The United Kingdom will officially leave the European Union in March 2019 but could leave earlier if a deal is reached soon which is unlikely. “The ultimate impact of Brexit vote will depend on the terms that are negotiated in relation to the UK’s future relationship with the European Union,” Pilgrim’s said in a securities filing. “Although the timetable for UK withdrawal is not at all clear at this stage, it is likely that the withdrawal of the UK from the European Union will take more than two years to be negotiated and conclude.”
Pilgrim’s said Moy Park and its operations in France and The Netherlands accounted for 18.2 percent of net sales in 2017.
Moy Park made significant investments in its chicken production operations, according to the securities filing. From 2016 to 2017, Moy Park invested approximately £20 million in a new poultry hatchery facility in Newark, England, with an egg set capacity of 2.9 million eggs per week.
Pilgrim’s noted that ongoing negotiations between UK officials and the EU will determine the future relationship between the entities. Brexit may adversely impact Moy Park’s financial results “…if the UK is unable to secure replacement trade agreements and arrangements on terms as favorable as those currently enjoyed by the UK. Any of the effects of Brexit could adversely affect our business, business opportunities, results of operations, financial condition and cash flows,” Pilgrim’s said.
“Brexit could impair our ability to transact business in the UK and in countries in the European Union,” the company said in the filing. “Brexit has already and could continue to adversely affect European and/or worldwide economic and market conditions and could continue to contribute to instability in the global financial markets.
Pilgrim’s explained the long-term effects of Brexit will depend in part on any agreements made to retain market access in the European Union following the UK’s withdrawal from the EU.
“In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which European Union laws to replicate or replace,” Pilgrim’s said. “If the UK were to significantly alter its regulations affecting the food industry, we could face significant new costs. It may also be time-consuming and expensive for us to alter our internal operations to comply with new regulations.”
Craigavon, Northern Ireland-based Moy Park is a leading food company in the UK and Northern Ireland’s largest private sector business. Operations include four fresh poultry processing plants, 10 prepared foods cook plants, three feed mills, seven hatcheries and one rendering facility in the UK, France and the Netherlands, according to the securities filing. Moy Park processes 6 million birds per week, in addition to producing roughly 456 million lbs. of prepared foods per year.
Moy Park’s fresh chicken sales in the UK primarily consist of refrigerated and frozen whole chickens, breast fillets and bone-in chicken parts. Moy Park also produces further processed and prepared chicken products for customers in retail, foodservice, agricultural and international distribution channels, Pilgrim’s noted. Moy Park also manufactures a portfolio of ready-to-cook, coated and ready-to-eat chicken products to major retailers and large foodservice customers.
Pilgrim’s added that Moy Park makes products with high levels of brand recognition including Moy Park, Castle Lea, O’Kane Limited and the Moy Park’s Jamie Oliver food products. “Moy Park believes that its brands can be expanded throughout Europe, which provides the opportunity to sell higher margin products in its traditional markets,” according to securities documents.