REG - MHP SE - Financial Results for Q3 and 6M 2024
06/09/2024 08:15
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RNS Number : 2275D MHP SE 06 September 2024
06 September 2024, Limassol, Cyprus
MHP SE
Financial Results for the Second Quarter and Six Months ended 30 June 2024
MHP SE (LSE:MHPC), the parent company of a leading international
agro-industrial group with headquarters in Ukraine, today announces its
audited results for the second quarter and six months ended 30 June 2024.
Hereinafter, MHP SE and its subsidiaries are referred to as "MHP", "The
Company" or "The Group".
WAR IN UKRAINE
Whilst the ongoing War continues to impact MHP's operations, the Company has
been able to adapt to the challenges of operating in wartime.
As of today, over 3,000 employees have been mobilised to the Armed Forces of
Ukraine. Supporting our mobilised colleagues and re-integrating our veterans
back into civilian life remains a key part of our strategy and a focus of
specific Company programmes. The safety of our employees remains our primary
concern as MHP seeks to maintain continuity in its business operations,
overcoming disruptions and solving problems caused by the War. Over the last
2.5 years, we have learned how to react quickly to unforeseen external factors
and swiftly adapt to new business conditions.
Irregular and frequent drone and rocket attacks against civilian, energy and
other infrastructure targets have resulted in a challenging and disruptive
operational environment, leading to unforeseen war-related costs. In 6M 2024,
war-related costs and losses amounted to US$ 26 million (6M 2023: US$ 13
million).
MHP continues to invest in alternative energy sources - to mitigate
operational disruptions caused by Russia's targeting of Ukraine's national
grid and energy sector. If energy disruptions lead to a complete black out in
Ukraine, MHP will not be able to operate at full capacity and its operations
will face a significant increase in production cost, which will negatively
impact financial results.
MHP would like to inform its stakeholders that at the date of publication, all
currently operational Company's production facilities in Ukraine continue to
operate at close to full capacity and none (out of operational facilities) of
the Company's directly owned assets have suffered significant physical damage
from the recent Russian bombing terror.
Unfortunately, as a result of shelling by the occupying forces on May 17, in
Odesa region, a warehouse partly leased by the Company to store frozen MHP
chicken meat products was completely destroyed, resulting in the loss of
poultry products worth around US$ 7 million.
Considering the fast moving nature of the War, MHP can give no concrete
assurances that its production facilities and associated infrastructure will
not be targeted or adversely affected in the future. In the event of future
attacks the Group is fully prepared to respond immediately - taking all
necessary actions to protect its employees and to rebuild, restore and restart
production in the shortest time possible.
Despite the ongoing challenges, our commitment to ensuring sustainable
development remains at the heart of all our economic activities. As a
pioneering and innovative leader in biogas and bioenergy fields in Ukraine,
MHP is constantly working on boosting our energy independence and resilience
by integrating more renewable energy sources into our energy mix.
The Ukrainian agricultural sector has been severely impacted by the War. As a
result, MHP is a crucial 'cog' in maintaining both domestic &
international food security. Despite the challenges created by the War, MHP is
determined to continue supporting the Ukrainian economy - over the first half
of 2024, MHP enterprises transferred almost US$ 90 million (UAH 3.7 billion),
40% more y/y, to the state budget in the form of taxes, contributions and
fees.
MHP remains incredibly grateful for the support and patience of our investors
who have supported the Group as it navigated the most difficult period in
Ukraine's history.
CHANGE IN PRESENTATION OF SEGMENT INFORMATION
To accurately reflect the diverse nature of the Group's business operations
and improve disclosure, MHP has, since Q3 2023, implemented changes to its
presentation of business segment information, including:
· the introduction of a new Vegetable Oil Operations
Segment, which represents production and sales of vegetable oil and related
products. In Q2 2023 and 6M 2023, these activities were included in the
Poultry and Related Operations Segment as by-products of mixed fodder
production for poultry;
· the inclusion of meat processing and other meat
(previously reported within the Meat Processing and Other Agricultural
Operations Segment) in the Poultry and Related Operations Segment, given that
the meat processing and other meat operations represent less than 10% of the
Group`s revenue and have similar characteristics to the poultry operations;
and
· combining grain-growing operations (presented as a
separate segment in Q2 2023 and 6M 2023) and milk cattle farming (previously
included within the Meat Processing and Other Agricultural Operations Segment)
into a revised reportable segment called Agriculture Operations.
The corresponding segment information for the Q2 2023 and 6M 2023 has been
restated to ensure comparability. Overviews of each of the Business Segments
are provided below ahead of the respective Segment's financial and operational
results.
OPERATIONAL HIGHLIGHTS
Q2 2024
· Poultry meat production volume in Ukraine remained
stable y/y at 187,414 tonnes (Q2 2023: 181,690 tonnes). Poultry meat
production volumes of the European Operating Segment (PP) was up to 35,460
tonnes (Q2 2023: 33,306 tonnes).
· MHP Ukraine's average poultry meat price remained
stable at US$ 1.97 per kg (Q2 2023: US$ 1.97 per kg) excluding VAT. The
average price of poultry meat produced by PP remained almost unchanged y/y at
EUR 3.54 per kg (Q2 2023: EUR 3.64 per kg).
· Poultry meat exports from Ukraine decreased by 12% to
87,799 tonnes (Q2 2023:100,234 tonnes).
6M 2024
· Poultry meat production volume in Ukraine remained
stable y/y at 365,901 tonnes (6M 2023: 359,332 tonnes). Poultry meat
production volumes at PP increased by 7% y/y to 69,418 tonnes (6M 2023: 65,087
tonnes).
· MHP Ukraine's average poultry meat price remained
almost unchanged y/y at US$ 1.98 per kg (6M 2023: US$ 1.92 per kg) excluding
VAT. The average price of poultry meat produced by PP also remained almost
unchanged y/y at EUR 3.49 per kg (6M 2023: EUR 3.58 per kg).
· Poultry meat exports from Ukraine decreased by 12% y/y
to 185,854 tonnes (6M 2023: 212,106 tonnes).
FINANCIAL HIGHLIGHTS
Q2 2024
· Revenue decreased by 5% y/y to US$ 770 million (Q2
2023: US$ 809 million).
· Export revenue remained stable at US$ 503 million, 65%
of total revenue (Q2 2023: US$ 508 million, 63% of total revenue).
· Operating profit of US$ 108 million increased by 59%
y/y and operating margin increased to 14% y/y (Q2 2023: US$ 68 million and 8%
respectively).
· Adjusted EBITDA (net of IFRS 16) increased by 44% y/y
at US$ 145 million (Q2 2023: US$ 101 million) primarily driven by improved
performance in Agriculture operations; adjusted EBITDA margin (net of IFRS 16)
also increased to 19% y/y (Q2 2023: 12%).
· Net profit increased to US$ 29 million, compared to US$
17 million for Q2 2023.
6M 2024
· Revenue decreased to US$ 1,489 million, down by 4% y/y
(6M 2023: US$ 1,555 million).
· Export revenue remained stable at US$ 954 million y/y,
representing 64% of total revenue (6M 2023: US$ 973 million, 63% of total
revenue).
· Operating profit increased to US$ 192 million, up by
26% y/y (6M 2023: US$ 152 million) and operating margin increased to 13% (6M
2023: 10%).
· Adjusted EBITDA (net of IFRS 16) increased by 21% y/y
to US$ 264 million (6M 2023: US$ 218 million) mainly due to better results
delivered by Agriculture operations; adjusted EBITDA margin (net of IFRS 16)
also increased to 18% from 14%.
· Net profit of US$ 45 million (6M 2023: US$ 67 million),
primarily reflecting a US$ 81 million non-cash foreign exchange loss in 6M
2024 compared with US$ 5 million foreign exchange gain in 6M 2023.
FINANCIAL OVERVIEW
(in mln. US$, unless indicated otherwise) Q2 2024 Q2 2023 % change(1)) 6M 2024 6M 2023 % change(1))
Revenue 770 809 -5% 1,489 1,555 -4%
IAS 41 standard gain/(loss) 21 (39) 154% 31 (76) 141%
Gross profit 208 150 39% 378 294 29%
Gross profit margin 27% 19% 8pps 25% 19% 6pps
War-related expenses (16) (7) 129% (26) (13) 100%
Operating profit 108 68 59% 192 152 26%
Operating profit margin 14% 8% 6pps 13% 10% 3pps
Adjusted EBITDA 153 109 40% 280 233 20%
Adjusted EBITDA margin 20% 13% 7pps 19% 15% 4pps
Adjusted EBITDA (net of IFRS 16) 145 101 44% 264 218 21%
Adjusted EBITDA margin (net of IFRS 16) 19% 12% 7pps 18% 14% 4pps
Net profit /(loss) 29 17 71% 45 67 -33%
Net profit/(loss) margin 4% 2% 2pps 3% 4% -1pps
(1)) pps - percentage points
Average official FX rate for Q2: UAH/US$ 39.85 in 2024 and UAH/US$ 36.57 in
2023.
Average official FX rate for 6M 2024 UAH/US$ 39.01 and for 6M 2023 UAH/US$
36.57.
DIAL-IN DETAILS
MHP's management will host a conference call for investors and analysts
followed by Q&A on the day of the results.
The dial-in details are:
Time: 13.00 London / 15.00
Kyiv / 08.00 New York
Title: Financial results
for Q2 2024 and 6M 2024
UK: +44 203 984 9844
Ukraine: +380 89 324 0624
USA: +1 718 866 4614
PIN code: 645982
To follow the presentation with the management team, please use the following
link:
https://mm.closir.com/slides?id=645982
(https://mm.closir.com/slides?id=645982)
For Investor Relations enquiries, please contact:
Anastasia Sobotiuk (Kyiv) +38 050 339
29 99
+357 99 76 71 26
a.sobotyuk@mhp.com.ua (mailto:a.sobotyuk@mhp.com.ua)
Segment Performance
Poultry and processed meat and related operations
Poultry meat
(in tonnes, unless indicated otherwise) Q2 2024 Q2 2023 % change y/y²()) Q1 2024 % change q/q²()) 6M 2024 6M 2023 % change²())
Sales volume of poultry meat(1)) 163,128 174,408 -6% 164,087 -1% 327,215 357,529 -8%
Export sales 87,799 100,234 -12% 98,055 -10% 185,854 212,106 -12%
Domestic sales 75,329 74,174 2% 66,032 14% 141,361 145,423 -3%
Portion of export sales, % 54% 57% -3pps 60% -6pps 57% 59% -2pps
Average price per 1 kg net of VAT, USD 1.97 1.97 0% 1.99 -1% 1.98 1.92 3%
(¹)) Poultry meat consists of raw and unprocessed parts of chicken, meat
after minor processing, meat after grinding and chicken meat with the
addition of spices (marinated meat)
(¹)) pps - percentage points
The total volume of poultry meat sold to third parties in 6M 2024 decreased by
8% y/y to 327,215 tonnes (6M 2023: 357,529 tonnes) mainly as a result of a
significant decrease in export sales in 6M 2024.
Processed poultry meat
(in tonnes, unless indicated otherwise) Q2 2024 Q2 2023 % change y/y²()) Q1 2024 % change q/q²()) 6M 2024 6M 2023 % change²())
Sales volume of processed meat(1)) 10,671 8,992 19% 9,715 10% 20,386 17,163 19%
Export sales 3,045 900 238% 2,429 25% 5,474 1,961 179%
Domestic sales 7,626 8,092 -6% 7,286 5% 14,912 15,202 -2%
Portion of export sales, % 29% 10% 19pps 25% 4pps 27% 11% 16pps
Average price per 1 kg net of VAT, USD 2.89 2.76 5% 2.91 -1% 2.90 2.80 4%
(¹)) Processed meat consists of meat after significant processing (added
supplements like vegetables or breading), pre-cooked and ready-to-eat meat
²()) pps - percentage points
Total sales volume of processed poultry meat increased by 19% y/y to 20,386
tonnes in 6M 2024 compared to 17,163 tonnes in 6M 2023 due to the rise in
production and the further transformation into a culinary company. The average
price increased by 4% to USD$ 2.90 per kg in 6M 2024 (6M 2023: USD$ 2.80 per
kg) as a result of a change in sales product mix.
Financial result and trends
(in mln. US$, unless indicated otherwise) Q2 2024 Q2 2023 % change y/y(1)) Q1 2024 % change q/q(1)) 6M 2024 6M 2023 % change(1))
Revenue 390 416 -6% 398 -2% 788 831 -5%
- Poultry meat²()) 323 359 -10% 336 -4% 660 719 -8%
- Processed meat 31 25 24% 28 11% 58 48 21%
- Complementary products and other sales 36 32 13% 34 6% 70 64 9%
IAS 41 standard gain 10 10 0% 12 -17% 22 13 69%
Gross profit 103 120 -14% 114 -10% 217 212 2%
Gross margin 26% 29% -3pps 29% -3pps 28% 26% 2pps
War-related expenses (10) (4) 150% (5) 100% (15) (8) 88%
Adjusted EBITDA 72 100 -28% 87 -17% 159 178 -11%
Adjusted EBITDA margin 18% 24% -6pps 22% -4pps 20% 21% -1pps
Adjusted EBITDA (net of IFRS 16) 71 99 -28% 86 -17% 157 177 -11%
Adjusted EBITDA margin (net of IFRS 16) 18% 24% -6pps 22% 20% 21% -1pps
-4pps
(1)) pps - percentage points
(²)) Revenue from poultry meat includes sales of offal, which doesn't include
in table regarding sales volume and prices of poultry meat
In 6M 2024, revenue decreased by 5% y/y as a result of the sales volume
decrease of poultry meat mainly on export markets, partly offset by slightly
higher prices.
Gross profit in 6M 2024 at US$ 217 million remained mainly unchanged y/y,
while adjusted EBITDA (net of IFRS 16) decreased to US$ 157 million mainly as
a result of increase in selling, general and administrative expenses as well
as higher war related expenses.
Vegetable Oil Operations
Vegetable oil
(in tonnes, unless indicated otherwise) Q2 2024 Q2 2023 % change y/y Q1 2024 % change q/q 6M 2024 6M 2023 % change
Sales volume of sunflower oil 118,830 168,677 -30% 110,440 8% 229,270 245,878 -7%
Sales volume of soybean oil 12,071 13,630 -11% 11,747 3% 23,818 28,030 -15%
In 6M 2024 MHP's sales of sunflower oil decreased by 7% y/y compared to 6M
2023 to 229,270 tonnes, mainly driven by an decrease in production of
sunflower cake.
Sales of soybean oil decreased by 15% y/y to 23,818 tonnes in 6M 2024,
compared with 28,030 tonnes in 6M 2023 but were stable compared to the
previous quarter.
Financial result and trends
(in mln. US$, except margin data) Q2 2024 Q2 2023 % change y/y(1)) Q1 2024 % change q/q(1)) 6M 2024 6M 2023 % change(1))
Revenue 120 216 -44% 116 3% 236 345 -32%
- Vegetable oil 115 210 -45% 112 3% 227 326 -30%
- Related products(2)) 5 6 -17% 4 25% 9 19 -53%
Gross profit 15 28 -46% 13 15% 28 49 -43%
Gross margin 13% 13% 0pps 11% 2pps 12% 14% -2pps
Adjusted EBITDA 14 27 -48% 13 8% 27 50 -46%
Adjusted EBITDA margin 12% 13% -1pps 11% 1pps 11% 14% -3pps
Adjusted EBITDA (net of IFRS 16) 14 26 -46% 12 17% 27 48 -44%
Adjusted EBITDA margin (net of IFRS 16) 12% 12% 0pps 10% 2pps 11% 14% -3pps
(1)) pps - percentage points;
(2)) Related products consist of meal, cake, husk.
The segment's revenue in 6M 2024 decreased by 32% y/y to US$ 236 million,
resulting in lower adjusted EBITDA (net of IFRS 16) of US$ 27 million compared
to US$ 48 million in 6M 2023 as a result of decline in oil prices.
Agriculture operations
Winter crops (wheat, rapeseeds and other) harvesting is complete on around
93,500 ha of land:
- rapeseeds - around 34,300 ha with around 3.6 t/ha yield;
- wheat - around 39,700 ha with around 7.2 t/ha yield.
Yields of spring crops are expected to be better than in 2023 due to favorable
weather conditions in Ukraine. In 2024, MHP is planning to harvest around
344,700 ha of land.
Financial result and trends
(in mln. US$, unless indicated otherwise) 6M 2024 6M 2023 % change
Revenue 184 112 64%
IAS 41 standard loss 13 (86) 115%
Gross profit 61 (32) 291%
War-related expenses (1) - 100%
Adjusted EBITDA 82 (15) 647%
Adjusted EBITDA (net of IFRS 16) 69 (26) 365%
Agriculture Operations Segment's revenue in 6M 2024 amounted to US$ 184
million compared to US$ 112 million in 6M 2023. The increase was mainly
attributable to higher volumes of corn sales on the export market.
For 6M 2024, the IAS 41 standard showed a gain of US$ 13 million, in contrast
to a loss of US$ 86 million in 6M 2023. This substantial loss in 2023 was
mainly due to derecognition of the revaluation of agriculture produce, which
was carried at a fair value higher than the production cost and had been
consumed and sold. In 2024, the difference between fair value and cost is much
smaller, so this effect is not material.
In the first half of 2023, MHP faced a significant negative revaluation of
crops in the fields, which led to a loss under IAS 41 and adversely impacted
our EBITDA. However, the first half of 2024 marked a positive shift when
rising grain and milk prices have increased the fair value of biological
assets, boosting segment performance.
In addition, a substantial portion of the positive EBITDA for the first half
of 2024 is attributable to agricultural produce from the previous year's
harvest. This is due to the use of higher current market prices for
intersegment and external sales, compared to the lower prices applied to the
previous year's harvest.
European Operating Segment (PP)
Poultry(1)) Q2 2024 Q2 2023 % change y/y Q1 2024 % change q/q 6M 2024 6M 2023 % change
Sales volume, third parties tonnes 22,405 20,895 7% 21,102 6% 43,507 39,111 11%
Price per 1 kg net VAT, EUR 3.54 3.64 -3% 3.44 3% 3.49 3.58 -3%
(¹)) Poultry meat consists of raw and unprocessed parts of chicken, meat
after minor processing, meat after grinding and chicken meat with the
addition of spices (marinated meat)
In 6M 2024, poultry meat sales of the European Operating Segment increased by
11% to 43,507 tonnes. This growth was driven by an increase in sales in
Slovenia, Bosnia and Herzegovina, and Serbia, as a result of strategic focus
on expanding market presence and boosting sales in these regions.
Processed meat(1)) Q2 2024 Q2 2023 % change y/y Q1 2024 % change q/q 6M 2024 6M 2023 % change
Sales volume, third parties tonnes 11,963 11,291 6% 11,397 5% 23,360 22,013 6%
Price per 1 kg net VAT, EUR 3.37 3.33 1% 3.37 0% 3.37 3.32 2%
(1)) includes sausages and convenience foods
Meat processing product sales were up by 6% y/y to 23,360 tonnes in 6M 2024
(6M 2023: 22,013 tonnes) due to increase in production volumes of sausages and
convenience products.
Financial result and trends
(in mln. US$, except margin data) Q2 2024 Q2 2023 % change y/y(1)) Q1 2024 % change q/q(1)) 6M 2024 6M 2023 % change(1))
Revenue 145 142 2% 136 7% 281 267 5%
IAS 41 standard gains (1) (5) -80% (3) -67% (4) (3) 33%
Gross profit 42 33 27% 30 40% 72 65 11%
Gross margin 29% 23% 6pps 22% 7pps 26% 24% 2pps
Adjusted EBITDA 29 20 45% 19 53% 48 39 23%
Adjusted EBITDA margin 20% 14% 6pps 14% 6pps 17% 15% 2pps
Adjusted EBITDA (net of IFRS 16) 29 19 53% 18 61% 47 38 24%
Adjusted EBITDA margin 20% 13% 7pps 13% 7pps 17% 14% 3pps
(net of IFRS 16)
(1)) pps - percentage points.
European Operating Segment's revenue in 6M 2024 increased by 5% y/y to US$ 281
million (6M 2023: US$ 267 million), due to the increase in sales volumes of
both poultry meat and processed meat.
Adjusted EBITDA (net of IFRS 16) of US$ 47 million for 6M 2024 increased
compared with US$ 38 million for 6M 2023 due to higher gross profit result.
Current Group cash flow
(in mln. US$) Q2 2024 Q2 2023 6M 2024 6M 2023
Cash from operations 77 108 167 206
Change in working capital (36) 70 (24) 68
Net Cash from operating activities 41 178 143 274
Cash used in investing activities (100) (66) (165) (101)
Including:
CAPEX(1)) (77) (53) (134) (92)
Acquisition of subsidiaries and investments in associates (16) - (16) -
Cash from financing activities (40) 32 (113) 18
Total change in cash(2)) (99) 144 (135) 191
(1))Calculated as cash used for Purchases of property, plant and equipment
plus cash used for purchases of other non-current assets
(2))Calculated as Net Cash from operating activities plus Cash used in
investing activities plus Cash used in financing activities
Cash flow from operations before changes in working capital for 6M 2024
decreased to US$ 167 million (6M 2023: US$ 206 million), mainly as a result of
the lower profit before tax.
The investments in working capital during 6M 2024 compared to release during
6M 2023 was mainly attributed to significant release of inventories of
sunflower seeds and vegetable oil during 6M 2023 from the unusually high
levels at the end 2022, caused by disrupted logistics due to War activities,
that has partly recovered afterward due to the Grain deal and diversification
of delivery routes by the Group.
In 6M 2024 total CAPEX amounted to US$ 134 million, marking a significant
increase from US$ 92 million in 6M 2023. This rise is primarily driven by
substantial investments in several key areas, including extensive maintenance
and modernization of existing facilities and the construction of new bioenergy
production facilities. Additional investments were directed toward
margin-enhancing projects, advancing our culinary strategy, and meeting
evolving compliance requirements. These targeted expenditures are in line with
MHP's broader goals of sustainability, efficiency, and long-term growth.
In the first half of 2024, the Group strategically expanded its presence in
the agricultural and food sectors through key acquisitions and partnerships.
The Group acquired 100% of Toni d.o.o. in Croatia, enhancing its grain supply
chain stability, with a net cash outflow of USD 11 million. Additionally, the
Group invested USD 4 million for a 24.9% stake in "Ukrainskyi Miasnyi Khutir"
in Ukraine and USD 2 million in MHP Desert Hills for Poultry Company in Saudi
Arabia, reflecting its commitment to diversifying its operations and securing
new growth opportunities.
Debt Structure and Liquidity
(in mln. US$) 30 June 2024 30 June 2023 31 December 2023
Total Debt(1) 2)) 1,474 1,539 1,537
LT Debt(1)) 1,365 1,007 1,141
ST Debt (1)) 190 725 499
Trade credit facilities(2)) (81) (193) (103)
Cash and bank deposits (294) (502) (436)
Net Debt(1)) 1,180 1,037 1,101
LTM Adjusted EBITDA(1)) 490 449 445
Net Debt / LTM Adjusted EBITDA(1)) 2.41 2.31 2.47
(1) ) Net of IFRS 16 adjustments: as if any lease that would have been
treated as an operating lease under IAS 17 as was in effect before the 1
January 2019, is treated as an operating lease for purposes of this
calculation. In accordance with covenants in MHP's bond and loan agreements,
these data exclude the effects of IFRS 16 on accounting for operating leases.
(2)) Indebtedness under trade credit facilities that is required to be
repaid within 12 months of drawdown should be excluded for purposes of this
calculation
As of 30 June 2024, MHP's cash and cash equivalents amounted to US$ 294
million, of which US$ 123 million was held by the Group's subsidiaries outside
Ukraine.
The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 2.41 as of 30
June 2024, well below the limit of 3.0 defined in the Eurobond agreement.
As of 30 June 2024, the share of long-term debt in the total outstanding debt
was 93%.
Notes to Editors:
About MHP
MHP SE is the parent company of a leading international food & agrotech
group with headquarters in Ukraine and also in the Balkans (Perutnina Ptuj
Group).
Ukraine: MHP has the greatest market share and the highest brand recognition
for its products. MHP owns and operates each of the key stages of chicken
production processes, from feed grains and fodder production to egg hatching
and grow out to processing, marketing, distribution and sales (including
through MHP's franchise outlets). Vertical integration reduces MHP's
dependence on suppliers and its exposure to increases in raw material prices.
In addition to cost efficiency, vertical integration also allows MHP to
maintain strict biosecurity and to control the quality of its inputs and the
resulting quality and consistency of its products through to the point of
sale. To support its sales, MHP maintains a distribution network consisting of
nine distribution and logistical centers, within major Ukrainian cities. MHP
uses its trucks for the distribution of its products, which Management
believes reduces overall transportation costs and delivery times.
MHP also has a leading grain cultivation business growing corn to support the
vertical integration of its chicken production and increasingly other grains,
such as wheat and rape, for sale to third parties. MHP leases agricultural
land located primarily in the highly fertile black soil regions of Ukraine.
The Balkans: Perutnina Ptuj is a leading poultry and meat-processing producer
in the Balkans, has production assets in four Balkan countries: Slovenia,
Croatia, Serbia, Bosnia and Herzegovina; owns distribution companies in
Austria, North Macedonia and Romania and supplies products to 15 countries in
Europe. Perutnina Ptuj is a vertically integrated company across all stages of
chicken meat production - feed, hatching eggs production and hatching,
breeding, slaughtering, sausages and further poultry processing production.
MHP trades on the London Stock Exchange under the ticker symbol MHPC since
2008.
Forward-Looking Statements
This press release might contain forward-looking statements that refer to
future events or forecast financial indicators for MHP SE. Such statements do
not guarantee that these are actions to be taken by MHP SE in the future, and
estimates can be inaccurate and uncertain. Actual final indicators and results
can considerably differ from those declared in any forward-looking statements.
MHP SE does not intend to change these statements to reflect actual results.
MHP SE AND ITS SUBSIDIARIES
Interim condensed consolidated Financial Statements
As of and for the three-month and six-month period
ended 30 June 2024
CONTENTS
STATEMENT OF MEMBERS OF THE BOARD OF
DIRECTORS................................................................. 3
MANAGEMENT
REPORT........................................................................................................................
4
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL
INFORMATION..................................................................................................................................................6
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
THREE-MONTH AND SIX-MONTH PERIOD ENDED 30 JUNE 2024
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE
INCOME..............................................................................................................................................................
7
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION..................................... 8
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY..................................... 9
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS............................................... 10
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................. 11
1. Corporate
information.....................................................................................................................
11
2. Basis of preparation and accounting
policies...................................................................................
12
3. Changes in the group
structure........................................................................................................
15
4. Segment
information......................................................................................................................
16
5.
Revenue........................................................................................................................................
19
6. Profit for the
period........................................................................................................................
20
7. Property, plant and
equipment........................................................................................................
20
8. Investments in
associates...............................................................................................................
20
9. Inventories, agricultural produce and biological
assets..................................................................... 21
10. Shareholders'
equity....................................................................................................................
21
11. Bank
borrowings..........................................................................................................................
22
12. Bonds
issued..............................................................................................................................
24
13. Related party balances and
transactions.......................................................................................
26
14. Operating environment in
Ukraine..................................................................................................
27
15. Contingencies and contractual
commitments.................................................................................
28
16. Fair value of financial
instruments.................................................................................................
29
17. Risk management
policy..............................................................................................................
29
18. Subsequent
events......................................................................................................................
31
19. Authorization of the interim condensed consolidated financial
statements....................................... 31
STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS
In accordance with Article 10 of the Transparency Requirements (Securities for
Trading on Regulated Market) Law 190(l)/2007 ("Law"), as amended, the members
of the Board of Directors of MHP SE confirm that to the best of our knowledge:
(a) The interim condensed consolidated financial statements for
the period from 1 January 2024 to
30 June 2024 are presented on pages 7 to 31:
i. were prepared in accordance with IAS 34 Interim Financial Reporting
as adopted by the European Union and in accordance with the provisions of
Article 10 (4) of the Law, and
ii. give a true and fair view of the assets and liabilities, the
financial position, and the profits of MHP SE and the businesses that are
included in the interim condensed consolidated financial statements as a whole
and
(b) the interim management report gives a fair review of the
information required under Article 10 (6) of the Law.
6 September 2024
Members of the Board of Directors:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
Director
John Clifford Rich
Director
Philip
J Wilkinson
Director
Andriy Bulakh
Director
Christakis
Taoushanis
Director
Oscar Chemerinski
MANAGEMENT REPORT
Key financial highlights
During the six-month period ended 30 June 2024, consolidated revenue decreased
by 4% to USD 1,489 million, compared to USD 1,555 million for the six-month
period ended 30 June 2023. Export sales for the six-month period ended 30 June
2024 constituted 64% of total revenue at USD 954 million, compared to USD 973
million and 63% of total revenue for the six-month period ended 30 June 2023.
The revenue decrease is mainly attributed to reduced contributions from both
Poultry and Vegetable Oil segments, but it was partly compensated by higher
Agriculture revenue. The decline in Poultry and Vegetable Oil revenue is
mainly due to a decrease in volumes of chicken meat and oils, while higher
sales volumes and recovery of prices for grains in 2024 positively impacted
Agriculture revenue.
Gross profit increased by 29% to USD 378 million for the six-month period
ended
30 June 2024 compared to USD 294 million for the six-month period ended 30
June 2023. This growth was driven mainly by higher gross profit generated by
Agriculture operations and partial offset by lower results derived from
Poultry operations and Vegetable oil segments. Increase of grain and oilseeds
prices, leading to higher revaluation of crops in fields in the reporting
period, favourably contributed to the results of Agriculture operations.
Operating profit increased by 26% to USD 192 million for the six-month period
ended 30 June 2024 compared to USD 152 million for the six-month period ended
30 June 2023. This primarily stems from a rise in gross profit partly offset
by heightened payroll-related costs within the selling, general, and
administrative expenses as well as war-related costs in other operating costs.
Profit for the six-month period ended 30 June 2024 amounted to USD 45 million,
compared to USD 67 million for the six-month period ended 30 June 2023. The
decrease is mainly due to depreciation of UAH in relation to foreign
currencies during the reporting period, which resulted in a net foreign
exchange loss of USD 81 million for the six-month period ended 30 June 2024
compared to a net gain of USD 5 million for the six-month period ended 30 June
2023.
Dividends
In view of continuing War-related uncertainties and the resulting need to
preserve liquidity to support the Company's ongoing business operations, the
Directors decided not to declare a final dividend for the 2023 financial year.
No interim dividend has been declared for the six-month period ended 30 June
2024.
Risks and uncertainties
Russian invasion
On 24 February 2022, Russian forces began a military invasion of Ukraine
resulting in a full-scale war across the Ukrainian State (the "War"). Focused
on continuity and sustainability of its business and the preservation of value
for all stakeholders, the Group has concentrated on two key areas: the safety
of its employees and the food security of the country by prioritizing a
continuous supply of food to the population of Ukraine.
As a result of the War, MHP has experienced a number of significant
disruptions and operational issues within its business, which are described in
detail in Note 14 Operating environment. Detailed information on this matter
can also be found on pages 202 to 203 of the 2023 Annual Report which is
available at mhp.com.cy (https://mhp.com.ua/en/mhp-se/financial-reports) .
Management believes that the Group has adequate resources to continue in
operational existence for the foreseeable future. However, due to the
currently unpredictable effects of the ongoing War on the significant
assumptions underlying management forecasts, Management concludes that a
material uncertainty exists, which may cast significant doubt about the
Group's ability to continue as a going concern and, therefore, the Group may
be unable to realize its assets and discharge its liabilities in the normal
course of business.
Other risks and uncertainties
There are a number of potential risks and uncertainties, which could have a
material impact on the Group's performance over the remaining six months of
the financial year and could cause actual results to differ materially from
expected and historical results. The directors do not consider that the
principal risks and uncertainties have changed since the publication of the
2023 Annual Report on 2 May 2024. A detailed explanation of the risks, and how
the Group seeks to mitigate them, can be found on pages 204 to 207 of the
Annual Report which is available at mhp.com.cy
(https://mhp.com.ua/en/mhp-se/financial-reports) .
6 September 2024
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION
To the members of MHP SE
Introduction
We have reviewed the interim condensed consolidated financial statements of
MHP SE (the "Company"), and its subsidiaries (collectively referred to as "the
Group") on pages 7 to 31, which comprise the interim condensed consolidated
statement of financial position as at 30 June 2024, and the interim condensed
consolidated statement of profit or loss and other comprehensive income for
the three-month and six-month periods then ended, and the interim condensed
consolidated statements of changes in equity and cash flows for the six-month
period then ended and selected explanatory notes. Management is responsible
for the preparation and presentation of these interim condensed consolidated
financial statements in accordance with International Financial Reporting
Standard IAS 34 Interim Financial Reporting as adopted by the European Union.
Our responsibility is to express a conclusion on these interim condensed
consolidated financial statements based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410 "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity". A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim condensed consolidated financial
statements are not prepared, in all material respects, in accordance with
International Financial Reporting Standard IAS 34 Interim Financial Reporting
as adopted by the European Union.
Emphasis of Matter - Material Uncertainty Related to Going Concern
We draw attention to Note 2 to the interim condensed consolidated financial
statements, indicates that the Group's operations are negatively affected by
the Russian Federation`s military invasion of Ukraine, with the magnitude of
further developments or the timing of their cessation being uncertain. These
conditions, along with other matters as set forth in Notes 2 and 14 indicate
the existence of a material uncertainty that may cast significant doubt on the
Group's ability to continue as a going concern. Our conclusion is not modified
in respect of this matter.
Andreas Avraamides
Certified Public Accountant and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Nicosia, Cyprus
6 September 2024
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the three-month and six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
Six-month period Three-month period
ended 30 June
ended 30 June
Notes 2024 2023 2024 2023
Revenue 4, 5 1,489 1,555 770 809
Net change in fair value of biological assets and agricultural produce 4 31 (76) 21 (39)
Cost of sales (1,142) (1,185) (583) (620)
Gross profit 6 378 294 208 150
Selling, general and administrative expenses (163) (134) (86) (74)
Other operating income 7 6 4 1
Other operating expenses 14 (30) (14) (18) (9)
Operating profit 6 192 152 108 68
Finance income 14 6 3 4
Finance costs 11, 12 (80) (80) (39) (40)
Foreign exchange (loss)/gain, net (81) 5 (41) -
Profit before tax 45 83 31 32
Income tax expenses - (16) (2) (15)
Profit for the period 6 45 67 29 17
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss:
Cumulative translation difference (78) 11 (30) 4
Other comprehensive (loss)/income for the period (78) 11 (30) 4
Total comprehensive (loss)/income for the period (33) 78 (1) 21
Profit/(Loss) attributable to:
Equity holders of the Parent 42 71 25 18
Non-controlling interests 3 (4) 4 (1)
45 67 29 17
Total comprehensive (loss)/income attributable to:
Equity holders of the Parent (36) 82 (5) 22
Non-controlling interests 3 (4) 4 (1)
(33) 78 (1) 21
Earnings per share
Basic and diluted earnings/(loss) per share (USD per share) 0.39 0.66 0.23 0.18
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 11 to 31 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of 30 June 2024
(in millions of US dollars, unless otherwise indicated)
Notes 30 June 2024 31 December 2023
ASSETS
Non-current assets
Property, plant and equipment 7 1,859 1,885
Right-of-use asset 266 248
Intangible assets 71 75
Goodwill 3 69 62
Non-current biological assets 24 16
Investments in associates 8 12 1
Non-current financial assets 11 9
Deferred tax assets 1 2
2,313 2,298
Current assets
Inventories 9 277 333
Biological assets 9 349 171
Agricultural produce 9 216 370
Prepayments 29 28
Other current financial assets 42 34
Taxes recoverable and prepaid 52 30
Trade accounts receivable 198 186
Cash and cash equivalents 294 436
1,457 1,588
TOTAL ASSETS 3,770 3,886
EQUITY AND LIABILITIES
Equity
Share capital 10 285 285
Treasury shares (45) (45)
Additional paid-in capital 174 174
Revaluation reserve 635 706
Retained earnings 1,906 1,793
Translation reserve (1,434) (1,356)
Equity attributable to equity holders of the Parent 1,521 1,557
Non-controlling interests 13 10
Total equity 1,534 1,567
Non-current liabilities
Bank borrowings 11 443 234
Bonds issued 12 893 891
Lease liabilities 17 201 180
Deferred tax liabilities 109 123
Deferred income 36 36
Other non-current liabilities 6 5
1,688 1,469
Current liabilities
Bank borrowings 11 180 145
Bonds issued 12 - 348
Lease liabilities 17 78 76
Interest payable 11,12 23 22
Trade accounts payable 129 142
Contract liabilities 27 18
Other current liabilities 111 99
548 850
TOTAL LIABILITIES 2,236 2,319
TOTAL EQUITY AND LIABILITIES 3,770 3,886
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 11 to 31 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six-month periods ended 30 June 2024 and 2023
(in millions of US dollars, unless otherwise indicated)
Attributable to equity holders of the Parent
Share Treasury shares Additional paid-in capital Revaluation reserve Retained earnings Translation reserve Total Non-controlling interests Total equity
capital
Balance as of 1 January 2023 285 (45) 174 792 1,559 (1,337) 1,428 18 1,446
Profit/(Loss) for the period - - - - 71 - 71 (4) 67
Other comprehensive income - - - - - 11 11 - 11
Total comprehensive income/(loss) for the period - - - - 71 11 82 (4) 78
Transfer from revaluation reserve to retained earnings - - - (31) 31 - - - -
Translation differences on revaluation reserve - - - - - - - - -
Balance as of 30 June 2023 285 (45) 174 761 1,661 (1,326) 1,510 14 1,524
Balance as of 1 January 2024 285 (45) 174 706 1,793 (1,356) 1,557 10 1,567
Profit for the period - - - - 42 - 42 3 45
Other comprehensive loss - - - - - (78) (78) - (78)
Total comprehensive profit/(loss) for the period - - - - 42 (78) (36) 3 (33)
Transfer from revaluation reserve to retained earnings - - - (29) 29 - - - -
Translation differences on revaluation reserve - - - (42) 42 - - - -
Balance as of 30 June 2024 285 (45) 174 635 1,906 (1,434) 1,521 13 1,534
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 11 to 31 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise
indicated)
Notes Six-month period ended 30 June 2024 Six-month period ended 30 June 2023
Operating activities
Profit before tax 45 83
Non-cash adjustments to reconcile profit or loss before tax to net cash flows
Depreciation and amortization expense 4 88 82
Net change in fair value of biological assets and agricultural produce 4 (31) 76
Change in allowance for expected credit losses and direct write-offs (2) 1
Loss/(gain) on disposal of property, plant and equipment 2 (1)
Finance income (14) (6)
Finance costs 11, 12 80 80
Released deferred income (2) (1)
Foreign exchange loss/(gain), net 81 (5)
Operating cash flows before movements in working capital 247 309
Working capital adjustments
Change in inventories 37 142
Change in biological assets (171) (194)
Change in agricultural produce 140 122
Change in prepayments made (2) -
Change in other current financial assets 1 (3)
Change in taxes recoverable and prepaid (26) 11
Change in trade accounts receivable (20) (18)
Change in contract liabilities 12 (5)
Change in other current liabilities 8 10
Change in trade accounts payable (3) 3
Cash generated by operations 223 377
Interest received 6 5
Interest paid (78) (97)
Income taxes paid (8) (11)
Net cash flows from operating activities 143 274
Investing activities
Purchases of property, plant and equipment 7 (134) (92)
Proceeds from disposals of property, plant and equipment 2 3
Purchases of intangible assets (3) (3)
Acquisition of subsidiaries, net of cash acquired 3 (11) -
Investments in associates 8 (5) -
Purchases of non-current biological assets (1) (1)
Prepayments and capitalized initial direct costs under lease contracts (4) (3)
Withdrawals in short-term deposits - 4
Loans provided (6) (1)
Loans repaid 2 1
Investments in financial assets (5) (9)
Net cash flows used in investing activities (165) (101)
Financing activities
Proceeds from bank borrowings 369 52
Repayment of bank borrowings (127) (26)
Repayment of bonds issued (342) -
Repayment of lease liabilities (13) (6)
Dividends paid by subsidiaries to non-controlling shareholders - (2)
Net cash flows from/(used in) financing activities (113) 18
Net (decrease)/increase in cash and cash equivalents (135) 191
Net foreign exchange difference on cash and cash equivalents (7) 11
Cash and cash equivalents at 1 January 436 300
Cash and cash equivalents at 30 June 294 502
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 11 to 31 form an integral part of these
interim condensed consolidated financial statements
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
1. Corporate information
MHP (the "Parent" or "MHP SE"), a limited liability company (Societas
Europaea) registered under the laws of Cyprus, was formed on 30 May 2006.
Hereinafter, MHP SE and its subsidiaries are referred to as the "MHP SE Group"
or the "Group". The registered address of MHP SE is 16-18 Zinas Kanther
Street, Agia Triada, 3035 Limassol, Cyprus. The MHP SE shares are listed on
the London Stock Exchange ("LSE") in the form of global depositary receipts
("GDRs").
The controlling shareholder of MHP SE is Mr. Yuriy Kosyuk ("Principal
Shareholder"), who owns 100% of the shares of WTI Trading Limited ("WTI"),
which is the immediate majority shareholder of MHP SE, which in turn directly
owns of 59,7% of the total outstanding share capital of MHP SE.
The principal business activities of the Group are poultry and related
operations, vegetable oil and agriculture operations. The Group's poultry and
related operations integrate all functions related to chicken production,
including hatching, fodder manufacturing, raising chickens to marketable age
("grow-out"), processing and sale of frozen and chilled chicken meat, as well
as processed meat products. Agriculture operations comprise producing and
selling grains and cattle breeding for milk production. Vegetable oil
operations include the production and sale of vegetable oil, cake and husk. As
of 30 June 2024, the Group employed 34,450 people (31 December 2023: 33,169
people).
The primary subsidiaries, the principal activities of the companies forming
the Group and the Parent's effective ownership interest as of 30 June 2024 and
31 December 2023 were as follows:
Name Country of registration Year established/ Principal activities 30 June 2024 31 December 2023
acquired
MHP Lux S.A. Luxembourg 2018 Finance Company 100.0% 100.0%
MHP Ukraine 1998 Management, marketing and sales 99.9% 99.9%
Myronivsky Plant of Manufacturing Feeds and Groats Ukraine 1998 Fodder and vegetable 88.5% 88.5%
oil production
Vinnytska Ptakhofabryka Ukraine 2011 Chicken farm 100.0% 100.0%
Peremoga Nova Ukraine 1999 Breeder farm 99.9% 99.9%
Oril-Leader Ukraine 2003 Chicken farm 99.9% 99.9%
Myronivska Pticefabrika Ukraine 2004 Chicken farm 99.9% 99.9%
Starynska Ptakhofabryka Ukraine 2003 Breeder farm 100.0% 100.0%
Zernoprodukt MHP Ukraine 2005 Grain cultivation 99.9% 99.9%
Katerinopilskiy Elevator Ukraine 2005 Fodder production and grain storage, vegetable oil production 99.9% 99.9%
SPF Urozhay Ukraine 2006 Grain cultivation 99.9% 99.9%
Agrofort Ukraine 2006 Grain cultivation 99.9% 99.9%
MHP-Urozhayna Krayina Ukraine 2010 Grain cultivation 99.9% 99.9%
Ukrainian Bacon Ukraine 2008 Meat processing 79.9% 79.9%
MHP-AgroKryazh Ukraine 2013 Grain cultivation 51.0% 51.0%
MHP-Agro-S Ukraine 2013 Grain cultivation 51.0% 51.0%
Zakhid-Agro MHP Ukraine 2015 Grain cultivation 100.0% 100.0%
Perutnina Ptuj d.d. Slovenia 2019 Poultry production 100.0% 100.0%
MHP Food Trading United Arab Emirates 2016 Trading in vegetable oil and poultry meat 100.0% 100.0%
MHP B.V. Netherlands 2014 Trading in poultry meat 100.0% 100.0%
MHP Trade B.V. Netherlands 2018 Trading in poultry meat 100.0% 100.0%
MHP Saudi Arabia Traiding Saudi Arabia 2018 Trading in poultry meat 100.0% 100.0%
MHP Food UK Limited UK 2021 Trading in poultry meat 100.0% 100.0%
The Group's primary operational facilities are located in different regions of
Ukraine as well as in Southeast Europe, including Slovenia, Serbia, Croatia
and Bosnia and Herzegovina (represented by Perutnina Ptuj d.d. together with
its subsidiaries).
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six-month
period ended 30 June 2024 have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" as adopted by the
European Union (EU). The interim condensed consolidated financial statements
do not include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's annual
consolidated financial statements as of 31 December 2023, prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union and the requirements of the Cyprus Companies
Law, Cap.113.
The interim condensed consolidated financial statements are presented in the
US dollars (USD) and all values are rounded to the nearest million, except
when otherwise indicated.
Going concern
In 2024, the Group has continued its operations in an environment severely
affected by the Russian invasion of Ukraine since 24 February 2022. The Group
concluded that the analysis of the observable impact of the War as described
on pages 161 and 202-203 of the Annual Report, which is available at
mhp.com.cy (https://mhp.com.ua/en/mhp-se/financial-reports) , continues to be
relevant for these interim condensed consolidated financial statements. The
updates in the economic environment conditions during January-June 2024 are
presented in Note 14 Operating environment.
Management have prepared adjusted financial forecasts, including cash flow
projections, for the twelve months from the date of approval of these interim
condensed consolidated financial statements, taking into consideration most
likely and possible downside scenarios for the ongoing business impacts of the
War. These forecasts as well as related assumptions are materially consistent
with those, used in preparation of the annual consolidated financial
statements for the year ended 31 December 2023, and have been updated to
reflect current and reasonably expected market conditions.
These forecasts indicate that, the Group has adequate resources to continue in
operational existence for the foreseeable future. The Directors have therefore
concluded that it is appropriate to apply the going concern basis of
accounting in preparing these interim condensed consolidated financial
statements. However, due to the currently unpredictable effects of the ongoing
War on the significant assumptions underlying management forecasts, the
Directors have concluded that a material uncertainty exists, which may cast
significant doubt about the Group's ability to continue as a going concern, in
which case the Group may be unable to realize its assets and discharge its
liabilities in the normal course of business.
Adoption of new and revised International Financial Reporting Standards
The accounting policies adopted in the preparation of these interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual consolidated financial statements for the
year ended 31 December 2023, except for the adoption of new amendments
effective as of 1 January 2024. The Group has not early adopted any standard,
interpretation or amendment that has been issued but is not yet effective.
The following amendments have been adopted by the Group on 1 January 2024:
· Amendments to IAS 1 Presentation of Financial Statements:
· Classification of Liabilities as Current or Non-current;
· Classification of Liabilities as Current or Non-current -
Deferral of Effective Date; and
· Non-current Liabilities with Covenants
· Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback
· Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures: Supplier Finance Arrangements
The adoption of these new amendments did not have any effect on the financial
position or performance of the Group and did not result in any changes to the
Group's accounting policies and the amounts reported in the interim condensed
consolidated financial statements of the Group.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Standards and interpretations in issue, but not effective
At the date of authorization of these interim condensed consolidated financial
statements, the following standards, interpretations and amendments to the
standards were in issue but not yet effective:
Standards and Interpretations Effective for annual period beginning on or after
The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability - 1 January 2025
Amendments to IAS 21
Amendments to the Classification and Measurement of Financial Instruments - 1 January 2026
Amendments to IFRS 9 and IFRS 7
IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19 Subsidiaries without Public Accountability: Disclosures 1 January 2027
Annual Improvements Volume 11: Amendments to: 1 January 2026
· IFRS 1 First-time Adoption of International Financial Reporting
Standards
· IFRS 7 Financial Instruments: Disclosures
· IFRS 9 Financial Instruments
· IFRS 10 Consolidated Financial Statements
· IAS 7 Statement of Cash Flows
The above-mentioned amendments have not yet been endorsed by the European
Union. The Group is currently assessing the impact of these amendments and new
standards on the consolidated financial statements.
Functional and presentation currencies
The functional currency of the Ukrainian companies of the Group is the
Ukrainian Hryvnia ("UAH"); the functional currency of the Cyprus companies and
Luxembourg company of the Group is the US Dollar ("USD"); the functional
currency of the European companies of the Group is the Euro ("EUR"); the
functional currency of the United Arab Emirates companies is the Dirham
("AED"); the functional currency of the UK company is the British Pound
("GBP"); the functional currency of the Saudi Arabia company is the Saudi
Riyal ("SAR").
Transactions in currencies other than the functional currency of the entities
concerned are treated as transactions in foreign currencies.
Such transactions are initially recorded at the rates of exchange ruling at
the dates of the transactions. Monetary assets and liabilities denominated in
such currencies are translated prevailing rates on the reporting date. All
realized and unrealized gains and losses arising on exchange differences are
recognised in the consolidated statement of profit or loss and other
comprehensive income for the period.
These consolidated financial statements are presented in US Dollars ("USD"),
the Group's presentation currency, and all values are rounded to the nearest
million, except when otherwise indicated.
The results and financial position of the Group are translated into the
presentation currency using the following procedures:
· Assets and liabilities for each consolidated statement of
financial position presented are translated at the closing rate as of the
reporting date of that statement of financial position;
· Income and expenses for each consolidated statement of profit or
loss are translated at exchange rates at the dates of the transactions;
· Exchange differences arising on translation for consolidation are
recognised in other comprehensive income and presented as a separate equity
component. On disposal of a foreign operation, the component of OCI relating
to that particular foreign operation is reclassified to profit or loss;
· All equity items except the revaluation reserve are translated at
the historical exchange rate. The revaluation reserve is translated at the
closing rate as of the statement of financial position date.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Functional and presentation currencies (continued)
For practical reasons, the Group translates items of income and expenses for
each period presented in the financial statements using the quarterly average
exchange rates if such translations reasonably approximate the results
translated at exchange rates prevailing at the dates of the transactions.
The following exchange rates were used:
Currency Closing rate as of 30 June 2024 Average for six months ended 30 June 2024 Average for three months ended 30 June 2024 Closing rate as of 31 December 2023 Average for six months ended 30 June 2023 Average for three months ended 30 June 2023
UAH/USD 40.5374 39.0103 39.8478 37.9824 36.5686 36.5686
UAH/EUR 43.3547 42.1874 42.9079 42.2079 39.5236 40.0006
USD/EUR 1.0695 1.0814 1.0768 1.1112 1.0808 1.0939
USD/GBP 1.2641 1.2651 1.2622 1.2766 1.2327 1.2656
AED/USD 3.67 3.67 3.67 3.67 3.67 3.67
SAR/USD 3.75 3.75 3.75 3.75 3.75 3.75
Material accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2023.
Change in presentation of segment information
In order to accurately reflect the diverse nature of Group's business
operations and improve the granularity of reporting, since Q3 2023, the Group
has implemented changes to its presentation of business segmentation
information. These changes include:
· introduction of a new - Vegetable oils operations segment, which
represents production and sales of vegetable oil and related products. During
the comparative period ended 30 June 2023, these activities were included into
Poultry and related operations segment as by-products of mixed fodder
production for poultry;
· inclusion of meat processing and other meat (previously reported
within Meat processing and other agricultural operations) in the Poultry and
related operations segment given that the meat processing and other meat
operations represent less than 10% of the Group`s revenues and have similar
characteristics to poultry operations;
· combining of grain-growing operations (presented as separate
segment during six-month period ended 30 June 2023) and milk cattle farming
(previously presented within Meat processing and other agricultural operations
segment) into a revised reportable segment - Agriculture operations.
The corresponding segment information for the periods ended 30 June 2023 have
been restated accordingly to ensure comparability.
The consolidated financial statements of the Group for the year ended 31
December 2023 contained segment information, using the revised segment
composition as described above.
Seasonality of operations
Poultry and related operations, European operating segment, and Vegetable oils
operations segment are not significantly exposed to seasonal fluctuations.
Agriculture operations segment, due to seasonality and implications of IAS 41,
in the first half of the year mainly reflects sales of carried forward
agricultural produce and the effect of biological assets revaluation, while
during the second half of the year, it reflects sales of crops and the effect
of revaluation of agricultural produce harvested during the year. Also,
Agriculture operations segment has seasonal requirements for working capital
increase from November to May due to the sowing campaign.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
3. Changes in the group structure
On 28 June 2024, the Group acquired 100% of the issued share capital of Toni
d.o.o., a non-listed company based in Croatia that engaged in grain trading,
drying and storage. The Group has acquired Toni to ensure stability in supply
chain of grain for Slovenian and Croatian market.
The provisional fair values of identifiable assets acquired and liabilities
assumed are as set out in the table below.
28 June 2024
Property, plant and equipment 2.6
Inventories 0.4
Trade accounts receivable 3.7
Other current financial assets 0.1
Cash and cash equivalents 3.6
Trade accounts payable (0.5)
Other liabilities (0.4)
Bank borrowings (4.0)
Total identifiable net assets 5.5
Goodwill arising on acquisition (provisional) 9.1
Total consideration due and payable 14.6
Analysis of cash flows on acquisitions:
Net cash acquitted on acquisition 3.6
Cash paid 14.6
Net cash outflow on acquisition 11.0
The gross amount of trade accounts receivable approximates their provisional
fair value as stated above, and it is expected that the full contractual
amount can be collected.
The consideration payable is USD 14.6 million, out of which the Group paid USD
14.1 million in June 2024, while remaining USD 0.5 million is payable till 28
September 2024.
Since the Group acquired this business close to the reporting date, the
initial accounting for the acquisition has been only provisionally determined.
As of the date of finalization of these interim condensed consolidated
financial statements, the necessary market valuations and other elements of
purchase price allocation had not been completed and have therefore been based
on the directors' best estimate of the likely market values.
The goodwill of USD 9.1 million arising from the acquisition is attributed to
the expected synergies and other benefits from combining the assets and
activities of Toni with those of the Group, in particular of Perutnina Ptuj
operations:
· Stabilization of purchasing prices of grain for feed in Croatian
and Slovenian markets.
· Ensuring of local grain quantities supply in view of economy of
scale positive effects.
The goodwill is not deductible for income tax purposes.
From the date of acquisition, Toni made no material contribution to the
Group`s revenue and net profit before tax, as the acquisition was completed
close to the reporting date. If the acquisition of Toni had been completed on
the first day of the financial year, the Group revenues for the six-months
period ended 30 June 2024 would have been USD 1,497 million and the Group
profit would have been USD 46 million.
During the reporting period, the Group's goodwill increased due to the
acquisition of Toni d.o.o., which added USD 9 million while the translation
adjustment caused a reduction of USD 2 million. Consequently, the net book
value of goodwill increased from USD 62 million at 31 December 2023 to USD 69
million as at 30 June 2024. No impairment losses were recognized during the
period.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
4. Segment information
The Group's business is managed worldwide but main manufacturing facilities
and sales offices are located primarily in Ukraine, Europe and Middle East.
Reportable segments are presented consistent with the internal reporting to
the Group's chief operating decision maker ("CODM").
Segment information is analyzed based on the types of goods supplied by the
Group's operating divisions. The Group's reportable segments under IFRS 8 are
as follows:
Poultry and related operations segment: • sales of poultry meat
• sales of processed meat and culinary products
• sales of other poultry related products
Vegetable oils operations segment: • sales of vegetable oil and related products
Agriculture operations segment: • sales of grains and oilseeds
• other agricultural operations (milk, feed grains and other)
European operating segment: • sales of poultry meat and processed meat products in Southeast
Europe
The reportable segments information is prepared using the Group's accounting
policies as described in Note 2 Basis of preparation and accounting policies.
Sales between segments are carried out at market prices. The segment result
represents operating profit under IFRS before unallocated corporate expenses
and loss on impairment of property, plant and equipment. Unallocated corporate
expenses include management remuneration, representative expenses, and
expenses incurred in respect of the maintenance of office premises. This is
the measure reported to the CODM for resource allocation and assessment of
segment performance.
European operating segment primarily includes sales of poultry meat and
processed meat products produced by Perutnina Ptuj and its subsidiaries. The
CODM manages this as a single segment because each research, development,
manufacture, distribution, and selling of chicken meat and meat processing
products requires single marketing strategies, a centralized budgeting
process, and centralized management of production operations.
The Group does not present information on segment assets and liabilities as
the CODM does not review such information for decision-making purposes.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
4. Segment information (continued)
The following table presents revenue and profit information regarding the
Group's operating segments for the six-month period ended 30 June 2024:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 788 236 184 281 1,489 - 1,489
Sales between business segments 8 84 95 - 187 (187) -
Total revenue 796 320 279 281 1,676 (187) 1,489
Segment results 117 25 51 36 229 - 229
Unallocated corporate expenses (37)
Other expenses, net (1)) (147)
Profit before tax 45
Other information:
Depreciation and amortization expense (2)) 42 2 31 12 87 - 87
Net change in fair value of biological assets and agricultural produce 22 - 13 (4) 31 - 31
(1)) Includes finance income, finance costs, foreign exchange loss (net);
(2)) Depreciation and amortization for the six-month period ended 30 June 2024
does not include unallocated depreciation and amortization in the amount of
USD 1.4 million.
The following table presents revenue and profit information regarding the
Group's operating segments for the six-month period ended 30 June 2023:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 831 345 112 267 1,555 - 1,555
Sales between business segments 3 80 100 - 183 (183) -
Total revenue 834 425 212 267 1,738 (183) 1,555
Segment results 135 50 (40) 27 172 - 172
Unallocated corporate expenses (20)
Other expenses, net (1)) (69)
Loss before tax 83
Other information:
Depreciation and amortization expense (2)) 43 - 25 12 80 - 80
Net change in fair value of biological assets and agricultural produce 13 - (86) (3) (76) - (76)
(1)) Includes finance income, finance costs, foreign exchange gain (net);
(2)) Depreciation and amortization for the six-month period ended 30 June 2023
does not include unallocated depreciation and amortization in the amount of
USD 1.4 million.
(3)) The comparatives for the six-month period ended 30 June 2023 were
restated (Note 2)
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
4. Segment information (continued)
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 30 June 2024:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 390 120 115 145 770 - 770
Sales between business segments 4 42 42 - 88 (88) -
Total revenue 394 162 157 145 858 (88) 770
Segment results 51 13 43 23 130 - 130
Unallocated corporate expenses (22)
Other expenses, net (1)) (77)
Profit before tax 31
Other information:
Depreciation and amortization expense (2)) 21 1 17 6 45 - 45
Net change in fair value of biological assets and agricultural produce 10 - 12 (1) 21 - 21
(1)) Includes finance income, finance costs, foreign exchange loss (net);
(2)) Depreciation and amortization for the three-month period ended 30 June
2024 does not include unallocated depreciation and amortization in the amount
of USD 0.7 million.
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 30 June 2023:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 416 216 35 142 809 - 809
Sales between business segments 2 42 57 - 101 (101) -
Total revenue 418 258 92 142 910 (101) 809
Segment results 78 27 (35) 12 82 - 82
Unallocated corporate expenses (14)
Other expenses, net (1)) (36)
Profit before tax 32
Other information:
Depreciation and amortization expense (2)) 22 - 11 8 41 - 41
Net change in fair value of biological assets and agricultural produce 10 - (44) (5) (39) - (39)
( 1)) Includes finance income, finance costs, foreign exchange gain (net);
(2)) Depreciation and amortization for the three-month period ended 30 June
2023 does not include unallocated depreciation and amortization in the amount
of USD 0.7 million.
(3)) The comparatives for the three-month period ended 30 June 2023 were
restated (Note 2)
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
4. Segment information (continued)
Non-current assets based on the geographic location of the manufacturing
facilities were as follows as of 30 June 2024 and 31 December 2023:
2024 2023
Ukraine 1,892 1,913
Europe 395 371
The Middle East and North Africa (MENA) 2 4
2,289 2,288
(1)) Non-current assets excluding deferred tax assets, investments in
associates and non-current financial assets.
5. Revenue
Revenue from the contracts with customers for the six-month and three-month
periods ended 30 June 2024 and 2023 was as follows:
Six-month period Three-month period
ended 30 June
ended 30 June
2024 2023 2024 2023
Poultry and related operations segment
Chicken meat 660 719 323 359
Processed meat 58 48 31 25
Other poultry related sales 70 64 36 32
788 831 390 416
Vegetable oil operations segment
Vegetable oil 227 326 115 210
Oil related products 9 19 5 6
236 345 120 216
Agricultural operations segment
Grain 156 93 102 24
Other agricultural sales 28 19 13 11
184 112 115 35
European operating segment
Chicken meat 168 162 87 84
Processed meat 85 76 43 41
Other agricultural sales 28 29 15 17
281 267 145 142
1,489 1,555 770 809
The geographic structure of revenue for the six-month and three-month periods
ended 30 June 2024 and 2023 was as follows:
Six-month period Three-month period
ended 30 June
ended 30 June
2024 2023 2024 2023
Export 954 973 503 508
Domestic 535 582 267 301
1,489 1,555 770 809
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
6. Profit for the period
The Group's gross profit for the six-month period ended 30 June 2024 increased
compared to the six-month period to USD 378 million (30 June 2023: USD 294
million). This growth was driven mainly by higher gross profit generated by
agriculture operations and partial offset by lower results derived from
Vegetable oil segment.
Consequently, operating profit increased by 26% to USD 192 million for the
six-month period ended 30 June 2024 compared to USD 152 million for the
six-month period ended 30 June 2023 as a result of an increase in gross
profit. However this was partly offset by higher payroll in selling, general,
and administrative as well as increase in war-related costs in other operating
expenses, primarily driven by higher donations from the Group to communities
and the Armed Forces of Ukraine, along with inventory losses with carrying a
value of USD 6 million due to a rocket strike on a rented warehouse in Odessa
in May 2024.
Profit for the six-month period ended 30 June 2024 amounted to USD 45 million,
compared to USD 67 million for the six-month period ended 30 June 2023. The
decrease is explained by depreciation of Ukrainian hryvnia against the US
dollar and Euro during the reporting period, that resulted in a net foreign
exchange loss of USD 81 million for the six-month period ended 30 June 2024
compared to a net gain of USD 5 million for the six-month period ended 30 June
2023 (for details refer to Note 14 Operating environment in Ukraine).
7. Property, plant and equipment
During the six-month period ended 30 June 2024, the Group's additions to
property, plant and equipment amounted to USD 131 million (six-month period
ended 30 June 2023: USD 95 million) related to capital improvements and
modernization projects. An increase in additions is higher mainly due to
significant investments in the capital improvements of existing facilities and
the construction of bioenergy production facilities. There were no significant
disposals of property, plant and equipment during the six-month periods ended
30 June 2024 and 30 June 2023.
The remaining part of the movement mainly relates to depreciation charge over
the period and translation into the presentation currency.
8. Investments in associates
Acquisition of Ukrainskyi Miasnyi Khutir
In April 2024, the Group entered into a share purchase agreement to acquire
100% of the corporate rights in Ukrainskyi Miasnyi Khutir LLC, a company
engaged in meat processing in Ukraine. The total estimated consideration for
this acquisition is EUR 14.0 million (equivalent to USD 15.1 million).
As of the reporting date, the Group has made a payment of EUR 3.5 million for
the acquisition of 24.9% of the corporate rights in the company. The
transaction is anticipated to be completed by the end of 2024, subject to the
fulfillment of certain conditions, including the approval by the relevant
regulatory bodies.
Since the Group currently exerts significant influence over Ukrainskyi Miasnyi
Khutir, but does not yet have control, the investment is classified as an
associate and is accounted for using the equity method as at 30 June 2024 with
carrying value of USD 3.8 million. Subsequently, in August 2024 the Group has
increased its stake in Ukrainskyi Miasnyi Khutir to 49%.
Investment in MHP Desert Hills for Poultry Company
In June 2024, the Group and Desert Hills Veterinary Services Company Limited
(DHV), a wholly-owned subsidiary of Tanmiah Food Company, completed the
incorporation of MHP Desert Hills for Poultry Company. This new entity is
established for poultry farming in the Kingdom of Saudi Arabia. The Group
holds a 45% interest, exercising the significant influence over the entity,
and DHV holds the remaining 55%.
The Group has committed to investing SAR 26,810 thousand (equivalent to USD 7
million) in the entity, out of which 25% (or USD 2 million) has already been
paid in June 2024. The remaining investment will be contributed in accordance
with the terms of the shareholder agreement.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
8. Investments in associates (continued)
Investment in MHP Desert Hills for Poultry Company (continued)
As of the reporting date, the Group's investment in MHP Desert Hills For
Poultry Company is accounted for as an associate using the equity method.
As of 30 June 2024, the carrying amount of the investment is USD 7 million,
representing the total committed investment. The payable portion of the
investment is recorded under other current liabilities.
9. Inventories, agricultural produce and biological assets
A decrease in inventories for the six-month period ended 30 June 2024 is
explained by utilizing the existing stocks as at 31 December 2023 during the
sowing campaign in 2024 leading to seasonal transfer of the associated costs
to biological assets, which was partly mitigated by increase of sunflower and
soybean seeds balances designated for vegetable oil production.
A decrease of agricultural produce for six-month period ended 30 June 2024 was
mainly as a result of consumption of internally produced grains and oilseeds
that was partially mitigated by increase of chicken meat stocks.
The increase in current biological assets as compared to 31 December 2023 is
primarily related to crops in fields balance growth, represented mainly by
spring crops seeded as well as higher prices for grains and oilseeds to be
harvested.
10. Shareholders' equity
As of 30 June 2024 and 31 December 2023 the authorized, issued and fully paid
share capital of MHP SE comprised the following number of shares:
30 June 2024 31 December 2023
Number of shares issued and fully paid 110,770,000 110,770,000
Number of shares outstanding(1)) 107,038,208 107,038,208
(1) ) This number of outstanding shares is included in
computation of the weighted average number of shares used as a denominator in
calculating earnings per share
The authorized share capital as of 30 June 2024 and 31 December 2023 was EUR
222 million, represented by 110,770,000 shares with a par value of EUR 2 each.
All shares have equal voting rights and rights to receive dividends, which are
payable at the discretion of the Group.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
11. Bank borrowings
The following table summarizes bank borrowings and credit lines outstanding as
of 30 June 2024 and 31 December 2023:
30 June 2024 31 December 2023
Currency WAIR (1)) USD WAIR (1)) USD
Non-current
EUR EURIBOR(2)) + 0,98% 100 EURIBOR(2)) + 1,05% 116
EUR 0,11% 3
USD SOFR(3)) + 3,91% 325 SOFR(3))+ 3,70% 101
USD UIRD(4)) + 6,03% 15 UIRD(4))+ 6,76% 17
443 234
Current
USD 6,40% 4 7,38% 47
USD SOFR(3)) +2,48% 30 -
EUR 4.49% 31 6,26% 43
EUR EURIBOR(2)) +2,3% 16 -
UAH - - 11,85% 13
Current portion of EUR EURIBOR(2))+ 0,98% 24 EURIBOR(2))+ 1,05% 28
long-term bank borrowings
EUR 0,11% 1
USD SOFR(3))+ 3,91% 71 SOFR(3))+ 3,70% 14
USD UIRD(4))+ 6,03% 3 -
180 145
Total bank borrowings 623 379
(1) ) WAIR represents the weighted average interest rate on
outstanding borrowings
(2) ) According to the terms of certain agreements, if market
EURIBOR becomes negative, it shall be deemed to be zero for calculation of
interest expense
(3) ) The Secured Overnight Financing Rate (SOFR) is a broad
measure of the cost of borrowing cash overnight collateralized by Treasury
securities
(4) ) Ukrainian Index of Retail Deposit Rates (UIRD) -
indicative rate calculated at 15:00 Kyiv time of each Banking Day in the
Thomson Reuters system based on nominal rates on time deposits of individuals
in US Dollars for a period of 3 months with interest paid upon the expiration
of the deposit agreement, operating in 20 largest Ukrainian banks in the size
of the deposit portfolio of individuals.
The Group's borrowings are drawn from various banks, mostly from International
Finance Institutions (IFIs), Ukrainian subsidiaries of international banks and
Ukrainian state banks as term loans, credit line facilities. Repayment terms
of principal amounts of bank borrowings vary from monthly repayment to
repayment on maturity depending on the terms of the agreement with each bank.
As of 30 June 2024 and 31 December 2023, the Group's bank term loans and
credit lines bear either floating or fixed interest rates.
Term loans and credit line facilities were as follows as of 30 June 2024 and
31 December 2023:
30 June 2024 31 December 2023
Credit lines 81 103
Term loans 542 276
623 379
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
11. Bank borrowings (continued)
Bank borrowings and credit lines outstanding as of 30 June 2024 and 31
December 2023 were repayable as follows:
30 June 2024 31 December 2023
Within one year 180 145
In the second year 105 49
In the third to fifth year inclusive 303 167
After five years 35 18
623 379
As of 30 June 2024, the Group had undrawn facilities of USD 315 million (31
December 2023: USD 468 million). These undrawn facilities expire during the
period until December 2030.
The Group's bank borrowings are jointly and severally guaranteed by MHP,
Myronivsky Plant of Manufacturing Feeds and Groats, Oril-Leader, Peremoga
Nova, Starynska Ptakhofabryka, Zernoproduct MHP, Katerinopilskiy Elevator,
Agrofort, SPF Urozhay, MHP SE, Scylla Capital Limited, Myronivska
Pticefabrika, Vinnytska Ptakhofabryka.
As of 30 June 2024, the Group had borrowings of USD 142 million secured by
property, plant and equipment with a collateral amount of USD 131 million (31
December 2023: USD 148 million and USD 127 million, respectively).
As of 30 June 2024, the Group had borrowings of USD 46 million that were
secured by agricultural produce with a carrying amount of USD 58 million (31
December 2023: borrowings of USD 10 million were secured by agricultural
produce with a carrying amount of USD 13 million).
As of 30 June 2024, the bank deposits with carrying amount of USD 3 million
(31 December 2023: USD 19 million) were secured as collateral for issued
letters of credit. The restricted bank deposits are presented within other
current financial assets, and unrestricted ones are presented as cash and cash
equivalents.
As of 30 June 2024 and 31 December 2023, interest payable on bank borrowings
was USD 7.2 million and USD 2.4 million, respectively.
Covenants
The Group, as well as its specified subsidiaries, have to comply with the
following maintenance covenants imposed by the banks providing the loans:
EBITDA to interest expenses ratio, current ratio and liabilities to equity
ratio. Separately, in case of excess of Net Debt to EBITDA ratio (the Group's
leverage ratio), there are negative covenants in respect of restricted
payments, including dividends, additional indebtedness and restrictions on
mergers or consolidations, limitations on liens and dispositions of assets and
limitations on transactions with affiliates.
As of 30 June 2024, the Group has complied with all covenants. As at 30 June
2024, the Group's leverage ratio decreased to 2.41 to 1, below the defined
limit of 3.0 to 1, compared with 2.51 and 2.47 to 1 as at 31 March 2024 and 31
December 2023 respectively.
Loan agreement with international financial institutions
With the purpose of refinancing the part of its Eurobond indebtedness matured
in May 2024, on 20 October 2023 the Group signed agreements with three
international and development financial institutions - DFC, IFC and EBRD - to
provide facilities of up to USD 400 million in aggregate. First tranches in
total amount of USD 107 million were received to partially finance the
repurchase of Notes on 10 November 2023, under a Tender Offer, with a
principal amount of USD 151 million for USD 128 million (for details refer to
Note 12 Bonds issued). Subsequently, in 2024, second tranches (USD 113
million) were received to partially finance the repurchase of Notes on 23
January 2024, under a Tender Offer, with a principal amount of USD 138 million
for USD 131 million. The last tranches in total amount of USD 180 million were
received in early May 2024 for repayment of Notes with the outstanding amount
of USD 211 million (for details refer to Note 12 Bonds issued). As a result,
the Group's obligations in respect of 7.75% Senior Notes due in 2024 with a
total nominal value of USD 500 million have been fully discharged.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued
Bonds issued and outstanding as of 30 June 2024 and 31 December 2023 were as
follows:
Carrying amount Nominal amount
30 June 2024 31 December 2023 30 June 2024 31 December 2023
Non-current
6.25% Senior Notes due in 2029 348 348 350 350
6.95% Senior Notes due in 2026 545 543 550 550
893 891 900 900
Current
7.75% Senior Notes due in 2024 - 348 - 349
- 348 - 349
Unamortized debt issuance cost - - (7) (10)
Total bonds issued 893 1,239 893 1,239
As of 30 June 2024 and 31 December 2023, the amount of interest payable on
bonds issued was USD 15.4 million and USD 19.2 million, respectively.
6.25% Senior Notes
On 19 September 2019, MHP Lux S.A., a public company with limited liability
(société anonyme) incorporated in 2018 under the laws of the Grand Duchy of
Luxembourg, issued USD 350 million 6.25% Senior Notes due in 2029 at par
value. The funds received were used to satisfy and discharge the 8.25% Senior
Notes due in April 2020 for debt refinancing and general corporate purposes.
The Senior Notes are jointly and severally guaranteed on a senior basis by MHP
SE, PrJSC "Oril - Leader", PrJSC "Myronivska Pticefabrika", "SPF "Urozhay"
LLC, "Starynska Ptakhofabryka" ALLC, "Vinnytska Ptakhofabryka" LLC, "Peremoga
Nova" SE, "Katerinopolskiy Elevator" LLC, PrJSC "MHP", PrJSC "Zernoprodukt
MHP" and PrJSC "Agrofort".
Interest on the Senior Notes is payable semi-annually in arrears in March and
September. These Senior Notes are subject to certain restrictive covenants
including, but not limited to, limitations on the incurrence of additional
indebtedness in excess of Net Debt to EBITDA ratio as defined by the
indenture, restrictions on mergers or consolidations, limitations on liens and
dispositions of assets and limitations on transactions with affiliates. If the
Group fails to comply with the covenants imposed, the Trustee or the Holders
of at least 25% in principal amount of outstanding Notes may, upon written
notice to the Group, declare all outstanding Senior Notes to be due and
payable immediately. If a change of control occurs, the Group shall make an
offer to each holder of the Senior Notes to purchase such Senior Notes at a
purchase price in cash in an amount equal to 100% of the aggregate principal
amount thereof, plus accrued and unpaid interest and additional amounts, if
any.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued (continued)
6.95% Senior Notes
On 3 April 2018, MHP Lux S.A. issued USD 550 million 6.95% Senior Notes due in
2026 at par value. Out of the total issue amount, USD 416 million were
designated for redemption and exchange of the existing 8.25% Senior Notes due
in 2020.
The Senior Notes are jointly and severally guaranteed on a senior basis by MHP
SE, PrJSC "MHP", PJSC "Myronivsky Plant of Manufacturing Feeds and Groats",
PrJSC "Zernoprodukt MHP", PrJSC "Agrofort", PrJSC "Oril-Leader", PrJSC
"Myronivska Pticefabrika", "SPF "Urozhay" LLC, "Starynska Ptakhofabryka" ALLC,
"Vinnytska Ptakhofabryka" LLC, "Peremoga Nova" SE, "Katerinopolskiy Elevator"
LLC, Scylla Capital Limited.
Interest on the Senior Notes is payable semi-annually in arrears in April and
October. These Senior Notes are subject to certain restrictive covenants
including, but not limited to, limitations on the incurrence of additional
indebtedness in excess of Net Debt to EBITDA ratio as defined by the
indenture, restrictions on mergers or consolidations, limitations on liens and
dispositions of assets and limitations on transactions with affiliates. If the
Group fails to comply with the covenants imposed, the Trustee or the Holders
of at least 25% in principal amount of outstanding Notes may, upon written
notice to the Group, declare all outstanding Senior Notes to be due and
payable immediately. If a change of control occurs, the Group shall make an
offer to each holder of the Senior Notes to purchase such Senior Notes at a
purchase price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and additional amounts, if any.
7.75% Senior Notes
On 10 May 2017, MHP SE issued USD 500 million 7.75% Senior Notes due in 2024
at par value. Out of the total issue amount, USD 245 million were designated
for redemption and exchange of existing 8.25% Senior Notes due in 2020.
On 25 September 2023 MHP SE launched an invitation to the holders (the
"Noteholders") of its USD 500 million 7.75% Guaranteed Notes due 10 May 2024
(the "Notes") to tender for purchase for cash any and all of the USD 500
million aggregate principal amount of Notes outstanding. On 9 November 2023
the MHP SE has accepted for purchase all validly traded Notes in the amount of
USD 151 million with the aggregate principal amount of Notes outstanding
following completion of the Tender Offer. On 10 November 2023 Noteholders who
validly tendered their Notes were paid the consideration of USD 850 per USD
1,000 principal amount of the Notes (with total consideration paid USD 128
million) and, on the same date, Notes in the amount of USD 151 have been
cancelled. Finance income in the amount USD 22 million was recognized as a
result of the Notes repurchase in November 2023.
On 12 December 2023 MHP SE launched an invitation to the Noteholders of its
USD 349 million 7.75% Guaranteed Notes due 10 May 2024 (the "Notes") to tender
for purchase for cash any and all of the USD 349 million aggregate principal
amount of Notes outstanding. On 22 January 2024 MHP SE has accepted for
purchase all validly traded Notes in the amount of USD 138 million with the
aggregate principal amount of Notes outstanding following completion of the
Tender Offer. On 23 January 2024 Noteholders who validly tendered their Notes
were paid the consideration of USD 950 per USD 1,000 principal amount of the
Notes (with total consideration paid USD 131 million) and, on the same date,
the Notes in the amount of USD 138 million have been cancelled. Finance
income in the amount USD 6 million was recognized as a result of the Notes
repurchase during the six-month period ended 30 June 2024.
On 10 May 2024 MHP SE has successfully concluded the scheduled redemption of
all outstanding 7.75% Senior Notes in amount of USD 211 million. The
redemption of the initial Eurobond transaction and associated coupon payments
were executed in accordance with the terms outlined in the Eurobond
Prospectus, thereby fulfilling the company's obligations towards the
respective bondholders in full.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued (continued)
Covenants
Certain restrictions under the indebtedness agreements (e.g. incurrence of
additional indebtedness, restricted payments as defined above, dividends
payment) are dependent on the leverage ratio of the Group calculated as Net
Debt to EBITDA. Once the leverage ratio exceeds 3.0 to 1, it is not permitted
for the Group to make certain restricted payments, declare dividends exceeding
USD 30 million in any financial year, or incur additional debt except that
defined as a Permitted Debt. According to the indebtedness agreements, the
consolidated leverage ratio is tested on the date of incurrence of additional
indebtedness or restricted payment and after giving pro forma effect to such
incurrence or restricted payment as if it had been incurred or done at the
beginning of the most recent four consecutive fiscal quarters for which
financial statements are publicly available (or are made available).
As of 30 June 2024, the Group has complied with all covenants. As at 30 June
2024, the Group's leverage ratio decreased to 2.41 to 1, below the defined
limit 3.0 to 1, compared to 2.51 and 2.47 to 1 as at 31 March 2024 and 31
December 2023 respectively.
13. Related party balances and transactions
For the purpose of these financial statements, parties are considered to be
related if one party controls, is controlled by, or is under common control
with the other party or exercises significant influence over the other party
in making financial or operational decisions. In considering each possible
related party relationship, attention is directed to the substance of the
relationship, not merely the legal form.
Related parties may enter into transactions unrelated parties might not, and
transactions between related parties may not be effected on the same terms and
conditions as transactions between unrelated parties.
Transactions with related parties under common control
The Group, in the ordinary course of business, enters into transactions with
related parties that are companies under common control of the Principal
Shareholder of the Group (Note 1) for the purchase and sale of goods and
services and in relation to the provision of financing arrangements. Terms and
conditions of sales to related parties are determined based on arrangements
specific to each contract or transaction. The terms of the payables and
receivables related to the Group's trading activities do not vary
significantly from the terms of similar transactions with third parties.
Transactions with related parties during the six-month periods ended 30 June
2024 and 30 June 2023 were as follows:
in thousand USD Six-month period ended 30 June 2024 Six-month period ended 30 June 2023
Loans and finance aid provided to related parties - 46
Interest charged on loans and finance aid provided 115 162
Sales to related parties 474 121
Purchases from related parties 455 215
Key management personnel of the Group:
Loans provided 499 98
Loans repaid 248 226
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
13. Related party balances and transactions (continued)
The balances owed to and due from related parties were as follows as of 30
June 2024 and 31 December 2023:
in thousand USD 30 June 2024 31 December 2023
Loans and finance aid receivable 3,686 3,815
Less: expected credit losses (2,029) (2,101)
1,657 1,714
Loans to key management personnel 3,582 3,564
Less: expected credit losses (297) (414)
3,285 3,150
Trade accounts receivable 369 391
Payables due to related parties 11 53
Payables due to associates (Note 8) 5,421 -
Loans and finance aid receivable
For certain loans and finance aid receivable, credit risk increased to the
point where it is considered credit-impaired. The expected credit loss for
such loans amounted to USD 1,793 thousand and USD 1,894 thousand as of 30 June
2024 and 31 December 2023, respectively.
Compensation of key management personnel
Total compensation of the Group's key management personnel included primarily
in selling, general and administrative expenses in the Consolidated Statements
of Profit and Loss and Other Comprehensive Income, amounted to USD 12,176
thousand and USD 9,932 thousand for the six-month periods ended 30 June 2024
and 2023, respectively. Compensation of key management personnel consists of
contractual salary and performance bonuses paid.
14. Operating environment in Ukraine
On 24 February 2022, Russian forces commenced a military invasion of Ukraine,
resulting in a full-scale war across the Ukrainian state. The ongoing military
invasion has led, and continues to lead, to significant casualties,
displacement of the population, damage to infrastructure and logistics, and
disruption of economic activity in Ukraine.
In 2024, Ukrainian entities continue their business activities in a
challenging economic environment, facing disruptions in supply chains, higher
business costs, and the physical destruction of production facilities and
infrastructure. During March - August 2024, Russia's attacks on Ukrainian
power generation and distribution infrastructure led to the loss of a number
of generating capacities, severe power outages and increased electricity
price.
Stable operation of the Black Sea corridor, established during second half of
2023, continued to support economic activities of Ukrainian companies.
However, there has been another logistic challenge from the blockade of the
Polish-Ukrainian border by Polish truckers and farmers during November 2023 -
April 2024, which negatively impacted on Ukraine`s external trade during this
period.
In April 2024, the EU extended free trade agreement with Ukraine until 5 June
2025. Further, in May 2024, the EU introduced quantitative restrictions for
some types of agricultural products, including poultry, eggs, sugar, oats,
corn, cereals and honey. The imposed trade restrictions limit Ukrainian
imports of these products to the EU to the average yearly export volumes
recorded between 1 July 2021 and 31 December 2023.
Despite the mentioned and other challenges caused by the War, the Ukraine`s
GDP grew up by 4.1% during first half of 2024 comparing to the first half-year
of 2023. In June 2024, inflation accelerated to 4.8% y/y, driven by a higher
energy costs and wage costs as well as higher prices for processed food. Price
pressure is expected to persist in the second half year of 2024, caused by the
higher business costs, a fading effect of the last year`s larger harvest and
the adverse impact of a summer drought on the crop yields in 2024. Based on
the most recent publications in July-August 2024, the National Bank of Ukraine
(the "NBU") forecasts annual inflation at level of 8.5% by the end of 2024,
while economic growth is expected at 3.7% for current year.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
14. Operating environment (continued)
Given moderate inflation indicators in June 2024, the NBU cut its key policy
rate to 13% p.a. compared to 15% p.a. effective at 31 December 2023. At the
same time, the NBU continued to control foreign exchange market under the
regime of managed flexibility of the exchange rate effective since October
2023. As at 30 June 2024, Ukrainian hryvna depreciated against the US dollar
by 6.7% compared to 31 December 2023.
The Government continues to implement measures to stabilize markets and the
economy. International organizations (such as the IMF, EBRD, World Bank),
along with individual countries and charities, are providing Ukraine with
financing, donations and material support. International assistance remains an
important source of financing to meet state budget needs.
The Group considers the following expenses incurred during the six-month
periods ended 30 June 2024 and 2023 to be directly related to or driven by the
continuing war:
2024 2023
Salary to mobilized employees(2)) 10.4 8.9
Support donations to communities and defense forces(1)) 8.3 2.2
Write-off of damaged inventories and biological assets(1)) (Note 6) 6.3 0.2
Other war-related expenses(1)) 1.0 2.1
Total amount recognized in profit or loss 26.0 13.4
(1) ) These expenses are presented within other operating
expenses in the consolidated statement of profit or loss and other
comprehensive income;
(2) ) These expenses are presented within cost of sales and
selling, general and administrative expenses in the consolidated statement of
profit or loss and other comprehensive income.
The Group, working with volunteers, has provided humanitarian aid (mainly
through food supply) to the people of Ukraine since the beginning of the war.
15. Contingencies and contractual commitments
Taxation and legal matters
The Group carries its operations in various jurisdictions, with a significant
number of operations in Ukraine. Ukrainian legislation regarding taxation and
other regulatory matters, including currency exchange control and customs
regulations, is regularly changed and revisited. Non-compliance with tax laws
and regulations can lead to the imposition of severe penalties and fines.
Management believes that the Group has been in compliance with all
requirements of effective tax legislation.
The Group exports vegetable oil, chicken meat, and related products and
performs intercompany transactions, which may potentially be in the scope of
the Ukrainian transfer pricing regulations. The Group has submitted the
controlled transaction reports for the years ended 31 December 2022 and
31 December 2021 meeting the regulatory deadlines.
As of 30 June 2024 and 31 December 2023, management assessed the Group`s
possible exposure to tax risks for a total amount of USD 4 million related to
corporate income tax. No provision was recognised relating to such possible
tax exposure.
As of 30 June 2024, companies of the Group were engaged in ongoing litigation
with tax authorities for the amount of USD 30 million (31 December 2023: USD
35 million), including USD 4 million (31 December 2023: USD 6 million) of
litigations with the tax authorities related to disallowance of certain
amounts of VAT refunds and deductible expenses claimed by the Group. Out of
this amount, USD 21 million as of 30 June 2024 (31 December 2023: USD 5
million) relates to cases where court hearings have taken place and where the
court in either the first or second instance has already ruled in favor of the
Group. In addition, the Group maintains disputes with tax authorities in the
amount USD 5 million, which are not brought to the Court as at 30 June 2024
(31 December 2023: USD 26 million).
Manage-ment believes that, based on the past history of court resolutions of
similar disputes upheld by the Group, it is unlikely that a significant
settlement would arise out of such lawsuits and, therefore, no respective
provision is required in the Group's financial statements.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
15. Contingencies and contractual commitments (continued)
Contractual commitments on purchase of property, plant and equipment
During the six-month period ended 30 June 2024, companies of the Group entered
into a number of contracts with foreign suppliers for the purchase of
property, plant and equipment. These agreements are mainly related to
maintenance and modernization projects, new product development in Ukraine,
and expansion of Perutnina Ptuj production facilities. As of 30 June 2024,
purchase commitments amounted to USD 79 million (31 December 2023: USD 67
million).
16. Fair value of financial instruments
Fair value disclosures in respect of financial instruments are made in
accordance with the requirements of IFRS 7 "Financial Instruments: Disclosure"
and IFRS 13 "Fair Value Measurement". Fair value is defined as the amount at
which the instrument could be exchanged in a current transaction between
knowledgeable willing parties in an arm's length transaction, other than in
forced or liquidation sale. As no readily available market exists for a large
part of the Group's financial instruments, judgment is necessary in arriving
at fair value, based on current economic conditions and specific risks
attributable to the instrument. The estimates presented herein are not
necessarily indicative of the amounts the Group could realize in a market
exchange from the sale of its full holdings of a particular instrument.
The fair value is estimated to be the same as the carrying value for cash and
cash equivalents, short-term bank deposits, trade accounts receivables, other
current assets, and trade accounts payable due to the short-term nature of the
financial instruments. The fair value of non-current financial assets is
measured by discounting the estimated future cash outflows, with reference to
market interest rates, and it approximates the carrying value of non-current
financial assets.
Set out below is the comparison of carrying amounts and fair values of the
Group's financial instruments, excluding those discussed above, in the
consolidated statement of financial position:
Carrying amount Fair value
30 June 2024 31 December 2023 30 June 2024 31 December 2023
Financial liabilities
Bank borrowings (Note 11) 630 381 630 382
Senior Notes due in 2024, 2026, 2029 (Note 12) 909 1,259 707 996
The fair value of bank borrowings was estimated by discounting the expected
future cash outflows by a market interest rates for bank borrowings, and it is
within Level 2 of the fair value hierarchy.
The fair value of Senior Notes was estimated based on market quotations and is
within Level 1 of the fair value hierarchy.
In determining the fair value of financial instruments, the impact of
potential climate-related matters, including legislation, climate change, and
company climate objectives, which may affect the fair value measurement of
financial assets and liabilities, has been considered and found not to be
material.
17. Risk management policy
During the six-month period ended 30 June 2024, there were no material changes
to the objectives, policies, and process for credit risk, capital risk,
liquidity risk, currency risk, interest rate risk, livestock diseases risk,
and commodity price and procurement risk management.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to settle all
liabilities as they fall due. The Group's liquidity position is carefully
monitored and managed. The Group has a detailed budgeting and cash forecasting
process to help ensure adequate cash is available to meet its payment
obligations.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
17. Risk management policy (continued)
Liquidity risk (continued)
The following table details the Group's financial liabilities by their
remaining contractual maturity. The table has been drawn up based on the
undiscounted cash flows of financial liabilities using the earliest date the
Group can be required to pay. The table includes both interest and principal
cash flows as of 30 June 2024 and 31 December 2023. The amounts in the table
may not be equal to the statement of financial position carrying amounts since
the table includes all cash outflows on an undiscounted basis.
Carrying Contractual Less than From 2nd to 5th year After
1 year
amount Amounts 5th year
30 June 2024
Bank borrowings 630 740 218 486 36
Bonds issued 909 1,097 60 676 361
Lease liabilities 279 535 79 246 210
Trade accounts payable 129 129 129 - -
Other current financial liabilities 111 111 111 - -
Total 2,058 2,612 597 1,408 607
31 December 2023
Bank borrowings 381 439 164 256 19
Bonds issued 1,259 1,490 423 695 372
Lease liabilities 256 510 76 230 204
Trade accounts payable 142 142 142 - -
Other current liabilities 99 99 99 - -
Total 2,137 2,680 904 1,181 595
Currency risk
Currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates. The Group undertakes
certain transactions denominated in foreign currencies. The Group does not use
any derivatives to manage foreign currency risk exposure. However, Management
limits exposure to foreign currency fluctuations to manage currency risk.
The carrying amounts of the Group's foreign currency-denominated monetary
assets and liabilities as of
30 June 2024 and 31 December 2023 were as follows:
30 June 2024 31 December 2023
USD EUR USD EUR
Total assets 148 112 255 107
Total liabilities(1)) 1,381 116 1,449 225
Net (liabilities)/assets (1,233) (4) (1,194) (118)
(1) ) Currency-denominated liabilities consist primarily of
bonds issued and bank borrowings.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the six-month period ended 30 June 2024
(in millions of US dollars, unless otherwise indicated)
17. Risk management policy (continued)
Currency risk (continued)
The table below illustrates the Group's sensitivity to a change in the
exchange rate of the Ukrainian Hryvnia against the US Dollar and Euro. The
sensitivity analysis includes only outstanding foreign currency-denominated
monetary items and adjusts their translation at the year-end for possible
changes in foreign currency rates.
Change in foreign currency exchange rates Effect on profit
before tax, gain/(loss)
2024
Increase in USD exchange rate 10% (123)
Increase in EUR exchange rate 10% -
Decrease in USD exchange rate 2% 25
Decrease in EUR exchange rate 2% -
2023
Increase in USD exchange rate 10% (119)
Increase in EUR exchange rate 10% (12)
Decrease in USD exchange rate 2% 24
Decrease in EUR exchange rate 2% 2
During the six-month period ended 30 June 2024, the Ukrainian Hryvnia
depreciated against the EUR by 2.6% and the USD by 6.3% (six-month period
ended 30 June 2023: depreciated against the EUR and USD by 2.6%, while the
official exchange rate of UAH against the USD remained unchanged). As a
result, during the six-month period ended 30 June 2024, the Group recognized a
net foreign exchange loss in the amount of USD 81 million (six-month period
ended 30 June 2023: net foreign exchange gain in the amount of USD 4.5
million) in the interim condensed consolidated statement of profit or loss and
other comprehensive income.
18. Subsequent events
In July 2024, the Group entered into an agreement to acquire 70% of the equity
interest in KK & Sons Group Ltd, registered in United Kingdom, an
international logistics company, for a total consideration of USD 5 million.
The acquisition aimed at strengthening the Group's logistics and supply chain
capabilities. As of the date of approval of these interim condensed
consolidated financial statements, the preliminary assessment of the fair
values of the identifiable net assets acquired, as well as the determination
of goodwill and non-controlling interest, has not yet been finalized. The
Group is in the process of completing the purchase price allocation and
evaluating the financial impact of this transaction on its consolidated
financial statements, which is expected to be completed during twelve months
since the acquisition date.
19. Authorization of the interim condensed consolidated financial statements
These interim condensed consolidated financial statements were authorized for
issue by the Board of Directors of MHP SE on 6 September 2024.
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