Astarta Holding PLC

and company. I'm pleased to welcome you to a start us 4th quarter conference call. Today the company is represented by Mr. Victor Ivanchik, CEO, Mr. Victor Glatki, CFO and Mrs. Julia Breschenko, Director for Business Development, Industrial Relations and ESG. Gentlemen, the floor is yours.

Thank you very much, Pavel.

We are Holding today's call using teams. We would like to ask for everyone who is not speaking to have themselves on mute so that there is no background noise. In the. During the presentation. Also, to avoid any hiccups during our call, we would like to ask everyone to post their questions in the chat box so that we don't have people asking at the same time. We will address the questions as we receive them in the chat box. With this, I'm going to share my screen with the key numbers for the 2021 results.

I hope everyone can see the screen now.

The way we would like to run this presentation is only highlight our summary P&L balance sheet and cash flow. These are past year results and unfortunately the situation changed not just for our company, but globally from the 24th of February. And I'm sure that everyone read our annual report and you know the details of our past operating performance. We are here to address questions and have our top management to discuss the most recent and relevant developments. Although there is a word of warning here that because of the martial law, in Ukraine and because of numerous security concerns, we will not be able to provide some of the details. Also, but that doesn't mean to say that we will not continue reporting our data as a publicly listed companies as we did before, we will continue to do so. And our next reporting date is trade results on the 20th of April. So with this introduction. I. Would like to go through the first slide. You can see our impressive results last year. We were. the agricultural industry as a whole was quite lucky with the weather. There was a record harvest in Ukraine. We also managed to increase our revenues because of the favorable pricing environment, especially in the second half of the year. The sugar market was experiencing shortage of the product last year and as you know we switched on our raw cane sugar refining capacities and that also provided a positive effect on the operations of our sugar segment and you can also see a positive contribution from the soybean and cattle farming segments this allowed us to register a record profits for the year, over 120 million euros. Some of these numbers are affected by the accounting treatments, and if we strip biological assets and agricultural producer measurement effect, you will still see quite significant expansion of the gross margin and EBITDA margin. The balance sheet speaks for itself. Our leverage ratios and the amount of debt are rather conservative. We ended up here with a 30 million financial debt. And this was almost the same number as one year ago. How we managed to keep our leverage profile at such conservative rates is because we were focusing on our cash flows and this is operating cash flows as well as investing cash flows. We announced that our investing cash flows will only focus on the maintenance CAPEX. That allows us to strengthen our balance sheet and also to give room to pay out our debut dividends last year. We had a small treasury shares repurchase program and overall, by the end of the year, we accumulated significant cushion to embark on our development plans. These were development plans related to our silo facilities in sugar and in grains, as well as soybean processing plant. But as you would appreciate, currently we have to put these CAPEX plans on hold, and we will restart our business development plans after Ukraine wins the war with Russia. What is our current focus? We try to communicate as much as possible about our priorities through our press releases. But apart from studying our operational activity, we also are trying to help people in need We really appreciate assistance from Western countries in terms of military support, but also refugee outflow, children and women, which found their shelter outside Ukraine. However, Ukraine is a very big country and our citizens and children also find shelter in the western part of Ukraine, which is outside the military hostilities. Some of the most vulnerable citizens unfortunately had to stay where they are. So we set up a dedicated humanitarian project, which involves our employees working after the working hours, working at weekends, and every minute that they are not engaged in running our operations, our employees are engaged in the Common Health UA project, which started with a modest contribution from a Portuguese charitable organisation, and we delivered medical supplies, which was first an airlift cargo to Poland, and then we delivered it to nearly 50 local hospitals in Chernihiv, and other regions of Ukraine which are under military hostilities. Our employees also sacrificed part of their salaries to donate to this project. We are looking for business partners which have charitable activities, to give contributions to these projects, because as a large corporate, we do have capacity, storage facilities, transport facilities to deliver humanitarian aid to the most affected regions. Something that we didn't put on this slide, but you've seen in the press releases, Astarta has become a partner of the United Nations Food Project, and now a disaster response unit in Ukraine. We are their partner for delivering goods from Rzeszów in Poland across Ukraine using our transport and drivers, but also we are registered as a potential commodity supplier for food products. We are monitoring tenders and we will be supplying wheat, flour, sugar, oil and all other goods as part of this effort. So we will ask for anyone who would like to help or has links with organizations which can help us with this project to contact us. And those who can only contribute financially, the donations can be made on the link, which is listed on this slide. We will regularly remind our network of partners and friends about our progress of this project. Please help us to help Ukrainians in the affected regions. I think we will not go through the segmental information and the rest. This presentation is on our website. We are ready to answer your questions.

Maybe I'll start. so I'll just permit myself to ask questions directly as the moderator of the call. Do you have any estimates regarding the volumes you can export through the Western border?

It's still a question that we are in progress of formulating the answers. Generally, Ukraine, the infrastructure ministry, the ministry of agriculture ministry, are now working through all the bottlenecks which exist on Ukrainian land border. There are various numbers flying around, but generally before the war, the Ukrainian seaport facilities were able to handle 5 to 7 million tons of grains on a monthly basis. What the Ukrainian railway monopoly estimates currently, the current capacity is around half a million tons per month. And they are looking at the ways to increase this capacity twice or even by three times. However, we are also looking for solutions. We are looking for any opportunity to do forwarding by land to the Western border, to all border countries, which through Poland, Hungary, Slovakia and Romania, we are contracting our grain volumes for delivery to European consumers, but also as a transit cargo to Konstanta and Gdansk seaports. They unfortunately don't have as much capacity as Ukrainian ports used to have, but nonetheless, The bottleneck is Ukrainian railways, and also we are looking at automotive cargo delivery. The Ukrainian Ministry of Infrastructure estimates that current capacity of automotive route is almost similar to the one by the railways, and they are currently negotiating with each border country and other countries alone, the Ukraine, sorry, the European route, to simplify and lower the requirements for the Ukrainian automotive deliveries. So, the public estimate was that perhaps in a while Ukraine will be able to transport around one and a half million tons of grain through the western border using both railways and automotive. Question remains whether this amount can be increased. There are several ways to increase it, but as you might appreciate, Ukraine has two major physical exports industries, which is metals and agriculture. So, the Ukrainian railways worked out quota system between grains and metals and metal ore. And we have to see how this quota system works and whether grain deliveries will be a higher priority or can increase in the future because global hunger agenda is on top of everyone worldwide. So We are still in the process of working on our logistics. We keep contracting the volumes and we are doing pilot deliveries by all possible means. And we're looking whether we can establish a bulk storage and loading and loading facilities at the rail along the railway routes.

Perfect. Thank you so much for your answer. So essentially, from what I've understood, Ukraine will be able to export something like one fourth or one third of the pre-war volumes through the Western border using both combination of railway and automotive transportation. My next question refers to your land bank and expectations for yields. Are you comfortable with the fertilizers supplies you have and do you have any kind of expectations regarding the yields that you expect from the part of the land bank which will be subject to the sowing campaign? I assume that will be vast majority of your land bank. that you will be pursuing with this own campaign?

Thank you. Yes, thank you for this question. We did communicate recently regarding this. Due to geographical location and also thanks to the Ukrainian army, we are able to start spring planting on all the area which is currently leased by us. Where at the time of the, at the time of publishing of the annual report, we indicated that 4000 hectares of land located in the Chernihiv region may not be part of our spring planting because that area was occupied. However, as of today, this area is free of occupation. It is controlled by Ukraine. We are doing security checks on this land. The Ukrainian military leadership always asks for their personnel, qualified personnel, to check the area for any mines, any explosives or contamination before we can start operating it. And we believe that we will be able even to utilize 100% of our leased areas for spring planting. What was in favor of the start of the spring planting is late weather conditions for planting. The weather conditions are very similar to last year. If you remember, spring planting started later than generally is in previous years. This year also we have a late start of the spring planting. We already started. The first crop that we put into the ground was sugar beet and more than half of sugar beet plantings already in the ground. And we will start with Pavel. and we will be putting other crops into the ground. And the estimate by our agronomists that because of the late start of the spring planting, it will not be completed until mid or even second part of May. However, this is normal. We are now in favourable conditions to continue spring planting. With regards to the second part of your question on the inputs which are required for planting, we are also in a much more favourable position than most farming operators in Ukraine, especially small and medium-sized farmers who traditionally rely on selling off stocks of the previous harvest in order to finance spring planting. Because we are a large-scale business, we always have our inputs ready for spring planting long beforehand. And as we reported, 90% of our inputs, whether it's fertilizers, plant protection, fuel or seeds are available. So we started spring planting at full speed with all the necessary inputs regardless of the external conditions this year.

Perfect, that's all from my side. Thank you so much. I see that we have some questions from in the chat box, so I'll just let you read it with them. Thank you.

OK, uh, uh, I will post it. Okay, so can't you will? Uh, we're more. It's it also started about less. Yeah, she just not sure. Spear all applause. I'm going to address the first question in the chat box from. Jakub, question regarding sowing campaign. Our acreage is around 220,000 hectares. Expectations regarding the sugar beet acreage in Ukraine. Again, the situation will be known in a few weeks time, but what we hear from the market and the data that we collect, Indicates that the acreage area could be between 100 and 160,000 hectares under the sugar beet. Are any Astarte green stocks within combat range? Uh. It's an interesting question. All our assets, whether this is grain or land, or our plants, are located deep inland in Ukraine. None of them are located in the north, East or South, where military hostilities take place. However, as you know, the Russian Navy and army have artillery and missiles, which are able to reach very deep inland. We do not believe that our assets can be targeted compared to how the Russian forces are targeting military infrastructure or other infrastructure. However, we do make all precautions for this to not happen. We spread our equipment and stocks across the areas so that they are not concentrated in one particular place. and this dispersion of stocks, inputs and equipment is done to the extent possible. Were there any significant losses in non-current assets, agricultural equipment as a result of fighting? No, we were lucky that our physical assets were not affected. We gave some automotive transport for the needs of the state. But in terms of the stationary real estate assets, there was no,

I would like to add that from the beginning of the hostilities, did not stop our operational activity and did not lose a single liter during the production of milk. The production of soy processing plant was stopped for a couple of weeks due to security issues, but we launched it again and it works at full capacity every month.

Since the beginning of military actions, we haven't stopped our operations, and we continue to produce milk in full scale. We have stopped for certain time our soybean processing plant, but right now it's operating. And we continue to operate as usual.

That was a remark from our CEO, Mr. Viktor Ivanchik. Since we don't have the camera, I will also name the person who is answering the question. Now I'm going to the next questions by Darius. Does the company expect delays in payment of receivables during the war? Obviously, there was some shock and rearrangement of regrouping of the businesses in Ukraine. At the beginning of the war, because physically people had to rescue their families, to send their children away, and some of the operations had to go through remote work in the office, and that affected all businesses, including ours. However, this situation lasted only for a short while because everyone understands that Ukraine needs not only military assistance and support, but it needs economy working and providing jobs. providing cash flows to keep around the country, the government and the state. So, there was a temporary delay with receivables at the beginning of the war, but now all businesses are united to work with each other and to have a very good payment discipline. Also, businesses are focusing on their supply chain, and they pay special attention to locally located suppliers, so that cash doesn't leave the country and continues working for the Ukrainian economy. We also note that most businesses that had to suspend the activities because of the technological processes are restarting them. And this concerns the steel industry, but it also concerns us When the war started, we had to suspend our soybean crushing operations for two weeks. And then we restarted with new security procedures in place, with new safety for our employees. And this concerns all businesses. Also, there is a very big push from all the businesses to support their workforce. not to make people redundant because of the current circumstances, but to keep them on payroll. And also, even at the beginning of the war, many businesses, including ourselves, we did upfront monthly salary payments to our employees so that they have a financial means evacuate their families from the affected areas. Next question is from Natalia Spigotska. Congratulations with strong results. Would you would it be fair to assume company will retain 100% of its 21 net income to support liquidity? Uhm, Yes, I believe the company does not have given the agenda for the company and for the country. This is what all businesses in Ukraine will do, including ours. Pavel, if you want to add something, or Viktor Anatolyevich? Question from Raimonda. Have you lost any employees either due to fighting or because they evacuated? Is labor supply an issue going forward? We do have one fatality among our workforce. This is someone who was mobilized into the Ukrainian army. We have.

I think that we can say that from the very beginning, the government made a decision to arm political specialists, especially in agriculture. Therefore, in advance, we submitted all the people we needed agricultural operations. First of all, for the seeding company. And all our wishes were taken into account. Therefore, we have mobilized in the army, we have people who went to the air defense. But this absolutely does not prevent us from doing all the necessary work in the terms that we need. And in this regard, we can say that mobilization and people who volunteered will not significantly affect our ability to carry out all the necessary work. And there was a question, I know, in this or in another, Unfortunately, we already have one dead.

Viktor Petrovich, let's pause so that Pavel can translate you.

So the government, the Ukrainian government decided to allocate certain professions to a reserve. So we applied for these reserves and our employees, which are required to conduct our common operations, Uh, where is yours? So we have, of course we have people that, uh, right now in the army and the internal and territory defense, um, troops. But anyway, we conduct our activities as usual, despite of this, uh, all our operations are conducted timely and, um, uh, this will not influence the situation.

Unfortunately, one of our employees was killed

Since the start of this war, he was 28 years old and we provide all necessary assistance to his family.

Next question, please.

So, you know that we employ several thousand employees. We have under 300 in the army and the territorial defense, which is a duty in Ukraine. However, this number of people is very small compared to our overall workforce. And we are able to reserve. through an official procedure through the Ministry of Agriculture and the Ministry of Defense, the critical workers and agriculture is considered a critical industry and therefore we do not have a problem with the workforce. Uhm? labour supply going forward, again, we do not believe that this will be an issue, because there are most people who had to leave for western part of Ukraine, are from eastern Ukraine, all our employees feel safer, where we operate compared to other parts of the country. They help those who are relocating from the east, and they are going, they are passing our operations in the Poltava region, in the Vinnitsa and Khmelitska region towards the west. And all our employees on the ground are offering support. along their daily operating activities running of the agricultural equipment etc etc next question from dariush a startup has announced a draft resolutions for what reason does the company intend to issue shares Dariusz, thank you for your question. This is the annual resolution, which is published on an annual basis since the company became public. My understanding that a 10% capital increase is always a useful cushion to have in case the company needs emergency funds but we never utilized this option in the past and we don't believe that we will need it, but it's one to have and our shareholders and the board always keep this option open. Jakub, next question. How many employees were taken to the army? I already answered these questions, under 300. Do you still operate soybean crushing plant? Yes, we did. As I explained, we suspended operations for two weeks only in order to secure, to make it higher security and higher safety for our employees, but it is now operating as before. Petr Manzielov, significant part of the company production for 2022 has already been contracted. What will be the consequences for the company in the current situation in case of impossibility of exporting this contracted production? And in particular, whether force majeure will prevent the company against the claims of contractors? And according to what law will this possible dispute be settled if such claims occur? Well, from the legal point of view, we do have protections of force majeure. And this should not be a problem. I wouldn't go through the details of our supply contracts, but At the moment our legal department is confident that we can resolve everything. Also, if necessary, we can negotiate with our contracts and postpone the delivery when it comes to the physical bottlenecks. Also, we are able to store significant amount of our harvest in our silos and also for any future crop, if there is such a need, we can store our crops in so-called sealed bags. After corn or any other crop is treated in the silo facilities, it can be stored on the ground in sealed bags and the period of storage is over 12 months. So we believe that it is possible to renegotiate physical deliveries for anything outstanding. And also in terms of the future volumes, We have the option of sealed bags which was used by the company before successfully before we built our industrial silo facilities.

Uhm?

If there are no other additions, what is currently monthly level group fixed cost in hryvnia? I don't know whether the financial department would like to handle this question, but... Viktor Anatolyevich, I think we can answer.

First of all, in the sense that we are provided No, no, I'm here, I'm here.

If you take fixed costs, which are currently an average allocated to our four business lines, because it fluctuates from month to month. So we can take, you asking in UAH, it's roughly 250 million up to 300 million hryvnias monthly. A CEO asked me to comment on liquidity position. which company has at the moment. I would like to refer before to the question of account receivables. We have the same account level of account receivables as before war. And the discipline and payments are improving because our counterparts are adjusting to the current conditions. We managed to as before offload that and we had positive cash on deposits before war which allowed us to almost one month to finance all operations activity and of the company from our own cash at the same time we after banking stress scenario, which was taking almost two weeks. Banks start lending to corporate customers. We are in first ranked credit reputation company in the list of all among Ukrainian companies. So we immediately got already access to lines from four major banks. uh another probably four lines for credit lines from including state banks are coming shortly so which cover completely all our potential gaps and liquidity which you asked as a potential risk and we are trying to create cushion on such situation in order no have disruptions for operational activity from the point of view of liquidity. So all necessary inputs, this is what I was asked to comment as well, what all inputs for sowing seasons were bought on time, financed, including seeds, herbicides, pesticides, fertilizers and fuel. So at the moment company, as was mentioned, has access to all assets. And we are planting all area which are in our lease. That's all what I wanted to comment.

Thank you. Thank you, Victor. Next question from Jakub. Can you elaborate a bit about migration process? What is the purpose to change into Cyprus? The process of migration coincided with the start of the war in Ukraine. We just didn't consider stopping it. We believe there are numerous advantages of us relocating from the Netherlands to Cyprus on the basis of what we've seen with other Ukrainian issues and publicly listed issues. This is just to simplify the legal organization of the group to avoid the double sandwich structure. We are removing extra level of ownership within the structure. We were optimizing with management of a startup was focused on optimizing the group structure for awhile. We were uniting, liquidating or diverse and legal entities which have become redundant from a business point of view. In the last four years, for example, the number of legal entities within the group was reduced from 46 to 20 plus, and you can see it from our annual reports when you look at the list of legal entities analyzed for the purposes of financial accounts. The number is always decreasing. Also, Last year, our operating subsidiaries in Ukraine have become subject to standalone IFRS audit requirements. This is Ukrainian legislation requirement, and it is associated with extra costs and administrative burden for running our operations. And we started looking at other ways of reducing such costs. One of them is elimination of procedures or even audit related to the Dutch NV. It should be noted that the holding company jurisdiction in 2006 for the IPO purposes was chosen because there was a clear investor preference for the Netherlands as country of jurisdiction for well-established corporate law, public takeover and listing rules, as well as a system of corporate governance, IFRS reporting, verification, disclosure. But In the last 15 years, we believe that the regulations in these areas become uniform across all EU jurisdictions, and there is absolutely no preference whether it's Cyprus or Netherlands. And given the equivalence of EU regulations, our shareholders would prefer a simplified legal structure with reduced cost of its maintenance.

A question from Radim.

I would assume that delivery of agri-products to domestic market would be top priority. Can you imagine deliveries free of charge under martial... I think you meant probably martial law in Ukraine rather than martial law. We... the government of Ukraine is concerned with the food security for the country. And there were several attempts to enhance such food security. At the beginning, there was price control over certain staple food items. but then it was relaxed. Also, there is a licensing regime in place for exports, which has also been relaxed. For example, there is no restriction to export corn or sunflower oil out of Ukraine, but there is a licensing regime for wheat and some other commodities. But we believe that as the situation normalizes, at least from the economic point of view, because all businesses in Ukraine are united in making the economy running smoothly as possible, these kind of restrictions will be less limiting. So we do not imagine that anyone in Ukraine will be forced to give up food items for free, but there could be some licensing or price control issues, which I'm sure will be relaxing as Ukraine will be having visibility on its new harvest, the winter wheat harvest is already in progress. And once it is known what size of it going to be, we believe further relaxations on the economic front can follow.

I would like to add that relations with the government today are based solely on commercial principles. If some resources are needed, for example, sugar, then the government makes state purchases and pays money for this product.

I would like to add that relations with the government are built on the commercial base and the state is paying for all goods that we supply to it.

As for our social program, we have, of course, corrected it. And today all our social programs are focused on helping people who are evacuated from on which hostilities take place. Therefore, we help these people in transport, we help them in accommodation for the night, and we, of course, help them with food. But this is practically within our budget, which we, as always, make in the area of 50 million hryvnias.

Of course, we have developed our social programs. Our social programs are now concentrated to those people who really need them, namely the people that were evacuated from the places of active military actions. We provide accommodation products, Of course, within the limits of our budget, about 50 million hryvnias.

We do not rule out that in the future, if necessary, this budget will be increased, but it is not critical and it does not in any way interfere with our operational measures

of course in future we can increase this budget but we're sure that this will not influence our common operation activities and we will support we will continue supporting

Julia, please continue.

I believe these were all questions covered in the chat box. Unless anyone else would like to raise another one, we would like to complete this call. Thank you for your interest, for your support to the company, management and employees. And thank you, Pavel, for moderating this call.

My pleasure. Let's hope that the war will come to an end very soon and there will be no further casualties and damages. Thank you so much for answering the questions, holding the presentation, answering all the issues that were raised by the course participant and hope to speak to you soon. Stay safe. Goodbye.

Thank you. Bye bye.