MHP SE (MHPCL.XC) Q3 FY2025 Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and I'd like to welcome you to MHP's Third Quarter and 9 Months 2025 Results Conference Call on the 15th of December 2025. [Operator Instructions] So without further ado, I'd like to pass the line to Anastasiya Sobotyuk, Director of Investor Relations. Please go ahead, madam.

Thank you very much. Good day to you. Thank you for joining us for MHP's conference call dedicated to our third quarter and 9 months results. I'm Anastasiya, 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 financial statements 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 move on to Slide #3 of the presentation. Just a second. My slides do not move. Yes, I can move the slides now. Perfect. So a few words about the macro environment in the reporting period. Despite challenging environment, including ongoing missile attacks on critical infrastructure, Ukraine's economy continued to demonstrate resilience in the third quarter of the year. Ukraine's GDP expanded by 2% year-on-year in the third quarter of 2025, according to preliminary national statistics, reflecting continued economic resilience despite ongoing challenges. The economy continues to contend with substantial headwinds related to the conflict, including damage to critical infrastructure, particularly energy systems, labor shortages due to mobilization and displacement and broader disruptions to trade and investment, which have constrained growth and increased uncertainty in Ukraine. Looking ahead, the National Bank of Ukraine projects GDP to grow by 2% in 2025. Inflation trends have also shown some moderation, as you can see on the diagram, the National Bank's current forecast anticipates inflation for the full year to reach 9%, approximately 3 points lower than in 2024 with a projected further decline to around 7% in 2026. Since October 3, 2023, the National Bank has adopted a managed exchange rate regime, which is actually in place today. The exchange rate remains highly sensitive to global geopolitical developments, including shifts in international trade and tariff policies. In 2025 harvest season, Ukraine's agricultural sector delivered a substantial output despite ongoing war-related operational challenges and adverse weather conditions during summertime. Early official data and industry estimates indicate that farmers are on track to collect significant volumes across major commodity groups, including grains, corn and oilseeds. Deputy officials have projected that Ukraine could harvest around 52 million tonnes of whole grains and approximately 21 million tons of oilseeds, broadly in line with 2024 results. Overall, the total harvest of grain and oilseed crops for 2025 is expected to be in the range of about 70 million, 75 million tonnes. Despite logistics and security constraints linked to the war, Ukraine farmers continued operations across major agricultural regions, underscoring the resilience of the country's agri-food sector and its critical contribution to both domestic food security and international markets. 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. We move on Slide #4 of the presentation. Just give me a second. Yes. Here, let's look at the financial performance for the reporting period and the main points are following. First of all, it's revenue growth. In Q3 2025, revenue increased by 29% year-on-year to approximately $1 billion, while in 9 months 2025, it increased by 16% year-on-year to over $2.6 billion, and it increased by 17% quarter-on-quarter. This strong performance in Q3 2025, both in revenue and EBITDA, is driven by strong results in poultry, agricultural and the European operating segment, reflecting especially an integration of UVESA, the Spanish company, which MHP acquired this summer into consolidated results of the group. Second point is the adjusted EBITDA net of IFRS 16 gross. In Q3 2025, EBITDA increased by 27% to over USD 200 million, while in 9 months 2025, it increased by 4%. I would say remained relatively stable year-on-year and reached USD 455 million. And actually, EBITDA also increased by 75% quarter-on-quarter. Strong results in 9 months 2025 is driven by factors reflecting Q3 2025 trends. However, EBITDA increased slightly, experiencing pressure on profitability from higher payroll cost, SG&A costs and increased war-related expenses. Let us move on Slide #5, and we will look at the financial results by segment. In the 9 months of 2025, poultry and related operations segments remained the largest contributor to the company's performance, accounting for 53% of total revenue and 53% of EBITDA. This was primarily driven by an increase in poultry prices, however, partially offset by poultry production costs and slightly lower poultry sales volumes. Agricultural operations were second biggest contributor to the group's EBITDA, driven by good harvest, especially for winter crops. I'm talking about wheat in this case, especially, and growing prices for crops, both in Ukraine and internationally. Main triggers for adjusted EBITDA growth in 9 months 2025 were an increase in poultry prices, however, partially offset by poultry production costs and slightly lower poultry sales volumes, good harvest and strong crop prices, as I mentioned earlier, and integration of UVESA's financial results as well as slightly higher sales volumes of poultry and processed meat products at Perutnina Ptuj with stable pricing environment. Let us now take a closer look at the performance of each business segment. And here, 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 our ongoing challenges of the war in Ukraine, MHP delivered solid performance in Q3 and 9 months with a result exceeding those of the same period last year. This was driven by stronger poultry and processed meat prices, together with effective cost management, demonstrating the company's resilience and efficiency in operations. Poultry costs both in 9 months and Q3 increased year-to-year, primarily due to the higher grain prices, payroll and utilities prices. Poultry price, both in 9 months and Q3, increased year-on-year, while remained stable quarter-on-quarter, mainly compensate for increased production costs during the last period. Commodity price volatility remains a key challenge for MHP. To mitigate this, we strategically towards higher-margin value-added products. This transaction required ongoing investment in innovation, product development and market expansion. Our team remains fully committed to the transformation. We support both margin resilience and long-term growth. We can also see increase in sales volume of processed meat products in Q3. We further prioritize sales of processed product, focusing on those delivering the strongest returns. A few words about our vegetable oil segment, Slide #7. Performance in the segment remained weak with EBITDA for both 9 months and Q3 declined year-on-year. However, results stabilized quarter-on-quarter, supported by slightly better margins. The pressure mainly reflected in high sunflower and soybean seed price, which were not fully offset by oil price changes. The increase in seed price was driven by lower harvest yield in 2024 and increased crushing capacity in Ukraine. During the 9 months, Ukrainian vegetable oil producers continue processing seeds carried over from the '24 season. To mitigate the negative effect on group result in 2025, we have adjusted our fodder recipe, switching from sunflower cake to [indiscernible]. This resulted in higher soybean oil output, while sunflower oil production decreased correspondently. We expect profit to increase slightly in next year, driven by high production volume of sunflower oil and rising price for both sunflower and soybean oil. Let's move to Slide #8, agriculture operations. As of early December, MHP harvested more than 330,000 hectares, representing over 90% of the land under cultivation for the 2025 season and collected in excess of 2 million tonnes of crops, wheat yield reached a record high of 7.7 tonnes per hectare compared to the 7.2 tonnes per hectare last year, while [indiscernible] seed yield were slightly below the prior year at 3.3 tonnes per hectare compared to the 3.7 tonnes last year. As of today forecast, corn yield are estimated 8.7 tonnes per hectare with sunflower yield projected at approximately 3 tonnes per hectare. As of today, we anticipate spring crops yield to be broadly comparable to the last year. The overall harvest is expected to total between 2.0 million to 2.2 million tonnes. The harvesting of the winter crop has been completed. Segment revenue remained unchanged as higher price across most crops and increased sales volume of soybean and wheat offset the decline in volumes of corn and [indiscernible] seed. EBITDA of Agricultural Operations segment improved significantly, driven by higher price of grain and oilseeds. Let's proceed to the Slide #9. Several words about European operations segment. Following the acquisition completed on 31 of July 2025, UVESA results have been fully consolidated into European Operations segment. In the first 2 months post acquisition, UVESA generated revenue of USD 126 million and EBITDA $9 million. The result together with increased sales volume and stronger price at Perutnina Ptuj contribute to 18% year-on-year increase in the segment EBITDA for 9 months. Slide #10. A few words about our cash flow and liquidity position. Cash from operations before changes in working capital amount $313 million this year and $132 million in Q3, both exceeded last year's levels, release of working capital of $46 million in 9 months in contrast to the investment recorded in 9 months 2024. This release was mainly driven by, first of all, consumption of corn and soybean stock purchased in 2024 and settlement of recoverable VAT. CapEx in both 9 months this year and Q3 slightly decreased and was directed to several key areas, include expensive maintenance and modernization of existing facilities, the expansion on international poultry operations, the construction of new bioenergy production facility and also compliance standards and margin improvement initiatives. As you already know, on 31st of July, the group finalized the acquisition of 92% of the share capital of UVESA Group, a leading Spanish producer of poultry and pork meat and animal feed. The total consideration for transaction amount to $312 million. Approximately 80% of this amount was financed through debt facilities from private European banks, while the remainder was funded from the group's own resources. Total identifiable net assets amounted $283 million with goodwill arising on acquisition $44 million. Regarding debt, as at the end of the period, the company total debt was nearly $1.1 billion and net debt about $1.5 billion. The liquidity position at the end of Q3 was $463 million in cash, only $185 million of which was held by the group's subsidiaries outside in Ukraine. At the 30th of September, the group's leverage ratio was 2.6, below the defined limit of 3.0. Pro forma leverage ratio calculated as if the UVESA acquisition had occurred on the 1st October 2024 amounted to 2.4. With respect to the $550 million notes due in April 2026, this matter remains a top priority for company, and we fully recognize its importance to investors. By the end of September, they not have been reclassified from long-term to short-term debt. There have been no recent changes to Ukrainian capital controls of liquidity regulations, which require foreign currency proceeds from export originated in Ukraine to be repatriated with 120, 180 days. In practice, these requirements limit the company's ability to utilize offshore cash for debt repayment. While MHP is able to service its existing loan portfolio and bond obligation from Ukraine, there are no restrictions on coupon payment. The repayment of principal from offshore entities remains restricted. We continue to operate under uncertainties and challenges due to the ongoing war. With the notes maturity in approximately 4 months, we are actively evaluating all available options and to remain confident in our ability to implement an effective repayment strategy. We sincerely appreciate the support from our investors since the beginning of the war in Ukraine and look forward to continue our constructive cooperation. And now I give the floor to Anastasiya.

Thank you very much, Viktoriia. Let me conclude the presentation before we start our Q&A session. Despite highly uncertain and volatile operating environment, which you also mentioned, marked by ongoing war in Ukraine, fluctuating export market conditions from poultry instability in grain and vegetable oil prices, MHP continues to demonstrate operational resilience, and we can all see this resilience in our financial and operational results. The company not only sustains core business activities under persistent disruptions, but also persists strategic growth and is becoming an international company as reflected in the acquisition of UVESA in Spain. As the company approaches the bond 2026 refinancing milestone, it remains focused on prudent financial management even as capital controls by the NBU remains unchanged, as Viktoriia has just mentioned. In a landscape lacking clarity on ceasefire or peace negotiations, MHP adapts, innovates and positions itself to navigate near-term headwinds while building the long-term strength. Dear stakeholders, let us take your questions now. Thank you very much. Operator?

[Operator Instructions] So our first question is from Anton Anikst from Knighthead Capital Management.

First one is a clarification. Slide 5 shows a $13 million positive impact from UVESA on year-over-year EBITDA performance, but slide 9 shows $9 million. So which number is correct? And part of the reason I'm asking is I'm trying to understand what's happening with Perutnina. Because if UVESA was $13 million, then it sounds like Perutnina is down year-on-year. But if UVESA was $9 million, then Perutnina is up slightly over year. So if you could clarify that, that would be great. Did you follow that?

Yes. Just give us a second, we will open 2 slides, right? And we'll come back to you in a minute.

Yes. And then my next question is just -- any early thoughts on '26 guidance or at least as you think about the refinancing of the 2026 bonds, do you expect to be free cash flow positive between now and the maturity of the bonds.

Anton, sorry, I'll come back to the -- thank you for your question. I'll come back to -- maybe I did not catch exactly your question. Because if you look at -- in Slide 9, we see the better financial result in EBITDA from -- in European $13 million. I see it is not UVESA effect. UVESA effect only $9 million, $4 million is effect from Perutnina. Total better financial result in European Perimeter segment, $13 million, $9 million of them just UVESA.

Got it. The other $4 million is Perutnina. So Perutnina grew as well. That's helpful.

Yes. Perutnina grews well. And please repeat the second question about positive [indiscernible].

Yes. Any early thoughts on '26, high-level production, maybe EBITDA, CapEx? And a related question, do you expect to be generating cash between now and [indiscernible].

As you understand, unfortunately or fortunately, in Ukraine during the last 10 years, we have been working at 100% capacity utilization. We cannot produce more in our current capacity as the main driver for increase our -- increasing the European operations. And yes, we understand the biggest increase we expect from UVESA, from our new company in our family. And we understand how we can increase sales volumes there and how we improve efficiency and cost optimization, yes. And if you ask me about, yes, our expectation about total EBITDA because unfortunately, MHP remains -- is not just noncommodity company, we continue to produce 50% of total commodity, and that is why our business correlate with prices. But we expect that our total EBITDA for next year will be very similar with this year. It would be around $580 million, $600 million. And regarding cash flow total, yes, so we expect that we will have positive cash flow, not so high, around maybe $30 million, $40 million, $50 million. But now we're considering our company as the 2 divisions, one of them in Ukraine division and the second, European operations. In European operations, because we understand that we need to invest money in UVESA for increasing this business. We expect the negative cash flow. At the same time in Ukraine, we expect positive cash flow. It is in total the expectation for the next year.

Our next question is from Stella Cridge from Barclays.

I wanted to ask a couple of areas. So yes, I wondered in terms of the first 4 months that you've been consolidating UVESA, I mean, you touched on it briefly already. I mean, what -- in your first year in 2026 of kind of owning the asset, what are the main kind of targets or things you're going to look at to try to improve performance there? That would be great. And also just on the prior question, I'm sorry if I missed it there, what you expect CapEx to be for the whole group next year and kind of the main projects that you're looking at? And then finally, I understand that you've been talking with investors recently about the bond. I was wondering what kind of feedback you got from that experience? What kind of options might be possible? And what do you think potential you could go up to, say, on coupons and a new bond or any kind of cash component? It'd be great to get some feedback from those discussions with investors.

Thank you for your question. We will then answer one by one. The first question, if you ask me about pro forma for 2026. As I have mentioned just a few minutes ago, we see the big potential for growth in UVESA and we understand how to improve cost of production. We understand how we can increase sales volume there and our estimation about increasing EBITDA in t UVESA approximately by 25%, 30% year-to-year. Total CapEx of the group. Yes, total CapEx around $250 million. But what I would like to emphasize our maintenance CapEx because we are a big company with revenue of $4 billion plus with EBITDA of $500 million, $600 million. And that is why, yes, our total maintenance CapEx today around $100 million -- if you -- $130 million, $150 million -- take into account Ukrainian operations and European operations and plus additional $100 million CapEx, which correlates mostly with our European operations and our project -- noncommodity project in Ukraine. Yes, -- feedback from -- yes, as I told during the presentation, our priority #1, it is our issue with Eurobond 2026. I think, yes, we understand that only in from us, and we try to find the best, how to say, to the best solution for company, for bondholders, for investors. And I think that -- because all our strategy -- all our history, MHP always demonstrated very good -- strong -- not just strong performance and strong trade records. And during the whole history, we were the most reliable partners for all our creditors, and we would like to be the same.

Super. If I could also ask as well, I noticed in the short-term borrowings, there's $318 million of other short-term borrowings. Could you just run through the breakdown there and how you also plan to address those?

If you speak about short-term loan borrowing, it is a part of the PXF financing because you know that we have the huge crushing businesses. And part is for financing working capital, the same is in Ukraine and in Perutnina.

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

Thank you very much for the presentation. I just wanted to ask a few follow-up questions. You mentioned that you expect positive free cash flows next year. We just discussed the CapEx expectations for you. Can you unpack the way you look at the poultry prices? Like basically, we see a material increase year-over-year in poultry prices. Basically, how do you see the poultry prices evolving into 2026, given like all the demand-supply balance? And also kind of also subquestion, basically, when it comes to your expectations for 2026, how should we look at the working capital because working capital was a positive inflow this year. Also kind of curious when you expect positive cash flows, how do you look at the working capital impact for the next year? So this is my first question.

Regarding the poultry price, yes, our expectation, you're completely right. This year, the poultry price increased substantially. And we don't expect further increase in poultry price. Even in some region, if you have to be honest, yes, in some region, report slightly lower than even current price because always at the beginning of the year, we try to be more conservative and this was -- our budget will always -- for me, personally is more comfortable to be this very conservative budget. Yes, it is much better to see the higher figures by the middle of the year compared to the budget because, yes, we don't expect any further increase in poultry price. Regarding the second question about working capital, yes, if you look at our 9 months result, we have some release in working capital. But if you speak about the whole year, we expect that we will have some investment in working capital, not very significant, around $20 million, $30 million because mostly -- because we significantly increased price and that is why trade receivables increased. Regarding next year, we don't expect any investment in working capital, yes, it is close to 0.

Understood. That's helpful. I also wanted to ask you about cash outside of Ukraine, which is around $185 million as of now. Are there any kind of restrictions like when it comes to this cash? So for example, do you have just to hold like a minimum amount of cash in Spain or in Perutnina [indiscernible] Slovenia as part of the covenants with the bank. So should we look at this cash as kind of available for any kind of debt management liability management exercise? So there is some restrictions when it comes to offshore cash of $185 million.

Yes, the question -- yes, you're completely right. Around $60 million of this amount is the amount on account to UVESA and Perutnina, not the special restriction regarding the pledge of this cash. Yes, you're right. But the second -- your question about what?

I mean is it like -- can you use this cash without any kind of restrictions, any consent from lenders just to use this cash. So basically freely available cash that can be used for like the intergroup operations?

No, you're completely right. Yes, you're completely right. The base of credit -- base of loan agreement, the company cannot -- yes, cannot pay -- yes, cannot upstream as dividend to MHP. Yes. Just UVESA because UVESA is a subsidy to Perutnina and Perutnina to acquisition of UVESA [indiscernible] possible intercompany debt. Yes.

That's helpful. And probably like one kind of clarification on like current capital control rules and et cetera, because you're kind of about to come to like a potential agreement or like a deal just to extend the bond or do something else with the bond. I'm just trying to understand, are there any restrictions on how much you can pay like interest rates or any kind of limitations on the interest rate the company can offer to bondholders. So for example, like 10%, not more than 11% is allowed to [indiscernible]...

No, no. No limitations. Yes, it seems to me just 12% -- yes, accordingly in Ukraine is the maximum interest rate from Ukraine outside 12% you're right.

12% is the maximum that can be offered to new [indiscernible] holders -- interest rate all in. Okay. That's clear. And final clarification, apologies. You mentioned that you expect free cash flow negative profile at UVESA given CapEx and expansion CapEx. How do you plan to fund this negative cash flow? Like additional loans expected to be drawn?

Yes, additional loans, but it would not be a very big amount. It would be very [indiscernible]. Yes.

So it will be funded from loans, not from Ukrainian box perimeter, right, basically?

No, no. From Ukrainian box, you understand that we cannot do it. So yes, we don't have any possibility to do it.

Yes. Just -- thank you for this clarification.

Yes, from Ukraine, we said the priority #1 is the issue with our Eurobond of $550 million.

[Operator Instructions] Okay. It looks like we have no further voice questions. I will now hand it back to the MHP team for the closing remarks.

Thank you. Can you hear me now? Yes. Thank you. Thank you very much. Thank you for the meeting. Thank you for the questions. Of course, I understand that there are some questions which we didn't cover during our meeting. And of course, you are more than welcome to get in touch with me, and we will cover those questions directly. Thank you, and we'll stay in touch. Bye.

Thank you. Thank you so much. Good day.

That concludes the call for today. Bye-bye. Thank you. Have a nice day.