Astarta Holding PLC (AST) Earnings Call Transcript & Summary

Thank you very much for your interest in the 6 months call for Astarta. We would like to start the call with the traditional overview of our consolidated P&L. One can see that we kept revenue stable. This is on back of higher revenues, sales volumes in the agricultural segment, which allowed us to compensate a slight decrease in the revenues in the other segments. On the profitability side, as cost of sales were going up and there was a price correction in the market, gross margin halved to 20% and EBITDA margin came down to 15%. The bottom line was also affected not only by the operating results, by the ForEx movement of EUR 4 million, which gave us a loss at the bottom line. Going to the cash flows. Our focus remained on maximizing operating cash flows, which were helped by working capital release as we accelerated sales of grains and oil seeds. We kept our investments at maintenance CapEx level, save for residual investment into the SPC, but lower profitability led to increased leverage currently standing at 3x net debt to EBITDA. Going into agricultural segment results. One can see higher volumes of corn, wheat and sunflower seeds, but lower average prices compared to the previous period for all crops across the board. If we are looking at our harvesting results, we see higher yields for winter crops, the harvesting for which we already finished at 5.4 tonnes per hectare in wheat and 3.1 in rapeseeds. We continue harvesting for late crops and the results will be known later during the year. If we are looking at the market situation, we see already a much widening differential between global and domestic Ukrainian prices because of the difficulty of getting grain out of Ukraine, 90% of soft commodities used to be transported via Odesa-based ports. And these now do not operate at full potential. We see the alternative capacity at maximum 2.5 million tonnes per month, which was a recent estimate by the Ministry of Agriculture. But the real Ukrainian needs for its annual harvest is 5 million tonnes per annum. And that resulted in significant declines for corn and wheat prices Ex Works in Ukraine. And the pricing differential between international and domestic export prices currently already exceeds EUR 100 per tonne. Sugar, the processing season hasn't started yet. We are still selling stock from the previous one. We have higher sales volumes and exports at reasonable levels with MENA region being the key export destination. But of course, Ukraine wants to utilize fully its EU import of 100,000 tonnes. Profitability is much lower than last year due to higher logistics costs. Part of sugar exports is also done by sea. So switching to [indiscernible] other alternative routes have its cost. What we expect in terms of prices for next year, the situation might look brighter because the adverse weather conditions in Europe mean that there could be a deficit of sugar in the EU. So that might provide an opportunity to increase quota for Ukrainian sugar next year. The adverse weather conditions in Brazil, so we have to see how the situation will work out. But for the first 6 months, we see 20% decline in average prices. Soybean processing is a stable production and sales picture. We see stable prices, but profitability is lower due to higher energy and logistics costs. We are putting the last CapEx into the SPC project this year, and we hope to launch it relatively soon. In terms of the market outlook, domestic crush looks favorable despite 20% acreage downturn because of the limited export routes. Very briefly on cattle farming, the price is down by 25%, which created a very big one-off biological asset revaluation hit of EUR 5.5 million and that translated into negative EBITDA. We sell milk domestically, but in terms of byproduct meat, we continue to be one of the leading exporters of live cattle out of Ukraine, and that generated 8% of the cattle farming revenues this year. This is all in a nutshell in terms of the presentation.

I can see that there are already questions in the chat box. The first one is coming from [indiscernible]. Fair value of biological assets and agricultural produce increased in second quarter by EUR 10 million versus EUR 36 million in second quarter '25. To what extent was this driven by cost to sell component? Considering the status in Ukraine export volumes, are land transport routes, railway, trucks are viable alternatives to sea freight. I'm going to pass the floor to Ms. Liliia Lymanska, the CFO.

The deferred value of biological assets as of the end of June this year, of course, largely driven by higher logistic costs, if you mean this by cost to sell component. And it is based on our estimation of market price of goods at the date of harvesting, as of the date of authorization of our financial statements to issue.

Regarding the second part of the question, land transportation routes, railways and truck, a viable alternative to sea freight. Capacity-wise, as I mentioned, the Ministry of Agriculture considers alternative route capacity to be half of what is required up to 2.5 million tonnes per month as opposed to 5 required. So whether this is viable, of course, we'll have to use all capacities required. We also need cooperation from neighboring countries for transit of Ukrainian grain. And we are pleased to see that Romania is the friendliest towards Ukrainian grain transit. And it has been announced recently that the Port of Constanta takes Ukrainian cargo as a priority. So even this capacity requires good cooperation on European level, and we hope that this full potential will be realized. Next question from Marcin Nowak, several of them, that was the first one. What is the status plan towards selling 2026 agricultural volumes with limited capacity of Black Sea terminals after recent strikes? This question is to Mr. Viacheslav Chuk, the Commercial Director.

Thank you very much for your attention to our results. In replying to this question, I would say that we will use the routes we were using in -- at the beginning of the full-scale invasion. It was transit routes to the port of European countries -- to ports of European countries. And of course, we will use a railway logistics to direct processors of the oilseeds. We are not processing by our own to the European continent. I would say that we have -- and we have stable contacts with the partners in EU territory, and we are maintaining this relationship. So actually, it will be slower pace of export, but stable from the perspective of volumes month by month.

Related question from the same block, do you plan to resign from trading in third-party volumes until export capacity increases?