Mhp Reg S Regulatory News (MHPC)

18 May 2023, Limassol, Cyprus

MHP SE

Unaudited Financial Results for the First Quarter ended 31 March 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 first quarter ended 31 March 2023. Hereinafter, MHP SE and its subsidiaries are referred to as "MHP", "The Company" or "The Group".

WAR IN UKRAINE

The War in Ukraine continues, with irregular but increasingly frequent attacks across the country and widespread expectations of further escalation in the coming weeks.

Nonetheless, as of today, all MHP's production facilities continue to operate at close to full capacity.

The Company continues to export to over 70 countries, providing grain, vegetable oils and poultry meat worldwide. However, since the beginning of Q2 2023 the operational environment has become more challenging as a result of bans imposed by a number of EU neighbour countries affecting exports and transit of agricultural produce. If these bans remain in place, MHP will continue to use more complex and higher-cost logistics routes.

Extension of the Black Sea Grain Deal, which is due to expire on 18 May, is still under discussion. Even if new terms are agreed, the operational environment may remain disruptive due to longer than expected inspections undertaken in the Bosphorus ports, which prevent ships coming to Ukrainian ports and cause significant delays in sales.

In addition to the significant general uncertainties inherent in the War, any substantive escalation of attacks could increase risks to MHP's Ukrainian operations, potentially leading to disruption of production. An attack in recent days in the Odessa region caused the destruction of a rented cold storage facility where MHP stored poultry products for export. The loss of stock is expected to be modest.

OPERATIONAL ENVIRONMENT

As of today, the Company has been able to continue operations in Ukraine and its own facilities have not suffered any 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.

MHP is adapting to the new operational environment - doing business during a time of active War, while recognizing that risks have increased, and their nature has changed substantially.

MHP is reporting good operational and financial results for Q1 2023 thanks to strong demand, positive price movements and minimal disruption to production as a result of the enormous amount of work undertaken by the MHP team since the beginning of the War. It should be noted that operational and financial results in Q1 2022 were more seriously affected by disruption in the early stages of the War. Results for the next periods of 2023 may again be adversely affected by War-related challenges that are not under MHP's control.

OPERATIONAL HIGHLIGHTS

· MHP poultry production volume in Ukraine was broadly stable y/y at 177,642 tonnes (Q1 2022: 175,644 tonnes). Poultry production volume of the European Operating Segment (PP) increased by 11% to 31,780 tonnes (Q1 2022: 28,550 tonnes).

· The average chicken meat price was stable at US$ 1.86 per kg (Q1 2022: US$ 1.84 per kg) (excluding VAT). The average price of chicken meat at PP increased by 21% to EUR 3.43 per kg (Q1 2022: EUR 2.83 per kg).

· Chicken meat exports increased by 26% to 112,921 tonnes (Q1 2022: 89,340 tonnes).

FINANCIAL OVERVIEW

· 1) pps - percentage points

· Average official FX rate for Q1: UAH/US$ 36.5686 in 2023 and UAH/US$ 28.5545 in 2022.

FINANCIAL HIGHLIGHTS

· Revenue of US$ 746 million increased by 35% y/y (Q1 2022: US$ 553 million) and was down 3% q/q (Q4 2022: US$ 766 million).

· War-related expenses decreased by 77% to US$ 6 million (Q1 2022: US$ 26 million).

· Export revenue increased by 69% to US$ 522 million, 70% of total revenue (Q1 2022: US$ 308 million, 56% of total revenue), and increased by 6% q/q (Q4 2022: US$ 491 million).

· Operating profit increased to US$ 84 million (Q1 2022: US$ 9 million); operating margin was 11%.

· Adjusted EBITDA (net of IFRS 16) increased y/y to US$ 117 million from US$ 43 million and was 7% higher q/q (Q4 2022: US$ 109 million); adjusted EBITDA margin (net of IFRS 16) increased to 16% from 8% y/y and from 14% in Q4 2022.

· Net income was US$ 49 million, compared to a net loss of US$ 108 million for Q1 2022, including US$ 4 million of non-cash foreign exchange translation gain in Q1 2023 compared to a foreign exchange loss of US$ 95 million in Q1 2022.

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: 14.00 London / 16.00 Kyiv / 09.00 New York

Title: Financial results for Q1 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

For Investor Relations enquiries, please contact:

Anastasia Sobotiuk (Kyiv) +38 050 339 29 99

+357 99 76 71 26 a.sobotyuk@mhp.com.ua

Segment Performance

Poultry and Related Operations Segment

1) Total poultry sales include domestic sales, export sales and sales of culinary products

2) pps - percentage points

Chicken meat

Aggregated volume of chicken meat sold to third parties increased by 19% to 188,509 tonnes (Q1 2022: 159,024 tonnes) mainly due to an increase in export volumes. Domestic sales increased by 8% mainly due to higher demand in Ukraine compared to Q1 2022 when the full effects of the War affected results in March. In Q1 2023, export sales increased by 26% y/y to 112,921 tonnes, mainly as a result of substantially decreased sales in March 2022 due to the effects of the War.

Poultry export prices increased by 5% y/y mainly driven by product mix optimization (higher volume of fillet sold) as well as the combined effect of substantial international price increases across all markets (particularly fillet prices in the EU and MENA and small bird prices in the MENA region) from the middle of last year. From the beginning of September 2022, due to changes in the economic environment in the EU and UK and increased competition in the MENA region, poultry prices across all export markets (MENA, EU and CIS) started to decline sharply, which resulted in an 5% q/q decrease in price in Q1 2023.

In Q1 2023 poultry prices in the domestic market (in US$ terms) decreased by 10% y/y, predominantly driven by the significant depreciation of the UAH. In UAH terms, in Q1 2023, poultry prices increased by 15% and 8% y/y and q/q respectively.

Vegetable oil

In Q1 2023, sunflower oil sales volume was 77,201 tonnes, which is 134% higher y/y 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 Q1 2022. In Q1 2023 MHP's sales of soybean oil also increased by 39% compared to Q1 2022 to 14,400 tonnes.

Financial result and trends

1) pps - percentage points

Revenue increased by 37% in Q1 2023 compared to Q1 2022, as a result of an increase in prices and volumes of chicken meat on export markets in particular as well as an increase in sales volumes of vegetable oil. A 3% decrease of revenue q/q was mainly attributable to a decrease in sales volumes of vegetable oil while vegetable oil prices on the market both in Q4 2022 and Q1 2023 remained stable.

IAS 41 standard gain in Q1 2023 amounted to US$ 3 million mainly as a result of a slight increase in chicken meat price in Ukraine.

Gross profit of the segment for Q1 2023 increased by 80% compared to Q1 2022 to US$ 110 million. The increase was mainly driven by higher sales volumes of chicken meat as well as by a significant increase from sales of vegetable oil in Q1 2023.

In Q1 2023, adjusted EBITDA increased to US$ 97 million compared to US$ 31 million in Q1 2022, as a result of higher gross profit and lower War-related expenses (US$ 4 million compared with US$ 21 million).

Grain Growing Segment

Grain growing segment's revenue for Q1 2023 amounted to US$ 69 million compared to US$ 35 million in Q1 2022. Such a significant increase was mainly attributable to higher exports of crops in Q1 2023, as a result of a partial restoration of logistic routes compared to the operational environment at the beginning of the full scale Russian invasion in Q1 2022.

IAS 41 standard loss for Q1 2023 amounted to US$ 40 million compared to US$ 65 million in Q1 2022. The loss represents a net change in effect of revaluation of agricultural produce (sunflower, corn, wheat and soya) as a result of a decrease of grain in stock due to internal consumption in line with the harvest cycle and seasonality. The lower decrease in Q1 2023 compared to Q1 2022 mainly relates to higher revaluation of grain in 2021 comparing to 2022, which resulted in a higher amount of revaluation derecognized on the balance in Q1 2022 due to sales and consumption.

Meat Processing and Other Agricultural Segment

Sales volume of meat processing products decreased by 58% y/y to 2,525 tonnes in Q1 2023 driven by War-related challenges that resulted in the temporary suspension of production facilities at "Ukrainian Bacon" in the Donetsk region and the subsequent partial redeployment of its operations to Central Ukraine. The average processed meat price increased by 52% year-over-year to UAH 133.30 per kg in Q1 2023 driven mainly by an increase in raw material prices (spices, packaging and other components) as well as by a positive change in product mix.

Sales volumes of convenience food in Q1 2023 increased by 13% to 4,503 tonnes. The average price in Q1 2023 increased by 49% to UAH 79.60 per kg (excluding VAT) mainly driven by raw material price increases as well as a focus on increased sales of higher-margin products.

Financial result and trends

1) pps - percentage points;

2) includes milk, cattle and feed grains.

Segment revenue in Q1 2023 decreased by 11% compared to Q1 2022 to US$ 32 million mainly due to lower sales of meat-processing products as a result of production redeployment. The segment's adjusted EBITDA improved from breakeven to US$ 3 million due to the significant War-related expenses incurred in Q1 2022.

European Operating Segment (PP)

In Q1 2023, poultry sales of the European operating segment increased by 8% to 19,114 tonnes. This was driven by an increased production of chicken meat following expansion of facilities in Croatia and Serbia. Average price increased by 21% in Q1 2023 to EUR 3.43 (Q1 2022: EUR 2.83).

1) includes sausages and convenience foods

In Q1 2023, meat processing products sales of the European operating segment constituted 10,715 tonnes, with an average price of EUR 3.31.

Financial result and trends

1) pps - percentage points.

European operating segment's revenue in Q1 2023 increased by 21% to US$ 125 million (Q1 2022: US$ 103 million), mainly as a result of the increase in poultry sales volume and price.

Adjusted EBITDA (net of IFRS 16) increased to US$ 19 million for Q1 2023 from US$ 14 million for Q1 2022. The significant increase of Adjusted EBITDA q/q from US$ 7 million to US$ 19 million resulted from lower energy and grain prices in the EU as well as higher prices for meat processing products during Q1 2023. Another driver of q/q growth of EBITDA was one-off expenses related to disposal of non-current assets in Q4 2022.

Current Group cash flow

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 Q1 2023 amounted to US$ 98 million (Q1 2022: US$ 121 million). Q1 2023 cashflow included payment in February 2023 a part of the deferred interest payment agreed with creditors at the end of Q1 2022.

Lower investments in working capital comparing to Q1 2022 are mostly related to:

· Higher level of sales of chicken meat and grains as well as increased cost of grains consumed and sold in Q1 2023 comparing to Q1 2022;

· Lower prepayments to suppliers for gas and diesel in 1Q 2023 comparing to 1Q 2022.

In Q1 2023 total CAPEX amounted to US$ 39 million mainly related to modernization projects, new products development, the maintenance and improvement of Perutnina Ptuj production facilities and purchase of diesel generators to mitigate the impact of possible power outages.

Debt Structure and Liquidity

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 31 March 2023, the share of long-term debt in the total outstanding debt remained unchanged at 98% of total debt. The weighted average interest rate is around 7%.

As of 31 March 2023, MHP's cash and cash equivalents amounted to US$ 351 million. Net debt decreased to US$ 1,183 million, compared to US$ 1,237 million as at 31 December 2022.

The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 2.58 as of 31 March 2023, lower than the limit of 3.0 defined in the Eurobond agreement.

As a hedge for currency risks, revenues from the exports of grain, sunflower and soybean oil, sunflower husks and chicken meat, which are denominated in US Dollars and Euros, are more than sufficient to cover debt service expenses. Export revenue for Q1 2023 amounted to US$ 522 million or 70% of total revenue (US$ 308 million or 56% of total sales in Q1 2021).

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 period ended 31 March 2023

CONTENTS

STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS............................................................... (a)

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

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2023

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME.............................................................................................................................................................. 5

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION..................................... 6

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY..................................... 7

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS................................................ 9

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.............................. 11

1. Corporate information..................................................................................................................... 11

2. Basis of preparation and accounting policies................................................................................... 12

3. Segment information...................................................................................................................... 14

4. Profit for the period........................................................................................................................ 15

5. Property, plant and equipment........................................................................................................ 15

6. Inventories and agricultural produce................................................................................................ 15

7. Shareholders' equity....................................................................................................................... 15

8. Bank borrowings............................................................................................................................ 16

9. Bonds issued................................................................................................................................. 17

10.  Related party balances and transactions....................................................................................... 19

11.  Operating environment................................................................................................................. 20

12.  Contingencies and contractual commitments................................................................................. 21

13.  Fair value of financial instruments................................................................................................. 22

14.  Risk management policy.............................................................................................................. 22

15.  Subsequent events...................................................................................................................... 23

16.  Authorization of the interim condensed consolidated financial statements....................................... 23

STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS

In accordance with Article 10 of the Transparency Requirements (Securities for Trading on Regulated Market) Law 190(l)/2007 ("Law"), as amended, we the members of the Board of Directors of MHP SE confirm that to the best of our knowledge:

(a) The interim condensed consolidated financial statements for the period from 1 January 2023 to31 March 2023 that are presented on pages 5 to 23:

i. were prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union and in accordance with the provisions of Article 10 (4) of the Law, and

ii. give a true and fair view of the assets and liabilities, the financial position and the profits of MHP SE and the businesses that are included in the interim condensed consolidated financial statements as a whole, and

(b) the interim management report gives a fair review of the information required under Article 10 (6) of the Law.

17 May 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 three-month period ended 31 March 2023 consolidated revenue increased by 35% to USD 745,602 thousand, compared to USD 553,328 thousand for the three-month period ended 31 March 2022. Export sales of USD 521,945 thousand for the three-month period ended 31 March 2023 constituted 70% of total revenue compared to USD 307,603 thousand, and 56% of total revenue for the three-month period ended 31 March 2022.

Gross profit increased by 61% to USD 143,556 thousand for the three-month period ended 31 March 2023 compared to USD 89,272 thousand for the three-month period ended 31 March 2022. The increase was driven mainly by higher gross profit in the poultry and related operations segment due to increases in both volume and selling price of chicken meat as well as higher volumes of vegetable oil sold.

Operating profit increased to USD 83,990 thousand for the three-month period ended 31 March 2023 compared to USD 8,691 thousand for the three-month period ended 31 March 2022, mainly as a result of the increase in gross profit and non-recurrence of significant write-offs of inventories and donations to communities in Ukraine following the Russian invasion in February 2022.

Profit for the three-month period ended 31 March 2023 amounted to USD 49,065 thousand, compared to a loss of USD 108,252 thousand for the three-month period ended 31 March 2022. The increase is mainly due to higher operating profit and stabilization of the Ukrainian Hryvnia against the US Dollar and EURO, which resulted in a modest foreign exchange gain of USD 4,180 thousand for the three-month period ended 31 March 2023 compared to a foreign exchange loss of USD 95,323 thousand for the three-month period ended 31 March 2022.

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.

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, which are described in detail in Note 11 Operating environment. Detailed information on this matter can also be found on pages 156 to 157 of the Annual Report which is available at mhp.com.cy.

Management believes that the Group has adequate resources to continue in operational existence for the foreseeable future. However, due to the currently unpredictable effects of the ongoing War on the significant assumptions underlying management forecasts, Management concludes that a material uncertainty exists, which may cast significant doubt about the Group's ability to continue as a going concern.

Other risks and uncertainties

There are a number of potential risks and uncertainties, which could have a material impact on the Group's performance over the remaining nine 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 Annual Report.

17 May 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 period ended 31 March 2023

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoriia Kapeliushna

The accompanying notes on the pages 11 to 23 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as of 31 March 2023

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoriia Kapeliushna

The accompanying notes on the pages 11 to 23 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 2023

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoriia Kapeliushna

The accompanying notes on the pages 11 to 23 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 2022

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoriia Kapeliushna

The accompanying notes on the pages 11 to 23 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the three-month period ended 31 March 2023

(in thousands of US dollars, unless otherwise indicated)