MHP SE

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's 4Q 2022 financial results call on the 11th of April, 2023. At this time, all participant lines are in listen-only mode. The format of the call today will be presentation by MHP management and IR team, followed by a question and answer session. So without further ado, I would now like to pass the line to the MHP team. Anastasia, the floor is yours.

Thank you very much, Michael. Dear stakeholders, good morning, good afternoon. Thank you for joining us today for MHPC's conference call. I'm Anastasia Stavatiuk, Director of Investor Relations and International Communications of MHPC. Together with Victoria Kapelushina, CFO of the company, we are glad to present you MHPC's financials and, of course, operational results for the fourth quarter and full year of 2022. 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 consideration. Now we move to page three of our presentation. Let me start from a general overview. 2022 was extremely challenging for Ukraine and for all businesses in the country. The war started at the end of February with no understanding how it could progress and to what extent. We immediately set out our priorities at the time to care for our people, to maintain food security, and to support Ukraine. Operational challenges for MHP were very significant. The mobilization of employees, the disruption of supply chains, a temporary decrease in the supply of some goods, including vitamins and minerals to produce feed, and plant production goods, including pesticides, the physical disruption of energy and transport infrastructure, and the temporary occupation of some territories. The war in Ukraine continues. It is more localized now, mainly in the east and in the south of the country. However, there is a significant level of uncertainty how the war will develop and when it will finish. Moreover, it is highly unlikely that MHP, as well as any other business in Ukraine, can foresee a size of adverse impact on its operations, which can potentially occur at any time. Macroeconomic situation continued to look very challenging in 2022, GDP in 2022 decreased by around 29%, while next year, taking into account that active hostilities finish by the end of this year, the economy will begin to recover. We all keep our fingers crossed. Inflation ratio was at 27% in 2022, and it is expected to be at around 19% in 2023, still extremely high. The unemployment level is still very high, reaching 26% in 2022. It is expected to remain almost at the same level in 2023. There is still a significant amount of people staying outside of Ukraine, up to 8 million as of today, for obvious reasons. The currency ratio is expected to continue to devalue and will be at around 42 UAH per one U.S. dollars in 2023. Let me now proceed with the company's results for the year, and we go to slide number five of the presentation. I will start with operational highlights for the year. Driven by decrease in capacity utilization, poultry sales decreased by 5% and reached around 666,000 tons. Following the operational plans and taking into account manageable situation with export sales, MHP managed to reach almost 100% capacity utilization by the end of 2022. Facing significant challenges in logistics, during the first three months since the beginning of the war, poultry exports from Ukraine decreased by 8% to around 368,000 tons, with a significant share of transshipments made through the territory of the European Union to the MENA and African countries. Total share of exports out of total poultry sales volumes decreased from 52%. 2022 financial results are following. Group's revenue increased by 11% and reached over US$2.6 billion, with export revenue representing 61% of total revenue, mainly driven by high export prices for poultry meat, partially offset by lower volumes and higher volumes of vegetable oil sales. Adjusted EBITDA decreased by 41% to US$384 million, That was a real and direct impact of the war on our business when MHP team was working 24-7 to offset war impact. The decrease in EBITDA is mainly driven by substantially weaker results in grain growing operations segment, though as a result of significant increase in production cost. Prices of fertilizers and plant protection materials, for example, increased by over 40%. lower grain prices in Ukraine because of the logistic challenges, for example, ports are partially operational even now, and increased logistic costs, as well as lower yields compared to 2021 harvest. As a result of the war, MHP had over $69 million of war-related expenses, mainly as a result of insolvency of MHP partners in Ukraine, who, because of the war, lost their assets or ability to operate, support to communities, written off inventories and biological assets. So I think we can now proceed to the key financials for the fourth quarter of 2022. And we go on slide number six of the presentation. Despite extremely challenging operational environment in the fourth quarter of 2022, the group's revenue increased by 6% and reached $766 million, with export revenue representing 64%. Due to the launch of the additional sunflower crushing facility in October 2022, MHP managed to increase production and exports of sunflower oil by 21% year-on-year. Adjusted EBITDA decreased by 16% year-on-year to 109 million US dollars, with EBITDA margin of 14%, significantly down year-on-year because of the world disruptions. Let's go on slide number seven of the presentation, which shows our financial results by segment. And this information is for the total 2022. Paltry operations remains Our key segment, the group generated the majority of total revenue, around 71%, and 70% of the groups EBITDA. Grain segment generated 6% of total revenue and 24% of companies EBITDA. Meat processing and other agricultural operations generated just 5% of consolidated revenue with around 2% contribution to EBITDA. Please take into account that in April, 2022, MHP closed its meat processing facility in the Donetsk region, which resulted in significant decrease in meat processing operations of MHP Ukraine. The European operating segment generated 18% of total revenue and actually around the same amount contribution to the company's EBITDA. Let's have a closer look at each business segment. And I would like Victoria to continue the presentation.

Thank you, Natalia. Good afternoon, everyone. Let's have a precise look at poultry segments, performance slide number eight. Needless to say that during 2022, MHP has been facing complex challenges and disruption in operations. in sales and logistics as a result of war in Ukraine. Since the beginning of the war, MHP had to cut production by around 15%, and then only at the end of first quarter this year, MHP managed to reach full capacity in poultry production again. Taking into account the enormous number of attacks on the energy infrastructure of Ukraine during the first quarter, and the first quarter 2023, which can continue in the future, there is always a risk of potential decrease in policy capacity again. The impact of the war in Ukraine remains unclear at this time and can change seriously, quickly, and without notice, as you understand. Despite a number of difficulties due to the war in Ukraine, MHP delivered a quite good result in 2022. However, we already see some challenges ahead. I will talk about these trends further in presentation. The main driver of our strong result in 2022 is the 40% of annual export price increase across all the markets that was particularly negatively offset by increased logistic cost due to the war and low export volume. An additional positive effect on the cost of cake and feed for poultry production was due to the favorable ratio of price for sunflower seeds and oil. Export price increased significantly during the second quarter and third quarter of the last year. However, due to the change, However, due to the change in the economic environment in the EU and UK and increased competition in the MENA region, from September 2022, poultry price across almost all export markets started to decrease, which resulted in more than 11% decrease in price in Q4 2022. At current price in EU and MENA region, lower than in Q4 last year, lower by 10%. At the same time, sales of poultry meat in Ukraine, despite of substantial decrease in population, migration, and disposable income, high unemployment rate, with a weak labor market, market mentioned by Anastasia Oleh, remains stable in Q4, year-to-year and quarter-to-quarter. Average policy price in U.S. dollars, however, decreased substantially by 22% year-to-year, driven mainly by depreciation of Ukrainian greenery. MHP is regularly exposed to commodity price risk. To mitigate this risk, we continue to focus more and more on non-commodity products, ready-to-eat, ready to cook. However, penetrating and increasing of our share of this market requires a lot of effort and expenses as today and in the near future. Let's move to the slide nine, grain growing operations. It is important to highlight that despite high prices for grain of international market, export price for grain from Ukraine is significantly lower compared to the international price, due to logistical substantial increase as a result of the war in Ukraine, and challenging unstable logistics and regulations. Obviously, this is negatively affected by profitability of MSP, as well as all agri-producers in Ukraine. Moreover, bad weather conditions in regions where our lands are located, especially in Vinnytsia and Circassia of 2022, negatively affected our harvesting campaign. This is the result in low corn and sunflower yield compared to one in 2021 year. Corn minus 28%, sunflower seed minus 22%. EBDA of grain segment, net IFRS 16, last year constitutes $93 million compared to the $340 million previously in 2021, mainly due to the lower yield and grain prices. I would like to know the path of EBDA in 2022. was attributable to positive impact of hryvnia functional currency on the group farming companies where hryvnia denominated expenses declined due to the currency devaluation against the US dollar. Let's proceed to the slide 10. Meat processing business financial performance deteriorated significantly due to suspension of Ukrainian bacon operations in the next region in April 2022. Partially, the equipment has been relocated to other regions in Ukraine. Additional negative impact was due to significant decrease in demand for hurricane segments during the last year. As of today, MHP produced around 1,000 tons of meat processing products per month. Before the war, we produced and we sell almost 3,000 tons per month. Let's proceed to the slide 11, several words about the routine up to it. Growth in capacity in Serbia and Croatia resulted in 16% increase in poultry sales year on year, while EBDA was stable year on year since the increase in sales volume and price was set by higher cost of production and selling general and administrative expenses. The devaluation of euro against the dollar had additional negative impact on the Pyrethina's financial results. Slide number 12. A few words about our cash flow and liquidity position in 2022. Cash flow from operation before changes in working capital amounted to $480 million, higher compared to the EBITDA due to non-cash adjustment mainly related to FRS-41 standard. Cash from operating activities was mainly investment in working capital. Mostly related. First of all, an increase in trade account receivables and stock of sunflower oil due to longer settlement period as a result of increased delivery period as well as due to increased production sunflower oil. This investment around $150 million in 2022. Secondly, higher volumes of raw materials were accumulated to ensure confidence in smooth operation of our factories. as well as the need of sewing campaigns. The main investments were direct-to-the-purchase non-grain, veterinary components, packaging materials, gas and fuel reserves, fertilizer, plant and protection products, and seeds. Total amount of this around $550 million total. This high investment in working capital was caused mainly by war. We don't expect that realize the working capital while the war in Ukraine continues. Total COPEX last year was 160 million, mainly related to, first, competition of projects that we started in 2021, such as oil crushing plant, and others. Secondly, some logistic projects, we bought baggage and railway wagons. So generators, I'm sure that everybody understands that we need to buy generators to ensure the smooth operation of our factories. And we will continue to purchase generators at the beginning of this year. Fourth, maintenance and new equipment. Regarding debt, at the end of the period, the company total debt was nearly $1.5 billion, net debt about $1.2 million. Using the opportunity, I would like to thank all our Eurobonds holders and banks Our tight cooperation, support and partnership during the difficult times of Ukraine allowed to MHP to receive our consent for 270 days interest payment extension, which the company met in full and on time at the end of 2022, at the beginning of this year. At the same time, we have now received the approvals for prolongation of uncommitted lines from all banks till August and December 2023, second time since the beginning of the war. We remain a responsible partner and we have paid print coupons to the date. The operating environment remains volatile, extremely challenging and unpredictable, including the NBU restrictions regarding capital movements outside of Ukraine for the all Ukrainian legal entities and individuals. The liquidity position at the end of the year was $300 million in cash, mostly in dollars. Given the current operation environment and significant uncertainty, we estimate our minimum safe cash balance at $200 million. And now I give the floor to Anastasia for update and outlook.

Thank you very much, Victoria. So let me start with an update regarding the war in Ukraine. We all understand the situation remains highly unpredictable and uncertain. The war continues. Missile attacks are likely to continue with a potential harm to the infrastructure of Ukraine. Hopefully, MHP facilities will continue to operate as usual. Prices in several poultry markets, including the Middle East and EU, have softened substantially, and they've been softening since the end of 2022, and they are expected to remain stable at least. due to excess supply and difficult economic environment in different parts of the world. However, trends are subject to the avian influenza spread and stabilization of economic situation worldwide. There are upsides and downsides here, for sure. Vegetable oil prices since the beginning of the year decreased substantially. We can see that internationally. 20-25% decrease. and are likely to remain at this level through 2023, as the market is overloaded by sunflower oil supplies from Russia and saturated EU market from 2022. Grain prices are decreasing worldwide by around 10%, have decreased by around 10% since the beginning of the year, and even more they decreased in Ukraine, driven by the problems with logistics, compounded by the ongoing effects of the war in Ukraine. As of today, we do not foresee grain price increase in the nearest months, taking into account strong harvest of soy and corn in Brazil particularly. However, the landscape is subject to change. It may change later this year. with a new harvest. A few words about pyridine obturi. It continues its further production growth in the Balkans, following the group's strategy of cladding neurotransformation. Let me stop here, and we will be glad to answer your questions.

Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you have any questions and you are dialed in via the telephone, please press star 2 right now, star 2, for voice questions. If you have any text questions, you may also type them. And I acknowledge the two text questions received from JR Investimentos and PWP, which we will get to shortly. Thank you. Our first question, voice question, comes from Mr. Daniel Vacekovic from Barclays. Please go ahead, sir. Your line is open.

Thank you very much for the call. So you mentioned that you see your cash level that you would need is around $200 million. I mean, do you expect that your current cash position is going to be sufficient for your working capital needs this summer?

Yes, thank you for your question. Yes. Yeah, especially in current situations, a lot of the challenges, everybody understands the minimum 200 and current our position 300 is more or less acceptable. Yeah.

And could you share my idea of how much of your cash is held internationally and available for debt service or whether you have an offshoring of cash when needed?

Yes, we try to keep the bigger part of our cash outside. But at the same time, you understand that we have the strict requirement during 180 days to return this amount to Ukraine. We provide a lot of export, but we need during the 180 days to return money to Ukraine. Now we keep 80% of total of our cash abroad, but at the same time, we have this obligation.

Okay, thanks.

And then finally, just maybe on the logistics of your exports, you know, you've obviously done a very good job of completely changing your export model. Do you think there's scope for improvement, you know, in terms of like working capital or the costs of the current export model? Or do you feel like you've got it quite well optimized now?

You're question about how we optimize our logistics after the war, this year. It's a very interesting question. If you ask me what is the price of logistics, price for us, especially logistics of meat, was one year ago, in April last year and in May, it was, to be honest, it seems to me, maybe 30% higher than today. But at the same time, current price of logistic of me doesn't matter to Europe, if you speak about Africa, MENA region. Anyway, current our price of logistic approximately 70-90% higher compared to before the war. You understand my point, yeah? Yeah, we optimize price compared at the beginning. Yes, slightly optimize, maybe 20, 25%. But at the same time, current logistic price is higher if you compare to before before by 70, 90%. Hello?

Thanks very much.

Thank you very much. We will now be moving to the next question. Next question comes from Miss Erica Ive from MetLife Investment Management. Please go ahead, ma'am. Your line is open.

Hello. Thank you for taking my question. I got just a follow-up on the 180 days that you have to repatriate cash in Ukraine. When is actually the deadline? Because we keep saying about this 180 days and it's quite a while we keep saying that. But realistically, when are you supposed to repatriate all cash in Ukraine? Bye.

You need to understand that every month we provide exports and every month we must repatriate cash which we exported six months ago. You understand? Yeah, we need the cycle. Okay. Because every month we export, yeah, every month we exported 40,000 of the flour oil. Every month we exported approximately 1,000 of meat. And, yeah.

So always being equal, if you have carried on paying coupons so far, you reckon that you would continue paying coupons, given that you've got still a six-month lag, time lag?

No, yes, I think that, yeah, it would be very, yeah, it would be, because you understand that we paid until today. Since the start of the war, we paid three coupons. Not only, we paid three coupons, total amount approximately $150 million, and received special permission, and not just special permission for MHP, it's a permission for all companies in Ukraine to pay some interest rate outside in Ukraine only for one coupon. To be honest, $100 million will be paid as coupons to both holders through this revenue, through this cycle.

Okay, understood. And in terms of... Nasha, please carry on. Okay, in terms of the actual survey that you sent out a while ago about the suspension of coupon payments, Is there going to be any follow-up around it? You were basically assessing investors' sentiment and then ideas around suspension of coupon payments.

No, yeah, I suppose, yeah, we do the best, yeah. I think that, yes, we will, yeah. And at the same time, yeah, we ask about the permission from our NBU, yeah, again, yeah, and we will try to pay this revenue Yes, we will. Yeah, we will do everything to fulfill our obligation.

I see. So basically, I seem to understand that basically you are able to continue paying coupon just because you've asked a special permission. Is it correct?

It is one way, yes, one way if we ask, yeah, we would like to ask the special permission. But to be honest, I have a lot of concern that our NBU provide the permission to MHP because I know the situation with other companies who ask about this permission with NBU. But at the same time, yes, we can, maybe we will try to pay this coupon, yeah, next coupon from revenue. And we... We expect and we hope that war and situation will improve, and war will stop, and regulation of NBU will change.

I see. All right. Thank you. That's all for me.

Okay. Thank you very much. We'll be moving to the last voice question before we proceed to the text questions. Next question is from Joe Melanda from Red Intel. Please go ahead, sir. Your line is open.

Thank you very much for taking my call. I was just seeking some clarity following up from the previous question. Am I right to understand then that you're not intending to further restructure or reschedule the 2024 Eurobond commitments, either with regard to future coupon payment or the principal repayment, and likewise with your longer-dated Eurobonds?

Thank you. Thank you for your question. As you understand, it's difficult to forecast how the situation will develop in Ukraine. But at the same time, our priority, you understand that we continue to operate as efficiently as possible across all business segments, taking into account the situation in Ukraine. And company understands that 2022 bond maturity is one important question on the agenda. And we will be able to address it appropriately during this year.

I see. So you intend to be able to repay the coupon and the principal next year for the 2024s. Is that right?

Thank you very much.

We will now be moving to the text questions of the call. First question from Jesse from DAR Capital. Thank you for taking my question. What kind of developments have you seen so far in the poultry exports market with regards to demand and pricing?

Sorry, excuse me. Please repeat about poultry export market.

Sure. What kind of developments have you seen this year in the poultry export market with regards to demand and pricing?

Yeah, yeah. As I told in presentation, what we see right now, especially regarding price of export market, what we see current price in Europe, if you speak regarding the filet, and if you speak about the small chicken in Vienna, current price low compared to the even price of the first quarter, low compared to the first quarter, approximately by 10%. If you compare in the first quarter last year, price lower, maybe approximately 70 cents. As I told in presentation, the maximum as the peak of price of export market in Europe and in MENA, in Saudi Arabia region, were during the summer last year. Yeah, it was unrealistic high price and that is why we received and we achieved so high a result in poultry segment last year. Now price unfortunately low, and our expectation, we think that maybe this price will continue the same level. We hope that price of chicken in these two very important regions will not decrease more.

Okay, thank you very much. Next question comes from Constantine from UpToYourCapital. There's a few questions here, so I'll just read them. The first question, what is your thinking on the 2024 bond maturity? The second question, could you please confirm cash position as of 31st of March, 2023? Mm-hmm.

By the end of the March, our cash position was completely very similar at the beginning of January, around $300 million. Regarding maturity of bond 2022, we understand and we think that bond maturity of 2024 is a crucial question for us and crucial question for our agenda. and I'm sure that we will be able to address it appropriately this year.

Okay, thank you. Continuing the questions from Constantine, could you please give an update on the latest NBU regulation and the ability to pay coupon in the second half of 2023? Prices are softening. Do you have scope to improve volumes, and do you see reduction of cost pressure.

Yeah, your question about the two parts, one of the regarding payment coupon in the second half of 2023, and the second part of question about cost pressure, please clarify.

I did not catch it.

Just question about coupon.

Yeah, so the second question is prices are softening. Do you have scope to improve volumes as the prices are softening? And do you see reduction of the cost pressure?

Regarding the coupon, yeah, no, yes, we try because MHP, yeah, I would like to emphasize that MHP always was and is a reliable partner for all our partners yeah and we uh yes we will do everything to pay coupon in 2023 we will do everything yeah but at the same time we have some restrictions we discussed about a lot yeah 10 minutes ago but uh yeah no it's very difficult yeah uh if situation will continue yeah yeah i think that we can and we do everything to pay this coupon But unfortunately, yes, I understand that. I told this a lot of times. We continue to live during the war. Yeah. And unfortunately, it's very difficult to predict what will be in the second half of the year. Because you remember that just only three months ago, only four months ago, yeah, we have the big problems sometimes, the big problems with electricity and a lot of different situations. Unfortunately, it's very difficult to predict what we will have in the second half.

Thank you very much. We'll move on to the next text question. And I acknowledge the voice questions from Dragon, MetLife and JFS. We will come back to you shortly. This text question comes from Ili from PWP. What is the estimated value of assets of Perutina and what is the outstanding balance of its loans? I think you mentioned it to be 140 million euros on the previous earnings call.

Yes, regarding the Perutnina, I cannot say exactly figures about this because I don't see right now the balance of Perutnina because you understand I described it out consolidation balance. But total loan in Perutnina, it seems to me 140, yeah, around this, 150 million.

Okay, thank you very much. The next question comes from Mr. Magnus from Zorg. Can you please explain how 2021 adjusted EBITDA in grain was higher than revenue?

Yeah, it is not something new. If you look at our historical figures, if you look at P&L during all our history, Yes, very, yes, always, not always, but it seems to me 90% of our ABD higher than our revenue because here the revenue, two-thirty part, the biggest part of grain we consume internally in poultry segments. Yeah, you can see the revenue, this revenue inter-segment. If you look at our financial report in segment, you notice which describe segments, yeah. And that is why our EBDA from EBDA in grain segment, from all our operations, revenue only to certified.

Thank you very much. Next question comes from Joseph from JR Investments. Two questions. Thank you for keeping the company running in this extreme and difficult situation. My first question is, what is your plan in order to pay the bond that matures in 2024? The second question is, what was the cost of energy before the war, and what is it now, and the tendency for the future?

Regarding the bond 2022, I asked, 2024, sorry, I talked about this twice, because unfortunately I cannot add something new I talked about. It's a very, very important question to ask. And regarding price of utilities, last year, the price of gas last year, yes? Price of gas increased by twice. Electricity plus 30-40% and fuel around 30% compared to the price 2021, compared to the price of utilities 2021.

Thank you very much. We will now be moving to the voice questions. The next question is from Mr. Dmitry Ivanov from JFS International. Please go ahead, sir.

Hi, Victoria, Anastasia, can you hear me?

Yes, yes, we hear you.

Yes, hi, thank you for the presentation. I have a few questions first on this extension of bank loans to August, December. Could you give us a bit more color on this extension? What was the amount of bank loans that were extended to... august december this year and let's imagine for now for simplicity that there is like a status quo situation in ukraine how do you see repayment of these loans like would you kind of ask for like extension or you use cash offshore to repay these uh bank loans uh when when they do uh in august uh december 2023 so that's the first question from me

Yeah, total amount of this loan approximately, not approximately, $150 million. Yeah, we prolongate it until August, December, depends on banks. Yeah, and we will try again to ask about prolongation. Yeah, because as I told during the presentation, this year we invest more than $300 million in working capital and we will keep this amount in working capital

until the end of the war yeah that is why we really need money understood understood thank you very much and like this kind of clarification on working capital like invested 340 million in year 2022 and you mentioned that you want to maintain this level of working capital in absolute amounts so does it mean that like at least expectation for this year again like We're talking about status quo scenario that there will not be like a negative working capital impact this year. So at least it will be like a working capital neutral this year or something else. So it would be great to have color on working capital changes this year. Yeah, thank you.

Yeah, thank you for your question because, yeah, it's a very big issue regarding reimbursement VIT. Because you understand that our expert around 65%, almost 70% of total our revenues and total endorsement of VIT, which we shoot and we forecast that we get from government, $150 million. Yeah, for me, it's a very big issue, because last year we had investment in VIT, but approximately $30 million, because for this year it's a very big issue. And unfortunately, I cannot predict it. Yeah, I'm sure that, yes, try to be conservative and I think that minimum 50-70 million dollars maybe we will have investment in working capital mostly related and the big part of this related to the IT reimbursement because I see how the situation now is on the market and with the IT reimbursement we will see or maybe war will continue we will talk and in that case we will not have any Thank you.

So, basically, the item that might affect your cash flows is VAT reimbursement, which is, in the worst case scenario, $50 million to $70 million impact on working capital free cash flow this year. Yeah.

Yeah. Okay. Yeah. Maybe VAT.

Understood. And if you could give us some guidance on the capital program, capital capex this year, again, like in a base case, status quo scenario, that would be very helpful.

Sorry, your question about capital? Capital expenditure capex, right, correct. Yeah, yeah, capital expenditure. Capital expenditure for this year is $150-170 million. I will explain. I understand it's a big amount, but we need to understand why. First of all, as I told during the presentation, some approximately $30-25 million related to war situation, because in the first quarter, We bought some generators, and we need to build some social permission for employees, and we buy some logistics. It's a very big amount of maintenance, approximately 70 million, around up to 70 hour maintenance. Yeah, CapEx regarding all our businesses, yeah, and together with businesses in Peru, Nina. So what is our CapEx related to our culinary strategy? I will explain what is it. Because as I told, yeah, we need and we must produce more non-commodity products. Because as I told, price of commodity chicken is very fluctuated. And when we produce, more non-commodities, we can, sure, yeah, we can insurance of this be fluctuated. And this capex around $40 million. Yeah, total capex, as I told previously, approximately $150, $170 million.

Understood, understood. Thank you very much. And just one small clarification regarding your offshore cash. You mentioned, like, 80%, approximately 80% was offshore cash balance, which is, like, approximately $240 million. And just to clarify, what's the proportion of Pirutnina cash balance in this number, like, approximately? And maybe you have, like, a rough estimation, like, absolute amount.

Yes, Pirutnina... Approximately, from 80%, approximately $70, $70, $60 million.

Thank you very much. I appreciate your answers. Thank you.

Thank you. Thank you. Thank you very much. We did register a question for Mr. Luis Carral earlier from Northlife Capital. Please go ahead, sir, in case you still have a question. Your line is open.

Thank you. Just a quick question. Recently, I think Poland is thinking of suspending imports from grain from Ukraine. Could you give us a sort of an update on the situation? I understand it's fairly recent, but also whether or how much you export into Poland of grain. Thank you very much.

Victoria, maybe I can catch this question.

Yeah, yeah.

Thank you very much for the question. Actually, the situation with the grain deal remains very uncertain and rather, I would say, unstable because we all hear the news that the grain deal has been extended and there are some resources which are telling us that it has been extended by 60 days and other resources are telling us that it was extended by 120 days. Right. So, frankly speaking, that is why it is very, very uncertain. And frankly speaking, it creates an additional turbulence for our traders. I mean, the traders in Ukraine, unfortunately, because of that, we do not have stability in operations. Moreover, definitely, we have a different situation. challenge which is not in Ukraine but it is in Bosphorus, it is in Istanbul where unfortunately there are many additional challenges set by the Russian bureaucracy and we used to have approximately 10 ships per week arriving to Ukraine at the moment we have 2-3 ships arriving to Ukraine than to be loaded with grains. Unfortunately, this is how the situation looks like as of today. And unfortunately, as you understand, it doesn't bring us, MHP or Ukraine in general, too much certainty what will happen with new harvest and with new export sales. Frankly speaking, when it comes to Poland, as you understand, we are not the biggest grain traders in Ukraine, especially taking into account that we produce grains mainly for internal processing, to produce chicken feed, feed for chickens. And therefore, it's difficult for us to be 100% certain and informed how much we export to Poland.

Thank you. Okay, thank you very much. Our next question comes from Carl Knightley from Knighthead Capital Management. Please go ahead. Your line is open.

Thank you. A few questions. On the net working capital forecast for 2023, could you reiterate what you expect? I think I had heard 150 million potential inflow, but I also heard 50 to 70 million potential investment. I was just curious what the total net worth capital cash flow is expected to be for the coming year.

Sorry? Yeah, if I get you correctly, you're question about investment in venture capital 2023, yes?

Yes, correct.

Yeah. As I told previously, our expectation about investment in working capital approximately $57 million. I will explain why and what is it. It is mostly regarding to reimbursement VAT. Because total amount of VAT based off our budget for 2023, total amount around $140 million. is a very big amount. And my expectation, our conservative expectations that unfortunately, we will not receive all this amount. What is the main contribution in working capital regarding creativity?

Okay, so what about all of the, so we had negative 300 plus million of networking capital for 2022. And I think the prior year was negative $250 million. So there's no – so this year is going to be negative $50 to $70 million in addition to that negative $600 million?

Yeah. Yes. You're correct.

On the EBRD facility and the press release, there was a notation that an incremental lender provided $10 million. Could you provide any detail as to who that lender was?

Oh, sorry, the connection is not so good, please allow it, yeah. What is your question about last question?

In the subsequent events noted in the press release, highlight the EBRD facility, the 90 million, which it's also noted that a third party lender provided 10 million. Could you provide any detail as to who that third party lender is that provided 10 million?

There's just one minute, sorry. It's a very interesting question. Yes, we talked about $100 million, but in real life, we received just $90 million by Yeberdi, and $10 million now we did not receive, and we don't know who will provide to us this money. Not yet. Bill Ender, yeah. It is because Yeberdi is in the process. Yeah, because you would reorganize this process and yeah.

It does not happen.

In the $300 million current cash balance, I think you noted that the March ending cash was approximately $300 million as well. How much of the EBRD debt is drawn in that $300 million?

uh yes yeah i will explain yeah you birdie yes you birdie one we can use only for by sunflower because it's a p classic pxf loan and i understand your question if you ask me yeah by the end of march we had 300 million dollars yeah correct Yeah, not by the end of last year, because it might confuse, yeah. By the end of March, yeah, we did not, yeah, because we got EBRD in April, yeah. By the end of March, no. We got EBRD in April.

Okay, so there's no EBRD loan outstanding in that standard.

Yeah, yeah.

And then my last question is on the Slovenian operations. So the fourth quarter EBITDA was fairly low relative to prior periods. How do you see that operation looking in 2023? Should we think of EBITDA in the 60 plus million range or would it lag this year?

uh your question about the routine no we suppose yeah yeah as i told in presentation is the two issue one of them it is the currency ratio between euro and dollar yeah yeah if you if currency ratio will stable yeah so yeah maybe it is achievable yeah it would be achievable if currency ratio was the whole oh it would be low yeah okay

But for the total year, the Euro dollar hasn't moved that much. And I believe you did EBITDA around 7 million for the quarter?

No, I think it is very 65, 60, yeah, 65, yeah, 60, 70, yeah. Okay.

Okay. And then of the CapEx... and the investment in this region, what type of growth capex are we doing in Slovenia? Is it all through the existing entity, or is there M&A?

Yes, we have some expansion project in Perutnina, yeah. We started this project in 2021, especially in Serbia and Croatia, yes. Yeah, total capex include maintenance capex in Perutnina, yeah, for this year around 60, yeah, 60, 70 million. Include maintenance. Yeah, 60, 70 include maintenance, yeah.

And how much is maintenance?

How much what? Maintenance around 20, yeah. 20, around 20.

OK, so we're doing $40 million of gross capex. And do you have an estimate as to how much, like what's the return on that capex? Will there be incremental EBITDA?

No, yeah, it would be incremental EBITDA, but not 2023. It would be, yeah, because it's invented in 2024. Yeah, 2024 and 2025. Yeah. No, our expectation, yeah.

But do you know how much incremental EBITDA the project will return? So if we invest $40 million, will we receive an incremental $5 to $10 million of EBITDA, or is it higher or lower?

Yeah, it is about IRR around, yeah, it's very difficult to say, but because a lot of different projects, there's not one project in a lot of different investments in different countries, you understand, it's Perutnina, not just Slovenia, and a lot of countries, but we see that our IRR of different projects in Perutnina, yeah, in different projects, between 12, 15, sometimes even we invest money even with IRR around 11%,

Okay. So 11 to 12% IRR.

Yes.

Okay. Thank you. That's all from me.

Thank you. Thank you very much. Unfortunately, we have no further time to take any additional questions. I'll pass the line to Anastasia for the concluding remarks. Please go ahead.

Thank you very much, Michael. Thank you very much, everybody. That was a very interesting call. Definitely, as I see, we've got many questions which are required to be answered. And as far as you know, my email address, please forward your questions directly to me, or actually I can use a platform to take them from here, right? And we will be glad to answer them all. In case you require an extra conference call together with the team, please send me a message. Thank you very much and have a lovely day. Bye.

Thank you. Thank you. This concludes today's conference call. We'll now be closing all the lines. Thank you. Goodbye.