MHP SE

Good afternoon and welcome to MHP second quarter 2022 results conference call. We are joined by Anastasia and Victoria. I will now hand over to Anastasia to begin the presentation.

Hello, thank you very much, Tim. DS3 Holder is Good afternoon and good morning. Thank you for joining us today at MHP's conference call. I'm Anastasia Sobatyuk, Director of Investor Relations and International Communications. Together with Victoria Kapelushna, CFO of MHP, we will discuss MHP's financial and operational results for the second quarter and six months of 2022, as well as current operational environment and expectations for 2022, taking into account that war in Ukraine continues. Today's call is based on information released earlier today. However, during our call, we will discuss our projections and plans based on our assumptions, domestic and international trends. Please take it into account. We are now moving to the slide number three of the presentation. I hope you received the presentation all right. Let me start from the general overview of the first, second quarter of 2022. The war situation in Ukraine has stabilized to some extent, although the situation remains highly fluid, and they are both subject to extraordinary uncertainty. The macroeconomic situation is completely in red zone with negative trends across all spheres. Another significant drop of around 37% year-on-year in the second quarter after a drop in the first quarter of the year. CPI accelerated to 24% year-on-year in August, and foreign exchange rate continued to devalue, showing 34% devaluation since January 2022. There are a few positive changes, though. Due to the arrangement signed on 22nd July by Ukraine, the Russian Federation, Turkey and the United Nations to resume grain exports, agricultural companies are now able to export from Ukraine and more than 100 ships have delivered animal feed grain and vegetable oils to a number of MENA and EU countries. MHP is planning to use this route to export grains later this year. The Ukrainian army is pushing Russian terrorist forces out of Ukraine slowly but surely, which means that Ukraine still requires international support not to spread the disease across the continent. Although MHP continues to face complex challenges and disruptions in operations, sales and logistics, the company has now been able to restore pulse production in its Ukrainian facilities to almost 100% of the capacity. Let me now proceed with the company's results for the second quarter of the year. We move to this slide number five. Sorry, my computer is a little bit slow. So I'm moving the slides now. So we're here now. Good. Let me start with operational highlights for the first half of 2022. During the decrease in capacity utilization in Ukraine, poultry sales decreased by 12% and reached around 300,000 tons of chicken meat. Facing significant challenges in logistics, Paltry exports from Ukraine decreased by 17% to around 158,000 tons, with significant share of transshipment made through the territory of the EU to the MENA and African countries. Total share of exports out of total paltry sales volume decreased to 53% from 57% in the first half of 2022. financial results for the first half of 2022 are following. Group's revenue increased by 16% and reached almost 1.1 billion U.S. dollars, with export revenue representing 56% of the total revenue, which was 51% in the first half of 2001, mainly driven by high export prices for poultry meat, partially upset by lower volumes. Adjustability decreased by 54% to US$154 million as a result of war disruptions in operations, which led to lower volumes in production and sales, as well as significant increase in logistic costs and challenging logistics in general. NABDA to LTM EBITDA ratio constituted 2.75 times. Please take into account that the first time in MHP's history we report on war expenses, which were at around 50 million US dollars in the first half of 2022, mainly related to community support donations like food and goods, Sheets of operations at metro testing facility in Donetsk since March. Rattles of inventories, loss of produce in the coal storage in March, and biological assets, as well as salaries to the mobilized employees of MHP, who we will continue to support until the victory of Ukraine in this heretic war. Let's go to slide number six of your presentation. Group's revenue increased by 10%, as you can see from the slide, and reached around 595 million U.S. dollars. With export revenue representing 56%, adjusted EBITDA decreased by 60% year-on-year to around 111 million U.S. dollars, with a EBITDA margin of 19%. which is significantly down year-on-year because of the war disruptions in operations. We now go to slide number seven of the presentation, which shows our financial results by segment for the first six months of the year. And we start from paltry operations. Paltry operations, as you know and see now, we made our key segment As usual, and during the first half of the year, the group generated the majority of total revenue, 70%, and around 65% of the companies EBITDA. Grain segment generated 5% of total revenue, and about 22% of companies EBITDA. As you know, majority of grain produced, we use internally to produce feed mill for chicken. Meat processing and other agricultural operations generated about 5% of consolidated revenue, with zero contribution to EBITDA. Victoria will comment on main drivers of this segment later during the presentation. The European operations segment generated approximately 20% of the total revenue and 23% of the company's EBITDA. Let's have a close look at each business segment, and I want to pass my word to Victoria to continue.

Thank you, Anastasia. Good afternoon, everyone. Before I start presentation, I would like to highlight that I will talk and walk you through the second quarter results of this year and compare them with the second quarter last year mainly. So you can see how the current environment and war in Ukraine have impact of MHP operational and financial results. Let's go to the slide number eight. Let's start from the results in poultry division. During the second quarter, poultry production volume slightly decreased as MHP has been working at around 85% capacity utilization. Overall revenue of division increased by 10% year-on-year. Manly revenue in poultry remained relatively stable year-on-year, whereas revenue from vegetable oils increased substantially. driven overall increase of results year-on-year. During the second quarter, MHP average export sales price for poultry meat increased by more than 65% in dollar store, mainly driven by products mix optimization, as well as substantial international price increase across all markets, Chile price in Europe, and MENA, smaller price in MENA region. But at the same time, export volume decreased by more than 35% due to the challenging and disruptive logistics because of the war. Price on domestic market in the second quarter decreased by 7% year-on-year in grievance term, mainly driven by low shares in sales of chilled meat, as well as product meat structure change. At the same time, volumes remained relatively stable. Poultry production costs in the second quarter remained almost at the same level in the first quarter, but significantly increased compared to the year-to-year, more than 30%. Gross profit in Q2 substantially decreased by 21% mainly due to the problem with logistics and much lower sales volume in exports than expected, ongoing growth, while in the first half of 2022, gross profit increased by 3% due to the exceptional low results in the first quarter of 2021. Adjusted EBITDA before the IFRS 41 effect per one kilo in Q2 was 16% lower year on year as a result of war-related expenses mentioned earlier by Anastasia. Let's move to the slide number nine. This year, harvest is expected to be good for all agricultural producers. Despite difficult sowing campaign in spring and challenging agricultural operation in summer, taking into account good weather conditions in Ukraine for rapeseed and soil, the company has good yield for these crops this year. Yield for wheat, corn, and sunflower are lower than expected and low compared to the last year. At the same time, low grain price in 2022 season in Ukraine compared to the same period last year, it was affected by disruptive and expensive logistics of grain in Ukraine, from Ukraine, despite of high international prices, as well as higher production costs resulted. Resulted to significant decrease in EBDA in H1 by 80% lower in 2022 compared to the same period last year. Slide number 10, meat processing and other agricultural operations segment. Just a reminder, at the beginning of April, MHP has decided to temporarily suspend the operation of Ukrainian bacon, partially relocate equipment to other MHP production facilities. As today, MHP continues to produce meat processing products, mainly operating with subcontractors. Production volume decreased substantially, so the sales volume decreased by 70% year to year. to around 2,000 ton in Q2. As a result of segments, EBDA in Q2 decreased to nil from 70 million. Many due to effect of war and significant disruption in demand for horticulture segments. Please let's go to the slide 11. Following the strategy of poultry production growth and increased several facility capacity utilization in Serbia, in Croatia. Poultry production volume of European operating segment in the second quarter increased by 6% year-on-year. Average poultry price increased by more than 30%. Average price for meat processing products increased more than 10%. There are trends absolutely in line with international poultry prices. At the same time, revenue higher year-on-year by 15%, and EBITDA remain approximately at the same level, 22 million. Let's go to the slide number 12. It is crucial to draw your attention to cash flow of companies in challenging times for Ukraine. Net cash used in operation activity amount 8 million, this year in H1 compared to the almost $50 million the same period last year, mainly due to significant investment in working capital. In the first half of the year, we invest in working capital $144 million more compared to the same period last year. It is mostly related to, first of all, increase in trade receivables for export sunflower oil and poultry meat due to the longer logistics. Secondly, higher amount of chicken meat in stock due to disruptive logistics, the same problem. Third, the change in condition in trade account payable. increase in VAT receivable balance. General total capex in H1 amount 36 million. Mainly related some maintenance capex and some improvement production facility. Some our projects regarding the new product development. Some words about MHP debt. and our liquidity position. As you know, around 90% of MHP total debt are Eurobonds. At the end of June, MHP liquidity position was 220 million in cash, mostly in dollars. Because of the war in Ukraine, MHP is facing significant challenges to attract new credit line. At the same time, the minimum liquidity position the company see appropriated to continue its business as usual is a minimum 120 130 million dollars weight of current situation despite certain restrictions set by a national bank of ukrainians and general uncertainty in ukraine because the war mhp expects to pay its forthcoming semi-annual bonds coupon in full and on time. And now I give the floor to Anastasia to provide you the outlook.

Thank you, Victoria. Definitely. First half of the year was full of challenges, instability, and disruptions, which the company managed to overcome with support from our responsible partners in different parts of the world, our strong, brave, and ambitious employees and management team. Looking forward, the company understands that although the situation in Ukraine will remain fluid and highly uncertain while the war isn't going, the group's Ukrainian operations and exports to continue to return gradually towards normal level of activity. Results in the second half of the year should be influenced primarily by customary market factors. When it comes to poultry business, we expect some further downward correction in global poultry prices in the coming months. although these may be influenced by varying market factors in different regions, such as avian influenza-related supply constraints in the EU, but possible excess supply to some Middle East markets. While MHP's vertically supplying chain has protected from some extent from global inflationary pressures, increased logistic costs are expected to continue into 2023. Grain markets remain volatile. Grain prices are likely to remain high at least into 2023 internationally, reflecting ongoing global supply constraints due to climate change effects As Victoria highlighted earlier, this year's harvest in Ukraine is going to be good, despite all difficulties of the war time. However, we do not expect significant development in grain price growth, especially in Ukraine, as soon as logistic costs remain high and there is rather fragile stability in grain exports. At the same time, Peritoneum 2E will continue its further development in the Balkans, supported by favorable market environment. And finally, what I would like to say, and as Victoria mentioned, MHP expects to pay its forthcoming semi-annual bond coupons in full and untimed. Taking into account the uncertainties of the war, it should be noted that any potential further actions by the National Bank of Ukraine could affect MHP's future bond coupon payments. Thank you very much. We are ready for questions. To ensure that all participants on today's call have equal opportunities, please follow the rule. One participant, three questions. Thank you very much for cooperation in advance. Tim, we are ready for questions.

Perfect. Thanks, Anastasia. So we'll now move to the question and answer section. If you would like to ask a question, please press star 2 on your phone and wait to be prompted. If you're dialed in by the web, you can either type your question in the box provided or request to ask a voice question. So our first question comes from Robert Jones from insight investment management, please go ahead Hello, can you hear me?

Yes, we can hear you, Robert. Please go ahead. Yes, thank you. Sorry, yeah. So I just want to understand on the coupon payments. Obviously, you deferred the spring payment, so you're going to make the autumn payment. So does that mean you intend also to make the spring payment within the 270 days of the standstill that you have?

Sorry, please repeat your question. Because the connection is not so good, yeah.

I just wanted to understand the coupon that you have deferred. Do you intend to make that payment within the 270 days it stands still that you have? Also, as well as the coupon that is coming due.

Payment?

Nastya, sorry, did you catch the question?

Yes, I heard the question. So the question is, can you hear me?

Yes, yes.

Can you hear me? Okay, so the question was about the coupon payments, which we told, 270 days, right? So... I understand the question is what is our plan with regard to this coupon payment?

Yes. Thank you. Your question about the next payment, not about the coupon payment autumn, September, November. Your question about our winter payment. Based on current situation, And anyway, based on current situation, we would like to continue to pay coupons. But at the same time, we have some restrictions from national bank. Because now national bank allow to us to pay only interest payment, not just MHP for all companies from Ukraine, only interest payment until the 10th of August. I hope the National Bank will continue and reload same normative and I hope that, yeah, we hope that if situation will continue but unfortunately we cannot guarantee, you understand, that we live in during the war and for us it's very difficult to guarantee what we will have in some period of the time.

Hello?

Okay. All right. I might follow up.

Thank you very much.

Thank you. So our next question comes from James Barry from Gramercy Fund Management. Please go ahead.

Hi. Can you hear me?

Yes, we can.

Yes. Okay. I just want to follow up on the previous question. So the 2H coupons, your intention is to remain current on those, but the 1H coupons, what would be the rationale to delay paying? So I think it's promising from the set of numbers that you have, that you have $223 million in cash. Why not simply just pay those coupons now? And what would be the rationale to delay? I understand you say that there is MBU regulation that may prevent that, but that's not necessarily the case for other Ukrainian corporates that have paid coupons and have remained current on their debt obligations.

Yeah. Can I ask a clarification question, Victoria? Can I clarify the question? So you're asking about the Detroit coupon payments, and you're asking... Sorry, I'm not quite clear what the question was.

Yeah, yeah, the question, yeah, I understand that now we have, yes, as I told in presentation, in current situation, we have a lot of problem with new credit line you understand yeah to be honest it's completely impossible to attract a new credit line for no not just for mhp even for mhp yeah and our minimum liquidity position must be at minimum 130 million dollars yeah and we don't know what will happen and potentially can be happened yeah in with our assets and with our facility. That is why it is minimum we need to keep. And in the near future, during the month, we will pay 50 million the first hour coupon. And right now, we don't have a lot of money for payment, all coupons, you understand, yeah? We understand how we pay on the first, yeah, these coupons, yeah? Or maybe I did not catch your question. I don't think that $200 million is so big liquidity for MHP with current situation when we cannot attract any loan.

The capex intensity is associated with the two harvests, right? And if the autumn harvest has now been complete or is in the process of being completed, you're going to have... reasonably strong visibility on what you can pay you know in the next few months it's just the grace period obviously clearly is the end of december so why not pay sooner we we should have you know reasonable visibility from here

He asks, I'm so sorry, I have to translate it to Victoria, because the connection was not that good. He says that we don't have that many capexes right now. We, of course, are now collecting harvest. That is, there is additional cash. And, accordingly, the question is... Yeah, first of all, yeah, base of current situation and how now we see the hour forecast for

Next 12 months, we understand that we will pay next winter coupon. But what my worry, biggest worry, because we live during the war and potentially can be changed at any time. That is why we don't have that. I understand you. Now we get the harvest. But what you need to understand, the biggest part of the harvest we consume internally and we will consume not in the first quarter, sunflower seeds, corn, we will consume internally. It can work in money during the fourth quarter and nine months next year. Because we sell only grain, which we sell usually, only rape and part of wheat. That is my, yeah, that is my thought. Yeah, I understand.

But you remain confident that you'll pay the winter coupons? prior to the end of the grace period or on the date of the grace period.

Victoria, the next question is, are we sure now, at least now, that we will pay the coupons that we were given, that we transferred?

Yeah, very important question. Based on current situation, yes. Based on current situation. But yeah, I would like to repeat a lot of times, but nobody knows what will be tomorrow, not in one month.

Thank you very much.

Thank you. So our next question comes from Erica Ive from MetLife Investment. Please go ahead.

Good afternoon. Can you hear me well?

Yes, we can.

Excellent.

Yes, we can.

Basically, I got a question on cash of 222 million. How much of this is held at the Slovenian subsidiary level? And can this cash be moved to the parent company if needed? Victoria, did you understand this question?

Yes, yes. But the second part, what is the second part of this issue?

How long will it take you to redirect from the exchange to the parent company? And can we do this?

Yeah, yeah, approximately, yeah, total cash in Perutnina, it is around, yeah, 100 million, yeah. Slightly, yes, very similar figures, maybe slightly low. Yeah, we can send some, yeah, some amount, but not so significant because at the same time, yeah, Perutnina has a restriction, yeah, and that is why this amount only maybe 20 million.

So, excuse me, can you repeat? So how much, what are these restrictions in place and how much can you send up to?

No, up to 20.

Up to 20 minutes. Yeah. That is, how that is established is basically a fifth should be 20% of what is usually had on the peritonitis level or is it 20 million is a hard figure? How calculated is it? Is it a hard amount that you apply always, or is it just a proportion of how much cash is had at the subsidiary level? Is it a sum or a part? Are you talking about 20 million or 20%?

Yeah, yeah, the 20, yeah, the same, the 20, the 20 percent, 20 million completely the same figures, around 20 million. Because, yeah, because Pirutnina has some restrictions for payment because Pirutnina has loans, yeah, syndicate loan, and has some restrictions to payment to parent company. And that is why this approximately amount which we can take from Pirutnina around 20 million.

excellent thank you then in terms of the 24 million ebrd loan do you expect this still to be drawn in october no no no no everybody alone we we received in the in july yeah you know yeah you know yeah yeah down liquidity yeah sorry shall i repeat basically have you already draw down the liquidity have you already used the liquidity or is still there the loan uh no we took this loan for for liquidity position yeah but have you have you used it or not yet uh not yet this liquidity yeah we took this loan

And it's not just our country. Yes. We took this loan from Yeberdi, and now we use for some of our grain operations. So basically you've already used it? Yes.

Okay, I thought actually that you would have used it in October in conjunction with the harvesting campaign. Sorry, the sowing campaign, the new sowing campaign.

Because in August, we started to bought some utilizers.

Fertilizers and plant protection materials.

No, no, not plant protection. Don't utilize it.

So basically, you're telling me that... Fertilizers and... Sorry.

Please go on. Yeah, we bought, yeah, you understand, the price of I don't remember, is it fertilizer? Fertilizers. Fertilizers, sorry, sorry. Fertilizers. You understand that the price of fertilizer increased significantly, and in August, in September, at the beginning, even by the end of July, we bought fertilizer, yeah, fertilizer, and we use this loan for purchasing fertilizer.

Okay, thank you. And last one is before you mentioned the minimum liquidity position, if understood correctly, is it estimated at 140 million in total? Was my understanding correct?

How much?

Basically, what is it?

Yes, yes, yes, yes, yes, yes, yes, you're correct.

Okay, 130, okay. And that includes how much to be had at Perutinina?

No, no, I talk about when I speak about, yes, maybe my mistake. You're completely right. We need to say that, you know, not jointly, separately, yeah. For MHP, for Ukrainian MHP, we need to have a minimum of 120 million dollars.

look at the position with current situation yeah okay uh mhp parent and then the classes yes no mhp ukrainian companies yeah yeah yeah yeah okay brilliant thank you very much very helpful thank you thank you uh our next question comes from antonio gomez from 91 please go ahead

Hi, thank you for your time. I was wondering if you could kind of give us an update on the harvest so far and whether or not you've been able to export any of the grains that you've harvested to date. In your last update, you mentioned that your spring crops had already been harvested. So it would be good to kind of get some color on how that's gone and whether you're generating cash from grain as well as poultry at this point.

I think if we pay because my question regarding our green regarding our winter crops. Yes, correctly. We gathered winter crops, grapes, grapes and wheat. Yield is not so bad, even is good regarding grapes and we now we are exporting grapes, but very, very slowly. Yeah. No, because you know the problem with export grain. And we suppose that we will export grapes by the end of this year. Regarding wheat, no, yeah, we will export in the fourth quarter, yeah, the small part. and maybe because price now is not so good especially for wheat it may be part of them no but part of them we use internally yeah and we try to export in fourth quarter and maybe some rest of them some part of them we will export next year but anyway we understand how important money for company and we we try to export these winter crops this year.

Okay, and that cash, is it going to be, are you going to be able to get it out of the Ukraine, or is it going to have to go via the Ukraine and hence be restricted?

No, no, we will receive cash out of Ukraine, but at the same time, we have obligation to send cash in Ukraine. You understand that we have obligation. to send this cash in Ukraine. We cannot keep all cash outside. No, we can keep for some period of the time, but anyway, we must return cash in Ukraine because they export from Ukraine.

Okay. Is it 100% or less?

Almost 100% because you understand that transient pricing in Korea is very popular in different countries and almost all, but It's good to have a minimum.

Okay. And then my other question was on your cash flow. Firstly, on your CapEx, you did about $35 million in this quarter. That gets you to about $65 million year-to-date. What are you budgeting towards the end of the year? Is it going to slow down in the second half?

uh yeah no a little bit maybe slow down but not significant because you understand that we have the yeah we have the very big part of our topics is the maintenance topics and to be honest we cannot stop and not invest money in maintenance yeah because yeah yeah you understand yeah this this issue and we have some projects in perutnina for improving efficiency. Okay.

And my final question is on your working capital position. Your trade receivables extended because of the longer supply lines, as you mentioned. Has your working capital position now stabilized at the level that it reached at the end of the second quarter? Or do you expect receivables to increase or any other working capital line to stay quite high relative to history?

Regarding our investment in working capital, I think that we invest more in the second quarter. I don't expect any additional investment in working capital in the second half of the year. You're right.

Okay. Perfect. Thank you very much.

Thank you. We've had a few text questions just asking for some additional clarity on the liquidity. I know you've discussed this already, but do you want to maybe say something else? For example, one caller is asking... Tim? Is it fair to... Sorry, go on.

Tim, I think I can take a text question separately and I will reply via email if you don't mind.

Yes, no problem at all. So, we've got another voice question from Natalia Sikorska from Dragon Capital. So, Korla, please go ahead.

Good afternoon and thank you very much for the presentation. I have a follow-up question on the working capital. If I've understood correctly, that company does not expect to invest more in working capital in the second half of this year?

Yeah, you're right.

Thank you very much. And another question would be if it's possible to ask what is the company's current liquidity? Thank you.

Our current liquidity position is around 250.

Perfect. Thank you very much.

Thank you. We have a question from Daniel from Barclays. Please go ahead.

Hi, thanks very much for the call. So just on the logistics, you mentioned that you have increased production back towards 100% capacity utilization. Do you think you will be able to also increase exports? So we'll see more of a recovery in exports through the second half of the year. And then just another question on the working capital. So just to clarify on the trade receivables, the increase in trade receivables, that's purely due to the change in the nature of your sales and the logistics around it rather than difficulties with payments from customers. Thanks very much.

Now, yes, you're correctly right. If you speak about the second equation, regarding our investment in working capital, regarding trade receivables, I suppose that we in the second, by the end of the H1, we invest in trade receivables enough amount. Yeah. And regarding, and please repeat the first equation about export. Yes, yeah, regarding our export, maybe a question about increase our meat export, yeah? Your question about export meat, yeah?

Yes, just whether you think the logistics are now improving or do you still have difficulties?

Anyway, it's difficult, but at the same time, we try to increase our export, yeah, and if you speak your... Our export in the third quarter compared to the second quarter, our export in the third quarter is higher. It's higher because especially in April, in the first quarter, you understand, April, it was... And export is higher than the average export of the second quarter. And we try every month, we try to increase our export.

Okay, thank you.

Thank you. So the next question comes from Kyle Knisely at Knighthead Capital. Please go ahead.

Thank you. I wanted to confirm on the NBU approval. If I heard correctly, you have approval until August 10th, but I'm confused as to how you can pay coupons after August 10th, or do we need a new approval?

Thank you very much for your question. I will try to explain the current situation. It is not just some special improvement from NBU only for MHP. What NBU, it seems to me two weeks ago, adopted a new document which allowed all companies from Ukraine to pay interest payment abroad which this company must pay from the 24th of February until 10th of August. You understand this point, yeah? And we can pay this amount of interest rate only do 20% every month. And based on current situation, based on documentation and normative base, we don't understand how not MHP, all companies in Ukraine can pay following interest payments. You understand, yeah, our point. That is why I told them we have some restrictions and some are certainly in this issue because only companies can pay interest which company must pay before the 10th of August.

Okay, so for the coupon on September 19th, will you be able to pay that with the current nbu yes okay the same is true so for all three for all three bonds you will be able to pay the next coupon via the nbu approval um i understand your question this yeah this coupon

Yeah, this coupon, I understand. We will pay from our cash, which we keep not in Ukraine.

Understood. You understand? Yes, okay.

So for the 215... I will explain just what NBU allowed to us, but at the same time, I will explain, but at the same time, this coupon, we will pay right now not from Ukraine. But we understand our strict obligation before our bank holders.

Okay, so future coupon payments with cash from Ukraine will require NDU approval?

Yes. Not just for MHP, because I'm sure that our national bank will need some permission for different companies. I understand that our national bank We'll see situation with currency trade balance or on total balance and we'll issue some new documentation which allow to pay.

Yeah. Understood. Can you clarify the 20% per month element? You mentioned 20% per month?

Yeah. What is that really? Total amount. Yeah. Yeah. Yeah, based on current documentation, a company cannot pay one month's whole amount, only 20% of the whole amount.

Of the cash?

Yeah.

Okay, so of the Ukrainian cash, you can only use 20% of it on a monthly basis to pay interest.

Yes, and it's possible to pay 100% during the five months, yeah.

Okay. And then, let's see. So the $215 million current cash balance, how much of that cash is in Ukraine?

Approximately 20%. Yeah, 20%, 15%.

Okay, so about $49 million.

But at the same time, 40% of them in Peru. Yeah, agents.

are the restrictions, yeah. Okay, so 20% of 200, so 40 million is in Ukraine, 40 million is in Slovenia, and the remainder is in Cyprus, I assume?

No, 100 million in Slovenia, and rest abroad, yeah.

Okay. Okay. And then my last question on the working capital, so you've made a significant investment through June. For the second half of the year, how do you forecast cash flow, and will there be a release? Will working capital be a positive cash figure for the back half of the year?

Yeah, I understand your question, but first, yeah, we understand that we have a lot of uncertainty, yeah, and at the same time, yes, you're right, I suppose that in the second half of the year, we will have reinvestment in working capital, it's minimum 50, yeah, it's minimum 50 million. Yeah, but at the same time, it would depend of a lot of different issue, and one of the biggest issue is the issue

regarding co-logistics yeah okay so we have a 180 million investment made in the first half and that should come in as cash in the second half okay okay thank you that's all my questions

Thank you. We also have a question from Konstantin Fastovets from Adamant Capital. Please go ahead.

Hi. Thank you for the call. I have two technical questions and one larger one. Maybe let's just go one by one. So the first one. So I've noticed that over the past few quarters, there is a difference. between export sales volumes. So if we sum export sales volumes and domestic sales volumes, we don't get the sales volumes to third parties. There's like a 2% to 3% difference. Could you say what this is due to?

Sorry, maybe I did not catch. Please repeat, what is the difference? What difference?

So if we take export sales volumes from the table in the financial table, and then...

Kostya, can you ask Kostya to say it in Ukrainian?

Okay, I'll say it in Ukrainian. Look, the question is this. If you take the volumes that go to export, plus the volumes that are sold in the middle of the country, put them together, I will explain.

If I understood you correctly, you say that our total sales less than our production. No, no, no.

No, no, no.

No, no, no.

No, no, no.

domestic sales domestic sales domestic sales domestic sales domestic sales domestic sales

Okay, we will explain you correctly all figures, yeah. Okay, okay. Yeah, the technical issue, yeah, we will explain you.

Yeah, I was wondering about that. Okay. And another sort of technical question, but I guess less so. Okay. So if we look at the EBITDA margin, In the second quarter for the grain growing operations, but excluding IFRS 41, so basically a cash EBITDA, right? I get a really, really high EBITDA margin in cash terms for this quarter. It's like 90% almost or something. That seems abnormally high to me. Could you comment?

I understand the English, no problem, but we need to calculate. I think that we need to organize a special conference call with you because all our EBITDA in the second quarter mostly consists of IFRS 41 standard and 41 standard non-cash. No, that's clear, that's clear, but like if you... I understand in the second quarter we sold some grain, it seems to me, for 20 million dollars in revenue. Yeah, we can explain what is it. I understand that in the second quarter we sold for export, it seems to me, our grain for 20 million.

Okay, it's fine, it's fine. Yeah, we can do either a call or an email. Okay, and then just finally, just one sort of an outlook question. Could you maybe give a bit more of an outlook of where you see prices for poultry going domestically and abroad? And also, where do you see costs? Do you see costs more or less stable, you know, in the coming two quarters, or do you see some sort of an increase in them?

I think that cost will be the same level because we understand the price of gas increased, utility increased, but at the same time, I think that price of some protein will be maybe slightly low, maybe the same. Okay, we will see, but our expectation about cost will be slightly, maybe maximum cost higher, but not so significant. If you speak of in dollars term, because first of all, dollars in Ukraine now is higher than in the first couple of years. That is why in dollars term, we expect that costs will be the same level. In griveness, maybe higher by 10% by dollars. Regarding price, what we see right now is that price and export market now decrease everywhere, everywhere. Fillet in EU, uh small chicken in myanmar unfortunately price of meat decrease its minimum decrease compared to the second quarter it's minimum by 10 no it depends of part depends of region minimum by 10 percent if you speak about ukraine in greenness storm price compared to the second quarter slightly increased but only in greenness storm You understand if you calculate in dollars, and you will see because dollars increase currency ratio, yeah, but this is not much, 20%. And in dollars, unfortunately, price decrease in Ukraine.

That's clear. So basically, if a double kilo is going to go down over the next two quarters, for sure.

Oh, yes. Yeah. No, because now I think about the trends what I see in September and in fourth quarter. In July, August, the situation was slightly better, more close to the second quarter. But if you think about the fourth quarter, yes.

Okay, super. Thank you.

Thank you. We have a question from Ksenia Mishankina from Loomis. Please go ahead. Ksenia, can you hear us? Perhaps we'll move on for another question. So we have a question from Rahul Chopra from Caspian Capital. Please go ahead.

Yes, hi. Can you please confirm if the current cash number is $215 million or $250 million? It was hard to hear. Yeah, deep, deep. Got it. And of that, we have 40 in Ukraine, 100 in Slovenia, and the rest in Cyprus. Abroad. Abroad. Got it. Okay. Thanks, Victoria. I appreciate it.

Thank you. We have a follow-up question from Robert Jones at Insight Investment Management. Please go ahead.

My question's been answered.

OK, no problem. Thanks, Robert. We also have a question from Konstantin Chervenov from Apto Capital. Please go ahead.

Hi. Could you please clarify what was your energy bill for 2021? And then sort of when we think about energy costs for 2022 for the first, let's say, eight months, how much they are up year to day? And then if you have any sort of hedging in place at the moment?

No, if you talk about the price of energy, especially gas price, compared to the more than 50-60%. I cannot say exactly figures, but increased significantly.

And what was the dollar amount of energy cost that you paid in 2021?

Dollar amount was part of cost of production or price?

Both indeed. So I could see fuel costs in the SG&A, but then what I can't see is the cost of fuel in the cost of production. So if you could confirm that, that would be helpful.

But your question about fuel or about gas, electricity?

It's both, both. So all energy costs.

All energy costs approximately 18% of total hour cost. Approximately, if you speak about figures, maybe approximately 20 cents. No, it is very approximately.

Sorry, could you... 20 cents per kilo.

And what you would like to see, the total hour cost? 20 cents per kilo.

So 20% of all your costs?

Approximately, yeah.

Okay, and those 20% are up 60% here today, right?

No, no, no. When I talk about 20 cents, I talk about our current situation. Approximately now, energy cost approximately 20 percent per kilo in previous year last year ago it was around around 14 15 approximately because if you think about electricity price of electricity year to year increase not so significant especially if you compare the price of electricity h1 to h the same period last year mostly increased price of gas and fuel

Got it. So for me to get the dollar amount, I have to basically take EBITDA, deduct revenue, so I get your cost load. And then you're saying that at the moment, 20% of that cost load is energy-related, right?

Approximately, yeah. I got to say exactly, yeah.

Got it, got it. And then you're not doing any hedging at the moment?

No, I cannot even imagine hedging in Ukraine.

Got it. And then in terms of access to internally generated energy, do you have any or you're reliant on third parties only?

No, we have internal generation, we use biogas internally and approximately maybe, I cannot say exactly, 15, maybe 15, 17% of total our energy we consume internally, we produce ourselves.

Got it. And 85% comes from the third parties, right? Yeah. Got it. And then, do you, how do you think about sort of access to electricity and and broader energy at the moment. Do you see any disruptions in that, or it's business as usual?

Until today, it's not a lot of disruption, but potentially maybe we expect a lot of it.

And do you have any sort of contingency plans in place in case of disruptions? the business model is really dependent on the continuous access to electricity, I would guess. So how do you think about it? Do we have to think about it at all?

Is it something that you care about? Thank you for your question. We're not just thinking. And we provide some projects. And we try. One of the most important of our tasks is to decrease consumption of energy, especially electricity. And in our CAPEX today includes the biggest part of our CAPEX, if you think about different projects, is the project which is related to improve our energy efficiency. It is not just this year. It's not just happened this year.

Got it. Okay, thank you.

Thank you. And we have, I think, one final question from Dmitry Ivanov from Jefferies. Please go ahead.

Hello, can you hear me? Yes, we can hear you. Yes, yes. Thank you for the presentation. I have like three questions. Apologies, some of them are kind of a liberation clarification. But the first one is on the debt maturity profile. I think like in February 2023, you have to repay 140 million in bank loans. And it looks like it won't happen given this current and new restrictions. Maybe if you give us any color on their kind of situation with bank, Landers, have you started any negotiations with regards to prolongation of this credit? Because again, it looks like you won't repay this $140 million in February 2023. So that's my first question. I'll ask question by question.

Thank you. Yeah, thank you for your question. Yeah, you're completely right. You know our debt profile very well. Yeah, yes, exactly. In February, you're completely right. We need to, yeah, we must repay, yeah, 140 million. No, okay. We provide different negotiations with our bank, but until today, yeah, we did not throw this amount.

Understood. So you will come to, you'll get this... get started uh closer to the maturity i guess right so um yeah okay okay you're completely right yeah you're completely right yeah understand so the second question actually on this um grain deal and apologies uh if like i someone already asked this question but uh your winter campaign is already done and you have like certain inventories uh crops uh And as we discussed with you previously, there are certain limitations on the capacity of vessels and etc. But given these inventories in place and given the current pace of exports from Ukraine of crops, how long will it take the company to export the current winter crops inventories? Are we talking about several months? I know this kind of idea. tricky question because this grain deal is due to be renewed soon, but in what period of time do you expect to export the current inventories from the winter crops outside of Ukraine, given what you observe now with the grain deal?

Okay. Thank you. Yeah. Thank you for your question about the winter crops. First of all, I would like to emphasize that winter crops, it seems to me around 20% and maybe less of total our crops, of total our grain, because only grapes, only rags and wheat. And based on current situation and logistic problem, I think that rags we will export. We start what is good, we have start export trade. And I think that we will export trade until by the end of this year. And the same situation with wheat. Maybe in some part of wheat, we postponed and maybe 20% or 25% of wheat, or maybe even 30, 35, we will export next year.

And in terms of the volumes, It's like, are we talking about like, is it possible to quantify like half a million tons in crops, in inventories?

Yeah, yeah, I will explain. Right now, we designate approximately 80,000 tons. And regarding, regarding, Nastya, help me please, regarding wheat, wheat seems to be 150. Yes? Yes. Yes. But part of wheat, yeah, but what is very important, yeah, part of wheat we consume, we use internally for parents. Approximately around 30% we consume internally. And we will consume the nine months during the fourth quarter and nine months next year.

Sorry, just to make it clear, you have like approximately... 240,000 tons of inventories like crops and approximately 40% expected to be consumed internally and 60% of it... No, no, no.

We speak now, we speak about just winter crops. Winter crops is rape and grain. Rape and wheat. I talk about only wheat. Wheat we consume internally.

Okay, I understand. So in the last question on this National Bank of Ukraine policy that explicitly asks you just to repatriate cash back into Ukraine from exports, right? And you mentioned like approximately $40 million in cash in Ukraine, 100 million and the rest offshore abroad. And how much of this cash, which is abroad, offshore, you have to repatriate back into Ukraine according to this NBU regulation? So how much of it has to be sent back into the country out of this like cash that you mentioned?

Approximately 90%, 92%, yeah. 90%, so... Yeah, more than 90%.

So 90% of cash that you mentioned...

which is either routine up to you or no, no, no, no, no, no, no, no, no, no, no, no, no, no.

but there is no kind of definition of there are no deadlines and etc so it's like it's just in the regulation just asks you to uh repatriate it back so without any kind of precise deadlines

Now, we have the time, which, yeah, from the, yeah, your question about how many days? Yeah, what time?

Yeah, how many days you have to repatriate it back?

Like, it's like... During the 180, from the export date.

Understood.

Yeah, from export date, from Ukraine, Ukraine. Water, 180 days.

Thank you very much. Appreciate it. Thank you.

Thank you.

Thank you. So there are no more voice questions. Just a reminder, all text questions will be forwarded to the MHP team following the call. So I'll now hand back to Anastasia and Victoria for closing remarks.

Yeah, thank you very much for everybody.

Yeah, goodbye everybody. If you have some questions, please send to Anastasia and to me. We answer for them. Thank you. Bye.

That concludes the call for today.

Thank you very much and have a nice day. And 150.