MHP SE

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's Q1 2021 results call. At this time, all participant lines are in listen-only mode. The format of the call today will be a presentation by the MHP management and IR team, followed by a question and answer session. After the call, you will have an opportunity to ask questions. If you are dialed in via the web, you may also ask questions using the voice or text feature. So without further ado, I would now like to pass the line to MHP. Anastasia, the floor is yours.

Hello, everyone. Good afternoon and good morning. Thank you for joining us today for MHP's conference call dedicated to MHP financial results for the first quarter of 2021. As usual, I have to tell you in advance that some of the things we discussed today are forward-looking statements. Please take it into consideration. I encourage you to use today's press release with our financial statements for the detailed information. One thing I would like to draw your attention to is that starting from this quarter report, MHP will also provide comparison of the results to the previous quarter in poultry, meat processing, and European operating segments. Grain growing segment is not included because of seasonality efforts. We believe that this approach in disclosure of our results will bring our stakeholders additional value and convenience, as well as better understanding of trends. On today's call, we have CFO of MHP, Victoria Kapelushina. She will present financial results of the company and best segments. And myself, Anastasia Sabatyuk, Director of Investor Relations. I will lead you through the presentation. After the presentation, we will be glad to answer your questions. I hope that everybody is ready so we can start presentation of the first quarter of 2021 straight away. Slide number four, please. Let me start from general overview of the first quarter of 2021. First of all, I would like to confirm that MHP continues to take proper care about its over 30,000 employees across 11 countries. We take COVID-19 pandemic seriously. We put in place, monitor and revise measures that enable our people and the company to operate safely and responsibly. Therefore, fulfilling our company's central role as a food producer during this challenging period for everyone. Second, since the first outbreak of avian influenza in Ukraine, middle of December 2020, MHP's facilities until now, and taken into account our prudent biosecurity measures in place, have not been and will not be adversely affected. So despite these two big challenges, MHP continued to evolve, advance, and implement its strategy, working at full capacity across all business segments. Let me add a few words about macro conditions in Ukraine. Despite difficult and turbulent Q1 2021, because of the third wave of COVID-19 in Ukraine and the strict lockdown, retail sales decreased by over 7% and GDP decreased by 2% year-on-year. However, the government expects real GDP growth to be around 5% year-on-year. Ukrainian currency is valued by 4%, with a forecast for Ukrainian hryvnia to USD. exchange rate at 29% on average in 2021. Annual inflation accelerated to around 7% year-on-year, driven mainly by food, utilities, transport, and education cost increase. Being one of the biggest grain producers, traders in the world, and taking into account current weather conditions as well as current world grain prices, expectations for 2021 harvesting campaign in Ukraine is strong and positive. Let me finish here and come back to the company's results. Let's go on slide number six of the presentation. That was absolutely challenging start of the year and actually expected result. Taking into account significant increase in gain and fall in prices since Q4 2020, And challenges mentioned previously, MHP, as well as other food producers in Ukraine and worldwide, was trying its best to get a good financial performance. As a result of our effort and strategy implementation, our revenue remained stable year-on-year and constituted $447 million, of which export revenue was 49%, around $217 million. However, lower by 8% year-on-year due to the avian influenza restrictions and exports since December 2020 mainly. EBITDA was around 57 million US dollars, 37% lower year-on-year, and EBITDA margin constituted 13%. Let's go on slide number seven. Slide number seven shows our financial results by segment. As you can see from the table, the mass majority of revenue in Q1 2021 came from poultry and related operations, around 70%, and the European operating segment, around 20%. Traditionally, due to seasonality effects, but also because of the historically low harvest in 2020, contribution to the revenue from grain growing segment in the first quarter was quite low. around 2% only in Q1 2021. At the same time, poultry, grain growing, and the European operating segments contributed to the most to the company's EBITDA, 56%, 23%, and 21% respectively. With rotation operations and other agri-segment contributions still remains the lowest boost to the revenue and EBITDA of MHP. However, with the prospects to increase, taking into account current transformation of the company and culinary strategy implementation. Let's have a closer look at each business segment on our next slide. Here I pass my words to Victoria. Thank you, Anastasia.

Good afternoon, everyone. Let me give you a call to our portrait segment, slide number eight. It is an influence in Ukraine during the first quarter. led to temporary ban of exports from Ukraine to EU. In order to mitigate adverse impact on MHP's operations and profitability, the management of the company decided to increase production of small chickens and export more to MENA market. Sales to MENA region increased from 31% to 54% of total export sales year-on-year, mainly driven by increased sales to Saudi Arabia. All of these poultry production facilities in Ukraine have been operated during the third quarter at full capacity. Despite of difficulties with COVID-19 and avian influenza, expert sales volume remains at the same level year on year. On the domestic market, we increased sales of chills, meat compared to the last year, but this was offset by slightly decreased shares of frozen chicken meat in Ukraine due to the low production and sales MDM. Total revenue in poultry segments increased by 3% year-on-year, driven mostly by an increase in price on domestic markets, which was offset by a decrease in sales volume of chicken meat on vegetable oil. Expert price decreased by 5% in average, mainly driven by product and geographic change in expert sales. Increased sales of smoked chicken to meat and decreased sales of chicken fillet to eel. Because of significant increase in grain and protein product price since the fall quarter 2020, Market price of chicken in Ukraine began to increase starting from December. In Q1, poultry price in domestic market in dollar term increased by 15% year on year, with further increase in price in Q2. Gradually compensating increased production cost. As you may know, since the first quarter 2020, all food products worldwide have been facing a challenging asset associated with increasing grain price because of different international drivers. At MHP, poultry production costs increased approximately by 25% in dollar terms as a result of unexpected significant growth of grain protein price after that harvest in Ukraine. Financial results of poultry segments in Q1 began to recover since a significant fall in Q4 last year. At the same time, the decline of results compared to the same period last year occurred because the increase in poultry costs was only partially compensated by a gradual increase in poultry price. Adjusted a bit down before the 31 standard. Per one kilo was $0.2, which was more than 40% lower compared to the last year, but around 80% higher compared to the worst-hour result in Q4 last year. Let's move to the next slide, slide number nine. External grain segment revenue. amounted $9 million. The decrease in revenue was mainly due to the low volumes of crop sold in 2021 as a result of a weaker harvest of 2020. EBD of grain segment in the first quarter of the year mainly comprises grain sales of poultry segment for internal consumption as many as poultry feed components. Regarding our winter crops, All our winter crops are currently in good condition. This year MHP is going to harvest around 355,000 hectares. MHP 2021 spring sowing campaign has been analyzed. Let's go to the slide number 10. Meat processing and other agricultural business perform relatively stable year on year. Volumes on convenient food production grew slightly by 3%, supported by continuing new product development program. Mid-processing product volume decreased around 3%, mainly in traditional stock segment. We expect to change volume dynamics to positive further in 2021, following the wide range of new product introduction to the market. Segment revenue remains materially unexchanged at amount around $36 million, adjusted EBD amount $4 million, decreased compared to the last year as a result of lower return earnings from meat processing products due to the higher poultry costs, which was only partially compensated by the increase in price. Let's go to the slide number 11. Following this strategy, of poultry production growth and increasing facility capacity. This slide number 11 about pyrotinib, about our pyrotinib 2 results. Following the strategy of poultry production growth and increased facility capacity utilization in Serbia and Croatia, poultry sales of European operation segment in the Q1 increased by 6%. Meat processing product sales remained almost on exchange compared to the same period last year. Average poultry price slightly decreased by 10%. Price of meat processing product was relatively stable. European operating segment generates around $90 million group revenue and $12 million of EBDA in the Q1. Adjusted EBD in Q1 increased by 90 cents year-on-year, mainly due to increased capacity and increased production. And in dollars, EBDA growth is also affected by depreciation euro against dollar year-on-year. The management is very, generally, is very satisfied with the result of the routine of two operations. A few words about our cash flow and liquidity positions, slide number 12. Cash from operation decreased mainly in line with decrease in EBITDA. An additional impact was due to the change in fair value of biological assets and agricultural produce, which represented no cash adjustment. Net cash from operating activity Amount to minus 36 million in Q1 compared to minus 39 million last year mainly due to the changes in working capital, seasonal changes in working capital. Use of funds in working capital during the Q1 was mostly related to, first of all, investment in inventory, corn, sunflower, and soy, designed for internal consumption until the next harvest. as well as higher grain price in Q1 compared to the same period last year. Secondly, investment in inventories related primarily to grain growing entities in respect of forthcoming spring sowing campaigns. Third, increasing VAT receivables, which is expected to be reimbursement in the second quarter. Total COPEX, in Q1 amount around $23 million, mainly related modernization products, new product development, maintenance, and production facility for the development. Total COPEX in this year is expected around $130 million. Regarding debt, And by the end of the period, the company total debt was nearly $1.5 billion, net debt around 1.3. 90% of total debt is long-term debt, 96% of which is Eurobond. Our average rate of interest rate currently is below 7. In terms of liquidity at the end of March, we had around about $140 million in cash, mostly in dollars. Due to the challenges in 2020 and only 2021, which resulted in decrease in EBDA, net death to EBDA ratio reached 4.28 versus Eurobonne COVID-19 3. We expected to increase in long-term EBDA since the second quarter of this year, which accordingly 12% will potentially reduce the ratio to three and even possible below. Having around 50% of our revenue, more than $200 million mostly in dollars dominated, during the third quarter, we fully covered all our debt service expenses and other payments in foreign currencies. Our currency balance, as usual, remains strong positive. And now I give the floor to Anastasia for update and outlook.

Thank you, Victoria. So we are in slide number 13 of the presentation. And in summary, I would like to say that MHP continues to implement and evolve its strategy in order to run business smoothly and efficiently. First of all, we continue to transform and the culinary campaign is progressing. A new concept of meat market 2.0 version, which is a combination of sales of meat and culinary products, has been launched together with our franchisees. Additional 100 meat markets are planned to be opened by the year end. MHP R&D Center is planned to be launched this June. And the new product development, mini MHP facilities, and demo format for partners will be launched as you understand, very soon. Second, as usual, and taking into account current food price challenge particularly, MHP continues to work on production efficiency increase group-wide. Third, we continue to explore M&A opportunities and different partnership cooperation around the world. And finally, MHP sets a target to become a carbon-neutral company by 2030, And as one of our steps forward, and at the moment, together with Alltech, we are on our way to calculate MHP CO2 and its equivalent impact across all business segments separately and together. So what do we expect going forward? Definitely, we expect poultry prices in our major markets to continue its growth, driven by grain price increase. We expect visibly improvement improving trends to impact more favorably on our business over the next several months. Prices both on the domestic and international markets are expected to remain strong for the balance of the year. We expect grain prices, although unusually volatile recently, so have been increasing, and we see that they have been increasing substantially since the second half of 2020. And this strengthening trend is currently expected to continue. And definitely we see the gradual scaling of a culinary transformation. Before we start Q&A session, I would like to say that taking into account volatile grain market, it is too early to predict an improved outlook for the full year and how exactly it will be realized by the end of the year. But we are currently optimistic that MHP will at least meet current expectations in 2021. Strong farming results should compensate for weaker poultry profitability and provide MHP for some upside to our full-year EBITDA outlook. Thank you very much. We are ready for questions.

Thank you very much for the presentation. We will now be entering the Q&A session. If you have any questions, please press star two on your telephone pad and wait for your name to be called. That is star two. You may also ask a question via text or voice if you're dialed in via the web. We'll now give a minute or so for the questions to come through. Thank you. Our first question comes from Mr. Daniel Vachkovich from Barclays. Please go ahead, sir. Your line is open.

Hello. Thanks very much for the call. I have a couple of questions, if it's okay. Firstly, could I ask about the product mix? You've obviously shifted to smaller chickens aimed to the meaner markets. How big a shift back to the larger chicken sales to the EU do you expect we'll see in the next few quarters? And then could I ask about your self-sufficiency in the key feed products at present? And so following the weak harvest, you know, how does your self-sufficiency currently and how might that improve going forward? And then you mentioned about returning to three times net leverage. I didn't quite hear when you expect that to happen. And also, if you could just maybe give us an idea of where you expect your You know, you currently expect your full-year EBITDA to land. That would be great.

Thanks. Just a second. Thank you. Yeah. I think if we have questions, first of all, regarding the first question about product mix. As I told in the first quarter, we could not export to Europe due to the ban. And regarding our next We would like to keep balance. Yeah, you're completely right. We slightly decreased maybe compared to the first quarter. We decreased our production and sell small chick because we would like to provide and to sell some more to Europe. In general, maybe if you know, the main rule is export-sales diversification. That is why now we understand that it is a good situation in the MENA region, but at the same time, we don't want to concentrate only in one region. That is why mixed VLB and even current in the second quarter, current mix is different compared to the first quarter. Regarding our self-sufficiency, if you think about last year, it seems to me last year it was the worst year in our history regarding the harvest. And last year, you're completely right. Since harvest 2020, MHP we are not self-sufficient in corn, and we bought corn especially in the Q1. Regarding harvest 2021, now we expect that, and previously, every year our harvest of corn, every year was approximately 1.3, 1.2, even sometimes 1.1 million stones. Now our expectations, yeah, the same figures, yeah, but we understand some weather, unfortunately, unfortunately, weather conditions, yeah, can bring to us sometimes benefit, sometimes, no, no, negative, yeah, negative, yeah, disadvantages. Because in general, except just 2020, harvest 2021, we always, we expect we were always self-sufficient in corn. Regarding our third question about our leverage, our expectation by the end of this year, we expect that our leverage will be around three. If you question how we achieve this, it will depend, it depends on our business and our financial results in grain segment because you understand the current price of grain even higher than price during the fourth quarter last year. But unfortunately, we have some uncertainly regarding yield, for example. Yes, and this is why Yes, and we will have much clearer picture about exactly our financial results in the grain segment in the second quarter. Because now, to be honest, that is why I thought this must happen. But anyway, we have some risk regarding yield per hectare and risk regarding price.

Thank you.

Okay, thanks.

Thank you very much. Our next question comes from Mr. Gabriele from Algebris Investments. Please go ahead. Your line is open.

Hello. Hi, Gabriele from Algebris. Thanks for your presentation and thanks for taking my question. I guess a bit related to the previous question, but essentially, if you could give us a little bit more color on the grain prices and as a result, the poultry prices, because obviously the EBITDA contraction was quite large. So to some extent, poultry prices didn't keep up to the big increase in grain prices. So just wondering if you can give us a bit more color on what are the plans in the short term. So whether you think we will see an upward adjustment in poultry prices in the second and third quarter, and if as a result, how much of the EBITDA gap which we have in the first quarter will be closing relatively soon in the next couple of quarters. Thank you.

Thank you for your question. It's a very interesting question about grain price. And you understand that our financial results in grain segments, it really depends on price of grain, especially the price of corn and flours. Because the biggest part of corn we consume internally, and we recognize in our calculation, in our financial report, at market price, which usually... happened during the harvesting time but we try to be conservative and we put price more than current price approximately by 20% and yeah and we have the very wide our expectation wide very wide range range of EBDA in grain segment yeah in grain segment because it is very yeah because we use It depends. It is one issue regarding price, and second issue about yield per hectare. But you understand, just clear calculation, not about just about, for example, price. Because price previously, during the five years previous, except 2020, average price of corn worth $130. Current price of corn approximately $220, $240. If you just simple calculation, how it is influenced to EBDA per hectare is $90 multiplied yield aid is a different $700 EBDA per hectare. Do you understand my calculations? Okay, it is why in general, for example, last year, we generated around $100 EBDA, total amount of EBDA in grain segments with very low yield of corn and very best yield. Potentially, yeah, with price which equal the same that last year, potentially our EBDA in grain can be around 180 million with good yield. That is why it's very big difference and a lot of uncertain way now to speak, but it is a very big range. Regarding the second equation, regarding price of chicken, as I told in presentation, In Ukraine, for example, since January, price of chicken, domestic market increased approximately by 18%. The same completely in trend, how to increase other food products. Yeah, a lot of different food products. Yeah, but at the same time, as I told in presentation, cost, since the fourth quarter increased around 25%. Yeah, that is why our expectations that price will continue to increase on domestic market because we understand that a lot of our competitors, not just in poultry segment and in beef and in milk and in pork segment, they generate not so much interesting financial results. Yeah. A lot of struggle because price of grain now is very high. That is why our expectation that price will continue to increase. What do we see on export market? Yeah. We see that price of quarters, for example, increased approximately by 40%. Yeah. If you compare current situation with price six months ago, yeah, and for example, in MENA region, we see that price increase, but not so significant, but anyway, we see that now increasing by, yeah, less figures by maybe 10, 16, 20 percent. And we understand that everywhere in the world, price of meat will continue to grow this current price of grains. And in all our history, during all our history, we had a lot of examples and a lot of cases where after increasing price of grain, price of meat has increased, but with some lacking types. What we have right now. Thank you.

Thank you. Our next question comes from Mr. Toby Hansen from Band Recruit. Please go ahead. Sir, your line is open.

Thank you. I had three questions. The first was if you could split out the adjusted EBITDA per kilo by domestic and export markets as sort of a year-on-year development. The second one was just a question on the grain sales that you make externally, do you hedge any of the forward sales prices, or do you just sell on the spot once the harvest is done? And then the third one was, you spoke about it a little bit just now, saying that a lot of your competitors are struggling, and it's clear players like Agromars are being liquidated. Are you planning to acquire any struggling assets, either in whole or smaller production facilities?

I think you have a question. I started from the question number three about Agromart. You completely right. The player number two was the CPA of the market, Agromart. And, yeah, we don't have any appetite to buy this effort because, yeah, fast is very important. And we thought a lot of times the cost of production and efficiency of production is the main our advantages. That is why we understand that we can achieve so high efficiency only through creating new capacity. Yes, to create and build state-of-the-art capacity. And we know that facility and that asset, this asset was, yes, we know that Agromar during the maybe last seven, I don't know, the maybe seven, five years, did not invest in modernization, in maintenance. And we know exactly, but we understand the level of quality of the set. It is completely not interesting for us. At other point, we cannot imagine how it's possible to produce tomorrow. Maybe if somebody buys this facility, I am sure they need some time to invest a lot of money. to improve quality, to provide some modernization of these facilities, it takes time. Regarding the second equation about hedging of crops, we sold some of our crops in forward contracts. Regarding, for example, rape, some volumes of corn. It is not something special for this year because according to our policy every year and our strategy every year we provide some amount of crops we usually sell in forward contracts.

Would you be able to say what percentage of the harvest is sold forward? Like is it under 10%?

It depends on crops. It depends on crops. Some of them approximately 50%, some of them 20%.

Was that 50 or 1515? 5-0. Okay, brilliant. Sorry to interrupt.

That's very helpful. Yeah, 5-0. And the first question about experts and Ukrainians. Yeah, EBDA per kilo. It's a very interesting question because it depends, the same situation depends on the market. Because if you compare, for example, current price of MENA region, when we sell the small chicken, per kilo EBITDA in MENA region is high in Ukrainian market. If you calculate, for example, Europe, if you calculate EBITDA per kilo, for example, in Europe and together with our quarters in Africa, it is slightly lower than in Ukraine. But what is very important for us, we would like always to keep the balance between exports and the Ukrainian domestic market. sometimes situation is the better your exports depends of regions and yes in some periods is better in Ukraine but today is I I can say the very similar depends of region thank you thanks thank you very much our next question comes from mr. Dimitri from Jefferies please go ahead sir your line is open Victoria thank you for your presentation

Just a couple of questions from my side. If I understand correctly, you have availability under some of the banking facilities for approximately 300 million US dollars. Can you please elaborate if there are any restrictions in the facilities in terms of the financial components, et cetera, and you can use them if you have any cash liquidity gaps. This is my first question. The second question, apologies if you already replied and you already elaborated on it, but can you provide any estimations for Q2 local prices for poultry and export prices? I understand that it depends on the product mix, etc., but maybe some indication of increase in prices you observe in Q2 versus Q1 will be very helpful. And my last question is regarding biological asset evaluation. So you mentioned during presentation that you included negative evaluation in Q1, which resulted in some worse results for the EBDA. Is it possible just also to briefly discuss this biological evaluation during Q1, what were the main causes, etc.? Yes, thank you very much.

Hi, Dmitry. This is Anastasia. Look, let me start from the third question you raised regarding the biological association. I think we will part this question and we'll reply you separately because it requires, I would say, proper communication. Proper communication is like a question and answer. So it requires discussion. And I pass my word to Victoria and she will explain.

Yeah, the first question about $300 million when drawing client, yeah? Today's amount is approximately $200 million, maybe $220 million in joint clients. That's your question, yeah?

Yes, correct. Are there any covenants, restrictions, et cetera, undertakings in these facilities?

No, no, no, no. No, no, no. No, we don't have any. All covenants, yeah. In all our credit lines, we have completely the same package covenants, which we have with our Eurobonds. Yeah, because Eurobonds 90% of all our debt, completely the same. Regarding the second question, yeah, about trend price trends in Ukrainian domestic market. For example, regarding Ukrainian, today price higher than price by the end, by the end of the first quarter. Domestic price higher approximately by 5%, not by average the first quarter, by the end of first quarter. That is why during the April, yeah, we increased our price around by 5%, 6%. Regarding export price, it depends on a region because, for example, quarters, yeah, as I told previously, price of quarters in March increased compared to January by 40%, and now price more or less the same, quarters. In Myanmar, price high by approximately 15%, sometimes 20%, not compared to the first quarter, compared to the first quarter, around maybe 10%. And at the same time, we expect that price will continue, will increase on Myanmar region in the near future. And regarding Europe, price increased compared to the March, because we started to effort to Europe by the middle of the March, approximately right now, approximately by 10%.

Thank you. Yeah, I guess, yeah, thank you for this indication, but If I remember correctly, back in February, we discussed that there are some issues in Europe with overstockings and etc. So just, I mean, like 10% increase for Europe and 10% for me in the region is quite significant. Do you see like a significant reversal in this market?

Yeah, you're completely right. It's a very interesting situation because when I talked about increasing, it is regarding price of fresh meat because we sent to Europe not just frozen and we sent a lot of fresh meat, child meat, breast and fillet, and it's price regarding fillet. And maybe you know that just it seems to me one month ago and three weeks ago, there were a lot of avian cases, not just more than one month, not a lot, but three or four avian cases, avian cancer influenza in Poland. Maybe it is one of the reasons why price today is high.

Understood. Thank you very much.

Thank you very much. Our next question comes from Amber Schultz from Rabobank. We registered the question online, but we'll open your telephone line. Please go ahead. Okay, in this case, we'll go to our next question, which is Ilya Timchenko from Red Intelligence. Please go ahead, Ilya. Your line is open.

Hi, yes, thank you for the presentation. I just had a number of quick follow-up questions, specifically in terms with the leverage. So you mentioned that by the end of this year, you expect that the leverage could possibly get below three. Could you specify by how much specifically? Is it around 2.9 or...

No, sorry. Yeah, sorry. Yes, it's very difficult to tell you exactly figures right now. Yeah, because as I told you previously, yeah, we understand drivers who can exchange our leverage. We understand that we have potential for growth, our EBITDA in gray segment, but we cannot say right now exactly figures. Yeah, we will have more confidence. maybe in our next conference call in three months. Because we have two risks, as I told previously, one regarding the price and the second regarding the yield.

Right, yeah. But in terms with that, I just remember during the previous earnings call back in March, I think the leverage was around 3.66. And as I understand, the main strategy to bring down the leverage was by increasing EBITDA. So obviously the results are sort of reversed to your expectations. So is it possible to give a quick summary? And obviously you mentioned it in some of your points, but just kind of summarize of your plan to tackle that issue of bringing down the leverage.

You're completely right. Yes, we expect that we will generate higher EBITDA. Yes, you're completely right. And better financial result. and higher financial results in firing the business.

Okay. And also, if the leverage does go below three, will you consider issuing a euro bond?

No, definitely not right now, yeah.

Okay, okay. And also, one more question. Are you still thinking about refinancing the 7.75% in May 2024 bond?

Yes, yes. We did the same. We provide a lot of refinancing in our history, it seems to me, the five, yeah, regarding five or six, yeah, and that is why I don't expect any changes in our strategy, yes. Yes, we will refinance, yeah.

Okay.

Thank you very much. Thanks. Thank you.

Thank you very much. Our next question comes from Ksenia Mishankina from Lumis. Please go ahead. Ksenia, your line is open. We can see that Ksenia has typed in her question. Partly may have already been answered. How do you see your debt dynamics going forward? What is your leverage limit under current ratings?

First of all, I would like to explain the situation about our limitation leverage. Yeah, we don't have any... Yeah, we have limitations that we just cannot attract more debt. Yeah. But at the same time, we don't have any maintenance governance. And that is why... And, yeah, and I'm sure, no, not I'm sure, I think that our leverage by the end of the first quarter is high, and we expect that our leverage will decrease, yeah. And so if you think about limitation regarding our rating, yeah, I think that it will be around 4.5, look like this.

Okay, thank you very much. Our next question comes from Henry Mark Paul from ERLS. Please go ahead. Okay, so I think we have a couple of text questions right now, which I will start reading. The first one is with regards to the merger. Can you please provide more color on the reasons and impact of the merger with Raftan Holding Bank, Hemiak Investments Limited and Eldim Investments Limited? How will these affect the P&L and balance sheet of the company?

Thank you very much for the question. It is an absolutely technical transaction, right? We've been relocating from Luxembourg to Cyprus several years ago. And at the time, we've reconsidered the structure, right? And we understood that because of the different transactions, historical MHP has been creating different Cyprus companies for different reasons. And therefore, in order to cut the cost, because anyway, we incurred legal costs, operational costs, etc., we just decided to merge all the companies with no adverse impact on P&L or balance sheet of the company. So it's absolutely technical.

Okay, thank you. We have a few more text questions. I'll just read out the first three. Given the current market conditions, have you sourced all the grain needs for the rest of the year? Second question, how much additional unutilized credits facilities? And number three, what level of peak net leverage?

Yeah, until, yes, you're completely right. You speak about giving the source all the grain needs, yeah, until the new harvest, yeah. How much additional realized credit? Yeah, I talked around $200, $220 million. A level peak net average, so we think that by the end of the first quarter, it was our peak.

Okay, thank you. Our next additional text questions. EBITDA expectations for 2021. Any comments on land reform laws currently passed and potential acquisitions of land?

Regarding our expectations, yeah. Yeah, at this stage, it is most likely that EBITDA will be a number starting with four. but we cannot yet state where is the trade. We are right now, as I told you, in the second hour conference call, in three months, we will be more confident. We are confident in exactly figures that I explained a lot of times today. The clear figures vary. It depends on our results in the business. Regarding reform law, Yeah, land reform. Yeah, we don't expect any big influence in our company because unfortunately, unfortunately, it is very controversial issue. Companies cannot buy land, yeah, since the 3rd of July, yeah. Yeah, we cannot, yeah, the company in general cannot, cannot buy. Yeah, and that is why we will continue to lease land

Yeah, if I can add, Dan, from the 1st July of this year, only private individuals will be able to buy land and they are restricted to 200 hectares of land. And only since the 1st January of 2024, Ukrainian domiciled companies will be able to buy land with a limit to 10,000 hectares of land. As soon as you know, MHP is a cyber domiciled company and therefore we are not allowed to buy land in Ukraine. So as Victoria said, we will continue with the long-term lease.

Thank you very much. Another text question. What is the outstanding amount of related party loans and what is the repayment schedule?

By the end of the quarter and today, And until today, the total amount of related party loans, $56 million. Mm-hmm.

Thank you. The final text questions, just once again a reminder for any additional questions, star 2 on the keypad. The final follow-up question on text we have is, can you clarify if the leverage endurance covenant is 3.0x?

That's right. So if we are talking about the net debt to EBITDA leverage,

Okay, thank you very much.

I am seeing no further questions at this point. I'll pass the line back to the management team for their concluding remarks.

Thank you very much, everyone. It was a very good conference call, and thank you very much for the questions. Of course, we remain at your disposal, and feel free to send your questions to me, to our team, or give me or us a call. Thank you very much. Have a nice day. Bye-bye.

Thank you. We'll be concluding the call.