MHP SE

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's third quarter 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 like now to pass the line to Anastasia Sobociuk. Please go ahead, ma'am. Your line is open.

Thank you very much, Rafal. Dear stakeholders, good afternoon and good morning. Thank you for joining us today at MHP's conference call dedicated to the third quarter and nine months results. I'm Anastasia Sobotyuk, Director of Investor Relations. Together with CFO of MHP, Victoria Kapelushna, we will discuss MHP's financial and operational results. as well as current operational environment and expectations for 2024. And of course, going forward, taking into account that war in Ukraine continues. Today's call is based on a press release and financial statements that is 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 are going to slide number three of our presentation. A few words about macroenvironment. First of all, an update about war impact. War continues, but MHP operations and results continue reflecting the resilience and agility of our business model and tremendous efforts of our workforce. Regular and frequent drone and rocket attacks against civilian energy and other infrastructure targets continued and have resulted in a challenging and disruptive operational environment, leading to unforeseen war-related costs. In nine months, 2024, war-related costs and losses amounted to 38 million US dollars. At the date of the publication, all our production facilities in Ukraine continue to operate at close to full capacity and our own facilities have not suffered significant physical damage. We can of course give no assurance that this will remain the case and that our production facilities and the infrastructure that we use will not become a target of new attacks. Microeconomic situation, taking into account that many businesses have been adjusting to new operational environment, which remained unpredictably volatile in 2024 GDP's growth during third quarter this year expected to be at 4%. Harvest this year is expected to be good, a bit lower than last year at approximately 74 million tons. As of today, Ukraine harvested over 90% of the land. Let me now proceed with the company results for the third quarter of the year. We'll go to slide number five. Let me start with operational highlights. Poultry sales decreased, as you can see, by approximately 8% in nine months of 2024, year-on-year. driven mainly by a decrease in volumes of exports. Financial results for the nine months of 2024 were following. Groups revenue remained stable at around 2.3 billion US dollars, with export revenue representing 60% of total revenue. Adjustability increased by 33% to 437 million US dollars. mainly driven by strong and much stronger than expected results in agricultural division. Net debt to LTM EBITDA ratio constituted 2.1. Let's go on slide number six of our presentation with key financials for the third quarter of 2024. So group's revenue increased, as you can see from this diagram, by 5% year-on-year and reached 773 million US dollars. At the same time, driven by strong results in agricultural division and generated by carotene upturi, net profit increased by 75% and reached 173 million US dollars. And adjusted EBITDA increased by 56% to 96 million US dollars. We go on slide number seven of our presentation, which show us the results for nine months by segment. As you can see from this table and the diagrams here, the biggest contributor to overall company's results in poultry and processed meat operation segment, the group generated the majority of total revenue above 53% and 49% of the company's EBITDA with highest EBITDA margin 18% across all businesses. Second biggest contributor to EBITDA was agricultural division 38% with a significant contribution of 164 million US dollars to the group's EBITDA. Outstanding result and a second historical record during the last 10 years. Let us have a close look at each business segment, and here I pass my word to Victoria.

Thank you, Anastasia. Good afternoon, everybody. Let's move to the slide number 10. Sorry. Let's move to the slide number 8. Despite the challenge of the war in Ukraine, MHP performed good results in Q3, which are lower than Q2, mainly due to stable poultry price and increase in cost of production. Poultry price in Q3, both on export and domestic market, remained almost at the same level as in Q2. Poultry costs in Q3 increased compared to the Q2, mainly due to the higher corn and electricity prices. We see further upward trends in costs in Q4 and into 2025. Commodity price risk is a common challenge for MHP. To mitigate this, MHP is focusing on production and sales, not commodity products. This requires a significant effort from our team and investments to launch new products and grow our market share. We managed to increase in nine months this year our volume of non-commodity products by 10% in Ukraine and by 45% on export markets. Total share of non-commodity product in our poultry sales is 20% in volume and 30% in EBDA. We will continue to concentrate on selling non-commodity product with focus on most marginal. A few words about our vegetable oil segment, slide number 9. In Q3, our ABDA for vegetable oil operation was similar to Q2. The decline in vegetable oil result compared to the last year was primarily due to a drop in oil prices. In 2024, we had a negative trend in sunflower oil prices, which lead to decrease of oil crushing margin. We assume that margin of the segment in Q4 will decline further. Let's move slide number 10, agricultural operations. As of today, MHP harvesting campaign is complete on around 345,000 hectares. the land yield for spring crops are lower than in 2023, especially corn, our yield 8.4 ton per hectare. A lower yield of spring crops was due to unforeable weather conditions, severe heat in central region of Ukraine. However, Starting from September 2024, there has been a significant increase in grain prices, which has increased our profit per hectare. Segment revenue in nine months amounted to $176 million compared to $138 million in nine months last year. This increase was mainly attributable to higher sales volume and price of corn on export markets. In the agriculture operations segment, net IFRS 16 in nine months was $164 million compared to $32 million losses last year. This result was driven by higher evaluation of harvest agricultural produce and crops in the field due to the increased grain and oilseeds price partially offset but lower use. Let's go to the slide number 11. Several words about our European operating segment. In nine months, poultry meat sales of European operation segment increased by 9% year to year. Meat processing product sales were up by 4%. EBITDA of European operating segment in Q3 remained almost at the same level. EBITDA growth in 9 months was driven by high sales in Croatia, Bosnia and Serbia due to the strategic focus on these markets. Slide number 12. A few words about our cash flow and liquidity position. Cash flow from operation before change in working capital decreased. $290 million compared to the $315 last year. Investment in working capital amount only $25 million. This was mainly due to the increase in VAT, re-endorsement receivables. Total CAPEX in nine months amount $217. marking a significant increase compared to the last year. The rise is driven by extensive maintenance and modernization of existing facility, construction on new bioenergy production facility, investment in cost optimization and our culinary strategy project, and expansion of Pirutnina production facilities. Regarding debt, at the end of the period, company total debt was $1.5 billion, net debt approximately $1.2 billion. The liquidity position at the end was $327 million in cash, $165 million of which was held by the group subsidiary outside Ukraine. And now I give the floor to Anastasia for Outlook.