REG - MHP SE - Financial Results for Q3 & 9M 2021
18/11/2021 07:10
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RNS Number : 8050S MHP SE 18 November 2021
18 November 2021, Limassol, Cyprus
MHP SE
Financial Results for the Third Quarter and Nine Months Ended 30 September
2021
MHP SE (LSE:MHPC), the parent company of a leading international
agro-industrial group with headquarters in Ukraine, today announces its
results for the third quarter and nine months ended 30 September 2021.
Hereinafter, MHP SE and its subsidiaries are referred to as "MHP", "The
Company" or "The Group".
Starting from the publication of its financial results for Q1 2021, MHP shows
relevant comparisons of results not only year-on-year, but also to the
preceding period. Accordingly, Q3 2021 results in Poultry, Meat Processing and
European Operating segments are compared not only with Q3 2020, but also with
Q2 2021. For Grain Growing Operations, where results are driven by seasonality
effects, this comparison is not relevant.
OPERATIONAL HIGHLIGHTS
Q3 2021
· Poultry production volume in Ukraine increased by 7% year-on-year
to 194,199 tonnes (Q3 2020: 181,661 tonnes). Poultry production volumes of the
European Operating Segment (Perutnina Ptuj or PP) increased by 8% to 29,812
tonnes (Q3 2020: 27,615 tonnes).
· The average chicken meat price increased by 32% year-on-year to
US$ 1.79 per kg (Q3 2020: US$ 1.36 per kg) (excluding VAT). The average price
of poultry meat produced by PP during Q3 2021 was EUR 2.65 per kg
(Q3 2020: EUR 2.48 per kg).
· Chicken meat exports totaled 108,963 tonnes, almost unchanged
compared from 108,472 tonnes in Q3 2020.
9M 2021
· Poultry production volume in Ukraine slightly increased by 2% to
551,729 tonnes (9M 2020: 541,592 tonnes). Poultry production volumes of PP
increased by 8% to 83,930 tonnes (9M 2020: 77,574 tonnes).
· The average chicken meat price increased by 22% year-on-year to
US$ 1.64 per kg (9M 2020: US$ 1.34 per kg) (excluding VAT). The average price
of poultry meat produced by PP was EUR 2.56 per kg (9M 2020: EUR 2.52 per
kg).
· Chicken meat exports increased by 8% to 300,278 tonnes compared
to 279,025 tonnes in 9M 2020.
FINANCIAL HIGHLIGHTS
Q3 2021
· Revenue of US$ 658 million, up by 20% year-on-year (Q3 2020: US$
547 million).
· Export revenue increased to US$ 341 million, 11% higher
year-on-year, representing 52% of total revenue (Q3 2020: US$ 309 million, 56%
of total revenue).
· Operating profit increased to US$ 161 million up 188%
year-on-year (Q3 2020: US$ 56 million); operating margin more than doubled to
24% (Q3 2020: 10%).
· Adjusted EBITDA (net of IFRS 16) increased by 115% to US$ 186
million; adjusted EBITDA margin (net of IFRS 16) increased from 16% to 28%.
· Net profit increased to US$ 145 million, compared to a loss
US$ 47 million in Q3 2020, including non-cash foreign exchange gains of US$
24 million (Q3 2020: US$ 61 million loss). Net profit before foreign exchange
differences amounted to US$ 120 million compared to US$ 14 million in Q3
2020.
9M 2021
· Revenue increased to US$ 1,647 million, up by 16% year-on-year
(9M 2020: US$ 1,414 million).
· Export revenue increased to US$ 843 million, 11% higher
year-on-year, representing 51% of total revenue (9M 2020: US$ 761 million, 54%
of total revenue).
· Operating profit increased to US$ 416 million, up by 114%
year-on-year and operating margin increased from 14% to 25%.
· Adjusted EBITDA (net of IFRS 16) increased by 72% to US$ 519
million; adjusted EBITDA margin (net of IFRS 16) increased from 21% to 32%.
· Net profit increased to US$ 377 million, compared to a loss US$
109 million in 9M 2020, primarily reflecting a US$ 75 million non-cash foreign
exchange gain in 9M 2021 compared with a US$ 191 million foreign exchange
loss in 9M 2020. Net profit before foreign exchange differences amounted to
US$ 302 million compared to US$ 81 million in 9M 2020.
FINANCIAL OVERVIEW
(in mln. US$, unless indicated otherwise) Q3 2021 Q3 2020 % change(1)) YoY 9M 2021 9M 2020 % change(1))
Revenue 658 547 20% 1,647 1,414 16%
IAS 41 standard gains 51 (17) 400% 176 29 507%
Gross profit 215 103 109% 573 322 78%
Gross profit margin 33% 19% 14 pps 35% 23% 12 pps
Operating profit 161 56 188% 416 194 114%
Operating profit margin 24% 10% 14 pps 25% 14% 11 pps
Adjusted EBITDA 208 106 96% 552 332 66%
Adjusted EBITDA margin 32% 19% 13 pps 34% 23% 11 pps
Adjusted EBITDA (net of IFRS 16) 186 86 115% 519 302 72%
Adjusted EBITDA margin (net of IFRS 16) 28% 16% 12 pps 32% 21% 11 pps
Net profit before foreign exchange differences 120 14 764% 302 81 273%
Net profit margin before forex gain 18% 3% 15 pps 18% 6% 12 pps
Foreign exchange result 24 (61) 139% 75 (191) 139%
Net profit/(loss) 145 (47) 409% 377 (109) 446%
Net profit margin 22% -9% 31 pps 23% -8% 31 pps
(1)) pps - percentage points
Average official FX rate for Q3 2021 UAH/US$ 26.91 and for Q3 2020 UAH/US$
27.60
Average official FX rate for 9M 2021 UAH/US$ 27.49 and for 9M 2020 UAH/US$
26.53
DIVIDENDS
On 28 April 2021, shareholders of MHP at the AGM approved payment of an annual
dividend of US$ 0.2803 per share, equivalent to US$ 30 million, to
shareholders on the register as of 07 May 2021. The Board of Directors
approved that no dividend will be paid on the Company's shares held in
treasury. As of 30 September 2021, dividends were fully paid to shareholders.
At its meeting on 17 November, in recognition of the Company's exceptional
performance in 2021, the Board of Directors approved the payment of a one-off
special dividend of US$ 0.2803 per share, equivalent to US$ 30 million.
Details of payment, which is expected to be made in December 2021, will be
announced later this month. The Board will consider payment of its customary
annual dividend in March 2022.
The dial-in details are:
Time: 14.00 London / 16.00 Kyiv / 09.00 New York
Title: Financial results for Q3 and 9M 2021
UK: +44 203 984 9844
Ukraine: +380 89 324 0624
USA: +1 718 866 4614
PIN code: 645982
In order to follow the presentation together with the management, please
follow the link:
https://mm.closir.com/slides?id=645982
(https://mm.closir.com/slides?id=645982)
For Investor Relations enquiries, please contact:
Anastasia Sobotiuk (Kyiv) +38 044 207 99
58
Segment Performance
Poultry and Related Operations Segment
Q3 2021 Q3 2020 % change YoY(1)) Q2 2021 % change QoQ(1)) 9M 2021 9M 2020 % change(1))
Poultry
Sales volume, third parties tonnes 185,364 195,119 -5% 181,804 2% 521,538 523,759 0%
Domestic sales volume, tonnes 76,401 86,647 -12% 72,749 5% 221,260 244,735 -10%
Export sales volume, tonnes 108,963 108,472 0% 109,055 0% 300,278 279,025 8%
Average price per 1 kg net of VAT, US$ 1.79 1.36 32% 1.67 7% 1.64 1.34 22%
Average price per 1 kg net of VAT, UAH (Ukraine) 48.73 37.56 30% 45.05 8% 45.16 35.45 27%
Average price per 1 kg net of VAT, US$ (Ukraine) 1.81 1.30 39% 1.63 11% 1.64 1.26 30%
Average price per 1 kg net of VAT, US$ (export) 1.77 1.41 26% 1.69 5% 1.63 1.40 16%
Culinary Products, tonnes 2,702 747 262% 1,743 55% 5,101 760 571%
Sunflower oil
Sales volume, third parties tonnes 36,620 84,877 -57% 35,192 4% 127,760 248,233 -49%
Soybeans oil
Sales volume, third parties tonnes 12,571 11,511 9% 11,871 6% 35,587 33,121 7%
(1)) pps - percentage points
Chicken meat prices
The total volume of chicken meat sold to third parties in 9M 2021 remained the
same and constituted 521,538 tonnes (9M 2020: 523,759 tonnes). In Q3 2021
domestic sales decreased by 12% to 76,401 tonnes, compared to Q3 2020 (by 5%
higher compared to Q2 2021), mainly due to decreased sales of frozen chicken:
whole chicken, fillet and quarters. Poultry exports remained relatively stable
both y/y and q/q.
Poultry export price in Q3 2021 increased by 25% year-on-year, and by 5%
quarter-on-quarter, mainly driven by strong prices on breast and fillet in
Europe as well as positive price trends for quarters and small chicken in the
MENA region.
Poultry prices on the domestic market in Q3 2021 increased by 39% year-on-year
mainly affected by a substantial poultry production cost increase since Q4
2020 and upward price trends for all proteins.
Vegetable oil
In Q3 2021, sunflower oil sales volume amounted to 36,620 tonnes, down 57%
year-on-year. In 9M 2021 MHP's sales of sunflower oil decreased by 49%
compared to 9M 2020 to 127,760 tonnes, mainly due to decrease in production as
a result of a decreased share of sunflower cake in fodder (due to change in
the fodder recipe).
Sales of soybean oil amounted to 12,571 tonnes in Q3 2021, 9% higher
year-on-year, and 35,587 tonnes in 9M 2021, 7% higher year-on-year, mainly as
a result of raising production to support the increased share of soybean cake
in fodder and increased third party sales.
(in mln. US$, unless indicated otherwise) Q3 2021 Q3 2020 % change YoY(1)) Q2 2021 % change QoQ(1)) 9M 2021 9M 2020 % change(1))
Revenue 433 362 20% 392 10% 1,140 970 18%
- Poultry and other 366 291 26% 334 10% 948 767 24%
- Vegetable oil 67 71 -6% 58 16% 192 203 -5%
IAS 41 standard gains/(losses) (11) (17) 35% 18 -161% 7 (11) -164%
Gross profit 76 58 31% 110 -31% 219 176 24%
Gross margin 18% 16% 2 pps 28% -10 pps 19% 18% 1 pps
Adjusted EBITDA 70 58 21% 108 -35% 210 180 17%
Adjusted EBITDA margin 16% 16% 0 pps 28% -12 pps 18% 19% -1 pps
Adjusted EBITDA per 1 kg (net of IAS 41) 0.44 0.38 16% 0.50 -12% 0.39 0.36 8%
(1)) pps - percentage points
Revenue increased by 18% in 9M 2021 compared to 9M 2020 mainly as a result of
increased prices of chicken meat.
IAS 41 standard loss in Q3 2021 amounted to US$ 11 million (compared with a
US$ 17 million loss in Q3 2020) mainly as a result of an increase in cost of
chicken meat.
Gross profit in Q3 2021 increased by 31% year-on-year to US$ 76 million. This
was mainly due to the increases in chicken meat prices. Poultry production
costs in Q3 2021 increased compared to Q2 2021 reflecting higher cost of
fodder.
Adjusted EBITDA in 9M 2021 increased by 17%, as a result of an increase in
gross profit partly offset by an increase in administration, sales and
distribution expenses.
Grain Growing Operations Segment
In 2021, the Company is to harvest around 355,000 hectares of land.
As of the date of this report, the Company's harvesting campaign is almost
complete. All spring crop (corn, soybeans and sunflower) yields are expected
to be good and are in line with the Company's expectations taking into account
weather conditions.
Crops current yields are as follows:
2021(1)) 2020(3))
MHP's Ukraine's average MHP's Ukraine's average
average average
tonnes per hectare tonnes per hectare
Corn 11.0 6.4 5.7 5.0
Wheat 5.9 (2)) 4.6 5.1 3.8
Sunflower 3.4 2.4 2.9 2.0
Rapeseed 3.2 (2)) 2.9 2.6 2.3
Soya 2.7 2.7 2.4 2.0
1) Ukraine - bunker weight, MHP: corn, sunflower, soya - bunker weight. 2)
MHP: wheat, rapeseed - net yields. 3) MHP and Ukraine - net yields.
(in mln. US$, unless indicated otherwise) 9M 2021 9M 2020 % change
Revenue 79 90 -12%
IAS 41 standard gains 165 39 323%
Gross profit 252 61 313%
Adjusted EBITDA 292 106 175%
Adjusted EBITDA (net of IFRS 16) 261 78 235%
Revenue in 9M 2021 amounted to US$ 79 million compared to US$ 90 million in 9M
2020. The decrease was mainly attributable to the lower amount of crops in
stock designated for sale as of 31 December 2020, compared to stock for sale
as of 31 December 2019, mainly as a result of lower yields in 2020.
IAS 41 standard gain in 9M 2021 amounted to US$ 165 million compared to US$ 39
million in 9M 2020. The gain mainly represents the result of the revaluation
of crops in fields (biological assets) at the reporting date, due to increases
in grain prices and yields.
Meat Processing and Other Agricultural Operations segment
Meat processing products Q3 2021 Q3 2020 % change YoY Q2 2021 % change QoQ 9M 2021 9M 2020 % change
Sales volume, third parties tonnes 9,378 8,870 6% 8,462 11% 25,447 25,392 0%
Price per 1 kg net VAT, UAH 83.37 72.14 16% 80.72 3% 80.02 70.75 13%
Sales volume of meat processing products remained almost unchanged
year-on-year and amounted to 25,447 tonnes in 9M 2021. The average processed
meat price increased by 13% year-on-year to UAH 80.02 per kg in 9M 2021 driven
mainly by an increase in raw material price (poultry meat).
Convenience food Q3 2021 Q3 2020 % change YoY Q2 2021 % change QoQ 9M 2021 9M 2020 % change
Sales volume, third parties tonnes 5,442 6,054 -10% 4,485 21% 14,107 14,591 -3%
Price per 1 kg net VAT, UAH 47.58 40.81 17% 50.91 -7% 47.29 40.28 17%
Sales volumes of convenience food in 9M 2021 remained stable and amounted to
14,107 tonnes. The average price in 9M 2021 increased by 17% to UAH 47.29 per
kg (excluding VAT), due to increased sales of more expensive SKUs and
expansion of cooperation with large HoReCa channels such as McDonalds Ukraine
and KFC (since Q2 2021) with more marginal products sales increase.
(in mln. US$, except margin data) Q3 2021 Q3 2020 % change YoY(1))( ) Q2 2021 % change QoQ(1)()) 9M 2021 9M 2020 % change(1))
Revenue 49 39 26% 42 17% 126 106 19%
- Meat processing 41 29 41% 34 21% 102 82 24%
- Other(2)) 8 10 -20% 8 0% 24 24 0%
IAS 41 standard gains/(losses) - - 0% 3 -100% 3 - 100%
Gross profit 3 6 -50% 8 -63% 16 14 14%
Gross margin 6% 15% -9 pps 19% -13 pps 13% 13% 0 pps
Adjusted EBITDA 1 6 -83% 6 -83% 11 15 -27%
Adjusted EBITDA margin 2% 15% -13 pps 14% -12 pps 9% 14% -5 pps
(1))pps - percentage points
(2))includes milk, cattle, and feed grains.
Revenue in 9M 2021 increased by 19% year-on-year to US$ 126 million due to
increase in price of meat processing products. Adjusted EBITDA decreased to
US$ 11 million due to lower meat processing results driven mainly by an
increase in cost.
European Operating Segment
Poultry Q3 2021 Q3 2020 % change YoY Q2 2021 % change QoQ 9M 2021 9M 2020 % change
Sales volume, third parties tonnes 19,367 16,804 15% 19,508 -1% 54,917 47,842 15%
Price per 1 kg net VAT, EUR 2.65 2.48 7% 2.53 5% 2.56 2.52 2%
Poultry sales in Q3 2021 increased by 15% to 19,367 tonnes (Q3 2021: 16,804
tonnes) and decreased by 1% quarter-on-quarter. This was facilitated by
increased production of chicken meat following expansion of facilities in
Croatia and Serbia. Average prices showed positive to stable trends
year-on-year and constituted EUR 2.65 in Q3 2021.
Meat processing Q3 2021 Q3 2020 % change YoY Q2 2021 % change QoQ 9M 2021 9M 2020 % change
products(1))
Sales volume, third parties 11,030 10,218 8% 9,868 12% 30,046 28,853 4%
tonnes
Price per 1 kg net VAT, 2.76 2.69 3% 2.80 -1% 2.76 2.71 2%
EUR
(1)) includes sausages and convenience foods
Meat processing product sales were up 8% year-on-year and amounted to
11,030 tonnes in Q3 2021 (Q3 2020: 10,218 tonnes) and 12% quarter-on-quarter.
Average prices in Q3 2021 increased by 3% to EUR 2.76, remained relatively
stable in 9M 2021 year-on-year.
(in mln. US$, except margin data) Q3 2021 Q3 2020 % change YoY(1)) Q2 2021 % change QoQ(1)) 9M 2021 9M 2020 % change(1))
Revenue 110 91 21% 104 6% 301 248 21%
IAS 41 standard gains - (1) -100% 2 -100% 2 1 100%
Gross profit 31 27 15% 31 0% 86 71 21%
Gross margin 28% 30% -2 pps 30% -2 pps 29% 29% 0 pps
Adjusted EBITDA 19 12 58% 21 -10% 52 40 30%
Adjusted EBITDA margin 17% 13% 4 pps 20% -3 pps 17% 16% 1 pps
Adjusted EBITDA (net of IFRS 16) 18 12 50% 20 -10% 50 38 32%
Adjusted EBITDA margin (net of IFRS 16) 16% 13% 3 pps 19% -3 pps 17% 15% 2 pps
(1)) pps - percentage points.
Revenue increased by 21% to US$ 301 million in 9M 2021, mainly as a result of
an increase in poultry sales volume. Adjusted EBITDA (net of IFRS 16) reached
US$ 18 million and US$ 50 million in Q3 2021 and 9M 2021 respectively. An
increase in Adjusted EBITDA in Q3 2021 year-on-year was mainly attributable to
higher volumes sold and higher operational efficiencies that allowed PP to
offset growing cost of raw materials.
Current Group Cash Flow
(in mln. US$) Q3 2021 Q3 2020 9M 2021 9M 2020
Cash from operations 128 97 278 196
Change in working capital 81 65 (20) (58)
Net Cash from operating activities 209 162 258 138
Cash used in investing activities (41) (17) (96) (94)
Including:
CAPEX(1)) (38) (17) (92) (58)
Cash from financing activities (44) (20) (58) (33)
Dividends - - (38) (30)
Total financial activities (44) (20) (96) (63)
Total change in cash(2)) 124 125 66 (19)
(1))Calculated as cash used for Purchases of property, plant and equipment
plus cash used for purchases of other non-current assets
(2))Calculated as Net Cash from operating activities plus Cash used in
investing activities plus Total financial activities
Cash flow from operations before changes in working capital in 9M 2021
amounted to US$ 278 million (9M 2020: US$ 196 million).
Use of funds in working capital during 9M 2021 was mostly related to
investments in crops in the fields to be harvested in 2021. The difference
compared to 9M 2020 was mainly attributable to lower investments in inventory
during 9M 2021 (sunflower and soya) designated for internal consumption.
In 9M 2021 total CAPEX amounted to US$ 92 million mainly related to
modernization projects, new products development, maintenance and further
improvements at Perutnina Ptuj production facilities.
Debt Structure and Liquidity
(in US$, millions) 30 September 2021 31 December 2020 30 September 2020
Total Debt (1)) 1,451 1,462 1,461
LT Debt (1)) 1,431 1,453 1,443
ST Debt (1)) 20 36 30
Trade credit facilities(2)) - (27) (12)
Cash and bank deposits (287) (218) (305)
Net Debt(1)) 1,164 1,244 1,156
LTM EBITDA (1)) 558 340 347
Net Debt / LTM EBITDA(1)) 2.09 3.66 3.33
(1) )Net of IFRS 16 adjustments: as if any lease that would have been treated
as an operating lease under IAS 17 as was in effect before the
1 January 2019, is treated as an operating lease for purposes of this
calculation. In accordance with covenants in MHP's bond and loan agreements,
these data exclude the effects of IFRS 16 on accounting for operating leases.
(2)) Indebtedness under trade credit facilities that is required to be repaid
within 12 months of drawdown should be excluded for purposes of this
calculation.
As of 30 September 2021, the share of long-term debt in the total outstanding
debt remained at 99%. The weighted average interest rate was below 7%.
As of 30 September 2021, MHP's cash and cash equivalents amounted to US$ 287
million. Net debt decreased to US$ 1,163 million, compared to US$ 1,244
million as at 31 December 2020.
The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 2.09 as of 30
September 2021, lower than the limit of 3.0 defined in the Eurobond agreement.
As a hedge for currency risks, revenue from the export of grain, sunflower and
soybean oil, sunflower husks, and chicken meat are denominated in US Dollars
and Euros, sufficient for covering debt service expenses. Export revenue for
9M 2021 amounted to US$ 843 million or 51% of total revenue (US$ 761 million
or 54% of total sales in 9M 2020).
SUBSEQUENT EVENTS/CHANGES IN THE BOARD
The Company announces today that Mr. Yuriy Melnyk, taking into consideration
the length of his service as an Executive Director of MHP SE and Chief
Operational Officer of MHP SE and the significance of rotation of executive
directors, resigned from the Board of MHP SE with effect from 16 November
2021. Mr. Melnyk will continue to serve the Company as First Deputy CEO.
Executive Chairman, Dr John Rich commented: "On behalf of the Board, I would
like to express my appreciation and thanks to Yuriy Melnyk for the enormous
contribution he has made to the success and development of MHP over the last
11 years. We are delighted that he will continue to serve the company as
First Deputy CEO."
Outlook
The powerful combination of positive price and weather trends reported at the
time of our half-year results in September has continued unabated through the
harvesting season, which is now substantially completed with record crop
yields. The combination of high global grain prices and actions the Company
has taken to lock in forward sales give us confidence that results for the
full year will be at the top end of our earlier expectations, with EBITDA in
excess of US$ 600 million.
Looking ahead to 2022, some of these trends are expected to soften, and this
will be compounded by further substantial cost increases, particularly in
fertilizer, fodder and utilities, which we are already experiencing in the
fourth quarter of this year. As a result, next year's results are expected
to revert to more customary levels after MHP's exceptional performance in
2021.
Notes to Editors:
About MHP
MHP is the leading producer of poultry products not only in Ukraine , but also
in the Balkans (Perutnina Ptuj Group) and in the EU.
Ukraine: MHP has the greatest market share (around 57% of industrial
production) and 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 15 distribution and logistical centres,
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, Macedonia and Romania and supply products to 15 countries in Europe.
Perutnina Ptuj is a vertically integrated company across all states of chicken
meat production - feed, hatching eggs production and hatching, breeding,
slaughtering, sausages and further poultry processing production.
Since May 15, 2008, MHP has traded on the London Stock Exchange under the
ticker symbol MHPC.
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 nine-month period ended 30 September 2021
CONTENTS
STATEMENT OF MEMBERS OF THE BOARD OF
DIRECTORS................................................................. 3
MANAGEMENT
REPORT........................................................................................................................
4
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2021
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE
INCOME..............................................................................................................................................................
6
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION..................................... 8
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY..................................... 9
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS............................................... 11
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................. 13
1. Corporate
information.....................................................................................................................
13
2. Basis of preparation and accounting
policies...................................................................................
14
3. Changes in the group
structure........................................................................................................
15
4. Segment
information......................................................................................................................
16
5. Revenue........................................................................................................................................
19
6. Profit for the
period........................................................................................................................
19
7. Deferred
income............................................................................................................................
20
8. Property, plant and
equipment........................................................................................................
20
9. Inventories and agricultural
produce................................................................................................
20
10. Biological
assets.........................................................................................................................
20
11. Share
capital...............................................................................................................................
20
12. Bank
borrowings..........................................................................................................................
21
13. Bonds
issued..............................................................................................................................
22
14. Related party balances and
transactions.......................................................................................
24
15. Contingencies and contractual
commitments.................................................................................
25
16. Fair value of financial
instruments.................................................................................................
27
17. Risk management
policy..............................................................................................................
28
18.
Dividends....................................................................................................................................
29
19. Subsequent
events......................................................................................................................
29
20. Authorization of the interim condensed consolidated financial
statements....................................... 29
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, we 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 2021 to
30 September 2021 that are presented on pages 6 to 29:
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.
17 November 2021
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
Christakis
Taoushanis
MANAGEMENT REPORT
Key financial highlights
During the nine-month period ended 30 September 2021 consolidated revenue
increased by 16% and amounted to USD 1,646,586 thousand, compared to USD
1,414,017 thousand for the nine-month period ended 30 September 2020. The
increase in revenue was mainly attributable to increase in the export and
domestic price as well as growth in export volume of chicken meat sold. Export
sales for the nine-month period ended 30 September 2021 constituted 51% of
total revenue and amounted to USD 842,948 thousand, compared to USD 761,244
thousand, and 54% of total revenue for the nine-month period ended 30
September 2020. The increase in export revenue was mainly attributable to
increase in the price and volume of chicken meat sold.
Gross profit increased by 78% and amounted to USD 572,991 thousand for the
nine-month period ended
30 September 2021 compared to USD 322,399 thousand for the nine-month period
ended 30 September 2020. The increase was driven mainly by higher returns
earned by the grain growing and poultry and related operations segments due to
increase in grain and poultry meat prices respectively.
Operating profit increased by 114% and amounted to USD 416,153 thousand for
the nine-month period ended 30 September 2021 compared to USD 194,410 thousand
for the nine-month period ended 30 September 2020, mainly as a result of
an increase in gross profit.
Profit from continuing operations for the nine-month period ended 30 September
2021 amounted to USD 376,847 thousand, compared to loss of USD 107,617
thousand for the nine-month period ended 30 September 2020. The growth is
mainly due to increase in operating profit as well as appreciation of
Ukrainian Hryvnia against US Dollar and EURO, which resulted in foreign
exchange gain of USD 74,680 thousand for the nine-month period ended 30
September 2021 compared to loss of USD 190,500 thousand for the nine-month
period ended 30 September 2020.
Having regard to the activities of the Group, management believes that the
above measures are frequently used by investors, analysts and stakeholders to
evaluate the efficiency of the Group's operations. For further information on
the above measures, please refer to page 6 of the interim condensed
consolidated financial statements for the nine-month period ended 30 September
2021.
Related parties
During the nine-month periods ended 30 September 2021 and 30 September 2020
the Group entered into transactions with related parties that are under common
control of the Principal Shareholder of the Group (Note 1) in the ordinary
course of business. Detailed information on operations with related parties is
disclosed in Note 14.
Dividends
At the extraordinary general meeting, which was held on 28 April 2021, the
Shareholders of MHP SE have approved payment of an annual dividend of USD
0.2803 per share, equivalent to USD 30,000 thousand to shareholders on the
register as of 7 May 2021. As at 30 September 2021 dividends were fully paid
to shareholders.
At its meeting on 17 November, in recognition of the Company's exceptional
performance in 2021, the Board of Directors approved the payment of a one-off
special dividend of US$ 0.2803 per share, equivalent to USD 30,000 thousand.
Details of payment, which is expected to be made in December 2021, will be
announced later this month. The Board will consider payment of its customary
annual dividend in March 2022.
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 three 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
annual report for the year ended 31 December 2020. A detailed explanation of
the risks, and how the Group seeks to mitigate the risks, can be found on
pages 154 to 157 of the annual report which is available at www.mhp.com.cy
(http://www.mhp.com.cy/) .
COVID-19
In 2020 a new coronavirus disease (COVID-19) spread rapidly all over the world
resulting in the announcement of pandemic status by the World Health
Organization in March 2020.
The world economy entered a period of unprecedented health care crisis that
has already caused considerable global disruption in business activities and
everyday life.
Risks and uncertainties (continued)
COVID-19
COVID-19 had an adverse impact on 2020 earnings, mainly because of the impact
on prices and exported volumes as many global competitors were experiencing
reduced demand and resulting excess capacity. At the end of 2020 and in 9M
2021 the situation stabilized temporarily, although it still could negatively
impact the remainder of 2021. These challenges could increase our operating
costs and negatively impact our volumes. Management cannot currently predict
the ultimate impact that COVID-19 will have on short and long-term demand, as
it will depend on, among other things, the severity and duration of the
COVID-19 crisis.
Management has concluded that the event does not have an immediate material
impact on the business operations. The Company's liquidity is expected to be
adequate to continue to run operations and meet obligations as they become due
in the foreseeable future.
17 November 2021
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 nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
Nine-month period Three-month period
ended 30 September
ended 30 September
Notes 2021 2020 2021 2020
Revenue 4, 5 1,646,586 1,414,017 658,011 546,569
Net change in fair value of biological assets and agricultural produce 4 176,279 29,180 50,953 (17,149)
Cost of sales (1,249,874) (1,120,798) (494,058) (426,035)
Gross profit 6 572,991 322,399 214,906 103,385
Selling, general and administrative expenses (159,734) (134,494) (54,338) (46,225)
Other operating income 10,169 14,063 2,856 4,484
Other operating expenses (7,273) (7,558) (2,425) (5,275)
Operating profit 6 416,153 194,410 160,999 56,369
Finance income 8,409 10,483 2,102 2,734
Finance costs 12, 13 (109,347) (108,014) (37,581) (34,978)
Foreign exchange gain/(loss), net 6, 17 74,680 (190,500) 24,177 (61,028)
Other expenses, net (3,226) (7,127) (3,153) (1,919)
Profit/(Loss) before tax 386,669 (100,748) 146,544 (38,822)
Income tax expenses (9,822) (6,869) (2,003) (8,166)
Profit/(Loss) for the period from continuing operations 6 376,847 (107,617) 144,541 (46,988)
Discontinued operations
Profit/(loss) for the year from discontinued operations 179 (1,482) - -
Profit/(Loss) for the period 377,026 (109,099) 144,541 (46,988)
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME (continued)
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
Nine-month period Nine-month period
ended 30 September
ended 30 September
Notes 2021 2020 2021 2020
Other comprehensive income
Items that will not be reclassified to profit or loss:
Decrease in revaluation reserve as a result of impairment of property, plant 3 (3,944) - 161 -
and equipment
Deferred tax on revaluation of property, plant and equipment charged directly 985 985
to other comprehensive income as result of intercompany sales
Items that may be reclassified to profit or loss:
Cumulative translation difference on retranslation to group's presentation 45,508 (208,756) 20,048 (58,714)
currency
Other comprehensive income/(loss) for the period 41,564 (207,771) 20,209 (57,729)
Total comprehensive income/(loss) for the period 418,590 (316,870) 164,750 (104,717)
Profit/(Loss) attributable to:
Equity holders of the Parent 360,463 (112,255) 134,886 (45,021)
Non-controlling interests 16,563 3,156 9,655 (1,967)
377,026 (109,099) 144,541 (46,988)
Total comprehensive income/(loss) attributable to:
Equity holders of the Parent 403,067 (317,797) 154,893 (102,045)
Non-controlling interests 15,523 927 9,857 (2,672)
418,590 (316,870) 164,750 (104,717)
Earnings/(Loss) per share from continuing and discontinued operations
Basic and diluted earnings/(loss) per share (USD per share) 3.37 (1.05) 1.26 (0.42)
Earnings/(Loss) per share from continuing operations
Basic and diluted earnings/(loss) per share (USD per share) 3.37 (1.03) 1.26 (0.42)
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
Notes 30 September 2021 31 December 2020
ASSETS
Non-current assets
Property, plant and equipment 8 1,733,215 1,678,917
Right-of-use asset 240,423 207,001
Intangible assets 92,417 96,841
Goodwill 68,292 70,614
Non-current biological assets 31,313 25,584
Non-current financial assets 28,385 23,083
Long-term bank deposits 13,639 4,612
Deferred tax assets 2,991 1,822
2,210,675 2,108,474
Current assets
Inventories 9 182,029 240,715
Biological assets 10 513,608 175,085
Agricultural produce 9 223,408 269,045
Prepayments 38,093 16,776
Other current financial assets 79,645 81,314
Taxes recoverable and prepaid 55,096 54,647
Trade accounts receivable 160,577 119,187
Cash and cash equivalents 286,659 217,579
1,539,115 1,174,348
TOTAL ASSETS 3,749,790 3,282,822
EQUITY AND LIABILITIES
Equity
Share capital 11 284,505 284,505
Treasury shares (44,593) (44,593)
Additional paid-in capital 174,022 174,022
Revaluation reserve 634,042 648,982
Retained earnings 1,538,209 1,195,143
Translation reserve (975,288) (1,020,229)
Equity attributable to equity holders of the Parent 1,610,897 1,237,830
Non-controlling interests 23,712 16,373
Total equity 1,634,609 1,254,203
Non-current liabilities
Bank borrowings 12 47,778 64,608
Bonds issued 13 1,375,502 1,370,999
Lease liabilities 17 169,582 136,495
Deferred income 7 45,516 44,505
Deferred tax liabilities 29,690 29,867
Other non-current liabilities 6,785 7,233
1,674,853 1,653,707
Current liabilities
Trade accounts payable 198,528 149,768
Other current financial liabilities 68,237 86,638
Advances received 51,722 15,227
Bank borrowings 12 16,399 39,788
Interest payable 12,13 34,843 21,487
Lease liabilities 17 70,599 62,004
440,328 374,912
TOTAL LIABILITIES 2,115,181 2,028,619
TOTAL EQUITY AND LIABILITIES 3,749,790 3,282,822
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the nine-month period ended 30 September 2021
(in thousands 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 1 284,505 (44,593) 174,022 648,982 1,195,143 (1,020,229) 1,237,830 16,373 1,254,203
January 2021
Profit for the period - - - - 360,463 - 360,463 16,563 377,026
Other comprehensive profit - - - (2,337) - 44,941 42,604 (1,040) 41,564
Total comprehensive profit for the period - - - (2,337) 360,463 44,941 403,067 15,523 418,590
Transfer from revaluation reserve to retained earnings - - - (52,198) 52,198 - - - -
Dividends declared by the Parent (Note 18) - - - - (30,000) - (30,000) - (30,000)
Dividends declared by subsidiaries - - - - - - - (9,072) (9,072)
Non-controlling interests arising in a business combination - - - - - - - 888 888
Translation differences on revaluation reserve - - - 39,595 (39,595) - - - -
Balance as of 30 284,505 (44,593) 174,022 634,042 1,538,209 (975,288) 1,610,897 23,712 1,634,609
September 2021
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the nine-month period ended 30 September 2020
(in thousands 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 1 284,505 (44,593) 174,022 862,435 1,148,113 (842,188) 1,582,294 13,572 1,595,866
January 2020
Loss for the period - - - - (112,255) - (112,255) 3,156 (109,099)
Other comprehensive loss - - - 985 - (206,527) (205,542) (2,229) (207,771)
Total comprehensive loss for the period - - - 985 (112,255) (206,527) (317,797) 927 (316,870)
Transfer from revaluation reserve to retained earnings - - - (60,730) 60,730 - - - -
Dividends declared by the Parent (Note 18) - - - - (30,000) - (30,000) - (30,000)
Translation differences on revaluation reserve - - - (136,035) 136,035 - - - -
Balance as of 30 284,505 (44,593) 174,022 666,655 1,202,623 (1,048,715) 1,234,497 14,499 1,248,996
September 2020
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise
indicated)
Notes Nine-month period ended 30 September 2021 Nine-month period ended 30 September 2020
Operating activities
Profit/(Loss) before tax 386,669 (100,748)
Loss/(Profit) before tax from discontinued operations 179 (1,482)
Non-cash adjustments to reconcile profit or loss before tax to net cash flows
Depreciation and amortization expense 4 136,259 136,959
Net change in fair value of biological assets and agricultural produce 4 (176,279) (29,180)
Change in allowance for expected credit losses and direct (400) 2,294
write-offs
Loss on disposal of property, plant and equipment and other non-current assets 725 775
Finance income (8,409) (10,483)
Finance costs 109,347 108,014
Released deferred income 1,806 (1,127)
Non-operating foreign exchange loss/(gain), net (74,680) 190,500
Operating cash flows before movements in working capital 375,217 295,522
Working capital adjustments
Change in inventories 65,069 13,050
Change in biological assets (121,468) (92,319)
Change in agricultural produce 40,836 35,411
Change in prepayments made (20,077) (667)
Change in other current assets (1,566) 800
Change in taxes recoverable and prepaid 3,309 (7,507)
Change in trade accounts receivable (40,154) (6,596)
Change in advances received 34,713 (28,662)
Change in other current liabilities (32,823) 1,785
Change in trade accounts payable 51,799 26,393
Cash generated by operations 354,855 237,210
Interest received 5,802 8,742
Interest paid (94,991) (95,578)
Income taxes paid (7,585) (12,341)
Net cash flows from/(used in) operating activities 258,081 138,033
Investing activities
Purchases of property, plant and equipment 8 (85,137) (53,048)
Purchases of other non-current assets (6,528) (5,066)
Proceeds from disposals of property, plant and equipment 5,209 2,196
Proceeds from disposals of subsidiary 3 671 2,700
Purchases of non-current biological assets (1,201) (437)
Acquisition of subsidiaries, net of cash acquired 3 (1,840) -
Prepayments and capitalized initial direct costs under lease contracts (4,856) (3,274)
Investments in short-term deposits (10,304) (193)
Withdrawals of short-term deposits 442 -
Loans repaid by/(provided to) employees, net (136) (1,184)
Loans provided to related parties 14 (3,683) (36,080)
Loans repaid by related parties 14 11,000 -
Net cash flows used in investing activities (96,363) (94,386)
Financing activities
Proceeds from bank borrowings 79,533 76,604
Repayment of bank borrowings (116,962) (93,094)
Repayment of lease liabilities (19,787) (14,884)
Dividends paid 18 (30,000) (30,000)
Dividends paid by subsidiaries to non-controlling shareholders (8,398) (930)
Net cash flows used in financing activities (95,614) (62,304)
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
Notes Nine-month period ended 30 September 2021 Nine-month period ended 30 September 2020
Net decrease in cash and cash equivalents 66,104 (18,657)
Net foreign exchange difference on cash and cash equivalents 2,976 (16,739)
Cash and cash equivalents at 1 January 217,579 340,735
Cash and cash equivalents at 30 September 286,659 305,339
Non-cash transactions
Non-cash repayments of lease liabilities 6,000 5,727
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 13 to 29 form an integral part of these
interim condensed consolidated financial statements
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the nine-month period ended 30 September 2021
(in thousands 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, grain growing, as well as meat processing and other agricultural
operations. The Group's poultry and related operations integrate all functions
related to the production of chicken, including hatching, fodder
manufacturing, raising chickens to marketable age ("grow-out"), processing and
marketing of branded chilled products and include the production and sale of
chicken products, vegetable oil, mixed fodder. Grain growing comprises the
production and sale of grains. Meat processing and other agricultural
operations comprise the production and sale of cooked meat, sausages,
convenience food products, milk and feed grains. As at 30 September 2021 the
Group employed 31,061 people (31 December 2020: 30,471 people).
The primary subsidiaries, the principal activities of the companies forming
the Group and the Parent's effective ownership interest as of 30 September
2021 and 31 December 2020 were as follows:
Name Country of registration Year established/ Principal activities 30 September 2021 31 December 2020
acquired
Raftan Holding Limited(1)) Cyprus 2006 Sub-holding Company - 100.0%
Hemiak Investments Limited(1)) Cyprus 2018 Sub-holding Company - 100.0%
Eledem Investments Limited(1)) Cyprus 2006 Sub-holding Company - 100.0%
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 Trading FZE United Arab Emirates 2018 Trading in vegetable oil and poultry meat 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%
(1)) On 19 April 2021 merger of MHP SE with its subsidiaries, namely Raftan
Holding ltd, Hemiak Investments ltd and Eledem Investments ltd, took place.
All assets and liabilities of merging companies have been transferred to the
succeeding company MHP SE. Subsidiary companies were dissolved
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the nine-month
period ended 30 September 2021 have been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting" as adopted
by the European Union.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with International Financial
Reporting Standards ("IFRS") have been condensed or omitted. However, such
information reflects all adjustments (consisting of normal recurring
adjustments), which are, in the opinion of the Group management, necessary to
fairly state the results of interim periods. Interim results are not
necessarily indicative of the results to be expected for the full year.
These interim condensed consolidated financial statements have been prepared
on the assumption that the Group is a going concern and will continue in
operation for the foreseeable future.
The 31 December 2020 statement of financial position was derived from the
audited consolidated financial statements, which were prepared in accordance
with International Financial Reporting Standards ("IFRS") as adopted by the
European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113.
Audited consolidated financial statements are available at www.mhp.com.cy
(http://www.mhp.com.cy) .
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 Ukrainian companies of the Group is the Ukrainian
Hryvnia ("UAH"); the functional currency of the Cyprus companies and
Luxembourg company of the Group is US Dollars ("USD"), the functional currency
of the other European companies of the Group is EURO ("EUR"), the functional
currency of the United Arab Emirates companies is Dirham ("AED"). 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
at the rates prevailing on the reporting date. All realized and unrealized
gains and losses arising on exchange differences are recognized 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"),
which is the Group's presentation currency.
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 and other comprehensive income are translated at exchange rates at the
dates of the transactions;
· The exchange differences arising on translation for consolidation
are recognised in other comprehensive income and presented as a separate
component of equity. 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 for the revaluation reserve, are
translated at the historical exchange rate. The revaluation reserve is
translated at the closing rate as of the date of the statement of financial
position.
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Functional and presentation currencies (continued)
The following exchange rates were used:
Currency Closing rate as of 30 September 2021 Average for nine months ended 30 September 2021 Average for three months ended 30 September 2021 Closing rate as of 31 December 2020 Average for nine months ended 30 September 2020 Average for three months ended 30 September 2020
UAH/USD 26.5760 27.4866 26.9110 28.2746 26.5261 27.5996
UAH/EUR 30.9810 32.9022 31.7388 34.7396 29.8292 32.2429
USD/EUR 1.1658 1.1970 1.1794 1.2287 1.1245 1.1682
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 2020.
Seasonality of operations
Poultry and related operations, European operating segment and Meat processing
and other agricultural operations are not significantly exposed to seasonal
fluctuations.
Due to seasonality and implications of IAS 41, results of the Grain growing
segment 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, grain
growing segment has seasonal requirements for working capital increase from
November to May, due to the sowing campaign.
3. Changes in the group structure
Discontinued operation
During the nine-month period ended 30 September 2020, the Group disposed of
the Snyatynska poultry farm, which carried out goose meat and foie gras
operations located in Ukraine, and was previously presented within Meat
processing and other agricultural operations segment. Net assets as of the
date of disposal amounted to USD 3,303 thousand. The total cash consideration
amounted to USD 2,700 thousand, which was received during this reporting
period.
During the nine-month period ended 30 September 2021, the Group disposed of
the assets of its subsidiary Dobropilskyi GPP PrJSC, which was located in
Ukraine and carried out grain storage operations, and was previously presented
within Poultry and related operations segment. The net assets as of the date
of disposal amounted to USD 620 thousand. Before sale the property plant and
equipment included into the net assets disposed were impaired by USD 4,105
thousand. Impairment was recognized as decrease in revaluation reserve related
to those property, plant and equipment. The total cash consideration amounted
to USD 671 thousand, which was received during this reporting period.
Discontinued operations are excluded from the results of continuing operations
and are presented as a single amount as profit or loss after tax from
discontinued operations in the consolidated statement of profit or loss. All
other notes to the financial statements include amounts for continuing
operations, unless otherwise mentioned.
Acquisitions
On 01 June 2021, the Group acquired 51% share in the company Lubnym`yaso LLC,
Ukrainian meat production plant, whose main economic activity is the
production and sale of beef meat under the trade mark Scott Smeat. As of the
date of acquisition, the net assets of the acquired meat production plant
amounted to USD 1,800 thousand. Purchase consideration of acquired share is
equal to USD 1,840 thousand and was paid in cash. The goodwill in the amount
of USD 921 thousand is attributable to the expectations that this acquisition
will support strategic transformation to a culinary company through launch of
additional products.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
4. Segment information
The Group's business is managed on a worldwide basis, but operates
manufacturing facilities and sales offices primarily in Ukraine and Europe.
Reportable segments are presented in a manner consistent with the internal
reporting to the Group's chief operating decision maker ("CODM").
Segment information is analysed on the basis of the types of goods supplied by
the Group's operating divisions. The Group's reportable segments under IFRS 8
are as follows:
Poultry and related operations segment: • sales of chicken meat
• sales of vegetable oil and related products
• other poultry related sales
Grain growing operations segment: • sales of grain
Meat processing and other agricultural operations segment: • sales of meat processing products and other meat
• other agricultural operations (milk, feed grains and other)
European operating segment: • sales of meat processing and chicken meat products in Southeast
Europe
The accounting policies of the reportable segments are the same as the Group's
accounting policies described in Note 2. Sales between segments are carried
out at market prices. The segment result represents operating profit under
IFRS before unallocated corporate expenses and loss on impairment of property,
plant and equipment. Unallocated corporate expenses include management
remuneration, representative expenses, and expenses incurred in respect of the
maintenance of office premises. This is the measure reported to the CODM for
the purposes of resource allocation and assessment of segment performance.
European operating segment primarily includes sales of chicken meat and meat
processing products, produced in the facilities of Perutnina Ptuj. However,
the CODM manages this as a single segment, on the basis that each of research,
development, manufacture, distribution and selling of chicken meat and meat
processing products requires single marketing strategies, centralised
budgeting process and centralised management of production operations.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
4. Segment information (continued)
The following table presents revenue and profit information regarding the
Group's operating segments for the nine-month period ended 30 September 2021:
Poultry Grain growing operations Meat processing and other agricultural operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 1,140,327 79,245 126,158 300,856 1,646,586 - 1,646,586
Sales between business segments 33,532 134,539 267 - 168,338 (168,338) -
Total revenue 1,173,859 213,784 126,425 300,856 1,814,924 (168,338) 1,646,586
Segment results 139,107 245,855 6,795 39,058 430,815 - 430,815
Unallocated corporate expenses (14,662)
Other expenses, net (1)) (29,484)
Profit before tax from continuing operations 386,669
Other information:
Depreciation and amortization expense (2)()) 71,343 45,932 4,685 13,258 135,218 - 135,218
Net change in fair value of biological assets and agricultural produce 7,010 164,812 2,774 1,683 176,279 - 176,279
(1)) Includes finance income, finance costs, foreign exchange gain (net) and
other expenses (net).
(2)) Depreciation and amortization for the nine-month period ended 30
September 2021 does not include unallocated depreciation and amortization in
the amount of USD 1,041 thousand.
The following table presents revenue and profit information regarding the
Group's operating segments for the nine-month period ended 30 September 2020:
Poultry Grain growing operations Meat processing and other agricultural operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 970,066 90,258 106,052 247,641 1,414,017 - 1,414,017
Sales between business segments 26,461 138,148 260 - 164,869 (164,869) -
Total revenue 996,527 228,406 106,312 247,641 1,578,886 (164,869) 1,414,017
Segment results 106,765 61,195 9,561 26,375 203,896 - 203,896
Unallocated corporate expenses (9,486)
Other expenses, net (1)) (295,158)
Loss before tax from continuing operations (100,748)
Other information:
Depreciation and amortization expense (2)()) 73,391 44,305 5,132 13,733 136,561 - 136,561
Net change in fair value of biological assets and agricultural produce (10,733) 38,996 (307) 1,224 29,180 - 29,180
(1)) Includes finance income, finance costs, foreign exchange gain (net) and
other expenses (net).
(2)) Depreciation and amortization for the nine-month period ended 30
September 2020 does not include unallocated depreciation and amortization in
the amount of USD 662 thousand.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
4. Segment information (continued)
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 30 September 2021:
Poultry Grain growing operations Meat processing and other agricultural operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 432,975 66,756 48,536 109,744 658,011 - 658,011
Sales between business segments 13,487 14,935 119 - 28,541 (28,541) -
Total revenue 446,462 81,691 48,655 109,744 686,552 (28,541) 658,011
Segment results 46,144 103,646 (169) 15,139 164,760 - 164,760
Unallocated corporate expenses (3,761)
Other expenses, net (1)) (14,455)
Profit before tax from continuing operations 146,544
Other information:
Depreciation and amortization expense (2)()) 24,181 17,131 1,321 4,175 46,808 - 46,808
Net change in fair value of biological assets and agricultural produce (11,416) 62,658 (208) (81) 50,953 - 50,953
(1)) Includes finance income, finance costs, foreign exchange gain (net) and
other expenses (net).
(2)) Depreciation and amortization for the three-month period ended 30
September 2021 does not include unallocated depreciation and amortization in
the amount of USD 385 thousand.
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 30 September 2020:
Poultry Grain growing operations Meat processing and other agricultural operations European operating segment Total reportable segments Eliminations Consolidated
and related operations
External sales 361,754 55,664 38,636 90,515 546,569 - 546,569
Sales between business segments 11,542 44,451 94 - 56,087 (56,087) -
Total revenue 373,296 100,115 38,730 90,515 602,656 (56,087) 546,569
Segment results 34,998 12,359 4,351 8,311 60,019 - 60,019
Unallocated corporate expenses (3,650)
Other expenses, net (1)) (95,191)
Profit before tax from continuing operations (38,822)
Other information:
Depreciation and amortization expense (2)()) 22,872 20,522 1,625 4,285 49,304 - 49,304
Net change in fair value of biological assets and agricultural produce (16,960) 1,272 (678) (783) (17,149) - (17,149)
( )(1)) Includes finance income, finance costs, foreign exchange gain (net)
and other expenses (net).
(2)) Depreciation and amortization for the three-month period ended 30
September 2020 does not include unallocated depreciation and amortization in
the amount of USD 181 thousand.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
4. Segment information (continued)
Non-current assets based on the geographic location of the manufacturing
facilities were as follows as of
30 September 2021 and 31 December 2020:
2021 2020
Ukraine 1,915,283 1,816,045
Europe 250,377 262,912
2,165,660 2,078,957
(1)) Non-current assets excluding deferred tax assets, long-term bank
deposits and non-current financial assets.
5. Revenue
Revenue for the nine-month and three-month periods ended 30 September 2021
and 2020 was as follows:
Nine-month period Three-month period
ended 30 September
ended 30 September
2021 2020 2021 2020
Poultry and related operations segment
Chicken meat 891,990 730,410 345,523 277,871
Vegetable oil and related products 195,383 207,682 68,099 72,533
Other poultry related sales 52,955 31,974 19,353 11,350
1,140,328 970,066 432,975 361,754
Grain growing operations segment
Grain 79,245 90,258 66,756 55,664
79,245 90,258 66,756 55,664
Meat processing and other agricultural operations segment
Other meat 101,860 85,078 40,563 31,746
Other agricultural sales 24,298 20,974 7,973 6,890
126,158 106,052 48,536 38,636
European operating segment
Chicken meat 196,567 157,008 76,835 62,618
Other meat 80,036 71,095 23,858 20,647
Other agricultural sales 24,252 19,538 9,051 7,250
300,855 247,641 109,744 90,515
1,646,586 1,414,017 658,011 546,569
The geographic structure of revenue for the nine-month and three-month periods
ended 30 September 2021 and 2020 was as follows:
Nine-month period Three-month period
ended 30 September
ended 30 September
2021 2020 2021 2020
Export 842,948 761,244 341,384 308,523
Domestic 803,638 652,773 316,627 238,046
1,646,586 1,414,017 658,011 546,569
6. Profit for the period
The Group's gross profit for the nine-month period ended 30 September 2021
increased compared to the nine-month period ended 30 September 2020 and
amounted to USD 572,991 thousand (30 September 2020: USD 322,399 thousand).
The increase was driven mainly by higher returns earned by the grain growing
and poultry and related operations segments due to increase in grain and
poultry meat prices respectively.
The Group's operating profit increased mainly as a result of an increase in
gross profit partly offset by increase of administration, sales and
distribution expenses.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
6. Profit for the period (continued)
The Group's profit for the period from continuing operations for the
nine-month period ended 30 September 2021 increased compared to the nine-month
period ended 30 September 2020 from USD 107,617 thousand of loss to profit of
USD 376,847 thousand. A positive impact was attributable to growth of
operating profit and an unrealized foreign exchange gain amounted to USD
74,680 thousand for the nine-month period ended 30 September 2021 compared to
loss in amount of USD 190,500 thousand for the nine-month period ended 30
September 2020. Unrealized foreign exchange loss for the nine-month period
ended 30 September 2021 was mostly attributable to bonds and bank borrowings
denominated in foreign currencies due to UAH depreciation against USD and EUR.
7. Deferred income
Government grants for compensation of construction and reconstruction of
livestock farms and compensation of cost of machinery and equipment are
presented in the statement of the financial position as deferred income, which
is recognised in profit or loss on a systematic basis over the useful life of
the related assets. All other compensations received were recognised in
consolidated statement of profit or loss and other comprehensive income in
full. During the nine-month period ended 30 September 2021 the Group
recognized government compensations in the consolidated statement of profit or
loss and other comprehensive income in amount of USD 5,802 thousand (2020: USD
5,303 thousand).
During the nine-month periods ended 30 September 2021 and 30 September 2020,
the Group received government compensations in accordance with EU farming
subsidies policy and other compensations in accordance with the EU national
programs of employment, assigned contributions for employees, and refunds of
excise duties in amount of USD 4,705 thousand and USD 4,868 thousand
respectively.
8. Property, plant and equipment
During the nine-month period ended 30 September 2021, the Group's additions to
property, plant and equipment amounted to USD 85,137 thousand (nine-month
period ended 30 September 2020: USD 53,048 thousand) mainly related to
modernization projects, new products development and the maintenance and
improvement of Perutnina Ptuj production facilities.
There were no significant disposals of property, plant and equipment during
the nine-month periods ended 30 September 2021 and 30 September 2020.
The remaining part of the movement mainly relates to translation difference
into the presentation currency.
9. Inventories and agricultural produce
A decrease of agricultural produce balances for nine-month period ended 30
September 2021 was mainly as a result of internal consumption of corn,
sunflower, wheat and soya partly offset by harvest of current year.
Changes of inventory balances occurred due to consumption of purchased grain
stock and due to the fact that as of 31 December 2020 expenses incurred in
cultivating of fields which had to be planted in spring 2021 were capitalised
in work in progress balance. As of 30 September 2021 these expenses were
classified as crops in fields within biological assets, as the plants were
already sown.
10. Biological assets
The increase in current biological assets as compared to 31 December 2020 is
primarily related to crops in fields balance. The increase in crops in fields
balance mainly relates to spring crops seeded in the first half of 2021
classified as biological assets as well as due to IAS 41 revaluation
adjustment.
11. Share capital
As of 30 September 2021 and 31 December 2020 the authorized, issued and fully
paid share capital of MHP SE comprised the following number of shares:
30 September 2021 31 December 2020
Number of shares issued and fully paid 110,770,000 110,770,000
Number of shares outstanding 107,038,208 107,038,208
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
11. Share capital (continued)
The authorized share capital as of 30 September 2021 and 31 December 2020 was
EUR 221,540 thousand 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.
12. Bank borrowings
The following table summarizes bank borrowings and credit lines outstanding as
of 30 September 2021 and 31 December 2020:
30 September 2021 31 December 2020
Currency WAIR (1)) USD' 000 WAIR (1)) USD' 000
Non-current
EUR EURIBOR(2)) + 1.69% 47,778 EURIBOR(2)) + 2.62% 63,142
EUR - 2.54% 1,466
47,778 64,608
Current
UAH - 6.25% 3,537
USD - LIBOR + 3.25% 15,000
EUR - 2.30% 8,601
Current portion of EUR EURIBOR(2)) + 1.69% 16,399 EURIBOR(2)) + 2.62% 12,650
long-term bank borrowings
16,399 39,788
Total bank borrowings 64,177 104,396
(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.
The Group's borrowings are drawn from various banks as term loans, credit line
facilities and overdrafts. Repayment terms of principal amounts of bank
borrowings vary from monthly repayment to repayment on maturity depending on
the agreement reached with each bank. Interest on borrowings drawn with
foreign banks is payable semi-annually.
As of 30 September 2021 and 31 December 2020, the Group's bank term loans and
credit lines bear floating and fixed interest rates.
Bank borrowings and credit lines outstanding as of 30 September 2021 and 31
December 2020 were repayable as follows:
30 September 2021 31 December 2020
Within one year 16,399 39,788
In the second year 44,169 17,196
In the third to fifth year inclusive 3,609 47,412
64,177 104,396
As of 30 September 2021, the Group had available undrawn facilities of USD
304,974 thousand (31 December 2020: USD 304,910 thousand). These undrawn
facilities expire during the period from April 2022 until July 2024.
The Group, as well as particular subsidiaries of the Group has to ensure
ongoing compliance 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, when the Groups Net Debt to
EBITDA ratio exceeds 3.0 to 1, negative covenants become applicable in respect
of restricted payments, including dividends, capital expenditures, additional
indebtedness and restrictions on mergers or consolidations, limitations on
liens and dispositions of assets and limitations on transactions with
affiliates. The Group subsidiaries are also required to obtain approval from
lenders regarding property, plant and equipment to be used as collateral.
During the nine-month period ended 30 September 2021 and year ended
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
12. Bank borrowings (continued)
31 December 2020 the Group has complied with all bank covenants. As at 30
September 2021, the Group's leverage ratio improved to 2.09 to 1 from 3.66 to
1 as at 31 December 2020.
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, Zakhid-Agro MHP, MHP-Urozhayna Krayina.
As of 30 September 2021, the Group had borrowings of USD 38,936 thousand that
were secured by property, plant and equipment with a carrying amount of USD
68,365 thousand (31 December 2020: USD 45,958 thousand and USD 83,837 thousand
respectively).
As of 30 September 2021, the Group did not have any borrowings that were
secured by agricultural produce (31 December 2020: borrowings of USD 15,000
thousand were secured by agricultural produce with carrying amount of USD
18,750 thousand).
As of 30 September 2021, the deposit with carrying amount of USD 2,627
thousand (31 December 2020: USD 3,632 thousand) was restricted as collateral
to secure bank borrowings.
As of 30 September 2021 and 31 December 2020, interest payable on bank
borrowings was USD 312 thousand and USD 730 thousand, respectively.
13. Bonds issued
Bonds issued and outstanding as of 30 September 2021 and 31 December 2020 were
as follows:
Carrying amount Nominal amount
30 September 2021 31 December 2020 30 September 2021 31 December 2020
7.75% Senior Notes due in 2024 490,037 487,480 500,000 500,000
6.95% Senior Notes due in 2026 537,807 536,153 550,000 550,000
6.25% Senior Notes due in 2029 347,658 347,366 350,000 350,000
Unamortized debt issuance cost - - (24,498) (29,001)
Total bonds issued 1,375,502 1,370,999 1,375,502 1,370,999
As of 30 September 2021 and 31 December 2020 amount of interest payable on
bonds issued was USD 34,531 thousand and USD 20,757 thousand, 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 350,000 thousand 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 for general corporate
purposes.
All expenses associated with the placement of the 6,25% Senior Notes amounted
to USD 2,888 thousand and were capitalized.
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. 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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
13. Bonds issued (continued)
6.95% Senior Notes
On 3 April 2018, MHP Lux S.A. issued USD 550,000 thousand 6.95% Senior Notes
due in 2026 at par value. Out of the total issue amount USD 416,183 thousand
were designated for redemption and exchange of the existing 8.25% Senior Notes
due in 2020.
The part of expenses, connected with placement of the 6,95% Senior Notes
amounted to USD 11,564 thousand were capitalized, including USD 10,413
thousands related to the exchange. All other related expenses in the amount of
USD 32,915 thousand were expensed as incurred.
As a result of a non-substantial modification, the difference between the
present value of the cash flows under the original and modified terms
discounted at the original effective interest rate was recognised as a gain in
the amount of USD 4,733 thousand at the date of modification in the
consolidated profit or loss.
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. 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 101% 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 500,000 thousand 7.75% Senior Notes due in
2024 at par value. Out of the total issue the amount of USD 245,200 thousand
were designated for redemption and exchange of existing 8.25% Senior Notes due
in 2020.
The carrying amount of the Senior Notes was adjusted on transition to IFRS 9.
Under IFRS 9, as a result of a non-substantial modification, the difference
between the present value of the cash flows under the original and modified
terms discounted at the original effective interest rate should be recognised
as a gain at the date of modification. The difference between the carrying
amount of the Senior Notes under IAS 39 and IFRS 9 was recognised in opening
retained earnings in the amount of USD 7,566 thousand.
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. 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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
13. Bonds issued (continued)
Covenants
Certain restrictions under the indebtedness agreements (e.g. incurrence of
additional indebtedness, restricted payments, dividends payment) are dependent
on the leverage ratio of the Group. 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, incur additional
debt except that is defined as a Permitted Debt. According to the indebtedness
agreement, 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). The
Group has tested all the transactions occurred prior to publication of these
financial statements and has complied with all the covenants defined by
indebtedness agreement during the reporting periods ended 30 September 2021
and 31 December 2020.
As at 30 September 2021 the leverage ratio of the Group is 2.09 to 1 (31
December 2020: 3.66 to 1), lower than the defined limit 3.0 to 1. The Group
believes that since as at the interim reporting date, it improved the leverage
ratio and met the covenants imposed, the aforementioned restrictions are no
longer applicable to the Group from 9 September 2021 the date of publication
of reviewed interim condensed consolidated financial statements for the
three and six months ended 30 June 2021.
14. Related party balances and transactions
For the purposes 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 which 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
The Group enters into transactions with related parties that are under common
control of the Principal Shareholder of the Group (Note 1) in the ordinary
course of business 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 trading activities of the Group do not
vary significantly from the terms of similar transactions with third
parties.
Transactions with related parties during the nine-month periods ended 30
September 2021 and 30 September 2020 were as follows:
2021 2020
Loans and finance aid provided to related parties 3,683 36,080
Loans and finance aid repaid by related parties 11,000 -
Interest charged on loans and finance aid provided 3,890 2,723
Interest on loans and financial aid repaid 4,418 2,476
Sales of goods - 76
Purchases from related parties 391 12
Key management personnel of the Group:
Loans provided 631 1,722
Loans repaid 576 716
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
14. Related party balances and transactions (continued)
Transactions with related parties (continued)
The balances owed to and due from related parties were as follows as of 30
September 2021 and 31 December 2020:
30 September 2021 31 December 2020
Loans and finance aid receivable 65,350 73,035
Less: expected credit losses (4,399) (4,340)
60,951 68,695
Loans to key management personnel 4,683 4,698
Less: expected credit losses (417) (218)
4,266 4,480
Trade accounts receivable 115 109
Payables due to related parties 25 17
Loans and finance aid receivable
On 21 January 2020, the Board approved a loan facility of up to USD 80,000
thousand to the company's principal shareholder, WTI Trading Limited ("WTI")
to meet WTI's general liquidity requirements and other corporate purposes for
a maximum of three years.
As of 30 September 2021, the Group had advanced loans to WTI in the aggregate
amount of USD 60,000 thousand (31 December 2020: USD 67,400 thousand). The
loans, with a maturity in December 2021 - June 2022, bear interest at a rate
of 8.25% to 9.25% and are secured by a personal guarantee of WTI's ultimate
beneficial owner.
Expected credit losses on these loans amounted to USD 1,761 thousand as at 30
September 2021 (31 December 2020: USD 1,969 thousand).
The Group's Directors believe that the loans were issued at arm's length terms
and for fair market value, and that they were in the best interests and for
the commercial benefit of the Group and do not violate the terms of the Senior
Notes (Note 13).
Compensation of key management personnel
Total compensation of the Group's key management personnel that was paid for
for the periods ended 30 September 2021 and 2020 amounted to USD 15,853
thousand and USD 11,916 thousand, respectively. Compensation of key management
personnel consists of contractual salary and performance bonuses.
15. Contingencies and contractual commitments
Operating environment
Since 2016, the Ukrainian economy, which represents the core operating
environment of the Group, has been demonstrating signs of stabilization after
the years of political and economic tensions. Until the break-out of the
coronavirus (COVID-19) pandemic in the first quarter 2020, the real GDP has
been steadily growing, however it decreased by around 4.2% for year ended 31
December 2020. Real GDP increased by around 2.4% year on year for the
nine-month period ended 30 September 2021 compared to decrease of 5.5% for
the nine-month period ended 30 September 2020. The annual inflation amounted
to 11.0% (2020: 2.3%).
Ukraine continues to limit its political and economic ties with Russia, in
view of the annexation of Crimea, an autonomous republic of Ukraine, and an
armed conflict with separatists continuing in certain parts of Luhanska and
Donetska regions. As a result, the Ukrainian economy is refocusing on the EU
market by realizing the potential of the established Deep and Comprehensive
Free Trade Area with the EU.
To further facilitate business activities in Ukraine, the National Bank of
Ukraine (the "NBU") has lifted the foreign currency proceeds surrender
requirement from 20 June 2019, cancelled all limits on repatriation of
dividends from July 2019 and gradually decreased its rate of refinancing, from
18.0% in January 2019 to 8.5% in November 2021.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
15. Contingencies and contractual commitments (continued)
Operating environment (continued)
The degree of macroeconomic uncertainty in Ukraine in 2021 still remains high
due to a significant amount of public debt scheduled for repayment in 2021,
which requires mobilizing substantial domestic and external financing in an
increasingly challenging financing environment for the emerging markets. At
the same time, the Ukrainian authorities have demonstrated their commitment to
introduce reforms in order to boost economic growth, while maintaining
macro-fiscal stability and liberalizing economic environment.
Further economic growth depends, to a large extent, upon the success of the
Ukrainian government in realization of the planned structural reforms and
effective cooperation with the International Monetary Fund (the "IMF") as well
as the ability of the government to cope with the macroeconomic challenges
posed by the confinement measures introduced to contain the spread of
COVID-19.
The responses put in place by many countries, including Ukraine and the EU, to
contain the spread of COVID-19 resulted in significant operational disruption
for many companies and have significant impact on global financial markets.
While food supply chains proved to be largely resilient during the pandemic
and the confinement measures are now being progressively lifted or adapted in
Ukraine and other countries, many uncertainties yet remain around the economic
recovery, and thus around the evolution of the consumer demand and the supply
chain stability. In particular, the forecast magnitude of the recession is
such that it is expected to lead to a sharp increase in unemployment in the
EU, negatively impacting private consumption and limiting the Group's ability
to enjoy benefits from export supplies to the EU and other key markets.
Management has considered all available information about the future,
including the impact of the COVID-19 outbreak on customers, suppliers and
staff, as well as actual and projected foreseeable impact from various other
factors. Management will continue to monitor the situation closely and will
assess the need for additional measures in case the period of disruption
prolongs or escalates further.
The Group reviews its non-financial assets to determine if any external or
internal indicators of impairment exists. Based on these reviews, there were
no indicators of impairment as of 30 September 2021.
Taxation and legal issues
The Group performs most of its operations in Ukraine and therefore falls
within the jurisdiction of the Ukrainian tax authorities. Ukrainian
legislation and regulations regarding taxation and other operational matters,
including currency exchange control and custom regulations, continue to
evolve. Legislation and regulations are not always clearly written and are
subject to varying interpretations by local, regional and national
authorities, and other Governmental bodies. Non-compliance with Ukrainian laws
and regulations can lead to the imposition of severe penalties and fines.
Future tax examinations could raise issues or assessments which are contrary
to the Group companies' tax filings. Such assessments could include taxes,
penalties and fines, and these amounts could be material. While the Group
believes it has complied with local tax legislation, there are new significant
changes to the tax legislation that may be introduced in the near future.
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 report for the years ended 31 December 2018 and
31 December 2019 within the required deadlines.
As of 30 September 2021, the Group's management assessed its possible exposure
to tax risks for a total amount of USD 5,808 thousand related to corporate
income tax (31 December 2020: USD 5,459 thousand). No provision was recognised
relating to such possible tax exposure.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
15. Contingencies and contractual commitments (continued)
Operating environment (continued)
As of 30 September 2021, companies of the Group were engaged in ongoing
litigation with tax authorities for the amount of USD 66,003 thousand (31
December 2020: USD 36,616 thousand), including USD 53,652 thousand (31
December 2020: USD 26,153 thousand) 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 22,917 thousand as of
30 September 2021 (31 December 2020: USD 289 thousand) relates to cases where
court hearings have taken place and where the court in either the first or
second instance has already ruled in favour of the Group. In addition, the
Group maintains disputes with tax authorities in the amount USD 7,955
thousand, which are not brought to the Court as at 30 September 2021.
Manage-ment believes that, based on the past history of court resolutions of
similar lawsuits by the Group, it is unlikely that a significant settlement
will arise out of such lawsuits and no respective provision is required in the
Group's financial statements as of the reporting date.
Contractual commitments on purchase of property, plant and equipment
During the nine-month period ended 30 September 2021, the companies of the
Group entered into a number of contracts with foreign suppliers for the
purchase of property, plant and equipment for the development of agricultural
operations. As of 30 September 2021, purchase commitments on such contracts
were primarily related to modernization projects, new products development and
the maintenance and improvement of Perutnina Ptuj production facilities and
amounted to USD 27,446 thousand (31 December 2020: USD 15,396 thousand).
16. 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 the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. 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, and
trade accounts payable due to the short-term nature of the financial
instruments.
Set out below is the comparison by category of carrying amounts and fair
values of all the Group's financial instruments, excluding those discussed
above, that are carried in the consolidated statement of financial position:
Carrying amount Fair value
30 September 2021 31 December 2020 30 September 2021 31 December 2020
Financial liabilities
Bank borrowings (Note 12) 64,489 105,126 58,996 103,737
Senior Notes due in 2024, 2026, 2029 (Note 13) 1,410,033 1,391,756 1,482,897 1,515,005
The carrying amount of Bank borrowings and Senior Notes issued includes
interest payable at each of the respective dates.
The fair value of bank borrowings was estimated by discounting the expected
future cash outflows by a market rate of interest for bank borrowings 2.7% (31
December 2020: 3.4%), 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
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
17. Risk management policy
During the nine-month period ended 30 September 2021 there were no changes to
objectives, policies and processes for credit risk, capital risk, interest
rate risk, livestock diseases risk and commodity price and procurement risk
managing.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to settle all
liabilities as they are due. The Group's liquidity position is carefully
monitored and managed. The Group has in place a detailed budgeting and cash
forecasting process to help ensure that it has adequate cash available to meet
its payment obligations.
The following table details the Group's remaining contractual maturity for its
non-derivative financial liabilities. The table has been drawn up based on the
undiscounted cash flows of financial liabilities using the earliest date on
which the Group can be required to pay. The table includes both interest and
principal cash flows as of 30 September 2021 and 31 December 2020. The amounts
in the table may not be equal to the statement of financial position carrying
amounts since the table includes all cash outflows on an undiscounted basis.
Carrying Contractual Less than From 2nd to 5th year After
1 year
amount Amounts 5th year
30 September 2021
Bank borrowings 64,489 66,078 17,561 48,517 -
Bonds issued 1,410,033 1,882,375 98,850 1,367,900 415,625
Lease liabilities 240,181 458,435 65,511 205,039 187,885
Trade accounts payable 198,528 198,528 198,528 - -
Other current financial liabilities 68,237 68,237 68,237 - -
Total 1,981,468 2,673,653 448,687 1,621,456 603,510
31 December 2020
Bank borrowings 105,126 109,620 42,150 67,470 -
Bonds issued 1,391,756 1,942,738 98,850 837,275 1,006,613
Lease liabilities 198,499 405,127 57,204 184,699 163,224
Trade accounts payable 149,768 149,768 149,768 - -
Other current financial liabilities 86,638 86,638 86,638 - -
Total 1,931,787 2,693,891 434,610 1,089,444 1,169,837
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, Group management sets limits on the level of exposure to foreign
currency fluctuations.
The carrying amounts of the Group's foreign currency denominated monetary
assets and liabilities as of
30 September 2021 and 31 December 2020 were as follows:
30 September 2021 31 December 2020
USD EUR USD EUR
Total assets 238,604 71,704 209,298 31,412
Total liabilities 1,416,091 40,148 1,416,722 59,904
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2021
(in thousands of US dollars, unless otherwise indicated)
17. Risk management policy (continued)
Currency risk (continued)
The table below details the Group's sensitivity to strengthening/(weakening)
of the UAH against USD and EUR. This sensitivity range represents management's
assessment of the reasonably possible change in foreign exchange rates. The
sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period end for possible
change in foreign currency rates.
Change in foreign currency exchange rates Effect on profit
before tax
2021
Increase in USD exchange rate 15% (176,623)
Increase in EUR exchange rate 15% 4,733
Decrease in USD exchange rate 15% 176,623
Decrease in EUR exchange rate 15% (4,733)
2020
Increase in USD exchange rate 15% (181,114)
Increase in EUR exchange rate 15% (4,274)
Decrease in USD exchange rate 15% 181,114
Decrease in EUR exchange rate 15% 4,274
During the nine-month period ended 30 September 2021, the Ukrainian Hryvnia
appreciated against the EUR by 12.1% and against the USD by 6.4% (nine-month
period ended 30 September 2020: depreciated against the EUR and USD by 20.2%
and 16.3% respectively). As a result, during the nine-month period ended 30
September 2021 the Group recognised net foreign exchange gain in the amount of
USD 74,680 thousand (nine-month period ended 30 September 2020: foreign
exchange loss in the amount of USD 190,500 thousand) in the interim condensed
consolidated statement of profit or loss and other comprehensive income.
18. Dividends
At the extraordinary general meeting, which was held on 28 April 2021, the
Shareholders of MHP SE have approved payment of an annual dividend of USD
0.2803 per share, equivalent to USD 30,000 thousand to shareholders on the
register as of 7 May 2021. As at 30 September 2021 dividends were fully paid
to shareholders.
On 13 April 2020, the Board of Directors approved payment of an interim
dividend of USD 0.2803 per share, equivalent to USD 30,000 thousand to
shareholders on the register as of 24 April 2020. As at 31 December 2020
dividends were fully paid to shareholders.
19. Subsequent events
At its meeting on 17 November, in recognition of the Company's exceptional
performance in 2021, the Board of Directors approved the payment of a one-off
special dividend of US$ 0.2803 per share, equivalent to USD 30,000 thousand.
Details of payment, which is expected to be made in December 2021, will be
announced later this month. The Board will consider payment of its customary
annual dividend in March 2022.
20. 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 17 November 2021.
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