REG - MHP SE - Q3 and 9M 2023 Financial Results
16/11/2023 07:15
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RNS Number : 6794T MHP SE 16 November 2023
16 November 2023, Limassol, Cyprus
MHP SE
Financial Results for the Third Quarter and Nine Months ended 30 September
2023
MHP SE (LSE:MHPC), the parent company of a leading international
agro-industrial group with headquarters in Ukraine, today announces its
unaudited results for the third quarter and nine months ended 30 September
2023. Hereinafter, MHP SE and its subsidiaries are referred to as "MHP", "The
Company" or "The Group".
MHP is reporting good operational and financial results for 9M 2023 thanks to
a recovery in export levels, continued strong demand, a stable price
environment and the MHP team's success in minimizing disruption to production.
It should be noted that operational and financial results in 9M 2022 were
significantly more seriously affected by disruption in the early stages of the
War, setting a low bar for year-on-year comparison. Future results may again
be adversely affected by War-related challenges that are not under MHP's
control.
WAR IN UKRAINE - UPDATE
Ukraine continues to face the ongoing full-scale Russian invasion, with
significant war operations in the south and east of the country. Irregular but
frequent drone and rocket attacks against civilian infrastructure throughout
the territory of Ukraine remain a feature of the war. Indeed, October and
November have seen an intensification of attacks aimed at energy
infrastructure ahead of winter, with the expectation of further heightened
activity during the winter period.
Following the unilateral Russian withdrawal from the Black Sea Grain
Initiative - known as the 'Grain Deal' - in July 2023, seaborne transport for
Ukrainian agricultural produce remains severely restricted. In the absence of
alternative international agreements, Ukrainian authorities have been steering
vessels along the coast to decrease the chances of attack. Regular targeting
of port infrastructure by Russian drones and rockets makes the situation
extremely volatile. A number of vessels have been damaged by bombing,
including foreign-flagged cargo ships in the Odessa region.
The Company therefore continues to operate in an extremely challenging and
uncertain logistics environment, incurring substantial transportation costs
from having to utilize alternatives to shipping and manage increased
complexity across its logistics operations.
Due to these issues, MHP's exports continue to be reliant on the relaxation of
EU and UK poultry quotas and tariffs and any changes to the current regime
could pose a serious risk to the Company's ability to reach end markets
profitably. For certain products, including wheat, maize, rapeseed and
sunflower seed, the Company remains unable to access end consumers in some
central European EU countries due to exceptional restrictive measures.
Moreover, recurring strikes at the Polish border have increased the cost of
delivering poultry meat to the EU using other, longer routes.
To withstand the widely expected electricity shortages, MHP has made
provisions for electricity outages and has alternatives ready to replace the
supply by the national energy network that remains under constant threat of
Russian bombardment. Nevertheless, any significant energy outages are likely
to lead to increased cost and/or a decrease in production across the Company's
main products.
The Company continues to support its staff and focus on the welfare of its
people, including more than 2,300 employees currently mobilized. MHP has put
in place an on-going re-skilling programme, leading to extended average
employee age, as well as a higher ratio of women to men.
In addition to the specific challenges outlined above, the Company and its
staff continue to face severe general uncertainties inherent in the War, with
any substantive escalation of attacks increasing risks to MHP's Ukrainian
operations, potentially leading to further disruption in production.
Despite these significant challenges, MHP's production facilities have
continued to operate at close to full capacity throughout the reporting period
and to date. This has enabled the Company to continue exporting to global
markets, providing grain, vegetable oils and poultry meat to global markets to
over 70 countries.
On November 8 2023, The European Commission working group on EU enlargement
policy published its Ukraine 2023 Report. This concluded that Ukraine has
continued to progress on democratic and rule of law reforms despite the
on-going challenges of the full-scale invasion, and that the granting of
candidate status for EU accession to Ukraine in June 2022 has further
accelerated reform efforts.
OPERATIONAL ENVIRONMENT
As of today, by adapting dynamically to the evolving operational environment
the Company has been able to continue operating at close to full capacity in
Ukraine. MHP's own facilities have not suffered significant physical damage.
In the event of any future adverse impact to its operations, the Company has
in place detailed contingency plans, ensuring that it is ready to take all
actions necessary to rebuild, restore and re-start production in the shortest
time possible. The Company sees its readiness to act on contingencies as a key
strategic priority, including access to adequate liquidity to enact emergency
measures.
The global market environment for non-poultry products remains challenging,
with depressed prices for wheat and rapeseed products, including vegetable
oils, putting pressure on profit margins.
CHANGE IN PRESENTATION OF SEGMENT INFORMATION
In order to accurately reflect the diverse nature of the Group's business
operations and improve the granularity of reporting, from this report MHP has
implemented changes to its presentation of business segmentation
information. These changes include:
• introduction of a new Vegetable Oil Operations segment, which
represents production and sales of vegetable oil and related products;
• consolidation of all meat production operations in the Poultry
and Processed Meat and Related Operations segment;
• combining grain operations and milk cattle farming in the
Agriculture Operations segment.
Comparative results for the nine-month period ended 30 September 2022 have
been restated.
OPERATIONAL HIGHLIGHTS
Q3 2023
· Poultry meat production volume in Ukraine was up 10% at
187,036 tonnes (Q3 2022: 169,448 tonnes). Poultry meat production volumes of
the European Operating Segment (PP) increased by 5% to 34,764 tonnes (Q3
2022: 33,084 tonnes).
· MHP Ukraine's average poultry meat price was stable at
US$ 1.96 per kg (Q3 2022: US$ 2.03 per kg) excluding VAT. The average price
of poultry meat produced by PP was stable at EUR 3.42 per kg (Q3 2022: EUR
3.34 per kg).
· Poultry meat exports from Ukraine remained stable at
99,813 tonnes (Q3 2022: 99,250 tonnes).
9M 2023
· Poultry meat production volume in Ukraine increased by
6% to 546,369 tonnes (9M 2022: 515,488 tonnes). Poultry meat production
volumes of PP increased by 7% to 99,850 tonnes (9M 2022: 92,892 tonnes).
· MHP Ukraine's average poultry meat price was stable at
US$ 1.94 per kg (9M 2022: US$ 1.97 per kg) excluding VAT. The average price of
poultry meat produced by PP increased by 8% to EUR 3.46 per kg (9M 2022: EUR
3.19 per kg).
· Poultry meat exports from Ukraine increased by 21% to
311,978 tonnes (9M 2022: 257,250 tonnes).
FINANCIAL HIGHLIGHTS
Q3 2023
· Revenue stable at US$ 739 million (Q3 2022: US$ 727
million).
· Export revenue of US$ 411 million, 56% of total revenue
(Q3 2022: US$ 470 million, 65% of total revenue).
· Operating profit of US$ 95 million decreased by 5% and
operating margin decreased to 13% (Q3 2022:US$ 100 million and 14%
respectively).
· Adjusted EBITDA (net of IFRS 16) decreased to US$ 111
million from US$ 121 million; adjusted EBITDA margin (net of IFRS 16)
decreased to 15% from 17%.
· Net profit of US$ 55 million, compared to a loss of US$
181 million for Q3 2022.
9M 2023
· Revenue increased to US$ 2,294 million, up by 22% y/y
(9M 2022: US$ 1,876 million).
· Export revenue increased to US$ 1,385 million, 25%
higher y/y, representing 60% of total revenue (9M 2022: US$ 1,110 million, 59%
of total revenue).
· Operating profit increased to US$ 247 million, up by
40% y/y (9M 2022: US$ 176 million) and operating margin increased from 9% to
11%.
· Adjusted EBITDA (net of IFRS 16) increased by 20% to
US$ 329 million (9M 2022: US$ 275 million); adjusted EBITDA margin (net of
IFRS 16) decreased from 15% to 14%.
· Net profit of US$ 122 million, compared to a loss of
US$ 269 million in 9M 2022, primarily reflecting a US$ 7 million non-cash
foreign exchange gain in 9M 2023 compared with a US$ 367 million foreign
exchange loss in 9M 2022.
FINANCIAL OVERVIEW
(in mln. US$, unless indicated otherwise) Q3 2023 Q3 2022 % change(1)) 9M 2023 9M 2022 % change(1))
Revenue 739 727 2% 2,294 1,876 22%
IAS 41 standard losses 2 (26) 108% (74) (119) 38%
Gross profit 169 158 7% 463 398 16%
Gross profit margin 23% 22% 1 pps 20% 21% -1 pps
War-related expenses (9) (7) 29% (23) (45) -49%
Operating profit 95 100 -5% 247 176 40%
Operating profit margin 13% 14% -1 pps 11% 9% 2 pps
Adjusted EBITDA 133 136 -2% 367 304 21%
Adjusted EBITDA margin 18% 19% -1 pps 16% 16% 0 pps
Adjusted EBITDA (net of IFRS 16) 111 121 -8% 329 275 20%
Adjusted EBITDA margin (net of IFRS 16) 15% 17% -2 pps 14% 15% -1 pps
Net profit /(loss) 55 (181) 130% 122 (269) 145%
Net profit/(loss) margin 7% -25% 32 pps 5% -14% 19 pps
(1)) pps - percentage points
Average official FX rate for Q3: UAH/US$ 36.57 in 2023 and UAH/US$ 34.98 in
2022.
Average official FX rate for 9M 2023 UAH/US$ 36.57 and for 9M 2022 UAH/US$
30.95.
On 25 September 2023 MHP SE launched an invitation to the holders of its US$
500 million 7.75% Guaranteed Notes due May 10, 2024 to tender for the purchase
of any and all of the US$ 500 million aggregate principal amount of Notes
outstanding. The early tender offer consideration due to expire on 6 October
2023 amounted to US$ 850 per US$ 1,000 principal amount of Notes, while the
tender offer consideration due to expire on 26 October 2023 amounted to US$
750 per US$ 1,000 principal amount of Notes. Subsequently, the tender offer
was extended to 8 November 2023.
With the purpose of refinancing the Eurobond indebtedness, on 20 October 2023
the Group signed agreements with three international and development financial
institutions - DFC, IFC and EBRD - to provide facilities of up to US$ 480
million in aggregate.
On 10 November 2023, the Group completed the Tender Offer Consideration,
purchasing Notes with a principal amount of US$ 151 million for US$ 128
million, using disbursed first tranches from the IFI facilities with a total
amount of US$ 107 million.
DIAL-IN DETAILS
MHP's management will host a conference call for investors and analysts
followed by Q&A on the day of the results.
The dial-in details are:
Time: 13.00 London / 15.00
Kyiv / 08.00 New York
Title: Financial results
for Q3 2023 and 9M 2023
UK: +44 203 984 9844
Ukraine: +380 89 324 0624
USA: +1 718 866 4614
PIN code: 645982
To follow the presentation with the management team, please use the following
link:
https://mm.closir.com/slides?id=645982
(https://mm.closir.com/slides?id=645982)
For Investor Relations enquiries, please contact:
Anastasia Sobotiuk (Kyiv) +38 050 339
29 99
+357 99 76 71 26
a.sobotyuk@mhp.com.ua (mailto:a.sobotyuk@mhp.com.ua)
Segment Performance
Poultry and processed meat and related operations
Poultry meat
(in tonnes, unless indicated otherwise) Q3 2023 Q3 2022(1)) % change y/y²()) Q2 2023 % change q/q²()) 9M 2023 9M 2022 % change²())
Sales volume of poultry meat(1)) 177,613 173,565 2% 174,408 2% 535,201 473,740 13%
Export sales 99,813 99,250 1% 100,234 0% 311,978 257,250 21%
Domestic sales 77,800 74,315 5% 74,174 5% 223,223 216,490 3%
Portion of export sales, % 56% 57% -1 pps 57% -1 pps 58% 54% 4 pps
Average price per 1 kg net of VAT, USD 1.96 2.03 -3% 1.97 -1% 1.94 1.97 -2%
Average price per 1 kg net of VAT, USD$ (Ukraine) 1.70 1.42 20% 1.64 4% 1.63 1.49 9%
Average price per 1 kg net of VAT, USD$ (export) 2.17 2.49 -13% 2.22 -2% 2.16 2.38 -9%
(¹)) Poultry meat consists of raw and unprocessed parts of chicken, meat
after minor processing, meat after grinding and chicken meat with the
addition of spices (marinated meat)
(¹)) pps - percentage points
The total volume of poultry meat sold to third parties in 9M 2023 increased by
13% to 535,201 tonnes (9M 2022: 473,740 tonnes) due to a significant increase
in export sales. Domestic sales in 9M 2023 increased by 3% mainly due to
higher demand in Ukraine compared to 9M 2022 when the full effects of the War
affected results from March. Export sales in 9M 2023 increased by 21% y/y to
311,978 tonnes, mainly as a result of substantially decreased sales in 9M 2022
due to the effects of the War.
Poultry meat export prices in 9M 2023 decreased by 9% y/y, mainly driven by
relative stabilization comparing to their maximum levels achieved in Q2 2022.
In 9M 2023 poultry meat prices on the domestic market in USD terms increased
by 9% y/y, driven by increased sales volumes of high-margin fillet and due to
higher costs resulting from significant inflation both in 2022 and 9M 2023.
Processed poultry meat
(in tonnes, unless indicated otherwise) Q3 2023 Q3 2022(1)) % change y/y²()) Q2 2023 % change q/q²()) 9M 2023 9M 2022 % change²())
Sales volume of processed meat(1)) 10,097 9,752 4% 8,992 12% 27,260 26,962 1%
Export sales 1,864 1,163 60% 900 107% 3,825 2,737 40%
Domestic sales 8,233 8,589 -4% 8,092 2% 23,435 24,225 -3%
Portion of export sales, % 18% 12% 6 pps 10% 8 pps 14% 10% 4 pps
Average price per 1 kg net of VAT, USD 3.01 2.34 29% 2.76 9% 2.88 2.51 15%
Average price per 1 kg net of VAT, USD$ (Ukraine) 3.03 2.25 35% 2.79 9% 2.87 2.43 18%
Average price per 1 kg net of VAT, USD$ (export) 3.00 -3% 2.46 18% 2.93 3.24 -10%
2.90
(¹)) Processed meat consists of meat after significant processing (added
supplements like vegetables or breading), pre-cooked and ready-to-eat meat
²()) pps - percentage points
Export sales volume of processed poultry meat increased by 40% to 3,825 tonnes
in 9M 2023 compared to 2,737 tonnes in 9M 2022. The average price increased
by 15% to USD$ 2.88 per kg in 9M 2023 (9M 2022: USD$ 2.51 per kg) driven
mainly by an increase in raw material prices (spices, packaging and other
components) as well as by a positive change in product mix.
Financial result and trends
(in mln. US$, unless indicated otherwise) Q3 2023 Q3 2022 % change y/y(1)) Q2 2023 % change q/q(1)) 9M 2023 9M 2022 % change(1))
Revenue 425 411 3% 416 2% 1,257 1,106 14%
- Poultry meat 359 362 -1% 359 0% 1,078 969 11%
- Processed meat 30 23 30% 25 20% 79 68 16%
- Complementary products and other sales 36 26 33% 32 13% 100 69 45%
IAS 41 standard gain 2 9 -78% 10 -80% 16 24 -33%
Gross profit 99 75 32% 119 -17% 311 226 38%
Gross margin 23% 18% 5 pps 29% -6 pps 25% 20% 5 pps
War-related expenses (4) (4) 0% (4) 0% (12) (35) -66%
Adjusted EBITDA 83 53 57% 100 -17% 261 149 75%
Adjusted EBITDA margin 19% 13% 6 pps 24% -5 pps 21% 13% 8 pps
Adjusted EBITDA (net of IFRS 16) 83 53 57% 99 -16% 260 149 74%
Adjusted EBITDA margin (net of IFRS 16) 19% 13% 6 pps 24% -5 pps 21% 13% 8 pps
(1)) pps - percentage points
In 9M 2023, revenue increased by 14% y/y as a result of sales volume increase
of poultry meat and processed meat that was partly set off by lower meat price
on export markets.
IAS 41 standard gain in 9M 2023 decreased to US$ 16 million y/y mainly as a
result of a lower chicken meat price and optimization of meat stocks volumes
comparing to 9M 2022.
Gross profit in 9M 2023 increased to US$ 311 million mainly driven by higher
sales volumes of poultry meat on export markets partly set off by lower export
prices.
In 9M 2023, adjusted EBITDA (net of IFRS 16) increased to US$ 260 million,
mainly as a result of higher gross profit and lower War-related expenses.
Vegetable Oil Operations
Vegetable oil
(in tonnes, unless indicated otherwise) Q3 2023 Q3 2022 % change y/y Q2 2023 % change q/q 9M 2023 9M 2022 % change
Sales volume of sunflower oil 126,882 95,436 33% 168,677 -25% 372,760 176,912 111%
Sales volume of soybean oil 11,096 7,716 44% 13,630 -19% 39,126 27,263 44%
In 9M 2023 MHP's sales of sunflower oil increased by 111% compared to 9M 2022
to 372,760 tonnes, mainly driven by an increase in production of sunflower
cake due to both additional crushing capacity and a change in the recipe as
well as partial restoration of logistic routes comparing to 9M 2022.
Sales of soybean oil amounted to 11,096 tonnes in Q3 2023 also increased by
44% y/y, and by 44% to 39,126 tonnes in 9M 2023, compared with 27,263 tonnes
in 9M 2022 due to disruption in logistics in 2022.
Financial result and trends
(in mln. US$, except margin data) Q3 2023 Q3 2022 % change y/y(1)) Q2 2023 % change q/q(1)) 9M 2023 9M 2022 % change(1))
Revenue 143 155 -8% 216 -34% 488 316 54%
- Vegetable oil 137 149 -8% 210 -35% 463 306 51%
- Related products(2)) 6 6 0% 6 0% 25 10 150%
Gross profit 21 33 -36% 28 -25% 70 33 112%
Gross margin 15% 21% -6 pps 13% 2 pps 14% 10% 4 pps
Adjusted EBITDA 23 34 -32% 27 -15% 72 34 112%
Adjusted EBITDA margin 16% 22% -6 pps 13% 3 pps 15% 11% 4 pps
Adjusted EBITDA (net of IFRS 16) 23 34 -32% 26 -12% 71 34 109%
Adjusted EBITDA margin (net of IFRS 16) 16% -6 pps 12% 4 pps 15% 11% 4 pps
22%
(1)) pps - percentage points;
(2)) Related products consist of meal, cake, husk.
The segment's revenue in 9M 2023 increased by 54% to US$ 488 million that
resulted in higher adjusted EBITDA (net of IFRS 16) of US$ 71 million compared
to US$ 34 million in 9M 2022 driven by increase in sales volume of vegetable
oil which was partly offset with lower prices in 9M 2023.
Agriculture operations
In 2023 MHP expects to harvest around 348,300 hectares of land.
As of today, MHP's harvesting campaign is complete on around 303,000 ha of
land: corn harvesting is 82% complete, sunflower, soya, wheat and rapeseed
were 100% complete harvested.
Crops current yields are as follows:
2023 2022
MHP's Ukraine's average( 1 ) MHP's Ukraine's average( 1 )
average( 1 ) average( 1 )
tonnes per hectare tonnes per hectare
Corn 9.8 7.2 7.2 6.6
Wheat 6.6 4.8 5.5 4.1
Sunflower 3.1 2.4 2.5 2.2
Rapeseed 3.7 2.9 3.8 2.9
Soya 3.1 2.6 2.4 2.4
(1) MHP yields are net weight, Ukraine yields are bunker weight.)
The sowing campaign for winter crops has been fully completed, covering
approximately 74,300 hectares (around 53% of land is under winter wheat,
around 47% of land is under winter rapeseed).
Decrease of domestic grain prices and limited export capabilities as a result
of continuous rocket strikes on Ukrainian ports infrastructure and termination
of the Grain deal by Russia had a negative effect on segment performance.
However it should be noted that these events will have limited impact on the
overall Group performance, as almost all grains and oilseeds (except for
rapeseeds and some wheat) are consumed internally.
Financial result and trends
(in mln. US$ unless indicated otherwise) 9M 2023 9M 2022 % change
Revenue 138 109 27%
IAS 41 standard loss (88) (146) 40%
Gross profit (24) 49 -149%
War-related expenses (2) (2) 0%
Adjusted EBITDA - 82 -100%
Adjusted EBITDA (net of IFRS 16) (32) 55 -158%
Agriculture Operations Segment's revenue in 9M 2023 amounted to US$ 138
million compared to US$ 109 million in 9M 2022. The increase was mainly
attributable to the higher volume of sales of corn purchased from farmers in
Ukraine.
The reduction in Adjusted EBITDA (net of IFRS 16) to a negative result of US$
32 million in H1 2023 from a positive result of US$ 55 million in 2022 was
caused by lower revaluation of spring crops and agriculture produce as a
result of the decrease in domestic prices due to limited export capabilities,
as well as lower revaluation of milk cattle due to higher costs of milk
production.
A significant decrease in international grain prices, as well as increased
logistic costs due to the War impact, led to poor results in the Agriculture
Operations Segment. The Company expects Agriculture Operations Segment EBITDA
for 2023 to be significantly lower than in 2022.
European Operating Segment (PP)
Poultry Q3 2023 Q3 2022 % change y/y Q2 2023 % change q/q 9M 2023 9M 2022 % change
Sales volume, third parties tonnes 22,152 21,263 4% 21,956 1% 63,219 58,626 8%
Price per 1 kg net VAT, EUR 3.42 3.34 2% 3.34 2% 3.46 3.19 8%
In 9M 2023, poultry meat sales of the European Operating Segment increased to
63,219 tonnes. This was driven by an increase in HoReCa sales channel. Average
price increased by 2% in Q3 2023 to EUR 3.42 (Q3 2022: EUR 3.34).
Meat processing products(1)) Q3 2023 Q3 2022 % change y/y Q2 2023 % change q/q 9M 2023 9M 2022 % change
Sales volume, third parties tonnes 12,946 11,960 8% 11,289 15% 34,953 32,116 9%
Price per 1 kg net VAT, EUR 3.32 3.11 7% 3.54 -6% 3.32 3.05 9%
(1)) includes sausages and convenience foods
Meat processing product sales were up by 8% y/y to 12,946 tonnes in Q3 2023
(Q3 2022: 11,960 tonnes), at the same time increased by 15% compared with Q2
due to increase in sales of sausages. Average price in Q3 2023 increased by 7%
to EUR 3.32.
Financial result and trends
(in mln. US$, except margin data) Q3 2023 Q3 2022 % change y/y(1)) Q2 2023 % change q/q(1)) 9M 2023 9M 2022 % change(1))
Revenue 144 121 19% 142 1% 411 345 19%
IAS 41 standard gains 2 (1) 300% (5) -140% (2) 3 -167%
Gross profit 41 29 41% 33 24% 106 91 16%
Gross margin 28% 24% 4 pps 23% 5 pps 26% 26% 0 pps
Adjusted EBITDA 29 21 38% 19 53% 68 58 17%
Adjusted EBITDA margin 20% 17% 3 pps 13% 7 pps 17% 17% 0 pps
Adjusted EBITDA (net of IFRS 16) 28 20 40% 19 47% 67 56 20%
Adjusted EBITDA margin 19% 17% 2 pps 13% 6 pps 16% 16% 0 pps
(net of IFRS 16)
(1)) pps - percentage points.
European Operating Segment's gross profit in 9M 2023 increased by 19% to US$
411 million (9M 2022: US$ 345 million), due to the increase in sales volumes
and prices.
Adjusted EBITDA (net of IFRS 16) amounted to US$ 67 million for 9M 2023
compared with US$ 56 million for 9M 2022 in line with gross profit. Adjusted
EBITDA margin (net of IFRS 16) remained stable at 16%.
Current Group cash flow
(in mln. US$) Q3 2023 Q3 2022 9M 2023 9M 2022
Cash from operations 109 126 315 380
Change in working capital 12 (3) 80 (249)
Net Cash from operating activities 121 123 395 131
Cash used in investing activities (53) (52) (155) (125)
Including:
CAPEX(1)) (66) (44) (158) (107)
Cash from financing activities (117) 21 (99) 43
Total change in cash(2)) (49) 92 141 49
(1))Calculated as cash used for Purchases of property, plant and equipment
plus cash used for purchases of other non-current assets
(2))Calculated as Net Cash from operating activities plus Cash used in
investing activities plus Cash used in financing activities
Cash flow from operations before changes in working capital for 9M 2023
declined to US$ 315 million (9M 2022: US$ 380 million), mainly as a result
of interest payments of US$ 124 million in 9M 2023 compared to US$ 57 million
in 9M 2022.
The differences in working capital changes between 9M 2023 and Q3 2023
compared to 9M 2022 and Q3 2022 respectively were mainly attributable to:
· return of stocks of chicken meat and vegetable
oil to normal levels from the unusually high amounts in 2022, caused by
disrupted logistics due to War activities, that has partly recovered afterward
due to the Grain deal and diversification of delivery routes by the Group;
· lower investments in raw materials during 9M 2023
(energy supplies, fertilizers, plant protections materials, animal feed
components) comparing to 9M 2022 due to relative stabilization of situation in
Ukrainian economy and lower risk of disruptions in supply;
· stable amounts of trade accounts receivable
compared to significant growth in sunflower oil and chicken meat receivables
during 9M 2022;
It should be noted that investments in working capital will substantially
increase in Q4 2023, resulting in substantial cash outflow for 2023 due to
future required purchases of sunflower seeds, fertilizers and plant protection
materials.
In 9M 2023 total CAPEX amounted to US$ 158 million, mainly related to
maintenance and modernization projects, new products development of Ukrainian
operations and expansion of Perutnina Ptuj production facilities. The increase
from US$ 107 million in 9M 2022 is mainly due to higher investments in cost
optimization and culinary strategy projects as well as purchases of diesel
generators for mitigation of possible power outages impact.
Debt Structure and Liquidity
(in mln. US$) 30 September 2023 31 December 2022 30 September 2022
Total Debt(1) 2)) 1,547 1,537 1,503
LT Debt(1)) 1,025 1,507 1,480
ST Debt (1)) 604 182 167
Trade credit facilities(2)) (82) (152) (144)
Cash and bank deposits (446) (300) (317)
Net Debt(1)) 1,101 1,237 1,186
LTM Adjusted EBITDA(1)) 438 384 404
Net Debt / LTM Adjusted EBITDA(1)) 2.51 3.22 2.94
(1) ) Net of IFRS 16 adjustments: as if any lease that would have been
treated as an operating lease under IAS 17 as was in effect before the 1
January 2019, is treated as an operating lease for purposes of this
calculation. In accordance with covenants in MHP's bond and loan agreements,
these data exclude the effects of IFRS 16 on accounting for operating leases.
(2)) Indebtedness under trade credit facilities that is required to be
repaid within 12 months of drawdown should be excluded for purposes of this
calculation
As of 30 September 2023, MHP's cash and cash equivalents amounted to US$ 446
million, of which US$ 333 million was held by the Group's subsidiaries outside
Ukraine. Under the repatriation rules instituted by the National Bank of
Ukraine, the equivalent amounts of such cash and cash equivalents would need
to be repatriated to Ukraine within six months of recognition of foreign
currency proceeds from exports from Ukraine, which limits the Group's ability
to utilize such cash and cash equivalents for repayment of indebtedness. At
the same time, on November 10, 2023, the National Bank of Ukraine established
a maximum settlement period of 90 calendar days for repatriating cash
resulting from the export of a specified list of agricultural products.
The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 2.51 as of 30
September 2023, well below the limit of 3.0 defined in the Eurobond agreement.
As of 30 September 2023, the share of long-term debt in the total outstanding
debt decreased to 66% as the first US$ 500 million Eurobond, which is due for
repayment in May 2024, is now classified as short-term.
Notes to Editors:
About MHP
MHP SE is the parent company of a leading international food & agrotech
group with headquarters in Ukraine and also in the Balkans (Perutnina Ptuj
Group).
Ukraine: MHP has the greatest market share and the 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
nine distribution and logistical centers, 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, North Macedonia and Romania and supplies products to 15 countries in
Europe. Perutnina Ptuj is a vertically integrated company across all stages of
chicken meat production - feed, hatching eggs production and hatching,
breeding, slaughtering, sausages and further poultry processing production.
MHP trades on the London Stock Exchange under the ticker symbol MHPC since
2008.
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 three-month and nine-month period
ended 30 September 2023
CONTENTS
STATEMENT OF MEMBERS OF THE BOARD OF
DIRECTORS................................................................. 3
MANAGEMENT
REPORT........................................................................................................................
4
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
THREE-MONTH AND NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2023
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE
INCOME..............................................................................................................................................................
6
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION..................................... 7
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY..................................... 8
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS................................................ 9
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................. 10
1. Corporate
information.....................................................................................................................
10
2. Basis of preparation and accounting
policies...................................................................................
11
3. Segment
information......................................................................................................................
15
4.
Revenue........................................................................................................................................
18
5. Profit for the
period........................................................................................................................
19
6. Property, plant and
equipment........................................................................................................
19
7. Agricultural
produce.......................................................................................................................
19
8.
Inventories.....................................................................................................................................
19
9. Biological
assets............................................................................................................................
19
10. Shareholders'
equity....................................................................................................................
20
11. Bank
borrowings..........................................................................................................................
20
12. Bonds
issued..............................................................................................................................
22
13. Related party balances and
transactions.......................................................................................
24
14. Operating
environment.................................................................................................................
25
15. Contingencies and contractual
commitments.................................................................................
26
16. Fair value of financial
instruments.................................................................................................
27
17. Risk management
policy..............................................................................................................
28
18. Subsequent
events......................................................................................................................
29
19. 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, 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 2023 to
30 September 2023 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.
15 November 2023
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
Andriy
Bulakh
Director
Christakis Taoushanis
Director
Oscar
Chemerinski
MANAGEMENT REPORT
Key financial highlights
During the nine-month period ended 30 September 2023, consolidated revenue
increased by 22% to USD 2,294 million, compared to USD 1,876 million for the
nine-month period ended 30 September 2022. Export sales for the nine-month
period ended 30 September 2023 constituted 60% of total revenue at USD 1,385
million, compared to USD 1,110 million and 59% of total revenue for the
nine-month period ended 30 September 2022. The increase in revenue was mainly
attributable to an increase in the volume of chicken meat and vegetable oil
sold, partly offset by a decline in export prices. The significant increase in
volumes is a result of the low quantity sold in H1 2022, when export volumes
were adversely affected by disruption in logistics caused by the Russian
military invasion of Ukraine, resulting in a full-scale war (the "War").
Volumes had mostly recovered in H2 of 2022.
Gross profit increased by 16% to USD 463 million for the nine-month period
ended
30 September 2023 compared to USD 398 million for the nine-month period ended
30 September 2022. The increase was driven mainly by higher revenue from
poultry meat and vegetable oils due to increased volumes sold. At the same
time, higher production costs and a decrease in grain prices led to the
negative revaluation of biological assets and harvested grains in Agriculture
operations segment, which partly reduced the positive effect of Poultry and
Vegetable oils operations.
Operating profit increased by 40% to USD 247 million for the nine-month period
ended 30 September 2023 compared to USD 176 million for the nine-month period
ended 30 September 2022. In March-September 2022, following the Russian
invasion in February 2022, the Group incurred significant expenses related to
the war (including write-offs of inventories, donations communities in
Ukraine, and impairment of particular property, plant and equipment), which
were significantly lower during the nine-month period ended 30 September 2023.
This factor, together with an improvement in gross profit, resulted in an
increase in operating profit.
Profit for the nine-month period ended 30 September 2023 amounted to USD 122
million, compared to a loss of USD 269 million for the nine-month period ended
30 September 2022. The increase is mainly due to higher operating profit and
fixed exchange rate of the Ukrainian Hryvnia against the US Dollar as
established by the National Bank of Ukraine, which resulted in a foreign
exchange gain of USD 7 million for the nine-month period ended 30 September
2023 compared to a foreign exchange loss of USD 368 million for the nine-month
period ended 30 September 2022.
Management believes that the above measures are frequently used by investors,
analysts, and stakeholders to evaluate the efficiency of the Group's
operations.
Dividends
In view of continuing War-related uncertainties and the resulting need to
preserve liquidity to support the Company's ongoing business operations, the
Directors decided not to declare a final dividend for the 2022 financial year.
No interim dividend has been declared for the nine-month period ended 30
September 2023.
Risks and uncertainties
Russian invasion
On February 24, 2022, Russian forces began a military invasion of Ukraine,
resulting in a full-scale war across the Ukrainian State (the "War").
As a result of the War, MHP has experienced a number of significant
disruptions and operational issues within its business, described in detail in
Note 14 Operating environment. Detailed information on this matter can also be
found on pages 156 to 157 of the 2022 Annual Report, which is available at
mhp.com.cy (https://mhp.com.cy/financial-reports/annual-reports/) .
Management believes that the Group has adequate resources to continue
operational existence for the foreseeable future. However, due to the
currently unpredictable effects of the ongoing War on the key assumptions
underlying management forecasts, Management concludes that a material
uncertainty exists, which may cast significant doubt on the Group's ability to
continue as a going concern.
Risks and uncertainties (continued)
Other risks and uncertainties
There are several potential risks and uncertainties that 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 2022. A detailed explanation of
the risks and how the Group seeks to mitigate these risks can be found on
pages 212 to 215 of the 2022 Annual Report.
15 November 2023
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 three-month and nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
Nine-month period Three-month period
ended 30 September
ended 30 September
Notes 2023 2022 2023 2022
Revenue 3, 4 2,294 1,876 739 727
Net change in fair value of biological assets and agricultural produce 3 (74) (119) 2 (26)
Cost of sales (1,757) (1,359) (572) (543)
Gross profit 5 463 398 169 158
Selling, general and administrative expenses (202) (171) (68) (58)
Other operating income 10 13 4 7
Other operating expenses 14 (24) (53) (10) (7)
Loss on impairment of property, plant and equipment 6 - (11) - -
Operating profit 5 247 176 95 100
Finance income 11 4 5 1
Finance costs 11, 12 (120) (117) (40) (38)
Foreign exchange gain/(loss), net 7 (368) 2 (274)
Profit/(Loss) before tax 145 (305) 62 (211)
Income tax (expenses)/benefit (23) 36 (7) 30
Profit/(Loss) for the period 5 122 (269) 55 (181)
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Decrease in revaluation reserve as a result of impairment of property, plant 6 - (9) - -
and equipment
Deferred tax on decrease in revaluation reserve as a result of impairment of - 2 - -
property, plant and equipment
Deferred tax charged directly to revaluation reserve - (81) - -
Items that may be reclassified to profit or loss:
Cumulative translation difference (2) (357) (14) (244)
Other comprehensive loss for the period (2) (445) (14) (244)
Total comprehensive income/(loss) for the period 120 (714) 41 (425)
Profit/(Loss) attributable to:
Equity holders of the Parent 124 (258) 53 (175)
Non-controlling interests (2) (11) 2 (6)
122 (269) 55 (181)
Total comprehensive income/(loss) attributable to:
Equity holders of the Parent 122 (695) 40 (414)
Non-controlling interests (2) (19) 2 (11)
120 (714) 42 (425)
Earnings/(Loss) per share
Basic and diluted earnings/(loss) per share (USD per share) 1.16 (2.41) 0.50 (1.63)
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 10 to 29 form an integral part of these
interim condensed consolidated financial statements
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as of 30 September 2023
(in millions of US dollars, unless otherwise indicated)
Notes 30 September 2023 31 December 2022
ASSETS
Non-current assets
Property, plant and equipment 6 1,908 1,856
Right-of-use asset 256 223
Intangible assets 76 80
Goodwill 59 60
Non-current biological assets 14 21
Non-current financial assets 10 8
Long-term deposits 2 3
Deferred tax assets 1 2
2,326 2,253
Current assets
Inventories 8 267 414
Biological assets 9 278 177
Agricultural produce 7 297 361
Prepayments 31 30
Other current financial assets 22 22
Taxes recoverable and prepaid 50 69
Trade accounts receivable 212 183
Cash and cash equivalents 446 300
1,603 1,556
TOTAL ASSETS 3,929 3,809
EQUITY AND LIABILITIES
Equity
Share capital 10 285 285
Treasury shares (45) (45)
Additional paid-in capital 174 174
Revaluation reserve 746 792
Retained earnings 1,729 1,559
Translation reserve (1,340) (1,338)
Equity attributable to equity holders of the Parent 1,550 1,428
Non-controlling interests 16 18
Total equity 1,566 1,446
Non-current liabilities
Bank borrowings 11 122 118
Bonds issued 12 891 1,383
Lease liabilities 17 191 164
Deferred income 36 37
Deferred tax liabilities 2 132 124
Other non-current liabilities 5 4
1,377 1,830
Current liabilities
Trade accounts payable 153 123
Other current liabilities 102 96
Contract liabilities 28 31
Bonds issued 12 497 -
Bank borrowings 11 102 176
Interest payable 11,12 35 42
Lease liabilities 17 69 65
986 533
TOTAL LIABILITIES 2,363 2,363
TOTAL EQUITY AND LIABILITIES 3,929 3,809
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 10 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 periods ended 30 September 2023 and 2022
(in millions 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 January 2022 285 (45) 174 812 1,557 (1,019) 1,764 30 1,794
Loss for the period - - - - (258) - (258) (11) (269)
Other comprehensive loss - - - (87) - (350) (437) (8) (445)
Total comprehensive loss for the period - - - (87) (258) (350) (695) (19) (714)
Transfer from revaluation reserve to retained earnings - - - (39) 39 - - - -
Dividends declared by subsidiaries - - - - - - - (2) (2)
Translation differences on revaluation reserve - - - (179) 179 - - - -
Balance as of 30 September 2022 285 (45) 174 506 1,518 (1,368) 1,070 8 1,078
Balance as of 1 January 2023 285 (45) 174 792 1,559 (1,338) 1,428 18 1,446
Profit for the period - - - - 124 - 124 (2) 122
Other comprehensive loss - - - - - (2) (2) - (2)
Total comprehensive profit/(loss) for the period - - - - 124 (2) 122 (2) 120
Transfer from revaluation reserve to retained earnings - - - (46) 46 - - - -
Balance as of 30 September 2023 285 (45) 174 746 1,729 (1,340) 1,550 16 1,566
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 10 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 2023
(in millions of US dollars, unless otherwise
indicated)
Notes Nine-month period ended 30 September 2023 Nine-month period ended 30 September 2022
Operating activities
Profit/(Loss) before tax 145 (305)
Non-cash adjustments to reconcile profit or loss before tax to net cash flows
Depreciation and amortization expense 3 120 118
Loss on impairment of property, plant and equipment 6, 14 - 11
Net change in fair value of biological assets and agricultural produce 3 74 119
Change in allowance for expected credit losses and direct write-offs 5 18
Loss on disposal of property, plant and equipment and other non-current assets - 1
Finance income (11) (4)
Finance costs 11, 12 120 117
Released deferred income (1) (1)
Foreign exchange (gain)/loss, net (7) 368
Operating cash flows before movements in working capital 445 442
Working capital adjustments
Change in inventories 147 (5)
Change in biological assets (105) (150)
Change in agricultural produce 21 38
Change in prepayments made (1) (16)
Change in other current financial assets (4) (3)
Change in taxes recoverable and prepaid 18 (25)
Change in trade accounts receivable (30) (75)
Change in contract liabilities (3) 3
Change in other current liabilities 11 (16)
Change in trade accounts payable 26 -
Cash generated by operations 525 193
Interest received 9 1
Interest paid (124) (56)
Income taxes paid (15) (7)
Net cash flows from operating activities 395 131
Investing activities
Purchases of property, plant and equipment 6 (156) (106)
Proceeds from disposals of property, plant and equipment 4 3
Purchases of other non-current assets (2) (1)
Purchases of intangible assets (4) (3)
Purchases of non-current biological assets (2) (3)
Prepayments and capitalized initial direct costs under lease contracts (4) (11)
Divestments/(Investments) in financial assets 9 (5)
Net cash flows used in investing activities (155) (125)
Financing activities
Proceeds from bank borrowings 115 162
Repayment of bank borrowings (187) (109)
Repayment of lease liabilities (25) (9)
Consent payment - (1)
Dividends paid by subsidiaries to non-controlling shareholders (2) -
Net cash flows used in/(from) financing activities (99) 43
Net increase in cash and cash equivalents 141 49
Net foreign exchange difference on cash and cash equivalents 5 (7)
Cash and cash equivalents at 1 January 300 275
Cash and cash equivalents at 30 September 446 317
On behalf of the Board:
Chief Executive
Officer
Yuriy Kosyuk
Chief Financial
Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 10 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 2023
(in millions 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, owning 59.7% of the
total outstanding share capital of MHP SE.
The principal business activities of the Group are poultry and related
operations, vegetable oil and agriculture operations. The Group's poultry and
related operations integrate all functions related to chicken production,
including hatching, fodder manufacturing, raising chickens to marketable age
("grow-out"), processing and sale of frozen and chilled chicken meat, as well
as processed meat products. Agriculture operations comprise the production and
sale of grains and cattle breeding for milk production. Vegetable oil
operations comprise the production and sale of vegetable oil, cake and husk.
As of 30 September 2023, the Group employed 33,045 people (31 December 2022:
31,701 people).
The primary subsidiaries, the principal activities of the companies forming
the Group, and the Parent's effective ownership interest as of 30 September
2023 and 31 December 2022 were as follows:
Name Country of registration Year established/ Principal activities 30 September 2023 31 December 2022
acquired
MHP Lux S.A. Luxembourg 2018 Finance Company 100.0% 100.0%
MHP Europe Limited Cyprus 2022 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 99.9% 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 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%
MHP Saudi Arabia Trading Saudi Arabia 2018 Trading in poultry meat 75.0% 75.0%
MHP Food UK Limited United Kingdom 2021 Trading in poultry meat 100.0% 100.0%
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 (represented by Perutnina Ptuj d.d. together with
its subsidiaries).
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions 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 2023 have been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting" as adopted
by the European Union (EU). The interim condensed consolidated financial
statements do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with the Group's
annual consolidated financial statements as of 31 December 2022, prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union and the requirements of the Cyprus Companies
Law, Cap.113.
The interim condensed consolidated financial statements are presented in the
US dollars (USD) and all values are rounded to the nearest million, except
when otherwise indicated.
Going concern
In 2023, the Group has continued its operations in the environment severely
affected by the Russian invasion of Ukraine since 24 February 2022. In its
analysis of the observable impact of the War and other factors on its business
during the nine-month period ended 30 September 2023 and up to the date of
authorization to issue these interim condensed consolidated financial
statements, the Group considered, among others, the following key events and
conditions:
· The Group's poultry production facilities have not suffered any
physical damage;
· certain inventories and biological assets were damaged and
written off as a result of the military actions of Russian invaders, as
presented in Note 14. Operating environment;
· the Group continued to provide a substantial range of poultry
products as humanitarian aid to the people of Ukraine (Note 14. Operating
environment);
· both export and domestic sales already returned to pre-war levels
in H2 2022 despite a limited capacity of existing delivery routes and active
hostilities in the southern and eastern regions of Ukraine. As a result, as of
30 September 2023 and 31 December 2022, the Group operated at its normal
capacity utilization after the lower production experienced levels during H1
2022;
· from November 2022 to February 2023, Russia's attacks on
Ukrainian power generation and distribution infrastructure led to severe power
outages in Ukraine. These caused temporary disruption of oilseed processing,
poultry and silo operations during this period;
· since the beginning of the Russian invasion of Ukraine, 2,322
employees of the Group joined the Ukrainian military forces and territorial
defense;
· termination of The Black Sea Grain Initiative ("Grain deal") by
Russia on 18 July 2023 and the intensification of attacks on the Ukrainian
ports infrastructure, grain depots, and other storage facilities has led to
the temporary suspension of shipping routes for the export of grains and
vegetable oil from Ukraine. However, from the second half of August 2023 the
temporary humanitarian Black Sea corridor started to operate with no regular
schedule, and with vessels moving whenever the security conditions allow. On
26 October 2023 a total of 51 ships used the corridor for entry, and 33 ships
exported more than 1.3 million tonnes of cargo. Moreover, since the Group
continuously develops and advances its logistic routes, this escalation did
not have a direct impact on the overall Group performance: the majority of the
crops (sunflower and soybean seeds, corn) are consumed internally, while the
Group exports poultry products and oils using its own-established delivery
routes;
· the Group's European operations at Perutnina Ptuj have not been
directly affected by events in Ukraine as they are largely independent and
self-sufficient from an operational and supply chain perspective and continue
operating at full capacity.
In 2023, in response to the above challenges, the Group has:
· optimized utilization of production facilities to meet domestic
and export demand;
· established alternative export routes, including by road and
rail, to address the logistical issues caused by the war;
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Going concern (continued)
· equipped its key assets with diesel generators and continued to
operate two biogas facilities to produce electricity, industrial steam and
heating to mitigate the impact of power outages on its business;
· in view of continuing War-related uncertainties and the resulting
need to preserve liquidity to support the Company's ongoing business
operations, the Directors decided not to declare a final dividend for the 2022
financial year. No interim dividend has been declared for the nine-month
period ended 30 September 2023;
· taking into account its debt maturity profile, the Group shapes
its debt management process in such a way as to ensure timely servicing of its
bonds and other borrowings as they fall due. In particular, after
considering various scenarios focused on servicing the bonds maturing in May
2024, the Group launched the tender offer for purchase for cash of any and all
of the USD 500 million aggregate principal amount (Notes 12 and 18).
Management has prepared adjusted financial forecasts, including cash flow
projections, for the twelve-month period starting on the date of approval of
these interim condensed consolidated financial statements. The adjusted
forecasts consider potential likely and downside scenarios for the operations
resulting from the War and other factors described above. The Group manages
its operations by continuously monitoring the Group`s obligations under the
existing debt agreements and taking required measures to service its debts on
time and in full.
These forecasts indicate that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Directors have therefore
concluded that it is appropriate to apply the going concern basis of
accounting in preparing these interim condensed consolidated financial
statements. However, due to the currently unpredictable effects of the ongoing
War, in combination with the influence of other described factors on the main
assumptions underlying management forecasts, the Directors have concluded that
a material uncertainty exists, which may cast significant doubt on the Group's
ability to continue as a going concern, in which case the Group may be unable
to realize its assets and discharge its liabilities in the normal course of
business.
Adoption of new and revised International Financial Reporting Standards
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 consolidated financial statements for the
year ended 31 December 2022, except for the adoption of new standards
effective as of 1 January 2023 and changes in presentation of segment
information. The Group has not adopted any standard, interpretation, or
amendment that has been issued but is not yet effective.
The following standards and amendments were adopted by the Group on 1 January
2023:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting policies;
· Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates;
· IFRS 17 Insurance Contracts;
· Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets
and Liabilities arising from a Single Transaction;
· Amendments to IAS 12 Income taxes: International Tax Reform -
Pillar Two Model Rules.
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
2. Basis of preparation and accounting policies (continued)
Standards and interpretations in issue, but not effective
At the date of authorization of these interim condensed consolidated financial
statements, the following Standards and Interpretations, as well as amendments
to the Standards, were in issue but not yet effective:
Standards and Interpretations Effective for annual period beginning on or after
Lease Liability in a Sale and Leaseback - Amendments to IFRS 16 1 January 2024
Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7 1 January 2024
International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12 1 January 2024
Sale or Contribution of Assets between an Investor and its Associate or Joint Postponed indefinitely
Venture - Amendments to IFRS 10 and IAS 28
Classification of Liabilities as Current or Non-current and Non-current 1 January 2024
Liabilities with Covenants - Amendments to IAS 1
The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability - 1 January 2025
Amendments to IAS 21
These amendments have yet to be endorsed by the European Union. The Group is
currently assessing the impact of these amendments to IAS 21 on the
consolidated financial statements. For other amendments, management
anticipates that their adoption will not have a material effect on the
consolidated financial statements of the Group in future periods.
Functional and presentation currencies
The functional currency of Ukrainian companies of the Group is the Ukrainian
Hryvnia ("UAH"); the functional currency of the Cyprus and Luxembourg
companies of the Group is the US Dollar ("USD"); the functional currency of
other European companies of the Group is the Euro ("EUR"); the functional
currency of the United Arab Emirates companies is the Dirham ("AED"); the
functional currency of the UK companies is the British Pound ("GBP"); the
functional currency of the Saudi Arabia company is the Saudi Riyal ("SAR").
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 prevailing rates 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 interim condensed 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 are translated at exchange rates at the dates of the transactions;
· exchange differences arising on translation for consolidation are
recognized in other comprehensive income and presented as a separate equity
component. 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 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 2023
(in millions 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 2023 Average for nine months ended 30 September 2023 Average for three months ended 30 September 2023 Closing rate as of 31 December 2022 Average for nine months ended 30 September 2022 Average for three months ended 30 September 2022
UAH/USD 36.5686 36.5686 36.5686 36.5686 30.9529 34.9787
UAH/EUR 38.5543 39.6290 39.8364 38.9510 32.8978 35.1843
USD/EUR 1.0543 1.0837 1.0894 1.0651 1.0628 1.0059
Change in presentation of segment information
In order to accurately reflect the diverse nature of Group's business
operations and improve the granularity of reporting, from this report MHP has
implemented changes to its presentation of business segmentation information.
These changes include:
· introduction of a new - Vegetable oils operations segment, which
represents production and sales of vegetable oil and related products. In
2022, these activities were included into Poultry and related operations
segment as by-products of mixed fodder production for poultry;
· inclusion of meat processing and other meat (previously reported
within Meat processing and other agricultural operations) in the Poultry and
related operations segment given that the meat processing and other meat
operations represent less than 10% of the Group`s revenues and have similar
characteristics to poultry operations;
· combining of grain-growing operations (presented as separate
segment in 2022) and milk cattle farming (previously presented within Meat
processing and other agricultural operations segment) into a revised
reportable segment - Agriculture operations.
The corresponding segment information for the nine-month period ended 30
September 2022 have been restated accordingly to ensure comparability.
Seasonality of operations
Poultry and related operations, European operating segment, and Vegetable oils
operations segment are not significantly exposed to seasonal fluctuations.
Agriculture operations segment, due to seasonality and implications of IAS 41,
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,
Agriculture operations segment has seasonal requirements for working capital
increase from November to May due to the sowing campaign.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
3. Segment information
The Group's business is managed worldwide, but operates manufacturing
facilities and sales offices primarily in Ukraine and Europe.
Reportable segments are presented consistent with the internal reporting to
the Group's chief operating decision maker ("CODM").
Segment information is analyzed based on 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 poultry meat
• sales of processed meat and culinary products
• sales of other poultry related products
Vegetable oils operations segment: • sales of vegetable oil and related products
Agriculture operations segment: • sales of grains and oilseeds
• other agricultural operations (milk, feed grains and other)
European operating segment: • sales of poultry meat and processed 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 Basis of preparation and accounting
policies. 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 resource allocation and assessment of
segment performance.
European operating segment primarily includes sales of poultry meat and
processed meat products produced in the facilities of Perutnina Ptuj. However,
the CODM manages this as a single segment because each research, development,
manufacture, distribution, and selling of chicken meat and meat processing
products requires single marketing strategies, a centralized budgeting
process, and centralized management of production operations.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
3. 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 2023:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 1,257 488 138 411 2,294 - 2,294
Sales between business segments 5 129 161 - 295 (295) -
Total revenue 1,262 617 299 411 2,589 (295) 2,294
Segment results 199 69 (36) 53 285 - 285
Unallocated corporate expenses (38)
Other expenses, net (1)) (102)
Profit before tax from continuing operations 145
Other information:
Depreciation and amortization expense (2)) 63 3 36 16 118 - 118
Net change in fair value of biological assets and agricultural produce 16 - (88) (2) (74) - (74)
(1)) Includes finance income, finance costs, foreign exchange gain (net);
(2)) Depreciation and amortization for the nine-month period ended 30
September 2023 does not include unallocated depreciation and amortization in
the amount of USD 2.2 million.
The following table presents revenue and profit information regarding the
Group's operating segments for the nine-month period ended 30 September 2022:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 1,106 316 109 345 1,876 - 1,876
Sales between business segments 4 84 - 354 (354) -
266
Total revenue 1,110 400 375 345 2,230 (354) 1,876
Segment results 91 33 39 43 206 - 206
Unallocated corporate expenses (19)
Loss on impairment of property, plant and equipment (11) - - (11) - (11)
Other expenses, net (1)) (481)
Loss before tax from continuing operations (305)
Other information:
Depreciation and amortization expense (2)) 2 44 15 117 - 117
56
Net change in fair value of biological assets and agricultural produce 24 - (146) 3 (119) - (119)
(1)) Includes finance income, finance costs, foreign exchange loss (net);
(2)) Depreciation and amortization for the nine-month period ended 30
September 2022 does not include unallocated depreciation and amortization in
the amount of USD 1.1 million.
(3)) The comparatives for the nine-month period ended 30 September 2022 were
restated (Note 2)
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
3. 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 2023:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 425 143 27 144 739 - 739
Sales between business segments 2 49 61 - 112 (112) -
Total revenue 427 192 88 144 851 (112) 739
Segment results 65 19 4 25 113 - 113
Unallocated corporate expenses (18)
Other expenses, net (1)) (33)
Profit before tax from continuing operations 62
Other information:
Depreciation and amortization expense (2)) 20 3 11 4 38 - 38
Net change in fair value of biological assets and agricultural produce 2 - (2) 2 2 - 2
(1)) Includes finance income, finance costs, foreign exchange gain (net);
(2)) Depreciation and amortization for the three-month period ended 30
September 2023 does not include unallocated depreciation and amortization in
the amount of USD 0.7 million.
The following table presents revenue and profit information regarding the
Group's operating segments for the three-month period ended 30 September 2022:
Poultry Vegetable oils operations Agriculture European operating segment Total reportable segments Eliminations Consolidated
and related operations operations
External sales 411 155 40 121 727 - 727
Sales between business segments 1 23 74 - 98 (98) -
Total revenue 412 178 114 121 825 (98) 727
Segment results 36 33 17 16 102 - 102
Unallocated corporate expenses (2)
Loss on impairment of property, plant and equipment - - - - - - -
Other expenses, net (1)) (311)
Profit before tax from continuing operations (211)
Other information:
Depreciation and amortization expense (2)) 17 - 14 5 - 36
36
Net change in fair value of biological assets and agricultural produce 9 - (34) (1) (26) - (26)
( 1)) Includes finance income, finance costs, foreign exchange gain (net);
(2)) Depreciation and amortization for the three-month period ended 30
September 2022 does not include unallocated depreciation and amortization in
the amount of USD 0.3 million.
(3)) The comparatives for the three-month period ended 30 September 2022 were
restated (Note 2)
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
3. Segment information (continued)
Non-current assets based on the geographic location of the manufacturing
facilities were as follows as of
30 September 2023 and 31 December 2022:
2023 2022
Ukraine 1,917 1,922
Europe 394 315
The Middle East and North Africa (MENA) 2 2
2,313 2,239
(1)) Non-current assets excluding deferred tax assets and non-current
financial assets.
4. Revenue
Revenue from the contracts with customers for the nine-month and three-month
periods ended 30 September 2023 and 2022 was as follows:
Nine-month period Three-month period
ended 30 September
ended 30 September
2023 2022(1)) 2023 2022(1))
Poultry and related operations segment
Chicken meat 1,078 969 359 362
Processed meat 79 68 30 23
Other poultry related sales 100 69 36 26
1,257 1,106 425 411
Vegetable oil operations segment
Vegetable oil 463 306 137 149
Oil related products 25 10 6 6
488 316 143 155
Agricultural operations segment
Grain 112 86 18 33
Other agricultural sales 26 23 9 7
138 109 27 40
European operating segment
Chicken meat 245 199 83 71
Processed meat 123 104 47 37
Other agricultural sales 43 42 14 13
411 345 144 121
2,294 1,876 739 727
(1) ) The comparatives for the periods ended 30 September 2022
were restated (Note 2)
The geographic structure of revenue for the nine-month and three-month periods
ended 30 September 2023 and 2022 was as follows:
Nine-month period Three-month period
ended 30 September
ended 30 September
2023 2022 2023 2022
Export 1,385 1,110 411 470
Domestic 909 766 328 257
2,294 1,876 739 727
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
5. Profit for the period
The Group's gross profit for the nine-month period ended 30 September 2023
increased compared to the nine-month period ended 30 September 2022 to USD 463
million (30 September 2022: USD 398 million). The increase was driven mainly
by higher revenue from poultry meat and vegetable oils due to an increase in
the volumes sold. At the same time, higher production costs and a decrease in
grain prices have led to the negative revaluation of biological assets and
harvested grains in Agriculture operations segment, which partly reduced the
positive effect of Poultry and Vegetable oil operations.
Operating profit increased by 40% to USD 247 million for the nine-month
period ended 30 September 2023 compared to USD 176 million for the nine-month
period ended 30 September 2022. In March-September 2022, following the Russian
invasion in February 2022, the Group incurred significant expenses related to
the war (including write-offs of inventories, donations to communities in
Ukraine, and impairment of particular property, plant and equipment), which
were significantly lower during the nine-month period ended 30 September 2023.
This factor together, with an improvement in gross profit resulted in an
increase in operating profit.
Profit for the nine-month period ended 30 September 2023 amounted to USD 122
million, compared to a loss of USD 269 million for the nine-month period ended
30 September 2022. The increase is mainly due to higher operating profit and
fixed exchange rate of the Ukrainian Hryvnia against the US Dollar as
established by the National Bank of Ukraine, which resulted in a foreign
exchange gain of USD 7 million for the nine-month period ended 30 September
2023 compared to a foreign exchange loss of USD 368 million for the nine-month
period ended 30 September 2022 (mainly on the Group's borrowings in foreign
currencies).
6. Property, plant and equipment
During the nine-month period ended 30 September 2023, the Group's additions to
property, plant and equipment amounted to USD 162 million (nine-month period
ended 30 September 2022: USD 102 million) related to maintenance and
modernization projects, new products development of Ukrainian operations and
expansion of Perutnina Ptuj production facilities. An increase in additions is
higher mainly due to increased investments in cost optimization and culinary
strategy projects as well as purchases of diesel generators for mitigation of
possible power outages impact. There were no significant disposals of
property, plant and equipment during the nine-month periods ended 30 September
2023 and 30 September 2022.
During the nine-month period ended 30 September 2022, the Group identified
indicators of impairment of property, plant and equipment of its subsidiary
"Ukrainian Bacon", which was located in the Donetsk region. As a result, as of
30 September 2022, the Group has recognized an impairment loss of USD 20.6
million in respect of property, plant and equipment, of which USD 11.1 million
was recorded as Loss on impairment of property, plant and equipment within
profit or loss and USD 9.5 million as Decrease in revaluation reserve within
other comprehensive income.
The remaining part of the movement mainly relates to depreciation charge over
the period and translation difference into the presentation currency.
7. Agricultural produce
A decrease in agricultural produce balances for the nine-month period ended 30
September 2023 was mainly a result of internal consumption of grains and
oilseeds as well as a decrease in stocks of chicken meat due to optimization
of working capital, partly set off by new harvest recognized.
8. Inventories
A decrease in inventories for the nine-month period ended 30 September 2023
was mainly due to seasonal reclassification of investments in fields to
biological assets as well as a decrease of vegetable oil and sunflower seeds
balances due to sales and internal consumption, respectively.
9. Biological assets
The increase in current biological assets as compared to 31 December 2022 is
primarily related to crops in fields balance growth, represented mainly by
spring crops seeded that were not completely harvested as at 30 September
2023. The increase is partially offset by the negative IAS 41 revaluation
adjustment due to lower sales prices.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
10. Shareholders' equity
As of 30 September 2023 and 31 December 2022 the authorized, issued and fully
paid share capital of MHP SE comprised the following number of shares:
30 September 2023 31 December 2022
Number of shares issued and fully paid 110,770,000 110,770,000
Number of shares outstanding 107,038,208 107,038,208
The authorized share capital as of 30 September 2023 and 31 December 2022 was
EUR 222 million, represented by 110,770,000 shares with a 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.
11. Bank borrowings
The following table summarizes bank borrowings and credit lines outstanding as
of 30 September 2023 and 31 December 2022:
30 September 2023 31 December 2022
Currency WAIR (1)) USD WAIR (1)) USD
Non-current
EUR EURIBOR(2)) + 1,06% 122 EURIBOR(2)) + 1.35% 118
122 118
Current
UAH 20.00%(4)) 2 20.00%(4)) 2
USD 7.48% 43 6.06% 57
USD - - SOFR(3)) + 2.20% 11
EUR 6.56% 37 4.32% 57
EUR - - EURIBOR(2)) + 2,3% 26
Current portion of EUR EURIBOR2()) + 1,06 % 20 EURIBOR(2)) + 1.35% 24
long-term bank borrowings
102 176
Total bank borrowings 224 294
(2) ) WAIR represents the weighted average interest rate on
outstanding borrowings
(3) ) According to the terms of certain agreements, if market
EURIBOR becomes negative, it shall be deemed to be zero for calculation of
interest expense
(4) ) The Secured Overnight Financing Rate (SOFR) is a broad
measure of the cost of borrowing cash overnight collateralized by Treasury
securities.
(5) ) Deduction interest amount equal to 3m UIRD will be
applied as interest compensation from Government, where Ukrainian Index of
Retail Deposit Rates (UIRD) - indicative rate calculated at 15:00 Kyiv time of
each Banking Day in the Thomson Reuters system based on nominal rates on time
deposits of individuals in hryvnia for a period of 3 months with interest paid
upon the expiration of the deposit agreement, operating in 20 largest
Ukrainian banks in the size of the deposit portfolio of individuals. As of 30
September 2023 3m UIRD rate is equal 14.25% p.a. (31 December 2022: 11.18%
p.a.)
The Group's borrowings are drawn from various banks, such 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.
As of 30 September 2023 and 31 December 2022, the Group's bank term loans and
credit lines bear either floating or fixed interest rates.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
11. Bank borrowings (continued)
Bank borrowings and credit lines outstanding as of 30 September 2023 and 31
December 2022 were repayable as follows:
30 September 2023 31 December 2022
Within one year 102 176
In the second year 24 27
In the third to fifth year inclusive 98 84
After five years - 7
224 294
As of 30 September 2023, the Group had undrawn facilities of USD 34 million
(31 December 2022: USD 37 million). These undrawn facilities expire during the
period until November 2026.
The Group, as well as particular subsidiaries of the Group, have to comply
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, in case of excess of Net Debt to EBITDA ratio (the
Group's leverage ratio), there are negative covenants 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.
As of 30 September 2023, the Group has complied with all covenants. As at 30
September 2023, the Group's leverage ratio decreased to 2.52 to 1,
compared with 2.58 and 3.22 to 1 as at 31 March 2023 and 31 December 2022
respectively. As a result, restrictions are no longer applicable to the Group
from 18 May 2023, the date of publication of interim condensed consolidated
financial statements for the period from 1 January 2023 to 31 March 2023.
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.
As of 30 September 2023, the Group had borrowings of USD 129 million secured
by property, plant and equipment with a collateral amount of USD 101 million
(31 December 2022: USD 109 million and USD 101 million, respectively).
As of 30 September 2023, the Group had borrowings of USD 10 million that were
secured by agricultural produce with a carrying amount of USD 12 million (31
December 2022: borrowings of USD 31 million were secured by agricultural
produce with a carrying amount of USD 38 million).
As of 30 September 2023, a deposit with a carrying amount of USD 15 million
(31 December 2022: USD 23 million) was restricted as collateral to issued
letters of credit.
As of 30 September 2023 and 31 December 2022, interest payable on bank
borrowings was USD 1 million.
Loan agreement with international financial institutions
With the purpose of refinancing part of its Eurobond indebtedness, on 20
October 2023 the Group signed agreements with three international and
development financial institutions - DFC, IFC and EBRD - to provide facilities
of up to USD 480 million in aggregate and received first tranches totaling USD
107 million to partially finance the repurchase on 10 November 2023, under a
Tender Offer, of Notes with a principal amount of USD 151 million for USD 128
million (for details refer to Note 20 Subsequent events).
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued
Bonds issued and outstanding as of 30 September 2023 and 31 December 2022 were
as follows:
Carrying amount Nominal amount
30 September 2023 31 December 2022 30 September 2023 31 December 2022
Non-current
6.25% Senior Notes due in 2029 348 348 350 350
6.95% Senior Notes due in 2026 543 541 550 550
7.75% Senior Notes due in 2024 - 494 - 500
891 1,383 900 1,400
Current
7.75% Senior Notes due in 2024 497 - 500 -
497 - 500 -
Unamortized debt issuance cost - - (12) (17)
Total bonds issued 1,388 1,383 1,388 1,383
As of 30 September 2023 and 31 December 2022, the amount of interest payable
on bonds issued was USD 35 million and USD 41 million, 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 million 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 general corporate purposes.
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 in March and
September. 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.
6.95% Senior Notes
On 3 April 2018, MHP Lux S.A. issued USD 550 million 6.95% Senior Notes due in
2026 at par value. Out of the total issue amount, USD 416 million were
designated for redemption and exchange of the existing 8.25% Senior Notes due
in 2020.
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.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued (continued)
6.95% Senior Notes (continued)
Interest on the Senior Notes is payable semi-annually in arrears in April and
October. 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 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 million 7.75% Senior Notes due in 2024
at par value. Out of the total issue amount, USD 245 million were designated
for redemption and exchange of existing 8.25% Senior Notes due in 2020.
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 in May and
November. 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.
Covenants
Certain restrictions under the indebtedness agreements (e.g. incurrence of
additional indebtedness, restricted payments as defined above, dividends
payment) are dependent on the leverage ratio of the Group calculated as Net
Debt to EBITDA. 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, or incur additional debt except that
defined as a Permitted Debt. According to the indebtedness agreements, 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). As of 30
September 2023, the leverage ratio of the Group is 2.52 to 1 (31 March 2023
and 31 December 2022: 2.58 and 3.22 to 1, respectively), lower than the
defined limit 3.0 to 1. The Group believes that since, as of the interim
reporting dates, it improved the leverage ratio and met the covenants imposed,
the aforementioned restrictions are no longer applicable to the Group from 18
May 2023, the date of publication of interim condensed consolidated financial
statements for the three months ended 31 March 2023.
Consent solicitation in 2022
On 30 March 2022, the Group received consent from Holders to postpone the
semi-annual interest payments on each of the 2024 Notes, the 2026 Notes, and
the 2029 Notes scheduled for Spring 2022 for a period of up to 270 days (the
"Support Period"). As a result, the Group postponed bonds` interest payments
for a total amount of USD 49 million, and interest on postponed payments
continued to accrue during the Support Period. As of 31 December 2022, two
deferred semi-annual interest amounts of the 2026 Notes and the 2029 Notes in
a cumulative amount of USD 32 million were paid by the Group on time. The last
deferred coupon payment due in February 2023 in the amount of USD 21 million
was paid on time.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
12. Bonds issued (continued)
Tender offer for bonds repurchase
On 25 September 2023 the MHP SE launched an invitation to the holders (the
"Noteholders") of its USD 500 million 7.75% Guaranteed Notes due May 10, 2024
(the "Notes") to tender for purchase for cash any and all of the USD 500
million aggregate principal amount of Notes outstanding. According to the
conditions, the early tender offer consideration due to expire on 6 October
2023 amounted to USD 850 per USD 1,000 principal amount of Notes, while the
tender offer consideration due to expire on 26 October 2023 amounted to USD
750 per USD 1,000 principal amount of Notes. Subsequently, the tender offer
was extended till 8 November 2023.
13. Related party balances and transactions
For the purposes of these interim condensed consolidated 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 that 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 under common control
The Group, in the ordinary course of business, enters into transactions with
related parties that are companies under common control of the Principal
Shareholder of the Group (Note 1) 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 2023 and 30 September 2022 were as follows:
in thousand USD Nine-month period ended 30 September 2023 Nine-month period ended 30 September 2022
Loans and finance aid provided to related parties 46 319
Interest charged on loans and finance aid provided 245 -
Sales to related parties 346 16
Purchases from related parties 415 412
Key management personnel of the Group:
Loans provided 277 527
Loans repaid 279 830
The balances owed to and due from related parties were as follows as of 30
September 2023 and 31 December 2022:
in thousand USD 30 September 2023 31 December 2022
Loans and finance aid receivable 3,881 3,601
Less: expected credit losses (2,180) (2,117)
1,701 1,484
Loans to key management personnel 3,654 3,656
Less: expected credit losses (442) (276)
3,212 3,380
Trade accounts receivable 151 106
Payables due to related parties 18 21
Loans and finance aid receivable
For loans and finance aid receivable, credit risk increased to the point where
it is considered credit-impaired. The expected credit loss for such loans
amounted to USD 1,965 thousand and USD 1,882 thousand as of 30 September
2023 and 31 December 2022, respectively.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
13. Related party balances and transactions (continued)
Compensation of key management personnel
Total compensation of the Group's key management personnel included primarily
in selling, general and administrative expenses in the Consolidated Statements
of Profit and Loss and Other Comprehensive Income, amounted to USD 15.7
million and USD 13.3 million for the nine-month periods ended 30 September
2023 and 2022, respectively. Compensation of key management personnel consists
of contractual salary and performance bonuses paid.
14. Operating environment
On 24 February 2022, Russian forces commenced a military invasion of Ukraine,
resulting in a full-scale war across the Ukrainian State. The ongoing military
attack has led and continues to lead, to significant casualties, dislocation
of the population, damage to infrastructure, disruption to economic activity
in Ukraine, and temporary occupation of some territories. Sea ports and
airports remain closed, and some have been damaged, and many roads and bridges
have been damaged or destroyed, further crippling transportation and
logistics.
In 2023, Ukrainian entities continue their business activity in the
challenging economic environment, facing disruption of supply chains, higher
business costs, and physical destruction of production facilities and
infrastructure (in the energy sector, in particular).
In September 2023, consumer inflation decelerated to 7.1% y/y, according to
the inflation report of the National Bank of Ukraine (hereafter "NBU"). The
easing of inflationary pressure was primarily driven by the large supply of
agricultural produce from the new harvest, in particular fruits and
vegetables, grains, and oilseeds, the recovery of the energy system from the
consequences of Russian missile attacks, and the decrease in global energy
prices. Core inflation also slowed considerably in September 2023 to 8.4% y/y.
According to the NBU's recent forecasts, inflation will be 5.8% by the end of
2023 and will grow up to 9.8% in 2024 and then will decelerate to 6% in 2025.
The NBU forecasts real GDP growth of 4.9% in 2023. In 2024, the economy is
expected to grow by 3.6%, mainly because of persistently high security risks,
with further economic growth of real GDP by 6% in 2025.
The NBU set its key policy rate at 16% effective 27 October 2023 and kept the
interest rates on all of its transactions with the banks unchanged, including
keeping the rate at 16% for overnight certificates of deposit (CDs), 16% for
three-month CDs, and 22% for refinancing loans.
During the nine-month period ended 30 September 2023 and up to the date of
authorization of these interim condensed consolidated financial statements,
the exchange rate remained fixed at UAH 36.57 to the US Dollar. In October
2023, the NBU moved to a regime of managed flexibility of the exchange rate,
whereby the official exchange rate is determined by the exchange rate used for
transactions in the interbank foreign exchange market instead of being set by
the NBU under Resolution 18, as had been the case since 24 February 2022. At
the same time, the NBU will continue to control the situation in the interbank
FX market in an attempt to better manage the foreign currency structural
deficit.
On November 10, 2023, the National Bank of Ukraine decreased the maximum
settlement period from 180 to 90 calendar days for repatriating cash from the
export of specific grain products, including wheat, corn, soy, sunflower,
rapeseed, and vegetable oil (soy, sunflower, and rapeseed).
On 15 September 2023, the European Commission decided not to renew the
restrictive measures on Ukrainian exports of wheat, maize, rapeseed, and
sunflower seed to five EU Member States (Bulgaria, Hungary, Poland, Romania,
and Slovakia). According to the reached agreements, Ukraine introduced an
export licensing system for verifying the export of these four categories of
agricultural products in the EU market.
The "Grain deal" or Black Sea Grain Initiative, which was signed by Ukraine,
the UN, Turkey, and Russia on 22 July 2022, was suspended on 18 July 2023
after Russia had refused to extend the deal. From the second half of August
2023 the temporary humanitarian Black Sea corridor started to operate with no
regular schedule, and with vessels moving whenever security conditions allow.
On 26 October 2023 a total of 51 ships used the corridor for entry, and 33
ships exported more than 1.3 million tonnes of cargo. The situation remains
highly fluid and the outlook is subject to extraordinary uncertainty.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
14. Operating environment (continued)
The Government continues to implement measures to stabilize markets and the
economy. International organizations (such as the IMF, EBRD, EU, and World
Bank), along with individual countries and charities, are providing Ukraine
with financing, donations, and material support. These disbursements remain
the main source for covering the high budget deficit, which stands to widen to
almost 29% of GDP in 2023, from 18% in 2022.
Since 24 February 2022, the Group has suffered losses as a result of the
continuous war. The Group considers the following expenses incurred during the
nine-month periods ended 30 September 2023 and 2022 to be directly related to
the war:
in thousand USD 2023 2022
Loss on impairment of property, plant and equipment - 11,114
Community support donations(1)) 4,781 17,484
Write-off of inventories and biological assets(1)) 196 9,833
Salary to mobilized employees(2)) 14,044 9,094
Expected credit losses of trade accounts receivable and non-current financial - 5,535
assets(1))
Other war-related expenses(1)) 3,559 3,033
Total amount recognized in profit or loss 22,580 56,093
Decrease in revaluation reserve - 9,489
22,580 65,582
(1) ) These expenses are presented within other operating
expenses in the consolidated statement of profit or loss and other
comprehensive income
(2) ) These expenses are presented within cost of sales and
selling, general and administrative expenses in the consolidated statement of
profit or loss and other comprehensive income
The Group, working with volunteers, has been providing humanitarian aid
(mainly through food supply) to the people of Ukraine since the beginning of
the war, despite logistical challenges. Since the invasion began, the Group
has provided over 12,000 tonnes of poultry products pro bono.
15. Contingencies and contractual commitments
Taxation and legal matters
The Group carries its operations in various jurisdictions, with a significant
number of operations in Ukraine, which are subject to tax legislation.
Ukrainian legislation regarding taxation and other regulatory matters,
including currency exchange control and customs regulations, is regularly
changing and revisited. Non-compliance with tax laws and regulations can lead
to the imposition of severe penalties and fines.
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 regulations. The Group has submitted the
controlled transaction report for the years ended 31 December 2020 and
31 December 2021 within the required deadlines.
As of 30 September 2023, the Group's management assessed its possible exposure
to tax risks as a total amount of USD 4 million related to corporate income
tax (31 December 2022: USD 4 million). No provision was recognized relating to
such possible tax exposure.
As of 30 September 2023, companies of the Group were engaged in ongoing
litigation with tax authorities for the amount of USD 15 million (31 December
2022: USD 26 million), including USD 6 million (31 December 2022: USD 17
million) of litigations with the tax authorities related to disallowance of
certain amounts of VAT refunds and deductible expenses claimed by the Group.
Out of the total amount above, USD 10 million as of 30 September 2023 (31
December 2022: USD 20 million) relates to cases where court hearings have
taken place and where the court in either the first or second instance has
already ruled in favor of the Group. Manage-ment believes that, based on the
history of court resolutions of similar lawsuits by the Group, it is unlikely
that a material settlement will arise out of such lawsuits and, therefore, no
specific provision is required in the Group's financial statements as of the
reporting date.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
15. Contingencies and contractual commitments (continued)
Contractual commitments on purchase of property, plant and equipment
During the nine-month period ended 30 September 2023, companies of the Group
entered into a number of contracts with foreign suppliers for the purchase of
property, plant and equipment. These agreements are mainly related to
maintenance and modernization projects, new product development in Ukraine,
and expansion of Perutnina Ptuj production facilities. As of 30 September
2023, purchase commitments amounted to USD 54 million (31 December 2022: USD
33 million).
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 defined as the amount at
which the instrument could be exchanged in a current transaction between
knowledgeable willing parties in an arm's length transaction, other than in
forced or liquidation sale. 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, other
current assets, and trade accounts payable due to the short-term nature of the
financial instruments. The fair value of non-current financial assets is
measured by discounting the estimated future cash outflows, with reference to
market interest rates, and it approximates the carrying value of non-current
financial assets.
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 2023 31 December 2022 30 September 2023 31 December 2022
Financial liabilities
Bank borrowings (Note 11) 225 295 230 296
Senior Notes due in 2024, 2026, 2029 (Note 12) 1 423 1,424 1 027 693
The carrying amount of Bank borrowings and Senior Notes issued includes
interest payable at 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 of 4,7%
(31 December 2022: 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.
In determining the fair value of financial instruments, the impact of
potential climate-related matters, including legislation, climate change, and
company climate objectives, which may affect the fair value measurement of
financial assets and liabilities, has been considered. At present, the impact
of climate-related matters is not material to the Group's financial
statements.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
17. Risk management policy
During the nine-month period ended 30 September 2023, there were no material
changes to the objectives, policies, and process for credit risk, capital
risk, liquidity risk, currency risk, interest rate risk, livestock diseases
risk, and commodity price and procurement risk management.
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 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 and other current liabilities, which are
considered by the Group from a risk management perspective. 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 2023 and 31
December 2022. 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 2023
Bank borrowings 225 246 111 135 -
Bonds issued 1,423 1,696 610 714 372
Lease liabilities 261 498 68 227 203
Trade accounts payable 153 153 153 - -
Other current financial liabilities 102 102 102 - -
Total 2,164 2,695 1,044 1,076 575
31 December 2022
Bank borrowings 295 310 183 120 7
Bonds issued 1,424 1,766 119 1,252 394
Lease liabilities 229 439 65 193 182
Trade accounts payable 123 123 123 - -
Other current liabilities 96 96 96 - -
Total 2,167 2,734 586 1,565 583
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
various 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 2023 and 31 December 2022 were as follows:
30 September 2023 31 December 2022
USD EUR USD EUR
Total assets 240 135 178 117
Total liabilities(1)) 1,474 73 1,498 136
Net (liabilities)/assets (1,234) 62 (1,320) (19)
(1) ) Currency denominated liabilities consist mostly of bonds
issued and bank borrowings.
Notes to the INTERIM CONDENSED Consolidated financial statements
for the nine-month period ended 30 September 2023
(in millions of US dollars, unless otherwise indicated)
17. Risk management policy (continued)
Currency risk (continued)
The table below details the Group's sensitivity to the
strengthening/(weakening) of the UAH against the USD and EUR. This sensitivity
range represents management's assessment of the 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 changes in foreign currency rates.
Change in foreign currency exchange rates Effect on profit
before tax
2023
Increase in USD exchange rate 20% (247)
Increase in EUR exchange rate 20% 12
Decrease in USD exchange rate 2% 25
Decrease in EUR exchange rate 2% (1)
2022
Increase in USD exchange rate 20% (264)
Increase in EUR exchange rate 20% (4)
Decrease in USD exchange rate 2% 26
Decrease in EUR exchange rate 2% -
During the nine-month period ended 30 September 2023, the Ukrainian Hryvnia
appreciated against the EUR by 1.0% while the official exchange rate of the
Ukrainian Hryvnia against the USD remained unchanged (nine-month period ended
30 September 2022: depreciated against the EUR and USD by 13.0% and 25.4%
respectively). As a result, during the nine-month period ended 30 September
2023, the Group recognized a net foreign exchange gain in the amount of USD 7
million (nine-month period ended 30 September 2022: net foreign exchange loss
in the amount of USD 367 million) in the interim condensed consolidated
statement of profit or loss and other comprehensive income.
18. Subsequent events
Tender offer results
On 10 November 2023 the Group completed the Tender Offer Consideration
purchasing for USD 128 million in cash 2024 Notes outstanding with a principal
amount of USD 151 million, using disbursed first tranches from the IFI
Facilities with a total amount of USD 107 million. For details on IFI
Facilities and Bonds Tender Offer refer to Notes 11 and 12 respectively.
19. 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 15 November 2023.
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