Astarta Holding PLC

We can see positive pricing environment for wheat and oil seeds such as sunflower seeds and rapeseeds. That allowed us to register higher revenues for these crops. Acreage for corn was down as we focus more on growing soybeans for processing and revenue for wheat remained stable despite lower pricing environment. The yields last year were less positive than in 2023. 23 was a bumper harvest year, and due to the natural climate cycle, we don't expect it to repeat too soon. But our crop acreage remained mostly stable. We remain focused on our strategic crops, which is sugar beet, soybeans, also wheat and oilseeds. We already started our spring planting and very soon we will be announcing our final acreage. The pricing environment is much more positive to Ukrainian agricultural producers than in the previous years. And this is because Ukraine managed to ensure stable supplies of grain and other product volumes through the greater Odessa ports. And that is fully reflected now in the pricing differential between global prices and Ukrainian ex-works prices. The gap widened, and now we see the situation more resembling pre-war times.

Sugar.

The margin is down on lower pricing, but production levels are intact at 380,000 tons. We are an active exporter of sugar out of Ukraine. The production campaign lasted longer than in previous years. It's over 130 days. And the output actually reached an all-time high in the last seven years. If we're talking about general market trends, Ukraine increased sugar production, which is flat in the last several years at 1.8 million tons. And Ukraine emerged as one of the key exporters of white sugar to the European market as well as to the global markets. There were defensive measures introduced by Europe against Ukrainian white sugar, but the overall quota, which was approved by the EU until June this year, was still five times higher than under the previous trade association agreement regime between Ukraine and EU before the war started. And there is now a licensing regime according to which producers of sugar in Ukraine receive their water on the basis of the production to the EU. Soybean processing is our key areas of focus. We manage to keep our margins intact. There is supportive soybean growing environment in Ukraine, not only us increasing acreage under soybeans for own processing, but we also see Ukrainian agricultural producers are now planting much higher acreage than in the previous years. The oil price is also up. That helped us with the margin. And we also have two major projects for developing this segment further. In the Poltava region, there will be further processing of soybean meal into concentrate. And this project is in the construction phase, should be launched next year in production. And in the western part of operation, we intend to build a new multi-seed crusher to replicate our success in the central part of Ukraine with crushing soybeans and also adding rapeseeds to the mix. Cattle farming is another area of growth for us. We see a positive price in environment despite decline in live cattle numbers in Ukraine. This is because the larger producers with economies of scale like us are winning market share from small-hold farmers. Our milk is of consistent high quality for processors and producers of dairy milk in Ukraine. So we continue to grow our livestock. We have an increase in daily milk output, as well as we also started exporting milk. meat, which is a byproduct of dairy farming as far as Middle East, which is also a noticeable export effort from our part. Our strategy remains intact. We are operating during a full-scale war, so we are focusing on resilience, on ensuring the safety of our operations and personnel. But at the same time, we continue to invest into development projects, especially in Europe. oilseed crushing, and plant protein area. In agriculture, we continue to expand scale of regenerative agriculture, and our efforts are also recognized by various partners and off-takers. We listed only one of them, such as Agrina. We started a carbon farming project with Agrina several years ago, and now we are at the stage that we obtain carbon certificates. We also have several projects where we do joint investments into reduced tillage and cover crops with one of the global off-takers. And they partly finance CAPEX related to conservation agriculture. We also... have our product of takers prepared to pay premium pricing on our products, providing we can verify traceability for our production in the field of regenerative agriculture. So this remains our key focus, and that ensures not only stable market share, premium pricing, or additional payments from our off-takers, but also positively impacts our GHG footprint, which we also report on an annual basis. And we also announce our decarbonization strategy. And in the area of agriculture, we remain fully on track to meet the requirements of our strategy. This is all for the main part of the presentation. We can switch to the Q&A. We already have the first set of questions starting with Marcin. The first question is why fourth quarter sugar segment EBITDA was so weak? I would like to pass the floor to our CFO, Lilia Lemanska, to comment on EBITDA in the sugar segment in the first quarter.

The main influence on EBITDA for the first quarter for sugar is was made by the price. If you saw, the decrease of price is 19% in euro and 9% in hryvnia. And these figures reflect in gross margin.

Thank you. The second question was about export to Africa and Europe. Is it still profitable with sugar prices today? I am passing the floor to Mr. Vyacheslav Chuk, the commercial director.

Good afternoon to all. Thank you very much for participating in the call. I would say that as of now, the current prices are still profitable for doing export. Thank you.

Number three, do you think the market would curb year-on-year beet area in 2025? We think the market remains conservative, and it made its mind earlier. Sugar beet is on five-year rotation crop. So most farmers made their decision last autumn. According to the Ministry of Agriculture, the area already sown under sugar beet is 230,000 hectares. And the expectation, it will hit 250, so almost at the last year's level. But obviously, we'll have to see what the yields are going to be like because the weather conditions were not particularly conducive in terms of precipitation last autumn. which also continued into winter, and we still don't know the weather in summer. What is the rationale for new crushing plant in the Khmelnytsky region? Is there cogeneration included in the project? Do you think you would have enough space to compete with kernel there? I'll start answering this question and then let Vyacheslav to add. We developed our industrial cluster in the Poltava region, which showed us a lot of synergies. If we have sugar making facilities, biogas, which is working on the residue of sugar beet plant and this biogas is supplied to another industrial acid which is soybean crushing. Almost 70% of Energy needs of the soybean crusher were met by our in-house biogas facility, and biogas also can be converted further into electricity and cogeneration. So, yes, the rationale is to build a similar cluster in Khmelnytsky and Vinnytsia region. We already have sugar plants. We can have a crusher and we grow. Most importantly, we grow and we have enough land to have a good coverage by raw materials from our own in-house production. And we can go further with bioenergy facilities as well. In terms of the space to compete with kernel, again, we grow our own produce, rapeseeds and soybeans. And it is important that we capture the processing margin in addition to the crop growing margin there. And I will ask Vyacheslav to add to the picture.

I think it's that since 2014, a startup built quite good expertise, professional expertise in protein markets for the feed compound. We're converting our current assets to the fish feed, and it's logical that we stay on the feed compound with a new asset. So basically, we have the markets, we have the expertise, so we are taking this in our new capacity. Thank you.

Next question is from Natalia. Could you please update us on sugar production costs in 2024-25 marketing year compared to the previous one?

The floor is to our CFO.

Thank you, Julia. They are on the same level as it was last year in Grimnya. accordingly less than last year cost in Europe.

On the currency exchange rate. The next question is, do you see current uncertainty with respect to duty-free trade with EU after June affecting sugar beet sowing campaign? Yes, there is a great uncertainty, but we hear positive vibes. We regularly participate in meetings with European authorities. Although they are quite tight-lipped, there was assurance that the trading regime will not revert back to the pre-war setup, but it will be predictable. It will have visibility for several years, which is reassuring and will remove this uncertainty we have now. But for the current acreage, which we already repeated from the sources of the Ministry of Agriculture, remains intact because agricultural producers are relying on sugar makers to continue to actively export. So as long as the global prices remain at good levels to allow export, the quota with EU is not the only option. a major impact on their expectations. How this year's grain crop costs per hectare compared to last season? Over to Lilia.

We will have a slight increase, but it is much lower than even 10%.

Could you please also, Lilia, provide CAPEX guidance for 2025-2026?

We divide our CAPEX for maintenance and development, and we expect this level near about 100 million euros. and the maintenance part will be up to 30% from this amount.

Yes, and the majority of these investments are going into the development projects, which is SPC, which is in the second year and the final year before the launch next year, and also the start of the multi-seat crusher in Western Ukraine. Good afternoon. Next question from Robert Koshka. Do you perceive the fact of being company listed on the Warsaw Stock Exchange still more beneficial than if a starter was not listed on the stock exchange? It's a very loaded question. We would like to reiterate assurances from our CEO and the founder. I'm passing the floor to Mr. Viktor Ivanchik.

I greet all the participants of our conference. Thank you for the question. But I remind you that I have been answering such questions several times during the last two and a half years. I assure you that I, and I hope that all the shareholders, are supporters that Vostata, of course, remained a public company. and strengthen its position both on the market and in partnership with our key stakeholders.

Yes, Mr. Ivanchik has been providing reassurance for the last couple of years that we see ourselves developing as a publicly listed company. We see support and hope to keep receiving support from all stakeholders and shareholders. to develop the business as a public company. Next question is from Nico Dem. With the ongoing U.S.-China tariffs potentially diverting American soy exports away from China and increasing supply in Europe, does a start anticipate downward pressure on European soy prices? How could this impact your strategy and do you still see an opportunity to take market share in China to offset this price dynamics? I will start and then ask Vyacheslav to add. Well, first of all, we need to remember that Europe and Ukraine as associated member are in the non-GMO soybean market. And there are certain strict requirements for soybeans imports, including this issue, but also deforestation issue, which becomes mandatory from January next year. If we are talking about trans trade between America and Europe and China, we see certainly Brazil stepping into U.S. shoes in terms of Chinese market, but for us specifically, We supplied our soybean products, our meal, and we will supply SPC to the European market. And our product has certain digestibility benefits, other benefits which are greatly appreciated by feed producers in Europe. And that gave us confidence to widen our product range and also specifically for the European market. It is also worth noting that there haven't been any trade restrictions for soybean products from Ukraine into EU. And we believe there will be none. So we compete with Latin American imports into European market. And this market is our focus rather than China.

As Julia mentioned about rebalancing of the markets, so Brazil taking the role of US on the China market. flows of Brazil is decreasing, but U.S. increasing in Europe. However, we see a quite big demand from the Chinese market also on Ukrainian proteins origin. So we see the request and we are certifying our facilities to export also to China and to Asia. So the rebalancing of the market is appearing, but we see it as a normal business as usual. Thank you.

Next question from Lukasz Kaczynski. If the company is considering paying an interim dividend, we prefer to provide stability and visibility. and we debuted our annual dividend in 2021. We have development projects in which we need to invest. We operate in the wartime environment, so we do not believe that switching to interim dividends currently should be considered. Next question from Nika Dem. What are Astarta's long-term plans regarding dividend policy? As earnings grow, should investors expect an increase in dividend payouts over time? I think this is not a very fair question to the business which operates during the war. We continue to pay a stable dividend. We have development projects, and we believe that Ukraine is a good place to invest in. You probably have noticed that compared to other Ukrainian agricultural peers, we continue to exclusively invest in Ukraine, and we have very sizable projects now. Over time, needs to be put into some specific time horizon. In the next year or two, we focus on development projects rather than increasing a dividend. Lukasz Kaczynski, would you consider having a general meeting proceed in online way? Again, we will do general meeting in the same way as last year and the year before. If you are our shareholder, you can specifically put proposal for us to consider. After the war, we can consider other formats, but we don't see why we should change the course at the moment. Another question from Marcin. Follow-up from quarter fourth sugar segment EBITDA result question. If the price was so low, it caused EBITDA loss. Hence, why Astarte was sold in fourth quarter over 100,000 tons of sugar?

Thank you for the question, Martin. I think that it's worth to mention that historically, fourth quarter is every time the lowest from the price perspective. But it's always a question of the balance in the market and the markets around us. So being a production company, not just a trading company, we need to serve the markets we have around us. And of course, we need to be in the balancing management of the markets in Ukraine and outside. However, after we see the correction of the prices as usual in previous seasons and working with other respective volumes, which are remaining in our balance. Thank you.

I also would like to add that it should be remembered that Astarta is a producer of high-quality sugar for industrial consumption. So we work with multinational confectionery beverage companies, and we contract our volumes depending on their needs. Therefore, higher or lower volumes is not much as a market environment, but our contractual obligations in line with the production volumes of our customers. And this should be taken into consideration that Contracts can be concluded by the commercial department ahead of time, but the actual sale under IFRS is recorded in a specific quarter. So this is not a reflection on our strategic marketing picture. Sam John is again asking about, given the net cash position, solid free cash flow generation, are there any thoughts on potentially increasing the dividend? Is there a target net cash position? I just would like to repeat that we would like to use the strength of our cash flow position and low leverage to develop two projects related to plant proteins and OLCs. So two projects each around $75 million is a big undertaking, which also is implemented this year and next year. Therefore, we focus on these projects rather than on dividend payout. Peter Salaric asking next question, declining U.S. euro exchange rate could pose challenges for the company?

Suppose no. It requires from us to be more accurate in our forecast, but we have a native hedge and I don't think that we will face any challenges due to these exchange rate changes.

Next question from Nicodem. Given that a significant portion of Astarte exports rely on maritime transport, do you anticipate substantial decrease in transportation costs in case the war concludes? How might such a reduction influence your export strategies and overall competitiveness in international markets? This is a question for our commercial director.

Thank you very much, Nikodem, for the question. I think that our original and our traditional routes of export for the agri-commodities is, of course, mainly maritime routes. So we have these routes opened and the prices for logistics is already very high. They feel the volume, so we see already the marketing of these prices. There is no big pressure from the war. And the potential decrease after the war still could happen depending on the market environment. So that's the case.

A follow-up question from Natalia. She asks if weather capex in both 25 and 26 is expected at around 100 million euro, including one-third for maintenance and 70 for development. Natalia, the guidance we provided here of around 100 million euros is for this current 25 year. We don't provide exact guidance two years forward, so this is for the current year. And another small question, what is your current outlook for key crop yields in 2025 versus 2024? Well, Natalia, as you know, we had already a difficult start. We had low precipitation in the autumn, which continued in winter, some frost in spring. So that was a negative impact on winter crops. And low precipitation was also a feature for spring planting, where precipitation was low, but the temperatures were raising quite rapidly, so we had to complete planting within a short period of time. So we do expect lower yields for winter crops. Last year winter crops were actually quite good, but this year winter crop will probably be lower. on account of weather. For the spring crops, much will depend on the summer weather, but obviously it didn't help that precipitation level during spring was lower. There were counter measures taken by the agronomical service. First of all, we continue to expand reduced tillage Reduced tillage preserves moisture in the ground, and we increased it to 177,000 hectares. And also, we are quite careful with the density of planting. If precipitation is lower, the density of planting is lower as well. So we hope that the summer weather will be more favorable, and we still yet to see what late crops yields are going to be like. Next question from Raimonda Eging. Same questions as last year. Do you observe any M&A activity in the agricultural sector? Would you consider using your net cash position for an acquisition? We see many activity in the land assets, but it is not something radical. The market was open for trade of agricultural land relatively recently. And during the war, there is not enough loan financing from the local banking community to make it a high churn. Therefore, it is rebalancing of the lands between various operators depending on the which regions they focus. But one should understand that during the war, it is unlikely that major M&A deals will come through, although I believe Ukrainian agriculture is a very big industry, so there might be a continued interest. Whether it materializes this year is a question mark. Regarding our net cash position, again, we focus on the greenfield projects. Our greenfield projects are in soybeans and rapeseeds. If we see a good land plot, which will allow us to grow more soybeans, We will consider it. So there are smaller land related activities which are below materiality of IFRS accounts, but it does take place from time to time. Sam John, next question. What is the hurdle rate for new investments? We do not provide specific hurdle rate, especially given that the country risk premium during the war is very high. However, our internal investment committee considers new investment projects with a payback well below 10 years at current discount rates. So this will remain our main guidance. Yuri Balashkevich, can you provide an update on the timeline for the new project? Specifically, when are they expected to be completed and begin generating revenue? In terms of soy protein concentrate, We are in the second year of CAPEX construction. It should be ready to start producing concentrate next year in 2026. In our plans, that half of the meal which is currently produced by the crusher will go into concentrate next year. And then once we have a multi-seed crusher built in Western Ukraine in 2026, we can switch to 100% of meal in the Poltava region going into concentrate and meal production will be taken over at the new asset in Western Ukraine. What is the approximate revenue potential of the new projects once they are fully operational, and what profit margins are you expecting from them? Obviously, this will depend on the price of raw materials. Soybeans and rapeseed still are the key raw materials. In terms of profitability for the new multi-seed crusher, you can look at the profitability of our soybean segment in the Poltava region. The product range will be the same, except we will add rapeseed crusher to soybean crusher. But the growth margins, crash margins are quite similar because these are oil seeds. In terms of SPC, we expect an uplift in our margins because we go into higher value-added margin area. But SPC is not a commodity exchange product. The pricing will depend on our off-taking arrangements with the consumers in Europe with whom we are currently working on long-term off-taking arrangements and designing the product which is specifically tailored to their feed needs. So I suggest that we will, the current crushing margin will be the bottom of the range and we hope an uplift with a new facility coming on stream. Has maintenance CapEx increased this year? If so, by how much? If I'm not mistaken, it is historically been under 20 million euros. It did increase because we do replace our machinery more actively than in the previous years. Just to give you an example, as I explained, we expand machinery. Our reduced tillage and regenerative agricultural practices that requires more frequent, not frequent, but lower life service of the current equipment as we switch to the new equipment. for modern agriculture and precision farming. Same is for sugar segment. The new silo, which was built last year, is a significant investment, but this is investment into the exports of sugar. where it should be conditioned before longer distance delivery to our clients in Europe and Middle East. And we also are doing testing. energy efficiency projects in sugar making. We pursue renewable fuel usage in sugar making. This also requires modernization of our boilers. This was one of the projects last year when we – now our boilers allow – for burning plant pellets, which allowed us to reach 17% energy replacement with renewable fuels overall. What percentage of land you could plant with soybeans maximum? Jakub, last year acreage was the maximum of the current crop mix, but we obviously are in the crop rotation process, which is a five-year cycle. So last year is probably the peak for soybeans that we achieved. Sam John, what is the current discount rate used to calculate a better than 10-year period? Sam, you should probably look at our accounts and see what is the average cost of debt on our balance sheet. So our interest payments depend on our bilateral arrangements with banks, and we get a lot of credit for doing regenerative agriculture, decarbonization. So we believe that we borrow at lower rates than other countries. companies in Ukraine, and that allows us to command a lower discount rate. But for the average for the year, you should look at our actual results in the accounts. Marcia Novak, have you already secured financing for 2025 CapEx? 100 million euro guidance is significantly above your 24th generation, not to mention 2023. I'm passing the floor to CFO who single-handedly talks to 30 banks and secures the lowest cost financing in Ukraine.

Thank you, Julia. We have already secured the financing for all our CapEx. you possibly saw the information from IFC regarding the new facility to finance our SPC project. And you possibly saw the amount of this facility. And as you understand, it is the main part of our CAPEX project. And yes, we have secured financing.

Yeah, there is a certain time lag between multinational banks announcing approval of loan agreements and us actually signing. So we as a public listed company only report publicly once the actual agreements are signed. But yes, from your point of view, this is already secured. Next question from Marcin. Do you expect to have positive working capital change in 2025 after plus 20 million euros in 2024? We don't give guidance on this. We'll have to see on the market environment. Sam John asks, Given that 2024 soybean planted area increase by 35%, are there concerns about excess supply? Certainly not, because Ukraine is next door to Europe. There haven't been any trade barriers, and we believe there will be no trade barriers for Ukraine to supply soybean products to EU market. We compete with Latin American imports because acreage under soybeans in Europe is under 1%. So Europe is very short in soybeans, which is required for their livestock, poultry, and other industries. And we believe we have one of the best digestibility and non-GMO product for this market. The excess of soybeans is only favorable to the crushers like us because the most soybeans produced in Europe domestically inside Ukraine, the lower crash margin, sorry, the higher the crash margin and lower cost for us. So this can only be beneficial for us. Peter Salaric, are euro prices for crops stable as US dollar weakens?

Thank you very much for your question. It depends on the crop, which type of crop you are mentioning. For example, motif on the wheat price is a little bit decreasing on the forest exchange. However, other prices are stable.

I don't see any more questions.

We hope that we answered all of them, but please don't hesitate to drop us a line or call us if you have anything specific, and we will be very glad to address them on a one-to-one basis. I can see another question from Martin. Could you please comment on expected incremental EBITDA from both the new meal processing line and new CRUSH facility? Margin, you can, for the new multi-seat facility, you can assume crash margin at the same level as in Poltava, but take into account the volumes. At 100% volumes, it will be not 230,000 tonnes, but 400,000 tonnes. For ESPC, you can take our current meal production and increase margin because this is a higher value-added product. But specifically, we will have to see what it is going to be like because we are still one year away from producing it and placing it with our customers. Thank you very much. Have a great afternoon, and we look forward to our next meeting. Bye-bye.