Astarta Holding PLC

Good afternoon, ladies and gentlemen. My name is Paweł Wieprzowski, and on behalf of Wooden Company, I would like to very warmly welcome you to the first quarter conference call with a startup management. Today, the company is represented by Viktor Ivanczyk, CEO, Viktor Blavky, CFO, and Yulia Baryshenko, Business Development and IR Director. Now, I'd like to pass the floor to the management board. Gentlemen, the floor is yours.

Thank you very much, Pavel, and thank you everyone who dialed in today's call. Yesterday we published our first quarter results, and we would like to briefly go through them. As it was expected, our revenues for the first quarter are slightly lower compared to the same period of last year. and this is on account of the agricultural performance revenues, which were lower on lower harvest in Ukraine, and specifically for us, this amount is largely explained by lower volume sales of corn. The revenues in the sugar segment were largely flat. We had an improvement in the soybean processing site and flat revenue numbers for the cattle farming. If we look at our EBITDA and cash flow position on a segment basis, we see a lower number for the agricultural segment, again, largely due to the lower harvest of last year. We are testing our remaining stocks. There was a good turnaround of our margin on the sugar side due to higher prices, small uplift on the sodium processing, and a negative number in the cattle farming segment on account of lower revaluation of biological assets. If we strip out the impact of biological assets on our P&M, You can see that our margin largely improved, and this is both on the gross margin and EBITDA level. The bottom line is positive in the first quarter at almost 4 million euros, so we are quite happy with our results. If we go further into looking at our balance sheet position, it has become even stronger. After we recorded higher operating cash flows in this quarter, this allowed us to pay down the debt as we also have a positive cash flow from investing cash flows. This allowed us to lower our net debt position further down to €117 million, which translates into 1.1 net debt EBITDA multiple. Going into more details on the segment side, the results we see in this segmental reporting are largely explained by lower volumes of corn sales and other crops were largely sold before the first quarter of this year. However, we see a much better picture on the pricing side. We will see on a later slide what was the latest development on the pricing side, but one of the surprising pictures we see for many years is when corn prices outstrip wheat prices with the origin in Ukraine. With regards to our this year's harvest, the acreage area did not change significantly. The crop mix is largely stable, safe for the lower acreage under sunflower seeds. And on the other side, we are growing more red seeds. Red seeds is the crop that we introduced for the first time last year. We had encouraging results. Therefore, we increased the acreage. What also should be noted on the crop mix side because of the changing weather patterns in Ukraine, we are expanding our winter crop acreage. So winter wheat and red seeds are the first crops that we are going to harvest this year and in more significant quantities. As I already mentioned, this is a surprising picture. There is a big diversion between the prices for corn and wheat. And this is explained by the appetite, high appetite, one of the key global consumers, China. And there are some weather concerns in other corn producing regions, especially in America. On the sugar side, we have lower sales volume because of the lower sugar beet harvest last year. However, this was largely offset by higher prices. 478 if translated into euros versus 352 last year. And this allowed us to expand our gross profit margin from 14% to 39% and more than double our EBITDA margin to 34%. If we are looking into this year's situation, there is still upward pressure on the sugar prices because of the lower sugar beet harvest in Ukraine and much lower stocks. The government of Ukraine initiated imports of raw sugar cane into the country under WTO quarter. This is something that hasn't happened in Ukraine for a decade. However, given the low availability of the sugar in the market, we consider this move as wise. We were one of the major players who has technical capabilities to process raw cane sugar. So we also started importing and processing sugar cane into white sugar. And for this year, we contracted 60,000 tons. At the same time, we can see that the farmers are increasing acreage under sugar beet. This cannot be increased radically because of the crop rotation requirements. So the increase of acreage is expected to be modest at 5% year on year. On the soybean processing side, we are pleased to present our results. There was a price value for soybean oil. However, the prices for soybean meal, which is the main product of soybean crusher, did not keep pace at the same level as soybeans. So we can see a decrease in our crushing margin, which also translated into a squeeze on the EBITDA side from 13 to 11%. However, we do believe that given the current situation in the market, our margins are quite respectable. Our soybean crafting facilities are one of the most utilized ones in Ukraine. And this is largely due to our own crop growing efforts. We process one-third of total intake of soybeans at our crafting facilities. from our own fields. Also this year, according to the government forecast, there is an expectation of a 5% increase in the acreage under soybeans. So we believe the margins should recover with the wider availability of soybeans in the market. Cattle farming, we can see higher milk production with the same size of herd and this is because we increase the yields to each of our cows. The amount of milk sales volumes are flat but the prices lowered from 370 to 348 euros. This is the situation which is likely explained by the delay between the price growth and the cost base growth on the feed side. Key crops and feedstock prices are growing at a faster pace now than milk prices in Ukraine, but we do believe that the situation with milk prices will catch up with the soft commodity rally. One of the other factors which contributed to the negative number on the biological assets evaluation site is simply of technical nature. This is the structure of our herd. If we have a slightly higher churn within our herd or a slightly higher average age of the herd, The fair value of biological assets is lower because the discount period is shorter. But this is largely of a technical matter, and we believe that six-month results will be more representative of our efforts. With regards to strategy and outlook, we discussed it in more detail just a month ago when we presented our annual results. There is no change here. We continue to focus on our profitability and we would like to maintain our massive share in all the segments. Thank you very much for your attention during the presentation. I'm happy to take your questions.

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