MHP SE ($MHPC)

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's Fourth Quarter and 12 Month 2026 Results Conference Call on the 5th of May 2026. [Operator Instructions] So without further ado, I would now like to pass the line to Anastasiya Sobotyuk, Director of Investor Relations. Please go ahead, ma'am.

Thank you very much, Michael. Dear stakeholders, good day to you. Thank you for joining us for MHP's conference call dedicated to our fourth quarter and the results of the year. Just give me a second, I have a problem with the line. Just give me another second. I'm sorry. I have a problem with the line.

Anastasiya, we can hear you loud and clear.

All right because it looks like that I do not have a good connection. I'm so sorry. Okay. I can continue, right? You can hear me well. Okay. Thank you. Thank you very much. So once again, good day to you, and thank you for joining us for the conference call, which we dedicate to our fourth quarter and 12 months results. My name is Anastasiya. I'm Director of Investor Relations, and I'm joined today by Viktoriia Kapeliushna, Chief Financial Officer of MHP. Together, we will present and discuss the company's financial and operational performance for the reporting period. Please note that today's discussion is based on the press release, investor presentation and annual report released earlier today. In addition, during our discussion, we will share our outlook and strategic plans, which reflect current assumptions as well as domestic and international market trends. We kindly ask you to take this context into account during the call. We are moving to Page #3 of the presentation. Thank you. So let me walk you through the latest macroeconomic picture in Ukraine. Starting with GDP. Ukraine has moved from a deep contraction in 2022, 2023 during the peak of the war impact into a stabilization and modest growth pace. As we move into 2025, '26, growth is normalizing. For 2025, real GDP growth came in at around 2% year-over-year, and the Central Bank expects a similar trajectory into 2026. The key takeaway here is resilience despite ongoing infrastructure attacks and security risks. The economy is maintaining positive momentum, albeit at a slower and more sustainable pace. On inflation, we have seen a significant improvement compared to the volatility of prior years. Inflation peaked in 2022 and has since been trending downward overall, though with some fluctuations. As of Q4 2025, CPI moderated to around 8%, down from nearly 12% in the previous quarter. Looking ahead, the National Bank of Ukraine expects inflation to decline further to around 6% to 7% in 2027 with a continued downward path thereafter. This inflation trend reflects a tighter monetary policy and gradual stabilization in supply chains, which is supportive for real returns and investment planning. Turning to the currency. The green has shown stability over the past year. The Ukrainian to USD dollar exchange rate remained largely stable through 2025, ending close to its starting level despite external pressures. However, we did see a moderate depreciation of about 13% during the year, reflecting global dollar strength rather than domestic imbalance. This relative effect stability is important. It signals effective central bank management and helps reduce volatility for foreign investors. Finally, on key sectors, agriculture continues to demonstrate resilience. The 2025 harvest confirmed Ukraine's ability to sustain output despite volatile conditions. Grain production reached approximately 64 million tonnes, up 13% year-over-year. Let's move on Slide #4 of our presentation. So we will come back to the results of MHP. And let me walk you through our financial performance. Starting with Q4 2025, revenue grew strongly by 44% year-over-year, reaching approximately USD 1.1 billion. This was primarily driven by higher prices in poultry and processed meat as well as continued contribution from our European operations, including the consolidation of the UVESA business in Spain. Despite this top line growth, profitability was under pressure. Operating profit declined by 33% and EBITDA was down 12% year-over-year, mainly due to higher payroll and administrative costs as well as elevated war-related expenses, which remained a persistent drag on margins. As a result, we reported a net loss in Q4 compared to a small profit last year. Looking at the full year 2025, revenue increased by 24%, reaching USD 3.8 billion. EBITDA remained broadly stable at approximately $570 million with a margin of 15%, slightly below last year. Importantly, net profit increased by 30%, supported by lower FX losses compared to 2024 despite ongoing war-related costs throughout the year. On the export side, we continue to see a positive mix shift. Total exports increased from USD 1.8 billion in 2024 to over USD 2 billion in 2025. Growth is primarily driven by higher value products, particularly poultry and processed meat, while grain remains an important but more volatile contributor. Let's move on Slide #5 of the presentation. Here, we have the breakdown of our 2025 performance by segment. Starting with revenue mix, our poultry segment remains the core of the business, contributing 51% of total revenue. The European segment is also significant at 27%, followed by agriculture at 12% and vegetable oils at 10%. In terms of profitability, the picture is more balanced. Poultry and agriculture are the main EBITDA contributors accounting for 56% and 46%, respectively, while Europe delivers a solid 21% contribution. The Vegetable oils segment remains relatively small at 2% -- now turning to the EBITDA bridge. Total EBITDA remained broadly stable year-on-year at around $570 million, as just recently mentioned. In poultry, positive pricing, particularly higher meat prices supported performance, but this was offset by lower sales volumes and higher input costs. In Vegetable oils, results declined due to lower volumes and margin pressure and agriculture was relatively stable. The European segment showed improvement, supported by the U.S. acquisition, along with better pricing and volumes. I would like to pass the word to Viktoriia here. She will provide you a detailed picture on MHP's financial results across business segments. Please, Viktoriia.

Thank you, Anastasiya. Good afternoon, everyone. Let's turn to poultry and related operations segment performance, Slide #6. Despite the ongoing challenges with the war in Ukraine, MHP delivered solid performance in 2025 with results significantly exceeding those of the same period last year. Revenue grew 18% year-on-year for 12 months last year, this was driven by high price for both poultry and processed meat introduced to pass through rising production costs, preliminary reflected grain price inflation and annual salary review. The stronger price environment also contributed to higher evaluation of biological assets and agricultural produce, which supports our performance. As a result, adjusted EBITDA net IFRS 16 grew 26% to $370 million for the full year with margin improving 1 point to 16%. Total poultry meat sales declined modestly from 52,000 ton 626,000 tonnes in 2025, preliminary due to the low domestic sales in Ukraine, while export volumes remained stable. Processed meat volumes grew from 45,000 to 57,000 tonnes, driven by higher production and ongoing shift toward production of added value product. Poultry price increased year-on-year through '25 before moderating in Q4. The decline has continued into Q1 2026. However, we already saw signs of price stabilization in April. Looking ahead in 2026, we expect the overall cost and price environment to remain challenging in additional ongoing commodity price volatility we factor in increased energy costs, including diesel as well as continued pressure on logistics costs and supply chain stability due to the war in the Middle East. These factors may limit margin expansion and require continued pricing discipline. Let's proceed to the Vegetable Oil segment, Slide #7. Performance in this segment remained weak in 2025, revenue declined 18% year-on-year and adjusted EBITDA fell by 71% to the 14 million for the full year. Q4 results were particularly solid with EBITDA near breakeven. The pressure continues to reflect higher sunflower and soybean seed price, which were not fully recovered through oil price movement and dynamic driven by an increased crush capacity in Ukraine. Sunflower oil sales volume declined across the year as visible in the chart, while soybean oil volume partially offset this through the production adjustment change in recipe as described in our previous communications. Looking ahead to 2026, we expect some improvement in segment profitability, supported by gradual normalization of the raw material cost environment and higher production volumes. This this outlook remains highly sensitive to commodity price dynamic and potentially increase in all input costs, including energy and logistics, particularly in light of ongoing instability in the Middle East. Additional any continued imbalance between seed price and oil price could further weigh on margin. As a result, the pace of extent of recovery remain uncertain, and we maintain a cautious near-term outlook. Let's move to the Slide #8, agriculture operations. The segment demonstrated solid resilience in 2025. Revenue grew 14% year-to-year, supported by higher price across most crops and increased sales volume of soybean and wheat, which offset lower volume of corn and seed. Adjusted EBITDA net IFRS 16 held broadly flat $259 million. Crop yield across the 2025 harvest were broadly stable year-on-year and in line with expectation across both winter and spring campaign. The 2025-2026 winter sowing campaign has been fully completed and spring campaign is currently underway. We expect the 2026 harvest to be broadly comparable to 2025, while we take in account the risk of higher production costs, including fuel, fertilizer and logistics as well as potential disruption to export routine streaming from instability in Middle East. The impact of increasing fertilizer price for the 2026 harvest is expected to be limited. They reflect the fact MHP has already produced a sufficient quantity of fertilizer required for the 2026 harvest. Accordingly, any adverse effect from higher fertilizer price is more likely to be seen starting from 2027 harvest, which may affect overall profitability even in case of stable heat. Let's proceed to the Slide #9. Several words about European operations segment. 2025 was the landmark year for this segment. Together with the results from newly acquired UVESA Group, the segment crossed USD 1 billion in revenue, up 76% year-on-year. Adjusted EBITDA net IFRS 16 grew 37% to $119 million. For full year for 2025, UVESA contributed $318 million in revenue and $15 million of adjusted EBITDA representing 5 months of consolidation. Tina continued to perform well organically with both poultry and processed meat price and sales volume rising constantly through the year. EBITDA margin for the segment came in at 12% for the full year, down 3 percent points year-on-year, partially due to downward revaluation of biological assets in Spain following an African swine outbreak the pressure pork-related margins. Slide #10. A few words about our cash flow, debt and liquidity. The group demonstrates strong cash generation last year while absorbing the UEA acquisition into the balance sheet and debt structure. Operation cash flow grew year-on-year to $413 million 2025, driven by improving earnings, working capital representing as investment $142 million for the year mostly reflecting seasonal sunflower seed procurement and trade receivable growth in line with revenues. CapEx, $275 million was directed at maintenance and modernization of existing facility, expansion of international poultry operation, new bioenergy production and compliance and margin improvement projects. Cash used for acquisitions and investment amount $280 million, mostly reflected the net cash outflow from acquisition of 92% stake in Vesta Group completed on 31st July last year. Regarding debt, net debt at the by the end of 2025 was 532 billion, incorporating both the new facility draw, not financing drawn to financing the U.S. acquisition and U.S. existing debt on consolidation. Total cash position was around $415 million by the end of the year. The group's acquisition leverage ratio by the end of the year was 2.5. The remains comfortable with defined limit of 3.0 and the group has complied with all bank covenants as of the reporting date. Thanks to support of MHP bonders, we successfully complete the refinancing of $550 million senior notes that were due in 2026. In January and February 2026, MHP issued $150 million in aggregate of new senior notes due 2029 and used the proceeds to repurchase of outstanding 2026 notes. As a result of all obligation in respect of our note have been fully discharged and our bond maturity in 2029. We are grateful for continued trust and support of our investors throughout the process. And now I give the floor to Anastasiya.

Thank you very much, Viktoriia. Thank you for a detailed view on the results. Let me briefly outline our outlook going forward before we start our discussion. We remain prudent in our approach to growth while continuing to pursue selective international expansion in Europe, focusing on opportunities that enhance synergies, diversify high currency earnings and support long-term sustainable growth while maintaining stable operations in Ukraine. The operating environment remains highly uncertain. We continue to closely monitor the war in Ukraine, where any progress towards a lasting piece could support economic stabilization, although visibility remains limited. We are also monitoring the ongoing conflict in the Middle East, as you rightly mentioned, Viktoriia, particularly its potential impact on logistics and global supply chains. Since 2002, we have demonstrated strong operational flexibility, adapting to significant disruptions and maintaining stable deliveries to key markets. However, further deterioration in conditions could still impact our operations. On costs, we expect moderate increases in grain, vegetable oil and poultry prices, driven in part by high energy and fertilizer costs, including the impact on the ongoing conflict in the Middle East, which may pressure margins in the short term. Over the medium term, we expect pricing to adjust with a lag, helping to offset these increases. We have secured key inputs and do not anticipate immediate supply constraint, as mentioned by Viktoriia. However, continued geopolitical instability, including the war in the Middle East alongside inflationary pressures may weigh on demand. Overall, our priority remains maintaining resilience, ensuring continuity of supply and carefully managing risks in a volatile environment. I think this summary concludes my presentation, our presentation. We are now ready to take your questions. Operator?

Thank you, Michael -- we're also welcoming text questions. However, please note that those text questions will be followed up by Anastasiya and the team after the call. Our first question comes from Stella Cridge from Barclays.

I was just wondering if I can ask in a couple of areas. Could you firstly just talk a little bit more about the pricing pressure that you've seen? Where is that coming from? Is that coming from domestic market or some of the export markets? And secondly, on the Middle East, in 2026, have you actually seen kind of pressure on any sales volumes in the Middle East? Or is it more of a case of what you're discussing around the freight cost element? And do you think you could potentially -- would that be reflected in higher prices to potentially offset that? And finally, just on the CapEx side, it would be great if you can give us an update on planned spending and what the priority areas would be this year? That would be great.

Question. Yes, regarding pricing, yes, first quarter, it was very difficult regarding price, especially in Ukraine because to be honest, first quarter always is very low season, yes. But what we see right now, now the price stabilized and current price at the same level that we had in December. Regarding export price, yes, the same situation, especially regarding price in Europe in EU. Current pricing price of the first quarter approximately by 10%, 15% lower than fourth quarter. Regarding cost of production, yes, what we see right now, we see right now significant is not something especially in Ukraine and of course that everywhere in the world, price of fuel increased and in Ukraine increased approximately by 40%, 50%. In our cost of production share of the fuel in farming segment, approximately 7%. That is why we see increase in cost of production approximately 3%. And the same in poultry share of cost of fuel less is approximately 5%. So it is the main pressure. But to be honest in the first quarter, we had very -- how to say, a very cold winter, and we consume normal amount of gas. But anyway now it's a good weather. But anyway, total our expectation of cost of production based on current situation in poultry segment increased year-to-year approximately by 5%, 7%. Now at the beginning of the year, we always try to be very conservative based on conservative scenario. Regarding CapEx, CapEx for 2026 250 27 includes maintenance CapEx and CapEx for expansion and for modernization in our European businesses.

That's great. And just on the GCC side, could you comment on what the impact has been on Middle East?

Middle East, yes, as I told because -- yes, in Middle East, regarding volume, no, we sell yes, because our logistic cost, our logistic cost significantly increased logistic cost to deliver our products to Middle East, increasing approximately by 30%, 40%, but it was compensated by price. Yes. The big influence to us regarding in Middle East increased the fuel price in U.K. And potentially, as I told in the presentation, fertilizer price. But fortunately for us, we bought all fertilizer for the season 2026 in the fourth quarter. And that is why we will not have any influence on our cost of production. It would be our -- is a factor for increasing our cost of production for the next harvesting campaign 2026.

Our next question comes from Mr. Dmitry Ivanov from JFS. Yes, please go ahead.

I have a few questions as well, if I may. Maybe elaborating on the previous questions. Can you remind us about your share of Europe and Middle East in your poultry sales? So how much of your exports are expected to be exported to European countries and the Middle East for 2026? Just remind us about the kind of the proportions.

Based on volume, our export approximately 35% in Europe, 35%, 40%. And in Middle East and total Middle East includes Iraq, approximately 20%...

20%, approximately Middle East sales...

It depends -- you understand, yes, we have some limitation of export volume and that is why we see what is the price that is approximately around 20%.

Understood. You mentioned you're seeing some pressure from a pricing perspective in European market. I'm just trying to understand from like overall product mix and from like geographical mix, like do you expect to see lower like realized poultry prices? I'm kind of trying to understand because you mentioned you see some increase in prices in the Middle East, basically lower prices in Europe. So you're also selling like some volumes to other like geographies. Should we expect some reduction in poultry prices for the business? Or like how should we look directionally...

I will explain. Yes. First of all, when I speak about the Middle East price increase, but just this increasing only compensate significant increased logistic costs. You understand our profitability remains even with I cannot say this is more attractive. And to be honest, and yes, because if you -- yes, we send mostly for the Middle East mostly the small chicken, chicken with rate 1 kilo, 1.2 kilo. It is a completely different product. And so it is something different.

I'm just trying to understand basically like -- just apologies another follow-up question on CapEx. So basically, your CapEx guidance, right, basically, how much of this CapEx guidance will be spent in Ukraine operations versus like international like Tsui and USA. So what's like the proportion of CapEx allocated to Ukraine and non-Ukraine businesses?

50% in Ukraine. But in Ukraine, it is mostly consist of maintenance CapEx. Our maintenance CapEx approximately 80%, 90% in Ukraine. In Europe is amount $140 million, but maintenance of them total only $40 million -- $40 million, $45 million. It is a different projects, especially in U.S. project which will allow to increase our production and sales volume.

Is it reasonable to assume that your operation will be free cash flow negative this year?

Yes, a little bit. No. But anyway, we have the clear target for us. We provide acquisition and we have a clear business plan, how we increase size of this business and increase profitability and increase sales volume. That is why we must invest money.

Understood. So this year, like it will be free cash flow negative European business basically. Okay. Okay. And I'm just trying to understand when it comes to your like Ukraine business, basically, with all the developments that you just mentioned, like increase in cost of sales, reduction in poultry sales, do you expect to be free cash flow positive in Ukraine business perimeter?

Yes, we expect that it would be positive cash flow. But anyway, unfortunately, this year, based on factor which we discussed, we expect that lower -- based on current situation. I don't know -- and we will try -- in the past, we try to always -- we try to be always very conservative. But yes, in Ukraine, we understand that we will generate positive cash flow.

Okay. Just 2 quick final questions. Basically, if like you were just to stake if you can like share some base case assumptions. How much EBITDA reduction do you expect in 2026 versus 2025? Basically, I was talking about like 10%, 15% reduction year-over-year.

You're completely right. expectation now we understand is around 50% 15%, not 5...

Yes. Understood. So basically versus 2025. And could you also share the latest cash position because it's already May, and we are looking at 2025 financial data. What's like latest $350 million, and I guess the majority is still outside of Ukraine. Yes, you're right.

We have a follow-up question from Mr. Dmitry from JFS.

Apologies, there's not many other questions in the line. Just maybe I will ask on the working capital because this increase in working capital, $188 million in Q4 was a bit higher than I think you expected before, right, when we discussed. You kind of explained it by increasing inventories. And could you please like help us understand how should we look at working capital in 2026, basically? Should we expect some release of working capital? Basically, you expect more buildup? So just trying to understand what happened between like the latest updates and this 8 million working capital hit in Q4? And what's your expectations for 2026? That would be my last question.

Yes, you're completely right. In 2026, we expect to have the release from working capital. Why we have so high investment in working capital last year, first of all, because it's a few reasons. One of them, significantly increased price in export and in Ukraine, and that is our trade receivable increase. And we slightly increased our stocks in meat especially in export. The second point, we purchased a big amount of sunflower seed significantly higher our total sunflower seed by the end of 2025, approximately by 40% higher compared to the last year. It is the main contribution in working capital. And we had some issues with VATbursement. We received this money in January, but anyway by the end. And yes, regarding 2026, yes, you're completely right. We expect some release in working capital at minimum $30 million, $40 million.

Minimum $30 million, $40 million for the full 2026 year, right? Yes, it is a minimum because as you remember, we try to be very conservative because I don't know what will happen with VAT reimbursement because you know that we are a big exporter from Ukraine and our total VAT reimbursement for full year is approximately 150 million $170 million. It is always some issues.

Just a final -- yes, we have a question from Mary G from SAIC.

So my question is, and I'm not sure if I mentioned it before, but what's your expectation for 2026 in terms of EBITDA? Where do you hope to end by the end of this year?

Thank you for the question. But you understand it's very difficult to predict our EBITDA, especially with challenging environment. But we put in our forecast around 15% lower compared to the last year, around $500 million, slightly higher than $50...

$50 million...

Okay. We'll give another 10, 15 seconds to any follow-up questions. We have a question from Nina from BCB Securities.

I may have missed it. connection was not great for us here. We noticed quarter after quarter a slight decline in production volumes and consequently a decline in sales. What is the reason for that? And is there an expectation of reversal of this trend anytime soon? And also, I may have missed, what is the reason for the reduction of EBITDA going into 2026?

Yes, yes. Your question about the decrease in product sales volume quarter-to-quarter, what quarter-to-quarter -- sorry -- please clarify...

I think that we have a question to clarify your question regarding the quarters. Can you hear us?

Yes, regarding...

We saw that there is a slight decline in production of poultry like in the past few quarters. What is the reason for the decline? And are we -- do you guys expect to have it like restore to the previous...

Yes, sorry, this is the sales. Yes, as I told previously, by the end of the year, we have a higher stock of meat, and it is one of the biggest reason why it is the sales decrease. And other very important point that we have the strategy and we produce more ready-to-cook products and more value-added products and that is why less carcasses, less whole chicken. And if you speak about -- and that is why quantity volume of this is less than if you sell just chicken.

Diversion of more poultry to the readycookilstood...

Yes. And the second question about EBITDA, I would like to repeat that basically...

Trend, EBITDA seems to be with all acquisitions, and we're hoping to see some growth, but you're guiding.

Yes. Regarding QS, we have the strict plan how we increase our size of the company. We understand how we increase sales and production of chicken and how we increased our EBITDA in this segment. Yes. But you know that we have -- this company has not just segment of poultry and pork segment and due to decreasing price of pork in Spain because it was a case of African view. Yes. And that is why we have some negative revaluation...

To add more to the question and to the answer which Viktoriia has just given, I would like to add that the decreased EBITDA assumption now is driven by the challenges which we all see and face, right, because of the Middle East conflict, right? And as we've started the year, right, we can see that we are impacted by the logistics, right, especially logistic price which we are trying to offset. And we expect also going forward to have an adverse impact on the production cost of grain because of the diesel price and next year fertilizer prices.

Okay. It looks like we have no further questions at this point. I'll pass the line back to the MHP team for the concluding remarks.

Thank you. Thank you very much, Michael. Thank you very much, everyone. Thank you for joining us today, and thank you for the questions. In case you have any additional questions or you would like to clarify something, please give me a call or send me a message, and I will be glad to meet with you. Thank you, and have a lovely day. Bye.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.