Ukrproduct Group Ltd 04 October 2005 4 October 2005 Ukrproduct Group announces the offer to acquire Jhmerinka Butter & Cheese Plant Ltd and Letichiv Dairy Plant Ukrproduct Group ('UPG') is pleased to announce the offer to acquire 100% of the capital of the Jhmerinka Butter & Cheese Plant Ltd and a 62% stake in the Letichiv Dairy Plant for a total cash consideration of £1.3 million. The offer is being financed through the funds raised at the Group's admission to AIM in February 2005. Completion of both deals is expected in the next four weeks. The offer to acquire both plants is in line with UPG's strategy of developing its market-leading position in its two core segments of processed cheese and packaged butter, increasing its presence domestically in what is a fragmented market, expanding the product offering of the Group and reacting quickly to opportunities as they arise. The dairy-based food market continues to be a direct beneficiary of the sustained rise of consumer affluence in Ukraine, especially in the shift towards the consumption of packaged quality products. The acquisitions of the Jhmerinka Butter & Cheese Plant and Letichiv Dairy Plant will provide UPG with the necessary increase in production and raw material capacity to meet rising consumer demand. The transactions will also expand the geographic coverage of the Group, provide complementary products to the Group's existing product ranges and extend the Group's raw milk supply zone. The Directors of UPG believe that the operating performance of both plants can be significantly improved through the introduction of improved cost controls, leveraging of the distribution network and optimisation of the product mix. The Jhmerinka plant, located in the region of Vinnitza, produces a range of regional, well established processed cheeses and butters. According to the official data of the Ukrainian State Committee of Statistics, it was the twelfth largest manufacturer of processed cheese in Ukraine, having produced 1,012 tonnes in the year to 31 December 2004. The plant is also the region's leading supplier of packaged butter, selling over 1,000 tonnes per annum. The management of Ukrproduct Group estimates that the plant will add 2.4 percentage points to UPG's current domestic market share of 30% in the processed cheese segment. In the year ended 31 December 2004 the plant reported sales and assets totalling £4.8 million and £1.2 million respectively. The Operating profit of the plant was £74,000. The Letichiv plant, located in Ukrainian region of Khlmelnitski, produces various dairy-based products such as cream, butter and casein* with the capacity to collect up to 100 tonnes of raw milk per day. The acquisition of the plant expands UPG's raw milk zone in the region, which is central for ensuring the continued supply of raw materials needed for the increase in production at the Group's Starkon plant. The plant also provides UPG with the option to develop hard cheese. The acquisition will also provide UPG with the opportunity to optimise the product mix in order to react better to the seasonal demand for its products. In the year ended 31 December 2004, the plant had sales of £1.25 million and assets of £0.3 million. The operating profit of the plant was £154,000. Commenting on the offer, Sergey Evlanchik, CEO of Ukrproduct Group, said, "I am delighted to announce the offer to acquire Jhmerinka and Letichiv, our first acquisitions as a public company. The plants provide a complementary fit in terms of products and operational capabilities as well as the necessary capacity and raw materials to expand production of the Group's core segments. Both acquisitions are low-risk operating purchases that are reasonably priced and well-capitalised. I expect only a limited capex requirement for both companies. These acquisitions further strengthen UPG's position in capturing the rising consumer demand for quality, branded dairy based products. Going forward, UPG will continue to look for opportunities that enhance the overall strength and future growth of the business, but most importantly shareholder value." *Casein is a protein that is precipitated from milk by the action of rennin, forming the basis of cheese. For further information: Ukrproduct Group +38 044 502 8014 Sergey Evlanchik, CEO, and Dmitry Dragun, CFO Financial Dynamics +44 20 7831 3113 Ben Foster/ Charles Watenphul This information is provided by RNS The company news service from the London Stock Exchange