Astarta Holding PLC

Good afternoon, ladies and gentlemen. My name is Paweł Wieczorski and I'm meant to welcome you to the third quarter conference call with Startup Management. Today the company is represented by Mr. Wiktor Iwańczyk, CEO, Mr. Wiktor Blaski, CFO, as well as Mrs. Julia Bereszenko, Director for Business Development and Hire. Gentlemen, please go ahead.

Thank you, Paweł. We would like to go quickly through our key results, and we start with discussion of our TMM. On the top line, you can see that we registered an increase in the total revenue, and that was on account of revenue of the sugar, soybean processing, Cattle farming, although in the agriculture there was a dip, which was related to us selling the remains of the last year's harvest, which was a lower number overall for Ukraine and for us. On the profitability side, we can see doubling of our margins on the growth process and EBITDA level. Part of this growth is related to the biological asset revaluation. At the time of issuing our financials, we had our seed crop still in the ground, which is sugar-dead corn. soybeans and sunflower seeds. However, in the agricultural segment, you will also see that we basically harvested the oilseeds, sunflower and soybeans, and we already report our final numbers. This allows us to double our EBITDA from 81 million euros to 189. And if we strip the accounting effect of IF41 of biological assets, we also see our margin widening from 26% to 29% at the EBITDA level. Now, if we switch to the brief overview of our cash flows and balances, Our cash flows, operating cash flows before working capital changes were stable. Same as last year, around 50 million euros. We managed to keep our targets at maintenance level of around 10 million euros. The number which is asterisked in the table, which is a positive number, is a result of us digesting of a few assets related to old sugar plants in the first half of this year. Therefore, this number was positive. Our capex and cash flows allowed us to keep low leverage, which on the net debt to EBITDA level was lower than 1, although our land lease liabilities slightly increased. The financial debt at most events was at the stable level of around 30 million euros. Now, if we go into our segment results, as I just explained, our thumb teeth and soybean We are still registered as biological assets on our account as of nine months. However, we have finished the harvesting the crop, and you can see our final yield of 2.7 for sunflower seeds, and so these are three tons per hectare, which is much higher than last year, and also traditionally higher than the Ukrainian average. We are still in the process of harvesting corn and sugar beets, and we hope that we will report our final numbers later this year. But nine-month results related to the agricultural segment can be seen on the right-hand side of this slide, and it is obviously affected by the cancellation of the biological assets. Slide number six, I'm sure that you follow the soft commodities global development as in detail as we do. We see that the prices remain favorable for us and the temporary situation where corn prices were higher than wheat prices from Ukraine reversed into a more normal situation, and we still see the upside in relation to corn and sunflower, as well as wheat for the next marketing year. In sugar production, as we announced with our six-month results, we will focus on processing sugar, raw cane sugar, which we imported in the amount of 75,000 tons. We produced 73,000 tons of white sugar from raw cane sugar, and this process finished by September, and since Mid-September, we are already producing white sugar from the new harvest of sugar beet, and up to date, the amount is over 152,000 tons. Our financials were affected by the price growth. The average price growth on our revenue line was around 60%. for the key product sugar and that allows us to double our gross profit and EBITDA margins from 17% to 31% and from 15% to 27%. Now looking at the situation in the Ukrainian market, although there was a recent dip in the local prices for sugar in Ukraine, they still remain at a large premium to global benchmark, such as raw sugar and white sugar in London. We expect the harvest of sugar beet to be higher in Ukraine this year. According to public sources, up to 33 sugar mills will be in operation during this season which started in September and the output is forecast at 1.4 million tons, but we also see there might be a potential for a higher number. As of today, the amount of sugar produced by the whole sector was just Soybean processing is the next segment that we saw results for the nine months. Unfortunately, the price rally for soybeans was much higher than the price growth for the seed products soybean meal, 61% versus 27%. And the price growth for soybean oil, which was reaching nearly 1,000 euros per ton, was not sufficient to offset the price growth for raw materials. And that resulted in the margin squeeze, the growth level from 14% to 7%. and a similar squeeze at the EBITDA level for 9.5%. However, we expect a much higher harvest of soybeans in Ukraine this year. As of beginning of November, Ukraine already reported a higher harvested crop on the basis of 90% of the planting area than for entire 12 months of last year. There is a new development in the soybean segment that we have already reported to the market. We included a short slide outlining our investment that we are planning in this area. This is a $50 million plant, which will be an addition to our soybean crushing facilities in Globen of the Poltava region. Currently, the plant produces two key products, which is a meal and oil, and the new line will allow us to fill the process for the meal into higher protein concentrate for food purposes. These new facilities, which will require around two years to build, will allow us to diversify into a higher value added product and also have flexibility between the volumes that we process into the concentrate versus the volume of soybean meal that we are producing now. This facility was started together with a multinational commercial institutions in Ukraine which sponsor detailed technical marketing feasibility studies. The project also falls under the auspices of favorable treatment by Ukraine Invest which is an initiative by the Ukrainian government to give certain tax holidays including on the corporate income tax and duty-free inputs of required equipment. And we are working with the Ukrainian government to make it even a more effective investment from a financial point of view with their assistance. This product is used for Ukraine. It hasn't been produced before. And the biggest market we see for it is in Europe. The feed concentrate can be an addition to the meal for livestock, poultry, and aquaculture. We believe that it has multiple sustainable benefits. If it is used for feeding fish, which is farmed in Europe, It will reduce consumption of fish meal, which is much more favorable for the biodiversity, as well as it has a better calorific value in terms of economic efficiency of aqua farming. Also the byproduct of sodium processing into the concentrate molasses can be used if we blend it with the byproduct of sugar production with our biogas facility, therefore producing green energy for us. The last segment we traditionally discuss is cattle farming. We can see a slightly higher volume of production of milk while the head count of herd remains stable. And this is because we are still focusing on higher productivity of milk production from each cow. which increased from 21 to 22.5 liters per head in the nine months this year compared to last year. And pricing environment for premium quality milk, the one that we produced, also remained favorable to us. What was affecting our results in the nine months was also the cost side fees. Growing costs of seeds, which are affected by the price increases for top commodities, increased our costs, and that resulted in a 2 million euro negative devaluation of the biological assets. But even taking into account this number, which is non-cast in nature, our EBITDA remains stable at 5 million euros. Our strategy and outlook hasn't changed. We regularly update it on a regular basis, so we will be able to discuss it in more detail with our annual results, but we did update it for our new project in 4D processing. This is also our main part of the presentation. Obviously, there are tendencies with more detailed numbers. You are welcome to ask us questions.

Thank you.