Astarta Holding PLC

Thank you very much for your interest in the call regarding first quarter results of a starter. This is one minute past two. We will start the call. If you have any question, please put it into the Q&A box so that we don't have background noise. Everyone is on mute except me at the moment and I would like to go through our presentation. First quarter results were affected by our results in the agricultural segment. we had majority of our produce sold by year-end. So compared to the first quarter this year, we had lower revenue volumes compared to the previous one. We'll go through this in more detail in the agricultural segment overview. Other segments such as sugar production and soybean processing were flat on the top line and we have a good increase in cattle farming as we continue to grow our operations in this business segment. Profitability-wise, EBITDA was lower, but the margin was higher on the account of lower selling and distribution costs. If we stripped the impact of IAS 41 from our results, gross margin was lower, but the EBITDA at 29%. Now, if we are going into our cash flow and balance sheet, we have very healthy operating cash flows, although reduced from 42 million to 35 million before the working capital. We have significant increase in investment cash flows compared to last year. This is around 20 million euro as we replace our agricultural fleet and we also implement one of our largest investment projects which is soy protein concentrate in the Poltava region. Still, our net financial debt is currently at a positive cash position and the overall leverage ratios remain low. If we are looking at agriculture results, they were impacted by lower corn sales volume, which was over 110,000 tons compared to 200 last year. We also sold off majority of our produce of wheat and sunflower seeds compared to last year. There is a positive pricing environment for corn. while wheat was flat and it was a very good increase for the price of sunflower seeds which also positively impacted our margin. One can also see CAPEX increasing and this is the replacement of agricultural machinery as we are increasing our scale of regenerative agriculture. As of date of this report, we are in the middle of spring planting the acreage. remains largely the same as last year. However, we see a lower acreage under soybeans, but we have higher acreage under sunflower seeds due to the more positive pricing environment. We also slightly increased our acreage on the corn and sugar beet is at 34. If we are looking at the general market, we can see a nice convergence between international prices and domestic ex-works prices in Ukraine. And this is thanks to the good operations of Odessa-based deepwater seaports, allowing all agricultural products, which are grown by Ukrainian farmers to be exported in the most efficient manner.

Sugar production.

Compared to the previous year, first quarter, we have higher volumes of sales. And that somewhat offset lower prices for sugar, which averaged 525 euros for the first quarter of this year. That combined with lower SDNA expenses allowed us to increase EBITDA margin to 15%. Half of the volumes that we sold in the first quarter were exported. The main export destinations were in the Middle East, as the European market is currently difficult for Ukraine because of the uncertainty for the future trade regime. What we heard today is that Ukraine and EU are still working on the long-term solution. Therefore, the ATM, autonomous trade regime, which was introduced as an assistance to the Ukrainian economy, last year will not be renewed. There is an interim measure for the remaining seven months of this year, which will provide the parties more time to agree on their multi-year trade regime, which will give more gradual reopening of the market for Ukrainian producers. So for the second half of this year, we haven't seen the figures published yet, but we largely expect seven twelfths of the volumes which were agreed under the DF-CTA before the war between Ukraine and the EU. And these expectations led to Ukrainian farmers reducing acreage under sugar beet, so it is down by 16%. Ukraine remains a major exporter of sugar, but the volumes which are going to the EU are much smaller because of the current restrictions. So the key markets are in the Middle East, the most important ones being Turkey and Libya. Soybean processing, we have steady operations and lower price for soybean meal was well compensated by higher prices for soybean oil. So, we have revenues remain largely flat. However, profitability is lower this year with crash margins going down, which is reflected at the gross margin level of 19%. As Ukraine experienced shortages of sunflower seeds last year, we can see moves by the farmers to increase acreage in that crop at expense of soybeans. So, the Ministry of Agriculture officially forecast soybean area to be down by 9% this year. The final figures will be known later after the planting is done. Cattle farming, we continue to increase our herd and the milk production. The quality of our product remains high and we see the premium paid for this high quality milk. price-wise remains high. However, there is an upward pressure on our costs, and that led us to negative biological asset evaluation booked in this business segment of 8 million euros, and negative EBITDA for the first quarter of this year. This is in a nutshell regarding our first quarter results. I'm going to switch to Q&A. Just one second, I'll stop sharing for a moment and then we'll come back so I can see the Q&A box.

Sorry, I don't see the Q&A box, so I'll have to go into...

Apologies, Pavlo, can I ask you to read out the questions from the Q&A box? Because when I go into it, I get thrown out from the meeting. Thank you.

Yeah, sure. Why cattle value biological assets was reduced by 8.1 million euro when amount of drop from 28% This is a question regarding the biological and cattle value.

Yes, we would like to pass the floor to Lilia Lemanska, who is our CFO, to clarify the questions on the BA in the cattle farming.

Hello, everyone. Thanks, Julia. Except for the quantity there are two main factors which are influenced on the value of biological assets. They are price expectations and costs. So we expect price less than it was at the end of the year, and we have cost higher than for the previous period.

Okay, thank you.

Pablo, I've opened my second screen. On the second screen, I do have it. So, second question, UE agreement, I suppose that was probably EU agreement to free import from Ukraine agricultural products ended in June 2025. How this will impact the starter cash flow and earnings? I will start replying and perhaps our CFO will add. The company has operated under similar conditions before the war. We mostly served global markets as opposed to the EU. There are several products which were never impacted by any quotas or in practice were not impacted by the quotas. This is soybeans and corn. So we have demonstrated since last year that our exports can go to other markets, especially with sugar. We would prefer to trade with the EU because this is a next-door market, but now it is sold into the Middle East, and volume-wise it was half of our exports. Half of our revenues were done by exports in the first quarter of this year. So the same goes for grain and also for soybeans. There has never been a quarter for soybean products because the EU is such a big... importer and only one percent of acreage currently in the EU is under soybeans and this is why we develop soybean processing as our strategic area by expanding into new products such as SPC but also we announced a second project another crusher Vyacheslav, would you like to add anything to this? Vyacheslav is our commercial director.

Julia, thank you very much. I would like to add that before the war Ukraine was actively exporting, for example, wheat was exported to Indonesia, Egypt, Turkey, Pakistan, Bangladesh, Morocco, Tunisia. question that the rebalancing of the rules with black supports give us flexibility to serve other markets which were traditionally before but still we have the contracts to europe and we can do both markets thank you

Okay, next question. Area of production all types has dropped from 201,000 hectares to 190,000 hectares. Are there any plans to increase amount of land used for production in 2026? I would like to note that the area under key crops is described in the section of biological assets in our accounts. So what one can see there is the area under the key crops. Niche crops or area under... under the grass and pasture for livestock is not shown in this breakdown. So, by and large, we have a stable land bank Of course, there is optimization of land, depending on the productivity of land. And this churn has always been limited to 1% or 2% per year. So if you would like to compare the acreage, I would encourage you to compare it like for like, for example, six months report to six months report when our acreage is reported under biological assets. So it is largely stable. And we also are looking, we are looking opportunistically at anything in the neighboring area. for leases, again, with the same objective to have stable land bank.

Next question.

5% buyback for employee plans. That sounds like quite big amount. Are there any plans for buyback shares for redemption only to decreases amount of shares? Just to clarify what our board has already took decision upon and what is being put for our shareholders to consider during the meeting. We would like to have up to 5% of our shares to be held by our key employees, meaning top management, which is a global practice. So we would like our management to work on increasing capitalization, as well as cash flows and the dividend yield for our shares. Technical implementation of these share incentive schemes are quite difficult in Ukraine. for various reasons, but we believe that what we have identified now with the help of various advisors will be workable. We would like to create an employee benefit trust and these shares to be deposited for the benefit of top management as a long-term incentive. We have several rules to have this 5% of shares and the first one is of course buyback. We already have 2% of our shares which we acquired in the previous exercise for buying back shares and we would like to eventually have up to 5% in this employee benefit trust. Plans for buyback shares for redemption only, which decreases amount of shares, we are not planning. Everything that has been announced publicly is for the benefit of long term incentives for the top management. Next question number 5. What CAPEX is planned for the rest 2025 and in which areas? I would like to pass the floor to Lilia Limanska, the CFO, to comment on this topic.

The main area, as we've already informed, will be our new SPC plant. the agriculture machinery, farm reconstruction, and our new oil seed crusher. These are the main areas we expect to finance till the end of this year.

Thank you. Next question. Who is the intended beneficiary of the group employee incentive plan? C-level executives, middle management, regular employees. Are there going to be any restriction placed on those shares? Are those shares going to be given or sold at a discount? Well, these are the technical details that we are still working out with our advisors, but in terms of intended beneficiary, we have several dozen people within our several thousand employee workforce. which we would like to be beneficiaries of this trust. These are the people in the top management of our least tint company, top management of our Ukrainian holding company and its subsidiaries, the operating operating plants, farms, etc. So, we are drawing a list of these individuals as we speak, and we would like them to become beneficiaries in this trust. In terms of the restricted period placed on those shares, Again, we will have to technically work through this. You would appreciate that the company migrated to Cyprus only recently, so we expect this trust to benefit from both a dividend payout and market cap growth, but this is a long-term arrangement which will cover all employees in a trust arrangement. So this is not something that will be given on an individual basis. Once we have technical issues sorted out, we will be able to share more details. What is the expected timeline for the buyback? Have I understood correctly that the company plans to issue up to 5% new shares to support this program? If so, what is the emission timeline? Our goal is to have up to 5% of our shares in the employee benefit trust. And there are several rules that we can take. Buyback was quite lengthy when the company was domiciled in the Netherlands. And buyback is also subject to very strict buyback rules, depending on the liquidity of the shares. So we would like to have a spare option, and this alternative option is a new share issue because this is a much simpler and straightforward route to buyback. uh create five percent of shares and put them into the employee benefit trust uh however this issue will be subject to shareholders vote on the 12th of june so we we are not prepared to talk about this in detail yet until the meeting takes place Does the company plan to have 12% as treasury shares? No, we never intended to have so much shares as a treasury stock. In fact, there is a legislative restriction kept at 10%. And our goal is, as I described, to have up to 5% for the benefit of our employees in the trust. It is only that we are exploring various options how to do it easier from the technical point of view. Next question, given the major capital investments underway, does management consider the dividend and buyback program financially safe? If we compare the size of the buyback and eventual goal of having up to 5% of shares, in employee benefit trust compared to the current investments into major expansion in the soybean processing segment, they are not really comparable. So the buyback is really something much smaller by scale, but creating exactly the incentives for the top management ahead of launching two major plans to have the long-term incentive, which will work for the value of the company to grow and its cash flows and dividends to grow. Does the company aim to increase the dividend over time, and is there a long-term policy behind it? Are future dividends expected to be linked to a free cash flow or another metric? What are the main factors that will influence dividend levels in the next five to 10 years? We address these questions on an annual basis really. Our dividend policy is very flexible at the moment and this is done for the purpose. We live in two great uncertainties. First one is that agriculture by its nature is a highly volatile business, the results of which depend on the weather conditions. So this is why we started paying dividends several years ago and we keep it flat despite the company operating during the war. So, we keep paying the dividend, we initiated major investment projects despite the war because we believe that we have very good expertise in the soybean segment and we have good customers and market in Europe and we are ready to expand. But the long-term view for five next 10 years, I suggest we return to this question after the war is over, because we cannot currently discuss while the major uncertainty is still there. What is the current expected timeline for the soy protein concentrate facility and the 400,000 ton crusher? Is there any risk of delay? I will pass the floor to Vyacheslav Chuk, our commercial director, to address this question.

Thank you, Julia. The current expected timeline is not different from that we were taking and we are on the active construction phase with soybean protein concentrate and on the active phase of starting the new crusher. Every time there is a risk, but we don't see as of now any substantial delays. Thank you.

Next question has a financial impact of the week 2024 harvest already been fully reflected is 2025 expected to have better harvest I will I will start answering this question and will ask this year for to Add if there is anything to add here obviously we are we are in the first quarter of this year and the week harvest 2024 largely was reflected in the lower sales volume which everyone has seen in the end of the year and also the first quarter this year compared to the previous one. On 2025, it is quite difficult to forecast the harvest for this year, but we already commented during our annual results presentation in April that there were not very good conditions for the winter planting. It was quite dry autumn. last year winter was also quite dry and spring conditions were also quite difficult. So overall in Ukraine the conditions for the winter crops were not as good as last year and for the spring crops they still remain to be seen. Also in the media you may see that some farmers had to replant crops in some areas of Ukraine. And this is currently early days, but the farmers were combating these adverse weather conditions and replanting the crops. So maybe a question to Lilia whether our first quarter results already reflect. 24 or. Whether the first quarter results already reflect last year's crop and now we are into the new season.

Julia, I have nothing to add. Actually describe everything important.

Okay, great. Next question. Assuming risk with the EU tariffs and trade restrictions, particularly on grain exports, what is the company doing to mitigate the impact? Sugar sales seem to be performing well despite tariff limits. Yes, we will separate this question into grains and then sugar. Sugar we already export globally. Middle East is next closest and sugar deficit region that we are serving together with our sugar producers. On the grain, I will also remind that the majority of these tariffs impact wheat, but again, there is no problem with placing wheat in the global markets, and one can see that the wheat prices are actually rising. there was never any problem with placing soybeans and the products made of it. And in practice, corn supplies were not really restricted from Ukraine. Perhaps Vyacheslav would like to add to this picture.

Julia, thank you very much. I think nothing to add because really with Open Odessa Ports we have the access to different markets. And depending on the price and logistic parity, we serve these markets. That's before the war. Thank you.

Yeah, so Ukraine is returning to pre-war trading conditions. What we expect is that the gradual liberalization of the trade with EU will bring us back the volumes and the benefits that we had in the previous two years. But for now, these are pre-war conditions. Could you please comment why cost sales per ton of sugar salt declined by 20% in the first quarter 25? During last call, management said this season's sugar production costs were flat. Thank you. I'm passing the floor to our CFO.

Thanks, Julia. Yes, you can see the decrease in the cost of sugar in the first quarter, but I think that it will be more correct to estimate this cost for the marketing year because you understand that We started the processing of sugar beet in the fourth quarter of last year. And you can see that the cost was higher in the fourth quarter due to accounting procedures. And in the first quarter, it is lower than it was in the first quarter because we finished the season and then we have some recalculations. That's the first point. The second point is the cost depends on the plants. where sugar was sold this quarter, had been produced. Because all plants produce sugar with different costs. And due to seasonal... due to some logistic issues. We sell sugar from different plants in different quarters. That's why seasonally you can see some differences in cost. But for the total season, we expect that cost will be slightly the same, so almost flat in hryvnia. And you can see the decrease in euro, which will be higher than in hryvnia.

That's it.

Okay.

Thank you, Lilia. Next question regarding what EBITDA will be generated by new investments. So we have two investments. One is the SPC plant, which we started building earlier. And the way to look at our future profitability is that currently we have two products, soybean meal and oil. and soybean meal revenue line will stay as is, but soybean meal will be further processed into a higher protein product. So the margin that one can see now in the soybean processing segment which was at the level of 23-24% in the last three years, we expect it to be higher because we produce a higher value product. With regards to the multi-seed crusher, the way to look at it is to compare the capacity of soybeans processed by our current crusher, which is 230,000 tons. The new crusher will be closer to 400,000, but the products, meal and oil, will be the same, although it will be made of two oil seeds, not just soybeans, but also rapeseeds. In terms of the crush margin, we expect them to be in line with what we have at our current crusher in Poltava region. Without providing EBITDA focus, one can estimate it by looking at the profitability of our current crushing facility.

Oh my God, so many questions dropped into the box.

Just one second, I'll find the next one.

Julia, I think this is the question. Welcome in the general meeting of shareholders on 12 June.

Yes. Welcome in the general meeting of the shareholders on June 12. You proposed change in the remuneration policy in 0.6. Please explain what exactly 0.8 of this meeting means. Will Astarta issue new shares? How many and at what price? um if you compare remuneration policy which was introduced by the company last year to the version that we proposed to vote at the general meeting it is quite simple we extend our long-term incentives based on shares from top management executive directors of the Cyprus listed company to the top management of our subsidiaries. So if previously only executive directors had the benefit of receiving shares as part of their long-term incentives, but we are extending it to dozens of top management, which we believe are crucial for our long-term results. So, this is a major change in our remuneration policy to cover the whole group of the companies. And point eight or other points or the AGM agenda are actually linked to it. As I explained, we would like employee benefit trust to have up to 5% of shares. The beneficiaries of this trust will be several dozen people who run our operations on a daily basis. And these shares can be created through the new issue or can be created by buying back shares from the market. We are still working out technical issues on how to do it, and we would like to have both options on the table because we would like to implement this long-term incentive plan in the nearest future because we have such significant investment projects in the pipeline in the next several years. Next question related on land lease expenditure in the first quarter 2025, why these scores grew by some 40% and what is the current average rent rate in the market for a start-up? I'm passing the floor to our CFO, Pris Lilja.

Thanks, Julia. First, I think that it's better to estimate the lease expenses according to P&L. You can see there that they increased by 12%. And I would like to pay attention that this increase includes the influence except for the rent, the tenor, and the tenor for which we prolong in this period the agreements, first one, and the second, which contract extension fee were paid during this period for such extensions. 40%, which you mentioned here, it is the increase in cash flow payments. But it was caused only by decrease of payments during the first quarter of last year. And It is not something that can be used for estimations of real lease expenditures. I think that we cannot say here the average land rate. I can tell only that the increase of this rate is lower than 12% increase of interest expenses, which you can see in our P&L for the first quarter this year.

Okay, thank you. Concerning point eight, which will be voted in the annual meeting, how would be set prices for new shares? Can you set assumption for new remuneration policy in a startup? If we're talking about potential to issue new shares up to 5% and put them into employee benefit trust, we are still working out technical issues how we do it. We expect the roadmap for creating EBT to be presented by our advisors to the board and for the board to decide on the mechanics. But one thing we can say at this point of time, we do not expect these shares to be freely traded. They really are to be put into the trust arrangement. and for this trust to be a long-term vehicle for long-term incentive of our management. Next question. Could you comment substantial reduction of selling distribution expenses versus last year?

I would like to pass the floor to Vyacheslav Chuk.

Julia, thank you very much. I think that we can talk that a lot of this allocates to changes in routes because in first quarter, for example, for sugar in 2024, we're delivering sugar to European market by land logistic. And in first quarter of 2025, more sugar were exported by sea routes. to global markets, so expenses were lower on that deliveries. Thank you.

Thank you. Next question. Will there be a restricted period for the shares granted to the management? Why not phantom shares? Yeah, phantom shares is something that we also considered, but we concluded that an employee benefit trust is the option that links the long-term interest of our shareholders management to the long-term result. And these shares, as I explained, will not be freely traded. They will be in the long-term trust arrangement for the benefit of management. These shares will receive dividends, et cetera. So we are not talking about a restricted period, but we believe they will be there in the foreseeable future. The next question is quite a difficult one. Do we expect peace? And if so, when? I think we are not in position to comment here, unfortunately. We follow the discussion. which is in public domain regarding various stakeholders in the peacemaking process, EU, US, and intermediary countries. So, unfortunately, we are not in position to comment or know more that is in the public domain. Next question, would you please also elaborate on the counting effects that affected sugar cost sales in fourth quarter 24? Why is it elevated? Thank you. We are talking about fourth quarter results, not first quarter results. I would like to ask our CFO.

Julia, I will try to explain it in several words. It is only about sugar yields during the season. Until the end of the season, the cost is calculated by expected sugar yields. That's it. And when we have the actual results, we calculate it according to actual results of sugar yields of every plant. That's it.

Okay. Last question, I hope. Does a company comply with No, it's not. Does a company comply with the EU rules on deforestation-free supply chains, EUDR? Yes, of course. Not just the company, the whole country has to meet the requirements of EUDR. This relates to our soybeans and soybean products, but really it's such an important topic on sustainability that majority of our off-takers would like to see deforestation-free certification. But luckily enough, we practiced regenerative agriculture which implies no deforestation for already quite some time. And we can prove traceability and what is required to meet EUDR. We have all our products which are exported, especially to the EU, certified under ISCC standard. And ISCC at the beginning covered mostly carbon footprint. But now there is a special model created by the certification for deforestation. So we hope that extended or add-on EUDR module will satisfy all our off-takers and the regulators from 1st of January. what is the processing capacity of soy protein concentrate facility. Currently, we produce 150,000 tons give and take of soybean meal at our current crusher, and this will be converted into 100,000 tons of soybean concentrate, which is higher protein content, but from the same beans. So this is the projected capacity. If you don't expect an end to this terrible war, why are you investing such a large amount in a new factory that can be destroyed by Russian drones? I will address this question. In a way that unfortunately with drones or Russian missiles, anything can be hit by them. But Ukraine learned to live this kind of risk. We run our crusher. around the clock and it is in the Poltava region but the new crusher that we plan to build in the western part of our operations is further away if it matters but from practical point of view it doesn't matter we have successful projects industrial cluster operating in the Poltava region now. We have several sugar plants, we have grain storage, we have soybean crusher, and we have a biogas facility which feeds biogas into a crusher and sugar mill. We have a similar facility potential for similar facility set up in the western region of operations because we already have two sugar plants there we will build a multi-seat crusher we have uh half of our land bank over 100 000 hectares also there we grow some beans there and rapeseeds so we Currently, for example, do not process rape seeds internally, but once we build the multi-seed crusher, we'll be doing it ourselves. So what we are doing, we are replicating the success of the Poltava cluster, which is operating seamlessly under the war conditions. in another part of our operations. And this is the confidence in Ukrainian agriculture, in the country, and of course into our management employees. I can see several thank you messages, so I hope that we answered majority of your questions. Feel free to drop us an email if you would like to have one-on-one discussion. And with this, I would like to complete this call. Thank you very much. Have a nice afternoon.