Mhp Reg S Regulatory News (MHPC)

PRESS RELEASE

26 May 2015, Kyiv, Ukraine

MHP S.A.

Unaudited Financial Results for the First Quarter

Ended 31 March 2015

MHP S.A. (LSE:MHPC), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and cultivation of grain, today announces its unaudited results for the first quarter ended 31 March 2015.

Q1 2015 OPERATIONAL HIGHLIGHTS

· Since January 2015 the Vinnytsia poultry farm works at full capacity

· Production volumes reached 140,370 tonnes (Q1 2014: 137,270 tonnes), despite reconstruction of Peremoga Nova farm

· The average chicken price increased by 63% year-on-year to UAH 25.35 per kg (excluding VAT) predominantly due to the Ukrainian Hryvnia depreciation

Q1 2015 FINANCIAL HIGHLIGHTS

· Revenue of US$242 million, decrease of 22% y-o-y

· Export revenue amounted to US$102 million, 42% of total revenue (Q1 2014: US$119 million, 39% of total revenue)

· Operating profit of US$108 million, up 35%; overall operating margin was 45%

· EBITDA margin increased to 51% from 34%

· EBITDA increased from US$106 million to US$123 million, up 16%

· Net loss for the period totaled US$292 million, of which US$394 million relates to non-cash foreign exchange loss

FINANCIAL OVERVIEW

* pps - percentage points

Average official FX rate for Q1: UAH/US$21.1157 in 2015 and UAH/US$8.8627 in 2014

Commenting on the results, Yuriy Kosyuk, Chief Executive Officer of MHP, said:

"In the first quarter of 2015 the Company continued to grow and develop.

We have already started new constructions both in breeding and broiler divisions. We continue to build our soya crushing facility. All these capacities will deepen MHP's vertically integrated business model as well as bring us more self-sufficiency in hatching eggs and protein and new poultry meat volumes in the nearest future.

Despite challenging macroeconomic and political situation in Ukraine, nevertheless due to the vertically integrated business model, I am confident, it will be a stable year for the Company."

MHP's management today will host a conference call for investors and analysts followed by a Q&A session. The dial-in details are:

Date: Tuesday, 26 May 2015

Time: 09.00 New York / 14.00 London / 16.00 Kyiv / 16.00 Moscow

Title: Financial Results for Q1 2015

International/UK Dial in: +44 (0) 1452 555 566

USA free call: +1 866 966 9439

Russia free call 8108 002 097 2044

Conference ID 50737823

In order to follow the presentation together with the management, please register using the following link: http://engage.vevent.com/rt/mhp~20150526

For Investor Relations enquiries, please contact:

Anastasia Sobotiuk (Kyiv) +38 044 207 99 58 a.sobotyuk@mhp.com.ua

For Analysts enquiries, please contact:

Iryna Bublyk (Kyiv) +38 044 207 00 04 i.bublik@mhp.com.ua

Segment Performance

Poultry and related operations

Sales of chicken meat to third parties (domestic and export) in Q1 2015 remained relatively flat compared to Q1 2014 (Q1 2014: 113,640 tonnes). Because of strong domestic demand, MHP's sales volumes in Ukraine in Q1 2015 increased by 7% year-on-year and constituted 87,590 tonnes. During Q1 2015 export sales decreased by 14% year-on-year to 26,050 tonnes, mainly due to the macroeconomic instability in CIS region and instability in some countries in the Middle East market. During the reporting period the Company continued to increase its export sales to EU. In Q1 2015 MHP exported poultry meat to around 50 countries including countries of Middle East, Africa, CIS, Asia and the EU.

During Q1 2015, our average chicken meat price was UAH 25.35, 63% higher than in Q1 2014. The two main contributors to the increase were considerable share of export sales denominated in foreign currencies as well as substantial increase in price on domestic market year-on-year as a result of devaluation of Ukrainian Hryvnia.

During Q1 2015 sunflower oil sales volumes remained flat with 7% decrease in average sunflower oil prices in line with global trends.

* pps - percentage points

Revenue of Poultry and related operations segment has decreased by 26% and amounted to US$195 million, mainly as a result of UAH depreciation against US Dollar.

Gross profit decreased by 21% and amounted to US$77 million for Q1 2015 compared to US$98 million for Q1 2014 partly offset by a decrease in US Dollar equivalent of operating costs predominantly fixed in UAH resulting in 2% decrease in EBITDA for Q1 2015 compared to Q1 2014.

Grain growing operations

Segment revenue for Q1 2015 amounted to US$28 million compared to US$11 million in Q1 2014; an increase is mainly attributable to the sale of grain remaining in stock as of 31 December 2014 in Voronezh region, the Russian Federation.

IAS 41 standard losses for Q1 2015 amounted to US$3 million as a result of a decrease of grain in stock due to internal consumption as a result of the harvest cycle and seasonality in this division.

Increase in segment EBITDA for Q1 2015 compared to Q1 2014 is attributable to higher sales volumes as well as due to a increase in sales price in UAH terms due to devaluation of UAH against US Dollar during Q1 2015.

Over 70,000 hectares of land in Ukraine are under the winter crops (winter wheat, rapeseeds and barley), which are around 24% of the land cultivated in the grain growing segment of the Company. Currently, all crops are in good condition. As a result, MHP expects good harvest of winter crops in 2015. MHP's 2015 spring sowing campaign is complete now with no significant change in crops.

Other agricultural operations

Sausage and cooked meat sales volumes decreased from 6,860 tonnes in Q1 2014 to 5,280 tonnes in Q1 2015 as a result of a decrease in the demand for value-added products in Ukraine due to overall economic recession.

An increase of 64% sales price mainly relates to depreciation of UAH against US Dollar.

* pps - percentage points

The segment's EBITDA decreased to US$2 million in Q1 2015 compared to Q1 2014 of US$5 million a 60% decrease mainly attributable to lower returns on value-added products and a decrease in government grants.

Current Group financial position and cash flow

Cash flow from operations before changes in working capital remained flat and amounted to US$100 million in Q1 2015 (Q1 2014: US$96 million).

Use of funds in working capital is mainly attributable to higher investment in sunflower seed stock used in production that is reflected in both change in inventory as well as change in taxes recoverable and prepaid.

In Q1 2015 total CAPEX amounted to US$48 million, mainly related to construction of Peremoga Nova breeding farm and soya oil crushing.

Debt Structure and Liquidity

As of March 31, 2015, the Company's total debt increased by 8% up to US$1,314 millionmainly as a result of US$90 million out of a total US$200 million loan with IFC to refinance bonds maturing in April 2015.

The share of long-term debt in a total debt outstanding is about 73%. The weighted average cost of debt remained around 8%.

At the end of Q1 2015, MHP's cash and cash equivalents amounted to US$214 million. Net debt remained stable at US$1,100 million.

The Net Debt/ LTM EBITDA ratio was 1.92 as of March 31, 2015, well within the Eurobond covenant limit of 3.0.

As a hedge for currency risks, revenue from the export of grain, sunflower oil, sunflower husks, and chicken meat are denominated in US Dollars, fully covering debt service expenses. Export revenue constituted US$102 million or 42% of total revenue in Q1 2015 (US$119 million or 39% of total sales in Q1 2014).

Subsequent Events

On 28 April 2015, the Board of Directors of MHP S.A. approved payment of the interim dividend. On 14 May 2015 MHP S.A. paid a dividend to shareholders in amount of US$0.47429 per share, equivalent to approximately US$50 million.

On 29 April 2015, the Group has repaid it's 10.25% Senior Notes due 29 April 2015 in amount of US$234 million using syndicated loan facility of IFC (International Financial Corporation), a member of World Bank Group, which provided MHP with US$200 million (US$175 million from IFC and US$25 million from ING), and the Company's cash from operations.

Outlook

Despite unfavorable conditions in Ukraine's economy the Company continues to implement its growth strategy.

In 2015 MHP plans to increase its production volume of chicken meat up to 600,000 tonnes. Poultry meat will be sold both domestically and for export with around 20% increase of chicken export sales year-on-year.

Our winter and spring crops are in good conditions, that provides the Company with a positive outlook for 2015 harvest.

We are confident that due to our vertically integrated business model, we will deliver good financial results, supported by significant share of hard currency revenues from our chicken, oil and grain export sales.

Notes to Editors:

About MHP

MHP is the leading producer of poultry products in Ukraine with the greatest market share and highest brand recognition for its products. MHP owns and operates each of the key stages of chicken production processes, from feed grains and fodder production to egg hatching and grow out to processing, marketing, distribution and sales (including through MHP's franchise outlets). Vertical integration reduces MHP's dependence on suppliers and its exposure to increases in raw material prices. In addition to cost efficiency, vertical integration also allows MHP to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale. To support its sales, MHP maintains a distribution network consisting of 15 distribution and logistical centres, within major Ukrainian cities. MHP uses its trucks for the distribution of its products, which Management believes reduces overall transportation costs and delivery times.

MHP also has a leading grain cultivation business growing corn to support the vertical integration of its chicken production and increasingly other grains, such as wheat and rape, for sale to third parties. MHP leases agricultural land located primarily in the highly fertile black soil regions of Ukraine.

Since May 15, 2008, MHP has traded on the London Stock Exchange under the ticker symbol MHPC.

Forward-Looking Statements

This press release might contain forward-looking statements that refer to future events or forecast financial indicators for MHP S.A. Such statements do not guarantee that these are actions to be taken by MHP S.A. 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 S.A. does not intend to change these statements to reflect actual results.

MHP S.A. AND ITS SUBSIDIARIES

Interim condensed consolidated Financial Statements

For the three-month period ended 31 March 2015

CONTENT

MANAGEMENT STATEMENT................................................................................................................ (a)

MANAGEMENT REPORT...................................................................................................................... (b)

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2015

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME............................. 4

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION...................................... 5

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY...................................... 6

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT......................................................... 8

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................... 10

1. Corporate information...................................................................................................................... 10

2. Basis of preparation and accounting policies..................................................................................... 11

3. Segment information....................................................................................................................... 13

4. Loss for the period.......................................................................................................................... 14

5. Income tax benefit/(expense)........................................................................................................... 14

6. Property, plant and equipment.......................................................................................................... 14

7. Inventories and agricultural produce.................................................................................................. 14

8. Biological assets............................................................................................................................ 15

9. Bank borrowings............................................................................................................................. 15

10. Bonds issued............................................................................................................................... 16

11. Related party balances and transactions........................................................................................ 17

12. Contingencies and contractual commitments.................................................................................. 18

13. Risk management policy............................................................................................................... 19

14. Subsequent events....................................................................................................................... 20

15. Authorization of the interim condensed consolidated financial statements.......................................... 20

MANAGEMENT STATEMENT

To the best of our knowledge, the unaudited interim condensed consolidated financial statements prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

25 May 2015

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

MANAGEMENT REPORT

Key financial highlights

During the three-month period ended 31 March 2015 consolidated revenue decreased by 22% and amounted to USD 242,206 thousand, compared to USD 308,597 thousand for the three-month period ended 31 March 2014. Export sales for the three-month period ended 31 March 2015 constituted 42% of total revenue and amounted to USD 102,190 thousand, compared to USD 119,317 thousand, 39% of total revenue for the three-month period ended 31 March 2014. Overall decrease in revenue is mainly attributable to the UAH depreciation against USD.

Gross profit has increased moderately by 5% and amounted to USD 107,539 thousand for the three-month period ended 31 March 2015 compared to USD 103,489 thousand for the three-month period ended 31 March 2014.

Despite moderate increase in gross profit, operating profit increased by 35% to USD 108,321 thousand for the three-month period ended 31 March 2015 comparing to USD 80,292 thousand for the three-month period ended 31 March 2014. Operating profit margin increased from 26% for the three-month period ended 31 March 2014 to 45% for the three-month period ended 31 March 2015. Since operating costs are majorly fixed in UAH and remained relatively flat, its USD equivalent has decreased due to UAH devaluation against USD, resulting in significantly lower operating expenses.

Net loss from operations for three-month period ended 31 March 2015 amounted to USD 291,692 thousand compared to net loss of USD 315,674 thousand for the three-month period ended 31 March 2014. Loss is mainly related to unrealized foreign exchange loss on bank borrowings and bonds issued in foreign currency as result of UAH depreciation against USD and EUR during the period ended 31 March 2015.

Subsequent events

On 28 April 2015, the Board of Directors of MHP S.A. approved payment of the interim dividend. On 14 May 2015 MHP paid dividend to shareholders in amount of USD 0.47429 per share, equivalent to approximately US$50 million.

On 29 April 2015, the Group has repaid it's 10.25% Senior Notes due 29 April 2015 in amount of USD 234 million using syndicated loan facility of IFC (International Financial Corporation), a member of World Bank Group, which provided MHP with USD 200 million (USD 175 million from IFC and USD 25 million from ING), and the Company's cash from operations.

25 May 2015

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board: 

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as of 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the three-month period ended 31 March 2014

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT (continued)

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 10 to 20 form an integral part of these interim condensed consolidated financial statements

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

1. Corporate information

MHP S.A. (the "Parent" or "MHP S.A."), a limited liability company (société anonyme) registered under the laws of Luxembourg, was formed on 30 May 2006. MHP S.A. to serve as the ultimate holding company of PJSC "Myronivsky Hliboproduct" ("MHP") and its subsidiaries. Hereinafter, MHP S.A. and its subsidiaries are referred to as the "MHP S.A. Group" or the "Group". The registered address of MHP S.A. is 5, rue Guillaume Kroll, L-1882 Luxembourg.

The controlling shareholder of MHP S.A. 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 S.A.

The principal business activities of the Group are poultry and related operations, grain growing, as well as other agricultural operations (meat processing, cultivation and selling fruits and producing beef and meat products ready for consumption). The Group's poultry and related operations integrate all functions related to the production of chicken, including hatching, fodder manufacturing, raising chickens to marketable age ("grow-out"), processing and marketing of branded chilled products and include the production and sale of chicken products, sunflower oil, mixed fodder and convenience food products. Grain growing comprises the production and sale of grains. Other agricultural operations comprise the production and sale of cooked meat, sausages, beef, milk, goose meat, foie gras, fruits and feed grains. During the three-month period ended 31 March 2015 the Group employed about 30,730 people (31 December 2014: 30,854 people).

The Group has been undertaking a large-scale investment program to expand its poultry and related operations. In May 2010 the Group commenced construction of the greenfield Vinnytsia poultry complex and in the second half of 2012 started commissioning of production facilities which were already completed. During 2014 and first quarter 2015 the Group, as scheduled, has launched in operations main production facilities of Vinnytsia poultry complex which is currently operating at full production capacity.

As of 31 December 2014, the Group has commenced construction of new production facilities at Peremoga Nova chicken farm. The construction is scheduled for 2015 and is aimed to cover the shortage of internal production of hatching eggs due to suspension of production at Shahtarska Nova breeding farm. The first hatchery egg expected to be produced in June 2015.

The primary subsidiaries, the principal activities of the companies forming the Group and the Parent's effective ownership interest as of 31 March 2015 and 31 December 2014 were as follows:

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

1. Corporate information (continued)

The Group's operational facilities are located in different regions of Ukraine, including Kyiv, Cherkasy, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Vinnitsa, Kherson, Sumy, Khmelnitsk regions, Autonomous Republic of Crimea and the Russian Federation.

2. Basis of preparation and accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the three-month period ended 31 March 2015 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group management, necessary to fairly state the results of interim periods. Interim results are not necessarily indicative of the results to be expected for the full year.

The 31 December 2014 statement of financial position was derived from the audited consolidated financial statements.

Adoption of new and revised International Financial Reporting Standards

The adoption of the new or revised Standards did not have any effect on the financial position or performance of the Group and did not result in any changes to the Group's accounting policies and the amounts reported in the three-month period ended 31 March 2015 or prior periods.

Functional and presentation currencies

The functional currency of Ukrainian, Cyprus and Luxemburg companies of the Group is the Ukrainian Hryvnia ("UAH"); the functional currency of the Group companies located in the Russian Federation is the Russian Rouble ("RUB"). 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 on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are translated at the rates prevailing on the reporting date. All realized and unrealized gains and losses arising on exchange differences are recognised in the consolidated statement of 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 statement of financial position presented are translated at the closing rate as of the date of that statement of financial position;

· Income and expenses for each statement of comprehensive income are translated at exchange rates at the dates of the transactions;

· All resulting exchange differences are recognized as a separate component of equity.

For practical reasons, the Group translates items of income and expenses for each period presented in the financial statements using the quarterly average rates of exchange, if such translations reasonably approximate the results translated at exchange rates prevailing at the dates of the transactions.

The following exchange rates were used:

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

2. Basis of preparation and accounting policies (continued)

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2014.

Change in accounting policy

Group moved to revaluation model for buildings and structures, production machinery, vehicles and agricultural machinery during the year ended 31 December 2014. For all groups of property, plant and equipment carried at revaluation model revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date. If the asset's carrying amount is increased as a result of a revaluation, the increase is credited directly to equity as a revaluation reserve. However, such increase is recognized in the statement of comprehensive income to the extent that it reverses a revaluation decrease of the same asset previously recognized in the statement of comprehensive income. If the asset's carrying amount is decreased as a result of a revaluation, the decrease is recognized in the statement of comprehensive income. However, such decrease is debited directly to the revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

Depreciation on revalued assets is charged to the statement of comprehensive income. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings. No transfer is made from the revaluation reserve to retained earnings except when an asset is derecognized.

Seasonality of operations

Poultry and related operations as well as other agricultural operations are not significantly exposed to seasonal fluctuations.

Grain growing 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, grain growing segment has seasonal requirements for working capital increase during November - to May, due to the sowing campaign.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

3. Segment information

The following table presents revenue and profit information regarding the Group's operating segments for the three-month period ended 31 March 2015:

1) Depreciation and amortization for the three-month period ended 31 March 2015 does not include unallocated depreciation and amortization in the amount of USD 207 thousand.

The following table presents revenue and profit information regarding the Group's operating segments for the three-month period ended 31 March 2014:

1) Depreciation and amortization for the three-month period ended 31 March 2014 does not include unallocated depreciation and amortization in the amount of USD 728 thousand.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

4. Loss for the period

The Group's net loss for the three-month period ended 31 March 2015 constituted USD 291,692 thousand mostly attributable to unrealized foreign exchange loss of USD 394,474 mainly attributable to bonds and borrowings as result of UAH depreciation against USD and EUR.

The Group's operating profit for the three-month period ended 31 March 2015 increased compared to the three-month period ended 31 March 2014 and amounted to USD 108,321 thousand. Since operating costs are majorly fixed in UAH and remained relatively flat, its USD equivalent has decreased due to UAH devaluation against USD, resulting in significantly lower operating expenses and higher operating profit.

Net change in fair value, reflects IAS 41 adjustment relating to revaluation of crops in fields, poultry stock and other biological assets balances to the fair value as of 31 March 2015 as well as revaluation of agricultural produce to the fair value at the date of harvest.

5. Income tax benefit/(expense)

The Group has recognised income tax benefit in the amount of USD 22,436 thousand mainly as a result of recognition of deferred tax assets arising from tax losses carried forward to the extent of deferred tax liabilities recognised on revaluation of property plant and equipment (Note 6). The effect of recognition of deferred tax liabilities on revaluation of property, plant and equipment was recognised as other comprehensive loss.

6. Property, plant and equipment

During the period ended 31 March 2015 the Group engaged independent appraiser to determine fair value of its vehicles, production and agricultural machinery as of 31 March 2015. The valuation, which conformed to the International Valuation Standards, was determined using market comparable approach adjusted based on age and condition of the machinery or for items of specialized nature replacement cost method. The excess of fair value over carrying value in the amount of USD 105,413 thousand was recognised in revaluation reserve.

During the three-month period ended 31 March 2015, the Group's additions to property, plant and equipment amounted to USD 46,363 thousand(three-month period ended 31 March 2014: USD 25,194 thousand).

There were no significant disposals of property, plant and equipment during the three-month period ended 31 March 2015.

7. Inventories and agricultural produce

Decrease in inventory and agricultural produce balances as of 31 March 2015 compared to 31 December 2014 is mainly attributable to translation difference due to depreciation of UAH against USD.

For the three-month period ended 31 March 2015 change in inventory is mainly attributable to the costs incurred by grain growing entities in respect of forthcoming spring sowing campaign partly offset by consumption of purchased grain stock.

Change in Agricultural produce is mainly attributable to higher prices of meat stock partly offset by consumption of grain stock.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2015

(in thousands of US dollars, unless otherwise indicated)

8. Biological assets

Decrease in biological assets amounting to USD 23,813 thousand compared to 31 December 2014 is mainly attributable to the translation difference as a result of depreciation of UAH against USD, partly offset by IAS 41 gains (Note 4).

9. Bank borrowings

The following table summarizes bank borrowings and credit lines outstanding as of 31 March 2015 and 31 December 2014: