and penalty charges) is included within the going concern statements on pages 19 and 36 of the Group's audited consolidated financial statements for the year ended 31 December 2025, which were published on 22 June 2026 and are available on the Company's website. The principal security over the borrowing subsidiary's operating assets will be transferred to DTC; certain historical guarantees and other arrangements no longer applicable following the change of creditor will be released or amended.
Completion remains subject to a number of contractual, settlement and administrative requirements and the registration or amendment of the applicable security arrangements across several jurisdictions. These steps are expected to take some time to conclude. The Group will provide a further update at completion, or otherwise as required by its disclosure obligations. Following completion, the Group will have no remaining external indebtedness owed to EBRD.
Financial reporting considerations
The accounting consequences of the transaction on the Group will need to be considered at both individual entity and consolidated levels, and are not yet fully determined, for the reasons set out below.
At the level of the original borrower (Starokonstantinovskiy Molochniy Zavod SC), the contractual obligation remains outstanding following the assignment. At the level of DTC, the acquisition will give rise to a financial asset, the recognition and measurement of which will be determined in accordance with applicable accounting standards. The historical facility has been reflected in the Group's financial reporting over a number of years, including the recognition of finance costs, accrued interest and other contractual charges arising from the extended period of non-performance; a significant part of the Group's accumulated losses in prior periods arose from these charges.
For consolidated reporting purposes, the transaction will require the elimination of intra-group balances and an assessment of the resulting treatment under International Financial Reporting Standards. Different Group entities may record gains in some cases and losses or provisions in others. At consolidated level, the netting of these positions may give rise to a material non-cash accounting gain, which could increase reported retained earnings and shareholders' equity - notwithstanding that no cash has changed hands with any external party and no new capital has been introduced. In certain Group entities, provisions may be recognised against the risks arising from the war, and amounts may be set off against losses carried forward from prior periods.
The precise amount, the period of recognition and the presentation of any such effect have not yet been determined. The Group has not yet completed its detailed accounting assessment, nor discussed the proposed accounting treatment with its external auditor, and the Board is accordingly not in a position to provide a reliable quantified estimate of the ultimate consolidated financial effect at this time.
The Board emphasises that any accounting gain arising from the transaction would not represent an inflow of cash or an injection of capital, and that the Group's operational liquidity and cash-generating capacity remain subject to the exceptionally challenging conditions described above. Separately, the Group continues to assess the financial consequences of wartime damage and disruption, including potential asset impairments, inventory losses, receivable recoverability and other provisions, which may adversely affect future reported results. The Board therefore cautions against interpreting any potential positive accounting effect from the assignment in isolation from the wider financial and operational risks affecting the Group.
Further information will be provided once the relevant assessments have been completed and to the extent required by the Company's disclosure obligations.
Board statement
The Board records again its appreciation of EBRD's constructive engagement over an extended period in addressing the legacy financing arrangements under exceptionally difficult circumstances. The transaction represents a further step in the Group's management of its historical financing obligations; it does not, however, remove or diminish the significant operational, financial and security challenges confronting the Group, which remains in a position of considerable difficulty. The Company remains focused on maintaining essential food production, preserving employment where possible, and managing its operations prudently in an environment of continuing and severe uncertainty.
Further announcements will be made as required.
For further information contact:
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Ukrproduct Group Limited |
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Rinat Abdrasilov, Non-Executive Chairman |
Tel: +44 1534 507000 |
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Oleksandr Slipchuk, Chief Executive Officer |
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Strand Hanson Limited |
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Nominated Adviser and Broker Rory Murphy, Richard Johnson, Imogen Ellis |
Tel: +44 20 7409 3494 |
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No. 596/2014, which forms part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon publication of this announcement through a Regulatory Information Service, the inside information is considered to be in the public domain.
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