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UKRAINE MARKET FOR AIR CONDITIONERS

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UKRAINE MARKET FOR AIR CONDITIONERS Powered By Docstoc
					UKRAINE MARKET FOR AIR CONDITIONERS
PRODUCT MARKET STUDY

MATRADE KIEV
September 2009

MATRADE Kiev: Ukraine Market for Air Conditioners

TABLE OF CONTENT CONTENTS PAGE

1. 2. 3. 4.

Product Definition Product Sub- Sectors Background of the Air conditioners Market in Ukraine Ukraine’s Trade in Product Sector By the countries By the import dynamics

2 2 3 5

5. 6. 7. 8.

Ukraine’s Major Companies involved in Product sector Market Trends Sales and Distribution Structure Market Access Import Tariff Market Regulations

6 7 8 9

9. 10. 11.

Pricing Prospects and Suggestions for Malaysian Exporters Useful Contacts for information

9 10 11

ANNEXES A. B. C. D. E. List of Importers List of Associations List of related trade fairs and exhibitions List of Chambers of Commerce and Industry List of related or relevant Ministries

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MATRADE Kiev: Ukraine Market for Air Conditioners

1. Product Definition
An air conditioner is a part of home appliance system or mechanism designed to dehumidify and extract heat from an area, or provides heat to an area. The main purpose of a conditioner, in the premises or in automobile, is to provide comfort during either hot or cold weather. The cooling is done using a simple refrigeration cycle. In the refrigeration cycle, a heat pump transfers heat from a lower-temperature heat source into a higher-temperature heat sink. Heat would naturally flow in the opposite direction. This is the most common type of air conditioning. A refrigerator works in much the same way, as it pumps the heat out of the interior and into the room in which it stands. In property development, a complete system of heating, ventilation, and air conditioning are referred to as "HVAC."

2. Product Sub-Sectors
There are several types of the air conditioners, but all of them can be split into “one unit type” and “split system” (two (2) and more units’ type). The conditioners can also be split in “home systems” – 15 to 80 SQM of conditioned space and “industrial systems” – more than 100 SQM of conditioned space. There are also car air-conditioners that form separate product category. Window or through wall conditioners are one unit type device for one room or small separated premises that is placed at a window or wall opening with interior controls. Interior air is cooled as a fan blows it over the evaporator. On the exterior, the air is heated as a second fan blows it over the condenser. In this process, heat is drawn from the room and discharged to the environment. A large house or building may have several such units, permitting each room be cooled separately. For this category, there are also portable air conditioners which are moveable for one unit device that can be used to cool a specific room in a home and do not require permanent 2

MATRADE Kiev: Ukraine Market for Air Conditioners installation. The air is circulated through the unit and is cooled by evaporator coils with refrigerant running through them and then blown out through the front. Remaining hot air in the unit is expelled and vented through the back with an exhaust hose. Split system – where the condenser and compressor are located in an outdoor unit and the evaporator is mounted in the air handler unit. When the air handling unit is turns on, room air is drawn in from various parts of the premises through return-air ducts. This air is pulled through a filter where airborne particles such as dust and lint are removed. Sophisticated filters may remove microscopic pollutants as well. The filtered air is routed to air supply ductwork that carries it back to rooms. Whenever the air conditioner is running, this cycle repeats continually. This unit offers a lower level of indoor noise than a free-standing air conditioning unit as the condenser unit (with its fan and the compressor) is located outside the house.

3. Background of the Air Conditioners Market in Ukraine
The trade of these products has been increased steadily in the last several years. In 2006, the total value of air conditioners’ market was US$69.81 million. In 2007, the market grew by 60.5% to US$112.1 million and grew by 24.8% to US$139.934 million in 2008. World economic crisis had strong negative impact on these products. According to the local market analysts, in first six (6) months of 2009, the products recorded a decrease in import volume by more than five (5) times to US$ 13.17 million (for the first half of 2008, the value was US$70.89 million). The situation for July – August is slightly better whereby the monthly import volume increased to US$ 4.5 million, up from US$2.2 million. But it does not change the trend (import volume is still far from last year figures). All suppliers try to sell out the available stock which was imported in 2008. In 2010, the annual sales amount is forecasted to be about US$60 million – an approximately 85% of the market size in 2006. There were several reasons for stable growth of the market in the previous years. Simultaneously there was a boom in the local construction sector, where the new standards 3

MATRADE Kiev: Ukraine Market for Air Conditioners were innovated (the premises should be equipped with air conditioning systems). So the market of industrial systems grew 50-70% every year. In addition, in 2006-2008, it was a very hot summer seasons and many people were forced to install conditioners in their houses. Tight competition at the market led also to significant price decrease in this sector. The average retail price for middle class air conditioners was US$450-500, so more people could afford it. Last year, the conditioners sold under Chinese brands (Midea, Haier, Gree) made up about 40% of sales of total air conditioners imported into Ukraine. The share of dominance Korean brands (LG and Samsung) in the local market started to decline and recently was quoted by the Korean importers’ at about 40% only. Japanese brands (Panasonic, Daikin, Mitsubishi Heavy and Toshiba) reached 15–17% of the market size. Ukraine also imported air conditioners from France (Airwell) and Slovenia (Gorenije), but the sales volumes were quite modest. American air conditioning systems of industrial types (chillers) also were imported for big office and industrial premises in Kiev and Donetsk. Malaysian air conditioners imported by the Ukrainian are for these three (3) brands. There are: • • • Panasonic – 80%, Mc Quay – 15% Acson – 5%

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MATRADE Kiev: Ukraine Market for Air Conditioners

4. Ukraine’s Trade in Product Sector
Statistics on Ukrainian Imports of for Air Conditioners (HS 8415) By Countries: US$ Thousands

COUNTRY
Italy Germany Czech Republic People’s Republic of China Thailand Malaysia Republic of Korea The USA Japan Others Total:

2009 (Jan- June)
$2,128 $924 $757 $3,786 $837 $477 $453 $447 $306 $3,061 $13,176

2008
$6,089 $9,634 $1,878 $55,952 $8,771 $7,316 $19,555 $3,269 $918 $26,552 $139,934

2007
$5,599 $11,825 $2,000 $28,424 $4,461 $4,808 $27,667 $2,726 $371 $24,212 $112,100

2006
$3,927 $10,126 $965 $16,708 $2,378 $3,012 $11,435 $1.018 $192 $20,049 $ 69,810

60000 50000 40000 30000 20000 10000 0 2006 2007 2008 2009 (Jan-Jun)

Italy Germany People's Republic of China Thailand Malaysia Republic of Korea

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MATRADE Kiev: Ukraine Market for Air Conditioners

5. Ukrainian Companies Involved in Imports of Air Conditioners
Two main importers of air conditioners into Ukraine are People’s Republic of China (1st place) and Republic of Korea (2nd place). They have maintained their positions in the market. Last year, Chinese companies exported to Ukraine a total of US$55.952 million worth of air conditioners, while Korean companies’ exports amounted to US$19.555 million. In 2008, these two (2) countries made up of 54% of air conditioners imports to Ukraine. There are hundreds of small companies such as retailers that are specialized in sales and installation of air conditioners in Ukraine. Last year, the number of main distributors of such products was reduced to 20-25 companies only. Ukrainian biggest importers are companies which are specialized in this business (80% of market volume). Among the biggest distributors are “Optim”, “Eurotrade”, “Step”, “Mir Conditsionerov”, “Ivik”, “Sunice”, “Kiev – Climate”, “Likond”, “Klondike” and “Dekker Ukraine”. Majority of distributors work with several brands of different producers, but several companies are dedicated to 1 producer only. Second group of importers are large supermarkets of electronics (Foxtrot, Technotrade) that sell several brands of conditioners in a different price segments (15-20% of the market size). The main market for air conditioners is located in Kiev. Even after the decrease in sales amounts for about 50%, local companies are still competing with each other. Another region of the traditional sales activity is Donetsk and eastern region of Ukraine. Western and southern parts of the country are less active market for these products. The construction of new premises was not developed here as much as in Kiev or Dnipropetrovs’k, so the only sales center here is Odessa region.

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MATRADE Kiev: Ukraine Market for Air Conditioners

6. Market Trends
Last year, Ukraine succeeded to become the 10th largest importer of air conditioners in Europe. However, world economic crisis has a very negative effect on the market. The sales volumes decreased twice. The situation worsened because many distributors imported twice bigger volumes in 2008 expecting further increase of sales. Now all of them try to sell out all these stocks at competitive prices. Kiev market had the least negative effect where the biggest sales decrease recorded was around 45%. In other regions, the situation was negative 3-4 times decrease in sales and many small companies were forced to close their businesses. Main reasons of lower sales are due to decline purchasing power, significantly impacted by decrease in construction and renovation sectors. Trade analysts noted that biggest drop (up to 80%) in sales was in the middle price sector (US$350-600 per one split system). Sales of the cheapest split system (US$300) dropped by 30-35% as well as the sale of high price devices (more than US$1,000). Due to these, the prices of the conditioners and their installation were also decreased. Last year, an average profit margin per a conditioner was about US$150. Currently, this figures dropped by 3 times. Some distributors sell the products at a minimal margin and with the condition that they will make installation for the customer. Last year, installation cost for 7 kWt split system was US$250 and currently the price is reduced to US$150. This decrease will push small installation companies out of business. The good news for this sector is Euro 2012 soccer championship. Ukraine needs to construct four (4) stadiums, refurbish two (2) stadiums and refurbish 32 training centers. A large sale of air conditioners is expected to be sold to these premises. Beside of that, several hotel operators, such as Hilton, Accor Group and Starwood Hotels & Resorts Worldwide announced their plans to construct hotels in Ukraine and that will additional boost the sale of air conditioners.

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MATRADE Kiev: Ukraine Market for Air Conditioners

7. Sales and Distribution Structure
The sales structure in air conditioners’ market in Ukraine consists of three (3) groups: big importers (distributors,) retail dealers and installation companies. Distributors prefer to work with regional dealers that can buy out significant number of split systems on a regular basis. The total number of such dealers was about 1,500 companies in March 2009. They are trade houses, hypermarkets of electronics, construction, engineering and installation companies that cover small areas (regional towns, industrial centers, etc.). The increase of competition level force importers to be active to attract not only final consumer, but the dealer too. Besides of the price incentive, some importers provide technical and information support, organize seminars and conferences for dealers. They sometimes even organise visits to the production site. In 2007, several big distributors founded Ukrainian Academy of Conditioning MHI that obtained the state license to train specialists for sales and installation of air conditioners in Ukraine. Numerous world famous brands are presented in Ukraine now, starting from cheap Chinese, middle class Korean and high segment Japanese, European and American. All of them are well known for Ukrainian customers and have their own market niche. On annual basis, several new brands will try to penetrate the Ukrainian market. In 2009, German (Eurofan) and French (Lessar) brands were introduced to the market. They will not catch many customers because of the tight competition, but will attract attention of those who want to change old split system onto new one. In 2009, there are 15% of such sales in the market structure. And in future this percent will be definitely be higher. Previously, more than 1.5 million conditioners were sold in Ukraine, so in future they are expected to change to the new products.

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MATRADE Kiev: Ukraine Market for Air Conditioners

8. Market Access
A. Import Tariffs

The import tariffs for air conditioners in Ukraine are as follows:     Window or through wall type – 1% Home split systems (7kWt) – 5% Industrial split systems (up to 50 kWt) – 10% Big industrial split systems (more than 50 kWt) – 5%

The importer also needs to pay local customs fee. If an importer transports the goods to Ukraine by truck, he has to pay additional tax (it depends on the car truck weight and distance to local customs where the clearance will be made). In addition, air conditioners imported to Ukraine are subjects to sanitary-epidemiology, radiation and ecology control. Importers need also should to pay 20% VAT on the goods imported during the customs clearance. B. Market regulations

By the Ukrainian legislation, the imports of air conditioners, Freon components and other spare parts to Ukraine is a subject of general requirement, applied to all electric and electronic products. All products have to be duly certified by the Ukrainian center of Certification. All signs and marks should be made in Ukrainian language.

9. Pricing
The structure of pricing of the air conditioners market in Ukraine is dependent on the general economic situation rather than the season. The economic crisis has reduced the margins of the companies, but the trend remained the same. Currently, the distributors’ margin is about 1015% and expected to decrease by 3 times due to the crisis. Everybody try to keep the sales pace rather than profit margin. Dealers and installation companies have their “piece of cake” of 20% profit margin and it is rather fair – the price for copper tubes is up for 35% in 2009. This price structure will assist the Ukrainian market to keep the sales volume at the level of 2005-2006. 9

MATRADE Kiev: Ukraine Market for Air Conditioners

10.Prospects and suggestions for the Malaysian exporters
 Ukrainian market of air conditioners reflects the Ukrainian economy situation. In the first half of the year, the market was being restructured for the new conditions. Some trade ties were broken and some small businesses were closed. Now 80% of the air conditioners, imported to Ukraine are in the lower price segment. So it has very negative effect on the Malaysian export (mainly Malaysian companies exported mid class devices). So Malaysian exporters need to focus on marketing of air conditioners in the lower price segment. The cooperation with Panasonic is also important, although it does not reflect the market sentiments. Thus, introducing of new (low price) brands from Malaysia should be the main strategies to penetrate this market at the current moment. As sales of low price segment will dominate the market, thus Malaysian exporters should are encourage to market their air conditioners within US$ 250-350 range to stimulate more demands.  Additionally, Malaysian air conditioners exporters should engage local distributors to penetrate the market. Chinese exporters maintained their trade position due to their well developed distribution network in Ukraine. It is much easier to adapt to the market fluctuation if you have reliable partner here. MATRADE encouraged Malaysian companies to participate in the electronics and ventilation exhibitions that are held in Ukraine annually. It is a good chance to meet and establish business partner as well as to evaluate business opportunities available.

Prepared by: MATRADE, Kiev September 2009

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MATRADE Kiev: Ukraine Market for Air Conditioners Sources of Information:  State Statistics committee of Ukraine (www.ukrstat.gov.ua)  Ministry of Economy of Ukraine (www.me.gov.ua)  Ministry of Industrial Policy of Ukraine (http://industry.kmu.gov.ua/control/uk/index)  State Customs Service of Ukraine (www.customs.gov.ua)  Business weekly magazine (www.business.ua)

Contacts for Information in Ukraine

1. MATRADE Kiev Address Tel : 25. Buslivska St,. Pechersk, 01901 Kiev : +380 44 286 8940/41 286 7128 (direct line) Fax Contact person E-mail : +380 44 286 8942 : Mr. Vitaly Boiko : kiev.vitaly@matrade.gov.my

2. Embassy of Malaysia in Ukraine Address Tel Fax Ambassador E-mail First Secretary E-mail : 25. Buslivska St., Pechersk, 01014 Kiev : +380 44 286 8940/41 : +380 44 286 8942 : Dato’ Abdulla Sani Omar : malkiev.@kln.gov.my : Ruzaimi Bin Mohamad : ruzaimi@kln.gov.my

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MATRADE Kiev: Ukraine Market for Air Conditioners

1. LIST OF UKRAINIAN IMPORTERS OF THE AIR CONDITIONERS
1. “Optim” Address Tel Tel/fax E-mail Website Contact person : 7, Vozdukhoflotskiy ave., 03049 Kiev : +38 044 248 8848 : +38 044 348 4807 : info@optim.ua : www.optim.ua : Olga Gryn – Brand Manager

This company was founded in 1995 and it is one of the oldest traders. Currently they are one of the biggest importers of air conditioners. Their products list includes following brands: LG, Panasonic, Mitsubishi, Sytemair, Neoclima and Hidros. They trade with Malaysian products (Panasonic).

2. “Eurotrade” Address Tel/fax E-mail Website Contact person : 70, Pobedy Ave., 03113 Kiev : +38 044 453 4941 : polyakov@eurotrade.kiev.ua : www.eurotrade.kiev.ua : Michail Polyakov – Director on Development

This company was founded in 1995 and now it is one of the largest traders on the market of air conditioners. They sell the following brands: (Home systems) – Sensei, Chigo, LG, Eurofan and Fuji Electric; (Industrial systems) – LG and Fuji electric.

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MATRADE Kiev: Ukraine Market for Air Conditioners 3. “Step Ltd” Address Tel Tel/fax E-mail Website Contact person : 72, Velyka Vasylkivska St., 03150 Kiev Ukraine : +38 044 461 7892 : + 38 044 461 7893 : retail@step-kiev.com : www.step-kiev.com : Yuri Vdovichenko – General Director

The company started in 1996. They trade with full variety of products and spare parts for the conditioning, heating, cooling and moisturizing systems. Their main brands in air conditioners are: LG, Samsung, Hitachi, General Electric and Crystal.

4. “Mir conditsionerov” Trade House Address Tel/fax Fax E-mail Website Contact person : 24, Starovokzalnaya St., 01032 Kiev Ukraine : +380 44 531 1904 : + 380 44 537 6018 : info@midea.com.ua : www.midea.com.ua : Sergei Kireev – General Director

The company was founded in 2002 and now actively trades air conditioners in the Central region of Ukraine. They trade with Chinese brand MIDEA as the main product (authorized distributor in Ukraine) and also with Fujitsu, LG, Samsung and Toshiba.

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MATRADE Kiev: Ukraine Market for Air Conditioners 5. “Ivik” Address Tel Tel/fax E-mail Website Contact person : 14/34, Kramskogo St., 03115 Kiev Ukraine : +380 44 502 0062 : +380 44 502 0062 : assist@ivik.com : www.ivik.ua : Gennady Nimich - General Director

This company is specialized sales of the air conditioners and other related spare parts of Mitsubishi Heavy Industries. They are authorized dealer in Ukraine. They are one of the first traders in this market (founded in 1993) and also founded Ukrainian Academy of Conditioning in Kiev, where the dealers can be duly trained and certified. Besides MHI they also trade with heating and cooling equipment.

6. “Sun - Ice Ltd.” Address Tel Tel/ fax E-mail Website Contact person : 5, Osvoboditelei Ave., Kiev Ukraine : +380 44 451 4854 : +380 67 536 5666 : jura_marinenko@ukr.net : www.sun-ice.com.ua : Yuri Marinenko – General Director

This company is middle-size trader, specialized in sales of MHI, Ciat, Systemair and McQuay. They import this brand from Malaysia; sometimes they also purchase it in Germany.

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MATRADE Kiev: Ukraine Market for Air Conditioners 7. “Kiev Climate Ltd.” Address Tel Tel/fax E-mail Website Contact person : 4, P. Tychyny Ave., 02098 Kiev Ukraine : +380 44 206 2060 : + 380 44 206 2060 : mail@kievclimate.com : www.kievclimate.com : Konstantin Marusov – General Director

This company was founded in 2000 and now they are middle-size trader, specialized in sales of Mitsubishi Electric, Gree (China), Supra and Acson (Malaysia).

8. “Leacond Ltd.” Address Tel Tel/fax E-mail Website Contact person : 10-a, Yakira St., 04119 Kiev Ukraine : +380 44 238 6121 : + 380 44 238 6120 : daikin@leacond.com.ua : http://leacond.com.ua : Vladimir Stepura – General Director

This company was founded in 1996 and now they are big importer, specialized in sales of high price segment products. In their portfolio only one brand – Daikin (Japan) – they are authorized distributor in Ukraine and also one of the founders of Ukrainian Academy of Conditioning.

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MATRADE Kiev: Ukraine Market for Air Conditioners 9. “Klondaik Ltd.” Address Tel Tel/fax E-mail Website Contact person : 95, Otradnyi Ave., 03061 Kiev Ukraine : +380 44 494 3920 : +380 44 490 2252 : info@klondaik.com.ua : www.klondaik.com.ua : Eugeniy Demyanenko – Director

This company is relatively fresh trader, they were founded in 2001. They also specialized in Daikin brand but import it not from Japan (through intermediary in Moscow). Another brand they trade is Swegon.

10. “Dekker - Ukraine Ltd.” Address Tel Tel/fax E-mail Website Contact person : 1, Laboratornyi Lane, 01133 Kiev Ukraine : +380 44 461 9900 : + 380 44 461 9900 : uzdek@iptelecom.net.ua : www.dekker.com.ua : Dmitriy Gladilin – General Director

This company was founded in 1998 and trade with Dekker (their own brand, produced in China), Carrier, Toshiba, MHI, General, Fujitsu, Sharp and Samsung.

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MATRADE Kiev: Ukraine Market for Air Conditioners

2. LIST OF ASSOCIATIONS
1. “AVOC-Ukraine” Association of Ventilation, Heating and Conditioning Address Tel Tel/fax E-mail Website Contact person : 1/3, Dvoryanskaya St., Odessa Ukraine : + 380 48 720 9108 : + 380 48 723 1145 : admin@osar.odessa.ua : www.osar.odessa.ua : Alexander Lipa – Vice-President

3. LIST OF RELATED TRADE FAIRS AND EXHIBITIONS
1. XIII International Exhibition “Aqua – Therm” – 2010” May 12 – 15, 2010 http://www.aduatherm.kiev.ua Address: International Exhibition Center 15, Brovarsky Ave., Kiev Ukraine

Organizer: “Finexpo” Address: off.1318, 172, Gorkogo St., 03150 Kiev Ukraine Tel. + 38044 521 2181 Fax.+ 38044 521 21 81 E-mail: luciano@ukr.net

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MATRADE Kiev: Ukraine Market for Air Conditioners 2. “Industrial Cold Ukraine”

March 2 – 5, 2010 Kiev Expo Plaza Address: 2-a, Salyutnaya St., Kiev Ukraine

Organizer: “EuroIndex” 56, Pobedy Ave., Kiev, Ukraine. Tel Fax Website : +38044 461 9201 : +38044) 461 9201 : http://promholod.euroindex.ua http://euroindex.ua

4. LIST OF CHAMBERS OF COMMERCE & INDUSTRY
1) Ukrainian Chamber of Commerce and Industry Address Tel Tel/fax E-mail Contact person : 33, vul.Velyka Zhytomyrska, Kiev, 01601, Ukraine : + 380 44 272 2911 : + 380 44 272 3353 : ucci@ucci.ogr.ua : Viktor Yanovskiy – Secretary General

2) ICC Ukraine Address Tel Tel/fax Website Contact person : 19-b, Reitarska St. 01034 Kiev Ukraine : + 380 44 234 4273 : + 380 44 270 6829 : www.iccua.org : Volodymyr Shchelkunov – President 18

MATRADE Kiev: Ukraine Market for Air Conditioners

5. LIST OF RELATED/RELEVANT MINISTRIES AND STATE COMMITTEES
1) Ministry of Economy of Ukraine Address Tel/fax E-mail Website : 12/2 Hrushevskoho str., 01008 Kiev Ukraine : +38 (044) 253 9394 : meconomy@me.gov.ua : http://www.me.gov.ua

2) The State Customs of Ukraine Address Tel Fax E-mail Website : 11-g, Deghtyarivska str., Kiev, 04119 Ukraine : (044) 247-26-06, 274-27-06 : (044) 236-82-81 : dmsu@customs.gov.ua : http://www.customs.gov.ua/

3) Ministry of Foreign Affairs in Ukraine Address Tel Fax E-mail Website : 1, Mykhailivska Sq., 01018 Kiev Ukraine : + 38044 226 3379 : + 38044 226 3169 : zsmfa@mfa.gov.ua : www.mfa.gov.ua

4) Ministry of Industrial Policy of Ukraine Address Tel Fax E-mail Website : 3, Surikova St. 03035 Kiev Ukraine : +38044 246 3320 : +38044 245 6209 : info@industry.gov.ua : http://industry.kmu.gov.ua/control/uk/index

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MATRADE Kiev: Ukraine Market for Air Conditioners 5) State Statistics Committee of Ukraine Address Tel Fax E-mail Website : 3, Shota Rustavely St. 01023 Kiev Ukraine : +380 44 287 1411 : + 38044 235 3739 : office@ukrstat.gov.ua : www.ukrstat.gov.ua

6) UKRSEPRO Certification and Conformity Center Address Tel Fax E-mail : 7, Krasnova St., Kiev Ukraine : +380 44 3590129 : + 380 44 359 0129 : info@ukrsepro@kiev.ua

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