MHP SE (MHPCL.XC) Q2 FY2025 Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'd like to welcome you to MHP's Q2 and 6 Months 2025 Results Conference Call on the 12th of September 2025. [Operator Instructions] So without further ado, I'd like to pass the line to Anastasiya Sobotyuk, Director of Investor Relations. Please go ahead.

Thank you very much. Dear stakeholders, good day to you. Thank you for joining us for MHP's conference call dedicated to our second quarter and semiannual results. My name is Anastasiya. I'm IR Director. 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 financial statements released earlier today. In addition, during our discussion, we will share our outlook and strategic plans, which reflects current assumptions as well as domestic and international market trends. We kindly ask you to take this context into account during the call. We move to the Slide #3 of the presentation. A few words, first of all, about macro environment in the first half of 2025. Despite challenging environment, including ongoing missile attacks on critical infrastructure, Ukraine's economy demonstrated notable resilience in the first half of the year. According to official data, Ukraine's real GDP grew by an estimated 1.3%, 1.5% year-on-year, driven by recovery in industry and construction budget constrained by war-related disruptions, energy shortages and labor challenges. Looking ahead, the National Bank of Ukraine projects further recovery with GDP expected to grow by approximately 2% this year. Inflation trends have also shown some moderation. The Central Bank currently forecast anticipated inflation for the full year to reach approximately 10%. Since October 3, 2023, the National Bank has adopted a managed exchange rate regime, introducing more flexibility into the foreign exchange market, which remains in place today. The exchange rate remains highly sensitive to global geopolitical developments, including shifts in international trade and tariff policies. In 2025, Ukraine is expected to harvest over 23 million hectares of agricultural land with roughly half allocated to grain crops and nearly 40% to oilseeds. Recent public forecast suggest that after 2024 harvest of about 71 million to 75 million tons of grains and oilseeds, Ukraine's 2025 harvest is likely to decline modestly under many scenarios. mainly projecting 73 million to 74 million tonnes. Though more optimistic outlook see potential to reach 83 million tonnes if conditions improve. In summary, all these macro indicators collectively highlight both the resilience and the potential of Ukraine's economy as it continues to navigate complex and evolving environment. Let's move on Slide #4 of the presentation. So returning now to our financial performance for the first half of 2025. The main points are following. Revenue growth, around USD 1.6 billion with 10% increase year-on-year. We have stronger performance in poultry, Agriculture and European segments drove revenue growth in both Q2 and 6 months 2025, offsetting the decline in vegetable oil sales. Vegetable oil weakness continued. This segment continued to underperform, dragging down profitability, but its impact was offset by growth in other core segments, as mentioned. Gross profit stability, approximately USD 368 million in the first half of 2025. While vegetable oil margins declined, this was largely balanced by stable or improved results in poultry and agriculture, resulting in broadly stable Q2 or slightly lower 6 months gross profit. EBITDA and operating profit decline. EBITDA net of IFRS 16 decreased by 11% to approximately USD 236 million, and operating profit decreased by 89% to $136 million, mainly due to higher payroll-related SG&A expenses, increased depreciation and additional war-related costs. Net profit growth despite operational decline. Net profit increased in both periods by 67% to USD 75 million in the first half of 2025, thanks to foreign exchange gain reserving a significant FX loss in the prior year caused by grid depreciation. Let's move to Slide #5 of the presentation. Here, we have financial results by segment. And in the first half of 2025, the poultry and related operations segment remained the largest contributor to the company's performance, according -- accounting for 55% of total revenue and 70% of total EBITDA. This was primarily driven by an increase in poultry prices. Main trigger for adjusted EBITDA in 6 months 2025 were actual triggers. We have a few were growth in poultry prices. However, partially offset by higher production costs and lower sales volumes for exports, significantly higher production cost of sunflower oil, driven by higher prices of sunflower and increased SG&A costs. Let us now take a closer look at the performance of each business segment, and I pass my word to Viktoriia.

Thank you, Anastasiya. Good afternoon, everyone. Let's have a look at poultry and related operations segment performance, Slide #6. Despite ongoing challenges of the war in Ukraine, MHP delivered strong performance in Q2 and H1 2025, exceeding the results of the same period last year. This was driven by strong poultry and processed meat prices, together with effective cost management, demonstrating the company resilience and efficiency in operations. Poultry costs continue to increase in H1, primarily due to the higher grain prices and regular salary review, and it is market adjusted in spring. Looking ahead, we expect additional pressure from energy, payroll expenses and broader inflation impact on production inputs in Ukraine. Poultry price continued to rise in Q2 and H1, both on export and domestic markets, up 16% year-on-year, compensating growth of poultry production costs. Volatility in commodity prices remains a key challenge for MHP. To mitigate this impact, MHP strategically continues growing its share of noncommodity products, both in Ukraine and export markets. In H1, we further prioritized sale of processed meat products with a focus on delivering the strongest returns. A few words about our Vegetable oil segment, Slide #7. Performance in this segment remained weak with revenue decrease in Q2 by 13% year-on-year and 12% quarter-on-quarter, driven by substantial increase in sunflower oil sales. Year-on-year EBITDA for both H1 and Q2 declined year-on-year. However, results stabilized quarter-on-quarter, supported by slightly better margin. To mitigate negative effect on group results, we have already adjusted our order received, shifting substantially from sunflower to soy cake. This result in higher soybean oil output, while sunflower oil production continued decreasing correspondently. This pressure in profitability mainly reflected higher sunflower and soybean prices, which are not fully offset by oil prices changes. This was driven by a low harvest year in 2024 and increased number of crushing capacity in Ukraine. As a result, we expect this segment to deliver lower profitability this year. Let's move to Slide #8, Agricultural Operations. Slightly higher segment revenue in H1 was a result from increased prices, partially offset by the lower volume of grains sold to external customers from the last year harvest. EBITDA of Agriculture Operations segment remained almost unexchanged. The result was mainly the offset of higher prices with mixed yield and slightly increased production costs. Spring crop harvesting has already started and is it progressing well. As of today, we anticipate the yield of spring crops to be comparable to the last year. I would like to mention that only harvest of wheat was higher over the 7 tons per hectare, while yield was slightly lower than prior year with 3.3 tons per hectare. 2025 harvest is expected to be between 1.2 million and 2.5 million tonnes of crops. Let's proceed to Slide #9. Several words about European operating segment. EBITDA of European operating segment was broadly stable year-on-year in both in H1 and Q2, however, improved compared to the previous quarter. This growth was supported by higher sales of poultry meat in Slovenia, in Croatia as well and other export market, along with modest price increasing in Q2. Slide #10, a few words about cash flow and liquidity position. Cash from operations before changes in working capital amount to $180 million in H1 and $80 million in Q2, broadly in line with last year. Investment in working capital amount $19 million during the first half of the year, pretty stable year-on-year, primarily due to the increase in trade account receivables driven by high meat prices and change in inventories, agricultural produce and biological assets were largely seasonal and tended to offset each other. CapEx, $134 million in H1 remained stable year-on-year and was directed to several key areas, including extensive maintenance and modernization of existing facilities, plus cost optimization project, also expansion and improving of Pirutinapo production facility and construction on new Bergy production facilities. As you already know, on 31st of July, subsequent to the reporting date, the group finalized the acquisition of 92% of the shares capital of EVESA Group, one of the leading Spanish producer of poultry meat and animal feed. The total consideration for the transaction amount to EUR 171 million. Approximately 70% of this amount was financed through debt facility from private European banks, while the remainder was funded from the group own resources. EVESA Group is one of the leader in the food industry in Spain and one of the leading poultry producer in Spain. The group operates in 4 feed mills, 1 hatchery and 4 poultry slaughter house and 2 pork farms. Besides the 2024 results, the group produced over 150,000 tons of poultry and over 70,000 tons of pork generate over EUR 600 million of revenue. Regarding debt position, at the end of the period, the company total debt was nearly $1.7 billion and net debt about $1.2 billion. The liquidity position at the end was $330 million in cash, $154 million of which was hold by the group subsidiary outside Ukraine. At 30 June 2025, group's leverage ratio was 2.3x. Regarding $550 million notes due in April '26, this is a top priority for us, and we fully understand its importance to investors. As of 30th of June, the note has been reclassified from long-term to short-term debt. There have been no material changes in Ukrainian capital control or liquidity regulation, which requires that foreign currency proceeds from export originated in Ukraine be repatriated with 180 days. This in practice, limits our ability to use offshore cash for debt repayment. While MHP can service its existing loan portfolio and bonds from Ukraine, principal repayment from offshore remain restricted. We continue to operate under uncertainties and challenges due to the ongoing war. With the notes maturity in approximately 7 months, we are actively evaluating all available options and remain in our ability to implement an effective repayment strategy. We certainly appreciate the support from our investors since February 2022 and look forward to continue our constructive cooperation. And now I give the floor to Anastasiya.

Thank you, Viktoriia. Let me conclude the presentation before we start our Q&A session. Despite a highly uncertain and volatile operating environment marked by ongoing war in Ukraine, fluctuating export market conditions for poultry, instability in grain and vegetable oil prices, MHP continues to demonstrate operational resilience. The company not only sustains core business activities under persistent disruptions, but also pursues strategic growth as reflected in the acquisition of Uverse Group. As the company approaches the bond 2026 refinancing milestone, it remains focused on prudent financial management even as capital controls by the IBU remain unchanged. In the landscape, lacking clarity on ceasefire or peace negotiations, MHP adapts, innovates and positions itself to navigate near-term headwinds while building for long-term strength. Let us take your questions now, dear stakeholders. Thank you. Operator?

[Operator Instructions] So our first question is from Stella Cridge from Barclays.

It would be possible to ask 2 areas, please. The first is on the Spanish acquisition. Thanks for the detail on the financing of that. Could you just give us an idea of what the maturity profile would be of the debt associated with that? And what your pro forma leverage would roughly be post the acquisition, that would be great. And the second, thanks for obviously running through thoughts on the 2026 bonds. I was just wondering what your options might be available. I mean, would you consider a full extension of the bond into new maturity? Could it be kind of part cash, part extension or maybe some new funding? Just keen to get a sense of what the options might be in practice, that would be great, please.

Thank you for your question. Regarding our debt portfolio after acquisition, as I told during the presentation, we -- our acquisition cost of our acquisition EUR 271 million, approximately more than $300 million. We adjust with this acquisition finance is the debt from priority European Bank, around EUR 200 million long-term debt. And after the acquisition, our current -- our position, our leverage approximately 2.7 current our leverage position. Regarding together with, if you calculate together with EBITDA of U.S. consolidated and consolidate debt of U.S. Regarding the second question about options for 2026. You know that during all our history, we have never done any restructuring even in 2014. The time we -- MHP was only 1 institution from Ukraine, who repay Eurobond and as far as the market approach is the issue new Eurobond and from this money repaid previous Eurobond. But nobody knows if market allowed to us to do it. Unfortunately, just 2 months ago, 3 months ago, we thought that it would be maybe realistic a chance of that we estimate 10%, 20%. Now we believe in some miracle, maybe something changes on the market. And first of all, with war in Ukraine and maybe market will allow to us issue Euro report. Maybe we will be very happy with this. But if not, we are considering a different possibility and we understand that maybe MHP one of the most reliable partners for all creditors, in Ukraine, outside Ukraine. And I think that I suppose that we can achieve some compromise anyway.

Our next question is from Erika Ive from MetLife Investments.

I got a couple only about EVESA acquisition. And could you indicate how much EBITDA do you expect from the company? And in terms of notice, you put aside $43 million of funds in short-term deposits to guarantee -- to secure bank guarantees. Should I assume that -- these funds have been released in July. Could you provide, please for some color?

I think your question about EVESA. As I told that revenue of U.S. by approximately EUR 600 million, EBITDA approximately EUR 50 million. Regarding R&D, yes, you're completely right. It was release.

[Operator Instructions] Our next question is from Dmitry Ivanov from JFS International.

Just a few questions from my side, if I may. Just apologies again, like for the Spanish asset acquisition. But just to confirm, like apart from this EUR 200 million acquisition-related debt that you attracted to finance the deal. Does the asset have another separate debt like working capital term loans facilities. So we are think about only EUR 200 million acquisition debt that you will assume as a part of this acquisition just to confirm this number if I may.

Sorry, maybe we did not catch regarding acquisition.

Does the asset have -- does the asset have a debt on the balance sheet?

In debt and balance sheet in US around EUR 60 million.

EUR 60 million debt on the balance sheet for basically -- so basically, -- it will be like 200...

Net debt, and EUR 60 million, yes.

Okay. Okay. Okay. Got it. And are there any kind of contingent deferred payments for this asset? Or you already like EUR 270 million equity...

No, no. Because as I told you about no, no, no, no. I told we 92% this company.

Okay. Got it. And can you also share with us like the latest cash position after the acquisitions. So basically, you disclosed that EUR 330 million as of June end? What is the latest cash position after the acquisition?

Yes, No, our current position of cash around $300 million.

So the $300 million after...

Yes, current position of the acquisition because now in September, we closed our deal by the end of July, our current position is around $300 million.

Got it. And how much of it is...

At the same time, but what I would like Yes, what I would like to emphasize is very important. With current situation to is a minimum cash, which we must have cut account due to currency as is minimum in beyond $200 million is our policy is very important.

Okay. Got it. So minimum $200 minimum $300 million the current after the acquisition, basically. And just finally, to confirm 2.7 net leverage is pro forma, expected by the end of the year with the asset with asset fully consolidated, right? So just what you mentioned 2.7 pro forma net leverage.

Approximately maybe 1.75%. Yes, approximately.

Our next question is from [ Nandini Bomonti ] from JPMorgan.

I have 3 right now. So the first one is the debt which is raised at our riser the funding. Could you please provide like the cost of this debt? And are there any amortization payments? Or do you expect it to be a bullet repayment?

The question about the condition of our acquisition finance yes, financial to yes. Yes, it is a loan for 7 years, 2 year a grace period.

2 year a grace period...

[indiscernible] During the year.

And after 2 year grace period, what's the annual amortization?

Yes, this quarter, yes. quarter amortization. Yes after 2 years, after 2 years grace period quarter amortization.

Okay, 25% for the year. Sorry, if I could go to my question -- next question on that. What is the cost of this debt?

No, sorry, it is commercial. Yes, believe me, it's very attractive. Yes, very attractive but...

Understood. Also, could you please provide the full year EBITDA guidance now that we are halfway through the operations?

Yes, based on current situation, yes because you understand we hope that every ticket would be booked. based on current situation, our expectation EBITDA for full year $550 million, $570 million together with U.S.

Together with U.S. on first 6 months, I think. Got it. And what is the full year CapEx guidance?

CapEx guidance result U.S. without our acquisition, approximately $280 million.

$280 million including U.S got it.

Excluding U.S.

Excluding U.S. Okay. And my last question is about the European operating segment. Can you please remind what's the net debt at this entity and how much more additional debt capacity that entity has currently?

You understand that we attract our acquisition finance for European segment of our European company and current our position of net debt of Perutnina, around $380 million.

$380 million is net debt. Got it. Do the covenants -- loan covenants allow you to take additional debt over there?

Yes, because it is current covenant U.S. Perutnina, brought vessel and our current covenant on 2.9. Not covenant our current net debt ratio 2.0 is very close to the maximum.

[Operator Instructions] Okay it looks like we have no further voice questions. Anastasia, do you have any final comments?

Thank you very much. Thank you for assisting us dear stakeholders. I can see that there are a few more questions but in the chat. If you don't mind if you don't mind, if you have any questions -- and if you can share those questions with me by e-mail, please follow those questions directly. Thank you very much. And with many of you, I think we will see next week at the JPMorgan conference. Thank you. Bye-bye.

That concludes the call for today. Thank you, and have a nice day.