MHP SE

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's fourth quarter and 12-month 2024 results conference call on the 28th of April, 2025. At this time, all participant lines are in listen-only mode. The format of the call today will be a presentation and a question-and-answer session. So, without further ado, I would like to pass the line to Anastasia Sobocik. Please go ahead, ma'am.

Thank you very much. Dear stakeholders, good afternoon and good morning. Thank you for joining us today at MHP's conference call dedicated to the fourth quarter and 2024 full year results. I'm Anastasia Sobotyuk, Director of Investor Relations, ESG Compliance and Reporting. Together with CFO of MHP, Victoria Kapelushina, we will discuss MHP's financial and operational results as well as current operational environment and expectations in 2025, taking into account that the war in Ukraine continues. 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 and projections. Please take it into account. We go on slide number four, sorry, three of the presentation. A few words about macroenvironment. First of all, an update about the war as well. The war in Ukraine with intensive fighting in the south and east of the country and irregular but frequent severe and devastating rocket and drone attacks against civilian infrastructure across Ukraine continues. The bombing campaign shows no sign of abating, unfortunately. I am sure we all follow the same news regarding ceasefire talks, which have intensified since January 2025. However, as of today, Ukraine and Ukrainians are still awaiting for ceasefire and peace as soon as possible and hope it will be with us soon. Macroeconomic situation. Taking into account that many businesses have adjusted to the war operation environment, which remains unpredictably volatile, in 2024 GDP growth was at around 3%. Forecast GDP growth in 2025 is expected to be around 4%. CPI. In 2024, Ukraine experienced a significant rise in inflation, with the annual consumer price index, CPI, reaching 12% by December, up from 11% in November 2024. This marked a notable increase from 5% in 2023 and almost 27% in 2022. The main drivers of inflation were food and energy costs. Looking ahead, the NBU project inflation decreased to 8% by the end of 2025, and returned to the 5% target in 2026, contingent on improved agricultural yields, energy sector stabilization, and continued international financial support. Effects. Starting from October 2023, the National Bank has been implementing managed exchange rate flexibility. MX rate is highly volatile. Let me now proceed with the company results, and we go on slide number four of the presentation. Q4 2024 results in revenue, as you can see from this table, were stronger year-on-year, mainly driven by strong performance of poultry, agricultural operations, and operations of protein and toys. Revenue increased by 8% year-on-year and reached around 785 million US dollars. Q4 2024 adjusted EBITDA increased by 11% to 129 million US dollars with stable EBITDA margin at 16%. 2024 revenue remained stable year-on-year since decrease in vegetable oil was upset by improved performance in agriculture and European operations and resulted in over 3 billion US dollars. Adjusted EBITDA increased by 27% to 566 million US dollars with EBITDA margin increased to 19% from 15% in 2023. Let's move to the slide number five, financial results by segment. As you can see from the slide and from the table, the biggest contributor to the company's revenue in 2024 was poultry and related operation segment, 54%, while the biggest contributor to EBITDA in 2024 was agricultural segment. as a result of significant increase in grain prices in Ukraine and their alignment with international prices. As you can see from the diagram on the right, adjusted EBITDA in 2024 was by 27% higher, which is actually around $120 million higher than in 2023, driven by a number of positive drivers, such as grain prices, That was a significant impact. Paltry meat price increased, export market predominantly, and increased sales volumes at Pyrot-Naptuy, following its growth strategy. At the same time, there was a number of adverse impacts, which negatively affected 2024 financial results, amongst which were increased production costs for paltry meat, lower sales volumes in Ukraine and for export, higher payroll, and war-related expenses. Let us have a close look at each business segment. Here I pass my word to Victoria.

Thank you, Anastasia. Good afternoon, everyone. Let's have a precise look at blockchain-related operations segment performance slide number six. Despite challenges of the war in Ukraine, MHP performed good results in Q4 last year, which are lower than Q3, mainly due to the stable poultry price and increase in cost. Poultry cost in Q4 increased compared to the Q3 last year, mainly due to the significantly higher corn price and gas. This is a further upward trend in costs in the first half of 2025. However, increase in corn prices gave a positive effect on our agriculture segment results. Ultra prices in Q4, both on export and domestic markets, remain almost at the same level as in Q3. Commodity price risk is a common challenge for MHP. To mitigate this, MHP is focusing on production and sales of non-commodity products. This requires significant efforts from our team and investments to launch new products and grow our market share. We managed to increase in 2024 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 EVDA. We will continue to concentrate on selling non-commodity product with a focus on most marginal. A few words about our vegetable oil segment, slide number seven. In Q4 last year, our ABD for the vegetable oil operation decreased compared to the Q3, as well as compared to the 2023. The decline in vegetable oil result compared to the last year was primarily due to the high sunflower and soybean price and low oil prices. Last year, oil prices experienced a downward trend, while sunflower price increase resulting in reducing oil crushing margin. This was caused by low yields and increased crushing production capacity in Ukraine. We assume that the margin of this segment this year will decline further. Let's move to slide number eight, agriculture operations. In 2024, MHP harvested around 345,000 hectares of land in Ukraine and gathered around 2.1 million tons of crops, lower than last 2023, mainly driven by low corn and soy use, and lower use of crops was due to unfavorable weather conditions. However, starting from September last year, There has been significant increase in grain sizes, which has increased our profit per one hectare. Grain size increased by 25% winter crops and around 50% spring crops. Segment revenue last year amounted to $381 million compared to the $227 million. The increase was mainly attributable to increasing both sales volume and price grains sold to external customers. EBITDA of agricultural operations segment, net OFRS 16, in 2024 was $264 million compared to $6 million previous year. This result was primarily driven by significant high grain and oilseed prices, but also offset by lower yields. Let's refer to the slide number nine, several words about European operating segment. Last year, poultry meat sales of European operating segment increased by 11% to 60,000 tons. Process meat product sales were up by 4% to 49,000 tons. EBD of European operating segment last year remained almost at the same level. EBD decline in first quarter was driven mainly by one-off expenses related to previous quarters. Slide number 10, a few words about our cash flow and liquidity positions. Cash from operations before changes in working capital decreased to $343 million compared to the $377 million in 2023. Investment in working capital amounted to almost $100 million last year. This was mainly due to purchasing of corn, sunflower and soybean from Saudi parties for both internal consumption and trading purposes, secondly, increase in advance to supply for energy resources, and also high investment in breeder and brawlers due to the rising cost of production, and also a growth in recoverable VAT. Total COPEX last year amounted to $290 million, making a significant increase compared to 2023. This rise primarily driven by extensive maintenance and modernization of existing facilities, construction of new bioenergy production facilities, investment in cost optimization and culinary strategy projects, inspection and improvement of Pirutnina production facilities. During the 2024, company made several acquisitions and investments in amount $29 million. They are related mainly to acquired grain storage facilities in Croatia and also meat processing plant in Ukraine. In line with our expectation strategy in the EU market, during the March-April this year, the group entered into a share purchase agreement with a holder representing around 92% of the shares capital of Spanish group Uvesa. Representing equity value of approximately $270 million, enterprises value will be disclosed close to the deal closing date. The completion of this transaction is subject to obtain regulatory approvals, including merger control and foreign subsidies clearance by European Commission. Uefa Group is one of the leaders in food industry in Spain, thanks to its poultry, pig and sheep manufacturing areas. one of the largest producers of chicken in Spain with 15% market share in Vopio. The company's chicken production is about 150,000 tons and pork 70,000 tons annually. Revenue is approximately 600 million euros per year. MHP currently expects to finance a substantial part of transactions by acquisition financing from commercial banks, and with its own funds. Regarding debt, at the end of the period, the company total debt was nearly $1.7 billion, and net debt about $1.2 billion. The liquidity position at the end of Q4 was $350 million in cash, around... 70% of which was held by group subsidies outside Ukraine. As of December 31, 2024, the group's leverage ratio decreased to 20.8, below the defined limit of 3, compared to the 2.5 by the end of 2023. With regard to 2026 bonds, this is our crucial item on our agenda, and we understand importance for investors. Ukrainian capital control and regulatory set out by the National Bank of Ukraine dictates that foreign currency proceeds generate from exports, but originated in Ukraine, must be brought back to Ukraine with specific timeframes, 120, 180 days, which in principle limits our ability to utilize the short cash for debt repayment. MHP is capable of servicing of existing loan portfolio and bond from Ukraine. repayment of principal remained prohibited by the National Bank of Ukraine. We would also like to highlight, however, the uncertainties and difficulties in the operating environment that MHP continues to face amidst the ongoing war. We are mindful of the fact that that the nodes are maturing in approximately 12 months from now and we will intend of fundraising the maturity appropriated in due courses. Once again, we are very grateful for all the support extended to us by investors since 24th of February 2022 and are keen to continue our fruit field cooperation going forward. And now, I give the floor to Anastasia to update and outlook.

Thank you very much, Victoria. Let me actually conclude the presentation because you've provided our stakeholders with lots of interesting and detailed information. I think we are ready for discussion and of course questions. Thank you very much for cooperation in advance. We are ready for your questions.

Thank you very much for this presentation. We'll now move to the question and answer section of the call. If you would like to ask a question and you're connected via the telephone, please press Start To on your phone and wait for your name to be prompted. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question We'll just wait a moment or two for the questions to come in. Okay. We see our first voice question from Stella from Barclays. Please go ahead. Your line is now open.

Hi there, everyone. Many thanks for all the updates today. I was wondering if I could ask on a couple of areas. The first was on the Spain acquisition. Could you just talk a little bit more about why you find this acquisition interesting, what your plans would be for that business? It would be great to get the EBITDA for that business if you had it in addition to the revenue. And then on the financing, so of course you said the volume would be disclosed towards closing. Do you have an idea at this stage about how much debt you would be looking to raise and how much you would be contributing out of own funds? That would be great. That's my first question, please.

Yeah, thank you for your question. Yeah, thank you for your question. Why is it so interesting to provide this conversation in Europe? Because we have very good trade records. Because just five years ago, we bought Pirutnina. Yeah, it's a leader in the Balkan region. And only five years ago, when we bought Pirutnina, Pirutnina was a company with approximately... 350 revenue and around less than 40 million euro every day. And today we have the company, and Perutnino today is a company which increased almost, regarding every day, almost in three times. Today Perutnino generate, last year generate more than 95, around 95 million euro every day. And we understand that... We understand how to improve and how to provide growth in Europe, not just in Ukraine. It's a question regarding why it's so interesting to buy. Regarding financing this transaction, as I told you during the presentation, now we attract acquisition finance from European banks. and we try and we will finance this transaction mostly yeah the biggest part we are financing from acquisition financing clone as i think to tell our enterprises value and we will disclose all information about this company when we will close our deal because now we in process we are continuing to wait some provisions, romantic trust, and with the European Commission. Thank you.

Thank you for that. That's much appreciated. If I could also just ask on the current business as well, could you talk a little bit just about the financial cash flow outlook for next year? You obviously mentioned that the oil segment is going to be a bit weaker. What's your expectation in the grain segment and also for poultry in Ukraine? That would be great. And do you have a number in mind for CAPEX at this stage as well, please?

Thank you for the question. You know that we always try to be very conservative at the beginning of the year and completely the same we did during all our history. Last year, I remember that we told that our last year, the same period of last year, we talked about our BDA for 2024. It seems to me we told that our BDA maybe would be 450, but as you see from our presentation from our financial report, last year we generated more than $550 million. Now, based on our budget, based on current trade, our expectation for next year is around 500 million euros. Oh, dollars, sorry, dollars. But anyway, we try always to be very conservative. Our CAPEX for next year is approximately 220, 240, because it mostly consists of maintenance CAPEX.

Yeah.

Then to expect the positive cash flow, yeah.

Thank you.

Did you say 300 for EBITDA, 3-0-0? No, no, no, 500, 500. Oh, 500, okay. Around 500, yeah.

Okay, thank you so much. Okay, thanks for answering the questions. I appreciate that.

Okay, thank you. Thank you very much. So we'll be now moving to the next voice question from Brittany Vera from Goldman Sachs. Please go ahead. Your line is now open.

Hi, congrats on the results and thanks for the information. I just wanted to ask a little bit more about the U.S. acquisition. Where this asset will lie and will it be part of the bond coverage? If not, then is there a plan to use money from the Ukrainian entity to sort of fund this acquisition? Thank you.

As I told previously, when we close the deal, we will present more detail. We will present more information about you. Yes, I'm hot now. We're in process. Yes. And I told you this company is one of the biggest players of the chicken and Spanish market. We are trading around 600 million euros. And yes, we will finance this transaction from acquisition finances, not from Ukraine. Because as you know that we have some prohibited and we cannot pay any dividends from Ukraine and we have the various capital control. That is why we will attract the special financing for this transaction.

Thank you. And maybe just one more question on the poultry business. I saw that the margins in terms of like the cash EBITDA, which is excluding the effect of the IAS adjustment. But excluding that, it seems like, you know, margins have declined for poultry business. 2025, do you see any impact of the TATF war ongoing? Will that have like a positive or a negative impact for poultry in Europe?

You're question about the damage in poultry in European, our segment. And you asked me, European segment, yeah?

It's a separate segment in our financial world. Yes, European segment as well as like the export that happens from Ukraine.

European segment, it is not, it is our businesses in Balkan region, is the Peruvian businesses. And our expectations that EBITDA margin will be remained. Yeah, I told that in first quarter we have the one-off, yeah, one-one expenses. And generally, we expect that EBITDA margin in European, our segment, will remain at the same level as the fall of 2022. Regarding export, yeah, from Ukraine, it is inclusive business, including our segment poultry and related operations. our quantity, we expect that the BD margin will remain at the same level.

Thank you.

Thank you.

Okay, thank you very much. We are now moving to the next question from Dmitry Ivanov from JFS International. Please go ahead. Your line is now open.

Thank you very much. Can you hear me? Yes, thank you for the presentation. I have a few questions, if I may. Maybe the first question on your leverage. You already shared guidance on EBITDA with us, like 500 million. So basically there will be some decrease in EBITDA, so like and I'm trying to understand like your current leverage is 2.1 and given like you expect to acquire like WESA which also will add some leverage so I'm just trying to understand how do you see your net leverage developing in 2025 given like reduction in EBITDA from the existing business and additional debt which will be acquired through this acquisition of So should we expect net leverage to go to 3, 3.5? So any color on your leverage in 2025 would be much appreciated. So my first question, basically.

Based on our current forecast about EBITDA for 2025, around 500 million, and together with acquisition, we expect that our leverage will be around 2.7, 2.8.

2.7, 2.8, okay, okay.

Yeah, okay.

And in terms of the timeline, so you mentioned, like, you are waiting for something like approvals to go ahead with acquisition. And should we expect, like, Q3, Q4? What kind of timeline are you expecting for this transaction? Yeah, yeah, it's very –

Yeah, it's a very good question. But anyway, our expectation, it would be maybe in the second half of the year. Maybe we expect that maybe it would happen in the Q3, but we cannot guarantee. Maybe in Q4, yeah.

So this, like, number 2.7, that's, like, yeah.

Together, it is a pro forma together with this acquisition. And this acquisition happened in the second half of the year.

That's very helpful. That's very helpful. This is pro forma 2.7, 2.8. My second question basically on working capital dynamic, and you already provided some color on the kind of factors behind some increase in working capital in 2024. How should we look at the working capital in 2025? Should we kind of expect a working capital neutral position, some release, build up working capital? So any kind of guidance would be much appreciated on working capital.

In case you have a question, yes, exactly. Last year, unfortunately, we had investment in working capital, and I explained why it was happened. So this year, we don't expect any investment in working capital, and maybe we will provide some action, and maybe we will have some release of working capital.

So neutral or potentially... Neutral or positive, yeah, or maybe, yeah, yeah.

As a conservative approach, yeah, neutral. But we will, yeah, we have some reserves, yeah, even for a risk.

Understood, understood. And if possible, like, could you please remind us about your available crate facilities that are still on drone? and you have, you can use it. I guess this is mainly trade facilities, right? Available. Yeah. Can you just share?

Yeah. Yeah. Okay. For now, yeah, now it is around $200 million.

This is mainly for different working capital, like, items. So, basically, this is not, like, for CapEx.

It's mainly for, like, to find... Some of them, no, no, some, yeah, yeah, some of them for working capital, some of them of CapEx.

Understood. And if possible, can you share like the latest cash balance after December, like the current cash balance?

Current cash balance almost at the same level that we had at the beginning of the year, around $350 million.

Got it. Thank you very much. I appreciate the call.

Thank you. Thank you.

Okay. Thank you very much. We'll be now moving to the next voice question from Erika from MetLife. Please go ahead. Your line is now open.

Good afternoon. Can I ask you, and I don't know if you have already said it, but if so, I haven't really understood. What is the EBITDA that Ubeza generates?

Yeah, as I told previously, we will discover, how to say, no, open this information, yeah, disclose, disclose this information on closing, yeah, on closing date, yeah, because, yeah, it will happen.

Yeah, sorry, yeah, but could you provide at least a range in terms of bidder margins?

EBITDA margin is European companies. Usually European company, EBITDA margin around from 5% until 15%. Yeah, in this framework.

Okay, you said between 5% and 15%. Yeah. Okay, thank you. And in terms of that, the net debt that Invesa is carrying on, do you, could you disclose that or give a sense of it?

Yes, I told, after closing this transaction, when it was happened, we will open all information, disclose all information about this company. But now we in process and transaction, unfortunately, has not finished. Yeah, after that, we will organize maybe even a special conference call or introduce everybody with our new acquisition.

Okay, understood. Thank you.

Thank you.

Thank you very much. Just a reminder before I move to the next question. If you are connected via the telephone and you would like to ask a voice question, please press star 2 on your keypad. If you are connected via the web, you may send us a text question or also ask a voice question. Our next question is a text question from Anna Kucina, T. Rowe Price. Does your CAPEX guidance of $220-240 million include cash component of acquisition purchase price for uVisa?

No, no, no. No, this is our CAPEX, which includes multi-maintenance CAPEX and CAPEX slightly for expansion in Puritino. No, it is not without any cash component, regardless of uVisa.

Okay. I see Anna also wants to ask a voice question. So Anna, your line is now open. Please go ahead.

Thank you very much for the presentation. I just wanted to talk about SALIK, strategic investment into MHP. What progress has been done in Saudi Arabia and maybe you can shed light on some of the priorities or things you are planning to do with SALIC or in Saudi Arabia, or if there is any potential injection or strategic suggestions coming from SALIC for cooperation in Saudi Arabia. Thank you.

Yeah, SALEC now is one of our shareholders today, but right now we don't see any project with SALEC. Now we don't consider any project, any injections from SALEC. Yeah, SALEC are our shareholders. Thank you.

Okay, thank you. Thank you very much. We have next question, a text question from Vicky Chen from Ivo Capital Partners. Could you please disclose the cash at European PP level for the undrawn facilities? What are the maturities? Thank you.

If you're questioning what amount of cash we have in Perutnino, yeah, today it was around $50 million in cash in Perutnino.

Okay, so at this point, we are seeing no further questions. So I would like to pass the line back to MHP team for their closing remarks.

Thank you very much, Rafael. Thank you, dear stakeholders, for all your questions. And please take into account that we remain at your disposal in case you have any further questions or would like to clarify something. Thank you very much and have a lovely day. Bye-bye. Thank you. Thank you. Bye.