MHP SE

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

Thank you very much, Tim. District Holders, good afternoon and good morning. Thank you for joining us today for MHP's conference call. As Tim said, I'm Anastasia, Director of Investor Relations and International Communications. On the call today, together with Victoria Kapelushna, CFO of MHP, We will discuss MHP's financial and operational results for the third quarter and nine months of 2022, as well as current operational environment and expectations until the end of 2022 and going forward, taking into account the war in Ukraine, its current consequences for the country, challenges it brought to the operational environment in Ukraine and in the world. 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 now move on page number three of our presentation and we'll have a look at macro environment in Ukraine. But first of all, let me start from general overview, how the macro environment looks today and expectations and expected to look like next year based on the forecast provided by the NBU, the Ministry of Finance in Ukraine and number of research run in Ukraine during the last quarter. As you see from the public domain, the war situation in Ukraine has escalated since October when the Kremlin started to conduct targeted massive missile strikes on the territory of Ukraine, fiercely attacking the country's energy infrastructure. This has led to the complete destruction of over 50% of Ukraine's energy infrastructure. Although the recent recovery of Kherson has been encouraging, the overall situation remains highly fluid and the outlook is subject to extraordinary uncertainty. MHP faced complex challenges and disruptions to operations in the middle of October, when a number of the country's electricity generation stations and power lines were hit by missile attacks. operations at some MHP facilities had to shut down for a short period of time after these missile hits. As of today, MHP is again operating close to full capacity using a combination of state grid, electricity generated at MHP's biogas stations and diesel generators. However, events have shown that the situation can deteriorate seriously, quickly and without any notice. Macroeconomic situation looks very challenging though. GDP in 2022 is expected to decrease by around 32%, while next year, taking into account that active hostilities finish by the end of this year, the economy will begin to recover. Fingers crossed. Inflation ratio is expected to exceed 30% in 2022 and to be over 20% in 2023, including food inflation expected to reach same levels as the overall inflation. The unemployment level reached 28% in 2022 and will remain almost at the same level in 2023. Interesting findings from the research I would like to share with you, and they are following. Around 13 million people left the country since the invasion, of which 50% came back to Ukraine and around 20% will come back next year. Around 60% of the population are in a difficult financial situation because of the war. Over 50% of population has got financial resource for less than a month. Over 50% of employees' salaries have been decreased and almost a quarter of the population lost their jobs and are unemployed now. The currency ratio, as you can see from the presentation, is expected to reach 42 Ukrainian hryvnia per one US dollar. Let me now proceed with the company's results for nine months of the year, slide number five of the presentation. So let me first of all start with operational highlights for the nine months of 2022. Driven by decrease in capacity utilization because of the war in Ukraine, poultry sales decreased by 9% and reached around 477,000 tons Facing significant challenges in logistics during the first three months since the beginning of the war, poultry exports from Ukraine decreased by 14% to around 257,000 tons, with a significant share of transshipments made through the territory of the European Union to MENA and African countries. Total share of exports out of total poultry sales volumes decreased to 54% from 58% in the same period last year. Financial results for nine months of 2022 are following. Group's revenue increased by 14% and reached almost $2 billion, with export revenue representing 59% of total revenue, mainly driven by high export prices for poultry meat, but partially offset by lower volumes and higher volumes of vegetable oil sales. Adjusted EBITDA decreased by 47% to $275 million as a result of war disruptions in operations, which led to lower volumes in production sales as well as due to a significant increase in logistic cost and challenging logistics in general. Let's go on to the next slide, number six, where we can see the key financials for the third quarter of 2022. The results are following. Group's revenue increased by 10% and reached $727 million, with export revenue representing 65%. Adjusted EBITDA decreased by 35% year-on-year and reached $121 million, with EBITDA margin of 17%, significantly down year-on-year because of the war disruption in operations let's move on on slide number seven of the presentation where we can see the financial results by segment for the nine months of the year multi-operations remained our key segment the group generated the majority of total revenue which is around 72 percent and 67 percent of the companies will be done grain segment generated five percent of total revenue and about 18% of companies EBITDA, net of affairs 16, of course. As you know, the majority of grain produced by MHP and usually used internally to produce seed meal for chicken. Meat processing and other agricultural operations generated only 5% of consolidated revenue. The European operating segment generated approximately 18% of total revenue and 20% of the companies EBITDA. progressing in line with their strategy and development plans. I would propose to have a closer look at each business segment of MHP, and here I pass my word to Victoria. Thank you, Nathalia.

Good afternoon, everyone. Let me give you more color on our poultry segment performance, slide number eight. It is important to highlight that during the last seven months of the year, MHP has been facing complex challenges and disruptions in operations, sales, and logistics as a result of war in Ukraine. Only during the third quarter of the year, MHP managed to reach full capacity in poultry production after having decreased to around 80-85% in March 2022. However, taking in account an increased number of attacks on energy infrastructure of Ukraine, we foresee the MHP can potentially decrease its poultry capacity again. The impact of the war in Ukraine remains unclear at this time and can change seriously, quickly, and without notice. Despite a number of difficulties due to the war in Ukraine, MHP delivered relatively strong results in Q3 compared to the same period last year. However, we already see that the company's financial results in Q4 are going down. I will talk about this further. The main driver of our strong results in Q3 is substantial export price increase across all markets. by 40% year-on-year that was particularly negatively upset by increased logistic costs due to the war. Thanks to the effective action of the company and the establishing alternative roads, our export volume decreased only by 10% quarter to quarter. At the same time, sales in poultry meat in Ukraine despite a substantial decrease in population, migration more than 7 million, and disposable income. Anastasia was talking about the trends earlier, remain stable in Q3 this year, and even increase compared to the second quarter. At the same time, poultry price decreased substantially by 25% in dollar store, driven mainly by depreciation of Ukrainian grievance and mix of the product. Let me explain you what has happened now in Q4 on export market. As a result, it changed economical environment in EU and UK and increased competition in MENA region, especially Saudi Arabia. Export price trends have changed to negative. Paltry price across all export markets, MENA, EU, since from September started to go down sharply, with current price being substantially lower than in Q3 this year. Moreover, MHP has been facing a triple increase in logisticals year on year, I mentioned before, which make it much more difficult for MHP to compete with our competitors from worldwide. Let's move to the next slide, number 10, grain growing operations. It is important to highlight that despite the high price for grain on international market, export price for grain from Ukraine and in Ukraine are significantly lower to international price due to the logistic cost increase because of the war in Ukraine. All this negatively affect the profitability of MHP as well as all agri-company, agri-producer in Ukraine, negative effect for profitability. Moreover, this year, weather negatively affect to our corn yield in Veneta and Cherkasy region, which we expect to be lower budget, nine ton per hectare yield. EBITDA of the grain segment in nine months constitute 50 million compared to the 260 last year, mainly due to low expected results for spring crops and mainly because low yield of corn and price. We expect total EBITDA in grain segment this year to be around 60 million. This is the lowest result in MHP history. Let's go to the slide 11. Mid-processing business financial performance deteriorated significantly due to suspension of Ukrainian back-on operation in the Donetsk region in April this year. Partial equipment has been relocated to other regions in Ukraine. Additional negative impact was due to significant decrease in demand demand for horeca segments. Yesterday, MHP produced around 1,000 tons of meat products per month, versus 3,000 per month last year, using both companies and rented facilities. Let's go to slide 12. Several words about . Growth in capacity in Serbia, in Croatia, resulted in increased 10% in poultry sales year-on-year, which resulted in EBDA growth 11% year-on-year, driven both an increase in production volume and price. Despite strong price trend during the last month, we expect poultry price in Balkan and Perusnina export market, the EU, to go down in the first quarter 2022. Let's go to the slide number 13. It was about our cash flow and liquidity position. Cash from operations before change in working capital amounts $378 million higher compared to the EBITDA due to non-cash adjustments mainly related to 41 standards. But at the same time, Cash from operating activity was mainly investment during the nine months in working capital. This investment in working capital was more than $245 million and mostly related to high amount of chicken meat by the end of nine months designed for sales. Secondly, increase in investment in biological assets during the crop sowing campaign due to the higher cost per hectare compared to the previous year. Third, increase in trade account receivables for sunflower oil due to the longer settlement period as a result of increasing delivery period. Fourth, an increase in VAT receivables. And last, a fall in trade account payables for plant protection products and seeds, and increase in advance made for fuel to be used in far and first-coming harvesting and sowing campaigns. I also want to highlight the MHP made low investment in sunflower seeds as the start of September compared to the same period last year. This will result in more substantial investment requirements in sunflower seeds in Q4. In Q4, we expect additional investment in working capital, about 100 million. We expect that our cash and cash equivalents by the end of the year will be amounted around 200, 250 million dollars. For us, it's very important to understand the minimum hour position. Minimum safety cash balance for MHP now is $100 million, $150 million, given to current situation and significance uncertainly. And now I give it to Flo to answer here.

Thank you very much, Victoria. Let me start with an update regarding war and its consequences for Ukraine and MHP. First of all, MHP team would like to thank the Defense Forces of Ukraine, which since February 2022 have de-occupied a total of 52.5% of the territories captured by the Russian Federation, almost 78,000 square kilometers. Although we all have been receiving encouraging news from the defense forces of Ukraine, the overall situation in Ukraine remains highly fluid and the outlook continues to be subject to extraordinary uncertainty. Unfortunately, the terrorist state does not stop its massive attacks and just yesterday it fired over 90 missiles during a massive strike surpassing October 10th, this year when 84 missiles were fired. As you can see from the press statements published today, MHP facilities were not physically hit by the missiles attacks in October and November. However, the destruction of the energy generating stations and power lines has influenced and continues to influence MHP's operations as a production process has become very disruptive and has already led to increased production costs, losses in produce and difficulties for employees' lives. If such massive attacks continue, the energy infrastructure can be destroyed completely or to the large extent. And in this case, it will be extremely difficult for MHP to operate as usual and that will lead to a decrease in capacity utilization of its poultry capacity, increased costs and other expenses. Nonetheless, as of today, MHP has been successful in maintaining operations close to full capacity. Hopefully, we will be able to continue to do so. As far as normal trading is concerned, prices in several poultry markets, including the Middle East and EU, has softened substantially and are expected to remain weak. Due to excess supply and increased competition, the significant incremental costs incurred in recent months due to global inflationary pressures as well as increased logistic costs are expected to continue in 2023. Grain and vegetable oil prices are likely to remain stable and high at least into 2023, reflecting ongoing global supply constraints compounded by ongoing effects of the war in Ukraine. At the same time, the European asset independently will continue its further development in the Balkans, supported by favourable market environments, we hope. But let's see. Following the strong support demonstrated in March 2022 by holders of our euro bonds, and our bankers, the group paid Eurobonds coupons due in autumn and will pay in full and on time all bond coupons deferred from March and May 2022. Let me finish the presentation now. We are ready for the questions. To ensure that all participants on today's call have equal opportunities, please follow the rule that one participant can raise three questions per time. Thank you for cooperation in advance. Tim?

Thank you, Anastasia. So we will now move to the question and answer section. If you would like to ask a question, please press star two on your phone and wait to be prompted. If you're dialed in by web, you can either type your question in the box provided or request to ask a voice question. So our first question comes from Yulia Dimambro from Federated Hermes. Please go ahead.

Hi, thank you very much for the presentation. I have three questions, please. So you mentioned the horrific scale of destruction to Ukraine's energy infrastructure. How have you been able to continue to operate at near full capacity? Do you have backup generators for your production facilities? And how are your production facilities heated? And if we think about the very worst-case scenario and the destruction continues, would that mean high production costs for you, or would you have to halt production completely? That's my first question. Should I go through all the questions, or should I do one at a time?

Yeah, thank you for your question. It would be better if you answer question by question. It's a good question about... No, you understand. It's very difficult to predict... yeah now yes yeah what potentially what potential can be yeah with our facility because it is not just issue to be honest now is not issue about the electricity infrastructure and issue about the in general our assets you understand 31 minutes okay yeah but um we have some generators but not 100 percent and we try and now we try to buy more yeah uh no anyway we cannot exclude 100 percent risk no we can we try to manage Yeah, the situation, because, yeah, you know, that we have the different slaughterhouse in the different part of Ukraine, and our factory are located in different part of Ukraine, and we have generate, and we have move generate from one facility to other facility. No, until today, we manage, yeah? And we had some break, but not so long, maximum for few days, yeah? But we cannot guarantee what we will do in the future.

That's clear. Thank you. And my second question is on your negotiations with the bank lenders. So when you presented your Q2 results, you mentioned that you were in the process of talking to them about potentially reopening some of the credit lines. Have these negotiations progressed at all, and how do you plan to address the $160 million bank debt repayment in February 2023?

Sorry, please repeat. Maybe I did not catch your question precisely. Yeah, yeah, please repeat what it means, what you mean. Yeah.

Question about? It's about bank borrowing. Have you been able to get any new credit lines since we last spoke during your Q2 results presentation? And also, you have $160 million of bank debt coming to you in February next year. How are you planning to repay that?

I think that's a good question, yeah, about repaying our short-term debts. yeah yeah you know that we prolongate in the march in april this year we prolongated short term data until the february and yes and now and now yeah until the 2023 and now we are starting negotiations with bank about next prolongation yeah now we in process yeah yeah because yeah i think that you know yeah this financing for finance and working capital and we are in process about prolongation and we hope, yeah, and we hope that we can prolongate. It is not so big amount to be honest, 160 million, yeah, and we have a very good relation with banks. Yeah, I think that we will do it.

Great, thank you. And my last question is on your dividends. So the statement included a sentence that you plan to repay all of the delayed coupons from earlier this year, which would mean that you could potentially resume paying dividends again. Should we expect you to resume paying dividends in Q4 this year?

Sorry, it seems to me, no, it's a very interesting question, but it seems to me in the current situation, I cannot imagine how we can pay dividends. Yeah, yeah, yeah, because we, yeah, because, you know, we understand that we have huge obligations. First of all, huge obligations with our people, with our employees. 26,000 people who live and work in Ukraine during the war. It is the first of our obligations. And the same situation, we understand that we have a lot of creditors and obligations before creditors. So I don't think, for me, especially because liquidity position and cash is very, very important for continuous business of company now.

That's great. Thank you very much, very clear. Thank you.

Thank you. Our next question comes from Antonio Gomez from 91. Please go ahead.

Hi, thank you for your time. I wanted to ask you a couple of questions around the working capital items. The first one I had was in this quarter, your biological assets fell by around $130 million, but the cash inflow in the quarter from biological assets was only $19 million, and the fair value revaluations for the quarter were only around $12 $25 to $30 million. So I was just trying to understand what the difference is in your biological assets between Q2 and Q3 that led to the substantial decline but no cash inflow commensurate with that.

Hello?

Hello, I tried to figure out just one minute. Just one minute. Maybe, yeah, sorry, maybe I did not catch your question about, yeah, decreased working capital. Please repeat, yeah, the difference between the Q, yeah, please repeat your question about investment in working capital, yeah.

The movement in biological assets between Q2 and Q3 was significant. $130 million. It went from $424 million to $294 million. But the cash inflow or the change in biological assets for Q3 was only $19 million, year-to-date minus $150 million, of which Q1 and Q2 had been $169 million. So the change in biological assets was $130 million, but the change in cash flow was only $19 million inflow. which means that there's about 110 million delta that's not explained.

Does that make sense? You're different in balance position and position in cash flow, yeah? Yeah. Yeah, okay, okay. We will send, Anastasia, we will send you the calculation because at the same time, you need to understand that we increase it because we show our financial report in dollars. but currency ratio change by 20%. And we will explain you, because it is not possible exactly the direct way to calculate cash flow between balance position. But at the same time, we will send to you explanation, clear explanation, okay?

Okay, that makes sense. And then the second one is you're looking at another outflow with continued showing of the, the rapeseed crops and, and looking into 2023, um, you know, when, when do you expect that release in cashflow from, you know, a high balance in 2021 versus 2020, and then, you know, a closing balance again in 2022 that, you know, is, is you're talking about a 300 million, uh, cash outflow from working capsule in, in, for the full year.

Yeah, I will explain. Yeah, I'll explain. First of all, yeah, regarding what you need to understand, due to the war, we increased significantly our balance sheet regarding sunflower, yeah, as I told you. Just, yeah, in sunflower, yeah, we increased our investment around in sunflower business, yeah, because it is trade receivables and sunflower oil on stocks, when only war stopped we decreased this cash flow regarding our crushing business regarding our for example the same situation now we have very high level of stock of chicken meat because today in chicken meat we have more than 75,000 tons for us um normal level of chicken meat in chicken meat on stalker around 30 000 tons yeah we can change this situation just maybe the same situation after stopping the war i don't expect this situation will change next year we will invest this money but how i see the 2023 which is a good good signal yeah because in 2023 we don't even current situation will continue until by the end of the next year we don't expect any additional investment in working capital yeah because we invest a lot of money and we understand the big part of this related to situation with work Yeah, and we don't expect any additional investment.

Okay. And my final question is, you know, you have your short-term debt in February. You're looking to extend that. You have the final deferred coupons that are going to probably be paid in January, February time, which, you know, takes your cash balance further down from the 200, 250 million cash closing balance. And then you're going to start looking into sowing in March, April time for, you know, your next harvest season, which is next summer. I was just wondering, you know, what your cash need is and how you plan to fund that.

No, we, if current situation will continue, yeah, until the February, we understand, as Anastasia told, we understand how we will repay our Euro bonds. which will postpone the third Eurobond. Yeah, we understand. We invested a lot of money regarding XOE campaign. We bought fertilizer now in the third and fourth quarter. Yeah, and that is why we understand that our investment regarding XOE campaign next year will be slightly low compared to the 2022. Yeah. and we understand how we repay this coupon. But at the same time, based on currency changes, if something happens, we understand it will be a completely new issue.

So how much does the sowing campaign from a working capital need next year versus this year?

But we start showing campaigns, yeah, to be honest, we start showing campaigns since October because you understand we try to buy fertilizer from the fourth quarter. Total hour, if you compare all our investments year to year, approximately decrease, not so significant, approximately by 10% if you compare total amount.

Okay. Okay. Thank you very much.

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

Thank you. I had two topics. First, on the export pricing, and I guess a generic question around EU and NENA pricing. So for the quarter, I believe your export pricing was in the neighborhood of $2.60. And I was curious what the outlook for that is for Q4. And I'd like to understand how the outlook for pricing for EU exports from Ukraine compares to the outlook for Perunina pricing in the Balkans.

If you're regarding price, Q4 compared to the Q3. In Europe, approximately minus 20-25%, which is the trend, around 20%. And in Myanmar region, the same trade, approximately. In Pirutnina, because you know that Pirutnina sells mostly branded products, we see just not so significant decreases. decrease but not the same figure yeah it's lower yeah maybe five three percent depends on the market depends on the product yeah okay so we could get round numbers to down around two dollars per per kilogram on the from the ukraine export pricing yeah yeah okay

And my other question was just to help bridge the cash from 317 currently to 200 to 250 at your end. What would the inputs there be for CapEx? I think you said negative 100 million for working capital. And so I'm struggling to understand where we see EBITDA, CapEx with the coupon payments coming due. versus some commentary earlier today about the EBITDA outlook being approximately 50% lower.

Your question about this, you know, how we calculate, how we estimate 250 million compared to the current, our cash balance, 300, yeah?

That's right. Rough numbers.

By the end of September, our stock of sunflower seeds was very, very low. Usually, we buy approximately 400,000 tons of sunflower seeds. Usually, we make it very interesting to buy during this harvesting campaign. sunflower seed and put in stock. We invest in this approximately $100 million. At the same time, in December, we will pay the Eurobond coupon. And we have the CAPEX maintenance, according to our program, approximately $30-$35 million. $40-$45 million of CAPEX? Yeah, no, it's the maintenance, yeah. No, maintenance and some finalize our project. It's very important that you understand that for us it's very important to buy some equipment and to produce for export market, not just commodity product and something value-added product because when we sell for the market value-added product, we have the higher margin and it's not so huge influence in price. Yeah. if you think about the value-added product.

Okay, and my last question on the income statement, there's a large FX loss for the quarter, and I was trying to understand what drives that.

It is very simple because you have the debt of more than $1.5 billion in dollars, yeah, and the revenue is devaluated by 20% approximately. And that is why it is the effect, the currency effect of balance position of debt, the valuation balance position of debt.

Okay, I may follow up on that. But thank you.

Thank you.

Thank you. Our next question comes from David Shellhammer. Please go ahead.

Yes, thank you for taking my question. Just back on the cash balance at the end of 3Q, just curious how much of that cash sits at the holdco and how much of it sits in your Croatian subsidiary? And then just a follow-up, how much can be repatriated from the Croatian subsidiary?

Victoria, we cannot hear you.

Can you hear me now?

No, no, no. I'm looking for Victoria. Victoria, we cannot hear you. Give me a second. Oh, my God.

Sorry, it was, yeah, sorry, it was disconnection, yeah, interruption, yeah, sorry.

Sorry, just bear with us a few minutes while we try to get Victoria back. Thank you.

Yeah, sorry. I tried to answer to your question. If you speak about the cash position in Perutnina, around $90 million. And potentially, and at the same time, you know that Perutnina has loan, loan with the syndicate. around $140 million, yeah, and some limitation, yeah, limitation of this loan. Potentially, maybe it's possible peritoneal pay can repatriate some amount to MHPSA, but not so big amount, you know, 20, yeah, not so big amount, 20, 30 million.

20, 30 million.

20, 30 million euros. Sorry, everything with figures, no dollars, is a euro. Yeah, because Krutnina is a euro.

Yeah, sorry. Yeah. Great. All right. Thank you very much.

Yeah, it was very important to understand because MHPSA is not guarantor for this loan. Yeah.

Okay. Thank you very much.

Thank you. We also have a question from Anna Kuchina from T. Rowe Price. Please go ahead.

Hello, Anastasia, Victoria. Thank you for the presentation. I wonder if you may have rough estimates, a high level of a cash burn on a monthly basis, all things equal as of now, and all things equal when the sewing campaign starts in the spring. Thank you.

Maybe cash, what monthly?

Monthly cash burn, so how much cash, all things equal, you need on a monthly or weekly basis to get operations going.

It depends on the month because you can see that if you look at our financial results during the last nine months, our cash from operation after working capital, after investments in working capital, positive $130 million. Because in the case of currency trees, we need to see this separately. What we see right now is that we... Your question about what cash we generate, yeah? We generate what the operation cost of the investment working capital we have right now, yes?

We generate every month. Yeah, I apologize. Many apologies for not being clear. The question is rather how much cash you need to put into your business on a monthly basis to get going rather than how much cash you generate. How much cash you need to put in the business to generate to break even, so to say. But you might not have this number, so we're just wondering on a high level.

Maybe, yes, maybe I don't understand your question clearly. Yes, regarding the way in which Yes, we invest, we need to invest approximately, but in the sowing campaign, we need to understand what we mean sowing campaign. During the sowing campaign, we need to understand approximately $150, yeah, $180 million. Part of them we invest even in third quarter, even in fourth quarter, because, for example, right now, yeah, we provide sowing wheat and grapes, yes, Approximately 30% of our land under this. And that is why regarding the next year base of currency, I understand that for full years we don't need investment in working capital. If you speak about the first quarter, we need to invest in sewing campaign approximately $130 million. Approximately. But it would depend, yeah, because now we continue to calculate. We continue to, yeah, what we do right now, we try to decrease. We understand that corn is not during the war, yeah, especially right now, is not right crop, yeah, because the profitability of corn, one of the lowest. Yeah, and that is why now we calculate and we try to change maybe crop rotation to change from corn to sunflower seeds. But in general, it's approximately 100 during the first half of the year.

Thank you, Karen. What is your maintenance capex per annum?

I know our maintenance capex approximately 50, no, not just 50, approximately 60 million. 60 million for MHP and approximately 20, 25 million for Perutnino.

Thank you. And just maybe the last question. Do you expect any equity raising or any shareholder loans potentially in next year. Thank you.

Yeah, a question about loan from shareholders?

Yeah, either just direct equity injection or the informal shareholder loan. Is it something which...

you could potentially access or not at the moment no it's a very interesting question yeah because at the same time our management understands that we uh that mhp now we understand that current situation mhp will not pay dividend yeah but If we don't pay for that, we understand that we will support the company. Thank you.

Thank you. Our next question comes from Dimitri Ivanov at Jefferies. Please go ahead.

Hi, can you hear me? thank you very much for the for the presentation I have like a three quick questions maybe the first one on this current National Bank of Ukraine regulation when it comes to effects treatment so whenever you export something What is the current expense of the Bank of Ukraine when it comes to repatriating back of the cash and any kind of restrictions, limitations when it comes to servicing of the coupon under international kind of bond instruments? So any kind of color would be very helpful. My first question.

Yes, it is a real problem. You know very well our legislation, yeah. It is a big problem that because, yeah, because according to the current situation, yeah, we cannot pay maturity, we cannot pay coupon, yeah. No, we will see, but yes, it is a real problem what we see, yeah.

Now, we will ask... You cannot pay coupons, right?

Yes, we can pay coupons just since February, which we have since February until August. This is allowed to pay, and we paid this coupon. You know that. From September to October, we paid this coupon. But according to the legislation, we cannot pay. From Ukraine, yes. health problem.

Okay, so in December, you have to pay these deferred coupons, right, under this consent solicitation obtained in March. Are there any issues with getting approval from NBU to repay this deferred coupon in December?

Yeah, this coupon we will pay from our account outside in Ukraine. yeah this coupon we will pay from this account but it would be very big issue regarding the next coupon and about especially maturity you understand just one coupon i think it's not so big problem for us we can we can pay yeah just one coupon no just for half for six months coupon 50 million but the next yeah it is a very open issue when we ask the national bank about please give to us permission national bank told us, yes, because I asked a lot of times, told us, please provide restructuring the same as Ukraine. Because everybody, all bondholders, all world should understand what situation now in Ukraine. Yeah, it is not my words. It's the words of our national bank. And everybody, yes, help to Ukraine and please ask. Everybody should understand.

I understand. So there is no kind of current, let's say, regulation because there was some regulation covering period from February to August. So there is no such regulation for now and everything is prohibited, like any payment of coupons to the offshore accounts from Ukraine is prohibited, right? So there is no kind of guidance on this.

Yes.

Okay, understood. Just to understand, like in December, you mentioned that you will pay deferred coupons, and deferred coupons are for the total of $50 million, like approximately. So in December, you plan to pay the whole balance of the deferred coupons, like $50 million?

Yeah, December, January, accordingly, our schedule, yeah. Well, because December, January, depending on the schedule, yes.

It will be in December and January, payments of the 50 million deferred, like deferred coupons.

Yeah, because we have, yes, you know that we have three bonds, so three-year bond is December, January.

Understood. And I apologize, I'll ask the third question on the export of grains. You told us that due to logistics costs and et cetera, you might like wait for the better prices to start exporting grains. So when your harvesting campaign ends, so how should we kind of look and approach your export of volumes? Do you expect to export like some volumes this year, like wheat or rap seed or like

you will wait until like uh next year to to see more like better prices and etc so any kind of color on on expert of grains okay okay i understood yeah now first of all we grow just two crops for experts because you know the corns and flowers it's where we use for internal meat yeah Regarding grapes, the biggest part, maybe 70%, 80%, we sold this year and we exported this year, maybe 20%, 15% next year, and very similar proportion regarding wheat. Maybe 60, 40 approximately this way. 60 this year, 40 next year.

Okay, but is it like at the current prices, is it profitable to export or like due to logistic costs, it's just break even on the export of grains?

Depends of crops, to be honest. Rapes is profitable. If you speak about the wheat, it's non-profitable, it's a loss. But anyway, we have the wheat, and we must sell, yeah, because it is money, yeah. Thank you very much. Because you talked about the profitable is grain-growing business, yeah?

Right, right. More about export profitability, because I think profitability... because of the internal consumption of the crops, right? So I'm just curious about exports profitability.

Sorry, your question, I didn't catch that.

On the profitability of exports of these crops. Mm-hmm. So it's not profitable at this price.

No, no, I cannot say about just export of the crops because for us it is a grain growing corporation. Yeah, we are not trading. We don't buy and sell for the export. We are not traders. When I talk about profitability, I talk about profitability of grain growing business, farming business.

Okay, understood. Thank you very much.

Thank you.

Thank you. Our next question comes from Jennifer Finca from Deutsche Bank. Please go ahead.

Thank you. So regarding the bond coupon payments, the deferred bond coupon payments, will you pay the record holders at the original date from March or will you pay the current bond holders later? And do you plan to run a consent solicitation on this?

Victoria, let me take this question, please. Got them. First of all, thank you very much, Jennifer, for the question. With regard to the default coupon payments, you're absolutely right. Talking about the record date, this is how the approach works. So those bondholders who were the bondholders at the record date, meaning, for example, they were the bondholders on March 19th, April 3rd, and May 10th, only those bondholders will be paid, will get the deferred coupon payments. This is how the rule works. have been consulted together with the Citibank. And actually, if there is such a question, and I hear that there is such a question, then you can also consult the EuroClear team agents, right? They will definitely provide you with more details regarding this question. But definitely, they will use the registry based on the record date.

Okay, and you're not planning to think about a consent solicitation given that most of those bondholders are no longer your creditors, they have sold out of their... No, this is not how the approach works. Okay.

It is not planned.

That's clear, thank you. And my second question regards the grain segment. I see you have revenue of $86 million for nine months in 2022. Then you have an IAS 41 loss, and this is $147 million. I'd like to understand how you get to your gross profit of 44 based on those numbers.

First of all, you need to understand 70% of total grain which we produce internally, we sell to poultry in intersegment. It is intersegment revenue. At the same time, we calculate our EBDA in grain segment, EBDA for all grain which we produce internally. because now when we see just revenue 86 million this revenue only to 30 parties yeah at the same time during the nine months we sold in intersegment our grain which we which we harvested last year to poultry segment at the same time we have the 31 standards where we Revaluate, yeah, biological assets, yeah, corn and sunflower seeds in the field and some of our new grain on the stock. It is very difficult to maybe issue. We can describe you by email. Okay, by figures, okay?

So to understand your revenue figure is external sales only and your EBITDA figure... Yes. And your EBITDA figure includes inter-segment sales. Yes.

Yes, exactly. Thank you. Okay.

Thank you.

Thank you. Our next question comes from Sergey Makhin from VR Capital.

Please go ahead. Victoria and Stacia, I just want to come back for a second to the issue of the third coupon. So we obviously understand how the mechanics and how the documentation works that you have to pay to the auditors of the record date in March. But as you also know, there has been a lot of trading in the bonds since March. So I really think that you should kind of carefully think about this source of liquidity for both the company and for kind of any company discussions that the company may want to have with its bondholders, maybe in 2023. $30, $50 million that nobody expects from the holders of the March record date who sold it already. And it's really the source of liquidity that can be used to pay to the current stakeholders. So I would just, you know, honestly have a conversation within the company about it. And it's not so difficult to run a consensual station or approach it differently from what the documentation says today.

Nice.

Anastasia? I don't think, yes, I'm here. I think at the moment I do not have any further comments. And thank you very much for your comments. I think in order to comment more, we will have to get in touch with the team we've been doing the content solicitation day, sorry, deal in March and April. And my recommendation from the company is that you definitely need to get in touch with the EvroClear ClearStream systems right, an agent, so we can be clear on terms and conditions of the deal.

Thank you. I mean, we are very clear. We know that it will be paid to the record holders as of March.

It's just... Yes. This is what I've been told by the city bank, right? And I hear you, right? We hear your recommendation, so Let us discuss it internally with the team.

Yeah. I mean, like, obviously, from our perspective, and we have, you know, fairness, gift, and holding, the bonds, that would be the right approach for the company to go through that.

But, yeah, just I would like to add just a few words. We understand that we have obligation to pay coupon. And to be honest, we pay coupon to trustee. And Please, yes. For me, it's very difficult. It is not our obligation to pay directly, and it is the obligation of the state to pay to bondholders, and to distribute to right bondholders.

Yes, according to the registry. That is right.

Yes, yes, yes.

Mm-hmm. Mm-hmm.

Okay, thank you. So I'm not seeing any more questions. Just a reminder, so text questions will all be forwarded to the MHP team after the call. So perhaps I can hand back to Anastasia and Victoria for closing remarks.

First of all, thank you very much for the productive call. Thank you very much for your questions. In case you have any further questions, please email me. Second, definitely all the text questions will be answered during the next two days. In case your question hasn't been answered, please approach me. Thank you very much and have a lovely day. Thank you. Bye.

Thank you. That concludes the call for today. Thank you and have a nice day.

Thank you so much.