MHP SE

Ladies and gentlemen, thank you for standing by. And I'd like to welcome you to MHP's Q2 and six months 2025 results conference call on the 12th of September, 2025. At this time, all participant lines are in listen-only mode. The format of the call today is a presentation which will be followed by a question and answer session. So without further ado, I'd like to pass the line to Anastasia Sobotchuk, Director of Investor Relations. Please go ahead.

Thank you very much. Dear stakeholders, good day to you. Thank you for joining us for MHP's conference call dedicated to our second quote in semi-annual results. My name is Anastasia. I'm IR Director. I'm joined today by Victoria Kapelushna, Chief Financial Officer of MHP. Together, we will present and discuss the company's financial and operational performance for the reporting period. Please note that today's discussion is based on the press release, investor presentation, and financial statements. released earlier today. In addition, during our discussion, we will share our outlook and strategic plans, which reflects current assumptions as well as domestic and international market trends. We kindly ask you to take this context into account during the call. We move to the slide number three of the presentation. A few words, first of all, about macroenvironment in the first half of 2025. Despite challenging environment, including ongoing missile attacks and critical infrastructure, Ukraine's economy demonstrated notable resilience in the first half of the year. According to official data, Ukraine's real GDP grew by an estimated 1.3-1.5% year-on-year, driven by recovery in industry and construction, but constrained by war-related disruptions, energy shortages and labor challenges. Looking ahead, the National Bank of Ukraine projects further recovery with GDP expected to grow by approximately 2% this year. Inflation trends have also shown some moderation. The central bank currently forecast anticipated inflation for the full year to reach approximately 10%. Since October 3, 2023, the National Bank has adopted a managed exchange rate regime introducing more flexibility into the foreign exchange market, which remains in place today. The exchange rate remains highly sensitive to global geopolitical developments, including shifts in international trade and tariff policies. In 2025, Ukraine is expected to harvest over 23 million hectares of agricultural land, with roughly half allocated to grain crops and nearly 40% to oilseeds. Recent public forecasts suggest that after 2024 harvest of about 71 to 75 million tons of grains and oilseeds, Ukraine's 2025 harvest is likely to decline modestly under many scenarios, mainly projecting 73 to 74 million tons. Though more optimistic outlook see potential to reach 83 million tons if conditions improve. In summary, all these macro indicators collectively highlight both the resilience and the potential of Ukraine's economy as it continues to navigate complex and evolving environment. Let's move on slide number four of the presentation. So returning now to our financial performance for the first half of 2025, the main points are following. Revenue growth around 1.6 billion US dollars with 10% increase year on year. We have stronger performance in poultry, agriculture and European segments through revenue growth in both Q2 and six months 2025, offsetting the decline in vegetable oil sales Vegetable oil weakness continued. This segment continued to underperform, dragging down profitability, but its impact was offset by growth in other core segments, as mentioned. Growth profit stability, approximately $368 million in the first half of 2025. While vegetable oil margins declined, this was largely balanced by stable or improved results in poultry and agriculture. resulting in broadly stable Q2 or slightly lower six-month gross profit. EBITDA and operating profit decline. EBITDA, a net of FRS-16 decreased by 11% to approximately $236 million, and operating profit decreased by 29% to $136 million, mainly due to higher payroll related SG&A expenses increased depreciation and additional war-related costs. Net profit growth despite operational decline. Net profit increased in both periods by 67% to US$75 million in the first half of 2025 thanks to foreign exchange gain, reserving a significant FX loss in the prior year caused by grivna depreciation. Let's move to slide number five of the presentation. Here we have financial results by segment. And in the first half of 2025, the poultry and related operations segments remained the largest contributor to the company's performance, accounting for 55% of total revenue and 70% of total EBITDA. This was primarily driven by an increase in poultry prices. Main trigger for adjusted EBITDA in six months 2025 were actually triggers. We have a few. The growth in policy prices, however, partially affected by higher production costs and lower sales volumes for exports. Significantly higher production cost of sunflower oil driven by higher prices of sunflower and increased SG&A costs. Let us now take a closer look at the performance of each business segment. And I pass my word to Victoria.

Thank you, Anastasia. Good afternoon, everyone. Let's have a look at poultry and related operations segment performance, slide number six. Despite ongoing challenges of the war in Ukraine, MHP delivered strong performance in Q2 and H1 2025 exceeding results of the same period last year. This was driven by stronger poultry and processed meat prices together with effective cost management demonstrating the company's resilience and efficiency in operations. Poultry costs continue to increase in H1 primarily due to the higher grain prices and regular salary review, and it is market-adjusted in spring. Looking ahead, we expect additional pressure from energy, payroll expenses, and broader inflation impact on production inputs in Ukraine. Faulty prices continue to rise in Q2 and H1, both on export and domestic markets, up 16% year-on-year, compensating growth of poultry production costs. Volatility in commodity prices remains a key challenge for MHP. To mitigate this impact, MHP strategically continues growing its share of non-commodity products, both in Ukraine and export markets. In H1, we further prioritized sale of processed meat products with a focus on delivering the strongest returns. If you worked about our vegetable oil segment, slide number seven, performance in the segment remained weak with revenue decrease in Q2 by 13% year-on-year and 12% quarter-on-quarter driven by substantial decrease in sunflower oil sales year-on-year. EBDA for both H1 and Q2 declined year-on-year. However, results stabilized quarter-on-quarter, supposed by slightly better margin. To mitigate negative effect on group result, we have already adjusted our fodder receipt, shifting substantially from sunflower to soy cake. This result in higher soybean oil output. while sunflower oil production continued decreasing correspondingly. This pressure in profitability mainly reflected higher sunflower and soybean prices, which are not fully offset by oil prices changes. This was driven by a low harvest year in 2024 and increased number of crushing capacity in Ukraine. As a result, we expect this segment to deliver low profitability this year. Let's move to slide number eight, agricultural operations. Slightly higher segment revenue in H1 was a result from increased prices partially offset by the lower volume of grains sold to external customers from the last year harvest. ABD of agricultural operations segment remained almost unexchanged. The result was mainly the offset of high prices with mixed yields and slightly increased production costs. Spring crops harvesting has already started and is progressing well. As of today, we anticipate the yield of spring crops to be comparable to the last year. I would like to mention that only harvest of wheat was higher, over the seven tons per hectare, while the yield was slightly lower than prior year with 3.3 tons per hectare. 2025 harvest is expected to be between 1.2 and 2.1 million tons of crops. Let's proceed to slide number nine. several words about European operating segment. EVD of European operating segment was broadly stable year-on-year in both in H1 and Q2, however improved compared to the previous quarter. This growth was supported by higher sales of poultry meat in Slovenia, in Croatia as well, and other export markets. along with modest price increasing in Q2. Slide number 10, a few words about cash flow and liquidity position. Cash from operations before changes in working capital amount 180 million in H1 and 80 million in Q2, broadly in line with last year. Investment in working capital amount 19 million during the first half of the year, pretty stable year on year, primarily due to the increase in trade account receivables driven by high mint prices and changing inventories, agricultural produce and biological assets were largely seasonal and tended to offset each other. CAPEX. $134 million in H1 remained stable year-on-year and was directed to several key areas, including extensive maintenance and modernization of existing facilities, plus cost optimization project, also expansion and improving of Pyrut-Ninabtu production facility, and construction of new bioenergy production facilities. As you already know, on 31st of July, subsequent to the reporting date, the group finalized the acquisition on 92% of the shares capital of UESA Group, one of the leading Spanish producers of poultry meat and animal feed. The total consideration for the transaction amount of 171 million euros Approximately 70% of this amount was financed through that facility from private European banks, while the remainder was funded from the group on resources. Uvesa Group is one of the leaders in the food industry in Spain and one of the leading poultry producers in Spain. The group operates in four feed mills, one hatchery, and four poultry slaughterhouse and two pork farms. Besides the 2024 result, the group produced over 150,000 tons of poultry and over 70,000 tons of pork generate over 600 million euro of revenue. Regarding debt position, At the end of the period, the company's total debt was nearly $1.7 billion and net debt about $1.2 billion. The liquidity position at the end was $330 million in cash, $154 million of which was held by the group subsidiary outside Ukraine. As of June 2025, Group's leverage ratio was 2.3. Regarding 550 million notes due in April 26, this is a top priority for us, and we fully understand its importance to investors. As of 30 June, They have not been reclassified from long-term to short-term debt. There have been no material changes in Ukrainian capital control or liquidity regulation, which requires that foreign currency proceeds from exports originated in Ukraine be repatriated with 120-180 days. This in practice limit our ability to use offshore cash for debt repayment. While MHP can service its existing loan portfolio and bonds from Ukraine, principal repayment from offshore remain restricted. We continue to operate under uncertainties and challenges due to the ongoing war. With the node's maturity in approximately seven months, we are actively evaluating all available options and remain confident in our ability to implement an effective repayment strategy. We certainly appreciate the support from our investors since February 2022, and look forward to continue our constructive cooperation. And now I give the floor to Anastasia.

Thank you, Victoria. Let me conclude the presentation before we start our Q&A session. Despite the highly uncertain and volatile operating environment marked by ongoing war in Ukraine, fluctuating export market conditions for poultry, instability in grain and vegetable oil prices, MHP continues to demonstrate operational resilience. The company not only sustains core business activities under persistent disruptions, but also pursues strategic growth as reflected in the acquisition of Uvesa Group. As the company approaches the Bonn 2026 refinancing milestone, It remains focused on prudent financial management even as capital controls by the NBU remain unchanged. In the landscape lacking clarity on ceasefire or peace negotiations, MHP adapts, innovates and positions itself to navigate near-term headwinds while building for long-term strengths. Let us take your questions now, dear stakeholders. Thank you. Operator?

Thank you very much. We'll now be moving to the Q&A part of the call. If you'd like to ask a question, please press star two on your phone. That is star two. And if you're connected from the web, you can also ask a voice question. We'll wait a few moments for the questions to come in. Okay, so our first question is from Stella Cridge from Barclays. Your line is now open. Please go ahead.

Hi there. Afternoon. Many thanks for all the updates there. If it would be possible to ask two areas, please. The first is on the Spanish acquisition. Thanks for the detail on the financing of that. Could you just give us an idea of what the maturity profile would be of the debt associated with that and what your pro forma leverage would roughly be post the acquisition? That would be great. And the second, thanks for obviously running through the thoughts on the 2026 bonds. I was just wondering what your options may be available. Would you consider a full extension of the bond into new maturity? Could it be part cash, part extension, or maybe some new funding? Just to get a sense of what the options may be in practice. That would be great, please.

Thank you for your question. Regarding our debt portfolio after acquisition, as I told during the presentation, Our acquisition cost of our acquisition is 271 million euros, approximately more than 300 million dollars. We attract for this acquisition finance is a debt from private European bank, around 200 million euros, long-term debt. And after this acquisition, our current position, our leverage approximately 2.7, 2.7, current our leverage position. Regarding, together with, if you calculate, together with EBD of U.S., consolidated U.S. and consolidated debt of U.S. Regarding the second question about options for 2026, you know that during all our history, Yeah, we have never done any restructuring, even in 2014. At that time, we, MHP, was only one institution from Ukraine who repaid Eurobonds. And for the market approach, the issue, new Eurobonds, and from this money, repaid previous Eurobonds. But, yeah, nobody knows. if market allowed to us to do it. Unfortunately, just two months ago, three months ago, we thought that it would be maybe realistic, a chance of that to be estimated 10, 20%. Now we believe in some miracles, maybe something changes on the market, and first of all, this war in Ukraine, and maybe market will allow to us issue Maybe we will be very happy with this. But if not, we are considering different possibility and we understand that maybe MHP one of the most reliable partners for all creditors in Ukraine, outside in Ukraine. And I think that, I suppose that we can achieve some compromise anyway. Thank you.

Thanks very much for the answers. I appreciate it.

Thank you very much. Our next question is from Erica Ive from MetLife Investments. Your line is now open. Please go ahead.

Hello. Thank you for taking my questions. I got a couple only about Uwe's acquisitions. Could you indicate how much EBITDA do you expect from the company? And in terms of a notice you put aside, 43 million of funds in short-term deposits to secure bank guarantees. These funds have been released in July. Could you provide, please, for some color?

I think you have a question about this. As I told that revenue of U.S. approximately 600 million euro, and BDA approximately 50 million euro. Regarding RID, yes, you're completely right. It was released. Thank you.

Thank you very much.

Thank you. Just a reminder, if you'd like to ask a question, it's star 2 on your phone, and you can also ask a voice question from the web. Our next question is from Dmitry Ivanov from JFS International. Your line is now open.

Please go ahead. Hello, Victoria. Can you hear me?

We can hear you.

Thank you very much for the presentation. Just a few questions from my side, if I may. Just apologies again for this Spanish asset acquisition. But just to confirm, apart from this €200 million acquisition-related debt that you attracted to finance the deal, does the asset have another separate debt, like working capital, term loans, facilities, or we are talking about only €200 million acquisition debt that you will assume as a part of this acquisition? Just to confirm this number, if I may.

Sorry, maybe we did not catch regarding acquisition.

Does the asset have other debt? Does the asset have debt on the balance sheet?

In debt and balance sheet in the U.S., around $60 million.

$60 million debt on the balance sheet of the U.S., basically. Yeah. So basically, you would... It will be like 200.

Yeah, and 60 million, yeah.

Okay, okay, okay, got it. And are there any kind of contingent deferred payments for this asset or you already like 270 equity?

No, no, no, because as I told you about, no, no, no, no. As I told you about 92%.

of this company. 92%. Okay, got it. Thank you. And can you also share with us like the latest cash position after the acquisition? So basically you disclosed like $330 million as of June end. What is the latest cash position after the acquisition?

Yeah, now our current position of cash around $300 million. $300 million after you made this... Yeah, current position after acquisition because now in September... Yeah, we closed our deal by the end of July. Our current position is around $300 million.

Got it. And how much of it is approximately?

But at the same time, what I would like to emphasize is very important. With current situation, it's the minimum cash which we must have in our account due to current situation. It's minimum $200 million is our current position. policy is very important.

Okay, got it. So minimum required is 200. So 200 minimum, 300 the current after the acquisition basically. And just finally to confirm, 2.7 net leverage is pro forma expected by the end of the year with the asset fully consolidated, right? So just what you mentioned, 2.7 pro forma net leverage.

Approximately, yeah. Approximately. Maybe 1.75, yeah, approximately, yeah.

Okay, got it. Okay, thank you very much.

Thank you. Our next question is from Nandini from JP Morgan. Your line is now open. Please go ahead.

Hi, thanks for taking my questions. I have three right now. So the first one is the debt which is raised at for the funding. Could you please provide like the cost of this debt? And are there any amortization payments, or do you expect it to be a voluntary payment?

The question about the condition of our acquisition finance, yeah? Yes, that's right. Yeah. Yeah, it is a loan for seven years. It's a two-year grace period.

Two-year grace period.

And during the seven years.

And after two-year grace period, what's the annual amortization?

Yes, with quota, yeah, with quota amortization. Yeah, after two years. After two years grace period, quota amortization.

Okay, 25% per year. Thank you. Sorry, if I could go to my question, next question on that. What is the cost of this debt?

No, sorry, it is commercial. Yeah, believe me, it's very attractive. Yeah, it's very attractive.

Understood. Also, could you please provide the full year EBITDA guidance now that we are halfway through the operation?

Yeah, based on the current situation, yeah, because you understand, yeah, we hope that everything would be good. For full year, $550, $570 million, together with U.S.A.

Together with U.S.A. for six months, I think. Got it. And what is the full year CAPEX guidance?

CAPEX guidance without U.S.A., without our acquisition, approximately $280,000. 280 including U.S.A.

Got it.

My last question.

Excluding U.S.A. Okay. And my last question is about the European operating segment. Can you please remind what's the net debt at this entity and how much more additional debt capacity that entity has currently? Okay.

You understand that we attract our acquisition finance for a European segment of our European company and current our position of net debt of Pirutnina around 380 million.

380 is the net debt. Got it. Do the loan covenants allow you to take additional debt over there?

Yeah, because it is current Covenant USA because Pirutnina bought USA and our current Covenant 2.9. Not Covenant, our current net debt ratio 2.9 is very close to the maximum. Okay.

Thank you.

Thank you. Just a reminder, if you have a voice question, it's star two on the phone. And you can also ask a voice question if you're connected from the web. With a few more moments. Okay, looks like we have no further voice questions. Anastasia, do you have any final comments?

Thank you very much. Thank you for assisting us. Dear stakeholders, I can see that there are a few more questions in the chat.

If you don't mind... If you don't mind... If you don't mind...

Can you hear me, Luis?

Yes, I can hear you. There was some background noise.

Thank you very much. If you don't mind, if you have any questions and if you can share those questions with me by email, please forward those questions directly. Thank you very much. And with many of you, I think we will see next week at the JP Morgan conference. Thank you. Bye-bye.

That concludes the call for today. Thank you and have a nice day.