MHP SE

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's Q1 2024 results conference call. At this time, all participant lines are on listen-only mode. The format of the call today will be a presentation by the management team, followed by a question and answer session. So without further ado, I would now like to pass the line to Anastasia Sabotniuk. Please go ahead, ma'am, your line is open.

Thank you, Michael. Dear stakeholders, good afternoon. Thank you for joining us today at MHP's conference call dedicated to the first quarter results. I'm Anastasia, Director of Investor Relations and ESG Compliance. Together with Victoria Kapelushna, CFO of MHP, we will discuss MHP's financial and operational results for the period. Today's call is based on the press release and financial statements 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. We now move to slide number three of the presentation. A few words about macro environment. Taking into account that many businesses have been adjusting to a new operational environment, war environment, which remains unpredictably volatile in 2024, In Q1 2024, GDP grew by over 3%, with a forecasted growth in 2023 at the same level, 3%. CPI slowed down to 1% compared to 3% in Q1 2023. 2024 harvest in Ukraine is expected to be strong, pretty much at the same strong level as it was in 2023, which is around 74 million tons. Let me now proceed with the company's results for the first quarter of the year. Let's go together to the slide number five of the presentation. First of all, the war continues and the first quarter of this year's performance reflects the resilience and agility of our business model and the tremendous effort of our workforce. Irregular and frequent drone and rocket attacks against civilian energy and other infrastructure targets continue. MHP would like to inform its stakeholders that due to shelling by the occupied forces on May 17th in Odessa region, a warehouse partly leased by the company to store frozen MHP's chicken meat products was completely destroyed, resulting in the loss of poultry products worth over US$8 million dollars mhp's employees fortunately were not injured moreover the company provided comprehensive medical and psychological assistance to its employees at the date of the publication all our production facilities in ukraine continue to operate at close to full capacity when you look at our financial result for the first quarter you can see the group's revenue decreased by four percent and reach approximately $720 million, with export revenue representing 63% of total revenue. Adjusted EBITDA remained stable and constituted $119 million, with EBITDA margin of 17%. War-related expenses increased by 67% year-on-year and constituted around $10 million. Let's move to slide number six. where you can see the financial results by segment. Main contribution to MHP's financial results in the first quarter of 2021 were paltry and related operations. The group generated the majority of total revenue, about 55%, as you can see, and 72% of the company's EBITDA, and the European operating segment, generating 19% of total revenue and contributing 15% to the company's EBITDA. Let us have a closer look at each business segment, and I would like to pass my word to Victoria here.

Thank you, Anastasia. Good afternoon, everyone. Let's have a precise look at poultry and related operations segment performance. Slide number seven. Despite of numbers of difficulties due to the war in Ukraine, MHP delivered a good result in Q1 thanks to the combination of market environment and enormous amount of work undertaken by MHP team. Paltry price in Q1 both on export and domestic market remain almost at the same level as Q4 2023. We don't expect further growth in poultry prices in this year. Commodity price risk is a common risk for MHP. In order to mitigate this risk, MHP continues to implement a culinary strategy and focus more and more on production and sales of non-commodity products, which are ready to eat and ready to cook. At the same time, it requires substantial effort from our team, investment in CapEx, as well as expenses to launch new products and increase our share on the local market. This trend will continue in the near future. In Q1, we continue to concentrate on selling processed meat with a focus on the most marginal products. Our strong result of Q1 mainly driven by higher sales volume of poultry meat on export market and by positive effect of revolution biological assets and agricultural produce accordingly to IFRS 41 standard. A few words about new segment. Vegetable oil, slide number 8. In vegetable oil operation, in Q1, we had low ABDA compared to the same period last year. This increase in the volume of vegetable oil sold sector did not manage to sufficiently mitigate a decline in vegetable oil prices. In Q4, 2023, and Q1, this year's sunflower oil prices trend was negative, which led to decrease of our oil crushing margin. We assume that the margin of the segments this year will remain at the level in Q1. Let's move to the slide number 9, agricultural operations. Segmentary revenue in Q1 amounts to $69 million compared to the $77 million last year. The decrease was mainly attributable to low volumes of corn sales on domestic market. EBITDA of agricultural operations segment, net of FRS 16, was 17 million compared to the 3 million last year. This result was mainly due to significant negative evaluation of winter crops in fields in Q1 2023. Adversely affected both of 41 standard and EBDA. In Q1 this year, certain stabilization of price had no significant positive impact of total hour EBITDA. Let's proceed to the slide number 10. Several words about European operating segment. EBITDA of operating segment in Q1 amount 18 million dollars and remained almost stable compared to the last year. The increase in revenue was offset by a decrease in 41 standard. Slide 11. A few words about our cash flow and liquidity position. Cash flow from operations before change in working capital this year slightly decreased to $90 million compared to $98 million last year. Release of working capital amount to $12 million, mostly due to the higher trade accounts payable and other liabilities, as a result of procurement of material for spring sowing campaigns, such as energy, fertilizer, plant protection material, animal feed components, and other. Total complex. in Q1 amount almost 60 million, and mainly related to maintenance and modernization project, construction of bioenergy production facility, investment in cost optimization and culinary strategy project, and expansion and improvement of Pirutni-Naptui production facility. Regarding that, At the end of the period, company total debt was $1.5 billion and net debt about $1.1 billion. At the beginning of 2024, MHP completed its second tender for repurchase of bond 2024 in amount $138 million. The last tranche from IFIs in total amount of 180 million were received in May this year. On 10 of May, MHP Eurobonds 2024 was fully repaid. The company completely fulfilled its obligation regarding MHP Eurobonds 2024. The liquidity position at the end of the first quarter was 390 million in cash, 218 million of which was held by group subsidies outside Ukraine, as today we have around 300 million in cash, including only 130 million outside in Ukraine. Given current operational 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.