REG - MHP SE - Financial Results for the First Quarter 2024
04/06/2024 07:45
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RNS Number : 0102R MHP SE 04 June 2024
4 June 2024, Limassol, Cyprus
MHP SE
Unaudited Financial Results for the First Quarter ended 31 March 2024
MHP SE (LSE:MHPC), the parent company of a leading international
agro-industrial group with headquarters in Ukraine, today announces its
unaudited results for the first quarter ended 31 March 2024. Hereinafter, MHP
SE and its subsidiaries are referred to as "MHP", "The Company" or "The
Group".
WAR IN UKRAINE - UPDATE
War continues to have a major impact on Company operations. Irregular and
frequent drone and rocket attacks against civilian, energy and other
infrastructure targets continue, presenting us with a challenging and
disruptive logistical environment, driving additional other War-related costs.
We have made arrangements for electricity outages and have alternatives ready
to replace the supply from the national energy network that remains under
constant threat of bombardment.
At the date of publication, all our production facilities in Ukraine continue
to operate at close to full capacity.
MHP would like to inform its stakeholders that due to 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 US$ 8 million (book value -
around US$ 7 million). MHP's employees, fortunately, were not put injured.
Moreover, the Company provided comprehensive medical and psychological
assistance to the employees.
Taking into account the war operational environment, we can give no assurance
that this will not occur in the future and that our production facilities and
the infrastructure that we use will not become a target of new attacks. In the
event of adverse operational impacts, the Group is ready to respond
immediately and to take all actions necessary to protect its employees and to
rebuild, restore and restart production in the shortest time possible.
Our operations in the Balkans, Perutnina Ptuj ("PP"), are not directly
affected by War as they are largely independent from an operational and supply
chain perspective.
We have incurred substantial War-related costs since the start of the
conflict. In Q1 2024, these amounted to US$ 10 million (Q1 2023: US$ 6
million).
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 Q1 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 Q1 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 Q1 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
Q1 2024
· Poultry meat production volume in Ukraine was stable
y/y at 178,487 tonnes (Q1 2023: 176,608 tonnes). Poultry meat production
volumes of the European Operating Segment (PP) was up by 7% to 33,958 tonnes
(Q1 2023: 31,780 tonnes).
· MHP Ukraine's average poultry meat price increased by
6% to US$ 1.99 per kg (Q1 2023: US$ 1.88 per kg) excluding VAT. The average
price of poultry meat produced by PP was stable at EUR 3.44 per kg (Q1 2023:
EUR 3.51 per kg).
· Poultry meat exports from Ukraine decreased by 12% to
98,055 tonnes (Q1 2023 - 111,873 tonnes).
FINANCIAL HIGHLIGHTS
Q1 2024
· Revenue decreased by 4% y/y to US$ 719 million (Q1
2023: US$ 746 million).
· Export revenue of US$ 453 million, 63% of total revenue
(Q1 2023: US$ 465 million, 62% of total revenue).
· Operating profit of US$ 84 million remained stable y/y
while operating margin increased to 12% y/y (Q1 2023:US$ 84 million and 11%
respectively).
· Adjusted EBITDA (net of IFRS 16) was almost unchanged
at US$ 119 million (Q1 2023: US$ 116 million); adjusted EBITDA margin (net of
IFRS 16) increased y/y to 17% (Q1 2023: 16%).
· Net profit decreased to US$ 16 million, compared to a
profit of US$ 49 million for Q1 2023.
FINANCIAL OVERVIEW
(in mln. US$, unless indicated otherwise) Q1 2024 Q1 2023 % change y/y(1)) Q4 2023 % change q/q(1))
Revenue 719 746 -4% 727 -1%
IAS 41 standard gain/(loss) 10 (37) 127% 26 -62%
Gross profit 170 144 18% 176 -3%
Gross profit margin 24% 19% 5pps 24% 0pps
War-related expenses (10) (6) 67% (12) -17%
Operating profit 84 84 0% 92 -9%
Operating profit margin 12% 11% 1pps 13% -1pps
Adjusted EBITDA 127 124 2% 141 -10%
Adjusted EBITDA margin 18% 17% 1pps 19% -1pps
Adjusted EBITDA (net of IFRS 16) 119 116 3% 116 3%
Adjusted EBITDA margin (net of IFRS 16) 17% 16% 1pps 16% 1pps
Net profit 16 49 -67% 20 -20%
Net profit margin 2% 7% -5pps 3% -1pps
(1)) pps - percentage points
Average official FX rate for Q1: UAH/US$ 38.17 in 2024 and UAH/US$ 36.57 in
2023.
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 Q1 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 related operations
Poultry meat
(in tonnes, unless indicated otherwise) Q1 2024 Q1 2023 % change y/y²()) Q4 2023 % change q/q²())
Sales volume of poultry meat(1)) 164,087 183,121 -10% 156,779 5%
Export sales 98,055 111,873 -12% 84,945 15%
Domestic sales 66,032 71,248 -7% 71,834 -8%
Portion of export sales, % 60% 61% -1pps 54% 6pps
Average price per 1 kg net of VAT, USD 1.99 1.88 6% 1.98 1%
(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 Q1 2024 decreased by
10% y/y to 164,087 tonnes (Q1 2023: 183,121 tonnes) and increased by 5%
compared to Q4 2023 mainly as a result of a significant decrease in export
sales in Q4 2023 caused by logistical disruptions to EU countries.
Processed poultry meat
(in tonnes, unless indicated otherwise) Q1 2024 Q1 2023 % change y/y²()) Q4 2023 % change q/q²())
Sales volume of processed meat(1)) 9,715 8,172 19% 10,368 -6%
Export sales 2,429 1,062 129% 2,277 7%
Domestic sales 7,286 7,110 2% 8,091 -10%
Portion of export sales, % 25% 13% 12pps 22% 3pps
Average price per 1 kg net of VAT, USD 2.91 2.85 2% 3.09 -6%
(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 9,715
tonnes in Q1 2024 compared to 8,172 tonnes in Q1 2023 due to the rise in
production and the further transformation into a culinary company. The average
price decreased by 6% q/q to USD$ 2.91 per kg in Q1 2024 (Q4 2023: USD$ 3.09
per kg) as a result of a change in sales product mix.
Financial result and trends
(in mln. US$, unless indicated otherwise) Q1 2024 Q1 2023 % change y/y(1)) Q4 2023 % change q/q(1)
Revenue 398 415 -4% 386 3%
- Poultry meat²()) 336 360 -7% 324 4%
- Processed meat 28 23 22% 32 -13%
- Complementary products and other sales 34 32 6% 30 13%
IAS 41 standard gain 12 3 300% (1) -1300%
Gross profit 114 92 24% 91 25%
Gross margin 29% 22% 7pps 24% 5pps
War-related expenses (5) (4) 25% (5) 0%
Adjusted EBITDA 87 78 12% 60 45%
Adjusted EBITDA margin 22% 19% 3pps 16% 6pps
Adjusted EBITDA (net of IFRS 16) 86 78 10% 59 46%
Adjusted EBITDA margin (net of IFRS 16) 22% 19% 3pps 15% 7pps
(1)) pps - percentage points
(²)) Revenue from poultry meat includes sales of offal, which doesn't include
in table regarding sales volume and prices of poultry meat
In Q1 2024, revenue decreased by 4% y/y as a result of the sales volume
decrease of poultry meat mainly on export markets, partly offset by elevated
prices.
Gross profit in Q1 2024 increased to US$ 114 million due to the positive
effect of revaluation of biological assets and agriculture produce as a result
of higher chicken meat stocks and higher prices.
In Q1 2024, adjusted EBITDA (net of IFRS 16) increased to US$ 86 million,
mainly as a result of higher gross profit.
Vegetable Oil Operations
Vegetable oil
(in tonnes, unless indicated otherwise) Q1 2024 Q1 2023 % change y/y Q4 2023 % change q/q
Sales volume of sunflower oil 110,440 77,201 43% 94,166 17%
Sales volume of soybean oil 11,747 14,400 -18% 11,640 1%
In Q1 2024 MHP's sales of sunflower oil increased by 43% y/y compared to Q1
2023 to 110,440 tonnes, mainly driven by an increase in production of
sunflower cake due additional crushing capacity.
Sales of soybean oil decreased by 18% y/y to 11,747 tonnes in Q1 2024,
compared with 14,400 tonnes in Q1 2023 but were stable compared to the
previous quarter.
Financial result and trends
(in mln. US$, except margin data) Q1 2024 Q1 2023 % change y/y(1)) Q4 2023 % change q/q(1))
Revenue 116 129 -10% 114 2%
- Vegetable oil 112 116 -3% 102 10%
- Related products(2)) 4 13 -69% 12 -67%
Gross profit 13 21 -38% 9 44%
Gross margin 11% 16% -5pps 8% 3pps
Adjusted EBITDA 13 23 -43% 10 30%
Adjusted EBITDA margin 11% 18% -7pps 9% 2pps
Adjusted EBITDA (net of IFRS 16) 12 22 -45% 9 33%
Adjusted EBITDA margin (net of IFRS 16) 10% 17% -7pps 8% 2pps
(1)) pps - percentage points;
(2)) Related products consist of meal, cake, husk.
The segment's revenue in Q1 2024 decreased by 10% y/y to US$ 116 million,
resulting in lower adjusted EBITDA (net of IFRS 16) of US$ 12 million compared
to US$ 22 million in Q1 2023. The considerable increase in the volume of
vegetable oils sold sector failed to sufficiently mitigate the decline of oil
prices.
Agriculture operations
(in mln. US$, unless indicated otherwise) Q1 2024 Q1 2023 % change
Revenue 69 77 -10%
IAS 41 standard loss 1 (42) 102%
Gross profit 13 (2) -750%
War-related expenses (1) (1) 0%
Adjusted EBITDA 22 10 120%
Adjusted EBITDA (net of IFRS 16) 17 3 467%
Agriculture Operations Segment's revenue in Q1 2024 amounted to US$ 69 million
compared to US$ 77 million in Q1 2023. The decrease was mainly attributable to
lower volumes of corn sales on the domestic market.
For Q1 2024, the IAS 41 standard showed a gain of US$ 1 million, in contrast
to a loss of US$ 42 million in Q1 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.
Additionally, Q1 2023 experienced a significant negative revaluation of winter
crops in fields, adversely affecting both the IAS 41 standard and EBITDA. In
Q1 2024, the relative stabilization of prices had no significant impact on
these measures.
European Operating Segment (PP)
Poultry(1)) Q1 2024 Q1 2023 % change y/y Q4 2023 % change q/q
Sales volume, third parties tonnes 21,102 18,216 16% 20,229 4%
Price per 1 kg net VAT, EUR 3.44 3.51 -2% 3.49 -1%
(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 Q1 2024, poultry meat sales of the European Operating Segment increased by
16% to 21,102 tonnes. This was driven by an increase in production volume of
poultry meat, both fresh and frozen.
Processed meat(1)) Q1 2024 Q1 2023 % change y/y Q4 2023 % change q/q
Sales volume, third parties tonnes 11,397 10,722 6% 11,596 -2%
Price per 1 kg net VAT, EUR 3.37 3.30 2% 3.36 0%
(1)) includes sausages and convenience foods
Meat processing product sales were up by 6% y/y to 11,397 tonnes in Q1 2024
(Q1 2023: 10,722 tonnes) due to increased in production volumes of sausages
and convenience products.
Financial result and trends
(in mln. US$, except margin data) Q1 2024 Q1 2023 % change y/y(1)) Q4 2023 % change q/q(1))
Revenue 136 125 9% 134 1%
IAS 41 standard gains (3) 2 -250% 2 -250%
Gross profit 30 32 -6% 26 15%
Gross margin 22% 26% -4pps 19% 3pps
Adjusted EBITDA 19 20 -5% 25 -24%
Adjusted EBITDA margin 14% 16% -2pps 19% -5pps
Adjusted EBITDA (net of IFRS 16) 18 19 -5% 24 -25%
Adjusted EBITDA margin (net of IFRS 16) 13% 15% -2pps 18% -5pps
(1)) pps - percentage points.
European Operating Segment's revenue in Q1 2024 increased by 9% y/y to US$ 136
million (Q1 2023: US$ 125 million), due to the increase in sales volumes of
both poultry meat and processed meat.
Adjusted EBITDA (net of IFRS 16) of US$ 18 million for Q1 2024 remained almost
stable compared with US$ 19 million for Q1 2023 in spite of the increase in
revenue, which was offset by the decrease in IAS 41 standard results.
Current Group cash flow
(in mln. US$) Q1 2024 Q1 2023
Cash from operations 90 98
Change in working capital 12 (2)
Net Cash from operating activities 102 96
Cash used in investing activities (65) (36)
Including:
CAPEX(1)) (57) (39)
Cash from financing activities (73) (14)
Total change in cash(2)) (36) 46
(1))Calculated as cash used for Purchases of property, plant and equipment
(2))Calculated as Net Cash from operating activities plus Cash used in
investing activities plus Cash used in financing activities
Cash flow from operations before changes in working capital for Q1 2024
slightly decreased to US$ 90 million (Q1 2023: US$ 98 million), mainly as a
result of the lower effect of revaluation of biological assets and agriculture
produce partly mitigated by lower interest payments of US$ 25 million in
Q1 2024 compared to US$ 59 million in Q1 2023. The difference in interest
payments is mainly due to the early payment of a US$ 20 million bond coupon in
March 2023, that was due on 3 April 2023, alongside the payment of a coupon
amounting to US$ 21 million deferred from 2022.
The positive change of working capital in Q1 2024 compared to Q1 2023 was
mainly attributed to higher trade accounts payable and other liabilities as a
result of purchases of materials (energy supplies, fertilizers, plant
protections materials, animal feed components) - for the spring sowing
campaign.
In Q1 2024 total CAPEX amounted to US$ 57 million mainly related to
maintenance and modernization projects. The increase from US$ 39 million in Q1
2023 is mainly due to to significant investments in the maintenance of
existing facilities and the construction of bioenergy production facilities.
Debt Structure and Liquidity
(in mln. US$) 31 March 2024 31 December 2023 31 March 2023
Total Debt(1) 2)) 1,513 1,537 1,534
1,537
1,537
LT Debt(1)) 1,240 1,141 1,509
ST Debt (1)) 326 499 176
Trade credit facilities(2)) (53) (103) (151)
Cash and bank deposits (390) (436) (351)
Net Debt(1)) 1,123 1,101 1,183
LTM Adjusted EBITDA(1)) 447 445 458
Net Debt / LTM Adjusted EBITDA(1)) 2.51 2.47 2.58
(1) ) Net of IFRS 16 adjustments: as if any lease that would have been
treated as an operating lease under IAS 17 as was in effect before the 1
January 2019, is treated as an operating lease for purposes of this
calculation. In accordance with covenants in MHP's bond and loan agreements,
these data exclude the effects of IFRS 16 on accounting for operating leases.
(2)) Indebtedness under trade credit facilities that is required to be
repaid within 12 months of drawdown should be excluded for purposes of this
calculation
As of 31 March 2023, MHP's cash and cash equivalents amounted to US$ 390
million, of which US$ 217 million was held by the Group's subsidiaries outside
Ukraine.
The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 2.51 as of 31
March 2024, well below the limit of 3.0 defined in the Eurobond agreement.
As of 31 March 2024, the share of long-term debt in the total outstanding debt
was 82%.
Subsequent events
In the beginning of May 2024, the last tranches of IFIs loans were disbursed
in the amount of US$ 179.5 million. On 10 of May 2024, MHP SE Eurobonds 2024
(ISINs: XS157796500; US55302TAD72) was duly and fully repaid as per the terms
and conditions stipulated. The Company has completely fulfilled its
obligations regarding the MHP SE Eurobonds 2024.
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 period ended 31 March 2024
CONTENTS
STATEMENT OF MEMBERS OF THE BOARD OF
DIRECTORS................................................................. 3
MANAGEMENT
REPORT........................................................................................................................
4
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
THREE-MONTH PERIOD ENDED 31 MARCH 2024
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE
INCOME..............................................................................................................................................................
6
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION..................................... 7
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY..................................... 8
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS............................................... 10
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................. 12
1. Corporate
information.....................................................................................................................
12
2. Basis of preparation and accounting
policies...................................................................................
13
3. Segment
information......................................................................................................................
15
4. Profit for the period
.......................................................................................................................
16
5. Property, plant and
equipment........................................................................................................
16
6. Inventories and agricultural
produce................................................................................................
16
7. Shareholders'
equity.......................................................................................................................
16
8. Bank
borrowings............................................................................................................................
17
9. Bonds
issued.................................................................................................................................
19
10. Related party balances and
transactions.......................................................................................
21
11. Operating
environment.................................................................................................................
22
12. Contingencies and contractual
commitments.................................................................................
23
13. Fair value of financial
instruments.................................................................................................
24
14. Risk management
policy..............................................................................................................
25
15. Subsequent
events......................................................................................................................
26
16. Authorization of the interim condensed consolidated financial
statements....................................... 26
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
31 March 2024 that are presented on pages 6 to 26:
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.
3 June 2024
Members of the Board of Directors:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
Director
John Grant
Director
John Clifford Rich
Director
Philip J Wilkinson
Director
Andriy Bulakh
Director
Christakis Taoushanis
Director
Oscar Chemerinski
MANAGEMENT REPORT
Key financial highlights
During the three-month period ended 31 March 2024 consolidated revenue
decreased by 4% to USD 719 million, compared to USD 746 million for the
three-month period ended 31 March 2023. Export sales for the three-month
period ended 31 March 2024 constituted 63% of total revenue and amounted to
453 USD million, compared to USD 465 million, 62% of total revenue for the
three-month period ended 31 March 2023. The revenue decrease is chiefly
attributed to reduced contributions from both Poultry and Vegetable Oil
segments. The decline in Poultry revenue can be delineated by a decrease in
chicken meat sales volumes, partly offset by elevated prices. The considerable
increase in volumes sold within the vegetable oil sector mitigated only partly
effect of a fall in oil prices.
Gross profit increased by 18% to USD 170 million for the three-month period
ended 31 March 2024 compared to USD 144 million for the three-month period
ended 31 March 2023. The increase was driven mainly by higher gross profit in
the poultry and related operations segment due to the positive effect of the
revaluation of biological assets and agriculture produce as a result of higher
chicken meat stocks and higher prices.
Operating profit remained unchanged at USD 84 million for the three-month
periods ended 31 March 2024 and 31 March 2023. This primarily stems from an
escalation in gross profit offset by heightened payroll-related costs within
the selling, general, and administrative expenses. The uptick in these
expenditures is a result of substantial indexation efforts initiated since 1
April 2023 and thereafter. Notably, these increase was not accounted for in
the three-month period ended 31 March 2023.
Profit for the three-month period ended 31 March 2024 amounted to USD 16
million, compared to USD 49 million for the three-month period ended 31 March
2023. The decrease is mainly due to depreciation of Ukrainian Hryvnia against
US Dollar and EURO, which resulted in foreign exchange loss of USD 40 million
for the three-month period ended 31 March 2024 compared to modest gain of USD
4 million for the three-month period ended 31 March 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 three-month period ended 31
March 2024.
Risks and uncertainties
Russian invasion
On February 24, 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 11 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.cy/) .
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 nine 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.cy/) .
3 June 2024
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
( ) Notes Three-month period ended 31 March 2024 Three-month period ended 31 March 2023
Revenue 3 719 746
Net change in fair value of biological assets and agricultural produce 3 10 (37)
Cost of sales (559) (565)
Gross profit 4 170 144
Selling, general and administrative expenses (77) (60)
Other operating income 3 5
Other operating expenses (12) (5)
Operating profit 84 84
Finance income 11 2
Finance costs 8, 9 (41) (40)
Foreign exchange (loss)/gain, net 4, 14 (40) 4
Profit before tax 4 14 50
Income tax benefit/(expense) 2 (1)
Profit for the period 16 49
Other comprehensive income
Items that may be reclassified to profit or loss:
Cumulative translation difference (48) 8
Other comprehensive (loss)/profit for the period (48) 8
Total comprehensive (loss)/profit for the period (32) 57
Profit/(loss) attributable to:
Equity holders of the Parent 17 52
Non-controlling interests (1) (3)
16 49
Total comprehensive (loss)/profit attributable to:
Equity holders of the Parent (31) 60
Non-controlling interests (1) (3)
(32) 57
Earnings per share
Basic and diluted earnings/ per share (USD per share) 0.16 0.48
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of 31 March 2024
(in millions of US dollars, unless otherwise indicated)
Notes 31 March 2024 31 December 2023
ASSETS
Non-current assets
Property, plant and equipment 5 1,859 1,885
Right-of-use asset 258 248
Intangible assets 73 75
Goodwill 62 62
Non-current biological assets 20 16
Non-current financial assets 6 8
Long-term deposits 2 2
Deferred tax assets 1 2
2,281 2,298
Current assets
Inventories 6 400 333
Biological assets 178 171
Agricultural produce 6 288 370
Prepayments 22 28
Other current financial assets 38 34
Taxes recoverable and prepaid 39 30
Trade accounts receivable 194 186
Cash and cash equivalents 390 436
1,549 1,588
TOTAL ASSETS 3,830 3,886
EQUITY AND LIABILITIES
Equity
Share capital 7 285 285
Treasury shares (45) (45)
Additional paid-in capital 174 174
Revaluation reserve 669 706
Retained earnings 1,847 1,793
Translation reserve (1,405) (1,356)
Equity attributable to equity holders of the Parent 1,525 1,557
Non-controlling interests 10 10
Total equity 1,535 1,567
Non-current liabilities
Bank borrowings 8 327 234
Bonds issued 9 892 891
Lease liabilities 191 180
Deferred income 35 36
Deferred tax liabilities 119 123
Other non-current liabilities 6 5
1,570 1,469
Current liabilities
Bank borrowings 8 107 145
Bonds issued 211 348
Lease liabilities 86 76
Trade accounts payable 147 142
Contract liabilities 25 18
Interest payable 8,9 32 22
Other current liabilities 117 99
725 850
TOTAL LIABILITIES 2,295 2,319
TOTAL EQUITY AND LIABILITIES 3,830 3,886
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the three-month period ended 31 March 2024
(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 2024 285 (45) 174 706 1,793 (1,357) 1,556 11 1,567
Profit/(loss) for the period - - - - 17 - 17 (1) 16
Other comprehensive loss - - - - - (48) (48) - (48)
Total comprehensive income/(loss) for the period - - - - 17 (48) (31) (1) (32)
Transfer from revaluation reserve to retained earnings - - - (16) 16 - - - -
Translation differences on revaluation reserve - - - (21) 21 - - - -
Balance as of 31 March 2024 285 (45) 174 669 1,847 (1,405) 1,525 10 1,535
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the three-month period ended 31 March 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
Loss for the period - - - - 52 - 52 (3) 49
Other comprehensive loss - - - - - 8 8 - 8
Total comprehensive loss for the period - - - - 52 8 60 (3) 57
Transfer from revaluation reserve to retained earnings - - - (21) 21 - - - -
Balance as of 31 March 2023 285 (45) 174 771 1,632 (1,329) 1,488 15 1,503
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise
indicated)
Notes Three-month period ended 31 March 2024 Three-month period ended 31 March 2023
Operating activities
Profit before tax 14 50
Non-cash adjustments to reconcile profit before tax to net cash flows
Depreciation and amortization expense 3 43 40
Net change in fair value of biological assets and agricultural produce 3 (10) 37
Change in allowance for irrecoverable amounts and direct 1 (2)
write-offs
Loss on disposal of property, plant and equipment and other non-current assets 1 -
Finance income (11) (2)
Finance costs 41 40
Released deferred income (1) -
Foreign exchange loss/(gain), net 40 (4)
Operating cash flows before movements in working capital 118 159
Working capital adjustments
Change in inventories 6 (72) (81)
Change in biological assets (16) (19)
Change in agricultural produce 6 71 75
Change in prepayments made 5 4
Change in other current financial assets 2 -
Change in taxes recoverable and prepaid (10) 5
Change in trade accounts receivable (13) (3)
Change in contract liabilities 7 3
Change in other current liabilities 22 6
Change in trade accounts payable 16 8
Cash generated by operations 130 157
Interest received 3 2
Interest paid (25) (59)
Income taxes paid (6) (4)
Net cash flows from operating activities 102 96
Investing activities
Purchases of property, plant and equipment 5 (57) (39)
Proceeds from disposals of property, plant and equipment 1 1
Purchases of intangible assets (2) (2)
Prepayments and capitalized initial direct costs under lease contracts (1) (1)
Withdrawals from short-term deposits - 5
Loans provided (4) -
Investments in financial assets (2) -
Net cash flows used in investing activities (65) (36)
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
Notes Three-month period ended 31 March 2024 Three-month period ended 31 March 2023
Financing activities
Proceeds from bank borrowings 131 12
Repayment of bank borrowings (73) (22)
Repayment of bonds issued (128) -
Repayment of lease liabilities (3) (4)
Net cash flows (used in)/from financing activities (73) (14)
Net decrease in cash and cash equivalents (36) 46
Net foreign exchange difference (10) 5
Cash and cash equivalents at 1 January 436 300
Cash and cash equivalents at 31 March 390 351
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia
Kapeliushna
The accompanying notes on the pages 12 to 26 form an integral part of these
interim condensed consolidated financial statements
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
1. Corporate information
MHP SE (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 at 31 March 2024 the Group employed 34,036 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 31 March 2024
and 31 December 2023 were as follows:
Name Country of registration Year established/ Principal activities 31 March 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 three-month period ended 31 March 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 three-month
period ended 31 March 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
As a result of the Russian invasion, the Group has experienced a number of
significant disruptions and operational issues within its business, which are
described in Note 11 Operating Environment and on pages 202 to 203 of the
annual report which is available at mhp.com.cy (https://mhp.com.cy/) .
Management have prepared adjusted financial forecasts, including cash flow
projections, for the twelve months from the date of approval of these
financial statements, taking into consideration most likely and possible
downside scenarios for the ongoing business impacts of the War.
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 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 adoption of the new or revised Standards 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.
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Functional and presentation currencies (continued)
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.
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 31 March 2024 Average for three months ended 31 March 2024 Closing rate as of 31 December 2023 Average for three months ended 31 March 2023
UAH/USD 39.2214 38.1727 37.9824 36.5686
UAH/EUR 42.3670 41.4668 42.2079 39.2233
USD/EUR 1.0802 1.0863 1.1112 1.0726
USD/GBP 1.2637 1.2683 1.2766 1.2139
AED/USD 3.67 3.67 3.67 3.67
SAR/USD 3.75 3.75 3.75 3.75
Significant 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.
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 three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
3. Segment information
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 31 March 2024:
Poultry Vegetable oils operations Agriculture operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 398 116 69 136 719 - 719
Sales between segments 4 42 53 - 99 (99) -
Total revenue 402 158 122 136 818 (99) 719
Segment results 66 12 8 13 99 - 99
Unallocated corporate expenses (15)
Other expenses, net (1)) (70)
Profit before tax 14
Other information:
Depreciation and amortization expense (2)) 21 1 14 6 42 - 42
Net change in fair value of biological assets and agricultural produce 12 - 1 (3) 10 - 10
(1)) Includes finance income, finance costs, foreign exchange loss (net).
(2)) Depreciation and amortization for the three-month period ended 31 March
2024 does not include unallocated depreciation and amortization in the amount
of USD 0.8 million.
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 31 March 2023:
Poultry Vegetable oils operations Agriculture operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 415 129 77 125 746 746
Sales between segments 2 38 44 - 84 (84) -
Total revenue 417 167 121 125 830 (84) 746
Segment results 57 23 (4) 15 91 - 91
Unallocated corporate expenses (7)
Other expenses, net (1)) (34)
Profit before tax 50
Other information:
Depreciation and amortization expense (2)) 21 - 14 5 40 - 40
Net change in fair value of biological assets and agricultural produce 3 - (42) 2 (37) - (37)
(1)) Includes finance income, finance costs, foreign exchange gain (net).
(2)) Depreciation and amortization for the three-month period ended 31 March
2023 does not include unallocated depreciation and amortization in the amount
of USD 0.7 million.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
4. Profit for the period
Gross profit increased by 18%, reaching USD 170 million for the three-month
period ended 31 March 2024, up from USD 144 million for the same period in
2023. This growth was driven mainly by higher gross profit in the poultry and
related as well as agriculture operations partly setoff by decrease in
Vegetable oil segment.
Operating profit was stable at USD 84 million for the three-month periods
ended 31 March 2024 and 31 March 2023. This stability resulted from an
increase in gross profit offset by heightened expenses related to payroll
within the selling, general, and administrative areas. The uptick in these
expenditures is a result of substantial indexation efforts initiated since 1
April 2023 and thereafter. Notably, these increase was not accounted for in
the three-month period ended 31 March 2023.
Profit for the three-month period ended 31 March 2024 was USD 16 million, down
from USD 49 million for the same period in 2023. This decrease was mainly
attributable to the depreciation of Ukrainian Hryvnia against US Dollar and
EURO, leading to a foreign exchange loss of USD 40 million for the three-month
period ended 31 March 2024, compared to a modest gain of USD 4 million for the
same period in 2023.
5. Property, plant and equipment
During the three-month period ended 31 March 2024, the Group's additions to
property, plant and equipment amounted to USD 59 million (three-month period
ended 31 March 2023: USD 42 million) mainly related to maintenance and
modernization projects. An increase is mainly due to significant investments
in the maintenance of existing facilities and the construction of bioenergy
production facilities.
There were no significant disposals of property, plant and equipment during
the three-month period ended 31 March 2024.
6. Inventories and agricultural produce
An increase in inventory balance as of 31 March 2024 compared to 31 December
2023 is mainly attributable to costs incurred by grain growing entities in
preparation for the upcoming spring sowing campaign Additionally, increased
acquisitions of sunflower seeds intended for vegetable oil production have
contributed to this uptick.
A decrease of agricultural produce for three-month period ended 31 March 2024
was mainly as a result of consumption of internally produced grains that was
partially mitigated by increase of chicken meat stocks.
7. Shareholders' equity
As of 31 March 2024 and 31 December 2023 the authorized, issued and fully paid
share capital of MHP SE comprised the following number of shares:
31 March 2024 31 December 2023
Number of shares issued and fully paid 110,770,000 110,770,000
Number of shares outstanding 107,038,208 107,038,208
The authorized share capital as of 31 March 2024 and 31 December 2023 was EUR
221,540 million represented by 110,770,000 shares with 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 three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
8. Bank borrowings
The following table summarizes bank borrowings and credit lines outstanding as
of 31 March 2024 and 31 December 2023:
2024 2023
Currency WAIR (1)) USD' mln WAIR (1)) USD' mln mlm000
Non-current
EUR EURIBOR(2)) + 0,98% 112 EURIBOR(2)) + 1,05% 116
USD SOFR(3))+ 3,85% 199 SOFR(3))+ 3,70% 101
USD UIRD(4))+ 6,76% 16 UIRD(4))+ 6,76% 17
327 234
Current
USD 6,40% 4 7,38% 47
EUR 5,41% 49 6,26% 43
UAH - 11,85% 13
Current portion of EUR EURIBOR(2))+ 0,98% 24 EURIBOR(2))+ 1,05% 28
long-term bank borrowings
USD SOFR(3))+ 3,85% 29 SOFR(3))+ 3,70% 14
USD UIRD(4))+ 6,76% 1 -
107 145
Total bank borrowings 434 379
(1) ) WAIR represents the weighted average interest rate on
outstanding borrowings.
(2) ) According to the agreements terms, 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 semi-annually
repayment to repayment on maturity depending on the terms of the agreement
with each bank.
As of 31 March 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 31 March 2024 and
31 December 2023:
31 March 2024 31 December 2023
Credit lines 53 103
Term loans 381 276
434 379
Bank borrowings and credit lines outstanding as of 31 March 2024 and 31
December 2023 were repayable as follows:
31 March 2024 31 December 2023
Within one year 107 145
In the second year 68 49
In the third to fifth year inclusive 222 167
After five years 37 18
434 379
As of 31 March 2024, the Group had undrawn facilities of USD 448 million (31
December 2023: USD 468 million). These undrawn facilities expire during the
period until February 2025.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
8. Bank borrowings (continued)
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 31 March 2024 the Group has complied with all bank covenants. As of 31
December 2023, the Group's leverage ratio slightly increased to 2.51 to 1,
compared with 2.47 as of 31 December 2023. The restrictions described in Note
9, which were in place since 31 December 2022, had been lifted from 18 May
2023, the date of publication of unaudited interim condensed consolidated
financial statements for the period from 1 January 2023 to 31 March 2023.
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 31 March 2024, the Group had borrowings of USD 154 million that were
secured by property, plant and equipment with a collateral amount of USD 133
million (31 December 2023: USD 148 million and USD 127 million respectively).
As of 31 March 2024, the Group had borrowings of USD 10 million that were
secured by agricultural produce with a carrying amount of USD 13 million (31
December 2023: USD 10 million and USD 13 million respectively).
As of 31 March 2024, the bank short-term deposits with carrying amount of USD
19 million (31 December 2023: USD 19 million) was restricted as collateral to
secure issued letters of credit. These amounts are presented within cash and
cash equivalents and the letters of credit in other current financial assets.
As of 31 March 2024 and 31 December 2023, interest payable on bank borrowings
was USD 6.5 million and USD 2.4 million, respectively.
Loan agreement with international financial institutions
With the purpose of refinancing the part of its Eurobond indebtedness maturing
in 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 9 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
during the period from 2 to 7 of May 2024 for partial repayment of Notes with
the outstanding amount of USD 211 million (for details refer to Note 9 Bonds
issued).
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
9. Bonds issued
Bonds issued and outstanding as of 31 March 2024 and 31 December 2023 were as
follows:
Carrying amount Nominal amount
31 March 2024 31 December 2023 31 March 2024 31 December 2023
Non-current
6.95% Senior Notes due in 2026 544 543 550 550
6.25% Senior Notes due in 2029 348 348 350 350
892 891 900 900
Current
7.75% Senior Notes due in 2024 211 348 211 349
211 348 211 349
Unamortized debt issuance cost - - (8) (10)
Total bonds issued 1,103 1,239 1,103 1,239
As of 31 March 2024 and 31 December 2023 amount of accrued interest on bonds
issued was USD 25.8 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.
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 the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
6.95% Senior Notes (continued)
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.
The Senior Notes are jointly and severally guaranteed on a senior basis by
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, SE "Peremoga Nova", "Katerinopolskiy Elevator" LLC, Scylla
Capital Limited.
Interest on the Senior Notes is payable semi-annually in arrears in May and
November. 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 the then 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 101% of the principal amount
thereof, plus accrued and unpaid interest and additional amounts, if any.
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 at 31 March 2024 the leverage ratio of the Group is 2.51 to 1 (31 December
2023: 2.47 to 1), lower than the defined limit 3.0 to 1. The above
restrictions, which were in place since 31 December 2022, had been lifted from
18 May 2023, the date of publication of unaudited interim condensed
consolidated financial statements for the period from 1 January 2023 to 31
March 2023.
Repurchase of bonds
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
9. Bonds issued (continued)
Repurchase of bonds (continued)
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.
On 10 May 2024 MHP SE has successfully concluded the scheduled redemption of
all outstanding 7.75% Senior Notes an 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.
10. 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 three-month periods ended 31
March 2024 and 31 March 2023 were as follows:
in thousand USD 2024 2023
Loans and finance aid provided to related parties - 45
Interest charged on loans and finance aid provided 63 80
Sales of goods 227 26
Purchases from related parties 31 4
Key management personnel of the Group:
Loans provided 131 98
Loans repaid 66 90
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
10. Related party balances and transactions (continued)
Transactions with related parties under common control (continued)
The balances owed to and due from related parties were as follows as of 31
March 2024 and 31 December 2023:
in thousand USD 2024 2023
Loans and finance aid receivable 3,756 3,815
Less: expected credit losses (2,041) (2,101)
1,715 1,714
Loans to key management personnel 3,515 3,564
Less: expected credit losses (385) (414)
3,130 3,150
Trade accounts receivable 389 391
Payables due to related parties 42 53
Loans and finance aid receivable
For 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 1,851 thousand and USD 1,894 thousand as at 31 March 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 2,843
thousand and USD 2,610 thousand for the periods ended 31 March 2024 and 2023,
respectively. Compensation of key management personnel consists of contractual
salary and performance bonuses paid.
11. Operating environment
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
attack has led, and continues to lead, to significant casualties, dislocation
of the population, damage to infrastructure and disruption to economic
activity in Ukraine. Sea ports and airports remain closed and some have been
damaged, and many roads and bridges have been damaged or destroyed, further
crippling transportation and logistics.
Ukrainian entities continue their business activity in the challenging
economic environment, facing disruption of supply chains, higher business
costs, and physical destruction of production facilities and infrastructure
(in the energy sector, in particular).
In the first quarter of 2024, economic activity continued to recover. However,
the NBU estimates that real GDP growth was only 3.1%, which is lower than in
the previous quarter and the estimate in the January 2024 Inflation Report -
3.6%. In the following periods, economic growth is expected to accelerate to
4.3% in 2024 and 6.4% in 2025, but the forecast could deteriorate sharply if
the war continues.
In April, the NBU cut its key policy rate to 13.5% from 15% as at 31 December
2023.
In October 2023, the NBU moved to a regime of managed flexibility of the
exchange rate, whereby the official exchange rate is determined by the
exchange rate used for transactions in the interbank foreign exchange market
instead of being fixed by the NBU, as had been the case since 24 February
2022. At the same time, the NBU continues to control the situation in the
interbank foreign currency exchange market in an attempt to better manage
the foreign currency structural deficit.
Consumer price growth continued to decelerate sharply in the first quarter of
2024, to 3.2% in March. The easing of inflationary pressure was facilitated by
the sufficient supply of food staples and fuels and by recovery of the energy
system from the consequences of Russia's terrorist attacks. According to the
NBU's recent forecast, taking into account better actual inflation dynamics
and improved inflation expectations, the inflation forecast for the end of
this year was lowered from 8.6% to 8.2%.
The Government continues to implement measures to stabilize markets and the
economy. International assistance will remain the main source of capital
inflows to the country in the future. Despite delays in the flow of
international aid at the beginning of the year, it is expected to resume in
the coming months.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
11. Operating environment (continued)
From the second half of August 2023 the temporary Black Sea corridor started
to operate with no regular schedule, and with vessels moving whenever security
conditions allow. Since then, Russia has launched a series of air attacks on
Ukraine, focused, among others, on destroying Danube ports infrastructure as
well as Black Sea ports infrastructure. The situation remains highly fluid and
the outlook is subject to extraordinary uncertainty.
The blockade of the Polish-Ukrainian border which commenced in November 2023
and intensified in January-February 2024, led to additional logistic
challenges. During the respective period, Ukraine export and import volumes
dropped and businesses faced a need to establish alternative logistic routes.
In April, the EU extended duty-free trade agreement with Ukraine for another
year, until June 5th, 2025. At the same time, quantitative restrictions were
introduced for some types of products: poultry, eggs, sugar, oats, corn,
cereals and honey. From June 6th, 2024, the quota for Ukrainian imports of
these products to the EU is determined based on the average export volumes
recorded in 2023, 2022 and the last half of 2021.
International organizations (IMF, EBRD, EU, World Bank), along with individual
countries and charities, are providing Ukraine with financing, donations and
material support. In March, the Ukraine received about USD 9 billion from
international partners, which allowed it to increase its international
reserves to almost USD 44 billion. In addition, in April, Ukraine received
positive news from the United States about the approval of a military and
financial assistance package and also received another tranche of EUR 1.5
billion from the EU. Given this, Ukraine can expect to receive USD 38 billion
of external budgetary assistance this year.
The Group considers the following expenses incurred during the three-month
periods ended 31 March 2024 and 31 March 2023 to be directly related to or
driven by the continuing war:
2024 2023
Salary to mobilized employees(2)) 5.2 4.2
Donations of inventories to communities and Armed Forces(1)) 3.5 0.7
Other war-related expenses(1)) 1.0 1.2
Total amount recognized in profit or loss 9.7 6.1
(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.
While the Ukrainian businesses and government institutions demonstrated a high
degree of adaptability and resilience in the face of challenges brought by the
full-scale military invasion, the related security and macroeconomic risks
remain high and continue to affect the economic situation in Ukraine. Due to
the unpredictability in the future course of the war and the uncertainty
regarding the timing of its cessation as well as availability of sustainable
international financial support, other geopolitical and macroeconomic factors,
it remains difficult to estimate the scale and direction of possible further
developments, both negative or positive, in the operating environment in
Ukraine at present.
12. Contingencies and contractual commitments
Taxation and legal issues
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 ("TP") regulations. The Group has submitted the
controlled transaction reports for the years ended 31 December 2022 and
31 December 2021 meeting the regulatory deadlines.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
11. Contingencies and contractual commitments (continued)
Taxation and legal issues (continued)
As of 31 March 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 31 March 2024, companies of the Group were engaged in ongoing litigation
with tax authorities for the amount of USD 34 million (31 December 2023: USD
35 million), including USD 6 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 24 million as of 31 March 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 ruled in favour of the Group.
In addition, the Group maintained disputes with tax authorities in the amount
of USD 26 million as at 31 December 2023, but there were not such disputes as
at 31 March 2024.
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.
Contractual commitments on purchase of property, plant and equipment
During the three-month period ended 31 March 2024, the 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 31 March 2024,
purchase commitments amounted to USD 73 million (31 December 2023: USD 67
million).
13. 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
31 March 2024 31 December 2023 31 March 2024 31 December 2023
Financial liabilities
Bank borrowings (Note 8) 441 381 446 382
Senior Notes due in 2024, 2026, 2029 (Note 9) 1,129 1,259 922 996
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
13. Fair value of financial instruments (continued)
The fair value of bank borrowings was estimated by discounting the expected
future cash outflows by a market rate of interest for bank borrowings, and 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.
14. Risk management policy
During the three-month period ended 31 March 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 managing.
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
31 March 2024 and 31 December 2023 were as follows:
31 March 2024 31 December 2023
USD EUR USD EUR
Assets 189 137 255 107
Liabilities(1)) 1,403 231 1,449 225
Net liabilities 1,214 94 1,194 118
( 1) ) Currency denominated liabilities consist
mostly of bonds issued and bank borrowings.
The table below illustrates the Group's sensitivity to a change in the
exchange rate of the Ukrainian Hryvnia against the US Dollar and EUR. The
sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at period end for possible change
in foreign currency rates.
Change in foreign currency exchange rates Effect on profit
before tax
2024
Increase in USD exchange rate 10% (121)
Increase in EUR exchange rate 10% (9)
Decrease in USD exchange rate 2% 24
Decrease in EUR exchange rate 2% 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 three-month period ended 31 March 2024, the Ukrainian Hryvnia
depreciated against the EUR by 0.4% and the USD by 3.2% (three-month period
ended 31 March 2023: depreciated against the EUR by 2.1% while was stable
against the USD). As a result, during the three-month period ended 31 March
2024 the Group recognized net foreign exchange loss in the amount of USD 40
million (three-month period ended 31 March 2023: foreign exchange gain in the
amount of USD 4 million) in the consolidated statement of profit or loss and
other comprehensive income.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the three-month period ended 31 March 2024
(in millions of US dollars, unless otherwise indicated)
15. Subsequent events
On 17 May 2024 due to shelling by occupying forces in the Odesa region, a
warehouse partly leased by the Group to store frozen MHP chicken meat products
was completely destroyed. This event resulted in the loss of poultry products
with a total weight of 5,000 tonnes valued at approximately US$ 8 million
(book value - around US$ 7 million).
16. 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 3 June 2024.
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