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.